Supply Chain Collaboration - Samik Chakraborty, Zonal Business Head – East, Drive India Enterprise Solutions Limited

Collaboration and integration among the various parties involved in any Supply Chain is essential for achieving common goals and obtaining mutual benefits. To elaborate, collaboration in the supply chain helps in increasing supply chain efficiency in procurement, production and distribution, offers higher flexibility, leveraging world class technology without much capital investment, improves visibility, safety & compliance Factors, and enables reasonable cost reduction.

Collaboration in supply chain can be internal or external, pertaining to individuals, departments, suppliers or partners and organizations. It can be in Sourcing, whether in freight consolidation, using multiple distribution channels effectively or in vendor managed inventory. It can also be integration in inventory management or a collaborative distribution system.

Organized 3PL players act as consolidators in various forms as they collaborate with different entities such as:

• With customers –  For an integrated and customized supply chain set up, 3PL companies  collaborate with manufacturers, traders, retailers, E-commerce, buying agents etc.
• With carriers –  To manage end to end supply chain, collaboration is done with Airlines, shipping lines,  rails, truckers as well as with courier companies
• With agents – Collaboration with various agents like custom house agents, NVOCC, IATA and other insurance authorizes are done during international logistics
• With Infrastructure providers - Support of proper infrastructure is a must; hence 3PL companies collaborate with ports for open yards, bounded warehouses or standalone warehouse along with latest logistics technologies like ERP, track and trace, WMS etc.

Supply chain collaboration is not bereft of hurdles. The challenges here are:

• Staying Interconnected  – Integration between Customers, Suppliers, Service Providers is difficult as needs differ
• Short Term Focus - If management is incentivized based on short-term results, then investments in long-term stability can be a hard sell
• Technology Compatibility – Inherent difficulties in supporting a wide array of external ERPs, internal systems for planning, procurement, finance with connectivity protocols
• Balancing the Benefit - Partners need to see on an on-going basis, tangible benefits in continuing business with your company.
• Collaborative Execution - Connecting information flow across various trading partners and synchronizing it for quick problem solving can be tricky

Hence, making the right choice in partners for collaboration in supply chain is necessary.

•           Collaborate on strengths rather than for compensating for weaknesses
•           Select partners based on capability, strategic goal & value potential
•           Invest in right infrastructure and right resources
•           Establish a robust, joint performance management system
•           Trust, mutual benefits, transparency and extensive information sharing
•           Collaborate for the long run

The Supply Chain of the future – smart and integrated

Looking back, Looking Ahead...

By Vikram Mansukhani, NOH, DIESL

While the soothsayers, pontiffs and religious zealots look on in disbelief at the last few days of 2012, doomsday as predicted by them apparently seems to have been a misnomer. Our world still exists physically, although scarred by   incidents such as Hurricane Sandy , Typhoon Bopha , the shootout at the Connecticut children’s school , passing away of legends like Rajesh Khanna , Yash Chopra , Pandit Ravi Shankar  and most recently the passing away  of  India’s  symbol of “Nirbhaya”. The global economy has yet to shake off the fallout from the crisis of 2008-2009. Global growth dropped to almost 3 percent in 2012, which indicates that about a half a percentage point has been shaved off the long-term trend since the crisis emerged. This slowing trend is likely continue. Mature economies are still healing from the scars of the 2008-2009 crisis. But unlike in 2010 and 2011, emerging markets did not pick up the slack in 2012, and are not expected to do so in 2013 either.

A more significant slowdown is expected for less mature economies over the next year – and beyond. Overall, growth in developing and emerging economies is projected to drop from 5.5 percent in 2012 to 4.7 percent in 2013, with growth falling in China from 7.8 to 6.9 percent and in India from 5.5 to 4.7 percent. From 2019-2025 emerging and developing countries are projected to grow at 3.3 percent. The long-term global slowdown we project to 2025 will be driven largely by structural transformations in the emerging economies. As China, India, Brazil, and others mature from rapid, investment-intensive ‘catch-up’ growth to a more balanced model, the structural ‘speed limits’ of their economies are likely to decline, bringing down global growth despite the recovery we expect in advanced economies after 2013.

The last few years, have though not been referred to as the years of global meltdown or the dark ages of economic recession as in the late 20’s, the mood and the sentiment they have created are one of extreme conservativeness. None of the business houses or large scale entrepreneurs has put their money where their mouth is and have rather looked at growth opportunities rather cautiously. Projects involving huge infrastructure investments have been few and far between as all decision makers are keen to pursue ROI in the short term versus long range projects.  The silver lining behind the clouds is that India is still considered a favorable destination for FDI which is expected to grow considerably by about 20% in 2013. With the Government of India laying intense focus on increasing the country’s share in the global FDI space from 1.3 per cent in 2007 to 5 per cent by 2017 by relaxing and un-complicating the FDI norms, it is expected that foreign majors would invest aggressively in the flourishing Indian markets. While this is a positive sign , the issue overall I the lack of certainty as to when these investments would come in , exactly in which sectors and what resistance would it face in a year before the country goes to the polls in 2014.

The year ahead is full of opportunities but needs optimism to ignite the actions on the ground. Making the most of available resources , expecting the biggest bang for the buck , consolidation of operating areas , increased focus on ROI and driving increased productivities shall remain as the mantras for survival in 2013 which hopefully shall build the platform for a flying start to 2014 and beyond.

 

Mixed Budget for the Logistics Industry

- Ajay Chopra

A budget is an exercise that a government carries out annually and at basic level it serves the purpose of outlining the manner in which money collected by the government from us - the taxpayers - will be utilized. This year’s budget was even more historic as it heralds the completion of two decades of liberalization initiated in 1991 by Dr. Manmohan Singh, the then Finance Minister.

So, did the budget meet the expectations on this front? Well, answer is both yes and no.

Yes, in the sense that coming in midst of high inflation and global economic pandemonium and with the pressing  needs of social and infrastructure sector investments the Finance Minister has done a commendable job of maintaining continuity. Mr. Pranab Mukherjee has also put a thrust on increased expenditure in these areas which will result favorably for the logistics sector. The tax-free bonds of INR 30,000 crore to boost infrastructure will reap benefits in terms of improved transport infrastructure. Investments in warehousing of up to INR 2,000 crore and Cold storage projects being classified as infrastructure are encouraging signs.

The bad news in the budget is in the sense that coming at such critical juncture the budget fails to bring any path – breaking initiatives. It shows certain timidness on the tax front on both direct and indirect taxes areas. For example, the DTC while announced still fails to include all provisions into it and while there was mention of GST roadmap a number of times, no clear timelines still emerges. On custom duty also once again individual items have been looked at for concessions instead of systemic improvement.

The biggest challenges confronting the Indian economy currently are inflation (especially the volatile food prices) and the slow speed of infrastructure development. Last year National Highways were constructed at the rate of only 4 kms per day as against the target of 20kms per day. These find no concrete solutions or action plan in the budget document.

(Author: Mr. Ajay Chopra is the Chief Executive for Drive India Enterprise Solutions Ltd. (DIESL), a TATA group company.)

Challenges in Outsourcing

- Jayanta Ghatak

Long after Outsourcing has become a buzz word in many industries, logistics it seems is still waking up to it. The challenges in outsourcing are plenty but in my reading – the most crucial among them is the mind set. For instance - the fear of leakage of sensitive data and information, which should also be a deterrent for the I.T industry, does not hamper outsourcing for the likes of Wipro and TCS. On the contrary outsourcing is a key driver for the information technology industry. The above in reality is a perceived challenge – other challenges of the mindset include Loss of Internal Logistics Management Facilities, biased choice of service providers, service degradation, emergency response, longer order cycle time, loss of control and representation, reduced contact with final consumer and less visibility to customers.

Apart from perceived challenges, outsourcing also throws up some real ones. They can be broadly classified into a) Strategic, b) Organizational, c) Operational, d) Selection and e) External challenges.

Strategic challenges include Management Buy in, Scope of Outsourcing and Cultural fit. Scope of Outsourcing corresponds to the problem of the extent of outsourcing the company needs to offload. Scope of Outsourcing can be tricky as companies are usually unsure about drawing the line between what works in house and what needs to be outsourced. The ability of cultural amalgamation between the client and LSP is a necessity as the latter functions as an extended arm of the client and for many end consumers the LSP is the client.

Organizational challenges include redeploying existing resources which at times become a major roadblock to outsourcing and improving efficiency. Change management also becomes a key area of focus in an outsourcing scenario. Companies face a daunting task of forecasting the quantum and the timing of change.

Operational challenges include reengineering existing processes in view of outsourcing strategy, framing KPIs/ SLAs both for internal resources and for external agencies, implementing processes across the organization and initiating MIS generation and measuring performance and benefits of outsourcing.

Selection challenges include ability to understand and assess customer’s requirement, Project management and roll-out capabilities, framing appropriate performance measurement system, information technology integration and interface, IT and communication infrastructure up gradation, managing relationship with customers/ vendors/ authorities/ employees, developing short-term and long-term infrastructure, developing strong intra-country dependable distribution service, ability to scale-up/ down depending on customer’s requirement, developing and enhancing Intellectual Capital, Continuously enhancing and expanding service offerings, developing and implementing industry-specific SCM solutions with tangible measurable results.

    Apart from the above, outsourcing also deals with external challenges like poor road conditions, lack of dependable communication infrastructure, managing multiple government authorities and understanding and adopting laws of land.

(Author: Mr. Jayanta Ghatak is the Zonal Business Head (East) for Drive India Enterprise Solutions Ltd. (DIESL), a TATA group company.)