Lt june 2012 pdf by Raj Misra

REPORT ROAD TRANSPORTATION

QUICK CHAT HARPREET SINGH

EVENT SCLG SUMMIT

LogisticsTimes www.logisticstimes.net

June 2012

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TARGET

Future Perfect

Having established an operational base with definitive differentials, Future Supply Chains has set its eyes on ambitious targets...

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All about Transportation, Distribution & Infrastructure

Volume 3: Issue No.2 * June 2012 Editor in Chief

Raj Misra rajmisra@logisticstimes.net

Editor

Ritwik Sinha

COVER STORY

ritwik@logisticstimes.net

Sub Editor Photographer Design Consultant Designer Circulation & Distribution Legal Advisor

Neha Richariya Anil Baral S. Athar Hussain Kausar Syed Kamruddin SaiďŹ Rakesh Garg

Our Bureau Mumbai Rahul Kumar rahul@logisticstimes.net Bangalore

B Shekhar

Target: Future Perfect

shekhar@logisticstimes.net N Raju Chennai

raju@logisticstimes.net Sudhir Kumar

Hyderabad

sudhir@logisticstimes.net

Editorial Advisory Board Paul Lim Founder & President, Supply Chain Asia Prof. Samir Srivastava Associate Professor, IIM-Lucknow Prof. Akhil Chandra Institute of Logistics & Aviation Management

Marketing & Sales Kalika Singh Ph: 011-22478538-39, 9891007542 Email: advt@logisticstimes.net Printer & Publisher Deepa Misra for

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

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News Briefs

Product

REPORT

Operational Efficiency of Freight Transportation by Road

40 QUICK CHAT

Harpreet Singh

44 AUTO LOGISTICS Stockyard Management by 3PLs

48 EVENTS

5th SCLG Summit

EDIT NOTE

The Big Idea

lame it on my limited exposure. But what I witnessed at Future Supply Chains’ big box (read: Distribution Center) at Bhiwandi just outside Mumbai last month was quite an experience. That was something I have heard supply chain experts unanimously and repeatedly emphasizing at all conferences - the imperative of bringing in automated warehousing units in the country which could play the role of vibrant distribution hubs rather than chugging along with rag tag dumping stockyards. Conveyor rollers, put to light machine, automatic weighing machine, hand held scanners, rolling cage for quick uploading in trucks waiting at the docks – on a cumulative basis probably everything subtly symbolized the big idea of Future Supply Chains. Personally I had been nurturing this idea of looking at FSC’s affairs from close quarters for quite sometime given their lineage even as I have come across industry insiders who believe that FSC (it has just completed five years of its journey) is yet to produce results befitting its high pedigree. Prior to the birth of this dedicated supply chain unit, Future Group had to indulge in experimentation galore while setting up half a dozen retail formats. And as I discovered while interacting with FSC top brass last month to put together the cover story for this edition, all that experience is the exclusive attribute of the supply chain unit now. It is that experience which has probably guided them to take not so unfamiliar (by global standards) but least trodden path ( in the Indian market place) which are defined by : fully automated large scale warehouses ( Anshuman Singh, the top boss of FSC calls them virtual factories) and a growing road express division to catapult their position as the end-to-end service provider in the real sense of the term. In a country where majority of warehouse operators are still loath to opt for basic WMS, FSC penchant for an advanced automation base comes as a pleasant surprise. And then the emphasis on road express division (no other company has managed to successfully create a new road express unit in last 15 years in the country) is that vital component which gives a holistic nature to their offerings. The entire thought process of FSC seems to boil down to this critical assumption – with even 5-6 percent consistent GDP growth, players across several sectors would be forced to scale up their operations and there FSC would be ready to minimize their transformational pangs thanks to its own experience base and preparedness with advanced processes. Leaf through the cover story to understand the basic grains of this company which has set its eyes on ambitious targets including becoming a billion dollar entity in next five years. Among other highlights of this edition is the recently released TCI- IIM, Calcutta joint study on freight movement which clearly underlines that not much is happening to infuse the required dose of efficiency in the road transportation sector. In the quick chat section, you would notice a senior official of TNT, India responding to the perception that the company has slipped into a quiet mode waiting for UPS- TNT deal to be finally inked.

Waiting for your feedback.

Ritwik Sinha ritwik@logisticstimes.net

LOGISTICS TIMES August 2011

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20% export growth target Amid global economic problems, Union Commerce Ministry unveiled seven-point strategy to boost exports in the current fiscal. The new package unveiled early this month includes extension of interest subsidy scheme by one year till March 2013. “We have now decided to extend the scheme (interest subvention) for another year and expand its coverage to include other labourintensive sectors namely toys, sports goods, processed agricultural products and readymade garments”, commerce minister Anand Sharma said while releasing annual supplement to the Foreign Trade Policy in the capital. The minister also exuded confidence that India would be able to sustain 20% export growth in the current fiscal. “It is our expectation that with these measures, we shall be able to sustain an annual export growth of 20% this fiscal,” he said. India’s exports grew by 21% in 2011-12 to touch $303 billion. The seven-pillars to boost exports, Sharma said, would also include efforts to increase exports from the north-east

FTP-HIGHLIGHTS

Government aiming 20% export growth in 2012-13 2% interest subsidy scheme extended till March 2013 0% duty EPCG scheme for technology upgradation extended till March 2013 Incentives for exports from north-eastern states Shipments from Delhi, Mumbai through post, courier or e-commerce to get export benefits Ahmedabad, Kolhapur and Shaharanpur new towns of Export Excellence Govt to come out with new guidelines to promote SEZs Steps announced to reduce transaction cost of exports

LOGISTICS TIMES June 2012

region and provide incentive for manufacturing of green goods. Besides, he said, there would be an “endeavour to reduce transaction cost through procedural simpliﬁcation and reduction of human interface.” According to the minister, efforts would also be made to promote technological upgradation of exports to retain a competitive edge in global markets and encourage domestic manufacturing for inputs to export industry, thus reducing dependence on imports. As regards the Special Economic Zones (SEZs), he said, “We will come out with new guidelines to make the operation of the SEZ policy more buoyant.” Besides, the minister said the government would revamp the 100% Export Oriented Unit (EOU) scheme in the next few months. Furthermore, in order to boost value-added exports and encourage technology upgradation, the zero-duty EPCG (Export Promotion Credit Guarantee) scheme would be extended by an year to 31 March 2013.

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LOGISTICS TIMES June 2012

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Air Cargo Logistics Board constituted In a signiﬁcant development, the Ministry of Civil Aviation recently announced forming an InterMinisterial Air Cargo Logistic Board headed by Secretary, Ministry of Civil Aviation. The board will lay down the policy guidelines for setting up of air cargo facilities at airports and will also set performance standards relating to the quality of service in the air cargo logistic supply chain. A press release from the ministry states that the Civil Aviation Minister Ajit Singh has set up the board with an objective to resolve inter-ministerial issues that affect the air cargo operations in the country. The board on a continuous basis, will review the general and sectoral policy regime governing air cargo logistic operations and remove the bottlenecks to efﬁciency. The Ministry of Civil Aviation had earlier constituted a working group on air cargo and service industry to set priority of issues and recommend policy initiatives on air cargo express service industry recognizing its vital role in the economic development of the nation. The Inter-Ministerial board has been constituted on the recommendation of this working group in keeping with the need to handle increased demand for air cargo transportation and ensure rapid delivery of goods. The 17-member board with representatives of the level of Joint Secretary and above from various Central Ministries and Departments will have a broad framework of functions which include: to review and monitor the functioning of Cargo Facilitation Committee that are headed by Airport Directors of AAI and other private/JV airports with a view to review the effectiveness of these bodies; to lay down policy guidelines

for setting up of Air Cargo facilities at airports, air freight stations/cargo villages including guidelines for Public Private Partnership model of development of these facilities; to act as a coordinating agency to ensure expeditious clearance of the proposals for setting up of air cargo facilities at airports, air freight stations/ cargo villages in the country subject to fulﬁllment of all statutory requirements; to lay down performance standards relating to quality of service in the air cargo logistics supply chain to be monitored by the Airports Economic Regulatory Authority (AERA) for implementation and to review the progress on development of major gateway airports as cargo hubs through facilitating transshipment. Representatives of the Ministries of Environment and Forests, Ministry of Health and Family Welfare, Ministry of Home Affairs,, Ministry of Railways, Ministry of Road Transport and Highways, Ministry of Shipping, Planning Commission, and Representatives of Department of Agriculture and Cooperation, Department of Commerce, Department of Revenue, Central Board of Excise and Customs, Container Corporation of India Ltd, Joint Secretary dealing with Airport infrastructure, Ministry of Civil Aviation, Commissioner of Security, Board of Civil Aviation Security, Airports Authority of India and Economic Advisor, Ministry of Civil Aviation as Member Secretary will comprise the 17-member Board which may co-opt representatives of any other Ministry/Department of Government of India, State Governments, Financial Institutions and professional experts and representatives of the industry as and when necessary.

20 kms/ day target to be achieved in 2013-14 The union government’s target of constructing 20 kms road on a per day basis is expected to be achieved in next two years. Speaking in the capital recently Union Minister for Road Transport & Highways Dr. C.P. Joshi maintained that the ministry is confident of achieving that critical milestone by 2013-14 as investments in road sector are very encouraging. Dr. Joshi was speaking in a function to release the “2nd Report on Operational Efficiency of Freight Transportation by Road in India” (see details in the report section). Meanwhile, during the ocassion, Dr. Joshi indulged in some plain-speaking expressing his deep concern on over-loading of vehicles. He asked the transporters to pay attention to it as it leads to increasing road accidents besides damaging the quality of roads. Dr. Joshi also informed the gathering that his Ministry is very actively working on improving the Toll Plazas on national highways to make them more fuel efficient and time saver for vehicles. He also added that going ahead, government would be focusing more on greenfield projects under PPP route to build new routes as brownfield options are narrowing.

LOGISTICS TIMES June 2012

India’s performance improves in trade logistics Progress in trade logistics performance slowed down over the last two years amid the global recession, but countries that pursued aggressive reforms continued to improve their performance, according to the World Bank’s latest survey on trade logistics. Singapore is the top performer among the 155 economies included in the Logistics Performance Indicators (LPI), which are part of the ‘Connecting to Compete 2012: Trade Logistics in the Global Economy’ report. Countries like Chile, China, India, Morocco, South Africa, Turkey, and the U.S. all improved their previous performance, according to the study, which is based on a comprehensive world survey of international freight forwarders and express carriers. The report was released last month. “Trade logistics is key to economic competitiveness, growth, and poverty reduction,” said Otaviano Canuto, World Bank Vice President for Poverty Reduction and Economic Management (PREM). “Unfortunately, the logistics gap between rich and poor countries continues and the convergence trend experienced between 2007 and 2010 has stalled as events like the global recession, and the European debt crisis shifted attention away from logistics reform.”

According to the latest LPI list, high income economies dominate the top logistics rankings, while the economies with the worst performance are least developed countries that are also often landlocked, small islands, or post-conflict states. Nevertheless, logistics performance is not simply determined by the level of per capita income, as many countries across different income groups have done better than their peers. In the upper-middle income country category, top performers include South Africa, China and Turkey. In the lower middle income category, India, Morocco and the Philippines have above average performance improvements. And among low-income countries, outperformers included Benin, Malawi and Madagascar. “Infrastructure stands out as the chief driver of progress in top performers, followed by improvements in logistics services, and customs and border management,” said Mona Haddad, Sector Manager of the World Bank’s International Trade Department. “All top performers show strong cooperation between the public and private sectors, and a comprehensive approach in the development of services, infrastructure and efficient logistics.” The survey, which for the first time included environmental indicators, also found that green logistics is quickly gaining prominence in high-income and emerging economies –a positive development since logistics and freight-related activities may account for up to 15 percent of human carbon dioxide emissions. Large logistics providers like DHL, FedEx, UPS, and TNT, all now have global initiatives to reduce their carbon footprint, shift to more efficient vehicles, make facilities more efficient, and help clients become more green-friendly

Strategic alliance with Port of Antwerp Essar Ports, one of the largest private sector port companies of India, has announced the creation of a long-term strategic alliance with Port of Antwerp International (PAI) and an investment of approx. Rs 175 crore by PAI in Essar Ports. PAI is the international investing arm of the Antwerp Port Authority, which supervises the second largest port in Europe handling 187 MMT of cargo in 2011, and a gateway to many European economies. The Antwerp Port Authority and Essar Ports will collaborate in the areas of training and consultancy services, port planning, traffic flow, quality and productivity improvement and will further build a mutually beneficial commercial relationship based on mutual business and investment preferences. Both Essar Ports and PAI will mutually assist in the growth in the volume of their businesses. On this occasion, Marc Van Peel, president of the Antwerp Port Authority commented: “Essar Ports is a highly regarded, strong and reliable partner with a lot of know-how in India. We will rely on them for the development of port activities in India, one of the strategic regions of our daughter company PAI. The port of Antwerp will share her knowledge and expertise on port development and strategy with Essar Ports. This added

value for both parties will create breeding grounds for further development of both regions.” As a part of the strategic alliance agreement signed between the two parties on 30thMay 2012, PAI has invested approx. Rs 175 crore in Global Depository Shares (GDS) of Essar Ports at a price of Rs 100 per equity share underlying the GDS. “We are extremely happy that Port of Antwerp which is Europe’s second largest port has partnered with us. This partnership will promote growth of port trafﬁc between Port of Antwerp and ports of Essar and help us in developing world class port facilities with focus on quality, productivity and environment,” Rajiv Agarwal Managing Director of Essar Ports said on the deal. LOGISTICS TIMES June 2012

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Arshiya – GATX deal Arshiya Rail Infrastructure, part of Arshiya International recently signed a long term deal with GATX India, a subsidiary of GATX Corporation, to lease its rakes to ARIL. GATX globally is one of the world’s leading railcar leasing companies. This relationship will help Arshiya Rail migrate its business to a capex lean model, resulting in lower gearing and improved margins as ARIL expands its business. As part of the 10-year deal, GIPL will initially provide 10 newly manufactured BLC rakes, for Arshiya Rail on operating lease. Further, leveraging GATX’s 114 years of expertise, ARIL will be able to introduce world class wagon technology and bring in the highest standards of safety, reliability, efﬁciency in rake operations, besides expanding its gamut of services in delivery of customized solutions to clients, all vital to growing Indian rail-freight business. An augmented rail capacity through its relationship with GIPL is planned to be deployed at its new state-of-the-art rail terminal at Khurja, which will act as a hub and will offer integrated and cost effective solution to its customers across major Indian cities.

Commenting on the deal, Ajay S Mittal, CMD,Arshiya International said, “This is a very strategic tie up for Arshiya, as also for the rail space in India and marks the beginning of a new phase in our evolution. GATX Corporation has a strong technology leadership and a strong legacy in the space. We are extremely conﬁdent that this relationship would help us provide improved value to our customers.”

5000th truck roll-out from Chakan

Mahindra Navistar Automotives, a part of the US 15.4 billion Mahindra Group recently announced the roll out of its 5000th truck from its state-of-the-art plant at Chakan in Maharashtra. The company has reached this milestone in a very short span of time since commencement of production. In addition, the 4500 trucks running on Indian roads have clocked more than 8 Crore kms under various application, pan-India. According to a company release, during this eventful period, Mahindra Navistar has also been conferred the No. 1 rank in TNS Truck Track 2012 in the LCV load and mini-bus segment and joint No. 1 position in the HCV Truck (MAV segment). Earlier, LOGISTICS TIMES June 2012

the company had announced its pan-India commercial launch in December 2011. Speaking on the occasion, Nalin Mehta – MD, Mahindra Navistar Automotives said, “Mahindra Navistar has today emerged as the new and viable alternative for the Indian trucking customers who have been experiencing status quo and inertia in a duopolistic market. As a challenger brand, Mahindra Navistar’s strategic intent is to challenge this status quo by not only trying harder but also trying out-of-the-box measures which can be summed up by the brand philosophy of “OK IS NO LONGER OK” Mehta, further, added, “This is a landmark day in the history of Mahindra Navistar as it marks another very important milestone with 5000 trucks rolled out from Chakan Plant and with more than 8 crore kilometers behind us! This achievement reﬂects the ever increasing conﬁdence of the customers. This also indicates that MNAL trucks are running on multiple applications across India with wide acceptance of customers.”

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‘The International Specialists’ campaign

DHL, the world’s leading international express services provider, launched the second wave of its successful International Specialist advertising campaign recently. Accompanied by the signature “Ain’t No Mountain High Enough” soundtrack, the campaign will feature on pan-global TV channels and national channels in India, China, Mexico, Norway, South Africa, South Korea, Turkey, the United Arab Emirates (UAE) and the UK. The campaign celebrates DHL’s world-class partnerships with Manchester United and Formula 1 with two dynamic spots filmed on location in Brazil, Japan, the UAE and at the legendary Old Trafford stadium in the UK. In the Manchester United TV spot, the company teams up with football superstars Ryan Giggs, Javier Hernandez, Wayne Rooney, and club manager Sir Alex Ferguson to showcase the global talent and expertise shared by the two brands. The advertising campaign has not been limited to the screen, however. DHL Express has also celebrated its Official Logistics Partner relationship with Manchester United by giv-

ing each of its 100,000 employees around the world a Manchester United training top emblazoned with the DHL brand, spreading the excitement around the relationship via dedicated “brand ambassadors” in over 220 countries and territories worldwide. “For DHL, a claim in an advertising campaign means nothing without a committed team of international specialists and a world-class express delivery network behind it,” said Ken Allen, CEO of DHL Express. “This latest campaign represents a celebration of the global partnerships which help our customers to connect emotionally with the DHL brand.” R.S Subramanian, Country Manager, DHL Express, India said: “The success of the first International Specialist advertising campaign, which ran across 42 key markets, translated into 25 local languages and received 2.16 billion online impressions, has spurred us on to achieve greater heights. The launch of the second wave is paramount in spreading DHL’s compelling message across India offering unrivaled speed, efficiency and strong customer service.”

Mark Martyn is new MD of UPS India UPS has announced the appointment of Mark Martyn-Fisher as Managing Director of UPS India. He replaces Mark Khambatta who joins the UPS Asia Paciﬁc strategy team which has oversight of UPS’s long term development within the region. Martyn-Fisher joins the UPS India team with over 30 years of international management experience, the past 13 of which spent with UPS. In his new role, Mark will oversee UPS’s express and supply chain operations in India This

includes marketing, business development, international trade services, industrial engineering, human resources, customer service, security, ﬁnance & accounting, supply chain solutions as well as ocean, air & ground operations. UPS India operates 19 facilities locally and serves eight airports namely Mumbai, Chennai, New Delhi, Bangalore, Kolkata, Kochi, Ahmedabad, & Hyderabad. Over the past several years, UPS has invested heavily in building its air freight services and acquired capabilities and expertise, integrated global networks, and implemented new performance standards and technology to increase overall operational capacity. LOGISTICS TIMES June 2012

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ICTT, Vallarpadam receives ISO Certifications India Gateway Terminal Pvt Ltd (IGTPL) operators of the International Container Transshipment Terminal, Vallarpadam recently received ISO certifications for its Integrated Management Systems (Quality, Environment, Occupational Health and Safety). The certification for ISO 9001:2008, ISO 14001: 2004 and OHSAS 18001:2007 was handed over to K. Krishnadas, CEO, DP World Cochin, by the Lead Auditor from Det Norske Veritas B.V.Netherlands (Certifying body), Jetcy Thomas, at a function held at the terminal on 1st of June, 2012. Speaking on the occasion, Anil Singh, Sr. Vice President and Managing Director of DP World Sub-continent said, “This is an important milestone for us at ICTT, Vallarpadam and reflects our capability to provide excellent services with superlative standards. It is an honour to receive the ISO certification . We take great pride in our efforts to strike a balance between our responsibility towards our stakeholders, environment and the community at large. The ISO certification will encourage us to continue in our spirit of operation”. “This is a very momentous occasion for us. An ISO certification in integrated management systems reiterates our constant commitment towards the environment, occupational health and safety. This certification is also recognition of our technological

advancements and continuous dedication to emerge as one of the most important ports of the subcontinent region” noted K.Krishnadas, CEO, DP World Cochin added. Vallarpadam Terminal is the largest single operator container terminal in India and the ﬁrst in the country to operate in a special economic zone.With a productivity of 30 moves per hour per crane, ICTT is comparable with the best international ports. The vessel related charges at ICTT is also the cheapest in the region comparable to other transshipment ports like Colombo and Singapore.

China Airlines links Chennai with Europe

The National carrier of Taiwan, China Airlines Cargo, has commenced a twice weekly B747-400F Freighter Service on the Taipei-Kuala Lumpur-Chennai-Luxembourg-Taipei route, with effect from May 16, 2012. Stating this in a press conference in Chennai last month Brian Chou, Senior Vice-President of the Airline exuded conﬁdence that routing through Kuala Lumpur would be an advantage as it would help in cross-loading, since it attracts cargo from Hong Kong, Indonesia and other South-east Asian markets. He said that the allocation from Chennai was 40 LOGISTICS TIMES June 2012

metric tons on each ﬂight. The exports focus would be primarily on electronics, mobiles, pharmaceuticals, leather, textiles, etc. The imports into Chennai would mainly consist of electronics goods. Subsequently, at the function in Chennai, which was wellattended by Freight Forwarders, Regulatory authorities, the Press and others, the senior staff from the airline, too, joined in. These included Brian Chou; KK Wu, VP-Sales & Mktg.; Paul Hseuh, GM-Cargo Mktg. & Planning and HoJo Chang, Country GM-India. Distinguished visitors from the expatriate community included David Hsu, Economic Counselor & Director, Taipei Economic & Cultural Centre; George Lin, Director, Taipei World Trade Centre, Keng Lee, Director- Institute of Information Industry. Hsu was quick to point out that Taiwan has built up a significant level of investment in India, despite very few Taiwanese actually staying here. BK Mehrotra, General Manager-Cargo, Airports Authority of India also graced the occasion. Pukhraj Chug, Managing Director, Ascent Air, GSA in India of China Airlines Cargo from Nov. 1999, thanked all present for their support and cooperation.

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LOGISTICS TIMES June 2012

REPORT

Operational Efficiency of Freight Transportation by Road Transport Corporation of India (TCI) in association with IIM- Calcutta recently released the second edition of joint study titled “Operational Efficiency of National Highways for Freight Transportation in India.” The report, which was unveiled by Union Road Transport & Highways Minister Dr. C P Joshi, highlights serious constraints in the road sector and suggests a series of measures to improve the scenario. Excerpts from the executive summary:

(left to right): D P Agarwal, VC & MD, TCI; Dr. C P Joshi, Union Cabinet Minister, Road Transport and Highways; Professor Subrata Mitra, IIM- Calcutta and Vineet Agarwal, JMD, TCI LOGISTICS TIMES June 2012

India has the second largest road network in the world with a road length of 4.24 million km. India’s road density is among the highest in the world with 1.29 km of roads per sq. km of area. However, India’s national highways and expressways constitute only 1.67% of the road length, and the percentage of paved roads is only 49.3%, lagging behind both the U.S. and China. While India’s road freight volumes are increasing at a compounded annual growth rate (CAGR) of 9.08% and the population of vehicles (all types) is increasing at a CAGR of 10.76%, the road length is increasing at a CAGR of only 4.01%, indicating the paucity of roads. Moreover, roads are of poor quality, lacking maintenance and pedestrians and animals have uncontrolled access to roads, resulting in slow speed of vehicles, break-downs and accidents. It has become imperative that new roads should be built, and the existing roads should be widened and properly maintained. However, these projects require massive investments, which are beyond the budgetary provisions and borrowings from banks and financial institutions. Therefore, private investments in the form of PPP must be sought for road development and maintenance projects. However, there are some concerns regarding project viability such as uncertain traffic volume, diversion of traffic, projected demand and revenue realization, toll structure and toll collection, and return on investments. The Government should adequately address these concerns, and to attract private investments, offer incentives such as Viability Gap Funding (VGF), land acquisition, waiver of taxes and duties etc. It is expected that in the 11th Five-Year Plan (2007-12), more than 50% of the investments in roads will be contributed by the private sector. Also, henceforth all National Highways Development Projects (NHDP) will be implemented in the PPP mode. Toll collection is an alternative way of financing road development and maintenance projects. The majority of Indian toll plazas employ manual tolling systems. Manual toll collection is a slow

process, leading to congestions and long queues of vehicles at toll plazas. A CRISIL study estimates that a vehicle has to wait for about 5-10 minutes in the queue before it can pay the toll and leave the toll plaza. The data available for the Delhi-Mumbai route in the 2011-12 survey also conﬁrmed that the average waiting time at a toll plaza is about 10 minutes. Moreover, the data for the DelhiBangalore and Delhi-Mumbai routes showed that toll delays and toll expenses as percentages of total stoppage delays and total stoppage expenses, respectively, had increased in 2011-12 over 2008-09, indicating the requirement of a thorough analysis of the toll collection process and toll structure. To expedite the toll collection process, India should gradually move towards electronic toll collection (ETC). Implementation of ETC will not only reduce congestions and long queues at toll plazas, but also reduce operating costs for toll operators and plug revenue leakage. However, there are some concerns such as cost implications for users and toll operators, inter-operability of different ETC systems and so on, which need to be addressed before ETC can be implemented. The Committee, set up by the Government and chaired by Mr. Nandan Nilekani, recommended

the use of the passive Radio Frequency Identiﬁcation (RFID) technology, which is not only fast becoming the popular global standard, but also less expensive and less complex to implement. The Committee recommended that the existing manual toll plazas be gradually converted to ETC plazas and the new toll plazas be built with ETC capabilities. The Government has accepted the recommendations of the Committee for implementation of ETC in India. As mentioned before, India’s roads and highways are easily accessible to slowmoving vehicles, pedestrians and animals, resulting in a low average speed of vehicles and a high number of accidents. India has a meager 600-700 km of access-controlled expressways compared to 74,000 km of expressways in China. India needs to build more high-quality, access-controlled expressways for faster connectivity between cities and towns. The expressways should be equipped with Intelligent Transportation Systems (ITS) including round-the-clock CCTV surveillance for monitoring real-time trafﬁc data and ensuring safety and security of users. A recent study recommends that 18,637 km of expressways need be built by the end of the 13th Five-Year Plan period, i.e. 2022. However, the massive investment required LOGISTICS TIMES June 2012

REPORT

“Qualitative improvement is more important” Vineet Agarwal, JMD, TCI comments on serious imports of the report: Do you find the basic findings of the report disappointing? The latest report is probably saying not much has changed when it comes to the improvement of road freight transportation segment? It is somewhat disappointing but you have to look at the positive points also. The average speed has gone up – from 21 to 23-24 km. It seems a very small improvement but if viewed in percentage terms, its close to 10 percent. An understanding of the issue is emerging and that is very important. When the first report had come out, it had triggered right kind of debate. Mr. Nandan Nilekani had also interviewed us for his book. In that book he had quoted TCI saying how electronic highways can help. Now ETC is getting implemented. And I think this is a major development in last three years. Seven- eight years ago it was generally believed that if you have toll plaza on highways, they would result in better regulations. Now it appears as if they themselves are contributing to the problem. How would you respond to it? The moot question is: how are they designed? What is the rationale behind them? Today when you go to certain toll plaza, there aren’t places for trucks and cars. You will notice long queue. Secondly, even the fares are not right. At some places, you have got fares like Rs21-22. Now who is going to find Rs 1-2 change? Thirdly, even where you have electronic tolling for instance at Gurgaon, there is no penalty for customers who are not carrying electronic cards. An important statistic furnished by LOGISTICS TIMES June 2012

your report is – road transpprtation business is growing by around nine percent, number of vehicles by 10 percent but road network by 4 percent. Anybody with some macro-economic understanding would call it a receipe for disaster. What’s your take on it? I don’t think using disaster would be the right term. You need to look at numbers in different perspective. What is the kind of roads that are being built? Are we targetting the high traffic density locations? These are important issues. Increasing the road length alone would be not enough. It is the qualitative improvement which is important. The qualitative improvement has to happen in high traffic density locations, in locations which have movement of over dimensional cargo (ODC). You need to expand those highways. And the quality of highways also need to be minutely judged. Can they last the high speed and continuous wear and tear? So qualitative improvement is more important than quantitative improvement. The minister made it absolutely clear that brownfield projects would be difficult to pursue and the correct route would be greenfield projects. But as we all know greenfield projects is very time consuming. If we view the scenario from this prism, do you foresee highway development exercise being expedited in the near to medium run? There has to be a combination of both the routes. I think, he rightly said vertical expansion has to happen visà-vis horizontal growth in the road sector. And this would obviously entail land acquisition which in my opinion

would not be as complicated as when you do it for industrial plants. We have seen that in DFC projects as well where the entire stretch of western corridor has already been acquired. So I would be hopeful for the future. The government is also of the feeling that a strong element of self-regulation is required to do away with the overloading trends which eventually affect the quality of roads. What do you have to say on this? Self-regulation anywhere is not an easy task. But yes, its an important factor and I think the associations need to work very seriously on it considering the long-term picture. You can’t forget the benefits to the national economy if our roads are in good conditions. At some point of time, most transporters would have to bite the bullet. When you come out with the third edition of this report, may be two- three years later, what all difference you would like to see then? I am broadly talking about changes which are feasible given the kind of policy paralysis which is presently there. With ETC expanding more rapidly now, I think the average speed would increase and stoppage delays would come down. I would also expect some progress on express highways, some stretches would be awarded and some work would commence on them. And I would certainly expect that the government would draft a policy on logistics parks and multi-modal hubs. Some of it is already part of DFC and MDIFC but I would think a national policy would help in expediting the creation of these units.

“Not much change in the scenario” Prof. Subrata Mitra of IIM-Calcutta explains the degree of inefficiency in road transportation and its huge cost implications for the economy: Am I correct in my assessment that the biggest takeaway of your report is: practically nothing has changed in last three years? Yes. Things have more or less remained unchanged. The only difference we saw which has been highlighted in the report - the contribution of toll expenses to total stoppage expenses has increased. So that means there are more toll roads and toll delays as a percentage of total stoppage delays have increased. At one point in time, there was this strong perception that with more toll plaza, you will have better regulation on our highways. But that perception seems to be losing ground? There are two issues. You need more funds and that’s why you collect tolls. Now how do you collect tolls? If you collect tolls manually which is happening in India, it results in delays. But they are gradually moving towards electronic toll collection. Once you have electronic toll collection in place, the delays would be minimised. On a cumulative basis you are saying we are losing around $17 billion every year because of inefficiencies in road transportation? We are losing $5.5 billion because of delays in road transportation. Other one is addition of fuel consumption. Just to illustrate, if you are driving a car in top gear at a modest speed without any stoppage for a long duration, you will get maximum mileage. When you

Things are happening though definitely not at the pace which is actually required in road freight transportation. see a car manufacturer talking about mileage, the company is projecting an ideal condition. If you can attain that mileage, you can certainly reduce fuel consumption which is not happening on Indian roads due to delays. I made an estimate and if you do that you can save $12 billion on fuel consumption annually. Freight volumes are increasing but there is no corresponding improvement in road network. Do you foresee any change in the scenario? Its true that freight volumes are increasing but improvement or expansion in road network is lagging behind. There are two things. The number of vehicles and freight volumes are growing more than the growth in road lengths. That means you have to build more roads or if you have existing roads, you have to widen them. So two lanes have to be converted in four lanes and four into six. This is how

capacity can be improved. Yes, there are constraints for existing roads. But you can always think of greenfield projects. But greenfield projects take more time to materialise than brownfields? Yes, they certainly take more time. But once you do them, they will last for a long time. You have to do both – a right mix of greenfield and brownfield. Over a period of next two years and that is the time left with the present government, what all they can do to bring even a slight change in the road transportation sector? The minister has said that they are trying to expedite the implementation of ETC and this would fetch good results. I think, revenue leakage can be stopped on the stretches where it is implemented. The report talks about more investment in logistics parks and hubs like Nagpur. And creation of more access controlled expressways need to be given a push. We have given the comparative analysis of express ways in China and India. We certainly need to devise ways and means to expand them. At the end of the day, are you disappointed? There aren’t many positive takewaways from the report. I wouldn’t say I am disappointed. Things are happening though definitely not at the pace which is actually required in road freight transportation. LOGISTICS TIMES June 2012

REPORT

for the expressway projects is estimated at Rs. 450,000 crore. The Government, under NHDP-VI, has already given the approval for constructing 4 expressways of more than 1,000 km length at a financial outlay of Rs. 16,680 crore. Therefore, it is suggested that private participation in expressway projects in the form of PPP should be encouraged. There are, of course, concerns regarding projected traffic volumes, revenue realization and profitability of such projects. Besides adequately addressing these concerns, the Government should also facilitate land acquisition, provide the basic infrastructure, give quick approvals, and offer economic incentives such as waiver of taxes and duties. Revenues may be realized through toll collection and property development in the vicinity of the expressways. The report also highlights the importance of logistics parks/hubs. Logistics parks differ from ordinary warehouses in terms of offering value-added services shared by multiple users. Benefits accrued to users include cost savings to the extent of 50% through economies of scale and scope, efficient use of multi-modal transportation, and availability of valueadded services under one roof. According to an estimate, strategic locations of logistics parks may save India USD 1316 billion in logistics costs. The scale of Indian logistics parks is very small (only 3-4% of the warehouses may qualify as multi-modal logistics parks) compared to the same in China and other developed Asian countries. India needs to scale up its logistics parks and clearly differentiate them from ordinary warehouses if it wants to compete with the logistics parks in Hong Kong, Shanghai, Singapore and Dubai to capture a reasonable share of international cargo. There are some existing and promising hubs, which have already been identified based on their LOGISTICS TIMES June 2012

locations, proximity to economic and industrial activities, and connectivity by rail, road etc. The Ministry of Railways has also proposed to set up a number of multimodal logistics parks along the dedicated freight corridor. However, there are some concerns such as the low level of containerization of cargo in India and the required investment for setting up logistics parks. For logistics parks to be successful, the scale of containerization of cargo has to increase. While in developed countries, 80% of the cargo is containerized, in India, the ﬁgure is only 20%. Out of the 560 million containers handled across the world in 2010, India handled only 9.4 million containers while China, Singapore and Hong Kong handled 150 million, 28 million and 24 million containers, respectively. While India has 130 Container Freight Stations (CFS) and 61 Inland Container Depots (ICD), there are 3,000 CFS and ICD in China. Therefore, the Government has to play an active role in setting up more CFS and ICD to promote the containerization of cargo. To build and operate logistics parks, investments from the private sector would have to be sought in the PPP mode with appropriate economic incentives.

Finally, the potential of Nagpur as an emerging air cargo and logistics hub has been discussed. Nagpur already boasts of a number of logistics parks because of its location and connectivity through rail, road and air. The proposed logistics hub spread over 4,354 hectares, which is expected to be completed by 2035 at an estimated cost of Rs. 2,581 crore, will also include an integrated township and a Special Economic Zone (SEZ). Once completed, the project is expected to serve 14 million passengers, handle 0.87 million tonnes of cargo and generate revenues worth Rs.5,280 crore annually. If developed properly, Nagpur has the potential to emerge as the logistics hub not only for India but also for the SouthEast Asian region. As far as the route surveys are concerned, no appreciable differences in parameters related to the operational efﬁciency of freight transportation by road have been observed in 2011-12 compared to 200809. Although it seems that the mileage of vehicles has marginally improved, the average speed of vehicles, stoppage delay per km and stoppage expenses per tonne-km have more or less remained at the same level. Average trip expenses and freight rates per tonne-km have, of course, increased due to inﬂation.

Average contribution and profit margins, on the other hand, show no specific trend and depend on the route under consideration. One observation, specific to the DelhiBangalore and Delhi-Mumbai routes, which were surveyed in detail, was of importance, i.e. on these routes, it was found that the number of toll stops as a percentage of the total number of stops, toll delay as a percentage of the total stoppage delay and toll expenses as a percentage of the total stoppage expenses were higher in 2011-12 than in 2008-09. This observation indicates the growing contributions of toll delays and toll expenses to total stoppage delays and total stoppage expenses, respectively. Although, costs of delay were not significant for individual trips, an estimate indicated that the annual cost of delay to the Indian economy was of the order of Rs. 270 billion or USD 5.5 billion. Also, another estimate showed that the impact of additional fuel consumption due to delay and slow speed of vehicles on the Indian economy was of the order of Rs. 600 billion or USD 12 billion per annum. Recommendations: The study shows that freight volumes and vehicles are growing more rapidly than the growth of road lengths over the years, putting more pressure on the existing roads and seriously affecting their quality and maintenance. Therefore, the Government should pay immediate attention to the development of new roads, and widening and maintenance of the existing roads. However, these require massive financial outlays for which the Government must seek private investments in the PPP mode. To attract investments from the private sector, the Government, apart from offering economic incentives, should adequately address the concerns of the private sector in terms of uncertain traffic volumes, demand and revenue realization, toll structures and toll collection, political interference, and returns on investments. Now, the National Highways Authority of India (NHAI) acts as the

regulator for roads and highways. In the context of private investments, an independent regulatory authority like the Telecom Regulatory Authority of India (TRAI) should be set up to assess costs/ beneﬁts, service levels, safety measures and tariff structures. The study shows that on two major routes, toll delays and toll expenses are making higher contributions to stoppage delays and stoppage expenses, respectively, in 2011-12 than in 2008-09, necessitating a detailed examination of the toll collection activities at toll plazas. There is an urgent need for reducing toll delays and rationalizing the toll structure to divert more trafﬁc to toll roads and plug leakages. The solution to the problem of toll delays is to gradually move towards electronic toll collection (ETC) systems. The majority of Indian toll plazas employ manual toll collection and only a handful of them are equipped with ETC. There are some concerns, however, regarding the deployment of ETC such as cost implications for users and toll operators, inter-operability of different ETC systems etc., which need to be taken care of. The recommendations of the Committee chaired by Mr. Nandan Nilekani have been accepted by the Government for implementation of ETC in India.. Implementation of ETC will not only reduce toll delays, but also reduce fuel consumption and environmental pollution. To address the issue of rationalizing the toll structure, an independent regulatory authority need to be set up, as already mentioned before. India needs to build a large accesscontrolled expressway network with Intelligent Transportation Systems (ITS) capabilities for improved road safety and security. The proposed expressway projects may be taken up with private participation in the PPP mode. The Government should facilitate by acquiring the land, providing the basic infrastructure and giving quick approvals besides extending economic incentives such as exemptions from taxes and duties. Revenues may be realized through toll collection and property development

in the vicinity of the expressways. Also, a National Expressway Authority of India (NEAI), in line with NHAI, should be set up for construction, operation and maintenance of the expressways. India needs to build large-scale logistics parks and scale up the existing parks in order to compete with the logistics parks in Hong Kong, Shanghai, Singapore and Dubai for international cargo. New logistics parks should be built in the PPP mode with economic incentives such as waiver of taxes and duties for the private sector. Logistics parks not only lead to economic development and generate employment, but also promote multimodal transportation including the use of railways to increase efﬁciency and reduce pollution. Nagpur, on the other hand, should be developed as an international air cargo hub since Nagpur has the potential to emerge as the logistics hub not only for India but also for the entire South-East Asian region. Presently, in India, freight transportation is heavily tilted towards roads, which carry about 60% of the total freight volumes whereas railways carry about 35% of the total freight volumes. The trend is different in the U.S. and China where railways carry about 47-48% of the total freight volumes. According to a report by McKinsey & Company, the ideal modal mix for India should be evenly balanced between roads and railways, each carrying about 46-47% of the total freight volumes. Multi-modal transportation should be encouraged where long distance transportation services may be provided by railways and the last-mile connectivity may be provided by roads. More use of railways, as mentioned before, is environment-friendly. However, multi-modal transportation needs the coordination among different ministries, i.e. Ministry of Road Transport and Highways, Ministry of Railways, Ministry of Shipping and Ministry of Civil Aviation. Ideally, an apex body should be set up with representations from different ministries to coordinate and facilitate the use of multi-modal transportation. LOGISTICS TIMES June 2012

COVER STORY

Target: Future Perfect The past five years of Future Supply Chains (FSC) has seen building up of an operational base with some noticeable differentials - high-end automation, vibrant DC network and a growing express division. The company now claims to be ready to meet anykind of challenge to catapult itself in the fast growth orbit and has set its eyes on ambitious targets. Ritwik Sinha reportsâ&#x20AC;Ś

LOGISTICS TIMES June 2012

COVER STORY

14th May probably was a day of surprises for me. Not certainly of the kind that you should be completely disbelieving your own eyes. But when you notice the fructification of a theorectical assumption etched in your mind for quite sometime, the element of surprise can’t be ruled out. Go to any seminar or any conference on logistics and supply chain and one disquieting takeawy for you would be: Indian warehouses in general are no better than godowns and could do nothing to improve efficiency. Period. But on that fateful day, on the expansive floor of Future Supply Chains’

trucks fitted with tail lifts standing on the dock. This coupled with hand held scanners (every instrument costs Rs 60k) being used by every worker on the floor was defining the term seamless process in warehouse management – something which is believed to be a major gap in the logistical regime prevailing in the country. “Our entire system is paperless and very fast. Even those rolling cage saves a lot of time for us as loading of a truck takes barely 20 minutes in our case as against two hours if undertaken manually,” the warehouse supervior told me. The scene witnessed at Bhiwandi units

MD and CEO Anshuman Singh told me that FSC’s objective is to beome a billion dollar company by 2017-18. He underlined it in almost matter-of-factly style- no unwarranted assertion in his tone.“Isn’t he talking too big?,” this thought crossed my mind instantly. But then as Anshuman and the core team members of the ﬁrm explained to me during my long conversation spread across two days, FSC during its ﬁve years of journey (the division was formed in 2007) has built a high-end but at the same time cost effective operational base wherein there is something to offer to everybody – not

Distribution Center (DC) at Bhiwandi just outside Mumbai, a state-of-the-art automated process was rolling before my eyes. Goods and cartons moving on conveyor rollers, scanned by attached weighing machine, sorted out (either to be transferred to the inventory or immediately despacthed for delivery to stores) by put to light (PTL) machines, automatic labelling machine punching every carton, goods to be despatched immediately put into the rolling cage (technically called unitised utility machine) and they further being loaded on to the

(there are four units broadly in the space size of 1.25 lakh to 2.0 lakh square feet each with G-5 to G-7 structure meaning huge vertical space catering primarily to the FMCG and apparel sectors)subtly symbolised what Future Supply Chain (FSC) has come to be identiﬁed with – seeking positioning in Indian market with world class or advanced operational modules. Hours later, at the Jogeshwari (East) located headquarters of the company, I was greeted with another bout of surprise (being stumped could probably be a more apt expression) when

only the FMCG or electronics giants but also the mid-rung or lesser known brands which ﬁnd it difﬁcult to develop the larger consumer connect. And that the time for kill is around the corner or probably has already started.

LOGISTICS TIMES June 2012

Pre-FSC days It is no secret to anybody that FSC and Future Group has a symbiotic relationship. “ It is a needle and string kind of relationship even as now we have reached to the position where we are serving customers outside the group. And

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that number is growing. We are targeting 50% of our revenues from outside Future Group units, this year” Anshuman points out. The basic building blocks of FSC’s evolution and functionings are, in fact, rooted in Future Group’s requirements and experimentations it had to undertake especially between 2000 to 2008 when fuelled by a booming economy , Kishore Biyani led group had to significantly expand – both qualitatively (with specified formats) and quantitatively (number of stores). And here Anshuman Singh played a pivotal role being appointed as the first supply chain head of the group.

for Pantaloon format required lowest time to market strategy by emulating that popular Zara model. With the key drive to put the goods on the shelf asap, express transportation was needed. As against this, the formula evolved for Big Bazaar format was efﬁciency and cost to market, which was important. Here a little bit of extra lead time is tolerable but the key concentration is to ensure that logistics cost is minimal. And therefore no express transportation was used to ferry goods. “Such a strategy for Big Bazaar was much in alignment with format’s USP – isse sasta aur achha kahin nahin,” Anshuman

for the group. Meanwhile, to cater to the customers all across the country through its retail outlets, the company had by then established as many as 60 stockwarehouses all around the country. But then they were mostly godown kind of structures. However, with an economy on ﬁre then and middle class consumption on a rise forcing Future Group to expand left, right and center, around 2006 end a decision was taken to form a separate supply chain entity. And as is the wont of Kishore Biyani, the mandate for FSC was also big-ticket in nature – put in

Recalls he, “I came to this group ten years ago and at that time the group was much smaller. Pantaloon was the main format and Big Bazaar was emerging. Future Group was the ﬁrst retail company in the country to set up a supply chain function. And later more formats like Food Baazar, Central, E-Zone, Hometown, Furniture Bazaar were added.” But given the rapid rise in volume, each format demanded application of different approach in terms of devising an efﬁcient supply chain strategy. For instance, shaping up effective delivery model (at the end point)

specifies. When Food Bazaar came off the block, Future Group decided to ride on the streamlined supply chain base of FMCG companies which they had assiduosly built for last fifty years. Around the same time, the company had also successfully toyed with the idea of opening a discount chain for Pantaloon in locations where specific outlets were not present. It was much on the lines of factory outlets of global brands like Nike and Reebook where footfalls are assured. And with low renatls in tier-2 locations, this format had done exceedingly well

place a robust supply chain ﬁrm which should cater to all kinds of customers. In 2004, Anshuman had left Future to join Welspun Retail as CEO but he was called back when the idea of FSC was being mooted. “Kishoreji called me to head this unit because by then I had seen both the sides- retail front- end and supply chain back- end. The mandate was to create a vibrant and dedicated supply chain unit which would take care of all retail needs. In 2007 April, Future Supply Chain was formed by hiving off the erstwhile supply chain divisions which were created for LOGISTICS TIMES June 2012

INTERVIEW

To begin with, give me a sense of supply chain management in Future Group’s retail operations prior to the formation of this separate supply chain division? I came to this group ten years ago as the first head of supply chain division. At that point in time, the group was obviously much smaller. Pantaloon was the main format and Big Bazaar had just begun to shape up. In fact, Future Group was the first retail company in the country to set up a supply chain function. One of my first taks here was to set up the supply chains for Pantaloon, Big Bazaar, Food

undertake an exhaustive evaluation process of vendors, their factories and supply system; we had to set up inventory norms, warehouse infrastructure, a transport network and the parameters for the costing analysis, etc. Again each category of products required different treatment. For instance, in fashion we wanted to emulate the Zara model. It was our role model ten years ago. So it was a responsive supply chain strategy for Pantaloon format. But when it came to Big Bazaar, the strategy again changed. In responsive supply chain, time to market factor was paramount. Whereas

“We want to become $1 billion company” In a no-holds-barred interview with Logistics Times, Anshuman Singh, MD & CEO of FSC explains the rationale behind the evolution of the separate supply chain division, how it has shaped in last five years and where it is heading with emphasis on high-end infrastructure and automation. Excerpts from the conversation: Bazaar, and then other formats. At that time supply chain itself was the new evolving concept in the country. So the basic role of supply chain in the retail operations was undergoing an evolution process. It encompassed a lot of roles including developing categories for new formats like Big Bazaar. We were earlier known for apparels and there were not too many categories. So it was also supply chain teams’ job to align with buying and selling teams and help them to develop vendor base for new categories like plastic, luggage, wooden goods, toys, etc. On an overall basis, the task was mounthill cutting across all categories including apparels. We had to develop vendor base for all categories, had to LOGISTICS TIMES June 2012

in Big Bazaar supply chain strategy, the cost to market was more important. You can afford some additional lead time but the cost has to be lowest. The supply chain system for Big Bazaar had to be in alignment with our claim isse sasta aur accha kahin nahin. When we opened Food Bazaar, a new strategy emerged. Initially, we did set up DCs because FMCGs can’t store foods. But later we found that the FMCG biggies for last fifty years had established a very streamlined supply chain costwise. They were afterall serving kiranas for so many years. At that time some other retailers were planning to set up big DCs and centralised distribution systems for FMCG firms but we found that model was unnecessary. We decided to ride on

the existing distribution base of FMCG firms. So we created a very different strategy for food. I want to understand how infrastructure for Big Bazaar was planned. It is the most popular format touching the lives of millions of consumers. For Big Bazar, we realised that we needed to be closer to the market. Hence we opened 16 stockpoints, for each major category, closer to the consumption centers. All that has changed in last five years but that is because we kept on changing the scales. But at that time, the strategy was let the cost to the market be lowest and ,therefore, let the vendors bear the cost of bringing in the goods nearest to the stores. In fact, given a choice we would not have even opened warehouses for Big Bazaar. Ideally, we should have taken the goods directly from vendors to the stores. But by default we had to take warehousing space in 16 major cities where Big Bazaar had a presence because you can’t store the goods inside the city. Now the transportation from vendors across the country to those 16 locations would have taken slightly more time because we wanted to transport using lowest cost method. So express was never used. Instead, we used parcel loads through the traditional transportation which took three-four days extra but goods reached at the stores at the lowest cost. But at Pantaloon, the strategy was very different. Time to market was crucial and everything moved on express transport. Warehouses were centralised even then because the inventory optimisation was a must. At Pantaloon, we went a step ahead. At the end of every season, there are leftovers and every retailer face this problem. We devised a strategy. We noticed a lot of garment brands have factory outlets – Nike, Reebok, etc. However, retailers had not taken this route. We did something which nobody had done before. We created factory outlet of Pantaloon and we mostly set them up in locations where there was no Pantaloon store. Even today Pantaloon

factory outlets is a big chain â&#x20AC;&#x201C; there are as many as 40 outlets. Despite selling at discounts, we were making profits because these were low cost stores with low rentals. And then came that critical decision to float a separate supply chain division around 2007. What were the basic objectives? In 2004, I had left Future Group and became CEO of Welspun Retail.For me, it was like moving to the other side of the table. In 2006 end, however, I was called back here by Kishoreji because I had the experience of both sides of the retail value chain. The mandate was to create a vibrant and dedicated supply chain company which would take care of all concumption needs. And in 2007 April, Future Supply Chain was formed. The erstwhile supply chain units which I had created for different formats were completely hived off and it became a separate legal entity with separate shareholding pattern. The primary objective was to bring the best practices in consumption logistics from across the world to India and create a company which can bring the actual value to the entire consumption space. When I say consumption space, I do not merely mean retail. It means all FMCG companies, all electronics and apparel firms, etc. Whether they are in retail or just manufacturing, we want to be their partners in reducing their supply chain cost and to help them in their cost to the market requirements. From our own experience of evolution of different formats between 2002-07, we had realised that as you grow in scale, the challenge of reaching to the consumers become more acute. At a small scale, you are able to manage. At the medium scale, somehow it happens for you. But at the large scale, it becomes a huge challenge. That is the inflection point when you have to shift to technology, automation, infrastructure, large size, large number of people, etc. Now all of this requires investments, knowledge base and a different mindset to manage. We realised every company would go

through this challenge. And they would not be able to do this because they are more focused on manufacturing. All the noted 3PL MNCs are here but they are not yet into this. Why? Because Retail, which as a sector is solely responsible for advanced automation/ technology in logistics across the world, was itself an evolving industry in India.But we were lucky. We had the backing of Future group which had already become the largest retail group in the country and was

You have explained the primary mandate for this firm. Now let me hear from you how you have built scale in last five years? In short, please summarise the journey of this unit since its inception in 2007? First of all, we moved to larger DCs. That was the first part of our initiative to build scale. When we started five years ago, we used to operate more than 100 small warehouses all across the country â&#x20AC;&#x201C; mostly 20k -30k square feet units which were no better than

expanding in all retail categories. That gave us the opportunity to aim and set up the best supply chain practices for each of these categories. Retailers across the world focus on a select categories. But we were focusing on all the categories. We had developed Big Bazaar, Pantaloon, Food Bazaar, Central, E-Zone, Hometown, Furniture Bazaar and formats were only increasing. So as a service provider we got the opportunity from our anchor customer to develop expertise in so many verticals, something which no other supply chain solution provider in the country was exposed to.

godowns. So in terms of infrastructure development in last five years, we have moved from godowns to warehouses to distribution centers to factories. Today we have virtual factories. In the transportation sector, we have moved on from desi truck kind of arrangment to a dedicated express unit of our own. We have a fleet which is empowered with GPS systems facilitating real time visibility of all trucks and continuously integrate with each other to reduce cost to the market and time to the market. On the infrastructure front, I personally collaborated with a large number of landlords who had land and got quality LOGISTICS TIMES June 2012

INTERVIEW

warehouse units/ logistics parks built. We realised that building warehouses inside the cities was not possible. So we had to build them close to the major cities. So for a consumption powerhouse like Delhi, we built our DC at Hasangarh. We knew GST would be ultimately implemented. So we started planning accordingly and have built 16 state-of-the-art DCs. While planning the automation in these units, we went to the world studying the best DCs and emulated some of the most vibrant examples we noticed. Firstly we put in racking and shelving systems on our DCs. And then we brought in one of the best WMS in the world. What does a WMS do? What is the challenge in a warehouse of our kind? The primary challenge in a 200,000 square feet DC with 100,000 SKUs would be nobody would know where different products have been kept. We have found many companies in India still struggling in putting in place WMS. But once we had taken a call, we were prepared to go to any length. We also had no choice - it was a do or die proposition for us. Our retail business was growing left, right and center. Thankully on automation front, things have smoothly fallen in place. After implementing WMS, we have seen our fill rate going up from 60 percent to as high as over 90 percent. Our DCs are wireless , Wi-Fi, RF enabled paperless units. Every worker works with a handheld scanner and each set costs Rs 60,000. We applied the courage on investments.There are six different software applications being used in our DCs- ERP, WMS, sortation system, conveyor system, auto weight check system and auto print and apply system. Can I get a sense of the kind of investments you have made since the beginning? We have invested close to Rs 300 crore in last four years. And we plan to invest Rs 100 crore each year, at least in the next three years. Can you explain the current scale LOGISTICS TIMES June 2012

of your primary verticals like warehousing and express division? When it comes to supply chain which includes DCs maintenance, we had broadly started with apparels and then we took on FMCG including electronics and IT and now we have cracked all categories of products, systems and processes. Now we are in a position to arrive at cost per piece, cost per carton, cost per square feet. And these costs are lower than what they used to be. We are mastering the art of managing this. In contract logistics, I would say we are ahead of the curve vis-Ă -vis other existing players. Our first focus obviously was on warehousing and contract logistics and when we developed basic strength in them, we realised our transportation system is not reliable. Around 2010 beginning, when we had streamlined the contract logistics piece, I knew the time has come to turn our focus on transportation. One that is the largest pie in the logistics business and secondly all my good work in contract logistics would be wasted if I do not have the support of reliable transportation piece. So we decided that we would create end-to-end piece â&#x20AC;&#x201C; right from vendors and vendorsâ&#x20AC;&#x2122; vendor to the end customer. That is how express division was created. Another thing was: express transportation also gave us the chance to serve outside customers. And since day one, we have been focusing on customers outside our fold. Today we are the fifth largest express transportation player in the country. And we are perhaps the only new company in the country which has created an express transportation unit in last 15 years. There have been scores of failures in this business in last two decades. We are no different in the sense that we are also relying on asset light model. But the critical difference is our reliance on technology. We are the first express transportation company in the country to roll out the real time online tracking of vehicles.We are rolling out new products in the transportation vertical such as Express FTL, Tertiary Distribution, Milk run Distribution and

Last Mile Delivery (Home Delivery & E-Commerce Delivery) and Tertiary Transport Solution. So having built a viable base wherein you have automation and high-end infrastructure as the differentials, where do you see this company going in next three-five years. What are those hard numbers you would be chasing? The timing is great for us. Even in the worst scenario, the GDP growth would be in the range of 5-7 percent. And it would be good enough to take more business from the unorganised piece. We have already signed up more than 500 companies for our express division. In contract logistics, it took us some time to convince customers that our offerings would be in the interest of their business. Now the conversion has started and we have over a dozen major customers. Just to cite an example, we have started working for the most valued FMCG firm in the country by way of taking care of their warehousing needs in Chennai. Similarly, one of the largest global chocolate manufacturer has signed up with us and we are taking care of their cold storage warehousing requirements.We do endto-end work for a major Consumer Durables customer and a major MLM player is our customer.We believe most of the large FMCG firms, consumer durables, IT companies, general merchandise, furniture, etc. would shift to the model we have created for them. I personally believe that we will be one of the largest players in the integrated, end-to-end supply chain play across contract logistics. International logistics we had started because we wanted to offer one stop shop. But in all candidness, we have not made much headway here. Brand distribution is another unique offering where growth could be tremendous. If you ask for numbers, then our target is to become a billion dollar company by 2017. At the end of the current fiscal, our topline would be close to Rs 800 crore.

different formats. That’s how the journey of Future Supply Chains started,” recalls Anshuman. FSC’s Progression– Report Card Even as Future Group had a functional supply chain system in place, forming an umbrella unit had its own set of complexities and challenges. P V Sheshadri, Head (Operations & Procurement) narrates the early days hiccups in these words and according to him the first major issue was that of change in the mindset. “ It was a difficult time because the company was going through a transformation – transforming from individual mentality of departmental functioning to organisational functioning. There were several supply chain departments but after FSC was formed, all of them were brought under one roof. We had something around 600 people on board and it took a little time for them to understand that they are now working for an organisation that is aiming big. Second thing was infrastructural challenges. The infrastructure we had was absolutely basic and in the name of technology what we had was a legacy system.” Deven Pabaru, Head of Express Division cites another critical hurdle wherein there was that perpetual feeling that whatever could be done at the back end, it would not be enough to support a robustly growing front end. “We were largely relying on manual applications and processes initially. The scale was mounting very fast for Future Group and that resulted in our unit also being pushed to pick up speed. In our kind of business, there always has to be right equilibrium between front end and back end.So that lagging behind fear was always there. Pantaloon was especially growing very fast and it always used to happen that the space booked by us for storage and distribution would become insufficient much sooner than we had anticipated. And that pressure was immense,” he says. Amidst such a scenario, the first decisive step set afoot was to consolidate the infrastructure. Earlier the startagy was to have warehouses at all the places where

Big Bazaar was expanding its footprint. But the new strategy mooted by FSC was to put in place fewer ‘big boxes’- large sized distribution centers. “ The first part of our initiative to build scale was to move to larger DCs. When we started five years ago, we used to operate more than 100 small warehouses – 20k-30k square feet units and they were mostly godowns. So in these five years when I talk of

20 large size DCs and scores of smaller storage units. And during the intial phase of their development most of these units saw the gradual addition of the advanced racking and shelf system coupled with suitable designing element. And quite subtly, alongwith the laying of physical infrastructure, the company also decided to bring in advanced automation which today is probably the most vibrant sub-

“You can ask any other retailer – can you do two lakh additional pieces per day? And in all probablity they would say no. But our response would be positive. We are already doing 1.5 to 2 million pieces every day and we are ahead of the curve.” Samson Charuvil Samuel, Chief Operating Officer Future Group SCM & Digital Commerce Supply Chain

infrastructure development- we have moved from godowns to warehouses, from warehouses to distribution centers, and distribution centers to factories. Today we have virtual factories,” Anshuman speciﬁes. On a pan-Indian basis, the FSC is today offering a cumulative storage and distribution space of around six million square feet with

plot of FSC’s growth story. “Infrastructure and automation are two pillars. We knew to cater to the growing scale in the future, there is no option but to opt for advanced automation,” Anshuman reasons. The journey of automation process began with scouting for best WMS model available in the global market. The WMS solutions of LOGISTICS TIMES June 2012

COVER STORY

“There is absolutely no compariosn if we have to judge the scenario when we had started and now. We measure our performance on the basis of throughput. Those days, the fill rate was 60-70 percent, now it is in high 90’s.” P V Sheshadri, Head (Operations & Procurement)

three companies – Manhattan, Red Prairie and Infor – were closely considered and the deal ultimately went to Infor because of its presence in the Indian market via its partner Vinculum. The entire process of automation was rolled (in different phases, of course) almost in a break neck speed manner since there was no time to lose out given the volume pressure. “I remember, I had hired an expat COO to design and implement WMS for all our DCs. After studying our requirements, he came back to me saying it will take ﬁve years to implement it completely. We said we want to get it done in one and a half years. He almost fell off from his chair. But then that was the kind of urgency we had,” Anshuman narrates. In chronological sense, 2008 onwards period has seen consistent technological empowerment of FSC’s operational base. 2008 saw the implementation of basic ERP-SAP as well as the launch of Vendor Relationship Management Portal (VRMP). WMS became operational in 2009 and the year also saw the implementation of advanced Trasnport Management System (TMS). 2010 brought in place Put to Light (PTL) sortation system followed by implementation of VTS/GPS system in the following year. So on an overall basis, LOGISTICS TIMES June 2012

the automation base of FSC comprises nearly half a dozen advanced applications today and while they are available in all the buzzing hubs, the drive to have them fully implemented in all the units has been set afoot. And this kind of technological base has brought in a world of difference when it comes to efficiency evaluation. “There is absolutely no compariosn if we have to judge the scenario when we had started and now. We measure our performance on the basis of throughput. Those days, the fill rate was 60-70 percent, now it is in high 90’s. Earlier at every warehouse, if we used to churn out 20-30k pieces everyday, it was a big thing. Now the figure has jumped up to over a lakh pieces.Our Nagpur DC has already broken the benchmark of processing over 250,000 pieces of Apparel in a single day- matching the best global standards,” says Sheshadri. Samson Charuvil Samuel, Chief Operating Officer, Future Group SCM& Digital Commerce Supply Chain, (he had spent eight years in US working for companies like Wipro and Cognizant and got the exposure to deal with global retail gaints) presents an interesting take in terms of what automation has done to FSC. “Firstly, I would say automation is a misnomer. From my standpoint, we put in technology which is a combination of infrastructure, software and processes. Autmoation is taking away a process and trying to do it with minimal human intervention, whether it is WMS or conveyor – they can be dubbed as automation. Technology in silo can’t work, it needs very strong support of infrastructure and processes.

Our investment in technology has given us the ability to serve the customers in best possible way.” And in terms of scale, Samuel is quick to emphasise the enviable position which FSC has attained. “You can ask any other retailer – can you do two lakh additional pieces per day? And in all probablity they would say no. But our response would be positive. We are already doing 1.5 to 2 million pieces every day and we are ahead of the curve” he says. Express DivisionThe New Magnet Its not big DCs and automation alone which has ﬁlled the FSC top brass with conﬁdence to handle all kinds of supply chain challenges. An equally remarkable sub-plot has been the emergence of a dedicated express division around 2010. And the rationale has been simple – providing the best eco-system for storage would not truly make you an end-to-end player capable of cornering larger share of customer’s wallet. “It took us some time to make it happen but we knew that transportation piece would be vital. And eventually we have moved on from desi trucks to a dedicated express unit of our own laced with such facilitations as GPS system, real time visibility, continuous integration with each other to reduce cost to the market and time to the market. We have been the only new player in the country to develop a road express unit in last 15 years. Many others had jumped in the fray but they were unsuccessful,” Anshuman says. Pabaru provides more details. “Two years after this company was formed, we realised that we have

done a lot of work on the warehousing side. And we knew what we are doing was unprecedented. But for transportation, we were using other service providers and that was a big gap. We realised that the last mile or the ﬁnal distribution is very important and therefore we need reliable express division which should be under our command and should have apt techlogical support so that we can provide

well structured warehousing network and we know the processes to integrate the warehouse and transport. In a nutshell: all the trappings to bolster express division’s fortune and this is what we are witnessing,” Pabaru points out. With a ﬂeet size of around 1000 vehicles straddling across the length and breath of the country, FSC express division has, in fact, turned out to be that major magnet

“We understand geography because of 150 cities retail footprint. Today we have a well structured warehousing network and we know the processes to integrate the warehouse and transport. In a nutshell: all the trappings to bolster express division’s fortune.” Deven Pabaru, Head, Express Division

superior services to our customers.” Adding on express wheels has also provided FSC the leeway to have a double-pronged sales approach. “On one hand, we decided to bundle it with our warehousing offerings and at the same time, the product is also being sold separately. And this two proned approach has started paying us handsomely. We understand geography because of 150 cities retail footprint and we know the nature of deliveries. Today we have a

to draw companies from outside Future Group fold. According to Pabaru, the unit has over 500 customers presently (of varying size and scale) and the number is growing at a fast pace. The icing on the cake is: Future Group’s contribution to this division’s earnings is only 12 percent. And while apparels, FMCG, consumer durables and IT peripherals were major sectors to garner business for the unit in the initial phase, two more verticals as prime domains of concentration have

been added - auto and pharma. “The possibilities are immense. At the end of this year, we expect the topline of this division would be in the range of Rs 300 crore,” Pabaru concludes. According to Anshuman, FSC is looking at a topline figure of Rs 800 crore at the end of this fiscal and a Rs 300 crore possible contribution from express division would certainly cement its position as the star performer. New products in the transportation vertical such as Express FTL, Tertiary Distribution, Milk run Distribution and Last Mile Delivery (Home Delivery & E-Commerce Delivery) are also expected to be rolled out this year to further bolster transportation offerings to customers. The Big Ticket Dream In the marketplace, I have heard this quite often. “FSC has created big boxes, they have pumped in money in automation but have the customers really flocked to them?” Pose this to Anshuman and he subtly underlines that this could be a parochial assumption. And that the changing tides in Indian business environment have not been understood properly. “Right from day one, our main objective has been that we will bring the best practices in consumption logistics from across the world to India. When I say consumption space,apart from retail it also includes FMCG, electronics, apparel, etc. Our customers - whether they are in retail or just manufacturing, we want to be their partners in reducing their supply chain cost and to help them in their cost to the market and time to market during the scaling up process.At a small scale, you are able to manage. At the medium scale, somehow it happens for you. But at the large scale, it becomes a huge challenge. That is the inflection point when you have to shift to technology, automation, infrastructure, large size, large number of people, etc and we are well prepared to be their valuable partners. In Indian market space, we have learnt the art of coping with the pangs of scaling up and this is what ultimately we are offering to our customers through solutions,” he reasons. In his view, FSC has been lucky to gather LOGISTICS TIMES June 2012

COVER STORY

Basic Rules for Big Boxes Ravikant Parvataneni, Head- Projects and Design, Future Supply Chain Solutions explains the components of an efficient Distribution Center (DC). The common place term of godowns and warehouses is fast giving way to Distribution Centers as customers start to realize that speed and cost benefits easily justify the investments needed for a welldesigned distribution centre. Distribution Centres form a key component of the overall supply chain as the points of Inventory Receipt, Storage & subsequent dispatch to the next link. In the last few years itself they have evolved from being simple Godowns managing a few hundred transactions per month to Hi-Tech Distribution Centres handling millions of transactions per month. The overall warehouse design can be broadly split into two parts: 1. Internal design, ie. the Product flow & Process design, & 2. External design ie. the WH building design For a warehouse to operate at maximum efficiency, while internal design with systems & technology are important, the warehousing building design itself becomes one of the most important & crucial factors. Physical infrastructure is one of the investments which once done can not be easily changed, so it is all the more important that enough thought & time is given to WH building Design. External Design The key decisions to be taken when constructing a WH are height of the building, type of flooring, ventilation and fire & safety. Warehouse building specifications need to be carefully planned and the below parameters also need to be considered. 1. Grid spacing: Column & bay spacing, position of wind bracings etc. 2. Loading docks: Size, numbers, type etc. 3. Safety: Fire hydrant, Sprinklers, detectors, etc. 4. Power and Utility: Transformers, DG sets, water storage, etc. 5. Security: Boundary walls, Gates, CCTV, PA system etc. 6. Other amenities: Truck Parking area, Drivers’ rest rooms, Trash room, etc. Internal design A well-designed, modern distribution centre takes into account the following key factors 1. Storage Strategy: The storage strategy would be determined by defining the type of merchandise to be stored,

LOGISTICS TIMES June 2012

number of Stock Keeping Units (henceforth referred to as SKUs) and categories of SKUs, dimensions and weight, mode of receipt in terms of load units ie., cases, pallets etc., and SKU wise inventory norms. 2. Stock Movement Strategy: In a typical modern warehouse stock movement is determined by throughput per day for each of the sub processes within a warehouse such as Receiving including pre-receiving process, Putaway, Picking, Sorting, Packing, Loading and Shipping etc. 3. Warehouse Layout Design: Based on the storage and stock movement strategy the flow of goods is determined. Other important aspects of design that should be finalised are• Outbound and Inbound staging area • MHE planning in terms of number of BOPTs, HPTs and Reach Trucks required • Manpower planning and type of manpower required in terms of skill levels • Section wise zoning. Based on historical sales data, storage area is divided in sections, placement of fast moving and slow moving SKUs is decided • Non Storage area Design (Office space, MHE charging area, workers’ amenities etc.) 4. IT, Technology and Automation: Basis the specific requirements of inventory and processes, technology and automation related products like, WMS, RF, Put/Pick – toLight, Conveyor systems etc. are finalised. 5. Resource Modelling: A typically big Distribution Centre employs 200 to 250 people and it is extremely important to identify and source the right people for the right job. The product flow design throws out the expected output and based on the Industrial Engineering standards, productivity norms are finalised for each activity which helps in finalising the number of people required for each activity and also for the complete warehouse. A big Distribution Centre always has a floating population of 80 to 100 drivers, cleaners etc. So while designing, things like worker’s amenities, parking areas, driver’s rest rooms, effluent treatment, garbage disposal should not to be missed out. Therefore, a good warehouse design must not only take care of material storage but also take care of people working in it so that they continue to come for work consistently and therefore deliver value to supply chain in particular & business as a whole.

Automation Next Level

this expertise and knowledge base since it was pushed by the requirements of its parental firm. “Other firms (even 3PL MNCs) could have done it too, but Retail itself was a nascent industry.” In the same breath, he quickly emphasises that the conversion has begun for the contract logistics division in terms of forging partnerhip with the front ranking FMCG firms. “It took us a while to convince our customers of our contract logistics offerings. And now results are coming in at a fast pace. Several contracts have been inked recently. For instance, we are providing dedicated warehousing solution to country’s biggest FMCG firm in Chennai and world’s biggest chocolate manufacturer has signed with us for cold storage solutions in India, a major MLM player and two major Consumer Durable companies are important customers. On

the Express transportation side, we have over 500 customers already who will become contract logistics customers” he informs. A high trajectory growth is what the FSC top brass is aiming now. According to Pabaru, express division is looking at a customer base of 3000 in next three years. When it comes to storage capacity, Samuel says FSC would need 10-12 million square feet by the end of 2015. Gen next of automation like downward spiral conveying system and dynamic PTL are well round the corner which as FSC ofﬁcials claim would be the highlights of the upcoming DC in Nagpur. Anshuman pegs the possible investment to the tune of Rs 100 crore per year in the medium run to further consolidate the operational base of FSC and assures there are mutiple routes available to raise capital (noted PE

firm Fung Capital, part of the $ 20 bn Li & Fung Group, already holds a stake of 26 percent in the company). Apart from contract logistics and express, FSC has two more divisions – international logistics and brand distribution. While international logistics is slated to continue playing a low key role, the latter could spring some surprises. “Brand distribution is an unique model. In this space, we are the only player in terms of pan-India modern trade distributor for FMCG products in the country. The idea here is to facilitate the product distribution of lesser known brands on a larger scale, much in alignment with modern trade rules.Our expertise in modern trade, retail and FMCG is behind this product helping the mid-rung companies’ products to reach to the shelf on a broader basis. We already have over 20 customers (FMCG brands) here and we supply to all the large retail chains in the country. I believe this vertical has the ability to grow big time,” Anshuman underlines. And now the moot question: as a sum total of all the efforts which FSC has already put in or would be putting in the near to mid run, what are those hard financial numbers it is chasing?“ We want to be a billion dollar company by 2017 with Future Group divisions’ share to our topline coming down to 20 percent from the present 60 percent level. And its not an exaggaerated figure. In next five years, Indian logistics business would grow to be in the range of $250 billion. Even if the organised players corner 10 percent of the pie, it would be a perfect setting for three-four aggressive players to become a billion dollar company. And we want to be part of that club,” concludes the top boss of FSC. Certainly a tall figure as it looks today but one must not forget the lineage of FSC wherein its parental firm had seen topline shooting to its first billion dollar from a base of Rs 200 crore in five years and then another billion dollar added in next three years. Coupled with the growing opportunities in Indian market space and FSC’s preparedness, certainly its idea of a perfect future could have been no different. LOGISTICS TIMES June 2012

QUICK CHAT

â&#x20AC;&#x153;No change in our commitment to the Indian marketâ&#x20AC;? Having sold its road transportation unit recently coupled with the news of UPS buying out TNT on a global basis, the marketplace is abuzz with the theory that TNT India has slipped in a quiet mode and future developments would only be directed by the nature of the deal between the two global logistics giants. Harpreet Singh, Director (Sales & Marketing), TNT India responds to that critical perception in a candid conversation with Ritwik Sinha: LOGISTICS TIMES June 2012

you have international air frieght as the big driver? Right now, we are focusing on international - exports and imports. And in domestic segment, we are primarily concentrating on air freight. Parcel carriage is a major business for us – both international as well as domestic. For international express service, how would you explain your present capacity? Last year, you had introduced a freighter to Delhi market. We have recently tied up with Emirates which provides us much better uplift capacity across India. And I can tell you we have a better capacity now. Can you give me number in terms of your weekly capacity? I would not like to get into numbers but the growth has been much better than our expectations. We have withdrawn our freighters after the deal with Emirates. You have to look at the broader objective. The objective is that our customers want a delivery from point ‘a’ to point ‘b’ within the timeframe which we commit. He is not bothered whether you are ferrying it in your own freighter or using a third party. Its working well for us. We are getting uplift capacity from seven-eight airports in India now.

The impression out there in the market is that TNT India has slipped into a quiet mode? I don’t think we have been very quiet. There have been activities at our end. Recently we sold our domestic transportation business. So there has been a lot of news about TNT. But even otherwise, when it comes to business development, we have traditionally been a quiet player. We believe in relying more on customer-centric approach. What was the rationale behind selling off domestic transportation unit? Conventional wisdom suggests that if you are operating international express business, it is advisable to have your own road transportation wing in a marketplace like India. You are right. But we believe that international operation is still tier -I, tier-II and metro-centric business in India. Tier-III and tierIV pockets are still not in alignment with international business though they have sizeable domestic business. So in that sense, it is not compatible. Our domestic road business was doing well but it was simply not aligned to our main business. Our focus now is clearly to get much stronger in express business. And let me clarify - we haven’t completely exited domestic business. We have exited road express part but in domestic air freight, we are still there. So right now if I talk about your operational profile-

The market is abuzz with the theory that you are in a shrinking mode – you have sold off your road transportation business and withdrawn your frieghter. All said and done, when you fly your own frieghter it sends the message that you are a committed player. Isn’t it? That’s a way of looking at things. We are looking at providing better services to the customers. And if that means we go with a third partry, what’s wrong in that? It does not mean our commitment to India has gone down. Service considerations are paramount for us. UPS buying TNT globally, the deal almost seems to be certain now. What implications it has for TNT India? Ans: Personally, I do not have enough information to answer that question. But as and when the deal materialises, do you expect a stronger unit emerging after this buyout? In my personal view, yes. TNT is number one in Europe and UPS in the US. So any competition would be taking note of this. The merged entity would be an ideal one and let me tell you, it would be very complimentray. In next one year, what all can happen in TNT India quarters? As far as we are concerned, UPS-TNT deal is happening and it is very much at the back of our mind. But we would continue to be working and focusing on areas which we feel would be driving our growth.

LOGISTICS TIMES June 2012

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AUTO LOGISTICS

Management of finished vehicle yards by 3PL providers Finished vehicle yards in India are growing rapidly in their capacity ranging from 10000 cars to 30000 cars and beyond as car maker Prof. Akhil Chandra, Companies Institute of Logistics & like Maruti Aviation Management Suzuki, Hundai and Tata Motors and many others are planning to set up huge Finished vehicle yards country-vide covering the states like Tamilnadu, Maharashtra , Gujarat and Haryana. This advance planning is in line with the Sales Forecast for the financial year ending 31st March,2012 expanding to 3 million light vehicles being manufactured in India and further by 2015 to have almost doubled to just shy of 6million units , with an increase to 8million units by 2019 and 10million units by 2024.Growing appetite of Indian consumer for light vehicles was also evident with the successful Auto Expo 2012 currently staged in New Delhi with almost every Auto manufacturer wooing the Indian customer with the new launches of cars each eager to have their market share in the growing Indian pie of finished vehicles. The huge expansions in vehicle yards are however associated with new challenges for the third party Logistics providers and shippers due to associated complex sets of problems which can be solved only by introduction of suitable technology ranging from information and communication technology and process control and Automation. In this article, we shall look into how 3PL providers/shippers in Automotive segment could solve the complex problems of managing huge vehicle LOGISTICS TIMES June 2012

yards with mammoth size comparable to several football fields. In order to keep their bottom line intact and growing, 3PL Service Providers have to keep three things in mind to manage their finished vehicle yard efficiently viz visibility in their inventory of finished vehicles , optimization of space utilization in the vehicle yard and integration with their customers ( dealers and vehicle manufacturers). Easier said than done, this requires to take first a holistic view of major pain areas in a large vehicle yard managed manually and then solve them through technology available. a) Time waiting inside the yard is unknown. b) Vehicle Location in the yard is unknown to the yard manager who is responsible to quickly unload the vehicles and the time waiting of the

to solve other associated real time and pressing requirements in the yard which are as under. What labour do I need? Which cars are blocked? How much capacity do I have? Where in the yard is damage occurring? Which cars are to be loaded to train and which to truck? How did we do last month, and can we do better? And more..... Visualization armed with yard monitor through information and communication technology can give better insightâ&#x20AC;Ś. better understanding. Efficient equipment yard inventory management requires the ability to automatically track how much inventory is on hand, where and to whom it is

Trailer causes delays. c) No visibility in loading and unloading and the departure time at the distribution centre. d) Checkout delays, errors and wrong trailers. This leads to a very lengthy process

being delivered, how long it has been outstanding, and how often it is used. Existing manual equipment inventory management methods can sometimes work, but as the volume of equipment or activity increases, the need for automation is paramount to running an efficient and

MEDIA PARTNER

LOGISTICS TIMES June 2012

AUTO LOGISTICS

profitable operation. How is it really done? 1. Vehicles are tagged with RFID tags. With the help of these tags, vehicles will be tracked automatically as they move in and out of the yard. 2. RFID readers are installed at key entry and exit points and at locations within the yard. These readers provide instant visibility to what is leaving and entering the yard. As well as its location. 3. RFID badge tags are provided on the drivers. This allows to track driverâ&#x20AC;&#x2122;s movement and to ensure the correct association of driver with the associated vehicle. Further whether for security reasons or to ensure proper delivery and accountability, tracking authorized repair crews to the correct vehicle and equipment contents on the vehicle is essential for effective utility yard management aided by such Badge tags. 4. Such RFID sensors and readers are connected to a Wi-Fi local LOGISTICS TIMES June 2012

In order to keep their bottom line intact and growing, 3PL Service Providers have to keep three things in mind to manage their finished vehicle yard efficiently viz visibility in their inventory of finished vehicles , optimization of space utilization in the vehicle yard and integration with their customers area network connecting them to a warehouse management system (WMS) server. 5. Yard monitor placed in the central control room provides for vehicle yard management provides real time inventory visibility, vehicle locations within the yard and control of outgoing and incoming vehicles at the gate. By integrating with WMS systems following benefits are

derived. 1. Reduced yard operations costs and increased productivity due to a high level of automation. 2. Easy traceability of vehicles within the yard by way of real-time tracking through a visual interface. Vehicles such tagged with RFID tags will be tracked automatically as they move in and out of the yard. RFID readers located at key entry and exit points and at locations within the yard provide instant visibility to inventory

leaving and entering the yard, as well as its location. In addition, RFID tags have on-board memory so you can store a complete history of the asset (e.g. life, usage rate, etc.) directly on the tag. 3. Real time visibility of the yard and vehicles. RFID tags automate the receipt of vehicles in the yard and reduce the manual intervention. Whether due to peak periods or as part of a bulk delivery, equipment often get missed at check-out. Manual equipment check-in/checkout procedures are prone to errors and delays. Equipment is sometimes â&#x20AC;&#x153;lostâ&#x20AC;? in the field due to not knowing where or who it was delivered to. An automated gate check solution can significantly increase accuracy and prevent loss of equipment. 4. Customized MIS report generation for better analysis and planning. 5. Ranking of vehicles in order to reduce

rework costs. 6. Recommendation of a suitable parking location for each vehicle on the basis of the available slots and the parking settings defined. 7. Visual damage tracking mechanism in order to enable yard jockeys to effectively communicate the location of damage to workshop Mechanics. 8. WMS has an activity management module that identifies the activities that need to be performed on each vehicle, and schedules a time for the performance of the activity. This streamlines the workshop process and ensures timely dispatch of the vehicle from the yard. 9. Yard view management software integrated with WMS graphically can display for example say rectangles to represent trailers and their locations, color-coding them to indicate their status - empty or loaded, waiting to be loaded or unloaded, or in the process

of being loaded or unloaded By integrating the above local area network with the customers through internet, complete visibility is provided to the customers and manufacturers with warning alarms and alerts sent through E-Mail. Summary RFID managed yard management systems are already in vogue in developed countries. Such web based yard managed systems provide real time location system capabilities to manage the trailers and vehicles in the ever growing complex and large yard environment and complete visibility of the inventory to shippers and third party logistics service providers. It is imperative and a must that Indian shippers and 3PL providers also embrace such technological solutions without delay to remain competitive in the present cut throat competition in Automotive domain due to fresh arrivals of Automotive multinationals in the country.

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SCLG Summit in Dubai With a core objective of further growing the UAE’s logistics sector, Supply Chain and Logistics Group (SCLG) gathered industry experts from over 15 countries to the ‘5th Global Logistics and Supply Chain summit’ in Dubai late last month. SCLG, a not for profit business group working under patronage of Dubai Chamber of Commerce and Industry, is engaged in advancing and addressing the challenges of the supply chain and logistics industry. During the inaugural address at the summit, Atiq J. Nassib, Senior Director, Dubai Chamber, appreciated the fact that SCLG has put together a world class summit that has far exceeded expectations. Around 14% of UAE’s GDP is contributed by the supply chain and logistics sector and it is an integral part of our economy. Dubai’s supply chain and logistics sector saw growth even during the downturn and will continue to grow. Dubai is an attractive destination for the global logistics firms due to the city’s modern and extensive infrastructure.” Mohammed Sharaf, Group Chief Executive Officer, DP World, said in his speech, “Innovative system solutions in the field of maritime logistics are key to ensuring the efficient flow of goods along the supply chain at local, regional and global levels. Operating in the ‘market space’ created by Information Technology is not an option, but a necessity to secure the industry’s future. ” 5th Global Logistics and Supply Chain Summit 2012 with the most relevant theme “innovation, infrastructure and growth” attracted speakers, panelist and over 200 delegates from across UK, Malaysia, India, Singapore, Netherlands, Germany, Switzerland, Austria, Nigeria and Hungary. The summit included key note speeches, expert panel discussions and eight delivery tracks to communicate case studies, experience and expertise to benefit the industry. “Dubai in itself is an example of great leadership for innovation. Dubai has proven visionary leadership, business agility and execution ability to deliver perfect solutions to individuals and organizations for any business vertical. We are delighted to have hosted such a large Supply Chain and logistics fraternity from across the globe at our summit in Dubai. We were able to formulate and discuss several strategies and

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solutions for countering the current market conditions and take measures to further grow the industry in 2012. Through these summits, SCLG helps to build strategies for companies, support the government in policy formation in industry growth, with an aim to weather these global challenges. We strongly believe that through its innovative approach this industry will consolidate and grow further by end of 2012,” said Shashi Shekhar, Founder and Group President - SCLG. After the invigorating sessions, SCLG also organised a gala networking event for all the delegates and many other SCM professionals and non delegates. Many CEOs and high-level ofﬁcials were present to grace the occasion. A ﬁlm commemorating DP World’s 40 year journey, highlighting its role in nurturing trade in the UAE, was previewed at the summit. The summit was supported by many leading organizations such as DP World the signature sponsor, Al Futtaim Logistics - the Gold sponsor, ADPC, Apparel Group, Dulsco and Tim Hortons among others.

End Hunger: Walk the World In a world where more than one billion people don’t have enough to eat, the United Nations World Food Programme (WFP), together with its major corporate partner TNT had their annual global walk against child hunger on Sunday, 3rd June 2012 to help “End Hunger: Walk the World”. Government dignitaries, UN agencies, WFP corporate partners, their employees, friends and families were part of the walk across 24-time zones in 24 hours, to raise awareness about hunger for one day, and raise money to feed poor school children. The walk started from Lodhi Colony Main Market witnessed people from all age groups. Prominent personalities likeMr. Bob Hiensch, Netherlands Ambassador to India, Ms. Jan Henderson New Zealand High Commissioner and Mr. J. K. Raman HeadExternal Relations & Advocacy – WFP also participated in the walk. The popular city ‘Cycle for Fun’ group, Green Pedals was also a part of the walk. cyclists of Green Pedals from varied backgrounds showed their support and solidarity by being part of the event yesterday.

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Best Air Cargo Industry Customer Care Award AirAsia was named winner of the ‘Air Cargo Industry Customer Care Award 2012’ in Shanghai, China early this month, beating some of the most prominent global aviation giants. AirAsia received the award from Air Cargo Week (ACW), a respected UK-based air cargo news publication, after emerging first in a global survey that polled industry peers and shippers. Apart from the industry votes, AirAsia was also measured on three key criterions: Proactive approach to customer service, effective strategy for problem resolution & defined and measurable customer care policy. AirAsia had won the same accolade in Munich, Germany last year; making it the first airline to have won the award two-years in a row and the first ever low cost carrier to be awarded this global recognition.

ACI award for MIAL

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Vikram Sethi, Vice President, Terminal Operations, MIAL was handed the award for the 3rd best airport globally and the second best airport in India for airports in the 25-40 million passengers per annum (mppa) category, as a part of the annual Airport Council International (ACI) Airport Service Quality (ASQ) awards for 2011 at a glittering ceremony in Singapore. This was well attended by several dignitaries from the aviation sector (see attached picture). CSIA had emerged as one of the top 3 performing airports in the annual ACI Airport Service Quality Awards for 2011. The survey was conducted at 180 airports across the globe. The ASQ passenger survey undertaken by ACI, an autonomous and independent body measures customer feedback on a range of service delivery parameters that track the customer experience at an airport from the moment of arrival to the departure gate. Analysis of this “real-time” data, recorded on the day of travel, serves as a guide for better aligning service provision with customer expectations. By benchmarking an airport with other similar airports, ASQ enables airports to see where they stand in competition with their peers.

RNI No. DELENG/2011/39329

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