Strategic Success in India

Transcription

1 Strategic Success in India Daniel Castle Vice President Operational Excellence Tata Quality Management Services Background on India One of the world s fastest growing economies Huge Western influence 2 nd most populated country high demand for products and services Vast pool of talented professionals English language competency Openness towards foreign brands However, low competition relative absence of foreign brands Government support towards FDI 1

2 It s a Mixed Bag Changing socio-economic demographics State-specific legal and compliance regulations Changing demands and rising customer expectations Huge distances to be traversed High attrition rates in the corporate sector Significant political influences Bribery and corruption Logistics Challenges in India Infrastructure Regulations Fragmented Industry 2

3 Infrastructural Challenges Ports Airports Railways Roads Heavy congestion at major ports higher vessel turnaround time Inefficient handling Long waiting time Congestion at main airports Inefficient handling resulting in pilferage / damage High cost of alternate arrangements (prices quoted by individual loaders) Choked rail network and resultant lower speeds Transportation delays and cost overruns Dedicated freight corridors planned Do not support the axle weight of the trucks and cause roads to crack / cave in Bad road quality low speeds, accidents and high maintenance costs of vehicles Warehousing Very few logisticsparks, nospace in urban areas, poor maintenance 3

4 Logistics Challenges in India Goods and Services Tax (GST) Octroi / Customs Bribes/ corruption Land reforms, Special Economic Zones (SEZ), etc. Laws - various Acts Regulation Challenges Dominated by unorganized players Weak vendor management Non leveraged IT infrastructure Operational inefficiencies resulting in high operating costs Presence of operations in risk-prone areas like North East and Jammu & Kashmir The Good News is Significant investments have been approved for major infrastructure projects like the Delhi-Mumbai freight corridor, new railway set-ups, better road networks and airports To increase competence in the sector, the government has introduced private sector participation, especially in the Ports sector In order to liberalize railway services, the government opened its doors of container business to private parties Warehousing Industry moving towards sophistication Share of organized retail is expected to increase from 5% (current) to 24% by 2020 Robust campus recruitment programs both at graduate and post-graduate levels Advanced levels of technology support like Track & Trace, Warehouse-and Transportation-Management Systems Implementation of Goods and Services Tax (GST) expected to be imminent 4

5 In such a scenario, 3PL service providers may Negotiate and re-negotiate contracts better Optimize Loads Schedule routes more efficiently Implement IT / automated processes Save on logistics related communication Optimize / reduce Manpower costs Etc. Outsourcing Logistics.. now a Global Trend 5

6 India vs. USA & China Logistics Cost vs. GDP and Third Party Logistics Revenues vs. Logistics Cost (2011 USD Billion) GDP Logistics Cost (% GDP) Logistics Cost 3PL Revenue (% Logistics Cost) 3PL Revenue USA 15, % 1, % 134 India 1, % % 14 China 6, % 1, % 89 Indian logistics vs. other countries Strength of Logistics Sector Low Medium High Small Medium Large Size of Economy Source: World Bank, KPMG Analysis (2010) 6

7 Decoding the Logistics Outsourcing Dilemma When, where and why does one engage a 3PL Company? The Supply Chain Every day we do our best to manage all this, to keep our customers and bosses happy. And everything is in motion, all the time inventory, people and resources 7

8 Supply Chain Management (SCM): The New Focus Area for the CEO Supply chain management is now a hot topic in the board room CXOs want to know details about supply chain design They are aware of the availability of outsourced partnersboth on the supply and order fulfillment sides Can supply chain be a strategic enabler? Wish list of every SCM Head Year-on-year reduced operating costs and resources More value-adds Optimal inventory Least loss, scrap and unsold inventory Reduction in SCM Costs as a % of Sales Stable partner and scalability on demand 8

9 Hidden costs across the supply chain Blocked capital Excess pre- and post-production inventory Sales returns Double transportation, packing and handling unsynchronized transportation and warehouse management Unorganized partner Low operating costs, long term risks CFA-based operations Sustainability issues Why do customers hesitate? To outsource or not to outsource. 3PL surveys show the most frequently occurring reasons to avoid outsourcing are: Source: 3PL Annual Survey Report by Capgemini Consulting 9

10 Why should companies outsource logistics? AVOID CAPITAL EXPENDITURE REDUCE OPERATING COSTS FOCUS ON CORE BUSINESS IMPROVED SERVICE LEVELS ENHANCED ECONOMIES OF SCALE AVOID LABOUR ISSUES How outsourcing has helped companies in India Cost Reduction 90.6 Focus on Core Competence Improved customer satisfaction Improved return on total assets Increased inventory turns Flexibility in operations 46.1 Expansion into newer regions 35.9 Reduced capital investment 24.5 % of Respondents 10

11 Extent of logistics outsourcing Prime reasons for logistics outsourcing Avoid capital expenditure Reduce operating costs Increase flexibility (financial/service) Focus on core business Improve service Lack of economies of scale in house Acquire talent Avoid labor issues Contract Logistics Savings Potential Service Description Savings Realized Route design and optimization 10-15% Closed loop dedicated operations 15% Mode conversion 10-15% Core carrier management 5-10% Rate negotiation and audit 4-5% Inbound consolidation 20-25% Reverse logistics 10-15% Distribution centre (DC) location realignment 10-12% Reduced inventory 7-10% 11

12 Key factors beyond price Scalability and flexibility Empowered ground operations Planning to address peaks and seasonality Simplified technologies for visibility Analyzed data for inventory optimization THE TATA GROUP A journey of > 140 years started in 1868 by Jamshedji Nusserwanji Tata A tradition of Trust and Principles that puts People before Profits upheld by Group Chairmen such as JRD Tata and RN Tata 12

13 THE TATA GROUP The group that has shaped the destiny of India sprogress with Power Telecom Steel Automobiles THE TATA GROUP Nowbrings to the logistics industry the same level of trust that has won over > 1 billion people With a network connecting 7,000towns in India More than 165 warehouses across India Including a North East presence covering > 85% of India s districts With > 4,000 people striving towards excellence Revenues of $ 55 million DIESL is India s leading integrated supply chain solutions provider 13

14 Milestones 2009 onwards Secure the future Levels of Evolution Bootstrapping Started Warehousing and Value Added Services Extended presence to 18 states with business volumes touching 10 million units 1 Set up Trading business for Telecom Products withpresence across six States Scale-up 7 Crossed Rs. 100 crores in Logistics Business Services Achieved ISO certification 9000:2001 Started providing end to end solutions Created Pan India Presence and included Distribution Services Customer & Brand Loyalty Award 2011 in Logistics Sector Best 3PL company of the year 2011 Best 3PL company of the year 2010 Castrol Award 2009 for Best CFA operations, North India Achieved Rs. 200 crores in Logistics Business Services Warehousingcapacity exceeds 5 million sq. ft Supply chains currently managed Inbound logistics : Supplier to OEM stores Stores management and feeding the production line Finished goods management: Stores and open yard Outbound logistics: Customer order fulfillment Sales returns and reverse logistics Customer s Customer 14

15 Fast moving consumer durables (FMCD) sector leading air-conditioner and television brands 3PL: Outbound: Factory to regional DC Stock management: Regional DC Outbound: Regional DC to state DC Stock management : State DC Outbound: State DC to dealer network Customer: FG inventory on 3PL network 30-day inventory across all state DCs 100% inventory accuracy Sales order fulfillment Milk run dealer deliveries Mobile and Personal Computing Market Leader Imports management National warehouse Stock transfer Regional distribution Last mile delivery to dealers 15

16 Supplier Collection and Implant Stores Management Auto and Engineering Sectors SUPPLIER -1 Pre-and post-production inventory control Just in time (JIT) Line feeding MHE deployment and maintenance SAP trained skilled manpower 24x7 operations on demand SUPPLIER -2 SUPPLIER - 3 STORES JUST IN TIME FINISHED GOODS DISPATCH SUPPLIER -4 B2C Order Fulfillment e-commerce SUPPLIER -1 CUSTOMER SUPPLIER -2 SUPPLIER - 3 SUPPLIER -4 AM / PM order fulfillment within city Small parcel network partners Asset-free operations for e-commerce sector Scalability on demand 16

17 Focus Sectors Telecom Engineering FMCG FMCD Automotive Project logistics / infrastructure Technologies / Systems implemented (Warehousing) Effectiveness Distribution requirements planning software 19% 44% 37% RFID 19% 50% Bar coding 50% 25% 25% Network planning /optimization tools 38% Warehouse management system 50% 19% Transportation management system 62% 19% 19% Advanced planning and scheduling software 38% 0% 20% 40% 60% 80% 100% 17

18 Logistics practices implemented Effectiveness Share real-time, electronic demand / inventory data 50% 38% 6% 6% Continuous-replenishment programs / management of inventory for customers 6% 32% Cross-docking / flow-through 38% 6% 25% Formal returns management 44% 13% 12% Differentiated logistics services for discrete customer segments 38% 13% 25% 25% Collaboration and integration among service providers 13% 50% 19% 19% Supply chain visibility for managing exceptions 44% 38% 6% 13% Collaborative carrier management 19% 25% 25% Formally documented Logistics & Distribution strategy 69% 0% 20% 40% 60% 80% 100% Success stories International brands in India Glocalization, Operational Efficiency Product superiority Investment in invention, product development and manufacturing Customer Intimacy Treating each customer as unique; Delegation to customer facing employees 18

19 Case study: The customer is a recent entrant to the Indian market. Product Profile: Their products range from small general-purpose safes for domestic use to high security fireproof burglary-resistant safes for the retail, banking and hospitality sectors Customer Focus Area: After-sales service. With an all-india distribution network, services such as installation, maintenance and customer support are provided. Case study: Key challenge faced by customer: To exponentially improve the sales footprint across India without increasing the sales and distribution cost. To sell across the country, the customer would have had to set up exclusive billing teams, warehouse and secondary distribution channels, etc. Demand from Indian 3PL: Pan India operations Integrated warehousing and distribution network Strong ERP Trustworthy partner 19

20 Case study: Solution offered: Consignment Sales Model: allowing the customer to easily manage inventory at customer s geography, invoicing the eventual consumer only when the product is actually sold Ownership of these goods remains with the customer 3PL sells the goods on behalf of the customer In operating terms, the following assistance is provided: Primary Distribution to the State warehouse where products would be sold Warehousing and Inventory Management Solutions, Tax Compliances and Financial Management Order Management and Last mile delivery Case study: Final Outcome: Customer now can sell anywhere in the country without actually registering themselves in each State Customer need NOT spend capital and effort to configure inventory in SAP since the 3PL will handle the invoicing With Inventory being closer to customer, the 3PL became a key enabler to increase speed to order fulfillment 3PL will collect the value of the inventory and remit to the customer, which ensures timely collection Since the physical and system processes are already configured by the 3PL, the customer now can expand anywhere across India 20

21 Outsourcing your logistics is a smart move: Allows you to be MORE EFFICIENT and streamline operations Requires less capital expenditure and helps control COSTS Delivers more finely tuned SUPPLY CHAIN solutions Gives you the freedom to FOCUS on core competencies Can significantly enhance customer SATISFACTION Success factors Good cultural fit Solid reputation Prompt, attentive service Agility and adaptability Lean practices Updated technology Ability to grow with you Geographic desirability Competitive pricing 21

22 Thank you! questions? comments? Contact information Daniel Castle 22

23 Survey 23