Final logistics times january 2011 by Raj Misra

INTERVIEW Dr. Mark R. Drabenstott

PERSPECTIVE Plead guilty!

EVENT Automotive Logistics India

Inside Calendar 2011

LogisticsTimes www.logisticstimes.net

January 2011

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CREDENCE LOGISTICS

Bulking Up UTLOOK UT U TLO OOK OK

2011

Ajay Mittal Abh Abhik Mitra Aj Aja ay Chopra Ajay Pranil Vadgam Pra Vadgama Arif A. Siddiq Siddiqui Kalpesh Path Pathak Pawanexh Ko Kohli

Anil Khanna Oscar De Bok Lars Sorensen R K Saboo Anil Arora T S Narsimaham

Anshuman Singh Harry Lagad Prof. Vinod Singhal Pradeep Kumar Vineet Kanaujia Akash Bansal

Logistics Times

CONTENTS

All about Transportation, Distribution & Infrastructure Volume 1: Issue No.9 * January 2011 Editor in Chief Raj Misra rajmisra@logisticstimes.net Editor Ritwik Sinha ritwik@logisticstimes.net Consulting Editor Ramesh Kumar ramesh@logisticstimes.net Mumbai Bureau Rahul Kumar rahul@logisticstimes.net Sub Editor Neha Richariya Photographer Anil Baral Design Consultant S. Athar Hussain Designer Kausar Syed Circulation & Distribution Kamruddin SaiďŹ Legal Advisor Rakesh Garg Editorial Advisory Board Paul Lim Founder & President, Supply Chain Asia Vinod Singhal Brady Family Professor of Operations Management, Georgia Institute of Technology, College of Management Kate Vitasek Faculty, Centre for Executive Education The University of Tennessee Prof. K S Pawar Nottingham University Business School Prof. Samir Srivastava Associate Professor, IIM-Lucknow Prof. Akhil Chandra Institute of Logistics & Aviation Mgt Sanjay Upendram Founder & Chairman, Amarthi Management Consulting Swaran Singh Soni Consultant (Oil Industry) Arif Siddiqui Chairman, Coign Consulting

Marketing & Sales Outthink Strategies Ph: 65177214, 26412476, 9818097385 Email: sales@logisticstimes.net Printer & Publisher Deepa Misra for

E-77, West Vinod Nagar, Delhi -110092 Tel: +91 11 22478538-39, Fax: +91 11 22471764, Mumbai: +91 9322811550 Printed at Personal Graphics & Advertiser Pvt. Ltd. Y -22, Okhla Industrial Area-II, New Delhi-110020

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Cover Story

BULKING UP

10 INTERVIEW

Dr. Mark R. Drabenstott Edit Note Perspective Events COVER PHOTO: Sampat, Navi Mumbai

6 24 49

30 Thrust on efficient system Ajay S Mittal

Air Cargo is drawing more attention now Anil Khanna

31 Biggest growth year Anshuman Singh

32 Growth drivers to game changers Abhik Mitra

UTLOOK

2011 39 Small window for growth Pradeep Kumar

Woodcutters to carpenters Arif A. Siddiqui

34 The future is bright Oscar de Bok

40 Right time for infrastructure investment

35 Through the eyes of the logiscope Harry Lagad

Future has arrived Ajay Chopra

Anil Arora

41 IT refinement inevitable Vineet Kanaujia

Cost pressures to continue

Kalpesh Pathak

Managing disruptions vital Lars Sorensen

42 Precision is the key T S Narasimham

Key SCM Challenges Vinod Singhal

Itâ&#x20AC;&#x2122;s happening! Pranil Vadgama

44 Going beyond transportation Akash Bansal

Stress on one window solution

Consolidation game

R K Saboo

Pawanexh Kohli

EDIT NOTE

2011: A Defining Year? It is that time again when all of us take a pause and tend to evaluate the year that has signed off and build expectations for the next 365 days. The latter obviously emanates from the former since the world does not change dramatically in the process of slipping from 31st December to 1st January. “In my beginning is my end… in my end is my beginning,” the immortal words of T S Eliot probably find apt reverberation in the change of calendar since one of the interpretations is: the poet is talking about a strong undercurrent of continuity in the life cycle. So how does circa 2011 look for the logistics and allied industries? What promises it hold for the players in the ring? The answer of these moot points obviously lie in understanding where from the industry is coming in the immediate context. Twelve months ago, the industry probably had somewhat a mixed feeling – but surely more tilted towards optimism than cautiousness. The severe slowdown blues of 2008 also had some spillover effect in 2009 and that explains the presence of cautious quotient then. But this time, the case is different. With economy particularly manufacturing firing on all cylinders and projections of over nine percent growth in 2011-12, the logistics and supply chain industry can probably afford to have an unbridled sense of optimism. Logistics Times spoke with a cross section of industry representatives and experts to get a sense of the mood in the industry (reflected in the major highlight of this issue: Outlook-2011 section) and the common thread they share is: 2011 has all the trappings of a defining year. But this is more in a qualitative sense than just merely being quantitative. The broader issue is preparing for a longer time frame of a robust economic spell where rules of the game would change. For instance, logistics service providers would have to assume the role of partner of the end user industry rather than just being a loose associate (“They need to become carpenters from mere woodcutters,” a contributor to this edition has strongly pointed out.) And then there are other related issues like the greater degree of IT acceptance, making serious moves on skill gaps front and, of course, creating new hard assets. So the year promises to be interesting in the sense that certain pending imperatives would probably get more attention than ever before. But having said that, we are probably looking at change in approach and attitude and that is always easier said than done. Continuing with our practice of spotting emerging stars on the Indian logistics horizon, we turn the spotlight on Credence Logistics this time. The company presents an interesting mix of old and new lines of businesses in serving the bulk commodity sector. The mantra for them is not merely to create new growth drivers but to do old things in new ways and that makes the story most interesting. Thanks to a combo of an experienced pool combining the experience and youthful exuberance, the company is subtly expanding its wings. Leaf through the cover story for details… How about having a goggle like platform specifically dedicated to the logistics sector making it easier for players of any size and scale to access information and connect to the customers on a global basis? Well, this is not an utopian idea. Geneva-based Global Coalition for Efficient Logistics (GCEL) is precisely working on it. In our interview section, we feature Dr. Mark R Drabenstott, Secretary General of GCEL who tells us how such a platform would become a reality in not so distant future. The icing on the cake is: both strategically and geographically, India is a crucial gateway in the implementation of this programme. Wishing you all a very happy new year. Waiting for your feedback. Ritwik Sinha ritwik@logisticstimes.net LOGISTICS LOG LO OG O GIST STTIC ICCSS TI TTIMES IM MEES MES ES M Maaayy 20 May 22010 10 10

NEWS BRIEFS

8 $10million PE investment Bangalore-based Siesta Logistics has raised $10 million in private equity from Ashmore Alchemy India, a joint venture between Alchemy Partners LLP and Ashmore Investments (UK). Siesta began its operation in 2007 and today offers a wide variety of services to its clients including transportation, freight forwarding, port and cargo services, over dimensional cargo, freight forwarding, customer house agent, warehouse management services, STPI and related services, 4PL and consulting services.

B2B marketing award The “Take control” campaign, which promotes TNT’s Express Import service, was awarded “Best international campaign” by B2B Marketing Magazine, a reference publication for the sector. TNT received the award at the 2010 B2B Marketing Awards in London on 25 November. Contenders included Vodafone, IBS and Colt. The campaign devised by 438 Marketing for TNT Express features an engaging music conductor at the office to illustrate how customers can orchestrate many complex imports into a sound and orderly symphony. The online and offline campaign ran from February 2010 in more than 60 countries worldwide. It included a microsite, direct mail, flash and static banners for websites and press advertising.

Maini- Nacco Alliance Maini Materials has entered into a strategic agreement with the world’s third largest Forklift and materials handling equipment manufacturer, Nacco Material Handling Group(NHMG) of USA. The agreement entails manufacturing of speciﬁc Yale products within India, besides marketing Yale products made at overseas units. Maini Materials would also take care of service, parts and customer support for YALE’s extensive range of products sold in the Indian market.

Modest growth The Railways have reported revenue earning of Rs. 39452.32 crore from commodity-wise freight traffic during April-November 2010. The earnings had stood at Rs. 37030.48 crore during the corresponding period in 2009. The growth during the stated period in the current fiscal, therefore, stands at 6.54 per cent in precise terms. In terms of commodity specific tonnage volume, Railways have reported carrying 593.43 million tonnes of traffic during April-November 2010 as compared to 574.40 million tonnes carried during the corresponding period last year.

LOGISTICS TIMES January 2011

Expanding Indian footprint FedEx Express last month announced the expansion of its premium domestic express delivery service across India. The FedEx Priority Overnight and FedEx Standard Overnight services, launched in October 2009, will now include 331 destinations, up from 58 destinations previously. This extension of FedEx domestic footprint is intended to support the growth of customers’ businesses by providing increased reach to key Indian markets. “India’s GDP is expected to grow between 8percent in the FY 2010-2011, making it one of the fastest-growing economies in the world. This growth represents enormous potential for businesses in terms of domestic trade and exploring new market opportunities within the country,” said Kenneth F. Koval, Vice President, Operations, FedEx Express India. “Our expansion is designed to facilitate faster and easier domestic trade and enhance our customers’ ability to leverage the country’s growth potential and take advantage of new trade opportunities.” Meanwhile, the company has also planned to expand its premium domestic express service to 58 origin cities by February 2011. The service is currently available from a number of cities including Ahmedabad, Bengaluru, Chennai, Coimbatore, Delhi, Faridabad, Ghaziabad, Gurgaon, Hyderabad, Jaipur, Kolkata, Mumbai, New Delhi, Noida, Pune, Secunderabad, Tirupur, Chinchwad, Pimpri, Thane and Navi Mumbai.

Foray in bulk shipping Shreyas Shipping & Logistics announced its foray into the coastal bulk shipping operations with the deployment of M.V. Unity, Indian ﬂag coastal bulk vessel last month. “Shreyas’s entry into the bulk coastal shipping would complement its position as an integrated multi-modal logistics service provider. The coastal route is one-third in terms of operational cost when compared with railways, and one-tenth that of road transport. However, the subsidized road and railways disturbs the feasibility of coastal shipping in India unlike in developed countries where coastal shipping is subsidized vis-a-vis roads and railways. Deploying M.V. Unity into the Indian coastal trade reemphasizes our commitment of improving coastal shipping in India,” said, S. Ramakrishnan, Chairman & Managing Director of the company. The vessel M.V. Unity (GRT 11982 and DWT of 14101) is single decker, self geared, bulk ship strengthened for heavy cargo. Earlier she was deployed under the foreign charter but in view of increasing demand for coastal bulk movement, the company deployed her for coastal bulk trade. According to a company release, Shreyas Shipping is handling maximum coastal containers since inception of its coastal container service and has deployed presently three vessels of 1200 TEUs (Twenty Equivalent Units) on coast.

Betting big on Air Freight For OMX (Express Division of OM Logistics Ltd.), the next two years would probably a spell of intense activities. The division which commenced its operations in 2005 is not only keen to expand its operational base but a clear priority also is to induce a significant shift in its operational structure – making the air freight segment more formidable. “ The operations of OMX had kickstarted around the end of 2005 and since then, the unit has managed to create quite a scale in the part express cargo segment (consignments usually in 25-200 kg range). We are offering services through all the three modes of transportation – Ground Express, Train and Air and going by the latest count, we are pretty much close to touch 200 million kg figure in this fiscal,” says Shantanu, Country Manager, OMX adding that the strong network of the group on a pan-Indian basis has aided

the usual trend of high margin emanating out of transporting high value goods by air is reﬂecting in the revenue break-up

equation will evolve in next two years,” Shantanu outlines. He further emphasizes that scaling up this unit won’t be difﬁcult

OMX - Segment wise break up

the division to make a mark in a short span of time. However, an analysis of the segment wise performance of its express division makes it clear that it’s the Ground Express unit which is driving the show (Refer to the chart). Going by the statistics provided by the company, the Ground Express mode presently has the lion’s share of 92 percent in the volume tonnage and in terms of topline contribution, the share is as hefty as nearly two-third of the total pie. The revenue contribution by the Train is 12 percent, and in Air, while the load share is much lower than that of Train, its share in the revenue kitty is 14 percent. Obviously,

of OMX as well. And it is this segment where OMX intends to go all hog in next two years stretching it to what it envisages the optimal potential in a supportive economic environment. “Especially this year, we have seen a huge surge in the demand for air freight services. On one single day recently, we executed booking & deliveries of 80 tonnes of Air cargo for one single client! This has emboldened our belief that this segment has to be spruced up expeditiously. Our target now is to make our express Air segment equivalent to Ground Express unit which is currently driving our business. We hope this

as basic modalities are well in place. “We already have agreements with all the leading airlines’ operating in the domestic sphere to connect directly with them. This makes us utilise the vast ﬂeet of the airlines’ and offer the shortest delivery times to our customers in the Air mode.” Shantanu adds. Meanwhile, the major shipments carried by OMX presently are: electronics, pharmaceuticals, electricals, engineering, and sports goods. “ We expect this basket to signiﬁcantly expand horizontally & vertically, which would eventually help us to realize our pie in the Air mode” he sums up. LOGISTICS TIMES January 2011

COMPANY NEWS

INTERVIEW

soft infrastructure, “Digital an imperative to enhance

“

LOGISTICS TIMES January 2011

efﬁciency

Geneva-based Global Coalition for Efficient Logistics (GCEL) is advocating and has drawn a structured programme for the adoption of digital soft infrastructure on a global basis to enhance efficiency in trade related processes. Editor Ritwik Sinha caught up with Dr. Mark R. Drabenstott, Secretary General of GECL, on the sidelines of CII’s Logistics Summit-2010 in Delhi last month, to understand the possible revolutionary implication of digital soft infrastructure, particularly in terms of cost reduction in logistics processes in the global trade. Excerpts: First of all, I would like to understand how GCEL has evolved?

GCEL is about two years old. We grew out of an initiative that represented about 10 years of research and development (R & D). The first testing of this technology was done in the busiest trade quarter of North America – between Ontario and Michigan involving the most complex supply chain on the planet. That’s the automotive industry- Maglite corporation in Ontario and Ford Motor Company in Michigan. We came out with a report which demonstrated the kind of savings that can be made by introducing digital soft infrastructure in the automotive activities between these locations. We recognize that the core problem in the global logistics industry is its inefficiency and highly fragmented nature. You really need to bring together the public, private and nonprofit entities to trigger a solution. Before you go further, I would like you to explain the term fragmented here. Are you referring to developed markets also?

There was a major study done by Asia Paciﬁc Economic Co-operation Organisation (APEC). They showed that the average international shipment involves upto 30 entities from shelf to shelf, involves more than 40 documents, and huge percentage of these data elements are re-entered multiple times. At the end of the story about 17-18 percent of all the documents still exchange hands. And the reason is: the global logistics industry even if it is more efﬁcient than what you see in India, it is exactly where airline industry was 25 years ago. They were exchanging papers along the way because the systems don’t talk to each other. Companies like Tata, HCL, Siemens or IBM have excellent systems. But the fact of the matter is those systems work if everybody ultimately is tuned to an uniform system. And the reason the

industry is so inefficient because we have not figured out any solution to that core problem. Our answer is (and that is why GECL came into the being), this is a global problem. This involves global trade wherein national security and sovereignty issue are integral components from the perspective of several countries. So you have to bring the public sector on the one side, private sector on the other and you have got to have NGOs and international agencies which see the benefit of doing this. To put it in simple terms: based on our study, we reckon that we can bring in that critical difference and cut the cost by as much as 30 percent around the globe. How much time it will take to see the real benefits of the system you are talking about?

It would be 30 months to cover the globe from the time we start our Asia benchmark tradelane initiative. That 30 percent cost reduction we are talking about amounts to $700 billion every year savings in the global economy. Let me just put that in the perspective. The US stimulus package was $787 billion. So we are talking of an amount which is similar to US stimulus package. The Doha round and global trade talks which started in 1999 is going on for 11 years and still hasn’t reached to any conclusion. That Doha round in the very best case can deliver $350 billion of savings. So by improving the efﬁciency of trade infrastructure and trading system, we can deliver the beneﬁts of two Doha rounds without waiting for so many years. And there are two core elements to our approach to this problem. One is: we believe that you can truly solve this problem on a global basis by making the solution to be free. And here one does not need to look beyond Google and Yahoo. They have shown that if you want anything to catch up on a global basis, the solution offered has to be free. The second thing is: for this system to be excepted LOGISTICS TIMES January 2011

INTERVIEW

globally, you need to have geo-political powers embedded in the deployment. For instance, China is simply not going to except the solution provided by Tata or IBM or Siemens. For that reason, a non-proﬁt public-private partnership is crucial in our approach because it would be an objective arms length organization that uses a transparent request for license (RFL) process to select the 28 gateways who will be deployers of this technology. And make sure that they are evenly distributed - seven each in Asia, Europe, Middle East/Africa and Americas. You must have a non-proﬁt independent organization to do that. Correct me if I have got you wrong. What you are advocating is uniform solution for the logistics industry from the third party?

We believe that quickest way to solve this problem in a highly fragmented industry and is to get agreement among three pillar service industries that support global supply chain. Those are: ﬁnance, insurance and technology. If we get world’s best class companies which are already in these businesses to adopt this system, then they will bring all their customers with them. That is far quicker then trying to get all the logistics players around the world in one room. The way you would like this platform to spread out and become popular, doesn’t it entail that you also need to deal with governments directly?

We will certainly engage governments in each of our four benchmark tradelines. That is why we are partnering with CII in India and similar agencies in other countries because we know they have a voice in the government. There are huge beneﬁts for the governments in terms of e-custom clearance, cargo security. You just take the issue of cargo security alone, we will provide the potential to grow from 2D to 3D. We will provide that stream of information for free to your government. How it chooses to use that information is upto them. Look at the beneﬁt. You are getting the digital soft infrastructure for free at a time when most governments LOGISTICS TIMES January 2011

are trying to ﬁgure out how they are going to fund other hard infrastructure. We think, it is important to get the soft infrastructure right ﬁrst. Your emphasis on digital soft infrastructure. I would like to understand what all it constitutes in the operational sense?

The digital soft infrastructure we talk about have three key elements. The first is the core technology which we call Global Logistics System (GLS). That is an open platform technology which would allow seamless sharing of electronic information among all parties in the supply chain. And it is exactly that information which has become the driver of the business efficiency because businesses need optimizing the decision on 24x7 basis. So having real time dynamic information which can be seamlessly shared across all parties in the shipment process - that’s the foundation of GLS. And that core technology would allow for web portal access. GLS would also provide the integration of existing vertical systems into that and beauty of that is if you are a company in India using a Tata system and if you have a customer in Germany using a Siemens system, our core GSL will allow those two systems to talk to each other. This is what we call point to world integration. The second is a global deployment network. We will have 28 gateways in our system comprising three levels. On the first level, there would be 12 technology companies, the likes of Tata, IBM, Oracle, Siemens, etc. Each of those technology companies would have direct access to global logistics systems and through their own unique user interfaces would allow the customers to gain access to the system. The second level is we will have 12 financial institutions, the likes of HSBC, JP Morgan Chase, etc. Those financial institutions will also have direct gateway access to global logistics system. And they too can provide user interface to their customers. Third tier is for insurance companies like Llyods or AIG. You see, these companies represent the world logistics council network and they

deploy the system for the benefit of their customers. The third key element in digit soft infrastructure is going global quickly. We all understand that the trade is global. You can’t simply solve the problem unless your solutions span the world. So the four benchmark trade lanes and we are kicking off Asia trade lane (from Indonesia to India). Here, we will select seven gateway partners – three technology, three finance and four insurance firms. And then technology companies would identify a group of companies that are their existing customers in a limited number of products and we will do a before and after assessment - what’s the efficiency of the shipment now and how it was changed after GLS was deployed. CII will be our partners in India to do that assessment at the Indian end of our tradelane. How much of investments are really going into this infrastructure?

We are about to begin bids for developing the code core system – the GLS and those would be very significant bids. That would be the first significant step in turning this system into reality. But we have ten years of R & D which has brought us to this point. And in the case of GCEL, its two years of hard work in which we have gone to all parts of the world to build consensus to trigger this. We have been meeting with government officials and representatives of the private industry particularly finance, insurance and technology to build awareness what this initiative is all about. How soon you expect to kickstart the process?

We will begin the shipment efﬁciency assessment, the baseline assessment for India and Indonesia starting in January. And our hope is to have all the participants in the assessment in Asia benchmark tradelane identiﬁed in coming months. So we are very excited to see this process to come out trumps in Asia and probably this continent would take the lead in implementation. And after doing it in Asia, it will take us 30 months to cover the globe.

COVER STORY

CREDENCE LOGISTICS

Bulking up Pradeep Tewari, CEO Ramesh Kumar

Camera. Lights. Action. One by one the senior executives troop in under the glare of 1000 watt arc lamps to pose for the customary photo shoot. Lensman Sampath directs them individually with a slew of commands: Chin up. Turn face right. Or left. Say ‘cheese’ (someone prefers, ‘kabaddi’). Fold hands across the chest. Some were asked to put their left or right leg on the impromptu stack of brick bars onground to extract a different pose. Against the black backdrop slung on the concrete wall after removing wall paintings, Sampath and his team are choreographing the Credence Logistics team on a December Friday afternoon at the Belapur corporate headquarters of Rs.350 crore logistics player. LOGISTICS TIMES January 2011

PHOTOS: Sampat, Navi Mumbai

ll regular work has come to a standstill. There is a lot of light hearted banter. Colleagues tease and pull each other’s leg. As they step out of the artificial glare, I pose a volley of questions. One of them is: “What’s your personal goal for the next year?” One common response is: “ BMW”. Spontaneous. Unrehearsed. Yes, it’s an ambitious goal. But the confidence and self-belief of igniting that cherished status symbol next December is pretty high. And infectious too. Suddenly the heat in the room seems to have shot up several notches. Not because of the 1000 watt arc lights, but due to the high octane, ‘we-can-do-it’ collective spiel. Good. The BMW dream may not be a dream at all. Why? Chief Executive Officer Pradeep Tewari, who had cut his logistical teeth in the nurseries of TCI several autumns ago, has concocted a beautiful blend of solid experience with youthful exuberance. An exotic concoction of traditional business warriors and new age business agents. This was no cakewalk for the soft spoken, former physics lecturer at DAV College, Kanpur. “It was tough convincing my Board,” admits he (See Interview: “We want to be the FedEx or UPS”). He had no option but to push hard to take Garuda Carriers that originally serviced the logistical needs of steel giant Ispat since 1990s to a higher plane when he came on board six years ago. Even while steps were underway to rechristen it as Credence Logistics, like a seasoned director he began assembling the right talent (See Box: The Big Boys). Though the plain vanilla or traditional transportation business is the bedrock, Tewari is busy building up a Rs.1,000 crore empire by 2014 with several new growth areas: 3PL, 4 PL, port logistics, warehousing etc. For him, the growth lay beyond Garuda’s grasp and he was right. Revisit Tewari’s warriors. There are two distinct groups. He has beautifully plucked his erstwhile colleagues at TCI and Gati to steer trucking and rail business spheres. Plus, he has strategically roped in veterans who had a key role in managing the original promoter’s business. They

form part of the “Traditional Business Warriors”group which at this moment fetches close to half of Credence’s income. Wise move indeed. At the same time, Tewari has created another group who can be termed as “New Growth Messiahs”. As the very name indicates, these warriors are expected to catapult Credence Logistics into a different league. Significantly, these new growth messiahs have no logistics baggage in the original sense of the term.

Gossain, the Strategist The 32-year old Senior Vice President Hitesh Gossain, one of the earliest New Growth Messiahs who came on board 20 months ago with global consultancy background and an MBA from IIM Ahmedabad, gives a glimpse into his

Hitesh Gossain

induction process: “My brief was to put up a robust, sustainable strategic plan to take it to new highs. At that time, the company was too engrossed into transportation and infrastructure (basically in the metallurgical segment) and wanting to diversify into high value areas.” Gossain produced a five year road map in consultation with stakeholders and expectedly asked to execute the plan on ground. His biggest challenge was not growth, but “sustainability”. Besides, he has to scout for funding of his plan and he was fully aware that he has to generate big money and grow. No big godfather around to unzip purse-strings. Naturally, he has to identify growth areas that would fetch him good money quickly and grow

bigger. The incredible growth story of Indian economy was a big palliative for Gossain. Indian businesses were favourably looking at improving their supply chain and logistics. Not the pure, vanilla transportation focus, but going beyond that and providing value-added services. For a seasoned corporate strategist like Gossain, it did not take him much long to understand the absence of a cohesive and comprehensive plan to improve corporate efficiency through better “full value chain management”. That is where, 3PL and 4PL crept in. He decided not to get into warehousing, though everyone was jumping into it due to financial reasons. That is, no outright buy of warehouses. Nevertheless, external arrangement was not ruled out. Other growth areas identified include shipping and port services, 3PL-4PL and reverse logistics. In addition to his role of streamlining the strategy, he also manages the execution of the same on the ground delivering the overall business – handling the additional role of overall business head for the revenue generation in the company. As the head of strategic business units (nonmarine), he is geared up to deliver on the overall growth plans of the company. His team of seasoned and new age professionals has given him the correct mix to execute on his ambitious plans for the organization. With a 70% growth clocked year-over-year, he is now all set to deliver on all strategic developments that are sustainable. He echoes the thoughts of Tiwari on a clear focus on 3PL / 4PL to become a seasoned player in value-added logistics in the Indian (and international) diaspora. He believes in rolling up the sleeves and driving the business on full throttle and has always been on lookout for high value sustainable accounts to deliver the 90:10 rule most efficiently thereby maintaining a healthy mix of bigticket high value accounts. “A healthy mix of diversified and sustainable businesses which complement each other to deliver on the overall strategy is what I aim to clearly create, and yes , I have been able to lay down (Continued on page 18)

LOGISTICS TIMES January 2011

COVER STORY

What’s your style of management?

I try to do things differently. Leaders normally have either an authoritative or democratic style. I go for a mix of both to get the best of both worlds. Everything boils down how to interact with your colleagues to achieve the set targets for each of them. I throw my full support behind them once the business prospects are identified. In the process of achieving our business goals, we do certainly run into a bit of rough weather and suitable remedial measures are undertaken to smoothen the process. All this is a collective work. On a rough estimate, I occasionally use 10 per cent authority when there is some amount of slackening. Every organisation has its own strengths and weaknesses and working cohesively as a team we try to

closely by few investors – five to be precise. At the initial stages, Ispat was one of larger customers and we have worked very closely with them over the years. Purely on basis of this to state that Credence Logistics belongs to that group is a misnomer. Yes, we handle Ispat’s business. We are recognized as a 3PL service provider who is adding value to their business. We handle inbound as well as outbound logistics of their businesses. It is our constant endeavour to fill up the gaps in their supply chain. Garuda Carriers originally managed this and now we handle. Today, a huge chunk of business for us comes from non-Ispat and non-metal customer base as well.

of the same to the nook and corner of this vast country. Unfortunately, nobody is talking about moving thousands of tonnes of raw material from wherever to the manufacturing site. We opted to fill that space. In this journey, whatever is required in the form of rail, road or warehouses et al, we are moving by beefing up these strengths. In a growing economy like ours, we see a huge business potential in terms of margins and size of business as well. And an unending growth prospects.

What’s your company’s vision?

One of your colleagues mentioned less profit to begin with. More business over the years. Large turnover and through operational efficiency higher returns…

Simply put, we want to become one of

Let me put this way: less profit for that

‘We want to be the FedEx or UPS in bulk’ –Pradeep Tewari, CEO, Credence Logistics reach our goals. Our team, therefore, is closely integrated. Everyone is there to support one another. There are no solo players at Credence Logistics. This way, we move at a brisk pace. You can, very well, say, we are on the fast-track always. Such seamless integration, you will be surprised to know, does not happen in an organisation which boasts of Rs.350 crore turnover. It is difficult to implement decisions swiftly when people are not working as a team. Luckily, we do not suffer from such a malady. There is a general perception that Credence Logistics is an Ispat group company. How much of this assessment is valid?

First things first. This is not – I repeat this is not an Ispat group enterprise at all. Credence Logistics was developed LOGISTICS TIMES January 2011

the most respected 3PL or 4PL company in India. We are developing a customer need-based model. There are various service verticals and our target is to integrate all these for better results for the customer. Our objective is to help them a large scale integration from inception. For instance, if we are developing a trucking solution, it’s not an isolated trucking solution but well integrated with others as well. Normally, in many businesses one can notice that one division benefits immensely while other divisions hardly gain anything. This is not the case with us. Our portfolio of services afford that kind of multi-faceted benefit both to clients and us as well. It is a win-win scenario. We see a huge gap in bulk transportation sphere which we want to leverage. Everyone is talking about massive warehouses for finished goods and time-bound delivery

unit per se. But when we talk in an integrated approach the profit size is much larger. Am I right to deduce that you are embarking on a “bulk journey”? And is it because you reckon that it is almost a virgin territory?

Actually there is some competition in this sphere as well. But it comes in the form of an unorganised kind. No big players so to say. Cost is a big concern. When you carry millions of tonnes of raw materials – be it , steel, iron ore, coal, bauxite or fertilizer – even a single Rupee matters. We do things differently. Most customers initially do not perceive the benefits of an integrated approach. Once they are convinced that the Credence’s integrated formula results in waste elimination and better efficiency, they have no hesitation

in signing up with us. Clients are always looking for smoother and professional dealings given the bad experience of the past in doing business with unorganised service providers. There is a greater realisation at the top managerial level the need for greater professionalism. Don’t forget the core sector is very large in India. To that extent, the business prospects are unquantifiable. Hardly 10 per cent of this business is handled by big companies, thus leaving a yawning 90 per cent in the hands of small and marginal operators who are unorganised. This is where you see a big scope for Credence…

Yes. It is a big challenge in transporting one or two million tonnes of bulk material particularly from a cost mindset. But that is changing because clients have begun to examine the overall cost impact of going through a professional logistics set up instead of purely looking at transactional cost. It is a welcome change. This is opening up a large market for people like us. Many companies are asking us to come and take over as their 3PL. How tough it was to build up a core team to manage Credence?

First and foremost it was tough to convince the Board of Directors to induct a diversified team. If you check with many logistics service providers, they are packed with people with experience in this sphere only. But if you check the credentials of Credence pack, you will notice that more than half of them have no logistics experience. It was a deliberate decision because we felt these outsiders will have greater understanding of business processes, marketing, customer service etc. This does not mean we have diluted the importance of core expertise. The other half is packed with operational intelligence and knowledge. It is a 50:50 blend. Once inducted, we gave the newcomers sufficient team to grasp the intricacies of logistics business. Their learning was rather very quick and fast and they are in a position to deliver. On the one side, they have a conceptual knowledge and on the other, they have access a large

pool of operational talent. It is one of the finest integration in talent management. I must admit that these new members have accepted the challenge because they see a huge upside for logistics business in India in the years to come. Vaulting ambitions on their career front as well. Both sides are benefiting from this healthy alliance. Equally noteworthy was the acceptance and warm reception extended by veterans who have been with us for many years to the newcomers. We waited patiently for our model to solidify. Today, we have the perfect team to take on the world and grab a larger business pie. Everyone at Credence is confident of posting Rs.1,000 crore turnover by 2014-15 and by the way, each one has a huge wish-list to reach there. Today, everything cost money. Where is the money going to come from to realise that dream?

It is a comfortable target. I have no doubts on that score. Money definitely is an issue. We are a little apprehensive about Private Equity funding. We are confident that internal accruals coupled with bill discounting, bank credit facilities will definitely see us through to meet our working capital requirements. Once our strengths are beefed up, we will certainly go for an initial public offering. Our business model is structured in such a way that our working capital requirements are low. Our business partners pay up in shortest possible time – 7 to 10 days after the billing process is completed. Unheard of, perhaps, but it is working for us. We are building up competencies and systems and none has a bone to pick with. What is structure?

your

management

I am the Chief Executive and Managing Director and there are independent directors with illustrious innings in supply chain, industry and academics. I report to the Board. I understand road and rail fetches you almost 50 per cent of your revenue and other business are in the process

The Big Boys Tier I: Hitesh Gossain Senior Vice President Business Head May 2009 Capt. Alok Kumar Senior Vice President Head Shipping March 2010 Arvind Ambo Vice President, Head-Business Expansion (3PL & 4PL) January 2010 Anil Jain Vice President – IT June 2010 Surya Narayan Singh Assistant Vice President Sales & Marketing (Key Accounts) May 2005 Mishra Sanat Assistant Vice President Head Ship Chartering April 2010 Harsh Saksena Assistant Vice President Head Trucking Solutions June 2009

Tier II: Sudhir Menon Deputy General Manager Fleet Operations January 2008 V V Sridhar Assistant General Manager June 2007 Ram Vihari Senior Manager Fleet Operations April 2009 Rohitash Jhangid Deputy General Manager Key Accounts Sept 2007 Rajat Kumar Lahiri In-Plant Logistics Oct 2010 P.N. Pandey Assistant General Manager Regional Head North Sept 2007 M.S. Reddy Deputy General Manager Regional Head South July 2009

LOGISTICS TIMES January 2011

COVER STORY

18 (Continued from page 15)

of gaining traction. Can we talk about the new growth areas?

Strengthen those areas where we are already operating is the first priority. Traditionally we have dealt with road and rail transport. We have consolidated these areas. Then we began looking at verticals which the industry is looking for one by one. Our aim is to be the most trusted 3PL player in the industrial segment. Ship chartering is one area. Structuring and designing solutions on the import front is a new area. Then a realisation came that we have road, rail, ship chartering, but the element of port was missing to provide a complete 3PL service to any potential customer. Then we zeroed in on port services. This vertical is a facilitator for customer, port and our other main activities on rail and road. Our journey so far has been very good. Every year, we will keep adding to this portfolio of services. Steel is one of our focus areas, thanks to our exposure to Ispat group. We are handling its inplant logistics, raw materials and stock yard management. We deploy technology for better operational efficiency. Our add on is technology and processes. We introduce six sigma and TPM in all our dealings. We are not a pure vanilla service provider. Our service portfolio will usher in visible changes in the client’s domain. That’s our value proposition. We are looking at various sectors to foray. Recently, we set up an Indonesian office where there is a large coal movement. We are into ship chartering into an Indian port, customs clearance, road or rail movement to the destination. Unless and otherwise someone offers a composite service package, both industry and traders are in big trouble. Credence offers them a solution which reduces cost of handling and improves efficiency. Of late, we realised talking to marketing and finance heads at various verticals is fetching better response than interacting with logistical heads per se at these places.

Because, while logistical experts are purely looking at comparative transactional cost, others are able to understand and appreciate the much larger picture that we present in the form of an integrated approach. What’s the big picture you have in mind?

We are working on creating a FedEx or UPS in bulk segment. We notice that there are very few players who are willing to provide a complete 3PL solution to Steel Industry. That’s why we chipped in and fine tuning and improving all round performance. In the shortest possible time, we have learnt crucial lessons which we reckon would be able to provide the same services to the huge steel industry that is crying for such an endto-end solutions. Ispat alone has a Rs.1000 crore logistics spend per annum. The logistics business in steel industry as a whole is mindboggling. When I say “bulk”, it should not be mistaken for bulk in physical volume like iron ore, fertilizer or coal etc. Suppose a client receives 100 containers every day at a port and has to unloaded, warehoused and distributed across the country, we are ready to provide logistics solutions. In fact, we have received substantial queries in this regard. That’s what I mean when I mention, “bulk”. Another area we are working is on reverse logistics wherein we have built a robust system for waste disposal where the billing is in crores of Rupees. We designed a system whereby the waste is collected across a wide area and processed at a single point. It’s logistics again.

Our journey so far has been very good.

LOGISTICS TIMES January 2011

What are the three things you need to make such a big mark in your sphere of business?

I would put people at the top of this list. Second, resources and finally, finances.

the path for the same” adds the cheerful Gossain.

Ambo, the Marketer Once the Rs.1,000 crore by 2014 strategy plan with specific growth areas identified was chiselled out, Tewari roped in two more new warriors. After Gossain, his next big catch was Arvind Ambo, Vice President in charge of 3PL-4PL and Business Expansion. Mind you, Ambo

Arvind Ambo

again has no logistics baggage. The ISB alumni has spent over a decade in sales and marketing and “coming to terms with the 3PL and 4PL jargon” was bit of a challenge. His brief was to bring in a “culture of service, sales and marketing – which would be the foundation for integrated supply chain services being offered to clients across a wide array of industries”. “We have 35 branches across India and what we have is excellent operational managers, but no sales and marketing expertise,” elaborates the young and charismatic Ambo. Aggressive marketing is the need of the hour and Ambo moved in with a concise plan to hit the market with a vengeance. Once the target businesses were identified, his marketing was unique. “No business discussions on the basis of rates. We are not going to get into that kind of business. Value added services with a clear Service Level Agreements would be offered. We conduct a thorough study of the target company’s business operations and then knock on their doors. We used to surprise

potential clients with our knowledge of their industry and operational style. Then we tell them how Credence Logistics can make a difference. Significantly, the client would be made aware of cost saving by availing of our services. Once the confidence is gained at our price, grabbing a larger slice of their business was no problem. Our professional approach made a huge difference”, explains Ambo. To illustrate his case, he draws attention to a towel manufacturer for whom Credence Logistics offered basic logistics desk service to begin with. Before he could collect his first payment, Ambo saw more business opportunities in the same enterprise. Today, Credence Logistics is deep into it with a clutch of services which amazingly includes, procurement of cotton, yarn management, packaging and above all, handling the client’s export front as well. Ambo’s fundas are quite simple: live up to your promises made at the pitching stage and excel. Gain customer confidence. Grab more business. And earn more. And pick your cheque in shortest possible time. He has managed to raise the profit margin bar to 20% plus. Anything less than that does not excite him. His marketing skills ought to be unparalleled because many clients have shared a lot more critical data with Credence Logistics sans Non-Disclosure Agreements because they were convinced that Credence’s intervention would lead to true value addition! Strategically he is focused on companies whose turnover is in the Rs.1,000-4,000 crore range. They are large, their systems are complex and service requirements are bottomless. Actually there is no competition so to say because there are few professionally managed logistics service providers with a portfolio of services that can help them seamlessly. As a 4PL service provider, Credence aims to become India’s leading single window provider of end-to-end supply chain solutions that are not just customized and cost effective but also time sensitive and integrated into the client’s existing network. “Credence 4PL Services aim to enhance shareholder value by working with companies to take away the load of

their non-core competency areas, giving them ample bandwidth to focus on their core competency of manufacturing”, adds Ambo. Reverse Logistics is another big ticket area for Ambo. Recently, he has teamed with an Indian company in this arena. Credence team picks up industrial waste – be it 75 kgs or 2 metric tonnes from customer’s customers locations after inspection, consolidate and deliver at the prescribed waste disposal sites. “It’s a new business and a tough one at that. We have never done it until now. The client is happy and we too,” adds the cheerful ISB alumni.

Kumar, the Mariner According to Gossain, there is a latent demand for shipping and port services in the core sector. So, it is but natural for

Capt. Alok Kumar

him to pencil in this as one of the new growth areas. What next? Walks in the 1962-born Capt. Alok Kumar as Senior Vice President in charge of marine solutions with a remarkable marine career at home and abroad. He worked as a naval officer as well as manager of commercial operations at London, Oslo, Singapore. With a MBA and CF Level 1 certification. With a 1,700 kilometre coastline and eight per cent year on year GDP growth, Kumar surmises, “No country can afford to ignore marine traffic.” For a long time, Geetapuram Port on the western coast, where Tewari is on the Board, provided ample hands on experience for his team to learn exim trade

Mishra Sanat

formalities in coal and iron ore. Recently, the Port has received clearance to handle third party logistics as well, resulting in the formation of Geetapuram Port Services. “There is a lot of movement of coal and iron ore across international waters particularly from Indonesia, South Africa and Australia. Besides there is scope for coastal shipping as well,” elaborates Tewari. Chartering ships for transport is a big business and Credence has posted Mishra Sanat, Assistant Vice President and Head of Chartering Division at Jakarta, Indonesia. Kumar is keen to buy fleet in large numbers but at present he is happy with a dozen mini bulk carries under construction. Ever since he came aboard Credence Logistics in the first quarter of 2010, he has signed sizeable business and hopes to close FY 2011 with Rs.12 crore. By 2014, he wants the marine division to contribute at least 10 per cent of Rs.1,000 crore turnover. “Cargo is available. So also ocean carriers. However, we need to have our own vessels. Given the current global climate, ship building will remain cheap till 2014. We will do something in this regard much before that,” explains the seasoned seaman. When Credence V V Sridhar Logistics roped in Vacha Venkata Sridhar in 2007, the original idea was to get into Container Freight Station (CFS) business because that was LOGISTICS TIMES January 2011

COVER STORY

Traditional business with new zeal “I’m into offering trucking solution, not transport solution,” is how Harsh Saksena opened up. Like his boss Pradeep Tewari, he had also learnt the ropes of logistics in the same nursery viz. TCI. So when Tewari called him in June 2009 to come and take charge of developing road segment by offering trucking solutions to corporate, the bespectacled Saksena has no hesitation. He is into concept selling, he reminds. What’s trucking solutions? I wonder. Saksena Harsh Saksena is ready with a live case that he had handled for Credence Logistics in the recent past. His trucking solution helped Delta, a Rudrapur-based company, to slash down the transporting cost by Rs.800 per unit of hydroelectric panels. A huge cost saving for the company that trundles out large number of panels. He convincingly demonstrated how the movement of Delta’s panels in a containerised Ram Vihari Sudhir Menon mode could not only result in cost saving, but increase safety factor as well. Want more proof? Okay, here it is. Tarai Seeds, an Uttarakhand government undertaking, ran into a problem of sending seeds of wheat and rice to Bihar, West Bengal and Uttar Pradesh during sugarcane harvest season due to non-availability of long haul trucks. Saksena walks in with a solution of transporting the same in a trailer because, according to him, “trailers are available in plenty during sugarcane season also”. Trailers are season neutral. Client is happy. So is Credence Logistics. Just one more, please. A Nashik-based company wanted to expand its capacity without adding any extra labour for loading and unloading which was a huge drain on its books. The Credence trucking solutions honcho devised a silo formula at an one time additional cost of Rs.20 lakhs for buying truck tippers. The idea was well received and implemented without a blink. Another feather in Saksena’s headgear. LOGISTICS TIMES January 2011

With a 35-branch strong network, Saksena is planning to pitch for accounts at all major industrial towns such as Rudrapur, Delhi, Ghaziabad, Nagpur, Lucknow, Agra, Ludhiana, Haridwar, Cuttack, Rourkela as part of Phase I expansion plans. Once this is achieved, his next target would be the coastal cities viz., Khandla, Vizag, Kochi, Tuticorin, Chennai etc. “Opening offices offer no difficulty. Execution is the key. We should be able to tap 1,000 vehicles in the shortest possible Surya Narayan Singh time,” explains he. For instance, to handle coal import at Vizag which has to be evacuated within 3-4 days time after unloaded to avoid wharfage, one needs a massive dump yard of your own or rented out and ability to rope in transporters to move coal to diverse consumption points. Foodgrain import and movement is another big business for trucking. He needs Rohitash Jhangid Rajat Lahiri additional 100 fleet. Only 100? “This is more than sufficient to control market rates,” adds he. Of course, empty back haul is an area of concern. While new projects are more or less dried up, Saksena sees a huge potential in manufacturing segment. As the company grows, he wants trucking solutions to fetch two-thirds of revenue for Credence Logistics by 2014. He is ably supported by 2 lieutenants: P N Pandey, heading the Northern region and M S Reddy manning southern operations, both with long years of experience in handling complex logistics challenges at leading logistics companies; they have been working hard to create a strong presence for Credence Logistics in their respective regions. Saksena has been successful in developing a healthy completion between both regions which has fostered good growth prospects for Credence. It was Circa 2005 when Surya Narain Singh returned from Nigeria after streamlining logistical operations of a steel

mine and took charge of western region of a Ispat. For a short while, he left and returned to Credence Logistics in 2006 as Tarai Seeds, an Uttarakhand Assistant Vice President, with a mandate government undertaking, ran to increase the network of credence in the steel sector. In 2009, he signed up into a problem of sending seeds Tata Steel to carry finished products from of wheat and rice to Bihar, West Jamshedpur to Haryana and Punjab (1700 kilometres and 5,000 tonnes per Bengal and Uttar Pradesh during month) with a lot of value addition such sugarcane harvest season due to as MIS and cut down carbon emission to meet client’s requirement. Above all, non-availability of long haul trucks. providing a fast turnaround in the sense Saksena walks in with a solution. that Credence trucks return to Jamshedpur for fresh load with or without return load. Through sheer better service, he has won over Tata Steel which in turn has bestowed some exclusive lines to him. Besides Tata Steel, Singh is year because “each will fetch an additional business of servicing Bhushan Steel, Wellspun, National Steel, Uttam Rs.35 lakhs per annum”. Vihari maintains project logics is a milch cow because the Galwa etc. To assist clients, even barges are fitted with tracking system, project heads do not haggle much on rates to ensure early explains the ex-Gati and Pepsi operations and marketing erection and commissioning of plants. Vihari is handling a wizard. “Customer expectations have gone through the roof couple of projects alone and in conjunction with other ODC and service providers like us are keeping up with them,” players as well, but selectively. A strict adherence to plying says he. As of now, his management of key accounts his fleet with no overload and regular maintenance, Vihari fetches Rs.70 crore and he hopes to post Rs.100 crore believes, would help grow his business fast. by March this year. What about 2014 when the projected Rohitash Jangid, handling the key account of Ispat mainly, group turnover will be Rs.1,000 crore? “Rs.400 crore,” pat has his own challenges: finding trucks in large numbers and extracting their services at the best price (for him, of course!). comes the response. Singh has also been spending a lot of time in furthering Vendor development is no child’s play. Look at his roster of the Railway/Multi-Modal business of Credence and has responsibilities. He has to arrange for movement of coal developed a high skilled team headed by M K Khedwal from Gandhidham by coastal and road; moving iron lumps to take this further. They have been working with Indian form Hospet by rail rakes and road; iorn pallets by road; Railways, Concor and private rail operators to provide in the absence of a rail siding inside Ispat plant at Dolvi, Maharashtra his challenges multiply. “There are sleepless integrated multi-modal solutions to their customers. Any discussion about trucking solutions at Credence Logistics nights at time,” he confesses, but he has not given up since would be incomplete without turning the spotlight on Ram 2007 when he joined Credence Logistics at the behest of Vihari, who joined in 2009 in charge of fleet operations and Tewari under whom he had worked at Gati in the past. His maintenance. Sudhir Menon, who came on board a year forte is: patience and cool temper and an ability to keep earlier, handles marketing of trucking solutions and his focus both vendors and his masters happy at all times through in cryonic gas transportation. Together, this duo manage 105 personalised service. vehicles from the Panvel fleet hub. Vihari’s biggest challenge No easy task. He is supported by a central regional team at is to set in motion the Tata Steel’s Jamshedpur to northern Nagpur, headed by T K Bhattacharya, who has also been India odyssey carting Tisco products on open trailers. With a part of the credence family for several years, has been the business growing, he has upped the fleet strength to 55 handling logistics operations for Credence Logistics’ Steel from 25 a few months ago. His aim to deploy 100 vehicles clients in the Nagpur region. The high powered business and operations team of Credence for Tata Steel and shorten the delivery time to 5-6 days. “We run as a separate profit centre. If Credence Logistics is Logistics is ably supported by a rock solid Finance and able to give us market rates, we are ready. Otherwise, no,” Accounts team, managed by S N Sharma and Hasmukh says Menon cryptically. He has a point, no doubt. According Thakkar. They ensure that precious working capital funds to him, the business is bright and asset-light formula will be are efficiently and effectively allocated to the most deserving counterproductive. Profit margins are very good and he has business units so that they are able to live up to client some reputed clients such as Sail (Bokaro), British Oxygen commitments, and at the same time ensuring desirable ROI etc. Given a choice, he would like to add 50 vehicles every for the company. LOGISTICS TIMES January 2011

COVER STORY

his forte. With the Geetapuram Port in their kitty, it was analyzed that CFS would be an ideal business proposition, but the idea was dropped due to exorbitant initial costs. Then he began supporting the initiative to convert the captive port into a commercial port for which the customs clearance has come through recently. Now that the Geetapuram Port Services has been established as a separate entity, Sridhar got engaged in assisting the establishment of a full fledged shipping division within Credence Logistics under the tutelage of Capt Kumar. “Very few logistics companies boast of a fully owned port,” adds he. The absence of a port on the Maharastra coast to handle bulk cargo was another big incentive to pursue this new strategy. Credence has access to 16 barges now which would double soon to handle coal, bauxite, fertilizer. According to Sridhar, the initial response to avail of this facility is good and necessary governmental clearances for creating sheds, dump yards are underway. Moreover, Credence Logistics has procured the Import General Manifest (IGM) licence to handle this business from Bombay Port on its own. Similar steps to transact import at other ports would follow suit, he confides.

Bulking Bonanza “Bulking” is another word that keeps cropping up in discussions with Credence honchos. Tewaridreams big: “We want to be the FedEx or UPS in bulk segment.” Nothing less. While the logistics industry’s target is on FMCG, retail, pharma verticals, the Credence Logistics czar sees a big future in meeting the logistical needs of core sector such as coal, iron ore, bauxite, fertilizer etc. Before one jumps to conclusions that he is into trucking solutions, hang on. “Integrated approach” is his mantra. “Bulking is not an obsession with us, but it is our core competency,” argues Gossain. “Examine any segment. How much of value chain one can own? Actually you can execute more than you can own through outsourcing. Yes, the cycle is very complex. Remember, we have long experience of inplant logistics (inbound, LOGISTICS TIMES January 2011

outbound and storage) in the metallurgy segment and very comfortable. Therefore, we can beat customer expectations hands down. Mind you, it is a volume business, not high value. For instance, we may hypothetically charge Rs.3 per tonne for coal or iron ore, but the quantity will be humungous,” adds Gossain. Inplant logistics, particularly in steel industry, is another growth area. Credence has the right credentials. It is nothing unusual for a seasoned player like Credence to offer steel industry related logistical services to other players in the same segment. Bigger the size, bigger the challenge. Logistics budget for any integrated steel plant may run into several crores. Even a marginal improvement in

Anil Jain

its services while making decisions.

Brand Loyalty

Brand loyalty is bound to kick in sooner rather than later. inventory management will automatically result in better utilisation of men and materials and thereby adding glitter to the bottomline, elaborates Rajat Kumar Lahiri who is supervising the steel-focus logistics service. Lahiri’s innovative management of materials at Ispat over a span of 15 years is being put on sale to potential help seekers in the steel segment. “Everyone is interested in cost reduction. Give them any process improvement idea that will make their business life better and be rest assured that they will be accepted,” claims a proud Lahiri. In a huge industry like steel, “there is a lot of buffer for cost saving,” adds Gossain. All said and done, technology certainly plays a big role in any enterprise. Credence Logistics is no exception. Technology has not been neglected. “We are aiming to create the tech savvy image,” says Anil Jain, Vice President in charge of information technology. The endeavour is to assist customers derive value out of

While companies have managed to create a name for themselves in the logistics sphere, there is no brand loyalty yet. It is a still a commoditised market, say observers. “Ask any client whether they are a customer of company X or company Y in this segment, you will be surprised by their response. Nobody is yet proud to claim that I am a customer of this company or that company,” analyses Gossain. Yet, he is confident that brand loyalty is bound to kick in sooner rather than later. That is where, according to him, Credence Logistics is angling for. “Credibility in whatever we do will be the hallmark,” adds Ambo. Tewari concedes that now that the team is in place and service offerings are already tasted by clientele in various domains, Credence Logistics is fast gaining mindspace through roadshows and customer meets. If Ambo is to be believed, Credence Logistics has successfully managed to drill the fact that when you sign up Tewari’s team, what you get in turn is beyond your imagination in the form of innovative solution package. It’s not just transportation and warehousing alone. Much beyond that. A balm that heals the convulsions of handling challenges on high seas, highways and on rails. Simply put, nothing is left to imagination. All fronts covered to create customers’ delight. Put your feet up and … Relax. Super, isn’t it?

PERSPECTIVE

Plead guilty! Debdulal Thakur*, Economist, National Institute of Public Finance and Policy, believes the proposed Goods and Service Tax (GST) will enhance flawless credit across the entire supply chain and across all states under a common tax base. Ideally there is nothing wrong to agree with Donald Alexandar that we now have so many (tax) regulations that everyone is guilty of some violation! But, gone are the days. Bringing an end to distortions of differential treatments to manufacturing and service sector, Goods and Service Tax or GST is a step forward towards abolishing taxes like Octroi, Central sales tax, State level sales tax, entry tax, stamp duty, telecom license fees, turnover tax, tax on consumption or sale of electricity, taxes on transportation of goods and services and multiple taxation in the country.

But what exactly is the idea about? In a simple frame let us first understand how would this GST regime going to work! The very idea of GST is a tax on each financial contribution in the distribution chain. ‘Supply of goods’ and ‘supply of services’ are to be taxed under GST. The tax will be excised on the valueadded component of the supply. This is expected to be accomplished by working tax on the full fundamental value of the goods or service and giving set off/ credit of tax undergone at the previous stage, identified as input stage, to keep away cascading effect. In this frame the entire supply chain up to the final consumer gets taxed with in-built mechanism of input stage credit. The GST payable at *Views expressed are personal and in no way binding upon the institute

LOGISTICS TIMES January 2011

the speciﬁed tax rate would be borne by the purchaser of the goods and the buyer of the service and ﬁnally the accrued amount out of GST would be transmitted to the government.

Why GST at all? It is nothing new to state that fragmentation of ownership rights and much of an informal or unorganized structure is the signature Indian phenomenon, especially of the logistics industry. Clubbed with these inefﬁciencies if the industry is to compete in the international sphere it will also have to attract new investors. This is only possible if at all it corrects its antique infrastructure base, slip disk of quality and above all the dis-incentivising existing tax structure hindering automation, technical experiments etc. These grim situations have further posed deep rooted challenges like suboptimal investment in building scale, automation, human capital and technology, infrastructure gaps in roads, rail, ports and coastal etc. The bigger problem is the insufﬁcient use of hub and spoke mainly driven by the customer’s tax avoidance motives for this industry. Indeed, there are reasons strong enough to hit below the belt. But, under the new GST regime, with an uniform tax rate- the basic foundation of a GST, it is also expected to raise the revenue pool by increasing the collections

of tax. As regards to the logistics industry it would help in the re-arrangement of the logistics and therefore the manufacturer could store and distribute having no state boundaries. As stated the current cobweb of national, state and local taxes creates a disincentive for the development of national distribution systems in India. The proposed reforms will not only integrate the country economically but would also ensure cheaper goods once the cobweb of the multiple tax structure is abolished.

Task Force Recommendations Recommendations of the ‘Report of the Task Force on Goods and Services Tax’, submitted to the Thirteenth Finance Commission, clearly mentions that transport services, like most other services, are used both as intermediate input and in ﬁnal consumption. Further, the transport equipments are also subject to multiple taxation at both Central and State level. The present regime leads to cascading effect of embedded taxes on the downstream industry which do not get rebated thereby leading to enhanced cost for such industries. Hence, it is imperative to rationalize the taxation regime for transport services. Accordingly, the task force recommended few measures. • Firstly, it categorically mentioned that the tax on vehicles and the tax on goods and passengers levied by

the State Governments should be subsumed in the GST. • Secondly, the task force felt that all transport equipments and all forms of services for transportation of goods and services by railways, air, road and sea must form an integral part of the comprehensive GST base recommended by the task force over which both the Central and State Governments would have concurrent jurisdiction. • Third, the tax regime for the transport equipments and transport services should be the same as in the case of any other normal good. • Finally, the task force mentioned that it is not necessary to levy higher rates of taxes on vehicles as is the existing practice since it is proposed to subject the use of these vehicles to tax at higher rates through excise on emission fuels. Accordingly, the present practice of levying higher rates of taxes on vehicles should be done away. Further, CRISIL estimated that due to inefﬁciency and inadequate infrastructure during 2008/09 the total logistics spend covering both primary and secondary movement to be high around 10.7 percent of the GDP compared to the 5 to7 percent across developed nations. Its research claims that by implementing GST, with the development of logistics parks strong economic growth are expected to restructure the industry. The revenues of the third party logistics (3PL) service provider’s segment is expected to grow strongly at around 27% compound annual average growth rate over the next 5 years, to around Rs. 162 billion in 201314 from an estimated Rs. 48 billion in 2008-09.

Is it ‘the solution’? However, there are serious debates regarding the uniform rate structure that GST proposes even if the tax net is expanded to include ﬁnancial services and local sales of computer-related services and the present classiﬁcation of goods is retained with the proposed rates of 6 per cent for basic goods and 8

Proposed GST rates for 2011 to 2013 Year

2011 April

2012 April

2013 April

Categories

Total Tax Liability

Goods at lower rate

Goods at standard Rate

Services

Goods at lower rate

Goods at standard Rate

Services

Goods at standard Rate

Services

per cent for services and the average rate being 11.7 percent. A recent study at the NIPFP suggests some thought provoking results and reminds us that the problem is not merely a transition issue; rather it is a problem more structural in nature. To cut a long story short, there are two scenarios. First, it shows that under such circumstances at least four states, namely Chhattisgarh, Goa, Haryana and Jharkhand, would require standard rates higher than 15 per cent for revenue neutrality. Since financial services are considered difficult to tax and bulk of computer-related services are either inputs or exports, if these two sectors are excluded from the base, the average revenue-neutral rate increases to 14.7 per cent. Interestingly, in this second scenario the number of states requiring standard rate higher than 15 per cent increases to nine, including Bihar, Delhi, Gujarat, Kerala and Punjab. Now even if we assume that the tax base for goods expands by 10 per cent as a result of lower distortions and improved tax compliance in the new regime, there will still remain two states with a revenue neutral rate above 15 per cent, and at least five states with revenue-neutral rates above 12 per cent. These differences are the result of the fact that some states lose more from CST compared to tentative gain from inclusion of services in the base. Quite obviously, compensation might not be the effective anecdote for the States.

The optimistic Indian…! Estimation suggests that the GST implementation increased Canadian GDP by 1.4 percent. Therefore, there is minimum reason to think that India would lose a similar kind of positive impact. Assuming this to be true , gains of about 15 billion dollars annually is for sure and discounting these flows at a modest 3 percent per annum, the present value of the GST works out to about half a trillion dollars. Indeed GST is going to reduce manufacturing cost and benefit end-customers. The implementation of the tax would also result in Indian manufacturing sector being globally competitive and promote the entrepreneurial initiatives and economic activity on the whole. Since, presently, most large manufacturing firms have regional warehouses of their own to avoid inter-state taxes, but under GST they can streamline their operations and outsource their supply chain requirements to logistics firms, leading to savings of up to 20 per cent. No doubt that with around 9 percent growth rate the Indian economy is anxiously waiting for a turnaround in its indirect taxation framework. NEXT ISSUE Bumps Ahead! Vijay Bhalaki, Director, Athena Infonomics India and Research Fellow, Center for Asia Studies

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UTLOOK

2011

OUTLOOK 2011

Thrust on efficient system India has seen consistent GDP growth of over six percent in the last decade. As India’s Ajay S Mittal economy surges Group Chairman and Managing Director ahead and trade Arshiya International Ltd. increases, bringing the desired efficiencies in logistics systems in India will be imperative to country’s growth. Capitalizing on this opportunity the Logistics and Supply Chain Industry in the year 2011 and beyond will see emergence of Integrated Supply Chain and Logistics Infrastructure Solutions. At present Logistics cost in India is fairly high – at around 14 percent of GDP, as against 8-9 percent in most developed nations. On a one trillion GDP; this represents absolute value of in-efficiency and therefore a logistics market potential of over US$ 50 billion. India’s container throughput in FY09 was just under seven million TEU’s, as compared to Dubai (12 million), Singapore (24 million) & China (186 million). Even with the poor road infrastructure and disorganized trucking network in the country, road transport currently accounts for approximately 65 percent of the total Indian freight transport. With rail having only about 30 percent market share, making hinterland cargo movement more expensive and in-efficient. Added to the above, India has challenges with the inefficiencies consistent with an unorganized 3PL / 4PL and lack of logistics infrastructure network. India is becoming the epicenter of global expansion strategy of many MNCs and also the emerging supplier base for domestic as well as international companies. Thus, country’s trade volumes in terms of imports, exports and re-exports will witness a steady rise in coming years. To capitalize on the opportunity, India needs to build and operate world-class state-ofthe-art infrastructure, which is presently existing in competitive economies such as Singapore, Dubai, China and others, to enable seamless movement of goods in LOGISTICS TIMES January 2011

and out of the country. Companies will find game changing value in their business strategies with logistics infrastructure such as Free Trade and Warehousing Zones (FTWZs), which will enable EXIM cargo consolidation, value addition and allow India to become a regional trading hub. Dependence on inefficient road transportation will reduce with cost effective freight movement through rail supported by state-of-the-art rail terminal facilities at strategic locations and domestic distribution hubs for cargo consolidation and transportation through rail. Integration of logistics infrastructure with global logistics, domestic supply chain management and information technology will result in reduction in working capital and increase in product visibility and control. On a global scale Logistics and Supply Chain Industry has been under tremendous pressure for the past few years in bringing down operating costs, in the light of the global economic meltdown. For the past few years’ companies focus was primarily on bringing down the inventory levels and reducing capital costs. Now, as most economies are experiencing an upward trend in terms of growth supply chain will become an even more integral part of a company’s value chain. Logistics and Supply chain function will be instrumental in improving the quality of products or services, improving customer service, getting products or services to the market faster.

In order to understand the global trends in 2011 and beyond, one also needs to take closer look at the critical requirements for rooting out inefficiencies in the logistics and supply chain space. With the economic complexities and global volatility, integration of logistics and supply chain services is the precursor to efficiency and profitability. Integration of various services by logistics and supply chain players helps in customizing advanced logistical solutions that helps inordinately to unriddle the issues that besets the logistics space. Integration reduces the dependence of companies on multiple supply chain partners, improves visibility as well as makes the supply chain more responsive to the changing market trends and complexities in customer demand. Seamless synergized network, supported by advanced technology helps companies find ways to meet most insurmountable challenges. End-to-end supply chain and logistics solutions will ensure a streamlined flow of products, services and information from manufacturing plants to delivery destinations, rooting out inefficiencies and empowering companies to respond to changing market dynamics. Overall, 2011 will see more companies leveraging India’s opportunity, thus focusing on their core competencies and outsourcing their logistics and supply chain activities to players providing integrated solutions.

Air Cargo is drawing more attention now Express today plays an important role in trade and distribution because of the timesensitive nature Anil Khanna Managing Director of many goods, Blue Dart Express Ltd and the increasing demand for reliability and security. With

encouraging projected GDP growths, development of industry, and India emerging as an important sourcing hub for some industries, great opportunities exist. Further, we have a large consumption base, and secondary markets are expanding. Air transportation is still the preferred option for those looking at

reliability, speed and security, and many companies are looking at end-to-end solutions from service providers who are specialists in the field, rather than setting up infrastructure and operations of their own. Hence, there is immense scope for players operating in this segment. Apart from the temporary situation faced in the macro-economic environment, issues such as infrastructure, both air and surface, continues to be a challenge. In the logistics industry, where space is a highly perishable commodity, any disruption in services, due to either natural disasters or manufactured reasons, affects us adversely, as the day’s capacity inventory is lost forever. However, the growth in international trade coupled with strong domestic demand for goods has boosted the market. The current scenario has shifted the focus of players in the aviation sector from passenger traffic towards developing their air cargo operations in order to capitalize on the opportunities in the market. Many new players have either entered the segment or planning their entry as they take a cue from the success stories of dedicated air cargo operators over the years. Given the opportunities in the market, every player can find its own niche to cater to the rising demand and supply of an economy driven by domestic consumption. The market although large is predominantly fragmented with multiple factors - demographic, retail, media, and supplier fragmentation. Factors like congestion, over regulation and a weak transport network are also holding back the industry. However, the scenario is fast improving with an enthusiastic upswing in infrastructure. The Golden Quadrilateral Project, a planned network of divided 4-lane highways to connect all its major cities, is a good start, along with the East-West and North-South corridors. This will enable a significant increase in inbound and outbound cargo movement. Plans are also there for developing worldclass airports and seaports. All these and more constructive efforts in this direction will see the transformation required,

providing the much needed support that this sector needs to fully realize its potential. Air Cargo and, in particular, Air Express distribution is an indicator of industrial and economic health of any country. Express still remains crucial to globalization, which coupled with trade liberalization, is the driving force of economic growth worldwide. In an increasingly global community and market place, air express plays an increasingly prominent role – it is imperative in the transport and logistics value chain, and has been instrumental in radically transforming the world trade scenario. Quality is a necessary and intrinsic part of the air express service in order to deliver a strong value proposition. Service excellence coupled with costefficiency would stimulate the industry and expand business for all stakeholders – airlines, airports, service providers and customers as well. Air Express typically operates within a very short time-window, processing large volumes at high speed with the support of technology to ensure reliability through the chain, door-todoor. Control is essential to the delivery of quality. Therefore, factors that would assist the air express industry would be facilities at airports with airside and city side

access allowing simultaneous docking of multiple vehicles for speedy loading/ unloading; parking bays for aircraft at close proximity to operations facilities to enable rapid transfer/loading of shipments; reduction in traffic congestion to allow for punctuality and reduced fuel consumption and costs. Another area, which remains a concern, is the inertia of the industry towards embracing technology. Advances in IT solutions will make tracking and tracing of shipments much more seamless than it is today. Interactions will become much more automated; web-based solutions will provide real time information and better customer relationship management across the entire supply chain. The flawless sharing of information will transform the air express industry, as it is known today. India’s air express industry looks promising. To enjoy the full benefits of integrated air express services, the government needs to address restrictive civil aviation agreements, cumbersome customs clearance procedures, and restrictions on investment in ground transportation operations. A strong commitment from private sector operators coupled with determined efforts by the government and regulators will see a transformation for the sector.

Biggest growth year There is no denying the fact that the retail industry has bounced back quite significantly vis-àvis the dip it had Anshuman Singh MD & CEO registered during Future Supply Chain the slowdown period. Consumption is back again and recovery in retail is absolutely on lines with the recovery in the economy. Players are by and large doing well and skepticism from some quarters notwithstanding, we have again started witnessing opening of new stores. Almost in an aggressive fashion by some players. From my own experience, I can say that this year has been very good

for retail industry, especially the second half of the year. We are noticing a lot of tractions and recovery is robust, The bullishness witnessed during the festive season is a case in the point. Going by the projections, next few years would be the spell of robust growth for the economy and, therefore, we in retail business can expect to fare no differently. That entails scaling our operations and from industry perspective, I envisage a host of challenges on supply chain front. The mother of all challenges would be managing the growth and I would explain why. Many retailers had become very cautious during serious slowdown period they had cut down on investments in LOGISTICS TIMES January 2011

OUTLOOK 2011

creating robust infrastructure on supply chain side. But now with the business growth happening again which may even become stronger in the near term, the problem will be to handle the larger volume of growth. And this is a very serious issue for the retail industry today. Luckily for us, we did not resort to that kind of strategy wherein we went slow on our investments for the future because of adverse market conditions. We had planned large investments between 2007 to 2009, and one of the clear reflections of our big-ticket focus on supply chain side is the fact this unit (Future Supply Chain) was hived off for the purpose of investing into infrastructure, optimization and mechanization. We were committed about our investments and no corner was cut anywhere. And today this strategy has put us on a sound wicket and we are ready to meet the challenges of any kind of high growth scenario in retail. Not only for Future Group ,of course, which is our most important customer but all other players in the market as well. In fact, I would go to the extent of saying that slowdown has turned out to be a blessing in disguise. It helped us tremendously because as the growth dipped, it gave us the breathing time to get our act right. Afterall, getting our act right in a very high growth period does not often turn out to be an easy exercise. So other retailers, if they were conservative in those troubled times, then they could be facing big troubles in the near to medium term. Scales can’t be built up overnight and it could hold their growth for sometime. A strong feeling prevailing in the industry today is to wait for GST and then plan out future expansion. This again is a conservative stance. I don’t think GST is holding anybody back from preparing anything. No doubt, the enthusiasm with which a lot of companies had started thinking in terms of GST and its benefits has gone down to some extent. But in my opinion, this shouldn’t be the case. You have to be GST ready whenever it happens and that is what precisely we have done. We have built a GST compliant infrastructure network and it LOGISTICS TIMES January 2011

would come handy. I think, 2011 could well be the biggest year of growth for us. We have a completely GST compliant contract logistics network of distribution centers. And we are building 12.5 million square feet of DC space which would come up in next two years which would be offered not only to the Future Group but all customers in the consumption space – especially durables, furniture, food, FMCG, fashion, clothing, etc. Another

business which we have set up in last one year is express transportation business. This is a relatively new business but here we have got the maximum customers from outside. We currently have nearly 400 outside customers and here we want to change the paradigm of customers’ experience in express transportation. We are also setting up a freight forwarding business, an international logistics unit. So on an overall basis, year 2011 is filled with a lot of excitement for us.

Growth drivers to game changers “When the winds of change blow, some build shelters, some build windmills.” –Chinese Proverb While the jury is Abhik Mitra Managing Director still out on whether TNT India 2010 was a year of anemic increments or buoyant recovery, one thing is certain – the clouds have cleared across industries and geographies. From trenches to boardrooms, the mood is anticipatory. The World Economy is recovering and we have seen some of the key European countries and the Americas showing steady progress. Certain circles see the prevailing market climate as a tipping point, which will be triggered more by impending variables than industry constants. At TNT, we are keeping an eye to the future with a panoramic view of industries, weighed in with multiple factors – from both a company and industry perspective. In focus 2010: anticipating strong growth, investing with confidence Despite global economic challenges, the Indian economy surpassed expectations. Growing their footprint both domestically and internationally, many Indian companies, specifically in the automotive, industrial goods, pharmaceutical and healthcare, and textile industries chose TNT India as their preferred logistics partner. Building on impressive growth in 2009, TNT India has witnessed another eventful year in 2010. While international freight business has grown by a considerable amount, the domestic

business has grown by 36 percent — faster than the industry average. In addition to being testimony to TNT’s India strategy and “glocal” operations, this growth is reflective of the acceptance of a global major’s foray in the domestic logistics business. This also lends credence to the industry watcher’s perception of TNT India being the only significant global player in the Indian logistics market. To meet the anticipated increase in logistics demand, TNT launched a highgrowth strategy that will include enhanced international connectivity of the India network to its China and European network, as well as a focused growth plan for the India Domestic Network. Highlights include increased focus in the eastern region with the addition of over 100,000 sq. ft. of warehousing space. Another infrastructure ramp-up which has resulted in tangible benefits is the set up of a Hub Centre in Chennai with clearing capabilities to reduce the time of consignments being diverted to Delhi. Insight 2011: Increased demand for Service Logistics across verticals Based on observations in 2010, going forward in 2011, the automotive, industrial goods, pharmaceutical and healthcare, and textile industries will continue to be key growth drivers for the express, cargo and logistics industry. An emerging trend that will grow exponentially in 2011 is service logistics. Industries, especially HiTech, are looking for business solutions that go beyond “plain vanilla” offerings. For many of these companies, the needs of the hour are improved visibility, reliability

OUTLOOK 2011

and response times when dealing with their mission-critical consignments. After-sales is no longer an afterthought. Customers are looking at end-to-end solutions from procuring and consolidating raw materials, to transporting finished goods, to warehousing and distribution, with the latest being reverse logistics management. Having excelled in service logistics internationally and domestically, logistics service providers like TNT are equipped to meet the needs of Industries. Future outlook: will Goods and Services Tax (GST) change the game? Another important development in 2011 and beyond will be the implementation of GST. This will accelerate business while cutting down transportation time resulting from the current multiple

taxation hurdles. Though the impact of GST will take some time to bear fruit, we will see the introduction of more sophisticated supply chain solutions that will propel domestic and international trade. The opportunity to reduce costs by realigning supply chains is immense. The Govt. of India has also indicated the economic projection for 2010-11 to be a healthy 8.75 percent, with the possibility of crossing 9 percent. This denotes that there are strong economic fundamentals for continued growth in 2011 and thereafter. Uncertainties notwithstanding, the future belongs to those who prepare for it today. It’s time for the industry to look beyond “shelters” and drive growth by building “windmills”.

The future is bright The economy of India is the eleventh largest economy in the world by nominal GDP and Oscar de Bok, CEO the fourth largest (South & South East Asia) by purchasing DHL Supply Chain power parity (PPP). In the last few years, the country witnessed a healthy economic growth driven by robust industrial growth. Improving infrastructure like ports, highways, increasing connectivity, uniform tax structure and industrial demand is pushing the logistics growth. The Indian logistics industry is valued at Rs 3.6 trillion and poised for strong growth in the next five years with a CAGR of around 11 percent. A well-developed and networked logistics industry is imperative for the success and overall growth of the economy. Strong growth in economic fundamentals, favorable regulatory environment and greater thrust on logistics infrastructure LOGISTICS TIMES January 2011

development would be the key factors driving growth if India is to be a leading Global Economy by 2020. The government has been making strides towards ensuring economic growth and has taken several initiatives. One important initiative is the proposed Goods & Services Tax (GST) and while there is a lot of discussion on the impact of the same on the logistics industry GST is just a tipping point from what we see in the market as other governmental interventions like National Rural Employment Guarantee scheme has resulted in a consumption boom in Tier 2 and Tier 3 cities. GST has opened up a whole new avenue for growth for the LSP’s the overall requirement of large scale; quality warehousing space is expected to increase dramatically post Goods & Service Tax (GST). India is estimated to have about 1,800 million sq feet of warehousing space, with 8 percent of this being owned

and operated by organized players. Complimenting growth in the logistics sector, India needs at least 25-30 million sq.ft of additional warehousing space annually. Similar shortfalls exist in the cold-chain industry, which is estimated between Rs 8,000 crore and Rs 10,000 crore. The proposed implementation of GST and the development of logistics parks and Free trade warehousing zones (FTWZ) speed up formation of regional hubbased infrastructure and an environment conducive for rationalization of the logistics network. With more government collaboration(PPP), India is increasingly becoming a favorite investment destination and government policies for inviting such investments ensure there are best practices from all over the world with key players in the industry as its main customers and bring those practices to the Indian market. According to Crisil Research - agriculture wastages can be reduced to around 25 percent from the current levels of 3040 percent through an efficient supply chain mechanism. Lower wastages would ensure lower prices to end consumers and higher income for farmers. Efficiency in logistics operations can be achieved by outsourcing it to 3PL providers who can integrate operations by providing multimodal transport services and create better logistics infrastructure. The evolution in supply chain management will transform it from an activity-based function to a service-oriented function. The expected implementation of GST and the higher penetration of the third party logistics segment across non-bulk sectors will lead to savings in the 10-25 percent range. As the government gears up toward unleashing the GST regime, businesses will also need to adapt accordingly. A fresh approach is required towards supply chains in existing geographies as consolidation is the key. Focus is needed toward new areas that this impending legislation will bring. ( To read the unabridged version of this column, log onto: www.logisticstimes.net)

Through the eyes of the logiscope I don’t believe in horoscopes and predictions to me are a thing that most Strategy Managers world Harry Lagad Executive Director wide get into and Gati Ltd get them horribly wrong. I have always maintained the fact that in today’s business, the changes in the world and the society around a business can have a larger impact on the business than what happens within. Peter Drucker’s famous words, but not many businesses take those into consideration correctly. Lets look at the world briefly through 2010 and see what we predicted and we never saw. Many pundits predicted a “Double Dip” recession. We never saw that come through. People predicted that Europe would lead this but apart from Ireland and Greece, where truly speaking, the economics were hurt by a very different factor indeed, Europe seems to be moving along the track and getting stronger. America still moves on, still spends a fair amount and the housing market there is getting stronger and stronger. There was a hue and cry over H1N1 and predictions that millions would be wiped out. There was a mad research on the vaccine and the way people were stocking up on masks etc, well, nothing much happened, really and its just become a normal strain of a flu that came and will stay on for some years in a milder form. Airline businesses would suffer and there would be a spate of consolidations. Well, except for the fact that there was a crash here and there, and Qantas had a near miss with the A380, nothing significant happened, in fact, airline travel is still as expensive, if not more, as before. And finally, a volcano that can disrupt global travel and trade? Whoever had heard of that in 2009? So, when I am asked to write about 2011 and how do I “predict” the year to be, well, honestly, I will give my views on some of the things that will shape the tomorrow, but will all of them come true

is a matter that I think the businesses themselves have to decide on how they factor these assumptions and how well they take up to these trends. Information Technology will become a forefront of global Supply Chain drivers in the year to come and more and more companies are going to start looking at the “Shared Services” or “Saas” (Software as a Service ) models to adopt. While in India, the awareness phase of using good tools and software in supply chains is over and companies will start looking at investing in good systems and software, specially, TMS and WMS in their preparations for the GST regime. There is one particular aspect of “Information” that I think we will see emerge as being the forefront of the next future of supply chains. “Shared Information” will start showing the power of True Collaboration. Globally, there are a few companies who have developed the “Clouds” of the Shared Supply Chain Commerce Platforms which will allow easy passage of key information to be shared with collaborative partners thus making decisions on transportation, inventories, cash flows much more fluid. This in turn, will lead to better predictions of “market over heating, over supplies, production

glitches and demand drivers”. In India, this model has been developed, but unfortunately, still not understood in its totality. However, some “Exchanges” will become more mature and trade on these exchanges will start showing good results. Logistics costs will increase and shippers and manufacturers will come under pressure to re-look at their supply chains. The cost of fuel and other inputs will drive the cost up for most logistics service providers and these costs will have to be passed upwards. However, from a shipper’s perspective, they will seek better solutions and consolidated offerings from the service providers to bring down the overall cost impact and Service providers will have to better their service performances and their ability to design solutions. In India, I see the reverse. With more and more competitors now jumping onto the bandwagon, the simplest form of logistics & transport services will come under tremendous pressure for on-going profitability. Service providers will have to re-think their strategies on how to retain customers and continue to add value. ( To read the unabridged version of this column, log onto: www.logisticstimes.net)

Future has arrived The current logistics scene in India can be aptly understood through this observation by Ajay Chopra Peter Drucker CEO, DIESL -‘The future arrived when we weren’t looking, so we are still dealing with issues, ideas and programs that don’t fit the world’s new realities’. We stand at a very important and critical phase of our country and the global economy. The upward swing in the business sentiments is visible all over and the commercial world and its various constituents are looking expectantly at corrections and supports from financial

and regulatory bodies. We have all scrapped through and come out a little shaken but lot more intelligent and knowledgeable about the volatilities of the economies and the need to remain vigilant and aware of the risks that the same entails. This is also the time of big opportunities that stare at us and it’s completely in our realm to go for them and make a difference for all of us and our surrounding worlds. There are, however, few things that need to happen for that to be possible. I am mentioning here some points which require the government and bureaucrats to proactively get involved: Regulatory Changes that truly make the business seamless in the country: LOGISTICS TIMES January 2011

OUTLOOK 2011

We hope and wish for a complete and honest implementation of GST and other accompanied reforms. Anything less and partial will probably harm more than it would benefit. Complete abolishment of entry forms and controls across states in the country Removal of hidden costs and inefficient legacy systems of Octroi and Cess etc Effective answer to the Toll charges’ impact on the freight costs : this is remaining unaddressed and is a hidden cost as of now Creation of ONE regulatory body at Government level to address all issues of the Logistics industry : this is currently spread amongst Shipping/ Road/infrastructure and other ministries Solving the Infrastructure issues of Power and Roads: it’s amazing how the absolute BASIC issues still continue to haunt us across levels. Our infrastructure needs to be atleast 10 years ahead of requirement if we are to benchmark our operations with our international counterparts. Labor Reforms that bring control and

clarity in such a sensitive and critical area In addition to the above, Logistics service providers need to focus on giving integrated solutions to their clients that really add value to their services. They need to grow from ‘need based’ to ‘expectation based’ partners. Service providers have to friend technology to bring in the much needed assurance and visibility into the system. Trained human resource with cross functional abilities, that can respond quickly to change, is another aspect of this industry that needs to be addressed in the coming year. Cost advantage can only take you so far – the coming year will see companies investing in technology and human resources – the two tangible differentiators of the leaders from the followers. The above are potential change agents that can lead to the transformations which are long overdue. The industry itself can support the cause by getting united and speaking one language for all its issues.

Managing disruptions vital 2010 proved to be a good year for the logistics industry in India in comparison to 2009 which witnessed Lars Sorensen the impact of the CEO, Damco India global recession and falling demand. India’s exports and imports revived after a few months of reduced growth and overall industrial production and GDP growth increased in 2010. The key consumer markets for India’s goods in North America and Europe showed signs of recovery and this led to an overall robust year for Indian logistics industry including ocean freight, air freight, surface transport and other logistics support services. We witnessed continued focus on infrastructure development for the industry including new air ports, improvements to existing air ports and terminals and this has strengthened our logistics network. LOGISTICS TIMES January 2011

2011 promises to be a good year for the logistics industry. The Indian economy is growing at near 9 percent and this growth is expected to have a positive impact on industry. The exports are growing and key industries like automotive, pharmaceuticals, retail and apparel/ fashion are doing well and are likely to keep the demand for logistics services high. The increased GDP growth and change in consumption patterns of Indians are also resulting in imports of high value consumer goods. The growth trends are likely to contribute to a 20-25 percent growth for logistics industry in 2011. The demand for air freight services and ocean freight services improved in 2010 and is likely to continue so in 2011 due to the increased export-import volumes. Traditional corridors like Europe and North America have recovered post recession and emerging corridors like India-China and India-Africa promise

to continue the growth. The demand for project cargo services is witnessing growth and with increased focus on infrastructure development, we foresee this to continue in 2011. The warehousing industry is expected to witness changes in 2011 due to the expected revisions in GST policy leading to emergence of a hub and spoke distribution model in India. 2011 is likely to see the emergence of new logistics parks and free trade warehousing zones which will provide the end users with more choices and an integrated approach to logistics management. The increasing fuel costs, however, affects the fragmented trucking market in India especially the truck owners with lower fleet sizes. However, there are several potential challenges that the logistics industry could face in 2011. There are growing concerns regarding the economic situation in Europe. This can dampen the consumer demand and can impact other economies and can overall lead to lower demand for goods and logistics services. However Asian markets look quite optimistic as this involves trade between some of the fastest growing economies like China and India. Supply chain break downs and disruptions continue in India and we witnessed incidents like the ship collision in the Nhava Sheva port approach channel which disrupted the movement of the ships for several days. We saw several strikes by local unions, transport unions which impacted the efficiency and increased the costs for the supply chain. It is imperative that these disruptions are managed through careful planning, contingency planning and co-ordination among all the parties involved. If these disruptions aren’t managed, it will significantly impact the growth potential and will also create negative impact with India’s trade partners overseas. In 2011 we look forward to an integrated approach towards logistics development among the various industry stakeholders including government authorities. We also look forward to increased integration of information technology in daily operations from all stakeholders including customs authorities, logistics service providers and other related intermediaries.

Key SCM Challenges SCM executives will face many challenges in managing supply chains in 2011. I highlight four of Professor Vinod Singhal Georgia Institute of Technology these challenges: College of Management dealing with increased currency volatility; preparing for “black swan” events; the detrimental effect of too much focus on efficiency; and reconsidering offshore-outsourcing. First, SCM executives will have to manage and improve the performance of their supply chains while dealing with increased currency volatility. Political, economic, and financial events in 2010 have led to increased exchange rate volatility that is likely to continue in 2011. Take for example the Euro-Dollar exchange rate fluctuations in 2010. At the beginning of 2010 Euro fetched $1.40, dropped to $1.20 by end of May 2010, rose to $1.40 by early November 2010, and then dropped to $1.30 by midDecember 2010. During 2010 the Yen has strengthened considerably against the Dollar. A key challenge for SCM executives in the years to come will be to create a balanced currency footprint to mitigate the effect of currency volatility. Nissan Motor Company is dealing with this by developing plans to shift its future expansion in dollarlinked economies, including the US and China, to protect itself against currency volatility and move towards a more balanced currency footprint. Second, SCM executives must develop the capability to respond to “black swan” events. These are events that are rare, hard to predict and imagine, and have high-impact. Recent example of such events include the closing of much of the European airspace following the eruption of Eyjafjallajokull; the tsunami and volcano eruption in Indonesia; the return of terrorist activity with bombs found in Dubai and the UK en route to Chicago; and a split-second power disruption at a Toshiba Corp. factory

in Japan that could hurt shipments for one of the most widely used computer chips in consumer electronic devices. The answer to combating such events is not buying more insurance but risk mitigation. SCM executives should develop plans to deal with such events. This includes 1) identifying what to do, how, when and by whom; 2) assigning responsibility and authority to deal with the situation; 3) monitoring the situation; and 4) executing the plan as needed. Third, SCM executives must guard against the relentless focus on cost cutting and doing things faster to make supply chains even more efficient. Short-term financial performance pressures create a bias and urgency to cut costs and reduce time as the benefits of such actions can have a positive effect on short-term financial results. But such short-term actions increase the risk that something in the future could go wrong with the supply chain. Too much emphasis on reducing cost and time leaves little slack in the supply chain, making the supply chain brittle and prone to disruptions.

Finally, SCM executives must develop a more comprehensive and dynamic view of offshore-outsourcing. Offshoreoutsourcing has many advantages including allowing the firm to focus on its core competencies, cost savings, benefiting from the supplier’s economies of scale, flexibility, faster time to market, and lower risks. However, there are disadvantages of offshoreoutsourcing such as incentives to squeeze suppliers, loss of control, inability to effectively deal with disruptions, and hard to pin down responsibility when things go wrong. During the last two decades the trend has been towards more offshoreoutsourcing. However, more recently, firms are rethinking about the extent of their dependence on offshoreoutsourcing. There is no one answer that will fit all offshore-outsourcing opportunities and each opportunity must be evaluated keeping in mind the context of the opportunity and using a broad and comprehensive evaluation framework. ( To read the unabridged version of this column, log onto: www.logisticstimes.net)

It’s happening! Everyday we are observing that more and more companies are moving towards palletisation. Pranil Vadgama Certain markets are President, Chep India more advanced like FMCG but also within FMCG there are major advancements being seen by various organisations especially the MNC’s. What is driving the real need for palletisation? There are several factors: One is hygiene/contamination where products from the manufacturing are now placed on pallets for storage in the warehouses. Second is the speed of material handling,

especially where material needs to move in bulk – truck turnaround times are important. Third is storage in racking systems. As costs increase for warehousing space in the country, many organisations are looking to go vertical by using racking systems where indeed a pallet would be required. The fourth is the cost of manual labour and the challenges with managing tricky labour unions and relations. Companies are slowly moving away from manual labour and using more of forklift trucks, hand pallet trucks and stackers in order to optimise costs and improve efficiencies in product handling in their operations. And finally the fifth being shrinkage and damage reduction to products. We LOGISTICS TIMES January 2011

OUTLOOK 2011

have seen many organisations using palletisation and then shrink-wrapping the products which strengthens the load, eliminates damage in movement (less touch-points) and more importantly reduces shrinkage (theft) as the load becomes unitised as one. We do see more and more companies moving towards palletisation. Standardisation will play a very important role here, why? Just like in many mature supply chains in various countries – pallets will indeed one day flow from manufacturer to 3PL to retail. This is where total supply chain costs will be large – but for a sender and a receiver of pallets to be unified they must be able to use the same size of pallet in their operations. Today in India the majority of pallets are of 1200x1000mm size but there are indeed other various pallet sizes for specific markets. Coming to one standard is a pre-requisite for all the supply chains in India to benefit from palletisation – the 1200x1000mm is emerging and backed by many companies in India today as the standard. Today palletisation is static, where if any movement (dynamic) happens it typically does so in a closed loop circuit (within the entity itself for example factory to DC). Several other factors determine the speed of dynamic palletisation specifically

to flowing pallets from one entity to another. The availability of trucks to take palletised loads (side entry and flat beds), road infrastructure improvements, and receiving infrastructure such as dock levels to enable flow through receiving and material handling equipment availability. This is a journey but through supply chain collaboration and working together as partners this is moving in the right direction. Now, let me tell you something that we have observed and seen over the past two years that has been incredible. Just like there are so many examples in India where there have been technological/process improvement leaps (straight jump from landlines to mobile phone) or (straight jump from CRT TVs to flat screen) – we have seen the same regarding use of pallets. Companies where they have considered palletisation have actually jumped straight towards pallet pooling. Pooling is the shared use of standard pallets across entities so that not one company has to buy pallets they simply join a pool that they use on a daily hire basis. Pooling is becoming the supply chain trend in palletisation. Palletisation is happening and will become an essential factor in the modernisation of the supply chain in India.

Stress on one window solution To get a sense of what lies ahead in the near term, it is important to understand where R. K. Saboo from we are coming. Chairman Express Industry At the first place, I Council of India feel that the express industry which had to suffer because of serious slowdown blues during 2008-2009 managed to almost completely recover in 2010. Industry is on the growth path and that too in double digit trajectory. LOGISTICS TIMES January 2011

If you look at the historical pattern, then you will notice that except in 2008-09, the express industry has been growing between 15 to 20 percent annually and I expect that the trend of double digit growth will continue in years to come. Since GDP is continue to grow between 8- 9 percent, this entails most of the business verticals would be growing significantly. And our fortune is obviously tied to these verticals. In terms of possible distinctive trends during the course of the year, I think

there would be more emphasis on direct marketing. In express industry, this mode of marketing will grow at better pace and it will help industry in its growth drive especially in segments like parcel. I think, a lot is also anticpated on the consolidation front, in terms of mergers and acquisitions. In my view, they are part and parcel of a growing segment but I strongly feel that the scope of such developments is now limited considering the current positioning of various players in the market. More than consolidation, I think players in the express industry would be more engaged in (a) improving their services and (b) offering an integrated basket of services. The competition in the segment has intensified manifold and this is reflected in the fact that most of the leading players have already begun catering to all kind of segments like domestic express, international services and surface express by way of providing one window solution to its clientele. On the regulatory front, we are also expecting that the proposed amendment to Postal Bill might come through and we are quite hopeful that government will make amendments which would incorporate the interest of the industry. At the association level, we are looking forward to some more progressive changes in 2011. EDI should be implemented and that will be first of its kind PPP project. This will definitely expedite clearance at all major gateway in India. One major burning issue we have in our hand is load retrieval at major metros. Load retrieval at various Common User Terminal is quite time consuming and that is affecting the overall delivery of shipments to consignees. We expect authorities to pay immediate attention to the issue so that that the efficiency of infrastructure like Common User Terminal could be enhanced. Of course, by involving all concerned parties and stakeholders in the value chain.

Small window for growth Since the last quarter of 2009, the world economy regained some momentum and Pradeep Kumar accordingly air Senior Vice President (Cargo Revenue Optimization) cargo business has Emirates picked up. And first six months of 2010 has been extremely good. We were able to recover the losses which we had suffered the previous year and recently we announced our half yearly results as well. From cargo point of view, we have announced an increase of 48.2 per cent in revenue terms and 22 percent on the tonnage front. However, the latter part of the year has been somewhat not that positive. In cargo business, the demand usually picks up in the last quarter. But we have not seen the momentum which is normally associated with the last quarter. IATA indicates that year 2011 is something we all have to be cautious about. We do subscribe to this projection and there are concrete reasons for it. Exports from Europe has been low and that is an area of concern. That could be more because of pull effect of currency crisis in Spain, Portugal, and Ireland. On the economic and business front, things are not in fine fettle in these countries and consumers buying habits has dropped. We are waiting to see what happens during Christmas. If the demand does not pick up during the Christmas and the new year eve, then an inventory of goods exported to these countries from Asia would pile up and then there won’t be much demand in the first quarter and that’s a major concern for global air cargo players. On the larger macro basis, there are certain other significant spots of bother for the air cargo industry emanating out of world economy dynamics. We are noticing somekind of currency war going on between several leading economies. For instance, there is this serious issue in

the west that the Chinese currency Yuan had been artificially lowered to promote exports. But a similar case is built up against US also which several economists have pointed out. The value of the US dollar is also believed to have been artifically pulled down to promote their exports and there are concrete signals to suggest that US exports is doing well. But import wise, they don’t want to promote and with low dollar value, their ability to purchase from international market is littered with constraints. These trends are creating contradictions. You look at the global trade equation today. Asia has become the factory of the world and the manufactured goods from the continent are meant to be absorbed by the Europe and the United States. I think, considering these constraints in mind that IATA is advocating a cautious approach in air cargo business in 2011. But we as a stakeholder in the global air freight industry strongly believe that the world has to move on and consumers would need high value goods. My own gut feeling is that that the growth in international air cargo business would

not flatten and would probably be in the range of four-six percent. There certainly is a small window of positive growth in the new year. However, one serious challenge as I could envisage for the air cargo industry is in sustaining the yields. Rates have improved in the recent past after dropping significantly during the global recessionary phase. The yield has also shown remarkable improvement and it broadly believed to be stabilizing. Now the issue is: can we sustain this stability? It would be interesting to see how scenario unfolds on this front. Meanwhile, like our passenger segment, we would continue to expand our cargo business and now our new focus is on African and South Amercian markets. And there would be a gradual expansion in our fleet. Right now we have seven freighters fleet five 747-400, and two 777 freighters. But we have ordered seven firm options for 777 freighters. The third aircraft would be delivered in August, 2011 and fourth one would join the fleet in February, 2012. So by March, 2012 we will have nine freighters in our fleet.

Woodcutters to carpenters The logistics service providers in the country have all the reasons to look forward to 2011 as a year of Arif A Siddiqui tremendous growth Coign Consulting o p p o r t u n i t i e s. The economy is doing pretty well, the manufacturing indices are up and that means the demand for their services would further mount. However, even as the things look extremely promising for them, there are certain concerns which need to be understood by them in proper perspective. In fact, today is that critical moment to address those concerns as they need to bring in a structural change

in their relationship vis-à-vis the end user industry, not only for 2011 but for the years ahead. I think, the key challenge on which players in the industry need to work on an urgent basis is to ensure that the relationship between 3PL service providers and end user industry reach to a certain maturity level. Exceptions notwithstanding, on an overall basis the LSPs are usually a commodity service provider rather than a value service provider. In the minds of the buyers of the logistics and supply chain services, the service providers are hardly specialists and a serious trust deficit exists in their relationship. LSPs are broadly looked upon as woodcutters whereas with growing competition and LOGISTICS TIMES January 2011

OUTLOOK 2011

volume pressure, the end user industry needs carpenters who can design and mould that basic wood into designs (read solutions) which suit the business needs. The most critical need of the day, therefore, is that LSPs give a facelift to their approach and operations, not only to deliver quantity but better quality. â&#x20AC;&#x153; Keep killing me on the cost, and keep cheating me on serviceâ&#x20AC;? â&#x20AC;&#x201C; the strong

feeling underlining the prevailing mistrust has to go and subtly substituted by mere supplier to partnership relationship. From LSPs standpoint, specialization in regard to intellectual capital and expertise has to come up. The writing on the wall is clear: the days of those mundane mathematical cost effective solutions are over and its time to make breakthrough in efficient solutions. Those who would understand

this need and take pro-active steps in the near run would be better geared up to take up the challenges in the future. I do firmly believe that in 2011, LSPs would tend to fill in the gaps in their operational structure in a more serious manner. There would be more focus on sharpening of skill-sets and adoption of advanced IT processes would certainly be on the top of their agenda.

Right time for infrastructure investment As we are moving into the new year and given the projections, the economy seems Anil Arora to be firing on Managing Director all cylinders. M J Logistics Quite obviously, this bodes well for logistics and allied industries. However, I feel that to make the most of the robust economic environment, GST should have been implemented in 2010 itself. The rationale is simple: at least it would take one year after GST implementation for the players in the industry to adjust to new business environment. There could be positive or negative fallouts in the immediate context when it comes to the adjustment issue. And on these issues, the regulatory authorities would have to pitch in again. That time span of one year becomes important. So if we are talking about fiscal 2011-12 with a projection of around double-digit GDP growth, then we need to really hurry up with the GST so that initial pangs or adjustments can be taken care of as expeditiously as possible. Another important issue is that of infrastructure. The government certainly has drawn a bigger picture in terms of better ports connectivity and highways or even multi-modal hubs, but all of that would take four-five years in actual realization. But whatever has been refurbished or opened up till now and every bit of infrastructure which would be adding up in the coming years, will result in providing impetus to economic LOGISTICS TIMES January 2011

activities in those pockets. Herein lies new opportunity for us and we should be agile in spotting those opportunities. In a way if you have to map the growth out, then you have to map out which projects are on and which are hitting completion and what effect they will have. A small example is Kundli-Manesar-Palwal (KMP) expressway project. The project has been delayed but the moment it

becomes operational, it would integrate the regional economy. It will be a big impetus to places like Manesar which is overcrowded today. That is what we have to see as how many such projects are going to become operational in the country in 2011 and accordingly make our business plans. One debate doing the rounds is given the kind of economic growth environment, would there be more impetus in creating better structured facilities like logistics parks which are so crucial for our business? My response is: its proverbial chicken and egg story. Look at the base

rental scenario of the warehouse today. We had seen a major hike in 2006 and 2007 which was primarily triggered by retail boom expectations. And a lot of capacity was added, some of them even without considering the issues like right locations. The organized retail players were in an equally bullish mood and signed agreements. And suddenly there was this bubble burst in 2008. And so 2008-09 were very bad years particularly for rentals. But in 2010, the capacity which was added in 2007 has more or less been gobbled up. The ones which are not doing well are those which were thoughtless investments and primarily suffer from locational disadvantage. A good location warehouse is today difficult to find. I strongly feel that if you believe in the medium and long term India story, then this is the time to put investment. If you do not put investment in this year, then it would be very difficult to grow. Another interesting trend which I am expecting during the course of the year is further consolidation by way of mergers and acquisition in our industry. The process gained significant momentum last year and it would certainly intensify. But more than anything else, the key point of attention in 2011 would be GST. It would be the major disappointment if it does not happen in the new year for the simple reason that it would defer a lot of expansion plans which logistics companies would like to undertake to take their operational scale to the next level.

IT refinement inevitable The economic prospects in year 2011 look pretty rosy and that could well turn out to be Vineet Kanaujia a defining period for GM (Marketing) the logistics industry Safexpress as a whole. Given the current momentum in the economy, all economic indicators are pointing towards a comfortable nine percent plus growth scenario and this would make logistics and supply chain industry not only a beneficiary but also a significant contributor to the expected high growth trajectory. I firmly believe that supply chain logistics would be the engine of economyâ&#x20AC;&#x2122;s growth we are expecting in 2011 and it would eventually assume the positioning of a sunrise sector in next couple of years. So from the standpoint of attaining that coveted status of a sunrise industry, a significant impetus would come in the new year given the fact that every player is now scaling up thanks to the buoyant economic environment. In 2011, we are slated to witness some interesting development on several fronts in terms of renewed vigour or emphasis. Firstly, players in the fray would be finetuning and getting more aggressive on their 3PL offerings. This big area of growth has been talked about for a long time but it is yet to reach anywhere close to the maturity point. The growth blip witnessed during 2008-09 probably slackened the pace of this service but is now getting into a buoyant groove with LSPs showing a commitment to make a significant mark in this space. Secondly, with IT being the backbone of supply chain, companies would opt for adoption of advanced technological processes. IT empowerment both in terms of improving hardware and adopting stateof-the-art solutions could be a defining trend in 2011. Afterall, industry has by and large realized that improved IT infrastructure and IT-backed product offerings are strategic weapons which ensure enhancement in delivery performance. And given the growth prospects lying ahead, not only in the new year but also years ahead, the inevitability

of IT refinement is now realized more than ever before and it would find a definitive expression in 2011. Another distinctive trend I could envisage is on the front of finding effective solutions to fill the skill gaps. Training and re-skilling modalities would find more attention from players in the industry as multiplying growth opportunities would entail not only training the new recruits but also having a vibrant training programme for the existing pool to upgrade their skill sets. This clearly is a major challenge. I am also expecting some definite action on supply chain consulting front. Given the fact that Indian growth story has once again assumed a very formidable shape, more MNCs in this space could join the party. Retail and lifestyle are the particular

domains which offer huge opportunity to them and these are the areas they would like to capitalize upon. For a company of our size and reach and also knowledge leadership positioning, the new year is certainly filled with excitement galore. Our product line would further expand and improve and our infrastructure capacity building exercise would see some significant addition. For instance, we have planned to add 10 more logistics parks to our existing base of 13 by the end of fiscal 2011-12. Again on the skill building and improvement front, we have our own academy which would assist in creating a qualified manpower pool. We are well placed to make the most of the opportunity unfolding in the near to long term.

Cost pressures to continue We had a great 2010 for entire automotive industry in India. It was full of challenges but we Kalpesh Pathak all felt happy and Asst. VP (SCM)- Fiat India satisfied at the end of the year with milestone market growth achievements throughout the sector. The industry went through too many constraints starting from capacity issues in component supply to logistics bottlenecks added with poor availability of skilled talent to support the growth. But the industry came out with very strong results achieving phenomenal growth which shows the great character of the Indian automotive industry in terms of smart management of bottlenecks to meet opportunities. It was a great accomplishment on part of the industry. Having said that, 2011 is going to be a promising year for the industry. Economic growth parameters are right in place for 2011 and I donâ&#x20AC;&#x2122;t see any reason why industry will not grow in terms of absolute numbers. However in terms of percentage growth, it will be moderate

looking at very high base achieved in 2010. While growth is a given fact, on the industrial side it is going to be another challenging year for all my colleagues in OEM as well as component suppliers as cost pressures are going to continue and may become more pressing due to oil prices movement, major commodity prices movement and capacity bottlenecks in few commodities driven by raw material availability and labor availability (e.g. tyres, castings). With lot of component suppliers having made fresh investments in 2010, I foresee situation in terms of capacities will ease out little bit but absolute numbers growth and increased car park in after sales market will still continue to maintain pressures on capacities available which will force all of us to smartly manage the supplydemand scenario. One more prominent factor which needs to be kept in mind is to manage harmonious labor relations. In 2010, we have seen labor issues in some part of the country impacting OEMs as well as component suppliers. The industry needs to really keep a top focus on this aspect LOGISTICS TIMES January 2011

OUTLOOK 2011

and pro-actively manage labor relations in best manner to avoid un-wanted problems on our platter when our plate is full of other challenges which we have to anyway fight. The industry also needs to watch our very vital resource – human resource. Scarcity of right kind of resources with right skills is impacting the industry in terms of efficiencies and costs. We really need to gear up our efforts and put smart human resource management and training tools in practice to make sure that we generate efficiencies and customer enthusiasm. Most of our logistics movements are dependent on road infrastructure. We need to gear up our efforts on multimodal solutions to improve efficiencies in transit time and costs. We have done some ground work in 2010 to explore new modes (Rail) and dedicated transportation fleets for outbound movements which have shown great results. We need to increase the frequency of such initiatives in 2011. We also have un-explored coastal belt across the country for domestic movement in auto industry. It is high time to explore some solutions on coastal movements to reduce congestion on road infrastructure and meet growth

challenges. If GST implementation goes through in 2011, we have one more challenge to redesign our supply chain business models both for inbound as well as outbound movements. This will be a huge task for the entire industry. Only way we can do it right the first time is to pro-actively work with our supply chain partners and bring collaboration based on service provider strengths to not only seek the individual best but industry best solutions. This is easier said than done but we all need to be seriously thinking and looking at possible solutions together otherwise correcting a small mistake in supply chain design may prove very costly affair on short run to change. To summarize, we have great times ahead for the industry in terms of opportunities and growth but we all have a cause for our respective stake holders to give best returns. Our supply chain management community would be going to play a very important role. How we deliver supply chain efficiencies will make the difference not only from cost perspective but from delivery to our customers and their enthusiasm.

Precision is the key It is not the speed alone but how safely and timely the LSP ( logistics Service Provider) T S Narasimham Executive Director delivers to curtail DARCL project over runs which holds the key to success in the fast growing Over Dimensional Cargo (ODC) segment in the country . Every ODC movement may be of different heavy lifts and is thus an experience and project by itself. Needless to say, these projects require varying combination of dedicated people and process technology tools as they are of higher order value chain and calls for meticulous working. Entry to this segment is not easy and rather tough because of risk profile, and LOGISTICS TIMES January 2011

therefore needs experience . Of course good and bad!! The ODC is a affluent cousin of FTL Bulk goods or LTL ( less than truck load or LCL less than container Loads) and occupies enviable position in logistics value chain. Good Freight when compared to Bulk Loads/break bulk etc, yet full potential and value remains to be realized by the LSPs as one sees it. A single piece of heavy lifts would mean turbine generator, steel member, storage tanks, boilers and with configured Hydraulic axles take from say 40 MT to even more- generally we find loads nearly over 200MT which are moved by road . Hydraulic axles and mechanism helps to adjust the massive load aided by process operated by

experienced and alert technical hand in turns and twists of roads in transit for smooth trouble free movement . To see an 1800 MT load on a vessel is a thrill, and tells the planning behind the purpose achieved ! PDCA ( Plan do Check and Act) being an essential component in this servicecalls for route survey, and one cannot rely on past alone and needs fresh updated ones or even due diligence with every work albeit same route , as to check any development enroute in highways or state highways or any approach road, bridges and capacities . This is required to be planned for proper diversion with permission from authorities as applicable. As in aviation, the takeoff and landing is crucial as major accidents take place during those crucial moments. Loading of ODC is technical and needs experienced engineer supervision, studying drawing and CG of the consignment and inspect, re-inspect packing lashing, dunnage to make consignment a package of roadworthiness - and, of course, other checks on the Axles and Prime Movers including but not limited to Tyres. A GPS tells the positioning and enables the LSP to advise the consignor / consignee on time schedule. Reference should be made to SLA (service level agreements) , MVA (Motor Vehicle Act) for various rules , including lights, amber colors, etc. crossing commercial tax/state border check posts and the experienced crew should carry all documents of load, RCs, axles to denote permissible legal loads… Advance team in a jeep can signal the huge load carrying vehicle on possible obstruction as a matter of caution. For LSP, carrier legal liability insurance cover should be a backup for any eventuality or untoward incident or for hedging against transit risks. For the project people who hire the service, it is essential to have Marine Cargo and Consequential Loss covers for construction or other infrastructure projects anywhere in the world (also known as Advanced Loss of Profits “ALOP” or Delay in Start-Up “DSU”). LSP to think when they are shouldered with responsibility to carry consignment

OUTLOOK 2011

value of Rs.50 crore or Rs.100 core single piece, factoring of costs, related to value of goods, risk profiling, apart from routine variable costs, and idling time need to be taken before the LSP thinks

to embark on another successful venture. Sharing of capacities, good networking, complementary approach will save lots of excess capacities and save mobilizing costs for every one.

Going beyond transportation We are yet to see more demanding and competitive focus on logistics due to growing Akash Bansal c u s t o m e r Head (Logistics Om Logistics expectations and capabilities of organised logistics companies to provide the services as required by customer for enhanced serviceable and cost optimization in time to come. The demand for logistics services has been largely driven by the remarkable growth and the credit goes definitely to the customers and their varied demands. Logistics players are realizing the potential in the outsourced logistics market and are expanding their range of activities to include value added services and customized supply chain management solutions. Companies, which want to grow along with the robust economic pace, should be ready

with the best available resources to handle the business opportunities arising due to consolidation. The logistics industry has grown rapidly in the last decade and various factors such as initiatives taken by government, improved service offering with value added services, usage of information technology etc. have contributed to this growth. Today the scenario is changing for logistics business and people are moving ahead of mere transportation to just in time solution, online inventories etc. So, basic focus area of companies should be now to give flexibility to operations and adding more services to their portfolio. We feel that customer have to be more analytical is selecting a logistics provider for a long-term business relationship and improvement through our the value chain. With the strong outlook of customers and growing opportunity I see logistics a major growth driver for the economy.

Consolidation game The cold chain is a much bandied about business proposition in India, attracting Pawanexh Kohli ever burgeoning Chief-Cold Supply Chain Business attention over the Gati Ltd past decade. It has typically been associated with securing national food supply, reducing wastage and with an energy intensive technology. Despite fetching increasing focus driven by the government, its ground manifestation is limited. The cold chain industry is understood differently by various pronouncers of the trade. Most people, including some of those driving this from within the government, LOGISTICS TIMES January 2011

presume the “cold chain” implies solely temperature controlled storage or carriage of goods. This automatically pre-supposes that the application of refrigeration is the singular differentiator. In reality the cold chain is a misnomer derived from “Cold SUPPLY CHAIN”; and like any supply chain, the production process, packaging criteria and delivery & distribution mechanism is particular to the cold chain. Hence the benefits perceived from the cold chain are not just limited to those derived through application of cooling, but additionally those due to inherent procedural changes it enforces across the entire supply chain process. For example, the cold chain is dependent on air flow patterns; hence the unit

load must not restrict but promote air infiltration around the goods. Consequently shoulder vents, side vents (or Jaali type crates) become important in this supply chain. Application of specially designed unitised packaging aids in minimises handling damage. It requires perforce, the application of hygiene and traceability norms, leading to a brand value added in terms of quality and regulatory compliance. Furthermore, the cold-chain is essentially about speed. A product must reach the consumer well within is marketable life and without transit losses; haste becomes one of the most crucial aspect in perishable distribution. The ordinary supply chain delivers a predetermined value (goods) to markets… whereas; the cold chain is integral to and effects the value discovery, quality and price realisation of the goods. The fact being, the cold chain incorporates all that the ordinary supply chain aspires towards – integration, speed, value continuation and direct supply lanes. The future hinges upon intrinsic understanding of above concepts, among others, in reference to driving the cold chain. In my opinion, the realisation of the true value derived from cold chain is yet unstated. Our infrastructure will take a long while to keep pace with developing and demanding India. With distance alone not being the sole bottleneck for perishables – even entry access into metros takes many hours and crossing barriers adds further time delays – the cold chain takes on even more import, as it alone would allow suitable extension of transit life (time). Regulatory norms are forthcoming both in the live perishable and pharmaceutical space which will further spoon the need for the cold chain. The pharmaceutical industry will have increasingly bulk shipments with primary, secondary and tertiary packaging changes, all with temperature controlled transits in mind. FDI into retail (inevitable in coming years), will also fuel need for an optimal cold chain, based on a long term vision for sustainable quality supply chains. (Log on to www.logisticstimes.net to read complete text.)

My P & Q It is no secret that it takes a minimum of 10 months for a normal child to be birthed. Premature happenings do happen but with complications. I have been conceptualising this column – My P & Q – since March 2010. Yes, that was 10 months ago. Now it has arrived. Naming this monthly ‘diatribe’ was no cakewalk, despite having

authored truckloads over a span of 35 odd years in various publications at home and abroad. Yes, the challenge was akin to naming of the human child or your pet dog. After much deliberations, the choice fell on “My P & Q”. “My P&Q” stands for “My People & Quotes” because the column will be focused on people and what they say and how it impacts the logistics and supply chain industry. Harvard Business School teaches more through case studies than pure vanilla theories and doctrines. This is because it is easy to relate to fellow creatures than abstract, which honestly is the domain of saints and philosophers. Unfortunately or otherwise, none of us are in the S&P category - not Standard & Poor, but you-knowwhat! Here, we go.

Milk run mystery! during this conversation, he would have noticed the contortions my face had undergone. Nonetheless, I heard him out and the next thing I did was to call up a friend (and philosopher!) in the industry seeking his ‘gyan’. He laughed out loud on hearing my story and dispelled my ignorance. Subsequent to this hilarious episode, every time the phrase ‘milk run’ is uttered, you know whom I remember the most!

30-minute Magician

“Milk run operations are very dicey, complicated and critical,” said Vibhu Prakash of Panalpina sometime in June last year over phone. I was stumped. Am I interacting with someone in logistics and supply chain segment or someone working for Mother Dairy or Amul? What has ‘milk run’ got to do

with Vibhu, the veteran logistics player? I was ignorant of this terminology. Though I have been exposed to macro economic issues for three decades, this ‘milk run’ got my goatee. Had the handsome Vibhu, who has packed and left for Canada to rejoin his family recently, been physically present

Heard of Prakash Dindorkar? You better. I consider him to be a magician. In the same class as Mascrenhas of Sanjay Leela Bhansali’s Guzaarish. You’ll be bewitched and spell bound when I tell you that the lean and mean Maharashtrian General Manager of Bajaj Auto Rudrapur plant has ensured that every single two wheeler that trundles out of his assembly line is sent out of his factory gates. In just 30 minutes. Yes, I repeat, LOGISTICS TIMES January 2011

Nano Cranes Pvt Ltd Khewat No.78, Village Chhapraula, Palwal, Dis Faridabad, Haryana Ph: +91-129-4272900,901 Fax: +91-129-4272924 Email: info@nanocranes.in, website: www.nanocranes.in

MY P&Q

Thanks, Prakash & Jagjit!

What’s up, Cyrus?

in 30 minutes. Handpicked by Rajiv Bajaj two years ago when the massive and state of the art plant came up in the industry-friendly Rudrapur of Uttarakhand, this powa-loving, down-toearth auto genius is weaving magic with 800 odd young workforce. No inventories, please. Why? Simple. Prakash does not like them. … and he does not want to waste his precious space. By the way, I had the first experience of what a ‘milk run’ is at the Bajaj Auto plant. Seventeen component suppliers operating out of the adjacent campus with a workforce of 18,000 collectively – who are not on the rolls of Bajaj Auto! – keep pushing out stuff for Prakash’s boys – yes, very young team – to do the rest. Prakash is ably assisted by none other than Jagjit Sethi of TCI Supply Chain Solutions. “We are the 18th partner in the whole scheme of things. We oversee the milk run,” explained the bespectacled supply chain veteran a few weeks ago. Of course, he ensured that I had a ‘dekko’ of ‘milk run’ managed by TCI SCS at Rudrapur, a few weeks ago. LOGISTICS TIMES January 2011

Here’s a teaser: “Putting It All Together”. Tell me whose tagline is this? The clock ticks now. Ten… Three. Two. One. OK. Given up? No problem. Folks, this is the ‘punchline’ of AFL Private Limited. Wonder why I harp on this? In mid-December, I literally bumped into Cyrus Gazdar, Chairman and Managing Director of AFL Private Limited at The Grand, New Delhi where CII Institute of Logistics hosted the Logistics Summit 2010. No, not when the charismatic AFL honcho was moderating panel discussions because I was not present unfortunately at that time. Late on day one, I return to catch up with Brambles bossman Thomas Gorman whose Chep is

that you’ve disposed off major businesses to FedEx in November, what is keeping you busy these days?” He flashed his trademark smile, dug out his business card and gave it me. “Am in a hurry to catch the flight. Call me on this number. We can talk,” he said. One quick glance at the card revealed the absence of his handphone or mobile number. “Can I have your mobile number?” I requested. “Look, my mobile remains switched off most of the time. This is my direct number. I check my mobile for messages a few times a day,” he responded. We shook hands and he left. I won’t be surprised if Airtel or Vodaphone – whoever is the operator servicing Cyrus, would not be happy with his ‘frugal’ usage.

Sartorial preference

performing phenomenally well under the stewardship of dynamic Pranil Vadgama. Coming out of this meeting, I literally ran into Cyrus Gazdar in the lobby as he was checking out to fly back to amchi Mumbai. I stopped him in his tracks even while the hotel attendant kept insisting that his car was waiting outside. My only question to him was: “Now

At the recently concluded Automotive Logistics India Conference held in Chennai, I ran into a challenge with my photographer Sathya. I told him to “shoot” Prof Janat Shah of Indian Institute of Management, Bangalore who was one of the prominent speakers. During lunch break, I buttonholed Sathya to check how his assignment was progressing. “All’s well, but.. who’s Shah?” he demanded. Why? What’s the problem? “Am unable to identify him,” he responded.

I looked around and spotted him and directed Sathya in Shah’s direction. Pat came the

reply: “He can’t be.” Why? I demanded. “He’s not wearing any jacket or tie!” Uff. Shah’s sartorial preference is different. He does not believe in jackets and ties perhaps. I remembered writing to him July last “please send me a high resolution image of yours with a jacket and tie” to carry along with his opinion piece for our Supply Chain Special. The humble, but most revered academician, never replied. Now I got used to the tall frame (must be 6 feet something!), but kept bombarding seminarists at various locations with “Have you ever seen Prof Shah suited and booted?” Hmmm. What’s the response? Well, that’s a secret for the time being. See you, folks, soon. ramesh@logisticstimes.net

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EVENTS TS

Automotive Logistics Conference

LOGISTICS TIMES was the media partner of this event Logistics Summit CII Institute of Logistics organized Logistics Summit 2010 in Delhi between 1314th December. The event saw participation of leading industry representatives dwelling on some of the most pressing issues of the day. Infrastruture, new emerging trends in logistics, warehoursng and distribution problems, shortcomings in the port sector, the pertinent lessons for LSPs to cater to the growing retail industry, etc. were the issues which were taken up during the course of the event which drew impressive gathering. During the event, noted consultancy firm KPMG also released a new report titled â&#x20AC;&#x153;Adding Wheelsâ&#x20AC;? which primarily deals with the future challenges on the infrastructure side. LOGISTICS TIMES January 2011

UK-based Ultimamedia was back in India with its Automotive Logistics India 2010 show which was organized in Chennai between 8th-10th December. The venue for the conference was Le Meridien hotel, Chennai. The two day conference was divided into eight business sessions which saw participation of leading industry representatives from the automobile sector as well as experts from abroad. Companies like Fiat India, Tata Motors Distribution, Adani Logistics, Mahindra Logistics, Maruti Suzuki, APL Logistics, General Motors, TCI supply chain solutions, Delphi, Chrysler India, Ford Asia, Union Pacific Railroad, Chep India, Huyndai India Motor, Mercurio Pallia, BLG Logistics, Delphi etc. were represented by their senior officials in the conference.

EVENTS

Xmas Celebration Christmas function was celebrated by Air Cargo Club of Bombay on 10th December 2010 at Sutra â&#x20AC;&#x201C; Intercontinental, The Lalit Mumbai. Function was well attended by members alongwith their family and guests. Special arrangements of games and other activities especially for children were made. It was a memorable evening for the members, who enjoyed this special festival of Christmas.

Investors Summit The Madhya Pradesh government has called for increasing private participation in developing warehouses and other storage facilities in the state. Spearheaded by MP Warehousing & Logistics Corporation (MPWLC), an investors summit was organized in Bhopal early last month which was attended by the representatives of leading firms involved in warehousing segment â&#x20AC;&#x201C; both from within the state and outside. The event was supported by Food Corporation of India (FCI) as well as the local unit of PHDCCI.

LOGISTICS TIMES January 2011

RNI No. DELENG-17848/2010-TC