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July 2011 Vol. 4 — No.11 October 2010 | Vol. 4 – No.2 July 2011 Vol. 4 — No.11 October 2010 | Vol. 4 – No.2
Method In Method In Motion Motion
amit mukherjee, Vicepresident (iT and supply chain) amitgroup mukherjee, and cio atVicerpg, has president exemplary (iT and supply chain) deployed supplyand group cio atatrpg, has chain strategies spencer‘s deployed exemplary supplyretail >> page 34 chain strategies at spencer‘s retail >> page 34
TElEcom logisTics 20 THE FOOD CRISIS 54 Movement of telecom TElEcom network equipment opens An ISB Prof. shows20 how to alogisTics window of opportunity ensure food security. THE FOOD CRISIS 54 Movement of telecom
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July 2011 Vol. 4 — No.11 October 2010 | Vol. 4 – No.2
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The Right Method In Prescription Motion Dr Ravi Prakash Mathur, Director, SCM Logistics, Dr. Reddy’sViceLaboratories Ltd., amit mukherjee, describes how pharma giant manages president (iTthe and supply chain) itsand supply-chain likeat norpg, otherhas Indian group cio pharma company. deployed exemplary supplyPage 36
chain strategies at spencer‘s retail >> page 34
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Back To The Future
T
rue story. In the year 2007, on a cold and windy January morning, a man sat at a metro station in Washington DC and played the violin for passersby. If you were a music aficionado, you’d have noticed that he was playing compositions of Johann Sebastian Bach, the famous German composer. It is said that he played six Bach pieces for about 45 minutes that morning. During the entire time, only six people – most of them children – stopped briefly to hear him play. The man collected $32 for his efforts. Two days earlier, the same guy had played to a packed Boston theater where the average seat was sold at $100. The man was Joshua Bell, a world-renowned musician. The violin he played at the subway was worth 3.5 million dollars. The whole gig was part of a social experiment organized by the Washington Post to see how people take to talent when it is shorn of any showmanship. From the point of view of business, the moral of the story is: It’s not only the quality of the product, but the perceived value of the product that decides the price of the product. Supply-chain managers often lament that their function is not seen as important as other functions of a company—marketing, finance, sales, manufacturing, etc. And it reflects in several areas where the supply-chain of a company may need (justifiably so) better support in terms of finance, administration, and strategy, but are routinely denied or put on the backburner. I think the main reason why supply-chain figures relatively low on the company priority list is its perceived value. The sales team gets the money, the marketing team takes the company to the customer, finance decides the strategy – where does that leave supply-chain? Is it meant only to deliver products in time to the customer? Is that all? Several recent events and trends have highlighted how critical supply-chain is, even at the national level, to the lives of our people. Data obtained by the Times of India recently showed that 128 children died in 2010 due to adverse effects after immunization (AEFI). Doctors and experts interviewed by Log.India (Cold Chain Lapses Causing Infant Deaths? Page 10) say that the deaths are largely due to inefficient cold-chains. On the other hand, Dr Reddy’s Laboratories, ironically an Indian company, has built a world-class cold chain that delivers drugs to millions in the country and the world (The Right Prescription, page 36). On the same line, Professor N.Viswanadham of the Indian School of Business, Hyderabad, highlights (Empty Promises, Empty Stomachs, Page 54) how an integrative, evolutionary supply-chain can solve the grim food-security issue that plagues our masses. Therefore, when the supply-chain is so crucial to the lives of people then at the corporate level, why is it not attributed the weightage it deserves? In other words, what should supply-chain managers do to ramp
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up the ‘perceived value’ of supply-chain so that it gets its fair due in India Inc.’s corridors of power? Right now, a CEO assesses the supply-chain of his company on the basis of two deliverables: Cost and Efficiency. I am told that nowadays, companies are going beyond the cost imperative and looking at the supply-chain function as a profit center. That’s just calling a rose by another name – in practice, it’s still regarded as a cost center – and that is just another way Aanand Pandey of putting more pressure on Editor the supply chain team so they reduce costs even further. This is where one can learn from supply-chain heads of the likes of Dr Ravi Prakash Mathur of Dr Reddy’s Laboratories Ltd. and Mr Rakesh Sinha of Godrej who have empowered their companies’ supply-chains (by moving from the forecast-based model to the replenishment model) so that their supply-chains have begun to exert a quantifiable influence on the top lines of their companies. This is the point where CEOs begin to sit up and take notice. Green logistics is another big area where supply-chain managers can prove the value of their functions to the strategy team – not only is that going to earn them CSR laurels but they can also fetch valuable carbon credits for the company. Companies like Ceat, Ericsson (Swinging In The Greens, page 18) and Reliance Industries have taken up green logistics in a big way. Lastly, with the emerging trend of product customization (Buckle Up For Change, Page 26) – customers demanding laptops and cars of a particular colour and other personalized features, a trend that is catching on in other industries – supply-chains are bound to play an increasing role in driving the value of a product, and hence acquiring a key role at the strategy level of a company. Now that sounds like Bach to my ears.
Aanand Pandey aanand@logisticsweek.com
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CONTENTS 10 ANALYSIS
Cold Chain Lapses Causing Infant Deaths? The deaths of children after immunization due to a possible breakdown in the cold chain have revealed fissures in the system.
26
Buckle Up For Change Presenting an edited transcript of the Third Supply Chain Summit organized by DIESL and managed by LOG.India that hold valuable takeaways for the readers.
26 10 14 INDUSTRY EVENT A Homespun Elixir
On 24th June 2011, the Ballroom at Hyatt Regency, Mumbai, saw a full house as supply-chain folks concerned with the pharma sector gathered to witness and understand the complexities of the trade from the doyens of the industry.
36 FEATURE The Right Prescription Dr Reddy’s Laboratories Ltd has fashioned an intricate and complex supply chain which has ramped up its growth.
18 FEATURE
Swinging In The Greens Ericsson India shares the company’s crusade to bring down its carbon footprint further in the supply chain.
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July 2011 | www.logisticsweek.com
JULY 2011 54 SPECIAL FEATURE Empty Promises, Empty Stomachs Millions of poor continue to be deprived of a decent square meal every day. Professor N Viswanadham explains that what is needed is a co-evolutionary innovation strategy based on end-to-end supplychain.
ADVERTISERS INDEX Araham Logipark ................................................... IFC ARMSTRONG Limited. ............................................. 25 Auto & Auto ancillary conference ............................ 53 BLR Logistiks .......................................................... 49 Capricorn Logistics ................................................. 21 Cemat India ............................................................. 24 EXIDE Industrial ........................................................ 5 Frost n Sullivan ....................................................... 59 Gandhi Automation ...................................................17 India warehouse show............................................. 57 Logistics directory .............................................42-43 Phenix ....................................................................Ibc RK Foodland Pvt Ltd ................................................ 33 Safexpress .............................................................. 31 Sauditranstec ......................................................... 51 Shree Rajlaxmi Logistics Limited..............................11 Shree Rajlaxmi Logistics Limited..............................13 Siemens ..................................................................BC Sreeji Transport ....................................................... 23 Vijay Logistics .................................................... 6-Jan
54 JUNE 2011
58 BENCHMARKING Whether you are a warehouse manager, or a warehouse owner or just a supply-chain enthusiast wanting to know more about warehouse management, we have an expert you can turn to every month for all your queries.
60 PANORAMA Books, Journals, Blogs, Technology, C-Profile, and Solutions - a look at what's new in and for the supply chain industry.
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June 2011 Vol. 4 — No.10 October 2010 | Vol. 4 – No.2
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IND DIA IA
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Method In Motion
amit mukherje e, Vicepresident (iT and sup ply chain) and group cio deployed exem at rpg, has plary supp chain strat lyegies at spen cer‘s retail >> page 34
TElEcom logisTics 20
THE FINE Movem ent PRINT of teleco24 m netwo How torkavoid equipm enturns heartb opens awhen windo w of opport signing SLAs. unity
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low adopTioN 24
Moving Life’s Goods
KK Kaul, VP (Head - SCM ), LG Electronic India Ltd, has s set up the Korean giant supply-chain ’s India from scratch. NEglEcTEHere’s
how. d Why COLD WMS still CALL does: waTErwa Page 34 notIILF ys 44 have enough There’s business and suppo HERE: Indust rt. But India is ignorin takers inIS wheregare ry’s first enterp India inland the cold-chain THE ANSW waterw rise-on cos?...08 ays satwere ly award ER IS: Our expert its own given away in peril offers solutio May...12 ns for your wareh ouse woes... 44
July 2011 | www.logisticsweek.com 9
< AnAlysis
Train of ThoughT
We expect to pick up a large share of the growing e-commerce pie. Investments in supply-chain and technology will help us achieve our goal of becoming the largest e-commerce player in India. — Binny Bansal, Chief Operating Officer, Flipkart in an interview with livemint.
Traditionally, distributors sent the goods to the stores, took the money and moved on to the next store. Today, modern retailers expect distributors to study the shelves on the store and understand what’s selling and what’s not. Which is why we are leveraging our distribution capabilities.
We are waiting for reforms. The APMC Act did not get amended in all the states with fidelity. The other reason is that at least three times the Essential Commodities Act has been imposed on us. This means you cannot have a storage facility, and the moment you can’t store, you can’t buy.
— Anshuman singh, MD and CEO, Future supply Chain solutions at a press meet.
— yC Deveshwar, Chairman, iTC ltd on why e-choupals have not grown in numbers in an interview with Business Standard
Our competition is not so much with modern retail chains. Organized retail is still a very small fraction of the total market. Our competition is mainly with the unorganized stores. — Thomas Varghese, CEO, Aditya Birla Retail in an interview with Business Standard
Cold Chain Lapses Causing Infant Deaths? The deaths of children after immunization due to a possible breakdown in the cold chain have revealed fissures in the system. Pamela Cheema reports
A
n alarming rise in the deaths of children after vaccination has put this issue under the scanner of the Union Health Ministry and triggered off ripples of apprehension among the general public. The Union Health Ministry under the Right to Information Act put up by the media conglomerate, The Times of India, disclosed that 128 children died in 2010 due to adverse effects after immunization (AEFI). The number of deaths has escalated over the past three years from 111 in 2008 and 116 in 2009. According to media sources, the numbers only appear to be climbing upwards. Sources in the logistics industry and the medical fraternity are analyzing
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the cause of death and indicate that among other reasons, neglect of cold chain facilities could be a possible reason for such deaths.
July 2011 | www.logisticsweek.com
Breakdown Of Cold Chain Dr Amin Kaba, a paediatrician practicing at Saifee hospital, Mumbai, emphasizes that “that most doctors have very
poor knowledge of cold chain facilities or even logistics and don’t realize how this could impact the health sector. Many doctors store medicines in the
< AnAlysis
“While production and the first leg of distribution may still be well-controlled and monitored, the last leg is less monitored with control left to individuals.” ... are you the best Supply Chain Manager?
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door of the refrigerator in their clinics. In the case of vaccines, it causes the vaccine to lose its potency. However, I would like to point out that even this would not cause death—that could be due to various other factors too. All vaccines should have the Vaccine Vial Monitor (VVM) which is thermosensitive and is present on polio vaccines. This shows if the quality of the vaccine has declined.” Dr Usha Agboatwala, a consultant paediatrician at Prince Aly Khan and Noor hospitals at Mazagaon, Mumbai, says, “Maintenance of the cold chain is critical. If a vaccine is not properly preserved it becomes useless.”She also highlights the state government’s preference for cheaper vaccines and the lack of a regulatory body to institute stringent quality control as possible reasons for such deaths.
Declining Facilities Other probable reasons for such deaths are poor immunity of the children, improper administration of vaccines and acute malnourishment of young children who are unable to tolerate the vaccine dose. The largest number of deaths has been registered in Maharashtra (28). “Services in Maharashtra have been on the decline,” says Dr Agboatwala. “There is just no quality check here. The situation
here is different from the southern states where diligence is greater. Even Gujarat is better than Maharashtra in this regard.” Pawanexh Kohli, Founder of CrossTree techno-visors and Senior VP, Arshiya International Ltd, is convinced that “the deaths are largely due to inefficient cold chain practices from production to the last mile. Generally, the inefficiencies exist at the last leg of a vaccine’s life cycle. While production and the first leg of distribution may still be well-controlled and monitored, the last leg of distribution, storage and time lapse before vaccination at outreach points is less monitored with control left to individuals. Any lack of protocol here would impact quality and efficacy of the vaccine.” Mr Kohli notes that while pharma companies make huge efforts to ensure the quality of the vaccines, the distribution is left to “varying chains of custody and the custodians may not be fully aware or driven to maintain standards.” While the causes of death after immunization span the entire spectrum from malnutrition, poor health and immunity of children and improper administration of vaccines, the government must simultaneously correct deficiencies in cold chain facilities as this would go a long way in checking infant mortality and bolster the universal immunization programme in the country.
APPOINTMENT All eyes on Basu as india head of CsCMP of Supply Chain Management Professionals (CSCMP) INDIA The Council INDIA
Excellence A wards 2011 Frewin Francis Director and Publisher Logistics Week India
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has opened its latest branch office in Mumbai, and heading it will be Anshuman Neil Basu, Regional CSCMP Executive Director. With more than 15 years of SCM experience in overseeing projects in India and the Middle East, Mr Basu will be looked upon to provide a big boost to the council seeking to enhance its service to its growing base in India and the surrounding regions, as well expand its reach and programming in South Asia. Mr Basu’s career highlights include working for global organizations like Philips 9819928792 India Ltd, Tata Group, 3M, Sony Corp and APL. Electronics frewin@logisticsweek.com Founded in 1963, CSCMP is a worldwide professional association dedicated to education, research, and the advancement of the SCM profession.
July 2011 | www.logisticsweek.com
< EvEnt REpoRt
A Homespun Elixir On 24th June 2011, the Ballroom at Hyatt Regency, Mumbai, saw a full house as supply-chain folks concerned with the pharma sector gathered to witness and understand the complexities of the trade from the doyens of the industry.
(L to R) Prof. Saral Mukherjee – IIM Ahmedabad, Reena Gor – CEO, SK Distribution, Jigar Mehta – Partner, Amritlal Brothers, Daryll Mascarenhas – General Manager, GSK Pharmaceuticals, B Raveendran – Director Global Logistics, MSD Pharmaceuticals communicate on the status of the cold chain industry.
Aanand Pandey, Editor, LOG.India, B Raveendran – Director Global Logistics, MSD Pharmaceuticals, PA Patil – VicePresident, Supply Chain & Business Development, Lupin, Ashu Gupta – Associate VP, Distribution and Logistics, Wockhardt on how GST will benefit the pharmaceutical industry.
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2011| www.logisticsweek.com
Sanat Shirali – Director (Business Development), AIOCD, speaks on the subject of Data-Driven Distribution.
Kaushik Kumar Rajan, director, Jayem Logistics interacting during pannel discussion. Drugs come with an expiry period - some faster than you think. Daryll Mascarenhas – General Manager (Supply Chain), GSK Pharmaceuticals, speaks about ways companies can improve forecasting thus helping keep inventory in check.
Only an academician like Prof. Saral Mukherjee – IIM Ahmedabad could have defined the importance of collaborations and its benefits for the Indian pharma industry.
The presentations held the audience enthralled.
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< pRimER
Managing the logistics of temperature controlled supply-chain is what Jagdish Gohire – Head Logistics & Trade Compliance, MSD Pharmaceuticals explains in his presentation.
A topic that any user companies can benefit from: Choosing the Right LSp. Aanand Pandey as moderator hashes it out with panellists Jeevan Raosahib – Director, Indelox, Arif Siddiqui – Director, Coign Consulting, Rohan Shah – CEO, SK Logistics, and Rahul Agarwal – Managing Director, Bhoruka Logistics.
The pharma event saw a full house as supply-chain citizenry gathered to understand the complexities of the business.
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2011| www.logisticsweek.com
Mr. Patil makes a point during the discussion on Landscape Change in Pharma - GST.
< feature
Swinging In The Greens
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Having won the Green Supply Chain award at the IILf Supply-Chain Innovation awards in May, ericsson India is firming up with future plans. tej Nirmal Singh, Head (Supply), ericsson India, shares with Jayashree Mendes the company’s crusade to bring down its carbon footprint further in the supply chain.
E
ven WordWeb, an online dictionary available for free download, is concerned with green — and not just by explaining the term. A few months into using the free version, each time you click to open the dictionary you will be asked a question demanding to know about the number of flights you have taken in the last one year. God help you if you click on any of the options that say one or more flights! It could possibly mean immediate discontinuation of the service, thus calling for a fresh download. What then should be the magnitude of global and other companies to apply green as part of its philosophy? It is well-known that companies are spending huge amounts in modifying the old way of doing things, thus helping in any way they can to save the environment. Some of the green policies adopted by companies call for measures such as shipping with lesser material which is toxic-free to the way they create materials and the way they transport them. Given that most emissions come from business activity, their efforts are crucial to tackling climate change. Besides corporate, even the common man makes his green peace by sustainable living which is limiting the use of natural resources to buying ‘green’ products that are non-toxic or organic to recycling and reusing. While the whole world is at it, in the corporate sector it is the supply-
chain that has come under fire and immense pressure to reduce its carbon footprint. One of the bigger issues facing companies these days is the actions of their suppliers and transporters. Companies today are being held accountable for environmental problems created by outside agencies that work for them. Tej Nirmal Singh, Head – Supply, Ericsson India, says, “Corporate realize how certain activities can be damaging to the environment. So everyone is working overtime to give back something to the environment. And everybody does it in their own way depending on the sector they oversee.”
Ericsson’s Global Energy Efficient Method Ericsson uses a life cycle approach and Design for Environment (DfE) technique to identify and minimize its environmental impact. Life Cycle Assessment (LCA) defines the environmental impacts of its products from raw material extraction, manufacture, transport and use to disassembly and end-of-life treatment. The LCA approach includes supplier and operator activities, offering a full picture of the value chain, and also includes during product use, where most of the carbon-related impact lies. As the products have long life-cycles, the LCA tool can model the impacts of changes introduced today over a 15-year time horizon. Within the company, Ericsson works with internal energy efficiency targets, which apply to the entire product portfolio to contribute to overall goal of reducing our carbon footprint. In terms of material management, Ericsson works proactively with managing materials in products to reduce environmental impact of manufacturing, use and disassembly. It combines pro-active phase-out with knowledge of the material content in our products. Source: Ericsson website
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July 2011 | www.logisticsweek.com 19
< feature
... are you the best Logistics Service Provider?
Despite the hurdles, we have decreased our carbon footprint by over 80 percent since 2003.” — tej Nirmal Singh, Head - Supply Chain, Ericsson India Pvt. Ltd
Considering that Ericsson’s supply-chain scope varies (as per the contractual agreements with different customers), in broader terms, it includes end-to end activity, on behalf of the customer and includes the following: International freight, Custom clearance, Primary transportation, Warehouse management, and Secondary distribution. Globally, Ericsson provides support for networks for over two billion subscribers through having a presence in 175 countries. The company’s portfolio comprises mobile and fixed network infrastructure, telecom services, software, broadband and multimedia solutions for operators, enterprises, and the media industry. The enormity of its operations was what compelled the company to apply innovation to INDIA market-based INDIA solutions that could empower people and the society and help create a more sustainable world.
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Excellence A wards 2011
Green tendrils Frewin Francis Director and Publisher Logistics Week India
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It was in early 2003 that Ericsson began measuring the environmental im9819928792 pact. As this was a new initiative, the frewin@logisticsweek.com
July 2011 | www.logisticsweek.com
company decided to take into consideration all aspects of its products from cradle to grave such as raw material extraction, manufacture, transport, and use to disassembly, and end-oflife treatment. While it tackled each one at various levels differently, this article will consider how it reduced the environmental impact in its supplychain and manufacturing. When Ericsson set out to make its supply-chain green, it meant advocating stringent measures that would change the way it had worked so far. There was also the task of convincing its suppliers and customers the benefits of the program. According to Mr. Singh, changing the mindset of people is not easy. “But,” he says, “despite the hurdles, we have decreased our carbon footprint by over 80 percent since 2003.” Ericsson’s supply-chain division put into practice three major measures in its green campaign globally. The predominant transport medium changed to sea route (within Ericsson also termed as surface transport) thus reducing dependency on road and air. Over a four-year period from 20072010, the company’s surface transport share rose to 75 percent in 2010 from 30 percent in 2007. This alone helped it reduce CO2 emission factor (EF) by over 80 percent as Ericsson discovered in 2010. The change in strategy offered several benefits to the company. Mainly it reduced carbon footprint, as according to Mr. Singh, the average emission factor for sea freight mode is around 0.017 kg CO2 per ton-kilometer as against air freight being 0.65 kg CO2 per ton-km. In terms of cost, sea freight costs 1/6th of air freight. He also makes it a point to mention how the company avails of free warehousing services when goods are at sea. But the results did not come easy. Last few years, the company has had to deal with several challenges. It had to grapple with demand fluctuation that an exponential growth brought
< feature into the Indian telecom market ranging to a compounded annual growth rate (CAGR) of approximately 22 percent. Then there were the rollout pressures of meeting targets and deadlines for all its customers who are always anxious to get network up and running. The growing demand also applied immense pressure on the supply-chain where customers wanted shorter lead times enough to disconcert any supply-chain. Then there was the supply-chain challenge of bringing in the goods, and transporting them to various locations. The company also had to confront certain internal challenges like
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In manufacturing, ericsson has eliminated or scaled back on the use of hazardous chemicals linked to health and environmental problems.
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Excellence A wards 2011 Frewin Francis Director and Publisher Logistics Week India
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the goods at the warehouse and deliver them on-site by running as few trips as possible. As goods have to be constantly moved out of the warehouse and delivered into it, the company has asked its LSPs to deliver the goods directly on-site, if that is possible. And lastly, it made a conscious decision to recycle obsolete and redundant parts and equipment, and to stop selling old and redundant equipment to scrap dealers. Reuse of equipment, especially obsolete technology is also part of the action. No more are old equipment sent out to third-world countries as was earlier the norm; instead they are recycled.
managing freight capacity issues and a fluctuating LSP performance. Mr. Singh says, “It took us a couple of years to streamline these issues and I like I said, it was mainly the mind-set that needed changing.” The second decision Ericsson made was to bring down the number of trips to various customer sites by diligent planning and near-accurate forecasting. The company’s managed services division runs the network for its varied customers across the country that involves delivering equipment, installing them, and ensuring conINDIA INDIA stant uptime. A growing end-customer base means that clients often call on Ericsson to create networks for a million customers in a certain area within a given time, sometimes a month. Equipment to the various sites is delivered by its LSPs, and the preferred 9819928792 frewin@logisticsweek.com mode of transportation is road. Under the new policy, Ericsson instructed its transporters and LSPs to consolidate
July 2011 | www.logisticsweek.com
Incidentally, Sony Ericsson, with whom the company has a global tieup for handsets, has also begun providing the manual in the phone as one of its principal ideas in the new line of GreenHeart phones.
How the System Works A report brought out by Boston Consulting Group (BCG) and CII in March states that a majority of companies surveyed are engaged in green initiatives in some way, though motives may vary. The report adds that while green initiatives add to a company’s image (it was the most important reason), other advantages are cost savings, maintaining competitive advantage and increasing employee morale. A sector like the power industry may adopt green measures owing to regulatory compulsions, while others like retail see it as an opportunity to build a stronger brand with consumers. Mr. Singh says that while the improve-
ment in the company’s image has been an outcome of adopting green, the rest would stand true for Ericsson. In order to meet the commitments made to clients and adhere to its green policy, the company has set up a dedicated demand planning team at its office in Gurgaon. The team’s main job is to keep its eyes open for any expected spurt or lack of demand through its forecasting method. In doing this, it alerts the supply-chain team who thus prepares to deal with it effectively, and also stick to its green policies. This has helped the company to stand by its commitment to prepare orders in advance and also deliver in time. Meanwhile, Ericsson is now gearing to meet its targets for 2011 by tak-
ing the following initiatives: Higher involvement of Customer Unit by forming a cross-functional team; Explaining the cost benefits of Surface transport; Facilitating the Customer Unit to improve Forecast Accuracy; Making robust Distribution Delivery Precision; and Performance measurement and sharing of Supply updates with stakeholders. Says Mr. Singh, “We conducted a workshop some time ago (not per se for the supply-chain) and are still considering ways to take our green initiative further. Now that we have put our green plan together for the supply-chain, it is only a matter of growing bigger with more numbers and larger deliveries. As far as I can see, there is little less we can do.”
In terms of manufacturing, Ericsson ensures that its products have eliminated or scaled way back on the use of hazardous chemicals linked to cancer and other health and environmental problems, which in turn makes recycling less problematic. Ericsson’s green plan is about allround growth. Whether it is to do with procurement, better rates, accurate forecast to suppliers or extract cost reduction, the growth is the vision. It is a growing tree, and more branches are bound to come up. And they need not be only in the form of staff, but customers as well.
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July 2011 | www.logisticsweek.com 25
< EVENT TraNscripT
Buckle Up For Change Presenting an edited transcript of the Third Supply Chain Summit organized by DIESL and managed by LOG.India that hold valuable takeaways for the readers.
T
he Third Annual Supply Chain Summit was held on May 20. The focus of the event was: ‘Embracing Change in Supply-Chain’. A galaxy of industry luminaries came together and discussed issues central to the theme. We bring you an edited transcript of several key presentations and discussions from the event. This is a two-part series that will conclude in the next issue.
Date: May 20, 2011 Event: Third Supply Chain Summit Organizer: DIESL Venue: Hotel Taj President, Mumbai
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Track 1: The C Factor – The Effect of Change on Supply-Chain Presenters: n Nikhil Chalakkal, Project Consultant, Supply Chain Structure – Material Flow and Processes, Miebach Consulting India n Sarang K V, Project Manager, Miebach Consulting India Nikhil Chalakkal: There was a point of time when supply chain was just a support function. It used to be sales or manufacturing – whichever function had more clout in a company. Nikhil Chalakkal
As of now, supply-chain is a central coordinating function. It was a supporting function at a point of time, now it is directly reported to the CEO. There was a point of time when it was taken only as a cost centre. Now, people are not seeing it as a profit and a value driver. It is something that
gives you competitive advantage. This is how supply chain has changed. In terms of sales, the flexibility of supply chain has increased manifold from a traditional perspective to a modern perspective. So, what exactly do you mean by a flexible supply chain as of now? Flexible supply chain or a change in supply chain is something which will have all these features. Now why exactly is a flexible supply chain so important? The supply chain follows the business cycle. We know that the business cycle has an expansion or growth phase and then it has a recession or a decline phase. There will be a phase with consistent growth in the industry, which will direct it at the peak. When the sales is growing itself, people will start to crank up the sourcing and manufacturing to essentially make sure that the demand is met. At this point of time you’ll see that since demand keeps growing, capacity is insufficient which leads to a loss of sales. Now how do organizations deal with this? They augment the workforce and other investments in capacity in the areas of manufactur-
ing, logistics, and distribution. When we reach the peak and demand just evens out at that point of time, this leads to explosion in inventory. So this is a point where there are peak sales, peak capacity, peak inventory, and peak work forces. What happens next? You’ll see that the sales are not able to keep up, you figure out there is excess capacity, leading to inventory build ups. Then you start reaching a low point on the curve, start divesting in capacity – including that in the supply-chain – to make sure that all the excess capacity that we have liquidates so that the working capital can be released. At the lowest point in curve, we’ll have stagnant sales, with minimal capacity, inventory and workforce. At this point of cycle, growth will start again. And the business cycle goes on. Sarang K V: The economic fluctuations, apart from the evolution which we have seen in the last two decades sent tremors through the supply chain. Supply chain can be visualized comprising three pillars: infrastructure, processes and people. And each of these now have borne the INDIA |
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Sarang K V
burden of those tremors so as not to collapse under any fluctuations. What we see here is all of these pillars are intertwined. An improvement in one has to go hand in hand with improvement in another; otherwise it will be a meaningless pursuit. Most of the companies have manufacturing as a critical juncture in the supply chain to detect responses. How to ensure that the manufacturing part of the chain is responsive to the market? Hitherto it was assumed that a centralized production system catering to the entire country was the way ahead, because we had extreme pressures in terms of production cost, technology was not so developed, logistics was not available. But now there has been lot of technological improvements, we have seen a spurt of manufacturing hubs coming up across the country.
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And this has brought up a situation where distributed manufacturing is being pursued to a large extent. What has also changed is the batch size of productions with respect to, say, FMCG â&#x20AC;&#x201C; earlier, a lot of batch was produced which lasted for many days. Because of economic pressures, the cycle used to result in huge batch sizes. And then you ended up in a situation where we had a pretty bulky supply chain, which resulted in lot of inventory in the chain. This has now changed. Batch status planning is now incorporated in the inventory planning. Working capital is released according to an audited formula and therefore the economies of scale of production are being factored and the entire supply chain costing is being done. Overall, the manufacturing planning frequency itself has reduced. In the FMCG industry, for
example, it has come down to a week. Even sub-contractors are being influenced to have a lower, more frequent planning at entry process to ensure that they are able to respond to market fluctuations. Furthermore, people are the most important constituent of the supply chain and all the detailed changes, which are happening in terms of processes, in terms of infrastructure, have to be augmented if the responses to market fluctuations have to be realized in reality. People are the key in terms of averting a situation of curvy growth process â&#x20AC;&#x201C; skill supply in terms of recessionary scenario would have to be handled somehow. And that would require certain continuous influence to probably have core central team, which is of very high quality and would be able to make the transaction on the hypothetical side.
(L to R) Nitin Agarwal, M R Sundaresan, Amit Banerjee, and Abhijit Chaudhuri.
Track 2: Responding to Demand Flux Presenter: Shailesh B Harsora, Deputy General Manager, Supply Chain Management, Mahindra & Mahindra We deal with many complexities when business growth is expected: competition, new launches, schemes to be launched, seasonality, interest rates going up, GDP and related pressures, fuel price going up, and along with that handling a large number of finished goods products. Many times we have reached a phase when opportunities are lost or stolen. How do we manage these complexities? We have started to reengineer focus on supply-chain planning, driving customersâ&#x20AC;&#x2122; intensity, collaborating with suppliers and partners. We have strategic planning which takes care of five
years of volume. We have long-term planning for three years which includes budgeting and capacity planning. We have also started new process of mid-term planning that is a six-monthly -- every month we look at the next month, how it looks, â&#x20AC;&#x201C; it may be different from what we planned as a long-term plan. We also have short-term planning, and we will be moving to daily now. In this, we review the daily forecast, demand forecast, we also look at manufacturing capacities available in-house, extra capacity available in other plants, strategic decision based on these wants and demand. We have formed a high-level council â&#x20AC;&#x201C; a Sales and Operation Group (SOG) that reviews the manufacturing capacity, supply capacity, and planning horizons. It reviews decisions on which plant will make which vehicle, whether we need to
make some other vehicles in that particular plant to meet the demand or cut-down the plant production on one location, build ahead to meet the seasonality or build ahead when supply is going to be a constraint for the supplier. In order to have an 80 to 90 percent strike rate in meeting the demand, we plan everything as per the forecast and build our capacity for the demand as per the strategy. We call it the eDCM (e-Demand Chain Management) system. The philosophy is that whenever a customer walks into a dealership, the vehicle should be available there, and if it is not available, the dealership should be in a position to give him a date, and honor that particular date. The process flow is expected to be operated by the dealer in the system which is connected to our backend systems. The production INDIA |
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< EVENT TraNscripT Track 3: Proactive, Visible and Adaptable: Building a Change-ready Supply Chain
Shailesh B Harsora
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planning will also happen in the system considering all manufacturing and supply constraints on the time scale. Delivery confirmations meant for the customer are not only going to the dealer, they are also given to the customer. Actual production happens as per the system-generated plan. Billing and dispatch happen as per the actual confirmation to the end-customer and up-to-date status information to all stakeholders are given at a given point of time. This is what the eDCM process does. As part of this system, we have developed a Mahindra online INDIA |
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smart trader; which is patented now, wherein all the information is given to the end customer along with the dealers. So the customer will receive SMSes and emails on the events of the order, like order creation, etc. We also measure three things to meet market changes: one is the supply chain response time, how much time we take to fulfill the demand once the order is placed; second is, the commitments that we have given -- are we meeting them 100 percent, and the third thing is are we able to produce looking at the demand in the system?
Presenter: M R Sundaresan, Director, Operations, Dell India. What is important is the kind of transformation that we see in the supply chain is basically moving from managing discrete partners to managing a web of relationships. So it is very clear that with the brand owner at the centre, there are several partnerships and several relationships that need to be coordinated and managed. So, that’s the kind of change that we have seen in the last few decades. The change has come about due to the exponential growth in new-age technologies. I think that’s a revelation that has come over the last few decades that it’s important to have supply chain linked to the overall company strategy otherwise a standalone doesn’t make sense. Second thing, which we have seen is a ‘segmented’ supply chain. I think segmented means, for example, in our industry, when it comes to PCs and IT equipment, we have customers like you and I buying one laptop to large companies buying thousands or education institutions or the government. And each of the requirements is different. So segmenting the supply-chain by the needs of customers has become crucial for a supply-chain to succeed. Third is, I think, the interplay between service, cost and risk has become crucial. For example, there is a school of thought that says that instead of outsourcing manufacturing to Asia or Mexico shall I start making products back in the US itself. Also, Lean (Management) I think is a great tool and a great mindset to apply to the supply chain. I think we owe it to the automobile industry to really embrace and further this whole concept of lean and see that how it can
< EVENT TraNscripT be applied to all the other industries. And finally, talent is a crucial attribute. Supply chains have become mature over time. In my industry as well as in others like apparel or food, we have moved from a reacting standpoint -- the focus of reacting was on efficiency and on ensuring that there are process improvements -- to anticipating the demand in terms of what the trends are. Collaborating is being emphasized upon a lot where we are able to share as a brand owner my sales projections with my suppliers so that that they can prepare themselves better. But what we see in the future is more revelatory. The focus will be on agility – on how we get the opportunity by sensing demand as well as ensuring supply flexibility to put together any products and services that are truly made-to-order, just in time. We take calls only on customer relationship and on the ability to face it to the customer; we owe that piece to the customer. The processes that are undertaken to ensure this collaboration are orchestrated by several players that come together to ensure that we sense what the customer is wanting and will we be able to fulfill that requirement? That’s the trend that we are seeing, for example, in the fabric and apparel industry – you have the manufacturer who makes the shirt and the trouser. There is the whole web of relationship that starts from getting cotton to making the fabric to stitching to sizes, delivering it to the brand owner and then the brand owner has relationship with the customer. So related to that I think what we see is migrations from internally controlled to a 3PL, to carriers, which is the next stage where value addition to inventories is outsourced. Outsourcing means giving up all that you had, it’s all about how do we realize our vision. Like in the example of Airtel having an asset-
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like model means that the entire gamut of switches, network equipment and the towers are all not in the balance sheet of Airtel but managed by somebody else. And the stress will be on how quickly I can change to sense what the customer wants have your web of relationships manage and deliver that to the customer.
Track 4: Building a changeready supply chain Panelists: n Abhijit Chaudhuri, Director (SCM), Ispat Industries n Amit Banerjee, Head, Supply Chain, Tata Motors Ltd n M R Sundaresan, Director – Operations, Dell India Moderator: Nitin Agarwal, Head, Competence Centre, Miebach Consulting India
Nitin Agarwal (Moderator): Gentlemen, what have been the major
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change-events which have forced us to look at supply-chain industry differently? Abhijit Chaudhuri: For the steel industry the change event, rather the evolving trend has been the movement of very high volumes across the globe. And of course what made us open to change from supply-chain perspective is the readiness to respond to changes in market-risks. When the period of 2008-2010 saw a global meltdown, different industry verticals reacted in a different ways to it – I can speak about the bulk business part of the story where steel industries are concerned, where you are actually moving millions of tons of materials across the globe. What made us ponder over the change strategy was to focus on our readiness to respond, as a small change within ours can actually create havoc for our industry vertical. And we realized it on September 16, 2008. For a company like us, we
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< EVENT TraNscripT had a very long lean time to get to that situation. For us, particularly, it would’ve been moving scrap from the US to India or for that matter moving iron ore from Venezuela to India. Just to give a small dimension of what we do that we are talking about 18 m ton iron ore. How do we react to changes? We wanted to know how we can connect the highest end of the variable to the lowest end of the element. We realized that we have to be in the know of all the things in the supply chain – all the information had to be strung into one information matrix – on a day to day basis. And for something like natural gas, the planning is on actually an hour-to-hour basis. I must compliment Mr. Sunderasan for his presentation because that gives you the structure of the supply chain as a thought process. And when I reflect back on those charts, I remember the supply chain’s 3As: agility, adaptability and alignment. All the three of them swarm together to bring an operating system Amit Banerjee
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which allows you the flexibility to stay and work for moment. I will add a fourth dimension to that – the fourth A: alertness. That alertness is what makes you carry out all the three As: agility will give you speed of response; adaptability will give you change in a scenario, and alignment is going to give you the tools, like computing of managing an organization virtually and otherwise. But if you are not alert, if your timing is not right, I think you would’ve missed everything that we are working on. So what we learn out of this was that we need to add up, we reorganize, realign, redeploy our energies to bring alertness in the system. And as you’ve seen, the steel industry was one of the first to have come out of this recession. Steel making capacity, in 2008 – when the first disaster struck – was 1.1 billion ton globally. Today we are at 1.3 billion ton. And I recently read that the industry is going to grow above 24 percent in the next two years. Nitin Agarwal: Mr. Banerjee, can you give us some insights into the automotive industry as to how speedy channelization in the supply chain takes care of the changes? Amit Banerjee: We handle spare parts for the trucks. And as many of you know, Tata Motors manufactures heavy trucks, light trucks and small trucks as well. If you look at the profile of an Ace (a Tata minitruck) customer, you’ll understand his worries when one or two of his vehicles go off road for a couple of days. So we are handling a particular product which has business as well as an emotional effect. In today’s scenario, we have 2,500 channel partners through which we supply parts across India. And we brought 2,000 retailers to sell our parts. Now how do we make an agile and costeffective system where the parts are reaching on time? We are growing at a speed of 30
percent each year. The way we are handling our transportation, logistics, warehousing everything is influences by the growth. Our warehouses work 24x7. I don’t like to block my money, I’d like to invest my money to buy more trucks, so that I can sell and improve my top and bottom line. We look at the solution from the perspective of empathizing with the point of view of the customer, not from the point of view of the supplier. The moment I put my foot in his (the customer’s) shoes is when I start looking at my supply chain from front to back, and I understand the issues that are causing the delay. Nitin Agarwal: What are your views, Mr. Sunderasan on this point? MR Sundaresan: Three things stand out in our industry when it comes to high-tech and personal computers. One is the pace of change – it is dramatic, be it cell phones which change every six months to computers which last one year or
maximum two years. According to the Moore’s law, computer processing is slated to double every 18 months. So we really need to deal with how the supply chain manages the parts, what happens to processors which are outdated and how we manage the inventory. Second trend is moving from mass selling to personalization of selling that is happening in our industry. The third trend is moving from products to solutions. I don’t think hospitals, as an example, make full use of the IT systems they have. The supply chain has to be able to cope up with all that. Nitin Agarwal: How does one strike a balance by managing the change between cost-effectiveness and managerial role at the same time? Abhijeet Chaudhuri: In steel you’ll find that it is an aggressive product and that means that the product doesn’t change its character… it stays the same. And over a
period of time, having a history of more than 100 years now, the specification of steel is set. And there is a question of where do we bring in value for a customer. And the answer is possibly offer the lowest cost because we have already frozen our specifications and we realize that it is a good design of supply-chain system which brings in the best value in the product through the lowest cost of production. There is something called the value in use, it’s a philosophy which has been developed over the last decade. Natural resources are getting scarce, so you are going to see the value in use. So what we do is, any time whenever we have a product, we bring it in either as raw material or in the supply chain industry in terms of cost of transportation, we look at the ultimate value in use in terms of what is the quantum of money which is being spent and what is the realization
at the end of the development. We look at the hard numbers everyday and find out the wastage, if the value erosion happens, where the value erosion happens and how to bring this back into the production system. Nitin Agarwal: We see in the IT industry where the value itself is difficult to quantify, cost is something that can be applied directly on the balance-sheet. How to strike a balance between value and cost? MR Sundaresan: I think cost has been modeled from customer’s point of view – what the customer values in that product. The advantage of having a brand is to tell the customer: this is the promise I make to you and will deliver to you. Cost matters less than the value you offer, the right customer is always willing to pay for value.
An avid audience takes in the presentations and panel discussions.
(The edited transcript of the Third Annual Supply Chain Summit will be concluded in the August 2011 issue.) INDIA |
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< Cover Story
The Right Prescription Dr reddyâ&#x20AC;&#x2122;s Laboratories Ltd has fashioned an intricate and complex supply chain which has ramped up its growth. Pamela Cheema investigates.
DR. RAVI PRAKASH MATHUR Director, SCM - Logistics, Dr Reddy's Laboratories Ltd.
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Photo: Kalyan D
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O
ur car swings in through the black iron gates into the verdant campus of Dr Reddy’s Laboratories on the outskirts of Hyderabad. The peaceful 140-acre campus, with its atmosphere of unhurried calm, belies the stature of a company which is today one of the top pharmaceutical companies in the country. Founded in 1984 by entrepreneur scientist, Dr K Anji Reddy, Dr Reddy’s Laboratories Ltd. has leapfrogged over most other Indian pharmaceutical companies to cross $1 billion in revenue. According to the latest figures, its consolidated revenues are at `74.7 billion ($ 1.7 billion) in FY ’11, surpassing its revenues of `70.3 billion ($ 1.6 billion) in FY 2010. Its growth year-on-year has been a steady and encouraging 6 percent. Despite slate-grey overcast skies which threaten a heavy downpour, Dr Ravi Prakash Mathur, Director, Supply Chain Management-Logistics, strides quickly around the campus
pointing out buildings of interest, a Leadership Academy here, a biologics facility there. He exudes quiet confidence as he elaborates on the intricate and complex supply chain of his company which has put it in the vanguard of top pharmaceutical corporates of the country. Three years ago Dr Reddy’s Laboratories Ltd. made a radical switch from the forecast based supply chain system to the replenishment mode of supply chain. “This initiative involved the front end distribution system and operations and procurement as well,” says Dr Mathur. “It is an end-to-end solution which is aligned to meet the needs of the market too. This has made us more agile in meeting market demands and helped us to meet the twin challenges of excess inventory and shortages in the system.” Dr Reddy’s Laboratories Ltd. was the first Asia Pacific pharmaceutical company outside Japan to be listed on the New York Stock Exchange in 2001. It was listed on the Bombay Stock Exchange in 1986.
A Decision-making System Dr Mathur firmly believes that the forecast-based supply chain system has its own inherent limitations. Along with the vagaries of demand in the market, he notes that since the markets are very dynamic “a forecast can only be a forecast. It can’t be 100 percent accurate and you have to keep measuring its accuracy and its key performance indicators (KPIs).”In the replenishment-based system of supply chain, cognizance
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Source: Dr. Reddy's Laboratories Ltd.
GDC S
Dr Reddy's Laboratories Ltd follows a consumption-based replenishment model.
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Photo: Dr. Reddy's Laboratories Ltd.
is taken of what has been consumed at various supply chain nodes and the previous supply chain node replenishes consumption at the front end leading to a more responsive system. “The Israeli company, Teva, which is a very large generic pharmaceutical company has adopted this system to an extent, but we don’t know if any other Indian pharmaceutical companies have adopted this system,” says Dr Math-
ur thoughtfully. “There are many global companies, not necessarily pharmaceutical companies, that have adopted this system which they call by different names. For instance, Wal-Mart is on the automatic replenishment system, while Toyota uses a pull-based system. Among Indian companies, Tata Steel works on the replenishment system. This is an easy decision-making system and you get the right number of orders, so you are manufacturing just what
is needed and what is really required gets priority. ”
Perfect Availability Speaking easily and with great authority, he traces the supply chain from the suppliers who transfer raw and packing material to the material warehouses which in turn move it to the plants. These plants, in turn, forward the finished-goods to the finished-goods plant warehouses; the finished goods plant warehous-
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The replenishment mode of supply chain is an endto-end solution.
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< Cover Story es are connected to the regional warehouses from where products are sent forthwith to distributors who push them onwards to retailers and thence to the customer. “The role of our supply chain is that there should be perfect availability with no shortages,” emphasizes Dr Mathur. “ We want adequate inventory at our central locations with
The role of the supply chain is that there should be perfect availability with no shortages.
Photo: Dr. Reddy's Laboratories Ltd.
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daily consumption data along with more frequent replenishment.” While the supply chain with its complex interactions fulfils customer demand, the Research and Development facilities of the company control new products and execute the process of ongoing improvement in the company. The Replenishment System of
supply chain followed by Dr Reddy’s Laboratories underscores that if there is greater interdependence in a system, it may mean less freedom, but it also signifies that there are just one or two constraints in the system. On the other hand, in a system where there is more freedom, there are more constraints. Lack of interdependence leads to
multiple constraints, which can create serious and terminal blockages in a supply chain system. Hence a supply chain system which has less freedom is more supple and easier to manage than one with great freedom. In India the corporate has two central warehouses situated in Hyderabad and Ghaziabad which hold
Distribution Model For National Market
Source: Dr. Reddy's Laboratories Ltd.
Distribution Model For International Markets
Source: Dr. Reddy's Laboratories Ltd.
the maximum inventory for these regions. “The concept really is that we aggregate the goods at a central warehouse,” says Dr Mathur affably, “and the benefit of that aggregation is that we have maximum inventory near source and from that inventory we supply to further supply chain nodes.” Products are supplied in accordance with the consumption
data which is uploaded daily on the company’s software; the objective of the intricate system is that the warehouses must always maintain enough inventory to satisfy any immediate reasonable demand.
Stellar Features The Replenishment System of Supply Chain has several stellar feaINDIA |
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17 - 19 November 2011, University Grounds, Ahmedabad, Gujarat, India
MANCH communications
< Cover Story tures which has enabled it to power an efficient supply chain system. It assesses inventory at all stock locations, while enabling transfer of consumption data from all those locations. It truncates replenishment time and refills inventory as frequently as possible from the main warehouse to consumption points. It also maintains buffer inventories at every supply chain node. Like its national operations, the international operations of Dr Reddy’s Laboratories Ltd. also resonate with planning and care. The United States, for instance, is an immeasurably lucrative market for the company. The company supplies its products to a central warehouse in the US, which is operated by a logistics service provider of the corporate and takes its orders from diverse American pharmacies.
Photo: Dr. Reddy's Laboratories Ltd.
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While certain drugs are shipped directly to the US after being packed in India, others are delivered to a co-packer where the products are packed and then delivered to the central warehouse. A co-packer functions as a packer of drugs for the company in the US. From the central warehouse the drugs are distributed to the regional distribution centers of the customer and transported onwards to pharmacies. “The drugs go via our central warehouse to American pharmacies,” says Dr Mathur, explaining carefully the line of distribution in the US. Globally, Dr Reddy’s Laboratories supplies its products to the US, UK, Germany, Russia, Ukraine, Venezuela and South Africa. It’s financially lucrative markets are USA, UK, Germany, Russia and India.
Unfettered Distribution System In India the company has a welldefined and uncluttered distribution system which allows products to flow smoothly to the consumer. Its two central warehouses in Hyderabad and Ghaziabad are also known as Global Distribution Centers as they are suppliers to both global and Indian markets. They feed 32 regional warehouses, some of which are located in Hyderabad, Kochi, Mumbai, Jaipur, Delhi, Jodhpur, Bhubaneshwar, Kolkata, etc. The company follows the hub and spoke model of warehouse systems due to the vast geography to which its supply lines cater. It has 200 vendors and more than 2,000 distributors just for India. It has seven formulation facilities and one biologic facility which constitute eight ‘in house
Log. India
Size 206 X 270 mm Date 14.06.2011
locations’ (manufacturing plants), some of which are in Andhra Pradesh while two are in Himachal Pradesh. Dr Reddy’s also has over 10,000 raw material and packing SKUs and over 2,900 finished goods SKUs. The company has 170 employees who manage its supply chain in India and across the world ; it has eight logistics service providers like UPS, DHL and AFL who handle its international operations and 14 LSPs like TCI XPS and TNT who service its national operations.
Logistics For Major International Markets
the Pull Distribution System The corporate’s supply chain system is also distinguished by the use of a ‘pull distribution system’ or what is known in industry parlance as the ‘simplified drum-buffer-rope’ system. “The drum is basically the rate of consumption, the rope is your
Source: Dr. Reddy's Laboratories Ltd.
In India the company has a well-defined and uncluttered distribution system which allows products to flow smoothly to the consumer.
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< Cover Story lead time and buffers are nothing but our target inventories,” says Dr Mathur expansively. “This theory means that at any time you should be able to meet market demand. It has been implemented in a few Indian companies like Godrej. Abroad, it is well-known and is being used in quite a few companies.” Buffers are target inventories which measure consumption and are so designated because they imply ‘protection’ from depletion at every supply chain node. It is mandatory that any penetration in this target inventory has to be replenished. They are considered ‘buffers’ as they protect the supply chain nodes at the back from the demand in the front. Says Dr Mathur: “Every supply chain node needs protection equivalent to the lead time from the previous supply chain node and to the amount of the highest day’s sale that you have experienced at that node. I think we
are unique in the pharmaceutical industry for using the buffer system the way we do.” Since buffers are designed to combat uncertainty, they are strategically positioned at every level of the supply chain. “We have buffers at the stockist level, the CFA and Global Distribution level,” says Dr Mathur energetically, warming up to his subject. “There are buffers in production, packing material and raw material – our buffers are protecting each and every supply chain node.”
Innovative Colour Coding System Also present at all the supply chain nodes is an innovative colour coding system which calibrates the inventory and thus further refines the system. The four colours used indicate the level of inventory and enable prioritization of inventory in the system. The colours employed
are green, yellow, red and black; green denotes sufficient inventory, yellow implies adequate inventory, red cautions that the buffer is in danger of depletion and needs to be replenished swiftly, while black indicates a depleted inventory or a stock-out. “ When we are looking at our multiple SKUs, our highest priority is the SKUs in black which have to be attended to immediately, the next is red followed by yellow and green,” explains Dr Mathur carefully, switching quickly to the relevant slide on his laptop for easy clarification. “With this colour coding system, we achieve the dual target of keeping low inventory and high availability. Among the colours, yellow is the ideal one where you get to know that you have adequate inventory in the system.”
Crucial Lead times
Photo: Kalyan D
For any supply chain system to function superlatively in today’s bareknuckle competition, lead times are also crucial and any lapses could lead to serious tripwires in the system. However, in Dr Reddy’s Laboratories, the system of warehouses and buffers at every supply chain node has been designed in such a way as to ensure the fulfillment of all demands. “To give you an example, we have warehouses in India, the US, UK and Russia which cater to local demands,” elaborates Dr Mathur. “ With our supply chain system, we know that there is enough inventory at every node which ensures that there is enough lead time to meet local demands. So you can say that our lead time is immediate because we have inventory at every level, it is only the transportation lead time which will be the lead time.”
An automatic racking system in a warehouse of the company at Hyderabad.
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< Cover Story The transportation lead time, too, has been structured to satisfy all demands. In the north, goods are received in two or three days; the northeast may require a longer lead time, but the lead time increases only due to the distance traversed from the central warehouse to the regional warehouses in Guwahati and Kolkata. For international lead times, inventories are prepared to meet sea or air freight lead times. For sea freight which is by far lengthier, the lead time from India to the US will be 45 days, to the UK will be 26-30 days and end-to-end from India to Russia will be 30-35 days. These are average door-todoor lead times which are inclusive of customs clearance at both ends and pre-carriage and post-carriage to and from the ports. For a supply chain with such seamless inventiveness and exceptional flow of operations, a company would have to be large in scale to merely afford such a logistics system, right? Dr Mathur pauses. “I don’t know about scale,” he says, weighing his words carefully, “but you definitely need a very robust back-end system, especially an excellent IT system, to be able to support such an initiative. One of the key features in this system is information flow, so the more robust the information flow from the front to the back, the more successful your system will be. But even more critical than this, is a change in the way you think, because in this system you are moving away from a local optima to a global optima.” To assist in sea freight, an inland container depot (ICD) has been established in Hyderabad. The containers are loaded in a process
known as ‘factory stuffing’, sealed and the customs procedures, too, are finalized at the ICD at Hyderabad. These containers, which are reefer containers, then travel by road to the port of Nhava Sheva, near Mumbai, in Maharastra. On arrival, they are loaded on to mother ships which thereafter set sail for the United States and Europe. For air freight, the company uses the services of global airlines like Lufthansa and the Emirates. The products are flown from the air-
Dr. Reddy's Laboratories warehouse at Hyderabad.
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the transportation lead time, too, has been structured to satisfy all demands. In the north, goods are received in two or three days; the northeast may require a longer lead time. Photo: Kalyan D
< Cover Story ports of Hyderabad and Bangalore to Frankfurt, Paris and Amsterdam and from these major business centers, to their destinations across the globe.
Critical It Support
Operations proceeding in company warehouse at Hyderabad.
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A supply chain system whose various components are segued to achieve such a high degree of performance needs to be supported by a flawless information technology system. “We are on an ERP platform,” says Dr Mathur. “The orders are proc-
July 2011 | www.logisticsweek.com
essed at the CFA level and then serviced from the same level. In India, from the CFA onwards to the stockist, there is an exchange of information on consumption and inventory from those stockists who are on the replenishment mode and this flows back into our software.” When the stockist’s buffer is penetrated, the demand flows back into the CFA’s buffer. The CFA’s buffer acts as an ‘aggregate’ for all the stockists in that region and the aggregate consumption that has
Photo: Kalyan D
been recorded on that particular day has to be replenished by the Central Warehouse (Global Distribution Centre). While the information flows in on a daily basis, the demand is consolidated and shipped out only on the third day. The demand from international sources is also received on the company’s software on a daily basis. In addition to the SAP software, Dr Reddy’s Laboratories also employs the Symphony software which is a platform for the procurement,
17-19 October 2011
Dhahran International Exhibition Center, Dammam, Kingdom of Saudi Arabia
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The 2nd International
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operations and distribution solutions of the replenishment mode of supply chain. “Symphony is actually a software that sits on top of SAP, so it triggers various transactions in SAP,” explains Dr Mathur while disclosing the functioning of their intricate IT systems. “Every night there’s a run wherein data is uploaded on to Symphony. Based on what the penetration is in the various target inventories, the process orders are generated into SAP. So actually Symphony interfaces with
SAP. We have had this system for the last three years now.” Continuing his incisive analysis of his company’s IT systems, Dr Mathur elaborates further that the Symphony software absorbs data in the ERP “and converts it into a visual decision making system, so whatever system data we have it gets displayed in terms of the various colour codes we use, so we know whether we have adequate inventory, more than adequate inventory or less than adequate inventory. So on a real time basis, we are able to
see that for the entire globe, which SKU gets what priority!”
Cold Chain Facilities Most of the products of Dr Reddy’s Laboratories Ltd do not require cold chain facilities. They are ambient temperature products which are stored in ambient conditions. Some products which do need cold chain facilities can be stored with the aid of active and passive cold chain solutions. Active cold chain solutions are proffered by third party logistics
Most of the products of Dr Reddy’s Laboratories Ltd do not require cold chain facilities.
Photo: Dr. Reddy's Laboratories Ltd. INDIA |
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< Cover Story
The replenishment based system of supply chain has powerful advocates.
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providers like TCI XPS for national operations and for international operations, DHL and Lufthansa. TCI XPS and the international logistics providers offer an environment in which products can be safely stored at correct temperatures and for the required number of hours. Generally, for products which need cold chains the corporate uses air freight due to shorter lead times. With air freight, lead times oscillate between 72-120 hours. For passive cold chain solutions, the company uses ‘white covers’ (these are white sheets which contain thermal insulation) or thermocol boxes with ice packs which will maintain the products at the right temperatures and for the required number of hours. The government of India is planning to introduce the 2D Barcode system in the country for industry as a whole to stem any aberrations in
the market. The new system, which will not be limited to the pharmaceutical industry, will facilitate checks on expiry dates and also enable track and trace of products. “You will be hearing more about 2D in the days to come,” smiles Dr Mathur. “In the beginning, it will be used only for exports and it may be notified for use in just a few months from now. When it comes to the implementation of the 2D Barcode, India will be ahead of other countries—abroad, it will be implemented only in a few years from now.” The replenishment based system of supply chain has its own powerful advocates among third party logistics providers. Mr Ashutosh Dixit, Regional Director-South2, DHL Global Forwarding, which has been the international LSP for Dr Reddy’s Laboratories for the last seven years, believes that the system has elevated
planning and “led to a smooth movement of goods. It has also helped us to reduce errors and handle supply chain in a superior way.” But, he points out, goods could move with more slick efficiency if the government pruned its paper work at origin and destination points. Mr F S Poonia, Assistant Vice President, TCI XPS, which has serviced the national operations of the company for 13 years, is also supportive of the replenishment mode “which has helped us in planning activities and reducing last minute hiccups despite bottlenecks like road permits, non-uniformity of taxes, lack of skilled manpower, scarcity of manpower, etc.” With supply chain systems streamlined with finesse and skill and a fast-expanding global footprint, the future of Dr Reddy’s Laboratories Ltd appears undimmed.
July 2011 | www.logisticsweek.com Photo: Dr. Reddy's Laboratories Ltd.
Cover NEW July11.indd 3
7/1/2011 12:59:13 AM
< special feature
Source: www.impactalliance.org
EMPTY PROMISES, EMPTY S An academician suggests how an integrative supply-chain
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w
Millions of poor continue to be deprived of a decent square meal every day. professor N Viswanadham explains that what is needed is a co-evolutionary innovation strategy based on end-to-end supply-chain.
T
Most of the time, beneficiaries do not even get their quota of grains under the public distribution system.
he World Food Summit of 1996 defined food security exists when all people at all times have access to sufficient, safe, nutritious food to maintain a healthy and active life. Commonly, the concept of food security is defined as including both physical and economic access to food that meets peopleâ&#x20AC;&#x2122;s dietary needs as well as their food preferences. Food security is built on three things: Availability of sufficient quantities of food on a consistent basis; ensuring sufficient resources to obtain appropriate foods for a nutritious diet; and finally, appropriate use based on knowledge of basic nutrition and care, as well as adequate water and sanitation. The Government of India has launched several initiatives towards ensuring food security to its citizens. They include the public distribution scheme (PDS), the mid-day meal program for school children, the National Rural Employment Scheme, and several others to help people below the poverty line. The well-founded plans lack the desired execution by the various governments in charge of these schemes. At the other end of the spectrum, there are millions of hawkers in all major cities termed illegal traders by the municipalities but serving the food needs of millions of urban poor and lower middle class. They are self employed serving a cause. What is missing is an integrative, co-evolutionary innovation strategy based on end-to-end logistics and supplychain that would lead to high service quality food solutions to millions of people by combining innovations in several of the ecosystem elements and also their convergences.
a recipe for riot
STOMACHS will address the food security issue.
Consider the several schemes announced by various governments over the years that were meant to put an end to hunger or eliminate poverty. What is singularly lacking in all these ideas is the execution of an ideal supply-chain that could have functioned at a national level. The PDS operates under the joint responsibility of the Central and State governments. The Central government, through the Food Corporation of India, has assumed the responsibility for procurement, storage, transportation and bulk allocation of food grains to the state governments. The operational responsibility including identification of families below the poverty line, and issue of ration cards rests with the state governments. INDIA |
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< special feature The Mid-Day Meal Scheme was launched by the Ministry of Human Resource Development with effect from August 15, 1995, for the benefit of students in primary schools. It involves provision of lunch free of cost to school-children on all working days. The key objectives of the program are: protecting children from classroom hunger, increasing school enrolment, improved socialization among children belonging to all castes, addressing malnutrition, and social empowerment through provision of employment to women. The Department of Food & Public Distribution makes allocation of annual requirement of food grains
What is missing is an integrated, co-evolutionary innovation strategy that would lead to quality food solutions to millions through innovations in the ecosystem elements. under the scheme to the Department of School Education & Literacy, Ministry of Human Resource Development. About 120 million children are so far covered under the Mid-day Meal Scheme, which is the largest school lunch program in the world. The State of Karnataka introduced the provision of cooked meals in 2002. It has successfully involved private sector participation in the program. One successful venture is Akshaya Patra, which started with leadership from ISKCON. The Foundation gets a corpus from the state government but meets a major share of its costs with donations from private corporations and individuals in the city. The program is managed with an ultra modern centralized kitchen that is run through a public/private partnership. Food is delivered to schools in
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sealed and heat retaining containers just before the lunch break every day. The program contains one of the best menus in school meal programmes in India with tasty sambar, rice, vegetables and some curd on most days. National Rural Employment Generation Act (NREGA) is an important Central law having a large demographic and geographical spread. It assures livelihood guarantee to the entire population above 18 years of age residing in rural areas of the country. The act gives the right for 100 days of guaranteed employment in manual/unskilled work in rural areas.
What Went Wrong All the four schemes mentioned above are good initiatives but all of them have issues in implementation. The main problems with the system are the inefficiency in the targeting of beneficiaries and the resulting leakage of subsidies. Several opportunities to manipulate the system exist with widespread collusion across the supply chain. The Planning Commission had the following to say on the PDS system in its 2005 report, “For every Rs 4 spent on the PDS, only `1 reaches the poor.” The Supreme Court-appointed vigilance committee has slammed the PDS for “rampant corruption, black market and diversion involving a vicious cartel of bureaucrats, fairprice shop owners and middlemen”. Similar comments are available in the press for NREGAS and mid day meal programs. The lower income groups in the country spend a higher proportion of their income in making purchases from hawkers mainly because their goods are accessible and affordable. Had there been no hawkers in the cities the plight of the urban poor would be worse than what it is at present. In this way one section of the urban poor, namely, hawkers, helps another section to survive. Hence though hawkers are viewed as a problem for
urban governance they are in fact the solution to some of the problems of the urban poor. But hawking is not a licensed activity in most cities. Over the past few decades there has been a substantial increase in the number of hawkers in the major Indian cities. Mumbai has the largest number of street vendors numbering around 250,000. Kolkata has more than 150,000 street vendors. Ahmedabad and Patna have around 80,000 each and Indore, Bangalore and Bhubaneshwar have around 30,000 street vendors. The Cuisines by the sidewalks is a successful story from Kolkata which can be copied to advantage. Recognition of hawking as a profession would also benefit the municipalities. They would be able to officially enforce levies on hawkers. This would provide additional revenue for cash strapped municipalities. They would also be entitled to loans from public institutions thus reducing the hold of moneylenders over them.
an integrated supply chain The business processes can be identified, streamlined, standardized and automated or semi-automated using IT and sensor networks. Modernization and integration of PDS, midday meal program, vocational training programs under NREGAS, hawkers, and small food outlets using communication technologies would lead to a blockbuster industry serving the poor and creating millions of jobs for not so well educated. NREGAS can be used for training chefs, cooks, hawker owners, PDS employees, school employees, etc. Standardized and automated kitchens and IT enabled and GPS equipped push carts can be developed. The push carts can be built following standardized design and equipped with solar or gas run refrigerators and ovens. The entire process can be monitored, executed and controlled using a call center (See diagram). The missing link here is sophisti-
Integrated Food Security Plan
cated kitchens with chefs and cooks equipped with automated cookers, refrigerators, and ovens distributed all over the city. The location and capacity of the kitchens can be determined using standard optimization techniques from the demand estimates. Now the supply chain consisting of the PDS and kitchens and the schools participating in the midday meal program needs trained manpower. The vocational training centers can be funded through the NREGAS to train cooks, chefs, sales people, servers and millions of other jobs required for the supply chain operate well, given the perishable nature of the supply chain. Depending on the demand one can find the optimum number and locations of the kitchens to serve the community. The processes can be streamlined using sensor networks, smart cards, cloud computing, and mobile vans equipped with heaters
and refrigerators. One can use modern kitchens such as the Akshaya Patra with the help of NGOs and corporate. This new ways of meeting the food security will get rid of the prevalent corrupt practices and can be made smart and green. The governance model for this supply-chain can be worked out with an assemblage of NGOs, Corporate, Government and Associations. Making this work is a challenge but the rewards and impact would be tremendous. It would help to give a new direction to the current system which is corrupt and not working. The new system can be designed using new technologies such as smart cards, wireless, smart kitchens technologies, new designs for push carts equipped with refrigerators and ovens, hygiene indicators and several others. In fact a McDonaldâ&#x20AC;&#x2122;s kind of outlets can be opened to avoid traffic issues with push carts.
the impact Given the perishable and hygienic nature of the supply-chain, the products are made in the day and ends by night. This requires careful demand forecasting, routing and rerouting of the supplies and monitoring the antisocial activities. The program needs trained logistics and IT manpower and millions of other jobs. Several product and process innovations are needed and there are opportunities for several small and big private entrepreneurs. This is a unique opportunity for people from all walks of life: Governments, NGOs, Big business houses and small entrepreneurs and micro finance and other FIIs to come together to make this program successful. The author is Executive Director, Center for Global Logistics and Manufacturing Strategies, Indian School of Business, Hyderabad. He can be contacted at N_Viswanadham@isb.edu. INDIA |
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< Here To Help
How can I allocate manpower efficiently? Whether you are a warehouse manager, or a warehouse owner or just a supply-chain enthusiast wanting to know more about warehouse management, we have an expert you can turn to every month for all your queries, on this page. Pooja Dayal, Head-Business Excellence Function, DIESL, will answer readersâ&#x20AC;&#x2122; questions on teething issues they face in the area of warehouse management.
Pooja Dayal Head-Business Excellence Function, DIESL
What are CSS and SSS scores? How do i measure them? What are the benefits they offer to the warehouses. CSS stands for Customer Satisfaction Survey and SSS is Supplier Satisfaction Survey. You can't manage what you don't measure. It is an old management adage that is accurate today. Unless you measure something you don't know if it is getting better or worse. You can't manage for improvement if you don't measure to see what is getting better and what isn't. A high level of customer and supplier dissatisfaction can impact every aspect of your business including the top and bottom line. Hence itâ&#x20AC;&#x2122;s imperative to measure satisfaction level of both customers and suppliers. These surveys not only measure and evaluate the attitudes, opinions and satisfaction levels of your customers and supplier but also helps to identify areas of your business that do not meet their expectations. There are two types of satisfaction surveys: Transactional and Image-based. Transactional satisfaction: Each time a customer or supplier interacts with your company is a transaction -
every customer and supplier has formed an impression of your company. They are based on the sum of their transactions, their beliefs about your competitors, and the value they place in your product or service.
Please mail your queries related to warehouse management to jayashree@ logisticsweek.com
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whether it is a sales call, support function, logistics, or using the products or services. Many companies use ongoing transactional satisfaction measurements to monitor customer service, support or sales groups overtime. Image-based satisfaction: Every customer and supplier has formed an overall impression of your company. These opinions are based on the sum of their transactions, their beliefs about your competitors, the value they place in your product or service, and the impressions that their friends or colleagues may have shared. Regular image-based analysis is vital to understanding the company's strategic position with their customers and in the marketplace. Both this types can be made into a questionnaire which can be circulated at regular intervals to custom-
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2011| www.logisticsweek.com
ers and suppliers. The results of these surveys should be an analysis to draw improvement programs. Some of my clients are discontent with the number of manpower and fleet. I think we have enough manpower to manage the work. What would be the best way to allocate manpower efficiently? Adding manpower or number of fleet may not necessarily lead to increase in efficiency of work. Efficiency of manpower depends on job training, the resources provided and the monitoring done. Planning in terms of layout and route is also required to help increase efficiency. Wastage of time in unnecessary movements/excess motion of manpower due to improper layout, and waiting time for the lack of material handling equipment can be reduced to a great extent if apposite planning is done. Manpower efficiency index can also be derived by using techniques like work study and time-motion study to see how much manpower is required to do a particular job based on which you can also do internal benchmarking. According to SLAs I have signed with a user company, the onus of paying for damaged or lost goods becomes my responsibility. What are the terms I could sign with my clients in future wherein I incur minimum losses? How can I, as a warehouse manager, avoid the occasion of damaged goods in transit? Most customers would prefer not to apply for transit insurance and likely want the 3PL to take that responsibility. You can also take Goods in Transit Insurance which will insure you against loss, damage or theft when your goods are on the move. In case you donâ&#x20AC;&#x2122;t want to take this responsibility, then the same should be clearly communicated to the customer during the agreement stage itself for which you can take legal opinion. Most in-transit damages happen at the time of loading and unloading hence care should be taken during both times. Proper packing using multi-walled corrugated cartons that have undergone a bursting test to determine the amount of load it can take can reduce your chances of damaging goods. In order to arrest in-transit losses, direct routing of vehicle from origin to destination should be done eliminating unauthorized stoppages. Secure trucks with high quality, tamper-evident security seals and real-time tracking of the shipments will also control the losses.
14th-16th September, 2011 - The Zuri White Sands Resort, Goa The first exclusive Strategy Workshop on the Logistics Industry, ‘Future Supply Chain Strategies’, conducted in 2010 by Frost & Sullivan’s Transportation and Logistics Practice, established a unique platform for the logistics service providers (LSPs) and end users to deeply explore the state of supply chains in key industries, identify the challenges, ways to address them, and above all, envision the potential strategies for future supply chains of these industries. This year’s workshop titled “Future Supply Chain Strategies - THE WAY AHEAD” would serve as a platform to bring together all logistics end users and service providers under one roof and discuss the need for a combined effort from both the groups through collaborations, trust, and building relationships. Investments made through collaborations between service providers and end users would result in visibility and real-time information, and lead to the ideal future supply chain. This workshop aims to deliver a roadmap for this.
Key Benefits of Participating in the Workshop • Gain insights and learn about specific tools for actionable strategies for critical supply chain issues
• A platform to ideate and evaluate along with peers and leaders from key industries on the best possible methods and practices for future supply chains and develop practical, feasible, and sustainable models of supply chains for the future that can be implemented
Whom to Expect The workshop intends to assemble a network of today’s best thinkers, visionaries, and thought leaders from across the following key sectors: • Logistics Service Providers • Logistics Service End users Leading Companies from the Key Industry Sectors within the country including, - Automotive, IT Hardware and Telecom Equipment, Pharmaceuticals, and Retail • Logistics Infrastructure Providers Leading Providers of Logistics Infrastructure within the country, - Operators of Logistics Parks and Free Trade Warehousing Zones, ICD, CFS, and ports
Frost & Sullivan welcomes you to be an integral part of this Interactive – Path Finding – Only One-Of-its kind Strategy Workshop! Event Registration Fee: For 1 Person: INR 100,000/- + Service Tax @ 10.30% For 2-3 Persons: INR 90,000/- (per person) + Service Tax @ 10.30% Includes strategy workshop sessions participation, compendium, stay at The Zuri White Sands Resort, Goa during the summit, along with breakfast, lunch, cocktails, and dinner at the venue, pick up and drop facility from the Goa Airport Platinum Sponsor:
Associate Sponsors:
Media Partners:
To Register and know more about the event contact: Subir Shah; P: +91 22 6607 2031; M: +91 99875 41051; F: +91 22 2832 4713; E: subirs@frost.com Srinath Manda; P: +91 44 6681 4382; M:+91 98848 72788; E: srinathm@frost.com Priya George; P: +91 6681 4371, M: +91 98403 55432; E: priyag@frost.com For more information please visit: www.frost.com/FutureSupplyChainStrategies2011
< pAnoRAmA OFF THE SHELF
Getting It Right With Statistics
D
ata mining is the process of automatically searching large volumes of data for models and patterns using computational techniques from statistics, machine learning and information theory. This book looks at both classical and recent techniques of data mining, such as clustering, discriminant analysis, logistic regression, generalized linear models, regularized regression, PLS regression, decision trees, neural networks, support vector machines, Vapnik theory, naive Bayesian classifier, ensemble learning and detection of association rules. The book presents a comprehensive introduction to all techniques used in data mining and statistical learning,
from classical to latest techniques. It starts from basic principles up to advanced concepts and includes many step-by-step examples with the main software (R, SAS, IBM SPSS) as well as a thorough discussion and comparison of those software. The authors look at a range of tools and applications, such as association rules, web mining and text mining, with a special focus on credit scoring. Data mining and statistics for Decision making By StĂŠphane TuffĂŠry Publisher: Wiley Price: `4,530
Cover It Right
T
he revised and updated second edition provides a contemporary overview of food processing/packaging technologies. It acquaints the reader with food preservation processes, shelf life and logistical considerations, as well as packaging materials, machines and processes necessary for a wide range of packaging presentations. The new edition addresses environmental and sustainability concerns, and also examines applications of emerging technologies such as RFID and nanotechnology.
It is directed at packaging technologists, those involved in the design and development of packaging, users of packaging in food companies and those who specify or purchase packaging. Food and Beverage packaging technology, 2nd edition By Richard Coles, Mark J. Kirwan Publisher: Wiley Price: `9,062
Red Hot Metal
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his symposium aims to explore the current state-of-the-art in control of industrial processes in the field of extraction and processing of metals and materials. New sensor technologies, more advanced real-time models, and faster computers are enabling better control systems for these processes. Specific topics include but are not limited to: (1) novel sensors for hostileenvironment materials processes, such as online inclusion detection, temperature, and velocity in molten materials, etc.; (2) innovative online sampling and analysis techniques, (3) models for real-time process control and quality monitoring systems; (4) process automation, scheduling, and plant-wide logistics optimization,
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(5) control of composition, microstructure, and morphology in sintering, smelting, refining, solidification, reheating, deformation, and transport of ores, slags, mattes, metals, materials, and aqueous solutions; (6) prediction, control, and optimization of process parameters; (7) control in manufacturing processes; (8) control of impurities in product and waste streams. sensors, sampling, and simulation for process control By Brian G. Thomas, James A. Yurko, Lifeng Zhang Publisher: Wiley Price: `4,076
July 2011 | www.logisticsweek.com
BloGospheRe on thhe Right Road Blogger: Dan Goodwill Goodwill writes on his blog that a cost-effective supply-chain can be a competitive weapon. Companies such as Wal-Mart have reaped significant financial rewards from their skills in managing their supply chain costs. It is common for companies to over-spend on logistics costs, particularly in freight transportation. Here are some telltale signs that may suggest the need for a transformation of the transportation function within an organization: n Key categories of freight spend (e.g. fuel surcharges, line haul rates, accessorial charges) are sourced once without ongoing cost reduction or supplier development strategies other than re-bidding out of contracts prior to expiration. n A formal freight RFP exercise has not been conducted in the past five years. n T he organization doesn't track the implemented results of its sourcing efforts on a total freight cost and budget impact basis. n T he company’s freight audit team, whether internal or external, is not routinely identifying opportunities for cost. savings in terms of process or freight charges. n C ommunication with freight carriers is limited and noncollaborative. n F reight bids are sent every few years to the same limited set of carriers. n I nbound and outbound freight transportation are managed separately and not linked effectively.
ResouRce centeR UPS: Inventory in Motion By United Parcel Service In its paper on maintaining minimal inventory, UPS speaks of how logistics visionaries have talked for years about eliminating—or, at least, drastically reducing—the role of inventory in modern supply chains. The death of inventory would mean reduced logistics costs and simplified fulfillment. What’s more, two accelerating business trends are making it even harder to synchronize supply chains. First, global sourcing is forcing supply chains to stretch across borders. When goods cross borders, considerations such as fulfillment speed and inventory costs get more complicated. Second, powerful retailers and other end customers with clout are starting to push value-added supply chain responsibilities further up the supply chain. More customers are asking manufacturers or 3PLs to label and prepare individual items so the products are ready to
If the management of freight transportation in your company exhibits patterns that are consistent with five or more of the above listed issues, it is time to create a freight management transformation plan. No company should enter freight management without realizing that such programs will nearly always result in: Restructuring; Potential turf battles with Purchasing, and Technology and process change. search tags: freight spend, freight audit
Answering users' Questions Blogger: Arun Kumar Kumar in his blog mentions a well-known fact: Users are highly goal-driven on the Web. They visit sites because there's something they want to accomplish -- maybe even buy your product. The ultimate failure of a website is to fail to provide the information users are looking for. Sometimes the answer is simply not there and you lose the sale because users have to assume that your product doesn't meet their needs if you don't tell them the specifics. The worst example of not answering users' questions is to avoid listing the price of products and services. It's rife in B2B, where most "enterprise solutions" are presented so that you can't tell whether they are suited for 100 people or 100,000 people. Price is the most specific piece of info customers use to understand the nature of an offering, and not providing it makes people feel lost and reduces their understanding of a product line. search tags: user information, price on website
Journals, Case Studies, Research Reports go straight to store shelves. With added responsibilities, of course, come added costs. So suppliers are looking to squeeze more costs out of other areas of the supply chain. A growing number of companies are overcoming these barriers by taking a more direct approach to global fulfillment. This direct-to-store approach keeps inventory moving from manufacturer to end customer by eliminating stops at warehouses. Because companies can shrink the fulfillment cycle and eliminate inventory costs, directto-store can offer a good balance between fulfillment speed and logistics costs. Search Tags: direct-to-store, cross-border goods
Logistics Professionals Need To Manage Change By Harsco Rail Kuehne+Nagel’s journal speaks of how logistics professionals need to manage change. Most change is driven from the top.
For changes of this magnitude, logistics leaders can adopt two approaches: 1. Wait for the change to happen (and it will) and say: "We don’t have the infrastructure to support it. Give us 12 months." 2. Build an infrastructure NOW – that is flexible enough to manage future changes. Take here an example of a pharmaceutical company who needed to reduce overhead costs to drive shareholder value after a multi-billion dollar merger with another firm. Here, shared warehousing provides a strategic solution to a real business need. But despite the advantage of such an option, many 3PL firms are focusing less on managing shared space for multiple clients. Why? To minimize financial risk. But the demand for shared warehousing remains strong. And the ever-increasing pace of change in today’s business world will likely heighten this demand and the availability of such services. Search Tags: warehousing, managing change — Compiled by Jayashree Mendes
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< pAnoRAmA lAunchpAD Solution
D-logplus
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ENCO Supply Chain Solutions' warehouse management system (WMS) - D-LogPLUS - optimizes the distribution process. D-LogPLUS offers all the efficiencies of a Tier-1 WMS package and is scalable to any size operation. It supports many warehouse functions, including automatic alert notification, travel path optimization and multi-site/multi-company configurations. The open architecture of D-LogPLUS makes it easy to integrate into a wide variety existing systems for real-time visibility and accurate reporting. Using D-LogPLUS, GENCO Supply Chain Solutions' customers can manage all of their inbound and outbound needs and everything in between. It provides overall management control, which optimizes processes and planning while reducing errors, inventory, transaction costs and order cycle times. D-LogPLUS supports many options for tailoring picking and can manage staging, loading and departure of shipments. Tracking carrier arrivals and departures has never been easier. D-LogPLUS can be integrated with GENCO Supply Chain Solutions' Tier I transportation logistics system powered by Sterling Commerce or another freight
management system to provide complete supply chain visibility. Because D-LogPLUS tracks inventory from the time it arrives on the receiving dock until it departs from the warehouse, it can collect information about virtually every transaction. Complete visibility to the supply chain is provided through a Web portal via the Internet or Intranet using a standard browser. D-LogPLUS also provides both hard-copy reports and analysis tools to review data. Key Features: Global supply chain visibility Scalability through an open architecture Optimized warehouse operations with configurable, rule-based system direction Real-time inventory and order status visibility using Oracle's Discoverer Business Intelligence Tool Reduced back orders as much as 70 percent or more, in just one year's time Manufacturer: Genco Supply Chain Solutions Selling Point: Optimizes processes and planning
Product
track & trace
B
ayer Technology Services is an experienced and reliable partner for professional Track, Trace & Authentication applications (TTA). The complexity of product ranges is leading to divergent supply chain structures that are difficult to follow. Serialization and professional TTA applications enable the protection of products and traceability along the entire value added chain. Counterfeit products and the theft of medical products and consumer goods, in particular luxury goods and branded articles, result in annual losses of billions of dollars. The customized TTA solutions offered by Bayer Technology Services help to reduce such losses over the long term. Serialization using 2D matrix codes or RFID transponders allows original goods to be verified in bulk or individually at the point of sale (POS). The authentication technology ProteXXion is free of visible markings
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and enables the tracking of goods and protection against counterfeiting along the entire supply chain, as well as providing consumers with the reassurance that they are buying a genuine product. The security provided by this surface authentication platform even exceeds the security standard of biometric procedures, such as iris scans or fingerprint scans. The unique surface characteristics of any object scanned with ProteXXion allow the object to be identified as genuine. ProteXXion enables a guarantee to be given to customers about the authenticity of an object, with no risk of it being counterfeit. The ability to trace a product along the supply chain delivers an extremely high level of security for customers, especially for products with a limited shelf life, those that are important for safety and for pharmaceutical products. Key Features: Allows original goods to be verified in bulk Allows objects to be identified as genuine Manufacturer: Bayer Technology Services Selling Point: Helps trace products with limited shelf life
Advertorial
Entrance Automations and loading bay equipment company Gandhi Automations Offers Traffic – High Speed fold-up door with modular sections. n Sturdy, dependable and modular…the ideal solution for medium and large entrances Fast moving functional and reliable doors are what is needed in industrial and commercial contexts. Traffic high-speed fold-up doors, are versatile and solid ensuring long-lasting reliability. The modular structure of the curtains, assembled and joined by anodized aluminium extrusions, provides for a wide range of polyester sections available in a variety of colours. n Wide, full-width window panels ensure a safer traffic and allow more light in. Their fast and easy replacement, in case of accidental tearing, will save money and time. The alternating metal tubular structure there inserted ensure Traffic high windresistance. Traffic doors are the ideal solution for external entrances and effectively operate in any situation, even when strong winds are blowing, in rooms with high volume traffic. Sturdy and dependable, traffic is the intelligent door for medium and large entrances. n Functional and cost-effective. Versatile, with modular panels. Traffic is composed of a flexible curtain with modular sections inserted in rugged,
metal tubular structures. Curtain modularity allows for various arrangement either to suit different applications, or replace possible tearing or damage due to accidental crashes. Traffic shows great versatility in that it can be realized by joining flexible, blind sections with one or more wide transparent PVC ones. Curtains are available in their standard versions as well as in their standard versions as well as in their strengthened one, according to different wind-resistance requirements. Easy and quick installation The crosspiece mounted over the sturdy uprights, makes the installation of the door easier. All transmission mechanisms are housed and shielded there. Quick polarized wiring ensures quick and accurate electric connections. High safety and reliability Traffic sturdy, integrated structure can withstand extremely heavy workloads. Its infra-red photocells, located on the uprights, ensure high safety standards. On the safety edge a self-controlled photocell device or a pressure-switch, electro pneumatic system can be installed to activate the immediate reverse of the curtain movement in case of contact with an obstacle. It is provided in aluminium ex-
YALE-MAINI CO-Branded ERP15RCF (1.5t) This 3-wheel, rear wheel drive, electric forklift truck offers a cost-effective solution for medium duty application requirements. A compact and highly maneuverable truck, ideal for use in confined areas, the RCF delivers high performance and productivity at low operating cost. Key features: n 24 volt system, super cushion tyres n Energy efficient SEM traction motors and MOSFET controller
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n Auto regenerative braking increases battery, brake and brush life n Transistor hydraulics increase battery life and reduce component wear n Service accessibility and diagnostic fault code facility reduce downtime n Variable wheelbase increases longitudinal stability and reduces stacking aisle dimensions Spacious and comfortable operator compartment, with light steering and exceptionally low noise levels which contribute to reducing driver
July 2011 | www.logisticsweek.com
Fold Up Doors
trusion with a rubber ledge and this is the standard version also suitable for all other DITEC doors. The Modular counterweight balancing system with strong traction belts, enables the motor to work with minimum working stress. Moreover, the counterweights ensure the curtain safety holdback. The Emergency lock release, available on both sides of the door, provides for semi-automatic re-opening of the curtain by releasing the counterweight system. Gandhi Automations Pvt Ltd 2nd Floor, Chawda Commercial Centre, Link Road, Malad(w), Mumbai – 400064 Tel-022/66720200/300(200 lines) emailsales@geapl.co.in Website – www.geapl.co.in
< EVENTS
A PUBLICATION OF HAmBUrg mEDIA grOUP
J u l y 2 0 11 July 1 – 4, 2011 IndIa logIstIcs show hyderabad hyderabad International trade exposition centre(hIteX) Being hosted at Hitex Exhibition Center, Hyderabad, India Logistics Show Hyderabad is characterized as an entrusted meeting place for the logistics sector. For four days, the show will be classified as an eminent platform which will facilitate display of latest trends and innovations of logistics sector. The show will be organized by Print Packaging.Com Private Limited and will prove to be a podium which will facilitate direct dialog with leaders, associations and others. Profile for exhibit includes supply chain system designers & integrators, cold chain, sorting, grading, cleaning, warehousing systems, material handling, weighing, testing equipment, software, back end support and other services. organized by: Print Packaging.Com Private Limited Tel: +91 22 27812619/27812093/27812657 July 01 – 04, 2011 Pack Plus south 2011 hitex exhibition center, hyderabad Pack plus South 2011 is one of the most awaited events for the printing and packaging industry. The expanding packaging industry in India is highly competitive and new age solutions are urgently required. This exhibition will help the cause of the entire industry by bringing together major suppliers and buyers together under one roof. The event will also feature a conference aimed at addressing the major issues faced by the print and packaging industry. Exhibitors to the event will come from the following industries: printing and packaging services, pre-press services, graphic arts and design services, printing & packaging materials and accessories, consumables, finishing & converting services, latest printing and packaging technologies, equipment & accessories, multimedia technologies and services, equipment repair and maintenance services, digital inkjet printing & signage production services, and printing & packaging machineries and equipment. organized by: Print Packaging.Com Private Limited Tel: +91 22 27812619/27812093 July 08 – 11, 2011 subcon IndIaMart codissia trade Fair complex, coimbatore SUBCON IndiaMART is an event dedicated to the subcontract manufacturing services that will take place at Codissia Trade Fair complex, Coimbatore. Large OEMs and smaller companies will be the main visitors at the expo. Informative seminars featuring reputed speakers will serve as a source of knowledge and information. 64
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Exhibitors at the event will include: gear manufacture/broaching, grinding/drilling/boring, metal forming and pressings and spinning, Castings and forgings, fabrication and sheet metal work, turning and milling and machining, metal joining and welding, and finishing and surface engineering. Contract electronics manufacturers are also invited. organized by: CODISSIA Trade Fair Complex Tel: +91 422 2221582/2222409 July 14 - 17, 2011 access - MachIne tools & engIneerIng eXPo chennai trade & convention centre, chennai ACCESS - Machine Tools & Engineering Expo is a four day event that covers all aspects related with Machine Tools & Engineering, providing a one-stop shop for all the traders. Beyond its trading excellence, the event will also act as a hub for networking between all the major players in the industry by serving as a stage for discussions and interchange of innovations. Automation & Instrumentation, welding machines, drives and gears will be some of the main exhibits at the expo. The event will take place concurrently with ELECXPO which is another highly anticipated event by Smart Expos. Some of the exhibitor’s present at the event will be: Shears grinding machines, energy, air compressors, hydraulic & pneumatics, automation & instrumentation, motors, CNC machines, machine tools, metal working, metal forming, metal cutting machines, material handling, welding equipment, and pumps & valves. organized by: Smart Expos Tel: +91 44 28604087/28603086 July 28 and 29, 2011 the ManuFacturIng eXPo (tMeX) world trade centre, Mumbai The Manufacturing Expo (TMEX) is deals with the promotion of manufacturing industry. For the welfare of this industry, Exito group is organizing TMEX at World Trade Centre in Mumbai. This three day event will take a comprehensive approach towards the industry, dealing with all major aspects. New ways of using IT and other distribution channels for the collective growth of the industry will be pondered upon at the event. Major decision makers and exhibitors from India and across the globe will be present at the venue. Exhibitors at the event will include: Raw Materials & Consumables, Rubber & Plastics Machinery & Equipment, Safety Equipment & Clothing, Surface Treatment, Testing & Diagnostic Equipment, Turnkey Solution Providers, Warehouse / Factory Infrastructure, Automation & Robotics, and Control & Measuring Equipment. organized by: Exito group Tel: +91 80 42039851
July 2011 | www.logisticsweek.com
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