DEBATE8 CARGOTALK D E C E M B E R 2 0 1 4

In search of a sustainable SCM

CT BUREAU

It is prima facie that Supply Chain management (SCM) is simply moving a product or service from supplier tocustomer. However with the booming technology, supply has an important role to play in the efficient logisticssystem. In this issue, CARGOTALK focused on the challenges that hinder the smooth transportation.

Mansingh Jaswal, Director & CEO, Genex Logistics Today’s supply chain needs to deal with continuous volatility

and that does not mean risk only but also opportunity when a competitor is not being able to deliver the same. In this process of evolution, the pace of change has increased manifold and technology has been at the helm of affairs, either to create the paceor manage it. Shippers are under continuous pressure to reducesupply chain costs as part of larger organisational goals.

Largely the cost reduction has to come from two sources, either from simple incremental improvement in the ongoing process or from businessremodelling itself.

Most of the activities of an end-to-end supply chain happen outside the four walls of a warehouseand companies are largely looking at wireless solutions.

However, the fact that the pace of change in technology is almost catching up with the expectationsof the end consumer or the development in technology is raising the expectations of consumers. A lotof integration and automation upgrades still need to happen among shippers and 3PL providers toincorporate the emerging technology. E-commerce is a typical example of the role of logistics in busi-ness model creation. This is also an example of how technologies are deployed to bridge the gapbetween customer expectations and delivery. It does not end here, rather this has raised the expectationsof consumers, resulting in the ongoing spiral that technology is creating.

SA Mohan, CEO, Maini Materials MovementThe supply chain in India is largely inefficient,

causing huge losses and stock-outs appertaining tothe presence of intermediaries, infrastructural inade-quacy and complicated legislation. 13 per cent ofIndia’s GDP is spent on logistics, which is an alarmingfact. Proliferation of challenges in areas of reverselogistics, environmental sustainability, informationtechnology and overall supply chain integration arefurther evolving the strategic roles and responsibilitiesof warehousing and material handling solutions in thegrowing field of intralogistics.

Amalgamating new technology to increase efficiency of information exchangedwhether through automation, Warehouse Management System (WMS), lean designsand vertical expansion, for example, high rise warehousing and distribution centresis not a nascent concept anymore. Today, it is observed to be a prerequisite for gainingcompetitive advantage and can help significantly increase customer service andreduce costs.

The challenge for supply chain professionals lies in managingnot only long-term growth but also in being equally responsive toshort-term volatility, due to ever increasing consumer segments,greater number of products and emergence of new channels.

Statistical capabilities, enhanced by technology, will enable us to take a leap towardssmart supply chains and foster innovation adoption.

Vikas Anand, Managing Director, DHL Supply ChainIndia

IT is now perceived as a key enabler for all logistics offeringswith companies relying heavily on IT automated solutions to ensuresmooth logistics operations, which revolve mainly around WMS,TMS, EDI integration and visibility tools. India is a market with enor-mous growth potential for 3PL activity for those who can bring invalue-for-money services of modern standards. While it is true thatthis industry is still in its nascent stage in India, things have pickedup very rapidly in the recent past with more and more manufacturersrealising the need for credible and experienced 3PL providers.

Our infrastructure needs to be developed and while India isincreasing outlays on roads and ports along with more tangible economic reforms, these infrastructuredevelopment projects have a long gestation period. We welcome the change and infrastructureupgrades that are taking place as these will benefit and facilitate our services to our clients.

In India, logistics costs are very high compared to international standards owing to its underde-veloped infrastructure. Steps are being taken to improve the infrastructure, but the pace seems slowerthan the economic growth. Acceleration of road network improvement and expansion would meanhuge savings on fuel, greener environment, enhanced safety and better turnaround time for customers.

Jitender Panjwani , Head – Supply Chain, IndiaOperations, Micromax

There is a need to develop infrastructure to improve theSupply Chain Management function and a better reach to desired destinations.

Roads are congested and of poor quality: Lane capacity islow; national highways are two lanes or less and a quarter of allIndia's highways are congested. Many roads are of poor qualityand maintenance remains underfunded. More or less one-third ofmaintenance needs are met and this leads to the deterioration ofroads and high transport costs for users.

Railways are facing severe capacity constraints: All the country’s high-density rail corridors facesevere capacity constraints. Freight transportation costs by rail are much higher than in most countriesas freight tariffs in India have been kept high to subsidise passenger traffic.

There has to be an immediate focus on trade lanes; on road connections and where road trans-portation is taking place. An immediate improvement in current infrastructure is required with safetyand security for goods. Special cargo trains and unique material handling hubs with special featuresto cater volumes with minimal mishandling is the need of the hour for effective and responsive supplychain. Major improvements, such as good physical connectivity in the sector, are required to witnessa rise in demand.

� Technology is driving business and efficiency but there is a needto look at cost also

� Technology development puts the older organisations under tremen-dous pressure

� The e-commerce industry created the need for complex and sophis-ticated order fulfillment processes

� Complex tax structure could be one of the reasons for the lack ofeconomical options in warehouse and logistics� Innovation towards vertical specific solutions will be the key dif-ferentiator and business initiators

� Automation drive at customs, airports and ports in coming yearswill drive trade to adopt newer ways to do business� The challenge for professionals lies in managing not only long-term growth, but also in being equally responsive to short-term volatility

� Need better roads and quick pass-through of trucks at state borders

� There is a close correlation of technology and efficiency but necessities for performance and efficiency cannot be ignored� Adopt technology in a way to reduce operating costs and increasingproductivity

High l igh t s:

Prashant Bopardikar, Chief – Projects & Design, Future Supply ChainThe world is changing today, especially India where, with the advent of e-commerce,

efficiencies and ‘customer first focus’ supply chain isunder continuous pressure to deliver what it commits.Today the supply chain has an important role to play toimprove the firm’s profitability by reducing cost and timeto market. Supply chain definitions have to change. It hasto be more flexible, agile and customer centric. This is toensure the final consumer gets what he or she hasdemanded on time and in full.

Being able to identify and respond to events in timecan be the difference between staying ahead of compe-tition or falling behind. Therefore, companies are lookingfor better ways to control the end-to-end supply chain.Current supply chain is continuously evolving and adapt-ing to changing needs that are driven by customer demand and preferences. Certainly thereare roadblocks which need to be addressed and worked upon

• We need better roads, quick pass-through of the trucks at state bor-ders, which means documentation has to be less extensive and quick.With the new government prioritising the GST roll out in the nearfuture, it seems to be a reality

• Use EDI to link all the legs in the supply chain for visibility across allstakeholders. With proliferation of e-commerce, this aspect is improv-ing but it needs speed

• Invest in technology and automation as a long term strategic invest-ment

• Multimodal infrastructure is not completely evolved; a greater focusis needed on this in terms of developing infrastructure through logisticparks, which provide flexibility to customer to use road, rail, air andsea effectively.

DEBATE D E C E M B E R 2 0 1 4 CARGOTALK 9Devdip Purkayastha, President, CHEP India

A recent report from a leading international consultant titled ‘Building India:Transforming the nation’s logistics infrastructure’ mentions that around $45 billionis lost each year due to the inefficiencies in India’s logistics network. One of theparameters contributing to this huge loss of efficiency is non-standards in the entiresupply chain. This leads us to a debate on how to make our supply chains smarter.There are multiple dimensions on how this can be achieved, including adoptingtechnology, robotics, robust processes, adhering to standards, developing internalinfrastructure and most importantly skillful management.

For warehouses to be deemed ‘Smart’, it should enable the movement ofgoods by ‘the least touch method’. One key component is how material is handledsmarter at the warehouses. While most consultants and experts will talk about adopting hi-techand high-cost automation opportunities, it is really about getting the basics right.

Today, in India bottlenecks are created as goods move through the supply chain. It is important that this flow is seamless as goods move from supplierto manufacturer to 3PL to retail. Warehousing is one of the key pieces of thisjigsaw puzzle.

Technology definitely helps but the question is at what cost. Technology thatmay work in a developed market, where labour is scarce and hence expensive,may not make good business sense in India. Again it comes to basics, we have our racking systems, material handling equipment, docks and handling plat-forms such as pallets optimised to enable high throughput. Are there standards that enable ‘least touch’ in the warehouse? Does our warehousing support collaboration internally within our own supply chain or externally acrosssuppliers as well as customers’ supply chains? Are the warehouses compatible?

Many supply chain managers are adopting these basics and technologies that can reduce operating costs and increase productivity.

Shesh Kulkarni, President & CEO, UFMITechnology is a necessity these days; it is increasingly get-

ting imperative that the logistics industry at large, embraces tech-nology wholeheartedly. Organisations which fail to do so will beleft behind in the coming years.

With the growing demand of consumers and increasing useof e-commerce, the ease of transacting business for consumersand retail companies has become very easy. All this is enabledby an efficient technology platform. ‘Billion Sale’ by Flipkart is aclassic example of how technology is driving business and effi-ciency. But the question remains, is industry ready to supportthis. Many companies are building their own infrastructure for

on-time delivery of goods, and, the primary reason is cost.

The model of e-commerce business and its ability to make money is still not clear to many.Therefore, the logistics industry today is not ready to support e-commerce business, barring aselect few who have heavy assets and are leveraging this. For larger logistics industry to seebenefit, and for them to experience gain from growth, it is still a challenge to bring their cost ofoperations down.

The automation drive at customs, airport and ports in the coming years is going to be veryinteresting, and it will drive trade to adopt newer ways to do business. Future seems promising!

Suunil Dabral, Country Head, Schaefer SystemsInternational

Changing trends in customer’s needs and purchasing powercalls for ‘Just in Time’ and quick response inventory management,in order to meet the demand supply mismatch. In most of the sup-ply chains such as e-commerce and the fashion industry, distribu-tion channels from conventional retail and home deliveries, trans-porting individual orders directly to local stores or other pickuppoints are becoming more varied and complex. The increasingtrends in the e-commerce industry are creating the need for com-plex and sophisticated order fulfilment processes. Managementof these processes requires software and automated technologieswith the increase in number of orders.

In order to meet these uncertain future requirements and also to minimise distribution costs ,an efficient supply chain has an important role to play. Complex tax structure could be one of the rea-sons why manufacturers and distributors implement the most economical options in warehouse andlogistics, ignoring quality and efficiency. At present, companies handling manufacturing and distributiondesign their supply chains to reduce operational cost instead of value creation.

Subhasish Ghosh, Director – Information Technology,Schenker India

Technology is an important enabler for the efficiency of supplychain and complements it in the on-ground implementation. We seethat cost and time factors can be made more favourable by usingstate-of-the-art technology for the supply chain which would bringin more efficiency and saving for customers. Modern day supplychain runs on technology and the dependency is increasing con-tinuously. Companies are investing a fair amount of resources inupgrading the technology to increase their efficiency. On the otherhand, customers are more demanding than ever and as a serviceprovider we are committed to fulfilling their expectations.

In today’s world, we have access to technology however the implementation is very subjectiveas per the requirement of our customers and local market. In the Indian context, both are going handin hand as far as internal or controllable factors are concerned; for others we have to be largely depend-ent on other external factors like market, infrastructure and policies. So there is a close correlation oftechnology and efficiency but necessities for performance and efficiency cannot be ignored. Innovationtowards vertical specific solution will be the key differentiator and business initiator.

Akash Bansal, Head – Logistics, Om LogisticsTo survive on the long and bumpy ride through the

recent recession, many retail logistics executives focussedon cost reduction. However, this necessary objective droveimportant changes in the supply chain strategy, from net-work right-sizing to innovative warehouse automation andenergy-efficiency tactics. Now that the economy isrebounding, and rising costs are on the horizon, every sup-ply chain strategy must address this new reality. Anincreased focus on channelising strategies and the needfor faster delivery of more goods to more places couldcause some pain. It is high time for industries to reassess their supply chain.

One concern that always awakes the supply chain professionals is transportation costs.Trucks are responsible for transporting more than 80 per cent of consumer goods but witheconomic recovery, looming driver shortage and new federal regulations are expected to limitcapacity and trucking costs are on the rise. This declining supply could leave supply chainsin the tilt when they need capacity the most.

Next and same-day delivery is on the fast track to becoming table stakes for retailers.To achieve these tight delivery times without asking customers to foot the bill, one shouldexpand the distribution network to incorporate regional distribution centres in strategic markets.

Location decisions based on manufacturing costs alone could ultimately cost more. As markets change and customer bases shift, the cost of transporting products to consumerscould outweigh the value of lower manufacturing costs. To counter this, we should adopt region based manufacturing strategies. Making or sourcing products in the same region where they are consumed can reduce transport times, complexity and risk, and ultimatelyincrease efficiency.