Lt january 2012 for net

SPECIAL FEATURE TALKING WAREHOUSE

REPORT INDIAN STEEL SECTOR

EVENTS AUTO EXPO

Inside Calendar 2012

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January 2012

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SPECIAL ISSUE

2 11 LOOKING BACK 2 12 LOOKING AHEAD I

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CONTENTS

All about Transportation, Distribution & Infrastructure

Volume 2: Issue No.9 * January 2012 Editor in Chief

Raj Misra rajmisra@logisticstimes.net

Editor

Ritwik Sinha ritwik@logisticstimes.net

Sub Editor Photographer Design Consultant Designer Circulation & Distribution Legal Advisor

Neha Richariya Anil Baral S. Athar Hussain Kausar Syed

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COVER FEATURE

Looking kcaB Looking Ahead

Kamruddin SaiďŹ Rakesh Garg

Our Bureau Mumbai Rahul Kumar rahul@logisticstimes.net Bangalore B Shekhar shekhar@logisticstimes.net Chennai N Raju raju@logisticstimes.net Hyderabad Sudhir Kumar sudhir@logisticstimes.net 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 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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News Briefs

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SPECIAL FEATURE

REPORT

Talking Warehouse

Indian Steel Sector

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EVENTS

Auto Expo

EDIT NOTE

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Concerns Galore

H

ow times change? Last year in the same month, when we had put together the ‘Outlook 2011’ section comprising projections made by over 15 senior logistics industry representatives, the bold underlined sentiment was: we 2011 would be a sunshine spell. But those were the days when manufacturing growth was still in the double digit trajectory. And despite high inflation and high interest rate trends even then, the feeling in general was: the growth pattern would continue to remain robust.

But now cut to the first month of the new year and the underlying sentiment almost seems to have slipped to another extreme. Even as pessimism would not be the right term to define the mood of the logistics industry, there are clearly unambiguous concerns galore messages.

And this is much in alignment with the general feeling of India Inc. Afterall, the last six months have seen the overflow of negative trends – rupee decline, manufacturing growth slipping in the negative zone, investments falling, high inflation and interest rates showing no let up signs all through the year, falling exports, etc.

From the perspective of Indian logistics industry as representatives explain in our cover feature ‘Looking Back, Looking Ahead’, 2011 clearly marked a stromy spell in the operational sense. The frequent changes in the fuel prices (mostly in the northward region) kept them on toes in terms of offering a reasonable pricing structure to their customers. Sectors like autmobile saw inventories piling up and it is a commonplace knowledge that this kind of trend clearly puts more pressure on supply chain managers. Since India is no longer an insular economy, the upheavels in matured markets especially Europe has seen demand for some export items almost drying up towards the end of the year. Just to cite an example, leading air cargo operators are vouching today that garment exports decline from the country has been significant in last few months.

On the broader macro-economic basis, the logistics industry too seems to be extremely disappointed with what a leading contributor describes – policy paralysis syndrome. This has affected infrastructure development as well, one area where this industry is keen to notice progression without pause to weed out many of the structural inadequacies. The fiasco in allowing FDI in multi-brand is looked upon as a missed opprtunity and the industry would be too glad to see the proposal pushed to the forefront from the backburner asap. And of course, there are other issues like promoting institutional skill set development mechanism, green logistics practices, etc. which might have somewhat lost their way owing to unexpected operational pressures in 2011.

Flip through our cover feature to gauge the mood of the logistics industry as crica 2012 sets in. Optimism is not completely missing but they are mostly guarded and hinged more to the percption that going by the global standards, even 7 percent or slightly lower growth rate means opportunity to grow. Though a lower GDP growth margin would certainly require displaying deftness of highest order in terms of operational agility and flexibility- the quality which often separates men from boys.

Meanwhile, there are some discernible positive indications (emerging during the first ten days of this month) for 2012 which could be harbinger for tides turning during the course of the year. Firstly the government has allowed 100 percent FDI in single brand retail which could well be seen as the precursor of making a more serious effort for allowing foreign ownership in multi-brand. Probably, after state elections are over. The indirect tax collections are once again showing a surge much in alignment with budgetary estimates for the fiscal. And lastly, the inflationary pressures have cooled off a bit which may propel high interest rates being put on a reversal course. The fact of the matter is: year 2011 had begun on a high note of optimism but tables turned during the course of the year. So who knows 2012 might just display similar trend – beginning on a low note and leaving you with smiles when it signs off.

Enjoy the issue and here’s wishing you a Very Happy New Year…

Waiting for your feedback.

Ritwik Sinha ritwik@logisticstimes.net LOGISTICS TIMES August 2011

NEWS BRIEFS

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IEP acquires TNT Express’ domestic road business

In a significant development early this month, Mauritius based India Equity Partners (“IEP”), a leading private equity firm announced the acquisition of domestic road express business of TNT India. According to a company release, the sale took effect on 30 December 2011 and was sourced on a proprietary basis leveraging unique access through Abhik Mitra (IEP’s Platform CEO for the Logistics sector) and IEP’s global relationships. This new entity will be led by Abhik Mitra who has previously served as Managing Director of TNT India.

Commenting on this important acquisition, Sid Khanna, Chairman and Managing Director of IEP Fund Advisors,said, “IEP is excited by this acquisition and it is consistent with our

FIEO ELECTS NEW PRESIDENT Padam Shree M Rafeeque Ahmed was elected President of Federation of Indian Export Organisations (FIEO) at New Delhi on January 7, 2012. He has earlier been at the helm of FIEO between 2002 to 2004.

Ahmed is Chairman of the Farida Group of Companies, a leader in the realm of leather exports. He was also the Chairman of FIEO’s Southern Region. He is the first leading exporter from Tamilnadu to be elected as President of FIEO.

LOGISTICS TIMES January 2012

strategy of investing in Logistics and Infrastructure Services. In the Logistics sector, we see tremendous growth opportunities for mid-sized companies with the required management and capital, to scale rapidly and become market leaders.”

KK Iyer, Managing Director of IEP Fund Advisors, who previously led Accenture’s logistics practice in India, added “This investment is consistent with IEP’s differentiated investment strategy of control platform investments and portfolio value-add. IEP brings together outstanding management talent, the necessary financial capital, high quality governance and bestin-class management processes to build platforms that acquire companies to drive growth and become market leaders. We see TNT’s domestic road express business as a first step in building out our Logistics platform and intend to pursue other exciting investment opportunities in this sector.”

IEP is believed to be uniquely positioned to build and grow companies in the logistics sector with its exposure in three existing portfolio companies across different segments of the logistics sector. These are Fourcee Infrastructure - a niche liquid logistics rail transportation company, Swastik Roadlines (Coldex) - India’s leading cold chain surface transportation company, and Ocean Sparkle - one of India’s largest private harbor and seaport management services providers, which grew at 30% over the previous fiscal year.

Increase in freight traffic Indian Railways have reported carrying 704.75 million tonnes of revenue earning freight traffic during April-December 2011. The freight carried shows an increase of 31.44 million tonnes over the freight traffic of 673.31 million tonnes actually carried during the corresponding period last year, registering an increase of 4.67 per cent.

During the month of December 2011, the revenue earning freight traffic carried by Indian Railways was 86.75 million tonnes. This marked an increase of 6.87 million tonnes over the actual freight traffic of 79.88 million tonnes carried by the Indian Railways during the month of December 2010, showing an increase of 8.60 per cent.

NEWS BRIEFS

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Improving Public Transportation A new collaboration to optimize city bus operations in Mexico, Brazil and India was announced recently by FedEx Corp. and EMBARQ, the World Resources Institute’s center for sustainable transport.

“Thanks to the generous financial and in-kind support from FedEx, some of the world’s largest cities will be able to improve their public transit systems, which are critical in this time of rapid urbanization,” EMBARQ Director Holger Dalkmann said.

“Especially in developing cities, the key to scaling up sustainable transportation is being able to adapt to growth, and leveraging relationships between the private, public and nonprofit sectors to find new solutions.”

FedEx will provide $1.4 million over two years to EMBARQ to provide technical expertise on sustainable transportation projects that improve quality of life in cities. This grant is a continuation of FedEx’s successful collaboration with EMBARQ’s Center for Sustainable Transport in Mexico which began in February 2010.

In India, EMBARQ and FedEx will increase the technical capacity of city transport agencies to organize their bus systems, advising on areas like vehicle maintenance, procurement and technology, as well as data collection and management.

ISO Certification for JNPT G. K. Vasan, Union Minister of Shipping recently awarded ISO certification to Jawaharlal Nehru Port at a function in Mumbai recently. “I am happy to be in your midst at this function for the award of ISO 14001 and OHSAS 18001 Certifications to the Jawaharlal Nehru Port Trust by the Indian Register for Quality Systems (IRQS),” he said on the ocassion.

With the latest feat, JNPT has become the first major port in the country to achieve the three certifications from the International Organisation for Standardization (ISO). In addition, it has also bagged an Occupational Health and Safety Management System certification.

JNPT which accounts for over 55 percent of the total container handled by all the major ports in the country is slated for some major expansion in the medium. The Port is expected to join hands with PSA for development of Phase I of the Fourth Container Terminal. The projected investment is Rs 4,100 crore and the terminal’s capacity would be in the range of 2.4 million TEUs annually.

FMCG sector showing weakness

Fall of rupee against major currencies, new norms of standardsize packaging, increase in raw material costs due to upward spiraling interest rates and inflation together might dent the performance of the fast moving consumer goods (FMCG) sector, apex industry body ASSOCHAM recently maintained.

According to a sector specific analysis of chamber, a sharp depreciation in the value of rupee and new packaging norms from July 1 are going to have a drastic effect on the FMCG industry which is likely to increase cost of regular products like biscuits, coffee, tea, toiletries and personal care items by about 10 per cent and more by first quarter of the next financial year.

“Input cost inflation, persistent rise in raw material price, rising fuel costs, fluctuation in the currency, dipping industrial growth, slowing global economy together with an overall moderating consumer sentiment might lead to a slow volume growth of FMCG segment in 2012,” said D.S. Rawat, secretary general of ASSOCHAM while releasing the chamber’s analysis titled ‘FMCG Sector: An Outlook for 2012.’

“All of these factors might pinch the FMCG industry which will go for a fresh round of price hikes as we usher in the New Year,” Rawat added. To prepare this report, ASSOCHAM interacted with about 100 industry experts, analysts, economists and FMCG companies’, firms’ officials and sought their opinion on what the next year holds for the sector.

LOGISTICS TIMES January 2012

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India occupies 49th rank in GCI India has been placed at 49th rank in the first DHL Global Connectedness Index (GCI) which was recently released. GCI comprises a detailed country-by-country analysis of the flows that connect the world covering as many as 125 countries in the world. The index has prepared on the basis of the analysis of the depth and breadth of a country’s integration as manifested by its participation in international flows of products and services, capital, information, and people. The study documents that global connectedness has enormous room to expand, even among the most “connected” countries and that continued economic integration could spur global gross domestic product gains of five percent or more.

The overall GCI places equal weight on both depth and breadth. While India was a top scorer in breadth of coverage ranking 12, in terms of depth the country is far less connected at 110. Overall, India ranks 49 in the study.

However, India has been mentioned among the top ten countries which increased its level of global connectedness quite significantly between 2005 and 2010. R. S. Subramanian, India Country Manager, DHL Express India said, “The GCI study clearly indicates that the opportunity for future growth among the countries that promote globalization through public policy and business strategies is huge.”

India has moved up significantly in its ranking from 110 in 2005 to 49 in 2010. “Further emphasis on a more liberal investment regime and creating world-class infrastructure capacity will support India to rise higher in the international landscape,” added Subramanian.

India’s increase in overall connectedness came entirely from outward connectedness, and the largest specific source was a surge in outward FDI, reflecting the much greater prevalence of Indian companies investing abroad relative to foreign companies investing in India, contributing to the weaker depth score. This trend of higher breadth than depth scores is prevalent for each of the BRIC countries (Brazil, Russia, India and China).

Overall, the top 10 ”most connected“ countries as per the 2011 GCI study are: Netherlands, Singapore, Ireland, Switzerland, Luxembourg, the United Kingdom, Sweden, Belgium, Hong Kong (China) and Malta. The study was commissioned

by DHL and conducted by world-renowned global business strategist and economist, Pankaj Ghemawat, Professor of Global Strategy at the IESE Business School, Barcelona. “The positive impact of global connectedness on world prosperity

LOGISTICS TIMES January 2012

will continue to be of great importance. The misgivings some political leaders have about increasing global integration are misplaced; its benefits far outweigh the potential downsides,” said Ghemawat.

The key findings of the report are: The actual level of connectedness today is much lower than commonly believed; its potential for positive growth, therefore, is significant.

The Netherlands ranks No. 1 in terms of overall connectedness, Hong Kong scores the highest regarding the depth of its international connections, and the United Kingdom tops the list for the breadth of its connections.

Despite increasing its trade interaction in recent years, the United States ranks No. 25 overall. The United States is a leader in term of breadth (#3), but as is expected for a country with a very large internal market, it lags on depth (#84).

The lion’s share of international connections are still concentrated among countries that share borders (such as in Northern Europe) as well as cultural and historical ties, which indicates that much of today’s globalization is actually regionalization.

Larger countries score higher on the global breadth of their connections; smaller countries excel in the depth of their connectedness.

Countries that pursue public policies that directly encourage greater international flows, as well as policies that improve the domestic business environment, can enhance their global connectedness.

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FDI in single-brand retail The government may have faced stiff resistance in implementing the provision of FDI in multi-brand retail. But now it seems to have decided to take smaller steps to reach to that grand initiative. In a significant development on 10th January, the government notified 100 percent FDI in single-brand retail, paving way for global chains like Adidas, Louis Vuitton and Gucci to have full wnership of their India operations.

“Foreign Direct Investment [FDI], up to 100 percent, under the government approval route, would be permitted in single brand product retail trading,” a press note by the Department of Industrial Policy and Promotion (DIPP) said.

However, in respect of proposals involving FDI beyond 51 percent, the mandatory sourcing of at least 30 percent would have to be done from the domestic small and cottage industries which have a maximum investment in plant and machinery of $1 million (about Rs 5 crore).

“FDI in single brand has led to emergence of some global majors in Indian market...This will provide stimulus to domestic manufacturing value addition and help in technical upgradation of our small industry,” Commerce and Industry Minister Anand Sharma commented.

Prior to this move, 51 percent FDI was permitted in singlebrand format. The initiative to allow 100 percent FDI has been welcomed by all industry associations.

New CEO of Maersk Line Last month, Maersk Line announced appointment of as the new CEO. His tenure would begin from 16 January. Skou was previously CEO of Maersk Tankers and replaces Eivind Kolding who is leaving Maersk Line to become Chairman of the Executive Board of Danske Bank. An old hand of Maersk Line, Soren Skou has previously held various positions in the company ,from 1983 to 1998. In addition to being CEO of Maersk Tankers since 2001, he has also been a part of group’s Executive Board. He has, amongst others, headed the Group’s initiatives to reduce costs in 2009 and 2010. In 2011, he has been the leader of the Group’s preparations for further expansion in the new growth markets.

In order to concentrate fully on the tasks in Maersk Line, Soren Skou’s additional positions will gradually be transferred to others in the Group. These include, among others, the board positions of DFDS and Danish Shipper’s Association, where the Group will nominate CEO of Maersk Drilling Claus V. Hemmingsen, and Maersk Container Industry, where CEO of APM Terminals Kim Fejfer will take over the chairmanship.

Aramex releases First Carbon Footprint Report Aramex, the global logistics and transportation solutions provider, recently released its first Carbon Footprint Report, in line with its long-term strategy to environmental sustainability The report for 2010, which has been developed using the Greenhouse Gas (GHG) Protocol calculates, measures and presents Aramex’s global greenhouse gas emissions. The data, which has been independently audited and assured, will be adopted as the baseline for setting targets and assessing the company’s progress in reducing carbon emissions in the future, which will be disclosed in annual reports.

“Our first carbon footprint report opens the door for regional corporations to follow suite, and facilitate transparent dialogue concerning corporate sustainable business practices, performance and commitments”, said Fadi Ghandour, Founder and CEO of Aramex. The report identified key areas where Aramex has been successful in reducing its emissions, including the reduction of fuel consumption by 24 percent since 2006, and the saving of 72 tons of paper through the automation of internal processes, enforcement of printing restrictions, and increased utilization of Aramex’s intranet forum for internal communications.

LOGISTICS TIMES January 2012

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New Hactl IT system Hong Kong Air Cargo Terminals Limited (Hactl) – the major air cargo terminal operator at the world’s largest air cargo hub – has reported latest generation of Cargo Management System COSAC-Plus successfully going into the live mode on 26th December 2011, handling Delta Air Lines flight number DL638 departing at 8:00am. Phase I of the migration to COSAC-Plus also includes Japan Airlines. The remainder of Hactl’s 100+ airline customers will migrate to COSAC-Plus in further phases in early 2012.

COSAC-Plus represents an investment of USD31million, the largest single investment by Hactl since the building of SuperTerminal 1. It is the culmination of three years’ intensive development and testing by a team of up to 160 professionals from IT, operations and technology partners.

“We are very pleased with the early positive response from our users and are confident that the rest of our customers will soon find COSAC-Plus makes it easier than ever to work with Hactl. COSAC-Plus is our commitment to continuous investment in improving our IT systems and facilities to provide our valued customers with enhanced security, reliability and efficiency in handling their cargo. We believe COSAC-Plus is one of the most versatile and comprehensive cargo management systems in the world, ” Hactl Executive Director Tan Chee Hong commented.

Presence in North China Region In order to extend business coverage, develop new business and stretch its presence in the north of China, DB Schenker recently established a new branch office in Hohhot, capital of the Inner Mongolian Autonomous Region.

Hohhot is the first branch Schenker China Ltd. has opened in Inner Mongolia province. It is the commercial, political, cultural and economic center of Inner Mongolia. Hohhot is not only an industrial city, but also a woolen textile industry center in China. The most important industry is food industry. The main products in Hohhot are medicine, wind power, coal, machine tools, and fiber optic cable. These factors made Hohhot been rated as “TOP 10 most dynamic cities in China’s economic development”.

AMI Heathrow move spells greater space and efficiency The UK arm of Air Menzies International (AMI) – the world’s largest trade-only airfreight and express wholesaler – is relocating its London Heathrow hub facility to new, larger premises at Polar Park, on the main Bath Road on the airport’s north side.

AMI’s cargo division will be the first to occupy the building, in late January. The new base is conveniently located for AMI’s local customers, and for those from further afield using the M4, M25 and A4.

The new terminal will also be the new home for AMI’s Express division, which will move into the building in March 2012. This will bring the AMI family back together under one roof for the first time since 2008, when growth forced the express operation to move to temporary overspill premises in nearby Colnbrook.

With 46,253 sq ft (4,297 sq m.) of warehousing and 9031 sq ft (839 sq m) of offices, the new AMI base is over 50% larger than the previous facility which had been its Heathrow home since the early 80’s. The new building has greatly improved vehicle access via a one-way traffic system, and has been modified to offer five cargo doors plus a dedicated express door.

The AMI Heathrow terminal will be located in a secure compound, and access to sensitive areas will be via biometric turnstiles and airlocks. The new base provides a much larger yard, enabling easy truck parking and manoeuvring. It also features a large combined cargo and Express reception offering hot drinks, snack machines and toilet facilities for visiting drivers.

The most significant change with the new facility will be the introduction of an automated warehouse handling system LOGISTICS TIMES January 2012

(Hermes) which has just completed a successful trial period at AMI’s current facility. The system is a variant of the Hermes handling management system developed around twelve years ago by AMI parent Menzies Aviation, and which is used throughout its cargo handling operations around the world.

The new IT system will handle all aspects of AMI’s warehouse operations, assisting storage and retrieval of cargo. In turn, this will lead to more efficient use of the warehouse space and faster processing of freight, and will also drive a new truck queuing and door allocation system.

“The new base is all about providing greater efficiency for our customers, particularly focusing on reducing queue times to an absolute minimum. We know this is a real issue around the airport, so AMI will be working very hard to mimimise waiting times for customers’ vehicles,” AMI Regional Director Europe, Sharon Wright said.

THE TALKING WAREHOUSE

LOGISTICS TIMES January 2012

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Noted supply chain specialist Roger Byford* and journalist David Maloney* have authored an e-book called ‘The Talking Warehouse’ which deals with the efficacy of voice-based solution in product distribution. Logistics Times brings excerpts from the chapter titled – Solving Warehouse Challenges Using Voice published in the e-book. This feature is the third part of the series.

Changing business environments Diamond Comic Distributors went through a consolidation as a way of managing its growth. The U.S.-based Diamond is the largest distributor of English-speaking comics in the world.

The company opened a 325,000 squarefoot distribution center in Memphis, Tennessee in 2003 and quickly outgrew it within three years. It opened a second facility nearby, followed by a third building a year later. Its operations were slowed by the fact that it had three buildings trying to work together to do fulfillment.“We had underestimated the space we would eventually need, and so we decided to bring all of our distribution under one roof,” says Debby Salvatore, Director of Operations for Diamond Comic Distributors.

In 2009, Diamond consolidated distribution into a 600,000 squarefoot building in nearby Olive Branch, Mississippi. Using voice for picking both cases and split case products, the new LOGISTICS TIMES January 2012

facility has provided Diamond with room to control its growth and the flexibility it needs to remain a leader in the comic book industry.

Order sizes vary greatly among the company’s 25,000 SKUs, from one piece of a title to thousands. And since new editions are coming out weekly, the company needs the flexibility that voice offers to process orders efficiently. “We had looked at different technology over the years, including RF and pick-to-light,” explains Salvatore. “But we were not impressed with the flexibility these other systems offered. Our customer base is growing and each customer has different requirements. The others would not give us the flexibility to turn on a dime like voice can. Voice is a good fit for us.”

Some 60 workers use voice on each of two shifts to perform picking. They work in two four-level pick modules where they pick titles by zone into cartons. Full cartons are also picked in the module and placed onto takeaway conveyors.

“Voice can handle just about anything,”

Salvatore says. “We have a lot of flexibility to start workers at any location within the pick module, in any zone, based on the order profiles.”

Timeliness is extremely important in the comic book business. Each Wednesday new comics are presented on store shelves, and readers expect to see the latest titles in their local stores. That means each week’s orders need to be processed efficiently to be delivered on time to customers.“I can’t imagine getting things out the door with the volumes we have without a good warehouse management system and voice. It is very, very critical,” says Salvatore.

Another company that has been able to better manage a complex distribution network is The Co-operative Group, the UK’s largest mutual (consumer-owned) business. It operates everything from funeral homes to insurance to food service, and is also the operator of the country’s biggest convenience store network, with over 3,000 stores and 78,000 employees nationwide.

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moving ambient products. This instantly gave each of the regional ambient distribution centers more capacity. It also changed its transportation model to make deliveries more efficient. To streamline operations within the NDC and the regional warehouses, the company installed a new warehouse management software system-wide and moved to voice-directed picking for filling store orders. “We are well on the road to achieving our ideal network — multi-tiered, composite and strategically located,” says Ashworth. “We have a framework that gives us visibility and control of stock and the flexibility we need to grow. The productivity gains have been very impressive. So far we have seen a 10 percent improvement in productivity at all the sites which have gone live with the system.”

Handling the volume needed to supply all of the convenience stores was not an easy task. It involved many small depots that were difficult to service. Three separate distribution networks also existed — one for delivering ambient goods, another for temperature-controlled, and a third for frozen foods. Delivery zones overlapped, routes were inefficient or illogical, and many warehouses lacked sufficient space.

The Co-operative Group realized that it needed to streamline its distribution network, ideally serving each store with a single, multi-temperature truck while improving the availability of goods in the stores.“When you are dealing with

small stores, it’s a disaster if the product isn’t available,” says Trevor Ashworth, Director of Food Retail Supply Chain for The Co-operative Group. “You don’t have the luxury of offering the customer a range of brands when you have limited shelf space — the product is either there or it’s not. We knew that we were notching up a lot of unnecessary mileage with our deliveries and we had to find a way of fixing this problem while ensuring that product availability improved at the same time.”

The Co-operative Group revamped its supply chain by building a new National Distribution Centre (NDC) for slow-

Fluctuating volumes In many companies, the amount of volume passing through their distribution centers varies widely.This is especially true for distributors with a high degree of seasonal business. Lawn and garden suppliers, candy makers, lumber retailers, swimwear manufacturers, and those who distribute holiday products are just a few affected by the need to push the majority of their annual volumes through their facilities in just a few months’ time.

Signature Brands, part of Hero AG of Switzerland, manufactures Betty Crocker and Cake Mate dessert decorations and seasonal family decorating fun like Paas Easter egg decorating kits and Pumpkin Masters carving sets. These favorites of American consumers are often correlated with holiday seasons, which affect its distribution volumes. “Because our business is seasonal, our shipping requirements vary tremendously from month to month, and nearly 99 percent of our orders must be shipped the same day they are received, so responsiveness and accuracy are critical,” says Gary Stenzel, Senior Vice President of Operations for Signature Brands.

Prior to moving to voice, Signature Brands used paper for picking. According to Chief Information Officer Donna Dodson, “Since the voice deployment, we LOGISTICS TIMES January 2012

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have been able to confidently handle our seasonal fluctuations. Labor assignments are more flexible, which has helped us to reduce our labor hours by over 20 percent, decrease inventory adjustments in picking areas by 80 percent, and cut our training time by 80 percent.”

“Even before we had finished quantifying the cost savings obtained by deploying Vocollect and our new mobile computing terminals, we found that customer complaints had been greatly reduced,” recalls Stenzel. “In my mind, that benefit alone is priceless.”

Meeting regulator demands A major business challenge companies face today in most countries is meeting new government regulations.

This is particularly a concern in the pharmaceutical and food industries where additional information must be

captured on each item distributed. These regulations, also known as pedigree laws in the United States, are designed to protect consumers in the event of a recall, so that products can be removed immediately from the supply chain and the source of the problem can be quickly determined for resolution.

Working in conjunction with a user’s WMS, voice can gather the data needed to conform to pedigree laws. At any point within the put-away and picking process, lot codes, expiration dates, and other pertinent information can be gathered and tracked by voice and the WMS as each product makes its way through the distribution facility. This information can then be shared easily as products move through the other parts of the supply chain.

One leading global pharmaceutical company launched an award-winning

voice-directed order-picking solution from Vocollect within its highly regulated and validated pharmaceutical environment.

The company has found that voice helped it track products with exceptional accuracy. It also reduced pick errors by 57 percent, which reduces the quantity of orders being returned. The voice system has also helped the company save 10 percent of its overtime costs and has reduced training time by 50 percent. It found that workers achieve maximum speed and productivity in four weeks rather than two months.

Labor management Regardless of how much automation a distribution center has, it still requires people. People are the most important asset in any facility. Getting the right people and giving them the tools to be

Special Issue with Guest Editor Watch out for February Issue with Prem Verma, CEO, TML Distribution at the editorial helm.

LOGISTICS TIMES January 2012

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productive and happy in their work is an important piece to solving the distribution puzzle. Labor remains the biggest single expense in warehouses, so it is essential that supply chain managers find systems that use labor more efficiently, particularly in picking areas, which are typically the most labor-intensive activities within the building.

Voice systems reduce labor as they drive productivity. They are extremely user-friendly, with operators becoming proficient much sooner than with other technologies. VersaCold Logistics first introduced Vocollect Voice into Canada in the fall of 2009. The introduction was part of the implementation of its WMS, which is an RF-based system. “From our years of experience in the grocery business in the United States, we have proven there is a real ROI for the use of the voice technology on certain types

of business. The decision to expand this technology into the Canadian warehouses was a no-brainer,” said Robert Bascom, Vice President (Operations), Eastern Canada, VersaCold Logistics. “One of the greatest benefits with using voice is the decreased timeline for new hires to get up to productive levels of work.

Instead of focusing on accuracy, they can concentrate on safety, quality, and productivity.”

“The speed and efficiency with which we can train such a wide variety of new employees to pick accurately and quickly, fresh off the street, is incredible.

One person can train a number of new employees from start to finish in under two hours,” said Henry van Oudenaren, General Manager of Ontario, Canada for VersaCold Logistics.

The company has since expanded voice to six of its 38 warehouses in Canada

and has plans to add more facilities. “The deployment of the technology is as easy as the deployment of RF technology,” said Bascom. “Voice has helped to make us a world-class organization, and the level of accuracy we have achieved has made our customers the biggest benefactors.”

VersaCold Logistics has many nonEnglish speaking workers. Since Vocollect Voice is a speaker dependent system (it compares spoken responses to words the user has previously recorded on a template), workers can speak back to the system with any language they choose, as long as their responses are consistent with their recorded template. Currently, instructions are given in English.

Soon, the company will add the French Canadian language version for workers who prefer to receive instructions in their native tongue.

(Concluding part will appear next month)

* Roger Byford is Co-Founder and Chief Technology Officer of Vocollect, the world leader in voicecentric solutions for mobile workers. Roger’s career spans more than 20 years in the industrial application of voice technologies. A business journalist for over 20 years, David Maloney is senior editor of the leading North American distribution industry magazine DC Velocity.

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2011

Looking Back

2012

Looking Ahead LOGISTICS TIMES August 2011

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For Indian logistics industry, year 2011 had begun on a high note of optimism. But the year saw a significant drop in confidence level owing to multiple factors starting from high inflationary pressures to slippage in manufacturing growth to demands drying up and also to policy paralysis.

As a result, the logistics industry is grappling with concerns galore as the new circa sets in even as there are reasons to make them believe that a reversal in fortune may not exactly be a far-fetched idea.

Here is what senior representatives of logistics and allied industries have to say in terms of possible churnings in the new year‌ LOGISTICS TIMES August 2011

Rough weather to stay Ramu S.Deora , Former President ,FIEO

2011 was a tidal year, an year of ups and down, for Indian exports.Exports grew by 82 percent in July 2011 but plummeted to 4.2 percent in November 2011 casting serious doubts about its continuance in positive territory in 2012. The year also established that there is no direct relationship between exchange rate and exports.

When rupee was appreciating or hovering around Rs 44.50 to a US$ , exports grew by over 40 percent but when it zoomed to about 15 percent depreciation or more, export growth fell first to about 10 percent in October and 4 percent in November.

This may be partly on account of time lag between negotiating an order based on exchange rate and then executing the same.

Realizing the challenges faced by the global economy in second half of 2011, WTO also revised its forecast downwards for 2011 from 6.5 percent to 5.8 percent in September 2011.

2012 will see major economic upheavals in many countries and these will have serious repercussion on every nation as we all are globally integrated. The unemployment rate in Euro zone, US and OECD countries would be much more than in 2008 and public debt to GDP ratio in alarming zone. These factors will have adverse impact on demand which eventually will affect our exports particularly in the first half of 2012. Dollar will continue to be over Rs 50 in this period and I won’t be surprised if it breaches Rs 55 mark as over US $ 100 billion loans will be maturing this year and with uncertainty and indecisiveness, foreign investment will remain on low level thus widening the gap between demand and supply putting pressure on Dollar.

Achieving 27 percent growth this year seems a distant reality particularly when first half of 2012 will see exports dipping to single digit. However, we should not be disheartened by these developments. Exporters and Government should work in tandem to sail smoothly in such rough weather.

GDP number still promising Christoph Remund, CEO, DHL Global Forwarding

Early 2011 seemed to be the year in which the global economy would reach pre-2008 financial crisis levels as economies around

the world continued to gain momentum, leading to increased manufacturing output, retail sales, and global freight flows.

However, the year turned out to be tough with economies across the globe witnessing tremendous changes on political and economic fronts with crude oil touching the US$100 mark, the earthquake in Japan leading to high inflation and production cuts in the country, regional and geopolitical protests leading to regime change in some countries in the MENA region, European debt crisis followed by the unprecedented downgrade of United States’ credit rating from AAA to AA+ sending shock waves across the globe and the flood situation in Thailand disrupting the supply chains of many manufacturing companies. The unrest in the Middle East and its immediate effect on oil prices underscores the reality manufacturers, retailers, and logistics service providers have had to face since the global financial crisis in 2008— the reality of massive global economic shocks that hit suddenly with worldwide repercussions. . The world has always seen change — what makes the current period different is the frequency, scope and duration of each change.

Whether it is an individual or an organization, everybody is affected by weak markets. Since logistics is a derived demand, any slowdown in manufacturing or consumption is bound to affect the sector. The impact of slowdown on logistics globally is as much as other industries. If our customers are impacted, how are we not impacted? Volumes are shifting from one mode to another mode, with volume growth being affected and freight rates having declined in the last few months. Revision in fuel prices, and a rise in aviation turbine fuel costs have also affected the operations of players in India. This has forced companies to cut costs and innovate in terms of new product offerings catering to key sectors. With weak European and US markets, industrial performance has not come up to the forecasted expectations.

IATA had also indicated the volume growth projection of 5.5 percent early this year, but they now expect this to drop to 1.4 percent, by the end of the year.

Globally, strong demand for faster delivery of goods by shippers is creating numerous challenges for the air cargo industry in India. As a consequence, air cargo is slowly losing market share

}

2012 will see major economic upheavals in many countries and these will have serious repercussion on every nation as we all are globally integrated.Dollar will continue to be over Rs 50 in this period and I won’t be surprised if it breaches Rs 55 mark

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to ocean container shipping as high air rates and falling ocean freight rates widen the price gap between the two transport modes. Container shipping has been the major beneficiary of recent world trade growth while air freight volumes remained flat. Global travel demand is slowing as the spectre of another US recession looms large and Europe’ s deteriorating debt situation weighs in. While the rest of the world, particularly the US and the European Union grapple with low economic growth and high debt, India and China are expected to record reasonably strong growth GDP in 2011- 2012. Although various forecasts warn that India’s growth would not touch last year’s 9 percent, even the most pessimistic forecast project the GDP growth in India could easily touch 7.5-8 per cent. With this growth, the movement of goods is expected to be strong this financial year.

Certain industries continue to depend on air transportation, particularly the pharmaceuticals, healthcare and gems & jewelry sectors in India. Another key trend that has been witnessed over the past year is consolidation within the industry. There is a growing need for global standard logistics services in the country so that Indian enterprises can integrate seamlessly with the global economy. This is fuelling globalization and consolidation within the industry with the entry of global players as well as mergers and acquisitions in the Indian market.

The trends which are visible for the industry are enhanced focus in automotive, pharmaceutical, as large automobile companies have set up their manufacturing units in India. Focus is also going to be in terms of innovative warehousing and distribution. Our expectation in the current financial year is a significant growth, although it appears that the market would be either sluggish or flat. Emerging markets are set to witness significant growth. Over the next few years, we would like to see superior deliverables in handling facilities at the airports and sea ports, improved infrastructure in line with global standards, including temperature controlled facilities, a structured and defined EDI platform connecting all logistics stakeholders and customs willingness to start G-Green projects like E-freight.

With increased focus on supply chain reliability and cost efficiency, technology is increasingly becoming a vital part of today’s logistics industry. Organizations are progressively becoming more aware of the environmental impact of supply chains and are demanding green logistics solutions to reduce the overall carbon foot print of the supply chain.

With the advent of GST, all segments of logistics will see a change. The second factor is the adoption of technology

by the logistics players. Today technology is in use, but very selectively. We foresee this trend changing, more and more use of technology will push improved visibility and working. India, although a competitive market for logistics, could lag behind China and even the European Union if the additional costs due to logistics inadequacies are taken into account. These inefficiencies exist in state-border delays, tolls and lost time due to paperwork. While India is set to emerge as a major commerce hub, due to geographic location between South East Asia and European Union nations, infrastructure bottlenecks are a cause for concern. This reminds us that there is a need for further investments in the area of creating and maintaining good logistics infrastructure in India.

Going forward, we expect a secure, resilient and reliable logistics infrastructure in place, which would facilitate global transactions, augment and improve the Indian economy and bring greater stability to the region.

Long term story is intact Kenneth Koval, VP – India Operations, FedEx Express

Trade, GDP and the air cargo industry of any country are interdependent and interlinked.

The air cargo industry connects cities, countries and continents, thereby connecting diverse markets and forming global supply chains. India witnessed a slowdown in GDP growth towards the end of 2011 owing to the world economic crisis and domestic factors like impact of tight monetary policy and a dip in the industrial production. The revised growth projection for the Indian economy has come down to 7.5 percent for this fiscal. Despite these headwinds in the short term, FedEx continues to be extremely confident in India as it sees long term growth. The year 2011 was an important one for FedEx for many reasons. FedEx believes in innovating and making key strategic investments in India to enhance the region’s connectivity to both domestic and global commerce. In early 2011, FedEx acquired the businesses of AFL and UFL, and by doing this we not only increased the market coverage for our existing portfolio but also improved our service proposition. The

}Since logistics is a derived demand, any slowdown in manufacturing or consumption is bound to affect the sector. The impact of slowdown on logistics globally is as much as other industries.

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LOGISTICS TIMES January 2012

acquisition has given a boost to FedEx’s vision of being a ‘one stop shop’ for all customer segments in India. We consistently expanded our portfolio and included service enhancements in the last year. We launched a new inter-continental flight route using Boeing 777F freighters to provide Indian businesses with better international connectivity as well as additional capacity between the U.S., Middle East and Europe. We also launched an intra-India, door-to-door, day-definite express delivery service for ground consignments in 2011, thereby offering businesses in India a complete portfolio of domestic shipping services, presenting customers with a choice of air and ground services and improving domestic connectivity.

We are optimistic about the Indian economy at large and the country’s logistics market offers a lot of scope for development of our operations in the coming year.We believe that there are opportunities in several key industry sectors like E-commerce, pharmaceuticals and healthcare as well as gems and jewellery, which we think can propel the growth of express logistics industry in India.

The Indian pharma industry contributes to about 8 percent of the total output of Pharma products in the world. With Indian pharmaceutical exports poised to grow at 30-35 percent in 2011-2012, we see this industry growing to being in the top 10 in terms of foreign sales in the next couple of years. The sector’s need for specialised services such as packaging solutions and temperature-controlled ground and air transport facilities will offer the express industry tremendous opportunities in the coming year. The rapid evolution in India’s e-commerce habits has resulted in a sustained growth of our business from the industry and the projected industry growth will offer opportunities for growth that FedEx is well positioned to leverage. We anticipate additional growth for this specific sector coming from tier two and tier three cities in India which will, over a period of time, bring equity in growth between these tier two and three cities and the metros. At FedEx, our focus will be to ensure that our customers continue to get the superior experience and the value they have come to expect from us.

Things will fall in place Anil Khanna, MD, Blue Dart

2011 has been a mixed year. India’s GDP grew by 7.7 percent in Q1 of 2011-12 compared to 8.8 percent in the corresponding quarter a year ago. It has slowed down from 7.8 percent recorded

in the previous quarter. This is largely due to the steep fall in the growth of the construction sector which fell to 1.2 percent after having grown by 8.1 percent in 2010-11. Then there were other factors that impacted the economy like the world oil prices, political unrest in the Middle East and North Africa, tsunami in Japan resulting in a nuclear crisis and the impending slowdown in Europe and the US. The IMF (International Monetary Fund) has said Europe’s worsening economy and financial market turmoil meant it will revise downwards its predictions of the global economic growth contained in its World Economic Outlook report published three months ago.

Early this month, the UN also cut its world growth forecast to 2.6 percent in 2012 from 2.8 percent in 2011 and 4 percent in 2010, warning the global economy is “teetering on the brink of a major downturn.”

India seemed to be poised to attain robust economic growth.

However the mood of the country today is very different due to uncertainties created by persistent double digit inflations, the global upheavals and apparent lack of action by the government.

The growth forecast is being constantly revised due to various domestic and global challenges.

Like any other industry, the express logistics industry too has had its shares of ups and downs – buoyant at one time, uncertain at other times.

On Foreign Direct Investment (FDI) in retail, the new year holds a lot of trepidation for the logistics industry as on one hand the government announced its decision to permit up to 51 percent FDI while on the other hand; it was immediately put on hold due to stiff opposition. On Goods & Service Tax (GST), we hope to see some accelerated progress in this long pending initiative which has been an open issue all of 2011.

Implementation of the proposed GST regime may see a shift of trend in the movement of goods. Introduction of GST will make it economically viable to simplify distribution network and result in economies of large scale operations and process optimization. As per the draft 115th Constitutional Amendment Bill, petroleum products would be kept outside GST. As a result

} The mood of the country today is very different due to uncertainties created by persistent double digit inflations, the global upheavals and apparent lack of action by the government. The growth forecast is being constantly revised due to various domestic and global challenges.

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Logistics Times

India’s Most Valued Logistics Magazine

the current tax credits on ATF will no longer be available. Input credits especially on ATF should continue. All present taxes and levies on goods and services including octroi, entry taxes, electricity duty, etc. should be merged into GST. If octroi is to continue and kept out of GST, then a more transparent and user friendly administration should be adopted by the local bodies.

There is a need to engage with various committees working on GST. Currently we have no active industry representation.

Government’s efforts at improving the infrastructure both for air and ground will give a new fillip to the industry and help serve our customers better. Road construction activity is expected to accelerate over the next two financial years. A cumulative length of 7,144 km (19.6km. per day) of roads and highways is expected to be built in 2013-14. More than half of this length is likely to be built by the National Highways authority of India (NHAI).

This is expected to follow an estimated addition of 5,571km in 2011-12 and 6,474 km in 2012-13.

As per CMIE’s CapEx databse, 57 projects pertaining to the transport logistics services sector are scheduled to get completed in 2011-14. The total investment outlay for these projects is worth Rs. 7,090 crore. This reflects a sharp rise in investment as compared to the projects worth Rs. 4,076 crore completed in the preceding three-year period ending 31 March 2011. This rise is attributed to the spillover of projects from past years due to delays.

In the December 2011 quarter, sales of transport logistics service industry are expected to grow by a healthy 7 percent.

India’s foreign trade has been growing at a CAGR of 19.1 percent over the past five years. In 2011-12, it is expected to grow by more than 20 percent. This is likely to result in high cargo volumes and higher demand for logistics services in 201112. There was a glitch in reporting export numbers by over $9 billion due to software upgrade and punching errors, which prompted data revision for eight months. The admission of the mistake overshadowed the other bad news of exports growing by only 4.2 percent to $22.3 billion in November. With imports growing at 29 percent to $35.9 billion, there was no moderation in the trade deficit, which was estimated at $13.6bn.

Government of India has planned for phase-wise airport development and creating world-class airport infrastructure in some major places. This is likely to boost airline and cargo sectors. Many airlines are planning to create full-fledged cargo operations and it is expected that cargo movement from India will touch new heights due to increased economic activity in future. The Indian air cargo market in terms of volume is

expected to be 1.82 million tonnes of international cargo traffic and 0.86 million tonnes of domestic cargo traffic by 2011-12.

I am optimistic that things will fall in place as 2012 progresses.

As the leader in the express and logistics industry and the acknowledged trade facilitator in Blue Dart Country, it is important that Blue Dart works with the industry to consolidate its collective strength, maximise resources and continue to provide optimal service to customers.

Promising prospects for 3PL Vineet Agarwal, Joint MD, TCI

The logistics industry in India is transforming from a conventional transportation concept and is now being perceived as a better way of managing the supply chain and a strategic tool. With globalization, companies have started focusing more on their core manufacturing processes, outsourcing the logistics requirements to logistics service providers which are definitely taking the sector to the strong growth curve. The future of 3PL services in India is very promising.

The sector has witnessed substantial growth over the last year. The growth can be attributed to many factors like developing infrastructures and booming Indian economy which has given ample opportunities to sectors like automobile, retail, pharmaceuticals etc to flourish. These sectors have driven the growth of the supply chain business in the last year.

The sector has also seen increased productivity through growing investments in GPS tracking, radio frequency identification, online analytics and new supply chain tools over the past few years. As a result of the boom in commodities and retailing, India’s warehousing sector is growing at an annual rate of 35-40 per cent, and is expected to become a $50-billion industry in the near future.

Several factors will favorably impact the growth of the logistics industry in 2012 like the country’s changing tax structure, growth across major industry segments such as automobile, pharmaceutical, fast-moving consumer goods (FMCG) and the emergence of organized retail amongst others.

}Several factors will favorably impact the growth of the logistics industry in 2012 like the country’s changing tax structure, growth across major industry segments such as automobile, pharmaceutical, fast-moving consumer goods (FMCG) and the emergence of organized retail amongst others.

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Factors such as globalisation of markets, international economic integration, removal of barriers to business and trade businesses across the world has changed the scenario of the logistics industry to a great extent. The mega trend for the upcoming year will be the implementation of the Goods and Service Tax. GST will enable the creation of the common market thus permitting free and unimpeded movement of goods and services across the country.

Also, the need of the hour is the right integration of IT enabled technology to streamline the business processes. With the adoption of the latest technology logistics service providers are no longer restricted to the geographical boundaries and they can expand their business to any location across the globe and maintain visibility and control.

The growth of logistics industry largely depends on infrastructure availability. Government spending and involvement of private players will catalyze the growth of the industry. The continued investment in infrastructure projects through PPP will also help in the sustained development.

Worrying signals Pirojshaw Sarkari, CEO, Mahindra Logistics

The past year has been one of robust growth for the logistics industry as a whole. Our estimate is that the industry grew at between 10 percent and 12 percent this past year, while Mahindra Logistics has significantly outperformed the industry average, growing by 22 percent. The demand for both domestic, as well as international logistics solutions has been strong. The major industries – automotive, consumer goods, telecom, retail and engineering goods (amongst others) have all performed rather well and made a significant recovery.

However, there are some worrying signs for next year. We have already seen a fairly significant contraction in manufacturing growth rates (2.7 percent yoy, in H2 F’12), coupled with a drop in Gross Fixed Investments growth and a forecast slowing of consumer demand. These factors will naturally have a tempering effect on the overall growth of the logistics industry as well.

We estimate an overall industry growth rate of 8 percent to 8.5 percent next year, while here at Mahindra Logistics we are gearing up to grow at about 20 percent. This growth will be driven by a focused diversification, leveraging the size and scale of our automotive logistics business into other important industry segments, coupled with an enhanced solutions portfolio.

The key factors on which success will hinge – in the next year and those to follow – will be the ability to successfully provide solutions across the supply chain, with the in-built flexibility to customize to the implicit need of each individual service contract. Managing the service / cost equation for our clients and partners will be key. Further, robustness of processes and the right integration of information technology will define success. Here at Mahindra Logistics, we have invested over one million USD in the Mahindra Integrated Logistics Execution System (MILES), and focus on continuous improvement to our process controls and systems to achieve world class service standards.

The next year will also hopefully see the implementation of the greatest change agent this industry has experienced in a long while – GST. Whether it will bring with it the paradigm shift in warehousing and transportation systems is still to be seen. Once again flexibility of the possible solutions will be key. For example, here at Mahindra Logistics we have recognized that warehousing needs even within a single organization can be vastly different, hence our solutions are equally customized – from built to suite, to multi user, to specialized warehouses. All combined with the right level of automation and technology.

Last but not least, the year ahead may bring trying times, but large logistics service providers like Mahindra Logistics, who have the ability to continue investing and growing through diversification of their customer base and the types of solutions they provide, will doubtlessly continue to outperform the industry and economy.

No good news R K Saboo, Chairman, Express Industry Council of India

Second half of 2011 was largely filled with negative economic trends and no good news came from any corner. IIP data turned negative and rupee historical decline only meant rubbing salt to the wound. Problems are simply too many with no solutions in sight. Parliament is unable to function for various reasons which reflects a very sorry state of affair. We are entering into a

} There are some worrying signs for next year. We have already seen a fairly significant contraction in manufacturing growth rates (2.7 percent yoy, in H2 F’12), coupled with a drop in Gross Fixed Investments growth and a forecast slowing of consumer demand.

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new year with too many negative trends and I hope, this must force the Government think tank to sit down, take a stock of situation, indulge in some introspection and take corrective measure before it becomes too late for them to react.

But as we know that there is always sunlight after a dark night, similarly the hopes for a better tomorrow have not completely diminished. I am somewhat confident that FDI in retail will see the light of the day. Similarly GST is again too important for Indian economy to grow further and this may finally become a reality. From Express Industry perspective also, GST will ease the state border clearances, which otherwise is a nightmarish experience.

New Postal Bill is very important not only for us but for overall economy of India. Any retrograde step will not only kill this industry but globally also it will be viewed as non-progressive in nature. I am hopeful that concerned Ministry will ensure the availability of full draft copy to its stake holders before it is sent for cabinet approval. We cannot ignore larger picture that industry have too many players and any price multiple linking to EMS Speed Post tariff will not only kill the small and medium size players but will also be totally anti-consumer.

I hope things will fall in place soon and not only 2012 but many coming years will usher in favourable growth climate to make India what it truly deserves- THE FUTRE ECONOMIC POWER HOUSE.

off with a big bang. The euphoria of the market, the sentiments portrayed by the pundits, screamed loudly about the buoyed economy. The bullish outlook for the Indian markets swooned investors, who flocked in droves and India smiled !

But the under-lying currents of lethargic reforms, bungled politics and weak signals of change, soon started dampening the nation. The economic outlook of Europe and US, further tightened the noose and a wave of uncertainty soon gripped the nation. As we near the final bell ring out the year, India stands amidst a bleak out-look on its economic front, the much touted talks of FDI in retail, the GST and the development of the infrastructure projects almost stalled and slowed to a snail’s pace.

India is a market that can drive its own economic growth. Its own consumption power is enough to sustain continued growth of its GDP. 2012 will be the test of a market that has the potential to beat even that of China. Politics should be played with an eye on the overall benefit of the nation, swift reforms and measures should be brought in, and the sheer amount of wasted energy and wealth, due to the poor foundations of infrastructure and bearuacacy should be stemmed and ploughed back to add at least 2 percent points on India’s overall GDP. I see little changing for India in the year ahead, much as I would like to see the above reforms, and feel that its time, the Indian literate community of both professionals and businessmen, should boldly step out seeking change. Otherwise, sadly, I forsee an exodus of both professionals and businesses to relatively better structured and open markets outside of India.

Not just consumption Mecca

A testing year

Pawanexh Kohli, Senior VP, Arshiya International

Harry Lagad, VP (South & South East Asia), Toll Logistics

2011 was the year where circumstances worked against hope and forced many to revaluate business strategies. The global stirrup in the previous year has had an immediate and mid-term impact; evidenced by various indices having dipped.

Yet, my belief is that this actually sets a platform favourable for the emergence of India as a

Watching the TV news channel last night, I saw the year 2011 reflected in all its entirety, in the eyes of Anna Hazare. The tiredness, the defeat, the dejection and the misery of a cause, that could and should have put India firmly on the tracks of reform.

As is the case with anything of an Indian touch, 2011 started

}India is a market that can drive its own economic growth. Its own consumption power is enough to sustain continued growth of its GDP. 2012 will be the test of a market that has the potential to beat even that of China.

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manufacturing hub. Pressure on the currency coupled with fuel costs has actually contributed a strong relook at localised manufacturing vis-a-vis trade arbitrage between producers and consumers. The exposure to global sourcing opportunities will refine further to truly bring about ‘right-cost country optimisation’, quite the contrary to right-cost finished product sourcing – so expect more component and service out-sourcing for close to market fabrication or product assembling. India will not be seen as merely the new consumption mecca but also as the hubbing location of choice.

The ever improving Indian logistics infrastructure will further contribute to the emergence of India as a manufacturing hub.

The last year saw the emergence of Free Trade Zones in India and fast adaption of the concept. These free trade and warehousing zones present the perfect opportunity for businesses to realign their cost of doing business and extracting value even whilst the globe contemplates recession. Our government’s focus on developing such FTWZ has luckily witnessed a most opportune timing, given this global downturn.

Global trade by its very nature enforces global standards including those related to cargo handling; hence unitisation (palletisation and containerisation) which leads inevitably to multi-modal transportation; and multi-modality allows service integration and economy through scale. I would hazard to say that such exposure will lead to greater unitisation of domestic loads in 2012, largely driven through the logistics industry.

In the supply chain world, the year 2012 will initiate a renewed trend towards integration of services, integrated visibility and integrated value. This will be enforced due to increasing dispersal of the consumer market. The receiving consumer and the sourcing buyer have a larger and ever widening footprint, dispersed from across rural India to modern cities and from Latin America to China.

Logistics can no longer be mere movers of goods but must get into the box, understand the cargo and positively contribute to the value chain. Free trade zones and domestic distribution parks are the ready pre-cursors to this new trend and allow for an even grander scale to dispersed nature of global trade. This would be derived through partnering in the trade rather than only servicing as need fulfillers.

Integrated logistics is the strongest play today and the future. It can allow for scale which in turn fetches an associated economy; it allows for a model based on shared resources through multitenanted infrastructure across all modes and segments. So, no

single vertical but a business model that pans and controls judiciously planned enabling assets; one that stretches across the value chain and not just a cost to supply, such a total offering will strengthen the logistics sector. Such obvious need will see users realising and demanding cross functional integration, moving from segment cost to total value realisation.

Forethought in vision and speed in strategic uptake are the differentiators in the modern world. Impatience is almost a virtue, and the quick changing logistics landscape feeding hungry ambition of this almost developed nation will of course sift agendas and perceptions.

These circumstances invariably lead to innovation and new technologies. Mergers and acquisitions also become the probable follow through. Strategic alliances will initiate this trend initially. 2012 will see yet more acquisitions aimed at services integration.

Fixing policy paralysis Pranil Vadgama, President, CHEP India

“Policy Paralysis” has been the buzz word to describe the Indian economic scenario in 2011. We had various issue on corruption, scams and agitations-debated, dissected and marketed for TRP by various discussion forums across newsrooms, social media and all forms of interactive groups. What is the outcome of all these wasted hours of precious resources? More Debates!

So let us not debate on what has already been debated and look at what need to happen and when. The focus of the government in 2012 should be brought right back to the core issues of infrastructure development and stimulating manufacturing activities. This will be the defining theme to sustain the growth momentum in the economy. The logistic industry is so very dependent on infrastructure that the various forums, bodies and industry confederations must work towards pushing the government in infusing momentum towards this goal.

One more path breaking decision that would have massive implications for the logistics industry was the 51percent FDI into retail. This decision taken in 2011 was ill timed and lacked conviction. There was no preparation in building consensus,

}In the supply chain world, the year 2012 will initiate a renewed trend towards integration of services, integrated visibility and integrated value. This will be enforced due to increasing dispersal of the consumer market.

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educating on the benefits to all those impacted by the decision.

No plans were put forth to accommodate those negatively impacted. In summation it was a ‘rush job’ with dubious intentions that was designed to fail. The big question now is: will it happen? We are sure it has to, the unknown factor is when and in what form. The answer will be known in 2012.

Shifting our lenses from national to international events, the dominant factor in 2011 was the EU crisis which has a major bearing on our manufacturing and export oriented organisations.

Both these verticals impact the logistic industry and the pain will continue in 2012 as there is no ‘magic’ quick fix for this problem.

The logistic industry will have to get lean, optimise resources, cut flab, build synergies across their supply chains and remain focussed on their core activities. We may also witness a dip in FDI in warehousing as most MNC logistics players will utilise their cash to protect their businesses back home and in markets under duress.

Last but not the least is the depreciating Rupee which will impact imports of goods both capital and consumable. Inward logistics, organisations dependent on imports for manufacture will be impacted. Many businesses with plans to expand and importing machinery and other goods will have to rework their finances.

To make a new year wish, we would like to see a cure for “Policy paralysis” and look forward to an aggressive and positive Budget 2012. I still remain positive and hopeful.

Extremely Challenging Spell Vineet Kanaujia, GM, (Marketing), Safexpress

I would refrain from using plain adjectives like good or bad for 2011. I would rather use the term ‘extremely challenging’ to underline the developments in the just concluded year. In fact, for nimble players like us it has been a reasonable year which was not completely shorn of positives as is broadly believed.

It’s true that there were a host of irritants last year. From the perspective of transportation arms of logistics companies, the frequent changes in fuel prices (mostly in the northern belt) was a big issue in terms of

sustaining a balance in price equation for our customers. This certainly kept us on toes all through the year, because this is a delicate point in business deals. But even we can restrain ourselves from effecting a price increase to a certain limit. The serious decline in manufacturing especially in 3rd quarter of the present fiscal posed another serious hurdle.

But as I mentioned before, nimble players like us braved the business heat of 2011 quite reasonably through constant communication with our clients –in our case, it means topnotch entities of India Inc. In fact, I would go to the extent of saying that 2011 witnessed further consolidation in the industry – not in the sense of actual mergers and acquisitions but in terms of laying ground work for future. Some of us who are committed to improve the logistics infrastructure in the country did not lose the sight of this imperative. Safexpress launched two state-of-the-art logistics parks in Agra and Indore which is a case in the point. Similarly, there were some path breaking initiatives in the domain of bringing green supply chain practices.

My outlook for 2012 is largely positive. It’s difficult to say that GST would finally be set afoot during the course of the year but at least awareness about it would go up. I also strongly believe that 3PL focus of leading corporates would get augmented this year resulting in advent of 3PL finally in the country – something which we have been talking about for long and which has become a must for India’s logistics sphere. There could be more value-added offerings and consolidation of businesses seems to be inevitable.

I also expect IT empowerment exercise of companies reaching to the next level and there would be more concrete efforts from industry bodies to make that much-needed difference in the area of skill development.

E-commerce to evolve further Samson Samuel, COO & CIO, Future Supply Chain Solutions Ltd.

As year 2011 rolled by and the analysts were looking for positives, most reports suggested that year 2011 belonged to the start of India’s e-commerce story, both in terms of investments the sector received and the adoption of the e-commerce channel by customers.

The year 2012 will be about further fueling this growth through developing better e-commerce platform capabilities

} It’s true that there were a host of irritants last year. From the perspective of transportation arms of logistics companies, the frequent changes in fuel prices (mostly in the northern belt) was a big issue in terms of sustaining a balance in price equation for our customers.

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to meet and exceed customer expectations. A best in class e-commerce platform needs to be designed around customer usability perspective both around the customer shopping interface and the back end fulfillment interaction.

With the expected growth in e-commerce business the back end will need the ability to process huge amounts of orders from the distribution center and to reach it to the customer in time as per the customer’s convenience. For this to happen the industry will need technology enabled e-commerce warehouses and last mile delivery capabilities that will ensure that the orders get picked/ packed and shipped/delivered to customers in time.

Since the direct customer interaction of the company happens with the person delivering the consignment, this becomes a critical link in the chain that could make or break the e-commerce companies.

For this process to work well, companies will need to invest in building customer service capabilities at the back end- the person who confirms the appointment or gives the bad news of a missed shipment or the person who actually delivers it to the customer, all of them will need customer service orientation of a high order.

The capability to deliver to all pin codes in this country in a reliable and consistent manner will take capability building and investments of a very high order, to start with companies can focus on key cities and demographics.

It is important to create a sticky value proposition for the customer using the e-commerce channel vis a vis the brick and mortar/touch and feel shopping.

Technology can play a big role in enabling the back end processes. Companies will have to make the tough choice of building capabilities as the business grows versus building capabilities in anticipation of a higher growth so that the customer interactions are consistent and reliable from day one.

This will further the brand and stickiness for the company and will differentiate from the competition.

Overall it is exciting times for the e-commerce business and the ecommerce supply chain industry in India, year 2012 could

decide which companies will stay the longer course.

Serious decline in textile exports Carsten Hernig, Regional Director South Asia and Middle East,

Lufthansa Cargo AG After a very strong demand for air freight in 2010, the year 2011 has been year of some diverse developments. Geographically some Asian export markets such as Hong Kong and China have shown decline while other parts of the world have shown a continuous strong demand, such as Europe - especially Germanyor South America. In terms of industries, the textile air exports ex India have seen decline while other sectors have continued their growth.

In the last quarter of 2011 the total tonnage handled in Indian international airports has shown a decline in the year-to-year comparison - mainly driven by a decline in textile exports.

What will 2012 bring? The issues of the global economy are well known and they have accompanied us for quite a while. At one point of time, these issues will be at least to a certain extend resolved - the problem is that nobody is able to tell when.

There are certainly some positive developments which one should not ignore when looking into possible developments in 2012. For example, German retailers have just reported the best pre-christmas sales figures ever, which means that there is a certain positive consumer mood.

Apart from economic developments there are some issues in the context of the Indian air freight industry, which do hopefully move forward in 2012.

Among others, these issues are- implementation of CASS and e-freight, facilitation of build-up-unit logistics on land side and the upgrading of cargo terminals and processes at the airports.

Globally the aviation industry will have to maneuver within challenging parameters: fuel costs might increase further from an already high level, the increase of taxes and implementation of CO2-emission certificates and additional security regulations in order to ensure secure and safe air transportation.

}The logistic industry will have to get lean, optimise resources, cut flab, build synergies across their supply chains and remain focussed on their core activities. We may also witness a dip in FDI in warehousing as most MNC logistics players will utilise their cash to protect their businesses back home and in markets under duress.

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LOGISTICS TIMES January 2012

Yield under pressure

Stormy spell

Keki Patel, Cargo Manager ( India & Nepal), Emirates SkyCargo

Percy Averi, Country Manager, Aramex

We started the year 2011 on a very positive note and very high expectations with the air cargo industry having risen from the global recession and showing strong signs of an upswing.

However, due to various factors the Indian air freight industry experienced a major set-back in the second half of the year and even as we are on the threshold of 2011, the industry still faces stiff challenges.

The air-cargo industry had gone through a very slow phase due to various challenges like devaluation of the Indian rupee, rising prices of Aviation Turbine Fuel (ATF) and a huge decline in the US procurement of Indian readymade garments (India’s largest export) which resulted in lower yields and rising costs.

The Eurozone crisis further complicated a worsening situation by having a negative impact on air exports to European countries from India. There was an addition of capacity in a market which was already facing a problem of excess capacity and this put immense pressure on the yields and viability of the business in the industry.

As we are moving into the new year 2012, we very strongly hope that following the Chinese new year in February, we would experience some consolidation in the industry. We hope for a decline in the ATF prices in the next year giving some relief to the players operating in the Indian air cargo market as it would result in a major reduction in their operating costs. We also hope that the Indian Rupee rises in value to the mid-2011 levels and stabilizes. We can also expect a rise in export demand for Indian readymade garments by mid-2012 from the European and American regions which can give a much-needed boost to the industry. Also, a rise in demand for exports of engineering goods, pharmaceuticals, automotive segment, telecom and perishables can provide some momentum to the industry which at this point in time, is looking very weak.

We are guardedly optimistic about next year and the changes that it might bring for the industry. Our expectation is that, many of these changes will be favorable for consolidation and the overall growth of the entire Indian air cargo industry.

Three years since the collapse of Lehman Brothers and after an intervening period of recovery, the storm is again piling up for the world economy. Economic turnaround in the OECD area is slowing down. The unmanageable sovereign debt of a number of countries is threatening a fresh collapse in financial markets. Both expected and unexpected trends are now being seen globally. Analyst have downgraded their growth estimates for China and India during both 2011 and 2012.

2011 for India has been a tough year on an economic and political front. At this moment, we are challenged with a number of economic issues, most notably being the high inflation rate, low industrial output and dwindling GDP growth, shrinking exports and foreign investment, and a falling rupee. On the political front the government hibernation on introducing fiscal and monetary reforms to drive the economy has further impacted us.

There is no doubt that 2012 is going to be tough. But I always believe that when the going gets tough, the tough gets going. I am confident that the government and industry, which showed great resilience in weathering a worse global economy a few years ago, will come out with a recovery plan in 2012.

Partnership approach emerging Lars Sorenson, CEO (South Asia), DAMCO

The year that went by was a roller coaster year for the freight forwarding and logistics industry.

In 2011 we witnessed the rising importance of India in the global trade and subsequently we have seen the entire Indian sub continent assuming greater foothold in the complex global supply chain network. In the first half of the year, exports saw a

} Technology can play a big role in enabling the back end processes. Companies will have to make the tough choice of building capabilities as the business grows versus building capabilities in anticipation of a higher growth so that the customer interactions are consistent and reliable from day one.

LOGISTICS TIMES January 2012

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solid growth buoyed by the external demand of engineering goods, textiles products, jewellery and petroleum products.

Apart from the export related growth, 2011 also saw the continued momentum of imports which were largely driven by the domestic demand. The rising incomes, gradual urbanisation of tier l and ll towns, infrastructure improvements and presence of global brands in the Indian retail market have played a vital role in propelling import related growth.

We believe that coming year will be different from the year that went by speaking strictly from a macro-economic point of view. It is yet to become clear whether the current difficulties in the global economy will continue and how long it will take before we can expect to see some improvements. We believe that the situation in Europe and the US is quite challenging and we cannot underestimate the impact that it potentially will have on trade particularly for exports out of India. The manufacturing activity has slowed down across the Euro zone and this is impacting global trade. However, we believe that governments across the globe are collaborating with each other to normalize the economies which have been hit the hardest. We sincerely hope that this happens early enough in 2012 leading to the normalisation of the entire trade related activity between nations.

Speaking from an Indian context, although exports related growth has slowed down in the past recent months of 2011, imports primarily driven by domestic demand continue to offer opportunities for logistics players like Damco. Despite a difficult environment this year Damco has continued to grow its volume numbers in key products. As compared to last year we will end up growing our Ocean volumes by 63 percent and Air volumes by 41 percent this year. The growth is coming from both our current customers with whom we enjoy long-term relationships and from acquiring new customers. It is always important for a partner like Damco to show improvements related to costs and lead times in a difficult market and with our global network, we have managed to continue to improve on key elements. We also believe that our market position has been strengthened over the year and that has lead to a significant increase in new customer relationships which we highly appreciate.

Despite the current challenging market we remain very positive about our ability to deliver on our growth strategy in the years to come and grow faster than the market. The recent depreciation of Rupee will lead to increased import related costs and this is where logistics players like DAMCO can make

a significant contribution in reducing the landed cost of goods for importers through optimized transport solutions.

We have also witnessed some changing trends in the logistics industry in India and we see a gradual shift taking place in the way how logistics service providers and customers conduct business together. The transaction based relationship is giving way to a more partnership based approach which is increasingly strategic in nature. This sort of an arrangement allows logistics players like Damco to work very closely with the customers in optimizing their entire supply chain by providing a host of services such as route optimization, network planning, state of the art warehousing and distribution systems, visibility platforms, EDI and electronic uploads and sharing best practices from our global network and partnerships. So, what we see is that supply chain management function in organisations is increasingly assuming a greater strategic role and service providers like Damco, who are in a position to invest and meet these demanding requirements, will continue to work with our customers to improve and optimize on all levels. We have high expectations from the Indian market for both short and long term and we will continue to make necessary investments to meet our customers’ requirements.

Additionally with the government’s focus to prop up the entire supporting infrastructure this will provide the much needed boost to bringing supply chain efficiencies and drive down the costs by significant percentage points. The smoothened last mile connectivity so achieved will help in faster and cost efficient delivery of goods at destination. As we see the logistics industry in India transiting to the next level of growth, regulatory policies need to evolve well ahead of the introduction. With a potential to additionally contribute over one percent to India’s GDP, the proposed GST is eagerly being looked forward to. The recent government policy move to increase FDI in retail promises to be a game changer and will hopefully bring with itself many reforms which should benefit end customers with logistics service providers playing an important role in streamlining the supply chain.

The great enabler Sanjay Agarwal, CMD, Dev Bhoomi Cold Chain

Looking back, it seems the only thing that kept us from achieving our full potential and setting scorching speeds of growth was deficiencies that we have still to make-up in Government. And

} In the last quarter of 2011 the total tonnage handled in Indian international airports has shown a decline in the year-to-year comparison - mainly driven by a decline in textile exports.

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LOGISTICS TIMES January 2012

I say this when there is a positive sea-change in Government already; and we are far better-off than we were a few years ago.

But time and circumstances have called India to step on world centre-stage, and with this kind of potential we need a far greater degree of reforms. The lower rungs of Government, specially at State-level, need to get out of the ‘licence-raj’ mind-set of yore; and a mighty effort of reform is needed there. Thankfully, top-levels are generally enlightened, and that is some relief to business; but its not good enough !

Looking forward, I think the only thing we have to be afraid of is we limiting ourselves. I hope, at different levels of government machinery the socialist legacy is put to rest and instead of looking at business and industry with suspicion, come forward to ask how they can help. Industry departments and indeed government should be transformed into The Great Enabler, rather than the Great Obstacle. I expect India to reclaim its rightful position as the powerhouse economy of the world. I expect Government to work hard at pulling their act together, revamping the administrative systems to encourage the highest merit, bring reforms in labour laws, abolish APMC Act, etc. and make India a great place to invest in. If our elected representatives don’t do this now, they will be failing the country, and history will not forgive them. Time and circumstances have placed us at the cusp of greatness, and we have to seize the moment in history. Our biggest competitor, China is bedevilled by its political system; we are not. We are a great democracy, duty-bound to self-improvement. I expect a glorious future !

When tables turned Kalpesh Pathak, Assistant VP (Supply Chain), Fiat India

The first half of the year 2011 was buoyant for the automotive industry. Passenger car industry grew at the rate of 15.8 percent for the period of first six months (Jan-June-2011). The later half of the year saw growth trajectory going downwards. As of Nov2011, the passenger car industry growth is standing at meager 5 percent. This is quite a low growth looking at the potential of Indian market in terms of sales of passenger cars (the current penetration of passenger cars in India is meager 10-12 per

1000 population as against few hundred in other emerging/ developed economies).

So what has turned the tables from over 30 percent growth in 2010 to meager 5 percent (YTD Nov-2011) for passenger cars industry?

It started with negative sentiments of upward petrol price revision coupled with high inflation which resulted into negative sentiments due to liquidity issues and high interest rates forcing people to postpone their buying decision. Euro zone crisis added additional fuel to the fire impacting passenger cars industry growth on account of negative global economic sentiments. God also has been cruel in 2011 with Tsunami in Japan and flood crisis in Thailand because of which industry had to suffer a lot. Also labor issues and unrest at few OEMs impacted the growth of the industry.

To sum up these major reasons not only impacted the growth but also the profitability of the industry. Industry was forced to offer huge discounts to liquidate the stocks (especially petrol cars) which were produced with inflated material cost.

The low economic sentiments in later half of 2011 can be attributed also to poor political situation of ruling federal Government. In the last few months of 2011, it appeared that Government machinery is completely paralyzed and no decision on policy matters are getting through. This delay is impacting lot of decisions from Government side which can help control the inflation and further infrastructure developments.

Buoyant first quarter of 2011 (almost carry forward of 30 percent growth trajectory seen in 2010) resulted into lot of bottlenecks and pressures on many component suppliers (due to capacity mis-alignment with OEM demands and other bottlenecks like power/labor availability) and logistics service providers. Component and LSP industry had to work 24*7 to feed OEM lines regularly on airfreight mode. The growth was supported with these measures but it certainly impacted the bottom lines.

To summarize in 2011, the companies were forced not only with the burden of higher material cost but also increased logistics and other over head costs. An overall turbulent year for the industry turning tables from a descent 15 percent + growth in first half to meager 5 percent by end of Nov-2011. Not only

}The air-cargo industry had gone through a very slow phase due to various challenges like devaluation of the Indian rupee, rising prices of Aviation Turbine Fuel (ATF) and a huge decline in the US procurement of Indian readymade garments (India’s largest export) which resulted in lower yields and rising costs.

}

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market growth was impacted but profitability also.

Sudden negativity in economic sentiments and downward growth trajectory from second half of 2011, forced few companies to stall their investment plans in adding capacities (especially component industry and logistics service providers).

This delay will certainly impact the industry once the market gets back to normal growth mode.

So what is in offing for 2012..!!!

Personally I feel the first three months of 2012 will not be much different from later half of 2011 from passenger car industry standpoint, mainly due to stalemate in Government machinery on major policy decisions and political compulsion of Government to take harsh economic decisions to contain the inflation and put back the economy on growth track (don’t expect the major decisions to go through immediately in light of most crucial UP state legislative election scheduled in Feb-2012).

Outcome of UP state legislative election will have far reaching implications on incumbent federal Government in terms of their economic policies and overall functioning. Budget 2012 is also going to be very crucial for passenger cars industry. There is already rumors going around that there could be additional tax burden on diesel powered cars. One section in government thinks that richer part of the society is taking undue advantage of subsidized diesel..!! on the contrary recently published data from internal planning commission note estimates diesel consumption in personal cars only to the tune of 0.6 percent of the total diesel consumption in our country.

Outcome of crucial assembly elections in early part of 2012 and budget 2012 will decide the direction for passenger car industry for 2012. With current sentiments, it is difficult to think about a buoyant growth for 2012 for passenger cars.

Nevertheless whichever way policy decisions will be governed, one thing is very sure that logistics industry will have to work very hard in 2012 to support the industry not in terms of quality and timely delivery of goods and services but also in generating efficiencies to put a check on cost plus pricing of services to support industry maintain healthy competitiveness which will drive the growth.

Gloom, not doom Sanjiv Kathuria, CEO & Chief Consultant, ISIS Consulting

2011 started on a very promising note and expectations were ripe for a great year for the economy and business. But alas,

that was not to be. The GDP growth has dipped, inflation has been very high and that forced RBI to increase the interest rates and that in turn put brakes on investments and resulted in IIP index going into negative... we seem to be in a vortex. Some of these issues as we know have been imported from what is happening in the developed economies- Europe in particular. But there is a large part of the blame which would lie with what we as a country have done or not done on matters which were in our control.

From the specific perspective of logistics and supply chain, the key expectations of the industry were not fulfilled viz. there was no GST launch and the road infrastructure development perceptibly slowed down. Add to this the increase in diesel and ATF prices, which clearly added to the pressure on costs and bottom line. Not passing of the retail FDI bill was another blow to the overall sentiment. All in all, first half of the year saw a decent growth for LSPs but in the second half of the year there was a clear loss of momentum.

Going into 2012, it is this loss of momentum which is the biggest cause for worry. With key elections in the first quarter of the year, the government is unlikely to take any decisions which may create controversy in the short term even if that is the right thing to do for the economy. The way things appear as of now, GST in unlikely to come into force in the next fiscal and given the rupee-dollar equation the fuel prices are also likely to rise further post the elections. The fate of the reforms like the retail FDI bill will depend on what happens in the elections. Even if the interest rates come down and the investment cycle picks-up, the impact of that would not be felt till the second half of the year.

While all this foretells gloom (not doom though) for the domestic LSPs, the international LSPs should be in for a better time. With the rupee already depreciated by 15percent in the last four months the exporters are breathing easy. Pundits suggest that the rupee is likely to go down further by another 8-10 percent and that could only be music to the exporters ears.

This should certainly spur the key exports of textile, auto and engineering goods and ensure a more than healthy growth rate for the international LSPs. For the domestic LSPs, one segment

} 2011 for India has been a tough year on an economic and political front. At this moment, we are challenged with a number of economic issues, most notably being the high inflation rate, low industrial output and dwindling GDP growth, shrinking exports and foreign investment, and a falling rupee.

}

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which could be a dark horse is the e-tailing business which has been seeing an exponential growth and needs logistics services as an integral part of its business model.

On the whole, 2012 will be a year in which few new investments would be made and companies will try to sweat their current assets. Overall, it is likely to be a challenging year for the logistics industry.

Turbulent 2011, uncertain 2012

steep price increase in petrol has badly impacted the logistics cost. Most of the companies have already set up their targets for transportation cost reduction and this is now big challenge for Supply Chain professionals in order to meet their targets due to big competition and expectations from company management.

Supply chain has become a major focal point for all the companies and they have already started focusing on various metrics like delivery performance, inventory turns, days of supply, working capital, etc. Somehow these are mostly related to logistics and supply chain strategies.

Abid Hussain, Head (Supply Chain), Honeywell

One more year gone, but left us with lots of hopes and challenges for next year. 2011 was of course an exigent year for everyone with lots of ups and downs. From the uprisings in Middle East to Japan Tsunami and from flood havoc in Thailand to Anna’s fight for corruption, it has been a turbulent year. Many companies have suffered heavy losses due to chaotic situation created by natural calamities. Supply Chain and Logistics industries had to face big challenge in terms of meeting customers’ on time delivery commitments.

Once again there is a question mark with everyone, when we turn towards uncertain 2012. The western countries slow down trend and indecisive economic reforms are still not over. We are still lacking the competitive edge in terms of infrastructure and the policy reforms. Government needs to take keen steps in order to implement new policies and remove the bottlenecks in reforming current policies.

There seems to be big lacuna in the implementation of GST in India. There is a big threat to major industries as Government is still doubtful of the impact of GST implementation. Many manufacturing and trading companies have opened distribution centers in various states based on the current taxation system in India, but after the implementation of GST, they might need to change their complete supply chain strategies.

Economic growth and employment has always remained a big challenge in this country. Government needs to work towards better economic environment and increase employement opportunities everywhere. The day to day price increase in daily necessary commodities is big threat to control inflation. The

Where is the action?

Amrit Pandurangi, Senior Director, Deloitte Touche Tohmatsu India

2011, the year gone by was a big disappointment more than a downturn. 7 percent growth (or whatever growth number the government puts out finally) can be no reason for complaint in today’s world where people are happy if it is a not a negative number. Disappointment because everyone- the Government, the opposition, the bureaucrats, the industry, the activists and the people at large seem to be wanting no real action- a lot of talk but no one wants to come forward and commit to any action. Of course, everyone has strong and very rational reasons for their inaction, but then sum of many zeroes is still a zero.

Support and infrastructure industries therefore suffered heavily in 2011- caution in risk taking which is so central to an enterprise, mistrust in Governments and conservative financiers all added up to a slowdown of investments and thus growth, both in the short term and medium terms. The mysterious foreigners with pots of money, of course, didn’t come or were not allowed to. All in all a total wash out.

If all the above actors just continue to play their non-action role, 2012 will be another wash out year. With several critical elections round the corner, one can expect the policy makers to be busy. So we need to have our own version of “stimulus package” to get ourselves out of this mess. What can that be and how can we be sure that it is perceived as a stimulus, if it is not just throwing a lot more money (such as on free laptops or

} The first half of the year 2011 was buoyant for the automotive industry. Passenger car industry grew at the rate of 15.8 percent for the period of first six months (Jan-June-2011). The later half of the year turned the tables with growth trajectory going downwards.

}

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on sick airlines).

My suggestion is that it is the “Industry”that should take the lead- it has the ability, the visibility, the people, the ideas, the money and I would go further to say “the need”. The theme should be “rise” just like one of the industrialists has said already.

We can’t leave it to politicians to decide the fate of our people.

One has to go back to basics in everything- products, services, consumers, and infrastructure and realize that we still are a large country of enormous latent potential and talent. This is the time to take risks and invest. Everyone knows that we are a country of savers, even today. Savings have to move towards productive assets. This is possible only if industrialist take the lead and rise.

2012 is the year when this should and can happen.

Not exactly watershed Prof. Samir K Srivastava, IIM Lucknow

Although not exactly a watershed year, 2011 witnessed a number of initiatives and hurdles on demand, supply, technological, policy and regulatory fronts, some of which will have an everlasting impact on Indian logistics and supply chain industry. These legacies and trends force us to ponder about the future ahead, particularly for the coming year 2012.

Some good signals and trends were observed during 2011.

There have been significant investments in roads, railways, ports and highways, implementation of ICT (including new and innovative applications) which have shown good results.

Warehousing sector grew rapidly. Inland Container Depot (ICD) and Container Freight Stations (CFS) were among the fastest growing segments in the Indian logistics sector. Development of cold chain and other logistics infrastructure also progressed well. On policy front, the government has been moving from a regulator’s role to a facilitator’s role. The use of public–private partnerships (PPPs) for infrastructure development has received attention. Indian railways are already constructing doubledecked dedicated freight corridor. Further, the government has permitted 15 other players (private train container operators) to run container trains. However, we still continue to suffer from

inadequate infrastructure, industry fragmentation, complex tax laws, insufficient technological aids and red-tape. The intra-state tax regime has been a significant issue for logistics operators and FDI in retail continues to be a contentious issue. Manufacturing slowdown is another area of concern.

Each country has its particular challenges and opportunities, when it comes to logistics and supply chains. Changing business environment since the past two decades has pushed businesses in India to concentrate on their core activities and offload a host of logistics functions to LSPs. Consequently, the demand for seamless integrated logistics grew in 2011 and is likely to grow as companies in textile, automotive, pharmaceutical, manufacturing, retail and FMCG sectors increasingly opt to outsource their logistics requirements to specialized LSPs. Domestic trade volumes will grow at double digit CAGR and even international trade volumes will continue to rise despite the slowdown since the last quarter. The proposed introduction of a singular Goods and Services Tax (GST) is expected to lead to a substantial increase in demand for integrated logistics solutions.

The total revenue in the Indian logistics market is expected to reach around $100 billion in 2012. During the coming decade, this market is likely to witness annual growth of 8-9 percent and reach revenue level of $190-200 billion by 2020.

The year 2012 offers opportunities to LSPs in India for developing technology solutions and infrastructure (logistic parks), as well as providing quick and cost-effective multimodal transportation. Warehousing, Cold Chain / Cold Storage, Custom Bonded Warehousing and Project Cargo continue to offer strategic growth opportunities.

Port containerization and rail based logistics seem to be other major strategic growth areas. The newly emergent field of reverse logistics opens a number of avenues for experimentations and analysis for firms and supply chains that has not received much attention.

It is capable of becoming a major route to cost optimisation with the growth of the Indian economy as the reverse logistics market in India is valued around INR 800 billion currently and is expected to grow rapidly in the future. Further, as supply chains and businesses start focusing on ‘Planet, People and Profits’ simultaneously, sustainability is likely to emerge as the new metric for the supply chains. So, 2012 may witness more integrative contributions towards intra- and inter-firm diffusion of best practices, green technology transfer and environmental performance measurement.

}From the specific perspective of logistics and supply chain, the key expectations of the industry were not fulfilled viz. there was no GST launch and the road infrastructure development perceptibly slowed down.

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Case for advanced FM Sudhir G, COO, Goods Mover

The year 2011 was a year of ups and downs in terms of IT and GPS based fleet management for Indian logistics companies.

As IT and GPS implementation is still in the very early stages in India, most companies tend to put it on the back burner as soon as there are signs of weakness in the market. Given the tail winds buffeting the market, 2012 is expected to have a weak start in this area but will definitely pick up pace as the year progresses.

GPS based fleet management is here to stay and many end customers have realized the utility of the technology. The key differentiating factor would be as to how the company choose to use this technology? Do they want to do it just because everybody is jumping into GPS bandwagon or because of client pressures? Or does the company management truly believe that it is a genuine value addition which can give them an edge over others in the market. The companies which are backed by progressive ideas will definitely flourish using GPS based Fleet Management. Most companies today look at only one factor when it comes to GPS implementation and that is COST and most of them refuse to look beyond this. Most such companies will find that after a few months of implementation they really haven’t gained much and will start loosing interest in the whole exercise and then ultimately brand the whole exercise as a failure or just a farcical technology which will not work in Indian conditions.

The truth is, like any other technology GPS based FM also requires a lot of time and experimentation before it becomes an integral part of your system. It would be naive to think, that a single box fitted into the vehicle will get rid of all the woes in FM. The company has to work with the service provider in order to arrive at a proper solution which not only suits its mode of operation; but also suits its end customers. Unfortunately most service providers in the country look at GPS based FM as just a box selling exercise where the one who bids lowest wins and the logistics companies most of the times also look at this exercise from the same view point.

There is much more to GPS based FM than a dot on a map

and the companies that have realised this are reaping bountiful benefits. Telematics is going to bring a lot more innovations which is going to change the way FM is done, companies that are ready for such innovations by investing in devices and service providers who will partner with them for the future are going to win in this year. Most of the others will either loose out on this transformation process or will realise they have to start the exercise all over again – with a better road map and better idea of the value proposition GPS based FM brings to efficient and more productive management of expensive fleet assets.

HR Issues can’t be ignored Saurabh Goel, MD, ThinkLink

I have been a part of the logistics industry for 10 years and it is a meaningful milestone to sit back and review how things have panned out- what the wins are, and where the big challenges are in 2012 and in the coming decade.

It is always good to start with the wins: The realisation of logistics being central to economic development has gained ground, this is a watershed moment for us, The food supply chain is all about reduction in wastage, cutting down of intermediaries, better handling and storage, cold chains, FDI in retail, all powered by logistics and 3PLs, The “Bijli, Sadak, Pani” refrain of all political leaders, the Sadak in this slogan drives the Logistics point home, We have seen rise of the first mega logistics firms in India, companies which could become large to support an economy of the size of India. I am thinking Arshiya, All Cargo, TCI, specialised sector leaders like Radhakrishna Foodland and Safexpress, and also the advent of PE/VC capital plus M&A activity, The sector has an immense potential to contribute to the nation outside of its direct impact, Huge employment potential – NSDC estimates this at 20 million people over 10 years, Opportunity to cut fuel usage – support environment, cut cost, drive reduction in fuel bill for the country, and this is good

} Disappointment because everyone- the government, the opposition, the bureaucrats, the industry, the activists and the people at large seem to be wanting no real action- a lot of talk but no one wants to come forward and commit to personal action.

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business as well.

So it is a good time to be in logistics. Yet there are a few big challenges that face us right in the face, and the ones I am listing are the most direct: Our ability to grow talent within our industry is abysmal, there are no structured programs and skill interventions to grow people and make them capable of managing larger operations and responsibilities, this I am sure is a theme that occupies the minds of most of the CEOs in this sector, Overall we are not able to make compelling work environments for our people. And in general employee benefit programs are way behind most other sectors, The simplest illustration of the above comes through the ubiquitous truck driver, the key component in the logistics story, no career growth, shabby work conditions, and no support programs at all, This means that the young generation that is coming to work, the demographic dividend generation of India, does not want to take up logistics as a career, so though being a large employer with exciting prospects, we are losing good talent, A key reason for this is lack of employment linked training in white collar and blue collar roles at the entry level that is supported by industry and creates efficient productive workers.

My ten year journey and ThinkLink’s 5+ years of journey has told us that this is the gap that we need to solve.

Low Investment Ramesh Krishnan, Head (Supply Chain), Sahara Q Shop

In spite of some major disappointment due to stalling of FDI in Multi Brand retail or GST still remaining a dream in pipe line for logistic industry 2011 has been a year of consolidation and a year that gave hope and expectation.

Few leading logistic player struggled during the year. Some struggled due to factor beyond logistic failure which was probably due to investment in nonrelated segments. Some could not justify acquisition and could not understand the Indian nuisances. Some had unrealistic plans which could not be put into action in 2011. Some displayed

initial promise due to their strong brand name but struggled as they could not understand external business.

However, one of the major factors was definitely lack of fund. Hence imminent infusion of fund in logistics (operation and Infra) due to fund inflow in retail sector would have greatly helped in development of this industry.

Nevertheless the silver lining is FDI has to come and hopefully would see the day light in 2012. Hopefully huge investment would get into this sector and modernization and technology would come in a big way. May be bigger multinational companies would enter India.

GST hopefully would be implemented in 2012. Lot of consolidation would happen and warehouse will go vertical more aggressively. Many major boxes have already come in 2011 and many more such modern boxes are in the pipeline in 2012. More and more RFID, put to light, sortation devises etc would become visible in Indian warehouses and it would move towards global standard.

Major players have come in fray to build private corridor and this would greatly change the import and export scene of the country. I am inclined to believe that in spite of slow down in manufacturing, Indian economy is more resilient and we would bounce back and logistics industry would only move skyward next year.

Sweet and Sour Prof. Rajeev Sharma, BIMTECH

This year has been a year of growth and development in the logistics sector pervasive in all its elements, from shipping to IT solutions- falling vessel prices and a sharp downturn in the global freight markets, industry wide adoption of warehousing management systems, automation of warehouses, development of state of art cargo movement terminals, usage of GPS-enabled fleet and transportation system, freight tracking systems, introduction of Road Freight Index(RFI), increase in the trade cargo at Indian ports by 3.1 percent, etc. These are the encouraging signs for the logistics industry which is aiming at a worth of US$ 90 million

} The year 2012 offers opportunities to LSPs in India for developing technology solutions and infrastructure (logistic parks), as well as providing quick and cost-effective multimodal transportation.

}

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by 2012 end. But it still has many factors which are leeching out blood from the industry. First and the foremost is at the road transport front- cross border delays at state and national boundaries due to huge paper work. At sea the biggest risk of Indian shipping industry is the threat of piracy and maritime insurance premiums have also increased due to the growing risks.

At air- the cargo management and clearance, slow receivable conversion cycle is also a recognized thrust of the logistics industry. With these sweet and sour facts, we are looking forward to the next level of developments in year to come- GST as the main streamlining cause and a welcome factor in the near future.

May be adoption of an approach like TIR convention to reduce cross border delays is also a suggestive fact, standardizing the logistics practices through the adoption of RFID, GPS and anticounterfeiting technology will also benefit speedy and accurate service. FDI in multi-brand retail is also a boon logistic industry will look at in future.

New food laws are progressive Sunil Nair, CEO IMPEL PRO

The year 2011 has been a year of happenings in terms of new economic initiatives in the country. In the midst of the whole ‘Lokpal’ struggle, we could still experience some glimpses of major initiatives which can help India step up on the world’s economic super power ladder.

Implementation of Food Safety Standards Act 2006 (Implemented from 5th August 2011), repealing the Prevention of Food Adulteration Act 1954 and other Food Laws/orders, is one such initiative which is not just the simplification of Food Law, but is a major step toward safe food in the country. Unlike in earlier law where the focus was more on producing safe food, the FSSA includes the complete distribution channel as well. It focuses on traceability and preservation record keeping.

In short, it is comparable with stringent laws existing in many developed countries.

The proposal to implement FDI in multi-brand retail was an indicator that it is eventually going to become a reality. Though parked at this point of time, I am sure it is not going to be in parking lot for a long time. With its implementation, I see a major change in the way country operates in retail and backward integration of the products sold in retail. I do understand the risks of allowing such FDI, but I can’t ignore the benefits that the country, and particularly the farmers, can get out of it.

I believe the year 2012 is a make or break year for India. We need to make us visible on the globe.

I wish 2012 starts with some conclusion on Lokpal, and Government diverts their time, energy and money towards initiatives which will help India prove the BRIC study and LOGISTICS TIMES January 2012

become economic superpower soon.

I wish the much talked GST gets implemented and the whole country takes necessary positions in terms of locating and relocating their business houses and units and poise for efficiency improvement.

With foreign retailers, I see the entry of major Food Distribution companies to enter India and change the game. I would love to see some technology change in logistics for food and retail.

Potential game changer Prof. Akhil Chandra, Institute of Logistics & Aviation Management

India is now more than a trillion dollar economy and inspite of recessionary trends in Europe and other countries witnessed during last year, our GDP growth rate for next few years is projected to be more than 7 percent which is still one of the highest in the world and we have to get out of present gloom and doom sentiments relying on once again on all out efforts of public private partnerships through innovation resulting into greater quality, efficiency and responsiveness to customers.

Last month national manufacturing policy was approved by the cabinet so as to produce new mega industrial zones ( NMIZ) which shall provide impetus to grow manufacturing beyond 16 percent at present and shall give a much needed boost to inbound logistics.

In Automotive sector in year 2011, around 30 multinational automobile majors have recorded their presence in India, including international luxury automobile manufacturers such as Bentley, Porsche, Ferrari, Aston Martin, and Harley Davidson and foreign logistics multinationals like GEFCO, GEODIS, Schenker, DHLetc are consolidating their presence to provide end to end multi-modal services providing both in-bound and out-bound logistics to vendors and customers based in India and abroad.

Last year, we witnessed strengthening of our infrastructure in terms of new airports, sea ports and dedicated freight corridors through public private partnership which has eliminated bottlenecks in exports and imports.

As prime minister has assured that he still is hopful in getting FDI bill in Retail passed in the parliament post March, 2012 when state elections are over, cold chain logistics and supply chain infrastructure for agriculture shall get a big boost in year 2012 with presence of Retail multinationals like Wal-Mart, Carrefour, Tesco and Metro in the country.

With growing penetration of internet in the country, for logistics service providers, there is an opportunity in E-Commerce logistics as now there are more than 10 million on line customers who make on line purchases through a click and mortar model instead of conventional brick and mortar retail.

AUTOMATIC INDUSTRIAL OVERHEAD DOORS IndiaĂŠs No.1 Entrance Automations & Loading Bay Equipment Company ,Gandhi Automations is offering Automatic industrial Overhead doors.

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These overhead doors ensure a better use of inside space as the side runners vertically move the door along the wall and parallel to the ceiling. The doors are installed above the opening, thus ensuring a better use of the transit opening.

Easy and practical to open and operate- As these doors slide vertically, stopping in the proximity of the ceiling, they blend in with the architectural features of the building. Their compact size ensures more available space both inside and outside of the premises.

The doors are also easy and practical to use, specially if the original Ditec motors are used.

More environmental control Heat insulation and soundproofing ensured by heat-insulated panels improve working conditions on the premises and ensure energy savings.

Light and aesthetically pleasing environments The panels can also be manufactured with the addition of practical portholes or full aluminium sections featuring polycarbonate or unbreakable glass panels, wire meshing or air grilles They add value to the premises and meet all requirements - the design and different solutions offered ensure the door to

be aesthetically pleasing and perfectly suited in any architectural environment from modern and traditional industrial buildings to fine commercial buildings. The doors can meet any industrial and commercial requirement and add value to the building they are installed on. These doors are built to ensure the highest ease and flexibility of use which, in turn ensures a quick, hassle free and accurate replacement of old doors.

Reliability - all products are affixed with a CE mark.

operated sliding device specially designed to be installed in series, as required in logistics centres. The shape of the vertical guides and the location of the torsion springs ensure an easy and rational installation and make the bay model a very cost-effective solution.

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Lisbon Model This is the universal door for your working environment. The door is ideal for opening and closing transit openings to take goods to your own vehicles or to your supplierĂŠs vehicles.

This door is suitable for any installation requirement and leaves all the space required inside the building. Lisbon is offered in the medium and large size configuration with insulated steel panels.

Bay Model Bay is a Lisbon door specifically designedtocloseagoodsloadingbay.

Bay is equipped with a mechanically-

shaped to house methacrylate or glass window panels.this combination gives the door a very distinctive look, which enhances the face of both commercial and industrial buildings, where Gold Alu blends in perfectly as a practical and decorative feature.

Gold Alu makes the environment light and pleasant to work in as it allows natural light to go through the large clear area.

The aluminium profiles and the methacrylate or 3+3 chamber glass window sections are highly resistant to the elements and ensure a longer life of the door.

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REPORT

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Indian Steel Sector A recent report released by noted global consultancy firm Frost & Sullivan on Indian steel sector clearly underlines some major challenges for producers in the near run. Excerpts from the report: Market Overview The Steel Sector, one of the core sectors of the Indian Economy, has been on an upswing since early 2000.

The steel production capacity in the country currently stands at 78 million tonnes. India produced 66.8 million tonnes of steel in 2009-2010. India is ranked fifth among the global steel producing countries.

With the current growth, India is expected to become the second-largest steel producer by 2015-2016. Indian crude steel production has grown from 26.9 million tonnes in 2000, to 67.1 million tonnes in 2010, registering a Compound Annual Growth Rate (CAGR) of 9.6 percent, outperforming the global steel industry which grew at 3.7 percent during this period.

The CEO’s Perspective of the Complex Business Universe Technology Impact The Indian Steel Industry has been constantly innovating and adopting new technologies to improve productivity and move up the value chain.

Some of the key technology trends in the industry are listed below: Stamp Charging and LOGISTICS TIMES January 2012

Partial Briqueting of Coal Charge (PBCC) for metallurgical coke production Usage of energy recovery coke ovens to reduce power consumption and emissions Use of non-coking coal in iron making Use of Direct Reduced Iron (DRI)/Sponge iron in steel making Adoption of Continuous Casting Increasing size/volume of blast furnaces – largest furnace is 4,013 cu.m (JSW) Reducing coke consumption in blast furnaces – from 800 kg/ MT to less than 500 kg/ MT Efforts to reduce energy consumption and emissions The Indian steel market is maturing as there has been a shift from production of basic steel commodities to value-added steel production.

Major steel companies like Tata Steel, SAIL, and POSCO have plans to start manufacturing Cold Rolled Grain Oriented (CRGO)

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steel to cater to the electrical equipment industry requirement.

Global Opportunities The economic recovery underway has presented opportunities in the form of market expansion through acquisitions.

Globally, the acquisitions and deals in metals sector have increased from 18 in Q1 of 2009, to 26 in Q1 of 2011.

Essar Group has signed an agreement for a $750-million deal for the takeover of Zimbabwe Iron and Steel Corporation (ZISCO). Essar would acquire 54 percent share in ZISCO.

This investment is being made through the Mauritius-based Essar Africa Holdings ZISCO was Africa’s second-biggest

iron and steel plant, which had turned sick due to mismanagement and had been shut down since 2008. After refurbishment, ZISCO is estimated to

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in 2011. The steel sector is strongly correlated to the GDP, and hence would continue its growth in the second half of the year.

add 1 million tonnes to Essar Steel’s production capacity Essar Steel also acquired ‘Servosteel’, a major independent steel processing centre in Europe, for $100 million, to cater to its growing European customer base Jindal Steel & Power acquired Shaheed Iron and Steel Co LLC for $464 million to expand its presence in the Middle East and North Africa China Steel Corporation (CSC), one of the largest integrated steel makers in Taiwan, together with its co-investors, will invest $178 million in a new plant to produce electrical steel in Bharuch district of Gujarat In addition to the above, Indian steel manufacturers are actively looking for firming up global coal and iron ore mining assets to feed their everincreasing steel production.

End-User Perspective The accompanied chart (1.2) illustrates the performance of a few end-user segments in recent months. Most end users did not witness growth during Q4 2010, but in Q1 2011, they had higher growth. This trend is expected to continue during the remaining year.

The automotive sector, especially the passenger vehicle segment has had robust growth from 2003 onwards. Passenger Vehicles and Sports Utility Vehicle (SUV) production in the country has reached 2.4 million in the last fiscal, clocking a growth LOGISTICS TIMES January 2012

rate of 25 percent YOY. This has given rise to higher demand for steel.

Economic Impact Though the demand and prices of steel have increased in 2011, the bottom lines of steel companies have come under pressure due to higher costs of raw materials and overall high inflation in the economy Many of the steel majors have reported lower profit in the first half of 2011 Moreover, due to high input cost and non-availability of raw materials (a blanket ban on iron ore mining in Karnataka by the Supreme Court for fear of large-scale environmental degradation via illegal mining is one of the key contributors), few major steel producers in the Southern region of the country have been either forced to shut down their operations or decrease their capacity utilization In this situation, a Monitoring Committee constituted by the Supreme Court has started evacuation for iron ore from September 14, 2011, to clear the stockpile lying at various mines in Karnataka with the expectation to ease the pressure on steel companies to some extent with the availability of raw materials. Metal Scrap Trade Corporation (MSTC) Ltd., a Central Government enterprise, undertook the e-auction through its portal The GDP growth rate is expected to be in the range of about 8 percent

Competitive Analysis The Indian steel producers have been actively involved in capacity expansion to meet the anticipated steel demand in the country. Production capacity is expected to reach 200 million tonnes by 2020.

JSW Steel has acquired 49 percent stake in Ispat for $528 million heralding the consolidation phase in the Indian steel sector JSW, with the acquisition of Ispat, is poised to become the largest crude steel producer in India overtaking SAIL and Tata Steel (India) JFE Steel, Japan, has invested about $1.2 billion in JSW Steel for 14.99 percent equity stake. This deal is one of the largest FDIs in the Indian metals and mining sector and shows the interest among global steel companies in the Indian market Arcelor Mittal recently increased its stake in Uttam Galva to 29 percent through additional investment Major steel and mining projects, such as POSCO Steel Mill, continue to face delays in form of the environmental clearances, opposition from native people for land acquisition and higher compensation

Market Future Outlook/Conclusion Strategic Outlook for 2012 The increase in public and private investments in the country in infrastructure, core, and allied industries will help in sustaining the steel sector growth in the near future. Most Indian steel producers would continue to pursue both organic and inorganic capacity expansion opportunities to cater to the anticipated demand.

However, due to the impact of the mining ban in Karnataka, the manufacturers

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in the Southern region such as Jindal Steel (JSW) have been affected due to the sudden disruption of iron ore supplies; hence, high raw material cost (though e-auction has been started, but price seems higher than the market). The effect of the e-auction system would reflect in lower profitability during Q3 and Q4 of FY 2012, which would have a significant impact on the industry volumes. Moreover, specific companies would even face challenges in their diversification plans.

Strategic Outlook for 2020 The Indian steel sector is in its golden phase as it rediscovers itself to align to India’s growth story.

Illustrated below is the per capita steel consumption growth that Frost & Sullivan expects to witness in the steel sector in the new decade. The automotive and consumer durables sectors would be the key end-user segments that would drive steel growth, as penetration rates of these items improve from its current levels.

Courtesy: Metals & Minerals Practice, Frost & Sullivan – South Asia, Middle East and North Africa

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Trucks too dazzled at Auto Expo Scores of new truck launches also added glitter to the prestigious Auto Expo Exhibition held at Delhi’s Pragati Maidan early this month. Centred around hall no. 7, most of the prominent truck manufacturers, both from India and abroad, were present at the event displaying their new or upgraded offerings. The event also saw the presence of crane manufacturers as well as some leading logistics ďŹ rms.

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TCIF awarded for creating awareness among truckers TCI Foundation, the social arm of Transport Corporation of India Ltd., bagged the first ever Mahindra Navistar Transport Excellence Award under the NGO category – ‘Accepting No Limits’, for the Project Kavach - an endevour to address the issue of HIV/AIDS among truckers.

At a glittering ceremony held in Delhi on 19th December’11, these prestigious awards were presented

by Praful Patel, Minister of Heavy Industries & Public Enterprises. Receiving the award on behalf of TCI Foundation, Dr Indra Singh, Project Director, TCIF said, “It is our constant endeavour to make life better for the truckers who are the lifeline for the sector. Project Kavach, an initiative supported by Bill & Melinda Gates Foundation aims to work for the truckers who, owing to the long absence from home coupled with tough working conditions are highly vulnerable to HIV/AIDS and sexually transmitted diseases.”

DIESL Commemorates World AIDS Day Tata group’s logistics arm DIESL (Drive India Enterprise Solutions Limited) recently flagged off a nation wide AIDS Awareness Campaign. The initiative plans to cover 10,000 truck drivers across the country. The ambitious project is driven by DIESL in partnership with reputed NGOs from respective regions including Urbo Rural Integrated Development Association (North Zone), Bhoruka Public Welfare (East Zone), Indian Network For People Living With HIV/AIDS (South Zone) and Wockhardt HIV/ AIDS Education and Research Foundation (West Zone). The entire Campaign will be conducted simultaneously over a period of three months.

LOGISTICS TIMES January 2012

RNI No. DELENG/2011/39329

Regd No.: DL(E)-20/5380/2011-13