LogisticsWeek May 2012 by Frewin Francis

Interview

Column

Arnie Bornstein, Head, Corporate Communications, BDP International is a frequent visitor to Singapore to keep in close contact with his business associates.

It was President John Kennedy who said, “A rising tide lifts all boats.”

We never rest on our laurels

CSR: Magic Or Myth?

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May 1-15, 2012

Future Supply Chain Eyes Private Equity Funding To Drive Growth

uture Supply Chains, India’s largest supply chain company, plans to raise a second round of private equity funding to diversify into new consumer-driven sectors as retail growth in the country shows signs of moderation. The company, part of the Future Group, which runs the country’s top retailer Pantaloon Retail, earns most of its revenue providing services to affiliated companies such as the Big Bazaar hypermarket chain. “Retail industry’s expansion plans in the past 1-2 years have been witnessing a scale-down,” Chief Executive Anshuman Singh told Reuters. “So we identified drivers of growth in the consumer-driven sectors instead of focusing just on retail.” High inflation and interest rates have hurt consumer spending which alongwith a lack of funding and high real estate costs has hurt expansion plans of Indian retailers. Expectations that India’s capitalstarved retail industry would get a boost from the entry of global chains such as Wal-Mart Stores Inc and Carrefour were thwarted late last year when India back-

The company plans to use the funds to invest Rs 4 billion to expand its warehouse capacity. tracked on a plan to allow foreign supermarkets. Future Group has had long-running talks about joining forces with Carrefour when the French giant enters the India market. Future Supply Chains, which is looking to the consumer goods, autos and pharmaceuticals industries to power growth, hopes to finalise private equity funding in the next three months, Singh said, without giving details. It also plans to serve the burgeoning online commerce market. The company plans to use the funds to invest Rs four billion to expand its warehouse capacity. In 2009, it received $30 million from Fung Capital, the private equity arm of Hong Kong-based supply chain giant Li & Fung Group.

Don’t Look For Perfect Fruit News Desk

Mitigation of food wastage is the core concept that must drive thought behind India’s food supply chain development, whether cold or ambient. Cold is when food is put under refrigeration through application of energy and ambient is when it is not. Our cold chain must step in to prevent food losses, while preserving nutrition and taste. Heaps of good food is wasted when there is a grading process and aesthetics (the look of the food item) is emphasized. India does not need this misplaced direction. We can’t waste and we do not have a choice.

We have poor farmers on one hand and the case of millions of hungry on the other. We have spiralling demand driven food inflation and we have pressure of rising population. If India fails to solve the puzzle of its food losses, India’s social economy will be forced to enter the ‘oneway only’ road to devastation. The world can waste food but India absolutely does not have that liberty. Food is wasted from production all the way to plates — and this happens everywhere in the world. According to the Food and Agriculture CONTINUED ON PAGE 4

The company hopes to earn between 50-60 percent of its revenues from external clients in 2012/13 from 40 percent now. The supply chain industry is in its infancy in a country where cities can be thousands of miles apart, connected by pot-holed roads or creaking railways, and an estimated 30 percent of fresh produce spoils before it gets to market. Big chains such as Wal-Mart have ar-

gued that they can invest heavily into supply chain infrastructure. Singh downplayed any disappointment over the delay in foreign supermarkets entering India. “Our business plans are independent of whether or not Walmart or Carrefour come in. If they do, we are prepared. But in the coming years, the share of retail in our growth will be very small,” Singh said.

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Editor’s Note Woman On Top I was pleasantly surprised to be talking to a woman who heads the supply chain of a mid-sized company manufacturing a mass market product. And while she has earned several laurels in handling a supply-chain that calls for austerity measures, other things surprised me too. She has spent the first 15 years of her career setting up chemical and steel plants and helping them to realize commercial production. Not a big deal. But having worked for a supply-chain and logistics magazine for almost three years now, this is the first time I met a woman heading (actually executing) the daily grind of logistics and the supply chain for a company. And although the lady discussed here may like to say that supply chain happened by chance, she has done some pretty marvelous work. At a time when companies are constantly targeting the high maintenance supply chains within their companies, seeking out a woman makes sense. A woman brings with her a sense of balance, and make good managers. Especially in supply chain, giving the reins to a woman would also assure controlled costs. Since certain costs are imperative, she would know what corners to cut. I would like to suggest that more women enter the supply chain industry instead of turning up their noses thinking that it’s a man’s domain. Since we write exclusively about supply chain, we should know.

Jayashree K Mendes Editor, LogisticsWeek

Chief Editor and Publisher: Jacob Joseph Puthenparambil jacob@logisticsweek.com Publishing Director: Jayaram Nair jayaram@logisticsweek.com Group Editor: Anand Pandey aanand@logisticsweek.com Editor: Jayashree K Mendes jayashree@logisticsweek.com Editorial Executives: Anuja A, Pritha Dey Chief Designer: Shivasankaran Pillai

News From Elsewhere

Some significant events and news that took place last fortnight.

Highmark Starts SCM Firm Highmark Inc., the state’s largest health insurance company, has started a supply chain management company under the leadership of a former UPMC executive that the insurer says will help hospitals reduce costs. ProtoCo Supply Chain Partners is the latest addition to Highmark’s emerging integrated health care delivery system. The new system, to be anchored by the five-hospital West Penn Allegheny Health System, is being established by the health insurer to compete with Western Pennsylvania’s dominant hospital system, UPMC. ProtoCo Supply Chain Partners will manage the supply chain and handle purchasing for West Penn Allegheny, which Highmark is trying to buy for $475 million. The acquisition awaits approval from the state Insurance Department. ProtoCo, which has 50 employees in Pittsburgh and expects to add 30 by the end of the year, hopes to save West Penn Allegheny $100 million over the next five years. West Penn Allegheny spends about $480 million a year buying supplies for its hospitals, the company said. St. Vincent Health Center in Erie and the five-hospital West Virginia United Health System have signed up to have ProtoCo manage their supply needs. And the company is in discussions with other hospitals. In addition to the West Penn Allegheny acquisition, Highmark has said it will spend $500 million on its integrated delivery system to acquire private physician practices, build outpatient centers across the region and provide other services. Highmark and UPMC announced a deal that will allow Highmark members to retain in-network access at UPMC facilities through the end of 2014. The two organizations’ previous reimbursement contracts had been set to expire on June 30, 2013.

Panalpina Selects RedPrairie Supply Chain Suite RedPrairie Corp., a global supply chain and retail technology provider, has entered a strategic partnership with the Panalpina Group to provide a complete supply chain execution platform to support the expansion of Panalpina’s worldwide logistics operations. Panalpina will be able to benefit from RedPrairie’s extensive supply chain suite including warehouse, workforce, and transportation and billing solutions. Panalpina is one of the world’s leading providers of supply chain solutions, combining air and ocean freight with a wide range of value-added logistics and supply chain services. Operating a global network with 500 branches in more than 80 countries, Panalpina also works closely with partner companies in an additional 80 countries. Panalpina employs approximately 15,500 people worldwide.

Brightstar Selected As dtac Thailand’s Exclusive Supply Chain Provider Brightstar, the world’s largest specialized wireless distributor and a global leader in services and solutions for the wireless industry, has been appointed as the exclusive supply chain provider to dtac Thailand, one of the country’s leading mobile operators and part of the Telenor Group of Companies. This three-year agreement includes

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strategic sourcing, device management, supply chain planning, channel support and warehousing and logistics services. “This agreement between Brightstar and dtac couldn’t have come at a better time, as smartphone adoption has accelerated, and Thailand is gearing up for the roll out of 3G networks,” said dtac spokesperson Petter Furberg, Chief Marketing Officer of dtac. “Brightstar’s proven track record and end-to-end suite of supply chain services will enable dtac to surpass our customers’ demand for devices, and leveraging our new network capabilities will open up a world of new and exciting communication possibilities for them.” The dtac agreement is part of a growing list of supply chain service engagements led by Brightstar on behalf of leading operators around the world. In mature markets, such as Thailand, Brightstar helps operators increase consumer loyalty and drive ARPU by delivering a better and standardized product and service, resulting in an improved end-user experience. “We are pleased to work with dtac, as they continue their 3G build out, which is driving increased smartphone demand,” said Arturo Osorio, President of Brightstar Asia Pacific, Middle East & Africa. “Our services will provide a complete end-to-end supply chain solution that includes sourcing 3G devices and improving online stock and claimed product monitoring and tracking to ensure product availability for dtac’s customers.” Brightstar’s services help customers improve the execution of their core business strategy by managing the wireless customer relationship, increasing customer satisfaction and optimizing the performance of their supply chains.

Amazon Supply Fuels Disruptive Force To Industrial Supply Chain Amazon has launched a new online e-commerce offering — AmazonSupply.com — which is aimed at business, scientific and commercial customers and offers products like abrasives & finishing, cutting tools, fasteners, fleet & vehicle maintenance, hydraulics, pneumatics & plumbing, janitorial & sanitation, lab & scientific, materials, occupational health & safety, office, power & hand tools for sale. It offers more than 500,000 items and the same shipping terms as its regular customers – free two-day shipping for purchases above $50 and Amazon Prime members. It also offers a free 365day return policy, a dedicated customer service center and lines of credit for businesses. [1] Amazon, which launched as an online book store has branched into many different verticals, and now sells almost everything online. Amazon Supply originated from Amazon’s acquisition of Small Parts in 2005. Small Parts initially targeted just the medical supply and research industries, but Amazon is clearly aiming much higher now. After disrupting the consumer retail space, it is now targeting the business, industrial, scientific and commercial customers — essentially the supply chain. Amazon competes in the e-commerce and e-content space with companies such as eBay and Apple. We currently have a $205 Trefis price estimate for Amazon, which stands nearly 5% above its market price. Its e-commerce business accounts for almost all of its value.

would be pleased to receive amendments for possible inclusion in future editions. Opinions reflected in the publication are those of the writers. The publisher assumes no responsibilities for return of unsolicited material or material lost or damaged in transit. All correspondence should be addressed to Industrial Sourcing Media Private Limited.. All disputes are subject to the exclusive jurisdiction of competent courts and forums in Mumbai only.

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4 CONTINUED frOm PAGE 1 Organization (FAO), the challenge of food loss is universal, regardless of technology differences. They peg world food losses at an astonishing 40-percent level. FAO works with the pristine agenda of making every possible ounce of grown food succeed in its journey to a mouth somewhere on the planet. I have provided expertise to the veritable who’s who of the global supply chain leaders of the west. However, in all my years with these companies, we never once claimed to be in the business of serving interests of the world’s hungry. Thankfully, I don’t see the business like that any longer. All that we did back then was to give our market every type of produce all the year round. Our cold chains were not engineered to reduce food wastage, they were there to concentrate on food aesthetics and quality. We did that gloriously well. The focus of the world has to change and fao is trying to bring this about. I am a convert. I am on mission to marry what I learnt in the west about food preservation with the loss prevention needs we have down here in India. A combination of the two

May 1—15, 2012 www.logisticsweek.com methods helps people do goodbusiness and do good both at the same time. The world must lead India and India certainly must lead the world in reducing wastage. This is not just the new mantra of piety but this according to me is the new mantra of making loads of money. Going by FAO’s 40-percent wastage rule and applying it to India’s agri-GDP figure leads you to a realm that will shatter Warren Buffet’s own train of thought. There is a $100-billionper year opportunity hidden in India’s annual food wastage vault. Using cold chain applications in transportation and storage, quite a fair portion of this produce can immediately be saved. Cold stores are necessary to preserve seasonal baseline staples like potatoes. Like my pal P Kohli, the cold chain expert, says with the cold chain you buy time. This buying of time in the cold store is really an essential for food supply planning, not just profiteering. The cold chain is a virtual food creator. It brings to the market food that would otherwise be lost. So it is a good immediate step. Finally, it is higher yields that will really breathe life into the farming sector in India. That

will, of course, spin from aggregation of farms, if and when India can make the contract farming concept kosher. Right now, land-leasing is a can of worms no politician has the guts to touch — even if it is not an impossible change to promote and execute. The right politics to achieve this and much more is not far for India. Educated kids of farmers will not fight each other but will combine their holdings for mechanized farming to become possible. That is when the big change will come. The cold chain can start a side revolution of increasing produce numbers to market and do so by converting waste into wealth, without imposing on anybody’s revenue. Cold stores don’t make vast commercial sense in the present environment. The warehousing deficit, especially cold storage, will find ways to progress from a chain cost model into a chain value model. And this puzzle will be solved with new eyes of the educated young that look at old problems with a more enabled outlook. Some people in government talk of agri-market reforms but it is not easy to pull this off

Cold stores don’t make vast commercial sense in the present environment. The warehousing deficit, especially cold storage, will find ways to progress from a chain cost model into a chain value model. surgically. We must take cold chain awareness to the grassroots because this ‘cold swell’ will make farmers learn of alternative routes to market. They don’t have to be at the mercy of a poor solution. Cold chain can fire that change. Government is going to have to understand that this swell can be stirred through awareness and capacity building and never by doling out diktats and subsidies. Cold chain is the market lifeline for the farmer because it buys him alternatives to capitalize on his produce. India’s cold chain must carry what the farm produces. This is where the west makes a mistake. The uniform-size same-color fruit is a result of a lot of rejections. This picking and choosing sounds like a completely insensitive idea when you know that 25,000 people die of hunger every single day in the world. I

should not care about the beauty of my fruit if it comes at such a cost. India as the mother heritage of humanity must not fall for fascination. Our cold chain is meant for preventing food loss and not for pampering the rich — we should not forget this. Our bananas are tasty enough. We certainly don’t want to waste the bunches that bend at a different angle and do not have stickers pasted on each one. Like the apples from New Zealand that surely can’t keep doctors away more than our Golden Delicious can. We are a sane nation with strong preservation instincts: our cold chain needs to assimilate that ethos. May no food be wasted, may no one ever go hungry. Via cold chains.” Sushil Bhan is a strategy and technical operations veteran of 25 years. This article was written for Tehelka.

May 1—15, 2012 www.logisticsweek.com

INTERVIEW

“ We never rest on our laurels” Arnie Bornstein, Head, Corporate Communications, BDP International is a frequent visitor to Singapore to keep in close contact with his business associates. Serene Pan, our correspondent in Singapore, caught up with him during one such visit. You have come a long way from 1966 from being a freight forwarder to handling intimidating logistics of oil & gas, chemicals, healthcare, etc. How have you gathered the skill sets along the way to mature to this stage? We are a privately, family-owned company as well as a non-asset based business. Our three most precious assets are: people, processes and technology. The company was founded in 1966 and in 2011 we celebrated its 45th anniversary. Over the years, the developments of our services are skill sets and technology. Our business model is customer intimacy model. The company’s strategic direction has always been and will continue to be driven by our customers - what they need, where they are growing, what markets they are moving to. We are a US-based company that is based in Philadelphia. When I joined the company 15 years ago, we had 1100 employees, now we have approximately 3400 employees around the world. The fastest growing regions are in Asia-Pacific, followed by Latin America and the Middle East. Singapore is where our regional headquarter is located and has been part of BDP Enterprise since 1995. In essence, our strategic direction has always been driven by our customers. You manage lead logistics for some of the world’s largest manufacturing companies? What is the difference in lead logistics and other services that you offer your clients? When it comes to international trade and the transportation logistics and logistics aspects, one of the things that differentiate BDP from our larger competitors is that we look at each customer’s needs as being unique. So rather than a one-size-fits-all solution, we go to our customers, listen and ask questions to understand their needs better. Above and beyond the core services that we provide, we endeavor to earn the privilege to be able to combat what our client has set and after listening and research, we turn to them with recommendations on how they can remove or avoid costs in the logistics and transportation processes. Doing all of those often set out greater visibility which of course, is where our technology tools came in. Our founder Richard Bolte Senior realized way back in the 1970s that the information about the movement of cargo was going to be as just as important and sometimes, from a strategic standpoint, more important that the physical movement of cargo. So, dating back to the 1970s, BDP began to invest very significantly in IT. Today, more than 10% of our employees are IT professionals around the world. But at the end of the day, it is ultimately about designing, listening to our customers and rolling up our sleeves and going back to them with process improvements that are going to avoid or remove costs from the per unit delivered price of their goods. You offer your clients BDPSmart to enable them to track and trace their consignments, among other things. Could you explain in detail how BDPSmart works? BDPSmart is an online sweep of customer service applications that provide both tactical information for front line decisions support as well as strategic information that enable our customers to improve processes and re-

tools. A few years ago we were using PC, yesterday it was a laptop but today it is a tablet. We have an internal team we call BDPSmart Next Generation and they are constantly developing what that next generation tool is and every quarter, new updates with fine tunes are released.

duce costs. From a tactical standpoint, real-time information is the physical status of the movement of their cargo from as well as the status of the documentation, such as a clearing outbound regulatory agencies, inbound customs clearance and meeting the regulatory requirements of clearing customs. It is very much a tactical tool that a logistics transportation manager would look at, but at the same time it is also a strategic tool given its robust ability to create performance metrics around a variety of activities in the logistics and transportation process. One of the other aspects about the tool from a reporting standpoint is that BDPSmart can provide information to a number of cross functional stakeholders, such as procurement, logistics, regulatory and compliance functions in the customer’s company. Each of these cross functional stakeholders can configure and customize BDPSmart to provide them with the necessary information they need to perform their roles more effectively and efficiently which in essence, improves their processes. In other words, BDPSmart is an intelligent program that pushes the relevant information based on your requirements every single day. BDPSmart utilizes applications that we have procured from technology companies such as Oracle. We have utilized external support, but the programming and the function is BDP-owned. Increasingly there has been a tremendous interest among our clients for BDPSmart due to its transparency and customizability functions which affect cost accounting associated with logistics and transportation. We never sit and rest on our laurels because of the fast pace of change and, of course, the rapid advancement in technology. Presently, we are exploring on how to migrate tool work onto tablets. Companies like BDP must be able to make it as easy and convenient as possible because increasingly our clients are migrating to these

Considering that you run operations at a global level and have a large clientele base, how do you juggle process control and management of multiple nodes for them? In essence, a lead logistics provider (LLP) manages other logistics service providers, as well as other nodes in logistics and transportation phase of the supply chain usually on regional or global bases. So, an LLP manages other providers as well as carriers, warehouses and part of that LLP solution involves bringing a single, standardized global process onto the table for the client. And the heart of this process is the visibility of information, information quality and access to that central depository of information that so many despaired nodes in the supply chain contribute to. Generally speaking, it is about managing other logistics providers and nodes in the process and being that central repository and manager of information and data that we turn for information, something which the client ultimately uses as knowledge for decision making. One of the things I mentioned earlier was that BDP is a privately-owned, family-owned company and this is one of those success stories that started with small beginnings. The company started with our founder who had a manual typewriter and a one-room office in Philadelphia in 1966. Today, we have about 3350 employees, fully-owned offices, with joint ventures or partners in approximately 120 countries. The ownership of BDP and the culture of the company have always embraced the small company customer service culture. A kind of service that a small store at the end of the block might have, where you get to know your customers, you develop these enduring relationships. The larger a company gets, the more challenging it is to keep that genie in a bottle so to speak, of zealous customer service and enduring relationships, but we hold on very closely to the business model of being small enough to care, but also being large enough to leverage value on a global scale. How do we do that? We work very hard not to operate like a large company as we want to establish strong interpersonal relationships and communication among BDP colleagues around the world. BDP people around the world know each other by name. Depending on the time zone, people can pick up the phone anytime and be in touch. A colleague from Hong Kong or Shanghai knows his/her counterpart on a first name basis in Brazil or Belgium. Much of it involves holding very close notion of keeping bureaucracy to a minimum and a flat management structure in the way we operate. So doing that needsgood interpersonal relationships, strong communications, great information visibility. E-mails are wonderful tool, but we really believe in picking up the phone and having that live voice on the line. The same thing goes for our customers. As I was using the analogy of a small corner store that a family CONTINUED ON PAGE 7

May 1—15, 2012 www.logisticsweek.com

Straights And Bends K

eep in mind that companies want to produce their product. They’re not so interested in producing all of these various subcomponents, so the more that they can get from less, as far as numbers of suppliers, the easier it is — provided their supply base does good work.

The year ahead will usher in the next big disruptor for the retail industry — digital voice technology. The conversation will be between the customer and the retailer and, increasingly, it will take place between the retailer and company data. The chatter has already begun.

Dane Belden, President, McGregor Metalworking Cos, on how his company always looks at shortening clients’ supply-chains.

‘L

ean’ is one of the components [of ] how we think about building better working conditions. Because we think it’s the business conditions that enable a lot of the additional work we do.

Hannah Jones, Nike’s vice president of sustainable business and innovation.

n the past year, 60-65 per cent of our business would have been touched by a relaunch or a new activity to strengthen or refresh our brands. That is the impact of innovation and the intensity with which we are treating innovation.

-- Nitin Paranjpe, MD & CEO, Hindustan Unilever,

t is wrong to assume that there is a bias against Indian employees at Maruti. Perhaps, it has not come to such a stage where they (Japanese management) completely trust Indians to handle the company, which has now become very big.

on how innovation will play a key role in defining the future of the company.

doption of digital technology is something every institution needs to embrace for getting better insights. This propels a shift towards adoption of cloud, mobile, big data. These are driving growth.

Maruti Suzuki Chairman Bhargava , on why there has been no Indian representation on the board.

here is no point in entering a market unless there is a potential. Which is why we are now expanding aggressively in India, especially in the tier-2 and tier-3 cities.

Harikirat Singh, MD, Woodland, on his decision to open 60 stores this year alone.

N Chandrasekaran, MD & CEO, TCS, on why banking, financial services and the insurance sector continue to be under pressure.

hen we joined this project, we just had a piece of land. That was not enough. Moreover, this project was lying dead for long and this acted as another handicap. What I want to say here is that one formula cannot apply to all projects.

Lakshmi Niwas Mittal, Chairman & CEO, ArcelorMittal, after inaugurating the Bathinda oil refinery and how he feels bad about the delays his

The concept of “augmented humanity” began to crystallize with the introduction of Siri as part of the iPhone 4S rollout. Tapping into the power of voice response changes the way people interact with their smartphones — and looking ahead, it could reshape the way consumers shop.

projects face in India.

e have conversations on affordability at our meetings. One thing we believe in is that affordability is a state of mind, not a state of wallet. Absolute prices don’t matter anymore. For us, people are willing to pay a premium.

Jayant Murty, Director of strategy, media and integrated marketing, Intel Asia-Pacific on how despite India being a price-sensitive market, it does not pose a challenge to Intel.

May 1—15, 2012 www.logisticsweek.com CONTINUED frOm PAGE 5 might operate, a client of ours want to be able to have a familiar voice on the line, someone whom they know, who knows their performance over time, someone that they trust. That is the kind of the key to going from the regional company to being global; people, good people, good processes, strong technology tools in the hands of those good people. You appear to have tie-ups globally for warehouses for your clients. How do you manage that? Explain in detail how you offer warehousing space to your clients at the location of choice. I think a lot of it has to do with being non-asset based. Unlike some of ours much larger competitors, we have the autonomy to not necessarily drive business through owned or highly leveraged assets such as warehouses. Rather, we listen to what our client’s specific needs are. I am using the example of a warehouse. We have the latitude, the freedom, and the autonomy to line up and work with a warehouse partner whose capabilities meet that client’s needs. For example, if a client is involved with the shipping, warehousing and distribution of hazardous materials or dangerous cargo, those facilities must meet extremely strict environmental and safety requirements. Rather than owning those facilities, we work with partners who own and/or even those who are ready to invest in retrofitting and improvisation of various aspects, such as climate control or sprinkler systems and segregation of one category of product in the warehouse from another category of product in the warehouse. Our ability to manage is in part, based on our autonomy and the freedom of being non-asset based allows us to make recommendations that meet the specifications within the scope of our customer’s needs. From an operational standpoint, the company, departments, various stations or offices in countries around the world are going to work very closely with their counterparts of BDP and, of course, it is all going to be driven by the customer’s need. This is part of third-party provider’s responsibility to understand in-depth and personal client’s requirements and being able to design solutions and manage services on an international scale. In essence, this is what we do and our ability to do it well is what differentiates us from some of our larger competitors because, as I mentioned earlier, we do not believe there is a one-size-fits-all solution, but rather each client, even in the same industry vertical sector, has different requirements that are consistent with their company’s business culture. Some clients, for example, who use BDPSmart, want reports every day. Other clients will configure BDPSmart to get reports every month. Again, each client, based on culture and operating procedures, has different needs. We are always, as a matter of standard procedure, monitoring our own performance as well as performance of our carrier partners and other nodes in the supply chain. Part of the procedure is to revisit and reflect upon ourselves - ask the customer how we are doing, what we can do to continue to raise the bar from a performance standpoint. And every time we raise that bar and improve the processes that effect on cost avoidance or cost savings. And in today’s day and age, it is no longer simply about cheap transportation rates. Increasingly, over the last decade, financial leadership within major international companies that are manufacturing and trading products on a global scale, the practices of supply chain, logistics and transportation. Those practices have come under the wash fly of chief financial management within companies and increasingly. In near future, CFOs are going to supply chain, logistics and transportation people and say: “Find additional ways to reduces expense from the supply chain”.

Global Network Service Providers is not a concept well known. How does BDP International pull it off considering that you have mid-market logistics affiliations? The word global world network has, perhaps, a few different definitions. The semantics of the word global network, for example, BDP has a global network of fullyowned offices, subsidiaries, joint ventures and global network partners. I am going to try to answer the question within the context of both BDP’s global network and that part of our global network includes companies that we do not own or those who have joint ventures with us. These joint ventures are often in certain emerging markets or certain secondary markets. To a great extent our growth is really driven by where our customers go in terms of production and consumption markets. So, if our customers have expanded into growth markets in Asia, more recently into the Middle East and South America, BDPs growth has in essence tracked along where our customers go. Generally, the process happens in a way which we will enter a new geographic market working with a partner, a company that we do not have a financial number, that we do not have equity interest in or that is not a joint venture, but there would be a company similar to ours, often smaller, that has also strong management, great understanding of local business practices and regulatory practices, healthy balance sheets and good reputation. Initially, we may be working with a global network partner and as that marketplace begins to mature, the relationship might go on as a partner relationship or it could often morph a joint venture and then it could even morph into acquisition. Our growth is really driven by where our customers go in terms of production and consumption markets. And part of our culture is the belief that measurement of successful performance is not how many times you can stick your logo on a shingle outside of company. Many companies have tried to grow strictly through acquisition. In BDP’s business model, we do engage in strategic acquisitions, but performance must come first and, again, the measure of performance is about quality service first. We are in a process of migrating to a single, global ERP (Enterprise Resource Planning) system platform. IT is not a core service of a logistics provider, it is a tool. Our owner and the next generation of this family have made a tremendous and substantial investment in IT for a company of our size. Around 10% to 15% of our employees are actually IT professionals, from programmers to designers, to project managers, to hardware people,

software people. Our IT function in BDP is in essence a customer service function to BDP internal operating customers around the world and our own consumers. A number of our IT people have strong background from an operation standpoint in logistics and transportation processes. They are very much IT people who are very well versed in the operations of logistics and transportation, they comprehend quickly and design around that knowledge within a short amount of time. Do give us a glimpse into what are the various services you manage for all MNC clients. Please explain in terms of the various sectors From a core services standpoint, our portfolio runs the gambit from transportation, procurement and management to inbound logistics, which is customs clearance and the management of other aspects of inbound logistics. And outbound logistics which is freight forwarding, working with warehousing organizations, carriers, warehousing management that we talked a little bit earlier, project logistics, oil and gas logistics, logistics in other verticals such as chemicals, healthcare, life sciences, retail and consumer goods. We do not endeavor to do all the things for all customers. If it is not an area that we have expertise in, we are not going to compete for that kind of business because we stick to our knitting and focus our energies on those things that we do well. Beyond those core services, trade, security, health safety and environmental regulations are making supply chain management much more complex for global shippers progressively. Those types of services, such as consulting and delivering specific services for our customers, are a big part of our portfolio as well. Some customers are looking for very robust solutions that involve control towers - logistics control towers that manage regions. And often they go to global tower that amalgamates all that data and turns it into performance information. Some clients may just want a core service, such as freight forwarding or transportation management or regulatory compliance, so it really varies. We have our core portfolio and we are very keen to go beyond that traditional tactical role and play a strategic role to our customers. Increasingly, we realized that as manufacturing companies prefer to stick with what they do best and their core competencies, we bring more value by outsourcing some of these functions on behalf of them. At the end of the day, as I mentioned earlier, it is about delivering and executing services and solutions that are going to eliminate cost for our customers.

Four Soft Bets Big On Cloud-Based Product For Logistics Sector Four Soft, the IT services provider for the logistics and transportation sector is focusing on cloud computing. The company has designed a cloud-based product for the small and medium enterprises for effective management of information flows covering the entire supply chain structure. “We have already tied up with Amway and Toshiba for the product. “We feel cloud-based logistics product will be attractive for companies, as this eliminates the need to install and run applications on the customer’s own systems,” Mr P. Srikanth Reddy, Chairman of the company, told Business Line. The company feels the global logistics and supply chain market will be looking for specialised software that focuses on continued technology advancement. Four Soft is competing with companies such as Kale Consultants and Take Solutions in this space. Its product, SaaS, involves a suite of solutions on

cloud, using common platform for inter-operability across industries. Its other products include solutions for freight forwarding and logistics, extended warehouse management, customs brokerage, shipping line execution, etc. Four Soft, which is aiming at a net profit of Rs 15 crore this fiscal, feels that IT spends in the logistics sector are on the rise. The Indian logistics industry is estimated at $130 billion and is expected to grow to $385 billion in the next four to five years. A study by Mumbai-based Softlink Logistics last year had revealed that there is a significant increase in the number of companies planning to invest above Rs 1 crore on IT. The survey had revealed that 37 per cent of the large companies with a turnover of Rs 250 crore felt that not finding suitable software is a barrier in adopting IT.

May 1—15, 2012 www.logisticsweek.com

Blogs, Journals, Book releases Blogs Online Grocery Retailing that too in ....India

potential to garner higher revenues than any other category. In our daily life, we do not get time to buy grocery in weekdays. It has become a habit to buy it on weekends and normally we purchase it for a month so that we do not take pain coming to hypermarket every week. We supplement it by buying few items from local stores in vicinity or nearby supermarket. These are the activities we normally perform when buying from hypermarket. We have to drive down to get to the hypermarket store. We would look for the required product, have a look and feel of the product, look for good discounts, sometimes go for impulsive buying and check the expiry of product before keeping in the basket. Then go to the queue and wait for the turn to get the billing done. At peak time queue is normally longer and like us many purchase mostly on weekends hence it is bound to be there. Well if the discount benefits for shopping at brick & mortar stores are available for us to shop online at the convenience of our home. Advantages of it would be hassle free shopping, no queues for payment, less time to shop, have the monthly requirement list saved with option of quantity to be changed, product comparative features, savings displayed and fuel saved to go to

the store physically & return. If we are availing online facility we would require the grocery to be delivered at our home, as per our convenient date and time slot. The returns facility should be available without any inconvenience. If the above conditions are met I think so we would be more than happy to shop grocery online. There are very few e-retailers who have ventured full fledge into selling of grocery online in India. Browsing the present e-retailer selling grocery online one can find pictures for every product, home page mentions about the discount, shopping list saved with option to modify the item or quantity, savings displayed, points earned can be redeemed, free home delivery above certain order value, convenient return policy, and delivery on preferred dates and in standard time slot. They are catering to specific area within a city. Being a very huge initiative with manpower and transportation involved it would take some months to cater in whole city. Once the volumes grow up it would be feasible to deliver products below certain order value. But nevertheless the process has just begun. It may soon follow with a suite of e-retailer venturing into selling grocery online. Let me know if anybody has shopped grocery online or will you like to shop grocery online with the above features and what is your take on it.

Thermal Processing of Foods: Control and Automation

Retail Marketing and Branding: A Definitive Guide to Maximizing ROI

The food industry has utilized automated control systems for over a quarter of a century. However, the past decade has seen an increase in the use of more sophisticated software-driven, on-line control systems, especially in thermal processing unit operations. As these softwaredriven control systems have become more complex, the need to validate their operation has become more important. In addition to validating new control systems, some food companies have undertaken the more difficult task of validating legacy control systems that have been operating for a number of years on retorts or aseptic systems. Thermal Processing: Control and Automation presents an overview of various facets of thermal processing and packaging from industry, academic, and government representatives. The book contains information that will be valuable not only to a person interested in understanding the fundamental aspects of thermal processing (eg graduate students), but also to those involved in designing the processes (eg process specialists based in food manufacturing) and those who are involved in process filing with USDA or FDA. The book focuses on technical aspects, both from a thermal processing standpoint and from an automation and process control standpoint. Coverage includes established technologies such as retorting as well as emerging technologies such as continuous flow microwave processing. The book addresses both the theoretical and applied aspects of thermal processing, concluding with speculations on future trends and directions.

Today’s shoppers go online to research locations, compare prices or read reviews before they go to a store, and as soon as they are back home, they post details about their shopping experience on Facebook or other social media platforms. Online agencies rave about viral campaigns, guerrilla marketing and 360° communication. IT specialists are peddling one-to-one marketing tools and integrated customer data warehousing solutions. Should retailers care about any of this? The authors of this book firmly believe that they should — but in an environment of accelerating change, even veterans of the retail trade are looking for guidance on how to embrace the challenges thrown up by the evolving retail marketing landscape: How do I combine traditional and new marketing vehicles? How can I stay on top of what my customers want? How can I reach them efficiently? Do they still look at leaflets, or should I shift local marketing funds to social media? How can I leverage unique retail touch points, such as the POS, for value creation? Successful retail management might once have been about ‘just doing it’, but that is no longer the case. This book offers retail professionals practical and robust ways to improve the performance of their marketing function and align marketing investments with business objectives. This book consolidates the know-how of more than

30 practitioners in the field, created and refined over many years together with leading international companies. It covers some of the latest and most sophisticated approaches to the subject, yet it is anything but a theoretical treatise. The authors’ hands-on approach and the wealth of case examples make it an essential guide for all consumer-minded retailers. (from the Foreword by Dr Klaus Behrenbeck, Director, McKinsey & Company, Inc., Leader Consumer Industries & Retail Group, Europe)

We are familiar with the concept of buying online books, electronic goods, gift articles, apparels. Today we are able to browse the products many times, compare products and even call up the customer care executive to help us select the right product. But do we purchase grocery online (excluding the perishables) in India. I don’t think so. Even I do the shopping of grocery through supermarket or hypermarket. Do we know any e-retailer who sells grocery online? Will the grocery received online be in good condition? Will the grocery prices online be cheaper than our hypermarket/supermarket? All questions asked do we really need to purchase grocery online when we can get it in a nearby supermarket. Few would also argue that they can get them from local stores available in vicinity. At present buying grocery online in India is not an attractive option, as compared to other categories. Among the top 20 e-retailers in India grocery is sold by just 28%. They would not be selling many items in grocery but keep it with other categories to have all products under one roof. Grocery includes Food items, Home and Personal care, Beverages, Staples etc which are the daily use items. This category alone has huge

Books

K. P. Sandeep, Publisher: Wiley-Blackwell n `10,410

Jesko Perrey, Dennis Spillecke, Publisher: Wiley n `2,936

Retail Analytics: The Secret Weapon Emmett Cox, Publisher: Wiley n `2,400

Retailers collect a huge amount of data, but don’t know what to do with it. Retail Analytics not only provides a broad understanding of retail, but also shows how to put accumulated data to optimal use. Each chapter covers a different focus of the retail environment, from retail basics and organization structures to common retail database designs. Packed with case studies and examples, this book insightfully reveals how you can begin using your business data as a strategic advantage. Helps retailers and analysts to use analytics to sell more merchandise. Provides fact-based analytic strategies that can be replicated with the same success the author achieved on a global level. Reveals how retailers can begin using their data as a strategic advantage. Includes examples from many retail departments illustrating successful use of data and analytics. Analytics is the wave of the future. Put your data to strategic use with the proven guidance found in Retail Analytics.

May 1—15, 2012 www.logisticsweek.com

INTERVIEW

Leaner, Faster, Greener: Nike’s nNew Supply Chain Goals

ike is making some big changes to how it manages its supply chain. As part of its sustainability report, the retailer said it plans to launch a new manufacturing index in 2012 that will place factories’ sustainable practices “on equal footing” with the traditional supply-chain measures of quality, cost and delivery. The index will now include environmental and labor-sustainability metrics, according to the report. And Nike will use that index to evaluate its suppliers. It’s an interesting move with potentially widespread implications globally among suppliers -- and would-be suppliers -- to Nike. And with other retailers -- including Walmart, which said last month that it was expanding its supplier scorecard program -- taking steps to add sustainability to its supply-chain requirements as well, it appears that the supply-chain landscape may be poised for a shakeup that could give greener and more socially responsible suppliers a competitive edge. Retail suppliers will likely be keeping a close watch on these leaders’ criteria, which will begin to define sustainability for different products. We recently caught up via phone with Hannah Jones, Nike’s vice president of sustainable business and innovation, for more insight into Nike’s goals and its manufacturing index. Here’s an edited excerpt of our conversation: GreenBiz: The report talks about making your factories faster, leaner and more efficient. How do you accomplish that without descending into a Foxconn situation? Jones: [There are] two elements to ‘lean.’ One is the process change piece of it, and the engineering change around how you think about products’ efficiencies and quality. And the other is really about the culture of empowerment that is core to making lean really work. For our industry, this is key. It requires…management [to] understand that the worker is the closest to the process and to the act of manufacturing and therefore has the greatest insight. And that actually what you need to do is put greater value on the worker and enable the worker to feel empowered, so that they can speak out and speak up and talk about where they can see improvements could happen. It starts to change the conversation between the managers and the workers. It starts to change the conversation with the management, in how they have to stop viewing workers as a cost and start seeing them as one of the core, valuable assets that they have. That makes them think more about turnover rates. It makes them think more about HR systems, it makes them think more about supervisors being trained in management and it makes them really think through how do they communicate, how do they work with the workers to retain them. Because they want to invest much more in them, in terms of building up skill sets. So to us, ‘lean’ is one of the components [of] how we think about building better working conditions. Because we think it’s the business conditions that enable a lot of the additional work we do, through our code of conduct and through our Sustainability Manufacturing and Sourcing team. Then we have this new manufacturing index, which locks in performance on sustainability, performance on lean, performance on workers’ rights into the core conversation between the buyer and the supplier around where growth and volume will go and where orders will go.

We need new technology and new chemistry, new materials, to swap out with the old. So there is an innovation challenge. incentives along the way, but there are also sanctions for failing to meet standards and [for] repeat offences, which go up to and including termination of the relationship. If you look at some of the data in the labor section of this [report], you’ll see that we have eliminated a number of factories because of their unwillingness to consistently shift management strategy and culture [and] to build in sustainability and workers’ rights.

HannaH Jones, Vice President, Nike’s Sustainable Business and Innovation. What do your sustainability goals mean for current and potential suppliers to Nike? I think it’s a shift. And I think that the shift that’s been happening over the last two or three years, that this report kind of begins to capture and signal, is that we have been rewiring the conversation internally and rewiring the conversation with our suppliers in which we really explain to them that there are some new rules of engagement. And that our sourcing strategy and our sustainability and working conditions strategies are one in the same. We’ve built a sourcing strategy that looks at having fewer partners for the longer term that are optimized, to enable us to have those fewer partners. And then really building in to how we have a business discussion with them. So if you think before, in our industry, the traditional conversation between a buyer and a supplier is one of cost, delivery on time and quality. Those are always the driving kind of indicators [determining] are we going to give you more orders or less orders? And so now what was done is we’ve said: sustainability. And I want to emphasize [that] when I say sustainability it includes workers’ rights. Sustainability is one-fourth of that equation now. So our suppliers now know two things: one, their business with us is going to be dependent on how much they show their commitment to sustainability. And two, we’ve changed also from a ‘make your systems less bad’ [approach] to actually describing a vision of good. It’s saying if you’re going to be on the journey with us… we’re going to need you to really think about investing in your workers, investing in lean and investing in efficiencies and green. What do your suppliers need to do to stand out, to get good grades from your auditing team? We have a whole set of indicators, performance indicators that they need to be meeting. So there are kind of

Other big retailers are on the sustainable supplychain bandwagon: Walmart, for example, has a supplier scorecard program. Is the writing on the wall now for suppliers that transparency is needed to remain competitive? I think the signals are getting louder and louder. I think what was a whisper is now a shout. I think that’s a good thing. And I think that a lot of our suppliers are beginning to wake up; that there are new rules of engagement and that they will be, in this era of transparency, owning their reputations. And that it will be important; that it is a competitive advantage. How do you balance environmental and labor issues? We’ve been pursuing a huge amount of work around… the labor side of things and the environmental side of things. And then you’ll see in the manufacturing index, the environment piece is coming into it. I think what you’re going to see is even more convergence in the years to come, where we pull all these different sorts of indicators together. And it’s a balancing act. Where does Nike still need work to achieve its goals? Where are the places where you have the most catching up to do? There are different areas that I think about and that the team thinks about. We run sustainability now as you would almost an innovation pipeline. There are different kind of issues that hit at different times in that pipeline. For some issues that we have out there, there simply isn’t a solution yet that’s obvious. And what we need is… solutions. We need new technology and new chemistry, new materials, to swap out with the old. So there is an innovation challenge and it’s really about sending a signal to innovators in the company and outside the company, that we are in the hunt for alternatives. As you get further down into the commercialization nature of things it’s about how you get mainstream adoption. Because at the moment sustainability, absent strong policy levers being pulled, faces a scaling challenge. There is a cost to early leadership, and it’s the early cost of investing at a prototype level and all the money that goes into that R&D. So the faster we can get this to market and the faster we can get sustainable options to be the default, the more viable it becomes. It becomes a kind of self-fulfilling prophecy in a very good way.

May 1—15, 2012 www.logisticsweek.com

COlUmN

CSR: Magic Or Myth? It was President John Kennedy who said, “A rising tide lifts all boats.” but is Corporate Social Responsibility all it’s cracked up to be? asks Darryl Judd, COO for Logistics Executive Group.

t has been bandied around as yet another corporate “feel good” that is “trending” at the moment. Corporate Social Responsibility (CSR) is fast becoming an industry in itself, interspersed in corporate frameworks globally, and infused universally in standard business practices. Human Resources units are lavishing large budgets on CSR initiatives in the quest for their holy grail, which is envisioning an engaged employee workforce but does this work? Is CSR good for business on a wider framework? The Logistics Executive Employment Market Survey 2012 explored these questions and the perception of CSR in the market place. The survey found that whilst CSR was a focus for 74.2% of organizations, the respondents in leadership roles revealed that there were barriers to the wider adoption of CSR in the following areas: Cost, Unclear Benefits and lack of Senior Management Support. This suggests that there is still some confusion at executive level about the commercial benefits of CSR initiatives. Defenders claim that CSR increases the virtue of the company and employee brand. For example Human Resources professionals argue that CSR enhances employee engagement and the employee brand. It therefore increases employee retention and enhances talent acquisition strategies. The counter argument however is that most companies have yet to put clear measures in place that can articulate these benefits and the link to CSR. The reality is that shareholders are more likely to lean on executives to deliver clear metrics relating to profits rather than these soft targets. The truth is that without hard metrics, CSR becomes largely ineffective. According to political scientist Brendan Nyan, it could be argue that CSR is an easily manipulated medium. “Much of what passes for CSR is just stroking the egos

Darryl Judd COO, Logistics Executive of senior management. Having the corporation make contributions to causes favored by senior management is, from their point of view, the best kind of charity, because they get to spend other people’s money rather than their own. (They still get all the glory, of course, at those nice Man of the Year dinners and at the country club bar.) That’s not in the interest of the corporation, it’s just a form of non-monetary compensation. And doing it is a breach of their fiduciary duty to shareholders, every bit as objectionable as using the corporate jet for their own pleasure trips”. Of course there is the risk or some more cynically would say scandal avoidance - side of CSR. Consumer activists have used their new-found media clout to bully corporates into action against social injustice. Business leaders have become painfully aware that consumers don’t just buy goods these days. No, these days they like to “interact” with their favorite brands. They are educated, market savvy and demanding. They belong to a modern global workforce that has toppled governments with Facebook during the spring uprisings and brought major Corporates shamed over poor business practices. The only way forward for CSR it would seem is through a better understanding of this concept. Companies need to carefully prepare the way be-

fore implementing their CSR programs. Executive decision makers need to be better educated on what a true CSR program involves. Employee involvement needs to be a driver of the concept from the outset and companies acting as the enablers. Clearly defined processes and transparent metrics put in place. The concept of “social accounting/auditing” practices need to be implemented so that CSR responsibilities can be linked to outcomes in meeting the agendas of their corporate and community stakeholders. Transparency, accountability and ownership by all stakeholders are the underlying principles here and the key to success. It isn’t surprising therefore that Executives are a bit resistance to embark on a CSR program considering that they invest their company profits on a process that they have little control over – as this is largely handed over to their staff – and are often being dictated to on who and how they can do business by consumer activists. It is therefore worth asking, what can CSR offer if it is done well? Wejuan Yao, Director for China of Verite last year at the Supply CHIaNA 2011 Business Summit in Shanghai gave an impassioned presentation on “Trends in China Labor Relations and the Implications on Supply Chain CSR Issues”. Wenjuan is an example of modern China. She personifies in many ways the human challenges faced by a workforce in an emerging economy. Her recent assignments have seen her consulting to foreign company’s who are trying to manage their corporate image by ensuring the labor conditions of their Chinese suppliers meet requirements. Workers’ conditions are highly topical all over the world and have become a subject of open debate, even in China. Wenjuan provided a new perspective and a voice to what was already a nervous murmur at the Conference from many large corporates in

attendance. That is, the dramatic improvements in the Chinese economy that have led to the emergence of a new kind of Chinese worker who is educated and a lot more aware and demanding than previously. This is an issue about dealing with change more than anything. In Wenjung’s words “China’s economy, the international community, as well as all factories have been benefiting from the unlimited and welldisciplined cheap labor supplies in China over the past 30 year and we are now facing the turning point. When the tide goes down, the competition for survival will become fierce. Meeting CSR requirements may – finally -- become a real competitive advantage for them in the near future.” In this case, Wenjung is acting as the conduit, she is using CSR policy to build a bridge, which is creating a new era in China’s economic history by and bringing cohesion through a process of radical change in employment conditions. Of course we don’t all belong to large corporate entities. Successfully implemented CSR can also be found in smaller entities that have the advantage of easier to access staff and more egalitarian teams. “There are some basic commonsense rules that can be applied to all companies from small to large who wish to ensure their CSR meets the rigors and changing demands of the market place” according to Kim Winter, CEO of Logistics Executive. Of course Kim would know all about this subject as he is not only the founder of Logistics Executive but also the co-founder and CEO of Oasis Africa, a leading charity organization which supports the orphaned children of the Kibera slums in Africa. At Logistics Executive there is a strong voluntary involvement by staff. “Often it’s the giving facet of the CSR experience that is the most personally rewarding,” says Kim. “It can act as a culturally defining facet for your staff. It gives

all of us a sense of purpose and great pride to tell our story,” he continues. The extent of Logistics Executive’s commitment to Oasis Africa also acts as a brand differentiator with charity fundraising initiatives and events offering a fun and rewarding part of their client experience. In simple terms if Corporate Responsibility is implemented effectively it acts as a business enabler that can serve two main purposes: 1. Risk Avoidance strategy To prevent the company from making errors of judgment in their supply chain that will expose them to undue risk. These risks may include sourcing from disreputable suppliers who employing workers under poor conditions or who are not using environmentally sound practices. This is part of the corporate risk management strategy, a defensive approach to protect the company’s reputation. 2. Employer and Corporate Brand enhancer - An active community initiative that is based on philanthropy and aligns with the corporate brand. This promotes the customer’s experience of your brand and ties in with their values but it is only effective if employees drive it. Wenjuan brought it all together for everyone in her presentation, by quoting President John Kennedy who said, “A rising tide lifts all boats.” This resonates more than ever today as global market growth and new technologies keep proving that we are all in this together. The author can be reached at darrylj@ logisticsexecutive.com Darryl Judd, COO, Logistics Executive, has 20+ years of executive experience in aviation, supply chain and logistics transport industry, and held executive positions within the airline & aircraft leasing/charter industry. He is regularly called upon to manage key human resources consulting projects and supporting business to drive changes, particularly around M&A activity and international executive management.

May 1—15, 2012 www.logisticsweek.com

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Interview

IndIa’s LeadIng LOgIstIcs MagazIne www.logisticsweek.com

October 2011 Vol. 5 — No.2 October 2010 | Vol. 4 – No.2

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Method In Motion

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In For The Long Haul

Varun Dhawan, VP-Taxation, Blue Dart Express Ltd., simplifies the issues with GST that have boggled many in the logistics industry.

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Jayakumar Krishnaswamy, AkzoNobel’s SCM Britannia’s Replenishment Manager, Raviraj Rodrigues head, is managing a 24x7 supply-chain. Here’s DistributionNEglEcTEd Manager Sanjay low(right) and National how he plans to accomplish it. Page 16 Mukherjee (left), manage the supply-chain the FMCG adopTioN 24 waTErwaysof44 major while clearing the roadblocks and OLD ORDER: How auto cos manage serviceIndia logistics for ensuring phased-out models...08 Why WMS still does is ignoring inland not have enough waterways at its own logistics... logistics. sharp look. THE seamless FOREIGN HAND: HowAFDI in Retail would change India’s 25 20 Page takers in India peril PRO-LIFE SCM: Amid all the din around green logistics, some practical wisdom...30 BIGGER PICTURE: How supply-chain hurdles dent company bottom-line...14 RETAIL LACUNAE: Retail logistics managers rue lack of standardization....30 CII SUMMIT: Highlights from arguably the biggest congregation of SCM chiefs...36

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WALK IN THE PARK

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Firms Rethink Supply Chain Risks

Disasters in Japan, Thailand highlight need for continuity plan Bangkok As flooding in Thailand disrupts supply chains in many industries, the event—along with Japan’s March earthquake and tsunami—is prompting many to consider aspects of supply chain risk that might have been previously overlooked, says a recent report in Business Insurance. While many expect global sourcing to become an even larger factor for businesses going forward, recent events are prompting companies to consider the geographic concentrations of suppliers, the need for backup suppliers and reengineering processes to accommodate backup components should supply chains be disrupted. With an estimated 45 percent of the world’s hard-drive production located in Thailand and flooded plants affecting production by major manufacturers such as Seagate Technology Inc. and Western Digital Inc., some analysts say the disruption could affect PC production through the first half of 2012. The flooding also has had a major impact on the auto industry, where disruptions at Thai auto manufacturing plants and parts producers reportedly is expected to result in lost production of 250,000 vehicles worldwide. Many Japanese companies relocated production to facilities in Thailand after the March earthquake and tsunami. London-based law firm Reynolds Porter Chamberlain L.L.P. said the move to Thai facilities helped many Japanese companies mitigate their losses after the Japan disaster. But many now face further losses as a result of the floods in Thailand. “The problem for insurers who provide business interruption cover to Japanese manufacturers is that they have to cover the losses stemming from the Thai flooding because so many businesses moved some or all of their supply chain there,” Daniel Saville, legal director in the reinsurance and corporate insurance department of Reynolds Porter, said in a statement. “Moving production from Japan to Thailand was “Plan B.’ The question now is whether those businesses have a “Plan C,’” he said.

Source: cleveland.com

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Car manufacturers across the world suffer delays as factories lie submerged. Gerry Alonso, senior VP of claims at Factory Mutual Insurance Co., noted that the “slow developing” nature of the Thai catastrophe makes it difficult to get a handle on the extent of losses. And, the duration of the flooding could exacerbate the losses. “We’ve had some clients that have been able to procure divers and go in there, but that gives you an idea of what you have.” Mr. Alonso said. “The frustrating part from a claims perspective, you can’t assess losses until the water’s gone.” William J. Montanez, director of risk management at Ace Hardware Corp. and a member of the board of the Risk & Insurance Management Society Inc., said his company hasn’t been affected by either catastrophe, though it relies on overseas suppliers. Mr. Montanez said, “At the back end, we have to look at safeguarding and how we can make it less risky to do it.” With the Thai floods raising awareness of the risk of geographical concentrations of suppliers, Linda Conrad, director of strategic business risk management at Zurich Financial Services Ltd. in New York, said her company has been working with clients to

identify where suppliers and industries are concentrated. “I think this illustrates the need for better continuity plans, including backup supplier arrangements, diversifying the locations of suppliers and using different backup suppliers than competitors.” Ms. Conrad also said companies are starting to ask existing suppliers about their own continuity plans. “People are also starting to do a lot more scenario analysis, including calculating the potential impact of having to re-engineer processes if alternative components or parts don’t match the specifications.” In general, the recent supply chain disruptions are leading many companies to embrace “that resiliency mindset of: Let’s try to think through some hypotheticals and plan for this when it costs us less than when we are in a crisis,” Ms. Conrad said. “At the end of the day I think the onus that’s going to be on risk management and management in general is how can we get a preview of what the future might look like and how will we respond to it,” Mr. Montanez said. “That’s what ERM is all about.”

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