Smart Logistics - January 2011

Vol. 01 | Issue 09 | JANUARY 2011 ` 100/-

JANUARY 2011JANUARY 2011 • SMART LOGISTICS SMART LOGISTICS • 5

ALLIEDPERFORMANCE & PROFITS

The world of manufacturing is changing. Customers and suppliers are more demanding. Pressure from competitors

is more intense. And manufacturers are expected to do things better and faster – with fewer resources. The added pressure of entering into new markets, reducing costs and growing revenue means manufacturers have to embark on joint ventures, mergers & acquisitions, strategic alliances and outsourcing to expand their global footprint. How do you stay ahead of the game when things are moving so quickly?

Well, movement is the key word here and the key to stay ahead. Incidentally, logistics is all about moving… moving raw materials, moving parts, moving finished goods to the market, moving profits to greater heights… welcome to the allied world of manufacturing and logistics, where performance and the profits of the two sunshine sectors are interlinked.

At a time when companies are pushing relentlessly to compete more aggressively, move faster and fight harder, a swift, agile and smart supply chain network plays a critical role.

Never before has the manufacturing and logistics space been so dynamic. As manufacturing companies expand globally, they contend with significant challenges managing and ensuring process consistency across operations. There are additional requirements to provide real-time collaboration with suppliers and downstream supply chain partners.

Today’s manufacturing and logistics sectors are dynamic and performance expectations are high. To be competitive, organisations must increase the pace of

innovation, develop new revenue streams, and improve communications – both internally and externally – while reducing inventory and cost. In a nutshell, you need to outperform and outwit your competitors and contenders.

And how do you do that? If you want to stay competitive, you have to find innovative ways to improve manufacturing capabilities and business processes. That means making sure everyone in your company – from the top floor to the shop floor – has access to the information, communications and applications they need to work collaboratively, both internally and across your supply chain.

Companies, along with their logistics partners, can eliminate non-value activities and waste throughout the entire value network by using tool and best practices for standardising work, sequencing and dispatching tasks, automating operations, identifying materials & resources and collecting data and sharing information in real time. Also, it is critical to assess in-depth the current operations in order to develop an accurate justification for project costs.

To conclude, the chain of activity that begins at the raw material stage to the manufacturing plant and ends with the delivery of the product to the ultimate customer is not an isolated operation, but a highly integrated one with the performance and profits of all the stakeholders interlinked.

Archana Tiwari-NayuduExecutive Editor

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VIEWPOINT

6 • SMART LOGISTICS SMART LOGISTICS • JANUARY 2011JANUARY 2011

Supply Chain IntegrationPowering Manufacturing Strategy

INSIGHTS & OUTLOOK: MANUFACTURING SCM

VOL. 01, NO. 09 JANUARY 2011

ALSO IN THIS ISSUE

VIEWPOINT 5

NATIONAL NEWS 8

PROJECT UPDATE 10

NEWS ANALYSIS:

Coastal ShippingWitnessing The Winds Of Change 12

Integrated InfrastructureA Must For Sustainable Growth 14

WORLD NEWS 16

PRICE TRENDS 19

TECH TRACK 58

PRODUCT & ADVERTISERS’ INDEX 66

PRODUCT & ADVERTISERS’ INQUIRY FORM 67

CONTENTS

VIEW FROM THE TOP‘Strategic Planning Is Crucial For Attaining Supply Chain Effi ciency’Jasjit Sethi, CEO, TCI Supply Chain Solutions

42

Supplier SelectionBuilding Long-Term Relationships

Material Handling EquipmentBecoming Smaller & Smarter

Inventory ManagementFive Inventory Core Competencies That Can Make Or Break Your Competitive Advantage

322826

EVENT PREVIEW65 Hitech Material Handling Show Inspiring Seamless Material Handling

SECTOR UPDATETelecommunication LogisticsExpanding The Communication Channel

46

SL EXCLUSIVEDry PortsReinforcing Connectivity For Optimistic Future

50

SMART STRATEGIESTransportation Management SystemsFive Key Ways To Rapidly Reduce Costs

52

WAREHOUSING & DC

56Real-World Business OptionWMS In The Cloud Or Just Fluff?

Manufacturing SCMDesigning An Agile System 23

The manufacturing industry is on a comeback mode, hitting the business confi dence meter at an all time high, especially the Indian automotive industry. But, maintaining this growth momentum commands effi cient logistics strategies. With changing customer requirements and rising competition, manufacturing and logistics strategies are also witnessing changes. Hence, these could be of competitive advantage for corporates battling for marketshare in the future.

20

SPECIAL REPORTIndian Logistics InfrastructureOn A Strong Footing

36

EQUIPMENT UPDATE

62Mobile Price Label PrintersEnabling Real-time Retail Re-pricing

NATIO ALEWS


■ MINISTER WANTS ROLE OF TAMP IN SCRUTINY Union Shipping Minister GK Vasan has emphasised that there is a need to review the role of Tariff Authority for Major Ports (TAMP). “At present, TAMP fixes the tariffs for major ports, while non-major ports are given the liberty to fix their own tariff. There are concerns that some non-major ports, which have locational advantage, are charging exorbitantly from the trade. The role of TAMP also needs to be reviewed in the changing context,” said Vasan.

“The Ministry of Shipping is in the process of drafting a comprehensive legislation consolidating the Indian Ports Act, 1908 and the Major Port Trusts Act, 1963. I am sure it will address these concerns,” added Vasan. Talking about the challenges faced in public-private partnership (PPP) projects in the ports sector, Vasan said that there have been considerable delays and uncertainty in getting clearances from various ministries and agencies. Litigation during the tendering process also takes a heavy toll on some PPP projects, Vasan said, adding that there was a need to streamline the clearance processes and to ensure that decisions are taken within a specific time period.

■ PHARMEXCIL TO SET UP WAREHOUSING FACILITIES IN OVERSEAS MARKETS

With a view to boost pharma export, the Pharmaceuticals Export Promotion Council (Pharmexcil) is considering the setting up of warehousing facilities overseas under the Market Access Initiative scheme. Initially, it will set up warehouses in three countries, one in the Commonwealth of Independent States (CIS) countries, the other in Europe and the third one in Africa. The Pharmexcil has selected three international agencies, including two from Europe, to work out on the The agencies are already in the process of identifying a location and are expected to submit their reports in two to three months. Their proposals will then be submitted to the government.

These warehousing facilities are expected to help small scale companies, which cannot afford to set up their own warehouses in overseas markets, in a major way. All these warehousing facilities will have cold storage facilities, which is required for the storage of several pharma products.

Dr PV Appaji, Executive Director, Pharmexcil, said, “We are planning to set up 2-3 warehousing facilities overseas. It can be either pre-customs or post-customs type. The companies can store their products and then sell them to the domestic buyers whenever there is demand. The small companies are expected to benefit from this project.” Pharmexcil expects that with the opening of these facilities more companies will utilise their service.

■ SERVICE TAX LEVY ON RAIL FREIGHT DEFERRED TO APRIL 1, 2011

The Centre has deferred the implementation of Service Tax levy on transport of goods by rail for the third time this fiscal.

This levy will now come into effect from April 1, 2011 and not on January 1, 2011 as proposed earlier. According to official sources, the service tax exemption on certain goods carried by Indian Railways – such as pulses, foodgrains, petroleum products for PDS, organic & chemical manure and motor vehicles – will now come into effect from April 1, 2011 along with 70 per cent abatement.

The latest deferment comes at a time when the government is keen on ensuring that its actions do not fuel inflationary expectations. Moreover, it would also come as a relief for the domestic cement and steel industries, who would have otherwise been required to fork out higher freight rates for movement of coal, cement and steel by rail.

The Centre had in Budget 2010-11 proposed to bring transport of goods by rail in the Service Tax net from April 1, 2010. However, the implementation was deferred to July 1, 2010 in similar inflationary circumstances. Indian Railways had indicated after the budget that it would have no choice but to pass on the tax burden to its freight customers. The Ministry of Finance had taken a decision in June to defer the implementation of service tax levy to January 1, 2011.

■ SHREYAS SHIPPING FORAYS IN BULK COASTAL SHIPPING OPERATIONS

Shreyas Shipping & Logistics has recently announced its foray into the coastal bulk shipping operations with the deployment of Indian flag coastal bulk vessel, MV Unity.

“Shreyas’ entry into bulk coastal shipping would complement its position as an integrated multimodal logistics service provider. The coastal route is one-third in terms of operational cost when compared with railways, and one-tenth of operational cost when compared with road transport. However, the subsidised road and railways disturbs the feasibility of coastal shipping in India unlike in developed countries where coastal shipping is subsidised vis-à-vis roads and railways. Deploying MV Unity into the Indian coastal trade reemphasises our commitment of improving coastal shipping in India,” said S Ramakrishnan, Chairman & MD, Shreyas Shipping & Logistics.

The vessel MV Unity (GRT 11982 and DWT of 14101) is single decker, self geared, bulk ship strengthened for heavy cargo.


The vessel MV Unity (GRT 11982 and DWT of 14101) is single decker, self geared, bulk ship strengthened for heavy cargo. Earlier she was deployed under the foreign charter but in view of increasing demand for coastal bulk movement, the company deployed her for coastal bulk trade.

■ GOVT TO OFFER VIABILITY GAP FUNDING FOR MARINE SALVAGE GROUP

According to Union Shipping Minister GK Vasan, the government will offer viability gap funding for setting up a marine salvage group with advanced facility. The Ministry of Shipping wants the private sector to invest in a project to acquire advanced salvage tugs, equipment to check oil spills and facilities to handle any emergencies arising out of marine mishaps. According to the viability gap funding scheme, the government provides up to 40 per cent of the cost of the project with low financial viability as grant to make it commercially viable, particularly in public-private partnership projects. Although ports in the country and coast guards already have salvage tugs, they are not equipped to handle major accidents, said a port official. India depends on agencies in Singapore and other countries for rescue and pollution control operations whenever there is a marine accident. For a company with two advanced salvage tugs, pollution control equipment and adequate number of experts in the field will require minimum investments of $50 million, said sources.

The government should soon come out with a new policy on providing incentives to shipyards in India, Vasan said. According to the earlier scheme, which was in force till 2007, shipyards were given 30 per cent subsidy on the cost of the vessel built.

■ TCI ANNOUNCES COMMENCEMENT OF OPERATIONS OF ILSPL JV WITH CONCOR

Transport Corporation of India (TCI) and Container Corporation of India (CONCOR) recently announced commencement of operations of Infinite Logistics Solutions (ILSPL) a Joint Venture Company of CONCOR and TCI. In Infinite Logistics Solutions (ILSPL), TCI will hold 51 per cent of the equity shares, which it had recently acquired and the remaining 49 per cent is held by CONCOR.

ILSPL will offer end-to-end multimodal logistics solutions and establish an integrated rail-road cargo service thereby creating synergies between the two most widely used modes of transportation. The JV will offer comprehensive solutions for its customers by offering seamless services using the rail infrastructure of CONCOR and the road infrastructure of TCI. It will also run operations on dedicated routes and based on specific needs of customers, can offer customised solutions. Speaking at the occasion, Vineet Agarwal, Executive Director, TCI said, “The JV Company, ILSPL will use the core competencies of the JV partners – TCI and CONCOR to offer multimodal cargo transportation. TCI

will ensure the first and last mile delivery of the cargo. With this JV, TCI Is pleased to offer its customers a cost-effective, reliable and time-bound rail road solution.

Anil Gupta, MD, CONCOR, said, “It is CONCOR’s mission to provide efficient and reliable multimodal logistics support for the country’s EXIM and domestic trade & commerce. With this JV with TCI, we are getting a step closer. Containerised multimodal door-to-door transport, which ILSPL will offer would prove to be a more cost-effective solution for heavy cargo over medium and long distances.”

■ OM TRANS LOGISTICS OPENED ITS FIRST OVERSEAS OFFICE IN SHANGHAI

Om Trans Logistics has established its first overseas office in Shanghai. Vikarm Garg, CEO, Om Trans, had signed the Memorandum of Article with China Shanghai Municipal Corporation, which is in the shipping business under the name of JJ Shipping & Tradia corporation Japan, who is already a partner of ‘Om Trax’ (Relocation Wing of Om Group). Tradia Corporation Japan was established in 1941 and has been offering services relating to custom brokerage, warehousing, freight transportation and international freight forwarding. Om Group’s international company is registered under the name of ‘JC OmTrax International Logistics (Shanghai)’.

With this, Om Trans, one of the leading logistics support and solution provider, is poised to enhance its presence across Asia as well. This joint venture will help Om Trans to develop a market in this region. Vikram Garg, CEO, Om Trans Logistics, said our aim is to provide competitive and innovative logistics solutions while keeping the cost in check. With this joint venture, we are able to expand our presence in the Asian sub-continent. We will make our best efforts to continue to truly satisfy expectations and needs in the future.

■ SLOVENIA SEEKS LOGISTICS COOPERATION WITH INDIA

Slovenia is exploring the possibilities of cooperation in the areas of maritime, shipping, trade establishment with Indian Ports and Shipping Lines, said HE Janez Premoze, Ambassador of Slovenia at a meeting recently organised by the All India Association of Industries (AIAI) and World Trade Centre (WTC). There are several bilateral projects identified by India and Slovenia of which 18 have been approved and are under implementation.

Vijay Kalantri, President, AIAI, said that Slovenia has immense trade potential in the areas of maritime, pharma, textile, food products, etc. He said that in 2009, the total bilateral trade in goods amounted to €215.20 mn with India enjoying a trade surplus of €63.12 million. Bilateral trade figures from January to May 2010 indicated that Slovenia’s exports to India rose by almost 42 per cent and Slovenia’s imports from India increased by more than 78 per cent in comparison to the trade figures for the same period in 2009.

PROJECTUPDATE


■ HOOGHLY RIVERFRONT PROJECT GRADUALLY TAKES SHAPE

The proposed Hooghly riverfront project, which promises to change the economy and life of Kolkata, is gradually taking shape. It has been six months since the project was officially announced. A memorandum of understanding was signed between Kolkata Port Trust (KoPT), Indian Railways and the Kolkata Municipal Corporation (KMC) in August for the project’s implementation. However, the project, which was to be implemented through a public-private partnership model, lacks a clear mandate for the three key agencies as well as a co-ordinating mechanism, officials involved in the project said.

A Ranade, the Deputy Chairman of KoPT, said, “Complete mandate and co-ordination are required and a detailed plan is to be worked out.” A six-member panel was formed a couple of months ago and more members will be co-opted in time to come. KoPT has already prepared a broad project framework and presented it to the Ministry of Shipping. RITES – the consultancy organisation under the Ministry of Railways – will prepare the project’s feasibility report in a couple of months. The core project area will involve redevelopment of a 24-km stretch – 12 km each on the eastern and western banks of the river. The Ministry of Shipping has also mooted the idea of involving at least 40 municipalities, in addition to KMC, on both the banks of the river. The land on the banks has mixed ownership and hosts dockyards, heritage buildings, slums, godowns, industrial establishments, residential buildings and markets as well.

■ INDIAN RAILWAYS PUTS FORTH FIVE-YEAR DIVIDEND WAIVER DEMAND

The Indian Railways has sought from the government a five-year dividend waiver commencing this fiscal. It plans to use the relief to construct pending capacity enhancement works budgeted at `30,000 crore. In addition, the relief would also

help the Railways tide over a recurring, incremental and annual wage bill of `15,000 crore, which it has to bear on account of the Sixth Pay Commission. The total impact of the Sixth Pay Commission on the Indian Railways wage bill is estimated at `55,000 crore between 2008-09 and 2010-11.

This is not the first time that the Indian Railways has made such a demand. The Ministry of Railways had sought similar relief for fiscal year 2009-10 as well. However, the demand was turned down by the Railways Convention Committee – a Parliamentary Committee – based on the recommendation of the Expenditure Department of the Ministry of Finance.

Justifying the Ministry of Railways’ demand for dividend waiver, a railway board official said, “Barring American railroads, most of the railroads receive fairly high levels of government subsidy. We must remember that from rail links along the Golden Quadrilateral and its diagonals in our country (which now carry about 78 per cent of freight traffic), there was no return for 50 years. If the government wants us to fund the infrastructure from the surplus, it has to help us by sanctioning this dividend relief.”

The annual dividend payouts are in the range of `6,600 crore (FY2011) and `7,700 crore (FY2012), said the official. The Ministry of Railways has a huge backlog of ongoing projects the completion of which require `98,352 crore. Of this, it has already segregated projects requiring an investment of about `30,000 crore.

This investment in new lines, gauge conversion and electrification will lead to capacity creation of about 500 MT, enabling Indian Railways to carry 1,500 MT of traffic against the current level of 944 MT. The flagship project of Indian Railways – the dedicated freight corridors – require huge investments of the order of `1,50,000 crore.

■ CABINET COMMITTEE APPROVES MULTIPLE HIGHWAY DEVELOPMENT PROJECTS

The Cabinet Committee on Infrastructure recently approved the six-laning of the 122.88-km-long Barwa Adda-Panagarh section on National Highway (NH)-2 in Jharkhand and West Bengal in design, build, finance, operate and transfer (DBFOT) mode. The total project cost is estimated at `2,083.65 crore, said an official release.

The project’s concession period shall be for 20 years, including a construction period of 30 months. The project is a part of NH-2, the Grand Trunk Road connecting Delhi to Kolkata. The road runs through the industrial and coal mining areas of Jharkhand and West Bengal.

Meanwhile, the Cabinet Committee on Infrastructure has also approved the four-laning of the Barasat-Krishnagar section in West Bengal under NHDP Phase III in DBFOT (annuity) mode. The total project cost is estimated at `997 crore. The concession period of the project is 17 years, including a construction period of 30 months, said the official statement.

In addition, the Cabinet has approved “two-laning with Indian Railways plans to use the relief to construct pending capacity enhancement works budgeted at `30,000 crore

JANUARYJANUARY 2011 2011 • SMART LOGISTICS SMART LOGISTICS • 11

paved shoulders of Ambala-Kaithal section” in Haryana under NHDP Phase III on DBFOT (toll) mode.

The total project cost is estimated at `516.69 crore. The concession period of the project is 16 years, including a construction period of 30 months.

■ CHANGES LIKELY IN BEYPORE PORT DEVELOPMENT PLAN

The development plan for Beypore port, near Kozhikode, is likely to undergo further changes with the Indian Coast Guard seeking to have a berth of its own at the port. The original proposal is to develop the port, which is the second biggest port in the state after Kochi, by incorporating more cargo and passenger facilities at a total outlay of `760 crore. This proposal is envisaged to be achieved by increasing the depth of the basin from the existing four metres to 12 meters in stages and enabling vessels up to 20,000 dwt to call on the port. Also, a 400-metre wharf is to be constructed in addition to the existing two wharves.

Recently, the Ports Department had signed a memorandum of understanding with Lakshadweep Development Council (LDC) to let the latter construct a 200-metre berth exclusively for the passengers to and from the island at a cost of `20 crore. This has necessitated suitable changes in the original master plan. Apart from the development of the port, the Union Ministry of Defence has decided to establish a Ship Designing and Manufacturing Centre in Beypore, which will make the region a hub of activities. The township has been planned on a ‘sustainable development’ basis to meet the varying demands of the region’s emerging profile.

■ MUNDRA COAL TERMINAL TO BE OPERATIONAL BY MARCH 2011

The 60 MT dedicated coal terminal at Mundra Port and SEZ (MPSEZ) is in the final stage of completion. It is expected to be operational by February-March 2011.

The Adani Group-promoted terminal will handle about40 MT of imported coal for two power stations of Tata Power (4,000 MW) and Adani Power (4,620 MW) at Mundra, Gujarat, and the balance may be used either to supply imported coal to other power stations, under implementation by Adani Power or for trading purposes.

The completion of the dedicated coal-handling facility will also free capacity from the existing multi-purpose terminal in MPSEZ, part of which is now being used to meet the requirement of the existing 1,320 MW (4x330 MW) capacities of Adani Power (APL). The capacities are slated to increase to 1,980 MW in a few weeks with the commissioning of the first 660 MW unit. The entire 4,620 MW facility is scheduled to be operational in 2010-11, requiring 22 MT of coal, mostly imported, annually.

Meanwhile, Tata Power has reported that the first800 MW supercritical unit of the 4,000 MW (5x800 MW)

designated ultra mega power project (UMPP), is expected to be operational in September 2011.

■ ADANIS TO EXPAND COAL TERMINAL AT MUNDRA PORT

The Adani Group, which synchronised India’s first supercritical technology-based 660 MW thermal power unit at Mundra, has announced the commencement of a coal handling terminal at the nearby port. The company is all set to almost double its capacity to make it the world’s largest coal receiving terminal, Adani Group officials said. “Mundra Port’s capacity will increase from the existing 60 MTPA to 100 MTPA in the next two-and-a-half years,” Gautam Adani, the group’s Chairman, said.

Work on the incremental fourth coal-receiving berth is getting under way. Investments for its expansion are being worked out, a company official said, adding that it would not be too high as much of the infrastructure required is already in place. Adani said that with the synchronisation of the 660 MW unit of Adani Power (APL) at Mundra, achieved within 36 months of inception, the coal-fired thermal generation capacity there stands at 1,980 MW, making APL the third largest power generation company in the private sector.

The fully mechanised facility will supply coal not only to the 4,620 MW power plants of APL and Tata Power’s 4,000 MW ultra-mega power plant, but also to the other power plants in the northern and western hinterland of the country. After completion by March 2012, it will become the country’s largest coal-fired power station and one of the top five in the world.

■ DHAMRA PORT TO IMPLEMENT NEW RAILWAYS INITIATIVES

Dhamra Port, a joint venture between Tata Steel and Larsen & Toubro, will perhaps be the first port project in the country to implement the relevant provisions of the newly introduced Railway Initiatives for Infrastructure Investments.

The initiatives have several components, some of which will be applicable to the port. The relevant provisions provide, among other things, that after 30 years or so the Indian Railways will become the owner of the land provided by the Orissa Government for constructing the railway line on the 62-km stretch between Bhadrak, a station on the Howrah-Chennai trunk route, and the port.

The line, complete with signaling and other facilities, has been constructed by Dhamra Port Company (DPC), which will also be responsible for its maintenance. But the operations of the port railway will be undertaken by the Indian Railways.

Freight will be apportioned at agreed rates. The Indian Railways will share with DPC a portion of the freight to be earned by it for transportation of cargo to and from the port. Accordingly, agreements are being signed between DPC and the Orissa Government and also between DPC and the Indian Railways.


NEWS ANALYSIS COASTAL SHIPPING

TODAY, despite being a low-cost and fuel-efficient mode of transport, coastal shipping accounts for just 7 per cent of the total domestic cargo movement, the bulk of which moves by road and rail, adding to the pressure on these transportation modes. In a country with a coastline of over 7,000 km, coastal shipping as a mode of transportation has not been explored so far.

In a move to open up this segment and create more business opportunities for the industry at large, the Director General of Shipping, in a recent circular, has proposed to open Indian coastal shipping to foreign shipping lines. After years of closed-door treatment to coastal shipping, the proposed policy aims at easing the capacity constraints in coastal container services. However, the plan is to initially

allow foreign flag vessels to carry only containerised cargo along the country’s coast. All other types of cargo will be reserved for Indian ships. Also, according to the notice, cabotage regulations will continue for all other types of cargo, except containerised cargo. According to government officials, the proposed policy will be implemented in phases with a set time frame being already chalked out for

Even today, the sea remains the most unexplored means of transportation in India due to inadequate infrastructure facilities and stringent government norms. Relaxing its stance on this mode of transportation, the Centre has taken fresh initiatives to open coastal shipping for foreign lines, thereby ushering the coastal shipping industry into a competition-driven era.

SUMEDHA MAHOREY

WITNESSINGWITNESSING THE THE WINDS OF CHANGE


implementation by the Director General of Shipping, Ministry of Shipping.

The move comes as a respite for freight forwarders and Export-Import (EXIM) players who have been dealing with inadequate infrastructure, seamlessness, operational inefficiencies, high costs and almost no policy for container movement in India. The proposed policy, while allowing foreign lines to carry containerised coastal cargo, prohibits them from carrying empty containers between two Indian ports. The proposed policy also suggests relaxation in manning norms for coastal shipping and providing financial incentives to acquire vessels for coastal service. It also recommends freight preference to Indian ships in coastal trade.

Highlighting the effect of this proposed policy on coastal shipping, Manish Saigal, Executive Director, Head – Transport & Logistics Advisory Services, KPMG India, avers, “There are not many logistics players taking interest in this segment. With foreign shipping lines coming into picture, a competitive environment will be created. This will help the government as well as the regulators.” He further adds, “The proposed policy will bring in world-class facilities and expertise to Indian waters. This would definitely result in better transportation through sea at lower costs.”

COST ISSUES ON INDIAN WATERSWith Indian vessels facing capacity issues, delays in delivery of cargo and high transportation costs are the major bottlenecks faced by the industry today. With the doors open for foreign lines, capacity creation as well as cost factors can be duly addressed. Elaborating on this, Saigal points out, “Foreign lines will bring with them added capacity that used to go waste due to policy matters earlier. This would result in lowering of cost and provide a breather to importers and exporters.”

Local shipping lines argue that coastal cargo is reserved for them under the cabotage regulations to ensure national

safety and boost coastal tonnage. Initially, foreign lines would offer ‘dumping’ freight rates to attract cargo. But once they know that they can dictate terms, they will increase the rates. However, some have different views. P K Agrawal, Chief GM, Container Corporation of India, avers, “We welcome the move. The shipping fraternity was demanding this since a long time. Foreign lines will not only offer low rates but also create competitive environment, which is the need of the hour. With reduction in costs, we expect the pressure on rail and road transportation to ease.”

NEW RULES Apart from the proposed policy on opening up coastal shipping for foreign lines, the Director-General of Shipping has also revised the rules on ‘river-sea’ shipping, as part of its initiatives to boost coastal shipping services. According to an order issued recently, the Directorate has prescribed new rules for the construction and operation of river-sea vessels. These vessels can be operated both for inland water and sea transportation. The revised rules are expected to help in seamless movement of cargo, as the vessel operating in the river would also be able

to operate along the coast. Sir Mehernosh Shroff, Knight, CMD, Seaworthy Shipping Services & Growmore Group, says, “This move would make Indian ship owners more competitive and create a fantastic competition for business. This will lead to a decline in the freight rates as well. This will also benefit export-import and gradually help bring down coastal shipping freight rates, thus boosting cargo movement along the coastline.”

The revisions have also simplified the registration process for river-sea ships. The vessels now have to be registered under the Merchant Shipping (MS) Act. Existing vessels that operate in inland water services and are registered under the Indian Vessels Act can also register under the MS Act if they want to operate as river-sea vessels. The new order also prescribes standards for construction and operation of four types of vessels for river-sea transportation. They are expected to fill the gap in coastal shipping and ensure smooth flow of cargo.

THE BREATHING POINTWith the Indian coastal operators facing multiple issues like lack of connectivity to the hinterland and ports, heavy taxes, high cost of funds, absence of dedicated berths, etc, these policy initiatives come as a major relief that can change the way the industry functions today. With major initiatives being taken to create a free-trade environment, it is expected that in the next 10 years, Indian players will be in a position to provide world-class facilities for the growing cargo transport demands, and that too at lower costs.

There are very few logistics players taking inter-est in coastal shipping. With foreign shipping lines coming into picture, a competitive environment will be created. This will help the government as well as the regulators. MANISH SAIGAL, EXECUTIVE DIRECTOR, HEAD – TRANSPORT & LOGISTICS

ADVISORY SERVICES, KPMG INDIA

The shipping fraternity was demanding opening of shipping services for foreign lines since a long time. They will not only offer low rates but also create competitive environment, which is the need of the hour. P K AGRAWAL, CHIEF GENERAL MANAGER, CONTAINER CORPORATION OF INDIA

This move would make Indian ship owners more competitive and create a fantastic competition for business. This will also benefit export-import and gradually help bring down coastal shipping freight rates, thus boosting cargo movement along the coastline. SIR MEHERNOSH SHROFF, KNIGHT, CMD, SEAWORTHY SHIPPING SERVICES &

GROWMORE GROUP


NEWS ANALYSIS INTEGRATED INFRASTRUCTURE

ONE of the key priorities for India’s growth is infrastructure, on which the government spending has nearly doubled in the past decade. Although India currently boasts of 3.3 million km of roads – the second largest such network in the world – the shortage of highways has been a major hurdle in further growth ofIndian logistics industry. All this amountsto the need for having a robust and sustainable surface transport plan. Highlighting the importance of transportation infrastructure, Shyamalkumar Mukherjee, Joint MD, Maharashtra State Road Development Corporation (MSRDC), avers, “Considering the developing nature of the country, India needs to invest $300 billion in urban infrastructure. There is a huge stress on current infrastructure, which can be mitigated by such massive investments.”

PROBLEMS GALORE The logistics sector in India, which is highly dependent on infrastructure developments, is close to 15 per cent of the GDP. Its actual value comes to approximately $150 million. Meanwhile, 4.3 per cent of the GDP goes waste because of transport and logistics cost every year. The Indian rail transport cost

is among the highest in the world, one of the main reasons for this being lack of investments in rail development.

A recent survey identified India’s underdeveloped state of infrastructure as top priority, while an inefficient government bureaucracy is also a top concern. JP Nayak, Whole-time Director & President (Machinery & Industrial

The need for integrated infrastructure has been long felt in the Indian logistics industry, but with the country witnessing robust industrial growth post recession, this bottleneck has transformed into a major cost burden for the industry. To deal with this issue, the Centre needs to take immediate measures that will generate sustainable results in the future.

PURNA PARMAR

A MUST FORSUSTAINABLE GROWTH

Key Points• Improving infrastructure is key to India’s development• The government is addressing the challenge of land acquisition for

highway construction • India remains attractive enough to make finance available, but major

hurdles remain, such as lengthy dispute resolution processes and a banking system in need of reform

• Contracts within the PPP framework need to be made more attractive.


Products) – Larsen & Toubro, adds, “The infrastructure in India is insufficient, ill-equipped and ill-designed to sustain the rapid rate of growth. Yet, this is also an opportunity where the magnitude is such that two-thirds of the required infrastructure has to be newly created.”

Logistics cost in India is higher than that in even developed nations like the US. As compared to India, this cost in the US is 70 per cent lower for coastal freight and 30 per cent lower for road transport. “This is because of the inefficiencies and unproductive methods used in India. The waste generated is assessed at $45 billion or 4.3 per cent of our GDP. If we do not improve, it will increase to $140 billion, or 5 per cent of GDP by 2020. We can reduce this by half, but would need the right policies and investments,” says Nayak.

Highlighting few other challenges, Gopal N Sarma, Partner, Bain & Company, said, “We set a number of targets but do not have the mechanisms to implement them or monitor their implementation. Of the trillion dollars being talked about as part of the 12th Five-Year Plan (2012-17), not more than 60 per cent is realisable even in an optimistic scenario. On the policy front, the government is encouraging infrastructure development and users are also willing to pay. Over the years, not a single infrastructure project has been stopped for the need for financial closure. What is the problem then? There is no single authority on any project build-up; there are multiple interface points across the Centre as well as the state.”

Commenting on the need of the hour, he says, “Having an integrated transportation and logistics policy as a first step towards an integrated transportation department at the Centre is the key. This would resolve the immediate challenge of multiple authorities in the transport rollout.”

According to Sarma, another problem observed in the industry is the under-utilisation of transportation facility. An example here would be one of the busiest ports in India – Paradip port. Despite having mechanised movement of goods, the port does not have sufficient rail track to operate within the port premises. The port terminal can handle two vessels simultaneously, and there are multiple berths at the port. However, the entire evacuation of vessels is done by trucks, with about 2,000 trucks on an

average outside Paradip port, which cause environmental losses and 3-5 per cent handling loss. Another example would be the Jawaharlal Nehru Port Trust (JNPT), which handles about 60 per cent of the export traffic where evacuation of vessels is done by trucks and not rail. All these add to the logistics cost and, subsequently, affect the overall growth of the economy.

FORMULATING SOLUTIONS According to Nayak, the scenario can be improved by formulating a national integrated logistics policy, targeting a greater share of freight to rail, increasing energy efficiency, building dedicated freight corridors, coastal corridors, last-mile roads, multimodal logistics park, skill development, etc. This is a complex task involving multiple stakeholders, and would require a cross-ministerial group for driving it.

Having an integrated transportation and logistics policy as a first step towards an integrated transportation department at the Centre is the key solution for this issue. However, despite this, much remains to be done. In the past, infrastructure projects mainly rested with the government. However, at present, many private sector firms have entered, but they need more opportunity through clear guidelines set by the government. The emphasis is on the latest products, equipment and technology, with a focus on efficiency, productivity, safety, environmental protection, cost-effectiveness and construction quality.

“Within the infrastructure deficit, the lack of roads remain the greatest challenge. Although there are 71,000 km of national highways, 16,000 are single-lane roads. To work on the challenge of building 20 km of road per day, Government of India has embarked on one of the largest public-private partnership (PPP) schemes in history. The cost will be about $20 billion,

60 per cent of which will be raised by the private sector,” mentions Mukherjee.

According to the industry biggies, the need for government reforms is one of the top priorities. “To encourage private players to take risks, contracts need to be more attractive. The government is in the process of clearing some of these roadblocks. Clauses within contracts are being reworked with the input of private players. The government is trying to resolve the issue of surface transport through the PPP approach,” adds Mukherjee.

Talking about the government initiatives towards infrastructure development, Arjun Dhawan, President, HCC Infrastructure, points out, “The governments’ PPP approach to improve transportation and infrastructure has proved to be beneficial to both the government and private players. However, a few deterrents in this process are mainly due to the mindset, though all is not lost. Key decisions are

often made by few people through a long, tedious process. The government is now all set to address these problems. In a recent move, the length of time taken to acquire land has been reduced from 18 to 8 months. Further, no project will be awarded until the government has acquired 80 per cent of the land. Consultants who have consistently miscalculated estimated costs of projects are also being reviewed. Regarding dispute resolution, the government is considering a more equitable process to avoid time-consuming arbitration battles.”

A POSITIVE APPROACH As the industry looks forward to have an integrated policy to solve issues of increased pressure on the existing infrastructure and other transport-related problems, it is of paramount importance to see how the government manages to cater to the increasing demands of the industry through sustained development initiatives.

Considering the developing nature of the country, India needs to invest $300 billion in urban infrastructure. There is a huge stress on current infrastructure, which can be mitigated by such massive investments. SHYAMALKUMAR MUKHERJEE, JOINT MD, MAHARASHTRA STATE ROAD

DEVELOPMENT CORPORATION

WORLDEWS


■ CHINESE STEEL LOGISTICS INDUSTRY TO EXPAND AT 10 PER CENT PER ANNUM

The steel industry in China is anticipated to witness drastic changes in business practice and steel logistics is portended to become a potential field for expansion. It is predicted that China will witness an average of more than 10 per cent increase in the volume of steel logistics annually. Li Shijun, a Chief Analyst with China Iron & Steel Association, said, “It has been forecasted that steel consumption will total 700-800 mn tonne by the end of the 12th Five Year Plan period and be close to full capacity. Thereafter, the expansion speed of the steel industry will slow down. Steel logistics will not only help save the cost of reducing intermediate links in circulation, but also bring steel industry additional value.”

At present, the ratio of domestic steel output and logistics volume is about 1:5. This means producing one tonne of steel requires logistics volume of five tonne. Last year, China produced 568 mn tonne of steel and generated logistics volume of 3 bn tonne. In 2009, the average rate of profit in steel logistics enterprises was 6.7 per cent and some other diversified steel logistics enterprises’ profit even reached around eight per cent.

■ PORT OF OAKLAND TO BECOME MAJOR LINK IN TRANSPACIFIC COLD CHAIN

The recent announcement of a new ocean cargo service linking China to Oakland comes at a time when the port is making a remarkable outreach effort, with significant ‘cold chain’ implications. Last month, the port and China Merchants Holdings International had entered into an agreement to strategically

market and develop supply chain solutions for US exports, particularly agricultural commodities and perishable products. A delegation from the Port of Oakland, led by Pamela Calloway, VP, Oakland Board of Port Commissioners, participated in a signing ceremony held at China Merchants’ Hong Kong headquarters. The focus was on enhancing warehousing and logistics facilities and creating seamless cold chain services for US companies exporting their perishable products to China.

“The form and scale of this partnership is a first for the US port industry. China is a significant market for US food and agriculture products, but the lack of cold chain services is inhibiting the export potential. Our initiatives will help make it easier, safer and faster to export US commodities from California and distribute them in China,” said Omar Benjamin, Executive Director, Port of Oakland.

■ GLOBAL SHIPPING INDUSTRY WILL TAKE MORE TIME TO RECOVER: UN REPORT

While the hard-pressed shipping industry is recovering from recent declines, it is still being hindered by fragile global economic conditions as well as depressed freight rates and an oversupply of vessels, says a recent UN report. The Review of Maritime Transport 2010, produced by the UN Conference on Trade and Development (UNCTAD), indicated that international seaborne trade contracted by 4.5 per cent in 2009 to 7.94 bn tonne, which is below 2007 levels. It had climbed to an all-time high in 2008. The report stated that although a global recovery is currently under way, it is uneven, slower than the recoveries that have followed previous recessions, and subject to numerous uncertainties and to the fragile global economic conditions. “Signs show that the shipping industry and seaborne trade are recovering, but it will take some time for the industry to return to its 2009 levels,” UNCTAD said. The report said that seaborne trade in dry bulk commodities – such as iron ore, grain, coal, bauxite/alumina and phosphate, which represent around one quarter of seaborne trade – actually grew by an estimated 1.4 per cent in 2009. However, this figure masks fluctuations by commodity type, it added.

The supply of new vessels, the report points out, showed no signs of abating. At the beginning of 2010, the world merchant fleet reached 1,276 million deadweight tonne (dwt) – an increase of 84 million dwt over 2009. Despite this increase, the combined effect of a downturn in demand and an oversupply of vessels meant that freight rates for many vessel types remained depressed.

■ HONG KONG TO START NEW POLLUTION CONTROL INITIATIVE

In its first attempt at a maritime solution aimed specifically at the shipping industry to cut sulphur dioxide emissions by nearly 80 per cent at one of the busiest shipping ports in the world, an important fuel switch initiative, dubbed the Fair Winds Charter, will be rolled out in Hong Kong on January 17. For ships operating in Hong Kong waters, the initiative will cap the fuel sulphur content of ships and control overall emissions. It is especially important for the port of Kwai Chung, which has sulphur dioxide levels that are 64 per cent higher than anywhere else in Hong Kong.

About 80 per cent of the vessels that move into Kwai Chung will participate in the Fair Winds Charter before the government moves ahead with further regulation. Shipping giants Maersk and China Cosco Holdings have already said

The port and China Merchants Holdings International had entered into an agreement to strategically market and develop supply chain solutions for US exports.


they will participate. The participating ships will have to switch to low-sulphur fuels in Hong Kong, but can switch back to using high-sulphur contents on the open seas. Hong Kong follows a global trend for lower-emission agreements that has been seen in other ports including the Baltic Sea, English Channel, North Sea, Los Angeles, Long Beach and New York among others.

■ EMIRATES COMPLETES 1ST PAPERLESS FLIGHT

Emirates SkyCargo has recently marked a milestone with its inaugural paperless flight. EK702, from Mauritius to Dubai, became the first flight on its global network to operate with a hold filled entirely with shipments, which had been processed electronically. The Boeing 777-300ER, with a belly-hold capacity of 23 tonne, transported a diverse load, including bank notes, flowers, fruits, clothing and courier items. E-freight is a collective cargo industry initiative facilitated by IATA with the goal of removing all paper Air Waybills, as well as every other document and certificate, by the end of 2014. Emirates SkyCargo, the freight division of Emirates airline, is on track to meet the 2014 target.

“E-freight will become the industry standard and those who embrace the changes first will reap the benefits. It is with great pride then that we are celebrating our first e-freight flight, which will act as a catalyst across our global network of 109 destinations,” said Ram Menen, Emirates’ Divisional Senior Vice President Cargo. This marks a significant step towards working in a completely electronic environment, which will bring enhanced operational efficiency to the supply chain, streamlining processes, increasing speed and reducing costs.

■ PLEA TO MAKE CONTAINER SHIPPING SAFER Ship owners have urged the UN International Maritime Organisation to adopt rules regarding the use of overweight containers which are putting lives at risk, creating high operational costs and higher cargo liability claims at sea and on roads.

In a joint declaration, the World Shipping Council and International Chamber of Shipping have emphasised the need for adopting legally enforceable rules for overweight containers before loading to prevent risks of stacks collapsing and damaging safe ship operation and injuring personnel. The joint declaration also points out that the new laws requiring export cargo containers to be weighed at the marine terminal upon receipt and before vessel loading should be enacted.

■ LOGISTICS MARKET IN UAE TO GROW 9 PER CENT TILL 2020

According to a study by Frost & Sullivan, the UAE logistics market is poised to witness a consistent annual growth of around 8-9 per cent till 2020 with its revenues hitting a record $16 billion in the next 10 years. Being the primary entry point

for goods in the Gulf Cooperation Council (GCC) market, the UAE’s logistics industry was bound to scale new heights with an improving domestic economy and increasing regional economic integration, the study pointed out.

The Emirati logistics market had posted a 10.7 per cent growth in revenues which soared to $7.03 bn in 2010 thanks to a focussed development of logistics infrastructure and economic recovery, it stated. According to the study, the sector will witness a steady growth even in the coming year with its revenues reaching to about $7.5 bn.

Srinath Manda, the programme manager of Transportation & Logistics, South Asia and Middle East, Frost & Sullivan, who authored the report, said, “The increasing economic integration of the GCC nations, coupled with the evolution of supporting logistics infrastructure, is likely to result in progressive fortunes for the logistics industry.”

The total logistics spend (total logistics market size) in the UAE represents approximately 2.5 per cent of the country’s total GDP. However, it represents about 6.4 per cent of the services GDP. Further, the average logistics spend for non-oil manufacturing industry sectors is about 7.6 per cent, he noted.


WORLD NEWS GLOBAL LOGISTICS IN 2010

IN the absence of the dreaded double-dip, the global logistics industry witnessed a strong bounce back in 2010 as it emerged from recession. Air, road and sea freight sectors recovered dramatically, with CEVA Logistics, for example, reporting that air cargo volumes grew at 45 per cent in the first quarter. Although this growth moderated as the year went on, many metrics suggested that the industry had recovered to pre-recession levels.

UPTURN IN FREIGHT VOLUMESThe upturn in freight volumes and the measures which carriers had taken to reduce capacity had a significant effect on freight forwarders’ gross profits although the extent to which this occurred varied from sector to sector. Air freight capacity was particularly tight and rates have continued to rise throughout the year, while sea and road transport markets have been much softer. The industry was buoyed by economic expansion in China and South East Asia and if it had not been for concern about the ailing economies of the Eurozone (Portugal, Italy, Spain and Greece in particular) and the massive deficits of other western powerhouses, such as the US and the UK, confidence surely would have been still higher. The shipping sector was among the biggest beneficiaries of the recovery; the surge in volumes and rates meant that revenues and profits soared. Ironically, the sector was close to meltdown in the previous year.

SECURITY TOPS THE CHARTSecurity, once again, forced itself onto the agenda, when terrorists managed to smuggle in bombs onto a number of integrators’ and commercial airlines’ aircraft. The US and countries in Europe immediately announced tighter security measures such as banning air cargo from Yemen and the re-screening of air cargo on arrival. However, there were also calls in the US to go further and a bill to force 100 per cent screening of all air cargo is on the cards. Many industry bodies warned against knee-jerk reactions to the crisis, as this could be counter-productive and costly.

VOLCANIC ERUPTION – A DAMPENER Supply chain resilience was also called into question when the Eyjafjallajökull volcano in Iceland erupted. This natural disaster had an extraordinary effect on the air transport system of northern Europe. The air space of first Britain, Norway, the Netherlands and then Germany, Austria, Belgium, France, and most of Europe was shut to all commercial traffic. This forced air cargo and international express parcels operators to implement contingency plans (where they had them) and utilise gateways in Southern

Europe. Despite this, there were severe implications for many exporters of perishable goods, especially in East Africa.

MERGERS & ACQUISITIONSIn terms of mergers & acquisitions (M&A), there were few mega-deals, although there were numerous smaller purchases. Perhaps the most notable acquisition was that of UK-based logistics company TDG by French rival Norbert Dentressangle. UPS ruled out buying the restructured TNT in favour of a ‘fill-in’ strategy, which would see it purchasing smaller European players. DP-DHL and DB Schenker were signalling a period of focus on profitability rather than growth.

PRICE FIXINGPrice fixing was also a dominant theme in the year. In November, the European Commission fined 10 airlines a combined €800mn for their role in a global cartel that colluded to fix air cargo rates. Other administrations from the US to New Zealand have also issued fines. Freight forwarders were not immune with several global players fined by the US Department of Justice.

TREADING THE GROWTH PATH CAUTIOUSLY Looking at the performance metrics, we can say that world trade and global economy have grown strongly in 2010 and this has underpinned the growth of logistics companies exposed to global markets. The threat of a world slump has eased, yet it is obvious that uncertainty is still the spirit of the age. The US economy faces big hurdles, while Europe suffers from self-inflicted financial wounds. The world has benefitted from the boom of emerging markets, yet inflation in China may be the beginning of even more cause for nerves.

Courtesy: Transport Intelligence

GLOBAL LOGISTICS INDUSTRY

Despite major hiccups such as volcanic eruption and security threats, the global logistics industry has shown significant improvements in trade volumes over the year 2009. Though opportunities are lucrative, the global logistics industry needs to take a cautious approach to spearhead the growth momentum.

BACK POST RECESSIONBOUNCES

The shipping sector was among the biggest benefi ciaries of the recovery.


PRICE TRENDSThe RFI stood at 175 points for the month of December 2010 which was the same in the month of November 2010 but it had registered an increase by 3 points as compared to December 2009.

For Metros, ex-Kolkata rates registered on an average highest increase by 12 per cent, where as ex-Mumbai on an average registered highest decrease by 7 per cent.

INDEX OF 6 YEARS

AUTOMOBILES The overall production data for April-November 2010 shows production growth of 30 per cent over the same period last year. In November 2010, production grew at 13 per cent over the figures registered in November 2009.

Passenger vehicles segment in April-November 2010 grew at 32 per cent over the same period last year. Passenger cars grew by 32 per cent, utility vehicles grew by 20 per cent and multi-purpose vehicles grew by 51 per cent in April-November 2010 over April-November 2009.

For the period of April-November 2010, three wheelers sales recorded a growth rate of 18 per cent, while passenger carriers grew by 22 per cent and goods carriers grew at 6 per cent.

COMMERCIAL VEHICLESThe overall sales of commercial vehicles segment registered growth at 35 per cent in April-November 2010 as compared to the same period last year. While medium & heavy commercial vehicles grew at 47 per cent and light commercial vehicles grew at 26 per cent.

FORECAST FOR JANUARY 2011The trends for RFI in January 2009 over January 2008 remain stable and there is a decrease of 1 per cent over December 2009. The RFI stood at 171.30 for the month of January 2009 and 171.95 in the month of December 2009 which registered an increase of 0.65 per cent. The RFI for the month of January 2011 can be expected to increase marginally.

Knowledge Partner: Transport Corporation of India (TCI); website: www.tcil.com; e-mail: [email protected]

Indian Road Freight Index (IRFI), a service introduced by Transport Corporation of India (TCI), is an index of weighted average lorry freight rates across various routes, calculated based on the route density and the dynamic freight rates of routes across the country.

Road Freight Index Chart for December 2010

2005-06 2006-07 2007-08 2009-10 2010-112008-09

169

171 172

TRENDS FOR DECEMBER (Y-o-Y)

169

175

148

TRENDS FOR JANUARY (Y-o-Y)

150

167 171 174

2005-06 2006-07 2007-082009-10

169

2008-09

171

2010-11

INSIGHTS & OUTLOOK SUPPLY CHAIN INTEGRATION


THE global manufacturing industry is rising again, with its current purchasing managers index (PMI) at a four-month high. According to Chartered Institute of Purchasing and Supply (CIPS), UK manufacturing hit a 16-year high (highest since 1994) this November. France is at a 10-year high, whereas China, India and Germany respectively are at 8, 6 and 3 month high.

Given the upbeat market condition, this seems to be a good time for companies to ensure supply chain capabilities, which will in turn support manufacturing growth.

Talking about the manufacturing sector, the Indian automotive industry has seen tremendous growth and is one of the brightest sectors in the Indian economy. It has been scaling up and the impressive

statistics reflect the envious growth. It includes:• Second largest manufacturer of two

wheelers in the world• Fifth largest manufacturer of commercial

vehicles in the world• Ninth largest car manufacturer in the

world.During April to July 2010, the passenger

vehicle segment grew 34 per cent over

The manufacturing industry is on a comeback mode, hitting the business confidence meter at an all time high, especially the Indian automotive industry. But, maintaining this growth momentum commands efficient logistics strategies. With changing customer requirements and rising competition, manufacturing and logistics strategies are also witnessing changes. Hence, these could be of competitive advantage for corporates battling for marketshare in the future.

POWERINGMANUFACTURING STRATEGY


the same period last year, whereas commercial vehicle segment grew over 50 per cent.

As the Indian automotive industry positions itself for a bigger growth phase, the sector itself is undergoing some changes:• Indian firms are acquiring automotive

assets outside India (Tata Motors and Mahindra & Mahindra). This will lead to increased sharing of technology, suppliers, platforms and parts, all leading to a need for global supply chain capabilities.

• Global supply chain capabilities will also be required for firms looking to export to lucrative markets. This will include both finished goods logistics and aftermarket support.

• On the manufacturing side, companies are becoming even more aware about the need for planning facilities with the ability to scale up volumes and support multiple products with shorter product lifecycles.

• Just-in-Time (JIT) and lean manufacturing have been a part of the automotive lexicon for years. They continue to be sharp focus areas. A natural corollary is smaller and more frequent shipments to suppliers throwing up a host of supply chain challenges and opportunities.Therefore, while the automotive sector

keeps pace with growing demand and is scaling up, there is intense activity in the supply chain space to ensure that the parts are available at the right time, right place and appropriate cost.

All these issues affect the manufacturing and supply chain strategy, but the customer is at the heart of the changes that are driving the sector.

CUSTOMERS’ IMPACT ON MANUFACTURING STRATEGYThe growing customers’ demands and competition have brought in several changes in the manufacturing requirements.

To accommodate these trends and survive competition, manufacturing methods have suitably changed. These new methods have led to the development of common platforms, shared parts, reduced suppliers, lean inventory holdings and flexible manufacturing set-ups primed to run smaller batches of product.

With the emergence of lean and agile supply chains, inventory levels have

d r a s t i c a l l y reduced along the chain. These have resulted in p r o f o u n d consequences fo r t he s u p p l i e r s , as they are r e q u i r e d to supply shipments in smaller lots at increased f requenc ies . F u r t h e r , this means moving closer to customer plant locations, collaboration on mi lk-run based t r a n s p o r t programmes, m a s s i v e changes in p a c k a g i n g ready for feed to line and, most importantly, the need for greater visibility and reliability, as failure by a supply chain participant has a direct effect leading to production loss.

COLLABORATION BOTTLENECKSThe most important outcome of the trends in manufacturing and supply chain development is that organisations have to

Larger Number of

ModelsChoice

Short Product Lifecycles

Different Customer Segments

Features & Technology

Mass CustomisationHigh

Availability Competition Regulation

Price Pressure

Evolving Technology

Impact of Marketplace on Manufacturing Strategy

Customer & market demands cause changes in the manufacturing strategy


plan and develop supply chain capabilities together and individual action does not lead to significant benefit, therefore collaboration in the supply chain is the starting point for positive action.

Collaboration goes hand-in-hand with integration, as supply chain participants look at evaluating disparate supply chain flows sometimes between unrelated participants to achieve optimal closed loop systems. Supply chain collaboration is a winning concept, but implementing this in the fullest sense requires great planning and ongoing perseverance. Following are a few important pointers:• One must design a programme with

clear objectives, activities of each participant, the benefits and how each participant’s benefits will be aligned to: • Ensure cooperation

• Create a cross-functional team• Get information and data right• Do not broad-base efforts from the

first day; identify a series of wins to ensure that one is able to win time and build steam.

• One should ensure management buy-in and very strong sponsorship; this initiative may not succeed otherwise.

• After drawing up a programme, the partners must be involved and clearly communicated the objectives, requirements, benefits and timelines.

• As it happens in any programme, some people will participate and some will not, so one should be clear about how to tackle such situations in advance.

• One should not waste time and money to collaborate with an interested partner or one who does not see value.

• From time to time, a dip test must be done to check on commitment to succeed jointly.

• One should have support systems in place to help all participants along the journey to adopting new systems and processes.

• Periodic reviews must be conducted to outline both shared and individual gains.

• The winning mantra here must involve communication, promoting transparency and building trust.

ON A COMPETITIVE ADVANTAGEIndia is riding high on the manufacturing momentum and is poised to become a global hub for automotive industry in the coming years. This momentum should be supported by commanding logistics strategies to keep India at the same level of growth.

Over time, customer requirements and competition have brought several changes in manufacturing and logistics strategies and this is going to continue and hasten, as India becomes a hotbed for pitched battles between corporates fighting for marketshare.

Organisations that are able tobuild collaborative supply chainnetworks are in pole positions to navigate these changes better than others. Moreover, this could be a source of competitive advantage over the next few years.

Krishna Sumanth, Project Consultant & Saurabh Goyal, MD, ThinkLink SCSE-mail: [email protected]

Smaller and Frequent Shipments

Closer Locations and Supplier Parks

Transport Optimisation and Collaboration

Use of 3PLs, 4PLs, and LLPs

Supply Chain Visibility & Reliability

Lean and Agile

Supply Chain

Effect On Logistics

Capabilites

Supply chain components for effi cient logistics

Evolving Supply Chain and Logistics Paradigm

Supply chain integration, continued

Changing manufacturing strategy to weather competition

JITLearn

ApproachPostponement

VMIAssemble to Order Mass

Customisation

CPFR

Present

Make-to-stock models &

High Inventory Levels

Past

CCOLLABORATION GOES HAND-IN-HAND WITH INTEGRATION, AS SUPPLY CHAIN PARTICIPANTS LOOK AT EVALUATING DISPARATE SUPPLY CHAIN FLOWS SOMETIMES BETWEEN UNRELATED PARTICIPANTS TO ACHIEVE OPTIMAL CLOSED LOOP SYSTEMS.

MANUFACTURING SCM MANUFACTURING SCM INSIGHTS & OUTLOOK


THE fact that logistics plays a vital role in delivering a product to the customer at the right time and in the right condition is known to all. This process of distribution can be broadly categorised into three main stages – delivering raw materials to the manufacturer, logistics involved during manufacturing process and the logistics involved in carrying the finished product to the customer. While ensuring that the logistics involved in delivering the product from the manufacturer to the customer is efficient, it is important to develop a lean and agile supply chain within the shop floor.

SIGNIFICANCE OF EFFICIENT MANUFACTURING LOGISTICSManufacturing is a constantly changing

process. With manufacturers facing increasing pressure from customers and suppliers apart from competitors, they are expected to perform better and faster by making optimum use of the resources they have.

The added pressure of entering new markets and reducing costs have forced manufacturers to enter into joint ventures (JVs), mergers & acquisitions, strategic alliances and outsourcing to expand their global footprint.

In such a rapidly changing scenario, how can a manufacturer stay ahead? The answer to this question is ‘change’. Making the required changes to manufacturing and distribution is the need of the hour. However, it is important to ensure that while making the necessary changes, the overall

manufacturing process is not hampered. This is where logistics can play a crucial role. The purpose of logistics on the shop floor is to ensure that each workstation is timely fed with the right materials and in the right quantity & quality for carrying out efficient manufacturing. It aims to provide the means to achieve customer response and capital efficiency. Amul Shinde, Deputy General Manager – Logistics, Seco Tools India, says, “Customers today prefer honest feedback and commitments. So ‘reliability in the basics’ is a key factor. Customers have realised that we may not be able to satisfy every one every time. They now look for the value that the manufacturers add to products. Hence, manufacturers must recognise core competency and act accordingly.”

Increasing population, constantly changing demand trends and pressure from competitors have compelled manufacturers to shift their attention towards improving their logistics practices. This not only involves movement of finished products to the end customer, but also includes the practices used during the manufacturing process within the shop floor.

SUDHIR MUDDANA


Today, manufacturing logistics is becoming more important with decreasing batch sizes. In many industries, such as mobile phones and apparels, it is important to efficiently fulfill every single customer’s demand. In such a case, to stay competitive, one needs to find innovative ways to improve manufacturing capabilities and processes. Dr Rakesh Sinha, COO – Marketing & Operations, Godrej Consumer Products, explains, “A supply chain needs to be designed in such a way that it is agile enough to compete in today’s consumer markets. Since market demand is dynamic and unpredictable, the entire supply chain should work on replenishment principles to cater to demand changes. Supply chains working on forecast base would suffer in this environment.”

HURDLES IN THE WAYTalking about the challenges faced by companies while carrying out manufacturing logistics, Sinha avers, “Since supply chains need to be agile, tremendous flexibility is required in the back-end manufacturing systems to cater to dynamic demand changes. We also need effective information systems to provide complete end-to-end view of stocks and consumption at various nodes in the supply chain.” With constant changes occurring during manufacturing, forecasting is considered as one of the major challenges while carrying out logistics on the shop floor. This is because every machine on the floor must be fed with the right materials, at the right time. Ignoring these factors can lead to poor customer satisfaction, something that every company cannot afford.

Skill development is another challenge that most manufacturers and logistics service providers face today. Although there are institutes set up to train people, there is still a lack of institutes to cater to the huge working population. Shinde avers, “Forecast & flexibility in manufacturing and trained & competent

manpower in logistics are the key challenges today.” However, the answer to finding skilled people lies within the industry. Manufacturers should directly take upon themselves the responsibility of training their manpower to optimally utilise their talent for the benefit of the organisation.

DESIGNING A MANUFACTURING SUPPLY CHAINTo overcome the challenges faced, ensure the optimal utilisation of machines & manpower, and to stay ahead in the competition, it is important for manufacturers to efficiently design their shop floor supply chains. This includes factors such as keeping abreast with the latest technology advancements, ensuring their inventory levels are perfect and maintaining strong communication between people involved in the process. According to Sinha, the following should be kept in mind while designing a manufacturing supply chain:• Replenishment principles• Lean supply chain• Dependence on forecast only for

seasonal items and new products• Flexible manufacturing• Daily feedback, review and corrective

actions.Keeping the above in mind will not only

help manufacturers cut down on costs but also provide customer satisfaction, irrespective of the order size. According to Shinde, the five most important factors to consider while designing the supply chain are:

• Forecast • Flexibility in supply chain (reserve

capacity management for responding to urgencies)

• Clear communications and commitments (IT)

• Passion for customers and family spirit • Motivated manpower and motivated

suppliers including logistics partners.Sinha avers that with changing times,

some of the best practices that can be adopted to improve manufacturing logistics are:• Daily replenishment from upstream to

downstream nodes• Daily review of excess stocks and

potential stockouts• Theory of Constraints (TOC) principles

for continuous improvement of supply chain efficiencyOn the other hand, Shinde informs

that Seco Tools has adopted practices to ensure that each and every employee is involved in improving the overall manufacturing.

Moreover, to help the employees conform to the lead times, the company has launched an internal project called ‘LIFE: Little Improvements from Every One’. Here, even at the back office everyone tries to be as efficient, and even at the production side they monitor and encourage the workers and managers to create solutions that eliminate wastes and increase production.

STAYING AHEADKeeping these factors in mind while designing the supply chain will help manufacturers bring out the best from their shop floors in the form of more efficient and optimal productivity while meeting customer expectations. All these factors converge to create a competitive advantage that any manufacturer would like to have in this cut-throat market. Strategising at the manufacturing logistics level is thus a crucial step towards achieving supply chain efficiency.

Factors Driving Manufacturing Logistics Efficiency• Forecasts, flexibility in the systems to meet changing variables in

demand & supply and clear communication with customers regarding commitments are a key to success.

• Suppliers should not look at inventory as an enemy but strive for having healthy inventory to meet fluctuations in demand. This can be seen as an investment to gain marketshare.

Inputs by Amul Shinde, Deputy General Manager – Logistics, Seco Tools India

Supply chain needs to be designed for agility to compete in today’s consumer markets. Since market demand is dynamic and unpredictable, the entire supply chain should work on replenishment principles to cater to demand changes. DR RAKESH SINHA, COO (MARKETING & OPERATIONS), GODREJ CONSUMER

PRODUCTS

Manufacturing SCM, continued

INSIGHTS & OUTLOOK SUPPLIER SELECTION


THE Indian manufacturing sector is witnessing a growth that other countries are envious of. While a strong domestic demand has kept the Indian industry in a contented state, the newfound global faith in Indian quality has ensured an upsurge in international demand for Indian products. “Our quality is gradually being respected all around the world and while Chinese products are a potential threat, they cannot match up to our quality and after-sales standards,” avers Avra Mitra, Senior Manager – Key Accounts, Bobst India. With rapid implementation of technology across the vast expanse of the manufacturing sector, the country now boasts of state-of-the-art facilities to entertain customers from across the

world. Brand India is now being noticed everywhere.

SUPPLIER SELECTION & STRATEGY MANAGEMENTThis rapidly expanding optimism among the Indian manufacturing sector owes much to the logistics industry, which is probably the only chain that binds all

the processes, thereby delivering on final commitments to the end user. “Logistics is the backbone of the manufacturing sector. Novel techniques are coming up, which help deliver better services to our customers,” says Ravinder Singh Dhaka, Director, Vijay Logistics. However, one factor that is critical for smooth and efficient functioning of the logistics

Systematic developments and efficient functioning of the logistics industry has brought about phenomenal growth in the Indian manufacturing sector. This growth can be further enhanced by a strong supplier-manufacturer relationship, which will go a long way in eliminating the need to critically monitor every stage in the supply chain.

ANWESH KOLEY

Our quality is gradually being respected all around the world and while Chinese products are a potential threat, they cannot match up to our quality and after-sales standards. AVRA MITRA, SENIOR MANAGER – KEY ACCOUNTS, BOBST INDIA

MANUFACTURER • MANUFACTURER • MANUF

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SUPPLIER • SUPPLIER • SUPPLIER •

SUPP

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industry is the right supplier selection by manufacturers. “SCM provides us with the groundwork for timely delivery to customers, and we need to take the right decision while selecting our supplier,” adds Dhaka.

While selection of the right supplier is key for any activity in the manufacturing sector, it becomes imperative for the logistics industry to implement those, as timely delivery and commitment to consumers is at stake. “Selecting appropriate supplier is important for any manufacturer. If we go for a wrong supplier, our costs will be affected along with customer confidence,” says R Jagannathan, Manager-Operations, Halidon Marketing. There are large number of suppliers in the market but the company needs to select the right one based on individual requirements. “We are the final point of contact for our clients and they will consider any delay in delivery as a flaw on our part, and not from our supplier,” adds Jagannathan.

Companies need a strategy to manage all resources that go into meeting customer demand for their product or service. A significant step towards SCM planning is the development of a set of guidelines to monitor the supply chain so that it becomes efficient, costs less and delivers high quality and value to customers. R R Pandey, DGM, TCI Supply Chain Solutions, believes, “All suppliers are not familiar with the production plan of the company. Hence, the right supplier focusses on product planning control (PPC), which is important and often seen as crucial by the manufacturer. A proper supplier selection model enables us to minimise inventory and avail the benefits of large-scale production.”

Companies must choose suppliers on the basis of delivery requirements of the goods and services they need to create. Therefore, supply chain managers must develop a set of pricing, delivery and payment processes with suppliers and create a structure for constant monitoring. Arif Siddiqui, Director, Coign Consulting, says, “The objective of the organisation and their arrangements with the customers should be clearly explained to the suppliers. The actual deliverables should not be contradictory to the promises made to them, and there should be a prominent engagement between the two parties in the relationship.”

Supply chain managers need to put together various processes for managing their goods and services inventory, including receiving and verifying their receivables, transferring them to the manufacturing facilities and authorising supplier payments on time. “The supplier should not be seen merely as a cog in the wheel of the manufacturing and supply chain, but as a partner to the organisation,” adds Siddiqui.

A prominent aspect of the manufacturer–supplier relationship is feedback. While the manufacturer concentrates on market expansion and profit maximisation, a supplier deals directly with the market and is responsible for the final delivery to the consumer. Hence, he can provide valuable information about the market to the manufacturer. “Suppliers should be encouraged to innovate and contribute towards product development. This enhances their sense of accountability and gives them confidence in the company,” avers Siddiqui. Supporting this, PV Sivaram, MD, B&R Industrial Automation, says, “Our suppliers are crucial for us. They form the final link between us and the customer, and bring to us the reality of the market as well as the progress of our brand.”

MANAGING SCM CONCERNSThe current scenario in the Indian manufacturing sector seems poised for greater heights. However, there are bottlenecks in the system, which need to be resolved urgently. The chain, which begins at the manufacturingplant of a company and ends withdelivery of products to the final consumer, is not an isolated operation.

The barriers of time and distance are integral to the process, and this is where a few concerns arise. “The current state of infrastructure needs to be improved. The quality of roads and availability of power are issues that need to be addressed. There ismulti-stage transportation in the industry and any flaw at any point causes unnecessary delay in our commitment,” asserts Dhaka.

NEED FOR SINGLE-WINDOW SYSTEMToday, there is an urgent need to have a system through which manufacturers and suppliers can operate without multi-level formalities. “We should have a single-window system, whereby all our requirements are taken care of at one point, and we need not waste time in obtaining permits and establishing connections,” adds Jagannathan.

The supply chain does not end until a proper feedback is received from the final customer. This can be a problem in the supply chain for many companies. Supply chain planners need to create a responsive and flexible network for receiving defective products back from their customers and supporting customers who are not satisfied with the delivered products.

With developing technology, bottlenecks in the SCM of companies are becoming more streamlined and easier to eliminate. The technology to track shipments is improving with time and increasing number of companies are realising the benefits of such methods to ensure meeting the commitments on time. But, the reality is that most such technologies are expensive and cannot be easily purchased by all companies. Also, companies that can afford such technologies do not have the necessary infrastructure to implement these.

HEALTHY MANUFACTURER–SUPPLIER RELATIONSHIPThe level of efficiency in the entire supply chain is gradually increasing, and this requires a decline in the scope of error at every step within the system. This reason is enough for manufacturers to take supply chain management operations more seriously, as supply commitments are moving beyond borders.

A healthy relationship between the manufacturer and supplier will go a long way in eliminating the need to critically monitor every stage in the supply chain. This will thus reduce time and effort for both the parties and eventually ensure monetary savings.

Logistics is the backbone of the manufacturing sector. Novel techniques are coming up, which help deliver better services to our customers. RAVINDER SINGH DHAKA, DIRECTOR, VIJAY LOGISTICS


THE economic trends and performance of the construction, power and manufacturing sectors are the major factors affecting the dynamics of the material handling equipment (MHE) market. The developing economies of India and China, in particular, hold enormous potential for the market, owing to high economic growth rates and the burgeoning industrial products & consumer goods sectors.

The MHE industry may not directly

contribute to the production of goods, but it brings about efficiency in handling, transport and storage of goods. In fact, the MHE industry practically complements the manufacturing industry by ensuring smooth and efficient distribution of goods. Thus, the role of MHE in any set-up cannot be overlooked. From real estate, retail and hotel industries to shipping, aviation and steel, capacity expansions are the ongoing phenomena, resulting in a boom in the

MHE market. Thus, this sector is a critical intermediary for steering the economy of a country today.

DEMAND AND GROWTHIndia has a few key factors in its favour to ensure continual growth of the material handling equipment market. In addition, the resumption of a steady inflow of investments from foreign multinationals, increase in domestic spending on

The material handling industry is constantly evolving itself in order to ensure that its customers generate maximum return on investment. Making customer satisfaction its top-most priority, the material handling industry is currently focussing on building technology that is smaller yet smarter by incorporating electronic intelligence.

PURNA PARMAR

BECOMING

INSIGHTS & OUTLOOK INSIGHTS & OUTLOOK MATERIAL HANDLING EQUIPMENTMATERIAL HANDLING EQUIPMENT

SMALLER &SMARTERSMARTER


infrastructure construction and power projects, robust domestic growth rates, strong internal fundamentals and a healthy banking system make India an extremely attractive destination for companies that are facing shrinking sales in other economies. Consequently, India is emerging as one of the best global investment options. And as long as industrial investments continue, the demand for capital goods such as material handling systems will keep growing. Hence, contrary to the popular perception, the global slowdown has proved beneficial for India.

“One of the most important factors to help understand the development of the material handling industry is mapping its growth over the years. The size of the Indian MHE industry is estimated at

`5,000 crore, and is likely to grow at 20 per cent year-on-year over the next five years, in keeping with the overall economic growth. The growth drivers include domestic production and foreign trade,” comments Tushar Mehendale, MD, ElectroMech.

Since MHE is closely associated with the country’s imports and exports, its importance in the logistics industry cannot be denied. According to a report by Freedonia Market Research ACM, the global demand for material handling products will grow five per cent annually by 2012. The demand for MHEs will continue to grow in sectors such as manufacturing, logistics, warehousing, general engineering related to power plants, metro or irrigation projects and government sectors like the railways, ordnance factories, armed forces, etc. The Indian MHE industry is now poised for a healthy growth, as the report projects.

EVOLVING TRENDSThe most common trend in the material handling industry today is building MHE that is smaller yet smarter. Besides, MHE is being incorporated with immense electronic intelligence in the form of touch screen interfaces, distributed control functions that obviate the need for bulky control panels, upgraded software, etc.

The general trend in the MHE industry is towards increasing automation, enhancing productivity and maximising safety. A lot of innovations are also taking place to develop equipment specific to one sub-sector of a particular industry and in turn provide a highly customised solution for a niche requirement.

Victoria Rickey, VP, NMHG Asia Pacific, says, “For reducing complexity in material handling operations, warehouses are deploying integrated warehousing that is capable of handling enormous varieties of stock keeping units (SKUs), while reducing the overall complexity in customer delivery

and distribution. The resultant complexity in market segmentation has also enhanced the need for stringent tracking and tracing of product movement, which is also effectively done through the deployment of handling equipment.”

Supporting this thought, Sandeep Maini, Chairman, Maini Group, opines, “There are numerous technological advantages observed in the market, especially in the past decade. Equipment with higher control methodologies in terms of accuracy, repeatability and efficiency are now available. We have recently launched equipment with higher safety functions. For instance, we have an equipment with inbuilt sensors, which stops operating on sensing human beings around the predecided track or too close to the equipment.”

Further highlighting the benefits of technology in MHE, Mehendale says, “Advanced mechanisms, and the use of electrical sensors and invertors help ensure safety while using the equipment. With further evolution of production processes and increased exposure of Indian industrialists to modern manufacturing techniques and global best practices, there is a definite shift towards the adoption of novel technologies for industries as well. For example, the industrial cranes industry in India was traditionally dominated by the old Russian design of the 1960s.

However, companies like ElectroMech are at the forefront in convincing people to discontinue with the old technology and move towards the more modern and contemporary crane technology prevalent in Western Europe,” says Mehendale.

Further talking about the trends observed in the industry, Mehendale adds, “With the fast-changing business landscapes, clients today demand an MHE model that yields quicker return on investment (ROI). Even companies that are replacing or upgrading their existing MHE range are inclined towards technology that is efficient, faster, safer and cost-effective.”

The size of the Indian MHE industry is estimated at` 5,000 crore, and is likely to grow at 20 per cent year-on-year over the next five years, in keeping with the overall economic growth. And the growth drivers are domestic production and foreign trade. TUSHAR MEHENDALE, MD, ELECTROMECH

Image Courtesy: Godrej Material Handling Business Unit


TECHNOLOGY SOLUTIONSIn the past, many considered material handling control systems to be a collection of mechanical and control devices that move objects within a manufacturing, warehouse or distribution facility.

Earlier, effort was rarely made to connect MHE units to other departments or functions in the factory. This was particularly true for the manufacturing industry. In this sector, the material handling controls were not connected to the company’s high-level software. Thus, this entire system required to facilitate smoother flow of goods, mainly lacked consistency and organised connectivity in its approach.

However, with the advent of superior technology and the introduction of high-level software such as warehouse management system (WMS) and manufacturing execution system (MES), the isolated connectivity of MHE is being replaced by comprehensive interfaces. The more advanced material handling control systems that provide a single-point interface with high-level software are often called warehouse control systems(WCS). Such latest equipment control softwares are making automation of MHE easier.

“Another trend in MHE is the growing popularity of voice-recognition systems. People understand the benefits of using a hands-free communication system and are being trained to use this technology for

ensuring minimal error during operations, thereby leading to increased productivity. The voice-recognition system aids direct communication with a computer via a headset. While receiving instructions from the computer, operators can keep both hands on the equipment, which results in a safer working environment,” adds Mehendale.

According to Mehendale, the economic downturn has brought the criticality of supply chain visibility to the fore. Manufacturing houses have realised that cost reduction can be completely achieved only through a holistic approach. Today, companies seek technologies that connect with each other. This offers greater visibility, information sharing and performance along the supply chain. This is relevant to industries like retail and pharmaceuticals where the uptime and responsiveness are critical on the shop floor and warehouses. A real-time status check of material in the shop floor also facilitates smart decision making. Adjustments to schedules, manpower and other resources can be made proactively. The best take away here is that these systems can be linked into existing technology.

“Lean equipment are also in demand owing to the increasing space crunch that companies face. Lean electric trucks that require less space to move on the shop floor can help generate 40 per cent more space on the shop floor or warehouse.

This will help reduce cost. Meanwhile, inexpensive eco-friendly equipment are also being developed,” adds Maini.

An example is the distinct shift taking place in several industries in eliminating hydraulics and moving towards purely electrical drives. Hydraulic systems by their virtue are inefficient in converting energy into useful work. Typically, in a hydraulic system, an electrical motor first drives a power pack, which compresses the hydraulic fluid. This, in turn, rotates hydraulic motors or presses hydraulic cylinders. These systems were preferred because of their inherent compactness and smooth operational features.

With the advent of sophisticated electrical controls through various sensors and inverter drives, it is possible to achieve the same level of control and smoothness of operations using electrical drives. The advantage of electrical drives is higher efficiency in converting energy into useful work by directly driving the motors or actuators and eliminating hydraulic fluids. This benefits the environment by better use of valuable energy and elimination of problems caused by ruptured hydraulic hoses and subsequent oil spillages.

This trend can be effectively seen in case of marine deck cranes, which are moving away from the age-old hydraulic technology and embracing electrical drives.

THE WAY FORWARDMoving ahead, green initiatives are poised to pick up steam in the material handling industry. Industrial practitioners are displaying a preference for environmentally responsible material handling systems that reduce emission levels and produce less noise. To ensure greater uptake of material handling systems, new technologies must be developed to ratchet down costs and improve ROI. Greater investments in research and development, and innovation at faster rates are of utmost importance for the industry.

The trends and technological innovations all point towards equipment that will enhance productivity manifold on the shop floor and in warehouses. Also, these enhance the safety of the people working with it, and that tooin an environment-friendly manner. The MHE industry will soon see a lot of exciting new developments in thenear future and help its customers maximise their ROI.

For reducing complexity in material handling operations, warehouses are deploying integrated warehousing that is capable of handling enormous varieties of stock keeping units (SKUs), while reducing the overall complexity in customer delivery and distribution. VICTORIA RICKEY, VP, NMHG ASIA PACIFIC

Equipment with higher control methodologies in terms of accuracy, repeatability and efficiency are now available. We have recently launched equipment with higher safety functions. For instance, we have an equipment with inbuilt sensors, which stops operating upon sensing human beings around the predecided track or too close to the equipment. SANDEEP MAINI, CHAIRMAN, MAINI GROUP

Material handling equipment, continued


A key characteristic of best-in-class companies is their success in using inventory optimisation (IO) and cash management techniques to free up the working capital. The amount of a company’s working capital trapped in the inventory can be expressed as days inventory outstanding (DIO). As DIO rises due to factors such as slower sales, longer supply chains, stock-keeping unit (SKU) proliferation, and higher obsolescence, the return on capital employed declines, which can hamper a company’s ability to compete, especially when obtaining financing is difficult.

To combat these and other supply chain challenges, operations research experts developed a discipline called IO about a decade ago. Early adopters have realised hundreds of millions of dollars

in documented savings through smarter inventory reductions without sacrificing sales revenue or missing customer commitments. Other supply chains also took notice, and thus IO began its evolution from an algorithm-driven point analysis to a spectrum of integrated best practices.

IO TRANSFORMS BEST PRACTICESIO was born as an advanced algorithmic approach to understanding and quantifying the propagation of demand and supply uncertainties across a multi-level supply chain. Today, it is considered as core competency at both mid-size and multi-billion-dollar companies in several of industries. IO has proven to be a sustainable process to free up millions of dollars in working capital by reducing

inventory without damaging service levels. Unlike traditional ‘binge & purge’ cycles of overproduction followed by brute-force reductions, savings are achieved and turnarounds are increased while driving more profit to the bottom line.

As operational inventory excellence creates a sustainable competitive advantage, it transforms best practices within companies and changes everything from the expectations of chief financial officers (CFOs) to the stature of supply chain managers, from procurement practices to the effectiveness of sales and operations planning (S&OP).

Many organisations adopt S&OP as part of their core supply chain operations. IO brings a much-needed clarity regarding the types and causes of multi-echelon buffer inventory to these regular demand

INSIGHTS & OUTLOOK INVENTORY MANAGEMENT


and supply discussions.Every supply chain team understands

the impact of customer forecasts and demand planning on inventory investment. However, many of these are plagued by partial visibility or low quality data. The advent of mature IO practices and credible inventory impact information has enabled supply chain teams to move ahead, and stay ahead of, demand trends. Companies without proper discipline will unnecessarily squander capital on the downturns and lose marketshare on the upturns. During the recent economic slowdown, the ‘IO-embracing’ companies gracefully brought down their inventories to a soft landing, rather than stuffing their channels. The same level of responsiveness during an economic recovery will provide a competitive advantage through better

inventory preparation and utilisation to manage the increase in demand.

Inventory excellence also enhances the success of vendor-managed and customer-managed inventory programmes by guiding towards the lowest total supply

chain cost. Leading companies seek to influence the stocking policies of their vendors and end customers as a way to bring collaboration to the overall supply chain. IO allows the company to become an expert partner, recommending smart

FIVE INVENTORY CORE COMPETENCIES THAT CAN MAKE OR BREAK YOURCOMPETITIVE ADVANTAGE

Inventory best practices for supply chain team:

• Multi-level IO: Integrate IO across raw material inventory (RMI), work-in-process (WIP) and finished goods inventory (FGI)

• Synchronise Time-phased Business Cycles: Address business cycles, seasonality and product lifecycles through time-phasing of inventory targets

• SKU Proliferation and Postponement: Manage SKU proliferation by postponing final product differentiation until later stages in the supply chain and pooling inventory to meet aggregated demand

• Strategic Outsourcing: Fully account for total landed costs across an entire portfolio of products prior to making outsourcing decisions

• Position Capital for Customer Service: Set multiple classes of customer service and manage ABC items for each class. The knowledge of these best practices has been established and is built into the strategy of the world’s best managed companies.

All businesses differ, and so do their products & services. In the race to fulfill customers’ needs in the shortest possible time, companies need to take certain measures that can ensure quick returns on investment. One such phenomenon is inventory optimisation. It can put difficult decisions back on a strong, fact-based footing by integrating working capital data into the decision process. Thus, companies that want to remain competitive need to view inventory optimisation as a business discipline with inherent best practices, not a technology or a one-time point analysis.


positions based on the realities of multi-level demand and supply uncertainty.

FIVE BEST PRACTICES, NOW INVENTORY CORE COMPETENCIESCompanies that want to remain competitive need to view IO as a business discipline with inherent best practices, and not a technology or a one-time point analysis. While there are many best practices surrounding supply chain inventory excellence, a core set is coalescing out of the maturing discipline of IO.

1 Multi-level IO (Optimising much more than just FGI): In many companies, raw material inventory

(RMI), work-in-process (WIP) inventory, and FGI are managed by entirely different functional groups. These inventories should be viewed as an organic backbone of the supply chain, rather than separate silos in which one team may be motivated to buy in bulk, another to minimise the number of production set-ups and a third to hold enough finished goods to ensure 98 per cent customer service at all costs.

Because the availability of RMI impacts production lead times for WIP and, consequently, FGIs, the inventory policy for all three must be coordinated. For instance, managers may attempt to minimise production costs by instituting longer frozen periods, thus creating relatively low raw material inventories and high FGIs. But RMI is less expensive and typically has lower demand uncertainty. In practice, increasing RMI and WIP

strategically can decrease FGI and produce net savings of 20-30 per cent of total inventory invested.

Many organisations focus optimisation efforts on their finished goods stockpiles, but this tip-of-the-iceberg approach is not sufficient to increase turns and stay competitive in the market today. Multi-echelon supply chain modeling is required to reveal the full costs of policies that result in long frozen periods, extended lead times, excess safety stock, chronic expediting, among others.

Companies use mature IO analyses to transform their S&OP process, replacing emotions and rules of thumb with factual insights that support superior policies. Confident decisions are made regarding issues such as where to best position inventory, when to postpone value-add transformation steps, how to mitigate uncertainty by aggregating demand signals, and more. Companies have changed their organisational alignment, reward structures and key performance indicators (KPIs) to

support a holistic inventory management approach using multi-echelon inventory optimisation (MEIO).

IO techniques should be applied to the extended network of supplier-managed and vendor-managed inventories. Increasing inventory efficiency and improving service levels, at lower cost, builds better partnerships, greater trust and win-win relationships between customers and suppliers.

2 Synchronising Time-phased Business Cycles: All businesses have time-based cycles. Some are external and

macroeconomic, while others, internally generated. In some companies, much effort is spent with suppliers, partners and customers managing seasonal demand fluctuations that are specific to markets and individual products. It is not sufficient to look at the inventory that supports these cycles as a single tranche of time. For many, the level of demand is tied to cycles, presenting a different level of demand uncertainty during peak rather than non-peak periods.

IO should focus on setting the best possible targets for individual time period of the business cycle, taking into account the change in demand as well as the change in demand uncertainty during the cycle. It will be a mistake to assume that setting simple high and low limits around a smooth demand curve will provide adequate service levels over the entire cycle. A time-phased analysis will detect and account for changes in demand uncertainty, and create an envelope of varying width around the smooth demand curve.

Once demand variability has been accounted for, optimised inventory targets can be generated for each period in the business cycle in order to maximise service levels and minimise inventory on hand at every stage.

Factors other than demand alone influence changes in inventory policy, including availability of supply, production costs, logistics costs and more.IO best practices acknowledge that stationary targets are inappropriate for non-stationary business cycles. Time-phased optimisation must account for all inventory drivers.

3 SKU Proli feration with Postponement: New products, packaging, styles, bundling,

promotions and many other factors cause SKU counts to increase relentlessly. A silo

Inventory management, continued

Evolution of IOMulti-echelon inventory optimisation (MEIO) was once the purview of few well-educated operations research experts.Around 2001, pioneering companies began to exploit the mathematical discipline of operations research to accurately model the behaviour of stocks throughout a global supply chain. It unraveled complex interdependencies among myriad components across multiple stages and locations of a modern manufacturing and distribution network.Supply chain strategists applied operations research techniques to examine how lead times, inventory levels, stock locations, transportation links, distribution channels, forecast uncertainty, supply volatility and other factors sent internal ripples through the supply chain. No single department could see the full impact that its decisions had on the entire interconnected system. New software tools emerged to harness this mathematics for supply chain managers – tools and analysis that organised data collection, depicted the supply chain graphically and helped practitioners explore alternative scenarios to find the best option.

AAS SKUs PROLIFERATE, SO DO INVENTORY BUFFERS. SMART POSTPONEMENT STRATEGIES ARE A BEST PRACTICE FOR AVOIDING THE RUNAWAY COSTS OF FINISHED GOODS AND WIP INVENTORY.


organisational structure where multiple groups have different KPIs leads to a lack of ‘big picture’ visibility and contributes to the problem. Sales is concerned only with revenue and anything that generates it. New product development teams exist solely to bring new items to market, while supply chain managers are measured on their ability to control and reduce costs. In almost every case, the pursuit of revenue wins out. However, a strategic IO team understands the working capital required to support, for instance, a new product. IO experts bring real working capital numbers to the product planning process as well as expertise at trimming away the excesses while growing new, successful products.

As SKUs proliferate, so do inventory buffers. Smart postponement strategies are a best practice for avoiding the runaway costs of finished goods and WIP inventory. Postponement pools WIP and FGI to retain more flexibility in meeting demand while lowering manufacturing, packaging and distribution costs. Pooling inventory can lower safety stock levels by aggregating demand signals that partially cancel each other out. Postponement cuts obsolescence rates by delaying differentiating steps and late product fan-out in the form of packaging variants, branding, add on components, etc, and steps that can often be delayed until closer to the customer.

Everyone from executive management to the supply chain team should make postponement a core competency. They should create fact-based decision models for appropriate postponement strategy. Not all contractors and suppliers have fixed lead times and capacities. The management needs to work with the contractors and suppliers to model a comprehensive view of the extended supply chain and find opportunities for total supply chain improvement.

4 Total Landed Cost Impacts Before Making Outsourcing Decisions: Market-leading companies try to

plan, rather than react. Setting inventory plans up-front, based on accurate evaluations of how alternative decisions could affect supply chain performance, achieves the best tradeoff between service levels and working capital. IO as a core competency helps managers justify outsourcing strategies on much more than partial data estimates or ‘gut feel’.

The most difficult part of an outsourcing

evaluation is accurately assessing the impact of increased time in the supply chain.

Multi-echelon supply chain modeling and ‘what if’ analyses can determine the optimal outsourcing strategy for each product. Such a strategy frequently outsources higher volume, more mature, more certain products while keeping production of low volume, high-uncertainty products in-house. ‘Dual sourcing’ allows a certain portion of a product’s demand to be outsourced while responding to the variable portion with a more responsive local source. Flexibility and responsiveness are the most important features for products that are highly seasonal and have a short lifecycle. Long supply lines hinder quick adjustments to changes in the demand signal for these items.

IO can put difficult decisions back on a strong, fact-based footing by integrating working capital data into the decision process. For instance, closing a particular plant and outsourcing its production requires adjustments to maintain service levels for customers. IO reveals the best way to shift inventory around the network to manage transportation differences and variability tradeoffs that result from the shift in sourcing.

5 Positioning Capital to Manage Multiple Customer Service: Not all businesses are equal, nor are

all products. Often, only a handful of customers generate the majority of a business’s revenue. Customers also have widely differing service expectations: large customers can dictate service requirements and impose significant penalties for failure to comply. Thus, companies can use IO to manage a mix of service levels that realistically balances capital investment

with the revenue opportunity, recognising that service includes both fill rates and on-time delivery. Also, many companies differentiate between promotional demand and regular/replenishment trade demand.

For example, products that are already segmented by dollar volume using ABC macro-classifications can be managed to specific service level goals for each customer class, such as big box retailers and specialty retail. Each class may have different service requirements, lead times, variability and non-compliance penalties. IO best practices can make the right recommendation as to how to deploy working capital across the extended network in the right mix to support the company’s goals using the smallest practical inventory buffers.

Finally, suppliers, distributors and retailers must be provided with guidance on the benefits of managing inventory at the SKU/location level. For instance, customers may supply detailed sales and inventory data that allow the manufacturer to use its forecasting capabilities to generate more accurate sales estimates and better position products at the customer’s facilities to lift sales and reduce inventory for both parties.

IO AS CENTRE OF EXCELLENCEIO has evolved into a portfolio of capabilities and best practices that have been enthusiastically – and profitably – adopted by leading companies. Every inventory-related action taken by anyone in the organisation is an investment decision that impacts the working capital on the balance sheet as well as the top line on income statement. Today, it is evident that companies are largely competing on their supply chains, and treating IO as a point solution rather than a key internal discipline can be a competitive disadvantage.

Implementing an IO Centre of Excellence increases competitive advantage. At every earnings call, the Chief Financial Officer (CFO) fields analysts’ questions about how inventory turns stack up against the competition. In companies that have embraced IO as a discipline, the CFO knows exactly where the inventory is – and why – and can confidently defend the deployment of the company’s assets.

Courtesy: Logility Voyager Solutions

IINCREASING INVENTORY EFFICIENCY AND IMPROVING SERVICE LEVELS AT LOWER COST BUILDS BETTER PARTNERSHIPS, GREATER TRUST AND WIN-WIN RELATIONSHIPS BETWEEN CUSTOMERS AND SUPPLIERS.

SPECIAL REPORT INDIAN LOGISTICS INFRASTRUCTURE

36 • SMART LOGISTICS • JANUARY 2011

India’s logistics story is attractive, made so by its rapidly growing economy, the increase in outsourcing of logistics, steady supply side changes, significant Government investment as well as private participation in core infrastructure projects and landmark changes in tax and regulatory policies. As India turns the trillion dollar leaf, the industry is poised, more than ever, for sustained growth driven by greater investment and efficient operation..

AT 13 per cent of gross domestic product (GDP), India’s spending on logistics is both significant and inefficient. The inefficiencies are largely a result of India’s diverse geographic conditions, poor core infrastructure, complex tax policies and supply side constraints — all of which result in high transportation, storage and service costs. However, India’s logistics story is indeed an attractive one, based on its rapidly growing economy, the increase in outsourcing of logistics, steady supply side changes, significant government

thrust on investment in infrastructure and landmark changes in tax & regulatory policies.

It is this attractiveness, along with the potential to tide over inefficiencies that has driven scores of investors and operators to participate in the Indian transportation & logistics sector. Within a short span of time, these investors have gained market prominence among decades old businesses in the highly fragmented industry.

An extremely fragmented structure is only one of the peculiarities and

complexities faced by the sector besides fierce price-based competition, regulatory intervention, cyclicality and underdeveloped corporate governance standards. Hence, a deep understanding of the opportunities that stare at the sector and the risks that limit them within the wider regulatory and fiscal framework is desirable for stakeholders, especially investors.

BUOYED BY GROWTHThe excitement in the industry is driven by

ON A STRONG FOOTING

JANUARY 2011 • SMART LOGISTICS • 37

its high growth and fundamentals shifts in its construct. Several factors are responsible for this ongoing transformation. (i) Growth in Indian economy, key user sectors and international trade: The expansion in India’s GDP translates directly into growth in the transportation & logistics sector, there being a ~2x relationship between GDP growth rates and the transportation & logistics sector. The post-recession resurgence of domestic sectors focussed on the resilient Indian middle class such as retail, auto and manufacturing is expected to drive volume growth. International trade can be reasonably expected to grow at over 15 per cent per annum, and this will have a direct impact on port-oriented logistics.(ii) Rise in outsourcing and consolidation: On an average, companies in India currently outsource an estimated 52 per cent of their overall transportation and logistics activities. However, many more companies are increasingly leaning towards outsourcing and third party logistics (3PL) models, as they seek to optimise costs and focus on their core businesses. This rising trend is catalysing consolidation and scale development in the highly fragmented transportation & logistics industry.

Many manufacturing companies in India have legacy in-house logistics set-ups, which have historically been perceived as a support function and, as a result, have grown unwieldy and cost-inefficient over time. Also, as companies seek to focus on their core business, improve customer satisfaction levels and become more nimble in managing their supply chains, they are realising that partnering with 3PL or even fourth party logistics (4PL) experts is often the best or the only way to achieve these objectives. Companies quote a variety of reasons for outsourcing their transportation and logistics activities including capital preservation, operational flexibility, better inventory management and cost optimisation.(iii) Rapid supply side changes enabling positive service experiences and true value additions: Significant investment in modern warehousing, service orientation and improvements in transportation systems – along with the widespread adoption of warehouse management systems,

GPS-enabled fleets and other technology – are enabling more customers to move from their ‘store-and-transport’ mindsets to true supply chain management, with a focus on overall cost & efficiency.

As more multinational companies and transportation & logistics service providers increase their scale of operations in India, there is a rising demand for world-class logistics infrastructure and services, even among domestic corporates.(iv) Regulatory changes drive private participation and efficiency improvements: Boldness and willingness with respect to regulatory infrastructure is creating an enabling environment for growth in the transportation & logistics sector:• The impending introduction of a

goods and services tax (GST), aimed at creating a uniform tax regime across India irrespective of state boundaries, is expected to enable widespread rationalisation of warehousing space in

India, especially with respect to facility size, network design and location as well as the reorganisation of resulting transportation options

• Government incentives to investors and operators – in the form of tax breaks and incentives – are expected to further improve supply-side infrastructure and, in turn, efficiencies. Government incentives to food processing parks and cold warehouses are some recent examples

• Privatisation of the container rail segment and public-private partnership (PPP) programmes in key sectors such as roads, ports and airports have opened up new logistics segments for private participation.

(v) Significant government spending on infrastructure: The Indian Government has earmarked about `50,000 billion according to the XII Five Year Plan (2012-17) as against `25,000 billion in

the XI Five Year Plan (2007-12) for infrastructure investment. One-fourth of this investment is expected to be in roads, rail, aviation and port projects, representing a sharper focus on transportation infrastructure. For example, `281 billion has been allocated for the 2,700-km-long Dedicated Rail Freight Corridor project.

In spite of these strong and sustainable growth drivers, India is yet to achieve a level of transportation & logistics sophistication commensurate with its economic strength and potential.

XII Plan (2012-17)

XI Plan (2007-12)

X Plan (2002-07)

Planned expenditure on transport infrastructure is expected to be about INR 12,146 Bn. Assuming the split remains similar to the XI Five-Year Plan, it would amount to INR 6,493 Bn in roads, INR 4,679 Bn in railways, 955 Bn in ports and the leastINR 859 Bn in airports

Figure 1: Five-Year Plans - Infrastructure Spend (INR Bn)

TTHE INDIAN TRANSPORTATION AND LOGISTICS INDUSTRY STANDS AT AN UNMISTAKABLE INFLECTION TODAY BUOYED BY ITS GROWTH THOUGH LIMITED BY ITS INEFFICIENCIES. THE APPROACHING DECADE REPRESENTING THE OTHER SIDE OF THIS INFLECTION, SHALL UNDERLINE ITS OPERATIONAL PROWESS AS WELL AS RETURNS POTENTIAL.


Limited by inefficienciesIt is estimated that India’s transportation and logistics bottlenecks hinder its GDP growth by approximately 2 per cent. The complexity of the transportation & logistics network is further exacerbated by the fact that the sector is highly fragmented, with several small and mid-size players dispersed across multiple regional pockets, asset types and services, and with few, if any, players in India able to offer true end-to-end services to their customers.

Also, in many key logistics-intensive sectors – such as agriculture, food processing, oil & gas, engineering, consumer products, retail, metals and textiles – the source and destination points for cargo are distant and often located in regions with poor access by any mode of transportation. Attached to this is the inefficiency caused by an unfavourable modal mix, with a majority share held by road freight.

Even though the national highways constitute a meagre 2 per cent of the overall road network, they carry close to 40 per cent of the total road freight. The pressure on such critical routes is likely to mount further considering that a major chunk of the planned investments till 2014 is likely to go to the state roads.

Another area of critical but inefficient infrastructure is ports. Most of the Indian

ports are operating beyond 100 per cent utilisation, against an optimal utilisation benchmark of 80 per cent. This results in congestion within the port and pressure on the evacuation infrastructure, leading to bottlenecks through the logistics chain.

1Overstretched infrastructureEven as significant investments have

been earmarked for the port sector, execution has not kept pace with plans, as a result of which new investments and project completion under the National Maritime Development Programme (NMDP) have been lagging behind schedule. This scenario may further reduce the efficiency of the existing and upcoming ports, hindering the planned growth of the Indian maritime sector and, in turn, trade.

2 Sub-optimal quality of logistics services: Apart from infrastructural

bottlenecks, sub-optimal quality of logistics services contributes to lower productivity, higher cost and a higher turnaround time. A highly fragmented market, low share of 3PL service providers and low penetration of technology are some of the indicators determining the quality of the available services.

3 Warehousing – Too few, too small: Warehousing in India has traditionally

been lacking in optimal size, adequate ventilation and lighting, racking systems, proper hygiene conditions and inventory

management or technology solutions such as Warehouse Management Systems (WMS). Although modern warehouses are now developing across the country, there is still a significant growth story that remains to be played out in the global context.

4 3PL – Yet to evolve fully: The role of 3PL in the Indian logistics services

is in the early stages of evolution. Compared to their global counterparts, Indian customers are yet to witness end-to-end management of transportation & logistics services by the third-party service providers. For instance, Japan leads the key economies in terms of contribution of 3PL to overall logistics activity.

The above inefficiencies – infrastructural and operational – in the transportation & logistics sector in India are leading to the emergence of new business models and paradigms, further accentuating the role of investors and entrepreneurs focussed on this sector.

UNDERSTANDING THE OPPORTUNITY, ANALYSING THE POTENTIALThe Indian transportation & logistics sector appears to be undergoing an inflection in its evolution trajectory. While the past has witnessed complications and inefficiencies, the foreseeable future appears promising on account of sizeable

Indian logistics infrastructure, continued

COMPARATIVE ANALYSIS OF KEY VARIABLES IN WAREHOUSING SPACE

Parameters India China USA

Market Maturity(Fragmentation by contribution of key players to the total industry cost)

• Unorganised, fragmented warehousing industry

• Highly fragmented, top 20 companies contribute to 7% of revenue

• 20 largest companies control less than 30 percent of the market

Warehouse Infrastructure:• Size• Centralisation of

warehouses• Infrastructure

• Godowns with approximate size of <10,000 sq.ft

• Multiple warehouses, one in every state

• Poor infrastructure• High pilferage and loss

• Market is fragmented in terms of operator’s geographical presence

• Average level of infrastructure with small godowns

• Warehousing companies operate a single facility of 200,000 sq ft

• Excellent infrastructure

Value Added Services Poor Neutral Good

Level of outsourcing Poor Poor Good

Skilled Labour • Labour available but with

poor training• Labour available but with

poor training• Highly skilled trained labour

Technology used Poor Neutral Good

Consolidation: Level of usage of Large scale logistics parks and Free Trade & Warehousing Zones

Poor Neutral Very poor

Table 1: Warehousing - India versus the world


increase in investments (both public & private), a stronger focus on scale development including consolidation, developing openness towards technology and stakeholders, both on supply and demand sides, increasingly education and attentiveness towards addressing inefficiencies through the system.

However, for investors to identify specific opportunities, a deeper understanding of the key segments within the overall transportation and logistics value chain is critical.

1 Evolution of the roads sector: The most important mode of transportation

in India is road, and this dominance arises from decades of poor support infrastructure development in rail, coastal, pipeline and air transportation. Despite having one of the world’s largest rail networks, India’s share of cargo transported by rail has declined steadily. This is due to the poor quality of service (including last mile access solutions) driven largely by the historic monopoly of the government and the resultant overbearing focus on passenger services. Moreover, massive investments in road highway projects over the past six decades have helped position roads as the most significant, even if suboptimal, means of transportation.

Despite this growth, the road transportation sector faces many challenges. The industry is highly fragmented, and with low entry barriers, it has seen significant commoditisation leading to intense competition among truckers who find their realisations and margins continuing to be squeezed progressively.

These challenges have led road

transporters to adopt various de-risking strategies, and this creates an opportunity for investors and operators to invest in and/or partner, with leading road transportation companies on this transformation journey.

2 Evolution of the ports sector: While roads continue to remain

the dominant mode of transportation for domestic freight movement in India,

Figure 2: Transportation & Logistics Sector Value Chain

Figure 3: The evolution project tree


maritime transportation is yet to realise its full potential with respect to ports, coastal transportation and inland waterway connectivity.

The over 7,000-km-long Indian coastline has 12 major ports and about 187 minor ports. Historically, port infrastructure in India, both in terms of capacity and efficiency, has been below par in comparison to its international counterparts in Asia Pacific (APAC) or the West. However, after the liberalisation and globalisation of the Indian Economy, the government of India has been increasingly seeking active participation of hitherto untouched players – the private sector – which consists of developers, investors and operators. Regulatory changes promoting PPP-based privatisation of berths/terminals at major ports and greenfield investments in minor ports have resulted in capacity addition and better operational efficiency.

Despite such improvements, the Indian

port suffers from poor productivity on several key indicators including a worsening average turn around time (TAT) due to congested waterside capacity across several ports but especially evacuation limitations in most major ports in India.

Given capacity expansion limitations within major ports, the focus has increasingly shifted towards development of private greenfield ports or expansion of minor ports mainly in the west and south east of India.

3 Evolution of the warehousing sector: Conventionally, warehousing in India

has been marred by very low penetration of automation, technology and other efficiency-enabling facilities. Its highly fragmented nature has prevented optimal space utilisation and the much needed infrastructural investments. As high as92 per cent (of the overall 433 million sq ft) of the Indian warehousing industry is unorganised, characterised by medium to

low quality infrastructure and services.The industry is experiencing a number

of supply and demand side changes, including the following:• Resurgence of the Indian economy and

demand-supply gap – After a subdued two years, India is again witnessing a surge in the need for storage space. According to KPMG estimates, an additional 120 million sq ft of warehousing space will be needed by 2012 to bridge the demand-supply gap, and this translates to a massive opportunity for investors and operators.

• Implementation of GST – Currently, owing to multiple and differential state-level taxes, companies in India have set up multiple warehouses, often one per state (to minimise intra-state movements and associated taxation), servicing various parts of the country. This is highly inefficient and leads to higher unit and inventory-carrying costs. The Indian government plans to introduce a uniform GST, which is expected to level these state taxes and obviate the need for multiple warehouses. Thus, a significant reorganisation of warehousing space is expected in India, with development of large hubs in key locations, coupled with smaller spoke warehouses nearer to production and consumption centres.

• Infrastructure development – Development of key infrastructure projects related to ports, highway and rail projects – such as the Golden Quadrilateral project, North-South-East-West project and the Dedicated Freight Corridor project – is expected to result in the creation of new warehousing hubs aligned to these infrastructure corridors.

• Emergence of new storage models – Several players in India have announced next-generation storage models such as multi modal logistics parks (MMLP), mega food parks (MFP) and free trade warehousing zones (FTWZs). These large-scale projects are expected to significantly improve the quality of warehousing and storage space in the country, while allowing customers to reduce costs through economies of scale, government incentives and optimal usage of multiple modes of transportation.

4 Evolution of the 3PL sector: The Indian 3PL market is estimated to

grow rapidly, as customers increase the

Relationships

• Long term contracts with customers ensure regular and predictable volumes

• Cross-referrals from customers in the same industry a key value driver

Industry specific value-added solutions

• 3PL is hinged around offering industry-custom supply chain solutions, e.g. testing / inspection / line feeding for auto, reverse logistics for retail

• The ability to help customers re-engineer their supply chain, differentiates one 3PL from another, e.g. helping customers migrate from road to rail, project logistics management

Manpower

• Availability of skilled manpower – both management and operational – is a key constraint for the 3PL industry, and acquiring / retaining talent is a critical differentiator

• Key personnel also bring customer relationships and industry-specific logistics know-how to organisations, which is highly coveted

Ownership / control over assets

• End-to-end control over cargo is critical in qualifying as a 3PL company, and many 3PL players are beginning to own assets such as trailers and warehouses, to ensure this

• Developing relationships with key value chain partners such as freight forwarders, domestically and internationally, is necessary in giving customers comfort to outsource

Systems and processes

• Effective processes are needed to tightly control operations, e.g. backhaul management and route optimisation

• Coupled with this, customers are increasingly demanding technology enablement in 3PL solutions, e.g. GPS, RFID and real-time cargo updates

Efficient operations

• Service levels are critical for 3PL providers, when attempting to wean away customers from unorganised logistics segments such as trucking and ‘godown’ storage, e.g. timely pick-up and delivery, hygienic warehouses, call centre management

Source: KPMG Analysis

Table 2: Critical Success Factors for 3PL Vendors

Indian logistics infrastructure, continued


level of outsourcing, encouraged by the ability of 3PL companies to provide quality services.

The penetration of 3PL and the propensity of customers to outsource have been most pronounced in transportation, followed by warehousing, as these have been historically easy-to-implement point solutions that most service providers can readily offer to customers. Customers still retain in-house the highest value adding activities, such as production process alignment, invoicing and spare parts management, as 3PL vendors often lack the capabilities to deliver full supply chain solutions. Recently, some 3PL vendors have begun offering customers limited value added services centred around transportation and warehousing, such as packaging solutions within warehouses, tertiary transportation, production line feeding, spare parts testing and minor repairs.

However, this level of 3PL activity has been limited to only a few industries such as auto, IT hardware, telecom and infrastructure equipment – with adoption across other mainstream industries such as consumer products being restricted due to limitations in the customers’ ability or willingness to pay and the lack of vendors’ ability to offer service levels at such expected prices.

As companies increasingly focus on costs and asset returns, while focussing on their core business and building customer-centric business models, the share of 3PL is expected to rise further.

INVESTING IN THE TRANSPORTATION & LOGISTICS INDUSTRYThe regulatory and policy environment in India for the transportation & logistics sector has been continually evolving with an inflection seen post liberalisation. Investors and operators, including those from overseas are permitted 100 per cent investment in most segments of the Indian transportation and logistics sector. As a result, the wider sector has been witness to significant investment, domestic as well as foreign, in infrastructure as well as services across ports, rail, roads, shipping, logistics and aviation. Historically, foreign investors in the Indian logistics sector have entered the market either by investing in greenfield core infrastructure projects (such as a ports), setting up subsidiaries or joint ventures (JVs) in

India or through acquisitions. Partnering with or acquiring an existing company offers international logistics companies ready access to an existing network and customer relationships, which are often difficult to develop ground-up.

Further, with policy measures such as tonnage tax earlier and the GST and the direct tax code (DTC) now targeted at creating a globally competitive business environment that is fiscal and operation friendly, the Government of India is demonstrating its willingness to be ambitious with its policy affecting this critical industry. Besides, there are other benefits to investors such as tax breaks, grants and incentives when investing in infrastructure and some key sub-sectors such as cold storages, agricultural warehouses and FTWZs.

However, like any industry, there are risks involved with investing in the Indian transportation and logistics sector across greenfield ventures, equity investments, acquisitions or partnerships. Long gestation periods, the requirement for multiple clearances and shifts in policy are some key risks.

Therefore, it is important to have a granular understanding of the benefits available to and the risks associated with the segment in which the investment is targeted requiring investors and operators to consider multiple questions:• What are the regulatory risks faced

by the sector? How firm is the policy governing the sector?

• What kind of policy or fiscal reforms can the sector expect in the short to medium term?

• What kind of governance standards and lapses typically exist in the sector?

• What are the direct and indirect tax considerations determining profitability in the sector?

• What are the tax incentives available to investors in the sector?

• How will the implementation of DTC and GST affect the sector?

• What sort of tax or regulatory constraints can one expect if the business model changes?

• Are there any restrictions on partnering with overseas investors or operators in the sector?

IMPORTANT TAX AND FISCAL PROVISIONS

1 Key fiscal incentives to investors and operators: The Indian Government,

with a view to attract investments in infrastructure and the transportation & logistics sector, has introduced various tax incentives either in the form of profit-linked incentives or capital-based deductions.

2 Important regulatory provisions for international and domestic

players: The last two decades have been witness to the entry of most of the global transportation and logistics majors in India, with entry models ranging from own office set-ups, liaison offices,JVs, operational partnerships, PPPsand M&As. Such investment models need to abide by certain foreigndirect investment (FDI) regulations, as updated regularly by the Government of India.

The Government of India hasactively pursued policies to promoteFDI into the Indian transportation & logistics sector. Foreign companies can invest in India through two possible routes:• Automatic Route - Here, foreign

investors do not require anyapproval from the Reserve Bank of India (RBI - India’s central bank) or the Government of India for the investment.

• Government Route - For all activities, which are not covered under the Automatic Route, a prior approval of the Government of India through the Foreign Investment Promotion Board (FIPB) is required.

RECIPE FOR UNLIMITED GROWTHThe growth and opportunity this industry poses amidst a developing environment – the perfect recipe for new-age entrepreneurs and investors. The sector has evolved, more shaped and challengedby the waves of the unprecedented economic growth in India than any other sector. And therein lays its importance and potential.

The Indian transportation and logistics industry stands at an unmistakable inflection today buoyed by its growth though limited by its inefficiencies. The approaching decade representing the other side of this inflection, shall underline its operational prowess as well as returns potential.

The article is an excerpt from white paper by KPMG, ‘Investing In Indian Transportation & Logistics Industry’.

VIEW FROM THE TOP CEO, TCI SUPPLY CHAIN SOLUTIONS


PLANNING MARKET STRATEGIESThe most important factor for the logistics sector is the reach and an efficient distribution network for its customers. Companies should focus more on better management of supply chain processes and work to increase the penetration level in the market. Moreover, third party logistics (3PL) and fourth party logistics (4PL) services are now being perceived as a better way for managing internal and external logistics processes. Thus, logistics service providers (LSPs) should focus more on such services. Companies should offer a bouquet of services to the customers, with a greater emphasis on value-added services such as packaging, labelling, bar coding and reverse logistics. The supply chain requirements differ from one company to another, with every company desiring a unique supply chain. Also, offering customised and value-added services is a good strategy to cater to the ever-evolving logistics market.

GROWTH AHOY!The logistics industry in India has been valued at $125 billion in 2010. It comprises about 13 per cent of the country’s gross

domestic product (GDP), and it is expected to grow at a compounded annual growth rate (CAGR) of 8 per cent over the next 3-5 years. The logistics sector grows with the growth of the economy. The thumb rule that the logistics sector follows is that logistics grows at typically one and a half times the growth of a country’s economy or GDP. Therefore, the sector is bound to grow in the years to come.

KEY GOVERNMENT REGULATIONSPolicy makers seem to have taken several key measures to support the growth of the logistics infrastructure, eg, opening up the industry to 100 per cent foreign direct investment (FDI), removing central sales tax (CST), introducing value added tax (VAT), promoting multi-modal transportation network and public-private partnerships (PPPs). Initiatives like the National Highway Development Project, inter-connectivity of the 12 major ports, enhancing port handling capacities, eastern & western rail freight corridor adding up to 2,700 km rail lines, higher rail freight handling capacities and the Dedicated Delhi-Mumbai Corridor have also catalysed

growth of the logistics industry.

IMPACT OF GST IMPLEMENTATIONImplementation of goods and services tax (GST) will standardise rates across the nation, allowing many corporations to move away from having warehouses in different states to adhere to each state’s tax code, and employ logistics companies to manage distribution and supply chains. The GST will also allow manufacturers to see India as one large geographical expanse on which to store and distribute with no state boundaries. This will, in turn, allow them to aggregate 4-6 small state-level warehouses into one large, regional warehouse and increasingly use the hub & spoke distribution model that offers proven cost and operational efficiencies in geographically large markets. The GST should also lead to reduced documentation and efficient intra-state movements.

GROWTH ENABLERSTransportation today is much more than ordinary delivery of goods. It is now more about offering customised and value-added services. Technology incorporation

STRATEGIC PLANNING“Route optimisation helps increase efficiency of transportation. It helps in reducing the service

pipeline,” opines Jasjit Sethi, CEO, TCI Supply Chain Solutions, in an exclusive interview with

Factors that would boost the efficiency of Indian logistics industryAdequate Infrastructure: There is a dire need for quality infrastructure to boost efficiency of the logistics sector. India has the second largest road network in the world. National highways, which form only 2 per cent of the entire road network in India, handle over 40 per cent of the national road freight traffic, putting enormous pressure on the highway infrastructure. GST Implementation: GST implementation will lead to consolidation in the sector. Currently, there are multiple incidences of taxes such as custom duty, cess, sales tax/VAT, excise duty and service tax on transportation, which are not favourable for the growth of logistics industry.Electronic Documentation: Delays at check posts due to stringent documentation processess are a major cause of concern for transporters. Due to interstate sales tax-related issues and varying documentation requirements of different states, time wastage occurs at the border check posts in complying with the formalities. Easy and electronic documentation will thus be a boon for the sector.Skilled Manpower: There is acute dearth of skilled manpower in the industry. Thus, there is a need for quality manpower to adapt to modern technologies and management practices. Effective Toll System: The sector needs a tolling system that does not require trucks to completely stop at toll booths.

SUPPLY CHAIN


cost and offers improved capacity utilisation of vehicle and reduced inventory across the Sudhir Muddana. Excerpts…

EFFICIENCYin the supply chain has also helped the sector grow.

COST EFFICIENCY FACTORSOne can manage cost efficiency by taking into account factors such as right customer selection, right pricing, efficient team management, continuous improvements and monitoring cash flows.

THE HINDRANCESThe biggest factor hampering the growth of the logistics sector is inadequate infrastructure. Poor condition of roads translates to shorter lifespan of vehicles, which reduces efficiency and increases operating cost. Further, acute dearth of skilled manpower in the industry is another hurdle that the industry faces. Truck drivers form the backbone of the sector and, ironically, they comprise the most neglected and untrained group of workers. Other obstacles include stringent documentations, toll system, multiple taxes, etc.

NEW LAST MILE STRATEGIESAlthough last-mile logistics is only one small link in the supply chain, it is the only one that directly touches the customer. Companies use smaller vehicles for the last-mile delivery, which mostly entails intra-city movement of vehicles, making it more cost- and time-efficient. Route optimisation helps increase efficiency of transportation. It helps in reducing the service cost and offers improved capacity utilisation of vehicle and reduced inventory across the pipeline.

PLANNING & FORECASTINGStrategic planning is crucial for attaining supply chain efficiency. Planning the how, where and when of receiving the supply, and planning an efficient procurement system contribute to the goal of achieving efficiency. With strategic planning, the supply chain

designer can work on the speed equation, to make the supply chain faster, more transparent and effective.

BUILDING THE SUCCESS STORYTCI currently moves 2.5 per cent of India’s GDP by value. Today, we not only offer logistics services but also offer experiences to our customers. We also offers several value-added services under different verticals. TCI has played a significant role in streamlining the supply chain and logistics industry. It has helped change the way logistics is perceived and is now an integral part of all business. Thus, logistics service providers today are not just vendors but partners in business processes.

IS CRUCIAL FOR ATTAINING

CUTTING EDGETECHNOLOGY

360O PERSPECTIVE

BREAKTHROUGINNOVATIONS

Inspiring Seamless Material Handling

Innovations and Solutions for an Automated Future

INTERACTIVEDEMONSTRATIONNSSTSTSTTTSTTTS

BREAKTHROUGHINNOVATIONS

SINGLE LARGESTCONVERGENCE

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INDIA has more than 50,000 villages and 350 mid-sized towns, with over 650 district headquarters. Nearly 73 per cent of the population resides in villages, and a lesser percentage in urban areas.

Connecting these villages with the urban population through telecommunication networks is a daunting task even for global communication giants. Additionally with the number of mobile users in India expected to cross the 500 million mark soon, it is being predicted that rural India will account for about 35-38 per cent of the total sales of mobile handsets (as reported in a study by RNCOS), which forms more than 50 per cent of India’s total gross domestic product (GDP).

Today, with almost five million mobile phones being added to the subscriber base in the country every 25 days, the urban mobile markets are approaching saturation level.

In this scenario, the focus of the telecommunication industry is shifting towards ‘the next billion’ users subscribers’ base ie. rural

India – living in regions that are remote and far off from main cities.

Providing connectivity in these inaccessible places has its own limitations. Firstly, the existent infrastructure like communication networks and technologies cannot be directly adopted from the urban centre. Secondly, with inadequate infrastructure like road connectivity, providing services and telecom infrastructure to the rural regions will be a challenge that the industry will face in the near future. Srinath Manda, Programme Manager (South Asia, Middle East & North Africa), Automotive & Transportation Practice, Frost & Sullivan, believes, “The rural opportunity will be the next phase of growth for the telecom industry. For this, the logistics industry will need to support the growth with transportation of hardware (eg, equipment), products and management of supply chain. The telecom equipment involves major asset movement such as tower parts, cranes and physical assets as well as reaching out to retail outlets. The efficiency and impact on the buying behaviour, distribution and network reach to retail outlets will decide the yearly growth for telecom companies.”

SHIVANI MODY

EXPANDING THE COMMUNICATION CHANNELThe Indian telecommunications network with 621 million connections is the third largest in the world. With the sector growing at 45 per cent annually, telecom service providers are now moving into rural areas to create fresh avenues for exploration. With this

shift from urban to rural India, logistics service providers in this segment are all geared up to

counter the bottlenecks and help in the creation of an efficient communication network.

SECTOR UPDATE TELECOMMUNICATION LOGISTICS


Sandeep Choudhary, Head (Operations), Om Telecom Logistics, informs, “The next real opportunity will come from the increasing rural penetration. Although the rural population is not in a position to pay for value-added services, they definitely aspire to use mobile phones for talk time. These include deployment of networks and support services in the region. To see the results, the industry first needs to address certain challenges.”

Providing telecom services in the rural regions is not an easy task. The problems encountered can be classified into four major types – power issues, lack of skilled people, access issues and infrastructure development – as well as deployment issues. Tej Nirmal Singh, Director and Head-Supply, Ericsson India, says, “For rural telecom growth, the SCM challenges can be broadly divided into two areas/scope – the one-time setting up of a site (new site rollout) and the on-going maintenance (managed services/O&M). In rural regions, since the population density is lower, selecting a site becomes an issue, both from the geographical and commercial aspect. As the cost of setting up a site in a metro city and a rural region is the same, hence the capital cost per subscriber goes up.”

FACING POWER ISSUES One of the major infrastructure issues in rural regions is availability of power. Most rural areas do not receive power and experience electricity shortages/fluctuations. A conventional base station site alone requires power of about 5,000 W to run – excluding any base station controller (BSC) or mobile switching centre (MSC). Due to power availability constraints even in urban settings, the current GSM networks in India are estimated to burn about 2 billion litre of diesel each year. Fuel quality, transport challenges and the demands of generator maintenance make this power source unsustainable for rural GSM deployments.

LACK OF TRAINED MANPOWERThe availability of skilled manpower such as trained telecom engineers is limited in these regions. Moving workers from city areas also becomes a costly proposition. Even the installation and maintenance of GSM networks becomes a challenging task. Developing a GSM-based station takes 3-4 months of planning, followed by actually building the site. Creating the infrastructure

requires planners, suppliers, engineers, civil engineers and installation professionals, which is difficult to source in rural areas. The operator and logistics supplier both have to be constantly involved in the process. This process is easy to handle in an urban set-up where manpower is available. In comparison, finding skilled manpower in rural areas is a major issue. Scaling up the network and even regular maintenance becomes a problem after the network is built. The entire process and service becomes a huge cost involving proposition for a community that is unable to pay for the services.

Choudhary says, “It is difficult to find skilled workers at these remote sites. Besides, having a security personnel at the network site is also an issue. In many cases, we build a shelter near the tower where the equipment is stored. Often, the person in charge of the key is missing for days. Thus, the vehicle halts at the site for several days, which leads to loss of time and proves costly. Also, one engineer is recruited for 3-4 sites, which again adds to the delays.” Adding to this statement, Singh says, “It is not easy to find skilled resources who are willing to work in rural areas for site delivery and installation. Also, a site delivery in a main city can be done in one day, while the same requires three days in rural areas. This process increases the cost of delivery. Since the telecom equipment is bulky and hi-tech, a trained person needs to manage several minute details during delivery and construction of the site. Other challenges arise as skilled person are not willing to travel the distance and waste couple of days for one job. Also, providing training to people in the rural area for site installation or maintenance of spare parts is a tedious task, at least to begin with.”

ACCESSIBILITY AND COST BARRIERS Access and deployment of telecom towers and equipment in rural areas becomes difficult due to poor road development and connectivity issues. Apart from this, the supporting infrastructure is also not available. A typical GSM base station alone in these regions costs $1,00,000, excluding the BSC and MSC costs. Funding this capital expenditure requires the type of population densities and average revenue per unit (ARPU) levels that are found only in urban areas. Rural communities thus, do not provide the economic benefits needed to sustain

regular services and maintenance. Also, government subsidy cannot fulfill the cost of developing communication network in this region. Choudhary comments, “The roads in rural areas are not well-connected to the main hub. To factor this hurdle, we charge the telecom company for both ways – to and fro. Also, if the vehicle is stationary at the site for a few days, the telecom company is not willing to pay the halting charges. These issues add to the overall cost. There is always a tussle between the logistics service provider (LSP) and the telecom company regarding the additional charges.”

A GSM base station includes three refrigerator-sized cabinets, main power supply, large battery backup, dual air conditioning units, a tower or roof site and backhaul capability. All these are housed in a building – either existing or built for purpose. Just delivering all this equipment to a rural community multiplies the cost of deployment, as before provisioning, civil engineering, radio planning, testing and maintenance are also included. This clearly shows that for rural telecom connectivity, a new technology model needs to be deployed. Also, the telecom infrastructure is far from developed, as the network has still not factored in WIMAX and 3G.

“In rural regions, the site location can be an issue. This makes transportation of cranes and costly electronic equipment difficult. The storage of goods and distribution among sites also is an issue. All equipment and parts need to be present at the tower site one week before the erection, which creates issues with security and safety of goods and the need for proper storage facilities. The use of technology, such as 3G and WIMAX, is leading to movement of newer parts, which may add to complexities,” elaborates Manda. Singh thus informs, “A GSM base station uses high-value equipment and can cost up to few lakhs. To roll out the network in rural areas, firstly, there are no/poor quality roads and the distance of site from the warehouse is longer, thereby increasing the travel distance. While maintaining a site, one needs to take care of regular refuelling of diesel in the generator and keep checking/collecting faulty parts. All these cost add up resulting in higher logistics, installation and maintenance costs.”

Apart from movement of equipment, logistics providers also need to look at handset movement. For this, logistics


players have to deal with complex issues and need to handle multiple distribution centres and warehouses. They even need to have multiple stock-keeping units (SKUs) as well as enhanced warehousing capabilities. These warehouses must be equipped with the latest technology for locating, tracking and tracing of parts. Also, handset providers in India that ship product from overseas locations, such as China and Taiwan, need to assemble the parts and send the final product to the rural areas for distribution. Manda comments, “In rural regions, the telecom companies will have to set up service centres for customers. To provide parts and other accessories to these authorised centres, companies must look at distribution networks and develop logistics plans for the same or outsource the requirements. Providing after-sales service will also be a critical element in tapping the rural opportunity.”

TAPPING THE OPPORTUNITYAs telecom companies are moving into tier 2 and 3 towns, there is a major need of investment in building infrastructure like towers and transportation of products. Each telecom company has its own circle of operations, which makes it easy for them to plan and strategise the infrastructure development. In case of warehousing, telecom companies prefer using leased warehouses or outsource the requirements. Some of the warehouses are given to service providers to manage goods movement. The growing industry definitely promises more scope for outsourcing of towers, which sees the need for specialised LSPs having the experience and expertise to meet additional requirements. At present, with changing technology, the need for reverse logistics is also increasing manifold for telecom logistics.

REVERSE LOGISTICS FOR TELECOMThe growth of the telecom industry provides an opportunity for LSPs to render value-added services of reverse logistics capability as well. As per the Reverse Logistics Association, India is one of the most dynamic and promising reverse logistics markets of the world. In this segment too with the telecom industry growing exponentially, the country has huge opportunity for growth in reverse logistics. Some of the services required for reverse logistics capability include project delivery, logistics and warehouse management, products deployment, tech-

support helpdesk, repair and refurbishment services, managed services, training, etc.

CHALLENGES OF REVERSE LOGISTICS IN INDIAReverse logistics has its own set of challenges, which include meeting customer demands with effective and efficient use of resources including distribution capacity, inventory and labour. There is also an issue of managing expenses such as the need for substantially high investment to set up a reverse logistic centre. The cost can go up 7-8 per cent of the material cost. The entire operation is labour-intensive as well. The disposal of products is also an uphill task. The industry needs to fine a suitable place/resource to handle, destroy or donate the product.

Another dominating issue is complicated rules and regulations, which requires companies to have mandatory knowledge of waste management laws, regulations and processes. Also, there needs to be a proper understanding of taxation laws, which might vary from one state to another in India. On this, Choudhary says, “With changing technology, reverse logistics is coming to the forefront and forward logistics is taking a backseat. Nowadays, many towers are moving from 2G towards 3G. This has led to replacement of parts, resulting in increased movement of goods from the sites to the main centre. If this movement is taking place from a far off site, the process becomes costly.” Supporting this, Singh says, “While maintaining a site, there might be faulty parts that need to be replaced. A cabinet can be transported back from site easily but a card from within the cabinet, adds to further complications – we really need highly skilled resource

who can safely pack the faulty card and deliver it to repair centre. Considering the size of telecom network, approximately four lakh sites all over the country, the supply chain complexity increases. Not to mention that the same card has to reach back to the respective site, which requires highly skilled SCM services.”

TELECOM TECHNOLOGIESLooking to provide a sigh of relief to telecom companies, many LSPs are now providing services laced with latest technologies. Some of these include track-and-trace capability that deploys the general packet radio service (GPRS) or radio frequency identification (RFID) technology for visibility and transparency.

Manda believes, “One way in which the LSPs can gain an edge over competitors is by implementing the latest track–and-trace technology in their operations. This will assure customers about genuine parts transportation, enhanced transparency and visibility of goods movement. Such an added service for customers will definitely hold the service provider in good light over competitors.”

The industry is also trying out computer aided design solutions such as simulation of the demand and supply chain (DSCM) for the telecom industry. The objective for an efficient DSCM is reducing inventory, lead times and related costs for ensuring reliable and on-time deliveries from warehouses to customers. The simulation tools can help create a live and optimal DSCM for any region, high-volume and high-complexity environment including all issues. This will help the industry plan well and develop strategies for efficient functioning and smooth operations.

TELECOM LOGISTICS: AN EMERGING MAKET The country has a huge potential for growth in the telecom logistics services. Many of the telecom companies as well as large and small players, are looking to outsource all their services. But these players need well-equipped, experienced and up-to-date service providers. As the telecom companies move towards the tier 2 and 3 regions, the logistics providers will also have to gear up their services, which provides scope for specialised services. With the burgeoning growth of the telecom industry in the rural regions, all stakeholders are sure to see mature services and growth potential in the future.

Telecommunication logistics, continued

MMANY OF THE TELECOM COMPANIES, LARGE AND SMALL PLAYERS, ARE LOOKING TO OUTSOURCE ALL THEIR SERVICES. BUT THESE PLAYERS NEED WELL-EQUIPPED, EXPERIENCED AND UP-TO-DATE SERVICE PROVIDERS.

SL EXCLUSIVE DRY PORTS


GEETHA JAYARAMAN

Rapid industrialisation and a buoyant economy have resulted in increased goods movement which has led to increased congestions at ports as well as on rail & road routes. An alternative to resolve this is incorporating dry ports in the transportation system. A dry port directly connects the seaport via rail to inland intermodal terminals, to enable shippers deliver and pick cargo easily. This will thus help smoothen trade in land-locked regions of the country as well.

THE rapid economic growth in India has resulted in increased movement of goods around the world. This increased flow of goods demands quality logistical services at ports. However, these have not grown in proportion to industrial growth of the country. Besides numerous inefficiencies like connectivity among ports and transport nodes and shortage of free space in the port areas have generated the immediate need to look for alternatives. As a solution to these

issues, a new concept of dry ports can be explored.

A dry port is a yard for placing containers or conventional bulk cargo, and is usually connected to a seaport by rail or road. It helps avoid traffic bottlenecks, and connect cargo handling from the port with other types of cargo at one common transport centre. Moreover, it can help develop the hinterland areas. Although infrastructural facility in these ports is one of the key issues to be addressed, the

government has attempted to tackle this problem by introducing foreign private participation. At the same time, it has upheld its social-democratic tradition that local operators and interests should not be edged out by external competition. G K Vasan, Minister for Shipping, Government of India, comments, “The logistics industry is called upon to create adequate capacity to meet the rising demand for multi-modal freight movement fuelled by rapid national gross domestic product (GDP) growth.

REINFORCING CONNECTIVITY REINFORCING CONNECTIVITY FOR OPTIMISTIC FUTURE


The key challenges for the industry are the infrastructural bottlenecks and the high logistics cost, which at 13-14 per cent of GDP is far greater than 7-8 per cent of GDP of developed countries.”

SIGNIFICANCE OF DRY PORTA dry port is a multi-modal logistics hub having both rail- and road-based connectivity and catering to export and import (EXIM) traffic.

Rajesh Reddy, Assistant General Manager, Translog Lines, informs, “The infrastructure available at the dry port would be similar to that of a seaport in terms of logistics and facilities for importers and exporters. The dry port would be equipped to handle cargo and transfer freight to warehouses or open storage. Also, customs brokerage documentation and customs clearance could be handled at the dry port itself.”

The development of dry ports has become possible owing to the increase in multi-modal transit of goods by utilising road, rail and sea. This, in turn, has become increasingly common due to the spread of containerisation, which has facilitated faster transfer of freight from sea to rail or from rail to road. Reddy also adds that dry ports play an important part in ensuring efficient transit of goods from a factory in the country of origin to a retail distribution point in the country of destination.

THE UPSIDEImplementation of a close dry port in a seaport’s immediate hinterland increases its terminal capacity, which may help increase productivity since bigger container ships will be able to call at the seaport. Establishment of dry ports will also facilitate trade and transit, which will lead to improved market access. This will

promote private sector development, and thus create employment opportunities. It is a basic trade infrastructure for facilitating efficient movement of goods. It will also facilitate multi-model transport by cutting down costs. “A dry port provides various advantages and services similar to a seaport, with modern facilities such as storage, bulk-breaking and packing. These facilities will be further developed, which will invariably promote exports. Most importantly, it will help overcome the disadvantages of being a landlocked country,” points out Reddy.

DRY PORTS FOR NOTHERN STATESWhile there are a number of cargo transfer facilities that exist in the northern hinterland, the service facility to handle the burgeoning EXIM traffic generated by the north Indian states is inadequate. Measures and strategies identified to overcome the above limitations and promote trade include development of dry ports. A dry port facility equipped with appropriate cargo handling and storage facilities under customs control, along with associated capabilities for clearing and forwarding goods, warehousing, trans-shipment, transit, etc is essential to facilitate trade. It would meet the security needs of goods in transit and provide modern facilities for customs to improve the efficiency and speed of clearance as well as collection of duties & taxes.

STUMBLING BLOCKS Most of the dry ports that have proper

rail connectivity in India operate under state-owned corporation, with Container Corporation of India (CONCOR) being the flagship operator. Although, of late, several private players have come up, one of the major challenges they face is rail connectivity to their ports. On the other hand, infrastructural facility is also a crucial bottleneck. Along with the increased demand for efficient logistics supply chain, there is an equal demand for efficient infrastructural development. Cyrus Guzder, Chairman, CII National Logistics Council & CMD, AFL, avers, “The rail infrastructure is not properly aligned with the new production and distribution centres. As a result, there is excessive dependence on road infrastructure for freight movement.”

WAY TO GOAlthough the concept itself should bring numerous benefits to the logistics industry, there are still a number of impediments to its implementation. Most common of these are land use, infrastructure and environmental & institutional obstacles. Therefore, a dry port must fit into a transport system where regulations are designed to optimise the use and development of existing infrastructure as well as its modes of transport.

At the same time, with the shifting focus of the industry towards development of this segment, one can envision substantial growth in the area of dry ports in the coming years.

Utility of a dry port• Dry port is a yard used to place containers or conventional bulk cargo,

usually connected to a seaport by rail or road. • An Inland Container Depot (ICD) or a Container Freight Station (CFS),

located away from a seaport, providing facilities for cross-border trade in close vicinity of production/consumption in hinterland, with linkages to gateway ports.– A common user facility, for handling and temporary storage of

import/export, laden/empty containers, for clearance by Customs for home consumption, warehousing, onward transit or export

– A CFS is a generally on off-dock facility close to servicing port, helping decongest port by shifting cargo and customs-related activities outside the port

– Set up inland for linkage to a regional rail-linked ICD and to gateway port(s) by road

• Dry port helps take seaport and gateway to inland centre where they facilitate and promote growth inland locations, clustering of economic activities, special economic zones/special economic regions (SEZs/SERs), etc.

DDRY PORTS PLAY AN IMPORTANT PART IN ENSURING EFFICIENT TRANSIT OF GOODS FROM A FACTORY IN THE COUNTRY OF ORIGIN TO A RETAIL DISTRIBUTION POINT IN THE COUNTRY OF DESTINATION.


SMART STRATEGIES TRANSPORTATION MANAGEMENT SYSTEMS

RANSPORTATION MANAGEMENT SYSTEFIVE

KEY WAYS TORAPIDLY REDUCE

COSTSCompanies must focus on cost reduction strategies to stay ahead in today’s demanding market. Automation and optimisation of various processes in the distribution environment helps manage costs, without compromising on the services. Companies thus look up to transportation management system in the quest to achieve this goal. Here are five key points that companies must adopt to drive up cost-savings and improve returns.

MAINTAINING the competitive advantage in today’s demanding business environment requires continual process improvement and cost reduction. Most companies focus on transportation in an effort to control supply chain costs and help ensure timely shipments. Recently, however, effective transportation management has become more complex due to several industry trends.• Rise in cost of fuel, insurance and

drivers• Capacity shortage in truck-based

transportation has led to an environment in which companies have to get ‘service at any cost’

• Consolidation/attrition in transportation provider industry

• Increasing customer service pressure• Regulation and security changes.

Given these trends, companies involved in distribution often look towards transportation management system (TMS) to automate processes and reduce the costs associated with delivering products to their destination. According to industry analysts’ reports, it is generally accepted in the marketplace that TMS can reduce costs by up to 30 per cent. Up to 15 per cent of this number is typically derived through optimisation.

AN IMPORTANT CAVEAT: ONE SIZE DOES NOT FIT ALLThe amount a company spends annually on transportation determines the type of system it requires, as well as the savings that it can expect to generate. The estimated reductions will vary by company, depending on how the TMS is leveraged within the unique environment of each business.

Not all companies will necessarily achieve the estimated reductions in all areas. The TMS available are of different types, and one should focus on the appropriate ones while evaluating the offerings. For example, some systemsare batch-based and create plans that cannot be manipulated or re-run.Some are too complex and costly to implement & configure with changes in requirements. Others lack integrated supply chain execution solutions (ie, warehouse management or supplier enablement) that provide one with the ability to achieve additional savings across one’s business while some simply have too much functionality and exorbitant prices.

Mentioned below are the five key factors to help companies in regulating expenditure by adopting TMS:

1 CONTRACT MANAGEMENT(Estimated 10 per cent reduction in current administrative cost)Contract management gives a

company the ability to accurately record all transportation service provider contracts in a single, central repository and easily access & incorporate updated rates. This is a foundational element required to achieve transportation savings, and hence should not be overlooked. Contract management is also an administrative function where accuracy shows positive downstream results. Maintaining accurate rates prevents many costly errors in subsequent processes from carrier selection to freight payment. Simple-to-use, accurate administration of contract rates with a full audit trail of all activities translates into the ability to accurately calculate the cost for each shipment.

Implementing a new TMS application is an excellent opportunity to ‘get one’s house in order’. As one of the steps in this process, freight contracts should be rationalised across one’s carrier base. Having a standard format for contracts will enable better negotiation and evaluate the results of negotiations across the carrier base. The process of rationalisation should standardise linehaul rates. This is


possible by using common definitions of geography for traffic lanes across all contracts. It is typical to standardise traffic lane definitions on a point-to-state or point-to-three-digit zip code format.

Point-to-point lanes should only be used for inter-plant traffic or for situations where a few customer locations represent the majority of traffic shipped. For all contracts, a single mileage authority should be identified by product name and release level. This mileage authority should serve as the single source of mileage for all per-mile linehaul charges and all accessorials computed on a per-mile basis.

Complex accessorials such as fuel surcharges should be defined once and standardised across all contracts. The rates for a fuel surcharge can be subject to negotiation with individual carriers. However, the same calculation method should apply across the board.

Timely and accurate maintenance of rates is also critical in preventing downstream errors. Updates to contract rates should be recorded in the system as soon as the negotiation of changes is complete. The ability to enter rate changes today, which become effective at a future date is key to ensure that all rate changes are captured and implemented as negotiated. This ability to enter future-effective rates enables a new rate to be in place for use on the appropriate date, preventing misrating of affected shipments. The ability to maintain an online audit trail of all rate changes is also important in speeding up the process of reviewing freight charges and determining the correct amount for completed shipments.

2 OPTIMAL LOAD & ROUTE(Estimated 5-17 per cent reduction in annual freight spend)In today’s market, where capacity is

at a premium, reducing transportation cost requires finding greater efficiencies rather than simply working to extract deeper discounts from transportation providers. Creating an optimal transportation plan is a sure way to generate savings without disrupting one’s carrier base. The optimisation technology has advanced and is now accessible to a broader market. Thus, even smaller shippers can now take advantage of the savings created through optimisation.

In the past, creation of a manual transportation plan relied on individual knowledge and experience to combine

orders into shipments. Because of the time-consuming nature of reviewing the many potential combinations of orders, a simpler solution based on generalisation was always preferred. The process of building loads manually often sends excessive freight less-than-truckload (LTL) and overlooks the savings potential in creating cost-efficient, multi-stop truckloads. Here, automated optimisation can free up valuable resources from the time-consuming process of manually building and adjusting loads. This time can thus be utilised for value addition activities such as reviewing carrier performance and proactively working towards higher levels of customer satisfaction.

The opportunity for optimisation-based savings is also available for shippers outside of the traditional LTL to TL consolidation model. Optimal load and route planners now provide planning support for zone-skipping as well as pooling & cross-docking operations. The current demand for smaller, more frequent shipments has increased the reliance on parcel and LTL shipments to meet customer demands. This has also had an adverse impact on transportation costs. The TMS’s ability to efficiently plan and execute a zone-skipping or pooling strategy allows meeting the need for cost-effective transportation required by one’s customers as well as the organisation.

Optimal load and route planning coupled with accurate rates allow quick review of the financial impact of a transportation plan. Plans change frequently even in the most optimum environments. A TMS should allow one to see the financial results of an optimal transportation plan as well as review

the impact of changes on the plan. This will ensure that savings generated in the creation of an optimal plan are not eroded by the inevitable exceptions that occur.

3 LEAST-COST MODE(Estimated 2-7 per cent reduction in annual freight spend)Selection of a least-cost carrier

can yield savings without adversely affecting customer service. This does not mean lowering service standards. Often, this means being more aware of service requirements as well as historical carrier performance. The development of a carrier price/performance ranking is key in implementing an effective least-cost carrier selection process. The carrier base should be reviewed by each major traffic lane and a ranking developed, which clearly expresses the order of preference for the carriers in each traffic lane.

While implementing a TMS application the first time, the carrier performance ranking may be entirely subjective. In any case, a ranking should be developed and periodically reviewed, as empirical data becomes available on carrier performance. A common practice in this area is to classify carriers into primary, secondary and back-up categories and then numerically rank each within the categories.

Using this ranking as a guide in the tendering process is only half the battle. Key performance metrics should be gathered to ensure the effectiveness of a least-cost carrier selection programme. Internal and external performances must be clearly understood to correctly evaluate the success of a least-cost carrier selection programme. Internal conformance to the programme must be measured and monitored. When a least-cost carrier is not selected as the first carrier for a candidate load, it is important to record this and also understand the reasons for non-conformance. Often, simple corrective actions can be taken to further the success of a programme, such as tuning trailer pool sizes.

External metrics must also be measured (ie, tender acceptance rate for carriers). Carriers unable to deliver capacity at contracted rates should be noted and appropriate actions taken. Creating savings through a least-cost carrier programme requires monitoring and measurement, which is often difficult in a manual environment, but easily accomplished with current TMS capabilities.WW

HILE RESEARCHING TMS VENDORS, IT IS CRITICAL TO HAVE A FULL UNDERSTANDING OF ONE’S COMPANY’S NEEDS WITH REGARD TO FUNCTIONALITY AND SYSTEM SCOPE.


Another area of potential savings that is sometimes overlooked is the competition across modes for the same shipments. Traditional hard lines between modes need to be reviewed and adjusted to the current environment. Shipments should no longer be categorised as simply falling into a single mode. Instead, multiple modes should be reviewed for cost or performance when shipments are in a ‘grey area’ where multiple modes are applicable. Opening the carrier selection process to take advantage of current areas of competition between service providers can be an excellent way to create savings in a capacity-constrained market.

4SHIPMENT EXECUTION(Estimated 1-5 per cent reduction in annual freight spend)Automation in the shipment

execution process can yield significant savings in a number of ways. Shipment execution is often the most time-consuming area for traffic management staff. Freeing up time for the staff in this area through automation of repetitive tasks often helps drive greater savings in many other areas.

Automating the tendering process will yield savings greater than a simple reduction in staff time spent in ‘dialing for diesels’. This will ensure routine conformance to a least-cost carrier selection programme. Also, this means that carriers receive complete, accurate information on tendered shipments the first time, and every time.

In the past, automated tendering was limited to large companies & large carriers where an electronic data interchange (EDI) connection was available and cost-effective for both parties. Because of the variety of integration technologies now available in the market, even the smallest shippers and their entire carrier bases can use a cost-effective methodology. EDI is still the mainstay for communication to larger carriers. The EDI-formatted transactions do not necessarily need to be transmitted through an expensive EDI value-added network (EDI VAN). With current integration technologies, the EDI-formatted transactions can be reliably and affordably transmitted through various direct connections without the expense of a VAN. In many cases, this is not only possible with larger carriers but is also preferable.

For smaller, less technologically

enabled carriers, the Web provides the real-time connectivity needed to easily drive an automated tendering process. TMS applications can take advantage of the ubiquitous combination of the Web and email communications. When a carrier is selected for tendering, the TMS can send a notification of the tender either by email, fax or pager, directing the carrier representative to a Web page to respond to the tender notification. This simple, reliable methodology can replace a myriad of phone calls attempting to reach the desired carrier representative. Also, the carrier receives a complete and accurate communication of the shipment detail without a time-consuming phone conversation, which also reduces the chances for errors. For many current TMS applications, appointment scheduling can follow a similar process.

A manage-by-exception environment can extend well beyond the tendering process. Because of the ability to easily connect electronically to the entire carrier base, in-transit tracking can provide visibility to exceptions – often in advance of lapses in customer service requirements. The ability to monitor pick-up/delivery performance at each stop allows for proactive intervention when a shipment is falling off schedule. In many cases, this advanced visibility to performance exceptions allows for proactive customer notification and avoidance of the perception of poor customer service due to exceptions in the fulfillment process. Web-native TMS applications also provide the benefit of making order status information, from schedule through delivery, available to all vested parties in an organisation. Customer service and sales personnel can use self-service Web pages that allow them to easily inquire about order status without disruptive and time-consuming phone calls to the traffic department.

The ability to accurately record and access performance across the supply chain has taken on a higher value based on the current transportation environment. Detention and layover charges once considered trivial in the cost of transportation can now easily represent a significant element. Only the ability to track these events accurately as they occur by location will help in appropriately managing these costs. Detention costs must be dealt with by accurately allocating them to specific

customer locations and performance problems addressed, or by passing on the costs to the offending customer. In slim-margin industries, the profitability of a customer shipment may hang in balance based on dock door performance and the resulting detention charges.

5PERFORMANCE IMPROVEMENTS(Estimated 1-3 per cent reduction in annual freight spend)

The ability to manage performance has always been dependent on the ability to measure performance. In the fast-paced, resource-constrained business environment of today, often performance measurement has fallen by the wayside as a time-consuming activity to formalise as a process.

One of the major benefits of a TMS is automation in collecting key performance metrics. The system records these metrics in real-time as the shipping process takes place. The ability to measure both internal and external performance can provide a 360-degree perspective on performance required to ensure strong focus on correction & improvement activities. The ability to accurately access carrier performance requires an accurate measurement of the performance of locations in loading and unloading. The easily measured late shipment to a critical customer may be the result of poor carrier performance in-transit. But it can just as easily result from an upstream location with poor performance in loading/unloading. The ability to move such events out of subjective measurement and into a fact-based environment provides the ability to take meaningful and effective corrective actions.

Accurate freight spend allocation is another measure of performance that a TMS can provide. The ability to understand in detail the cost of servicing regions and specific customers can drive better strategic and tactical decisions. An accurate understanding of regional spend can drive improved network design in the location of distribution centres (DCs) and other facilities. The ability to measure in detail the total cost of servicing customers allows for decisions that can maintain the competitive position or help weed out unprofitable business.

The ability to gather and report on metrics enables fact-based continuous improvement. Using a TMS to enter a

Transportation management systems, continued


fact-based environment where performance is continuously measured and monitored will profit one’s supply chain.

SELECTING SUITABLE TMS VENDORWhile researching TMS vendors, a variety of functionality is found, at a variety of price points. There is a possibility of finding different options in terms of hosting. Best-of-breed systems are within one’s internal infrastructure, while application service provider (ASP) models are hosted off-site.

It is critical to have a full understanding of one’s company’s needs with regard to functionality and system scope. The right amount of functionality is always required and there are many systems that can fulfill the requirements, and thus create unnecessary complication and implementation cost. An internal audit of one’s requirements is a good first step.

Another key area of concern is the system’s ability to accommodate changing requirements of one’s business as well as customers. With today’s fast changing distribution environment, the ability to configure one’s system in-house is essential to maintain customer satisfaction. While working with each vendor to evaluate functionality, specific information and demonstration regarding their protocol for configuring business processes must be requested to meet one’s unique needs. Most vendors modify code to incorporate the requested changes, which is a costly and time-consuming process. On should seek a vendor offering a flexible system that does not require code-based configuration. This ability to make changes, and how changes are carried forward during an upgrade, will be important in determining one’s long-term total cost of ownership.

Another area of consideration is looking at a potential vendor’s entire product offering. Some TMS companies offer only TMS solutions. Thus, it is important to consider one’s supply chain operations as a single entity that likely encompasses warehouse operations, manufacturing, suppliers and other trading partners, and also focus on one’s customers. A vendor that offers a supply chain execution solution built on a common platform will help link a variety of elements in one’s operations spanning source-to-consumption processes. Consider the involvement of an experienced consulting systems integrator during the vendor evaluation process. A consultant can expedite this process and bring industry-leading information around potential software vendors to meet specific functional needs, technology standards & price point for a business. Consultants with system implementation and integration experience can also help identify all project costs early, eliminating sudden expenditures during the project.

FINDING THE RIGHT SYSTEMConstantly finding new ways to optimise supply chain processes is a challenge faced by all businesses today. Taking a closer look at transportation and TMS is an important step towards driving measurable cost reductions. A robust, adaptable TMS helps ensure that customer shipments leave one’s facility on timeand on a path optimised with the lowest cost. Ultimately, finding the right system and vendor will help address one’s business needs today and accommodate changes quickly and cost-effectively tomorrow.

Courtesy: HighJump software

WAREHOUSING & DC REAL-WORLD BUSINESS OPTION


OF LATE, there has been a lot of talk about cloud computing. Some providers are offering the warehouse management system (WMS) technology in a cloud delivery model at a lower cost and reduced risk option. However, people are still not entirely sure of what cloud computing is and wonder whether it is a real possibility for business, or just a new buzzword.

Cloud computing for WMS means that the WMS vendor will host the software application and hardware infrastructure for

one’s business as an on-demand, scalable and flexible service. It shifts the burden of WMS technology administration on to WMS technology experts. There is no hardware to purchase or maintain, patches and upgrades are done automatically, implementation is dramatically simplified, no capital expenditure is required and there is less risk for the business. One can access the WMS via a Web browser and gain the functional benefits of a new WMS without upfront costs andIT drain.

FOUR REASONS TO CONSIDER CLOUD COMPUTING FOR BUSINESSIn terms of supply chain, cloud computing is basically the IT equivalent of a third party logistics (3PL) provider that manages physical distribution for the business. Just like a 3PL supplier provides warehouse space to the businessman, the cloud WMS provider will host the hardware & software and maintain it on one’s behalf. No capital expenditure is required here because the system is essentially being rented. Also, there is less risk, implementation time is

WMS IN THE CLOUD OR JUST FLUFF?

Cloud computing in warehouse management system (WMS) acts as a third party provider that handles the software and hardware in a business. It shares infrastructure, provides warehouse space to providers, maintains hardware & software and manages physical distribution. In simple terms, WMS in a cloud delivery model addresses the concern of maintenance, cost and labour in the business, freeing up the personnel involved to concentrate on other vital issues.


much shorter and demands on IT staff decrease. Another advantage is that the solution can be tested for some time, and if it does not turn out to be the best option for one’s business, it can be discontinued. This is a new option that is usually not available with high-end software systems.

Following are four strong reasons for putting one’s WMS in the cloud for business, and also how it can affect the bottom line with a faster return on investment (ROI).

1 IT IS FLEXIBLE AND SCALABLE TO MATCH ONE’S BUSINESS NEEDSWMS in the cloud provides WMS

solutions that are affordable and efficient for companies of varied sizes. Gone are the days when tier 1 WMS was attainable only by the Fortune 500. With WMS in the cloud, a subscription-based pricing model is created; thus, there is a need to pay only for the services used. The outcome is a more affordable solution, with less risk to the business. The cloud is flexible and scalable, so more power can be accessed when needed for seasonal business changes or spikes in demand. The cloud provides ‘self-service’ access to the WMS application, giving increased agility to match the dynamic pace of one’s business. With conventional self-hosted systems, only the hardware based on the highest demand need to be bought. Thus, one can seamlessly scale and accommodate spikes in demand.

2WMS DELIVERED VIA CLOUD CAN HELP LIGHTEN THE IT LOADWith the rising technological

needs, many companies are running out of IT space and power. On-premise software requires rack space, electricity, cooling, bandwidth, hardware and trained IT staff to install the systems and perform upgrades & routine maintenance. Not to mention the manpower required to become an ‘expert’ on every technology stack and all the applications needed to run the company.

Cloud computing removes the maintenance headache of cost and labour, freeing up time for the IT staff to focus on more important issues. There is no need to purchase or maintain hardware, and manage hardware vendors, hardware support contracts & carry insurance on

the hardware. The shared infrastructure provided by the cloud takes advantage of economies of scale, yielding better hardware utilisation and resulting in more computing capacity for one’s infrastructure dollar spent.

3FASTER IMPLEMENTATION FOR QUICKER BENEFITSWith cloud computing, one can have the WMS up and running

much faster than with a conventional, on-premise solution. There is no lengthy and confusing installation to slow down the business and tax the resources. Rather than hard-coding customisations to one’s WMS, the software is configured according to business needs and the software image is ready to be turned on in a fraction of the time that is needed to implement a conventional on-premise WMS. Moreover, there is no need to worry about applying the latest patches, as ongoing updates are applied automatically and seamlessly.

Cloud computing can help achieve faster ROI. Because of the simplified implementation, and the ‘pay as you go’ service, the software can be test run without any major capital investment for a specific duration. Perhaps, people are intrigued by some new WMS capabilities and wonder whether the new functions can bring the necessary level of ROI for business to make the system purchase worthwhile. The software can be tested for a year, after which one can reject it if not appropriate.

4IT IS JUST AS SECURE AS CONVENTIONALLY INSTALLED SYSTEMSThe thought of having someone

else manage their data and applications can cause a ripple of fear in some people.

Questioning the security, reliability and availability of one’s data makes sense with any application that is run. With cloud computing, the risk & liability are managed by the service provider, and most cloud providers have security policies that are far superior to a company’s internal IT departments. The hardware and applications are hosted in a secure, state-of-the-art data centre that is designed to ensure the privacy, integrity & availability of customer’s systems & data. Uninterrupted Internet access ensures guaranteed & instantaneous availability of one’s system and data.

Secure data transfer protocols manage data security & privacy, and also provide encryption & secure identification of the server. The protocols ensure confidentiality and integrity of data over the Internet. One can even have a secure collaboration with supply chain partners via interface touchpoints within the WMS.

DETERMINING THE RIGHT WMS IN THE CLOUD FOR ONE’S BUSINESS?Determining whether a WMS with a cloud delivery model is right for one’s business depends on specific functional needs and staffing priorities. The key benefits that a cloud option provides over a conventional on-site hosted solution are that one gains the new WMS capabilities required for his business, and the solution is implemented more quickly and with less strain on one’s IT staff. Moreover, all these come without the large up-front capital expense.

For analysing whether the cloud is the best option for one’s business, one must calculate the cloud costs versus do-it-yourself costs by taking a good, in-depth look at the operations.• Is the expertise and additional IT staff

available to dedicate to implementing and maintaining a new application?

• Is the current infrastructure over-taxed and in need of an overhaul?

• Is there a pressing need for new WMS capabilities, necessitating a faster implementation?

• Are operational costs included, eg, energy, personnel and capital costs, including servers, storage & software when comparing cloud costs to hosting the same service internally?

• Has the added benefit of the subscription-based pricing of the cloud option been considered? If one has to determine the long-term payback potential, the cloud might be the right choice since there will not be a large capital expense tying one down for the long term to a specific application.

MAKING THE RIGHT CHOICEOne must discuss the differences and benefits with all those involved in operations and IT to decide upon the right option for the business. Knowing about the choices available for one’s WMS project is beneficial, especially when cloud computing seems to be far more simpler than what it sounds.

Courtesy: HighJump Software

IT TRENDS IN LOGISTICSIT TRENDS IN LOGISTICSTECHTRACK


SOFTEON, a provider of WMS suites and supply chain execution solutions for logistics and distribution management, has released a new series of supply chain execution applications that extend its traditional solutions such as warehouse management and distributed order management to mobile smartphones. The new Smart Phone Connector Series currently works on Apple iPhones and any mobile phones with Google’s Android mobile operating system.

According to Softeon, the initial application set in the Smart Phone

Connector Series provides detailed visibility into distribution center operations and performance as well as support for direct store delivery (DSD) and route accounting processes.

Shyam Krishna, Executive, Softeon, explained that the nature of their product architecture makes it easy for them to extend current supply chain applications to mobile devices. “It is clear that companies will be looking for smartphone applications, and to extend logistics system functionality to non-traditional users,” he said.

Softeon is currently working with a large third party logistics (3PL) service provider to use a Smart Phone Connector application to extend visibility to one of the 3PL’s large clients in terms oforders, shipments, and inventory status. Built on fully web-native technical architecture, Softeon offers a modular solution for warehouse & distribution management, order management,labour & resource management, work order processing, transportation management, beverage distributionamong others.

Softeon releases new applications for smartphones

AVERY Dennison recently announced the launch of its latest ultra-high frequency RFID inlay — the AD-232. It is ideal for item-level tracking of assets, retail goods including apparel, and many other applications where close proximity or stacking of goods is required. It is designed to perform exceptionally well on difficult-to-tag items such as denim apparel.

U s i n g N X P Semiconductors’ latest EPC Gen 2 integrated circuit, the G2iL, the AD-232 inlay is designed to provide global performance in the 860-960 MHz UHF band, with balanced performance across a wide range of applications. The AD-232 has an antenna footprint of 70 mm x 14.5 mm and fits nicely into a three-inch wide RFID label.

“We are proud to partner with Avery Dennison RFID with our latest UCODE

G2iL series IC, which offers excellent read range and unique features such as tag tamper alarm and privacy modes. The high chip sensitivity allows for small tags and great performance in high tag population. Our close strategic relationship brings forward solutions that address a host of applications where high and reliable read rates are a must,” said Chris Feige, General Manager – Tagging & Authentication, NXP Semiconductors.

Maggie Bidlingmaier, Global Sales & Marketing Director – RFID Division, Avery Dennison, explained, “We are pleased to add another product to our best-in-class UHF product portfolio. NXP is a strategic silicon partner with us, and their latest G2i chip technology enables us to address new market opportunities and growth segments with a suite of new inlays.”

Avery Dennison introduces new RFID inlay for item-level asset tracking WHILE many fulfillment

services continue to rely on spreadsheets for managing inventory and email for communicating with customers, leading fulfi l lment warehousing company, Gridiron Fulfillment has adopted a new Radio Frequency Identification (RFID) technology that combines enhanced efficiency and communication with significantly lower costs for its customers. The RFID system tracks all facets of inventory & order management, processing inbound inventory, item quantity & order pulling and packing & shipment.

In addition, the Gridiron system gives customers online access to their data and allows them to track inventory levels, place orders and, through seamless integration with the FedEx system, determine delivery status on a real-time basis.

The Gridiron system is designed in such a way that it is easily adaptable to suit

customers’ systems. It is so flexible that can integrate with existing customer systems without missing out on a step. Customers can interface with Gridiron, and vice versa, getting all of the benefits of enhanced information and tracking without having to reinvent the wheel.

The Gridiron system also includes a mobile component that puts smart devices into employees’ hands in the warehouse. This implementation tackles one part of the order fulfillment process that has often been vulnerable to human error. The device integrates RFID and barcode elements that automate a critical part of the fulfillment process, simultaneously eliminating human mistakes and speeding order flow. By lowering costs while enhancing service, accuracy and speed, the implementation of new RFID technology makes for a welcome addition from any perspective.

Gridiron uses new RFID technology to lower cost


LEADING Software as a Service (SaaS) global shipping & logistics solutions provider, CargoSmart recently announced the first sailing schedules iPhone application for shippers, logistics service providers and ocean carriers. This new application lets on-the-go shipping professionals’ access sailing schedules quickly and easily from their smartphones. CargoSmart has provided multiple-carrier sailing schedules online and fed schedule information directly to customers’ in-house systems by EDI, XML, and Web services for over 10 years.

CargoSmart offers the first interactive, smartphone application to manage critical ocean schedule information. “Busy international trade and logistics professionals are frequently on the road and rely on their smartphones and computers to multitask. The sailing schedule application improves efficiency for customers who want to manage schedule information from their iPhones,” said Joe O’Brien, MD, CargoSmart, North America.

The new application lets customers look up sailing schedules by carrier, origin city, and destination city search criteria. Users can share schedule search results by e-mail and SMS with colleagues and customers directly from their iPhones. CargoSmart currently offers schedules from 15 leading ocean carriers and is expanding to offer more carriers’ schedules.

Cargosmart presents sailing schedules iphone application

INFOR, a provider of business software for mid-market companies, has recently launched Infor AutoConnect, a demand management solution for suppliers in the automotive industry. AutoConnect provides a single view into planning, production and shipping across the industry’s complex supply chains and integrates with Infor ERP systems.

AutoConnect consolidates multiple electronic data interchanges into a single solution, providing suppliers global visibility and communication across the entire supply chain, enabling them to reduce administrative costs; accelerate response to supply chain variability; help ensure compliance with differing import, export and other regulations across regions; improve global logistics visibility, delivery execution & shipping accuracy and ease of expansion into new markets & regions through rapid addition of new upstream & downstream supply chain partners. Wolfram Schmid, Director, Automotive Solution Management, Infor, said, “With volatile customer demands and complex global supply chains, the automotive industry puts unprecedented pressure on its suppliers. Infor AutoConnect helps automotive companies reduce costs to increase profitability and ensure long-term viability by providing their OEM customers with greater service, dependability and support for worldwide operations.”

Infor launches AutoConnect for automotive industry

DAP TECHNOLOGIES has recently launched a powerful, lightweight M4000 series handheld modular computer which allows customers to choose the technology they need and easily upgrade as per their changing needs.

Built on a Windows CE operating system, sealed to IP65 and engineered to withstand multiple 1.5 metre drops, the M4000 is ideally suited to the specific requirements of warehouse environments. With 128 MB SDRAM and 1 GB flashROM standard, DAP’s newest offering provides amplememory for storing data locally, while communication options include GPRS and Summit Radio wireless LAN 802.11b/g. It also has a user-accessible, expandable SD slot. The M4000 series offers a 3.5” 256K colour LCD touch screen withLED backlighting and achoice between an alphanumeric (M4010 model) or alphabetical (M4020 model) keyboard. Customers are not locked into their decision as keyboards can be swapped. The same modularity is true of the optional 1D laser or 2D imager scanners, which canbe easily upgraded as technology advances. Customers can also choose standard or high-capacity Li-ion battery packs, and optional GPS or RFID functionality.

“Many companies are still using paper-based systems to manage inventory, shipments and fleets. DAP’s M4000 series rugged computers gives those companies the opportunity to make the transition to a more efficient, computer-basedsystem that reduces human error and boosts productivity, without locking into technology that has a limited lifespan,”said Khalid Kidari, Director – Product Management & Marketing, DAP Technologies. DAP’s voice-ready M4000 serieshandhelds feature four programmable function keys and four scanner trigger buttons – two each on the left and right sides – which ergonomically fit the user.

It can also be equipped with a removable pistol grip or vehicle-mounted. “The modularity of DAP’s M4000 means that customers not only have choices at the time of purchase, but they can also swap elements like the type of keyboard, RFID readers or scanners as their needs change or technology advances,” said Eric Miller, VP, DAP Technologies. “Customers are not locked into their original decisions by cost-prohibitive upgrades. That is true future-proofing, and we are offering it on a competitively priced computer.”

DAP Technologies introduces handheld computers

EQUIPMENT UPDATE MOBILE PRICE LABEL PRINTERS


The ability to reduce or increase the price of commodities in the store is a powerful tool, as re-pricing of products on shelf can help retailers save money and increase sales volume. Earlier, re-pricing was done manually, which created several points of error and deficiencies like slow speed, low accuracy and associates busy in re-labelling products instead of catering to customers. Today, high-speed, in-store wireless networks are available, which can help retail chains to re-label their products at the aisles, thus saving labour time, improving re-pricing accuracy and enabling associates to attend to customers.

RE-PRICING products in the store has evolved from simply being a reaction to purchasing mistakes, to a strategic tool that retailers apply to increase traffic and sales. Price changes are often required for regional pricing or other variable pricing strategies, promotional markdowns, clearance, seasonal sales or product mix changes. Retail headquarters usually sets overall pricing of products, though it carries weight in the store. For price changes to be effective, store operations must be modified to keep pace with

changing marketing strategies. Delays and errors in implementing price markdown strategies result in retailers having to bear unnecessary costs along with missed sales and increased labour costs. Delays in co-ordinating markdown prices on the shelf and at the point-of-sale (POS) also put retailers at risk for violating shelf pricing laws and checkout fraud.

Printing new price labels with real-time mobile printers closes the loop between pricing strategy and execution. Mobile printing is an essential tool for

efficient price labelling management, and a proven practice for reducing labour costs and improve accuracy for markdowns. Further, it has a wide variety of other retail printing applications.

According to SofTechnics, a leading provider of retail pricing and inventory management software, stores typically reduce their price marking costs in the range of 25-40 per cent by integrating price management software with mobile computing and printing operations. Retailers are now gaining profits from

ENABLINGENABLINGREAL-TIMEREAL-TIMERETAILRETAILRE-PRICINGRE-PRICING


mobile markdown printing and other price labelling methods, and also stores leveraging different printing applications to create more value.

COMMON PRICING STRATEGIESPricing strategies are a constant theme for discussion at all retailers. One of the most common questions asked is, “Which sells more at the best margins, end-of-season sales or regular markdowns?”Everyday low price: The everyday low price concept actually exaggerates markdown, based on the theory that people return to stores where they are offered the best price. This demands a minute-by-minute attention to the most aggressive price competitiveness, and focusses on in-store execution, which is about labelling and re-labelling. Grocers and general merchandisers have invested heavily in the technology to manage such a business model, from space allocation to price optimisation and perpetual inventory solutions.End-of-season and special event sales: End-of-season sales and sales for special events continue to be crucial in specialty retailing. Back-to-School, Thanksgiving and Anniversary sales represent a significant proportion of annual sales. The ability to reduce or increase the price in the store is a powerful tool, though fraught with danger.

LABEL PRICE DISCORDWhat happens if the label price is lower than the system price? Confusion at the POS, customer dissatisfaction, litigation or ruined reputation? What happens if the label price is higher than the system price? Would it lead to missed promotional opportunity or unnecessarily reduced margin?

Despite this, all stores use a label gun or red pen for re-labelling products, which does not ensure accuracy or timeliness. Specialty retailers need to implement the technology that the grocers and the general merchandisers had started to invest in some years ago. Fashion and other specialty stores need to present the ‘high quality/best value’ model they advertise. Moreover, they need to advertise the store at the end of every week and not

just at the end of the season. True price differentiation requires price optimisation and execution technology.

REGIONAL PRICINGVariable pricing is another strategy, which store chains typically implement according to region or demographic zone. They analyse buyer behaviour on the basis of products and product line to find that certain products do not achieve margin or sales volume expectations at the regular price. By increasing the price in certain regions or zones, retailers can increase margins and not affect sales volumes. In contrast, by decreasing the price in other regions or zones, the chain achieves volume targets, though at a lower margin.

At a theoretical level, this strategy appears to be good. At headquarters, variable pricing models achieve the perfect balance of margin and sales volume. However, it is different at the store level, as products in regions with higher margin do not receive a higher price, thus resulting in costly mismatches between the label and the system. Unlabelled products in lower-margin regions do not sell, often resulting in conflicts between store operations and pricing teams.

This is because, ultimately, stores can only introduce variable pricing with the use of an efficient labelling technique. Some retailers have set up re-labelling lines in the distribution centre for consumer electronics products, but for most product lines, the operation is expensive and time-consuming. However, this is not feasible, so for maximum re-labelling efficiency, stores must perform the task immediately after the arrival of goods.

PRICE OPTIMISATIONRetailers take a professional approach to markdowns, and increasingly using powerful price optimisation software to improve decision-making and profitability. Price management software helps retailers increase revenue by recommending specific items to mark down, as well as the appropriate time and numbers of items. Powerful forecasting algorithms analyse historical sales data and other factors to make appropriate markdown decisions. Price optimisation software provides similar input, but can manage the entire product price lifecycle. The optimal application software must offer flexibility to customise results for individual stores within a chain to account for geographic and demographic differences. It should also integrate directly with POS systems, and allow retailers to manage prices at multiple levels, including department, product class, subclass/type, stock-keeping units (SKUs) and Universal Product code (UPC).

Price management software alone is not enough to accelerate sales and turn inventory. Stringent processes and management are needed to form the foundation of the software so as to obtain optimum results. Software applications can accurately specify the right item, right price and right time to mark down an item. However, the application cannot ensure whether a store will actually perform the markdown in time, and will lose sales if this does not happen. How efficiently the retailer performs price changes will go a long way in determining the value and return on investment (ROI) that the price optimisation system will provide.

Retailers are increasing the use of regular markdowns and variable pricing

strategies, but they still have to answer the big question – How will the employees implement all price changes in the store?

STRATEGY & EXECUTION BALANCE INCREASES PROFITABILITY BY 20 PER CENTVariable pricing, re-labelling and markdowns are a common, everyday occurrence in the retail industry, although individual retailers and stores within a chain differ in the way they perform these pricing operations. Pricing has now become a science, PP

RINTING NEW PRICE LABELS WITH REAL-TIME MOBILE PRINTERS CLOSES THE LOOP BETWEEN PRICING STRATEGY AND EXECUTION. MOBILE PRINTING IS AN ESSENTIAL TOOL FOR EFFICIENT PRICE LABELLING MANAGEMENT, AND A PROVEN PRACTICE FOR REDUCING LABOUR COSTS AND IMPROVE ACCURACY FOR MARKDOWNS. FURTHER, IT HAS A WIDE VARIETY OF OTHER RETAIL PRINTING APPLICATIONS.


Mobile price label printers, continued

though for most retailers, execution is anything but scientific. Retailers should manage price labelling carefully and with proper planning as they do for other key areas of the business. Also, they should support the planning by using appropriate systems, else they are at risk for losing sales, slow inventory turnover and inefficient labour practices.

EFFICIENT EXECUTION OF VARIABLE PRICING AND MARKDOWNS Wireless label printing technology can be used to execute pricing markdowns.

Large grocery chains have implemented this process for perishable foods, with major success. The big discount apparel retailers deploy wireless label printing for marking down branded clothing. Today, due to the easy availability of high-speed and in-store wireless networks, retail chains of all sizes, including small specialty store chains, can implement regular markdowns.

Pricing systems from suppliers such as SofTechnics alert store managers of new pricing recommendations on their wireless personal digital assistants (PDAs) and desktop personal computers (PCs). Managers then approve the new pricing in real-time to trigger new price-labelling tasks to store associates in the aisles. Store associates use Zebra® mobile printers to print the price-change labels at the point of need. Retailers can also perform re-labelling at receiving, ie, immediately upon arrival of goods at the store. Retailers with effective variable pricing models and execution techniques scan all shipments upon arrival. The system identifies items that need re-pricing and automatically prints new price labels with the help of a mobile wireless label printer.

WIRELESS MOBILE PRINTING CREATES VALUESupporting pricing applications with wireless printing minimises the incremental time required to re-label goods with markdown prices. Mobile and wireless

computing systems already in use at numerous retail locations are easily adapted accordingly to support flexible, responsive markdown operations. By taking advantage of the existing in-store wireless infrastructure, retailers can create new price labels right at the aisles.

Reduced labour time required for labelling goods yields the ROI for this operation. The time saving is in the range of 25-40 per cent among SofTechnics customers who have converted to an in-aisle printing application. Integrated, in-aisle printing also gives retailers the pricing accuracy and other benefits associated with mobile printing, which will further

improve the effectiveness of their markdowns and promotions.

For example, printing a bar code on the new label means that store associates can process clearance or marked-down products quickly at the POS and make accurate stock adjustments. Simultaneously, the system information stays current because

the reduced price products have different codes in the system from the regularly priced products.

APPAREL STORE REALISES ACCURATE,

REAL-TIME PRICINGFor example, Topshop, a leading apparel retailer in Western Europe and Russia, selected wireless mobile printing to implement a price markdown system at its new Evropeiskiy trade centre in Moscow. At other chain locations, store associates executed price markdowns manually with the use of fixed-location printers, which was error-prone and inefficient. Topshop required a solution that could apply retail price markdowns to selected clothes items as opposed to the entire apparel collections, often consisting of hundreds of in-store items.

With the new wireless mobile printing solution, Topshop Russia retail store assistants now print price markdown labels, on demand, for selected clothing items on the shopfloor instead of the back office.

Here, efficient discounting and re-

labelling improved re-pricing accuracy, thus freeing up employees to attend to their customers. As a result, Topshop realised a lift in sales margins and profits, improved customer service and accelerated payment processing for its customers.

MOBILE PRINTING IN STOREMobile printing in store aisles is a proven practice for improving efficiency, which eliminates latency and reducing labour requirements. In most applications, associates use a mobile printer with a hand-held or cart-mounted computer to prepare markdown labels, audit shelf prices and create new product or shelf labels. The printer and computer use a wireless local area network (LAN) connection to the store computer system to access the updated price information and verify whether the price marked on the shelf matches with that charged at the POS. In case of a discrepancy, associates can print and apply the new labels on the spot. These applications protect retailers against pricing errors and help comply with price accuracy laws that many states and countries have enacted. Moreover, the process helps in catching missed markdown items, aligning store execution with pricing strategy.

SIMPLIFYING RETAIL OPERATIONS, WITH FOCUS ON SALESMobile printing is an excellent enhancement to markdown and other price-labelling operations. The labour savings alone deliver strong ROI, with even greater value when improvements to responsiveness and software effectiveness are considered. Mobile printing helps streamline retail operations, freeing up store associates to give more time to customers and improve sales.

In order to maximise the value of mobile printing and the incremental improvements it provides to markdown management software, retailers should implement mobile printers that:• Easily integrate with the pricing system

to make printing a one-step process• Are ergonomic and convenient for

workers to use and load• Support enterprise wireless networking

and security standards• Are flexible for multiple in-aisle printing

needs.

Courtesy: Zebra Technologies Corporation

HITECH MATERIAL HANDLING SHOW EVENT PREVIEW


TODAY’S competitive manufacturing set-up requires establishing a practical and efficient warehouse for seamless logistics. But, this is a big challenge, as it entails taking into account the right mix of conflicting objectives, including increased pick-up speed combined with manufacturing flexibility, organisational flexibility combined with effective space utilisation and high throughput at lower labour cost. With the current economic conditions, many companies are also working towards actively following lean practices, continuous improvements and just-in-time production systems.

Globalisation is further propelling competitiveness and driving the development of newer and more efficient material handling technologies in the market. Various industry sectors like power, mining and manufacturing are fuelling the demand for material handling systems that help reduce inventory levels and improve order-to-delivery cycles. Appropriate material handling systems also facilitate efficiency in a factory set-up, and play a crucial role in its overall success irrespective of the process.

‘INDIA SHINING’ IS FUELLING THE DEMANDToday, India is shining globally in terms of its manufacturing capabilities. Several companies in India have commenced process of mechanisation. With this background, the demand for forklifts and other material handling equipment (MHE) is likely to rise significantly.

Realising these needs, Network18 Group is organising the most futuristic

show – HiTech Material Handling Show – for the material handling industry in India. The event will enable the entire material handling industry to congregate on a single platform and serve as a foundation for future growth of the industry. Cutting-edge technology, breakthrough innovations and interactive demonstrations from the leaders in the material handling industry will be showcased in this show. The event will be held concurrently with the show HiTech Automation, under the umbrella show HiTech Manufacturing.

Some of the participating verticals are overhead and lifting equipment, trucks & mobile equipment, casters, wheels & tires, automated storage/retrieval systems, cleaning systems and maintenance equipment, conveyors, cranes & hoists, labels and labeling devices, pallets & palletisers and third party logistics (3PL).

“Recent economic trends and the performance of the Indian manufacturing sector have a lion’s share in changing the dynamics of the material handling systems market. The ever-developing Indian economy holds enormous potential for the market owing to high economic growth rates and the burgeoning industrial products and consumer goods sectors,” says Sudhanva Jategaonkar, Associate VP – B2B Publishing, Infomedia18.

MYRIAD CHOICES The availability of new and innovative MHEs at one single platform will enable the user industry in getting proper exposure to the latest in technologies and innovations. One can also explore a plethora of companies exhibiting cutting-

edge equipment and systems solutions at the show.

“At the HiTech Material Handling Show, one can witness an array of displays of the latest solutions and innovations that the industry has to offer and also meet leading providers of these solutions face-to-face. This will help in streamlining industrial operations and improve visibility,” asserts Jategaonkar. From MHEs like forklift trucks and automated logistics systems to pioneering and cost-efficient solutions in racking, shelving, storage, transport and distribution, packaging, handling system design & warehousing, the event will exhibit the best of new-age material handling solutions.

“While applications are many, every industry vertical demands a unique set of equipment to store inventories and dispatch the final product. It is important to be aware of the options available. The most effective method to spread awareness of one’s business is by participating in exhibitions. For this, exhibitions like the HiTech Material Handling show can be an effective marketing medium to find new customers, improve business relationships with existing customers, introduce new products and services and deliver many other meaningful and tangible business outcomes,” avers Sandeep Khosla, CEO – Publishing, Infomedia18.

The HiTech Material Handling Show will be accompanied by exciting opportunities for networking, exchange of ideas and innovations. The show is indeed all set to shape up India’s futuristic aspirations in achieving the numero uno status in the global material handling industry.

SHIBANI GHARAT

Mumbai | 17-19 Feb, 2011

INSPIRING SEAMLESSINSPIRING SEAMLESSMATERIAL HANDLINGMATERIAL HANDLINGThe material handling equipment industry in India has come of age, with numerous developments and innovations happening in the recent years. Riding high on the post recession demands from the manufacturing industry, there is an urgent need to bring all the entities of this industry on one platform. One such platform is HiTech Material Handling Show that will serve as a catalyst in changing the dynamics of the Indian MHE industry.


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enquiries to the advertisers directly to help you source better

COC = Cover-on-Cover, FIC = Front Inside Cover, BIC = Back Inside Cover, BC = Back Cover

Brooks self-adhesive tamper evident ..............................................................55

Cargo trackers ...............................................................................................................55

Containerised transportation ........................................... Front inside cover

Custom clearance .......................................................................................................31

EngineeringExpo exhibition ..................................................................................... 4

Everest pre-engineered steel buildings ........................Back inside cover

Exhibitions .........................................................................................................4, 44, 45

Forklift spares ..............................................................................................Back cover

Freight forwarding .......................................................................................................31

High security seals ......................................................................................................55

HiTech Manufacturing Show .......................................................................44, 45

India Maritime Technology Conference-2011 ...........................................49

ODC transportation ..................................................................................................31

Pallets ..................................................................................................................................17

Personnel trackers ......................................................................................................55

Project transportation ...............................................................................................31

Secure cargo tight inside the container ........................................................55

Security solutions .........................................................................................................55

Self adhesive tapes .....................................................................................................21

Smart Logistics Leadership Series .....................................................................25

Storage systems .............................................................................................................. 3

Vehicle trackers ............................................................................................................55

Ventilators ........................................................................................................................21

Ware housing ....................................................................Front inside cover, 31

Watchlocks ......................................................................................................................55

Products Pg No Products Pg No

Our consistent advertisers

Pg No Advertiser Tel. No. E-Mail Website

3 AACORD +91-20-24265926 [email protected] www.aacordindia.com

4 Engineering Expo +91-9920401226 [email protected] www.engg-expo.com

BIC Everest Industries Ltd. +91-11-41731952 [email protected] www.everestind.com

44-45 HiTech Manufacturing Show +91-9820373804 [email protected]

49 India Maritime Technology Conference 2011 – – –

55 Instrumentation & Control Systems India +91-33-26949026 [email protected] www.icscomm.co.in

31 MFC Transport Pvt Ltd. +91-22-40341406 [email protected] www.mfctransport.com

7 Nina Concrete Systems Pvt Ltd. +91-22-67166000 [email protected] www.ninaindia.com

17 Sintex Industries Ltd. +91-2764-253500 [email protected] www.sintex-plastics.com

25 Smart Logistics Leadership Series +91-22-30034650 [email protected]

21 Sreelakshmi Traders +91-44-24343343 [email protected] www.sreelakshmitraders.com

FIC Vijay Logistics Pvt Ltd. +91-2135-675000 [email protected] www.vijaylogistics.com

BC Watrana Traction Company +91-11-27456600 [email protected] www.forkliftspares.com

First Fold Here

Second Fold Here

Third Fold HereGLUE

First Fold Here

Second Fold Here

Use this form for free additional Information on advertisements published in this issue. We will send your inquiries to the advertisers and ask them to send you the details or contact you directly.

HOW TO USE THIS FORM: • Please tick against the box of advertiser(s) you are interested in: • Mention specific product/

service you need, against the advertiser’s name • Complete all the details on this form. • Tear the form & mail it to us. (It is a prepaid mail)

Tel.: +91-22-3003 4640 • Fax: +91-22-3003 4499

E-mail: [email protected]

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PRODUCT INQUIRY FORM

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AACORD

Engineering Expo

Everest Industries Ltd.

HiTech Manufacturing Show

India Maritime Technology

Conference 2011

Instrumentation & Control Systems India

MFC Transport Pvt Ltd.

Nina Concrete Systems Pvt Ltd.

Sintex Industries Ltd.

Smart Logistics Leadership Series

Sreelakshmi Traders

Vijay Logistics Pvt Ltd.

Watrana Traction Company

ADVERTISERS’ INQUIRY FORM

Brooks self-adhesive tamper evident

Cargo trackers

Containerised transportation

Custom clearance

Engineering Expo exhibition

Everest pre-engineered steel buildings

Exhibitions

Forklift spares

Freight forwarding

High security seals

HiTech Manufacturing Show

India Maritime TechnologyConference-2011

ODC transportation

Pallets

Personnel trackers

Project transportation

Secure cargo tight inside the container

Security solutions

Self adhesive tapes

Smart Logistics Leadership Series

Storage systems

Vehicle trackers

Ventilators

Ware housing

Watchlocks

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Please complete the following & get a quick effective response from suppliers: 1. Your company’s business function is (✔one only)

� Wholesalers � Manufacturer � Distributor � Agent � Other, please specify ______________

2. Your role in your company’s buying process can best be described as:

� I buy � I identify potential suppliers � I approve purchases� I negotiate contracts � I select suppliers.

3. Your line of business

4. Specific product requirement

Name: Designation:

Company Name:

Address:

City: Pin:

Tel: Fax:

Email:

01 /

2011

Business Reply InlandBR Permit No. 555

Bhavani Shankar Post Office,Mumbai 400 028.

POSTAGEWILL BEPAID BY

ADDRESSEE

NO POSTAGESTAMP

NECESSARYIF POSTED

IN INDIA

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Smart Logistics - January 2011