Post on 04-Dec-2015
description
Indian Automotive Sector – Supply Chain
Challenges & Opportunities
By
Mr. Subir Shah
Senior Consultant, Transportation & Logistics Practice
8th December, 2011
Agenda
Indian Automotive Supply Chain: Current Scenario
Key Opportunities for Improvements
Indian
Automotive
Industry’s Supply
Chains
Challenges &
Opportunities
27.6
48.6
39.1
64.4
0
20
40
60
80
100
120
2010 2015
Auto Components Automobiles
High growth, increasingly competitive sector will put tremendous pressure on Infrastructure by 2015
Ind
ustr
y T
urn
ove
r
($ B
illi
on
)
Total Turnover CAGR (2010-2015) = 11.1%
Product Segment-wise Contribution to Turnover of Automotive Industry, 2010-2015
41.4%
58.6%
43.0%
57.0% 100% = 66.7
100% = 113.0
Share of Auto Components in Overall Industry Turnover is Likely to Increase in the coming years due to
steady rise in sourcing of components from India by Global Automotive Majors
Source: Frost & Sullivan
Supply Chain Flow – Indian Automotive Industry
MANUFACTURING
PLANT
CENTRAL
WAREHOUSE
STATE / REGIONAL
WAREHOUSE
DOMESTIC
DISTRIBUTORS
DOMESTIC
RETAILERS
(Aftermarket)
SUPPLIER
(Sub Assembled
Components)
DOMESTIC
AUTOMOBILE
MANUFACTURERS
FOREIGN
CONSUMERS
(Aftermarket)
CLEARING &
FORWARDING
AGENTS
FOREIGN
DISTRIBUTORS
FOREIGN
AUTOMOBILE
MANUFACTURERS
SUPPLIER
(Raw Materials)
DOMESTIC
CONSUMERS
(Aftermarket)
Need for Efficient Transportation
(Road & Rail)
Need for Robust Port
Infrastructure
Need for GST
Source: Frost & Sullivan
Hyderabad
Chennai
Nagpur
Delhi
Jaipur
Kolkata
Lucknow
Bengaluru
Bhopal
Aurangabad
Kochi
Thiruvananthapuram
Mangalore
Mysore
Coimbatore
Madurai
Ahmedabad
Surat
Vishakhapatnam
Chandigarh
Shimla
Srinagar
Haridwar
Ranchi
Raipur
Patna
Jaisalmer
Bhubaneshwar
Darjeeling Dispur
Gandhinagar
Amritsar
Goa Vijayawada
Gulbarga
Tirupati
Mumbai
Pune
Expected Future Hubs
after GST
Implementation
Current State-level
Distribution Centers
Expected Major
Regional Zones after
GST
With some key game changers getting delayed, there is a need to infuse efficiency into the Supply Chain
The much-awaited DFC The even more-awaited GST
Source: Frost & Sullivan
Bottlenecks in the Infrastructure is a major reason for inefficiencies in Supply Chain
Key Challenges Faced by Users of Logistics Services in the Indian Automotive Industry
Share of End-user Responses Stating the Challenge as Important (%)
70%
63%
50%
43%
43%
35%
78%
76%
75%
0% 20% 40% 60% 80% 100%
Safety of goods during transit and warehousing
Skill and expertise level of labour handling logistics needs
Inability of Service Provider to provide complete multi modal transportation
solution
Slack delivery period and inefficiency of logistics service providers in
adhereing to timelines
Cost of outsourced logistics is high
Logistics service providers are unable to keep up with the evolving volumes
& technical requirements
Lack of sufficient warehousing capacity is a cause of concern
There is a need for integrated supply chain systems, but lack of funds is a
major challenge
Risk of information leak to competitors within the same industry
There is a need to manufacture ways to improve timelines and efficiencies despite the infrastructure
issues
Source: Frost & Sullivan
Agenda
Indian Automotive Supply Chain: Current Scenario
Key Opportunities for Improvements
Indian
Automotive
Industry’s Supply
Chains
Challenges &
Opportunities
1. Collaboration amongst End users
2. Collaboration amongst End users and LSPs
Key Opportunities for Improvements
Don’t waste time on Infrastructure
bashing…You’d rather Collaborate !!
Majority of the automotive industry participants believe that LSPs should initiate the collaboration in logistics activities, but the contracts given to LSPs are mainly for 1 year
End-user Opinion on Initiation for Collaboration (India),
2011
Source: Frost & Sullivan
LSPs
should
Initiate, 65%
Automobile
Industry
should
Initiate, 35%
Typical Contract Period with Logistics
Service Provider (India), 2011
Share of Total Responses (%)
20%
15%
3%
63%
0% 20% 40% 60% 80% 100%
1 year
2 years
3 years
5 years
Some of the key benefits from Collaboration that have been identified through our research
Source: Frost & Sullivan
End User’s Perspective
• Influencing supplier’s quality
• Secure reliable sources
• Competitive per unit or per head price of purchased item or service
• Improve delivery schedules
• Access to supplier’s new technology
• Reduce internal procurement procedures and costs
• Support JIT initiatives
• Reduce administration procedures and costs (for example, ordering and invoicing)
LSP Perspective
• Secure buyer for product
• Influence customer’s quality
• Support customer’s JIT initiatives
• Improve forecasts of requirements
• Reduce ongoing administration
• Reduce internal sales procedures and costs
• Price improvement
• Influence/gain access to customer’s new technology
Function / Segment Share of End-users Collaborating
Own Initiative or
from LSP Side
a) Transportation
In Domestic Long Haul Transportation 58% LSP
In Domestic Short Haul Transportation 38% LSP
In Domestic LCL Consignments Transportation 13% Own
In International Air Cargo Transportation 28% LSP
In International Ocean Cargo Transportation 28% LSP
b) Warehousing
In National / Central Warehouses 10% LSP
In Regional Warehouses 10% LSP
c) Value Added Logistics Activities
In Packing 10% LSP
In Labeling 10% LSP
In Quality Check 8% Own
In Order Management/Processing 3% LSP
In Customer Service or Support 3% Own
In Vendor Management 3% LSP
In Return Goods Management 3% LSP
In Invoicing and Payment Management 3% LSP
Value Added Logistics is where the true potential lies for Maximizing profits for the industry
Functions where Collaborations with Competitors is Prevalent (India), 2010
Source: Frost & Sullivan
Top 3 expectations of OEMs as well as Component Manufacturers suggest a more Collaborative Engagement with an LSP
Expected Value Added Logistics Services from LSPs
Share of End-user Responses Stating they Need the Service (%)
Source: Frost & Sullivan
57%
29%
35%
10%
18%
12%
43%
51%
71%
0% 20% 40% 60% 80% 100%
Education on GST System and Processes
Support in Process Efficiency Improvement
Support in Process Change/ Modification
Support in Infrastructure Development
New Services due to Post GST Status
Support in Information Systems Integration
Customer Support
Vendor Management
Information Management
Multi-user Yards are the way forward for the industry
OEM (North)
OEM (West)
OEM (South)
Multi-User Yard (West)
Developed AND OR Managed by
LSP
Component Manufacturer
OEM Dealer “A”
Pune
OEM Dealer “B”
Mumbai
OEM Dealer “C”
Nasik
Storage of Finished Vehicles as well as Spares of multiple manufacturers in Multi User Yards
for deliveries on as required basis to dealers in the region
Source: Frost & Sullivan
Primary
Transportation
Secondary
Transportation
WH / Depot
Mgmt.
WH Design
WH & Secondary
Inbound – JIT
Hubbing
Cycle count
Designing
inventory policy
Order processing
Demand Mgmt.
Documentation&
MIS
Kitting
Repacking
Labeling
Inspection &
Quality check
Sales tax & Excise
registration &
Return filing
Banking
transaction
4 PL / Consulting
Logistics audit
Logistics process
design
Logistics
Performance
improvement
projects
Integrated
Logistics services
Transportation Related
Warehouse
Related
Inventory Management
Value Added Services – Physical
& Financial
Solution Development /
Consulting
Collaborative Logistics – Moving up the Value Chain
Source: Frost & Sullivan