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Nicolas Piramals Neeta Sanghitalks about negative mindsets thatplague professionals
Five Bad Habits to Let Go
pg3
Supply chain and finance areevolving best practices together toemerge as winners
The Chains Next Frontier
pg6
Experts feel, in a few years India willcatch up with Chinese manufacturedgoods bandwagon
Tiger on the Dragons Trail
pg4INSIDE
H O W A G I L E I S Y O U R C O M P A N Y ISSUE 14, JULY-SEPTEMBER 2007
The shiny faades of latest shopping
destinations not only symbolize the
India-glory story, but have also become
a cornerstone for the retail boom in
India. While they may have faced a lot of
slack from people for over-development
or lack of a business model in some
places; carefully planned malls are driv-
ing India towards fast becoming a c on-
sumer-retail paradise.
This represents a great opportunity
for smaller vendors. It is also a big chal-
lenge. In order to compete with the
larger players, they would need to learn
and scale up at the same time. They can
do this by creating operational efficien-
cies at all levels and operational models
that complement new businesses. The
age of imitation is long gone. Ones who
keep an open mind and demonstrate
creativity are the ones who are more like-
ly to succeed.
As demonstrated by Koutons, where
they went against history and centralized
their operations with full supply chain
control; in an age where more than one
pundit preached decentralization. They
have even managed to establish a mutu-
ally profitable franchise business with a
keen eye on reverse logistics. All this has
resulted in them coming out trumps.So, it is not only a boon for con-
sumers, but manufacturers too; and a
new opportunity in the form of foreign
export.
As with China, this would help India
to improve the manufacturing base, by
increasing domestic consumption. It
would further help in strengthening its
position as the new manufacturing hub,
depolarizing Chinas position.
The next time you pass a new mall, just
try and think of it as a stepping stone for
India, and not a neighbourhood menace.
PAWAN JAIN
Chairman & MD, Safexpress Pvt Ltd
MESSAGE
MALLS,
ARE GOOD
COUP TO THE TOP SPOT
SAYANTANI KAR
Few of us spare a thought for the
journey that the petite top or the
sassy dress might have described
before it reaches the shop shelves
and catches our eye. Unknown to
us, ready-to-wear clothes reach the
stores after passing through one of the most har-
rying supply chains. Fashion's fickleness, multi-
ple hand-offs and innumerable SKUs of ready-
made garments script a supply chain that is even
more complicated than those of giant industrial
machinery. Here, the latter's size pales besides
sheer numbers and the need for frequent
changes. And, India's vastly uneven land with
poor infrastructure and even greater number of
consumers only compound the challenges of theapparel companies operating here.
That has not deterred apparel brands from
joining the fray to woo the Indian consumer,
who's increasingly becoming a spendthrift. One
that particularly stands out is the "Most Dynamic
Brand of the Year 2006", as adjudged in the
LYCRA Images Fashion Awards - Koutons
Retail India Ltd. It started out as a local apparel
maker, but burst onto the retailing scene with its
menswear brand in 2002, eventually to become
"Value Retailer of the Year 2006", according to
Star Retailer-The Consumer Way. Koutons can
boast of an organised retail presence and a
nationwide brand recall, when both are set to
grow manifolds in the Indian market.
Such a mercurial growth, that has left manya competitor smarting in its wake, is based on
identifying the critical need. H.S.Sidhu,
Executive Vice President, Koutons Retail India
Ltd., elaborates, "We are a nation (India) of a
large number of retailers and producers, most of
whom are not viable or profitable on their own.
What counts in India is how soon the company
gets the critical mass and a large scale counts".
This need for scalability has led Koutons to strike
out on paths less travelled by its peers - right from
the manner in which it opens new stores, its busi-
ness model for franchisees, to the supply chain
architecture that has been put in place. Sidhu
draws attention to China's success. "It is a pow-erhouse today because its enterpreneurs built for
potential demand too, as a result of which they
can now sell at such low costs."
In keeping with this belief, when opening up
new stores, Sidhu and company refuse to stick to
numbers that many would consider safe. Their
blueprint reads backwards. They start with the
number of Koutons Galleries that they would
want to open in the region, followed by the com-
position of the stock, including how much of
goods each might be selling.
Collective wisdom of supply chain practices
followed by the competition doesn't apply to
Koutons either. While others shrink away fromcentrally-controlled models for tackling a busi-
ness that is so unwieldy, Koutons has a supply
Continued on Page 2
From a local apparel
manufacturer tobecoming MostDynamic Brand of theyear 2006, Koutonshas scaled up byexercising total controlover their supply chain;right from manufactur-ing to retailing
D P S Kohli, Chairman, Koutons Retail India Ltd.
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JULY-SEPTEMBER 2007
chain that is helmed by people in the head office,
with a central distribution centre. Sidhu says,
"I (Koutons) am a manufacturer-retailer. We do
everything, right from planning, manufacturing,
advertising, to selling, without the interference of a
middleman. This arms us with the ability to plan
things and then decisively implement them. Without
such control, there is no plan; everything remains a
mere prediction with no ability to decisively imple-
ment plans".
Koutons' control of the entire supply chain starts
right from the supplier. "It has been the result of our
hard work over the last few years," notes Sidhu.
Everything including the weave and the thread are
made as per Kouton's specifications. Suppliers pro-
viding such customised raw material have helped
Koutons consolidate their plans to scale up to match
international players.
Production and the supply chain, too fall in line
with what Sidhu calls the "command economy-style
architecture". Production of the garments is in-
house, except for knitwear, which is outsourced.Even then, Sidhu assures that the price and the
design are well under Koutons' control. "The exclu-
sivity remains our's", he adds.
Whatever gets made is first stocked in the central
distribution centre in Manesar, Gurgaon. This is the
nerve-centre of the inventory supply chain. Every
single delivery to each of the stores all over India is
directly booked from the central warehouse. Such a
taut co-ordination is indeed daunting, but necessary,
if Koutons wants to retain the power over the value
chain. "This is how we can tweak the volumes and
make changes at any of the stages," explains Sidhu.
The customised IT system furnishes the manage-
ment with a daily update of the status of stocks sold
and left behind in each and every franchise store, as
"retail management is all about planning for the nextday, next week", according to Sidhu.
Adopting the franchise route, where no store is
owned by Koutons, might seem contrary to their
overall strategy. However, the consignment model
empowers Koutons further. "In our trade, it is the
leftovers that determine the profitability", Sidhu
notes, referring to the stocks that don't find favour
with the consumer. Koutons has taken the risk upon
itself, instead of asking the franchisee to buy the
goods. It lets Koutons have full control of the stock
in these stores, be it promotions, stock composition,
reverse logistics or clearance sale. With no pressure
on them to buy the stocks that they store, the fran-
chisees are raring to go along with Koutons' plans.Of course, it is not without its attendant evil - man-
aging frequent changes, clearing stocks and dealing
with as many franchises as there are.
But Koutons did not have much of a choice. Sidhu
explains, "The speed at which you want to grow
should dictate the rest of your strategy". He believes
no other strategy would have fuelled their appetite for
more stock and growth. This enables both franchisee
and company to work as a team instead of harbour-
ing conflicting interests. It also solves another dilem-
ma - that of managing personnel in the selling posi-
tions. "At such distances,hierarchy creeps in, and if it
were our own employees in the stores the motivation-
al levels would have taken a hit. But the incentive-
based income and zero risk for a franchise brings
along the right dose of commitment and dynamism",
says Sidhu. Control over the pricing lets it take care
of stock clearance through sale.
Not just scalability, but other insights arising from
understanding their category well have strengthened
their business too. Keeping tabs on consumers'
changing preferences through IT and the ability to
predict trends for the next week, and racing the
stocks to the stores, notwithstanding, Koutons knows
that not everywhere, everyone will take to avant
garde fashion at the same time in their category -
western men's wear. "Only 20 per cent change,"informs Sidhu. There are no sudden skews in con-
sumer preferences. However, the cardinal points are
getting the right size ratio, the price points apart from
the overall fashion that suits each location which they
cater to. While the size ratios will differ in the hills
and the cities, the more expensive garments may trig-
ger a keener demand in small-towns because not
many brands cater to them. Thanks to the supply
chain these can be altered to match any major skews.
With its customised IT systems and agile staff
who work in a relatively flat hierarchy that keeps dis-
putes at bay, monitoring and preparing for the week
ahead is a dynamic daily process.Koutons' pluck has
won it the backing of private equity firms UTI
Ventures and Argonaut, worth Rs 112.6 crore.
Understanding its supply chain means under-standing Koutons' take on the adage of a leader
doing things differently. Sidhu's unwavering insis-
tence that "a company today has to be better in
everything, -- product, cost, and delivery" then
becomes a lot clearer.
The IT system
furnishes the
management
with a daily
update of
stocks soldand left
behind in
every
franchise
store
Retail Management is allabout planning for the nextday, next weekH S Siddhu, Executive Vice President,
Koutons Retail, India
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APRIL-JUNE 2007
Neeta Sanghi, Vice President and
Supply Chain Head, Domestic
Formulation, at Nicholas Piramal
India Limited (NPIL), has been han-
dling supply chains for nearly 20
years now. Under her leadership,
NPIL became the first Indian pharma company to
use planning software such as Factory Planner and
Demand Manager for shop floor scheduling and
sales forecasting activities, respectively.
She has guided both her own and the sales team
to mould the processes around these softwares, so
that NPIL can now boast of the most accurate fore-
casts in the Indian pharma industry.
With experience in all aspects of supply chain,
Sanghi shares with us what she thinks are the five
attitude-traps that supply chain (SC) professionals
fall for and how to avoid them.
I. Stuck in silosSC professionals tend to work in silos, concentrat-
ing only on their area of performance.
Different companies have different departmental
structures. Manufacturing and new-product devel-
opment may be part of the supply chain in one com-
pany, while in another these may be separate.
However, I think unt il the product reaches the sell-
ing point, the path is one large supply chain, encom-
passing all the business units.
Hence, SC professionals should work with other
disciplines as well and be involved with quality-
checks and promotional activities.
It is time they looked at the business as a whole
rather than through the facets of just logistics, sourc-
ing etc. This will allow them to identify new oppor-
tunities and recognise trends.
A good way to solve this is to hold cross-function-
al training will bring about an organic change in the
mindsets. There should also be a business develop-
ment team for all the major functions that will draw
people from various disciplines.
II. Stumped by exceptionsExceptions to the supply chain's routine often
trigger extreme reactions from SC professionals.Some become too system focused (rigid) while oth-
ers remain too ad hoc.
The larger the organisation, the more complex
the processes become, with a growing need to work
in a systematic manner. Some companies become
replenishment-oriented, while others focus on fore-
casts. On the other hand, there are companies where
the SC managers resolve conflict by taking each sit-
uation as it comes, without understanding the caus-
es or discerning a pattern.
Supply chain professionals should intelligently
assess the crisis and then apply a method to the mad-
ness.. Just as rigid systems rob you of flexibility, an
ad hoc approach can retard with its anarchy.
Situations of extraordinary business needs may
crop up anywhere and anytime. For example, morestocks (than usual) may be needed somewhere.
However, supply chains have their lead times where
some stocks are usually in the pipeline.
This is where the professional has to take a call
whether it is an emergency or not. Can it be
ignored? What will be the repercussions on the sup-
ply chain if it is not met? What about the strain on
the supply chain, business loss, people motivation,
rapport between sales and supply chain etc.? It takes
business acumen to come up with the right answers.
Once done, you can work on effecting the changes.
During the Chikungunya outbreak, last year, the
product supply team at NPIL decided to pump in
more drugs to treat it. For this, we had to utilise our
safety stocks even as we revved up production.
III. The fear of automationSupply chains need the efficiency that IT pro-
vides. Yet, move to automate through new software
can often trigger a road-block.
Supply chain teams often resist such changes due
to a sense of a loss of control. The most commonly
asked question, following such measures, is "Whatwill we do now?"
The team leader, then, needs to reassure her
team that IT will only automate the mechanical
work. I tell my teams that it will perform the clock-
work. They will still approve and analyse the results.
At times the installed software is complex. Only
an understanding of the software enable them to
rectify errors. The complexity makes them wonder
if the software will ever be as good as the person is.
By taking care to synchronise the changed
processes and roles with the new software, a compa-
ny will find the amalgamation easier.
IV. Swamped by informationIt is too easy to get swamped with all the data that
flies around. One must seive out information whichis likely to have an impact from the chunks of data
that arrive from various departments, everyday.
This is why one crucial tenet is sharing the right
data with the right people at the right time", which
makes information exchange more meaningful.
For example, the knowledge of fluctuating raw
material prices is important for a pharma supply
chain. The prices of the drug does not fluctuate
daily, but that of the other raw materials does the
price of aluminium used in the foil packaging, for
instance. If the procurement and purchase depart-
ment share this information with those in finance
and sales on time, the latter too can make accurate
plans for the future.
Finance guys only get to see the final transac-
tions. With the awareness of the price trends in the
market, they too will be able to predict prices and
costs. A holistic knowledge will keep them from
declaring bonuses when the stocks are low or the
input prices are about to spiral upwards. Similarly,
the sales teams will know what to expect in the last
mile and wont make baseless estimates.
V. Jumping the trend-wagonThe inability to buck irrelevant trends is a major
drawback among the senior managers. They must
learn to assess the significance of market trends.
Managing supply chains in different sectors
requires an approach specific to that business. Of all
the supply chain headways such as RFID, 4PL, bet-
ter railway corridors, a company should ask, "What
impact will these have on our supply chain?"
For a supply chain in the cement sector, logistics
factors such as railway networks are important,given
that 20 per cent of the input cost is driven by freight.
In contrast, for pharma it is only two per cent. For
us, RFID adoption is a bigger concern because spu-
rious stocks abound
SC professionals often have to work their way upthe organisation, as a result they may not have devel-
oped a business acumen. Just as the absorption of
talent will help remove mind-blocks, nurturing a
business sense amongst SC professionals will also for-
tify a supply chain against these pitfalls.
FIVE BAD HABITS TO LET GO
LEADERS
Neeta Sanghi, heading the supply chain atNicholas Piramal, in a conversation withSayantani Kar, lists five mind-sets she thinkssupply chain professionals should be wary of
Sharing the
right data
with the right
people at the
right timemakes
information
exchange
more
meaningful
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JULY-SEPTEMBER 2007
SAYANTANI KAR
Will India be able to overtake
China in the race for the
worlds top manufacturer?
China's location, its strategic
industrial clusters and its gov-
ernment's economic policy
have engineered its lead in exporting manufactured
goods. It has even swamped the market of the erst-
while giant synonymous with manufactured goods
the United States. To stem the influx and reassure
panic-stricken domestic manufacturers, the US hasresorted to levying anti-dumping laws against China.
Meanwhile, India, despite being regarded as the
more service-oriented and quality-adherent manu-
facturer, continues to trail China's prowess..
It is time that India puts its manufacturing sector
at par with the best in the world. We may well be on
our way with dedicated hubs for manufacturing and
export of auto components, leather, readymade gar-
ments and even small cars, but it is going to be a
long, winding path.
Fast Track asks experts, some of who already
belong to the club of world-class exporters, if there
are any short cuts.
The sweeping generalisation of low labour costs
as the reason for China's success does not hold true.
What counts is that China has, along its coast, entirecities dedicated to churning out single products.
Think of a city acting as a supply chain cluster and
you will realise just how enabling China's coastline
is for mass manufacture and export. (See box for
more details)
S.S.Nabar, Director, Videocon Industries
Limited, one of the major exporters of white goods,
believes China's rise was helped by its neighbours,
Japan and Korea. "The demand stepped up when
these countries witnessed rising labour and opera-
tional costs. With their cities just hours away from
China, they off-shored some tasks while still manu-
facturing critical components that required their
technical wizardry. As the first factories were built,
the component bases in China grew as well, linked
backwards. The production capacity grew exponen-
tially, enabling them to export the excess stocks."
Nabar thinks the lack of demand for a vital com-ponent base is holding India back. "There is not
enough domestic demand for components in, say,
TV manufacturing. Overall demand for components
that go into TV manufacturing is roughly one-fifth
of that in China. The quantities don't justify an
investment. It is cheaper to import the required
equipment with lowered import duties than manu-
facture it here on a large scale. So we end up assem-
bling TVs rather than manufacturing from scratch."
The lack of a proper supply base does not allow
manufacturers the convenience that short distances
and less time provide.
Nabar says manufacturers here take 20 days
longer than their Chinese counterparts to deliver.
This is what makes India envious of China's exten-
sive and all-inclusive component parts industry.Nabar is hopeful that the next three to five years,
which is when 'special economic zones' (SEZs) will
come up with the much-needed infrastructure, will
bring a turnaround.
Videocon has carved out its clusters around its
factories worldwide. Nabar explains, "Take our fac-
tory in Italy, for example. Close to the actual TV-
manufacturing factory, we have units producing
bulkier components such as plastic cabinets, picture
tubes and facilities for spray-painting.."
However, all the electronic parts such as electron-
ic tuners are still sourced from China while glass
shells and mechanical parts such as loudspeakers are
exported from India.
Technology makes it possible to manage the
company's supply chain spanning as many as eight
countries. Nabar and his team use SAP to keep track
of the supply chain, give instructions and tacklematerial requirement.
Gokaldas Exports Limited, the leading exporter
of readymade garments in India, has come up with
an unusual practice. It has made all its suppliers
open up offices in its own head office. Dinesh
Hinduja, Executive Director, Marketing and
Production reasons, "It saves time, leads to healthy
competition among suppliers and, of course, the
'answerability' becomes greater."
He acknowledges that their lead times are longer
than that of China, losing an entire day in import-
ing raw materials from the Far-East. In order to
reduce the current turnaround time of 45 days, he
hopes to start sourcing from closer home, just as
China does from its neighbouring countries.
Having clocked 22 per cent growth in exportsover the last three years, Hinduja attributes it to fac-
tors such as removal of quotas in the textile and gar-
ments industry by the government, their infrastruc-
ture revamp to meet rise in demand, good supply
chain partners and their software programme, cus-
INSIDE OUT
Chinas lead in exporting manufactured goods cant be overtaken in a day. But in a few years, experts feel,
India will have got its act together to do just that
TIGER ON THE DRAGONS TRAIL
The lack of domesticdemand for compo-nents retards a propersupply base...SEZs willhelp bring in the requi-site infrastructureS.S. Nabar, Director, Videocon
Industries Limited
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APRIL-JUNE 2007
THE DRAGONS NESTS
I
n China, there are entire towns and cities that specialise in particular industries or
industry segments. Most of these are industrial production sites with ancillary fac-
tories near the main manufacturing units.
These clusters, with numerous inter-related supply chains, capitalise on four main sup-
ply chain drivers: facilities, transportation, inventory and information. These are also
major factors that create cost-advantage for an entire economy. They can boast of lower-
ing the capital investment cost, the domestic sourcing cost, increasing the economies of
scale and facilitating government incentives.
The benefits are supply chain miracles of tremendous synergies and economies of
scale that is difficult for anyone to beat, without such an extensive infrastructure. Also,
costs of transportation and transaction are reduced, and knowledge sharing is increased.
China has taken the Japanese concept of "just-in-time" (JIT) production one step
further. The Japanese brought in JIT in the eighties to create the leanest of supply
chains. This approach had various components for production arrive from all over the
world just in time for assembly and manufacturing. Although, it did raise the cost of
transportation, it drastically reduced the need for buffer inventory and the lower inven-
tory costs offset the transport expenses.
By converting entire cities into thriving hubs for industries, China has ensured that
not only can the enterprises practise JIT but can also bear meagre costs of transporta-
tion for a lean supply chain.
The clusters line the coastal areas of China. Even though labour is not cheap in
these areas, the companies still retain their cost advantage over manufacturers from
around the world. The logistical set-up reduces costs by 20 per cent of similar products
produced in the United States.
There are two main types of clusters found in the industrial network clusters on the
east coast of China :-
1. Hub-and-spoke: The cluster is dominated by one huge company usually the
large state-owned companies or the joint ventures. The hub company is supported by
a large number of suppliers and service providers. However, this kind of model is main-
ly restricted to the regulated and state-owned capital-intensive enterprises in sectors
such as telecom, energy, steel and chemicals.
2. The second type of clusters is what has turned China into the world's factory.
More prevalent, these mainly consists of private, especially small and medium enter-
prises (SMEs). They contribute well over one half of the nation's gross domestic prod-
uct and, of course, China's exports. Today, there are more than 1,000 supply clusters
for export-products, covering almost every major product category.
The majority of these supply clusters are located in China's most developed regions,
comprising the eastern provinces of Guangdong, Fujian, Zheijiang, Jiangsu, Tianjin,
apart from the metropolis of Shanghai and Beijing.
The characteristics of these supply chains also vary according to different regions.
For example, production clusters in the Jiangsu province mostly consist of units of for-
eign firms from Taiwan. In contrast, the neighbouring Zhejiang province hosts hun-
dreds of production clusters that are formed by domestic private companies.
Each cluster also has its own marketing strategy. The enterprises formed with for-
eign investments market their goods directly to large customers in foreign countries,
while the SMEs usually resort to brick-and-mortar marketplaces to reach out to both
large and small customers.
Examples of clusters:1. About 5,000 manufacturing enterprises in the Zhili township of the Zhejiang
province produce garments exclusively for children.
2. The famous toy cluster spanning the Guangdong Province in China, Macau and
Hong Kong, is the perfect example of the secret behind China's rampant low-cost pro-duction edge.
tomised to Gokaldas' requirements and aligned with
the world fashion exchange, providing supply chain
visibility to the suppliers. The electronic data inter-
face system through which the company can down-
load style details, order sheets and all other details of
buyers' orders has cut down the earlier 90-day lead
time to half of that.
While some industries have managed to establish
India as a serious exporter leather exports from the
Chennai cluster and auto components thanks to
companies such as Sundaram Clayton not every
SME can fund such extensive set-ups either at the
places of manufacture like Videocon, or in their
head office like Gokaldas.
Also, expecting that the manufacturing sector in
India will grow along similar lines as China is fool-
hardy. Saikat Chaudhuri, Assistant Professor of
Management, the Wharton School, University of
Pennsylvania, says it will be difficult to replicate the
way the Chinese government has been able tosupport enterprises there.
Chaudhuri feels encouraging FDIs in the
retail sector in a staggered manner, much
like India's telecom industry's growth over
the last decade,will shore up domestic con-
sumption and increase the volume of manufactured
goods. Foreign players initially can be asked to
improve infrastructure when they
move in.
For the short term, Chaudhuri stresses that
Indian manufacturers should concentrate on skill-
sensitive industries where both design and manufac-
turing of the highest quality (but lesser volumes) are
needed, for example, high-end leather goods.
Hinduja and Nabar too echo the sentiment that
India is ahead of China in terms of perception ofthe quality of the products. Moreover, while
Videocon is helped by anti-dumping duties against
Chinese companies in a few developed countries,
Gokaldas Exports is more flexible than its competi-
tors in accommodating changes in orders.
India can exploit its skilled and English-speaking
workforce till the infrastructure resembles that of
China and other automated countries.
"We need to spruce our manufactured exports in
order to feed over a billion people," Chaudhuri
points out.
Supply chain alone cannot provide that boost; it
has to be accompanied by infrastructure that facili-
tates demand and also fosters an environment for
increased production.
The Japanese gave JIT to the world, the Germans
engineering excellence and the Chinese cheap man-
ufactured goods. It is time Indian companies found
their niche.
By sourcing from closer homewe can match the turn-aroundtimes of Chinese firms.Dinesh Hinduja, Executive Director,
Marketing and Production, Gokaldas
Exports Limited
Encouraging staggered FDIs inthe retail segment will increasethe demand for manufacturedgoodsSaikat Chaudhuri, Assistant Professor of
Management, University of Pennsylvania
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JULY-SEPTEMBER 2007
THE AGENDA
THE CHAINS NEXT FRONTIERFinance and supply chain units have always had decisions to make that affected each
other. Now they are evolving best practices together, where both emerge winnersSAYANTANI KAR
Nothing in a supply chain (SC) comes
for free. At every link, money
changes hands. Supply chain man-
agers, the world over, are now get-
ting ready to tweak this reverse cycle
of supply chain finance (SCF) to find
the next set of benchmarks. Their quest is leading
them to make friends with their finance counter-
parts, even as the latter are realising that SC does
not affect operational competency alone, but also
financial efficiencies.
It is not that the two disciplines were at logger-
heads before, but there seldom was an effort to alignwith each other. This, despite the fact that the sup-
ply chain decisions such as where to open a new
warehouse or which supplier to source material from
are as much based on SC needs as they are on finan-
cial factors such as taxes.
Collaboration between the two units, then, natu-
rally became the next frontier for SC innovation. It
was further pushed by other factors. Global foot-
prints and managing multiple trading partners, such
as logistics providers and global vendors, called for
shifting the focus on SCF. The US and Nordic coun-
tries like Sweden were quick to the party.
Interestingly, Indian companies, such as Shoppers'
Stop, have not trailed behind either.
It was three years back when the two teams at
Shoppers Stop began to work as a single unit forsupply chain transactions. Earlier, while the supply
chain team negotiated with the suppliers, projected
margins and sourced globally, the finance team had
to work out the monetary roadmap that included
payments, tax calculations etc. Devadas Nair, Head
of Logistics and Supply Chain, Shoppers' Stop, says,
"There were too many surprises arising from deci-
sions taken independently by the two groups, which
hampered operations at both ends." A lot was to be
gained if only they joined forces.
Now they work together at each level in the sup-
ply chain. It starts right from registering a vendor.
Apart from verifying the terms and conditions such
as landed costs in the contract, the finance team
chips in with its recommendations while the SC unit
prepares the business model and the margin
between the cost and the MRP. Together, they
finalise cash discounts and payment terms with the
suppliers. Knowing each others capabilities, both
the units commit payment cycles which they canjointly fulfill, strengthening the trust their vendors
have in them.
This has cemented Shoppers Stops relations
with its 800-odd vendors. Not only do they oblige
with discounts and longer credit periods but also tag
their own products on behalf of the retail chain, sav-
ing time and cost.
Vendor interaction is only one of the stages at
which information is shared by the two departments.
There are weekly meetings which see the teams dis-
cussing budget deviations, margins achieved and
predictions for cost escalation.
The daily co-ordination is mainly automated,
making for error-free exchange of information. Nair
says, "Details such as number of SKUs, the cost of
an order, the landed costs including freight and salestax automatically get uploaded from our ERP sys-
tems on to Oracle Finance. The finance team can
trace the status of each and every SKU." What
plagues other organisations a common way of track-
ing transactions is easily resolved by this automated
audit trail. An annual reconciliation with suppliers
tops the collaborative efforts. This should receive a
further boost when the planned electronic payments
system is rolled out.
This partnership also makes global sourcing a lot
easier because "the finance team takes care of all the
import licenses, insurance etc.," informs Nair.
The process of alignment did come with its own
set of challenges. It took successive meetings to con-
vince the teams of the benefits of working together.
With time, the supply chain engineers came to think
like businessmen and the accountants got a hang of
supply chain best practices. Nair is happy with how
they have now become "an open book, discussing
everything before implementing".The finance and the supply chain departments
can, thus, jointly work out tax advantages and risks,
win suppliers, predict trends affecting the supply
chain and the business, prevent goods from being
stalled along the supply chain and keep tabs on sup-
pliers' financial health.
These practises have enabled companies to hold
fewer inventories, free more working capital, avoid
custom delays and provide suppliers with more pre-
dictable payments, building strong commercially-
optimised supplier relations.
A report by the Aberdeen Group notes how bet-
ter visibility for both the departments leads to
greater cash and credit flexibilities. This is becasue
of a better understanding amongst all the stake-
holders. Nair sums it up: "We don't have unpleasantsurprises, anymore."
SCF is clearly where the next set of supply chain
best practices will come from. It takes SC innovation
beyond the realm of a single discipline, to give a
company its competitive advantage.
Supply chain
decisions are
also based on
financial
factors.Supply chain
finance,
then, is
where the
next best
practices will
come from
8/2/2019 July Sep 2007
7/8
ANKITA SHARMA
Staying ahead of compe-
tition is imperative to the
success of a business.
Whether you are devis-
ing new business strate-
gies, entering new mar-
kets or exploring new technology, an
understanding of your competitor's
moves can make a ton of difference to
your profits.
Competitive Intelligence (CI) or
decision-making based on understand-
ing the competitive environment is a
necessary and proven ethical business
discipline that can give your business
the edge.
When applied to the supply chain,
CI is the art of acquiring, presenting,
analysing and refining knowledge
about rival supply chains and then
reaching actionable conclusions about
improving your own, according to the
Society for Competitive Intelligence
Professionals.
This will let you know if you are
competing well or are in for a rude
shock.
Further, it helps you improve
your supply chain and heighten
barriers to competitive
inroads. Key areas that
should be investigated
include lead time, vendor
response time and accuracy
of delivery information.
Michael Porter, in his book,
Competitive Strategy, identi-
fies threats from new
entrants, existing rivals,
buyers negotiating for a
lower price, suppliers negoti-
ating for a higher price and
substitute products with similar
or disruptive solutions. With CI,
identification of threats
becomes easier and you canleverage the knowledge you
gather into successful strate-
gies and operation tactics.
Ultimately, you gain competi-
tive advantage because CI makes
your business more flexible to adapt
to changes in the market conditions.
So, if you are convinced about the
old saying: "keep your friends close,
and your enemies closer", the follow-
ing steps will help you analyse your
competitors' supply chains better.
Acquiring the informationBefore you start looking for com-
petitive information, figure out what
kind of information is relevant to
you and chase that. Will it be useful
to know if your competitors' supply
chain is more cost efficient or deliv-
er faster?
Once you know what you are look-
ing for, gathering information is the
next step, and also the most important.
Given that companies leave a paper
trail as they go about doing their busi-
ness, primary data can be gathered
straight from sources such as annual
reports, stockholder communications,
financial press releases, speeches by
top management and even patents.
Next, data from secondary sources,
especially the internet, comes into
play. Newspapers, business magazines,
analysts, expert opinion and blogs also
help indicate the competitors' position.
Single out key competitorsand vulnerabilities
Prioritise which competitors you
need to focus on - direct or indirect
ones. The first group comprises firms
that offer similar services and solutions
for the same kind of problems.
Indirect competitors are difficult to
identify - it could be a start-up slowly
eating into your market share or a
company ushering in new technology.
Look out for choke points in the
competitor's supply chain, delivery time,
product shelf-life and sophistication of
the supply chain software they use.
Deducing from an incom-plete picture
A complete picture will never be
there as CI will vary with the avail-
able information, and decisions have
to be skilfully made from what can
be acquired. Observing erratic press
releases, delivery failures and slower
turnaround of special orders can
also point out the competitors vul-
nerabilities.
Conducting the AnalysisA number of analytical tools and
models are available to execute the
strategies based on CI. Tools such as
Balanced Scorecard are a good exam-
ple of a proven and helpful analytical
tool. A simple SWOT (strengths,
weaknesses, opportunities, and threats)
analysis also helps. A tool will help you
reach your conclusions quicker.
CI offers a successful strategy based
on your understanding of the com-
petitor's soul its market assumptions,
decision-making process, risk analysis
and potentially irrational reactions to
sudden changes. A new CEO, a merg-
er, a public relations catastrophe, law-
suits, unexpected write-offs of plants
and equipment, or even a rumour can
shake up the industry and help
you make your moves.
One cannot predict the
future, but one can evalu-
ate the past and analyse
trends to forecast the
future. CI's real contribu-
tion is in equipping man-
agers with the knowledge to
learn what the competitor
will do and not what the
competitor has already done.
In India CI has existed as a
function within the market
research department, but
now it has started playing a
vital role and has gained
prominence. Companies
with CI programs havebetter knowledge of
their markets, better
cross-functional relation-
ship between their business
units and a greater ability to
develop proactive competitive
strategies.
7
APRIL-JUNE 2007
Competitive Intelligence makes you aware of your competitive environment and reveals how you compare with
the rest. Result: your business can now truly brace for the future
KEEPING ENEMIES CLOSER
Actually, both.
When Hogwarts Express started its
eventful and historic journey to thou-
sands of Indian homes for the last time,it had a mammoth target. It was to
reach out simultaneously to 300 loca-
tions on Potter-Day after covering 1
million kms across the vast Indian geog-
raphy. More than some magicking was
required to achieve this almost unat-
tainable feat.
The first part saw Hogwarts Expresstransform into Safexpress. The cargo of
2.5 Lakh books of Harry Potter & the
Deathly Hallows was then broken into
300 smaller consignments. These were
loaded into Safexpress weatherproof,
Global Positioning System-enabled
vehicles which travelled across India at
break-neck speeds.Right at the stroke of midnight in
London, Potter-magic unfolded in India
as well. At 5.30 am on the morning of
July 21st, the books hit the bookshelves
at 300 locations simultaneously.
The project was executed at par, or
better than international standards,
despite the distribution complexitiesand a total distance of 1 million kms in
India. Even the distribution in Potter-
country, UK, could not claim such a
blemish-free record.
Mr. Pawan Jain, CMD of Safexpress,
says, We have been managing the
supply chain of Harry Potter books
for many years now. This coupledwith our supply chain expertise of man-
aging 98.78% on-time deliveries has
helped us in achieving this almost-
impossible feat.
PRIORITY
CONCEPT
HARRY POTTER CAME IN HOGWARTS EXPRESS OR SAFEXPRESS?
8/2/2019 July Sep 2007
8/8
SAYANTANI KAR
The crusade for the cricket
World Cup just ended in
the Caribbean Islands.
Most of us were catching
the Calypso carnival on
TV, for whatever it was
worth, after Team India's early exit.Be
it the wicket-keeper's pep-talk near the
stumps or a bird's eye view of the sta-
dium, the cameras were bringing
home the excitement from every pos-
sible angle.
For all this game play on the emer-
ald fields, before each match lies the
mammoth task of making the stadium
ready for a live telecast. In less than
half a day, the cameras, microphones
and other video production equipment
have to be installed in and around the
field, connected to a control room,
choc-a-bloc with audio-video gadgets,
somewhere in the gallery.
When done,the equipment, weigh-
ing around 13 tonnes, has to be port-
ed around cities, often the very next
day. It doesnt help that most of the
fragile cameras, mixers and recording
devices, hired for crores of rupees,
demand a gloved handling.
This is one jittery challenge that
sends the usual tenets of logistics for a
six. Yet, this is what the production
team at Nimbus Communications
Limited, which is covering cricket
matches, following a contract with the
Board of Control for Cricket in India,
have to do for the next four years.
There is no guaranteed routine of
the regular workplace. Anything can
go wrong from equipment malfunc-
tion in the stadium to delays on the
road with the match-date drawing
near like a ticking time-bomb. A crick-
et match, after all, won't wait for the
TV guys.
Taljit Nirankari, Production
Controller, Nimbus Communications
Limited, lets us in on the madness.
For a cricket match, the crew has to
race ahead of the travelling playersand are the last ones to leave the
grounds after the match is over, even
when the matches are scheduled back
to back in a series. (And you thought
only the players kept a hectic routine?)
The IL-76 Nimbus uses to cover
international cricket makes for a fast
air-transport. It not only seats the
entire team but all the unwieldy and
fragile equipment as well.
Yet, flying is not always breezy
thanks to venues with airports
unequipped to handle such a large
cargo plane. For a match in Rajkot, for
example, the plane lands at
Ahmedabad. The crew and the equip-ment then have to hit the road to reach
the spot.
Road conditions, which necessitate
special travel cases and shock-absorb-
ing container trucks, are not the only
speed-breakers. Road taxes and inter-
state permissions are major chores that
a 3PL partner helps them out with.
They literally take a huge load off the
production team by arranging permis-
sions and clearing taxes in time.
Except for the inaugural matches,
the team doesnt get much time to
install their paraphernalia. All they
have is a day to wire a stadium and set
up the control room to beam thematch to our drawing rooms.
Before setting shop, a quick check
tells them how far apart are the control
room, the commentary box and the
third and fourth umpire's chambers,
the weather conditions etc. which gets
them started. A huge stadium such as
the Eden Gardens in Kolkata, will
need kilometres of wire and rain
clouds on the horizon would mean
extra covers to prevent water seeping
into the cable joints.
As many as 25 cameras, right from
the ones at the stumps to the highest
point in the stadium are installed to
bring home every detail. The monitorsand the video production equipment
follow suit.
The testing of the installed equip-
ment can turn out to be a cliff-hanger
precursor to the match. The check for
inputs from the cameras precede the
"satellite check" that tests the
uplinking to the satellite.
If the rigging had started at around
eight in the morning, the satellite
check can be done by three in the
afternoon."With less than half a day to
go, we might realise that we have lost
the link with the channel or there's no
feed from one of the cameras," says
Nirankari. But there is no room for
panic when a job is at hand. In-house
guarantee engineers are the trump-
cards of the team as there is no tech-
nical snag that these wiards can't diag-
nose and fix," according to Nirankari.
The eclectic team also includes two
people from the equipment vendor for
rigging and de-rigging, technicians for
graphics, sound and video mixing,
commentators and the director.
Ideally, the team needs to reach the
stadium a day before the match to fin-
ish the rigging and a half day to de-rig
after the match before getting on the
road for the next venue.
However, every day does not turn
out to be an ideal one. Day and night
matches are often nail-biters for the
telecaster team because the time to de-
rig and rush to the next city gets meas-
ured in minutes.
One such edgy situation happened
during the recent Asia Cup for
women, which had two matches
scheduled for Delhi and Jaipur. Only
this time, the two were slated on con-
secutive days," recalls Nirankari.
The first match, held in Delhi, got
over only by 6 pm and left them with
just two hours for de-rigging and an
overnight journey ahead. "We reached
Jaipur by road in the wee hours, head-
ed straight for the stadium at 2 am,
and were all-set by 9 am, right before
the match started", informs Nirankari.
The crew, of course, had to go without
sleep for over a day.
At times, it is sheer luck that keeps
them in-step with the cricket teams. "A
match in Vizag [Vishakhapatnam]
had gotten us worried because of the
place's fickle weather and the conse-
quent landing problems." A miracu-
lous clear weather saved them from
another 800 kms of road journey from
Hyderabad to Vizag.
It is as much about foresight and
planning, as it is about ingenuity and
luck. The safeguards such as advance
schedules, leeway of a couple of days
for travel and back-ups of basic equip-ment may well get dashed since every
match can pose a different challenge,
much like the sport itself.
Nirankari reassures that even with
a few equipments out of action, the
show can still go on without the audi-
ence noticing anything amiss, thanks
to the expertise of the specialists on-
board. Their only respite from the
unrelenting schedulesthe monsoon
months when cricket is not played.
Otherwise, their relentless focus
keeps the process, with such a low
margin of error, from turning into
a disaster.
8
JULY-SEPTEMBER 2007
The run-up to a cricket-match telecast is a nail-biter. The gump-
tion of a few people brings the footage to your living rooms
RIDING THE CRICKETJUGGERNAUT
OFF-BEAT
Fast Track is a quarterly magazine on management, with a special emphasis on supply-chain issues, brought to you by Safexpress Private Ltd. The
magazine is committed to promoting business agility. Fast Track reaches out to CEOs, finance heads and logistics heads of companies. We would be
happy to take on-board issues related to supply-chain that you might be facing. A MINDWORKS MEDIA PRODUCT FOR SAFEXPRESS PVT. [email protected]
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