OPERATIONS

INSIGHT

DECEMBER 2019

SUPPLY CHAIN

LESSONS

FROM SANTA CLAUS

02

BLOCKCHAIN AS A

TOOL FOR SUPPLY

CHAIN INNOVATION

06

GIVING TECH TO

WHEELS: HOW

TECHNOLOGY IS

TRANSFORMING THE

LOGISTICS SECTOR

14

ALLCARGO

LOGISTICS BUYS

CONTROLLING STAKE

IN GATI

04

HOW FLIPKART IS

AUTOMATING ITS

SUPPLY CHAIN WITH

ROBOTICS, MACHINE

LEARNING.

07

U.S. PORT RATINGS

REMAIN STRONG

DESPITE TRADE

POLICY CHANGES,

SAYS FITCH

1̀5

Whats Inside...

THE LINEBETWEEN

DISORDER ANDORDER LIES INLOGISTICS…

WORDS BY SUN TZU

Planning is crucialSanta never wants to see disappointedchildren on Christmas Day, but sometimeshe makes mistakes – or shall I say his elvesdo. However, these are often minimal, andmany children receive what they haveasked for at Christmas, which is all down tocareful demand planning. It’s not justSanta, who needs to plan carefully in orderto be successful. In general, demandplanning is a vital part of every supplychain. Accurate forecasting is a must as nosupply chain manager wants to be left withempty shelves due to not having enoughsupply to meet demand. Yet at the sametime supply chain managers don’t want tobe left with shelves stocked with goodswhich nobody wants to buy. The use ofhistoric data alonecan often lead to discrepancies betweenthe forecast and actual demand. Therefore,many supply chain managers will useforecasting tools based upon intelligentalgorithms.

The Christmas holiday season is in fullswing and it’s this time of the year thatproves busiest for supply chain managers.Months of planning and preparation goesinto ensuring that everything in the run upto the big day is successful. Unfortunately,it doesn’t always go to plan.One person who has never had suchproblems is Santa Claus. Not only does heknow when you are sleeping, but he canalso accurately forecast demand to ensureeveryone receives the presents they wanton Christmas Day. This is one of the manyreasons that Mr. Claus is considered as asupply chain leader among those in theindustry. So here are few lessons can welearn from Santa Claus?

SUPPLY CHAIN

LESSONS

FROM SANTA CLAUS

Anuj Ghag | 16 December 2019

Let’s imagine you woke up on ChristmasDay and there were no presents under thetree. To say that this would not be great ispossibly a huge understatement. If you’vegot kids, it would be a complete and utterdisaster.This is also important for logisticscompanies to ensure that presents arrivein time for Christmas Day. In fact, perfecttiming is desirable throughout all elementsof the supply chain, but within in thelogistics process it is even essential.

There are some rumors that Santa is notreal and what he achieves is impossible.However, even if this is somewhat the case,even imaginative characters can be rolemodels for some people.Although his supply chain may be a littlefar-fetched according to some, it sets astandard that the supply chain can striveto achieve – maybe minus the flyingreindeer.

Timing is critical

And we should all believe

By having goals and targets to strive for, itpushes supply chain managers to optimizetheir supply chains and make them better.However, goals alone won’t improve supplychains and lead to innovations, supplychain managers need to believe they can dothis in order to make these changes reality.

Closing ThoughtsWhether you are a believer or a non-believer, you can’t deny that the Christmassupply chain works out for most people. Allthings considered; this is kind of a minormiracle. However, if you strive forperfection in your supply chain, Santa’ssupply chain model is a good one to follow.

Merry Christmas!......

truly multimodal solutions,” said AllcargoLogistics chairman Shashi Kiran Shetty.The express logistics industry is expectedto reach Rs 48,000 crore ($7 billion) by2023, according to a study led by Deloitte in2018.This growth will primarily be driven bydomestic consumption, shift fromunorganised to organised trade,ecommerce (domestic and cross border)and significant demand from small andmedium B2B segment. Allcargo is fundingthis deal through a mix of internal accrualsand debt. Internal accrual is throughmonetisation of non-core assets, includingland parcel. Allcargo had been in advancedtalks for the transactions in August lastyear, but withdrew later. The first round oftalks was renewed earlier this year. Thefinal agreement between the parties washeld up by Kintetsu World Express, aJapanese freight forwarder that owned3.99% stake in Gati as of September end.

Allcargo Logistics said it is acquiring acontrolling stake in the express logisticscompany Gati. The all-cash deal will seethe company eventually acquiring about45% in Gati through a direct purchase ofthe promoters’ stake and a subsequentopen offer. It values the company at aboutRs 1,000 crore.“The exponential rise in cross border anddomestic ecommerce has opened up newmarkets for traditional express playerssuch as Gati. With Allcargo’s existingstrength in the ocean transportationbusiness and Gati’s expertise in land andair transportation, we are now in a uniqueposition to offer our customers a suite of

ALLCARGO LOGISTICS

BUYS CONTROLLING

STAKE IN GATI

Lakshana Mandluskar | 06 December 2019

INDIA NEEDS TO

DEMONSTRATE

WILLINGNESS TO

BECOME PART OF GLOBAL

SUPPLY CHAIN: US

Aniket Dhok | 12 December 2019

India needs to demonstrate its willingnessto be a part of the global supply chain bytaking steps towards resolving largermarket access issues, a top US diplomat hassaid, expressing hope that a bilateraltrade deal being negotiated can be a"stepping stone" to more ambitious tradeliberalisation. Speaking at a programme tocommemorate the 60th anniversary ofPresident Eisenhower's Historic Visit toIndia, Acting Assistant Secretary of State forSouth and Central Asia, Alice G Wells, saidthe trade talks between India and the US aregoing on well. In September, US PresidentDonald Trump said that America will soonhave a trade deal with India to boosteconomic ties between the two nations.India is demanding exemption from highduties imposed by the US on certain steeland aluminium products, resumption ofexport benefits to certain domesticproducts under their Generalised System ofPreferences (GSP), greater market accessfor its products from sectors, includingagriculture, automobile, auto componentsand engineering.          The US, on the other hand, wants greatermarket access for its farm andmanufacturing products, dairy items andmedical devices, and cut on import duties onsome information and communicationstechnology (ICT) products. India's exports tothe US in 2018-19 stood at USD 52.4 billion,while imports were USD 35.5 billion.

to inefficient handling of returns to thesupplier. When a returnable pack wasunavailable, the supplier would resort to usingcorrugated boxes, which cannot be reused,efficiently stored or loaded into trucks. Onsome occasions, the supplier would have toexpedite the shipment of reusable back to thesupplier. These practices - which arecongruent across all supply chains - werecostly and unsustainable.Blockchain as a Tool for Supply ChainInnovationSurgere customizes unique solutions for everyindustry’s supply chain utilizingsensor-based science – in conjunction withtheir proprietary cloud-based solution – thatdelivers unprecedented visibility, data and ROIwhile providing 99.9% accuracy.Technological advancements are an integralpart of what makes the Surgere Solution soinnovative. As advancements in technology aremade, Surgere’s solutions gain more tools tocontinue resolving all challenges faced bysupply chains, like Block chain.Blockchain as a disruptive technology -enhances Surgere’s ability to identify and tracktransactions digitally and share thatinformation through distributed ledgers.

Blockchain: Surgere’s New Supply ChainToolAnnually, the Automotive Industry aloneloses billions of dollars due to supplychain mismanagement. For most, thedeficit is credited to losing between 16 and18 per cent of reusable packaging assets.The multi-billion-dollar problem in theAutomotive Industry is indicative of anissue with the current state of supplychain management across all industries.Simply stated - the status quo of supplychain management has been outgrown.For Honda of America Manufacturing, Inc.,the status quo became too costly andinefficient to sustain. As their supply chaingrew, they faced new problems - lostcontainers, a general lack of visible assetsand the financial burden of the earlier-mentioned. Like many others, Honda ofAmerica’s supply chain was threated due

BLOCKCHAIN AS A

TOOL FOR SUPPLY

CHAIN INNOVATION

Tejas Raut | 20 December 2019

The e-commerce giant is using robots to automateits supply chain and bring the next 200 million customersonline Tucked away in a nondescript lane on the outskirtsof Bengaluru, is the sorting facility of e-commerce giantFlipkart. Walking into the hangar-like building, you canhear grinding metallic noises.That’s the sound of hundreds of robots, or cobots, as theyare called, working seamlessly with humans. The humanworkers place the products on the orange-colouredrobots, and the machines sort them after scanning theencoded information on each parcel and placing them inthe designated bins.

HOW FLIPKART IS AUTOMATING ITSSUPPLY CHAIN WITH ROBOTICS,MACHINE LEARNING.

“A breakthrough in

machine learning would

be worth ten

Microsofts.”

Aniket Dhok | 12 December 2019

The logistics and warehousing sectorin the country has attracted $7.2-billioninvestment in the past two years,thanks to the emergence of global onlineretail giants and widespread expansionacross value chains.The largest of these is the $3-billion corpusset aside by the National InvestmentInfrastructure Fund to buy or sponsor aport and logistics-related projects in Indiathrough DP World (DPW). Allianz has alsoallocated $1 billion in e- Shang Redwood(ESR) to develop warehousing space ineight major cities across the country,according to data compiled by the CARERatings. These investments are plannedmainly to cater to services such as single-or multi-brand retail.

Online giants such as Walmart, Amazon,Flipkart, IKEA, and other large-retail formatstores have set up their warehousing facilitiesnear ports or markets to facilitate quickdelivery of goods to consumers. Thesewarehouses have modern infrastructure andamenities to service both agricultural andnon-agricultural sectors. E-commerce isprobably creating the biggest revolution in theretail industry, and this trend is to continue inthe years to come. Online retail business is thenext generation format which has highpotential for growth in the near future. Afterconquering physical stores, retailers are nowforaying into the domain of e-retailing toleverage the digital retail channels (e-commerce), which would enable them tospend less money on real estate (shops) whilereaching out to more customers in tier-II andtier-III cities. The government’s ambitious planto bring down and logistics cost from thepresent 14 per cent of gross domesticproduct (GDP) to less than 10 per cent by 2022poses a big challenge. With the unorganisedsector still controling 90 per cent of thewarehousing capacity in India, the small andmedium players look for consolidation eitherto sell their stake to multinationals orupgrade to meet global scale to remain afloatin the competition.

RETAIL BOOST FOR

LOGISTICS,

WAREHOUSING:

INVESTMENT RISES

BY $7 BN IN  2 YRS

Aniket Dhok | 28 November 2019

LOGISTICS FIRMS FEEL

THE SLOWDOWN, SCALE

BACK ON EXPANSION

The slowdown in India’s economy isbeginning to manifest in the logisticsindustry such as DHL Express, AllcargoLogistics, the logistics arms of Mahindra &Mahindra and retail behemoth FutureGroup, and the Warburg Pincus-backedStellar Value chain witnessing the impact oftepid business on the pace of growth. Someof the companies have deferred plannedexpansions, and setting relatively modestrevenue targets. “There is a bit ofslowdown. We are expanding 5-10% slowerthis year than the last. The slowdown hasbeen the most visible in the August-September period.” RS Subramanian, seniorvice president and managing director, DHLExpress India, said in a recent interview.Revenue has not declined for the companyand no change in its medium-to-long-termexpansion plan at DHL Express.Future Supply Chain has seen a “mellowingof demand in the first couple of quarters ofthis financial year. If the sales for acustomer were 15%, the new statistics are7%.” said its managing director MayurToshniwal. Future Supply Chain haspostponed the construction of some newwarehouses. The company was supposed toadd up to 3 million square feet ofwarehousing space of 250 crore this year,but will now add 2-2.5 million and budgethas now been cut to 180 crore-200 crore.Allcargo Logistics has seen a slower growthin exports. It will also miss its $2-billionrevenue target for 2020.India’s second-quarter GDP data is to bereleased on November 29.

Lakshana Mandluskar | 25 November 2019

In the recent past, auto sales, consumption, real estate sales and bank credit data havepointed to a demand slowdown. While many companies don’t see a decline in revenue growthdue to the addition of new customers, sales for traditional customers have taken a hit.Transportation has seen the most significant impact of the slowdown, with companies cuttingdown plans to expand the fleet. “The Indian logistics sector’s struggle to grow profitably in amarket marked by tight margins and rationalised volumes continues. Road transport being thebiggest segment of the Indian logistics sector, is feeling some heat. The temporary dip intransport volumes has resulted in rationalising routes, manpower and new capacity orders,”said Prahlad Tanwar, partner and logistics expert at KPMG. Sumit Sharma, co-founder oflogistics start-up GoBolt, said the company has cut by half its plans to increase its fleet size by100 this year. It operates a combination of owned and leased fleet of 500 trucks.

The American Trucking Associations (ATA) reported this week in its ATA QuarterlyEmployment Report that the annualized turnover rate for large and small truckload carrierswas up in the third quarter.The third quarter turnover rate for large fleets with more than $30 million in revenueincreased 9% to 96%, which ATA said is the single largest quarterly increase going back tothe second quarter 2016 and represents the highest figure going back to the second quarterof 2018.For small fleets, the ATA said the turnover rate headed up 6% to 73%, marking a gain overthe second quarter’s 67%, which is the lowest level, for small carriers, since 2011. Less-than-truckload driver turnover fell 4% to an annualized rate of 9%, which marks the lowestlevel since the fourth quarter of2017

ATA REPORTS GAINS IN THIRD QUARTER DRIVER

TURNOVER RATES

Hardik Mhatre | 20 December 2019

India will soon have its own index toestimate the costs of logistics in its topnine export sectors including agriculture,leather, apparel and, gems and jewellery.The department of commerce has begun anexercise to develop sector-specificindices to estimate the logistics costs andbring them down to 10% of the grossdomestic product (GDP) from 14% atpresent as they are higher than those indeveloped countries.The government of India also aims to breakinto the list of top 30 countries in the WorldBank Logistics Performance Index whichranked India 44 in 2018 from 54 in 2014.

“Internationally, no one has made sector-specific indices to estimate logistics costs.We have taken the top exporting sectorsand will move on to domestic trade later,”said Manoj Pant, director, Indian Institute ofForeign Trade (IIFT). The institute, anautonomous body under the ministry ofcommerce and industry, is developing theindex which is likely to be released earlynext year. Data collection for the indexstarted three months ago and is being donethrough perception based surveys throughthe respective export promotion councils.“We are getting to know about theirproblems such as biggest constraints intransportation and warehousing,” Pantsaid. The index would also look at thelogistics issues of electronics, marine,chemical and engineering goods and serveas a common measure of logisticsperformance for various industries in India.

INDEX TO MEASURE

LOGISTICS COSTS OF

KEY EXPORT SECTORS

ON THE CARDS

Tejas Raut | 08 October 2019

On 16 December, the day it closed its acquisition of Essar Steel India Ltd, ArcelorMittal SA,the world’s largest steel company and the new owner of the steel mill, held a closing partyat The Oberoi in Mumbai. The prevalent mood was one of relief. A collective sigh wasalmost palpable. When Standard Chartered Bank and State Bank of India filed insolvencyproceedings against Essar Steel in August 2017, the company had an outstanding debt of₹54,550 crore. It was the single biggest defaulter on the Reserve Bank of India is India’soriginal “dirty dozen" list of bad loans. Banks, which were laden with bad loans that wereeating into their profits and starving them of capital, were going to test the new Insolvencyand Bankruptcy Code (IBC), which had been passed in Parliament the previous year.At the start, the company didn’t have sufficient working capital to continue operations asall the critical suppliers said they would stop supplying goods and services unless theywere paid in advance, because they didn’t want to take additional credit risk. We met thetop 30 suppliers to assure them that Essar Steel was a going concern and that paymentswould be made on time. We had to build back the company’s credibility. Due to theseefforts, over two plus years of the case, the plant saw operational expenditure of over₹55,000 crore."

THE REMARKABLE CASE OF ESSAR STEEL: HOW IT

TURNED AROUND OPERATIONALLY DURING THE

INSOLVENCY PROCESS

Kalyani Patil | 19 December 2019

One of the outstanding things in the Essar Steel case is the promptness Unlike most othersteel plants in India, which are often based near iron ore reserves, the bulk of which is inthe eastern part of the country, the Essar Steel plant is a 9.6 million-tonne single-locationflat steel unit in Gujarat. But the Ruia family—the original owners—had built an ecosystemaround the plant that was efficient enough to make the plant cost-competitive. They hadbuilt a 253km slurry pipeline from iron ore mines in Dabuna (Odisha) to a pellet plant in thecoastal town of Paradip. These pellets were then shipped around to Hazira, where theRuias operated a port terminal adjacent to the steel mill. For prospective bidders, thisarrangement was a cause for worry. Only the steel plant was on sale in the deal, not thesupporting infrastructure. Battle for Essar Steel doesn’t seem to have fazed the Mittals.The first CoC member had also met ArcelorMittal owner L.N. Mittal, at The Oberoi party.“LN Mittal said that when he acquired Arcelor, he had to work with four-five heads of state,including France’s (Jacques) Chirac and (Valdimir) Putin in Russia. He closed that deal in sixmonths. Essar took 866 days. But the two years was worth it. It laid the foundations forIBC, not just for us with Essar but for everybody else."

Blume Global, a leader in global logistics and digital supply chain solutions, recentlyannounced that Hapag-Lloyd, one of the world’s leading shipping companies, has selectedBlume Logistics to support its entire global network of motor carrier partners, commencingin North America in January 2020.Hapag-Lloyd is one of the world’s largest ocean carriersoperating a fleet of 231 modern container ships with a total transport capacity of 1.7 millionTEU (twenty-foot equivalent units) and a container capacity of 2.6 million TEU, including oneof the most modern fleets of reefer containers. Hapag-Lloyd required a solution that couldhelp manage and ensure the highest level of quality door-to-door service capabilitiesacross its network of motor carrier partners.

ANOTHER INDICATION THAT DIGITIZED SERVICES

WILL SOFTEN IMPACT OF IMO FOR OCEAN CARRIERS

Hardik Mhatre | 19 December 2019

GIVING TECH TO WHEELS: HOW TECHNOLOGY IS

TRANSFORMING THE LOGISTICS SECTOR

Technology is finally solving inefficiencies in logistics, a sector that is directly linked toeconomic growth. Till not so long ago, the trucking and logistics industry was known for delaysand unpredictability. An enterprise or individual was never sure whether shipments wouldactually arrive on a given date. Now, with most firms adopting technology-led tracking systemsthat make it easy to predict when a parcel is expected, the sector is becoming morestreamlined. “In the last few years, we’ve adopted technology to enable tracking of shipments,dynamic route management, integrating wallets for cash-on-delivery and other areas,” saidKetan Kulkarni, head of business development and CMO, The company has also switched to anautomatic sorting and routing facility at its warehouses — a task earlier carried out manually bycourier delivery staff. The automatic system sorts all packages and creates the most effectiveroute schedule, freeing up 45 minutes per person every day, leaving them with more time to beout on the field. Anshuman Singh, CMD of Stellar Value Chain Solutions said the company hadcreated a “business operating system” based on core artificial intelligence and machineprinciples that minimise human errors at each step. “We use wireless handheld scanners toperform every task, handle each and every piece of customer good that come into ourwarehouse and are dispatched from our warehouse,” he said. Going forward, the industryexpects more action in the hyperlocal delivery space which is relatively nascent now.Companies are also starting to work with downstream players such as finance companies tonegotiate better rates of premium on insurance based on driving patterns, and this is only likelyto go up.

Kalyani Patil | 19 December 2019

Prolonged trade tensions between the U.S.and China has created quite a bit ofheadline risk for U.S. ports, though FitchRatings' latest sector peer review showsthat it has not trickled down to financial orrating performance. Both ratings andOutlooks have largely remained intact forFitch-rated ports, perhaps mostsurprisingly for those located on the WestCoast. Executive directors from all threemajor ocean cargo gateways in Californiahave voiced concern to LM in recentmonths about the risks related to tradefriction with China.

Yet, despite volume declines – which wereexpected seeing as West Coast ports arethe most susceptible to U.S./China tradedisruptions – financial and ratingperformance has remained quite stable. Landlord ports are generally not directlyexposed to volume volatility, which hasinsulated cash flow for ports like LongBeach and Los Angeles, CA despite theirtariff-related declines in volume,” saidDirector Stacey Mawson.

U.S. PORT RATINGS

REMAIN STRONG

DESPITE TRADE POLICY

CHANGES, SAYS FITCH

Hardik Mhatre | 23 December 2019

COMICS

CROSSWORD

2. Planning, execution, and controlof the procurement, movement,and stationing of personnel,material, and other resources toachieve the objectives of acampaign, plan, project, orstrategy.4. An end user, and not necessarilya purchaser, in the distributionchain of a good or service6. It refers to the goods andmaterials that a business holds forthe ultimate purpose of resale (orrepair).

1. The contracting or subcontracting of noncore activities to free up cash, personnel, time, andfacilities for activities in which a company holds competitive advantage.3. The act of obtaining or buying goods and services. The process includes preparation andprocessing of a demand as well as the end receipt and approval of payment5. Distribution method in which the goods flow in an unbroken sequence from receiving toshipping (dispatching), thus eliminating storage.7. A party that supplies goods or services, it may be distinguished from a contractor orsubcontractor, who commonly adds specialized input to deliverables. Also called vendor.

ACROSS

DOWN

4

2

6

1 3

7 5

OPERATIONS

INSIGHT

CHIEF EDITOR

ASSOCIATE EDITOR

MANAGING EDITOR

CHIEF DESIGNER

Kalyani Patil

Lakshana Mandluskar

Hardik Mhatre

Anuj Ghag

EDITION 14

Fr. C. Rodrigues Institute Of Management Studies

(Fr. Agnel Business School)