LOG.India July 2010

July 2010 Vol. 3 - No.10 Rs 100 Germany Bulgaria Middle Eastw

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FUEL SUPPLY 46Exploring oil-and-gas upstream and midstream supply-chain biz

BACKING UP 32How reverse supply chain can make or break a company’s position in the market

VITAMIN M 26Few realize the role maintenance plays in transporters’ profit margins

The HyperCity supply-chain team led by Lt Col. Vijay Nair (Retd) is putting up an inspired show >>

Page 34

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5INDIA| July 2010 | www.logisticsweek.com

Not very long ago, I heard of a smart trick some small Mumbai traders use to test new vendors or suppliers – to see if these guys can be trusted for long-term partnerships.

This is how it goes: while making cash payments (which usually is the case, given that these are small-time traders) to new vendors, these guys on several occasions would slip in one extra note into the bundle and see if the vendor points it out. For example, if a trader is paying a thousand bucks, he’d hand over eleven Rs 100 notes and ask the vendor to count the notes. If, on any occasion, the vendor quietly slips the notes into his pocket without pointing out the mistake, that’d be the last time he would be doing any business with this trader. It would mean the vendor is either careless with money or a cheat – and is a bad partner in either case.

This is simple, yet effective. Since these traders are doing business in an unorganized environment, where there are limited ways of checking vendor credentials, they devise innovative ways based on basic rules of human behavior.

Even in the organized world, where we have tools and processes to make things reliable and smooth, it is such innovative ways, based on nuances of human behavior, that often save the day. This is the trump card up every great manager’s sleeve.

Last month, we met Lieutenant Colonel Vijay Nair (Retd), who manages the supply chain of the Mumbai-headquartered, fast-expanding HyperCITY India retail chain.

Now when you step out to work in the morning to a place with ‘hyper’ in the name, you know you are in for a busy day. On a serious note, my understanding is that the ‘Hyper’ in the name refers to the ‘Hypermarket’ model, a concept that combines the you-name-it-you-find-it indulgence of a superstore with the homeliness of a department store – which is what the HyperCITY stores are about.

Be that as it may, the task of managing the supply-chain of HyperCITY is not for the weak of heart. To give you an idea, the central DC in Vadape, Maharashtra, handles 1 lakh units every day. Overall, the supply-chain team is handling 66,000 SKUs (Stock-Keeping Units) at any given point of time, servicing 800,000 sq ft of retail space. And the team comprises only about 130 employees (Col. Nair calls them ‘boys’, in true Army fashion). The best part is, this team clocks performance scores that can rival the best in the world. I kid you not. (In fact, the shelf fill rate is so good that the modest Colonel has forbidden us from bandying it about, lest it sounds self-congratulatory. You can find the number hidden somewhere in the cover story.) The other scores are as impressive.

Now how does HyperCITY’s supply chain manage to put up such a splendid show? By and large it’s the planning, execution and the brilliant use of technology. But what provides the edge, I believe, are the innovative ways of managing human relationships across the supply chain. Let me quickly illustrate this point with a few examples.

Maintaining a proper lead time for delivery of products is the biggest challenge for supply-chain managers all over the world, said a recent Aberdeen Group report. Col. Nair is not losing sleep over it anymore. This year he started an exercise in which he selects 15 vendors on the basis of business size and makes it a point to personally meet each one of them. “We are just trying to build a relationship with them,” he says.

Another example is about how Col. Nair has significantly reduced counting errors at the DC. He trains his boys – most of whom have studied till high school – to jot the numbers on the pick-list in English, but encourages them to count in Marathi, their mother tongue. Result: Near-zero counting errors. Simple, yet effective, isn’t it?

The third example is more illustrative of his understanding of bureaucratic behavior. HyperCITY must be one of the few retail companies to be paying octroi online. The result: Huge savings in costs and time, and better utilization rates. How was this accomplished? But you must read this and the rest of the incredible things the HyperCITY supply-chain team is doing in our fascinating cover story. Do give me your feedback on [email protected]

Human, After All

Aanand Pandey

Aanand PandeyEditor

Contents

Cover StoryForward MarchHyperCity India’s supply-chain team, led by Lieutenant Colonel Vijay Nair (Retd), works with a precision and a level of sophistication that would surprise many.

IntervIewIndia as Asia Hub for Auto LogisticsTVS Logistics Services Managing Director R Dinesh is chairing the CII Institute of Logistics’ Auto SCM 2010 event to be held at Le Royal Méridien, Chennai, on July 14 and 15.

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Column3PL CommandmentsHave an urge to fire your warehousing 3PL? You could have saved yourself the trouble if you’d followed this checklist of things to do when choosing the 3PL.

GueSt ColumnHow About Middle Infrastructure?For the country to continue its growth trajectory the development of logistics infrastructure is required.

INDIA| July 2010 | www.logisticsweek.com6

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26 GueSt ColumnAdvantage MAre you losing sleep over your trucks fetching poor margins? Is your transportation provider giving you the jeepers with increasing costs or frequent outages?

32 GueSt Columnthe Big BackstoryThe reverse-logistics capability of a company can make or mar its brand image.

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INDIA| July 2010 | www.logisticsweek.com 7

July 2010

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reGulArSevents 66

JULY 2010

FeAturenot for the MeekThe logistics of oil and gas exploration and production (E&P) is both challenging and rewarding. Then why there are so few players in the field?

ADVeRtIseR InDeXArham Logiparc ..................................................... 9

Auto SCM 2010 ................................................... 30

Barcode India .......................................................15

BLR Logistics ...................................................... 49

Capricorn Logistics ............................................. 43

CeMAT India ........................................................ 63

DHL Express ....................................................... IFC

Dighe Port ............................................................17

Drive India Enterprise Soultions .......................... IBC

Emirates Skycargo .............................................. BC

Energizing the Financial Supply Chain ................. 57

Everest Industries .................................................. 3

Exide Industrial.....................................................11

Godrej Security Solutions .................................... 29

Green Earth Translogistics .................................. 23

Hormann ............................................................. 31

Indelox Services ...................................................13

Institute of Supply Chain Management ................ 53

Round the Clock Logistics ................................... 59

Safexpress .......................................................... 37

Uniworld Logisitcs ................................................19

Vijay Logistics ....................................................... 4

VRL Logistics ...................................................... 21

June 2010 Vol. 3 - No.09 Rs 100Germany Bulgaria Middle East

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INDIA

BUILDING BRIDGES 46The Yemen-Djibouti bridge can alter the global logistics map

AT BAY 38The $2-bn Indian seafood industry has not enough meat for big LSPs

NOW, 7PL 22The YCH Group CEO talks about the legacy with Dell, the concept of 7PL and the India strategy

Vijay Kalantri, the CMD of BIPL and Dighi Port Ltd, Maha’s fi rst non-major port, sets the greenfi eld port rolling >>

Page 30

Port of Entrée

June 2010

PAnorAmABooks, Blogs and JournalsA section that will capture books, blogs and journals that talk about the supply chain industry and logistics.

BACK to BASICSIn this section, we revisit some basic concepts – everyday logistics and supply-chain terms that need a brush up (or an update) every now and then.

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INDIA| July 2010 | www.logisticsweek.com

Hat-trick for Apple in AMR Supply Chain Top 25

A t the time iPhone 4 is breaking sales records around the world, Ap-

ple’s supply chain team is hav-ing a fi eld day of its own. AMR Research, a leading research and advisory fi rm serving sup-ply chain management (SCM) and IT professionals – now a part of Gartner Inc (since De-cember 2009) – released its sixth annual supply chain report on June 2. And guess what, Apple has managed to retain its posi-tion at the fi rst spot for the third consecutive year, owing to, ac-cording to the report, “stellar fi nancials and strong votes.”

The FMCG giant Proctor and Gamble, the only company to have fi gured in the top 5 for six

consecutive years, came in at the second position, followed by Cisco, Wal-Mart and Dell, in that order (see box).

This time, fi ve companies appeared in the Top 25 for the fi rst time – the Blackberry mak-er Research in Motion (RIM), Amazon.com, McDonald’s, Mi-crosoft, and Inditex, a Spanish Fashion retail chain with stores in 76 countries.

The FMCG behemoth, Unilever, stages a comeback into Top 25 at the 21st posi-tion, in good part owing to its successful access to fast-growing markets such as In-dia and Africa.

AMR has attributed Ap-ple’s glowing performance on supply-chain metrics to the latter’s ability to transform its supply-chain into a value chain “starting with the con-sumer experience and design-

Dubai World Central, Aban Air, ACI, Aerospace Consortium, Aviation Service Management, Coyne Airways, EuroAsian Services, Gatewick, Ramjet, Reem Style, Rial Aviation, Rus Aviation, Sonic Jet, SunGlobal, Skyline and United Aviation Services .........12

DHL, Apeejay, Eredene, Jindals, Tatas, Visa Group ........14

CCCL, AAI, Sical, Nagarjuna, PSA Intl, Mitsui OSK, Casby, Geometra, VRL Logistics, Infolog ....................................16

Essar Shipping, .......................20

opeRaTIVe InDeX*

*Key entities mentioned in the news section

cisco, wal-mart and proctor & gamble shine as ever, research in motion and microsoft blast their way in amr 2010 top 25 list

I believe that organised retailing in India is poised to take off to the

next orbit of growth... Over the next five years, I can realistically foresee this business growing ten-fold.

— mukesh ambani chairman & managing

directorreliance industries,

addressing the company’s AGM in Mumbai last month

TRAIN OF THOUGHT

Any port in any state has to develop a rapport with the state government and convince the people of the state that the expansion and infrastructure projects would benefit people.

— digambar Kamat, goa chief minister

on the tussle between the state government and the Mormugao Port

Trust (MPT) over the latter’s development projects

There is convergence in the need for pursuing developmental activity and building quality roads. But the hurdles in acquisition of land and the social problems associated with it also need to be taken into account.

— Kp rajendranKerala minister of

revenue at a seminar on ‘Proposed

reduction of width of national highways in Kerala’

The AMR Supply Chain Top 5 for 2010Apple

Proctor & Gamble

Cisco Systems

Wal-Mart Stores

Dell

return-on-asset [(2009 net income / 2009 total assets)*50%] + [(2008 net income / 2008 total assets)*30%] + [(2007 net income / 2007 total assets)*20%] inventory turns: 2009 cost of goods sold/2009 quarterly average inventory revenue growth: [(change in revenue 2009-08)*50%] + [(change in revenue 2008-07)*30%] + [(change in revenue 2007-06)*20%] composite score: (Peer Opinion 25%) + (AMR Opinion 25%) + (ROA 25%) + (Inventory Turns 15%) + (Revenue Growth10%)

Source: AMR Research

Ranking Parameters

10

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ing its network to serve that master (the consumer) f irst and foremost”.

Cisco’s consistent perform-ance on this list are owed to many areas of supply-chain in-novation where Cisco is con-sidered to be a fi rst-mover – supply-chain risk management, multilevel demand-planning ex-cellence and regionalized sup-ply network architecture. The main credit, however, according to AMR, goes to the Cisco lead-ership’s “championing of the term ‘value chain’ as an organi-zational construct” under which the IT giant has brought togeth-er sourcing, production, logis-tics, customer service, quality, and new product launches as hard-line report functions.

Wal-Mart this year climbed three spots to No. 4, as the re-port attributes its success to its cost-focused supply-chain inno-vations and the fact that the com-pany’s reputation among supply-chain peers “remains stellar”.

The report particular gives special mention to Wal-Mart’s work in India to improve the operations of thousands of up-stream suppliers (read farm-ers) which, even in a small way, contributes to the betterment of the local economy.

The software giant Micro-soft was a newcomer to the list since the AMR analysis has excluded software compa-nies traditionally – due to the lack of a physical supply chain – but Microsoft’s Xbox, pe-ripherals and shrink-wrapped software business have be-

come so big that they couldn’t be ignored anymore.

Another newcomer, Re-search in Motion – the Black-berry maker – ranked at No. 9 deserves special mention be-cause it blazed its way into the list with inventory turns and return-on asset (ROA) numbers that challenged the best in the list (see box).

narrowing it downThe Supply Chain Top 25 ranking comprised two main components: f inancial and opinion. The f inancial data available in the public do-main provided a peek into how companies have per-formed in the past, while the opinion component offered an idea of future potential and ref lected future leader-ship, an important character-istic. These two components, having the equal weightings of 50/50 are combined into a total composite score.

The fi nancial component comprised three fi nancial metrics: ROA, which provided a general proxy for overall op-erational effi ciency and pro-ductivity; inventory turns, that offered an indication of cost; and revenue growth i.e change in revenue from prior year, which, clearly refl ecting myri-ad market and organizational factors, offered some clues to innovation. RoA was weighted 25 percent, inventory turns 15 percent and revenue growth 10 percent.

The opinion component of the ranking, was made up of two components, each of which was equally weighted at 25 percent: an AMR/Gartner expert panel and a peer panel.

The goal of the peer panel was to draw on the extensive knowledge of the professionals that, as customers and/or sup-pliers, interact and have direct experience with the companies being ranked.

indian cos have entered into m&as worth $40 billion in h1 2010, best since h1 2007

the amr supply chain top 25 for 2010Rank Company Peer Opinion

154 Voters (25%)

AMR Opinion 27 Voters (25%)

3-Year Weighted ROA (25%)

Inventory Turns (15%)

3-Year Weight-ed Revenue Growth (10%)

Composite Score

1 Apple 2787 508 11.7% 60.7 21.7% 8.21

2 Proctor & Gamble 2416 567 9% 4.9 3.5% 5.91

3 Cisco Systems 1678 501 11.4% 11.8 4.2% 5.43

4 Wal-Mart Stores 2567 365 8.2% 8.7 4.3% 5.18

5 Dell 2049 273 7.1% 47.4 -5.4% 5.06

9 Research in Motion 299 89 23.7% 13.7 62.4% 4.49

10 Amazon.com 1369 215 7.1% 11.9 30.4% 4.13

11 McDonald’s 506 90 13.7% 134.6 1.1% 3.97

12 Microsoft 363 151 21.1% 12.2 6.9% 3.92

20 Tesco 846 150 5.4% 19.7 9.2% 2.78

21 Unilever 630 168 11.5% 5.4 0.3% 2.76

23 Inditex 84 95 16.2% 4.2 9.4% 2.72

24 Best Buy 1105 73 7.7% 5.8 11.2% 2.64

25 Schlumberger 427 104 13.5% 8.8 1% 2.63

Source: AMR Research

The report particular gives special mention to Wal-Mart’s work in India to improve the operations of thousands of upstream suppliers

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Stormy Skies?

Dubai World Central Al Mak-toum International Airport

is officially open. The airport, slated to be the world’s largest, welcomed its first flight land-ing on June 20, as part of a se-ries of operational tests. Emir-ates Flight EK9883, a Boeing 777 freighter operating Hong Kong-Dubai and piloted by Captain Ahmad Bin Huzaim and First Officer Na-bil Yousuf Ahmad Mohammad Rai Al Boom, touched down at 1650.

A week later, on June 27, charter and scheduled flights of-ficially began, with inaugural flights from by Rus Avia-tion, Skyline and Aerospace Consor-tium. Dubai Airports publishing a list of carriers expected to come on board in the coming few weeks that included Aban Air, ACI, Aerospace Consortium, Aviation Service Management, Coyne Air-ways, EuroAsian Services, Gate-wick, Ramjet, Reem Style, Rial Aviation, Rus Aviation, Sonic Jet, SunGlobal, Skyline and United Aviation Services.

The list was kept under wraps until the opening, which led to speculation that Dubai Airports was facing difficulties encouraging customers to move from Dubai International.

“The biggest challenge is the fact that we have one of the leading airports in the world right next door in Dubai International,” Anita Mehra, Vice President, Marketing and Corporate Communications for Dubai Airports, told LOG. “However, DWC has its own

unique selling points that air-lines find attractive. The facili-ties are new, the operating en-vironment is uncongested, it is located next to Dubai Logistics City and connected to the near-by Jebel Ali Port and JAFZA by a bonded road.”

While some carriers com-plained that Dubai Airports was putting pressure on them to move by making life more difficult at Dubai Internation-al, for example with additional

Dubai’s Al Maktoum International Airport is open for business, but a dark cloud hangs over the levels of customer demand for the new facility, explores Kathryn Semcow

fees and regulations, Dubai Airports only mentioned the positive incentives it offered to shift. “We have offered time-bound commercial incentives related to parking, fuel and handling charges to name a few to encourage our early adopters to start operations at the new

facility,” said Mehra.At the opening Sheikh

Ahmed Bin Saeed Al Maktoum, President of Dubai Civil Avia-tion Authority and Chairman of Dubai Airports, expressed Dubai’s commitment to DWC. “Phase one is the first step in a long infrastructure develop-ment project that over time will see our new airport trans-formed into the world’s largest global gateway and a multi-mo-dal logistics hub that plays an

increasingly integral role in the ongoing economic and social development of Dubai,” he said. “It is a proud day for Dubai and an auspicious occasion for the future of global aviation.”

Phase one of the airport will feature one A380 capable run-way, 64 remote stands, one cargo

terminal with annual capacity for 250,000 tonnes of cargo and a passenger terminal building designed to ac-commodate five million passengers per year.

“Although it is a long term project, the need for a second airport in the near to mid-term is clear,” added Paul Griffiths, CEO, Dubai Airports. “Dubai International currently has capacity for 2.5 million tonnes of cargo while volumes are expected increase 48 per cent to 3 million tonnes by 2015.”

Only time will tell whether Dubai World Central’s gamble that there is enough cargo and passenger demand to warrant two international airports in Dubai has paid off. Arguably lacking any major international brands in the airline industry to date, Al Maktoum Internation-al are sure to be burning up the phone lines in a quest to secure some big names, and big busi-ness. Until then, all eyes are sure to remain on the airport.

Picture of the new Emirates tower, which is connected to the new Newcastle-Dubai

longhaul flight

total retail sales in india could grow from $353 bn in 2010 to $543 bn by 2014

14

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Company news

DHL Invests to Grow Share of Service Logistics Mumbai

From final configuration to repairs and asset recovery,

DHL is focusing on growing its share of the €3 billion out-sourced Service Logistics mar-ket in Asia Pacific. DHL’s Sup-ply Chain division announced plans to invest €50 million ($61 million) over the next five years to grow its Technical Services offering, part of its overall Service Logistics solu-tion, and mapped out expan-sion plans for China, India, Japan and Singapore.

DHL has also set up its first technical services competency center in Malaysia.

According to the company’s

estimates, the market is grow-ing at about 25 percent per an-num. Of that, Service Logistics services, especially Technical Services and repairs, accounts

Apeejay to Set Up Logistics Parks in Bengal, Orissa together will spend rs 260 crore in phases; to come up on 120 acres of landKolkata

Apeejay Infralogistics Pvt Ltd, a joint venture be-

tween Apeejay Surrendra

Group and Eredene Capital Plc, UK, hopes to commis-sion the first phase of its two

integrated logistics parks at Haldia (West Bengal) and Ka-linganagar (Orissa) towards the end of this year.

The company has recently received the Commerce Minis-try’s approval for setting up an inland container depot (ICD) at Kalinganagar while the same for Haldia was received earlier. The Haldia integrated logistics park, estimated at Rs 200 crore in phases, would come up on over 90 acres while the one at Kalinganagar, costing Rs 60 crore, will span over 30 acres.

The Kalinganagar logistics park would cater to the re-quirements of the steel units

for up to 60 percent of the over-all spend.

Across the breadth of its Ex-press, Global Forwarding and Supply Chain locations, DHL

plans to custom build an end-to-end Service Logistics solu-tion, including Technical Serv-ices. DHL’s Service Logistics solution builds on a network of over 16 distribution centers and over 490 field stocking loca-tions in Asia Pacific.

For geographically expan-sive markets like China and India, the focus is on growing DHL’s Service Logistics foot-print. DHL operates from 400 sites in China and 470 locations in India. It expects to double the number and increase its Service Logistics footprint in China and India within the next three to five years.

railways registered about 9 pc growth in freight traffic in apr-may 2010

coming up in the area since it hosts big names in steel such as Jindals, the Tatas, and the Visa Group.

The Haldia outfit, on the other hand, would be bigger and more diversified because it would cater to a cross section of industry.

In the f irst phase, the Hal-dia outf it would be complete with an ICD, warehousing facilities, both covered and open, truck terminal and trade facilitation center and other facilities. Similar fa-cilities, though on a smaller scale, too were being created at Kalinganagar.

DHL has drawn up technical services offerings for Asia Pacific

The integrated park will have an ICD, warehouses, terminal and

facilitation center

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CCCL Bags Goa Airport Contract Chennai

The Airports Authority of India has awarded Consol-

idated Construction Consor-tium Ltd a Rs 200-crore air-port construction project in Goa. CCCL will build a 5 lakh sq ft terminal, with a capacity to handle over 8 lakh passen-gers annually, and a 1.6 lakh sq ft multi-level car park for the airport.

The award of the new in-tegrated terminal building at Civil Enclave, Goa, is the sev-enth repeat order from AAI. Contenders for the contract

were Nagarjuna Constructions, Era Constructions and IVRCL.

Incidentally, it is only last year that CCCL made the transition to an infrastruc-ture player from a construc-tion company. The company’s total order book is Rs 3,560 crore to be executed over the next 18 months.

In the infrastructure space, the company is also into power plant construction covering civil structures and moving fast into balance of plant, water and environment

and bridges. It is also getting into infrastructure develop-ment projects through its sub-sidiary CCCL Infrastructure Ltd which is setting up a food processing SEZ in Tuticorin, has emerged the lowest bidder for two automated multi-level car parking projects to be im-plemented on BOT basis. The two projects are to be set up for the New Delhi Municipal Corporation.

The company is also looking at road projects, and water and oil pipeline laying business.

PSA International, Singa-pore, a leading container

terminal operator, has bought out the 27 percent stake in Chennai International Termi-nals (CIT) from its joint venture partner, Sical Logistics, for an undisclosed sum.

For Sical, it was a strategic decision to divest stake in the terminal and concentrate more on handling bulk cargo. The company will use the sale pro-ceeds for the upcoming auto yard management project being done in association with Mitsui

OSK Lines at Ennore and other ongoing projects.

Chennai International Ter-minals is the second private

container terminal at the Chen-nai port. The planned terminal capacity is 1.50 million TEUs (20-foot equivalent units).

Casby Group of Companies has tied up with Geometra

International to offer its cus-tomers capabilities in the field of relocation (packers & mov-ers), logistics and warehous-ing. Geometra has been in the

business of relocation over three decades from Singapore to other Asian countries. Cas-by has been in the port man-agement and logistics arena for more than 15 decades.

The JV holding is at 50:50

equity and is referred to as Casby Geometra Pte Ltd.

Simultaneously, Casby Logis-tics has been awarded the Best Service Provider in the Second-ary Distribution category by Di-rector (Supply Chain) of Castrol.

Sical Sells its Stake in CIT to PSAChennai

Casby Ties up With GeometraChennai

apollo-CV award Goes to VRL LogisticsBengaluru

VRL Logistics Ltd has been awarded the Apollo

CV Award for Best Practice Award Adopter of the Year, in Apollo-CV Awards 2010.

VRL provides its custom-ers with an entire bouquet of value-added services that comprises road transporta-tion, express cargo move-ment re-distribution, courier services, passenger transpor-tation & warehousing.

With pan India services in 18 states, VRL Logistics has es-tablished a strong network of 1,000-plus branches to cater to customer demands and needs.

Infolog pushes seZsoft to IT, mfrgBengaluru

Infolog Solutions has built software that can enable

SEZ units to run its compli-ance operations smoothly by tracking procurements, managing assets and gener-ating timely reports. SEZSoft is a comprehensive web-based solution for import-export compliance manage-ment for SEZ units.

Its other add-on modules like e-procurement, asset management and inventory management link with the module helps users gain con-trol of the system with the information on hand.

The software is targeted at the IT and manufacturing seg-ment and is priced reasonably, according to the company.

india has the world’s fourth largest coal reserves

Sical’s decision to sell its stake is to enable it to concentrate on

auto yard management project

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Trucks Shortage, More Cargo will Raise Truck Rentals New Delhi

Truckers in the South Demand Toll Fee ReductionTamil Nadu

The shortage of trucks on trunk routes in the last two

months and increased demand for cargo transportation from agriculture and manufacturing sectors, saw truck rentals rise by 3-5 percent.

The lower supply of trucks was mainly because of the non-renewal of new inter-state national permits by vari-ous states in May and the non-registration of new trucks due to confusion over the imple-mentation of the new emis-sion norms.

Truck rentals on the trunk routes had touched a new high

after three years. Rentals from November 2009 to April 2010 went up by 21-23 percent due to the growth in the manufac-turing sector. Cargo offerings during the same period were also buoyant with additional arrival of fruits, vegetables and continued wheat procurement.

Simultaneously, in Kolkata though the Union Government has refrained from revising fuel prices upwards, truck rentals may increase due to an increase in tire prices in June.

Tire constitutes 30 per-cent of the operating cost of trucks. According to the All

Truckers in southern states and the Union Territory of

Puducherry have demanded a reduction in toll fee and modi-fication in toll rules.

The South Zone Lorry Own-ers’ Association meeting,

planned to resort to an indefinite strike from August 2, if the Cen-tre failed to meet the demands.

Truck operators in Tamil Nadu are the worst affected as almost all important national highways have become toll

RoaD

Increase in prices of tires add to the rental cost

India Tire Dealers’ Federation (AITDF) overall tire prices are

up by 13-15 percent since Janu-ary this year.

government to raise ports capacity in india to 1,200 mt by march 2012

Four Highway projects get Cabinet nodNew Delhi

The Cabinet Committee on Infrastructure (CCI) has approved four highway projects worth Rs 2,536 crore. The highway

projects would span five states that include Bihar, Gujarat, Madhya Pradesh, Uttar Pradesh and West Bengal. For West Bengal, the CCI approved four-laning of the 78-km long Krishnanagar-Bahrampo-re section of the NH-34 at an estimated cost of Rs 702.16 crore.

The CCI has also approved the two-laning of the Muzaffar-apur-Sonbarasa section of NH-77 in Bihar at a cost of Rs 512 crore. Other approvals include four-laning of the Jetpur-Som-nath section of the NH-8D in Gujarat and two-laning of the Jhansi-Khajuraho section of NH-75 in Madhya Pradesh and Ut-tar Pradesh.

roads and on an average, each truck has to pay Rs 1,000 to Rs 1,200 a day on toll alone. The toll for the return trip between Tuticorin and Bengaluru amounts to around Rs 3,500.

The association also re-

quested that toll should be revised only once in five years. Empty cargo vehicles should be exempted from toll fee, and the fee should be collected only for the extent of roads used by the vehicles.

Truck operators pay up to Rs 1,200 per day on toll alone

#225, ST Bed Extn., 5th Main, Koramangala, 4th Block,

Bangalore 560034, India.Tel : +91 80 40833366 www.uniworld-losgistics.com

20

< news


Freight Market May Remain Volatile Hyderabad

Global freight rates in the tanker and dry bulk seg-

ments have been near steady this fi scal, primarily because of the shortage of vessels on certain routes and scrapping of single-hull tankers.

Analysts feel the tanker market may remain fi rm in the coming months, especially with world oil demand expect-ed to increase.

Overall, the shipping com-munity feels that the market will retain some volatility in the coming months.

Macro level developments in Europe also add to the un-clear picture. In the tanker seg-ment, Very Large Crude Carrier (VLCC) rates rose from an aver-age of $25,908 per day in Feb-

ruary to $29,491 in March and $37,368 in April. But, there was a marginal dip in May.

However, global fl eet expan-sion could curtail fl eet utiliza-tion in the long term — global crude and product tanker fl eet are expected to register 11 per-cent and 12 percent growth re-spectively in 2010.

Even though the global economy’s regaining of health could steady freight rates in 2010, ship-owners fear that the oversupply of new ships may not allow the rates to signifi -cantly fi rm up.

Buoyed by the freight mar-ket, shipping companies, which had been guarded in their in-vestments for fl eet acquisition in the last two years, are now

beginning to revive their capital expenditure programmes.

For instance, Essar Ship-ping has earmarked a capex of Rs 4,875 crore for the current fi nancial year for its shipping,

drilling and ports businesses. Of this, it plans to spend Rs 1,000 crore each on acquisi-tion of vessels and expansion of drilling capacity, while the rest will be spent on ports.

Fraternity Seeks Easing of Cabotage Law Ahead of Terminal CommissioningKochi

As Kochi port prepares to commission the Vallar-

padam Terminal, the shipping community has sought the re-laxation of the Cabotage Law, allowing foreign fl ag carriers to carry cargo between Indian ports. The Vallarpadam Termi-nal can develop as a trans-ship-ment terminal for the sub-conti-nent, only if foreign fl ag vessels are permitted to carry export/import transshipment contain-ers from any of the Indian ports to the ICTT or vice-versa.

The need to develop hub ports in India is documented by the Planning Commission in its

Tenth Plan document where it recommends that the Cabotage Law be done away with to facili-tate the growth of hub ports.

Industry sources indicate that doing away with the Cabo-tage Law would help reduce the cost of logistics and make Indi-an products more competitive in the international market.

The existing Cabotage rules, mandated by the Merchant Shipping Act, 1958, stipulate that the movement of container cargo between Indian ports should only be undertaken on Indian fl ag vessels. This means that a foreign shipping line,

irrespective of whether it op-erates a feeder, non-feeder or mainline vessel, would not be able to carry a container either to or from Vallarpadam to any other port in the country.

The ICTT at Vallarpadam was conceptualized as a ‘trans-shipment’ hub with the vision to offer credible competition

to Colombo, which has tradi-tionally been the regional port of choice for shipping lines seeking to trans-ship their container cargoes originating from/destined for the Indian subcontinent.

Using ICTT for trans-ship-ment would mean that ship-ping lines would be able to rationalize their ship deploy-ments. Rationalized ship de-ployments and lower operating costs would mean lower voyage costs resulting in lower ocean freight, which will translate into savings for Indian export-ers and importers.

poRT

Oversupply of new ships could allow rates to go up

turnover of auto component industry could touch $40 billion by 2015-16

Abolishing the law will reduce cost of logistics and make Indian products competitive in intl markets

22

< IntervIew

TVS Logistics Services Managing Director R Dinesh is chairing the CII Institute of Logistics’ Auto SCM 2010 event to be held at Le Royal Méridien, Chennai, on July 14 and 15. Among other topics, ‘making India the Asia hub for automotive logistics figures high on the institute’s event agenda. Excerpts from a related correspondence between R Dinesh and Aanand Pandey

The CII Institute of Logistics (CIL) envisages India as the Asia hub for automotive logistics. Isn’t it too ambitious

a vision, when we have industrial powerhouses like Japan, China and South Korea in the region? The theme is arising out of India emerging as the small-car-manufacturing hub. As is well known now, compa-nies like Maruti Suzuki, Hyundai, Tata Motors followed by a few others like Nissan, Renault have already made or stated intention to make India their production hub.

This will necessarily mean that the supply chain will revolve around this intent. Further, India has a unique geographical ad-vantage in Asia. Therefore we see In-dia emerging as an aftermarket hub in the next few years.

< IntervIew

India as Asia Hub for Auto Logistics

22 INDIA| July 2010 | www.logisticsweek.com

R Dinesh, Joint Managing Director, TVS & Sons and Member, National Logistics Council

Event: Auto SCM 2010Organizers: The CII Institute of LogisticsVenue: Le Royal Méridien, ChennaiDates: July 14, 15

Lastly, Indian suppliers are increasing their global reach. And this is another reason why India will necessar-ily become an important hub in the global (automotive) logistics milieu. This is where CIL is looking at how to work towards the necessary changes and improvements in infrastructure, processes, regulations, etc. It is in fact the global automotive giants from Asia – Japan, Korea, etc. – who are making India a global hub for certain prod-ucts of theirs.

CIL has been taking up the cause of the auto-logistics industry for many years, advocating improvements in areas like order accuracy, coordination across suppliers and assemblers, logistics infrastructure, tax uniformity, etc. Are you happy with the progress this industry has shown in these areas in the last few years? Yes, CIL has been actively pursuing the points mentioned by you. We see lot of progress in and by the various parties involved in the industry and we are happy to have played a catalyst’s role in this process.

However, we still see a large number of areas that we can help improve and that is why this conference (see box) is being held to bring to light the imperatives on infra-structure, taxes, rules and information-sharing. These steps can and will make a difference in the journey to In-dia emerging competitive not only in production but also in the inbuilt supply-chain and other support capabilities.

We see in this not only a role for the Government – in whom many people find an easy target to criticize or pass on the buck to – but various users and players from the fields of logistics, IT and infrastructure, players whose timely actions and involvement can make a huge differ-ence to the future of the industry.

In short, we have made and seen progress on various fronts. However, more proactive steps are required to fur-ther strengthen and grow the linkages the supply-chain has with production and aftermarket support – a cause that CIL will continue to propagate.

PAN India Warehousing (3PL/4PL)

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Primary & Secondary Transportation

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Logistics Staffing Services

Logistics Consultancy & Training

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Contacts : (+91) 99879 22244/9820761645E-mail: [email protected]


< COLUMN

24

< COLUMN

I

COMMANDMENTS3PL

PADMINI PAGADALA General Manager, TPG Consulting, Mumbai

Have an urge to fi re your warehousing 3PL? You could have saved yourself the trouble if you’d followed Padmini Pagadala’s checklist of things to do when choosing the 3PL. Here goes

IF YOU ARE a staunch believer in the dictum that self-help is the best help, chances are that you are not with the right warehousing 3PL. Worse, chances are that somewhere down the line, someone did not do his homework at the time of choosing the 3PL.

For one’s warehousing needs, one usually signs up with a 3PL, ideally never wanting to move. Shifting one’s house is bothersome enough and that is nothing compared to mov-ing from a one-lakh sq ft Distribution Centre (DC) to another.

Even more, there can be problems in a 3PL relationship that can make even the most happy-go-lucky manager rush to call in the moving company. Usually all such fall-outs can inevitably be traced back to someone who didn’t do his groundwork. Before we get into the ways to fi nd the right 3PL, let’s explore the self-help option fi rst. Do we really need a 3PL for warehousing (and allied transportation) needs?

The reason most companies hire a Third Party Logistics Provider is that their volumes are low. It is cost effective to have a 3PL in such cases.

Another big reason is that the companies

are venturing into a new business. In the begin-ning, these companies would rather invest time in building their business than in running a warehouse or managing a transportation fl eet. A business with huge demand challenges is also a potential candidate for 3PL. Such busi-nesses would prefer to let someone else handle the troughs and the peaks at the DC level.

Firms entering new markets typically get an LSP to handle the DC part of their supply chain. This is mostly due to their not being conversant with the local labor laws.

In addition to the aforesaid reasons, MNCs such as Tommy Hilfi ger continue to operate out of 3PLs to maintain performance levels. They reason that if the LSPs are doing a good job and driving costs down, why bring the bur-den on to oneself? To put it plainly, the crite-rion before you go in for a 3PL is to ask yourself whether the 3PL can do a better job of ware-housing or transportation than you or not.

This month, I bring to you my cardinal checklist of things to ensure you choose the right Logistics Service Provider (LSP) that can do your work for you.


Know Thy Needs Third party logistics providers run the gamut from peo-ple lending a tin-roof to companies who have sophisti-cated software, automation, and engineering talent. To fi nd the right one, as a customer, you need to know what you need from the LSP. As a customer, you need to think whether you want just a tin-roof over your goods (or any type of space) or you need the LSP to tackle complex fulfi llment needs, provide labor-intensive value-added services, or change the processes as and where required.

Data Data DataWhen you hand the RFPs (Requests for Proposal) out, it may seem strange to you to include your own operating costs in it. When LSPs look at your RFP, typically, they will hone in on the gaps present in the information provided to them.

Usually, the LSP makes sure he adds in his buffer to protect himself in areas where he feels the data is inad-equate. For example, you put in your RFP the duration of a particular peak demand period – when you will re-quire additional manpower – as four weeks, as against the industry trend of, say, six weeks. And do not provide any reason behind the deviation from the norm. The LSP who has been around for a while will assume the worst and factor in the maximum buffer that can offset the gap in the data. On the other hand, the LSP that may not have a lot of experience may take the best-case scenario and not put in the buffer that can save him later. This is-sue often leads to customer disputes due to such misin-terpretations. In either of the situations, the client loses.

Cost Structuring When you send your RFPs out, you must compel the LSPs to track costs in such a manner that you can compare your previous year’s operating costs with those of this year. Every year, your business is going to change or grow in some way. You need to be able to track the oper-ating cost per unit/ case / pallet. This is also a good way to compare with all the bids that you receive.

Lower Cost Every YearThis is a feat that can only be achieved if you were a GM (General Motors) or a GE (General Electric) outsourc-ing your entire region to a service provider. In the West, when companies as big as GE or GM negotiate with an LSP, they typically write into the contract that the op-erating cost-per-unit shipped has to go down by, say, 3 percent every year. This could be tied in with a promise of increasing volumes with every year.

Reducing per unit operational costs every year is not an easy task. But the giants ask for this in the belief that if an LSP performs the same functions year after year, then the per-unit operational cost ought to get better

every year. This is one way you could challenge your LSP and ask how they can reinvent themselves every year.

Know What You Are Paying For When they walk into an LSP’s warehouse, most custom-ers assume that the material handling equipment (MHE) that they see in the facility will be available for their use – for free. This is often not true. Service providers charge the client – sometimes as much as the full capital cost of the forklifts and other equipment that need to be used for them. This is truer in the case of WMS (Warehouse Management Systems) when the number of users needs to be increased because of increasing business.

Also, the software licenses that will be bought could be charged in entirety to the client although the LSP will have the right to carry on using them even after the client closes his business. This is something that as a client you ought to be aware of before you sign on the dotted line.

When Things Do Go WrongMy landlord from whom we have leased our offi ce space tells me that when things are great, the contract is only a mere piece of paper. But only when he and I have a problem does the contract assume the form of a legal document.

I would probably have smiled it away if not for the fact that I had spent a full week reading and re-read-ing the contract, negotiating on the terms and get-ting certain things changed – merely because I never wanted a chance for either of us to say, “Let’s look at the contract.”

When it comes to your warehouse, you need to tread this area even more carefully. Sometimes, things don’t go well and at such times, after exhausting all your prob-lem-solving skills and your managerial charm, you need to have good arbiters or clauses in your contract to be able to exit.

While the nature of the agreement and costs are basic, you could look for qualitative metrics that your LSP could provide you. And above all, the client needs to make sure that the LSP is a good cultural fi t in the organization, that is, the LSPs’ principles have to befi t your organization.

I hope the list helps a bit with your homework of choosing the right 3PL for your company.

25

In the West, big companies write into the LSPs contract that the op cost shipped has to go down by 3 pc every year.


< Guest column

Are you losing sleep over your trucks fetching poor margins? Is your transportation provider giving you the jeepers with increasing costs or frequent outages? Piyush shah gives you a game-changer

Piyush shahAssistant ProfessorOperations,SP Jain Institute of Management and Research

AdvAntAge M

26

The net margins of transportation service providers are usually as low as 3 to 5 percent. Major parts of the costs are predetermined. Fuel would

be around 60 to 80 percent, breakdown and basic maintenance cost around 10 to 15 per-cent and the rest would be made up by driver salaries and other miscellaneous expenses. The interest and cost of acquiring the capi-tal would also add to reducing the wafer-thin margin significantly.

Given the abysmally low margins in this business, service providers spend sleepless nights thinking of ways to increase the utiliza-tion. There is a desperate hunt for part-loads, for example, to fill any existing vacant space in a shipment. All possible means are also ex-plored to avoid empty back-hauls.

In this entire activity, transportation firms are losing sight of the one single cost header that can drastically change the nature of their business. This function can increase revenues by at least 15 percent, reduce expenses by around 10 percent and significantly impact the vehicle availability and utilization. This partic-ular lifesaver is none other than the vastly un-derrated function called ‘fleet maintenance’!

Systematic fleet maintenance can have a solid impact on all performance metrics. It can increase fuel efficiencies, reduce break-downs and generate more customer satis-faction. Realizing this, industries in general have for long focused on maintenance best practices. Information technologies help trace and minimise maverick spend on main-tenance activities.

The Japanese techniques of ‘Total Produc-

tive Maintenance’ ensure that the maintained machines become reliable. Operations-re-search-based replacement techniques ensure optimum trade-off between the cost of re-placement and cost of failure. Unfortunately, to the best of one’s knowledge, none of the above is unfortunately being practiced in the transportation sector.

the conundrum in logisticsIn the manufacturing, hospitality or health-care sectors, all the main resources are at one location. A maintenance team can easily be formed to take care of all the current or po-tential problems.

For logistics service providers (LSPs), their resources are continuously on the move. The trucks are tracing the corners of the country with very little predictability of the running course. It is very difficult to expect a truck to be at a definite point of location at a given point of time. Hence, planning for truck maintenance at a determined time or location is a matter of real challenge for an LSP.

The lack of location predictability is not the only problem. The technical knowledge of the driver may be inadequate when it comes to re-porting problems. The driver may also not be motivated to report failures. The same drivers usually do not drive the same truck every time and cannot (and should not) be held responsi-ble for breakdowns that occur on another driv-er’s watch. Also, failures, especially the minor ones, largely go unreported since they would look bad on a driver’s worksheet.

Also, a truck specifically brought in for maintenance would have a one-way empty haul.

27

AdvAntAge MThen there is the maintenance downtime cost.

There is virtually no record-keeping of any kind on the performance of the vehicle. In manufacturing, it is normal for the pres-sure of a pump to be recorded once during every shift. No such documentation is done in logistics. In case of a breakdown in remote locations, the driver is allowed to buy the necessary spares and also pay for the repair services. In a way, unchecked spending is in-stitutionalized for some LSPs.

One of the biggest reasons for this fact be-ing ignored is that the direct cost in logistics is small and sporadic. While the total cost of maintaining the fleet may be large, and hence accounted for, the cost incurred per engage-ment per truck is not a large sum – in many ERP (Enterprise Resource Planning) systems this sum is not tagged as a maintenance ex-pense and it is difficult to realise the total direct cost at the end of the year. Since the cost ‘seems’ to be small, obviously it gets less management attention.

Business impactIgnoring such costs has a direct impact on three scores. One, the cost of maintenance increases substantially. This impacts the bot-tom-line. Second, the asset availability drops. More vehicles are needed to haul the same amount of material. This pushes up the capital needed to do business. Third, customer sat-isfaction takes a beating. A customer will not tolerate frequent variations or delays in ship-ments. This will impact the revenues.

Poor maintenance practices have an impact on all the segments of financial statements revenue, expenses and the RoA (Return on As-sets). The total impact could be significant. In this age of competition and high capacity, good maintenance is a compulsion.

If it’s any solace, the entire transporta-tion industry has the same problem. The cost impact would thus be loaded in the expense statements of all LSPs. Customers have to somehow survive with an entire industry that is unreliable on this count. The other way to look at this is that sound maintenance plan-ning can be a big source of competitive ad-vantage. In an industry plagued with poor performance on this score all around, a slight improvement could easily catapult the organ-ization to a leadership role.

measuring the impactThe cost of maintenance spares are a direct cost. If a vehicle is repaired in a garage that is not owned by the logistics firm, the extra cost incurred should also be added to the tally.

The costs have to be further classified as preventive and corrective. The oil change is a preventive activity and changing a leaking coolant line would be corrective.

The cost of reduced performance would have to be recorded. A two-axle truck filled with FTL (Full-Truck Load) of 9 ton could be expected to have a peak speed of 75 kilom-eter-per-hour and a fuel efficiency of 5 kilom-eter-per-liter. Any deviation from this would be a cost. The fuel-efficiency cost would be easy to calculate. If a vehicle works at a mile-age of 4.7 liters-per-kilometer, the fuel ef-ficiency cost would be the cost of additional fuel used up to cover that distance.

For the speed loss, the cost would be the cost of distance and haulage opportunity lost. Moving at, say 35 kilometers-per-hour, the truck would have covered the distance faster and would be available to transport ad-ditional cargo. The cost of reduced perform-ance would have to be measured and record-ed for each vehicle separately.

The final cost is the cost of customers lost due to poor service. To be able to calculate this, the logistics organization would have to keep track of lost customers and also tabu-late the reasons for the loss.

The firm would have to create some basis for the cost of lost customers. In a way, this cost could be found out by dividing the mar-keting and advertising expense by the number of new regular customers. This calculation would be based on certain assumptions. It could also be calculated on a perspective of reduced profits because of the lost customer.

In many cases, causes for major accidents can be traced to poor maintenance. While the failure of the braking system can cause an ac-cident, the systems failure could in turn be caused by contaminated oil, leakage or worn-out parts – all signs of poor maintenance.

SyStematic fleet maintenance can have a Solid impact on all performance metricS. it can increaSe fuel efficiencieS, reduce breakdownS and generate more cuStomer SatiSfaction

total cost of poor maintenance = (breakdown maintenance + preventive maintenance) + cost of reduced performance + cost of lost customers



< Guest column

Assuming that accidents are rare, this cost could be kept out of calculations. However, with every incident of a crash, the firm needs to look deep for the cause and create a policy to avoid such events in the future. Along with this the cost of litigation for claims arising out of an accident has also been ignored.

Calculating the total cost of poor mainte-nance in this manner is bound to raise a few eyebrows. Since maintenance happens in small chunks, the total impact is never real-ized. Also, the impact on the customer side is usually never accounted for. The total cost would be a summation of all the three costs mentioned. Standard Transportation Man-agement Systems (TMS) and ERPs may not be tuned to give the data in the required format. Logistics firms will have to resort to tagging of costs as maintenance, reduced perform-ance or lost customer, so that the data can be retrieved and acted upon.

the maintenance ProcessThe first step would be to put maintenance as a part of the performance measurement for the vehicle drivers.

Since the drivers would not be driving the same vehicle every time, the performance-measurement part of the formula would have to be a group-based metric. The incentives

should be linked to corrective maintenance costs. A specific amount could be allocated for maintenance. Any savings then could be shared among the drivers on the basis of dis-tance driven. This incentive would have to be on quarterly- or half-yearly basis as the driv-ers may postpone change of spares on a short term to claim the incentive.

A maintenance department would have to be created with a focus on minimizing the to-tal maintenance cost. The department need not be staffed with a crew of technicians – the repair could still be outsourced. However, the department could have experts who can understand and analyse failure. The mainte-nance department would be concerned about monitoring the preventive maintenance. Most breakdowns occur because the preventive part has been neglected. Major heavy vehicle acci-dents are due to worn-out tyres.

The department could use quality tools like Pareto analysis to analyse breakdowns and work towards reducing them. A problem like engine seizure could merely be a symptom for some deeper malaise. Tools like the Pare-to chart (see graph) and root-cause analysis could be used in such cases.

One of the tasks of this department would be to introduce a documentation sys-tem. There has to be a system of compulsory

inspection by the driver at the be-ginning of every trip. Along with this there could be a detailed vehi-cle inspection twice a year. These reports would form the basis for analysis.

Every vehicle would have to be measured for its performance. Met-rics like fuel efficiency, spares re-placement, oil change, etc. would have to be tracked consistently.

In fact, large trailers could also be measured for metrics like temperature of exhaust. A higher temperature here could indicate a problem with the supercharger. A reduction in fuel eff iciency even by a few points could be an indica-tor to an impending breakdown. The wearing out of brake liners in a particular vehicle faster than the norm could again be used as a leading indicator.

0%

Batte

ry a

nd st

artin

g

Engine

Tran

smiss

ion sy

stem

Rakes

Collisi

on

susp

ensio

n

Light

ing

5%

10%

15%

20%

25%

30%

35%

40%

45%

Reasons for trouble at start up (A sample for Pareto Chart Analysis)

poor maintenance practiceS have an impact on all the SegmentS of financial StatementS revenue, expenSeS and the roa (return on aSSetS)


It is necessary to train the drivers continu-ously and keep informing them about the best practices in handling the vehicle. The training sessions have to be innovatively designed so that uneducated drivers can get the message.

In the course of their work and interaction with others, the drivers are sure to pick up wrong practices or forget the best practices of the train-ing. That is why the training has to be continu-ous. It could be a two-hour video that a driver sees and answers a simple test on a touch screen. The driver could be given the flexibility in seeing the video and appearing for the test within a time pe-riod at any of the major locations.

Overall, a metric that is tracked by the top management is generally achieved. A dashboard of maintenance has to be created and monitored by the top management. The dashboard could include simple things like hours lost due to maintenance, total cost of poor maintenance, etc. for a particular period.

Top management must make it a point to bring up this metric in their interaction with the operations.

the complete PictureBad maintenance is actually a symptom of a poor organization. Unfortunately, the indirect impact of poor maintenance is significantly higher than the direct impact. This has en-sured that the function stays at a low priority in logistics companies. Effort is put at creating stop-gap arrangements and somehow getting the vehicle to run rather than instituting a spe-cific process.

The mindset in this area is still to attack the existing breakdowns as fast as possible. The fact that these breakdowns can be reduced has just not sunk in. Designing a maintenance process can easily be a good source of advan-tage for any LSP.

Designing the maintenance process1. Include maintenance as a KRA for

drivers2. Set up an analytical maintenance

department3. Create a record keeping system4. Train the drivers5. Generate a maintenance based

dashboard for top management

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< guest Column

The reverse-logistics capability of a company can make or mar its brand image. Hitendra Chaturvedi lays out the criticality of reverse supply chain

Hitendra CHaturvediFounder and CEO, Reverse Logistics Company

The Big

32

In simple terms, supply chain in any indus-try has two components – forward, when products or services move from the origin to its destination; and reverse, when a

product or service moves in the opposite direc-tion i.e. from the consumer back to its origin.

This movement back can be for many rea-sons, including defects, end of life, warranty, overstock, discontinued line, etc. Simply put, reverse supply chain is defined as all activities associated with a product or a service after it is sold. India sees a return rate between three and five percent which means that anywhere between Rs 60,000 -75,000 crore worth of prod-ucts traverse the journey back through a largely inefficient reverse supply chain process where we spend another Rs 30,000 crore to move or process or store them.

Supply-chain efficiencies in our country are improving but they still rank abysmally low on the global scale. As a matter of fact, India still loses about 3 percent of GDP (around Rs 1.5 trillion) to supply-chain inefficiencies. Our supply-chain landscape is highly fragmented, replete with inefficiencies, and exacerbated by the omnipresent red tape. Reverse supply chain performance is even worse!

Why reverse supply Chain matters Reverse SCM (Supply Chain Management) matters because it makes business sense. Indian customers are becoming very de-manding – now we want services that are world class. A recent research from Reverse Logistics Company (disclosure: the author is the Founder and CEO of RLC) indicates that over 50 percent of customers with bad return experi-ence will not buy from that brand again. This

means that a brand may lose anywhere from 4 to 5 percent of its customer base if the return experience is poor.

RLC’s initial analysis across many OEMs (Original Equipment Manufacturers) high-lighted a startling fact – that in 70 percent of the cases, the cost to process a returned prod-uct can be higher than the value of the product! For example, if a mobile phone worth Rs 3,000 is returned, there is a high probability that the cost involved in managing its return (call cent-er, transportation, warehousing, repair, etc.) will be greater than Rs 3,000. This means that due to inefficient returns management, every return could be bleeding the OEM. Returned products lose value every passing day. What this means is that if you have a defective mo-bile sitting somewhere in your reverse supply chain for over a year then it is as good as scrap.

The power of reverse supply chain lies in the data but 90 percent of the companies we surveyed had zero visibility into returns data. Return data visibility can highlight factors like customer abuse patterns, product defects, trends, etc. – factors that can be of immense value while planning marketing, sales, and product development efforts.

As India considers strict laws to regulate e-waste, companies must know what is hap-pening to their obsolete, surplus and defective products. They can no longer dispose of such products in the secondary markets and con-sider themselves immune to repercussions if the products harm the environment.

From a business point of view, selling re-turned items to the highest bidder in the mar-ket, not knowing what the latter will do to the product, may be a ‘penny-wise-pound-foolish’

Backstory

33

strategy for a brand. Many of these products go back into the channel and get sold as new. This not only cannibalizes the new product sales of the company but also tarnishes the brand image as many of these products don’t get repaired in compliance with OEM standards.

Buyback programs – like the ones often or-ganized by Indian retail chains – are great stra-tegic plays to acquire new customers but in the absence of a structured ‘returns process’ this execution may not happen and the brand even runs the risk of losing competitive advantage.

What this means is that successful companies focus on their core competencies – delighting customers through forward supply chain. What many don’t realize is that managing an efficient reverse supply chain can create a competitive advantage. Our experience shows that efficient reverse supply-chain strategies can help reduce supply chain costs by 25 to 40 percent, increase the asset recovery of returned goods by a factor of four, boost productivity by 10 percent, profitabil-ity by almost two percent, and all this in proper compliance with e-waste regulations.

immediate stepsIn order to put in place an efficient reverse SCM strategy, companies could take the following two steps at the earliest:Impact Assessment: Over 95 percent of compa-nies we surveyed had little or no handle on the impact of reverse supply chain on the bottom-line. If not managed well, returns can eat into the health of the company. Fix Responsibility and Empower: Returns are a secondary responsibility for many managers. Since most of the returns process is ‘someone

else’s problem’ or fault, it is too easy for man-agers to fall behind in processing responsi-bilities. Not having a process owner also causes a certain ‘leakage’ in the system. A leader with management authority, empow-erment (and budget) to manage all aspects of returns processing will drive improvements.

to outsource or notMany companies ask if reverse supply chain is so strategic, why they shouldn’t do it them-selves. The answer is simple: With product re-turn rates in India ranging from three to five percent, companies do not have enough vol-ume to justify the cost required. An efficient reverse supply chain requires investment in customized technology, processes, infra-structure, people and all this has significant costs. The western world has learned these lessons and most of its companies outsource their reverse supply chain to specialists.

The Indian industry seems to be following this trend. In a recent study conducted by the D’Essence Group, a Mumbai-based consul-tancy, 55 percent of Indian companies sur-veyed plan to outsource their reverse logistics process over the next five years.

For companies that are doing reverse supply chain in-house, activities such as returns-transportation outsourcing or sur-plus (or overstock) sales don’t fetch the de-sired benefits. These are firefighting meas-ures that come into play when inventory needs to be cleared. If a company plans to outsource, it must select a partner that has the knowhow, the infrastructure, people, as well as the IT infrastructure in place.

With regulations looming over electronic waste it makes sense for Indian companies, particularly OEMs, to look at their reverse supply chain – not only to gain competitive advantage, but also for good corpo-rate governance. As organized re-verse supply chain gets recognized and funded by global players in India, many of the OEMs could finally have a solution that they have long been waiting for.

An efficient reverse supply chAin requires investment in customized technology, processes, infrAstructure, people And All this hAs significAnt costs

The author is can be reached at [email protected]

Manu-facturer Distributor Retailer

End ConsumerSupplier

Recycled

Warranty

Overstock

Discontinued

Scrap

Returns

Damaged

Shelf Pull

Refurbished End of Life

reverse supply Chain


< Cover Story

34

Forward march



HyperCity India’s supply-chain team, led by Lieutenant Colonel Vijay Nair (Retd), works with a precision and a level of sophistication that would surprise many. An inspiring story of a home-grown supply-chain team that holds many takeaways for logistics managers, brought to you by Pamela Cheema


< Cover Story

arranged fruit, vegetables, meat products and consumer durables line the shelves at the HyperCity store at Malad, Mumbai, which was the fi rst store inaugurated by the Group in the country four years ago. The vast range of products on sale covers the entire gamut from food, home decor, furniture to footwear. The double-storied store offers the customer ample space to view the products leisurely, inspect them carefully and then make a choice.

Standing tallAs a store, HyperCity combines the elegance of a premium departmental store with a convenience store where a plethora of products are available

at affordable rates. “Actually, this is our store’s USP,” beams Lieutenant Colonel Vijay Nair (Retd), General Manager, Supply Chain, HyperCity. “We have an excellent shopping at-mosphere, our store is also beautiful-ly laid out with a very wide range and value proposition.” HyperCity Retail has seven stores across the country at Mumbai, Vashi, Thane, Hyderabad, Bangalore, Jaipur and Amritsar and a central Distribution Centre at Va-dape, near Bhiwandi, Maharashtra. The warehouse spans 2,50,000 sq. ft and is the Distribution Centre for the entire chain of stores. It services 800,000 sq. ft of retail space spread out across its various stores in the country. “We are saving on expens-es with this central DC,” remarks Nair.”End-to-end it is still benefi cial for us to have just one central DC and with the implementation of GST, it will make even more sense.”

Though the single DC at Vadape services a huge area, supply chain operations at the hypermarket chain have been streamlined to a com-mendable degree with just 130 em-ployees. Says Nair proudly: “I have created a niche and a separate cus-tomer profi le.”

No Fixed IdeasLt. Col. Vijay Nair with 20 years of army service, is the quintessential army man with great enthusiasm for

xxx xxxxxxx

Indian retail is galloping up the growth curve in a welcome surge of expansion. Although Europe

and the United States have not been able to emerge decisively from the shadow of the recession and are, in fact, facing a period of bleak auster-ity, retail in India currently faces a future full of promise. According to industry sources, though organised Indian retail has a mere fi ve percent of the retail pie, it is currently worth $25 billion, a fi gure which is set to treble in the next fi ve years. Hyper-City Retail (India) Ltd., which is part of the K Raheja Group, is a vibrant manifestation of the resurgence of retail in the country.

Rows of neatly and aesthetically

HyperCity Fact File*Number of stores 7Supply Chain 130Employees Live SKUs 66,000 Total Retail Space 8,00,000 sftTransportation Service ProvidersTechnology Providers

Five transporters including Gati and VRL Logistics

JDA, IBM

*All the facts in the box are culled from media sources and interview transcript and are only indicative. For accurate information, please contact the company

LT.COL. VIJAY NAIR, (Retd), General Manager, SCM, HyperCity Retail (India) Ltd.

38

< Cover Story

his subject who was chosen by the previous CEO, Andrew Levermore, to head supply chain. “I did my MBA in HR (Human Resources), but Lev-ermore insisted that I was suited for logistics,” laughs Nair heartily.

Levermore was particular about HyperCity building its own legacy. “When we started HyperCity, Andrew said that he wanted an organisation with no baggage or background or previous legacy in logistics, which I think was a very strong strategy.” The first store was established with high-ly motivated, but raw talent who were expected to work in the warehouse, a procedure which continues even now where fresh management trainees are put through a rigorous 15-day work capsule at the warehouse. The blowback is that management execu-tives have a vastly improved under-standing of supply chain.

Despite the country’s meagre in-frastructure and other inescapable odds such as manpower challenges and red tape, that afflict supply-chains of all user companies, the hy-permarket chain has created a lean supply chain network and is achiev-

INDIA| June 2010 | www.logisticsweek.com

ing performance levels that are the best in the business. Its shelf fill rate and order fill rate are much above the India average, the supply-chain is cost efficient and the supply-chain managers maintain close relation-ships with both transporters and the top suppliers.

the ringside viewNair reveals the intricacies of their supply chain network which help them to service their stores. For Mumbai stores (Malad, Vashi and Thane), all products other than per-ishables are supplied by the DC. For all the other stores located across India home products, sports, toys, etc. are supplied from the central DC, whereas CDIT (Consumer Durables, IT and Telecom), FMCG products, and perishables are procured locally.

The Group maintains 66,000 live SKUs (Stock Keeping Units) at any given time, but prefers to run the entire supply-chain on its own, ex-cept transportation, a function that it chooses to keep flexible. Says Nair: “Including Gatti and VRL, we have five or six transporters whose rates are easily available and then we take the best rate.”

Nair services the retail stores with a supply-chain team of 130 employ-ees – surprisingly small given the expanse of the operations and the de-livery of best-in-league benchmarks, “The numbers are likely to go up,” in-dicates Nair, “when more DCs open across the country.” To give any idea of the scale of warehouse operations,

approximately 100,000 units are handled every day at

the central DC.

Seasonal flowsFrom June, sales start escalating and peak in Oc-tober. November

sees a dip, while December, especial-

ly around Christmas,

sees a surge in sales. From January-March sales hit a trough, and April and May witness a moderate rise in sales.

To aid in demand forecast-ing, customer footfalls are care-fully measured at the hypermarket; customer entries are scoured on a day-to-day basis and reviewed on a weekly basis. With a fluctuating sales graph, buyers are in constant touch with vendors to keep abreast with the highs and lows of sales and replenish stocks. HyperCity has a B-to-B (busi-ness to business) site which is inte-

Including Gati and VRL, we have five or six transporters

whose rates are easily available

and then we take the best rate

39INDIA| July 2010 | www.logisticsweek.com 39

grated with its Enterprise Resource Planning (ERP) and is accessible to vendors. The site was launched in 2009 and is supported by an IT team from IBM. “With this new facility, the vendor who has been provided with a login, can actually look into the site, get to know the complete details about the movement of his merchan-dise, the payment of his bills, etc.” reveals Nair.

The hypermarket chain has ap-proximately 2,000-3,000 suppliers (including the vendors who supply perishables). Perishables for Mumbai and Thane are generally purchased

from the APMC market at Vashi, Navi Mumbai.

tech ProwessHyperCity has invested heavily in technology which has spruced up its operations perceptibly. The supply chain team works on JDA supply chain management (SCM) solutions on IBM Systems platform. It uses a range of solutions including the merchandise management system (MMS), the ware-house management system (WMS), the automatic store replenishment module (ASR) and the automatic warehouse re-placement module (AWR).

For material handling, the DC uses battery operated pallet trucks which increase productivity consid-erably as opposed to hand jack pallet trucks which take 12-14 minutes for each use in the warehouse.

The scanners used for picking at the warehouse used by HyperCity are integrated with the ERP. The Centre does multi-store scanner-based pick-ing, where in one visit the picker can pick products for three stores, thus reducing travel time within the DC and maintaining a lean labour force. “We are big believers in technology. That’s how we have been able to man-

The store combines the elegance of a department store with the affordability of a convenience store


< Cover Story

age with a lean and efficient team for our stores!” says Nair proudly. Hy-perCity got a Silver Edge Award for its Distribution Centre Management System. This was awarded by the June 2009 issue of Network Computing magazine.

When asked about whether the warehouse uses the RFID (Resource Frequency-Identification) technol-ogy, Nair minces no words. “"We have put our thoughts to RFID. But it's just not viable because of the costs involved. The larger products don’t get lost and for smaller products it (RFID) is just too costly. For the mo-ment we are not even considering it."

Cost efficiencyJust as HyperCity Retail has been able to slough off old methods and atti-tudes in its swift adoption of technol-ogy, it has been able to trim supply chain costs at all levels – transporta-tion, packaging and delivery. In the sphere of transportation, the hyper-market’s main providers are Gatti and VRL, and talks are on with a pan-India express-cargo company. Ven-dors are urged to utilise these trans-porters and thus optimise on cost.

The buying team lays particular emphasis on maintaining accuracy of inventory levels, thus limiting ware-house costs. The owners of the chain were extra judicious in choosing the warehousing location and negotiat-ing the lease – they worked closely with the developer at the time – a wise move that keeps the running costs at a very reasonable level year after year.

Inspired PerformanceWorkers at the DC are offered incen-tives to maintain productivity at a certain peak level. Remarks Nair: “People often mention that cash in-centives increase costs, but I tell them that in the long-term a happy work force reduces costs!”

To enhance productivity, cross docking for certain stores is done in a separate area at the Distribution

Centre. “We advise our vendors to bring products in three lots, the Hy-derabad lot, the Bangalore lot and the Mumbai lot,” elaborates Nair. “The Hyderabad and the Bangalore lots are cross docked and this saves on our costs and time.”

HyperCity Retail also pays its octroi taxes online which slashes its transport costs, waiting time of trucks at checkposts and allows the hypermarket to service its other stores simultaneously. When the re-tail chain, like the rest of the industry, was reporting interminable delays at Mumbai’s octroi nakas, Nair thought of using the then newly introduced online octroi-payment facility. But despite several reminders and emails requesting the same, there was no response from the authorities. That’s when he decided to cut through the red tape.

He requested a meeting with the then Mumbai Municipal Commis-sioner Jairaj Pathak and it was duly granted. The rest of the road (pun in-tended) was smooth.

The upshot is that HyperCity has been paying taxes online ever since. Now the turnaround and utilisation rates have improved, and the trans-portation cost has come down. "Ear-lier a truck driver would go to the Malad store first and by the time he had gone through the octroi, he was not fit enough to travel to Thane. That has changed today. With one vehicle I am managing two stores. Otherwise all these stores had their own vehi-cles," he beams.

Moreover, the team maintains ex-cellent scores on key parameters. It reports a shelf fill rate which gener-ally hovers above 97 percent. This feat which has been achieved not only by increasing productivity, but also by reducing errors and delays – the two big hydras of any supply-chain op-eration – has been attained by using time-honed strategies.

For example, about 80 percent of the operations at the warehouse are

T i m e l i n e

scanner-based which goes a long way in reducing all types of handling er-rors.

Productivity at the DC is ampli-fied – and the counting errors re-duced – by encouraging the workers to count in their mother tongue and training them to write the numbers in English. A worker who commits an error notes it in a register kept for the purpose. The worker’s salary is not cut, but he realises that his work is under scrutiny. Notably, the worker with minimum entries against his name is given incentives in the form of salary increments, or rewarded in


mestic products four-six weeks. With fashion products and apparel, the in-ventory turn is slower and minimum stock is often held for 12-56 weeks.

This year, the order fill rates are up by around 10 percent from last year’s rates of 72 to 80 percent. Partly, the uptick has been achieved because of the active involvement of vendors. The order fill rates are available on the B-to-B site; vendors send their feedback and their ability or in-ability to fulfil orders. But Nair sees room for improvement on this score. “Their (vendors) supply chain is very challenging,” stresses Nair. “Also,

other innovative ways.To reduce transport delays, Nair

makes good use of feedback mecha-nisms. “We monitor and give feed-back. If an inbound transporter does not deliver on time, we give him feed-back. Also, we maintain fantastic re-lations with him.”

The productivity of each depart-ment is carefully monitored and this in turn ensures desired inventory turn ratios. The inventory turns differ with various categories of products – for instance, food items have an in-ventory turn of four weeks, imported products eight or ten weeks and do-

at times, they may not have enough numbers to give us, as well as to oth-er retailers like Big Bazaar, etc. Very often, these are the reasons behind order-fill gaps, but it impacts all re-tailers.”

A quarterly inventory audit is an-other way to ensure that the Distribu-tion Centre meticulously avoids er-rors. This ensures that the inventory remains correct and the location is better managed. Slot audits –25,000 of them – are performed every day at the rate of four slots a day. Elaborates Nair: “If a category is doing well and seeing business of 99 percent or 100

Surveying the vast range at the store


< Cover Story

percent fill rate, we do not audit that slot. But if a category is not doing well and is doing just 92-93 percent, we audit that slot and the fill rate au-tomatically improves.” The company also utilises the Global Data Syn-chronisation Network (GDSN) which allows the user to access the vendor’s data to get the product description and its specifications to weed out possible mismatches.

Even if all the other aspects of a business are neatly in place, the sup-ply chain of an enterprise could still founder and profit margins could be squeezed if certain other functions like order compliance, and demand forecasting is not finessed to a high degree of efficiency.

Of equal importance is the lead time given to vendors. The company issues vendor agreement forms in which the latter commit their lead times. He advises that a company must maintain good relations with its vendors. From the current year, Hyper-

City has embarked on a new exercise known as the supplier-relationship programme. “This is being led by me, “ explains Nair, “where we just meet the top 15 vendors and try and create a relationship, so the next time I pick up the phone, I know who they are and then automatically there will be a dif-ference in the relationship.”

The hypermarket chain had situ-ations of inventory surplus during the recession when sales suddenly dipped and some store expansion plans had to be put on hold. That lesson learnt, Nair has moved on. “I have passed the phase when we had high inventory. In fact, no retailer would buy large amounts of inven-tory because the environment dic-tates that your inventory could sud-denly go up. Finding out the reason for high inventory and learning from it is important; but equally important is the strategy that you must have to liquidate the surplus. The timing of liquidation is a very, very important

part of the strategy,” he says.High distribution costs can para-

lyse entrepreneurial vim. The hyper-market chain optimises its trans-portation costs by utilising its truck capacity fully. If only half a truck is full of furniture, for example, the other half is filled with other prod-ucts to ensure maximum utilisation of both weight and volume. “It’s really a question of optimising at the warehouse,” emphasises Nair. “Make sure your workers at the DC are cost conscious and how do you make them conscious? Anything that moves must be recorded at the DC. If a truck comes, take its weight and volume and go through the processes of optimisation.” Careful selection of the site of warehouses would also as-sist in lowering costs.

Swift expansion In a recent interview to CNBC TV18, B S Nagesh, vice chairman Hyper-City Retail (India) Ltd, while an-nouncing his move to up the stake of Shoppers Stop from 19 to 51 percent, said that the Group’s target is to add three-four stores every year and take it to a tally of 26 stores over the next five years. In terms of revenues, Hy-perCity’s current stores are on their way to see break-even by fiscal 2012. Apparently, Nair’s deft hands are go-ing to be full with targets and new benchmarks to achieve.

Fortunately for Nair, he can always draw inspiration and strength from his years spent in the army. Writing an extensive article on logistics su-periority for a military magazine (the article has still not been published) Lt. Col. Nair explains how “retail logistics can benefit from looking at what the army does well.....good leadership, managing individuals and teams and learning how to relate information and data to ground re-alities.” Apparently, it is these lessons learnt and practiced which is helping the hypermarket supply chain team tread the path of excellence.

Sheets of rain beat down on our car as we drive through a verdant countryside, al-

most magically revived by the much-await-ed south west monsoon. We are headed towards Vadape, 65 kms from Mumbai, where the central DC of Hypercity Retail is located. The cavernous DC is inside Shree Raj Lakshmi warehouse park and has been

configured with WMS. Chetan Rawat, man-ager, logistics, who overseas operations at the DC mentions that “100,000 units move into the DC every day, with a container load of products leaving for Hyderabad daily.”

Significantly, the Hypercity Retail DC has also embarked on corporate social re-sponsibility programmes. It has adopted a

girl’s primary school and along with Kotak Education Founda-tion, the company is training local youths in warehousing tech-niques, thus enhanc-ing their employment opportunities. It is also planning to green its supply chain by installing solar panels and introducing rain-water harvesting.

Where the Heart is

The central Distribution Centre at Vadape, near Bhiwandi, Maharashtra


< Guest column

For the country to continue its growth trajectory the development of logistics infrastructure is required, writes Vineet Agarwal

Vineet AGArwAlExecutive Director,Transport Corporation of India (TCI)

How about

44

The Indian economy registered 7.4 percent growth in the 2009-10 f is-cal and the government is expect-ing the GDP to grow at around 8.5

percent in 2010-11. A number of factors like the f iscal condition of the economy, the fo-cus on agriculture and the health sector etc. will determine whether we can achieve this growth rate.

There are several other issues on which this growth rate impinges – the pertinent one among them being the availability of infrastructure (both qualitatively and quan-titatively) — which will ensure this growth trajectory. As in most other developing coun-tries, sound infrastructure will be the back-bone of the Indian economy and play a sig-nificant role in its development.

The development of every sector in the country is directly or indirectly linked to infrastructure and this applies to the lo-gistics sector as well. For too long has poor infrastructure been a hurdle for the logis-tics sector, but lately the government has been taking several initiatives to improve it. There has been a lot of focus on hard infrastructure building with planned and enhanced activities and many projects such as the construction of airports, ports, indus-trial parks, roads, highways and dedicated

freight corridors etc. There have also been some signif icant developments in improv-ing soft infrastructure such as paving the way for GST, solving certain taxation issues, looking for solutions for seamless move-ment, the use of technology in various appli-cations, all of which fall in the category of soft infrastructure.

three-tier modelWhen we talk about an efficient and suc-cessful infrastructure design, it should be a three-tier model which comprises hard in-frastructure, soft infrastructure and middle infrastructure.

Middle infrastructure connects the hard and soft components and makes the whole model a success. This category consists of warehouses, multi-modal logistics parks, cold chains, cross docks, etc. It also includes the right linkages to truck terminals, transport nagars, toll collection systems, checkposts, anything which facilitates trade both directly and indirectly and makes the entire process function in a seamless manner.

Even though a preliminary base has been made for building infrastructure in the coun-try over the last decade, it is still not substan-tial. Unfortunately, there has not been much focus on the upgrading and improving of this

middle infrastructure?

45

middle infrastructure. There is a grave need to create large scale warehouses, logistics parks, hubs, modern truck terminals and set up cold chain networks in the country. The construction of more transportation hubs and logistics SEZs should be initiated as that will create common, shared facilities for lo-gistics providers to bring about overall opera-tional efficiencies.

India’s roads are congested and of poor quality. Its highways are also not access-controlled allowing humans, animals and all types of vehicles on the same road which results in accidents, reduces the eff icien-cy of highways and increases commuting time. Also, the amount of time spent in complying with inter-state and intra-state tax requirements and at transport check-points affects the cost and competitiveness of both logistics service providers as well as their customers.

In this regard, Transport Corporation of India undertook a survey on various routes across India to study the operational efficien-cy of national highways. If we take an exam-ple of the Delhi-Bangalore route, it was found that the average speed of vehicles on this route was 20-21 kms per hour. On an average, there were 25 stops (15 toll collections) on the way and the average stoppage delay was five hours, about 5 percent of the journey’s total time and on occasion, the delay was around 15-20 percent of the journey time. Due to all these reasons, trucks cover a maximum of 250-400 kms a day as compared to 700-800 kms in developed countries.

increase middle infrastructureThe National Highway Authority of India is trying to keep its promise of adding 20 kms a day to the highway network in the country, but, in the process, it might end up compromising on the quality of construc-tion. In order to improve the overall quality of freight transportation (both in terms of reducing transit times as well as reducing the number of accidents), the focus should be on high traff ic density routes by increas-ing their capacity and making them 100 percent access-controlled. More connecting roads like by-passes, ring roads etc. supple-mented by middle infrastructure should be made to ensure faster entry and exit from

small towns and cities. The government should also introduce

a uniform integrated tolling system where vehicles need to only slow down rather than completely stop and wait in queues for collection of toll at checkposts. Also, a system similar to the TIR Carnet system used in the European Union should be in-troduced that requires no checking of con-signments at interstate checkposts since the consignments are sealed at the origin. This will facilitate smooth f low of high-value, perishable and time-sensitive items.

shortage of manpowerAnother concern is an acute shortage of skilled manpower in the logistics sector. The government should collaborate with academia and industry associations for sector-specif ic projects and tailor-made training programmes. Driver training in-stitutes should also be set up to periodi-cally train and update drivers on vehicle maintenance, road safety, hygiene stand-ards and health hazards.

The future of the industry is very bright and it is sure to witness exponential growth in the coming years, though the biggest challenge will be to increase efficiencies and become more cost effective in order to make Indian industry globally competitive. This is a problem which needs to be ad-dressed in a holistic manner.

Awareness at the state government level as to how a formidable middle level infrastructure regime can enhance overall economic eff iciency by simple solutions, like allocating 5-10 percent of space in any new industrial zone for logistics, can go a long way. Even at the central level, there are far too many ministries dealing with infrastructure. Possibly, the solution lies in forming a committee comprising sen-ior off icials from different infrastructure related ministries who can create a road-map for the development of middle in-frastructure by taking state governments into conf idence.

NHAI IN tryINg to

keep Its promIse

of AddINg 20

kms A dAy

mIgHt eNd up

compromIsINg

oN tHe quAlIty

of coNstructIoN

Source: TCI- IIMC Joint Study report on Op-erational Ef f iciency of National Highways for Freight Transportation in India- 2009


The logistics of oil and gas exploration and production (E&P) is both challenging and rewarding. Then why do we have so few players in the fi eld? Jayashree Mendes explores the conundrum

Not for Not for Not for the Meekthe Meekthe Meek

< feature


< feature

No other business activity in the world brings together so many companies, so much

manpower and widespread use of technology as the oil and gas busi-ness does. Be it in onshore or off-shore exploration, rig operations, or the areas of transportation, or retail, the oil and gas industry is more de-manding and layered than any other industry. As per a guesstimate, even the smallest oil and gas exploration block involves a minimum cost out-lay per day of ten lakh rupees and di-rect and indirect involvement of more than 6,000 workers. Leave alone the massive involvement of technology and the variety of the equipment in-volved, the logistics of the entire business is mind-boggling. Consid-ering that India’s total production of crude oil during 2008-09 was 33.50 million metric tones (MMT) and the total production of natural gas dur-ing the same period was 32.85 billion cubic meters shows the huge capacity of the industry (Source: IBEF).

Indeed, logistics plays a very cru-cial and integral role in India’s oil and gas business, especially in an up-stream activity like exploration and

production, not just when oil is dis-covered but far earlier even before the process of looking for the oil begins. Particularly offshore, managing the processes without the help of a logis-tics player is unimaginable. Overall, logistics in oil and gas is not just an appendage. It is a sub-contract.

Need for logisticsSiddhartha Roy, the president of Arya Offshore – a company that was incor-porated in Mumbai soon after oil was discovered at Bombay High in 1973, and has since grown to offer integrat-ed logistics to the oil and gas sector – says, “It is generally thought that logistics companies offer periph-eral services to their principals. But oil and gas companies have realized the importance of involving logistics players from the time they decide to bid for a particular field or block till production and sale.”

Roy says that the biggest chal-lenge for a logistics player is that of meeting the critical demands of com-panies conducting exploration off-shore. “Even the minutest delay can cost millions of rupees per day. That’s why logistics service providers (LSPs)

playing in E&P offer holistic service. They are more proactive than restrict-ing to being a pure logistics player.”

Where do LSPs enter the equation? Looking for new oil-and-gas finds is a continuous process even though discoveries are rare. “Oil and gas exploration is a high risk game and a huge gamble. Companies and gov-ernments spend billions of rupees and nine times out of ten, one might not strike any oil at all. But it is criti-cal to the country’s economic future. India imports about 70-75 percent of its crude requirements. In this light, local exploration for oil and gas is a persistent program, be it onshore or offshore,” says a consultant who wishes to remain anonymous.

Exploration begins with incessant 2D and 3D seismic surveys conducted across land, oceans and seas. Large equipment move across land and sea for months and years using vibration, and reflection and refraction to find shallow and deep sea oil and gas.

LSPs help the exploration compa-nies acquire seismic data, in trans-porting seismic vessels, locating the seabed, processing and evaluation of data, while addressing the numerous


< feature

applications and engineering prob-lems related to transportation, infra-structure, and tunneling.

Once the seismic survey detects the presence of oil and gas, the government invites oil companies to bid for exploration now under its New Exploration and Licensing Policy (NELP). Bidding is a com-petitive process. However, there is a catch here. Seismic surveys only detect the presence of oil and gas and can be indicative. A suc-cessful bidder will be required to pump in up to Rs 30 lakh per day before the oil and gas can be ex-tracted. For the technical part of the bid, an exploration company will have to be sure of the capa-bilities that its logistics partners bring to the table.

In the fraySince they require large scale invest-ments, companies bidding for E&P for a particular block come together in a consortium. The main bidder chooses its partners on technical skill-sets and their willingness to take a commer-cial stake. The consortium will rope in the LSP at this juncture. “An LSP on board at the outset understands the operational requirements of the job and places orders for equipment, es-pecially the long lead items,” says KV Poojary, General Manager (Offshore Services), GAC Shipping, a logistics company in the oil and gas sector that recently ventured into offshore servic-es. Long lead items are made-to-order equipment that require a lead time of two years or more for delivery.

The exploration projects being

highly complex and tech-driven, equipment used are large and very expensive. There are few Indian com-panies that manufacture or own such equipment – a majority of them need to be hired. And the entire range of the required equipment may not be available with any one company. In terms of drilling rigs, some of the international companies that lease

LSPs source

equipment

across the

globe as an

entire range

of equipment

may not be

available with

any one single

company

n Arya Offshoren Babaji Shivramn Chandra Logisticsn DHLn GAC Worldn Inchcapen Sical Logistics

Big Players in the field


51

says, “There are real challenges and complications involved here. All the goods imported into the country for exploration must get the green sig-nal from either the Ministry of Home Affairs or the Ministry of Defence or both. This goes even for oilfield workers.”

But most importantly, according to Roy, LSPs needs to know the an-swers to the innumerable questions pertaining to equipment import. “What kind of goods (equipment) are

them out are Transocean, Ensco, Dia-mond Offshore; while Indian compa-nies are Aban, Jindal, Great Offshore, Great Ship. The large equipment are, in fact, ordered from various coun-tries and hired as exploration projects run for a minimum of 5-7 years. Most of the hiring is done through LSPs. Regular equipment for offshore ex-plorations include rigs, platforms, pipelines, SCADA (Supervisory Con-trol and Data Acquisition) systems, control systems, pressure control metering stations, compression fa-cilities, installation of GOSP (gas and oil separation plant), telecommuni-cations, heavy lifts barge, storage tanks, power generation facilities, among other smaller apparatus.

Gracias Thevar, Country Man-ager (Logistics), GAC Shipping,

LSPs aid

oil and gas

companies in

acquiring seis-

mic data, and

in processing

and evaluation

of data

OIl and gas LSPs must know

the proper etiquette of bring-

ing in equipment into the

country, getting documenta-

tions ready and returning them

back to the owner after use

n India has significant oil and gas reserves and just over 60 per cent of the potential in the oil sector has been explored so far.

n As per the Ministry of Petroleum, demand for oil and gas is likely to increase from 186.54 million tonnes of oil equivalent in 2009-10 to 233.58 mmtoe in 2011-12.

n The production of natural gas went up to 47.57 billion cubic metres tonnes (BCM) in 2009-10 from 32.84 BCM in 2008-09.

n India's natural gas demand is expected to nearly double to 320 million standard cubic meters per day by 2015

n Oil comprises about 33 per cent of India’s primary energy consumption at present

Highlights



< feature

they? Are they safe to import? Will they be allowed into the country? Are they restricted or non-restricted goods? Are those goods available in India? If so why should it be im-ported? Is there any customs duty to be paid? How long will the customs process take? Can there be any glitch-es? If the goods are stuck in customs, is there a back-up plan? Even if one gets it into the country, how do you take it offshore? Is there a supply base or a warehouse? And all these ques-tions pertain only to the equipment. All this because it is imperative that equipment is not held up for days on end and is quickly transported.”

The never ceasing documentation is another imperative. Since most of the equipment is leased, it has to be transported back to the owners which are often located overseas. The

Ministry of Defense will also want to know to what extent the equip-ment has been used, in case it needs to be imported in again for another project. Unless LSPs maintain com-plete records of import methods and payments, the equipment can’t be imported. However, the silver lining is that duties on equipment used in E&P are generally waived.

a matter of skillsThen there is the question about manpower. This part of the project is outsourced to the LSP who arrange for skilled technicians to work at rigs, platforms and barges. Thousands of people work during various phases of an E&P project. And consider-ing the grave security issues, this can become cumbersome. Customs clearances are mandatory and the

n Handling project transportation and supply chain logistics

n Acquire customs clearance for equipment and manpower

n Warehousing, packing, freight forwarding n Arrange clearances from Ministry of Home Affairs

and the Ministry of Defencen Maintain documentation of the innumerable

equipment required for explorationn Port and shipping servicesn Customs clearance for vessels bringing in cargo

and peoplen Arrange air and helicopter transfer of people

constantly flying in and out of oilfieldsn Loading and discharging servicesn Arrange for equipment, long lead items and anticipate

project logistics once a block has been wonn Source and manage the skilled technicians for rig

operations, barges, and supply vessels

What LSPs Do

The process of oil exploration looks a lot like the example above. A company identifies an attractive area to

drill, either onshore or offshore. Next, it and/or the government conduct seismic mapping to understand the

presence of hydrocarbons. It considers several factors about drilling a well: How deep are the hydrocarbons?

What are the rock formations beneath? How big might a potential hydrocarbon discovery be? Drill rig rentals

are brought in and various equipment is set up after the presence of oil is detected.


< feature

checklist, infinite. From scanning the backgrounds of the people hired to work to the number of workers needed and ensuring that they be al-lowed to enter the oilfields, the entire job has its own demands. Poojary says, “Nothing beats a visa problem. Most employees entering the country are not aware of the complexity of In-

dian laws. Some may have an employ-ment visa, for instance, but forget the clearance of the Government of In-dia. Handling men and equipment is a demanding job.”

It may take a while for an LSP (as well as an oil and gas company) to get used to the complexity of explo-ration, what with the tedious docu-

mentation, people and permissions involved. An expert recounts an in-cident where a rig owner had to stop work due to want of a spare part. They called for one to be imported and in-stalled. The technician promptly flew down from the US to India with the spare part. However, unbeknownst to the rig owner, the technician had

3D seismic data: A set of numerous closely-spaced seismic lines that provide a high spatially sampled measure of subsurface reflectivity. 3D seismic data provide detailed information about fault distribution and subsurface structures. 4D seismic data: 3D seismic data acquired at different times over the same area to assess changes in a producing hydrocarbon reservoir with time. artificial lift: A system that adds energy to the fluid column in a wellbore to initiate and improve production from the well. Barrel pump: A small pump with an extended suction duct to pump fluid from barrels. Cable-tool drilling: A method of drilling whereby an impact tool, suspended in the well from a steel cable, is dropped repeatedly on the bottom of the hole to crush the rock. Centrifugal pump: A pump used in the handling and mixing of oilfield fluids. They operate in high-volume, low-output-pressure conditions. It is also known as a "C pump." Degasser: A device that removes air or gases (methane, H2S, CO2 and others) from drilling liquids. Derrick: A structure used to support the crown blocks and the drillstring of a drilling rig. Derricks offer a good strength-to-weight ratio. Drillpipe: The drillpipe connects the rig surface equipment with the bottomhole assembly and the bit, both to pump drilling fluid to the bit and to be able to raise, lower and rotate the bottomhole assembly and bit. Drillship: A maritime vessel modified to include a drilling rig and special station-

keeping equipment. A drillship must stay relatively stationary on location in the water for extended periods of time.elevator: A hinged mechanism that may be closed around drillpipe or other drillstring components to facilitate lowering them into the wellbore or lifting them out. exploration: The initial phase in petroleum operations that includes generation of a prospect, and drilling of an exploration well. flare gas: An arrangement consisting of a vertical tower and burners used to burn combustible vapors. Gathering system: The process facilities that transport and control the flow of oil or gas from the wells to a main storage facility, processing plant or shipping point. A gathering system includes pumps, headers, separators, emulsion treaters, tanks, regulators, compressors, dehydrators, valves and associated equipment.Jackup rig: A self-contained combination drilling rig and floating barge, fitted with long support legs that can be raised or lowered. The jackup is towed onto location with the barge section floating on the water. Upon arrival at the location, the legs are jacked down onto the seafloor, preloaded to securely drive them into the seabottom, and then all three legs are jacked further down. Operator: The owner of the right to drill or produce a well, or the entity contractually charged with drilling of a test well and production of subsequent wells. Pipeline: A tube or system of tubes used for transporting crude oil and natural gas

from the field or gathering system to the refinery.rig: A machine used to drill a wellbore. Onshore, the rig includes virtually everything except living quarters. Major components of the rig include the mud tanks, the mud pumps, the derrick or mast, the drawworks, the rotary table or topdrive, the drillstring, the power generation equipment and auxiliary equipment. Separator: A cylindrical or spherical vessel used to separate oil, gas and water from the total fluid stream produced by a well. Submersible drilling rig: A type of floating vessel supported on large pontoon-like structures submerged below the seasurface. Submersibles operate in relatively shallow water, since they rest on the seafloor. Suction pit: A mud tank, usually made of steel, connected to the intake of the main rig pumping system. Supply vessel: Any barge, boat or ship that brings materials and personnel to and from the rigsite.Surface casing: A large-diameter, low-pressure pipe string set in shallow formations. Surface casing protects fresh-water aquifers onshore and enables a diverter or a blowout preventer (BOP) to be attached to the top of the surface casing string after it is cemented in place. treater: A vessel used to treat oil-water emulsions so the oil can be accepted by the pipeline.Wellhead: The system of spools, valves and assorted adapters that provide pressure control of a production well.

terminologies: What Lies Beneath


overlooked some formalities, such as acquiring a clearance from the Ministry of Home Affairs to enter the offshore field and the work permit re-quired in such cases. Consequently, the entire project schedule went hay-wire for a few days.

Goods once having entered the country, prior to taking them off-shore, need a place to be kept safe – ei-ther in a warehouse or in the port. Off-shore transfer can happen only by sea or air. And huge equipment must go by sea. There is the question of berth and port availability. Generally most oil and gas companies use the concept of a shore base or a supply base. Most LSPs playing in the oil and gas sector have their own marine base inside the port. This is far different from the days when oil and gas companies set

up their own bases due to want of spe-cialized LSPs. For example, Arya Off-shore offers marine support bases on the east and west coasts of India. The company offers three types of marine support bases to its clients. Multius-ers can use the water-front facilities at Bhavnagar and Mumbai with large storage and staging facilities. The Captive base offers similar facilities for a single operator. While Staging is a provision for material handling equipment, inventory management, and warehousing at site.

While support services are of-fered, it still does not put an end to the berth or port congestion at In-dian ports, which is a huge bottle-neck. Port authorities give preference to liner or cargo ships on account of the latter fetching higher revenues.

Oil and gas cargo ships are usually smaller than the average cargo ship or a cruise liner – oil and gas cargo ships range from 500 to 1,000 tonne with a draft requirement of 8 meters; cruise liners, for example, range be-tween 15,000 and 20,000 tonne.

Preserve of the fewIt is no surprise that just a handful of LSP players are present in this tricky and intractable area, and of that only two or three offer integrated service to oil and gas companies. “Oil and gas logistics is highly capital intensive, acutely technical and the LSP needs to provide end to end. It will not do to have the block owner running around to various players for various needs,” says Roy. In India, there are smatter-ing number of large oil and gas LSPs (See box: Players in the field) and a handful smaller players limited to se-lect parts of the supply chain.

Technology obsolescence is a big challenge. A technology used today may be outdated in three months time. For example, interpretation of data acquired for seismic evaluation of oilfield requires technologically advanced software and equipment that are prone to obsolescence. So the LSP has to keep track of the technol-ogy to be used and order a fresh piece at the right time.

“There is room for more technical players in this field. Most of the times we have to bring in technology solu-tion providers from different coun-tries due to the absence of local play-ers,” says Gracias.

Experts attribute the limited pres-ence of LSPs in this field to the fact that the business is capital intensive, leaving little or no scope for small entrepreneurs. Even more, the ges-tation period could stretch to years, considering the highly mission-crit-ical nature of the industry. Nonethe-less, given the magnificence of the re-wards, and the future of the industry in India, the oil and gas LSP business is a risk worth taking.

India's Annual Crude Production

The annual crude oil production ratio of offshore to onshore operations has largely remained static.

Source:Ministry of Petroleum and Natural Gas

0.00

12.224.1

22.9

22.7

20.8

22.4

21.9

20.6

11.2

11.3

11.4

11.6

11.5

11.8

2007-08

2008-09

2006-07

2005-06

2004-05

2003-04

2000-01

5.00

(in metric million tonnes)

10.00 15.00 20.00 25.00

Onshore Offshore


< primer

Andon

Trailer Drop Will Call

Supplier Scorecard

Back to Basics

Andon is a manufacturing term derived from the Japanese term

for a "Lamp" or signal with origins from ancient Japan where paper lan-terns were used as flashlights or sig-naling devices.

Andon lamps were originally de-veloped as part of the Jidoka quality-control method within the Toyota Production System together with Just-in-Time (JIT) to reduce process inventory costs in a supply chain. An Andon system is an essential aspect of lean visual control in a factory and in implementing a successful lean manufacturing program.

Andon systems and Andon dis-

plays improve response time by sup-port resources to plant operations that require attention. Andons can be used for multiple purposes - signal-ing resources, abnormal conditions, machine issues, and much more.

Andon information boards pro-vide an instant overview of a ma-chine’s performance such as units completed and number of defects, according to the Factories Strate-gies Group.

The boards can be in the form of computer screens, paper charts, electronic boards, manual boards, etc. They often include lights and/or sounds to communicate the status

Trailer drop is a safety risk that can occur at virtually any load-

ing dock and is often more severe on trailers with air-ride suspen-sion systems.

When the container is being of-floaded from the trailer on to the forklift, the trailer-bed can rise above the level of the forklift, and cause the container to come down with a heavy jerk at the operator’s end. This can not only damage the product and the forklift, but also cause back or neck injuries to the operator.

On the other hand, when the con-tainer is being loaded on to the trail-er, the trailer level drops, causing the container to fall with a jerk on the trailer-bed, thus causing possi-ble damage to the contained goods.

The drop or the rise can range from four to eight inches during loading or unloading by a forklift.

According to Rite Hite, a US-based loading-dock solutions com-pany, trailer drops can cause severe back and neck injuries, as well as cause muscle fatigue to forklift op-erators. They can also cause product and equipment damage.

For tackling trailer drop prob-lems, vehicle restraints are now available. The restraint supports the rear of the trailer during the loading and unloading process minimizing vertical and horizontal trailer movement.

The term “Will Call”, in the wholesale and retail trade industry refers to merchandise that is to be picked up

at the seller's place of business. A “will call” memo is given to wholesale delivery drivers as an instruction to pick up items at the address stated on the memo.

This is done by customers to save on shipping charges and is often frowned upon by companies that are not de-signed for in-person sales. As a result, some companies ban the practice of will call pick-ups while others implement a will call charge for in-person pick ups.

Supply chain improvement is critical for large, mid-sized and small sized manufacturers. The Supplier Scorecard

is a tool that helps evaluate individual suppliers.The tool assesses suppliers based on performance

benchmarks in areas such as Manufacturing Critical path Time (MCT), On-Time Delivery, Quality Parts per Million, Cost of Poor Quality, Inventory Turns and Productivity Gains. However, it makes room for adjustments depending on the specification of a particular industry.

In this section, we revisit some basic concepts – everyday logistics and supply-chain terms that need a brush up (or an update) every now and then

Can you help us with more such terms – used everyday but seldom revisited? Please mail your suggestions to [email protected]. If chosen, we will be happy to publish your suggestion with due credit. (Section concept: Rakesh Singh, Founding Dean, NMIMS School of Economics)

of a process and to call for help.On the Toyota Production Line, if an operator has a

problem, the Andon cord is pulled to signal that help is needed. This lights up an indicator on the Andon board and starts playing a musical tone particular to the problem. The Andon board sometimes also indicates the type of help needed (maintenance, team leader, supplier, etc).

Source: O

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umF

X

INdIa

Logistics Media Prtner


< panoRaMa

The Specialty Generalist

Energetic Progress

Hübner, in his book, “Strategic Supply Chain Management in Process Industries”

discusses on how often practitioners in the process industry have to acclimatize their global production networks to changes in a challenging environment. Many of the sup-ply network design models proposed by academia do not suffi ciently capture the eco-nomic and technical questions that should be resolved. This book aims to provide the nec-essary operations research decision support tools. It does so by building on an example of the specialty chemicals industry, which faces a strong increase of competitive pressure and historically grown production networks that

The book “Transport Revolutions: Moving People and Freight Without Oil,”examines

the kinds of change that motorized transport around the world could undergo. Today, 95 percent of this transport is fueled by deriva-tives of petroleum. A shortfall between de-mand and supply can cause prices to rise. Ac-cording to the author, high oil prices, or even the anticipation of them, could bring about four kinds of transport revolution:

1. Internal combustion engines could be propelled by electric motors in the future.

2. Land transport carrying fuel on board could be replaced by electric vehicles that are

Towards a Sustainable Living“Kick the Fossil Fuel Habit, 10 Clean Tech-

nologies to Save Our World” is an at-tempt by an engineer, Cleantech authority, venture capitalist, pragmatic entrepreneur and philosopher and author Tom Rand, to enlighten us on ways to reduce our depend-ency on fossil fuels.

Rand provides an in-depth look at 10 tech-nologies that together can bring a clean future, free of fossil fuels. The book is a clarion call to governments, corporations and individuals to provide future generations the opportunity to live in a sustainable world.

Kick the Fossil Fuel habit By Tom RandPublisher: Eco Ten Publishing, Inc.Price: Rs 1,570

strategic supply chain Management in process Industries By Reinhard Hübner Publisher: SpringerPrice: Rs 4,750

transport RevolutionsBy Richard Gilbert and Anthony PerlPublisher: New Society PublishersPrice: Rs 1,230

OFF THE SHELF

typically lack a coherent design strategy.The author proposes process splitting of

the planning process into two phases: global production network optimization and individ-ual site selection. To support the fi rst phase, a comprehensive Mixed-Integer Linear Pro-gramming model has been proposed and an Analytic Hierarchy Process approach has been suggested for the latter.

The book advocates the use of alternate sources of energy such as solar, wind, hydro-power and geothermal energy and how by adopting smart technology in one’s life one can take a step closer to preserving the environment.

Rand uses anecdotes, combined with a hard-headed engineering and business perspective and vivid photographs to spread his message.

grid-connected.3. Most marine transport is propelled by

diesel engines. In future their use will contin-ue but with assistance from wind.

4. Air movement is the fastest growing. However the author suspects that soon, there could be a decline in demand as there would be no adequate substitute for avia-tion fuels.


ResouRce centeR Journals, Case Studies, Research Reports

PUMA.Safe Launches Sustainable PackagingBy Puma

After more than ten years of implement-ing its social and environmental stand-ards (puma.safe), Puma launched its long-term sustainability program at the Design Museum in London. PUMA set new standards within the retail industry with its cutting-edge packaging and dis-tribution system by renowned industrial designer Yves Béhar.

The new solution will significantly re-duce the amount of waste and CO2 emis-sions that traditional product packaging such as polyethylene bags generate and underpins PUMA’s target of reducing carbon, energy, water, and waste by 25 percent, and developing 50 percent of its international product collections in foot-wear, apparel and accessories according to best practice sustainability standards by 2015.

Puma aims at a 25% reduction of CO2, energy, water and waste in PUMA offices, stores, warehouses and direct supplier

factories. The brand has also charted out a paperless office policy through a 75% reduction and offsetting initiatives for the remaining paper usage such as tree planting initiatives. Search tags: puma.safe, sustainable, packaging

Some 90 Percent of a Truck is RecycledBy Volvo

Volvo Trucks produced a dismantling man-ual back in the mid-1990s to facilitate recy-cling. Parts in good condition become spare parts, others are recycled or are turned into new energy. To make dismantling effective, the parts have been made easy to remove.

In a newly produced Volvo FM or Volvo FH 4x2 tractor, 97 percent of the weight of the cast iron is recycled, as is 50 percent of the forged iron and 90 percent of the alumi-num. When it comes to lead, bronze, copper and stainless steel, between 40 and 86 of the percentage by weight in a new truck is made from recycled material. Overall, about 33 percent of the weight of a new Volvo truck is accounted for by recycled metal.

In Sweden, not a single truck com-ponent from Volvo Trucks is buried at a landfill.Search Tags: Volvo, truck recycle

PLAZA, the Logistics Park of ZaragozaBy Noel Watson, Santiago Kraiselburd

In 2000, the government of the Autono-mous Community of Aragon, Spain, made public a project for the develop-ment of a large-scale logistics park on the outskirts of the city of Zaragoza. With an area of nearly 13 sq kms, Plaza (an acronym for Zaragoza Logistics Plat-form) would be by far the largest logis-tics park in Europe. The case illustrates the motivations, the reasoning used in deciding the location of the park, and also advantages (and disadvantages). It provides data to prepare an analysis from the viewpoint of a potential cus-tomer, where the cost advantage of locat-ing a facility in Zaragoza with respect to Rotterdam can be quantified.Search Tags: Noel Watson, plaza, Zaragoza, hbr

Forecasting ocean rates is a risky scienceBlogger: Laurie turnbull, supply chain consultant with the cole Group In his blog, Turnbull says that forecasting works well when parameters in consideration are certain. But what do you do when forecasting is based on variables or when the parameters lack clarity?

When asked if there would be a surge in shipping rates in 2010, most shippers agreed a surge was expected or perhaps none at all. Only a fraction predicted a fall. The majority was right. 2009 and the previous year saw a drop in rates so it was only logical that rates go up or remain unchanged. Forecasting transportation costs doesn’t get easier in the face of economic uncertainty, it just gets more important.search tags: Laurie Turnbull, ocean rates

the more you train, the more you gainBlogger: claes Åkerlund, concept Manager, scania Driver training

Åkerlund talks about the challenges of being a truck driver. Delivering cargo reliably through congested motorways, damaged forest roads can be stressful. Furthermore, drivers

are expected to drive gently so as to save fuel, the tyres, etc.Surveys done by Scania show that drivers who underwent

Scania driver training achieve at least 10 percent better fuel efficiency. Better drivers also help in longer tire life, lower maintenance, fuel costs, and lower emissions.search tags: Claes Akerlund, Scania, driver training

the Man, the Mouse and the WardrobeBlogger: Farhad Manjoo, the new York times

Farhad speaks about his experience with Trunk Club - an internet start up for men who dread a trip to a mall to buy clothes. Trunk Club is a clothing service based in Chicago that offers personal styling services. Under the leadership of Brain Spaly, a Stanford Business School graduate, Trunk Club has made it easy for men to buy clothes, hassle-free. The customer has an online consultation to take care of sizing after which the Club hand-selects outfits and ship them for free. The customer tries them out and receives a second opinion from an expert via a consultation. The item is sent back if it doesn't appeal to the customer. This is an example of how the internet will revolutionise retail.search tags: Farhad Manjoo, Trunk Club

< panoRaMa

BLoGospheRe

• Need for Mechanization at Indian ports

• Draft Constraints (which hinder entry of

large vessels to most major ports)

• The Policy Conundrum

• Regulatory Issues (The TAMP Factor)

• Labor Management at Ports

• PPP: Challenges and Opportunities

• Major and Non-Major ports: Lessons to

be Learned

• Epilogue

warehousing

HANDBOOK

Book your copy NOW and avail of the early bird discount

To advertise: West: Ashok [email protected]’

Dinesh Mishra [email protected]

Email: [email protected]

INdIaWe Transport Information

www.logisticsweek.com

Book Your

Copy Now!

• Need for Mechanization at Indian ports

• Draft Constraints (which hinder entry of

• The Policy Conundrum

• Regulatory Issues (The TAMP Factor)

• Labor Management at Ports

• PPP: Challenges and Opportunities

• Major and Non-Major ports: Lessons to

• Epilogue

warehousing

HANDBOOK

Coming Soon!

Ports of India HANDBOOK

JNPT MaTerial HaNdliNg? gaTeway TerMiNal iNTerNaTioNal

PrivaTe liMiTed iNdia gaTeway TerMiNal PrivaTe liMiTed PSa

SiCal TerMiNalS liMiTed CHeNNai CoNTaiNer PrivaTe lMiTed

viSakHaPaTNaM MuNdra PorT kriSHNaPaTNaM PorT kolkaTa PorT

MuMbai PorT abg kaNdla PorT MarMugao PorT New MaNgalore

koCHi PorTkaraikal PorT digHi PorT dHaMra PorT PiPavav PorT

Haldia PorT ParadiP goa TuTiCoriN JNPT MaTerial HaNdliNg?

gaTeway TerMiNal iNTerNaTioNal PrivaTe liMiTed iNdia gaTeway

TerMiNal PrivaTe liMiTed PSa SiCal TerMiNalS liMiTed CHeNNai

CoNTaiNer PrivaTe lMiTed viSakHaPaTNaM MuNdra PorT

kriSHNaPaTNaM PorT kolkaTa PorT MuMbai PorT abg kaNdla PorT

MarMugao PorT New MaNgalore koCHi PorTkaraikal PorT digHi

PorT dHaMra PorT PiPavav PorT Haldia PorT ParadiP goa TuTiCoriN

JNPT MaTerial HaNdliNg? gaTeway TerMiNal iNTerNaTioNal

PrivaTe liMiTed iNdia gaTeway TerMiNal PrivaTe liMiTed PSa

SiCal TerMiNalS liMiTed CHeNNai CoNTaiNer PrivaTe lMiTed

viSakHaPaTNaM MuNdra PorT kriSHNaPaTNaM PorT kolkaTa PorT

MuMbai PorT abg kaNdla PorT MarMugao PorT New MaNgalore

koCHi PorTkaraikal PorT digHi PorT dHaMra PorT PiPavav PorT

Haldia PorT ParadiP goa TuTiCoriN

The handbook looks into all the issues related to the major Indian ports with experts’ views of a roadmap to possible solutions for ports

infrastructure and performance excellence. The main topics to be covered will be:

LOG.India and Logisticsweek present you ‘Roadmap to Performance Excellence’, a

Handbook on Indian Ports.


< panoRaMa

hyundai Develops eco-friendly Marine Gas engine

cLeVeL Launches cstReaM

Sweden based commercial vehicle manufacturer Scania has launched its V8 series with the highest torque and

power ratings of any truck engine: 3,500 Nm and 730 hp. The V8 is based on the Scania R-series, boasting high-output and with four power ratings to choose from – 500, 560, 620 and 730 hp.

Its engine is based on the modular engine platform and technologies used with Scania's new inline engines, while also sharing many features and components of existing V8s and a great deal of the architecture with other Euro 5 V8s. The truck also has an all-new common-rail fuel injection en-gine platform.

The V8 features a reinforced Scania gearbox which is f it-ted as standard with the new Scania Opticruise automated gear changing system. The new engine is tuned to give plen-ty of torque at idling speed; maximum torque is produced from 1,000 r/min.

CLEVEL, the company that introduced the term

‘carbon footprint’ in early 2000, has launched its f irst web application to simplify carbon management in the supply chain.

The carbon app – CSTREAM – makes it easier and cheaper for any organiza-tion to work out the carbon footprint of its supply chain and also to collaborate on carbon reduction.

CLEVEL developed its be-spoke cloud based approach on client requests and is now offering CSTREAM as a car-bon app that can be individ-ually branded and tailored to match the needs of new clients.

Hyundai Heavy Industries (HHI) has completed a test run of its new, eco-

friendly HiMSEN Gas Engine H35G.The new gas engine can be used for ship

propulsion and power plants. The engine features ‘Lean Burn’ technology and is eco-friendly and highly efficient as a result of re-duction of parts to make it lighter and there-fore fuel saving.

The new engine emits 20 percent less CO2

than diesel engines, reduces NOx emissions by 97 percent to reach a claimed "world’s low-est" level of 50ppm, and improves engine per-formance by 47 percent.

Upon the completion of the newly devel-oped gas engine, HHI will have full produc-tion capacity of 582kW to 10,142kW diesel and gas engines.

HHI plans to start full-scale production of the new engines early next year.

New Products, Technologies, Solutions LaunchpaD

scania Launches new V8 Lineup


< panoRaMa

con-Way Introduces twitter app to Match Freight and carriers

Gramin Launches nüvi 3790t

EasyJet, the UK’s largest airline, has unveiled a tech-nology that will minimize future disruption from

volcanic activity. EasyJet will be the world’s first air-line to trial a new technology called AVOID (Airborne Volcanic Object Identifier and Detector). The system, a weather radar for ash, was created by Dr Fred Prata of the Norwegian Institute for Air Research (NILU). AVOID involves placing infrared technology onto an aircraft to supply images to both the pilots and an air-line’s flight control center.

The images will enable pilots to see an ash cloud up to 100 km ahead of the aircraft and at altitudes between 5,000ft and 50,000ft. This will allow pilots to make ad-justments to the plane’s flight path to avoid any ash cloud.

On the ground, information from aircraft with AVOID technology would be used to build an accurate image of the volcanic ash cloud using real time data.

Gramin, a manufacturer of satellite navigation devices, has released its newest variant in the 37xx series, the nüvi 3790T. A personal navigation

device (PND), it features a multi-touch glass display, nüRoute technology with trafficTrends and myTrends, voice-activated navigation, 3-D building and terrain view, lane assist with junction view, hands-free calling compat-ibility, and subscription-free traffic alerts.

The nüvi 3790T is less than 9 mm thick and has a full glass 4.3” diagonal multi-touch display. Dual orientation capabilities allow you to use the nüvi 3790T horizontally or vertically.

Implemented with trafficTrends, the nüvi 3790T automatically learns daytime trends for traffic flow to improve routes and better predict estimated time of arrival based on time of day and day of week.

For hands-free calling, it integrates Bluetooth with a built-in microphone and speaker that can be paired to a Bluetooth-enabled device. The device also has another feature, ecoRoute, that calculates a more fuel-efficient route, tracks fuel usage, among other things.

Con-way Multimodal, a division of Con-way Inc., has launched a twitter app, Con-way

TweetLoad — a tool that helps carriers f ind freight loads leveraging Twitter.

Carriers can now easily access available loads from Con-way Multimodal by following Tweet-Load on Twitter at www.twitter.com/ConwayTweet-Load. Carriers following @ConwayTweetLoad can quickly see the latest available shipments, along with links to further information on the Con-way Multimodal link board where the carriers can place bids on available loads daily.

To create the TweetLoad functionality, Con-way Multimodal IT professionals have designed a patent-pending application that extracts key information on available loads from the com-pany’s load board, LINK, and uses it to populate individual load tweets viewable by TweetLoad followers. The application checks and transmits new loads every 15 minutes to keep information up-to-date for carriers following it.

easyJet unveils ash Detector

New Products, Technologies, Solutions

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INDIA


< EVENTS

Ju l y 2010July 14-16, 2010Future Supply Chain StrategieSthe golden palms hotel & Spa, BengaluruFrost & Sullivan’s Transportation and Logistics Practice is hosting an exclusive strategy work-shop for the logistics sector ‘Future Supply Chain Strategies’ from 14th-16th July 2010, at the Golden Palms Hotel & Spa, Bengaluru, India.

Frost & Sullivan finds that the total logistics market in India earned revenues of $75 billion in 2009, representing about 6.2 percent of the coun-try’s GDP. The market is expected to reach $120 billion by 2014, witnessing a CAGR of 9.9 percent between 2009 and 2014. The transportation seg-ment accounts for about 62 percent of the total market reiterating the fact that it is the most impor-tant logistics function for all industries.

However, Indian logistics service providers (LSPs) fail to satisfactorily meet end-user expec-tations with regard to key performance criteria such as process improvement capabilities, and material safety.

The workshop intends to assemble a network of visionaries and thought leaders from industry sectors such as automotive, IT hardware and telecom equipment, retail, and pharmaceuticals in India, for the specific purpose of developing future supply chain strategies. Frost & Sullivan will facilitate the ideation and evaluation among the participants of the best possible methods and practices through workshops, breakout sessions, and panel discussions to develop practical, feasi-ble, and sustainable supply chain models essential for organizations.

Eminent speakers and panelists will discuss and explore topics providing insights into the cur-rent status of the logistics industry, structural and regulatory developments, capabilities, and bottle necks. Expert groups will work to create an ideal future supply chain model and discuss strategies for their assigned industries.

Log.India is one of the media partners for the event.Organized by:Frost & Sullivan Tel: +91-44-4204 4500 Ext 491

July 14-15, 2010auto SCM 2010hotel le royal Meredien, ChennaiThe automotive sector in India has been booming and has emerged into a competitive market with a host of local and global players. OEMs and suppli-ers have been developing and executing competi-tive strategies to get an advantage in the market place. Automotive supply chains are a critical source of achieving this competitive advantage.

The CII Auto SCM 2010 event throws spotlight

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on the current state of auto logistics, needs, issues, strategy, process and organizational imperatives of this sector both at the company as well as country level.

India’s aviation sector is also showing signs of a strong uptick. The sector has grown by 25 percent in the last five years. India, along with China and West Asia, is going to be a major driver of the aircraft, maintenance and overhaul (MRO) market – a critical segment of aviation logistics industry.

The conference would be organized as an interactive workshop over a 2-day period.Organized by: CII Institute of LogisticsEmail: [email protected]

July 29, 2010energizing the FinanCial Supply Chainhotel Sahara Star, MumbaiThe banking and financial world, in association with Institute of Supply Chain Management (ISCM) is organizing a one day seminar on Energizing the Financial Supply Chain. The seminar will include: Optimizing the financial supply chain; Factoring and forfeiting; Collections management; Developments in trade finance; Role of SWIFT in financial supply chain; and Risks in financial supply chain.Organized by: Associated Business Media

23 - 26 July, 2010inDiaMart aMteX 2010 ( aSian MaChine tool eXhiBition )pragati Maidan, new Delhi, indiaIndiamart Amtex 2010 (Asian Machine Tool Exhibition) Delhi, will serve as a medium and base for showcasing technological development real-ized by several machine tools and auto component industries. It stands out as the largest trade event of manufacturing technologies, machineries and machine tools in Asia. The tradeshow has seen a significant growth of 300 percent during this time and with more than 1,200 stalls displaying the most innovative inventions, it will be a medium for exchanging interaction amongst manufactur-ers, suppliers and users of the emergent Indian market.

Indiamart Amtex-2010 will have visitors com-ing from a wide array of industries such as; public authorities and institutions, manufacturing indus-try, capital goods industry, basic materials primary products, services, distributive trades, consumer goods industry, telecommunications, construction industry, energy industry and other manufacturing sectors. It will provide a one-stop platform for integrated technologiesOrganised by: Triune Exhibitors Private LimitedTel: +(91)-(80)-43307474/22352770/22352771

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RNI No. MAHENG/2007/23777 l Registration No.MH/MR/South-279/2008-10Allowed to post at Patrika Channel Sorting Offi ce G.P.O. Mumbai - 400001 Date of mailing: 5th of every month issue

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LOG.India July 2010

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