Lt october 12 fpor net by Raj Misra

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October 2012

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QUICK CHAT Pradeep Panicker

Devdip Purkayastha President , CHEP India

BIG ISSUE DEVIL IN RETAIL?

POLICY WATCH BIG BANG REFORMS...

Tablets & Smart Phones

COLLABORATION: Mantra for a Modern Supply Chain

Logistics Times

CONTENTS

All about Transportation, Distribution & Infrastructure

Volume 3: Issue No.6 * October 2012 Editor in Chief

Raj Misra rajmisra@logisticstimes.net

Editor

Ritwik Sinha ritwik@logisticstimes.net

Sub Editor

Neha Richariya

Photographer

Mohit Malik

Designer

Kausar Syed

Circulation & Distribution Legal Advisor

Kamruddin SaiďŹ Rakesh Garg

Our Bureau Mumbai

Rahul Kumar rahul@logisticstimes.net B Shekhar

Bangalore 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 Ramesh Kumar Member, National Committee on Supply Chain & Logistics, Govt. of India

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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26 COVER FEATURE COLLABORATION: Mantra for a Modern Supply Chain Edit Note

News Briefs

Report

Product

34 BIG ISSUE

Devil in Retail?

16 QUICK CHAT

Pradeep Panicker President, AICF

POLICY WATCH

Big Bang Reforms

EVENTS

EDIT NOTE

FDI in MBR & Supply Chain Reforms deluge! Yes, what has happened in this country from around mid-September to early days of October can’t be underlined in any less emphatic superlative. After a prolonged spell of policy paralysis or camatose, prime minister Manmohan Singh has once again shown his assertive side (something which he had displayed in 2008 while pursuing the clearance of Indo-US nuclear deal) and pushed through a spate of reform measures which were lying in cold storage for a long time. The government is surviving despite the pulls and pressures both from outside and inside even as there are many who believe that it will have to ultimately pay the price for showing audacity of an extreme nature. But as of now, the message from the government quarters is loud and clear: we will bite the bullet come what may. One wishes the assertiveness of this kind would have been shown just after the beginning of UPA-2 tenure when it would have been easier for them to put the reform wagon on the fast track. But that’s another story… Among the set of reform measures announced recently, FDI in multi-brand retail is certainly one initiative which has a direct connect with logistics and supply chain industry. And as you flip through our Big Issue section in this edition, you would notice that flagbearers of Indian logistics industry are by and large looking at the initiative as that potential catalyst which would make decisive difference. Its no secret to anybody that supply chains meant for multi-brand retail are the most complex given the intrinsic urgency. Indian LSPs, to some extent, have learnt the tricks of catering to big format retailers (eight domestic corporate giants have entered into this arena in last 10-15 years) and, therefore, even if the scale picks up gradally, they would not be completely unprepared. However, those basic learnings would have to be converted into specialised expertise as and when FDI in multi-brand intiative starts delivering results. There are very interesting observations you would notice in the Big Issue section. One industry representative says this move could separate men from boys in the logistics arena. There are chances of most of the noted LSP vendors of global retail giants becoming more aggressive in the Indian market is another interesting prediction. On the flip side are the concerns if we have the technology and adequate trained manpower which could get aligned with demand deluge which may be generated. Another bold statement is: like everywhere else, MNC retailers would display that typical ‘squeeze everyvody’ syndorme here as well. However, on an overall basis, nobody from logistics and supply chain industry has reported noticing devil in retail and that’s a big plus. Meanwhile, in the cover feature this month, we are turning our spotlight on CHEP India – an interesting company with presence in over 50 countries across the globe making a difference to the supply chain regime in those locations with their pallets and crates and several other value add offerings. The company is yet to reach its fifth anniversary mark in India and has braved two downturn cycles but as the head of its Indian unit Devdip Purkaystha underlines: the company’s core belief that collboaration is the mantra for modern supply chain is finding expression on Indian turf as well. Waiting for your feedback Ritwik Sinha ritwik@logisticstimes.net

LOGISTICS TIMES August 2011

NEWS BRIEFS

Industrial growth to be less than two per cent Growth prospects for India’s industrial production look quite weak and the output may show less than two per cent expansion in the current financial year, an ASSOCHAM study has indicated. The not-so-bright outlook for the industrial growth has been projected despite the fact that there are visible signs of improvement in the business confidence in the last two months due to several bold policy initiatives by the government. However, as the chamber said in a previous study, there would be a lag between the improvement in the business confidence and the conversion into the growth pick-up.

“In any case, it is not only the business confidence but also the consumer confidence all through the world, which is at low ebb and that is a real area of concern,” said ASSOCHAM President Rajkumar N Dhoot. The manufacturing, the main stay of the overall Index of Industrial Production (IIP) remains in a quite a bad shape and so are the other critical sectors such as capital goods, durables and non-durables. The IIP grew by 2.6 per cent in the financial year of 2011-12 and most of its slowdown had come from third and the fourth quarters. The IIP had grown by a healthy 6.1 per cent in the first quarter of the previous year, whereas it has dropped to minus 0.1 per cent in the April-July period of the current fiscal. Looking forward, the pressure on the manufacturing, capital goods and durables will only remain mainly from high raw material cost, prolonged slowdown and recession in several parts of the world, high interest rates and low consumer confidence.

DHL Express announces price increase DHL Express has announced its annual general price increase in India for 2013. The adjustment will be effective from January 1, 2013. In India, it will amount to 6.5% on average. A company release underlines that DHL’s annual rate increase is based on a number of factors. One of its principal considerations is the impact of general price inflation on input costs for the express industry. It also takes into account costs that are specific to the express industry, which are not directly linked to inflation, including the impact of regulatory measures, such as additional security requirements. The industry has absorbed costs in order to comply with these externally imposed requirements whilst ensuring that delivery times and service quality continued to improve. In fact, a recent ATKearney study states: “Volumes for the industry have increased consistently in recent years, while revenue per shipment has not yet returned to 2008 levels.” “The price increase that DHL Express is putting in place

globally for 2013 is aimed at offsetting rising costs, including external costs that are out of our direct control and cannot be compensated through productivity improvements or economies of scale,” said Ken Allen, CEO, DHL Express. “We are introducing our rate adjustment for 2013 with a clear focus on maintaining our value proposition. Our annual price increase is an important factor in maintaining the significant investments we make in our global network, which offers world class delivery performance for the benefit of our customers.”

Debt refinancing Last month, Essar Ports announced refinancing its debt in its subsidiary Essar Bulk Terminal Limited through take out finance scheme of India Infrastructure Finance Company Limited (IIFCL). Essar Ports has availed the take out finance scheme to reduce its interest rate by over two and half per cent on Rs 405 crore which is part of debt taken for building its 30 million tonne capacity bulk terminal at Hazira in Gujarat. Takeout finance of the infrastructure projects by IIFCL is the government initiative wherein an infrastructure project on commissioning can replace some of its costly domestic rupee debt with finances from IIFCL. This lowers the interest burden on infrastructure projects and facilitates incremental LOGISTICS TIMES October 2012

lending to infrastructure sector by freeing up the capital of banks. The company, which has a total debt of about a billion dollars could explore further availing the benefits of such a scheme for cutting the cost of its infrastructure project, Vadinar Port Terminal, a 12 million tonne all weather deep draft facility which is located in Gujarat. Speaking about the development, Shailesh Sawa - Director, Finance, Essar Ports Limited said, “As part of our constant endeavour to reduce the cost of debt, we have availed government initiated scheme of take out finance. This will reduce our cost of debt and we will undertake more such initiatives to deliver better returns to our shareholders.”

LOGISTICS TIMES October 2012

NEWS BRIEFS

Expanding ‘Priority Alert’ Services FedEx Express, recently announced expansion of its ‘Priority Alert’ and ‘Priority Alert Plus’ inbound and outbound services, introducing them to more than 70 countries including 29 countries in Europe, Middle East, Indian Subcontinent and Africa. FedEx Priority Alert TM and FedEx Priority Alert PlusTM will also be offered on domestic services in Switzerland, the United Arab Emirates, Mexico and Canada. According to a company release, FedEx Priority Alert packages are identified with a bright pink tape to signal their priority status when it comes to loading and unloading. Customers use FedEx Pri-

ority Alert to ship critical materials for the financial, aerospace, electronics, manufacturing and healthcare industries, where timing and visibility is of the essence. Customers using FedEx Priority Alert also receive 24/7 support from a team of dedicated global service analysts. These specially-trained analysts provide an added level of proactive monitoring and notification of the status of a shipment, whether it’s moving through the EMEA region or internationally. Designed primarily for the unique needs of the healthcare industry, Priority Alert Plus also includes added services to preserve critical shipments, including dry ice replenishment, gel pack reconditioning, and access to cold storage to help keep safe potentially life-saving shipments within the correct temperature range to protect the integrity of the contents from start to finish. “Our customers expect agility, speed and reliability for their global supply chain solutions. That’s why we introduced FedEx Priority Alert services which offers our customers endto-end visibility with 24/7 monitoring, priority boarding and recovery measures for their critical shipments,” said Carlo Novi, managing director, Sales, HealthCare Solutions, FedEx Express EMEA.

Schlanger takes over as CEVA CEO CEVA Logistics, one of the world’s leading non-asset based supply chain management companies, announced the retirement of John Pattullo, Chief Executive Officer, effective 12 October, 2012. Marvin O. Schlanger, CEVA’s current Chairman of the Board, will be appointed CEO. However, Pattullo will continue to serve on CEVA’s Board of Directors. “When John came to CEVA, he expressed his expectation of staying with the company for five years,” Schlanger said. “Under his leadership, the integration of TNT Logistics and EGL was successfully executed and the company’s unique customer-focused, end to end operating model successfully developed. He has also assembled a world class leadership team. All of this has allowed CEVA to serve our customers better and to grow faster than the market. We want to thank John for his strong leadership of the

company and look forward to his continued guidance as a member of our Board.” Schlanger added, “I look forward to working with the talented and dedicated employees of CEVA as we execute our strategies to become the most admired company in the supply chain industry.” CEVA is owned by affiliates of Apollo Global Management LLC, a leading global alternative asset manager.

Startrek Logistics is now SPOTON India Equity Partners (“IEP”), a leading, independent, control oriented private equity firm based in Mauritius, having acquired the domestic road express business of TNT India in December 2011 and operated it as Startrek Logistics, has now unveiled the new service logo and brand for the business. Hereafter Startrek Logistics Pvt. Ltd. will now be operating with the service brand as SPOTON - Engineered For Accuracy. Abhik Mitra, Managing Director, SPOTON & Platform CEO, IEP - Logistics Investments, said, “Nine months after having acquired the business, we have now given birth to a new brand - SPOTON. It’s been an exciting journey

LOGISTICS TIMES October 2012

resulting in the successful transition and growth of the business. SPOTON is represented by 3 colours - Orange, Green and White, similar to the Indian flag. The logo incorporates a network with a parcel at it’s centre signifying the integral customer and service centric focus with the backing of a well organised network.” He further added, “The logo can also be interpreted wherein the parcel is delivered accurately and on-time consistently with quality at every step. We believe the core value of our brand is ‘The System is the Service’, where the System is our network of people, processes, infrastructure and technology all baked into one identity.”

NEWS BRIEFS

LOGISTICS TIMES October 2012

POLICY WATCH

Big Bang Reforms are out of closet... finally! “The time for big bang reforms has come…We have to bite the bullet. If we have to go down, let us go down fighting”. Manmohan Singh to cabinet colleagues on 14th September, 2012

Himanshu Shekhar

History repeated itself in September this year. The political environment in the country resembled what had happened in July, 2008 when Prime Minister Manmohan Singh chose to go ahead with the Indo-US Civil Nuclear Deal despite Left’s threat to withdraw support. Days after the Monsoon session of parliament got over, the Manmohan government took a series of bold decisions in the second week of September to restore the waning confidence of investors, both domestic and international, in an attempt to revive the falling growth rate and bring back the animal spirit in the economy. The union cabinet decided to approve an upward revision in diesel prices and FDI in Multibrand Retail, Aviation, Broadcasting and Power Exchanges. This was done despite the threat of withdrawal of support by a key UPA ally, Trinamool Congress. In an unusual move, PMO issued a statement on behalf of the Prime Minister minutes after the cabinet meeting was over: “The Cabinet has taken many decisions to bolster economic growth and make India a more attractive destination for foreign investment. I believe that these steps will help strengthen our growth process and generate employment in these difficult times.”

LOGISTICS TIMES October 2012

This was an attempt by the Prime Minister of CII and industrialist, Adi Godrej to pull the reforms out of the shadow of argued: “…the recent announcements Coalgate. He also had to salvage his own aimed at fiscal consolidation and attracting reputation as a reformer. But Manmohan foreign investments are most welcome and did not get the support he desperately stand out as next generation reforms by wanted except from the industry. Within the Government…The announcements a week, the political cost of ignoring of 13th and 14th September have lifted Mamta’s protest became too apparent. investor confidence, which was sorely She promptly withdrew support after needed. And probably for the time being, the Prime Minister ignored her threat India has avoided being the first BRIC and the government issued notifications country to be downgraded by the rating to implement these decisions. After her agencies”. withdrawal of support, the Manmohan At the moment, the PM does not seem government became a minority deterred by the fact that he is running government. The consequent political a minority government. He seems uncertainty brought back memories of determined to take the reform process the controversial confidence vote of forward especially in the infrastructure July 2008 which had followed Left’s withdrawal of support to UPA-1 over the Indo-US civil nuclear deal. NEW MEASURES News channels debated as to how long the UPA-2 A) FDI in Multi-brand Product Retail would survive in power. Trading: Media analysts probed the 51% FDI in Multi-Brand Retail Sector numbers game. Psephologists Approved conducted mid-term polls. Retail outlets only in 53 select cities with But as of now, the UPA population of more than 10-lakhs government seems well States authorized to take a decision on prepared to handle the political whether they wish to allow FDI in fallout of Mamta moving out this sector of UPA-2. As he did in 2008, At least 50% of total FDI brought in Samajwadi Party president shall be invested in ‘backend Mulayam Singh Yadav has infrastructure’ again chosen to continue his B) FDI in Civil Aviation Sector: support to the UPA-2 from Approval to foreign airlines to make outside. Mayawati too has up to 49 percent foreign investment decided to continue extending in scheduled and non-scheduled air support to UPA-2 as of now. transport services The industry has strongly C) FDI in Power Trading Exchange: backed the government’s Foreign Investment upto 49% allowed in reform push. In a meeting Power Trading Exchanges with Finance Minister, P Chidambaram, the president

sector. He outlined his agenda in the full Planning Commission meeting on 15th Sept 2012: “The most important area for immediate action is to speed up the pace of implementation of infrastructure projects…Power projects are held up due to lack of fuel supply. Coal projects are being delayed because of environmental clearances and forest clearances. Port projects have slowed down because of security clearances. Many of our infrastructure sectors face financing difficulties which call for some creative solutions”. Along with a series of reformist measures to boost investors’ confidence, the Prime Minister also plans to personally monitor the new measures aimed to fasttrack the implementation of important central sector projects:“The Investment Tracking System, the monitoring of large PSU investments, the process to speed up security and other clearances are all part of the effort at de-bottlenecking…I have asked the Planning Commission to make a quarterly assessment of performance against targets in the infrastructure sectors. I will personally review the situation based on the performance in the first six months”. (Speech at Full Planning Commission meeting; 15 Sept, 2012) The political upheaval does not seem to have deterred UPA-2 from moving forward on the reforms front. In the first week of October, the union cabinet took a series of ambitious decisions again to reform the insurance and pension sectors pending ever since UPA-1 came to power in May, 2004. The Pension Fund Regulatory and Development Authority Bill 2011 proposes to allow “the foreign investment ceiling in the pension sector at 26 per cent or such percentage as may be approved for the insurance sector, whichever is higher may be incorporated in the present legislation”. Similarly, the amendments in the Insurance Laws (Amendment) Bill 2008 is aimed to increase the FDI cap from existing 26% to 49% with the argument that this is necessary “to meet the growing capital requirement of insurance companies”. But the fate of both these bills would depend on how successful UPA-2 is in cobbling through a consensus to muster the required numbers in both

Lok Sabha and Rajya Sabha to push through such INDUSTRY’S WISHLIST controversial legislations. The government will have to 1. Government must fast-track larger convince both Mulayam and projects, improve coordination between Mayawati before it can take and among different ministries such reformist legislations to 2. Steps must be taken to reduce Fiscal parliament for a wider debate. Deficit Considering their opposition 3. Fast-track the UID/Aadhar scheme to the government’s decision for direct cash transfer to targeted to allow FDI in Multi-brand beneficiaries Retail, it seems to be a 4. Move toward decontrol of diesel as daunting task. recommended by Kelkar Committee Meanwhile, Mamta’s decision Report to move out of UPA-2 has 5. Build up political consensus on GST led to an intense nation6. Set-up a Financial Institution to wide political debate on the channelize investments from Insurance merits of such ambitious Companies and Pension Funds into the economic reforms. The Infrastructure Sector. opposition parties held protests all over the country against the decision to allow do much more than just take reformist FDI in Multi-brand Retail and a hike of decisions. As the CII delegation urged the Rs. 5 in diesel. It became such a hotly Finance Minister P Chidambaram in the debated subject that Prime Minister first week of October that government chose to address the nation to clarify his needs to intervene to control “the fiscal government’s position on this issue:“I situation, starting the investment cycle, promise you that I will do everything simplification of taxes and means of necessary to put our country back on the rejuvenating the manufacturing sector”. path of high and inclusive growth. But Prime Minister has taken a calculated I need your support. Please do not be political risk in taking such ambitious misled by those who want to confuse you reformist decisions within a span of by spreading fear and false information. three weeks. His government appears The same tactics were adopted in 1991. stable as of now. Though it appears They did not succeed then. They will not certain that the fate of UPA-2 would succeed now” (September 21, 2012). be decided in the coming months by For now, the dust has settled down since the twists and turns in UP’s electoral Mamta moved out of the UPA. The battle-field. An early election doesn’t UPA-2’s gambit seems to be working as suit the political interest of Mayawati of now. Sonia Gandhi is now planning as she lost power to Samajwadi Party a significant reshuffle in both Congress in UP assembly polls just seven months organization and government this month ago. She would like the Akhilesh Yadav to refurbish the functioning of both her government to lose credibility and get party and government as she gears up to discredited in the eyes of the electorate tackle the intense opposition onslaught before another round of polls are held on the government. Rahul Gandhi’s in Uttar Pradesh. On the other hand, ascent in Congress hierarchy is expected buoyed by success in UP polls, Mulayam to be institutionalized in this reshuffle. has started positioning himself as the The next challenge would be to leader of a potential third front. But he effectively implement the policy knows the majority of political parties decisions announced. PM recently are not in favour of an early poll and asserted- “We will do what’s good for so he has chosen to silently nurture the country. Reforms are not a one- his ambition to become the prime off process,” he told reporters on the minister! sidelines of new Chief Justice of India’s (The author is a senior journalist oath-taking ceremony in Rashtrapati working with NDTV) Bhawan last month. But UPA-2 has to

LOGISTICS TIMES October 2012

QUICK CHAT

❝We would represent all stakeholders

❞

A new association for air cargo business – Air Cargo Forum India (ACFI)- came into existence early this month. The forum promises to emerge as an umbrella body bringing together all stakeholders of the business on a single platform to contribute their bit to improve air cargo logistics. Intially, ACFI would be working to collectively put in place efficient processes at Delhi airport. The forum was unveiled on 10th October in Delhi and on the sidelines of the inaugural session, Ritwik Sinha engaged Pradeep Panicker, President of ACFI for this quick chat: You have launched a new forum or association today for air cargo segment. But there are already half a dozen associations which are working in this area as well as related verticals. Given this scenario, the obvious question is: how you would be different from the existing associations? Air Cargo Forum India (ACFI) is going to be an association which would represent all stakeholders, whereas other associations belong to specific segments of the trade. So under ACFI, for the first time we are bringing together all stakeholders to develop a macro perspective and derive more efficient end- to- end solutions. Please remember, our business is driven by a logistics chain which could be as strong as weakest members of the chain. So we are trying to strenghten all segments of the sector so that we provide end- to -end efficient

LOGISTICS LOGIST LOG ISSTICS IST S IC ST ICS TI TTIMES IMESS Oct Octobe October obe berr 22012 0122 012

solutions which should be lean, mean and green. Has it been launched on a pilot basis right now? In operational terms, it has been launched today. But we have been working on this for quite sometime – almost eight months. We have already been working on various projects like improving the clearance time and thereby reduce the amount of delays at the end of the day. Subsequently, we have also started working on e-initiative wherein we have been able to send goods by adopting electronic exchange means replacing physical documentation. This is going to save four to eight hours for airlines and the freight forwarders and this would also reduce about 250 papers per flight. These are the two initiatives we have already undertaken and we will take them further. Now we are looking at developing industry specific sub-groups to look at specific solutions. You are looking at three verticals

broadly… We are looking at three-four verticals. They are: apparels, auto-components, pharma and may be electronics. And to focus on these segments, we are forming sub-groups which would consist of all stakeholders in these businesses. There will be members from freight forwarder industry, CHAs, express companies, airport and terminal operators, etc. So we are looking at all the stakeholders coming together and derive a solution to make the entire flow of goods more efficient. Any specific reason to choose Delhi airport as the starting point? Most of the founding members are from Delhi. That’s how we have started and decided to have Delhi as the point to commence our operations. And let me tell you, everybody has liked the idea. When we started meeting senior government functionaries specifically in ministry of commerce and civil aviation, they have

all welcomed the initiative that a national body to improve air cargo operations is coming into existence. We may appear out to be a Delhi-based organisation in the initial phase , but we already have members like DHL and Indigo which operate on a pan-India basis. We have invited all airports and airlines to become our members. We would certainly not restrict our focus to Delhi only. We would eventually roll out in other parts of the country as well. We clearly have a national perspective. Today you have announced the formal launch of this association. How many members have signed up with you? Today we have 20 members on board. And more would be joining us soon since we have received many applications for membership. By the end of the year, we expect to have around 100 members with us. Are you also speaking to existing associations for somekind of alliance with them? Yes, of course. Freight Forwarders Association of India has already become the honorary member of the association. EICI and Cargo Handlers Association too have shown willingness to join hands. IATA might also join hands with us. They are all appreciating this initiative. There has not been such a forum in the country till now and its being broadly viewed as a very progressive step. Over a period of next one year, what all one can expect from your forum? As I mentioned earlier, we are looking for industry specific solutions for four verticals. We would like to see how we can bring efficiency in terms of cost reduction and end to end solutions to develop the product. Second thing we are looking at is e-initiative. Our major focus here is: how do we reduce documents and make it more cleaner initiative. And third thing wherein we are trying to work closely with cusotms is to see if we can effectively work on a 24x7 basis. These are three critical areas we are looking at this juncture.

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REPORT

Focus areas for Infra development

LOGISTICS TIMES October 2012

On the occasion of the recently held Intermodal India Exhibition organised by UBM in Mumbai last month, noted global consultancy and research firm Deloitte released a knowledge paper on Internmodal and Mulit-modal Logistics highlighing the urgency of ramping up different streams of infrastructure. Here are the excerpts from the chapter “Focus Areas for Infrastructure Development” which among other things specifically underlines the emerging scenario in containerisation and dry ports segments: The major drivers of the logistics industry are economic growth and transport costs. India has been growing at an average rate of over 7.5% over the last 10 years, primarily driven by the services sector. Manufacturing and exports have also shown considerable growth. However, the logistics sector has not kept pace. Logistics costs in India are also high as compared to other countries. Average

logistics cost in India as a % of GDP is higher than even the other BRIC countries. The Indian transportation sector when benchmarked with global standards seems to be lagging far behind, both in terms of capacity and efficiency. Primary reasons for this are lack of capacity creation, lack of funds and delays in projects. This is quite evident from India’s 46th rank

among 155 countries in the World Bank’s International Logistics Performance Index Global Ranking. India’s LPI score was 3.08 (on a scale of 1-5, with 5 being the highest). Singapore, with a score of 4.13 was the top performer, the USA scored 3.93 and came 9th whereas India’s neighbour China came 26th with a score of 3.52. Containerization

LOGISTICS TIMES October 2012

REPORT

Containerization is the primary driver of growth of intermodal logistics. Container traffic at major ports has almost doubled in the past five years. Globally, container traffic has grown at around 10% per annum over the past 20 years. According to estimates, the world container throughput will reach 1 billion TEUs by 2020, which is almost double of the current container traffic. The emerging Asian & African countries are expected to be the prime movers in achieving this growth. Most of the shipyards are filled with orders for container ships of capacity over 10,000 TEUs. These container ships will form a major part of the world fleet in the coming years. The advantages of containerization

LOGISTICS TIMES October 2012

include among others, minimal or no damage to goods, optimum utilization of storage and warehousing capacity, technology adoption due to mechanized handling required for containers, reduction in transport time and end-toend delivery of goods, ultimately leading to significant cost savings. Presently, just over 20% of traffic at major ports is in containers. Major ports together handled 120.22 million tonnes of container cargo in 2011-122. It is estimated that the total container traffic will go up to 680 million tonnes by 2025263, which will be 42.61% of total traffic. To cater to this demand, there is a need to quickly ramp up container infrastructure. Indian ports have been investing in

building container infrastructure. Over Rs. 16,000 crores are planned to be invested, adding almost 20 million TEUs of handling capacity at major ports in India. Additionally, capacity creation projects are being undertaken at a large scale at ports of Mundra, Rewas and Kattupalli. Dry Ports The present Indian logistics set-up has dry ports in the form of Container Freight Stations and Inland Container Depots. They are equipped with fixed installations and offer services for handling and temporary storage of import / export laden and empty containers carried under customs control. Transhipment of cargo

also takes place from such stations. As per the Ministry of Commerce, as on 30th June, 2011 a total of 247 CFSs/ ICDs were approved by the InterMinisterial Committee out of which 73 were under implementation and the rest were fully functional. To support the planned container terminal projects at major and non-major ports CFSs/ICDs are expected to come up in their vicinity. According to a study, by the time all

phases of the Vallarpadam ICTT are commissioned, it is expected to create a need for around 20 CFSs in the region. Drivers & Challenges for the development of CFS / ICDs: Though increase in container traffic is driving growth, dry ports face several challenges as well. The initial costs of developing facility are quite high â&#x20AC;&#x201C; the main cause being rising real estate prices. Compliances and procedures required

for cargo movement play their part in increasing dwell times and delaying cargo movement. Also, the sudden surge in this sector has brought in a lot of competition for the existing players. With focus on intermodal/multimodal logistics, multimodal logistics parks are now being planned, which are much larger than CFSs/ICDs and provide several value added services. Private players have already started coming up with

LOGISTICS TIMES October 2012

REPORT

such logistics park on a large scale with state-of-the-art infrastructure. Several parks have also been planned along the Dedicated Freight Corridor. Port Sector in India India currently has 12 major ports and 187 minor ports. Port traffic grew at 7.66% p.a. between 2005-06 and 2010-11. While non-major ports registered a double-digit growth at 13.55%, traffic at major ports grew only at 5.37%. POL, iron ore, and coal constitute a major chunk of traffic at both major and nonmajor ports. Although the sector witnessed significant growth in cargo traffic, it has still not been able to optimize operations owing to technical and institutional constraints as under: Capacity constraint: As of 2009-10, around 8 of the 12 major ports were operating at more than optimum range of 70-75% capacity utilisation. Vizag, Tuticorin, Mormugao, & Mumbai ports are in fact experiencing more than 100% utilization. Correspondingly, the average capacity utilization at non-major ports was around 77% in 2009-10. Inadequate drafts & poor connectivity with other modes: Future shipping trends point towards larger vessels with a minimum of 6000-8000 TEUs and a few vessels with 12000-14000 TEUs. These future generation vessels would require drafts between 13 to 15.5 mtr. Due to current draft restrictions, several Indian ports are unable to handle larger vessels typically with more than 9.5 mtr. draft. This could lead to shipping lines

LOGISTICS TIMES October 2012

moving to other ports. Therefore, there is a need to firm up dredging plans and also improve productivity through removal of constraints like inadequate infrastructure, absence of seamless connectivity with other modes, etc. The dredging of the JNPT approach channel has just begun. The channel is planned to be dredged to a depth of 13.9 mtrs. in the first phase and then to 16.1 mtrs. in Phase 2. This is a promising sign for the sector. Cumbersome institutional arrangements & other issues: Institutional and regulatory arrangements need to be reviewed to provide for speedy development of ports. Similarly, the procedure regarding environmental clearances needs to be rationalized. Other issues facing Indian ports relate to high cost structures, different tariff setting frameworks for major & nonmajor ports, port security, land acquisition, etc. Adequate connectivity to the port acts as a catalyst for the portâ&#x20AC;&#x2122;s growth. Despite having proper depth and adequate facilities, ports may be stranded for the want of containerized cargo, while other ports may be burdened with an excess they canâ&#x20AC;&#x2122;t handle. The Committee of Secretaries (CoS), Government of India has recommended that a minimum 4-lane road and double line rail connectivity be provided at major ports. Minor ports, which are now showing high growth, also consider connectivity as an important parameter to further growth in business. Type of cargo, place of delivery and customer preferences are among the various factors considered while deciding

on the mode of transport of goods. Keeping in mind the planned capacity expansions and the projected traffic numbers, the Ministry of Shipping has planned various rail-road connectivity projects for the major ports. The following table enlists the phase-wise railroad projects planned by the Ministry. Inland Waterways India has navigable inland waterways of almost 14,500 km, of which 5,200 km of major rivers and 500 km of canals are suitable for mechanized crafts. Currently, IWT handles only around 1% of total inland cargo transport. There is potential for other cargo such as coal, dry bulk, break bulk and containers to be transported economically and effectively through IWT. IWT projects demand comparatively lower investments both for creation and sustenance as compared to other modes of transport. IWT is ideal for transport of coal, over-dimensional cargo and project cargo. However, until now inland waterways have largely been used for transporting boulders, cement and waste oil. The coming decade promises investment worth Rs. 30,710 crores for the development of IWT projects. Since, development of IWT in India is still in its initial stages, significant government funding is necessary. Still given the long term benefits, the private sector is expected to invest over Rs. 19,000 crores over the next decade. Courtesy: UBM India and Deloitte

COVER FEATURE

COLLABORATION: Mantra for a modern supply chain Even if you happen to be an MNC with a footprint in over 50 countries, facing two economic downturns within a span of five years of your debut in a complex and diverse market like India is not something you would ever ask for. That too in a segment where adoption of advanced processes is by and large an innovative proposition. Brambles group owned CHEP’s Indian subsidiary has exactly encountered above-mentioned challenges ever since it set its foot on Indian turf in 2008 with its unique model of pooling of pallets and crates- something which was not in vogue then. But through meticulous planning and persistent efforts, the company today has reached to the stage and scale wherein nearing 10 million pallets, crates and auto packaging equipments have been issued - making a critical difference to the operations of customers. For CHEP India, convincing their LOGISTICS TIMES October 2012

customers about the efficacy of their solutions have been quite an exercise (mostly through proof of concept methodology), but the unit’s new president Devdip Purkaystha strongly vouches that the company has ‘crossed the rubicon’ and now the time is to reap the benefits of a win-win

situation wherein the acceptability of its solutions has significantly improved with customers. Devdip took over the mantle of the head of CHEP India early this year and his appointment also marked the free mandate from Brambles that Indian operations would be solely run by â&#x20AC;&#x2DC;Desi Boys.â&#x20AC;&#x2122; Earlier, its top echelon had NRIs and expats and the clear idea behind that was to have managers with rock solid global expertise to lift the curtain from the stage. However, act-1

seems to have gone well and the steering of CHEP India has now been handed over to Indian hands. In a free-wheeling interview with Editor-in-Chief Raj Misra, Devdip shares the details of the broader objectives of the company in the medium run in terms of its footprint expansion both in the qualitative and quantitative sense. More importantly, how CHEP India is making most of collaboration opportunities with its customers. Excerpts from the hour long interview:

CHEP India Leadership Team From (left to right):Ravi Shankar, DK Rai, Ritesh Chandra, Devdip Purkayastha, Rajdeep Mhatre, Savio Pimenta, Ashok Badera, Shuchi Chatterjee

LOGISTICS TIMES October 2012

COVER FEATURE

You have not yet completed five years in this country and apart from structural challenges, you also had to brave two spells of sluggish business cycle. The second one is still going on. Tell me, amidst such a challenging scenario, how would you explain your positioning in the Indian market today? Organizations tend to focus on enhancing operational efficiencies to beat pricing pressures during sluggish business cycles and the CHEP value proposition is perfectly placed to step in and make that difference. CHEP brings in solutions based on the concept of equipment pooling of pallets and crates which helps these organizations reduce capital expenditure and overall supply chain costs. In the CPG space, raw material move on CHEP pallets from the supplier location to the manufacturing unit and the same pallet is used to move finished products to the warehouses and onwards to the retailer’s distribution center. Similarly, in industries which perform complex component assemblies such as automotive, electronics and white goods, the components move in CHEP crates from the point of production at the part manufacturer directly to the assembly line of the OEM. This process squeezes out inefficiencies brought about by multiple handling bringing in better labor and space utilization, product protection, reducing shrinkage and greening the supply chain. A culmination of all these benefits adds to the overall cost savings, operation efficiencies while modernizing the supply chain. This is the very reason that CHEP is clocking triple digit percentage growth in India since inception. Logistics Times has been interacting with CHEP team for quite sometime now and we believe more than anything else, the major issue must have been in convincing the customers here about your pooling business model which was new for them? CHEP India has now moved from the ‘convincing phase’ to ‘conduct’ mode. Today, top FMCG, automotive, retail, 3PL and white goods manufacturing organizations have signed on to the CHEP solution. The journey began with the CHEP design consultants working closely with the customers in educating and demonstrating the solution. These consultants helped the customers in mapping their current supply chain in understanding bottlenecks and challenges and then devising optimization plan in using CHEP equipment. The customers experienced the benefits through rigorous trials conducted by CHEP at their locations. Once convinced, adoption was quick and we are working with most of our existing customers in ramping up the partnership to cover their newer products as well as geographical locations. I am happy to say that my problem today is not ‘convincing’ our customers but delivering, every day. You strongly advocate standardisation of supporting tools and equipments to ease the process flow at the back end. As against this, India is a market where standardisation is a major issue. I have been told that LOGISTICS TIMES October 2012

CHEP India has now moved from the ‘convincing phase’ to ‘conduct’ mode. Today, top FMCG, automotive, retail, 3PL and white goods manufacturing organizations have signed on to the CHEP solution. there are as many as 90 varieties of crates available in the Indian market. How have you dealt with such anomalies? Absolutely! Standardization is the basic premise of the CHEP solution. Standardization can bring about collaboration in the eco system and collaboration leads to innovation. The supply chain eco system consist of the transporter, warehousing sector, racking supplier, material handling equipment manufacturers and the pallet and crate solution provider. Standardized truck bodies will allow transportation of goods on pallet as a unitized load. These unitized loads can then be stored in warehouses having standard racking sizes using pallet jacks. Standard sized pallet ensures that they flow through the supply chain eco system as shared equipment by multiple stakeholders. The global standard for pallet is the 1200 mm x 1000 mm footprint. CHEP crates are of standards sizes but are customized internally by placing low cost ‘insert’ to enable fit multi dimension components. These standard crates are today shared by multiple customers supplying into various OEMs handling multiple as well as multi-sized components in a single sized crate. What changes is just the internal insert with the change in component size. We refer to this as ‘Standardize Outside, Customize Inside’. Have you made any major addition to your product profile in last one and a half years? Solutions based on standard pallets and crates are the main offering from the CHEP stable in India. However, we are ‘testing the waters’ with our other international products such as the Intermediate Bulk Container (IBC) and Reusable Plastic Crates (RPC). IBC is used to transport solids, liquids and powders. Currently these goods are transported in tanker lorries or nonreturnable one way packaging such as barrels. IBC will allow

LOGISTICS TIMES October 2012

COVER FEATURE

these goods to be transported in smaller batches and is also a returnable packaging. RPC is used to ferry fruits and vegetables from the farms to the retail locations. These are designed to ensure that the produce reach ‘fresh’ to the retail shelves. There has been a significant change in the team which had set up CHEP India in this country. Earlier while you had a distinctive ‘desi tadka’ flavour in the top echelon (people of Indian origin were pooled in from other global units of CHEP), now it seems to be a totally ‘desi boys’ affair. What should one read into this? One interpretation could well be: the initial milestones set up by Group Brambles have been successfully achieved. I love your choice of words ‘desi boys’! The CHEP business model is unique and one cannot source human resources off the shelf. CHEP set up in India in 2008 and expats, both of Indian and foreign origin, manned the initial setup team. They educated us on the business and also recruited a local team. Today, it is a pure Indian team which has learned the CHEP global business processes and using their market knowledge are implementing them locally. We focus on developing our human capital to build a strong enterprise wide team of ‘pooling experts’ though internal and external education, cross functional job rotation and global business exposure. The initial team did a good job in setting up the business and we are a successful startup which is a great achievement, knowing that more than 90% fail. However, our journey towards our goal of getting to the next level, which is going from a “Good Startup” towards being a ‘Great Organization’ has just begun and we are absolutely focused. When we interviewed CHEP India’s top brass early last year, the functionaries then appeared out to be in an extremely upbeat mood and were talking of major expansion in the coming years. But hasn’t the present slowdown spell affected those rapid fire growth plans? There is a huge market out there with hundreds of millions of tons of consumer goods moving across the length and breadth of the country. We also have lakhs of vehicles, white goods, electronics manufactured in India. Our vision is that one day all consumer goods will move on CHEP pallets and all components will move in CHEP crates and we are talking millions of flows. We are very focused on picking the right opportunities and working through them to fruition. We collaborate with our customers at a very granular level and hence allocate the right human resources at various level of the engagement. We are definitely growing and this growth will be healthy, profitable and long term growth. FMCG and Automotive- these have been your two prime focus verticals. But in the latter, you were facing problems in making major breakthrough initially. What is the position now? LOGISTICS TIMES October 2012

These two segments function very differently as the decision making cycle in FMCG is much shorter than the automotive sector. We have been deeply engaged with most of the top OEM’s and their suppliers in the small to medium vehicle segment over the past few years proving our execution capabilities. Today many of them are CHEP customers and we are now completely entrenched into their end to end supply chains. We are growing rapidly in the automotive sector as we convert all component packaging that enter an OEM into returnable CHEP crate solution. Has any other vertical added to your list of key focus areas recently? We do see great potential in many other segments such as pharmaceuticals, chemical, toys, electronics and many more. It is very tempting to diversify but we want to remain focused and avoid spreading ourselves too thin on the ground. We are committed to our customers and highly engaged in implementing current opportunities in our core segments. Considering your global reputation, CHEP India had by and large focused on top of the pyramid players – both MNCs as well as domestic giants. Have you reached to the stage where you can think of serving players down the value chain? As an entry strategy, we did concentrate on the top few MNC organizations that catered to more than 70% volumes of the Indian markets. Our global reputation did help in starting a dialogue with these entities. However, we had to demonstrate our local capability to service them efficiently. We have now expanded our scope and we have quite a few customers which are

Standardization is the basic premise of the CHEP solution. Standardization can bring about collaboration in the eco system and collaboration leads to innovation.

The initial team did a good job in setting up the business and we are a successful startup which is a great achievement, knowing that more than 90% fail. However, our journey towards our goal of getting to the next level, which is going from a “Good Startup” towards being a ‘Great Organization’ has just begun and we are absolutely focused. local Indian players both in the pallet segment as well as crates. Some of the automotive tier supplier are very small entities but equally important to us as we drive towards 100% conversion of one way cardboard packaging into reusable CHEP crates. CHEP has taken the thought leadership position in modernizing the Indian supply chain. We are driving this change through educating the supply chain professionals using media as a propagating medium. Our speakers are invited at various event forums and also interact at industry body meeting such as ACMA and SIAM. CHEP recently won the ‘Supply Chain Innovation Award of the Year 2012’ at the Express Logistics & Supply Chain India forum. ELSC is a premium event that is attended by the entire gamut of the supply chain industry in the country. This is a powerful testimony that we are indeed helping modernize the Indian Supply Chains. What is the present count of your service centers? Around early last year, the number was close to 30 and the target was to double it in two years’ time? We have reached almost 40 service centers and counting. Our aim to be close to our customers so that we can serve them

on ‘as, when and where required’ basis. Lots of thought and analysis goes into setting up a service center as it is a direct cost and involves collaboration between our various functions internally. What all has happened in terms of bringing in advanced technological applications? Tracking and managing our pallets and crates which always remain the property of CHEP is a key driver of our business. Technology is an integral part of our value offering to our customers. We augment our global applications like SAP, Siebel and Net portal with locally developed low cost software to manage our operations in India. We have also collaborated at the systems level with some of our customers through EDI technologies in creating a transparent operation environment to help serve them better. Our global IT is continuously working on cutting edge technology in the mobility, RFID and business intelligence field and will get those modules to India at an appropriate time. Is your millionth pallet out in the market? Our business model is based on equipment flows and we measure equipment issues made rather than the quantity in the market. We are approaching almost 10 million pallets, crates and automotive equipments issued in India. Early last year I was also told that CHEP India would like to expeditiopusly introduce Intermediate Bulk Containers (IBC) in the country - yet another successful product from your basket. What has happened on that front? As said above we are ‘testing the market’ with this product and the opportunities seem very promising. This product is already successfully flowing between the raw material vendor and the finished product manufacturer. We expect substantial growth in volumes of IBC issues and this will be a key member of our product portfolio in India What is the kind of total investments which the group has made in its Indian unit so far and can I get a sense of your topline numbers? Our business is an asset heavy model and that makes us a large FDI initiative in the service sector in India. We do not sell our products but operate on a pay-as-you-use revenue model. Our top line is small but clocking triple digit Y-o-Y growth. Now, you are at the helm. Just share with me the big picture you have in your mind to take CHEP India’s journey to the next level. Our vision is very clear as we move ahead from being a ‘Successful Startup’ towards becoming a ‘Great Company’. We also believe that we cannot achieve this overnight but over a period of time and we have a strategy in place to get there. We have devised what we can the EPIC model. EPIC is an anagram LOGISTICS TIMES October 2012

COVER FEATURE

for: Employer of Choice (to all our human resources), Partner of Choice (to our customers and vendors), Investment of Choice (to our parent company Bramble and its shareholders) and Citizen of Choice (to this nation, to the supply chain industry and to the government). Let me elaborate on each of these Pillars as we call them. Employer of Choice: The CHEP business model is heavily reliant on the human capital as we have customer touch points at different levels across various functions and it is important that each and every one of our employee is a ‘Pooling Expert’. We are building our talent pool through a 360o engagement with our employees through internal and external education, cross functional job rotation, regional development centers and global business exposure. For internal education, we have developed a program called CID which is ‘CHEP India Development’. CID is conducted by our functional leaders and follows a college format to do this. CHEP has also partnered with premier Indian institutes to impart customized external education. We ensure that this is an all-inclusive development effort with 100% coverage across the organization. I am also working with my core leaders here in India in creating a high performing Indian Leadership Team (ILT). We want to ensure that each and every employee at CHEP has a clear career path and understand their development needs to achieve the goals. Safety of our employees is of paramount importance to us. We have rigid and extensive processes that ensure a safe working environment, not only at our own locations but also at our vendor and customer premises. This safety culture is ingrained

We have reached almost 40 service centers and counting. Our aim is to be close to our customers so that we can serve them on ‘as, when and where required’ basis. Lots of thought and analysis goes into setting up a service center as it is a direct cost and involves collaboration between our various functions internally. LOGISTICS TIMES October 2012

into each and every one at CHEP, right across the globe. We are happy to see that as we grow, many of our employees are acquired through internal references. We rigorously follow the concept of equal opportunity with a healthy mix of experience and the exuberance of youth as well as gender diversity. Partner of Choice: Customer focus is a widely used term to indicate all types of customer engagements. However, we at CHEP believe in customer collaboration to describe our engagement with them. We work very closely with our customers to design solutions as each industry and each organization has unique challenges in their supply chains. Our solution design professionals work with the customer’s operation team, while our finance team engages with the customers finance team on collection and similar does legal on the agreement and terms and conditions therein. So we truly believe that customer engagement is much beyond Sales. Similarly, our vendor engagement goes beyond purchase. We work closely with them to ensure that they understand our quality parameters, engage them in quality improvement workshops and sensitize them to the challenges that CHEP and our customers can face of the vendors failure to adhere to commitments. We also encourage our vendors to come up with innovations that can positively impact the CHEP market offering. This is the level of collaboration that we try to build in our eco system. Investment of Choice: CHEP operates in over 50 countries globally and ours is a capital intensive business. Brambles our parent company allocates this rare resource called capital to all their businesses based on potential and strategic importance. We are today experiencing exponential business growth in India and it is my job to ensure that this growth is profitable. Brambles, is very positive on our Indian business and are investing in this growth story and we have to perform every day. We have devised a tightly Integrated Business Planning (IBP) process. IBP is widely referred to as advanced Sales and Operations Planning (S&OP). S&OP stood firm for three decades as the process of choice to improve business performance, but IBP has brought with it a far more holistic approach, more robust financial projection and a tighter integration of all company processes; aligning strategic and tactical plans each month, and allocating critical resource -people, equipment, inventory, materials, time and money - to satisfy customers in the most profitable way. Citizen of Choice: This pillar of the EPIC model is very dear to me. I truly believe that we have to be socially responsible as a business. CHEP business is lumber intensive and it is our duty to be environmentally friendly. CHEP India imports lumber from Germany from certified renewable farms thus protecting the local Indian forests. Also, the CHEP pooled pallets moves though the supply chain eliminating the need for multiple pallet ownership thus reducing lumber requirements. Similarly, the CHEP crate solution eliminates one way packaging like cardboard and wooden boxes which is again positive for the environmental. We are also highly engaged with various social initiatives that work with the marginalized strata of the society. CHEP also ensures that they he are 100% complaint with the laws he

BIG ISSUE

Devil in Retail? The governmentâ&#x20AC;&#x2122;s recent decision to allow FDI in multi-brand retail has resulted in unprecedented brouhaha with its staunch critics from political quarters equating it with the unleashing of a monster which would eventually gobble up the businesses of millions of mom and pop format retailers in the country. But while analysing the details, is everyone noticing devil in the next level retail which could be defined by the presence of global gaints? Not everyone seems to agree with this viewpoint. India Inc. has as strongly supported the move as its vehement opposition by the political class. And flag bearers of Indian logistics industry are also speaking no differently though there are some serious concerns. Here are the voices from the industry: LOGISTICS TIMES October 2012

LOGISTICS TIMES October 2012

BIG ISSUE

FDI in retail is part of a larger reforms process necessary for a logistics revolution in India The opening up of multibrand retail is definitely welcome news for the logistics industry. The conditionality on 50% compulsory investment in back-end activities will have major implications for logistics industry in India, Malcolm Monteiro especially for third-party CEO â&#x20AC;&#x201C; South Asia supply-chain operations. It is DHL Express expected that a large number of foreign retail majors will invest in India to leverage the 200 million and growing middle-class consumer base that is just starting to flex its buying power. Since a large portion of their investment would mandatorily have to be in back-end activities, of which logistics would be the key competitive differentiator, the Indian logistics space could be expected to see a lot of business in the coming years. The requirement of minimum 30% sourcing from SMEs would also mean developing greater linkages with local industrial capacity, and this would also require putting in place logistics solutions. Companies like DHL Express have put a lot of emphasis on helping Indian SMEs get connected to national and international markets, and our experience has shown that Indian SMEs have tremendous capacity for innovation and efficiency and all they need is connectivity and an enabling environment to be successful. However, there are some important policy issues and challenges that need to be resolved if a rapidly expanding organized retail sector is to become a game-changer for logistics industry in India. The first challenge is that the final decision on implementation has been left to the states. This is a major departure from the practice of having single economic policy decision applicable for the entire country and testimony to the lack of political consensus on the issue. If only some states allow FDI in multi-brand retail and others do not, then it would be difficult to develop rational supply-chains based on economies of scale thus negatively impacting logistics development. GST is another outstanding piece of reform that would be critical if the demand for logistics arising out of a rapidly growing retail

industry is leveraged to create efficient logistics solutions. The policy priority would be to ensure that current impediments to logistics integration and creation of seamless markets such as Agriculture Produce Marketing Act (APMC), state level entry taxes, and local warehousing rules are adequately addressed through reforms to help Indian third party logistics firms offer the best value for money. All of these reforms together would create the enabling environment for increased investment in logistics leading real change in terms of economic connectivity in India. FDI in multi-brand retail will have a significant impact on the economy as well as the Indian logistics industry. It will be an important step in increasing access to consumers and will set pace for the second wave of economic reforms, which will attract foreign capital thereby strengthening the growth of Indian economy. The countryâ&#x20AC;&#x2122;s retail environment has been Vineet Agarwal dominated by the unorganized Joint MD, TCI segment, which has been ridden with several challenges on the logistics front resulting in wastage, higher costs and poor access. The investment will result in a pan-India expansion of organized retail and the countryâ&#x20AC;&#x2122;s geographical diversity will require supply-chain networks to not only improve accessibility but also offer multi-modal solutions and value-added services at par with global standards. Warehousing and 3PL are emerging as the next big opportunities. With store locations in place, the focus would shift to development of supply side activities with concentration on replenishment. This would largely be outsourced to Logistics Service Providers (LSPs) covering warehousing, primary and secondary transportation, international logistics and other value-added activities to supplement the efficiency of the supply chain. FDI in retail will help increase productivity and ensure an efficient distribution network. Major advancements that will help benefit the sector and economy. As large firms are able to get more output per unit of input, they experience lower average total costs and costs of production, thereby enabling it

The conditionality on 50% compulsory investment in back-end activities will have major implications for logistics industry in India, especially for third-party supply-chain operations. LOGISTICS TIMES October 2012

The country’s retail environment has been dominated by the unorganized segment, which has been ridden with several challenges on the logistics front resulting in wastage, higher costs and poor access. The investment will result in a pan-India expansion of organized retail. to compete on economies of scale. FDI in retail will serve as a force multiplier by forcing more investments by big chains to reduce wastages, improve efficiencies and increase speed of distributions. The companies will need to improve on the supply chains and logistical capabilities, thereby investing more in the infrastructure needed to source, ship, store and deliver products. These will encompass major areas of the supply value chain activities, including storage, packaging warehousing to product display and technology thereby bring in standardization and improvements at all levels. Suppliers too will benefit and the Indian SME sector will be assured of markets for their products and provide them an opportunity to scale up. The impact of increased FDI will be visible across the logistics infrastructure and services segments. From the infrastructure perspective, the advent of organized retail would result in a shift from the legacy supply chain where manufacturers and distributors have largely been responsible for last-mile storage and delivery to the retail outlets. It will facilitate creation of back end infrastructure towards processing, manufacturing, distribution, design improvement, quality-control, cold chain, warehouses and packaging. The multi-store formats will take control of inventory, warehousing and distribution activities resulting in consolidation of services. International retailers would also replicate their global supply chain best practices including improved storage and handling activities from the pre-harvest stage to store shelf. This will have the added benefit of addressing the currently estimated 30 per cent spoilage in the country. Logistics and supply chain companies will be the link between small manufacturers, producers, farmers and the organized retail chains, thereby helping them to get higher returns for their supplies. For international as well as Indian retail players to truly leverage the huge opportunities in India, the challenge would be to manage the complex retail supply-chain cost efficiently minimizing wastage and time delays. Well, it’s finally here! The much awaited, touted and debated and protested FDI in retail which the government and the majority of India feels will change the shape of things to come for the consumer as well as do a whole lot of good for the farmers, retailers, and the entire supply chain and logistics sector within India. In fact, the clause of compulsory investments into the “Back End” operations is one which everyone hopes will create this massive change!

Well, let’s look at this entire matter from an “Outside-in” perspective. Firstly, change is mandatory for any country, organization or culture to bring about betterment for the future. How change is introduced and more so, adopted, remains the key. My first thought on this would be, has the change been introduced in a manner which will allow total adaptation of Harry Lagad the new policies and will it VP, Toll Logistics really bring about the benefits to the consumers and the most important player in this entire gamut of things, the farmer and the manufacturer? This is a critical item that will have to be proved, not just with a few flimsy set of numbers but solid facts and figures with case studies and impact analysis. This is a big ask and one would question if we have the ability today to get such amount of research data available, given, we have no history of previous data on these issues. Secondly, and importantly, how will it benefit the consumer if there are only limited, nay, handful of states who have given their “nod” of acceptance? Do we really understand what retail means? The single biggest cost in retail is the retail space itself. Matter of fact, the simple way to measure success or failure of retail is the Yield per Sq Foot of retail space. Now, given this is going to be mostly rolled out in bigger cities, I would question this for retail or any commercial real estate in India is probably the biggest cost of operations. Wonder how one is going to recover this over sales of shampoos and soaps and other day to day household items. One has to just walk into some of the high end retail outlets and take a measure of footfalls to come to a quick realization that most of the Indian consumers still shy away from big ticket items!! Well….a question does arise. Given the scenario where the roll out is going to be limited, firstly due to the geographical nature as 70% of Indian states have not agreed to the FDI relaxations, and secondly, due to the constraints on the population and the location (i.e. cities with a minimum prescribed population level), the first and primary problem that any retailer and their supply chain experts will face is the huge amount of inventory management and then secondly, LOGISTICS TIMES October 2012

BIG ISSUE

the way to get this inventory across a limited geography. Top this up; with the mother of all issues, the VAT and we have another problem that retail rupply chain experts will struggle with. To even a novice, the clear message would be that most retailers would have to invest into a back end and hope to heaven that the FDI is rolled out within the entire span of India for them to ever reap benefits or they will still struggle to keep prices at levels which are internationally competitive. More ever, the imports will go through the roof, as most companies will find it cheaper to import from low cost manufacturing countries such as China and Vietnam to ensure they can still keep the prices at a level that the consumer will be interested in. What does this do to our balance of foreign currency reserves? And finally, the biggest question of all. Where is the technology? Where are the trained people? Who has set up the larger scale facilities for the “bottom of the pyramid” of retail workforce? The current scenario is pathetic and unless and until retailers themselves set up these facilities, which I doubt, one has to start thinking in terms of productivity. Which leads to the biggest question of all, employment? Do we really believe that retail will open up huge employment opportunities? I would give this some thought. Given the scale of salaries and the margins in the market today, employment in retail is bound to be taken away with more automation and more systems rather than bodies. Retail is about scale and today, with what has been announced and the way the government has a tough battle on its hand for the deployment of FDI across India, the biggest question one has to ask is what will be the true benefits. And for the poor logistics player? Well, my true advice to them? Better start creating “True Value Solutions” or otherwise be prepared to be beaten around the head with more and more of price drops. Short term, I would say, “Wait and Watch”.

Vikram Mansukhani

National Operations Head

DIESL.

“Will it could mean a Fully Developed India or a Fully Devastated Industry. Only time will provide the answer. But for sure, FDI in multi brand retail is here to stay now and will change the way

India shops , sources , produces and delivers. With a population exceeding 1 billion , a economy that is more stable than that of Europe and the US (at least for now) and disposable income increasing year on year in the hands of the upper middle class and the rich , the shopping experience is demanding a radical change that allows for a truly global experience. What gives further credence to this requirement is that only 5% of India’s retail market is catered by the organized sector. For a country that has a annual consumption spend of USD 957 billion , the room for large format retail players is abundantly available. FDI in multi brand retail therefore is a natural outcome in a space that has thus far been dominated by eight business houses. Large format stores will need consolidation of product lines, coordinated deliveries, agile reverse logistics and just in time inventory. All of these requires the logistics sector to build capabilities in warehousing and transportation which can handle diverse product ranges , temperature control requirements , hygiene factor , safe handling methods , dust minimal environment and an attitude to serve at short notice. With the way the supply chain industry in India is fragmented and dominated by largely unorganized local players (90% plus market share) ,the need of the hour is for large established supply chain companies to create the infrastructure in a collaborative effort with the large retailers and etailers positioned to enter India. Most of these large retail brands also have the capability of running their own supply chain for e.g. Walmart and Amazon and may also choose to take organic route to developing in-house logistics capabilities in India , should they not be satisfied with what they see when they arrive here. This would be a great opportunity loss for the Indian players who otherwise could gain from global best practices by adopting a investment plan in close consultation with these mega retailers. It is for the industry at large to embrace these changes and compete with strength in a global environment. Should the proposed GST regime come into force , the need for large super hubs and warehouses which have the capability of quick order turnaround time and market reach , will be more pronounced than ever. In a stage such as this, would Indian Supply Chain companies like to miss the bus? We have been providing logistics services to the multi-brand retail sector for several years. During that time, we have seen several multinational retailers enter the Indian market with the expectation of sourcing world class logistics services and eventually accept that what is possible in India is currently

FDI in retail will serve as a force multiplier by forcing more investments by big chains to reduce wastages, improve efficiencies and increase speed of distributions. The companies will need to improve on the supply chains and logistical capabilities. LOGISTICS TIMES October 2012

LOGISTICS TIMES October 2012

BIG ISSUE

Where is the technology? Where are the trained people? Who has set up the larger scale facilities for the â&#x20AC;&#x153;bottom of the pyramidâ&#x20AC;? of retail workforce? The current scenario is pathetic and unless and until retailers themselves set up these facilities, which I doubt, one has to start thinking in terms of productivity. limited to simpler approaches. The industry has managed to support growth within the non-FDI environment through continued investment. With the recent approval to allow FDI in multi-brand retail we should expect this situation to change, especially where local entities will need to justify to the global parent the sense of an additional Chris Buckthorp $100M investment. Chief Strategy and Shared Services The retail supply chain in GATI India will need to get smarter and more efficient very quickly if multi-brand retail is going to be viable in India. This means that the retailers are going to be looking for support in driving reforms across product suppliers as well as logistics service providers. Modern retail is fundamentally a supply chain business. With pressure on product margins the profitability of the retailer relies upon streamlining the flow of goods from the manufacturer all the way to the store shelf. At the moment, India lacks the basic tools that enable efficient retail supply chain management seen in developed countries. The fundamental building block is the efficient transfer of accurate data between trading partners. In the retail supply chain, this starts with the correct numbering and labeling of various trade units and adopting the electronic message standards that underpin data transfer and collaborative processes. The GS1 initiative is supported in India but the level of industry adoption must be accelerated. Logistics service providers in India will now need to start developing world class logistics capabilities if they have not been doing so already. Success in servicing Multi-brand retail will be based on supporting multiple physical distribution channels that support least SCM costs across the combined efforts of supplier, retailer, 3PL and store operations. We will need to drive the implementation of unit load techniques (pallets, roll cages, etc), the adoption of internationally recognized logistics data and messages, warehouse management and transportation planning technology and the development of suitably skilled labour. The greatest challenge facing logistics service providers is the increased level of compliance linked to the adoption of modern LOGISTICS TIMES October 2012

processes and technology. Where India has accepted the process modification by the man on the ground as normal in the past, this will not be acceptable in the future. Technology can control the step by step execution of a structured process but the workforce must be working in combination to the technology if the benefits of adoption are to be realized. The cultural changes required to create a semi-skilled labour force from within the class and caste structure will be the greatest challenge and a critical success factor to realizing profitability for the multi-brand retailers. We have always supported competition and I feel that FDI in multi-brand retail would induce that critical element to the current safeguarded retail business. If somebody is objecting, then I feel we are not sure about our capabilities of competing globally. Moreover, India is a big economy with a huge population and hence everybody would have the Akash Bansal opportunity to earn their Head-Logistics, Om Logistics bread and butter but will definitely have to work smartly to earn it thorough competitive channels. Why such a big economy is worried about competition from bigger players? If we have big size competitors then we also have an edge of being an Indian organization with core strength of understanding this market. FDI in multi-brand retail would be catering to a niche customer and would not be in a position to replicate the current retail model ( sector markets) as they are more of relationship driven rather than cost driven. The only thing I feel we are worried about is that we need to invest more man-hours in organizing our business to the level that these bigger players do. Lets take this as a challenge and move towards globalization to enter into their markets rather than thinking about safeguarding our interest without efforts. Let the best man win should be the policy. In terms of effect on logistics industry in India, it would not be an immediate impact as major retail companies work on a dedicated logistics model which is predominantly being managed by small time logistics companies. But yes, when these

LOGISTICS TIMES October 2012

BIG ISSUE

multi-brand retail organizations would be having a sustainable presence, they would be certainly focused more on organized logistics companies to sustain their growing business model on a pan-India basis. Definitely to achieve their objectives they would be requiring the level of expertise and innovation what they have been practicing in other markets to have an edge over domestic retails organization and would be focussed on such value added services for a more systematic control over deliverables. this would be the time for Indian logistics companies to re-engeenier their model and take this as a challenge to come up to their expectation at a controlled cost and the benefit for the same is with indian organization as we are thoroughly known to this countries logistics advantage. This would be a chance for us as organized Indian logistics players to add value to our service offerings and enhance our deliverables to our retail customers. This would even present us with an opportunity to explore markets as we would be familiar to the capabilities that are required to enter into these markets and hence would be a winwin situation to everybody. To summarize, we feel that this initiative would offer a new dimension to retail in India and would offer us an opportunity to place ourself into global footprint to promote our business. Unlike GST, finally FDI in retail has arrived. Real fun starts now with this suave move of union cabinet as it will create a new and competitive logistics arena which will separate men from boys. If you are among those who believe success of McDonald is because of Mc AlooTikki then believe me, FDI Retail Amit Kumar will have greater impact on Head – Logistics logistics with indigenous Indo-Arya touch; and it will be outrightly imprudent to compare this with US or Europe as aesthetic of consumers there are completely different from ours. We also need to understand FDI is no energy drink for economy, employment or superlative logistics services. We will have to keep patience for a time horizon of 18-24 month to get precise and profound advantage of FDI in Multi brand Retail sector. Hence the real

question is not only “how much” but “how soon”also. I truly believe if center and state government work in sync there is a lot of advantage our economy can derive logistically ( unfortunately this is most unlikely poetical situation). I see an immense possibility that with the advent of foreign retail chain our logistics practice spurring significant improvement in processes, infrastructure and systems which will bring transparency and efficiency though out the supply chain and this will direct and immediate impact on current domestic retailers as they will be under tremendous pressure to upgrade and invest in there logistics capabilities. While Indian customer will have a choice of wide range of products, it will take a while to get exact advantage on pricing front. Like I said above, FDI in multi brand will separate men from boys. LSPs now will have to choose which league they belong to or more importantly which league they want to be in. This new chapter will add more complexity in logistics and hence will see more process, practice and systems are being followed by LSPs. We will also see more 3PL company shopping in India along with leading retailers. For example Wal-Mart alone has a battery of 23 LSP companies in US of which only 6 LSP companies are present in India. Ditto with Tesco and other retailers, which will also see some takeovers, JVs & mergers in 3 PL industry. Like domestic retail companies, Indian LSPs will have to raise their bar in terms of service, capability, manpower and infrastructure to be in the game and to lead the game. FDI in multi brand retailing which was long due finally saw the light of the day thanks to political compulsions of the Government. I have always professed that Govt should be left with regulation and implementation and bringing about transparency in their workings and leave business to market forces. Let customer decide what is good or bad Ramesh Krishnan for them. Head (Supply Chain) The big formats are selling Sahara Q shop branded FMCG products cheaper than the Kirana shops. While big format adopt MOP ( Market operating price), Kirana often sells the product on

It would require the logistics sector to build capabilities in warehousing and transportation which can handle diverse product ranges , temperature control requirements , hygiene factor , safe handling methods , dust minimal environment and an attitude to serve at short notice. LOGISTICS TIMES October 2012

With pressure on product margins the profitability of the retailer relies upon streamlining the flow of goods from the manufacturer all the way to the store shelf. At the moment, India lacks the basic tools that enable efficient retail supply chain management seen in developed countries. MRP which is actually much higher and often at huge profit. In fact, as I have been saying, the small Dhaba/ Bidi- Pan outlets which are slowly increasing even in Metros sell items like cool drink, water etc on higher rate than the MRP. While they run out of illegal structure and hence make decent return due to low overheads, the middle men and Govt official also share the loot of this difference. If a modern retail outlet is able to sell at lower rate because of squeezing the company or by coming out in private brand and doing direct procurement from the growers / farmers and manufacturers, where is the harm? They not only give technology but also fund the supplier in many cases. I have maintained that farmers would definitely benefit from this decision as was amply expressed by Punjab farmers recently. Kirana trader as I have been saying is the person who flouts all rules like minimum wage, CLU requirement, working hours of workers and does not pay any tax to the Govt. Mind you even with this FDI opening up these enterprising Kiryana’s will survive as they have some distinct advantage and also serve the top up of the nearby customers. When there is squeeze on modern trade to sell at lower rate and it is turned the heat on towards FMCG manufacturer it is going to have impact on the ssupply chain - be it their own or outsourced. The actual pressure would be not on space rent but in fulfilling the line fill and faster rotation of the inventory. Hence unless supply chain become agile and upgrade itself on IT software , technology, vertical storage especially in big metros, reduce manual dependence and gets in to efficient soft ware driven ( like ARS) process the cost advantage would not be achieved. With development and globalization and better enforcement, the cost of manpower (watch out gleefully) and space scarcity (hence cost of property), is bound to swing upward whether we adopt technology or not. Hence it is inevitable that we now adopt vertical scaling and effective software and technique and increase output per manpower than got caught napping. Fortunately once FDI is in place, there would be no argument of unfair expectation from SCM or whether there would be need for sprucing up SCM operation. Instead it would become a necessity for survival. Refinement of LSP operation would be the need of the day. The Indian Government’s decision to permit 51 percent foreign direct investment (FDI) in multi-brand retailing segment is

a significant and positive development from the logistics industry’s perspective. This will allow global retail giants like Walmart to set up deepdiscount stores in India that can sell directly to individual consumers. Multinational retailers like Walmart of USA, Carrefour of France, and Metro of Germany have already Srinath Manda established stores in India, but Program Manager, are permitted to trade only as T & L Practice, Frost & Sullivan wholesale entities and barred from selling to walk-in individual customers. These retail giants are authorized to sell only to smaller retailers, like familyrun shops registered with them as authorized/approved customers. Key benefits expected out of the Government’s FDI in retail initiative include significant growth of employment in organized retail, and improvement in transportation and storage practices of several manufacturing industries (especially consumer goods) associated with the multi-brand retailing sector. The FDI policy is also expected to bring in much-needed investments in warehousing and cold chain infrastructure for food and agricultural products, which is likely to help contain their inflation. The FDI in multi-brand retailing initiative can be considered as the second-best Government decision benefiting the logistics industry within this year, after the support policy for the cold chain industry was announced during Union Budget 2012-13. The latter is likely to encourage foreign retail entities to invest significantly in relevant activities. The condition requiring foreign entities to invest at least 50 percent (within the minimum stipulated investment of $100 million by each entity entering the sector) in back-end infrastructure like warehouses, cold chains, and processing centers could be a major driver for the organized logistics sector’s growth in India. Logistics activities of consumer goods industries, which are largely-controlled by unorganized and partial logistics service providers, would witness significant shift toward organized logistics providers. Statistics from the Indian Food Ministry state that the country is losing about INR 50,000 Crore (~ US $10 billion) worth of LOGISTICS TIMES October 2012

BIG ISSUE

food stocks every year in form of wastage and damage, due to lack of sufficient storage infrastructure, thereby resulting in food inflation. A combined promotion of the supporting policy toward cold chain infrastructure and the above-stated 50 percent investment share in back-end infrastructure can fulfil at least some part of shortage of storage facilities and help in containing food inflation. To ensure that the logistics industry gets full benefit of this clause, it is important to ensure compliance of not including land and rental costs within the 50 percent investment in back-end infrastructure. Another condition within the policy mandating at least 30 percent of sourcing to be done from local producers would help large number of domestic manufacturers on a sustainable basis. The policy says if the multinational retailers are averse to sourcing 30 percent from local producers citing quality and supply issues, they will have to set up a manufacturing unit. Frost & Sullivan believes that such mandate is good and an increased share of sourcing from local producers should be prescribed or mandated, which would trigger rapid growth of domestic manufacturing activities of several consumer goods and also boost the economy. However, appropriate checks on a timely basis should be incorporated so as to avoid excessive margin squeezing by these retail giants, as has been reported in some cases across the world. Other benefits expected out of this policy include significant improvement in transparency of the wholesale and retail trade industry. It currently employs multiple middlemen, resulting in escalation of product costs, delays, and loss of sales tax for the Government due to the unorganized nature of transactions. These retailers are known to follow or promote the practice of buying directly from primary producers and inculcate organized trading practices among their suppliers. The FDI Policy would help in reducing retail prices of several products, especially agri-produce, food, and grocery items. In addition, ensuring adherence of these practices for the agricultural sector is likely to result in growth of organized and contract farming in the country and benefit a large section of farmers. However, there are some limitations in the policy, which may restrict realization of full benefits. These include the choice given to individual State Governments whether or not to implement it in their respective states. Other concerns are that the policy does not yet have a fool-proof mechanism to ensure that prescribed 50 percent investment is done in ‘warehousing and cold chain

facilities’ excluding land costs. Neither does it ensure that retailers do not exploit suppliers (especially the small producers and farmers) in the long-term with their buying power. It has been proved in several developed and other developing countries that multinational retail giants can bring in significant efficiencies in distribution systems of their suppliers, and have an overall positive impact on the entire logistics industry’s distribution systems. Similar positive impact is thus expected in the Indian logistics industry as well. In the debate for and against the move to allow 51% FDI in multi-brand retail, the focus has largely been on the implications for traditional kirana stores and farmers – the most visible stakeholders. In due course, Logistics Service Providers (LSPs) – playing a critical role in the backend, could be impacted as well. So what could change for Peeyush Naidu LSPs with opening up and Director, Infrastructure growth of multi-brand Consulting, Deloitte India retail? The size and scope of business opportunities along with opportunities for introduction of newer technologies & practices! At one level, we already have large format convenience stores and supermarkets in the country which have been able to successfully target certain retail segments like clothing, footwear, furnishing, appliances, etc. Logistics have hitherto been handled by these businesses through entirely self-managed logistics & warehousing networks as well as through networks with partial outsourcing. However, FDI could facilitate further investments as well as changes to existing supply chains through competition and innovation! While there could be initial mandates on investments in “backend” infrastructure – including “processing, manufacturing, distribution, design improvement, quality control, packaging, logistics, storage, warehouse and agriculture market produce infrastructure”, innovation could be driven by international players bringing in know-how. Innovation would also be required to adapt to local conditions and consumer preferences – as experiences in some countries have clearly

FDI in multi-brand retail would be catering to a niche customer and would not be in a position to replicate the current retail model ( sector markets) as they are more of relationship driven rather than cost driven. LOGISTICS TIMES October 2012

LOGISTICS TIMES October 2012

BIG ISSUE

Real fun starts now with this suave move of union cabinet as it will create a new and competitive logistics arena which will separate men from boys. demonstrated in the past! LSPs would have the opportunity to partner these players through various models – from becoming partners in creation of infrastructure facilities to their integrated operations, allowing organised retailers to focus on their core business. It could well provide an opportunity for widening and deepening of investments by LSPs while acting as a facilitator for consolidation in a fragmented industry! Also, competition would not just be with existing organised retailers.Existing organized retailers have, in fact, themselves had difficulty in competing with the traditional kirana stores in the food and grocery segment which is estimated to account for about 60-70% of the total retail market in India, where their market share is less than 5%. The real opportunity for multi-brand retailers would be a much larger organised share of the estimated USD 450 billion retail market, compared to the present 5% odd! And LSPs could focus on partnership opportunities with multi-brand retailers to support Key Success Factors for retail – bringing in newer products giving consumers greater choice (like organic produce), preserving quality, ensuring price competitiveness in a low margin business, meeting requirements for dissimilar consumer groups, etc. This could be through introduction of technology and know-how, at times also through tieups with international players, for proper storage of different commodities, provision of value adding services and supporting just-in-time supply chains. LSPs could also play an important role in supporting international retailers’ supply chains for external markets. Wal-Mart, for example, is reportedly expected to source and export about USD 1 billion worth of goods from India every year. The full impact of opening up of the multi-brand retail segment may only be felt with supporting legislative changes such as the introduction of GST – labelled by some as the ‘real turning point for modern retail’ and changes to the Agricultural Produce Market Committee (APMC) Act. Nonetheless, even if not required to do so quick and fast, LSPs may now have a marketdriven opportunity to spruce up their operations and practices! FDI in multi branding Retail in my opinion is a step in right direction and is long overdue. It is a well known fact that due to lack of proper warehousing and transportation facilities, there is 40 per cent wastage in India during the delivery process of food and vegetable products starting from farmers up to consumers LOGISTICS TIMES October 2012

due to which farmers are not able to get right price for their produce and a major portion of profit is looted by middlemen. We continue to transport our agricultural products in open trucks and during monsoon season, major chunk of wheat, vegetables and fruits get rotten and eaten by rodents in the ill equipped storage Prof. Akhil Chandra facilities which are in many Institute of Logistics cases uncovered and exposed and Aviation to rain. I call multinationals as necessary evils. We have to involve them in the retail sector through foreign direct investment as countries like China, Thailand, Indonesia and other South East Asian and Far East countries have done. Multinationals like Wal-Mart, Carrefour, Tesco and Metro shall bring advanced knowhow and technology in the country and shall create a healthy competition forcing domestic players to learn and improve their products . We have seen how local companies like Haldiram and Bikaner rose to the occasion after the entry of Pizza Hut and Mc-Donald in the country. These domestic companies sought new markets beyond the country’s frontier and are operating in number of foreign countries. The smart way while dealing with entry of multinationals is to learn the tricks of the trade from them and improve your manufacturing and infrastructure and create once again your own customized products through innovation. This is exactly what China did with them and today China is an international manufacturing hub through adaptation to foreign technology. Well, if you can not defeat them head on , you should join them and reap the strategic advantage through equity participation and joint ventures.. We already have witnessed success of FDI in Automobile sector and how companies like Tata, Bajaj and Mahindra & Mahindra themselves have now transformed into big Indian multinationals. Logistics service providers both in upstream and downstream mushroomed and today India has emerged as manufacturing hub in this sector. Though benefits of FDI in retail sector shall take some time to be reaped probably more than 20 months but somewhere a beginning is to be made. Multinationals with their deep pockets

shall make investment in country’s logistics infrastructure and everybody shall benefit including farmers, manufacturers and consumers. Even Mom & Pop stores ( Kirana stores ) shall find new ways to improve their neighbor hood strengths and shall use IT and telecommunication technology to their benefit. It will actually come out to be a win-win situation for everybody. Adulteration in food products shall stop and quality products shall be available. It will also improve tourism as most of foreign tourists care for hygiene and purity of edible products. It is a big opportunity for Logistics service providers and E-Commerce sector as country shall witness introduction of Automation, IT and telecommunication technology in a big way involving RFID, automated containers/reefers, ERP , GPS and WI-MAX etc improving the cold chain management. I recall lot of opposition to computers in sixties and seventies due to fear of unemployment but new avenues of employment got generated in the process and today life in India without computers can not be imagined. Change is a must and technology always brings lot of benefits and our country should not be kept isolated from its fruits due to unfounded fear of unknown. Finally I am confident that due to benefits to farmers and boost to manufacturers and logistics infrasructure, country’s GDP growth shall improve. Will FDI in multi-brand retail result in upgrading supply chain processes in the country? I find this question a bit skewed. Our provisions in terms of refinement of supply chain processes, in FDI for multi-brand retail, are nothing more than what multi-brand retail would themselves want for their own well-being. So there should be no question of Sanjay Agarwal our expecting too much. Are CMD we expecting too little or have Dev Bhumi Cold Chain we squarely addressed our concerns, is the question. Our one concern is the monopolizing DNA of multi-brand retail. Squeezing vendors (farmers, et al) and customers to the nth degree possible is the mantra to profits. Therefore in order to keep the playing-field level, it has to be managed in such a way that multi-brand retail not be allowed to become largely the only vehicle to market produce, as it has been in the US. This may be achieved not by restrictive ways but by right measures to encourage the growth of indigenous retail, in order to bring all-around refinement of supply chain processes in the country. Otherwise too much power becoming concentrated in too few hands delivering monopolization of wealth, shouldn’t really be seen as “refinement of the supply chain processes in the country”. With the introduction of a foreign (new) top-end of the food chain, all the indigenous denizens will have to scramble and evolve, in line with “survival of the fittest”. Those who find

niches to hide in, may conduct their business within those limits. Those who are in the way of the behemoth will be summarily swallowed. Therefore ‘quick’ and ‘fast’ will become a matter of survival for the remnants. There is no doubt that introduction of Multi Brand retail (MBR) in the country will be game changer at many levels. While the primary focus of the public at large today is jobs and the impact on the economy, the main changes will come in the area of Supply Chain Management. Big Retail - as embodied by multinational retailers like Walmart, TESCO, Carrefour – is characterized at the visible level by low Prices, high variety and more importantly high availability and reliability. However this is largely possible by the invisible network of a very robust and reliable supply chain. The model of Big Retail assumes the availability of strong SCM systems and without this system, this model would fail quickly and surely. There is no doubt that when these MBR firms come to the country, they will bring their processes and systems in India as well. India, with one sixth of world’s population had been touted as being one of the “last frontiers” for Multi Brand Retail. Thus the MBR companies will bring alongwith them the Sameer S Karkhanis knowledge, experience, Senior Manager - Marketing mistakes to avoid and Bertling Logistics India Pvt. Ltd. the best practices they have learnt while operating in markets worldwide. Yet, despite our developments, we still lack a world class Infrastructure. This includes poor roads, procedural bottlenecks, congested transportation systems and lack of Cold Chains – all of which make it difficult to predict the throughput in the Supply Chain and making it unreliable. Thus it would not be possible to implement a world class solution of systems and processes right away – rather the race will be to build a SCM solution that is the best-inclass i.e. making the best of the situation. The systems and processes thus developed will definitely improve on the existing solutions; yet it wont match up to the best in the World. And as these MBRs find their footing in the market, they will no doubt do their bit to improve the infrastructure – setting up cold chains, warehousing etc, to suit their solutions and develop and edge over the completion –innovating all the way along. This beneficial cycle of competition and innovation will lead automatically to better processes and systems. To summarize, the question is not of inappropriate expectations, rather of timelines. LOGISTICS TIMES October 2012

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EVENTS

ELSCC awards Blue Dart and DHL won key awards at the 6th Express, Logistics & Supply Chain Conclave (ELSCC) held late last month at the Taj Land’s End, Mumbai. Blue Dart took home the honours in the categories of ‘Best Air Express Provider of the Year – Domestic’ (Blue Dart Express Ltd.), ‘Best Air Cargo Carrier of the Year’ (Blue Dart Aviation Ltd.) and ‘CSR initiative of the Year’ (Blue Edge: Empowering Lives programme). In the individual category, Anil Khanna, Managing Director, Blue Dart Express Ltd. won the ‘ELSC CEO of the Year’ award. DHL, on the other hand, received the awards for ‘Best Air Express Provider of the Year – International’ (DHL Express) and ‘Best Logistics Service Provider of the Year – Air Freight’ (DHL Global Forwarding). At the conclave, CHEP India also won a major laurel as it received the award in “ Supply Chain Innovation of the Year” category.

LOGISTICS TIMES Octoberr 2012 2

EVENTS

International Student of the Year

FedEx Express recently announced the special ‘FedEx Student Offer’ and launch of the ‘FedEx International Student of the Year’ campaign in association with the upcoming ﬁlm ‘Student of the Year’ produced by Dharma Productions and Red Chillies Entertainment. Starring Sidharth Malhotra, Alia Bhatt and Varun Dhawan in the lead roles, the ﬁlm is directed by Karan Johar and is releasing on October 19, 2012. The campaign gives Indian students who intend to pursue higher education abroad an opportunity to earn a sponsorship of INR 500,000 and a chance to meet Karan Johar. The campaign also provides a counseling session from United States-India Educational Foundation (USIEF) for ten shortlisted students.

Talent Hunt in Mumbai

Million Minds Management organized an industry interactive session with Logistics professional to create awareness about LOGISTICS Achievers Award and Talent Hunt 2013. Million Minds had earlier launched 2nd season of LOGISTICS Achievers Award and Talent Hunt on 1st September in Delhi and on 27th Sept, it reached to Mumbai to launch the programme for Western Zone. Around 50 logistics professional from CONCOR, VRL Logistics, East India Transport Agency, TCI, Mahindra Logistics, DTDC Courier and Cargo, Transsolutions, Safe Express, Logisys, Inland Transport, DeLEx Cargo India, V Trans, Blue Drat, CCI , Arshiya, MSC india, Mugs line, Trans Ocean and other companies participated in this interactive session.

LOGISTICS LOG OGISTICS TIMES October 2012

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