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LogisticsTimes

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February 2014

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COVER FEATURE

Sustainable Supply Chain A Myth?

Logistics Times

CONTENTS

All about Transportation, Distribution & Infrastructure

Volume 4: Issue No.10 * February 2014 Editor in Chief

Raj Misra rajmisra@logisticstimes.net

Editor

Ritwik Sinha ritwik@logisticstimes.net

Sub Editor

Neha Richariya

Photographer

Mohit Malik

Designer

Kausar Syed

Circulation & Distribution

Kamruddin Saifi

Legal Advisor

Rakesh Garg

Our Bureau Mumbai

Rahul Kumar rahul@logisticstimes.net

Bangalore

B Shekhar shekhar@logisticstimes.net N Raju

Chennai

raju@logisticstimes.net Sudhir Kumar

Hyderabad

sudhir@logisticstimes.net Editorial Advisory Board Paul Lim Founder & President, Supply Chain Asia Pawanexh Kohli Principal Advisor, Cross Tree Prof. Samir Srivastava Associate Professor, IIM-Lucknow Prof. Akhil Chandra Institute of Logistics & Aviation Management Ramesh Kumar Member, National Committee on Supply Chain & Logistics, Govt. of India

Marketing & Sales Rajiv Sharma Ph: 011-22478538-39, 9811406654 Email: advt@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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24 COVER FEATURE

Sustainable Supply Chain: A Myth?

Edit Note News Briefs Report Special Feature Perspective

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EVENT Excellence Award

EDIT NOTE

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Search for the ideal In classical literature, as in life, there is a basic premise that all our activities are ultimately governed to attain the ideal. And that most of the conflicts that engulf our lives – as individuals, society, business enterprises, or even nations- primarily emanate from the discrepancy between what we perceive as ideal and what we come across as real. All our endevours, it is believed, seek the merger of the two which probably never happens.

In the backdrop of the above-mentioned fact, let’s look at what is happening in the realm of the global supply chain. In past one decade or so, the concept called sustainable supply chain has gained in popularity. The surface level definition of this concept is simple – to plan a supply chain base for 15-20 years at least and for that to make the required changes now which may entail investments in advanced processes and applications. Such a supply chain system has to be inherently scalable and should also be shock proof to disruptions like slowdown cycles or even natural disasters to the maximum extent possible. But as emphasized, this is the simplest definition we can think for sustainable supply chain.

When it comes to adoption in the real sense of the term, especially in an evolving market place like India, the story is not as simple as the definition suggests. The concept has various dimensions – some of them could be extremely complex in a market where a matured supply chain mindset is yet to evolve. Our cover feature in this edition (emanating out of a debate we conducted recently at Indian Institute of Foreign Trade) tends to closely examine the pillars of sustainable supply chain particularly eyeing for answers in terms of conversion of ideal to the real. Collaboration, sustaining profitability, preserving environment, complying with labour laws, etc. are the essential building blocks and putting all of them together would clearly be a huge challenge for any player driven by this grand idea.

Among other highlights of this edition, we have a brief interview with a senior official of Indian software major Infosys. The company has just forged an alliance with a major institute in the US for deepening knowledge base in the global supply chain (with specific focus on APAC and India) and the fact that a homegrown global heavyweight like Infosys is taking initiative of this nature could be certainly counted as a positive tiding for the Indian supply chain market.

By the way, a big thanks to our industry friends who were personally informed last month to view the pilot of our new product called LT 15 (www.lttv.in). Clearly first of its kind internet specific fortnightly video magazine focusing on logistics and supply chain launched in India (possibly in the world too), we are quite enthused with the response from all over the world. We are grateful to some of our industry friends who took the pains in sending us their suggestion list for the further improvement of the product.

Those suggestions would definitely be incorporated in the future episodes as we push this tool further to assume the positioning of the real gateway of Indian logistics to the world.

Waiting for your response Ritwik Sinha ritwik@logisticstimes.net LOGISTICS TIMES August 2011

NEWS BRIEFS

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Decks cleared for five major port projects The government early this month approved Rs 17,630 crore projects in the port sector to augment the capacity of major ports by about 151 million tonnes per annum (MTPA). “The Cabinet Committee on Economic Affairs (CCEA) approved five projects involving an investment of over 17,630 crore rupees to further increase the capacity of the Major Ports by 150.74 MTPA,” an official statement said. Of the five projects approved now, four are container terminals and one is a multipurpose cargo berth project in Mumbai port.

“The four container terminals are proposed in the major ports of Kandla (4.2 MTEU), Jawaharlal Nehru Port Trust (JNPT) (4.8 MTEU), Navi Mumbai, Kolkata(1.2 MTEU) and Ennore (1.4 MTEU),” it said. These proposed projects will double the container handling capacity which is at 11.57 million TEUs (Over 146 MTPA). The capacity of the multi-purpose cargo berth proposed for Mumbai Port Trust will be 4.5 MTPA to handle automobiles, iron

and steel cargo etc, among others, the statement said.

These projects will also bring the latest state of the art technology in line with the global standards, it said.

The Ministry of Shipping had a target to award 30 projects in the current financial year to add a capacity of about 282 MTPA at an estimated investment of over Rs 26,400 crore. As against these targets, the Ministry had already awarded 23 projects at a cost of over Rs 9,790 crore for an additional capacity of 116 MTPA.

Slowdown grips services sector

India’s services sector being pulled down by a dismal impact of manufacturing may grow just by about 6% in the current financial year, falling significantly from 6.8% in 2012-13 as some of the key segments like transport, hotels and construction take a hit from the slowdown, an ASSOCHAM study has said.

“The services sector which contributes over 60 per cent to the country’s GDP may expand a shade lower or above 6% in the fiscal 2013-14. The spill over from the manufacturing is clearly visible on the important segments of trade, transport and construction,” reveals the ASSOCHAM paper.

Illustratively, trade, hotels, transport and communication could manage a growth of four per cent in the first half of fiscal 2013-14 against 6.4 per cent in the same period last year. Likewise, construction could grow at only 3.5 LOGISTICS TIMES February 2014

per cent as compared to 5.1 per cent. The paper further said since the manufacturing stays in the negative zone, it has hit the trade segment in services significantly, also reflecting overall demand compression. “Vibrancy in trade –both wholesale and retail is missing and would return only when the overall industrial growth returns along with consistent agriculture expansion for at least two-three years. Both industrial production and agriculture along with exports affect the trade.”

As for the current fiscal, the paper noted that the services sector recorded the lowest growth of 5.8 per cent in second quarter of 2013-14 as the crucial segments of trade, hotels, restaurant, transport and communication along with community services showing laggard progress in the wake of overall slowdown.

The spill over is evident from the manufacturing sector which has declined by 0.6 per cent between April and November this fiscal. As many as half the numbers of 22 industries within manufacturing have shown a drop in production. These included basic metals, machinery & equipment, radio, TV and communication equipment, motor vehicles and fabricated metal products. “All these are highly connected with the transport sector”, the ASSOCHAM study noted.

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Biggest dry bulk vessel at Hazira

It was yet another milestone achieved by Essar Ports, when MV Kiran, a 175,000 tonne DWT vessel, the largest dry bulk vessel in Indian Fleet, berthed at Essar Bulk Terminal, Hazira to discharge Iron Ore Pellets early this month. The vessel, owned by Essar Shipping, has a length overall of 281m and beam of 45 m, making

it the largest ship the terminal has handled till date. The handling of a ship of this size highlights the capability of Essar Bulk Terminal Hazira, to handle the largest of bulk carriers. It also highlights the operational efficiency of the terminal, and the capability of the operating team.

Speaking on the occasion, Rajiv Agarwal, MD & CEO, Essar Ports said, “We are proud of our team at Hazira, which is now handling some of the largest bulk carriers. Our focus is on operational excellence and safety of operations, and our teams on the ground are continuously striving towards it.”

Essar Ports is one of the largest port companies of India, with a current capacity of 104 MMTPA. The capacity is being expanded to 181 MMTPA over the next few years.

Adani Petronet Dahej Port Creates Benchmark Adani Petronet Dahej Port, the solid bulk cargo handling port on the west coast of India recently created new benchmark of dispatching longest cargo measuring 101.6 meter, in a single piece.

“This achievement highlights the prowess of APDPPL in handling critical project cargo.

Through this feat APDPPL has once again established that it is fully capable to cater to the needs of effective handling of bulk and project cargo of the dense industrial belt of Gujarat, Maharashtra and Central Madhya Pradesh.

With efficient planning & implementation, worldclass technology & equipment and highly motivated workforce, the port will continue to serve the nation and the community while achieving such benchmarks”, said Karan Adani, Executive Director, APSEZ. The heavy equipment project cargo handled for Isgec Hitachi Zosen was a Quench Tower, weighing 383 tonnes and measuring 101.6 meter in length, making it the longest cargo handled at the port. The cargo was transported on single ply of 42 SPMT axles from port’s storage yard to South berth of Adani Dahej Port. It LOGISTICS TIMES February 2014

was shipped to ETHYDCO (The Egyptian Ethylene and Derivatives Company) at Al Ameriya, Alexandria, Egypt on MV BBC Citrine. The previous record was 91.15 meter long, 880 tonnes heavy C2 Splitter shipped on dumb barge using Ro-Ro Facility of the port to IOCL, Paradip during May 2013.

Adani group also operates ports in Mundra and Hazira, in Gujarat; Visakhapatnam in Andhra Pradesh and is setting up coal handling facilities in Mormugao (Goa) and at Kandla (Gujarat).

NEWS BRIEFS

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Phase II construction begins IndoSpace Logistics Park Luhari (IndoSpace Luhari), a 1.6 million square feet industrial and logistics park, has commenced construction of its second phase. IndoSpace Luhari is one in the series of modern industrial and logistics parks being developed by IndoSpace across India, and phase I of the park was launched in June 2013.

Mott MacDonald is providing architectural, structural and building engineering design services on the project, which is being developed by IndoSpace Development Management.

The site is within close proximity to several large industrial clusters, including IMT Manesar, Daruhera, Bhiwadi, and Bawal industrial areas. Good regional connectivity makes the site an ideal location for third party logistics services (3PLs), consumer goods companies and retailers to establish their distribution centres to service Gurgaon, Delhi and northern India.

Pankaj Vora, Mott MacDonald’s project director, said: “IndoSpace Luhari comprises modern infrastructure and warehousing facilities which are available for lease to large international and Indian companies, enabling efficient and world-class supply-chain operations. Mott MacDonald is delighted to be working for IndoSpace, India’s leading company in the industrial and logistics real estate sector, on this development, which is an important part of the country’s logistics infrastructure expansion.”

DP World Nhava Sheva handles longest vessel at JNPT

DP World’s Nhava Sheva International Container Terminal (NSICT) has once again reinforced its position as the leading container terminal in India, setting a new benchmark for the industry. Recently, it handled MSC Susanna – the longest ship ever to berth at India’s largest container gateway port.

According to a company release the MSC Susanna is deployed on the Mediterranean shipping company’s / Shipping Corporation of India’s ISES Service bound

for Europe. At 336.66m, the MSC Susanna is the longest vessel to traverse the Mumbai channel, and is a testament to the efforts and commitment by the Port Authority in improving the marine infrastructure at JN Port with its dredging project.

Speaking on the occasion Ajay Singh, CEO, DP World Nhava Sheva said “At DP World Nhava Sheva we are constantly striving both to meet our customers’ needs today and tomorrow, and occasions like this one reflect our ability to meet the changing dynamics of the container shipping industry.”

NSICT was set up in 1997 and is India’s first privatepublic partnership in the ports sector. DP World operates five container terminals in India, in Mumbai (JNPT), Chennai, Cochin, Mundra and Vishakhapatnam and supports a significant portion of India’s international containerised trade.

LOGISTICS TIMES February 2014

NEWS BRIEFS

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PLUSS Polymers gears up for global expansion PLUSS Polymers, the leader in research, development and manufacture of specialized polymers and phasechange materials (PCMs) is going global to tap new markets and strengthen its existing base across the world. 2014 will see a heightened visibility for the company on international platforms as it increases its participation in plastic and polymer exhibitions in markets like Turkey, Russia and Thailand.

To capture the growing polymer market in Turkey and to further bolster its current market share in the region, the company participated in the 23rd International Istanbul Plastics Industries Fair, PlastEurasia Istanbul 2013. The company received tremendous response from existing as well as potential global clients at the trade fair.

PLUSS Polymers, which is already exporting to Istanbul, took part in this trade exhibition to leverage its business into newer markets of Turkey. The event, organised

annually by Tuyap, in cooperation with PAGEV, Turkish Plastics Industry Foundation, attracted a wide range of participation from professional exhibitors as well as visiting participants.

To broaden its reach in global markets, the company will also participate in Interplastica 2014, an international trade fair for the plastics and rubber industry to be held in Moscow, Russia from January 28th to 31st, 2014. PLUSS Polymers is also planning to exhibit at Plastivision Arabia 2014 to be held from 7th to 10th April in the Expo Centre Sharjah, United Arab Emirates.

It is set to participate in other vital exhibitions in Brazil and South East Asia in the latter half of 2014.

PLUSS Polymers has a strong distributor base in Thailand and is in advanced talks of appointing distributors in Indonesia, Malaysia, Singapore and other ASEAN countries. The leading company will also participate in an exhibition in Indonesia in June 2014.

Schiphol cargo tonnage up 3.2% in 2013 Amsterdam Airport Schiphol experienced 3.2% growth in cargo traffic in 2013, with the total of 1,531,089 tonnes coming close to the airport’s alltime record set in 2007.

The final quarter was, as usual, the best of the year, with a total of 410,698 tonnes (up 8% on 2012). It also saw a return of the traditional pre-Christmas peak in traffic.

2013 also witnessed a strengthening in the airport’s Asia business, up 7.1% to 601,442 tonnes, which represented almost 40% share of all cargo traffic. This allowed Asia to retain its traditional top ranking, followed by North America (16.6% share), the Middle East (12.9%), Latin America (11.2%, overtaking Africa for fourth place), Africa (11%) and Europe (9%).

Exports and imports remained in close balance in 2013, with 50.86% and 49.14% shares of the total respectively.

Freighter movements rose 0.5% to 15,623 for the year, with most growth occurring in the final quarter (up 6.1% on 2012) as carriers introduced extra capacity to LOGISTICS TIMES February 2014

meet rising demand.

Commented Amsterdam Airport Schiphol’s Senior VP Cargo, Enno Osinga: ”These results show that we have turned the corner in 2013. Although the very high volumes of the most recent months have been driven mainly by electronics, and new products such as the Xbox2 and PlayStation 4, there has also been an underlying increase in general cargo since the middle of 2013 which gives us confidence that we are in a longterm recovery.”

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NEWS BRIEFS

Quarterly Results

Adani Ports and SEZ income rises 53% Adani Ports & SEZ recently announced the financial results for the third quarter and nine months ended December 31, 2013.

Consolidated total income for nine months increased by 53% to Rs 4,219 crore compared to Rs 2,759 crore in the same period last year. The consolidated EBIDTA increased by 43% to Rs 2,768 crore compared to Rs 1,942 crore in the same period last year. The consolidated PAT increased by 33% to Rs 1,210 crore for nine months as compared to Rs 913 crore in the same period last year. The consolidated cargo handled by the company was 83.90 MMT in nine months FY14, an increase of 29%, over same period last year.

Consolidated total income for the current quarter increased by 16% to Rs 1,244 crore compared to Rs 1,076 crore in the same period last year. Adani ports handled 74.73 MMT cargo making it the largest commercial port in India. It registered a 26% growth in nine months FY14 compared to growth of 2% for cargo at all major ports. In case of containers, it handled 1.68 million TEUs with 33% growth as compared to degrowth by 4% in container volume at all major ports.

Blue Dart Sales at Rs.505.41 crores

Blue Dart Express recently declared its financial results for the quarter ended December 31, 2013, at its Board Meeting held in Mumbai. According to a company release, Blue Dart has posted Rs.23.04 crores profit after tax for the quarter ended December 31, 2013. Income from Operations for the quarter ended December 31, 2013 was Rs. 505.41 crores. The Board of Directors have declared an interim dividend of Rs. 35/- per equity share. The record date for the same has been fixed asFebruary 17, 2014.

Speaking on the results, Anil Khanna, Managing Director, Blue Dart Express commented, “Despite tough economic

challenges, Blue Dart has delivered value to its stakeholders by incorporating high benchmarks and quality standards in every aspect of business. Blue Dart has steered through successfully with a clear focus on fundamentals like Quality, Consistency, Reliability, Passion and Commitment. With this holistic approach, Blue Dart will remain an undisputed leader in the industry and consistently achieve higher growth in the years to come�.

LOGISTICS TIMES February 2014

NEWS BRIEFS

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Quarterly Results

TCI Q3 revenues up by 4.71% Transport Corporation of India (TCI) has announced its financial result for the 3rd quarter / nine months ended December 31, 2013.

The company’s total revenue for the quarter registered a growth of 4.71% over corresponding period last year. The company saw its revenue rising to Rs. 515.09 crore as against the corresponding quarter of the previous year. It has registered 10.19% increase in EBITDA margin for the period to Rs. 37.73 crore from Rs.34.24 crore in the corresponding quarter last year.

TCI’s topline for the nine month period ended December 31, 2013 rose by 5.26% over the corresponding period ended December 31, 2012.

The company’s PAT rose by 8.98% to Rs.41.49 crore against the corresponding period ended December 31, 2012.

Commenting on the company’s performance, Vineet Agarwal, Managing Director, TCI said, “The company continues to feel pressure on direct cost on account of part pass through of monthly fuel hike & subdued

economic scenario. Still, EBIDTA for Q3 in absolute terms has gone up to Rs 37.73 crore against Rs 34.24 crore in corresponding previous quarter particularly on a/c of better performance by Express & Shipping divisions. The outlook for the last quarter should be better than previous quarters owing to some seasonal uptick in volumes.”

Keeping in view of the overall performance, TCI Board of Directors has decided to pay interim dividend to shareholders at 25% (i.e. Re. 0.50) per share.

Gati’s income @ Rs 374 crore

GATI recently declared its financial results for the quarter ended 31stDecember 2013. In Q2FY’14, the company’s net profit stood at Rs 8.7 crore as against profit of Rs 7.8 crore in the corresponding quarter previous year. The total consolidated income stood at Rs. 374 crore for the quarter ended December 31, 2013 compared to Rs 338 crore in the same period of last fiscal. In December 2013, consolidated business of Express Distribution, e-commerce and International crossed the all-time high revenue of Rs. 100 crore.

For H1FY’14, net profit stood at Rs. 14.5 crore as against profit of Rs 2.5 crore in the corresponding period last year. The total consolidated income stood LOGISTICS TIMES February 2014

at Rs. 741 crore for the half-year ended December 31, 2013 compared to Rs.641 crore in December 31, 2012.

Gati e-commerce has registered outstanding growth of 128% YoY. Commenting on the company’s quarterly performance, Mahendra Agarwal, Founder & CEO, Gati Limited said, “We have seen a change in the business scenario over the past quarter, partly because of trade momentum picking up on the macro side and also because we as a company are in a ramp-up mode. While we are focussed on our core business of Express Distribution, we have geared ourselves to tap full potential of e-commerce opportunity and emerge as a leader in the segment.

New Car Sales Leads Will Be Generated Digitally The disruptive influence of connectivity is changing the way business is conducted even in traditional industries such as automotive. High real-estate costs, expensive resources, and need for innovation to stay afloat have compelled many automotive dealerships to shrink store space by about 20 percent and resort to digitization for interactivity with the customer. As bricks and mortar gives way to a bricks and clicks sales model, European OEMs are pushing for standalone digital

formats while North America seems to prefer digitisation within existing franchise models.

New analysis from Frost & Sullivan, The Advent of Digital Retailing and its Impact on Car Dealership Structures, finds that global passenger car companies are desperate to innovate and adopt a new retail model to the next generation of young car buyers, the so-called generation Y, a generation that engages through collaborative consumption and targeted digital marketing campaigns. Frost &

Sullivan expects that by 2020, 6070 percent of new car sales leads are likely to be generated by a digital platform, be it websites, mobile sites, social media or apps.

Automotive major, Audi, is at the frontline of this change in retail network. Its digital showroom (Audi City), in an upscale shopping zone in London, presents the entire line-up of 40 models virtually. It encourages visitors to configure their dream cars on multi-touch tables, investigating all the possible options by themselves.

LOGISTICS TIMES February 2014

FUTURE TRENDS

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FUTURE TRENDS

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“The halo effect of the digital showroom in the heart of the city is expected to drive sales to outer stores and potentially affect dealership network setups, both in terms of size and total number of traditional dealerships,” said Frost & SullivanAnalyst.

Car companies are also using fashion merchandising and combining lifestyle elements into retailing globally. Lexus Intersect Tokyo and L’ Atelier Renault, Paris conduct special events and exhibitions for new product launches, offering a strong automotive brand experience through lifestyle-related concepts of art, fashion, music, design, food and technology.

The advent of digitization in car retailing has led to the development of new and additional performance indicators.

It has seen the introduction of innovative sales strategies, and both cost reductions and additions in upfront investments. New KPIs such as brand awareness, digital engagement of customers, LOGISTICS TIMES February 2014

Automotive major, Audi, is at the frontline of this change in retail network. Its digital showroom (Audi City), in an upscale shopping zone in London, presents the entire line-up of 40 models virtually. customer age, lead response time, and vehicle configurability satisfaction will be of increasing importance in future digital retail formats.

“Better quality leads and easier follow-ups through integrated social media strategy define the success of digital showrooms,” noted the analyst. “By 2016, automakers are expected to open more than 100 digital showroom/lifestyle stores globally, specifically aimed at

enhancing both the retail and brand experience with limited on-floor physical inventory.”

With European and North American OEMs expected to invest between $500 million and $5 billion in updating store technology, training staff, and digitally integrating various aspects of the car retailing process, soft digitisation technologies such as digital tools, signage and kiosks are anticipated to grow strongly in the short term.

Infosys partners with USC for Global Supply Chain Management

In a significant development, Indian software major Infosys recently announced a partnership with the University of Southern California (USC), one of the world’s leading private research universities, to work closely with the Center of Global Supply Chain Management (CGSCM) at the University’s Marshall School of Business. CGSCM will focus on advancing global supply chain management through three core activities - establishing a robust industry network, offering a variety of education programs and performing advanced research.

Supply Chain Management is a growing field and accounts for $10 trillion or roughly 14 percent of the Gross World Product - the United States alone

will need over 1,000,000 qualified professionals in this field by 2016. USC Marshall’s CGSCM will offer the first globally integrated Master’s program on supply chain management aligned to its mission of NEAR (Networking, Education and Advanced Research). As per an official release, the highlights of the partnership can be classified as: As a founding member, Infosys in partnership with USC Marshall will play a key role on the CGSCM board to design the Center’s charter of activities and its future growth Infosys will contribute topics for advanced research and thought leadership papers. It will also coordinate with other CGSCM members LOGISTICS TIMES February 2014

IN-FOCUS

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IN-FOCUS

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including industry experts, organizations, trade bodies and local authorities, to conduct the Center’s activities CGSCM’s multi-faceted program comprises of a Master’s degree, specialized training courses and Six Sigma Certification classes for working executives. The Master’s program, offered online and on campus, will include two experiential learning trips to key supply chain hubs The Center will also host roundtable conferences, industry forums and panels, networking events and speaker series. Additionally, it will conduct research on challenges faced by companies operating in and contributing to the supply chain space CGSCM’s other partners include leading multinational corporations from various industries Speaking on the partnership, Nick Vyas, Director, USC Marshall Center of Global Supply Chain Management (CGSCM) commented, “The global supply chain space is seeing strong growth, with the United States alone spending nearly 10% of its GDP on supply chain activities every year.

Capitalizing upon the Center’s global network and industry experience, along with the university’s renowned faculty, we hope to cultivate top talent and become the principal thought leader in the realm of global supply chain management. The USC Marshall CGSCM will work closely with Infosys and other companies across the globe to bridge the existing gap between supply and demand for skilled executives, who can meet the growing and complex demands of the supply chain industry.”

Rakhi Makad, Industry Principal, Infosys and Program Director from Infosys for USC Marshall CGSCM added, “Working closely with manufacturing companies around the world, Infosys has developed a unique insight into today’s highly complex supply chains. We also have our sights set on how companies will best manage and optimize their supply chains in the future. CGSCM will offer students an opportunity to learn from professors and business leaders and solve real business problems. Our partnership with the USC Marshall School of Business will allow us to bring together some of the brightest minds spanning academia and the industry to help shape

LOGISTICS TIMES February 2014

❞We acknowledge surging demand in Supply Chain

❞

In an e-mail response to Logistics Times, Rakhi Makad, Industry Principal, Infosys shares the details of the partnership between Indian software major and USC Marshall CGSCM:

To begin with, please explain to me the basic nature of your association with USC Marshall Center of Global Supply Chain Management (CGSCM)?

Infosys has long acknowledged the surging demand in the supply chain space; we already have a large pan industry and global supply chain practice, delivering consulting and technology services across end to end supply chain functions. We want to be recognised as the thought leader in the global supply chain industry and serve our clients better by building a strong competency in the supply chain of the future. USC Marshall Business School, on the other hand, is amongst the top business schools in the world and we find that the School’s mission statement is very symbiotic with ours. While we look to leverage the advanced research and networking of the Centre, the Centre can look to leverage our industry experience, business and technical capabilities.

Currently, our partnership with USC revolves around the Centre of Global Supply Chain Management. We are a founding member of this Centre and we envision the Centre to evolve into the top three research centres in

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the world on Global Supply Chain Management. As an anchor member of board, Infosys plays an active role in shaping the charter of the centre and the various initiatives and activities to be taken for meeting its objectives. Several activities are planned as part of this tieup such as an annual signature conference; a round table; speaker events with the students; webinars; etc., and of course bi-annual board meetings to monitor progress and take inputs from all the board members.

Having engaged with more than 300 clients in supply chain management, we bring in our wealth of industry experience to the Centre with our SCM experts contributing across the various initiatives that are planned.

Technology, today, is the key enabler in supply chain management and we would like to bring forth the perspective of how technology can help the industry innovate its supply chain function and bring business value. We also helped shape the agenda and participated in US-India Summit for Global Supply Chain Management last year, where we spoke on the topic of Technology as a Supply Chain enabler.

In addition to this, we look to provide technology and infrastructure support to the various initiatives and activities planned for the centre using our world class facilities. We also look at drawing focus to APAC and specifically India as a region for growth of Supply Chain competency, focus and opportunities.

Does this association also entail creating future industry leaders in the supply chain domain in the Indian market?

I definitely feel so and for good reason.

While the center is based out of US, the focus is global and like I said earlier, we want to emphasize on APAC and specifically India. The US-India trade summit I mentioned before was the first conference of

the Centre and focus on India is very clear.

A big part of the research and activities of the center would revolve around emerging economies like India, China, Brazil and Mexico and their integration into the global arena.

The center is offering an online flagship MS course and the board is looking to make a conscious effort to bring in a minimum number of working professionals and top executives from India

While the center is based out of US, the focus is global and like I said earlier, we want to emphasize on APAC and specifically India. The US-India trade summit I mentioned before was the first conference of the Centre and focus on India is very clear. and APAC region.

As a company, do you have any objective to play a larger role in the Indian supply chain domain - particularly in terms of offering new solutions?

As I mentioned earlier, Infosys has a large SCM practice providing consulting and technology services in supply chain to a large client base inclusive of Indian players. A lot of our global clients have an India presence too and are looking to their India operations to drive growth. So,

India is definitely a focus area for us. We already have specific custom offerings for India clients as well as standard solutions in supply chain management.

The supply chain industry is in a transition phase with significant modernisation and rapid evolution taking place in the industry. Hence we are investing a lot in advanced technologies like big data, cloud, mobile and internet of things to build business solutions of the future and help the industry with this transformation.

LOGISTICS TIMES February 2014

COVER FEATURE

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Sustainable Supply Chain: A Myth?

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Sustainable supply chain is probably the most talked about concept in the arena of global logistics management today.

Prima facie, it simply means putting in place a supply chain system which should have a very long journey by bringing in critical changes in the operational modules now. But there are myriads of expressions of this concept ranging from the extreme positions like equating it with sustainable development itself to its linkage with consistent profitability; not to forget the larger environmental objectives. To understand various dimensions of this concept and get a sense of its relevance for a marketplace like India, Logistics Times recently organized a discussion involving Professor of Supply Chain Management Dr. Nitin Seth of Indian Institute of Foreign Trade (IIFT); Suunil Dabral, Country General Manager, SSI Schaefer; and Vineet Mehrotra, MD, Fonty Supply Chain Solutions. Over halfan- hour discussion was moderated by Ritwik Sinha, Editor of this publication. Here are the edited excerpts: LOGISTICS TIMES February 2014

COVER FEATURE

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Logistics Times debate on Sustainable Supply Chain at IIFT, New Delhi: (L to R) Dr. Nitin Seth, Suunil Dabral, Ritwik Sinha, Vineet Mehrotra & Raj Misra

Ritwik Sinha (RS): Let me extend a very warm welcome to the panelists here- Vineet Mehrotra, Suunil Dabral and Professor Dr. Nitin Seth in this round table discussion. And the core theme of this discussion as we all know is going to be sustainable supply chain.

Now its no secret to anybody that it is a very broad concept. Anybody who would go to let’s say a search engine like google, he would come across myriads of explanations which could even be contradictory or extreme perceptions or versions. A popular theory talks about aligning all logistics related activities in such a manner that you attain seamless flow in your operations for a long period. Another version equates sustainable development to sustainable supply chain. A new viewpoint which seems to have strongly emerged in the global market place in last one decade links supply chain to the core issue of consistent profitability. That is, profitable supply chain is sustainable supply chain.

Prof. Seth, I would like to begin with you, what is that one definition which you believe presents the essence of this concept?

Prof. Nitin Seth (NS): Sustainability in supply chain is a term which is getting very popular all over the world, not only within the academic circle but also among the practitioners. I think the term broadly deals with the core issue of getting things manufactured and getting services delivered in a way we are doing today without losing the focus that with the same structure, operations LOGISTICS TIMES February 2014

can be seamlessly carried forward tomorrow as well. Do we have an operational structure which can sustain the same degree of efficiency? That is the larger question and that is the major challenge for the industry. When we talk of sustainability in supply chain, there are a host of issues which national and international agencies have begun focusing upon. For instance, there is the issue of environmental regulatory bodies and the kind of provisions they are making. The big question here is: are we maintaining those environmental standards, can you call your operations environment friendly?

Do we have our sourcing, manufacturing, storage and transportation capabilities all aligned with sustainable objectives? Apart from the environment, there are other serious dimensions like the level of corruption in a country, human rights and labour issues, etc. All these issues are equally important. I agree with the viewpoint that you raised in your opening remark that sustainable development can be equated with sustainable supply chain. When we talk of supply chain management of an organization in an integrated manner involving change in business processes, responding to the complexities of the business environment, I would tend to emphasize that managing sustainable supply chain is a huge challenge for all stakeholders.

Suunil Dabral (SD): If I have to cite a layman’s perspective, then sustainability in the business sense can be defined as undertaking activities by a firm in a

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way which should keep that firm in the business for next 15-20 years. And you fulfill your social responsibility in the sense that when you take resources from the community or surrounding environment, you give back in the same form or in some other form. Now, to the specific issue of sustainable supply chain; for this, we need to look at the operational pattern in the previous era. In the earlier business models, the focus was more on quality for creating the product differentiation and to gain more market share. But today, everyone has competitive technologies, talent and infra-structure so the differentiation has shifted from the product attributes towards the ‘Product Availability’ governed by the ‘Law of RIGHTS’ i.e. Right Quantity, Right Time, Right Place at Right Cost. So this means that the so called ‘Customer Service’ is being driven by the supply chains and it is the supply chains today which will control the market share of the firms in future and the competitiveness of those firms by keeping them in the business in future by making them sustainable.

and you can generate that by re-engineering the value chains and look for the opportunities to cut or optimize the input costs and derive the much talked about so called capable ‘Competitive Advantage’ of being able to deliver the product promise to the consumer. That’s where sustainable supply chain comes into the play. It starts from the point of sourcing, to storage and then to the final dispatch and entails applying processes which can give you price advantage.

RS: Are you pointing out at quality saturation?

VM: Absolutely. However, an organization has to focus on to sustain itself on a long-term basis. You see, profitability is at the core of any organization. And with profitability comes the inherent issue of sustainability of a company over a period of time. And once you have zeroed on the main mantra relating to the reason of your existence, then the company can think about other activities. Like what can we give back to the society since we have taken resources. The point is: everybody wants to do it but after attaining a certain level. In business, all the ideals remain the same but for your existential purpose, your priorities change. So sustainability could be the second or third step for a start-up. Nobody has

SD: Yes. We are in a situation today where all firms are trying to be competitive to remain in the business but now it is about the ‘Survival of the Fittest’. This is a ‘Ceteris paribus’ situation where everyone has better technologies/machineries/plants, access to better resources, and better manpower. This has brought most of the formidable or leading companies in specific segments at par with each other in terms of output capability and product quality. So the moot question is: where do you differentiate now? You have to now differentiate on the final delivery value of the product

RS: Vineet, for you I will rephrase my question a bit.

From the companies’ perspective, does sustainable supply chain means cracking that ultimate code?

Vineet Mehrotra (VM): Let me respond by saying this: sustainable supply chain is a myth. It’s a manna which everybody would like to have.

RS: If I have understood you correctly, you are probably referring to it as an ideal situation.

‘Customer Service’ is being driven by the supply chains and it is the supply chains today which will control the market share of the firms in future and the competitiveness of those firms by keeping them in the business in future by making them sustainable.

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There are other serious dimensions like the level of corruption in a country, human rights and labour issues, etc.

All these issues are equally important. I agree with the viewpoint that sustainable development can be equated with sustainable supply chain. all the answers. Collaboration which exists in theory has to be turned into reality in our line of business.

RS: I am coming to that point which I guess is very critical. As far as supply chain business is concerned, the element of collaboration does not exist very strongly in a marketplace like India. Is it a very strong impediment for the evolution of sustainable supply chain?

NS: I disagree on this. Collaboration does exist provided it draws a win, win equation for the partners involved.

We have seen that competitors can also collaborate in a business like telecom towers. In a dominating situation, collaboration will not happen.

RS: Agreed. But those examples wherein rivals collaborate are very rare.

VM: Let me take it forward from where you left in terms of telecom companies or competitors collaborating. Let me come to a very basic level- vendors and customer collaboration. Do you actually see that happen? Let’s say I am a service provider to FMCG companies, retail industry and 3PLs. I want to do something with all of them so that firstly I have a profitable unit and,therefore, I have sustainability in my organization. When I go to them, all of them are willing to collaborate. But then their uniform demand is to bring the costs down. I am not saying that we should go berserk with cost. But cost should not be the driving criteria. We should be talking about cost effective supply chain rather than the cheapest supply chain. Cost effective supply chain might require you to put up with some mechanizations.

If you are opting for cost effective solutions, you need LOGISTICS TIMES February 2014

to keep a specific time frame in mind. It never happens that you put in some investment today and you begin to get immediate results.

RS: I got your point. Suunil, as Vineet was indicating that proper collaboration between the end user and service providers is a must for sustainable supply chains to succeed. Since you are an industry insider, do you find people within the industry have begun to understand the efficacy of collaboration?

SD: I advocate the ‘Collaboration’ not only limited between the ‘User & Supplier’ but also amongst the ‘Competitors’. I can cite examples from our own line of business. We provide end to end intra-logistics solutions for warehouse automation. We are the only company in the world which is completely integrated along the value chain – right from conceptualization, consulting & IT, end to end in-house product manufacturing and execution. But if we look at our competitors in the world, nobody has the capability of manufacturing the storage part like racking and shelving. For example, ASRS is a combination of stacker cranes and pallet racking. No company in the world till date manufactures the complete AS/RS system in-house but SSI Schaefer does. They usually manufacture cranes and conveyors.

SSI Schaefer is the only company which is providing all systems in an end- to- end integrated solution basis and is an undisputed ‘Single Source Supplier’. To do all this and remain competitive, SSI Schafer intensively collaborate with its numerous suppliers around the world to source, design and develop high performance parts and components right from the stage of ideation, designing and testing and inducting in the manufacturing

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process. When I go to the market, I see my competitors competing for the same projects. If it doesn’t make any commercial sense for SSI Schaefer to take the complete project then instead of getting into a price war, SSI Schaefer offers the racking part to the competitors.

This is a ‘Win-Win-Win’ situation for everyone i.e. two competitors and the end customer. So SSI Schaefer is 100% open to collaboration with its suppliers and customers at all possible stages and historically we are very successful through collaboration.

RS: Suunil, my question was: are you finding Indian customers now willing to collaborate more than ever before since they also realize that collaboration is key to sustainable supply chain?

SD: Yes, absolutely. And the example I have given helps in going a bit ahead. The customer also understands that the investments he would be making in his supply chain by joining hands with us would repay in five years. Furthermore, the systems he would be opting for would help him to achieve his goals even after five years. That means the system is scalable and this is where sustainable system comes into the play. He wants to invest that extra cost today to be future ready.

RS: Please name the sectors wherein you find companies more willing to invest and adapt new processes to have a robust sustainable supply chain system for a long time?

SD: I would say automotive is clearly in the forefront followed by engineering and machinery industry. In most of these sectors, you have vibrant examples wherein companies are putting in place scalable and

Nobody

is

going

to

robust supply chains and this is a critical issue because now the sustainability of supply chain is inherently linked to the issue of future scalability. System has to be scalable for next 5-10-15 years because you would not like to discard something in a matter of few years and then reinvest in a new system or process.

VM: I have seen great companies like Coke and Pepsi.

They work on sustainability with a much broader perspective like re-harvesting of water, etc. It maybe for the right or wrong reasons- maybe the regulatory environment is such that they are forced to do it. The other thing is most of the top honchos of supply chain in any of the big organizations especially MNCs, they keep having these monthly and bi-monthly meetings and they keep hearing all those things and they often come up with the new ideas. So the germination of idea has happened and people want to do it but at the same time, they are very realistic in terms of how much it is going to impact their supply chain cost on an overall basis. And that is why they demand products and services at a cheaper cost from me as a supplier. I won’t blame them exactly. They have to also ensure that their organization remains profitable. And in the process if they ensure that their supply chains are sustainable, they will definitely do it. But nobody is going to do something saying I have to run after sustainability at the cost of profit. We may like it or not but the fact of the matter is: we live in a capitalist world. And the stakeholders in every organization are always concerned about the financial performance of the company. Once that has been taken care of and in the process if I can do something on sustainability, it will be done. So I think what is required for the industry is that the idea

do

something saying I have to run after sustainability at the cost of profit. We may like it or not but the fact of the matter is: we live in a capitalist world.

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of sustainable supply chain should be packaged in such a way that companies get the message that investments made for sustainability should not hamper their growth prospects and that they should not be a burden.

Don’t measure your investments in terms of getting returns tomorrow. Have a time horizon of three-five years. And you will definitely see the benefits coming to you and benefits reaching to the society and then attaining sustainability objectives like sustainability of the business, mother earth, the planet- all of them will get aligned.

understood the importance of closer collaboration with their logistics service providers?

NS: I will go ahead with two views. Today’s supply chains basically are judged on two parameters efficiency and effectiveness. When we talk of efficiency, it involves cost, productivity and quality. When we talk of effectiveness, we are broadly referring to the issue of delivering to the customers as per their requirements. You see, the world in which we exist today is glocal in terms of business competitiveness.

Graphic demonstration of the green supply chain advised for simple manufacturing of child’s crib- with rising environmental concerns, companies in all spheres would be compelled to adopt green supply chain while pursuing their idea of sustainable supply chain.

RS: As Vineet pointed out for the companies it is compelling to first ensure profitability and then probably they could look at the larger issue of sustainability wherein something should be done for the society, to pay back mother earth, etc. My question is: in a marketplace like India, has the manufacturing sector reached to that matured a stage where it should be religiously looking beyond its topline and bottmoline and think in terms of doing something for the society? Secondly have they LOGISTICS TIMES February 2014

India had a differential advantage in textiles not too long ago but slowly it is shifting to Bangladesh. India still leads in innovative designs but when it comes to regular production, it is now lagging behind because the cost of production is high. Now when you look at other emerging markets, you would notice that the cost of production in Mexico is now almost at par with India and China and some African countries are also aggressively creating low cost production

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base. So all stakeholders involved in manufacturing and distribution have to come together to draw an effective survival strategy. If you can’t do it today, somebody who is more competitive will come and throw you out of the business. When you are talking of sustainability of the cost, I personally foresee that there are issues particularly fixing a time frame while making changes or adopting something new. When you talk of sustainability two important questions come in – one is the trust. Here we are referring to integration; possible collaboration between the manufacturers, suppliers, distributors and all stake holders down or up the line. How much you trust and why you need to trust? These are the important issues. And what is the benefit arising out of it and does it make sense to invite your suppliers to work out of your own premises? Indians have already started and there are examples wherein suppliers are working out of the premises of manufacturers as collaborators. Even in the software industry, the SAP provides services to the downline. Warehousing people are entering into the manufacturing factories to workout solutions for them.

You see, inefficient practices everywhere have always been wiped out by efficient practices. Sustainability is always going to pave the way for survival in the future.

There is a cost of integration and there is always a cost associated initially. But ultimately it drives the profitability for future manufacturing. So India has to compete and we have to go for that. If we don’t do it, we will be out of the market.

considered to be the right time for the companies to make experiments and adjust to new processes and operational modules.

RS: All of you have broadly presented the viewpoint that a sustainable supply chain ultimately results in the evolution of a profitable supply chain. What, in general terms, is the time frame it takes to reach to that stage of profitability? To really realize that steps which a company had initiated for sustainable supply chain would pay good returns and at the same time would also ensure that future objectives would be met seamlessly.

VM: Taking it a bit further and again coming back to that capitalist view which I have been trying to convey in this conversation, if I have to look at it very objectively companies need to ensure that the satisfaction level of their customers remains high.

Only then you will have customers returning to you and your profitability can be ensured. That is why I have said that the cost and sustainable supply chains are not two different things. You always have to think about how they can be jelled together so that the primary objective as a company is achieved- that is of making profits. And there can be no other way of making profits than having a sustainable supply chain.

We have seen collaboration happening, probably it will take some more time to really mature. But the realization in the industry is certainly there.

SD: I would say that it will take not anything like less than eight to ten years from now. You may notice minor changes or positive results here and there in a shorter time frame but the major change would require a longer time frame. People need to mentally prepare themselves that the investments they are making today would ultimately deliver the required results but it would be a time consuming process.

RS: Now to the final point and I would like all of you to give me your response. How do you see this sustainability story unfolding in the Indian market in the near to medium run? Here you must not forget that we are in the midst of a slowdown and this is not

SD: I would say that a slowdown spell is an opportunity for the companies to re-evaluate their ‘Go-to-Market’ strategy and look at the ways of doing mutually profitable business with their suppliers and customers.

I personally consider this time for house-keeping and hence slowdown is the time for introspection and in this time we are bringing together our different functions like commercial and finance, sales, marketing, customer service, human resource and design & engineering to re-engineer the processes to drive the bottom line healthier. We are visiting our customers and meeting and discussing about the improvement ideas that could be implemented. We are correcting our mistakes and improving our ‘Net Promoter Score’. We have started involving our customers also in process improvements and wherever possible, SSI Schaefer funds the improvement programs.

NS: I would also fully endorse Suunil’s view. This is also probably the point when you should directly connect with the customers. One needs to understand what customers are willing to pay. They should go that extra mile to be attentive to customers’ complaints. I had mentioned in the beginning that trust plays a very vital role and companies can ignore it only at their own peril when the economy is not exactly firing on all cylinders.

RS: Well, I guess we are ending this conversation on a positive note. All of you are indicating that green shoots are quite visible indicating that the sustainable supply chain story in India would evolve more formidably in the time to come. Thanks to all of you for participating in this discussion.

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LPG Supply Chain In India

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The LPG cylinder delivery to millions of homes in India is clearly one of the largest supply chain operations in the world. This technical paper* (submitted to BIMTECH for a recently held international conference) traces the origin of LPG supply chain in India and its evolution over the decades. Here is the first part of the edited report: LOGISTICS TIMES February 2014

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Background

LPG has become the preferred choice of cooking fuel in India. It has been highly subsidised; thus prone to diversion into commercial segments. LPG has remained as an urban fuel initially but has become popular in rural markets also. With increase in its reach and corresponding higher subsidies it became imperative that the supply chain ought to be ”leak proofed” to reduce the subsidy leakages while meeting the customer expectations, who have not got the best service levels due to monopoly structure of the LPG market.

LPG utilization in India

The OMCs supply LPG in 14.2 Kg cylinders from 186 bottling plants through 13088 distributors to more than 15.82 crore households, covering more than half of the country’s population. Every day, more than 3 million cylinders are home delivered to the customers making it one of the largest supply chains in the world. The country’s consumption of LPG in 2012-13 was 15,207 thousand metric tons (TMT), of which indigenous production provides 62%, while the balance has to be met by imports. The LPG subsidy burden in year 201213 was Rs. 416 billion, which is around 25% of the overall fuel subsidy burden. Approximately, 90%consumption of LPG is in the domestic sector with the remaining distribution as shown in Figure 1.

imports. In 2002, private players were also allowed to sell imported LPG in domestic market.

Due to improved LPG availability, new connection releases were accelerated to around 4 million during 1997-98/1998-99 and to 9 million during 1999-2000.

The Government approved new LPG enrolment of 10 million during the calendar year 2000 and the oil industry released 11.8 million new LPG connections.

With this, the LPG waiting list throughout the country was liquidated and new connections were available across the counter w.e.f. Oct. 2000. The growth rate has been around 10 million connections per annum in the recent past. Table 1 shows the growth in sales of domestic and commercial LPG in TMT over the last 10 years.

Indigenous Sales (in TMT) by IOC,BPC,HPC Period

Domestic LPG

Commercial LPG

Domestic Customers at the end of the year (in Lacs)

2012-13

13611.5

1595.5

1503.9

2011-12

13297.4

1640.1

1371.2

2010-11

12368.7

1543.1

1253.9

2009-10

11364.4

1374.9

1150.6

2008-09

10636.5

1136.9

1057.3

2007-08

10298.6

1031.7

1009.8

2006-07

9741.9

784.3

942.6

2005-06

9447.0

513.3

887.1

2004-05

9530.9

381.6

844.9

2003-04

8794.1

284.7

771.8

Table 1: LPG sales by OMCs and customer strength (Source: OMCs).

Challenges faced by the LPG supply chain

Figure 1: Distribution of LPG consumption during 2012-13 (Source: OMCs).

LPG: Supply and Demand

With the growing acceptance of LPG as a cooking fuel and the marketing efforts and infrastructure augmentation,there was a phenomenal growth in the consumption of LPG.As demand for LPG increased in mid 70s, OMCs started planning for making LPG available and building the distribution infrastructure.

The shortfall in domestic production was met by LOGISTICS TIMES February 2014

Over the years, the public sector run LPG SC has faced three main challenges. Firstly, subsidies place a heavy burden on government budget, while often failing to reach their targeted beneficiaries. Secondly, leakage in its LPG supply arising from the price difference in domestic and commercial LPG has led to diversion of domestic subsidized LPG for commercial usage.

Thirdly, there was lack of incentive to improve customer service due to monopoly structure of the LPG market. Thus,technology was deployed to correct these imperfections in the SC by detecting and blocking multiple connections, infuse transparency and competition in the LPG supply chain to achieve twin objectives of reduction in diversion and improve transparency.

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Figure 3: Evolution of the LPG supply chain The LPG Supply Chain

In the context of the above mentioned The OMCs supply LPG in 14.2 Kg problems faced by the Indian PSUrun LPG SC, a slew of initiatives cylinders from 186 bottling plants were launched to address the above 13088 distributors to challenges - christened project through “Lakhsya” and launched in June 2012.

The market structure of the LPG more than 15.82 crore households, was largely a monopoly at the retail covering more than half of the level, where consumers were tied to a retailer for life. This led to poor country’s population. Every day, service standards with the consumer not having any recourse or knowledge more than 3 million cylinders are of his retailer’s service levels. There was no Know Your Customer (KYC) home delivered to the customers requirement prior to enrollment.

ICTs thus was deployed to bridge making it one of the largest supply the information asymmetry through the transparency portal inter alia for chains in the world. detection of fake/multiple connections and to introduce competition between retailers. To control the ballooning subsidy burden, trajectory over the last six decades. two seminal initiatives were taken, namely capping of subsidized cylinder entitlement, and sale of market Evolution of LPG Supply Chain priced cylinders with transfer of subsidy into the bank A comprehensive view of supply chain requires accounts of the consumers (DBTL – Direct Benefit extending beyond traditional modes of purchasing to Transfer of LPG). The DBTL initiative involved consider aspects of supplier development to leverage collection of biometric enabled citizen ID called capabilities and co-creating value (Nelson, Moody & Aadhaar that was used to link the LPG database and Stegner, 2000). The notion of integrative planning and the consumer Bank account number. This allowed sale management among and between various entities of of cylinders at market price with subsidy being directly a supply chain as well as modern marketing strategies transferred into the bank account of the consumer. are considered strategic objectives in that it provides These initiatives increased transparency, brought significant opportunities for all stakeholders. From the in competition, enabled removal of multiple/fake domestic LPG industry’s perspective, efficient delivery connections and removed the incentive of retailers to of LPG gas at subsidized rates whilst ensuring delivery divert subsidized LPG. With this brief, description of of LPG cylinders to its domestic consumers was initiatives we now briefly discuss the LPG evolution MoPNG’s strategic priority. The cumulative changes in LOGISTICS TIMES February 2014

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the SC culminated in the launch of the DBTL.Through interviews and discussions with senior management and data obtained from MoPNG/ OMCs/PPAC, we summarise the key periods of the LPG SC as it evolved over the last 58 years.

Figure 3 shows how the focus of the LPG SC has evolved and how the LPG SC became seamless and integrated over time through the use of four pillars, namely: process management, technolog y management, r e l a t i o n s h i p Figure4: Traditional forward and open distributed LPG SC. management, and knowledge as a distribution network that delivers goods to end management (Walters and Rainbird, 2006). Clearly, the customers (Lummus and Vokurka, 1999), and it can be LPG supply chain no longer operates in a traditional seen that the early LPG SC satisfied this definition and sense as a linear SC, but more as a service value network operated as an open distribution network. However, as (Agarwal&Selen, 2011b, Basole and Rouse, 2008). the SC evolved it acquired characteristics of a closed distribution network. These characteristics came about Existing LPG Supply Chain with requirements of data transparency, better service According to Mentzer, a supply chain is a set of response times and the need to prevent diversion of organizations directly linked by one or more of the subsidized LPG cylinders. Needless to say that a closed upstream and downstream flow of products, information distribution system is also required to ensure only those and funds from a source to a customer. Underpinning who deserve the subsidy get it(Fadillah, 2012). This the SC, Chopra and Meindl (2009) identify five stages was coupled with the need to deliver of LPG in the in an SC towards meeting and exceeding customer right quantity, at the right time, to the right customer, at requirements, namely raw materials, manufacturer, the right location, thus minimizing overall costs whilst wholesalers and distributors, retailers, and customers, ensuring consumer service levels. and not all of the stages are always applicable. Figure 4 shows the traditional LPG SC with upstream According to Gupta and Pochampally (2004), a SC and downstream processes, including LPG material flow can be of two types, forward and reverse supply chain, in the downstream direction, and the flow of subsidies and that for a closed loop supply chain both forward in the upstream direction. Lack of integrated and and reverse supply chains are required (Guide et al., connected systems across stakeholders limited the ability 2006). Some industries such as the automotive parts of the LPG SC to operate at full potential compounded have already implemented this concatenated SC, and by three challenges identified earlier. through our findings we see that the LPG SC possesses (To be concluded in the next edition) these characteristics. Further, a SC can also be deemed Courtesy: BIMTECH * Co-Authors Dr Neeraj Mittal, Joint Secretary (Marketing) Ministry of Petroleum and Natural Gas (MoPNG) Dr RenuAgarwal, Senior Lecturer in Innovation and Service Operations Management Management Discipline Group, UTS Business School University of Technology, Sydney, Australia LOGISTICS TIMES February 2014

The secret world of Angadias

A

ngadia, the traditional parcels delivery system, is unique in many ways and has a long history.

This system has been in existence probably since yore, much before India even heard about courier.

Some studies point out that the concept took off from an incident of Ramayana, Angad, the monkey warrior, was the first well- known delivery ambassador sent by Lord Rama to Ravana, with appeal to release Devi Sita. The practice still exists strongly in many parts of the central and west region where people still believe that Angadias hold same trust and responsibility while performing their duties.

During British era in India, this services touched its peak - all the valuable goods, gold, diamonds, silver and other precious stones used to sent across using the vast network of Angadias as it was the

Ajay Khosla Regional Manager Patel Roadways Limited only prompt and trusted delivery service available those days. This business is now as old as 125 years, in earlier days deliverymen carried parcels hidden under their cloths and used horses and camel while travelling to the delivery point.

This mode of delivery system has been particularly favoured by the Marwari and Patel business communities who have kept it alive

for generations. The two-pronged approach of the proponents of this system has been: never examine the contents of the shipment and ensure that the parcel is delivered on schedule. There is a strict element of secrecy maintained in the operations and is a favoured delivery system for a closely held group of traders in all important centres in the country who are reluctant to share much information of their trade encumbered with risk of theft and income tax raids. So facts and data of this big industry is not readily available.

In Gujarat, the Angadia clusters are in Surat, Navsari, and Bhavnagar.

Mumbai is another cluster for this business with majority of Angadia shops lined up between Kalbadevi to Metro Cinema Lane. The other centre point of this community is near Opera House which is in close proximity to the Diamond Export House. In Rajashtan, innumerable Angadia establishments can be found in Jaipur, Kota and Udaipur.

In the National Capital, Angadia service shops are available around Chandi Chowk and old Delhi areas beside Karol Bagh market.

Angadia services are still very popular particularly with the diamond cutting and polishing businesses. Most of the diamond merchants in various cities of Gujarat send ready diamonds to Mumbai by using Angadia service.

Industry estimates suggest that there are more than 50 angadia companies in Gujarat which are solely involved in the delivery of diamonds. Those involved in Angadia business have LOGISTICS TIMES February 2014

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well defined operational rules strick working hours (mostly 10:00 hrs to 20:00 hrs), and no work on holidays and Sundays. Those who know the functioning style of Angadia services will vouch that no shipment or mail is accepted after the given time slot. In early days Angadia broadly used to indulge in pickup form customer’s door. But these days, they insist on delivery to their shops / offices (after speaking over phones) if the content value is high.

The secret of their success primarily lies in staying inconspicuous. An angadia delivery man might be carrying parcels worth lakhs of rupees but you will not find them using ritzy vehicles or surrounded by gunmen. In cities like Delhi and Mumbai, they would be rather using metro railways or local trains.

One may even find them travelling by bicycle or travel by foot, wearing tattered trousers and carry precious parcels in filthy cloth bag.

Maintaining low profile is key of this business which they are using form generations.

LOGISTICS TIMES February 2014

When it comes on inter-city movement, they prefer cargo trains and travel in a convoy. They pool all goods in a single big bag including gold, silver, diamond, electronic goods and travel mostly in last coach of good trains together.

The packets Angadia’s are entrusted to deliver are mostly insured with an amount which is equivalent to the cost of packed shipment and they are charged accordingly. If the parcel is stolen or lost during

transaction (which is very rare),the sender will get full refund in next 12 to 24 hours.

Angadias are clearly the backbone of diamond industry playing a very significant role in a business hub like Surat. Going by an assessment, 10 out of every 12 diamonds in the world are cut and finished in Surat.

But, ironically Surat does not have very vibrant air connectivity with its major exporting destinations and therefore the finished diamonds

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have to be carried to Mumbai. And the responsibility of shipment from Surat to Mumbai has been largely shared by Angadias for decades.

The market rates for delivering diamonds and other precious stones are: approximately Rs.200/- per lakh from Surat to Mumbai and Rs.300/to 400/- per lakh to deliver in Delhi, Hyderabad, Chennai , Jaipur and cities of Punjab. Surprisingly most of them never touch any diamond or piece of Gold since they mostly deliver parcel wrapped in cloths packing.

This trade is very sensitive in term of security, Angadis travel with precious metals and therefore are highly risk-prone, more so in hinterland pockets. Although delivery men work for different firms but to avoid being waylaid by robbers and criminals, they usually travel in group of 8 to 10 to develop a little sense of security.

Haulage someone else’s assets without adequate protection as we understand in the modern sense are unsafe and there have been many instances of angadias being attacked or even murdered. But their style of functioning is clearly defined by audacity, accuracy and sincerity

in delivering valuable shipments keeping them still trustworthy in era wherein so many delivery options are available.

In early days, the scene was different.

Angaida never used to travel in groups. But after regular instances of attacks, the frequent convoy travelling pattern emerged. In terms of support by state governments like Gujarat and Maharastra, some steps have been initiated. For instance, in Mumbai, a police van usually escort them form station to city upto their firm clusters. If the shipment is too valuable and it has to be transported by train, security is ensured by providing some armed guards and a sniffer dog who travel along with the convoy in train compartments.

Many a times, Angadia firms book almost 20% to 25% seats of the particular compartment in which their personnel travel with precious goods.

Different state police academies especially in Gujrat and Mumbai have, in fact, issued many guidelines and suggestion to ensure their safety.

For instance, Angadias should change their routes frequently and frequently rotate field staffs and should also change service timings to misguide potential wrongdoers.

No doubt, many international and national courier and cargo companies have firmly established themselves in the Indian market place in recent years, but there are still some trades which need these old practices and customs to run their businesses. One can attribute it to the adage “old habits die hard.�

But here old habit is sustaining because the trust factor remains intact and not because of any routine reason.

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HIGHWAY ENCOUNTERS

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On the road to Haridwar A dip in the Ganges, particularly at Haridwar in the northern state of Uttarakhand, is considered as one of the steps towards Nirvana (salvation) for the Hindus. That was not the reason KRK Foundation chose this ancient pilgrimage town for a roadtrip from Delhi, but for a different kind of salvation: to check the awareness level of highway signages among truck drivers and, if necessary, provide a bit of ‘gyan’ (knowledge) to the needy.

Sensing the noble objective of highways safety for better commerce and trade, business enterprises such as Mahindra Logistics, Toll Global Logistics, Siddhi Vinayak Logistics and Johal Logistics jumped into the fray to be part of this activity. India’s oil marketing giant, Indian Oil Corporation (IOC) gladly threw in its hat by enabling retail outlet halts for interaction with truck drivers and dealers en route. GlobalTHEN, a fledgling knowledge provider with special focus on instilling soft skills among driver community, also joined. Besides Mayiladuthuraibased VK Enterprises, servicing the movement of foodgrains and fertilizer in the southern port of Karaikkal, media partners TRANSTOPICS and LOGISTICS TIMES and First Opinions, one of prominent market research agency, servicing auto and pharma companies too participated in this 2 day Delhi-Haridwar-Delhi trip.

Automotive Skill Development Council (ASDC), obviously, was the biggest supporter of this initiative that had begun last year under KRK Foundation banner.

With “Safer Roads, Safer Lives” as the theme, the entourage consisting of KRK Foundation’s Ramesh Kumar, Mahindra Logistics’ Syed Hassan, GlobalTHEN’s LOGISTICS TIMES February 2014

Pradipto Bhattacharya and Toll Global Logistics’ Ajay Srivastava commenced its journey with a

and Man Mohan Khera at IOC outlet, Ghaziabad. Two more IOC halts enabled us understand the oil marketing company’s truck driver-related activities such as constructing rest rooms for them.

Day One ended with an interaction with over 30 odd drivers (inbound & outbound) servicing Mahindra & Mahindra’s Haridwar plant, ably orchestrated by Mahindra Logistics’ Location Head Ashok Kohli and his team. Addressing the audience, Ramesh Kumar emphasised the need to ‘understand’ the highway signages and the negative impact

stimulating interaction with IOC Deputy General Manager Sujoy Chaudhry in charge of Uttar Pradesh and Uttarakhand and his team of senior officials K Arunan

of now knowing them. “Ignorance is no excuse because what is at stake is huge: the lives of drivers, the materials being ferried, the vehicle and last but not the least,

Ramesh Kumar

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the general public using the same highways,” he emphasised. Then a Quiz Show was held wherein Kumar posed questions to drivers by showing signages and asking their responses. Right answers received wide round of applause besides fruits, chocolates and caps offered by various sponsors and participants mentioned above.

GlobalTHEN’s Pradipto Bhattacharya, a veteran in the art of educating drivers on the need for personal hygiene, smart dressing and communication skills and also showed a promotional film of how drivers’ future is not bleak provided they take charge of their own lives. This was well received, obviously. Toll Global Logistics’ Ajay Srivastava harped on the need for safe or defence driving on highways and how to take care of minor ailments en route. Mahindra Logistics’ Syed Hassan also chipped in.

Next day (Day Two), another interactive session with 30 odd truck drivers servicing the Sidcul industrial area in Haridwar was conducted at Northern Fuel Station owned by Trilok Singh.

Participating in this session, IOC’s Dehradun-based Amitabh Goswami and Rajeev Tandon from Haridwar, elaborated IOC’s initiatives in driver welfare across its outlets all over India.

By the way, it is to be noted that the awareness of highways signage among truck drivers is very low.

They believe wearing seat belt while driving is cumbersome and since they are already in the profession of driving, there is no need to be aware of signs. “Nobody’s check these aspects. Why should we be worried?” is the common refrain.

Such an impression is not correct and there need to be a sustained effort by all stakeholders such as government, oil marketing companies, transporters, fleet owners, trade bodies (AIMTC,

AITWA & ACOGOA), tyre companies, HCV manufacturers to help drivers to become ‘fully aware of highways signages”.

The writer is the author of 10,000 KM on Indian Highways, Naked Banana!

and An Affair With Indian Highways.

He also runs KRK Foundation, a registered Trust, focused on improving the working and living conditions of truck drivers and their families living in remote villages of India. He is reachable at ramesh@krkfoundation.org LOGISTICS TIMES February 2014

AUTO EXPO

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Next Gen CVs at Auto Expo 2014 The glitz and glamour of Auto Expo 2014. best expressed by the cars and motorbikes, had a vibrant component in the form of display of new age commercial vehicles (CVs) too. Of the overall 69 new launches, companies in CV segment unveiled as many as 10 new products.w

LOGISTICS TIMES February 2014

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LOGISTICS TIMES February 2014

AUTO EXPO

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Primarily centered in Hall No. 11 of the expansive Greater Noida Expo, a host of next gen CVs vowed the visitors. Mahindra was present with its Truxo, Traco,Zoom and Torro brands while Eicher displayed its Pro series. Tata Motors showcased its Prima range.

Another notable presence in the commercial vehicle segment was that of Ashok Leylands.

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A relatively new entrant in the Indian market Scania also made the most of the opportunity provided by the grand show by showcasing its R 500 6x4 model with V8 engine. The product is believed to be particularly useful for the over dimensional cargo (ODC) with a host of state-of-the-art features.

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PERSPECTIVE

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What is Supply Chain Management Anyway?

A supply chain is a network of companies working together to deliver in the market. A supply chain consists of three types of entities – Customers, a Producer and the Producer’s Suppliers.

Supply Chain Management oversees and optimizes the process of acquiring inputs from the suppliers (purchasing) converting those inputs with finished products (production), and delivering those products or outputs to customers (fulfillment).

According to Hugos Michael, the definition of supply chain management is – “Supply chain management is the coordination of production, inventory,location,andtransportation among the participants in a supply chain to achieve the best mix of responsiveness and efficiency for the

LOGISTICS TIMES February 2014

Dr. Veni Mathur Ex-faculty, IIT, Delhi Dean, Million Minds

market being served."

Under this definition supply chain managers decide where to locate manufacturing and distribution facilities, how to route goods and materials among those facilities and from which parts of the world to source inputs. Supply chain management unites disparate

functions that historically reported to different executive positions with different and sometimes conflicting positions.

According to the Council of Supply Chain Management Professionals (CSCMP), Supply Chain Management encompasses the planning and management of activities involved in sourcing, procurement, conversion and logistics management. It also includes coordination and collaboration with channel partners, which may be suppliers, intermediaries, third party service providers or customers. Supply chain management integrates supply and demand management within and across companies. Recently, the self organized networks of businesses that cooperate to provide product and service offerings has been called

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PERSPECTIVE

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Extended Enterprise.

These chains can be quite complicated depending on the nature and origin of the products concerned.

The term supply chain management was introduced by Keith Oliver, a consultant at Booz Allen Hamilton in 1982, in an interview with Financial Times, but the concept received its due importance only towards the end of 1990’s, as a buzzword for management professionals.

Supply chain management addresses and finds solution for problems in management as – Distribution Network Configuration regarding the number and location of production facilities, distribution centres, warehouses, cross-docks and customers.

Distribution Strategy – all questions relating to operating control, direct shipment, truckload (LTL- less than truckload), parcel, railroad, intermodal, etc are dealt with in supply chain management.

Trade-off in logistics activities to come to the lowest logistics costs.

Information sharing as well as forecasts.

Inventory Management for all items whether raw materials, work-in-progress or finished goods.

Cash Flow relating to payment terms and methodologies.

A supply chain management has both –

1. Physical Flows including movement and storage of goods and materials. These are visible in the supply chain.

2. Information Flows between partners to coordinate on long term basis and to control day-today flow of goods and materials.

How Supply Chain Works

In the 21st century, proliferation of multi-national companies LOGISTICS TIMES February 2014

and globalization has led to the development of concepts like Justin-Time, lead manufacturing, Reverse logistics and agile manufacturing.

Besides, technological changes have drastically reduced communication costs. The ISO and IEC have jointly published standards for security management in supply chains.

Supply chain management helps to align all activities with business strategy in three simple steps.

1.

Understand the requirement of the company/client/customer.

2.

Define core competencies and rules for the company to serve the customers.

3.

Develop supply chain capabilities to become more efficient and responsive to the need of the customer.

Responsiveness and efficiency means increasing throughput while reducing inventory and operational costs; focus on ‘core competencies’ and partner with other companies to

create supply chains for fast moving markets. Today Vertical Integration has given way to Virtual Integration.

Virtual Integration has brought in a lot of changes in the supply chains in the form of E-Business through Internet technology; for example, GM Motors is selling cars on the net.

Design, build and buy products on-line.

Talk about change management in supply chain management wherein the concept of Benchmarking is gaining importance, which enables companies to identify gaps and focuses on improvement and implementation of changes.

The big question here is: Are you ready to initiate change?

The answer can be a ‘YES’, only when the fear and biases towards change will be removed. This is possible through Training and Education of all the participants in the supply chain.

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EVENTS

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Aviation Security

On 31st January 2014 the German University of Applied Sciences Frankfurt (FH FFM) together with its Indian partner, Centre for Aviation Studies of University of Petroleum and Energy Studies (UPES), organized the Aviation Conference at the Leela Palace Hotel, Mumbai on “Aviation Security: Current Threats and Challenges”.

The event, with supports from the Delegation of the European Union to India, CAPA - Centre for Aviation, and Dachser India was second in a series of conferences organized by FH FFM in India. Some of the important speakers at the conference were: Prof. Dr. Yvonne Ziegler, programme director of EU-India Aviation project; Sanjay Karve, Director Civil Aviation, Government of Maharashtra; Dr. João Cravinho, Ambassador of the European Union to India; Dorothy Reimold, Assistant Director of IATA; Peter Andres, Vice President Corporate Security, Deutsche Lufthansa; Kapil Kaul, CAPA; Manoj Singh, Vice President Cargo, Mumbai Int. Airport, etc. The conference also saw a panel discussion on the topic “What will be the impact of the new security requirements for air cargo & mail destined for the EU (ACC3) on Indian Airports and Airlines?.” The session was moderated by Cyrus J. Guzder, Chairman of Dachser India with David Mann, Lufthansa Cargo; B.K. Maurya, Executive Director – Security, Air India; Soumen Chakraborthy, Asst. VP Security, Air India SATS Bangalore; Bharat J. Thakkar, Immediate Past President, ACCAI and Colonel P.N. Thimmaiah, Head Aviation Security, Quikjet Cargo Airlines being the panelists.

LOGISTICS TIMES February 2014

EVENTS

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DACAAI AGM

Management Committee President : Arvind Nayak Vice President : Suraj Agarwal Treasurer : Ravijeet Sehrawat General Secretary : Amit Bajaj Joint Secretary : Sanjay Agarwal

Executive Body Gaurav Ghuwalewala Hari Nair Raj Kumar Gosh Inderjeet Sehrawat Dinesh Digga Amit Singh

Ismail Khan Sanjay Khanna Sajjan Kumar Grievance Cell Ananda Agarwala - Lead

The Annual General Meeting (AGM) of DACAAI was held at Lemon Tree Hotel, Delhi on 24th January, 2014.

In the meeting, the road map for year 2014-15 was decided and various other decisions were taken. This included announcement of new managment committee of the association.

At the AGM, the association also decided to organise more trainning programmes with the help of Airlines in conducting in DGR awareness and IATA certified DGR programs. The association also announced holding its annual convention in the Month of August in Delhi this year.

LOGISTICS TIMES February 2014

EVENTS

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CRWC bags Excellence Award

CRWC bagged ‘Excellence Award’ in the category of ‘Best Logistic Company in Govt. Sector’ which was conferred by the Institute of Economic Studies, Delhi at Hotel Taj Man Singh on 23rd January. Vinod Asthana, MD, CRWC received the award from Dr.Bhishma Narain Singh, Former Governor of Tamil Nadu; Sh. B.P. Singh, Fomer Governor of Sikkam and Lt. General Sh. Nirbhay Sharma, Governor of Aunachal Pradesh.

Award for Chapman Freeborn

Chapman Freeborn was once again voted as favourite charter provider by the freight forwarders and cargo airlines at the recently held STAT TIMES International Awards for Excellence. Russi Batliwala, Chapman Freeborn’s CEO, collected the award on behalf of the group at a glittering award function on 5th Feb in Mumbai.

LOGISTICS TIMES February 2014

RNI No. DELENG/2011/39329

Regd No.: DL(E)-20/5380/2014-16