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Managing Supply Chains in Developing Economy – Destination India
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Managing Supply Chains in Developing Economy – Destination India

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Presentation made by Saurabh Goyal, CEO, ThinkLink at the Doing Business in Dynamic Markets: Supply Chain Strategies & Keys to Success conference held in Johannesburg, South Africa. Program hosted by ...

Presentation made by Saurabh Goyal, CEO, ThinkLink at the Doing Business in Dynamic Markets: Supply Chain Strategies & Keys to Success conference held in Johannesburg, South Africa. Program hosted by the Gordon Institute of Business Sciences and Imperial Logistics. Talk focuses on supply chain and logistics challenges in India, best practices adopted by companies, and opportunities for creating value in supply chain and logistics operations for companies and 3PLs.

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Managing Supply Chains in Developing Economy – Destination India Presentation Transcript

  • 1. Doing Business in Dynamic Markets: Supply Chain Strategies & Keys to Success Module: Managing Supply Chains in Developing Economy – Destination India Presenter: Saurabh Goyal, Managing Director, ThinkLinkDoing Business in Dynamic Markets: Supply Chain Strategies & Keys to Success 1
  • 2. Moderator IntroductionSAURABH GOYAL Founder and Chief Executive of ThinkLink SCS and ThinkLink Learning Bachelors Degree in Technology from IIT Delhi in 2002 Work experience with Exel and DHL in Regional Head Office in Singapore and India Head Office in Mumbai prior to Founding ThinkLink Worked on engagements with PepsiCo, Shoppers Stop, Dell, Intel, Nike, DHL, Unilever, McDonalds, Shoppers Stop, Nokia, Volkswagen etc. Passionate about building a world class supply chain ecosystem in India to support the India economy Even more passionate about getting the best talent into the Supply Chain Sector Doing Business in Dynamic Markets: Supply Chain Strategies & Keys to Success 2
  • 3. Agenda for Today’s PresentationItem 1:State of Supply Chain and Logistics Management in India Item 2: Leading Practices adopted by Industry Item 3: Opportunities and Future Trends in the next 3-5 years Doing Business in Dynamic Markets: Supply Chain Strategies & Keys to Success 3
  • 4. Supply Chain and Logistics – A Backbone of the EconomyLogistics spend is estimated as between 10% - 13% of annualGDPGrowth is driven by consumption, manufacturing, retail, e-commerce, and food (processing and cold chains)Huge demand and supply gap for the skilled manpower (NSDCestimates 20 million skilled people needed by 2020) Doing Business in Dynamic Markets: Supply Chain Strategies & Keys to Success 4
  • 5. Supply Chain and Logistics – A Growing Market Source : KPMG StudyOverall spend is USD 135 billion and growing at 8% - 10% annuallyOrganized spend is less than 10% but is growing at 25% - 30% Doing Business in Dynamic Markets: Supply Chain Strategies & Keys to Success 5
  • 6. Supply Chain and Logistics – What is fuelling demand? Segment Mode Growth Rate (%) Transport Road 5.5% Air Cargo 11% Shipping 13% Rail 8.3% Warehousing Organized 20% Value Added Packaging 15% Services Source : NSDC ReportSource : KPMG Report Doing Business in Dynamic Markets: Supply Chain Strategies & Keys to Success 6
  • 7. Supply Chain and Logistics – KeyHubs and Developing Infrastructure Legend GQ and NSEW Expressway Dedicated Freight Corridor Ports Delhi Mumbai Industrial Corridor Source: ILFS Doing Business in Dynamic Markets: Supply Chain Strategies & Keys to Success 7
  • 8. Supply Chain and Logistics – Leading to Investment ActivityYear Name of Company Investor Deal Type Investment (USD Mn)2012 VRL Logistics New Silk Route PE 352012 TVS Logistics KKR, Goldman PE 53 Sachs2012 Snowman International Finance PE/Debt 6.5 Corporation2012 Shree Shubham Tano Capital PE 152011 TNT Express (India) India Equity Partners PE Acquisition (Undisclosed)2011 Continental Warehousing Warbug Pincus PE 1002011 AFL FedEx Strategic Acquisition, estimated USD 70 million Doing Business in Dynamic Markets: Supply Chain Strategies & Keys to Success 8
  • 9. Supply Chain and Logistics –Current Status and Key Issues…1Warehousing Quality of Infrastructure available is poor though it is improving Largely manual block stack operations Increasing land and labor cost beginning to change equation First Free Trade Warehouse Zones now operationalInland Transport Largely based on road, commodities like coal, ore, metal, cement etc move on rail High cost to economy, fuel inefficient, constraints in Infrastructure and also a largely government owned rail operator Private Operators given licenses over the last few years but struggling to make a profitable business model Doing Business in Dynamic Markets: Supply Chain Strategies & Keys to Success 9
  • 10. Supply Chain and Logistics –Current Status and Key Issues…2Ports Congestion at Mumbai Port Development of container terminals at Mumbai and other Major ports running behind schedule A number of minor ports have helped augment capacityAir Cargo Air Cargo volumes continue to grow at between 10% - 15% annually Most large airports moving to automated cargo handling systems to increase throughput Delhi will have a major automated cargo complex funtional next year Doing Business in Dynamic Markets: Supply Chain Strategies & Keys to Success 10
  • 11. Supply Chain and Logistics –Current Status and Key Issues…2General Indian taxation system requires most companies set up a warehouse in every province/state… can lead to upwards of 30 warehouses Inter State Movement can be slow due to cumbersome documentation adding inventory, cost, and lead time FDI in the Retail sector is keenly awaited, expected to bring in large international retailers and help grow the supply chain sector Automotive is a large sector in India – global companies have their sourcing hubs in India, rapid adoption of global best practice E-commerce – Along with Retail, E-commerce has picked up in the last year or two, scalable last mile logistics will be a key enabler for success in this Sector Doing Business in Dynamic Markets: Supply Chain Strategies & Keys to Success 11
  • 12. Agenda for Today’s PresentationItem 1:State of Supply Chain and Logistics Management in India Item 2: Leading Practices adopted by Industry Item 3: Opportunities and Future Trends in the next 3-5 years Doing Business in Dynamic Markets: Supply Chain Strategies & Keys to Success 12
  • 13. Supply Chain Practices – Mumbai Dabbawallas….1Collection and Delivery system oflunch for office goersLunch is picked up from houseand delivered to office by Noon,empty Tiffin is delivered backhome Monthly fee of less than 4 US$Complexity comes from moving200,000 boxes in a 4-5 hourwindow 5,000 men work together, no IT Operate at Six Sigma standards Doing Business in Dynamic Markets: Supply Chain Strategies & Keys to Success 13
  • 14. Supply Chain Practices – Mumbai Dabbawallas….2How does it work Color codes on the box help decipher and communicate… much like barcodes Colors denote an origin area, a starting train station, an ending train station, and handling dabbawalla/building and floor for deliveryA Dabbawalla earns about US$80 a monthCase Study in HBR, featured inForbes, BBC, NYT etc. Doing Business in Dynamic Markets: Supply Chain Strategies & Keys to Success 14
  • 15. Supply Chain Practices – Food & Beverages….1World leading F&B businessComplexity of delivering to morethan 10,000 points of sale inlarge metropolitan areasConstraints due to ready stocksale involving credit to shops,cash collection, and glasscollectionAdditional constraints of oneways, entry restrictions forvehicles, shop open timesHigh seasonal skews Doing Business in Dynamic Markets: Supply Chain Strategies & Keys to Success 15
  • 16. Supply Chain Practices – Food & Beverages….2Deployment of TransportOptimization tools Respect delivery/shop relationships for 95% deliveries Skews balanced out across vehiclesTraining of drivers to supportdeliveries to additional outletsChange in backend IT systemsSetup of national control towerSavings of up to US$ 20 million Supply Chain Innovationestimated over 3 years Project of the Year – SCLC/KPMG Doing Business in Dynamic Markets: Supply Chain Strategies & Keys to Success 16
  • 17. Supply Chain Practices –Consumer Packaged Goods….1Continuous Replenishmentsystems for Trade fulfilment Plant 1 Plant 2 Plant 3Deployed by a number of CPGand F&B companies,pioneered by Unilever India RDC/DepotDeployment of IT solution atDistributor to gain visibilitySetting of stock level by SKU CFA/Warehouse CFA/Warehouseand daily replenishmentLarger Distributors, Smaller Distributor 1 Distributor 3 Distributor 3Warehouses, Lesser Inventory,Higher Fulfillment % Points of Sale Doing Business in Dynamic Markets: Supply Chain Strategies & Keys to Success 17
  • 18. Supply Chain Practices – Third Party Logistics….1Private Equity Invested 3PLSet up of a network of DCs ona hub and spoke model toserve the North India market1 million sq. ft. of modernDistribution space on a pay-as-you-go modelReady to move Infra, worldclass IT systemsPositioned to integrate logisticsspend and move towards apost GST network Doing Business in Dynamic Markets: Supply Chain Strategies & Keys to Success 18
  • 19. Supply Chain Practices – Third Party Logistics….2Main Logistics Centre nearNew DelhiOn the alignment of the DFCCand on a key National Highway22 acre developmentPhase I about 220,000 sq.ft.18,000 pallets positions ofambient storageApprox. 6,000 pallet positionsof temperature controlledstorage Doing Business in Dynamic Markets: Supply Chain Strategies & Keys to Success 19
  • 20. Agenda for Today’s PresentationItem 1:State of Supply Chain and Logistics Management in India Item 2: Leading Practices adopted by Industry Item 3: Opportunities and Future Trends in the next 3-5 years Doing Business in Dynamic Markets: Supply Chain Strategies & Keys to Success 20
  • 21. Opportunities and Future Trends…1Implementation of Goods and Services Tax (GST) GST will create a common national market Number of warehouses will go down, large logistics hubs will emerge Network Design to drive efficiency in the supply chain will be a key requirement Warehouses will have more automation and mechanization to support higher storage and throughput levels Concepts like cross-docks will be used to cut inventory, expedite material flow This will also mean more IT enablement and higher visibility Doing Business in Dynamic Markets: Supply Chain Strategies & Keys to Success 21
  • 22. Opportunities and Future Trends…2India as a Regional Hub As more businesses scale in India or set up manufacturing in India, they could use India as a hub for serving South East Asia, South Asia, and Middle East, even Central Asia Better Air Cargo facilities will enable this More port capacity and FTWZs should also be a strong driver for thisFDI in Retail Government of India is likely to allow foreign investment in retail trade at some point This will mean more investment in farm-to-fork supply chains, food supply chains have tremendous waste currently Doing Business in Dynamic Markets: Supply Chain Strategies & Keys to Success 22
  • 23. Opportunities and Future Trends…3Implications on Logistics Services Higher cost of land and higher labor rates will drive use of cube and automation – will lead to more organized Logistics Parks IT enablement for EDI and visibility will be a must for 3PLs Use of rail will grow and multi-modal capabilities will become important domestically Growth of 3PL and Express sectors will be rapid and we could see several US$ 1 billion large logistics enterprises in India Cold Chain Management and Food Services are a niche area today which will scale rapidly, FDI in retail, the general opportunity for efficiency in food supply chains, and growth of businesses like McDonalds will be key enablers Doing Business in Dynamic Markets: Supply Chain Strategies & Keys to Success 23
  • 24. Opportunities and Future Trends…4Impact on Economy As international gateways gain capacity, domestic infra improves, Indian exports should become more competitive Implementation of GST is expected to add 1.5% additional growth to the economy every year More scale for the industry will also lead to more regulation which will mean better wages and better work conditions for operators at the bottom of the chain Cost of Logistics in India should drop by 1% - 2% over a 5 year period GST and DFCC will be key enablers for this reduction Doing Business in Dynamic Markets: Supply Chain Strategies & Keys to Success 24
  • 25. Questions?Doing Business in Dynamic Markets: Supply Chain Strategies & Keys to Success 25