X Logistics Summit 2012 Next Generation Supply Chains Challenges and Opportunities 12-13 June 2012 Inaugural Session

n Mr.Cyrus Guzder, Chairman, CII Institute of Logistics Advisory Council CII would represent Indias interest and views in the Asia Logistics Council towards implementation of global logistics solutions primarily aimed at raising the efficiency of the industry. The GCEL Shipment efficiency analysis Benchmarking Study is likely to become the industry benchmark in due course. Mackinsy Consultants, Knowledge Partners for the programme and have brought about a research publication, Supply Chain The New Normal, which will be released. CIIs Agenda at the National Level for the year 2012-2013 is Reviving Economic Growth, Reforms and Governance. High priority is placed for restoring High Growth trajectory clubbed with building global competitiveness, inclusivity and sustainability. CII will advocate measures to increase fund flows, improve fiscal consolidation, structural reforms at the state and centre spanning all sectors of the economy - agriculture, manufacturing, infrastructure, technology and energy. On the governance front, the focus would be on electoral reforms and effective regulation for all the core sectors and would take forward affirmative action, skill development and international engagement. CII operates in the Logistics Area with the CIL, that was established in 2004. The CII Institute of Logistics address the need for sharpening India's need for competitive edge through better logistics and supply chain practices. Among the range of services offered, are education - short and medium term courses, training at different levels, advisory services, research and publications and organize events. Some of the key initiatives during the current year are Green Logistics. CIL has launched two certification process: Warehouse WAREX Certification for Excellence and Performance that will help rank and rate warehouses across the country to drive efficiencies in warehouse management and to motivate and attract talent into the industry, the SCM Pro Supply Chain Management Professional Certificate started with the objective of recognizing and endorsing the competencies of supply chain professionals based on their body of knowledge. There is a growing demand for third part logistics companies in India and corresponding with that there has been an extraordinary improvement and broadening of the services, skills, technologies being deployed by third party companies in the services of manufacturing clients to bring about greater efficiencies. Business really 1|Page

needs to look as how to increase awareness, how to work with the government to improve infrastructure that sustains efficient (meaning cost effective) logistics practices across the country. There are several excellent models to draw from the developed world where they have taken multimodal logistics and the planning for all modes of transport and their integration into logistics networks to a very high level. A great deal of work needs to be carried out in the emerging markets as well. Realizing this, the Prime Ministers Office has appointed a National Transport Development Committee that would take a long term perspective of 20 years framework for building a multi modal transportation network in India. Mr. R. Dinesh, Co-chairman, CII Institute of Logistics Advisory Council Reviving economic growth is going to be priority for all both for business and those governing the country. Challenge from SC Sector is how it is going to be a differentiator. Those countries or companies who have given not just adequate attention to improving the supply chain but also making sure they adapt and integrate to their business and make them unique and differentiated. The future depends as how we treat supply chains with respect and with difference. In collaboration with McKinsey we hope to come out with a work plan document, a road map of how the CIL and the Government can work together on the need to integrate freight, the airport and the sea together. Three basic themes will be discussed: a) How do we integrate SC into our business model, b) How to differentiate supply chains by segmenting and adding value to business, c) How can Supply Chains be an enabler. Supply chain means outsourcing, an integral part of business model and have to depend upon the infrastructure of service providers . Archaic labour laws tend to view logistics as outsourcing as contract labour. CIL believes that it is a significant value addition and not just outsourcing of labour. The way to go is to view Integrated Supply Chain as Value Addition rather than provision of labour. The GCEL will be working with the CII in benchmarking the percentage and manner of outsourcing that takes place in India. CIIL would work with the government to see to it that this could become part of the legal system. The supply chain not only is competitive but also acts as a differentiator, not only in the manufacturing sector but various other sectors including infrastructure, retail, and agricultural products where huge wastage takes place. The focus of the conference is to create a knowledge base about supply chains that would make Indian supply chain companies become globally differentiated. Mr.Tan Sri Abdul Rahaman Mamat, Director General GCEL Asia The speaker was pleased to launch the Benchmarking Trade Lane Deployment between India and Indonesia and thanked the minister for supporting programmes and practices for enhancing the logistics industry's efficiency to reduce costs and spurring overall trade of the global community. The past twenty years has witnessed significant changing landscape across the global trading environment . The real economy is based 2|Page

on two main economic pillars: Agriculture and Manufacturing, supported by the services industry that includes logistics. However, globalization has resulted in major imbalances between the key elements of supply and demand across the world's economies. The developed economies representing 15% of the global population are high income countries having an ageing population but with enormous buying power. However, their productivity has lagged to surplus output necessitating expansion to new markets. The emerging economies are mid income countries, with large and growing industrial basis. In order to minimize their dependency upon high income countries, they are eager to tap large growing markets for expanding their production . The developing economies like Malaysia and India are low income countries with huge potential to serve as the desired market for both the developed and emerging economies. They have large young population and can produce labour intensive industrial products at a very low cost, but they lack buying power today. There was an urgent need to rebalance these characteristics by leveraging strengths and transforming weaknesses into opportunities. Innovation and productivity are paramount. A sizeable importance of trade and gains in efficiency, security and transparency which reduce costs and facilitate increased trade is a key step to the prosperity of people, nations, regions and the world as a whole. The common denominator that connects all nations is the global logistics industry, which should not be underestimated, whose historic impact at the heart of the global economy is indisputable. The advent of containerization almost 70 years ago, fuelled several decades of global economic growth throughout the world . The cargo containers secured goods against theft and damages while reducing the cost of trade including cutting loading costs from more than 5 US $ a tonne to less than 1 US $. The engine of global economic development, world trade combines the efforts of four primary industries: Commerce, Finance, Insurance and Logistics. Maximizing the efficiency of the global logistics industry empowers the three industries. The developing countries need to improve their purchasing power of their population through more diversified economic activities and to attract investments from developed countries . This can be achieved by reducing their high landed import export costs through being more efficient. The Human Wealth Programme is a comprehensive global plan where included is the Asia Benchmark Trade Land between India and Indonesia and will deploy soft infrastructure, critical foundation for the new digital economy. Trading activities can be made more efficient through the deployment of soft infrastructure which include: 1) an Open source platform proven and tested by the global organizations, 2) deployment of the platform by 28 of the worlds most prominent financial, insurance and technology firms at no extra costs to the end users and 3) rapid 18 month global deployment programme with 4 benchmark trade lanes in Asia, Middle East, Africa, Europe and the Americas. The essential requirement for restoring sustainable growth through the rebalancing of the global economy is the deployment of the soft infrastructure creating more efficient, dependable, and reliable logistics pipelines . Asian trade costs can be reduced by US $ 194 billion. In India alone, we have estimated 3|Page

to reduce the cost of doing business by 9.1 billion every year . In addition, we can create 25.8 million manufacturing agriculture and service industry jobs throughout the Asian region. The tool can be provided free of cost to millions of SMEs to reduce their operational costs by upto 15% and assist them to connect to global markets . In addition, due to increased shipment activities, transparency and visibility, our banking institutions will have lower credits and transaction risks thereby providing the SMEs more access to badly need trade financing. The financial crisis left behind a legacy of debt, lost opportunities and staggering trade imbalances that must now be resolved . As the new economic order begins, the Asia region can lay the foundation for sustained growth in the years and decades to come and take a much bigger role in the global economy. Asian nations must join together to seek mutually beneficial trade and investment within the hemisphere as means of sustaining balanced growth. GCEL and CII are conducting a Shipment Efficiency Analysis (SEA) on Indian businesses based on a comprehensive best in class approach to shipment efficiency and to become the new logistics benchmarks towards realising the true digital economy. Mr. Sumit Dutta, McKinsey We would be releasing a publication that speaks about our experiences with companies globally and looking at what are the challenges and opportunities that are coming up in India over the next 5 -10 years. Supply chain now has risen to the top 3 topics of most CEOs of companies in India. While, challenges that have been experiencing over the 10-15 years are likely to continue, tremendous opportunities are opening up for companies, in building Supply Chains as a differentiator. Seven trends and challenges that are going to hit are: i) High level of channel innovations, ii) Innovations in last mile delivery Iii) Extensive differentiation among consumers, in the B2C space or in the B2B space iv) Volatility of the Global Supply Chain and with increasing ferocity and increasingly in shorter duration of time, v) Talent scarcity with people looking at supply chain as a real differentiator and whose capabilities either need to be built or imported, vi) Near shoring as a global trend viii) Green Supply Chain that is going to be increasingly relevant in 10 years time frame. Five practices that are important to be able to respond to this change: a) Align the supply chain strategy to the corporate strategy B) Segmentation and Microsegmentation as a way of life. Identifying needs of different micro consumers and helping them out c) Need to balance the demand and supply networks. Over the next 10 years, the amount of freight or amount of goods that is to be moved around the country will increase by three folds. How do you effectively balance this demand and supply networks? e) Robust end to end planning, the norm in more and more industry. f) What is the sustainable talent development model? These in a nutshell are the development trends and five different practices that are going to be the new normal for the supply chains in India.

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Mr. G. K. Vasan, Minister for Shipping and Surface Transport, Government of India Globalization has led to increased trade and investment flows among countries and also intensified competition among them. Greater competition has increased the importance of efficiency in logistic management, an important determinant of competitiveness. India being one of the leading consumer markets of the world is expecting to sustain a strong growth over the coming years to become one of the top economies of the world by the mid century. The Logistics sector plays a major role. Connectivity and convenience in operations are the keys to sustaining global trade growth. Logistics infrastructure covering road, rail, waterways and air network is the backbone of the economy. We have experienced how robustly the Indian economy has grown for about a decade. We need to either ride the tide when the economic growth is high or invest to spur the growth itself. High economic growth has been associated with significant increase in freight movement across road, rail, air and ports , fuelling the demand for an adequate and modern logistics to enable efficient movement storage and distribution of freight. The installed logistics infrastructure is however still inadequate to handle the impact of increased economic activity and has put a lot of pressure on the logistics infrastructure, which needs speedy augmentation in terms of quality and capacity through adequate investments not only from the government but also from the private sectors. The countrys young demographic profile and growing disposable income with the people, have boosted the demand not only for goods but also for quality services. In the future, this could spur further expansion of the economy and consequently the infrastructure sector. However, Indias Logistics Performance Index (LPI) reflects its weakness in our logistics system where we slip in rank as per the World Bank Survey. Logistics costs are India is high at 14-15% of GDP compared to 7-8% in developed countries. The UPA Government has been very pro actively taking a number of steps to boost the growth in infrastructure . Policy reforms, building the infrastructure across rails, roads and ports, logistics parks, containers, inland container depots, container freight stations, warehouse and cold chains have been built. The government has taken several initiatives by allowing 100% FDI investments, eliminating CST, introducing VAT, improving multimodal transportation and aggressively promoting public-private partnership projects that include National Highway Development Programmes, Port Connectivity projects, projects for expansion of port capacities and increasing container handling capacity, dedicated rail freight corridors totaling 2700 km, increasing rail freight loading capacities, implementing the Delhi Mumbai industrial corridor project. An Action Plan has been worked out to spur economic growth through the infrastructure sector . Massive investment to build better logistics infrastructure and additional handling capacity is required. Ports and the shipping sector are the gateway powering our economic growth . The Shipping Ministry has been vigourously implementing the National Maritime Development Programme in the XI Plan and in the current XII Plan it is envisaged to increase the port capacity of major ports. Most of our projects for capacity addition are expected to come through the PPA route besides port funding projects. Port infrastructure are 5|Page

being developed to world class and the focus is now mainly on developing connectivity to the ports. Today the focus on making logistics activity leaner and greener by reducing and compensating the carbon footprint they leave on the environment. About 70% of the domestic cargo movement in India for the last mile delivery of good happens through roads which leaves more carbon footprints. We must consider adopting sea routes which are cost effective and environmental friendly on the same line inland water transport is another focus area. These initiatives should aim to make the business environment attractive for local and global companies and to encourage industry to invest in logistics and infrastructure. It is equally important to make out operations and processes more efficient. A well developed logistics infrastructure with efficient processes will result in significant savings in terms of service levels transit times, inventory costs, processing time and thus overall logistics costs. The Summit should address the issue of capacity addition for the future but also for making the processes efficient to cater the future needs and future course of action. Technical Session: Supply Chain The New Normal Mr.Mads Luritzen, Partner, McKinsey & Co, Bangkok Logistics and Supply chains will be a source of competitive advantage in the future. The presentation will cover the core trends influencing the supply chains over the next foreseeable decades. This presentation is based on a very large study covering 6000 executives across 600 global institutions in all continents including Asia and spread over five years that provide insights into trends in supply chains. Each industry has its own challenges but the common challenges and opportunities are depicted here. What has been important for supply chains so far, globalization, need for efficiency, off shoring, supply diversity, complexity management will continue to remain important. To win and go forward, a new normal, needs to be mastered, which falls into seven different clusters. Companies that master these challenges collectively are able to define a real source of competitive advantage and offer examples for other organisations to learn. 1) Channel Innovation. e-Commerce revenue in Asia represent 75 billion US $. Five years ahead, the size of this will be doubled. Japan and Korea will become second and China will move up. India will come but a little later. Disposable income in India is expected to grow from 5000-9000 US $ over the next ten years. The willingness of Indian consumers to pay for convenience is the highest in the world, whose number is about 75%. If one takes this collectively and look for what it means for e-com, the revenue works out to 40 billion US $. At such a scale, it will bring India to the range of with Japan, Korea and China. Hence ecom is worth start thinking about. The speaker presented a Case Study of TESCO 6|Page

SAMSUNG Home Plus from Korea. They put up virtual store in the subways in 2009 and customers order through their smartphones. Two months later this model was picked up by one of the largest Chinese companies who used the same model in Shangai. These ideas are being picked up very fast. What does this mean to supply chains? The impact is likely to be massive. Walmart on an average has 30,000 SKUs. The largest Chinese on-line retailers handle 700,000 SKU, which I now believe has grown to I million. Imagine an online world of small batches, short lead times, narrow delivery windows and picky customers . 2) This leads to next topic of last mile or distribution optimization. The last mile is a topic very important to India especially with regard to mastering challenges. The consumer one needs to concentrate is about the urban class from the perspective of numbers and size of disposable incomes. In India, urban consumers grow three times that of the rural population. Globally, the urban class grows six times faster than the rural class. By 2020, the urban class will be 20 billion consumers and out of which 80% will be from the emerging markets of which India will take a sizeable proportion and hence represent a sizeable opportunity. The urban class is not a one class but multiple classes. The challenges or opportunities are in the tier 3 and tier 4 cities where there is growth. Also see the geographical diversity, the remoteness and that is very the last mile connectivity comes to play. This is where India is investing heavily in improving its infrastructure be it road, railway is a big contributor to reach and tap into the potential, the revenue and profit of this group. Looking at infrastructure, the no of km of roads and rails in Brazil is 3 km/sq.km, Russia 5 , China 8, India 19, Japan 70, Germany is 117. There is still a long way to go. There is a big opportunity to close the gap. While this gap is being closed, we are facing realities, which I will illustrate with the J&J example from China. The current challenge is distribution network with a lot of complexity and inefficiency. We are looking at multilayered distribution network consisting of master distributors going down to sub-distributors to master dealers, dealers, retailers to stores. The multiple layers leads to longer lead time, more inventories at each layer, need to increase the working capital of the supply chain and erode the margins of profit for retailers and stores thereby reducing sales opportunities. Efficiency of the network hence becomes more important. The more layers we have, the more information is getting lost. One of the key pillars of a successful run supply chain is access to information and transparency. Companies are responding to this by increasing professionalization of logistics, transportation, warehouse and the end to end supply chain set up. China is a good example, which consists of a large number of Mon and Pop shops of 10-12 people. The 3 PL are moving into this in a big way and helping Multinational Companies. Remote areas beyond tier 1, 2 and 3 should also not be ignored. There are several examples. Nokia sent in Blue Vans across India for increasing their sales. 7|Page

Cococola is setting up Micro Distribution Centres (MDCs) in West Africa in collaboration with the Bill Gates and Mellinda Foundation to distribute and create business and have gained 500 billion US $. In Brazil, Nestle has launched supermarket boats 100 sq. m and carry 300 SKUs serving 800,000 people. One need to realize that the Amazon region is very difficult to approach unless one goes through the waterway. It is another way of thinking beyond tier 3,4 or 5 for which creativity is important. A lot of revenue is generated. The key are efficiency and de-layering and increasing transparency and injecting creativity to reach remote areas. Another example that serves a noble purpose but also has a commercial offside is by Novartis. Malaria is a major ongoing and persistent problem for the Tanzanian government. A low tech system to stock out malaria medicine has been put in place by Novartis. SMS for Life is a publicprivate partnership project by Novartis which brings weekly visibility of stocks of anti-malaria medicine at the local health facilities. Each local health facility would key in their current stocks of anti-malarials and the information made available on internet or blackberry mobiles to district medical officials and other users and stakeholders. The project Roll Back Malaria Partnership Pilot Programme effectively managed Novartis, Vodaphone, Tanzanian Ministry of Health and Family Welfare harnessed core competencies of multiple public and private organisations and can save the lives of malaria patients. The same channel could be used for sale of products and can be used beyond Africa. This is far from limited to Africa and can help the medical and pharmaceutical companies. 3) Consumer Differentiation. Consumers have developed a lot over the past 10-1520 years. Take India as an example, which could be another emerging market. In 2005 we had a uniform distribution of income and consumption. If you fast foreword to 2015 or 2025 it would be much more diversified consumers. We have this already today. If you translate this into to supply chain, what does this mean? Demand complexity is growing. Companies like Unilever, PNG, Kimberly Clark deal with a lot of SKUs, one of the ways is to plot value of products vs.demand variability Which of the products are stable and core? Which are slow and steady? Which ones are unpredictable? And translate this into supply chain. One realizes that this is not a single supply chain and one needs multiple supply chains within a company to handle this. This is called supply chain segmentation. TISCO has taken a decade or so to segmentation. It allows you to concentrate on SKUs and consumer which bring most of the money and allows automation and provides opportunities for revenue generation and hence segmentation becomes very important. Collaboration in supply chain. Few really apply it end to end downstream and upstream. Sales do not trust production and hence inflate their forecast. Production does not trust sales and deflate the forecast and pass it on to the 8|Page

suppliers. One ends up with three or four forecast figures. It affects customers. In response to this, is advance supply chain corporations introduce three core pillars Monthly Planning through SNOP Weekly Management Daily execution

Personal connections are important for collaborative supply chains. This problem represents between 60-70% of supply chain issues associated with most companies. Reestablishing trust is very import for efficient processes. To do so talent is important. 4) Talent. Asia, India included is a challenge. India is facing and will be facing within logistics and warehousing now and in the future is talent. There are three dimensions about this: From the top Executive Position in companies From the bottom Academies. Turning supply chain as career From the outside Academic collaboration

Creating academies, attracting talent are multiple ways to dealing with talent. Supply chains and logistics should be turned into a career function. 5) Green Supply Chain. Case study of LG Electronics. LG was looking at the modal mix. 100% of the low end mobile phones were being shipped from China to the US through air shipment. The CO2 emissions were very high running to millions of tons. If you value density and obsolescence of different SKUs and prepare a break even line as to when should one ship by air and when by sea. These products which were all low end phones there was not a single SKU which could not be shipped by sea. However, the engineers mentioned that the volatility of markets and customers would not permit such shipping by sea. McKinsey undertook a through demand analysis and found that the SKUs were highly predictable. A solution to the problem was provided. It was suggested that a base load of 80% would go by the sea and the peaks 20% would go by air and put in place. The savings were very massive 20% savings on landed logistics cost, 50 % cut in Co2 was reduced. This provides a case on the manner of maximizing modal mix to increase efficiency and adding value to customers. 6) Volatilty. Disruptive volatility is difficult to deal with. Disruptive volatile events include financial, flooding, earthquakes. There are no common denominators but they all impose volatility on the supply chain. Hence, supply chain risk management has become important. Supply chain risk is in the minds of CEOs. 9|Page

There is a lot of theory, but few practices. It boils down to solid, implementable plans and solutions on the ground. CISCO, Motorola, Siemens, Nokia have been successful in this regard by ensuring transparency end to end which will allow swift change of supply chains. 7) Near Shoring is also happening. The wage differences in low cost zones will disappear and will be impose footprints that are much more diversified than what is seen now. Typical large corporations today are China centric, Mexico centric, or India centric. This will not be so in the future. Networks supply chain are become more connected, more global, more diversified and complex. To conclude 90+ of the CEOs agree that the new normal is here to come, is critical, will be a strategic tool, provide competitive advantage to differentiate oneself . The skills required to master supply chain are: Supply chain as a strategic tool and supports the corporate strategy Smart segmentation to reduce complexity and require technical skills Matching demand and supply networks on a global basis End to end planning and being collaborative upstream and downstream Supply chain as a real career path to attract talent

Question and Answers Q1 Whether the extent to which the large amount of the SKUs will remain for the future or whether we see a more efficient portfolio going forward? It reflects the fact that China is just about to take off. In the Chinese market we see players trying to dominate as big portion of the space as possible. Over time we may see clustering, specialization of players owning individual segments. If you see the Amazon is going in the same direction not narrowing but broadening, adding new and newer services to portfolios. In that market the big one will remain big and try to cover a large portion and has large capacity to cope with players. At the same time smaller and niche players that have a more effective and lean set up to take care of certain segments. If you want to do this you have to install a performance management system or a way of measuring that provides a better balance between different KPIs. In short what this means this to have to look at the total cost or the landed cost but the total cost that the company faces for transporting a product from A to B and includes warehouse, the logistics cost and the inventory. Implications for the lean side, is that process innovation of supply chain will become even more important since nobody likes to have more inventory stock in their supply chains. This is where the point of ways of de-layering becomes more important. Various 3 PLS a lot is going on among them. One of the tpoics on their mind is how to institute lean warehouses , lean inventory practices and reward people by installing black belt systems and gold warehouses. To achieve the lean 10 | P a g e

practices or efficiency of the supply chain and logistics will be increasingly important at the same time the balancing the KPI s looking at the total cost are the keys. Question 2. Having made a detailed study why should not McKinsey they prescribe certain viable and efficient models for each country and for each product if possible. For example in India a lot of food grain and vegetables are being wasted. Storage and transportation problem. Why cannot they help farmers to see to that they get efficient market and efficient storage system?. Consumers need to know the supply chain management cost that is being added to the end product, which always remains a mystery. When you said about collaboration, even competitive owners can jointly export in a cargo rather than part by part. You did not mention about taxation and sea Piracy. Speaker. This is a question I would like to invite an Indian colleague to answer. Question 3. In your last mile connectivity which is critical to the supply chain. Companies like Wal-Mart did not want to make investments in transportation and depend only on outsourcing. Truckers are all overloaded and cannot make money even with two times overload. Service providers will not be able to cover cost. How then will the last mile connectivity be achieved in the future? What are your suggestions on this? Speaker. If you ask many of the MNCs that we have interviewed about the last mile connectivity and why do they choose to do what was shown on the chart in terms of outsourcing. Their strategy was less on outsourcing but more on recognizing that this was not their core. We need to professonalize it and too dependent on small low scale players that overload trucks and impose intransparency. They were willing to collaborate with larger partners and willing to pay the price it costs to involve larger partners. We should not underestimate the smaller partners in geographies like China and India who have the agility and access that heavy partners do not have yet. However, big companies can afford to think 5 years down the road and say that if we invest and develop collaborative models with partners and will in turn benefit from scale, be able to benefit from their capabilities to optimize supply chains rather than working with smaller players who do not have the skills to research and develop efficiency. It is not for the purpose of outsourcing but tapping on the skills and capabilities of partners.

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Session I: Supply Chain Supporting the Corporate Strategy Moderator: Mr.A.M.Vishwanathan, Sr.Vice President, Godrej Storage Solutions Ltd., SC is not considered a core function in India and many companies are not familiar with logistics and still do not consider it important and essentially see it as a tool for reducing costs. Many companies do not have a department. Mr.Prem Varma, CEO, TML Distribution Company Ltd., - Significance of SC The new normal will become the normal for industries. About 94 % of CEOs agree that Supply Chain in not considered a core function in many industries in India. Many companies do not have a separate department for supply chain, but treat it as a relegated function either being attached with the procurement or marketing divisions and seen as a tool for controlling or reducing costs. Some view logistics as warehousing and transportation and make reactive decisions as they are still unfamiliar with logistics. Product differentiation in the marketplace is disappearing and increasingly becoming commodities and black box technologies. Customers are becoming very aware, which can be attributed to the urbanization of the mind. Service levels have become a hygiene factor. In the future products alone will not fight in the market but supply chain will play a very important role for any industry. The gap between success and failure in business will be decided by the supply chain and in servicing customers. While the product and price will fight in the market place, so will the supply chains. How to service the customers in the emerging markets? Supply chain constitutes the actual operations of the organization and extended supply chains are established to meet a specific objective. How to align supply chains with the corporate strategy? Supply chains with sale silos will not go together. Aligning SC with corporate strategy is important for staying ahead of the velocity of the business change. Business needs to be treated as an integrated entity incorporating sales, marketing and logistics. Supply chain needs to get involved from the white board stage, not tweaked, but thought end to end. Technology will play an important role in changing supply chain strategy towards efficiency. The speaker provided the example of Kodak which was the first to invent the digital camera but did not stay in business. They did not take the initiative to shift to a new technology but believed that the future would stay with the film based technology. Channel and demand management have to be an integral part of the supply chain along with a robust SNOP process. Common failures occur when sales and marketing have no incentive to control inventory and excess or additional inventory lands with the supply chain people. The last leg of the supply chain is extremely important, is largely ignored. Several companies struggle with the customer facing situation both during sales and after sales. Post transaction elements are very critical that the customer perception of the company and product changes after the purchase. Product tracking, complaint 12 | P a g e

handling, warranties, claim settlement, product replacement are as important as timely delivery. Hence, supply chains cannot work in isolation. Forward looking supply chain is looking at advancing planning. The speaker gave the example of a company selling water dispensers. The product had to be shipped to the company to replace the filter. One can imagine the cost of logistics and the complexities involved. Need to look towards a forward looking supply chain. Planning cycles need to be shortened. Plans not only for the product, but revisit and realign the supply chain strategy. Whenever new products are launched, where there is a need to enter segments, new areas, territories, supply chain strategies should be on the same schedule. Differentiation point should be pushed to the customer end as much as possible with regard to product offering or ownership of product. Any company would like to operate with an optimum level inventory, larger the variance more the demand. A large variance means difficulty in forecasting at the retailer level but easier at the aggregate level. The more we push to a certain extent product differentiation, ownership differentiation to the customers, the better it is for the supply chain. Do not push beyond the customer tolerance level. Hotel Industry provides good examples. They have a large number of items. The prepare gravies red black, yellow, green and keep boiled vegetables. They take into consideration the time the customer is willing to wait. This is a critical decision. They keep in mind the time customer waits for the dish. The Asian Paint Industry tried to push the base colours as supplied by the companies and the computer generates each type of colour required by the customer and made a large mark in this. If every retailer had to stock every colour imagine an inventory and its cost. Ownership differentiation and customer tolerance level is critical. How much can we postpone the ownership and time the customer willing to wait and Inventory efficiency is important. No retailer would like to keep stock of items that are fast moving. Customer tolerance level is very important. Never let the SC strategy develop in isolation to the business. Checklist or key elements for alignment Need to know customer requirement How quickly one needs a product What kind of variety is required for storage? What kind of service level is required? What price they are willing to pay for these services? Define company competencies and roles in meeting those competencies. How does your company make its money?

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Moderator : Mr. A. M. Vishwanath Is the SC operational? Should it be strategic? Are we putting the customer first? Can SC really be a differentiator? What are the steps to be taken to remain a differentiator? How to be ahead of velocity of business change? Plan end to end, align SC to Corporate strategy. The moderator mentioned that logistics cost in India was high and supply chains are likely to play a serious role. Is SC strategic? Panelist - Mr.Ajit Jangle, Managing Director, Toll Global Logistics How to define Corp Strategy? In a nutshell, it is an organisational position in terms of cost leadership, differentiation and responsiveness. Cost Leadership in supply chain has four dimensions: Planning Sourcing Making Delivery

Supply chains are linked to the axis and the whole strategy is cost. The dynamics of the other axis about responsiveness is different. One needs to have the theory in mind before making decisions. These dimensions will change with the growth stage of the product: introduction, growth or maturity. It is about dissecting the different layers. Aligning is not a simple question. One needs to understand what is expected as a business strategy, and supply chain and check if they are aligned. If we want to serve 92% of service level and 98% service level, the cost of SC inventory in the warehouse is 4-5 times high. Design the organization in such a manner so as align with the corporate strategy. One can have good KPIs but miss the business target. The reverse should be true. Panelist Mr.Clifford Patrao, IBM Global Business Services Supply chain personnel are now reporting directly to the highest levels of the organisation, which is a positive direction. The expectation about supply chains have also changed. The expectation is one of responsiveness, service, managing inventory and costs. Supply chains can align with the corporate strategy in four dimensions: Role of optimizers where do I source, how do I service customers, batches larger or small, choices of distribution owned, outsourced Role of the implement how do they get corporate strategy executed? Implement corporate strategy

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Role of risk manager An evolving function. Risk moved out from the domain of the CSO and finances. Supply risk management or inventory risk management will be the role of the SC Role as integrator end to end tier 3-4 cities or going global integrating the entire chain supplier to supplier and supplier to consumers

The biggest challenge and opportunity is in improving visibility across the supply chain, which can be achieved only through collaboration. Studies have shown that the biggest problems are within organisations, where divisions work in silos and not integrating at a functional level. This calls for a mindset change. Technology is playing a role including the suppliers and customers. There are several opportunities for leverage of technologies to integrate. Organizations are more willing to give a lot of responsibility to supply chain functions. Are the supply chain professionals or leaders capable of taking more challenges? Panelist Prof Janat Shah, Head IIM, Udaipur Four characters of supply chain leaders are: Driven by Business. Case of the Marico. Vendor inventories are driven from supply chain decisions. The current supply chain was supporting high value sales and that low value business were not supporting small & low volume sales. Case of the ITC e-Chaupal on direct sourcing was driven by business needs of maintaining quality wheat, consistency of product across regions and round the year. Hence direct sourcing of the farmers was the solution. Technology Adoption. Kirloskar wanted to reduce inventory levels to 48 hrs. The challenge was to deal with inbound supply chain. They did not go for GPRS technology but reworked their strategy. One needs to be clear as what was needed for business and check the manner by which technology can help. Looking at Infrastructure challenges. Supply Chain leaders were not complaining but looking for innovative solutions. Taking Advantage of partnership capabilities leveraging capabilities of partners. Align and leverage by developing capabilities and partnerships. The supply chain leaders were sharp and willing to build capabilities. The future is volatile foreign exchange, GST and building capabilities are important.

Questions and Answers Question to Mr.Prem Kumar. Will point to one particular product. General Motors has announced and launched their product Spark with 3 years of service. A lot of Supply Chain is inbuilt into the strategy. I would like to have comment on this.

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Question: While technology has taken all industries by storm, the domain of supply chain has taken the least advantage of technology and its advancement. Companies spend huge amount of money on products and services, advertisement, research and development and least on supply chain. What has been done in this area to take advantage of technology? Has it build research capabilities? Has the cost of operations been reduced? Has it been made more efficient? Question: More panelists have discussed about the front end of supply chains. Look at the back end and manufacturing in a place like Chennai or Bangalore where there are opportunities. This has implications since we are a country within a country. Take the example of automobile sector. The number of inputs needs to come from different part of the country. All this is cost based. Can India become more homogenous? Will it have an impact on the cost when we become efficient? Question: Clarification required from Mr.Prem who stated that supply chains should be based Customer Tolerance Level. There is a corporate strategy and there is a company strategy. Company to customer it is OK. With more outsourcing, how far are we going to convince the LSP to align with the company strategy of customer tolerance level? Suggestion from the floor: Chennai and Bangalore has become hub for automobiles and other industries. The CII can work with engineering colleges and institutes for courses on Supply chain rather that highly priced courses. Response from panelist Mr.Prem Verma. Certain factors have become hygiene factors. When you purchase products you presume that there will be services. Such services have now become a factor today. It is taken for granted. This is happening in the durable industry also. Panelist Mr.Clifford Patro Service and products are being combined together. Is the supply chain really geared to that? Products and Services are getting combined. Do you have the right network, the right technology, right processes to reach out to the customers? Panelist Mr.Ajit Jangle. Linking the company strategy and corporate strategy is important, apart from cost leadership, responsiveness and differentiator. This company selling cars is adopting a differentiator strategy and is trying to capture the market share using the strategy. They want to ensure that whenever the customer comes, the product is available and tune the supply chain. The company is highly responsive compared to cost and aligned with the corporate strategy. Prof.Janat Shah Why are we not able to talk in the business long?

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Moderator What does the customer needs? Looking outside 3-4 dimensions are we clear on risk management. How clear are we with regard to being a risk manager? This is a subject that could support more discussion. Panelist Mr.Clifford Patrao Risk Management had become a major topic of discussion. The question is we managing risks? The panelist cited an example of a steel company having a single supplier. Risk can be reduced by having more players or Inventory Risk Management. Can you develop an alternate source if there is breakdown? Inventory risk management. Another example was concerning freshness. If the product does not reach on time, then the product is obsolete. The onus of all these are in the hands of the supply chain professional. People are tied down in operational challenges. Panelist Mr.Prem Varma Life is a tradeoff. Speaking about risk, in the past only the CEOs were held responsible. Now it is dynamic and even juniors are involved. Talking of service levels, is the logistics division as responsible for the business as the LSP. How serious are the logistics are? We all need to be accountable. Panelist Mr.Ajit Jangle I will talk about safety parameters. When MNCs come to India their standards changes. High safety standards of our company L3 were very costly. Our costing was very high. I explained to the senior manager, we were not cost competitive. We were handling dangerous good warehousing. India understands the importance of safety. Another example is Tata steel high in safety. Road transport safety 21 groups of driven training. We replicated the same on Customization an Indian Roads. Moderator Can India be a homogenous market? Panelist Prof. Janat Shah - Traditionally India has not been one market. The GST would help us being is as one market will have huge implications on warehouses. I think that India will not be one homogenous market from the market and sourcing perspective. There are too many regional differences. In terms of practices there may be some homogeneity. There are too many difference and we will have to practice accordingly. Panelist Mr.Clifford Pataro With GST coming in, a lot of decisions will be made on economic parameters, rather than fiscal parameters. There will be some uniformity based on economics. In terms of demands of customers and consumer driven it is only going to get worse in the future. Moderator: Supply chains needs to be aligned to corporate strategy and meeting customer demands. It is not about implementation but meeting customer demands. All organizations will be looking towards supply chains and supply chain strategies. In a world that is becoming more and more volatile world and more and more uncertain demands made by customers, the supply chain strategies are catching the attention of 90% CEOs, the future for supply chain professionals should good. One point made was 17 | P a g e

the spread education of supply chain strategies. There is a lot of work going on the subject and need to be addressed.

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Session II Smart Segmentation to Reduce Complexity Moderator: N.Sukumar, Member, CII Institute of Logistics Advisory Council How does segmentation reduce complexity? How to deal with product and demand segmentation? How does volume and demand variability relates to end to end configuring of the supply chain? How do companies think about segmentation? What do we segment? How do we segment? Why do we segment? What are the best practices of segmentation? What is segmentation? How to segment customers, markets and products? Segmentation is a complex subject of slicing the whole, consistent and congruent and need to be preceded with preplanned action. Mr.Ramesh Doraiswami, Vice-President, Johnson & Johnson J&J is a broad based healthcare company with three businesses diagnostics, pharmaceutical and a consumer goods, with 250 operating companies spread across 60 countries selling products in 175 countries having 1,18,000 employees. The concept of segmentation starts with the sea or ocean of customers. Customers want to be seen as special and treated specially. Segmentation is about understanding customers, the market can be seen as large chunks of customer with different customer segments having different attributes, consumer behavior, spend profile based on age and demographics to be seen within the frame of increasing competition and risks. A recent study of supply chains of 25 top companies ranked segmentation as one of the top three trends, the other two being risk management and multilocal presence. Supply chains are therefore important and from a business point of view. Supply chains are important not only for front end companies dealing with customers but also B2B companies like J&J. The attributes or drivers for purchase decisions made by different customers are different and supply chains need to respond to different customer bases. What is Supply Chain Segmentation? Just like customers, if you look at the value chain from raw material supplier to end customers, the needs of end customers are different and requirements depending on market and buying preferences, demographic. Some products require specific technologies, some require cold chains, and some products have a short shelf life. There is variability on the product side and supply side and there are a wide variety of channels available for marketing. The trick is the manner of slicing and dicing supply chains to be efficient. One needs to be smart to segment. Garner has proposed a three phase approach to segementation: Customer segmentation. What are needs and what are unique needs of customers? These need to be captured through analytics and market information. 19 | P a g e

Start looking at the capabilities as a business unit. What are the uniquely required in that supply chain to cater to the distinct needs of each of the customer group? There is 70% commonalities and 30% uniqueness. Identifying 30% that is unique and building capabilities for catering to unique requirements is important to generate value. Customers is not going to pay the price unless there is a value perception. The cost to serve will need to be determined to sustain the unique differentiated capabilities of meeting needs of customer segments. The cost to serve segmentation strategy of a company is the intersection of: Customer needs, Supply Chain Capabilities and Cost to serve to deliver. In addition it is a combination of things: What the customer needs, ability to respond to the customer needs and ability to optimize the value proposition from the cost perspective. The ability of a supply chain should be to work like a virtual team which can be reworked to meet needs of different set of customers. Segmentation is not about creating structures but ability working across structures seamlessly and virtually for meeting customer needs. The same parts need to be used to cater to different customer groups. Key enablers for successful segmentation are: Strong Analytics on customer needs, market insights and customer segments. On the supply side: strong capabilities to analyze the drivers that will differentiate the supply chain in meeting unique needs. Having an end to end perspective of the product from the material to the supplier perspective is critical. This requires an external focus what the customer needs and internal focus mediated by technology or infrastructure and reconfiguring structures to work seamlessly across boundaries. All elements of the structures should have access to data on a transparent basis. The speaker provided case studies of best practices with live examples. Case Study 1: Customer Analytics from the Plan Side. There are two or three health care companies that have created centers for excellence for demand planning and analytics, customer analytics and marketing. This focused and specialized group looks at data to fine tuning customer needs, preferences and demands and tunes the demand planning processes. Planning for portfolios of 30,000 skews on a weekly or monthly basis is an impossible task across customer segments. By segmenting the demand variability and forecast accuracy, some products and some customer types can be narrowed down. If variability is high, market inputs are required since history does not capture the demand pattern very well. Case Study 2: Example from make side perspective. There is a FMCG that has used smart segmentation approach to cater to its multiple organizational objectives in terms of maximizing productivity and improving flexibility and innovation. They segmented their needs and capabilities into three kinds:

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New products (Good drives in the future); Existing Products (steady large volume products) Medium Tier (products with variable demand)

They segmented capabilities of their factories: Cost effective and tax efficient factories (Maximize) New factories with new labor (Limited capabilities) 3-10 vintage company having capability to deal with variability with slightly higher costs Third Party sites

They developed a strategy that matched variability with capabilities. The A categories were given to new factories (Max production with minimum changeovers); Variable SKUs were given to other companies; New products were outsourced to manufactures where the scale and skills are effectively achieved. This is a case of a divergent market place with a divergent strategy using common infrastructure to deliver it. Case Study 3: Delivery Space Example of Dell Computers. A PC Manufacturer decided to move from online into retailing. They looked at attributes of retail customers. Customization was limited in the retail channel and it was standard products on the shelf, while online had larger variety. Forecast accuracy was higher in retail and low online. They moved from a pull supply chain for their online to a push supply chain in the retail. Case Study 4: Cricket in Eden gardens as an example of supply chain . The capacity of the stadium was 65,000 people and only 6000 tickets were sold in 2011.For the new IPL KKR Management developed tickets online or courier or sending mobile vans around Kolkatta. A six fold increase in sales based on a delivery stand point was achieved in a matter of six months. Supply chain is not what companies decide but what customers choose. Panelist Mr.C.S.Raghavan, Vice President, Fenner (India) Ltd., The speaker was keen on projecting the user point of view in the auto sector. Fenner India which makes power transmission belts and covers the auto and industrial belts. Businesses are carried out between nature (oils, ores and deposits) and the customer, with value addition in between. His company was somewhere down the slope near the top with high value addition dealing with customer centric problems. Companies having high value adds are near the raw materials end near the ores and crude, where volume aggregation and costs are the solutions and supplier driver aggregation and concentration does wonders. As one moves down the curve towards the customer end, it becomes small volume customer and service driven, thereby volume segregation 21 | P a g e

becomes important. The auto industry has complexity and hence required to segment. The OE Sector and Replacement Industry have traditionally been strong and the Engineering Production Division (EPD) and export and inward RM . The Auto Original Equipment (OE) manufacturers have brought in a culture of quality which will help India by changing the face of ways of working. The system integration, documentation and just in time (JIT) is changing the way logistics are being handled. In the replacement industry volumes are aggregated and delivered with efficiency and cost is a driver. For the export part, volumes are aggregated, containerized and addressed to a specific customer - area-wise either as continents or country wise. Segmentation is a part of our life and customers drive them. Panelist Mr.Milind Shahane, CEO, Drive India Enterprise Solution Ltd., on The Service Providers Perspective Drive India Enterprise Company Ltd., (DIESL) is part of the Tata Group providing integrated end to end supply chain and logistics solutions to customers in a variety of sectors, consumer durables, telecom, chemicals, automobiles, and engineering. The growing complexity in the markets is leading to smart segmentation by companies in the markets. As service providers they play in four areas: Segmented Approach to Customers, Suppliers, Distributors and Channel Partners. The variables for segmentation come in demand variability, the quantities, and the various needs of customers or distributors. From the service perspective, the starting point is about creating differentiation in terms of reach to distributor or customer or in terms of collection from the supplier. The part played by the service provider become very critical. Which are the resources required to translate segmentation for reaching the market or distributor from a supplier point of view? There are a variety of resources vehicles types of smaller, bigger, specialized vehicle for specialized type of delivery. The service provider has to bring in optimization and even go to the extent of delivering using motorcycles or cycles at the last mile delivery if required. Detailed planning is required at the level of the service provider. This also holds for other assets and resources warehouses, storage points or distribution point . Where should they be located, what should be their size, is there an optimum layout that help in differentiation and segmentation; material handling equipment like forklift and other warehousing equipment. Can it be custom made or special equipment required that can handle certain things in a certain manner? The third are the service provider contributes is in the area of methods . Equipments do not work without methods. The storage location and fast moving items are to be stored in the front of the warehouse so that they could be picked easily, the picking and packing methodology to be used in the warehouse, the loading and unloading strategy that would give a quick turnaround for vehicles to achieve the differentiation. The kind 22 | P a g e

of packaging required and can there is a packing possible that bring in differentiation to reach customers which includes the modal mix of transport, air, or road and in terms of road there could be choice of vehicles and last mile delivery. Documentation and the time required for each of these. The service provider measures and puts in place a plan in place for action. Skills and capabilities are primarily about people and manpower . If there is demand variability which happens month end when there is a surge in demand at the month end or seasonal demand during festivals or in terms of a season product which will require additional resources. Resources need to be planned not only for upward trend but also for a downward trend as well. KPIs are important, In case of a differentiated or segmented approach there should a differentiated KPIs. Panelist Mr.Arif A Siddiqui, Director, Coign Consulting Fundamental reason for business to create smart segmentation is increasing complexity in business. Firstly, the huge and increasing variety of products brings in huge challenges to supply chains in terms of service and inventory. Secondly there is decreasing product life cycle or obsolesce. The third factor is increasingly demanding customers. The fourth factor is fragmentation of supply chain ownership, and a huge perceptional difference on the manner of service. Fragmentation brings in its own challenges and standardization of services across the chain, globalization and difficulties associated with implementation of new strategies . How does segmentation address the complexities? Some of the solutions for resolving complexities are by using LIPS First level of segmentation - Location or Channel. The Disposition of all service centers for product differentiation. The location decide on the time to market, Need for deadlines Infrastructure. Build not only efficient and compliant infrastructure but also infrastructure compatible to process, systems, flow and type of skill one needs to retain to operate in that infrastructure. A key reason is that the educated do not relate to logistics infrastructure. Partners. Weld the links without administrative obstacles. Most contracts with service providers and service availers are like a threatening statement rather than a relationship building document. Remove such obstacles to ensure free flow of information and goods, a fundamental role of supply chain Service. Need for developing better logistics methods and systems and better logistics systems. Most organisations lack in this today. Wherever they are, they are not owned by people by who operate them. Belonging to these methods and systems is very important. Methods and systems should improve Positioning of stocks strategically to accommodate known obstacles to communication. If we understand the complications we will be able to achieve a high and consistent level of service. 23 | P a g e

Questions and Answers Question 1. If the contract for warehousing goes to Diesel, what and how would you segment its portfolio to cater to J&J? Panelist Mr.Milind. As a service provider we have to be part of the overall supply chain strategy of the main company. It is ultimately the products of the J&J that would be moving to the market or the customer. We would be in a position to share our knowledge in terms of segment the warehouse layout, storage, handling, reducing damages, some of this would require resources to be put in place, a change in methods. There are ways in which Diesel can contribute in differentiation and segmentation but has to be part of the overall strategy. Question. One point discussed on differentiated forecasting process. Can I have more elaboration on it? Panelist. Mr.Ramesh. In markets which are less mature like India, forecasting demand is an important part of smart supply chains. Superior analytics looks at demand in chunks and pieces rather than as a whole and identify patterns based on ability. History will help in improving forecasting accuracy. There are products and customers whose variability is higher, where marketing inputs may be required. If you can segment your demand into chucks which you need to focus from an SNOP perspective, then you can effectively use the marketing persons time in terms of managing products. Analytics should be used for plan and forecast better. Question. When you cater to a segmented customer base and design the supply chain accordingly, are you not increasing the overall cost of the supply chain catering to different kinds of customers? Answer. Mr.Arif. The function of the supply chain is to service the demands of customers. It is demand fulfillment that is being addressed by the supply chains. The moment I start segmenting customers into types and characters or buckets based on behaviour, and demand patterns, the costs are going up. The benchmark cost is wrong. The service itself would not be sufficient to cater. The cost you will incur. There is no relationship between the earlier cost that you spent and the new cost. Panelist. Mr.Milind. A fundamental mindset change among supply chain professional is required is changing from cost to value. This is segementation about. Customers may be willing to pay the cost. The metrics of measurement should be value and cost alone should not be the driver.

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Session III Match Demand & Supply Networks Moderator Mr. V. K. Gopalakrishnan, Member, CII Institute of Logistics Advisory Council The moderator was of the view that keys to matching demand and supply networks were: a) Agility of the supply chain. b) Intelligent Supply Chains provide competitive edge for the company and required end to end planning c) Intelligent enterprises leverage outside knowledge and derive value, d) Supply chain segmentation adds flavour to demand and supply management. To top it, standardized processes, smart data and information to draw analytics and physical assets to manage and commodities stored and moved and network analysis. Panelist Mr.Sanjay Tiwari, Director, Maersk Line India and Srilanka The complexity of managing a transporting network is huge and complex . The second or third most important person in the companies like FEDEX or UPS is the one dealing with supply chains and managing the heart of the business. Networks need to be balance fixed costs like assets and variable costs like fuels and people. New services require time to grow and mature. What India is adding to the system is at the expense of what China and Sri Lanka or Bangladesh are adding as competitors. Pricing is the technique by which one expresses or communicates balance and equilibrium. From a transportation point of view, pricing is used to exhibit the price of offering capacity. Transportation companies struggle with the basic issue of pricing. When they put a particular price in the market one would assume that that would cover the costs, which may not be the case. They may be managing a large number of network points across the world and the person in India assumes that his colleagues in China or US would be making the difference and vice versa. Pricing as a tool is not working well in a supply chain. One of the chief reasons is due to high level of inefficiencies in the supply chain due to process, data, infrastructure, and is hurting India compared to places like Singapore which reflect the costs. Service Providers view. Panelist. Mr.K.Rajkiran, Group Head, Transport Corporation of India Ltd., Demand and supply can be matched if IT, process and contentment are there. The panelist provided case studies to highlight his views. Case 1. Mon and Pop Restaurants. They are proud to knock off the menu one by one and do it with a bit of rudeness. They plan for what they want to sell and procure what they want. This is a matched demand and supply chain. If the scale comes in, agility is 25 | P a g e

required. Keeping aside the inbound side, the FMCG companies do, have a concept called go to the market. In a place like Chennai there could be nothing less than 50008000 outlets to be covered in a week and products directly sold in the kiosk or grocery store or kirana shop. If network is not matched to the demand and the supply, and the supply is typically from a plant located in vicinity of 500- 750 km one can be sure that one is not going to be present on the shelves of the store on a daily basis. The amount of cash being handled on a daily basis, one will have to plough back into the system to ensure that the plant produces, the warehouse stores and the driver takes it. It is the best case on the demand side everything is optimized and this is possible only with a very strong asset base, a strong IT system and route mapping and people who deliver as per the plan. Warehousing and Service Perspective. Mr.Sridharan, CEO of Sri Kailash Logistcs Ltd. The company has two divisions - Transport Division and Warehousing Division providing services. Networking supply has to be seen in two perspectives - the macro level and the micro level. Macro level can be provided only by the government in terms of better roads, ports, airports, connectivity and communication facilities. Companies work at the micro level in providing warehouse space. From a long term vision, one need to assess demand. With the infrastructure industry like logistics, land is primary, is time consuming, involving lengthy procedures. One needs to plan for five or ten years and develop a good data bank. One may have space for two or three customers, but one should have a data bank of 100-200 or 300 customers, thoroughly study the industrial development taking place and understand change. Who are likely customers? What are their plans to increase their production capacities? Who are their competitors? These considerations are important before expanding. The demand from the customer is also very high since they not only require space but auxiliary facilities like CCTV, Security, Canteen Facilities and Exclusive Parking bay. The speaker used to think of meeting demand and supply. Dedicated Maruti vans used to come from the Guragon factory carrying their cars to south and would return empty. The speaker used to wonder if they could carry paper from the south back, tried and failed. He suggested brainstorming in this regard. Standardization. Mr. S.Mohan, CEO, Maini Material Movement Pvt Ltd., The company was good in end to end solutions to warehousing infrastructure. They manufacture storage, shelving and racking systems as well as material handling equipments to move products. Standardization and cost are two critical inputs. In the last 5-7 years there is a progression towards standardization. 70% of warehouses are still not organized and are considered backyards and not focused upon. Matching 26 | P a g e

demand and supply network requires your physical infrastructure plays a critical role. Supply chain management is demand fulfillment on time. When one applies science in designing warehouse infrastructure there are several factors one need to consider. Cost of infrastructure and its efficiency will drive the cost one offers to the customer. Unlike the west, India not being a mature market, we are all on a cost plus model and not a cost minus model. Competition has not hit us like the west. The cost of service is not aggregated properly. One of the reasons is not valuing the product the manner in which it has to be valued. It gets pushed down the chain. People want to spend Rs.8/sq.foot for warehousing. How can you get it?. One gets a floor that cannot take the material handling equipment or cannot take the racking systems but need to store a lot of material. So one begin to compromise and not look at material handling equipment as long as labour is cheap in India. 100 people are deployed in a space of 10000 sq ft whereas one should be doing with only 15 people. The supply of labour and availability of labour is going to limit it. In many of the states, people are complaining that labour is not available and even when available it is available at a very high cost and therefore mechanization or automation is being looked at seriously. Whenever you are looking at warehouse infrastructure, look for a good design based on business inflows and outflows. Overall efficiency and productivity comes from the design of inflows and outflows, staging areas deciding on optimization and how the business in going to grow over the next 3-5 years and matching them with racking and material handling equipment. Most people tend to look at everything in isolation. They want to undertake a warehousing contract, loading/unloading contract separately, racking contract separately, material handling contract separately. A person who supplied racking does not take into consideration the equipment you need to use, since, you have not looked into your inflows and outflows, since, you have not looked into designs and hence lost valuable space by not looking at designs and cost optimization. While there is a move towards to standardization there is a design element for fulfilling the supply and demand network. Overall network efficiency is a function of physical infrastructure and data analytics. Mr. Ashok Gangadhar from Ford Logistics (in the Asia Pacific Region). Meeting demand through supply network requires two major factors - A strong IT system consisting of order to delivery system, material management system, or supply releasing system management b) Good sourcing strategy at product planning stage. The freight cost of logistics in the auto industry is sealed with the sourcing pattern because of the high investments and sourcing foot print and the logistics costs. With multiple demand if one does not get into the sourcing strategy at a very early stage through total landed cost approach, one will not be able to match demand though logistics network. We have a product planning cycle called Global Product Delivery Systems where before we launch a product, our logistics is frozen as to the manner in which the logistics blueprint should look. Prof.Janet Shah. Strategy and Tactics. In India the practice of matching demand and supply are comparable to be best in the world in terms of ideas, level and technologies. 27 | P a g e

Simultaneously, we have a significant part of India where the demand supply mismatch. It is a huge challenge, say for example fruits and vegetables. If one looks at the prices of fruits and vegetables the last 1-2 years, it is essentially a demand supply challenge. On one hand one speaks about a huge price surge and simultaneously speak about wastage of 30-40%. We talk of not being able to feed in certain parts of the country and rotting food in the other, since they not being stored properly. On one had we have a state of the art supply chain ideas and practices and other end we have a primitive practices incurring huge losses. When we look at some of these issues at a strategic level unless, we build capacities we will not be able to handle. Speaking about capacities we talk at two levels: infrastructure level government is supposed to provide and logistics level. We follow a model which is different from what China follows. China will first create infrastructure capacities with the idea that demand will then follow. India follows the reverse policy, where we create only when we are hit hard by constraints. As supply chain professionals we know that whenever we have a utilization level which is more than 90%, we have huge wait times, which also has implications in terms of wastages. A recent report by McKinsey on the total logistics costs of 13-14% of which 4.3% is due inadequate capacities. If there is not enough capacities in our rail and bulk of the capacity moves through roads leading to wastages. Looking at the future, even if logistics service providers build those capacities, if enough infrastructure in terms of rail is not built, Innovative firms will find solutions of meeting demand and supply but would add to the cost but make India non-competitive. Demand and supply mismatch needs to be seen in technical and strategic level and terms of infrastructure like rail and road infrastructure and soft infrastructure in terms of necessary standards and HR management. Questions and Answers Role of people in the next generation supply chain challenge? What is the attitude and psychology in India? Prof.Janat Shah. People will always remain as one of the most key elements. The idea of talent at all levels starting from a driver going all the way to the supply chain manager is important. Talking about analytics, one needs managers who look at the data and analytics. Talking about the service, the attitude of the driver and will be more important in the times to come. Panelist. Mr.Sanjay Tiwari. I spoke briefly about the inefficiencies in pricing valuation. The human element comes among the better educated people. We are educating our people to better assign value and a cost to products we are selling and understanding value from a customer perspective. Moderator. To add to that view, a few years ago, people were bearing the brunt of all other inefficiencies - information inefficiencies, technology inefficiencies. 5 years ago people spoke about IT system and analytics. The change which is happening now and 28 | P a g e

companies have the responsibility of enabling people to deliver better. It is service providers responsibility to provide its employees with the right a nalyzed information and clear directions on services to be provided to which kind customers. That responsibility is changing and people feel more enabled. Question: You were mentioning about a regulatory agencies for the transport sector. Transport sector is an open sector. People come and go, not like commodity markets or stock markets. The functioning of the transport exchanges after a period of time deteriorates since market rules the roost. We fix a certain price for a certain location and certain distance and it gets nullified and exchanges do not function. Maybe in the time to come a regulatory procedure should come in. The same goes in for balancing costs what we fix a certain rate is given. All gets nullified when there are second hand trucks that are 15 years old, where the fixed costs are one third of current costs, but the operational costs remain the same. These are anomalies. If you look at countries like China, regulation comes first and action comes later while in India, it is the reverse. A mix of standardization of service and service provision with respect to cost and price is what will make the market make itself. Panelist.Mr.S.A.Mohan. If you look at the US the trucking segment these transport exchanges work extremely well among the mom and dad truckers who work in fragmented markets which do not have their own marketing channel. Where they are not working is in the air or shipping freight sector, where there are few players and who do not have the exchanges. Panelist Mr.V.N.Sridharan. The ocean freight from the East coast of Canada down will be lesser than what is going to cost from Cochin to Delhi. This is going to be difficult for the transport industry. We should start thinking of manufacturing units in the major consumer centers and fight global competition. Question If you want demand fulfillment with the supply chain, capacity building is very important. Panelist Mr.Rajkiran. There are certain bottle necks and gaps to match the demand finance bottle neck, infrastructure bottleneck, and procedural bottleneck. One thing want to know what LSP is expecting from the government for bridging the gap? What the manufacturing company and the LSP do in the process to make the logistics sector a developed one? We need to bridge the gap. What they can do? The government is doing a lot, the intent is there. We typically tend to compare with China, the gap is execution. Let us see what we try to do. Getting a road permit or national permit was a Herculean task in the past. Today we pay Rs.15,000 and we get. We were responsible for this change but it took very long (40-50 years) and a lot of representation. There was a talk of auto toll system. Today the biggest cost manufactures pay is the toll. The toll goes on increasing and it adds to the cost. It pains everyone. A recent study TCI-IIM Operational Efficiency Document, a public domain document calculates the time 29 | P a g e

required for Mumbai to Kolkatta number of stops, sales tax check post and waiting for tolls. If we are able to collectively bring that down by brining in an auto toll system it would be useful. I would like to address the railways and the auto toll system. The point in India, cost has to come down. We have lost contracts due to lowering the cost. Many large logistics companies have been bled, but TCI survived 55 years. We need to make some amount of margin. We do substantial train movement. There is a community in Rajasthan who deal with marbles. They come together and leverage and deal with service providers to reach the market in the south, which is away from them. There are 3-4 service providers who go to the so called consolidated markets. Each guy pays only for the units they load and moves as a single unit and there is no multiple handling. 60 to 90 trucks go from north to south. In spite of the government and other difficulties there are small sector players and these services are given. Panelist Mr.Ashok. Manufactures view of the service providers to managing demand. From the manufacturers side, whatever strategy we are working for 6-10 years, we know that our Indian roads or Indian infrastructure cannot take the volume growth we are forecasting. We have no option but to diversify logistics be it railways, shipping or OEMs. 6-10 years from now, I do not think we have an option. Rail and coastal shipping has to be done. Maybe the cost might be slightly higher but that is what we plan to do the next few years. Question for Mr.Mohan. He was speaking about the warehouse which they do not get the expected revenue for the services rendered to manufacturers and 70% of the warehouses are unorganized. My question is low value goods like cotton yarn, rice, maize cannot afford to pay higher charges but they require the warehouse before shipping. What kind of solution you have to offer to them? A high end warehouse facility cannot be provided to them as well and they do not require them also. One more aspect I was looking at most of the manufacturing industries thinks of having warehouses next to the production centers. Warehouse promoters offer rates for those who demand for warehouse and that should not be the case. They should go to the manufacturing location before they construct their warehouse. Panelist Mr.Mohan. When we talk about the cost of warehouse or warehouse infrastructure it has to be commodity based. Based on the value of the goods, in the western world, the dwell time or churn time for a low value products are shorter, it comes and goes and the demand and supply are almost matched and hence the warehouse costs are minimized. Whether the quality of warehouse determines the quality of service there is no doubt. The second part of your question, what I would like to share today, we are taking a lead in the market place by proactively providing international class warehouse infrastructure that is a fully fitted out like the IT sector suited to the business of the customer and the step in the direction of what the manufactures need at their place they require.

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Panelist Mr.V.N.Sridharan. What is the cost of construction of the warehouse and the rent to be collected? We construct warehouse targeting a particular customers. In agricultural areas the type of construction is for Agriculture or Cold Storage. NABARD has come with a soft loan scheme to reduce costs. I would like to give the warehouse whoever gives better rent. Panelist Mr.Rajkiran. It is not that if it is a commodity. There is a company NBHC which does wonderful work state of art, much better work than consumer goods. It is an outcome of the exchange, they store grains. It has excellent storage facilities at reasonable rates and they are doing a great job. It is not that in India we are not providing such facilities. Session IV Facilitating Express Delivery Services Moderator: Mr.S.K.Saboo, Chairman, Express Industry Council of India Logistics is a key driver in a countrys economy. Globalization, privatization and growth of multinationals have led to an increase and expansion in trade and services and thereby created demand for sophisticated infrastructure. Express Delivery Services is one of the fastest growing sectors in India and plays a crucial role in trade, facilitating and enhancing global competitiveness of Indian industries . While express services will continue to focus on its core activity serving product mix, they have played a key role in one of the emerging markets in India e-commerce. The Current e-commerce market in India is approx 1.6 million US $ and is expected to grow approximately to 8.8 million UDS by the year 2016. While Indian e-commerce market is still a like a toddler, compared to countries like China, which is sitting on a staggering 169 million US $ market, a matured market and poised to grow by 25%. This shows that express delivery services are going to play in the overall global market including India. Ms.Chitra Shinde, GATI-Kintetse Express Pvt Ltd., Global Trade has been around for a very long time. The circuit Ancient Europe, India, China, Persia, China has been exchanging goods for a very long time. That later evolved after western European countries like Spain created Armada for exploring new worlds and continuing this trade mostly over waterways. In the 1969, the founders of DHL came up with the concept of express distribution and that was initially confined to documents. They started carrying on board courier consignments with documents in ships which were cleared in runs to ensure that they did not stay in the ports for a very long time. In 1973, the Federal Express pioneered the hub and spokes concept that revolutioned express distribution in the US, being able to offer overnight services in the main cities. A small example of how global trade happens, someone can be in any part of the world designing stuff and these design are technologically sent to the head office of the global companies. For example if one is looking at the fashion industry, a material designed in the New Zealand, approved in US, the fabric for this picked up from Egypt, 31 | P a g e

finally designed in Milan, mass produced in Asia and shipped to various destinations depending on what lead times they can handled and reached to the last mile delivery and gets delivered to the shop. This whole cycle has gone backwards and forwards across continents and the time taken for this can range between seven to ten days from conceptualization of design and finalization and of course its manufacture and arrival will vary from time to time. This is what express distribution has done. The sheer size to which the HTL and Federal Express and other companies have grown over the years stand testimony to global trade in the 20 century has evolved. The kind of goods that typical moves trough the express distribution is exotic fresh fruits and vegetables, pharmaceuticals, electronic goods and parts of aircraft or expensive machinery, fashion both low end and high end, clinical trials which is mind boggling which is carried from one part of the US to another and that is carried throughout under temperature controlled environment which is then used for development of medicine or vaccine. Express distribution in some places also moves horses under back hauls some times you bring in fish or horses. In India we are starting to see e-commerce over the last 10-15 years. Almost anything is a click away. The current generation is technology savvy and live in a virtual world. We are seeing a very large increase in volume and space as statistics show it is expected to continue to boom. We as an organization have realized that B2C express delivery capability is quite different compared to a B2B commercial delivery we undertake. We have set up a new division which is going to specialize only the delivery for that segment so that the speed and complexity of delivering in a residential area can be catered for and expectations of the industry met. Many of the industry are not able to find good service providers and hence are developing their own capabilities . This in my opinion should be left to the experts. The pickup and delivery operations gets complex when one reaches scale and need technology for optimization and visibility. This is where smaller operators may find it difficult and need to be balanced. We do a balancing act between high end technology vs. something that works to balance cost and utility . How long do you think the silk route took? Historian believes it took 12 and 16 months. How much time does a design from New Zealand could end up in a store? 7-10 days. If not from design from the manufacturing to the store through express delivery it is 36-48 hours. Guidelines of Express Delivery companies use are as follows: If it takes an individual X no of hrs for an individual will take to drive the airport, clear the customs take the flight, land at the other end and reach the particular place and that is the time the express delivery should take. These companies make constantly strive to improve their own times and in most countries in the Asia Pacific you could have a packet have picked up this afternoon and have it delivered the next morning. An example of express distribution is taken to the next level on commercial consignment that is liable for payment of duty. A pick up that is done in Oakland or anywhere in the world and then goes to a depot. A depot is a typical satellite place where there are 10-20 pick up a delivery people work to cater an area. From there the paper work is imaged and the image is visible to a company like TCS or any other BPO company. They do some data 32 | P a g e

entry and it goes back to the original country and gets the customs clearance. As the vehicles reach the gate, the consignment has made its journey with the data and goes to the customs and is ready for export. On arrival at the country of destination the information is available at the time and is also available to the delivery depots of express companies for them to optimize performance by looking at excess capacities and plan timing range between 95-97% on time delivery excluding some uncontrollable exceptions. The key thing is about data and customs clearance takes less than 12 minutes. Most people who work in these industries strive on are a very high sense of urgency and are extremely good at contingency planning and gifted at disaster management. The express delivery industry plays an important role in international trade. Over the years they have lobbied a lot and facilitated trade across borders, pre-clearances, customs working with other countries customs, globalization is also something that gets facilitated more and more having the capability of being able to take anything from anywhere at any point in time. As more and more countries have certain specialization in either manufacturing or raw materials or niche segments that they focus on this enables them to operate in such an environment. The express industry creates jobs and a statistics indicates it employs up to 10 million people around the globe and facilitates supply chains and helps to manage you supply chain deliver just in time . As the world is getting more and more integrated, express distribution has been an integral part of drawing it closer along with technological development available in todays world. How can express delivery help in competitiveness is by reducing purchasing costs, inventory costs, cost efficient way for time sensitive goods to be moved. Customers will be lot more satisfied and something that moves quickly has less chance of being damaged. In India the overall process remains the same. But we do not have a high degree of seamless integration between international arrival and domestic distribution. Typically our customers might bring in the goods use another freight forwarder have it cleared take it a warehouse call us, deconsolidate it and re label it for a domestic distribution. Most companies globally have a pipeline it with go through, through and through so that there is a multiple box break bulk concept and the final recipient is already labelled, thereby reducing time and go through seamlessly. We at GATI are the market leaders in the surface express distribution and undertake air express and have an international product which is about 10% of our business. We do have some customers through and through and they give us the consignment in China which is piped though our own customs network and delivered in India in my hometown somewhere in northern Karnataka. And there is a possibility of having a singer vendor solution and there are two other service providers who do seamless integration. How do we use technology? We use a printer, a little gadget that gives you the consignment note and actually works through a mobile phone which had got all information and is talking back to the main server in our office and we are using for pickups. This we are using only in three cities and the advantage of doing this there is no dependency on data entry and create parallel process flow that tends to happen later 33 | P a g e

and comes in batches. The capture of information is taking place on site in the place of pickup. The best solution is when the information comes from the system of the client to our system. If we used a high end Motorola scanner it would probably cost about Rs.1 lakh. If the yield is only Rs.10-11/kg then it becomes expensive. This one costs only about Rs.22,000/- and most of the price is in the printer and has a software customized for our needs. Loading and unloading scanner and we have the options of using sophisticated technology but we use one at the time of loading and unloading of trucks and tells us if something is extra or missing online and this also has sound. If you have done 300 packages across a night, this one tells us through sound. This is a dashboard and different from business intelligence and is a management tool for supervisors and managers. In Karnataka the manager is based in Bangalore and handles 600 km North South distance. This dashboard will give him a real time opportunity to look at the consignments that he has, that have left and those which are coming in with three clicks. The last example is VTS and is used by many companies for contingent planning, if the vehicle is down and the fastest way to move it and we also use for we have used them for proactive monitoring of driving habits if the driver is moving more that 60 km speed we have a centralized monitoring cell which will call him. This has reduced accidents. We do not have vehicle tracking unit for all vehicles but those traveling beyond 300 km. We have integrated this information into track and trace module to locate vehicles. Mr.Seshagir Anilkumar, Head Strategy and Business Development, DelEX Cargo Pvt Ltd., Logistics have become a major tool for dealing with global trade across the world. The new millennium companies profiles have become where the material is sourced from somewhere processed somewhere and marketed somewhere. If you see the mobile companies which are launching every fortnight what these companies do this they create a LC in China and Taiwan and move it very fast in India. Most of the products take 9-12 months to develop but have a life of only 3 months. Within the 3 months you see product change and the product change every month . The industry and production manufacturing keeps changes they expect that to be delivered in the fastest possible time to reach the customer before he changes his mind for a different product. 30% of the items sold in the Indian super markets are FMCG and foodstuff products imported for that specific location. You have smaller units being set up very closer in India so that the products can be manufactured and reached to customers at the fastest possible time. This amount to 10% of the products in any supermarket across the world. Most of these products are customized to the local markets. Most of the LCs or imports are cleared at a particular import gateway or you have a very close manufacturing sector from where the products are manufactured and have to reach the customer or self across the country at the least possible time. This is enabling trade in the current scenario. Most of the organizations are coming together to create a very comprehensive value chain for the customer, maximizing the value chain for the customer by reducing the lead time to reach the market place . You have a product and 34 | P a g e

service flow from source to retailers which is very fast and more importantly happening now is the information flow. Information flow is very fast and the expectation of the customer expectation is increasing day by day and has become a challenge for the industry like the example given by Chitra. This is creating faster movement of product and better cash flow to the manufacturing sector. To take you through the concept of competitiveness is time based and the inventory at the storage level . We have heard just in time and vendor management. JIT product lifecycle is reducing so fast and the new product before they hit the market, the design has to be sold before a competitor replaces it in the market. The other two quick response logistics (QRL) are e-commerce and Internet. QRL is nothing but an efficient consumer lifecycle in which JIT is applied continuously from the sourcing of the material, manufacturing to the end of the supply chain. Nowadays, the replacement level in the shelf is so fast they are tracking product lifecycle right from the point of sale (POS). If you go to a superbazar and purchase a product, within minutes, the back end people know that they have been exhausted and have to be replaced. From there the challenge for the express delivery starts to ensure that the products reach the shelf. More and more companies want to reach faster to the customer and do not want to spend time labelling and sticking MRP. Everything happens at the cross deck level where the product is segregated and reaching the store directly for the sale. This is becoming increasingly aggressive and important. Efficient consumer response and ensuring a Low inventory level will have good cash to cash cycle. E-commerce have become darling of the day. The challenge was to make customers purchase over the internet. Customer likes to hold the product and feel it. Companies later realized that the challenge was after the order being placed, delivery on the promised hour before the customer interest dies. The customer would like to see the product as ordered online and on time. This has become a challenge for the express delivery services industry as well. Safe and secure delivery is also importance apart from cash collection and remittance which is also part of the express delivery services. All items purchased online are either on COD or cash collect. This helps in trade is ensuring the cash flow remittances for the customer and manufacturing unit. Global trade is transforming express delivery services and requirements are changing on the way the express companies operate, must offer customer service. In the earlier days the proof of delivery was the document to ensure that the shipment was delivered. Now most of the companies insist that we provide the GRN along the POD to ensure that the product delivery is captured in their system as a proof. Real time information and reports which every company now days needs in anticipation of what they are expecting and what has been dispatched from various plants units and depots. Innovative out of box process example. We are on a project with a leading garment manufacturers in India called Active Merchandising. It is unique store to store movement and have stores across the country. They have realized that a particular brand like trouser or shirt does not do well in a store or mall but doing well in another place in the same city and they want to move the goods as fast as possible based on the inventory of the store holding it. Based on it we have put in a customized solution to ensure that this movement takes place within 24 hrs. This is an example of the manner 35 | P a g e

in which the delivery expectations of customers are changing and the time and cost reduction has become critical. Delex belongs to NDR Group. They have been in business since 1954, they have more than 10.5 million sq.ft warehouse space across India and present in all facets of logistics from container freight stations, trucking movement, last mile distribution, warehousing, 3PL management and capable of providing end to end solutions to its clients. NDR provides direct and indirect value adds to growing industry through general warehousing, international warehousing, own CFS and last mile delivery network. Continental Multimodal Train Terminal is an innovative project taken up by our group. This was promoted by the Indian Railways which is privatizing freight movements. Our group has set up 11 train terminals where private freight trains can offload cargo destaff and move cargo. Delex is also into delivery and distribution as well. It was set up as part of a leading airline company in India KF. We are now operating on our own and ready to expand it to others. We are basically infrastructure and solution providers to any industry in any segment. Moderator: The very idea of express in not lost there has been a lot of value added services provided by the large players. The common man does not realize the kind of logistic arrangements behind what he eats or wears and finished products. Express reduces costs - inventory cost and overall costs gets reduced, the moment express get involved, whether it is air express or surface express and it is not restricted to small pieces but large amount of goods are carried by the integrators. They operate dedicated freighters to carry from one place to another in India. The overall costs get reduced the Indian markets are also becomes very competitive compared to the global players and technology is making the job of the express easier. The key ingredients required to remain competitive in the market and how to improve efficiency. People say that to enter into the courier market there are no entry barriers. To actually to be a good courier there are huge entry barriers huge investments, have a large network, excellent technology, it is not only delivering goods but also the information . It is the express which is taking us to the Tier II and Tier III cities, while the metros continue to go. If you go any place in Tamil Nadu, UP, Bihar or WB people have access to every product. This is due to the presence of the express delivery. Questions and Answers Q1. My name is Ramesh and I am a Logistics Consultant. What role does the Express Industry Council plays for the betterment of the Express Industry? E-commerce industry is booming and is projected to grow. There are a lot of possibilities for the express industry, but the e-commerce companies are setting up their own logistics networks since they are not happy with the service providers. They have flexibility, cost reduction and more control over their own network. How is the express industry going to address this challenge? The express industry has been witnessing mergers and acquisitions in the last 5-6, what does this convey to the logistics industry? 36 | P a g e

Moderator: Globally, all logistics companies stick to their areas of core competencies . They generally outsource the first mile and last mile to the express operators . There have been some companies where they have outsourced the last mile on their own. That has its own complexity. Slowly they are again approaching the express operators. It is very easy to blame the express operator. Some of the companies sell through the television channels or through SMS. Customers press the SMS sometimes by mistake and the merchandise gets rejected by the end users. There is room for improvement and there is continuous improvement. The day is not far when the market is more mature. As I told you that the Indian e-commerce market is behaving like a toddler, but the services are continually improving. Ms.Chitra. There are a few companies which have start up and would not have the bandwidth to put up something like flip cart or start their own network. Scalability becomes a big concern. Managing semiskilled and unskilled resources is complex in itself. The third complexity is the casual delivery services which require a good amount of technology to know exactly what is happening on a minute by minute basis. In India there are a large number of smaller courier companies. It is easier for these companies to integrate into an e-commerce delivery segment than for a cargo company. The size of the fleet which cargo companies run on the road cannot be used to delivery in residential area, while they have small sized vehicles bike or rickshaw that is easier to navigate. It is like the difference between the air and surface network. In our case we have completely split it and in NCR we require additional 200 small sized vehicles to cater to the volume that is coming up. The sector is booming and it will evolve and get better. Moderator: Then there are state border clearance issues and the service providers get blamed for it like in West Bengal and Kerala. We have been talking as an industrial body to the government and there has been remarkable improvement in UP. E-filing has been happening, check post barriers have been removed and speed has increased . A shipment from the US takes 24-48 hrs, the same shipment takes say from Mumbai in Maharashtra covered in Octroi to West Bengal take times and there are sales tax issues. We have been talking to governments to remove or minimize the barriers or simplify them to enhance the overall efficiency of the express operators. Ms.Chitra. I can tell you about us. As you grow bigger and bigger you need to have enough profits to reinvest in your own growth. We had a unique combination of aircraft network we had a fleet of aircraft through Air India we were flying and we were way ahead of the curve in terms of investments in anticipation of the GST. We had assets created across the country in anticipation that are not generated enough of an income since there is not enough of need in those pockets. With increasing inflation and cost of fuel the last 3-4 years has been eroding the bottom line of the industry overall. Some of it has been passed onto customers. A lot of the larger customers have tremendous buying power and have pushed back severely. If your compare with the global logistics 37 | P a g e

cost typically it is down not due to transportation costs, but due to reducing inventory costs. If you look at the deregulation in the US the cost of transportation vs. cost of inventory the latter came down year after year and the former kept increasing due to fuel cost. We are not seeing that here. The KPMG report 70 US cents vs. US 3.8 US $ is the average cost to move a kilo across 100 km that in itself is something the industry the supply chain people the people making decision of cost vs. quality need to keep in mind. There is a bottom limit to which things can be pushed to up for scale. These things keep happening in the industry.

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Session V

World Class End to End Planning

Moderator: Mr.V.G.S.Mani, Member, CII Institute of Logistics Advisory Council Mr.Clifford Pattaro, Partner, IBM Global Business Services How has planning has moved over the years, where is planning it today and what is expected about end to end planning, why is it not happening and what is going to be its future? The concepts of planning have been there for long. The process of planning is critical and the process of learning from planning is critical. If you look at planning of how it has moved in some companies from silo approach when they had their own plan to a lot of integration across. Some organizations are also collaborating with their suppliers and customers . The next level is the smarter supply chain. How does one get more responsive and more predictive and that is where the next evolution will move to. That is where a lot of intelligence is being built, interconnections made and more instrumentation. If you look at certain best practices that are followed today which can be adopted for process. One is Collaborative Planning and Forecasting along with our customers. Today there is not enough transparency between an organization and its value chain partners. Increasingly we are getting into a partnered economy and specialized enterprises. You see organizations increasingly coming together to deliver goods and services to customers. It is becoming increasingly important to collaborate and have process that aid that. The second element that characterize is being responsive. Are you in a position to drive pull through the entire chain? Are you in a position to be responsive to the needs of the entire supply chain?. The synchronization between various elements of the chain is going to be very critical. Inventory is going to be more critical and driving the synchronization, obsolescence is going up, reducing product life cycles and shelf life and freshness is becoming increasingly important for some categories. Synchronization across supply chain partners is therefore becoming more important to adjust as you go along. The integrated sales and operations and sales planning which is the backbone of the entire planning process getting a single number in an organization is critical to run it across the networked organisation. Very often you see newer participants playing a critical role for example marketing. Very often when you took it in integrated sales, you may have the sales participation or supply chain participation. Organizations are finding it more important to include the marketing representation there. The kind of programmes one is going to run, the products one is going to introduce, the time frames and synchronized with sales and marketing. The role of finances would also be important element in this process since more and more choices are being made. Finance and marketing divisions are more and more are being integrated into the SNOP process. The last element that brings complexity to supply chains is customer segmentation customized service level and links back to the topic as how the supply chain aligns with 39 | P a g e

the corporate strategy. Micro segmentation of customers you get into differentiated services for customers the supply chain should also reflect that. The challenge is that one should not built complexity into the supply in being responsive and one should have diversity but also have simplicity and good organizations practice these. Many of these concepts have been there for a long but not many organizations are doing it or successful in running an end to end planning. Our studies show that a number one reasons that functions do not talk to each other within an organization . Trust and traditional silos does exist in an organization. It is more complex across organizations; it is about trust, keeping on your toes, ensuring you have some buffer. Hence, they are not willing to share a single plan across the supplier network. This is to do with trust and break barriers one at a time. The third reason is that of technology or barrier is also an opportunity. It can help in the execution. We were working with a steel company and steel industry is very complex manufacturing set up: the mill has constraints, the roller has constraints, they were working as saying that by the time I get a customer order I will be in a position to tell the customer that it will be delivered on a such and such date. It was based on gut feeling and standardized lead times say six weeks. These six weeks get stretched to ten weeks and the customer looses his confidence. Here technology helped they were able to synchronize their availability and promise customer on a date that is feasible and execute the plan. The other thing which works is the visibility of performance and measures and technology will help spread it across the organization. The final issue one is skills and requires discipline and processes to be followed by the organization. Implementation of advanced planning solutions requires skills within the organizations. Skill are required to decipher what the optimization is and trade off is and many organizations are found lacking. When they implement the technology they would have had skilled resources to perform those activities and later people would have got promoted or left or changed roles and adequate amount of training is not given and the quality would have deteriorated over a period time. Skills also mean thinking holistically and is a part of evolution. End to end planning therefore really not making a mark should have made due to these barriers. Organizations therefore need to tackle on all fronts process technology and people capability. In terms of process maturity organizations lack disciple and very often there are ways of working when there is an option. Does the origination have the discipline to follow the set process that needs to be checked. Cross functional participation has to be constantly reviewed and measures since the environment is constantly changing, the environment is dynamic, the demands are changing, the capabilities are changing and you need to review if the process holds true, responsiveness is there, efficiency is coming. Technology capabilities are a big opportunity which can be used to drive visibility and common understanding since organizations are becoming more multi-locational and global and technology will play an important role that everyone understands the same language and expectations. Integration is going to be critical. In technology it is also become important to be able to understand what is really is required and when and what purpose will it serve?. There 40 | P a g e

are a lot of options on the table, in terms of what can be done and what problems it will solve and what needs to be done need to be articulated and decisions made from there. People are the most important element. Are we supporting a culture of learning and continuous improvement? World class planning process is dynamic and constantly need change and review and constant learning and improvement. It is important that organizations and individual people working on supply chain have perspective. Cross training of individuals is important and would provide useful insights about various functions in an organization. Case study 1: Beer Manufacturer. The commodity has excise related challenges in transporting across the country. The way they looked at the entire planning was right from a long term planning process; from a macro business environment over a period of three five years and its impact on annual plan, coming down to SNOP and to various plans for individuals. All of these were integrated and objectives of planning responsiveness and inventory were all baked in. The changes one was making to the supply chain also reflected in the plan. In this case, they changed the entire supply chain network and optimized the entire network to cater to their future requirements. Right from strategic to operational level, they had synchronization - horizontal and vertical alignment in this case. This organization had the foresight on planning and execution in going forward. The future is going to involve a lot of elements in which they are going to change based on some of the Five Key Characteristics Visibility across the chain Building Risk into the planning process Customer input Kind of flexibility. Flexibility should be constantly reviewed with strategic alignment Globalized supply chain with integration and optimization

Keynote Presentation by Mr. Balasubramanian, Executive Vice President, CavinKare Pvt Ltd., I would like to present three examples as to how end to end supply chain planning has helped organizations in differentiation and competitive strength . We recently took over an ethnic snack business in Mumbai, which was developed by a school drop out. Manufacture in a traditional manner. It was a tin shed in the big city of Mumbai. They were manufacturing delicious Indian snacks. Most importantly delivering the snacks fresh which makes a huge difference. He delivers fresher than any of his competitors. Competition includes multinationals too. I was astonished to see the ability and speed in which the products reached the market. It was a full system in the supply chain parlance where market demands products from manufacturing and manufacturing demands products from souring and was pulled by default because the manufacturer had very 41 | P a g e

limited space. The distributors cannot retain 30 days stock due to rental and real estate costs; they typically had one day stocking space. The distributors would typically place orders over the phone and once the orders are done they would look at the stocks and order to the organization. The organization would look at the stocking capacity and what can be manufactured and what was manufactured has been sold. The pull system assumes that sales cannot be accurately predicted, since the front end demand varies, but can be correct in a directional manner. Manufacturing has to be on sales and not on a sales plan. Other support systems respond on the same market realities. When we took over we created functional silos of finished goods, raw materials (10 days stock) and packing materials (30 days stock). We worked out the reorders levels based on a sales plan and filled all silos. We had a lot of SKUs with 345 SKUs and reorder levels have be reworked and filled all the silos and refilled warehouse only when the reorders reached. The results we had 17 days inventory across the system from warehouses to end products. A typical FMGC industry works with 35 inventories. The low moving or slow moving do not happen on our godowns. The learning is produce what is sold. Do not plan to sell. Functional systems worked in silos and worked efficiently but seamlessly across silos. Case Study: Milk is a perishable product collected from villages and taken to consumers door step. World class business concepts exists not only in western countries but in India. This is a perfect example of end to end supply chain and the cases presented were built out of necessity and evolved that we tend to over look. We need to look at the fundamentals. Case Study 2: IT has been a supply chain enabler . I have been buying materials agricultural commodities, manufactured items and imported items. Money has been the biggest differentiator in the agriculture sector. The ability to pay the vendor on time puts you ahead of competition in commodity buying. A company Marico and Parachute is a Commodity Brand took to backward integration. The differentiator for coconut hair oil is aroma. In the last 5-6 years they connected all the vendors who supply meal to them online. Earlier they used to have an office in Calicut. This was taken into an IT enabled platform and they put in their offers that can be seen across the country. A particular day sentiment and market reaction is seen. The vendors can track their deliveries and is visible. It is visible agribusiness. In the past this was not the situation people had to spend a lot of time in the process. The process has been simplified and transaction is seen visibly. Agribusinesses are burdened with high cost with local borrowings. Improvement in transacting with the company is important. IT can be used to enable vendors. An efficient supply chain should business efficiency comprising of four elements: Quality of products Speed Cheapest Cost (Cheapest) User friendly environment for vendors and customers backed with IT support 42 | P a g e

Panelists Mr. V. Anand, General Manager, Hyndai Motors India Ltd., Outbound logistics What is world class end to end planning? It is all about forecasting demand as accurately as possible and trying to evolve supplies to meet this demand. Some of the basic essentials of a world class plan encompass principles and key ingredients: Absolute synchronized process. Time compression in all activities including cycle time, throughput time Absolute visibility across the entire organization including vendors and dealers, and distributors. All speak the same figure or number. Optimized network Clear segmentation on the demand and supply side Plans are aligned and relevant KPIs to supply chains and organisation goals Functional excellence in every activity

In an end to end integration supply chain solution, enhanced consistency and accuracy and visibility as key hallmarks. How to be accurate in forecasting demand? Based on global demand how is one develop a holistic global supply plan taking into consideration the inventory, capacity at a site level and transportation planning. They have to be built on a single system. Some of the value drivers in end to end planning Higher productivity and higher efficiency expense control has to be brought in Manage risks that take in shocks Adoption and compliance Unified analytics and optimization

Some of the business initiatives would include be important Sourcing and Supply Chain Augmentation Standardization in process Supplier enablement and rationalization Contract development efficiency Demand visibility Effective supplier management Alignment to corporate goals Supplier risk assessment and supplier risk management Process controls and policies Supplier performance

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Some of the structural initiatives Consolidation and centre focus Internationalization Global low cost sourcing Supply chain organization and dealing with 3 Pl and 4 PL Fresh look at distributors

Some of the operationalization initiatives include Rationalizing Logistics Collaborative back hauling Collaborative and integrated planning

Benefits of end to end plan Hard Benefits Increased customer service Increased plant productivity Reduction in inventory Reduction in freight costs Reduction in supplier lead time Reduction in order lead timee Reduction in obsolescence Reduced time in launching new products

Soft Benefits Enhanced team work and collaboration within the organization and outside Improved communication across and transparency within and outside like partners Greater accountability and control for top management

End to end planning helps in building what if scenarios to understand: Shifts in demands Shifts in capacities IT can be leveraged to a very large extent and help in financial decision making

Mr. M.R.Sundaresan, Executive Director, DELL India Pvt Ltd.,

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I share specific examples of IT industry. 3 trends seen in the IT industry with respect to end and end planning: a) First Trend. Companies are orchestration the supply chain. In the supply chain there can be three levels- strategic level, tactical level, execution level. In a typical SC you design, sell and market, manufacture, fulfill and service. 80% of the laptops in the market are not produced by the owners. It is made by others. The brand is owned by the company and the supply chain strategy. We own the contract with the major companies. We leave it to the original manufacturers to let them. The IT industry owns only the brand and supply chain strategy. Fabric The Brand Owns only the brand how it orchaestrates the supply chain. b) Second trend. Product lifecycle has shortened. Product life cycles 6-12 months how to manage end to end planning? Need for a continuous flow of products. It is a big deal for us. One example from DELL we are a made to order company. We are able to do demand shaping recently. 40% worlds Hard Disk are made in Thailand, which was disrupted due to floods. I TB Hard disks were in demand. We asked customer to pick smaller hard disk instead of 1 TB hard disks. Supply chain resilience.How resilient is your supply chain? How can demand be shaped? Supply Chain Resilience are important. c) Third trend. From Product Supply Chains to Products and Service Supply Chains When customers order they also order bags, printers and etc. This is getting increasingly difficult. The brand owners do not make all of that. Over it there is software, which adds to another layer of complexity. We have to make changes on the fly. The importance of getting services into the supply chains is becoming more difficult and complex. d) Software license. We were an entrenched hardware company. We are now purchasing software. We were not geared to deliver licenses. We printing the license place it in a box and have it delivered. We reinvented the process. These are some of the trends in the industry. Mr. Sylverster DMillo, Head of Sale, Mahindra Logistics LSP Logistics Service Provider Perspective we feel are key success factors for a LSP. Three key factors for successful partnership: Level of Engagement Stage of SC Integration Trust and Collaboration specific to the Indian context

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SC Engagement today mainly falls between two categories: Transactional and Tactical. There are few organizations which go into the strategic mode. This may be based on their experience. Using cases I would outline the key learnings. The initial stores of McDonalds were opened in Delhi and Bombay. One of the shocks which hit us was when we had to transport mutton patty from south to the distribution centre in north. We could not cut across the state of MP since discovered an archaic law that prevented from crossing that state. Imagine the colossal waste of resources in terms of fuel and time of the erstwhile service providers role who were circumventing the state of MP moving the products from the south to north and lobbied with the government and getting the rules changed. This was engagement of the service provider at a planning at a strategic level. A bad example we recently had a retail shoe company who had suddenly witnessing phenomenal growth and decided to expand operations from a small outfit in the downtown they wanted to move to Mumbai Octori to cater to across the country and in Mumbai. This company went ahead and signed up with a landlord facility requirement, made a long term lease, invested in handling equipment and then floated an enquiry and stated that they had some facilities such as warehouse and wanted their contract logistics requirement and SLEs. The warehousing opening got delayed by three months. One of the factors was that the local political dynamics of the place in which the facility was located. This is the first key factor. The second key factor is supply chain integration. The Supply Chain Integration could be classified in three stages - Make, Store and Distribute. Stage III is Integration upstream with Suppliers to tier 1, tier 2 and tier 3 and downstream with customers. An integration would not mean providing a terminal and portal and login password and now enter the data with respect to transactions from the tracking and billing perspective. Integration in the true sense means the supplier gets the seamless information visibility right through the custome rs end. This is important to deal with issues on products that have a short life cycle. If a supplier in tier 3 has the visibility of a particular part he has supplied to a company, the customer has now gone through the life cycle phase and it is eased out then proactively he would gear himself up for the next product part he is going to supply. He would get the information at a later stage that he is not required to supply the parts he besieged with stocks and has to look at ways of liquidating them. Players like Wal-Mart have gone for such system integration. IT plays a very key role from the service provider end. How do we do a pull to a push shift in one of our plants? We have two major plants in Yanching in China where we manufacture the largest number of tractors in the world ranging from 25 HP up to 125 HP of different sizes. Farmers spread across China used to schedule a visit the plant to pick up the tractors. Using IT as an enabler through our transport management system we got the planning module activated. Based on the orders in multiples of different HPs received from farmers of different north China region, the system used to throw up the route planning but also give the optimum vehicle and optimization of orders and space and shortest lead time delivery to the farmer. The farmer had a definite picture on when they will receive the tractor. This cuts the anxiety and lead time delivery at the same time it releases the inventory block up in the factory. The third most important in the Indian context is trust, transparency and 46 | P a g e

collaboration. The economics of scale then comes in which ultimately provides benefit to the organization and thereby the consumer. The auto vertical where in we provide supply chain services in plant in bound, stores management, line feed, sequencing just in time, just is sequence and virtue of having gained this expertise we provide similar services to other automotives like GM, on bound logistics for Hyundai all this is possible due to trust and collaboration. We do have a base traffic that moves criss-cross across the country from various plants. We superimpose the requirements of other customers and look for optimization during the return traffic. Almost all top five brands of 1 tonne and below ACs sold in India is produced in Shunde near Chechen in China. The collaborative approach adopted is that while bring in spare parts for the automotive and farm equipment from China, we approached the AC and microwave companies why dont we get together and organize the international freight consolidation movement. This is another example of trust and collaboration and are able to leverage the economics of scale. These are things which are taking us forward. We are talking of bringing in technologies like RFID. In the marketplace, product differentiation is gradually getting narrowed down and from a product fight in the market place is now a battle between supply chains. Companies having a more end to end supply chain are the ones with a sharper supply chain which win. Questions and Answers Question: I am Sandeep from Johnson & Johnson. We are talking end to end supply chain planning and assuming it is raw material to the customer. How do we cater to the reverse part of it? If you are talking of repair and return how do you build in efficiency it by virtue of repairing and bring it into the good stocks, managing the inventory and managing the costs attached and how do you increase the efficiency of it? Answer: In terms of our industry reverse supply chain is important for two reasons given the importance of e-waste and managing them. Governments across the world are shifting the responsibilities of managing the e-waste to the producers and we as producer responsibility need to manage the reverse logistics of it. How do we manage waste beyond their useful life? We have tie-ups with companies which safely dispose waste. From a consumer standpoint and corporate standpoint we offer those services. We tie with some of the forward logistics players as well. When we have product return we use the same hubs which the forward logistics have pick from the consumer doorstep and bring it back to the factories and refurbish in our factory and sell it to our employees or if they are beyond repair we dispose it off through approved vendors who can extract metals and dispose off the rest. We use the hubs and infrastructure of forward logistics and transportation of that. But the bigger point is that as producers we take the ownership and responsibility of waste generation that happens. The moderator added to it. He said the forward chain is very large and the reverse is very small. The forward chain comes from different source and the reverse chain is in courier mode.

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Q 2 I am also from Johnson and Johnson. End to end planning is well appreciated at the concept level this is fairly well understood. But if you look at in terms of real implementation and degree of success this differs widely between organizations. This also depends on the way goals are set across the organization. Unless people across are working towards the same goal this may not work. How do you see this as emerging? Are there are any example of goals getting aligned and end to end planning being successful? How much of a risk are we willing to have in each others business? It works very well with strategic partners and no issues common goals and plans can be made. The challenge how do you take to a mass scale? That is a problem. We work with our customers as well and work on the long term five to ten years arrange where there is no choice. The challenge is for smaller players. Technology will provide a means of doing it. It is going to be hard work. Moderator: From a practical standpoint, a very high level of collaboration is essential with customer in the front end and supplier at the back end and it also depends a lot on the trust and type of contracts across the board about sharing of information and what your plans are. What makes it work is the will and resolution of the management and putting in a robust process and sticking to the rigour of it. Deviations take a very large effort to bring it back on track. Nokia sells millions of phones in India every month. The process rigour set up are so strong. When we looked at the recent check there were 42 units that are obsolete across the million showing the strength. Q.2 Sankar from Campco. We are talking about the world class supply chain and are competing with world class supply chains. Looking at our country we cannot ignore the fact the infrastructure like ports are important factors in deciding the supply chains. What is that CII is doing to take it up at the highest level to ensure that we plan in advance and are pro active and best in the world. Moderator: CII is the best organization to answer. There is the Logistics Advisory Council and we are working closely with IBM and McKinsey to identify specific issues related to policy to be taken up with the government and matters to be dealt internally. Mr.Bala said that he was working with a 17 days inventory, which I think it is better than world class. Mr.Balasubramanian. More than physical infrastructural bottleneck in this country the bureaucratic bottlenecks are very high. Sylvester spoke about a law which prevents transport of meat products across the states. All across the states we are facing the problem of entry forms. If I have to send material from here to Uttrakhand I need to get entry forms from Uttrakhand. Road bottlenecks are indeed a problem. Interstate bureaucratic requirements like c forms and entry forms are a problem. Having a common network would make more sense. 48 | P a g e

Question. We have seen independent LSPs and company owned LSPs. We are pointing that in end to end planning we need trust and confidence. How can company owned LSP will make a justification on competitors end to end planning? I have an apprehension if it is an independent LSP they can give trust and confidence to the company. On the other hand if it is a competitor owned LSP how can they build trust. Mr.Sylvester. During the brief introduction I did mention that this is a need of the hour. If there is no trust and collaboration between the LSP and companies it would not take us forward. At Mahindra we not only provide service to other competitive companies. This is a need of the day with MNCs coming in. Unless you trust and collaborate you will not get economies of scale and you will not leverage the benefits and there are examples which are working fine.

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Session VI Supply Chain as Career Moderator: Mr. S. Ravichandran, Executive Director, TVS Logistics Services Ltd., The moderator introduced the speakers and expressed his view that supply chains should be seen something as basic as mathematics rather than being viewed as a function like finance of human resource management. Mr. Geoffery Conaghan, Victoria Trade Commissioner, Australian High Commission The focus of my talk is on talent acquisition and development of talent in supply chain and logistics training using the experience of Victoria in Australia. Victorias is on the south east corner and represents only 3 % of the land mass but generates to 25% of the GDP of Australia. It is driven by services, manufacturing and agriculture but not resources. We are what is known as above ground economy. We specialize in high value exports and food processing is one of the biggest exports amount to 5.6 billion $ a year and generating 60% of the countrys diary exports. There are 850 wineries which produce 30% of all of Australias wine. We are an export state and depend very heavily on good logistics. We have realized in the last twenty five years that having a well trained work force is important. The state has a population of 5.5 million and 4.0 million living in the cities and the logistics requirement is to the port and the airport. 10% of the population is employed in the Logistics and Transport Sector and second largest employer in the country. We have the largest sea port in the southern hemisphere and Melbourne is the only 24 hr capital city airport with significant focus on freight. What we have focused in the last twenty five years is paying attention to careers, employment, skills development in this sector delivers not only for companies but also contributes to the state GDP and national GDP. A wide range of qualifications have been developed in the last 20 years, 47 qualifications in the transport and logistics sector and 11 of them specifically related to logistics. For example, there is one on warehousing and Masters in Business in Supply Chain Management. One of the things that has attracted people to work in the sector and for companies is due to the professionalization of the sector. Our research indicates the 70% of the sector is aged between 25-54 years and the largest single group is 45-54 years. In any industry you need to do train people and suit needs of individuals concerned and built talent and attract new people. Design a training system to suit 45-54 years olds and the average of retirement is 65 years going up to 67, the reverse of what is happening in Europe. Maybe that is because that people do not have GFC. No work no pay. The skill needs of individuals and industry skill needs. In a nutshell the system identifies portable skills that work across industry: transport, storage, handling, marketing, finance and management and could be found in the retail sector, in hotels as well as transport and logistics then there are industry specific skills like custom products, CNA freight and cold storage. What is industry wide and what is 50 | P a g e

industry specific, how come we train working people who are 45-54 who will be in the work force for 20 years? A couple of bodies made these useful Transport and Distribution Training Board the peak body advising the government on skill needs on transport and logistics. The government depends on them for training: where to deliver the training whom to deliver to and the module. The Supply Chain and Logistics Association is parallel to CIL. It is membership based, has a governance framework and established representation and one of its principal jobs is to represent its members at training and education forum and how to get the money spent by the government is industry focused. I have summarized how education system into four points: We have 9 universities and dual sectors. India is looking at the dual sector university model, which bridges university delivery with vocational training delivery . Students on campus are studying everything from certificate in a trade like plumbing to Ph.D. There are 4 universities bridging that gap. This means that people can study can study all through and make training deliverable to the age group and people come back to study to add to their qualification. There are 14 public technical educational institutes, 1300 private training providers and 50 private higher education providers and deliver the national educational framework. In addition we also have the Institute for Logistics and Supply Chain equivalent of the IIM Bangalore. We are a long way at solving the problems. Mr K.V.Mahidhar, Head, CII Institute of Logistics One of the chief objectives of CIL is to facilitate and impart knowledge and skills at different levels using a three pronged approach. It was started in 2004 there was a specific objective of education based on industry requirements. This is being continued from 3 months to 3 year courses and these are aimed at engineers and others through the virtual mode. Several universities are picking up formal education in supply chains and logistics. We well recognize the competencies available in the industry in terms of knowledge and professional understanding of supply chain and logistics. We have recently launched a programme called SCM Pro. We would like to recognize the professional knowledge available so that a person has better marketability and opportunities and useful for the industry in recognition of a person by an independent body who has the knowledge in the subject. Need of the hour is skill development opportunities in the ground level. We are happy to say that CII has submitted a formal proposal to the National Skill Development Corporation (NSDC) for establishment of Sector Skill Council (SSC) in Logistics. The objective of the proposed SSC (Logistics) is bringing standards in doing the skill training across the country . CIL would provide guidelines for setting syllabus, set guidelines in terms of faculty requirements, training the trainers and facilities required in training centers . If the industry forms the centers, CIL can provide all the soft support. Several centers are run by the industry. CIL will give the certificates and there is uniformity. This approach will encourage entrepreneurs and make the centers more formal and uniform across the country like the UGC.

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Mr. R.Narayanan, Partner, KPMG In terms of logistics and skill gaps there is a need to explore what is the real skill gap. We prepared a Skill Gap Study across transport, railways, warehousing, water, air and value added services. There were gaps (including knowledge) across the value chain. The requirement of truck drivers by 2015 is estimated at 50 lakhs people. Even if you presume 50% will be available natural means and you want 50% more you even 100 institutes like the one you have in Namakkal will not suffice. We are not talking of small numbers. By 2015, 25,000 qualified loading supervisors are required, similar situation for warehousing supervisors. The numbers are large the time required is too short. There are three major areas of concern: Big attrition. Not too many people stick to it the job. Addition is insufficient. The number of entrants is insufficient. Improper recruitment no clear recruitment There are four reasons why these are happening Presence of alternate careers in the market place Very poor image about working in the supply chain sector Newer and newer skills required by the day due to changes in technology Poor supply of human resource The second and fourth one can be dealt with by the community of industries and will encourage more and more people to come into the sector. With regard to the supply part, the CII has taken a fantastic step in training. If you look at some of the skills required, the management part of the supply chain has come of age. One will see that some MBAs say fancily that they work in the supply chain and have a respected status in society. People who want to take up Supply Chain as a profession and there is widespread acceptance. But at the lower levels where people want to take it up as occupation there are serious issues. The skilled required for a task and distribute as to who should what at the industry level. On an urgent basis, industry needs to build image and bring in HR reforms for the supply chain sector. There are good practices and process available. Apprentice programmes work well. Someone should have a career path in moving across various levels. What can an Industry Association do? We are doing skill gap analysis; we are already late on the SSC front. CII has partnered with NSDC on many other sectors and established several SSCs. These SSCs are a recognized way for setting occupational standards and there is a need to have a forum. Form a SSC and define standards. Make sure that occupational standards should be adhered to. Anyone who subscribes to it should adhere to it and showcase what it takes to move from one level to another. The third stakeholder is the government has a larger role to play. Through NSDC is setting up the National Vocational Qualification Framework (NVQF). The AICET is coming up with 52 | P a g e

an alternate framework a National Vocational Educational Framework (NVEF). This association should ensure that logistics are identified as a key area in both these frameworks. We did a skill gap analysis in the construction sector and found in the UK example a very good practice. Any UK government construction projects withhold 5% of the total contract value. If the contract is able to show that they have employed people who have these qualifications, they amount would be released to them. The contractors recruit such people or train people to fulfill the requirement. Such incentives are likely to help. Questions and Answers and points of view Q1 One of the panelists spoke about driver shortage and the skills. Is there anything being done in this regard? Risks involved in being a driver. Lack of protection. KPMK study. 75% of the owners are small time owners. Selection of transport vendors based on scales, which is getting missed. Where is the scale? They drive the vehicle and the only reason for their survival is that they know that they survive until the wheel drives. How is this being addressed in terms of scale and skills training? Possibly CII can align itself or network with industrial bodies and create training initiatives and we are scaring a virtual stoppages if we do not recover from this. Q2 It world be better to look at a diploma for 17-18 years old and vocational training for people of 45 years. An added advantage would be if there are rules and regulations in this regard. Educational institutions can be involved in the area. A faster approach is required. Q3. What do you think of working conditions especially at the level of supervisors and loaders in warehouses and for drivers? It is a challenge in terms of attracting people to take up jobs at an occupational level. Unless people are really willing to take up this work how will skill development really be effective? Are you doing something like lobbying with the government about regulations or specifications around working conditions? Ans. Moderator. At the end of the day, the customer pays for the services and he is the person who is going to change the entire supply chain and demand the skill sets. I have a project in which a vehicle is unloaded in 15 20 minutes using forklift and palletized. On another project I have 3 hrs to 4 hrs for unloading which is requires 5 people. The industry is operating in a sub optimal level. This is because people do not understand total inclusive cost. They do not understand the total cost of business but look only the cost of unloading. The skill sets required in the country is at the highest level understand the total cost concept and bring about changes in the technology which will demand skills, lighten the load of people and enhance productivity. If you require 20,000 40,000 supervisors they cannot be generated over a two years period. What can be done is to improve productivity by doing increased jobs using the same supervisors and go in for lean management. The industry people need to work out and realign the 53 | P a g e

supply chain get into lean management and skills will fall in place automatically. On the working conditions, one thing we realized that uniformity found in other sectors cannot be found across the logistics sector. How much ever we try, there cannot be uniform standards and conditions that someone can impose and everybody follows. It has to be evolved. The concept everyone needs to embrace but rules are to developed at the local level. What the drivers and juniors wanted empathy. Q4. Pondy University. At the end of the day education and training are required. Many of the academicians are so confused looking at the industry not being able to define. Private institutes and universities are taking this up. If KPMG and CII are works with the UGC in bringing out a model curriculum it will able to get university recognized degrees and will have bigger strength skill development in the future. Answer. It is happening partly not from the UGC front but from AICET has proposed to offer degree in Logistics and across vocational education area. It is not the degree that matters but how much we are able to appreciate it. Recognizing in a degree crazy country like India is not the ultimate. Q5. What was contribution and how much amount investment was made in education and the results obtained in Australia? Answer. In the last 25 years things there has been a radical shift in investment. The focus is just not a masters or business qualification in logistics. Half of our work force in the transport and logistics sector does not have more that secondary school education. It is about the matching what the industry requires. Only 10% of the population went to University. One lesson learnt that all the six governments which came in build on what has already happened. The focus came not in the 1970s but in the 1980s.

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Session VII

Supply Chain Analytics Case Study of HAL and Aavin Milk

Mr.Arif A Siddiqui. Analytics has become important element of supply chains. Fundamentally one dealing with forecast is dealing with trends and planning for the business war and for improving the experience of customers on a day to day basis. One is fighting uncertainties on a day to day basis in which the macro environment is constantly changing and so is the political environment, the global economy. It is very important for businesses to have a dashboard that reflect the analytics of the company and continue to tell you how one is faring with regard to the KPIs. Professor. U.Dinesh Kumar, Indian Institute of Management, Bengaluru Two cases on supply chain analytics will be discussed. Supply chain is not an operational issue but a competitive strategy, used by many companies for compete in the market. DELL managed to compete in the market using its supply chain strategy. There are a large number of such examples. Domino Pizza which promises that it will deliver within half an hour is another example. There are many such companies which use analytics. There is a restaurant in California which advertise that they will provide lunch in 10 minutes, failing which they would provide free lunch. If you use it as a strategy then you have analyze the problem very well and check if it is good for you. Delivering doors in a window: Supply Chain Management at HAL An aircraft like 747 or 777 may have up to 6 million spare parts. Imagine supplying spare parts to them. There are airlines like Cathy Pacific which have a huge fleet of 160 aircrafts flying to 25 destinations. Imagine that one has a fleet of 747 flying to 50 destinations. How does one decide what spares to store in these destinations?. If spares not available, it would lead to cancellation of flights, in addition to taking care of unhappy customers and all associated logistics problems. Supply chain analytics are mathematical and statistical tools used to analyze supply chain and logistics data to supply chain problems. Aircraft manufacturing is a complex assembly process . Thousands and thousands of part get assembled that are supplied by several suppliers across various parts of the world. Each aircraft is likely to have 6 million parts of which over 1, 35,000 are unique items. Aircraft manufactures like to receive materials just in time and practice lean. Delays can have a huge financial impact on aircraft manufacturing companies. There was a delay in A 380 in 2006, when there was Airbus shares fell by 26% because there was news that there can be a delay in delivery. The present Hindustan Aeronautical Limited (HAL) Case was written in 2010. HAL supplies delivers doors to most Airbus models. Any A 319 or A 320 the aircraft doors are made by HAL. The door has more than 1200 parts. Production is highly labour intensive since a large number of operations is manual. HAL signed a contract with Airbus that each of the door will be delivered within a window period. Airbus provides the 55 | P a g e

schedules one year in advance as to when the doors need to be delivered. There is one year time to deliver the doors. Only 65% of the times they were delivering within that window period. Why was this happening? If there is a delivery day 13 of June, you can deliver a maximum of 5 days in advance or have a delay of 2 days. Penalty is calculated as a percentage of the door cost. Depending on the model, each door set costs anywhere between $ 60,000 $ 90,000. The contract has been signed, but the company was meeting the contract only 65% on time delivery. Possible answers include delay from suppliers, coordination with suppliers. Airbus wants to minimize the inventory they carry and hence have a stringent delivery schedule and want their customers to carry the inventory. This indirectly reduces your working capital. The first thing you do to be lean is to cut inventory. The 2009 door delivery data indicate that 227 pairs of doors were delivered. They made 56 late deliveries by 2 days and 22 early deliveries. How did they manage early delivery? If you look at the total number of delivery is 78 and mean delay is 1.32 and standard deviation is 3.38. If you take a simple percentage it is 35% of the time they are delivering outside the window and 65% on time delivery. The mean days from Bangalore airport to the customer plant in France is 6 days. HAL signed a contract from Bomell Lauraent and they used to pack doors from the plant and put in the Bangalore airport which were air lifted by Lufthansa and reached Paris De Gaulle airport, later to be taken by Airbus to Toulouse Airbus factory. Does it make sense that it takes 6 days for doors to be transported from Bangalore to Toulouse, which is only an overnight journey? Why do you think it is taking 6 days? You would be surprised that in France and probably most European countries, the trucks operate on Friday. No one works from Friday afternoon and they get back only Monday afternoon. If the doors reached on Friday morning, it will not be picked until Tuesday. HAL did not realize it until very late. This gives the probability of late delivery. 65% was 0. About 11% one day or early or late. About 12% had two days delayed delivery. This gives probability distribution. You are potentially carrying a penalty of $600 per door on each of the delivery and had to be minimized. This has 1222 parts, out of which 371 were standard parts and can be purchased from the market and 786 were detailed parts exclusively produced for that particular type of door. Apart from this there were consumables or glues or sealants used in manufacture and had a peculiar perishability problem. These consumables typically come with 6 months shelf life but if you open a can, it has to be used within 36-72 hrs. If you do not use it within the time period the material goes waste. They come under hazardous chemicals and only 3 airlines in the world which has license to carry these sealant goods. HAL have to carefully plan the purchase these sealants which come in 50 ml, 100 ml, 150 ml, 200 ml, 500 ml, 1000 ml bottles. Which size box will you purchase? If you buy 1000 ml bottle, you open it and dont have enough doors coming out of the assembly line, you will waste that left over. 100 ml bottle is worth $ 56. On analysis of data we found that they have 30% wastage only on sealants. How do you decide what box to buy when to open it? This is how the entire supply chain is planned. Public sector processes are long and they start the procurement, 14 months in advance. Each door is assigned 18.5 days. Why is there a huge spread in spite of being an assembly line? Answers are non availability of spare parts and lack of planning. They 56 | P a g e

have a scheduled start assembly time. We found that 94% of times, they start before that actual time. If 13 June is the start day for assembly time, they will start before that. By the time they finish assembly there is a 35% chance that it is likely to be delayed. We used 6 sigma analytics to find the root cause. Any 6 sigma projects start with critical to quality and you have a definition of what is a defect. Any delivery outside the window is considered defect. That is 35% and if that is converted into a 6 sigma scale it is 1.85. 6 sigma is a performance scale. The estimated delay costs is $ 600. In 6 sigma we use another term called poor quality. If you produce a poor quality product we calculate the cost to the company. In this case it is $ 600. Using 6 sigma we fond the r oot Causes of Delay: i) Availability of parts. 80% of the parts supplied are outsourced. There is a risk that if the part is not supplied, assembly would be delayed. There are lot of parts about 20% produced in house and these products share the same infrastructure shared by all other projects, and there is fight for common resource and infrastructure ii) Availability of manpower. During April May many of the people take leave. and iii) Availability of manufacturing resources. During April May people take leave due to kids. The number of delivery comes down sharply during April and May and also during Diwali and not delivering the product. And they are unable to handle manpower. Shelf life part are a complex mathematical problem. They had no clue when to open and find that sealants are not available and all of them are imported and hence they are constantly on the phone trying to get in touch with companies and asking them to deliver as quickly as possible. Even if companies are ready to deliver, there are only three airlines have license to carry this and you have to catch them asking them to deliver as quickly as possible. Freight forward is a strange thing. When you have a commitment, you also take some kind of commitment from your suppliers. Bormell lauraent did not sign such performance contract with HAL. Their job was to take the door and put in the aircraft. They did not sign any contract of guaranteed delivery. Most of the time because of freight forwarding that delivery was getting delayed . After analyzing using 6 sigma we came up with solutions to many of the problems except manpower that deals with trade unions. If there is a delay, start early. Our mathematical model you should start approximately 8 days early. When we saw the actual data, it was 8 days and hence it was not much of use. But we came up with models for handling consumable and simple suggestions like that there should be performance based contracting with freight forwarders. In 2011 they have 85% on time delivery, an increase of 20% efficiency. Maduri Aavin Supply Chain India is the largest producer of milk and the largest consumer of milk in the world. The industry is about 70 billion US $. So far we were able to manage our dairy products, but this is changing. From a net exporter we are likely or already become a net importer especially of milk. 57 | P a g e

Let us understand Aavin Madurai Avain Madurai was started in 1967 as Madurai Milk Project and currently have 500 staff and procure milk from thousands of farmers and have Milk Producers Societies and procure from 70-80 km radius of Madurai. What do you think will be a typical problems in a diary? Answer from the floor. Wastage, Storage, Collection, Transportation, Shelf Life, Quality. Why quality? They measure quality at society level. But if the cow itself produces that much quality. Why? What happened to the cow? If they are not fed properly. Why are farmers not feeding cattle properly? Answers from the floor. Availability of fooder. They do not get a price, Less margin. Do you know what do farmers feed cattle? This is an eye opener sometimes something totally irrelevant can screw up your supply chain. Over a period of time the raw milk quality supplied was going down. How do you measure quality? Look at fat content and solid non fat. They used to supply something called premium milk. Premium milk has 4.9% fat and SNF has 9%. Most of the Indian market looks for premium milk. A few years ago, the government came up with the idea of supplying rice Rs.2 per kilo. A lot of rice comes at a cheap price. What percentage of people actually eat this Rs.2 rice. Where does the rice go? Answer from the floor. Hotels, roadside eateries. The hypothesis is that most of the cattle are fed with Rs.2 rice. Cattle which were eating proper diet like groundnut cake are being fed with Rs.2 rice that is carbohydrates. If the input quality is bad, the output quality is going to be bad. You cannot blame farmers. It is also political. If low quality milk comes in you cannot sell it to customer and need somehow to improve quality. People come with a policy and some unrelated sector gets affected. This is the supply chain it is collected from the farmers, it goes to the cooperative societies and thPalkova en to the Avin diaries or it may go to some chillers and moved through refrigerated vehicles, processed and distributed to customers. In 2010 the market share of Aavin fell by 62-65%. There was high competition from private players, a lot of farmers moved away from Aavin since private players were paying more, paying in advance. Avani used to make several products like and toned milk whose production was stopped. They were unable to produce diversified products but were able to produce only premium milk. Probably those were the products that brought them profits. There were a lot of risks, too many suppliers. In general the quality itself were deteriorating. Aavin faced supplier attrition due to competition. Perishability and lack of infrastructure and a large number of other constrains. In 2011 they used to sell premium milk at Rs.22 / litre and the margin was Rs.4 per litre. One way of improving quality of milk was to add milk power to milk . One could not buy milk from wherever they want. At one point in time they were importing milk power from Australia. But sometimes the government bans important of dairy products. There are several production constraints on milk powder and butter. Milk powder can be produced only when there was 40,000 litres of milk. Butter can be produced only when there was excess of 20,000 liters. The problem was that they were unable to meet demand and there was no question of excess milk available. There was a policy that 5% of the milk was retained as safety stock. They can also make milk by combining milk and butter and on needed to maintain chemical balance. All those options they have. They have to take decisions like how much amount of milk they have to buy from other diaries like Thirunelveli, Dindigul and that increases your 58 | P a g e

production cost like additional transportation or you could produce through recombination using butter and skimmed milk powder, which increased production costs. Sometimes governments come up with policies like increasing the amount being paid to farmers, which happens before elections. They make loss on each litre of milk. If you are a manager of the cooperative society what would you do? Answer. Add water. You cannot sell it as premium milk. Answer. Stop buying Answer. Get rid of suppliers and have your own vertical. Speaker. How are you going to remove inefficiency from the supply chain as there are no layers? Answer. Rationing. A lot of people will make noise that poor are unable to afford milk. If you compare the HAL and Aavin, the problem faced by Aavin is much more complex. The mathematical model will not work. Instead of profit maximization you have to minimize loss and you have to be seen in the market as a threshold. You should not be seen in the market that there is not enough milk for sale. Things got better after the prices. Decisions have to be made every day. In 2011 estimated demand in Madurai was 3,40,000 litres while 2,50,000 were being produced. The objective was to meet market demand. Aavin was the most preferred brand compared to any private player. Choice of people was aavin which could sell whatever they can put in the market. Their market fell to 65% from 95%. They had to come up with innovative ways to be in the market even when their supplies were dwindling. They devised the recombination. We looked through the Integer Programme. If you know the demand you could optimize profits. Both cases use analytics. There are numerous examples in analytics. There is a bank called Capital One and had a profitable credit card business they made 1 billion US$ profits in 2012, while Citibank Card the loss from the same a loss of 750 $ million. It depends on the decisions made and the rationale behind the decision. Capital One runs 900 mathematical models everyday to arrive at the right customer. Target is a multinational retail store. In 2002 they hired a statistician and asked if he could predict if someone was pregnant. They wanted him to develop a mathematical model to identify pregnant person based on the kind of products purchased. A Duke University study claimed that 45% of purchases are based on routine carried out without application of mind and it was very difficult to change this routine. Pregnancy was the time when such routines are broken. It is the time they look for new products. If I know is someone is pregnant then I will catch them in the second trimester before someone else catches them. Once they become a customer they are likely to be their customer for the rest of their life. In 2002, Target was a 40 billion $ company and 2010 it was an 80 billion $ company. Very strong analytics processing company, where a large number of decisions are made based on analytics. Decisions cannot be made by picking numbers. It is not an operational issue but a competitive strategy. Always remember that there will be a smarter way of solving a problem.

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Questions and Answers Q1. Comments from the audience. Rare events. Recent tsunami in Japan. The probability is very low and mathematically model. Todays monsoons. These are becoming more and more unreliable. Analytics can help but we should anticipate problems. Speaker. Analytics will not work always. But there are cases it will solve. In 1884 there was an outbreak of cholera in London. Dr.John Snow found that Bond Street was worst affected. There was a water pump which was used by people to collect water for drinking. By marking the deaths on a map he found that the common factor was water. There were no deaths in one brewery building nearby there were no deaths. There were 70 inmates in the building who did not drink water from the pump but drank beer. Thd conclusions based on data visualization helped. He called the Municipality to close the water pump. During the Crimean War, a pie chart created by nurse Florence Nightingale was able to identify that a large number of soldiers were dying because of disease rather than being wounded in war. Right decisions need to be made. Question. What about training in Analytics? Speaker. Many universities have M.Sc in Business Analytics. There are many tools SPSS. Strata. One needs to have a clear understanding. A little bit of mathematical knowledge is required. Spare parts is a major problem for modelers. Forecasting is difficult and errors could be as high as 200%. Question. More than mathematics dont you think hypothesis building is important? Speaker. Yes. Where did the hypothesis come from? When are people looking for new products?. You have to catch customers when they are pregnant. You bump into hypothesis by accident. If I drink Complan will I grow taller? It is for a growing person. We are setting the ground conditions. Horlicks. How do you know that you child will be smarter if they drink Horlicks. People will grow whether they drink Horlicks or Complan or not. Accidental hypothesis Women purchase mobiles with camera rather than men. Another hypothesis Smart looking couple have girl child. Another hypothesis People change brand of beer after divorce. It is basically how you use it. Bring in intelligence and analytics.

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