Post Event Report

18 • SMART LOGISTICS • NOVEMBER 2010

EvEnt REPORt SL LeaderShip SerieS 2010

Visitors upbeat & confident speakers, the message was loud and clear that the entire logistics industry is united for the cause for collaboration. An overwhelming visitors’ crowd right from the word ‘go’, inspiring speakers and a whole host of activities would best describe the Smart Logistics Leadership Series, which was

recently held at Taj Lands End, Mumbai. Though B2B in its true sense & spirit, the event turned out to be no less than a show-stopper with each one of the attendees being involved in the knowledge dissemination session.

The event began with an inspiring welcome address by Senthil

Chengalvarayan, President & Editorial Director, TV18 Business Media. Providing refreshing insights on the need for collaboration, he mentioned that connectivity was yesterday’s buzzword.Today, it is important that you are smartly connected — and no where is that more true than in the connections

Mission ‘Collaboration’aCCoMplished

PrErNA sHArMA

on october 22, 2010, indian logistics industry witnessed the industry players joining hands of prospective partnership & alliance. this was the day when the industry pledged to work towards collaboration and surge ahead... the day when smart Logistics Leadership series

witnessed the entire industry standing united to fructify collaboration. the maiden edition of Leadership series proved to be a rock-star in every aspect be it overwhelming audience

response or disseminating knowledge…

NOVEMBER 2010 • SMART LOGISTICS • 19

you make while building your supply chain. In a globalised world, zeroing in on the right connection can make the difference between success and failure. You have to throw out old notions and sometimes adopt new ones that could seem completely counter intuitive. You may have no choice but to sleep with the enemy for instance….we call it Competitive Collaboration, where you and your partners compete with the same people at times. Does that sound surprising? You will find out that it is often the only way to survive!! With such fascinating thought, Senthil set the ball rolling for collaboration.

Session one started with the inspiring opinion of SV Sukumar, Executive Director, Operations Consulting Practice (Manufacturing & Services Sectors), PwC, wherein he gave a brief overview of how logistics is being perceived in the industry today. Revealing striking stats & facts about logistics, Sukumar, projected, “India is ranked 47th in the logistics competitiveness worldwide, which is not a good position to be in. Roughly US$ 45 billion is lost due to wastage during logistics. We spend 13 per cent of GDP on logistics, which is 30 per cent more than developed nations. Amidst all these complexities, the good news is that there is only one direction in which we can go and grow and make a complete difference and there’s no choice for that. This criticality points towards collaborating with partners as well as with competitors to attain excellence.” Leaving too many questions unanswered for the audience and speakers to emphasise upon, Sukumar set the tone of the conference. Jasjit Sethi, CEO, TCI Supply Chain Solutions vouched for the fact that no organisation in such heightened competitive landscape can work in silos. Companies need to adopt collaborative approach to surge ahead.

Pranil Vadgama, President, Chep India, averred, “Collaboration within the supply chain will become a norm in the industry to drive out supply chain costs.” Terming pooling as the source of collaboration, he further said that the time is now…let’s start to collaborate and reduce all our supply chain costs collectively – through pooling!

Giving a global perspective, Oscar De Bok, CEO, South Asia & South East Asia, DHL Supply Chain, said, “We should think of 3PL & 4PL players as the catalysts

for collaboration. If you use an entity that separates the interests of different parties, in order to bring in optimisation for different parties, then I think collaboration will move much faster and in a smooth manner.”

inspiring sessionsThe theme was divided aptly on the issues that require urgent attention from the industry players to come together and reach on a consensus. One of the sessions on ‘initiating & developing trust’ proved to be an eye-opener for the industry at large. While the spellbound presentations were eye-catching, thought-provoking insights of speakers established trust among partners as well as intrigued the attendees to look at their counterparts differently and develop a long-term relationship. The session chair, Lloyd Sanford, Founder & Director, Applied Logistics India, established the relevance and the criticality of developing trust among partners. He avowed that companies these days have slowly and steadily started realising that they must

change the way they manage their supply chain. They seek to improve bottom line and drive increased revenues and market share. In order to achieve this, there is a need for improved levels of consensus, cooperation, coordination, collaboration and co-opetition. Collaboration can go a long way in addressing existing need gaps. With such a headstart, the session highlighted various need gaps that exist in the way of collaboration.

In his awe-inspiring presentation, Juzar Mustan, CEO – Logistics, AFL, affirmed, “Collaboration and other win-win alliances require trust between compatible partners to succeed. Trust requires a degree of faith and propensity to risk. Companies need to identify and work on trusting behaviours and actions to quickly acquire relational trust capital.” While establishing trust has been one of the biggest concerns for the industry players, determining risk and how to overcome them is also an important aspect in the way of collaboration. Detailing on the risk factors that may arise on the way

(L-R): N Sukumar, Sr VP – Supply Chain, Reliance Industries; Lloyd Sanford, Founder & Director, Applied Logistics India; Arif A Siddiqui, Director, Coign Consulting; Jasjit Sethi, CEO, TCI Supply Chain Solutions; Juzar Mustan, CEO – Logistics, AFL; Vivek Sarbhai, VP – Logistics & Customer Operations, Cadbury India; and Suneel Aiyar, Associate Director, Consulting (Supply Chain), PwC during a panel discussion on paving the way for collaborative partnership

Industry leaders busy charting out the solutions for the many challenges towards collaboration


to collaboration, Howard James-Scott, Chief – SCM, Gati, averred that the bottomline is to never over-promise and under-deliver for collaboration in order to ensure successful partnership.

the User perspeCtiveUser fraternity holds a special place when it comes to collaboration. Providing a user perspective on collaboration, Vivek Sarbhai, VP – Logistics & Customer Operations, Cadbury India voiced his opinion on the critical need for internal collaboration. While Sougato Shome, GM – Big Bazaar Supply Chain, Future Supply Chain Solutions presented success stories on how collaboration helped in creating an icon called Big Bazaar in retail. He cited that the company was able to bring down import time lines from 60-75 days to 17-22 days from shipping to warehouse in collaboration with its import partners.

This helped import TTMs to be brought down from 100-50 days from import ship dates to store inwards. This success story speaks of the dire need of collaboration in Indian logistics.

An interesting session dedicated to the user industry completed the collaboration loop. While all the industry players agreed that there is a need to collaborate, they also threw open the areas of potential collaboration in the future. The eminent speakers in the session included N Sukumar, Sr VP – Supply Chain, Reliance Industries; Yogesh R Antad, GM – Supply Chain Functional Excellence, Cummins India; Anil Devli, CEO, Indian Shipowners’ Association, Sriram Venkateswaran, Director – National Supply Chain & QA, McDonalds India and was chaired by Suneel Aiyar, Associate Director, Consulting (Supply Chain), PwC. Leaving a clear message that a very concerted

approach towards collaboration is the necessity, the session was successful in driving the spirits of industry people towards collaboration.

an insightfUl breakaway sessionTo bring in interactivity, an out-of-the-box breakaway session was designed to involve all the delegates in crafting solutions for successful collaboration. Moderated by the leading industry expert, Arif A Siddiqui, Director, Coign Consulting, this brainstorming session probed critical insights into the areas of collaboration, challenges that may arise in the way of collaboration and finally mutually decide upon the probable solutions towards successful collaboration.

& now the grand finale…The grand finale to the event proved to be a winner of sorts by calling the entire logistics fraternity to collaborate. Moderated by Jasjit Sethi, CEO, TCI Supply Chain Solutions, a very intriguing panel discussion on paving the way for collaborative partnership provided a crystal clear roadmap for collaborative partnership. The panelists included Suneel Aiyar, Associate Director, Consulting (Supply Chain), PricewaterhouseCoopers (PwC); Arif A Siddiqui, Director, Coign Consulting; Juzar Mustan, CEO – Logistics, AFL; Vivek Sarbhai, VP – Logistics & Customer Operations, Cadbury India; Lloyd Sanford, Founder & Director, Applied Logistics India; and N Sukumar, Sr VP – Supply Chain, Reliance Industries.

After having engaged in such an inspiring day of sharing ideas and insights, it was time for the formation of consortium wherein the real problems will be solved by the core team members and a common consensus will be achieved to harmonise the supply chain of tomorrow. The core team members as well as the attendees pledged to work towards achieving collaboration to transform the Indian logistics industry.

This is not all, the 8 hours thought provoking session got over with the much-awaited spirited evening for the attendees as well as the hosts. The maiden edition of Smart Logistics Leadership Series in its very essence proved to be a rock-star. The series continues – Chennai in March 2011, Delhi in June 2011 and Mumbai in September 2011.

The overwhelming visitors’ response at the registration desk

Audience engaged in brainstorming activity

Event report, continued


Collaborative PartnershiP: ChallenGes Smart StrategieS

“It is the long history of humankind; those who learned to collaborate and improvise most effectively have prevailed.” This famous statement by Charles Darwin deliberates the need to collaborate in the modern day world. The need intensifies when the industry is as fragmented as the Indian logistics industry. Consider these numbers…The share of organised logistics players is less than 3 per cent of the entire logistics fraternity in India, compared to their counterparts in the US and Japan, which stands at 58 per cent and 80 per cent respectively. Because of this disparity, it is quite apparent that the available resources remain underutilised. The resultant impact is that logistics cost in the country is one of the highest in the world. Apart from costs, the skill gap in the logistics industry is also one of the major hurdles faced by many logistics service

providers (LSPs) today. All these factors call for the need to think differently…in a nutshell the need to collaborate!

Justifying this very fact, Jasjit Sethi, CEO, TCI Supply Chain solutions on the aegis of SL Leadership Series 2010, avers, “Apart from cost effectiveness, benefits of collaboration include ecological benefits, collaborative learning and reduced lead time.”

Thus, it is clear that collaboration between competitors or otherwise can bring in mutual benefits and make the industry more mature. While collaboration is indispensable for the growth of Indian logistics industry, it is important to identify the associated challenges, obstacles, hurdles in the way of effective & successful collaboration. The challenges are more diverse, when the collaboration is between the competitors. “Benefits

definitely outweigh the barriers when it comes to competitive collaboration, but there is a need to build up trust and alliances amongst various stakeholders in order to materialise these benefits,” Sethi adds. But trust does not come as easy as it sounds. Juzar Mustan, CEO - Logistics, AFL, says, “In India, there is a cultural context for not trusting our partners. We are susceptible to strangers and generally try avoiding any kind of risks. Moreover, in particular, the logistic players don’t know enough about the practices and deliverables of the other party. This makes them pessimistic about taking risks.” Apart from cultural context, there is industrial context to it as well. Mustan lists them down• Unsatisfactory past experiences:

Several bad contracts in the past have made companies skeptical about

TUGOF

WAR Sandeep paI

ever wondered what stops logistics companies from collaborating with each other knowing that it springs up benefits for all parts of the value chain? Undoubtedly, inherent cultural and

industry-specific barriers are holding it back. Find out how…


collaboration. They fear of losing out to better established players. This creates a serious hindrance to collaboration in the Indian logistics industry.

• Industry in nascent stage: - Fragment serv ice

provider base- Lack of known,

established players- Insufficient benchmarks

for ‘good practices’.• Lack of understanding of

business requirements: Several companies do not have proper understanding that collaboration can help their businesses grow. They function in traditional manner and are reluctant for any kind of a change. As a result, they have - Limited experience and exposure- ‘Still developing’ talent base.While lack of trust results in non-

collaboration, there are other factors as well, which prevent companies from collaborating with one another. These are mainly attributed to the nature and character of the Indian logistics industry. Consider a few hurdles:

LAck OF knOWLedGeBecause of the fragmented nature of the logistics industry, the companies do not understand the scope of collaboration. Moreover, despite several companies running businesses for generations, they lack knowledge about the areas where they can collaborate and benefit. In fact, it has been seen that smaller players fear that the larger partners will benefit most and they will lose out. They also fear that they will be bought out or absorbed by larger players eventually.

InFRAsTRUcTURe The motive of infrastructural collaboration is to reduce the overall space occupied and consolidate warehouses/DC in appropriate locations to achieve cost-effectiveness. However, there is a difficulty in sourcing for quality facilities with a sizeable space in key strategic areas. Thus, lack of good infrastructure among the logistics players prevents them

from coming together. It has been seen that in most of the cases the companies are not satisfied with others infrastructure facilities, be it warehouses or any other thing. Moreover, to establish a new infrastructure facility in collaboration results in high cost, which companies are generally reluctant for.

skILL GApThe skill gap in the logistics industry is one of the major hurdles faced by many LSPs today. So there is a need for these LSPs to come together to train the manpower collaboratively through institutes or vocational training courses. A KPMG India report on “Skill gaps in the Indian Logistics” states that while skill issues exist in varying degrees in all segments of logistics, there are areas where the gaps are not only wide but also widening at a relatively fast pace. The most severe and immediate requirement

for skill development is found to be in the road freight and warehousing segments.

But the road transport industry is so fragmented that it does not understand the benefits of collaboration. Oscar De Bok, CEO, South Asia & South East Asia- DHL Supply Chain estimates, “Eighty per cent operators own less than 5 trucks. Moreover, operators are lane specific and there are very few regions wide or pan-India players in this industry.” Nonetheless, smaller companies fear that the workforce will tend to move towards big companies after getting the

training. The fear of losing out prevents small players from collaborating.

TAxATIOnAs different states have different taxation and road permits, the idea of collaboration between different players becomes even more convoluted. Apart form taxation, there are different regulatory requirement at each state check post.

ThORns In The WAyMarket growth is driving volume challenges in capacity and supply chain cost issues. In such a scenario, many companies are fast moving towards supply chain modernisation to keep up with the level of market growth and cost pressures. The Indian supply chain is inherent of in-efficiencies & infrastructure challenges on a day-to-day basis. Logistics costs are one of the highest in the world and the lack of standardisation drives higher costs.

These challenges are faced by many organisations across India. The problem is that they are all working in developing their own solutions. The need of the hour is to collaborate. The benefits of collaborative distribution are far reached. This will not only be a cost-effective solution but will result in lesser traffic congestion and hence, reduce lead times. However, there are several reasons because of which companies are reluctant to collaborate. It’s about time to take the next step forward to reach out to others.

Barriers towards collaboration

• Decision making for short-term vs. long term sustainability

• Customised requirements for individual site locations as opposed to standards

• Over-reliance on cheap packaging materials that:– Are not environmentally friendly– Have very little shelf life requiring recurring

capital investment• Archaic leadership mindset of not trying something

new• Concerns about sharing resources with competitors

even though all parties benefit from the “pool”• Cultural mindset of ownership vs. leasing.

Inputs by Pranil Vadgama, President, Chep India

aiming For Collaboration

Area of collaboration

Challenges Solutions

Collaborative planning

• Fear of losing competitive advantage

• Building trust internally and externally

• Leveraging on cost and quality factors

• Lack of knowledge about the areas of collaboration

• Setting up of a logistics council for sharing knowledge

Infrastructure • High cost of establishment

• Clarity on sharing of infrastructure right at the agreement signing level

• Outsourcing to 3PL• Equipment pooling

• Need for skilled staff/training

• Providing vocational training in collaboration with the Government of India

Collaborative partnership: challenges, continued


Smart StrategieS Collaborative partnership: areas

Logistics and supply chain is one of the core elements of a company’s competitive advantage. Designing a seamless supply chain as a standalone entity is becoming difficult, considering the growing competition and high pressure on cost reduction. Here, competitive

collaboration and partnership plays an essential role in building a robust supply chain system and attain optimal customer satisfaction. Competitive collaboration and collaborative partnership are all about opportunities for greater coordination, integration and collaboration between

logistics service providers(LSPs) and service users. Various areas of collaboration that can shape up the future of logistics industry in India include:

Infrastructure sharIng Lack of infrastructure has always been an

Purna Parmar

a carefully crafted supply chain network will be a differentiating factor in establishing a distinct lead for a company. changing business dynamics and increasing competition today necessitates a partnership to have the winning edge. the success mantra lies in evolving a

collaborative partnership among the entire spectrum of the value chain, and exploring all the areas of collaboration for mutual benefit.

teamIng upfor success


issue for service providers as well as service users. Collaboration in infrastructure among competing industry players through service providers or consultants will not just help companies solve this imperative issue, but also help in cost reduction. The motive of infrastructural collaboration is to reduce the overall space occupied and consolidate warehouses in appropriate locations to achieve cost-effectiveness. Companies can also install shared warehouse management systems (WMS) and equipment managing systems.

“Market growth is driving up volume challenges in capacity and supply chain cost management issues. Many companies are rapidly moving towards supply chain modernisation to keep pace with the level of market growth and cost pressures. The Indian supply chain suffers inherent inefficiencies and infrastructure challenges on a day-to-day basis. Several organisations across India face these challenges and all are working towards developing their own solutions through collaboration,” points out Pranil Vadgama, President, CHEP India.

A large multi-user facility offers strategic benefits, which calls for key market players to come together to reap the benefits of collaboration in warehousing. Outsourcing of specialised logistics activities helps companies save costs, allowing them to focus on their core competency. “Collaboration in warehousing allows for customer expansion in a growing economy. Companies can pay for the space they use, and customers can expand their business & focus on demand and supply planning, while the downstream supply chain can be completely flexible,” said, Oscar De Bok, CEO, South Asia & South East Asia, DHL Supply Chain.

freIght exchangeAt an operational level, this may mean effective utilisation of logistics assets. A simple case may elucidate the opportunity: In a traditional user (shipper) and logistics service provider (LSP) relationship, both parties would be working on to improve their efficiencies for enhanced profitability. However, the approach would benefit only business processes that can be controlled independently by each party. There is enormous opportunity to improve on hidden costs. One such hidden cost is associated with asset repositioning.

Sharing information about freight schedules and exchanging freight

information can help companies leverage on the transport services of one another. According to industry players, a common body should be formed where companies can share and access freight information and collaborate to save costs, and hence establish an efficient supply chain system. Juzar Mustan, CEO, AFL Logistics, said, “Collaborating through freight exchange would help companies find logical and simple solutions for their transport-related challenges. This can be explained with an example; if company A wants to transport goods from one location to another, information obtained from freight exchange would help company A opt the best possible rates and routes that company B operating in the same location would offer. This would help company A negotiate and plan the whole transport process in a better way. Company A can also opt for collaborating with company B operating in the same location and share vehicles and transport.” Freight exchange provides far-reaching benefits. This is not only a cost-effective solution but will result in lesser traffic congestion, and hence reduced lead times.

Knowledge sharIngSharing of knowledge, eg technical know-how, is also a critical area of collaboration. For instance, if a company has deployed a new technically advanced system for managing its warehouse or even fleet tracking systems, it can share this information with other companies. A company can also share the best practises it follows that has helped it design a seamless supply chain management system. Besides, companies can share success stories and alert other companies on the various mistakes they made and which can be avoided in future.

“The need of the hour in the logistics industry in India is skilled labour. Hence, LSPs should come together to train the manpower collaboratively through institutes or vocational training courses,” points out Chaitanya Prabhu, AVP, Integrated Solutions, Arshiya. Another key component for competitive collaboration in the area of knowledge sharing is to have effective information at all levels about the status of a particular item, at any time. This is essential for coordinating the collaborative logistics streams for knowledge sharing. “Collaboration allows hiring of better qualified operations management personnel and provides

consolidation synergies for transportation. It also increases space utilisation and facilitates process standardisation or improvements through knowledge sharing, which further leads to a better planned customer growth,” explains Bok.

equIpment poolIngApart from infrastructure, logistics equipment such as crates and pallets is another area where companies can collaborate. For instance, fast moving consumer goods (FMCG) companies that have common problems across the entire supply chain, can be approached with common solutions of equipment pooling. Equipment pooling is the shared use of standard packaging across various entities. At present, environment has become a ‘top of the agenda’ item for companies. “Pallet pooling reduces burden on the world’s lumber supply and waste streams through responsible use of wood in products designed for repeated use. Controlled end-of-life management and a clear sense of ownership in a closed loop pool helps ensure that wood recovery, reuse and recycling efforts are maximised to keep waste out of landfills,” adds Vadgama.

According to Vadgama, good quality packaging is essential for a flexible, responsive and efficient supply chain. Standardisation will be the key for all parties in the industry to enable cost-savings in the supply chain. Packaging should be considered along with product configuration and design, and not as an afterthought.

Shared use of standardised returnable packaging equipment by multiple entities reduces costs significantly and is expected to become the norm in the industry to drive out supply chain costs.

Internal collaboratIonInternal collaboration forms the basis of competitive collaboration; however, it is one of the most difficult attributes to comprehend. Internal collaboration is centred around the culture and work environment of a company. A company looks forward to two behaviours – competitiveness and collaborativeness – and these work in contrast to each other. According to Vivek Sarbhai, VP, Logistics & Customer Operations, Cadbury India, companies lacking in internal collaboration find it difficult to form an external collaboration, due


to the absence of basic attributes like building trust and having a transparent system or developing futuristic thinking and working in co-ordination with each other. Hence, companies must have collaboration between various internal departments that further paves the way for external collaboration, finally leading to a competitive collaboration.

collaboratIve plannIngPlanning and strategising are critical and most confidential aspects of any company. However, if companies learn to collaborate and involve each other right from the planning stage, it would help them build a robust supply chain and improve the bottomline. Suneel Aiyar, Associate Director, PwC, says, “There are international forums where

executives of various companies gather and discuss about the issues they face and how they can be solved. These forums also have competitive companies that not just address challenges but also share their strategies and future plans. As an industry, we must have the maturity to handle such critical information. We must learn to adopt these strategies, rather than aping them blindly or applying against the competitive company, which will encourage unhealthy competition. This would help the industry to plan and strategise in a better way and avoid downtime.”

collaboratIon among value chaIn partnersCollaboration among the value chain partners is the key to success of an

organisation. Relevance of logistics for competitiveness makes the LSP an important partner for present-day businesses. Companies may collaborate with their LSPs and trading partners to bolster capacity to support growth as well as add capabilities to enhance customer service. This will improve efficiencies by drawing on the expertise of the partner as well as planning accuracy by improving information visibility.

Collaboration between shippers (users) and LSPs can be across a range of areas including sales & operations planning, manufacturing planning, sourcing logistics, warehousing and distribution logistics.

the way forward The collaboration continuum extends across the ecosystem of players, with the type of collaboration and maturity of collaborative relationship affecting the scope and impact of collaboration on the participating players. While these are some of the areas of collaboration, there are a number of challenges that companies face in each of these areas.

internal collaboration forms the basis of competitive collaboration; however, it is one of the most difficult attributes to comprehend. internal collaboration is centred around the culture and work environment of a company.

act

collaborative partnership: areas, continued


Smart StrategieS COLLABORATIVE PARTNERSHIP: SCOPE

Recent statistics reveal that India ranks 47th worldwide in terms of logistics competitiveness. Also, about $45 billion is lost due to the wastage occurring in the logistics industry. In addition, logistics contributes to about 13 per cent of the country’s gross domestic product (GDP), which is 30 per cent more than that of developed nations – 10 per cent of the GDP. With the contribution of logistics being so high to the country’s GDP, it is now time for companies to think beyond traditional methods, and innovate, to cut down on these costs. With the known benefits of collaboration, be it with competitors or customers, companies can now share services, thereby avoiding wastage in terms of space, cost, etc. Not only will this help in the development and growth of the companies involved in the partnership, but it will also provide a facelift to the overall Indian logistics industry. Arif A Siddiqui, Director, Coign Consulting,

avers, “In today’s business, collaboration and working together is the fundamental aspect of any organisation’s development and growth.”

Until recently, the industry worked around a notion that ‘One has to work around logistics and not on logistics’. They did not pay much attention to logistics, but changed other processes to work around logistics. In other words, logistics, being the backbone of most industries, did not receive the attention it deserved. However, the logistics scenario has changed dramatically in the last two years. Increasing demand and changing customer profiles have now become a matter of concern for the industry. Also, a number of organisations in India are going global, but the expectations of global customers are significantly different from those in the country. In order to overcome these issues and provide customer satisfaction, the industry needs to collaborate, and

no other option seems to be available. “We have to collaborate because we do not have a choice, considering the limited scope of our markets, transportation industry, the number of small & regional players and limited warehousing & small facilities. Today, a number of vehicles are moving within the country on a daily basis, returning almost completely empty or half full. Such a scenario demands that we as players need to do better, ie, collaborate,” asserts Juzar Mustan, CEO Logistics, AFL.

Attempts for collaboration were unsuccessful in the past. Jasjit Sethi, CEO, TCI Supply Chain Solutions, explains, “Earlier, a movement called Efficient Consumer Response (ECR) was carried out. This was based on how companies can collaborate together because retailers would want to have shelves of the same dimension. They will not want to waste space. This movement was visible the world over; however, it did not actually take off.

PAVINGTHE WAY

FOR APOTENT

PARTNERSHIP

SudhiR Muddana

With the indian logistics industry opening up for experimentation to

reduce overall costs through the use of collaboration as a strategy, time

has come to explore the potential of collaborative logistics and develop

innovative and unconventional methods to lead the industry towards

a bright future.


Lack of standardisation is a reason for this failure.” Citing the need for collaboration, he added that no company carries out the entire logistics of any user. They too need to collaborate with other companies to fulfill customer requirements.

Today, the term ‘Collaboration’ is the latest buzz in the logistics industry. Even though it has been done in the past directly or indirectly, it was never done consciously. Service users have always been collaborating with service providers. However, in recent times, not only this trend has strengthened, but collaboration with competitors is also seen as the most favourable option in logistics. Today, with increasing costs and growing demands, the need for collaboration is clear. “Collaboration among all key supplier partners and sharing of best practices between them has significantly helped in reducing system redundancies and enabled speed to market of several initiatives. We believe that sustaining and fostering this collaboration among suppliers will help in generating unique competitive advantage and long-term wealth from the system as a whole,” explains Sriram Venkaswaran, Director National Supply Chain & QA, McDonalds India.

Companies are realising the need to collaborate and are showing utmost interest in doing so. However, many companies find a lack of support from the government. Lloyd Sanford, Founder & Director, Applied Logistics India, says, “There are diverse players having the ability to start collaboration, and demonstrate to the government authorities what can be done, and how the government can incrementally step in and facilitate and help. I believe that the Indian Government, when approached correctly, will take action in this regard.”

This was recently witnessed in the Smart Logistics Leadership Series 2010 organised in Mumbai. What came as a

learning for the entire logistics fraternity is that collaboration holds immense business prospects for one and all. The time has now come to collaborate and excel. The panel discussion towards the end of the event involved users, providers and consultants, who discussed in depth the opportunities in collaboration and the potential it holds for the industry at large in the years to come. The user community, present at the discussion, showed interest in sharing their vendor assets with their competitors. They opined that since at the end of the day, retailers will have their own as well as their competitors’ products in the same store, at some point in the supply chain, both companies still co-exist. Also, with transportation being a major contributor

to the overall costs of logistics, and also with the growth of organised retail in the country, only few entities will manage the supply chain unlike today. “With the maturation of organised retail, the way we carry out transportation is going to change. All small service providers will no longer be there and the country will see true third-party logistics (3PL) service providers at that time,” confirmed N Sukumar, Sr VP - Supply Chain, Reliance Industries.

The panelists concluded that there are several areas of collaboration between different industries that have not yet been tapped. Therefore, it is important to study the specifics in each industry, in order to have the collaboration. Also, what came out from the discussion is that there is a great merit in having long-term contracts between entities, as it decreases the complexities in supply chain.

This shows unlimited opportunities and benefits in collaborating with competitors and customers. However, to facilitate collaborations, it is imperative for the industry to be transparent with the partners and have trust in them. With a vision to improve the Indian logistics industry, and thereby the overall Indian economy, it is clear that collaboration is the future of logistics.

Myths about collaboration With collaboration being the way out for the logistics industry, it is time to clarify a few myths about collaboration and examine what does, and does not work.Collaboration is a strategy: It is not a strategy, but it can add value to a strategy. Collaboration is the output of a culture based on trust and openness, where individual requirements are overall met better by partnering with others rather than by striving to meet it individually.Companies with inefficient supply chains will benefit the most from collaboration: This is a wrong belief. Rather, companies having the most efficient supply chains benefit more from horizontal collaboration, as they are aware of their costs. Such efficient companies have squeezed out all the costs possible internally and need to look outside the business for future big savings. They have overcome the problem of internal collaboration, secured significant benefits from vertical collaboration with suppliers and customers and, most importantly, have the time and senior management endorsement, which is vital to making horizontal collaboration work.Companies fall out over sharing of savings: This might happen, but can be avoided by benchmarking the respective supply chain costs of each collaborating party before commencing the project.Collaboration leads to loss of control and reduction in customer service: In fact, if done properly, the opposite can be true. Collaboration enables more economic and frequent shipments, which can increase delivery frequency to customers. With most industries looking for this facility, collaboration is a good step. For suppliers, the benefits of higher on-shelf or in-stock availability can reduce loss in sales.

components of competitive collaboration

Collaborative Distribution

The benefits of collaborative distribution are far reached. This is not only a cost effective solution but will result in lesser traffic congestion and hence reduce lead times.

Shared Learning

The need of the hour in the logistics industry in India is skilled labour. Hence LSPs should come together to train the manpower collaboratively through institutes or vocational training courses

EnvironmentalIssues

Competitive collaboration between logistics players could really help in solving the ecological issues, LSPs should come together to solve these issues that would impact the supply chains of the future

Courtesy: TCI Supply Chain Solutions


Collaborative partnership: solutions Smart StrategieS

Modern transport & logistics landscape is a highly distributed inter-business activity spanning across vast expanse with each of the involved business partners aiming at optimising their individual, commonly complex

supply and production chains. With such complexities in hand and brains working the world over, is it actually possible to solve the many, though sometimes common, challenges that this industry faces? Yes, it is…

Issues such as less than truck load (LTL), infrastructural bottlenecks, unskilled manpower, inappropriate technologies, mistrust, breach of intellectual property rights (IPR), competition, non-availability of professional transporters, increasing need

The secreT recipeTo success

SuMedha Mahorey

‘To every problem, there is a solution’, and finding one that solves the miseries of a logistics player would be like witnessing a eureka moment. But the real catchword here lies in devising

that solution, implementing and executing it, to achieve a collaborative aim of taking the Indian logistics industry to a new high. Taking a cue from this, the Smart Logistics Leadership

Series 2010 breaks through the many challenges the industry faces to derive solutions that are realistic and implementable.

Illus

trat

ion

By: S

anja

y D

alvi


Collaborative partnership: solutions, continued

for a freight exchange, questions like who will claim liabilities, can all be dealt with. One step can make way to overcome all these hurdles, and that is collaboration.

But how exactly does this work? Does one just shake hands and say, “Now I can trust you,” or is there another way to build strong relationships between companies? Can there be a solution that will actually lead to sharing of business information, confidential but necessary details, transportation capacities and reduce the most important ‘cost’ factor for both the partners. Delving in-depth to find the ultimate answer, Smart Logistics Leadership Series 2010 was held recently to zero in on solutions that can be readily implemented and executed.

Building TrusT The fundamental step towards collaboration is building trust that can only be developed by taking a step-by-step approach towards initiation, establishment and maintenance. Many issues, which threaten the business by moving it in a fundamentally undefined direction resulting in loss of control, IPR, process visibility and the dilution of brand image due to stock-out, high lead times, poor performance, etc can be nullified by building trust right at the start.

It also resolves many operational risks, which encompass a range of service-related, staffing and governance issues. Juzar Mustan, CEO – Logistics, AFL, says, “Logistics companies should show willingness to trust the other entities in the value chain. After collaborating, logistics service providers (LSPs) as well as manufacturers should be sure of their strategic objectives. Also, they must be ready to take smart & informed risks.”

Both the partners need to demonstrate their ability to understand and share the concerns to strengthen their relationship. This initiation needs to be supported by a trusting behaviour, which includes charting out common mission, shared values and goals, and accepting vulnerability. Once trust has been built, both the collaborators need to minimise ambiguity and incorporate conflict resolution procedures by way of contracting. Measures like frequent exchange of quality information, calibration of transaction costs,

transparency in decisions, responsiveness to critical situations such as misdirected communications and claims would help in maintaining this relationship in the long term.

Other measures, apart from building trust, that need to be taken to develop a collaborative relationship include: • Manage proposal process (structured

approach, outcome modelling, process reviews)

• Transfer insurable risks• Negotiate agreement• Manage key performance indicators via

robust relationship model• Assess existing arrangements

(renegotiating contract, identifying new value-added services)

• Re-evaluate outsourcing approach (changing strategy, extending scope, in-sourcing or spinning off).While building trust is a crucial

factor, other equally important aspects of a collaborative relationship include the following.

Knowledge sharing Need for a common platformWith the absence of a knowledge sharing platform within the logistics industry, ideas remain limited to one company. To overcome this, a logistics council should be formed to share the best practices/knowledge with the industry. A social communication networking group needs to be formed within the logistics industry, right from the service provider to the user for sharing best practices.

Skill development The industry has realised the need for a logistics management course that can generate the requisite manpower. Apart

from this, on the operating level, the industry needs technicians who have a sound understanding of the latest technologies emerging on a daily basis. The need for good drivers, material-handling equipment operators, people adept at shipping and transport activities, goods handling and ports can only be satisfied through technical training programmes. Once these institutes start functioning efficiently, another issue that may crop up is that if a leader in logistics opens up a skill development institute for the

blue collar workers, would it be open to accept people from competing companies to be trained in their institute? To this, industry veterans promptly reverted that they will be more than keen to educate and train people on the emerging trends & technologies shaping up in the supply chain domain.

Intellectual propertyOne challenge that always hampers sharing of knowledge is the IPR. There is a concern that sharing of an idea that has been floated internally with an external company will breach the IPR, though there is no patent to that intellectual thought. The solution lies in figuring out whether

that idea actually falls under the definition of IPR. A lot of ideas believed to come under the intellectual property do not actually fall under this premise. Such ideas can be shared with the industry, as they may help in the progress of the industry.

Fear of competitionA rampant fear that exists among the industry players today is that whether collaboration will take away my competitive edge? Whether sharing of knowledge will take away my USP? In

The Trust equation

TQ = C+R+IS

WhereC = Credibility (Ability)R = Reliability (Intent)I = Intimacy (Integrity)S = Self-orientation (Internal Focus)

Source: The Trusted Advisor, Green, Maister & Galford, 2000

SETTING up Of VOCATIONAL TRAINING INSTITuTES By MAjOR pLAyERS IN ThE LOGISTICS INduSTRy IN COLLABORATION wITh ThE GOVERNMENT wILL SuffICE ThE MANpOwER dEMANdS Of ThE INduSTRy ANd pROVIdE fOR wELL-TRAINEd ANd fOCuSSEd huMAN RESOuRCES AS wELL.


this scenario, the answer lies in sharing historical case studies, as they have already been implemented by the logistics provider/manufacturer/vendor. For example: In the US, there exists a supply chain executive board, which is a group of industrial organisations that share very detailed case studies with each other. But another challenge that arises here is that not many Indian companies actually record the best cases they have dealt with successfully. Some of the most complex terrains may have been

encountered and overcome by logistics managers. These include extreme climatic conditions, socio-political issues, etc, but generally they are not documented. So, it becomes difficult for companies to actually share such success stories. To solve this issue, whenever a major breakthrough is achieved, it needs to be documented and stored in a library. These can be referred when the need arises. For instance, when a request for qualification (RFQ) needs to be sent, the client asks to provide an interesting case study, at this time the document can be used.

Technology Today, the entire logistics industry is collaborating unconsciously, as the application service providers remain the same and provide the same software to several competing companies. Collaborating on the technology front would enable companies to better understand the bottlenecks in the whole process and make the program as close to reality as possible.

collaBoraTive planning Fear of losing competitive advantage Mistrust within the organisation or within the logistics community gives rise to such fears. The key to this lies in developing the trust factor both internally and externally over years of functioning, as trust cannot

be developed overnight. For developing trust, one needs to build in the culture within the logistics industry itself.

The culture of trust needs to be built on the foundation of OTTT – Openness, Trust, Transparency and Teamwork – between logistics players and manufacturers, from the top to the lower level management, including shopfloor workers as well. Apart from this, a company can gain competitive advantage by leveraging on other factors. Highlighting on these factors, Oscar De Bok, CEO, South Asia & South East Asia,

DHL Supply Chain, points out, “The industry should focus on six specific levers to achieve competitive advantage.” These include: • Cost lever: Become more cost

competitive through procurement• Cost lever: Leverage joint return loads• Cost lever: Leverage GST consolidation • Cost lever: Use commercialisation/co-

loading as a strategic lever• Quality and cost lever: Use joint IT as

a strategic and operational advantage• Quality lever: Differentiate through

reach.

infrasTrucTure Tackling high cost of establishmentWarehouses, logistics parks as well as high-end technology are the major cost centres in any supply chain. For warehousing bottlenecks, a major solution lies in third party logistics (3PL) companies, which cater to different customers and are blind towards competing players in the market. Thus, a multi-user warehouse facility, run by 3PL service would drastically reduce the high cost of establishment. Additionally, the costs involved in managing fleet can be reduced with the use of the right IT solution. For example: An aggregator like makemytrip.com for cargo movement can reduce transportation costs drastically, and better manage the movement of fleet from one area to another.

freighT exchange A freight exchange enables freight haulers and companies offering cargo loads to explore emerging business avenues with freight and freight forwarders. This system provides a platform that allows carriers to communicate freight traffic information to fellow operators such as transporters, forwarders and logistics companies. In India, TCI has been mooting the idea of creating a national freight exchange across the country since 2002. However, this system has not been established as yet because of several challenges that include trust issues, skills, IT, connectivity across the country and the non-willingness of several transporters to get together to share the load and capacities. Jasjit Sethi, CEO, TCI Supply Chain Solutions, believes that the logistics industry does not work on transparency. According to him, constant attempts are being made since 2002-03 to make the system functional; however, the very nature of online system, ie, transparency, poses threat to brokers. Thus, concerted efforts are required to make brokers understand the importance of freight exchange. Non-availability of professional transportersHere, the solution is three dimensional in nature. • Education: Setting up of vocational

training institutes by major players in the logistics industry in collaboration with the government will suffice the manpower demands of the industry and provide for well-trained and focussed human resources as well.

• Incentive-based performance: A reward-based system can be put in place for the best transporter. These rewards depend on the timing and the perfection with which they transport the cargo.

• Planning & technology: Traffic planning based on tight slots can help truck drivers manage their routes and optimise on the cost factor.

implemenT, execuTe and lead The fuTureWith so many options to tackle with varied challenges emerging at a single common platform of the Smart Logistics Leadership Summit 2010, it is evident that solutions lie within the industry. The need of the hour is to implement these solutions, and execute them smartly with collaboration as the keystone to transform the Indian logistics landscape.

aiming For Collaboration

Area of collaboration Challenges Solutions

Knowledge Sharing • Breach of intellectual property right

• Sharing ideas, which do not fall under IPR

• Documenting success stories• Sharing historical case studies

• Fear of misuse of information

• Agreement for sharing of information & resources

Freight Exchange • Claim liability for damages • Need for transparency

• Non-availability of professional transporters

• Starting up advanced post-graduate course in logistics management