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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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.
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".
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.
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.
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."
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.
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