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Smart Chains, Smarter Gains

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DQI Bureau
New Update

Imagine buying toiletries for about 40% less. And not because of a budget

sop. You have been paying extra bucks all these days for costs incurred in

reaching the product to you. Studies have shown that excluding taxes, companies

spend between 17% and 50% of the labeled price in moving goods from the

manufacturing plant to shop shelves. The cost includes intermediary margins,

logistics and that of holding inventory. While margins are an incentive to the

seller, the other two are system inefficiencies and can be controlled,

optimized, and reduced.

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“We realized the importance of having a core system and have been evolving it since ’89. Had we used any standard software at that time, the system would not have lasted very long...”

Malcolm Monteiro



senior V-P (sales), Blue Dart

Apply the above to the Rs 50,000 crore Indian FMCG sector alone with a supply

chain of 30,000 odd- distributors, thousands of clearing and forwarding agents,

wholesalers, and 12 million retailers–the results would turn out to be

amazing.

Here we are talking of prudent supply chain management and logistical

excellence enabled by a slew of information technology solutions. And the gains

are not only in cost savings but improved competitiveness, definitive customer

service levels and overall gain in profitability for organizations.

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Managing logistics is a nightmarish situation and adds costs and processes

that drain resources. The logistics chain extends from supplier management at

the procuring-end to delivery to the end customer. The members of this chain

include surface, sea, and air transport providers; air express/couriers, custom

brokerage houses, warehouse specialists, and 3PLs (third party logistics

providers) who handle all of it. Beyond this, the logistics chain is pressed

into service for handling after-sales service and repairs. The global trend is

to outsource parts or whole of logistics management to specialists. These

specialists rely heavily on IT to deliver value to customers.

Monitoring the flow



Says Santosh Kumar, consultant, Logistics, Gati Intellect Systems,

"Logistics professionals have an array of digital logistics weapons that

can be strategically deployed to unlock significant value and customer-focused

logistics systems that build a long-term competitive advantage. In fact,

logistics without IT as an integral part of it, is unthinkable. The flow of

goods is as important as flow of information."

Technology in logistics has been advancing in three phases. The first phase

is to monitor the logistics chain. Herein, technology helps companies monitor

orders, inventory and shipments with all parties. Since logistics is a business

process at the most basic level, IT is used to automate the process to gain

visibility. This is primarily done through an enterprise-wide software developed

in-house or procured third-party. Blue Dart, the Rs 256 crore integrated air

express carrier and Fedex service partner uses an in-house developed package

called as COSMAT II (Computerized online system for monitoring and tracking).

Says Malcolm Monteiro, senior VP- Sales and Systems, Blue Dart, "We

realized the importance of having a core system and have been evolving it since

1989. The system would not have lasted had we used any standard software at that

time".

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Gati, a pioneering Indian multimodal express cargo company, too uses an

in-house system that links various processes in the logistics chain. Some of the

IT applications that Gati has used over the past few years are trace-and trace

tools, vehicle monitoring systems, and web-enabled access to various application

systems. Similarly, Lemuir Group, the Indian arm of the AEI-Danzas, the $8 B

international logistics company also uses an in-house developed software that

links up order processing, warehousing, transportation and distribution with

full visibility over the process and automated document processing throughout.

Says S L Chopda, GM- Systems and Information Management, Lemuir Group, "Our

enterprise software has helped us to be flexible but yet adhere to standards. It

has also helped us to react quickly to external requirements". Adds Chopda,

"When the customs department changed the entire format for submission, we

could adapt to the new format within hours. This would not have been possible

without a sound backbone information system".

Geo-Logistics, another global leader with a presence in India, uses its

internal technology backbone called GeoVista. GeoVista runs the entire global

multi-modal shipment database consisting of information derived from our global

tracking, warehouse management and purchase order management applications. It

helps from system tracking and exception reporting to complex custom supply

chain management and optimization programs. That is, triggers have been built

into the system so that when certain planned events occur or do not occur, the

appropriate parties are alerted and workflow activity occurs to resolve those

events. All such core applications being enterprise-wide, almost all of the

logistics companies have good connectivity infrastructure in terms of wide area

network, connectivity with international carriers, and strong internal messaging

systems.

The second phase of maturing technology adoption focuses on management

capabilities in which the technology must provide the data and intelligence

gathering tools necessary to manage the flow of goods and establish business

rules to manage exceptions. More evolved technology backbones like GeoVista are

capable of handling this level of sophistication.

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The final phase of technology in logistics is that of optimization wherein

discrete parts of the chain as well as the entire chain is mathematically

optimized to suggest actions which will lead to achievement of preset objectives

within constraints. Specialized SCM tools like i2 and Manugistics help in

achieving this.

The big brother syndrome



The use of IT in the logistics industry is still immature because many of

the players who make up the numbers are from the trucking and transportation

background. This represents 80% of the logistics industry in the country and is

highly fragmented and unstructured. The rest comprises the organized part of the

logistics industry with players who have embraced IT in the past decade.

Implementing technology solutions in the logistics industry is fraught with

challenges. For one, a centralized IT architecture extended to multiple

locations is quite investment heavy. Secondly, though logistics-specific

packaged software is available globally, the use of the same in India is largely

untried because of issues in localization according to the Indian legal

framework and topography. Developing software in-house would take its own time

and require domain expertise.

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As a way out, logistics companies themselves have extended their in-house IT

expertise in this area to other companies. Gati Intellect Systems Ltd. (GISL)

and AFL Infotech are examples. GISL is the IT arm of Gati and helps corporates

manage their supply chains. The company also offers products in this area–iEM

Warehouse Manager, iEM Distribution Manager, Actinic eStore, and Commercial

Service Provider.

The Internet has helped the logistics industry by lowering communication

cost, create VPNs, intranets, and making applications available at multiple

locations through web-enablement. It has simplified the technical complexity of

spreading IT across the multiple-entity logistics chain. Also, the move towards

well-defined open standards like Electronic Data Interchange (EDI) and

eXtensible Markup Language (XML) has helped disparate systems to exchange

information seamlessly. Open source software is another force to reckon with.

Says Salim Affendi, FND Service Solutions and Systems, "Low-cost solutions

are a must. The rise of open source software has made a huge economic impact in

the usage of IT. Linux is fast, secure, and low-cost. MySQL- the database engine

again is low-cost since there are no license fees involved, unlike commercial

databases. Besides, it ensures high-speed delivery to a portal like Yahoo

Finance. Perl, the programming language can be used to read data from the

database and create a human readable web page from it". An increase in

available bandwidth makes it possible to send massive amounts of data in a short

time thereby allowing the synchronizing of databases.

Adds Affendi, "Software will enable the making informed decisions on an

individual load and network-wide basis. Information is analyzed and delivered in

a fraction of the time taken to accomplish this manually. This in turn, delivers

powerful, strategic line-haul load and network planning."

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LogisTech



Blue Dart, AFL, Gati, and DHL have used the Web for processes like tracking,

data download, order booking and processing. Says Monteiro of Blue Dart,

"All we had to do was to build a front-end system because the back-end was

already in place". Blue Dart started offering web-based services to its

clients in 1996. The services were re-launched in July 2000 with real-time

updates, full interactivity, and security.

There are several examples of the use of technology in this segment. Blue

Dart has partnered with high-traffic e-commerce sites to fulfill their delivery

chain. For example, when someone orders for CDs from FabMart and logs into the

site to check the status of the transaction, he is directly connected to the

Blue Dart database. Says Monteiro, "This is achieved because Blue Dart has

shared its Application Program Interface (APIs) called as ShopTrack which

connects its database directly to FabMart’s system".

Similarly, APIs are also shared with other B2B customers like call centers to

track the exact status of a product in transit. The buyer doesn’t need to call

up Blue Dart; he can get his delivery status through the call center of the

company he has bought the product from. Regular customers of Blue Dart are also

given a proprietary solution called as ShipDart, which is installed on the

customer premises and enables user control over entire shipping and tracking

processes. And for cellular phone users, status information is delivered via SMS

or email. In case you have a WAP-enabled phone, you can send back the exact

status via email or SMS by entering your waybill number.

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AFL effectively uses a Personal Digital Assistant (PDA) —based airway bill

scanning and data capturing system for pick-up and delivery developed by Mumbai-based

Lauren Software. This has reduced manual data entry resulting in cutting down

customer response time and improved customer services. The location master is

downloaded from the desktop to a PDA integrated with a barcode scanner every

day. This contains the setup of the route with relevant customer information for

delivery. For the pick-up process, the airway bill is scanned and the customer’s

signature is captured on the PDA. The airway bill is scanned at each stage-

handover, arrival, and final delivery. All this is then downloaded on to the

desktop, which synchronizes with the enterprise system. Similarly, another

leading air express company uses the PDA to maintain and monitor sales

processes.

Global positioning systems help pinpoint the location of a moving target and

then with the help of a GSM network, transmit the information to the location

required.

But it is quite a costly proposition and has not found any takers in the

logistics industry in India. Again bar code technology, though not expensive and

despite its advantages, is still to be used widely by the logistics industry.

Barcodes help in inventory control, simplify warehousing and streamlining

movements of material and information. RF (radio frequency) Tags beam radio

waves containing data to a reader connected to a host computer system. It can be

used in tracking devices and warehousing applications. Advances in voice

recognition technologies will help logistics companies capture and deliver data

through voice.

So how will all this make your shampoo cheaper by 40%? By making the supply

chain more effective and efficient, reducing average inventory levels, lowering

transport costs, lowering warehousing costs- among other ways.

It is no surprise that some of the top FMCG companies in India like Nestle,

P&G, Godrej Consumer Products and Hindustan Lever, have teamed up with

logistics companies like TCIL and Concor in an initiative called as Efficient

Customer Response (ECR) with a one-point mission to clean up India’s supply

chain. If a mature banking and financial system riding on technology is a sign

of maturity in a capital market economy, a robust IT-driven logistics industry

signifies maturity in global trade.

Easwaradas Satyan in Mumbai

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