Category Archives: India

Is Next-Day Delivery About To Become A Reality in India?

A recent article over on Knowledge @ Wharton, which asked whether or not “India’s Logistics Industry Could Deliver a Better Model for Transporting Goods”, noted that G.R. Gopinath, who revolutionized air travel in India with Air Deccan, is starting Deccan 360 with the goal of connecting 75 cities in India to each other on a 24-hour delivery schedule within the next year. That’s an ambitious goal in a country where only 1% of the population travelled by air up until 2003, and where air travel is still restricted to about 5% of the population.

It’s also an ambitious goal considering that while you can often get a part from any major city in the world to Mumbai in 24 hours, it will usually take at least 72 additional hours to get it to its final destination. The article notes how it once took seven days to move a spare engine from New Delhi to Kolkata (which is approximately 800 miles or 1300 kilometres away) and that it was cheaper to transport it via Singapore (which increased the transport distance to at least 4367 miles or 7028 km) than to transport it within India at logistics costs that are among, if not, the world’s highest. (Logistics costs in India account for about 13% of India’s GDP.) Talk about taking a ride on the crazy train.

Right now, only Blue Dart, owned by DHL, is the only logistics player in India with dedicated cargo aircraft — all 7 of them, dedicated to a whole three routes! So what Deccan 360 is proposing is revolutionary in scope. Starting with three Airbus aircraft and a network of 30 franchisees, Deccan will start offering next-day connectivity to 30 cities next month. Over the next year, it will add two more Airbuses and four ATR aircraft and expand to 75 cities. It will do this by way of a hub-and-spoke model run out of a 100-acre state-of-the-art cargo handling facility in Nagpur in central India. And if it works, express will no longer be a fantasy in India.

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Five Keys to Supply Chain Success in India

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I enjoyed the recent short article on “five keys to supply chain success in India” in Industry Week. Not only was it not another article about China, but it tackled the issue of manufacturing supply chains in India — instead of the usual focus on service opportunities (Call Center, IT, BPO, etc. outsourcing).

Noting that India’s economy, unlike many other economies, is continuing to expand (with 6.8% growth in 2008 and a projected growth of 5.5% in 2009), the article notes that there is significant opportunity due to increased demand — provided, of course, you can make your operations efficient. The article offered the following five strategies:

  • Ensure a clear understanding of local principles, customs and barriers.
    Knowing the limitations of India’s transportation infrastructure is critical in adjusting distribution strategies and having the flexibility to adapt to the varying restrictions and needs that exist within India.
  • Establish constant communication.
    India’s communications infrastructure is still inadequate for [most] global companies doing business there. As a result, many large manufacturing companies are allowing their partners, vendors and dealers to have direct access to their internal supply chain management systems in order to increase visibility.
  • Develop comprehensive procedures and processes.
    By synchronizing the multiple dynamics of demand planning and production planning, companies will have the ability to reduce over-stocks and stock-out situations.
  • Ensure the quality of input information.
    Companies need to invest in collaboration, planning, forecasting and replenishment (CPFR) and sales & operations planning (S&OP) solutions, which provide a link between disparate information and allow companies to create plans based on actual demand data.
  • Identify and integrate the right professionals and insist on teamwork.
    The scarcity of a skilled, knowledgeable and committed workforce is a challenge facing Indian companies.

A Tale of Murder and Intrigue in India

The Murder: I just read a short piece in Supply Chain Digest that noted that Lalit Kishore Choudhary, the India CEO of an Italian transmission company, was murdered by an angry mob after dozens of angry laid-off workers pummelled him during a meeting to discuss possible re-instatement.

The Intrigue: Searching for further information, I found this story in Industry Week which quoted India’s labor minister, who declined to criticize the attack, who said it should serve as a warning for management, workers should be dealt with compassion, and the workers should not be pushed so hard that they resort to whatever happened.

WTH?!? As far as I can tell, it sounds like the labor minister is saying that if you get fired for violence, and the discussions to reinstate you don’t go your way, that you can form a mob and kill your former boss. What?!?! You have the right to demand better pay and employment guarantees, but in today’s economy, you can’t expect the latter. If you don’t get what you want, you have the right to leave, and if you get laid off, you often have the right to severance. But you don’t have the right to resort to violence, and you definitely don’t have the right to kill your boss — who may not even have any say in the matter. Even the CEO has to answer to a self-serving Board of Directors!

According to the Industry Week article, a domestic industry body said the incident would hurt India’s international business image. Furthermore, the Federation of Indian Chambers of Commerce and Industry has said that such a heinous act is bound to sully India’s image among overseas investors and deserves our utmost condemnation. All I have to say is that I nominate that as industry statement of the year. If the reporting is accurate, the labor minister effectively said it’s okay to mob and kill your boss if you get fired for violence. Who’s going to want to open an operation in India in that economic climate?

Algorhythm and the Optimization Rhythm in India

Recently, I had the pleasure to have a couple of conversations with Ajit Singh, the Founder and Director of Algorhythm, a company in Pune, India that has significant expertise in Optimization and Supply Chain Modeling. The have their own optimization engine, a set of front-ends for different types of supply chain models that can be used by anyone with modeling skills, and significant experience in helping large global multi-nationals with significant supply chain network design and optimization problems. Basically, they’re India’s CombineNet, but with a slight distinction – every model they build, including custom models, can be executed and modified completely by the client through an extension of their easy-to-use windows-based front end – you are not tied to their services. In comparison, although CombineNet has done a great job over the past few years of actually building stand-alone products and interfaces, it’s still often the case that custom models are only available through their services model.

Algorhythm has the capabilities to attack both strategic and tactical supply chain problems from an optimization and simulation perspective. They have sophisticated models for strategic planning that include inventory optimization, distribution network design, manufacturing network design and for tactical execution that include production planning, logistics planning, and supply network execution.

They also have specialized solutions for oil, steel, and packaging as well as having a considerable amount of experience in creating models for manufacturers and distributors. Major clients include Unilever (Hindustan Unilever, Unilever Plc. UK, and Unilever China), Thyssen Krupp, Hindustan Petroleum, and Parle Products among dozens of others. Their manufacturing and distribution network design models often save their clients 3-5%. Remember that we’re talking production models here – not sourcing models, so this is actually quite good. In terms of efficiency, their production planning and scheduling models often halve throughput time and inventory carrying requirements – which is also very good. Furthermore, we’re not talking small models here – Parle, for example, ships 50K trucks per year per SKU from hundreds of factories to thousands of wholesalers.

It’s quite easy to build a model in their products, which they call Prorhythm (for production-planning based models), Netrhythm (for network-planning based models), and Logrhythm (for logistics planning models), and which run on top of their Xtra Sensory optimization engine. They’ve thought through what the model is, what the core elements are that make it up are, what the costs are, and what measures you might want to optimize. Building a model is simply defining all the relevant entities (which are factories, lines, outputs, inputs, etc. in production planning), the associated costs (material, labor, overhead, etc.), the measure(s) you want to optimize (cost, throughput, etc.) and their priority / weighting if multiple, and the constraints. It assumes all relationships between related entities are valid unless you specify them as invalid (and permits groupings for easy constraint definition). It also groups constraints in a “constraint file” so you can easily run the same model against different constraint sets. Basically, it’s built to build models the way the doctor would build it.

Since there is no “one” optimal solution when you’re optimizing against multiple objectives, as it’s almost always impossible to precisely normalize each measure to a uniformly distributed 0-1 interval that can then be weighted according to the weights you want, they also support simulation. You can tell the optimizer to construct a set number of models equally distributed around the desired optimization point and it will automatically create and run all of the variants which you can then compare to see how slight changes impact solutions and goals.

It’s a great offering, and the people are quite knowledgeable. If you have a tough optimization problem, be sure to check them out. They might surprise you.

India has Problems Too

With all the negative attention that China has been getting lately, I only thought it fair to point out that before you think of jumping ship to one of its closest neighbors, India, it also has its share of problems.

According to “Speeding Up, but still not ahead” in the Business Standard, despite their increasing presence in the global market, the Indian IT firms still have a way to go before they can play with the global giants.

The reasons for this are the rupee appreciation (it’s worth whole cents now!), wage inflation (since all of the IT outsourcing has increased the size, and wealth, of the middle class), high attrition rates (still not enough skilled talent to meet demand), and skill shortages (an estimated shortage of almost 500,000 qualified employees by 2009).

Then there’s Is “India Too Big to Fail?” in Knowledge @ Wharton, which reviews Edward Luce’s In Spite of the Gods: The Strange Rise of Modern India which notes that India is holding itself back because of an unwillingness and almost inability to take decisive collective action.

This is partly due to the fact that it seems that India has given a higher priority to stability than it has to efficiency. But likely more due to the fact that India has a deeply entrenched culture of pluralism. Whereas China has one script, one official language, and very little religious division, India has 18 official languages, several different scripts, and deep religious and caste divisions. Makes it very hard to even contemplate agreement, let alone reach one.

And there’s “The Dark Side of the Moon: The Downside to India’s Economic Rise” which reviews Niranjan Rajadhyaksha’s book The Rise of India. The article starts off by pointing out, as highlighted in the book, five major issues that India has to deal with if it wants to become a true player in the global economy: poverty trends (at least 25% of its population live below the poverty line), income inequality (all of the outsourcing has created a middle class that is almost rich in comparison), energy (it is a high-octane economy that has to import over 70% of its petroleum), employment (not enough skilled people to meet needs), and infrastructure (not near enough).

I could go on, but I think you get the picture. There might be challenges in dealing with China, but challenges exist with every off-shoring and Low-Cost Country. So don’t jump ship just because the boat starts to rock. Do a careful comparison of the advantages and disadvantages, build a total cost and a total value model, and perform a careful analysis before making a decision to go to a new off-shoring destination. Even if you run into problems now and again, staying the course might be the best thing to do.