Managing Supply Chains in Developing Economy – Destination India

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, ThinkLink

Doing Business in Dynamic Markets: Supply Chain Strategies & Keys to Success
1

Moderator Introduction

SAURABH 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

2

Agenda for Today’s Presentation

Item 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

3

Supply Chain and Logistics – A
Backbone of the Economy
Logistics spend is estimated as between 10% - 13% of annual
GDP
Growth is driven by consumption, manufacturing, retail, e-
commerce, and food (processing and cold chains)
Huge demand and supply gap for the skilled manpower (NSDC
estimates 20 million skilled people needed by 2020)

4

Supply Chain and Logistics – A
Growing Market

Source : KPMG Study

Overall spend is USD 135 billion and growing at 8% - 10% annually
Organized spend is less than 10% but is growing at 25% - 30%
5

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 Report
Source : KPMG Report

6

Supply Chain and Logistics – Key
Hubs and Developing Infrastructure
Legend
GQ and NSEW
Expressway
Dedicated Freight
Corridor
Ports

Delhi Mumbai
Industrial Corridor

Source: ILFS

7

Leading to Investment Activity
Year Name of Company Investor Deal Type Investment (USD Mn)

2012 VRL Logistics New Silk Route PE 35

2012 TVS Logistics KKR, Goldman PE 53
Sachs
2012 Snowman International Finance PE/Debt 6.5
Corporation
2012 Shree Shubham Tano Capital PE 15

2011 TNT Express (India) India Equity Partners PE Acquisition (Undisclosed)

2011 Continental Warehousing Warbug Pincus PE 100

2011 AFL FedEx Strategic Acquisition, estimated USD
70 million

8

Current Status and Key Issues…1
Warehousing
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 operational
Inland 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
9

Ports
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 capacity
Air 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
10

General
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

11



by Industry


12

Supply Chain Practices –
Mumbai Dabbawallas….1
Collection and Delivery system of
lunch for office goers
Lunch is picked up from house
and delivered to office by Noon,
empty Tiffin is delivered back
home
Monthly fee of less than 4 US$
Complexity comes from moving
200,000 boxes in a 4-5 hour
window
5,000 men work together, no IT
Operate at Six Sigma standards

13

Mumbai Dabbawallas….2
How 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 delivery
A Dabbawalla earns about US$
80 a month
Case Study in HBR, featured in
Forbes, BBC, NYT etc.

14

Food & Beverages….1
World leading F&B business
Complexity of delivering to more
than 10,000 points of sale in
large metropolitan areas
Constraints due to ready stock
sale involving credit to shops,
cash collection, and glass
collection
Additional constraints of one
ways, entry restrictions for
vehicles, shop open times
High seasonal skews

15

Food & Beverages….2
Deployment of Transport
Optimization tools
Respect delivery/shop
relationships for 95% deliveries
Skews balanced out across
vehicles
Training of drivers to support
deliveries to additional outlets
Change in backend IT systems
Setup of national control tower
Savings of up to US$ 20 million
Supply Chain Innovation
estimated over 3 years
Project of the Year – SCLC/KPMG
16

Consumer Packaged Goods….1
Continuous Replenishment
systems for Trade fulfilment Plant 1 Plant 2 Plant 3
Deployed by a number of CPG
and F&B companies,
pioneered by Unilever India RDC/Depot
Deployment of IT solution at
Distributor to gain visibility
Setting of stock level by SKU CFA/Warehouse CFA/Warehouse
and daily replenishment
Larger Distributors, Smaller
Distributor 1 Distributor 3 Distributor 3
Warehouses, Lesser Inventory,
Higher Fulfillment %
Points of Sale

17

Third Party Logistics….1
Private Equity Invested 3PL
Set up of a network of DCs on
a hub and spoke model to
serve the North India market
1 million sq. ft. of modern
Distribution space on a pay-as-
you-go model
Ready to move Infra, world
class IT systems
Positioned to integrate logistics
spend and move towards a
post GST network

18

Third Party Logistics….2
Main Logistics Centre near
New Delhi
On the alignment of the DFCC
and on a key National Highway
22 acre development
Phase I about 220,000 sq.ft.
18,000 pallets positions of
ambient storage
Approx. 6,000 pallet positions
of temperature controlled
storage

19



by Industry


20

Opportunities and
Future Trends…1
Implementation 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

21

Opportunities and
Future Trends…2
India 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 this
FDI 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

22

Opportunities and
Future Trends…3
Implications 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
23

Opportunities and
Future Trends…4
Impact 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

24

Questions?

25

Managing Supply Chains in Developing Economy – Destination India

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