pwc report - leadershipseries

OctOber 2010 • SMArt LOGIStIcS • 17

PwC REPORT

18 • SMART LOGISTICS • OCTOBER 2010

REPORT COMPETITIVE COLLABORATION & COLLABORATIVE PARTNERSHIP

THE Indian growth story, the performance over the past years and the promise of sustained economic growth in the future, has been a point of discussion across the globe.

Over the last five years, the compounded annual growth (CAGR) rate of close to 8 per cent has been propelled by robust industrial growth (graph 1).

A sector wise view reveals that manufacturing sector growth has been consistent over the past two decades, registering a CAGR of more than 7.3 per cent over the last decade.

However, achieving the robust projections of growth is contingent upon several factors, including, the concurrent development of transport and logistics industry in the country.

A SERIOUS SITUATION DEMANDINGATTENTIONIndia spends 13 per cent of GDP on logistics, which is more than what the US (9.5 per cent) and Germany (8 per cent) spend (graph 2).

The benchmark of transportation costs by mode demonstrates that India’s logistics infrastructure is inefficient compared with

mature markets (fig 1). For instance, rail and coastal shipping costs in India are approximately 70 per cent higher than those in the US. Likewise, road costs in India are higher by about 30 per cent. This not only results in higher prices and lower competitiveness, but also hampers

economic growth. As per the World Bank Logistics

Performance Index, ’10, India stands at 47th position, behind not just developed countries but also ranked the lowest amongst the BRICS.

Poor logistics quality in India is a result

While India Inc earmarks its growth trajectory for the next decade, supply chain is going to be a differentiating factor in providing it a distinct lead in the global marketplace. Though the hurdles are many, yet a carefully crafted supply chain network will prove to be a winning edge in its growth bandwagon. The success mantra lies in evolving a collaborative partnership between the entire spectrum of value chain be it manufacturers, retailers or logistics service providers and harmonise what we call as an ideal supply chain. This exclusive report, brought to you in association with PricewaterhouseCoopers, brings to you critical insights into what lies ahead for the Indian logistics industry and provides a roadmap for collaboration in order to gain mutual benefits.

PROVIDING AWINNING EDGE

GDP Growth

1994 1997 2000 2003 2006

12.00%

8.00%

4.00%

0.00% China India

13.0% 13.0%

9.9%

7.5%

11.4%

US Europe Japan

Graph 1: Growth in Indian GDP, manufacturing GDP Graph 2: Logistics cost as % of GDP

Government Policy Large number of check points (inter-state, octroi, etc)− Motor Transport Workers Act (duty hours, rest requirements, etc)− Financing incentives for small sized truck owners− Motor Vehicles Act (driver licensing, over loading, emission norms etc)Unwanted movement on account of taxation

Industry Structure Separation between owner & trucking companyTransportationPractices

Overloading of vehicles, Poor Truck Maintenance, Side Payments

Shipper Reduced expectation on quality of service, Focus on direct costs only, End of month batching

Hidden costs Safety, Pollution, damages to roads ~30% stock outs & 45 days channel inventory

Table 1: Various challenges faced by logistics industry today.

Source: KPMG, Goldman Sachs Research Estimates

OCTOBER 2010 • SMART LOGISTICS • 19

THE LOGISTICS IMPERATIVESAs companies push along to pursue their aspirations for

exponential growth, and as the markets become increasingly complex, supply chain logistics will become a critical differentiator and a source of competitive advantage.

The whole question of supply chain and logistics will be more central to overall organisational competitiveness than it has been ever before. The ecosystem of suppliers, customers, service providers, stakeholders and competitors will determine choices to be made in the long term.

It is understood that several key forces will influence logistics and supply chain industry in the times to come. These include globalisation, rising logistics costs, increasing risk, labour cost rise, sustainability, and growing volatility.

PwC envisages that companies will have to manage some key emerging logistics imperatives to remain relevant.

THE LOGISTICS IMPERATIVE INeed for sharing risk and rewardsCompanies that have been historically sourcing from inside the country are now exploring opportunities for sourcing across the globe. Across sectors, major players such as Sterlite, Reliance, Bharti, etc, are increasingly tapping global markets to source critical input materials for their businesses, Thereby, increasingly getting exposed to volatility or fluctuations in the global marketplace.

Impact of crude oil price fluctuations has been felt even in programmes such as the flagship rural roads programme steered by Government of India. The programme faced stiff resistance from contractor community on accord of sharing of losses due to crude price fluctuations. Crude price has direct impact on price of bitumen, one of the major materials, used in road construction. During the first half of 2008, the volatility in bitumen price was

LSP companies will need to have appropriate risk management systems in place to manage uncertainty. Some options include hedging for oil price fluctuations, organising operations in a less energy-dependent way and pricing that passes oil price fluctuations on to customers.Risk sharing based pricing model (graph 3) can be a competitive tool in this direction. This model has been implemented by a leading Indian engineering player for its inbound logistics contract. The

inbound logistics entailed multimodal and multi-vendor sourcing, leading to inherence risk of delays, losses in transportation and wastage due to high variety of input materials.

The collaboration resulted in the engineering firm entering into a medium-term partnership with a LSP based upon a risk sharing model.• Moving from a firm fixed price

contract to a cost plus fixed fee risk sharing contract for an inbound logistics service provider.

• Measurement of risk and quantification of key drivers of risk to develop a value at risk model.

• Development of contract as a fixed cost and risk cost component pricing.

• Development of sharing model for risk cost.

of the expectations that have evolved over time.Net cause and effect of this is decreasing sensitivity to the

direct, indirect, hidden, and opportunity cost sequence by the concerned players/stakeholders, while in reality, the costs have

increasing significance to the economy.Breaking from this vicious loop would require building

significant partnership with trading partners, within industry, and at the government policy making level (figure 2).

Figure 1: Dynamics in road transportation

GovernmentPolicy

FragmentedIndustry

Structure.

Price BasedCompetition

Low entryBarriers

TransportationPractices

Shipper Practices& Expectations

Non scientificWarehousing

End of Planningperiod syndrome

Unwantedmovement of

goods

HiddenCosts

+

+

+

+

+

+

+

+

+

+

+

PolicyStatus Quo

+

CurrentPerformance

CurrentRs

T1

T2

FutureState

T2

FutureState

D: Better service, better costCollaboration throughimplementation of a synchronised “Nationallogistics policy”

C: Same service, lower cost

Collaboration with Shipperspossibly at industry level

Customer Service

Logistics Efficient Frontier

B: Better service, atoptimal costCollaboration withtrading partners

Logistics Costs

AL Current State

Figure 2: What different stakeholders can achieve along the logistics frontier.

Expected Cost

Risk sharing contract

500 15001000 1250750

Fixed Price Contract

Graph 3: Risk sharing based pricing model.

Need For Risk Management Systems


very high, and a basic analysis revealed that contractors would have all their margins eroded. This led to disruption in work and thereby impacting programme’s progress (graph 5).

The logistics sector is no exception with respect to feeling the impact of fuel price volatility. More so, in the Indian scenario,

as the share of fuel cost in the expense sheet is very high, any hike in fuel price is accompanied by blockades as well as protests.

Oil price volatility is a significant risk for the sector, even though soaring oil prices (graph 4) are unlikely to be the primary driver for fundamental change, with over four-fifths of the increase in transport-led demand for oil likely to come from China, India and the Middle East. PwC research reflects managing and developing structures to share oil price linked risks as an import parameter for collaboration.

Oil price volatility would also clearly impact future global economic growth, or could even lead to a decline in the world GDP. The logistics service provider (LSP)

sector is cyclical in nature, so slower global growth or a global contraction would have a significant impact on the industry. Decisions to outsource manufacturing in low-cost countries and distribution patterns may need to be re-evaluated if oil prices increase substantively.

PwC Report, continued

THE LOGISTICS IMPERATIVE IINeed for Supply Chain to support dynamic supply portfolioLarge global companies face numerous challenges in today’s tumultuous economic climate. One of the biggest is creating dynamic supply chains that help a company achieve and maintain high performance despite major fluctuations in demand & supply, significant changes in commodity availability and prices, big swings in currencies, unforeseen geopolitical events and the need to align to both mature and emerging high growth markets. Also, in addition to knowing the location of necessary materials at all times, companies also need visibility into the inventories of other players in the value network. This allows them to monitor overstocking and under-stocking of component parts, coordinate production strategies and set pricing strategies based on available information about supply & demand.

While companies are globalising,

most of the optimisation still remains local. Attempting to enter new markets with new or existing products is always fraught with challenges; players need to optimise their networks to have insight into the true cost of products sold in different markets. They need to measure absolute gains, i.e. gains from lower unit costs of products, adjusted for losses, from delays and uncertainty, regulatory and tax issues, and huge logistics costs in emerging markets. Currently, logistics effectiveness and supply

chain optimisation are areas where companies feel the least onfident in peer performance comparision (table 2). Faster product cycles, new sources of supply, and ever-more-complex global networks increase the need for companies to continually optimise their value chain networks.

To get continuous network optimisation off the ground, companies must carefully consider

Initiatives Priority ( Last 2-3 years)Manufacturing Excellence 1Sales & Operations Planning 2Order to Delivery Cycle 3Sourcing & Procurement 4Logistics Excellence 5Sales Excellence 6New Product Development 7Supply Chain Network Structure 8

Source: PwC estimates

Table 2: Priority list for companies

150

125

100

75

50

25

2000 2005 2010

History Projections

2015 2020 2025 2030

Figure: Oil Price Projections2009 Projection2008 Projection

15%

8%

10% 15%

52%

Road Trip Expense - India

Fuel cost Toll expense Maintenance Driver expense Other on road expense

Graph 4: Oil price projections (2008 & 2009) Graph 5: Road trip expense-India

Sources: PwC, US Energy Information Administration (EAI), Annual Energy Outlook ’08 &’09 Source: Study by IIM, Calcutta and TCI Logistics

Collaborative partnership is about sharing transportation space to maximise gains.


their investment in the needed people, organisational, process, and technology capabilities. Optimisation of the global network can no longer be done just every three, five or 10 years. With

dramatic changes continuing to impact global networks, leading companies are building the capabilities to look holistically at their operations on an ongoing basis.

THE LOGISTICS IMPERATIVE IIINeed for automationContinuous real-time control of flow of goods eliminates disturbances in the supply chainPwC research shows that achieving real-time control of the logistics process is a viable goal. Real-time control is also seen as having a significant positive impact on the sector, with experts giving it high marks both for impact and desirability. Technology will permit strong oversight, thereby facilitating early communication and resolution of any disruptions that may occur. Inaccurate deliveries are one common disturbance in the supply chain and can cause significant additional costs; these may be reduced through new tracking mechanisms. Other disturbances to the supply chain such as incorrect storage or expired products can also be managed more effectively, as real-time control systems allow logistics managers to take appropriate counter measures more quickly. Further, by gaining a more comprehensive understanding of how and why disturbances arise, companies may be able to fine-tune the supply chain to avoid future incidents.

Strong IT systems are therefore, increasingly a core competence to ensure competitiveness. Experts are convinced that by pairing advanced information technologies with intelligent transport systems, companies can improve transport efficiency, resulting in significant savings and higher margins enabling faster processes, higher flexibility, better service levels, and better communication.

Cost of labourThe debate of outsourcing is again raked up. This time it is not about loss of jobs in the developed economies but even questions the fundamental reason for outsourcing i.e. cost arbitrage. Increasingly, the so-called developing economies have been the major outsourcing destinations due to availability of low cost labour. But the supply-demand equations are taking over even in these markets. In these developing economies viz. China and India, there is significant action even in the domestic market. Scarcity of labour is already felt in these markets. In India,

Dynamic Sourcing

CompanyCompany

3rd Tier 2nd Tier 1st Tier

Figure 3: Distribution model of the company

Source: Adapted from Mini Maestro Model, MIT Sloan

CASE IN POINT

A globally leading apparel company that serves private-label apparel firms in Europe and North America operates what might be called a ‘smokeless’ factory. Over the years, it has evolved from a trade broker between the West and East into a multifaceted coordinator of manufacturing. Although it maintains a network of 10,000 suppliers in 40 countries, it does not own any of them.

Value levers of the model:• The firm coordinates each

process in the supply chain right from raw material sourcing,

factory sourcing, manufacturing control, shipping consolidation, customs clearance and local forwarding logistics.

• Using its buying power and the trust it has developed with its supply base, the firm can shrink the delivery cycle for time-sensitive products considerably.

• This allows customers to make purchases closer to their target completion dates, providing them with substantial savings in the form of fewer inventory

• The company maintains a highly granular up-to-date view of supplier performance.


significant amount of labour efforts are consumed by the booming infrastructure sector.

The demographics of India may suggest an abundant supply of labour. India’s working age population (age group 20-50) is expected to be around ~60 per cent by 2020. As a comparison, the figure is 42 per cent for China and 36 per cent for France. This demographic advantage should translate into an abundant supply of working age people to fuel the drive for industrial growth. Unfortunately, a de-averaged picture of the demand-supply of skilled people indicates a major mismatch. According to a study conducted by Boston Consulting Group in 2008 along with CII, as the demand mix for people shifts more towards graduates and trained people (graph 6), an availability issue starts arising.

Besides, at an overall economy level, 23 per cent of the incremental demand is expected to be for graduates and vocationally trained personnel as compared to about 10 per cent today, leading to a shortfall of qualified talent. According to the study, a shortfall of about 2 lakh engineers, 4 lakh non-engineering graduates/post-graduates, and 1.5 lakh vocationally trained personnel may occur over a five-year period. This problem is further exacerbated if the aspect of employability is considered, given the wide-spread disparities in education across the country driven by available infrastructure, facilities and capabilities.

There is also increasing demand for skilled human resource from multinationals across the world. An estimated 48 million jobs will invite skilled manpower from across the world by 2020 as per the estimates from National Skill Development Report by Planning Commission 2009.

The surge in demand for labour in the developing economies such as India and China has led to increased cost of labour. Over the last five years, the labour cost in developing economies has

increased by 18-20 per cent year-on-year as against 3-5 per cent in the developed economies.

Industrial labour disputes on the riseOver the last decade, there has been a decrease in the number of reported labour disputes in the country. However, the problem continues across industries, across public and private sector organisations. For instance, in the recent months, few shutdowns have been seen at Nestle’s Pantnagar plant. Auto majors such as Mahindra & Mahindra and Hyundai have also witnessed strikes of late. The same is the case with MRF. In the public sector, besides bank employees, thousands of workers and officers of oil companies, MTNL staff and Airport Authority (AAI) have been on the warpath.

Considerable change is evident on the nature and magnitude of the disputes in recent years. The number of man-days lost due to labour disputes remains significantly high (graph 7), affecting overall productivity.

According to the Central Government’s Labour Bureau, the number of workers affected by strikes had almost doubled from 2007 to 2008. The Bureau believes that figures do not reflect the trend as often disputes are not being reported as workers accept it quietly or the units they were working for are very small.

Logistics sector including the logistics function of the organisations are typically labour-intensive. The increasing problems of labour cost, availability and the issues of disruption may lead to companies looking for alternatives such as automating some of the labour functions. Automation of logistics function would require capital investment and pooling of demand for such function may be the most efficient way to utilise capital machinery. User companies may look to a service provider to bear the cost of capital investments and the user companies may pay per usage.

Engineers

2

64

39

1.5

7.5

Graduates/PostGraduates

Shortfall based onqualification

Shortfall based onemployability

Vocationally trained

Graph 6: Estimated shortfall in qualified personnel (2007 – 12) in lakhs

Sources: CII-BCG Report “India’s Demographic Dilemma”, 2006

0.12

0.09

0.06

0.03

0.002000 2001 2002 2007 2008

Graph 7: Mandays lost index per dispute

Sources: Business World – Sep 2009, PwC Analysis

Collaborative logistics inspires

i ovation And



THE LOGISTICS IMPERATIVE IVNeed to be agile and flexibleThe speed and severity of the economic downturn in the latter half of 2008 has highlighted the importance of having flexible and robust supply chains. In many industries, demand dropped precipitously.

Traditional supply chain planning activities rely purely on the examination of historical patterns of demand to determine production level, raw-material purchases, transport capacity, and further important factors. Such systems are often ill-equipped to manage unanticipated drops in demand; in some cases a severe external shock might result in bankruptcy.

PwC research shows that longer and more global supply chains are especially at risk. Supply chains, which are able to respond more quickly to changes in demand, or pull rather than push inventory and parts, stand a better chance of withstanding severe shocks.

One way to achieve more robust and flexible supply chains may be an increased level of information sharing and collective decision making amongst autonomous supply chain partners. If supply chain partners exchange their knowledge more intensively, it may be possible to achieve superior operational performance in terms of flexibility in supply chains.

Demand VolatilityThe demand for consumer goods, capital goods and intermediates has shown significant variability over the past several months (graph 8). The impact of the economic climate has induced more complex behaviours from buyers leading to variability and strain on the supply chain. In such a scenario, companies have to contend with significant variability in demand.

Consumers’ purchasing decisions have a strong influence on manufacturing supply chains. PwC’s research anticipates that consumer behaviour is likely to change in various ways. While consumer patterns vary in different regions, they will also continue to demand more specific goods, greater control over the logistics process, and will more actively intervene in the delivery process of the goods they order.

SKU ProliferationConsequently companies have to cater to consumer preferences leading to proliferation of SKUs (graph 9) and this trend is no recent phenomenon. If we look at the last two decades, the

options available with the consumers have grown manifolds, catering to specific tastes of groups of consumers. For e.g. Maruti was known for its flagship Maruti 800 model a couple of decades ago and now the range has expanded to 15 models. Fifteen years back, ITC had about 40 SKUs to manage, which has increased to more than 10 times now.

Companies see increasing value in catering to specific tastes and by extension, they would be willing to cater to individual customers and their unique tastes. Going forward, realisation of consumer preferences will have a huge implication on logistics planning, design and execution. The supply chain logistics has to cater to the fluctuating requirements while ensuring customer service level and satisfaction.

Elongation of Supply ChainsTwo key factors have led to increasing elongation of supply chains in India:

Need for Wider ReachA large component of consumer demand in the country is driven by the estimated 70 per cent of rural population in India, making it imperative for players across industries to focus on ensuring reach of their supply chains to these remote rural locations. The rural consumers, living in more than 6,00,000 villages across the country, account for well over 60 per cent of the national demand for several product categories and have seen their income levels rise over the last 10 years. The number of rural households in the lower and lower middle classes decreased from 83 per cent in 1998-99 to 70 per cent in 2006-07 and is set to fall at a rapid rate over the next 20 years; the comparative fall for urban India has been from 53 per cent to 27 per cent. The figure (graph 10) below illustrates the differential growth rates between urban and rural consumption for specific personal care products.

The higher growth rates of rural consumption indicate that companies with an extensive supply chain network will have a better opportunity to serve such growing demand segments and potentially increase market share. This would be a challenging task given the infrastructure, geography and significant channel fragmentation.

GlobalisationA closer look at the rate of growth of manufacturing industry and the concurrent growth in manufacturing-led exports reveals that

700.0

600.0

500.0

400.0

300.0

200.0

Consumer Goods

Jan’ 2008 Jul’ 2008 Jan’ 2009 Jul’ 2009 Jan’ 2010

Capital Goods

Auto

250%

1000%

FMCG

Graph 8: Volatility in Index of Industrial Production Graph 9: SKU proliferation - 1995 to 2010

Sources: Ministry of Statistics and PI, India Sources: PwC estimates


year-on-year the growth is fuelled by the growth in the exports. It is apparent while manufacturing grew at CAGR 6.8 per cent over the last 10 years (graph 11); the exports grew at 11 per cent CAGR (graph 12), in sync with the globalisation trends.

PwC research shows a CAGR of 9 per cent in traffic volumes across the thirteen major ports in India over 2003 to 2009, reflecting the growth in export and imports driven by

globalisation. According to a survey conducted on globalisation trends, estimation suggests that there will be an increase (per cent of business managed outside the home country) of at least 20 per cent across industries. Globalisation and the pursuant adoption of global sourcing by industries such as manufacturing, automotive, etc. (graph 13) have also had a resultant impact of elongation in the supply chains.

Hair oil

Coconut oil

Shampoo

Toothpaste

14.30%

20.40%

13.50%

22%

14.60%

10.30%

12.20%

17.40%

Urban All India - Rural

Graph 10: Urban and rural growth rates - personal care productsSource: AC Nielsen Research

25%

20%

15%

10%

5%

0%

11%

India China

21%

20%

Korea Russia Ukraine Japan Germany China Brazil Spain Rest

9% 8% 8% 6% 5% 5% 5%

35%

Graph 13: Global sourcing locators for Indian companies in steel

Source: PWC Research

Graph 12: Manufacturing exports growth (FY 1998 - 2008)

Source: 2009 Euromonitor International

0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00%

Argentina

Brazil

Turkey

Hungary

Egypt

Thailand

Russia

Malaysia

Poland

India

China

Graph 11: Manufacturing GDP growth (FY 199-2009)

THE LOGISTICS IMPERATIVE VNeed for Green LogisticsPwC sees reducing emissions as posing a greater challenge to logistics companies over the next twenty years than obtaining a sufficient supply of energy. Whether or not, they see it as a business opportunity, logistics providers will most likely need to track, document and disclose their caused CO2 emissions in the future. Pressure on the sector is not only coming from governments though. Customers are increasingly demanding that their LSP providers demonstrate environmental and social responsibility.

Transportation accounts for more than 13 per cent of CO2 emissions worldwide, with road freight transport representing the largest – and growing – portion. Achieving a substantive global reduction of emissions will therefore, necessitate a significant decrease in transport emissions. In developing markets, transport-

related emissions are growing significantly. India and China lead the list in terms of the average annual growth rate of emissions, followed by the rest of Asia. While the fuel efficiency of transport vehicles is improving, gains are more than offset by increases in


Illustration By: Sanjay Dalvi


vehicle numbers and utilisation.A 2009 PwC survey around green logistics undertaken at

logistics companies in Germany showed that 70 per cent did not offer green logistics products.

One instance of companies looking at green supply chains came from PwC interactions with CEO of a global logistics provider, speaking on how environmental issues are affecting his firm. During the conversation, he mentioned, “Customers are more conscious of environmental issues and the impact of their business on the environment and in terms of resource utilisation. We have developed an environmental calculator, which calculates the environmental benefits of our pooling model. This is a strong

selling tool. We are also growing a total pallet management model, which reduces transportation costs significantly, takes trucks off the road and reduces the carbon footprint.”

Some of the other common steps taken by companies to accomplish the above are:• Deploying energy saving- and/or alternative energy-driven

transportation• Reducing the distance of transport by optimising distribution

models• Operating vehicles more efficiently by innovating systems (for

example route planning software), rewarding drivers for more fuel-efficient driving behaviour.

THE LOGISTICS IMPERATIVE VIOvercoming Infrastructure ChallengesPwC research finds that globally logistics players are viewing a greater prevalence of larger means of transport as a valid lever to compensate for rising transportation costs and realising greater economies of scale (graph 14), however, in India, infrastructural inadequacies will militate against this trend, since road infrastructure and ports are already struggling with the current sizes of transport modes. Even at a conservative annual growth rate of 7.5 per cent, India’s freight traffic is likely to double from the current levels by 2020.

Belying the global trends, we also found that over the last half decade, even though there has been a steady increase in fleet numbers, a trend towards lower capacity ships is in evidence in India (graph 15). The movement towards larger means of transport coupled with the inefficiencies in the current Indian transport and logistics presents a humungous challenge to

planning and development of requisite infrastructure over the coming years.

Currently, trucks on Indian roads take about twice the time that an average truck in the US takes to cover the same distance (graph 16) owing to infrastructure constraints and the various check posts that the trucks have to pass through leading to increased waiting times.

Stoppages on the road, toll and check posts amount to more than 50 per cent of the stoppage time. The total stoppage time may vary between 10-25 per cent of the journey time. There is a high-variability in transportation performance.

Inefficiencies also are abound in Indian ports and cargo handling. The average turn-around time (TAT) at ports is also comparatively high (graph 17). In India, it is at least 4-5 times higher as compared to that in Srilanka and Thailand.

Recognising these challenges, the Eleventh Five-Year Plan proposed a large increase in logistics infrastructure spend from

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4

3

2

1

0 30 40 50 60 70 100

11) Monopolies in mega-cities

9) Modal shift

10) Autonomous systems

8) Larger means of transport

Estimated Probability (%)

Imp

act

on

T&

L

0

50

100

150

200

250

300

350

2005 2006 2007 2008 2009

26000

27000

28000

29000

30000

31000

32000

No

ofSh

ips

Gro

ss T

on

nag

e/Sh

ip

Overseas Shipping

Year

Source: Transportation and Logistics 2030, PwC

Graph 14: Impact on T&L Graph 15: Overseas shipping statistics

Source: Shipping Statistics, Ministry of Shipping

100

80

60

40

20

0India Sri Lanka Thailand Singapore Hongkong

100

80

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00 20 40 60 80 100

USA

China

India

Graph 16: Truck speeds in different countries Graph 17: Port Turn-around Time (hrs)


The realities of the new economic compulsions have started dawning on the companies. Increasingly there is a realisation that ‘doing it alone’ is no longer viable. No matter how prudent your risk management capabilities are, it may be difficult to absorb the shocks rendered by the globalised economic network.

Companies have to be scrupulous about answering some of the questions that are arising in this new economic paradigm. • Am I aware of all the risks that

am exposed in this globalised market? Do I have counters to mitigate them? Or do I have someone who is willing to share it with me for a reasonable price?

• Is it efficient, in this uncertain scenario, to handle hundreds of supplier and channel relationships with a definite commitment of volumes? Or

should I be able to tap capacities as and when required at an optimal cost?

• Am I willing to invest in capacity, capital equipment and worry about their utilisation and locked capital during a slowdown?

Or do I want to convert the non-strategic fixed asset costs to variable costs in order to be able to weather down adverse market situations?• How do I survive in this ‘grow or perish’ business when I don’t have an understanding of serving other markets? Do I take small incremental steps to learn and expand? Will the competition allow me to take one-step at a time? Or should I leverage a partner that understands and has a set-up to serve?• How do I manage the need for skilled manpower?• Do I have to be more

US$65 billion or 1.5 per cent of GDP in the Tenth Plan period to US$160 billion or 2.3 per cent of GDP. This is even more than the amount that India plans to spend on power during the same period. Despite the large increase, the planned spend is

insufficient. It would at best result in a 15-20 per cent increase in road and rail network capacity.

While efficiencies may be built through improving the infrastructure and also the regulatory aspects, efficiencies may further be improved through better asset care (maintenance) and utilisation. Initiatives including standardising equipment, containers & pallets and allowing for sharing of transportation and storage space by two or more businesses will bring in efficiencies with

respect to logistics cost.

Regulatory LandscapeIndian logistics sector has been historically plagued with inefficiencies attributable to the byzantine tax structures and laws.

The good news is that the government is moving towards removing some hurdles (table 3).

This has led to encouraging private sector participation in the Indian infrastructure sector, overall investments in infrastructure went up by 21 per cent to `307,282 crore in the year 2008-09. An ideal tax structure may still be a fantasy. But the steps are in the right direction and it will be our hope that the proposed changes are implemented at the earliest.

THE UNDERLYING NEED FOR COLLABORATION

Use smaller capacity transportation/part

loads

Stock all SKU’s inthe warehouse

Market in a NewState

EstabilishWarehouse in

the state

Push stock to createtransportation

economies

Attach Sales &Supply Chain

Organisation to eachwarehouse

ManufacturingLocation

Initial PhaseGrowth

Warehouse Location

ManufacturingLocationWarehouse Location

Illustrative

Illustrative

Evolution of the disribution structure of companies led by �scal considerations has resulted in complex & fragmented distribution structure...

Regulatory Change BenefitProposed Tax reforms such as GST

Streamline tax structure, Growth for 3 PL

Rail Haulage opened to pvt. Players

• Better time efficiency• Improved quality of services

Leasing of Wagons Easier for pvt. Companies to expandAutomation of customs and tax filings

Saves time compared to manual processes

Table 3: Benefits of charges by Government

Customer

LSP

Shipper 2 Shipper

LSP

Horizontal

collaboration

Vertical

collaborationShipping Surface

Transport

RailwaysAviation

Integrated InfrastructurePlanning

Integrate Logistics Policy

Industry CollaborationInter modal collaboration

Supplier

SurfaceTransport

LSP

LSP

Table 4: Collaboration model ecosystem



eco-conscious? Will it become a business imperative? I do not understand it? Is it not complex and cost ineffective? Can someone help me do it in an efficient way?The answer to all these crucial issues lies in understanding the

notion of competitive collaboration and collaborative partnership. Competitive collaboration among businesses including providers, users, competitors and institutions is the way for the future, we believe co-opetition in various business processes will gain increasing acceptances as a means to cut costs and achieve competitive advantages. The scope of this collaboration extends beyond the ecosystem of user and provider to include industry to industry, institution to institution, service provider to service provider and further combinations of these entities (figure 4).

Competitors may increasingly look to partner in order to provide some aspects of logistics services more effectively (e.g. warehousing and/or transport of products). Logistics service providers may also collaborate in other ways; for example, they could co-operate in order to handle the challenges of mega- and inner-city supply. For instance, if several LSPs were able to agree to run deliveries only one day per week in a congested urban area, with each provider accessing the city on a different day and performing last mile deliveries for all the cooperating competitors, they could significantly optimise network and route planning.

Technology-oriented logistics service providers could position themselves as high-tech logistics providers providing the latest edge technology for interaction and manipulation. Thus, they would offer almost every possible ITC interface, so that customers are able to actively intervene at any time of the delivery process.

To give an example, customers could easily track the current location of a specific good in real-time and change its destination and delivery time frame via a mobile device.

Collaboration between the users and the logistics industry could be strategic, tactical and/or arms length in nature. To be meaningful and effective, collaboration must go well beyond vague expressions of partnership and aligned interest. The logistics service provider and the customer must leverage each other on a strategic and operational basis so that when working together, they perform better than they would separately (figure 5).

Opportunities exist for a closer collaboration between users and providers through, investment in the relationship, deeper industry knowledge, and proper expectation setting. This, in turn, will have a direct correlation on overall customer satisfaction.

Model Attributes: Partnership JV, Value Based,Risk Sharing, Long term (5+ years)Service attributes: Industry domain skills, BPO,PM, and Tech Integration & Continual Improvement

Model Attributes: Shor term (1 to 5 years)Service attributes: Traditional logistics services,Modular product offerings, focused cost reduction

Model Attributes: Short-term, transactionalService attributes: Run-off-the-mill; Modular

Strategic

Tactical

Arms Length

Figure 5: Operational view of collaboration

AREAS OF COLLABORATIONThe collaboration continuum extends across the ecosystem of players with the type of collaboration and maturity of collaborative relationship impacting the scope and impact of collaboration on the participative players.

Here, we present to you the collaboration continuum and the key features of collaboration across that continuum (table 4).

Vertical CollaborationCollaboration among the value chain partners is the key to success of an organisation. Relevance of logistics for competitiveness makes the LSP an important partner for present day businesses. Companies may collaborate with their LSPs and trading partners to bolster capacity to support growth as well as add capabilities to enhance customer service. This will also improve efficiencies by drawing on expertise of the partner and improve planning accuracy by bettering information visibility.

Collaboration between shippers (users) and LSPs can be across a range of areas including sales and operations planning,

manufacturing planning, sourcing logistics, warehousing and distribution logistics. Table following this section illustrates some of the areas of vertical collaboration.

Horizontal CollaborationHorizontal collaboration is a powerful means to improve overall efficiency of logistics in the industry.

Sharing of freight tripAt an operational level, this may mean effective utilisation of logistics assets. A simple case may elucidate the opportunity: In a traditional user (shipper) and LSP relationship, both the parties would be working to improve their efficiencies to improve profitability. However, the approach would reap benefits only on business processes that may be controlled independently by each party. There abounds considerable opportunity to improve on what could be termed as hidden costs. One such hidden cost is associated with asset repositioning.

28 • SMArt LOGIStIcS • OctOber 2010

While the above case points to collaboration between two players in the same industry or outside industry, there are other approaches that may require more than a few to participate from the industry or outside but at the same time promise to deliver considerable value.

Container pooling and standardisationSeveral trends are emerging in the logistics industry that moot collaboration among the industry partners. Container pooling is one such trend that is increasingly practiced in developed markets and is also catching up in India.

A leading LSP partnered with a globally leading food products company to manage their total supply chain from global sourcing units to the market delivery to end customer. Involving an elongated asset bearing cross continental supply chain with separate control towers and market delivery channels the said service provider managed and orchestrated a number of supply chain providers.

The partnership resulted in a collaboration across key areas, such as:

• Stock holding days getting reduced to 11 days for snack foods

• Stock turns in excess of 36 per annum

• Local production merged to reduce transport costs and increasing load optimisation

• Documentation management for exports managed by the LSP

• Damages in the supply chain reduced to <0.01 per cent

• Value Add Services such as ingredient

labelling performed on siteThree main areas of value were

delivered to the customer:• Increase in market freshness and

increase in shelf life-warehouse shelf time reduced from 23 to 11 days

• Reduction in number of service providers

• Order response time and service levels increased-order to shelf dwell life reduced from 45 days to 3/11 days.

Case In PoInTStrategic Collaboration For Enhancing Shareholder Value In Action…


The collaboration continuum – key features

FORMS OF COLLABORATION

VERTICAL HORIZONTAL INSTITUTIONALManaging Information

FlowWarehousing & Transportation

Last Mile Logistics Asset Sharing Standardisation Integrated Logistics Policy

Infrastructure Capacity Planning

Rela

tions

hip

mat

urity

WIN

Works to reduce planning cycles thereby improve replenishment

Is able to invest in assets in line with the company goals for growth eg. Rural Supply Chain, Modern Trade etc.

Consolidation in warehouse capacities through aggregation by logistics orchestrator.

Capacity exchange for sharing real time information on capacity availability on routes to enable reverse haul partnering and sharing of capacity

Standardisation of design of pallets, rakes, containers, enabling pooling of capacities and reusability with industry body being the custodian of all standards

Collaboration between Shipping, Railways and Surface, Transport ministries for integrated planning for corridor development

Growth projection based capacity addition planning for ports, airports and highway development

Generates long term forecasts and is able to hold leadership workouts for capacity building and investment

Understands the divers needs across the company product portfolio and makes capital allocation accordingly eg. High Axle Trucks, Specialised Fleet Designs, Cold Chain.

Reports performance regularly and is able to influence corrective action in the company

Is able to manage the foot print in accordance with the long term objectives while maintaining cost

ENG

AG

E

Leads to S &OP process for the company across portfolios

Able to chalk out investment plans in accordance with long term growth plans of the company

Sharing of warehouses and transportation fleets across competitors; effective utilisation

Planning for seamless inter modal logistics networks

Takes charge of performance in any of the markets in which the LSP has reasonable control influence

Adopts modern practices like cross dock, replenishment systems to improve flow through and reduce storage

Simplification of tax and regulatory polices to enable multi modal transport and logistics

Involved in the S&OP process in mid year reviews

Participates in Assessments and shares information on a regular basis

TRA

NSA

CT

Lag data sharing mechanisms on S&OP

Locational and Space decisions are taken in discussions with the company

Collaborative development information sharing and availability for warehouses

No operating model exist, any aspects of load sharing is a by chance activity

Leading players develop their own standard which is driven by the convenience of the user

Focus on individual sectors without looking at streamlining end to end flow

Policy making is plagued with an intention to reduce capital budge outlay

Absence of any data sharing on performance

Perceived as managing an outsourced operation in the supply chain

Standalone Warehouse contracts


A leading FMCG’s initiative is a classic case of recasting the business model around a path-breaking distribution network. It also establishes the concept of strategic partnership and collaboration between the company and its channel partners.Till the late 90s, the company prided itself on setting ambitious targets to expand distribution cover in its mission of increasing volume growth in urban and rural markets through a widespread network of distributors.However, the company was overburdened by the cost of such an extensive distribution network. As 85 per cent of its turnover came from top 30 cities, such a large distribution network was not justified.This challenge was also manifested in issues faced by its distributors. As the distributors handled smaller volumes, their return on investment was considerably low. To improve returns, the distributor

focussed on increasing their reach through direct servicing to higher number of retail outlets. However, as the product portfolio consisted of high margin & low volume products, the turnover per outlet was low, which resulted in increased cost of reach.As the distributors’ volumes were low, the replenishment from the company to distributors was less frequent, thereby increasing distributors’ inventories. This resulted in unattractive return on investment for the distributors. The other effect was the inability of distributors to extend credit to retailers, which resulted in gaps in product availability at the outlets.The company responded in a path-breaking but quiet move of rationalising its sales and distribution structure. It countered the challenges of the channel design and network strategy by slashing its distributor

network to one tenth of its size. In this model, the organisation operates through close to 30 key distributors across India.By shifting to this structure, the organisation could replenish these larger distributors more frequently and thereby reduce their inventory levels. In turn, the distributors had to invest in better IT systems and warehousing & distribution infrastructure to service the larger geographies assigned to them, which gave better information and control over sales. In order to increase sales efficiencies for distributors, direct coverage was reduced and the wholesale throughput was increased especially for mass-selling lines such as ointments & lozenges.The core principles that guided such a dramatic shift in distribution strategy were collaboration with distributors, managing distributors’ inventory & RoI and focus on secondary sales.

Companies, especially auto makers are moving away from single-use wooden boxes to returnable and re-usable solutions. While this could help in eliminating challenge of disposing used packaging, it will create a pile-up of returnable containers and the supply chain will have to deal with those. So the real value comes from container pooling. This is an arrangement where a provider can own the containers and the user companies can share the containers by renting them. This will in turn increase the utilisation of containers and containers may also be used across applications as determined by the pooling company. As is clearly visible, scale really helps in extracting value out of this model. CHEP, a global logistics provider, is using such an arrangement worldwide. The company owns about 300 million pallets & containers and at any time about 3 million containers are on the move.

However, one of the important hurdles in achieving scale in such pooling approach is the lack of standardisation. While there are standards that are emerging in developed markets such as Germany’s VDO standard for automotive industry and component suppliers such as JCI and Lear already have containers overlapping, the hurdle is more pronounced in India. Global auto companies such as Ford, General Motors, Chrysler and major tier suppliers are already taking steps that may lead to an agreed pooling protocol. However, in India, the requirements are India-specific and this may throw a challenge for standardisation across the value chain. One of the other challenges includes the need for protection of parts/units shipped. This may call for specific package dimensions. The key is to strike a balance between need for specific package requirements and advantages of standardisation. If companies in the industry can agree upon a manageable set of standard containers, then there may be a lot

to gain for the ecosystem as a whole.

Leveraging shared network infrastructureSharing of network infrastructure is a concept that is quite prevalent in telecom industry. Several models exist categorised under active (receivers, transponders and other communication equipment) or passive (sheds, towers, real estate, security and other facilities) infrastructure sharing. This has provided new market entrants a rapid way to roll-out services. Several governance related initiatives have also been taken around sharing, charging of fees. This has brought substantial benefit to both the service providers and the users.

A similar model may also be applicable in the logistics and distribution context, where companies leverage existing warehouse and transportation infrastructure of a competitor or other businesses in order to reach out to the market. However, multi-brand distribution centres are not common in India. Regulatory mandates that prevent establishing hub and spoke model of distribution as it calls for additional taxes at the point of consolidation. However, companies are exploring opportunities, especially in the automotive sector to come up with an arrangement for sharing distribution infrastructure. Industry bodies such as SIAM (in case of auto) may also play a crucial role in clearing any hurdles in the process for collaboration. The above model is also very pertinent to the logistics sector because of the high degree of fragmentation. Partnerships with other LSPs can provide the wherewithal to offer service for a larger user requiring access to several markets within India. An extension of this idea would be 4PL orchestration where a central organisation can aggregate demand i.e. requirements from user companies

Recasting The Distribution Network


on one side while pooling supplies (transportation, warehousing infrastructure and other value added services) on the other.

Joining hands in infrastructure investmentsAs discussed earlier, infrastructure is one of the critical bottlenecks adversely impacting logistics. Competitors can also collaborate to create or enhance common infrastructure that can address bottleneck issues and issues of inefficiencies. For instance, significant issues are faced by auto OEMs to export finished goods. However, majority of the auto OEMs operate out of ports in Mumbai, Mundra and Chennai. Besides, absence of roll-on & roll-off (Ro-Ro) facilities in the ports and smaller parking spaces act as major constraints. There is tremendous competition among ports and private investors are also getting into building port facilities. With more than 5,00,000 small cars exported already each year, opportunity is ripe for the industry players to get together to address capacity issues. OEMs are already exploring opportunities to partner to build dedicated terminals.

Institutional CollaborationInstitutional collaboration extends the continuum across the key policy and execution players in the government, who shape a vision for India’s logistics infrastructure. It is expected that collaboration will be a critical enabler for such efforts. It also stresses the paradigms for collaboration between industry and government in specific areas of logistics enablement. Institutional collaboration will reduce recurring losses to the economy and improve capital efficiency in the long run.

Collaboration would mean development of synchronised logistics policy on infrastructure and regulatory front to support a balanced and planned modal mix for the projected increase in freight traffic and flow. The policy should support development of organised node and branch network for country wide logistics corridors. This would also require ensuring better co-ordination between multiple national and state-level bodies responsible for developing logistics infrastructure & facilitating easier access to and optimal allocation of scarce resources such as investments, equipment and people.

Consider a scenario where two companies, Company A (Blue), Company B (green) (may be competitors or shippers from different industries), have contracted a dedicated trip from Chennai to Delhi on a weekly basis (figure 6). The route passes through 4 – 5 states including Tamil Nadu, Andhra Pradesh, Maharashtra, Madhya Pradesh, Uttar Pradesh and Delhi. If for instance, the blue company has some delivery to be made from a plant in

Tamil Nadu to a warehouse in Maharashtra and green company has a shipping to be done from Madhya Pradesh to Delhi every week, such a combined hiring of the trip from Chennai to Delhi may address part of the asset positioning cost. This, besides improving cost effectiveness for the shippers, can also positively impact the carrier through better asset utilisation and address some of the issues such as driver turnover through more regular driver schedules.

Chennai

Blue company andGreen Company shareschedules and hire tripfrom Chennai to Delhion a weekly basis

Bhopal

Nagpur

Blue companydelivery from Bhopalto Delhi

Green companydelivery from Bhopalto Delhi

Figure 6: Leveraging shared network infrastructure

CASE IN POINT

Joint Venture for capability building for integrated logistics solutions

India’s leading LSP entered into a joint venture (JV) with a leading Japanese firm to provide end-to-end logistics solutions for a leading auto maker.

The auto maker’s requirement for just-in-time logistics was fulfilled by the LSP by moving up the value chain through knowledge, technology and best practices acquired via the JV.

The JV resulted in collaboration across key areas, resulting in:• Supply and demand chain

development• Supply chain design and re-

engineering• Site and facility location

planning• Distribution network

planning• Customer service

review• Value-added services

such as material handling and cross docking.Two main areas of value delivered to

the customer, automaker:• Offering full range of logistics services

to the auto maker from inbound transportation from suppliers across India and abroad to outbound

transportation of vehicles and spares• Just-in-time and in sequence delivery,

removal of on-site inventories.The success of the partnership is

indicated from the logistics player, handling both outbound and inbound logistics for the automaker in India, unlike other country units with separate providers.

CASE IN POINTStrategic Collaboration In Action…



Leadership risk toleranceEmpirical research has shown that the propensity to take action based on option evaluation and corresponding risk impact is a factor of the hierarchial level of the decision maker in the organisation (graph 18).

A typical view of the supply chain and logistics is that of a support function and the leadership of the function does not typically reside in the firm’s leadership level. It is our contention that the risk reward equation of strategic collarboration makes it imperative that such decision be taken at senior management level, however traditionally logistics function resides with the supply chain function, which in turn lies under the operations, hence the risk taking ability required to succesfully execute collaborative relationships has always been a missing link, hence a barrier to the potential for collaboration.

Growth led profitability versus efficiency led profitabilityShareholders perceive growth in profitabilty through top line growth more favourably compared to cost reduction/ efficiency driver profitability (graph 19). Shareholders place a higher value on companies that improve their bottom lines through growth [value creation focus] than through efficiency and cost cutting [value delivery focus].

bArriers to collAborAte

Development of multi-modal logistics parksAnother area in need of significant institutional collaboration for planning and execution is the development of multi-modal logistics parks which require demarcation of land for logistics parks at key points where different modes such as rail, road, water and air overlap, near major cities, or along key traffic corridors in India. Development of such multi-modal parks equipped with the necessary infrastructure to ensure seamless movement of freight across modes, will to a great extent determine the efficiency and scalability of logistics industry in India.

Enabling development of common standardsThis refers to acquiring access to better equipment such as larger trucks & better designed rail wagons and developing common standards to aid inter-modal transport that ensure consistency in containers, pallets and cranes. Promoting research institutions for long-term impact of industry specific modal requirements, better quality roads, enhance standards in transportation and researching of means to reduce costs.

Manpower and skill development in logisticsThe anticipated growth in logistics industry will lead to increased demand for requisite logistics skills. For example, demand personnel will grow across areas such as warehouse managers, logistics managers, coastal seafarers and truck drivers. This in turn will require collaboration between government & industry for investment aimed at upgrading the training infrastructure and also industry & educational institutes for collaborating to develop courses, technology, engineering colleges, marine training institutes and driver training institutes to help meet growing demand.

Enabling CollaborationDeveloping and maintaining a supply chain relationship, requires considerable time and effort. Certain enablers that can facilitate the task:• Common interest: Both parties have a stake in the outcome of

the collaboration to ensure ongoing commitment.• Openness: Collaboration partners must openly discuss

their practices & processes. Sometimes, this means sharing information that is traditionally considered propriety.

• Mutual help: When addressing supply chain problems or opportunities, look for cross company solutions.

• Clear expectations: All parties need to understand what is expected of them and the others in the relationship.

• Leadership: Without a champion, collaboration will never be accomplished.

• Co-operation, not punishment: Focus on jointly solving problems, not looking for someone to blame.

• Trust: This must be evident throughout both organisations – at every management level and functional area.

• Benefit sharing: In a truly collaborative relationship, partners share the pain, the risks and the losses.

• Technology – advanced technology is essential to enable a collaborative relationship across the supply chain.Without the other relational enablers in place, advanced

technology means nothing; however, definite benefits can flow from the right technology, which:• allow a company to communicate with its suppliers at all levels;• can help break down barriers between companies;• speed up information flows; and• can turn data into useful collaborative information.

It should be emphasised that technology in and of itself is not enough – a human contribution is essential.


The resultant effect is lower prioritisation on leadership agenda of issues such as collaborative partnerships in logistics to drive efficiencies as a lever for profitability. Typically, this lack of focus also prevents concerted efforts on exploring avenues for collaboration.

Control on the partnershipMaintaining an equal control on the collaborative relationship

between a LSP and the industry user company becomes a challenge. PwC interactions with industry leaders brought to the fore this common area of friction both from the user and service provider’s side. The chief supply chain officer of a leading cement player expresses his concerns in this area as ‘quite frequently the tug of war for control over the governance of a collaborative relationship proves to be its undoing’.

Shift of power in the value chainSome of PwC interactions also brought to fore the belief that collaboration may shift away some of the power to make decisions. A collaboration of incomplete trust and hence, low transparency between partners may become a classic case of prisoner’s dilemma where partners are not able to identify the win-win scenario. Hence, sharing of decision making may be viewed as a way of losing control and eventually losing value.

Operational issuesGenerally, collaboration starts with contracts between involved parties. It is very essential to have a clear contract that communicates the same to all the involved parties. This ensures that the

Some of the barriers that contribute to failed collaboration include…• Failure to reach an understanding on shared goals,

expectations, responsibility areas and capabilities• Inadequate support from top management• Inadequate trust• Poor communication• Lack of benefit/risk sharing arrangements• Transactional methods of partnering• Failure to measure collaborative advantages• Start up factors such as initial costs, inadequate

time invested by partners

An industry leading company in the FMCG sector recently launched an innovative new model for reaching the rural customers, faced with the need to directly access consumers in villages with populations of less than 10,000 without compromising on the cost benefit equation; the industry leader employed a combination of innovative distribution and technology practices, in the process giving pointers to the supply chain collaboration areas of the future.

The key areas that arise from the experiment point to collaboration opportunities in the area of technology integration, last mile transportation planning and demand information systems

The company aimed to:• Develop means to

extend credit based supplies to rural retailers

• Capture lost sales due to lack of influence and control on the last mile wholesalers servicing rural retailers

• Exercise direct control on the SKU mix in rural markets The key measures taken were:

• Use of digital maps to identify last mile reach and develop micro-level distribution dashboards

• Developing strategies to increase rural

reach through insights from digital dashboards

• Ensuring last mile distribution reach through entrepreneur based locally mobile network, carrying pre-defined SKU sets and extending credit based supplies to rural retailers.

CASE IN POINTOpportunities To Collaborate... Helping Reach New Markets

Source: Forbes India, 24 Sep ’10 Issue

Board

.001%

Risk Tolerance (fraction of intrinsic value)

.01% .1% 1% 10% 100%

Corporate/CEO

SCM Head

Logistics Head

25

20

15

10

5

0

Ab

solu

te M

arke

t Val

ue

Gro

wth

ProfitableGrowth

Cost Cutting UnprofitableGrowth

Shrinking

Source: “Getting the Value out of Value Based Management, a Global Survey on Best Practices” INSEAD

Graph 18: Risk tolerance (fraction of intrinsic value) Graph 19: Shareholder value perception - share price driver



Collaboration is the future, unlocking the value of collaboration across the continuum by examining challenges, identifying opportunities and building common grounds will be the management challenge of the coming decade.

Logistics service providers are ideally placed to reap the benefits of the booming growth of consumer spending and

the Indian economy the need of the hour is to introspect and visualise what can be and must be done better. Companies that employ an open-minded approach to collaborate with their competitors, with clients and with the government to move to the next orbit of service delivery will emerge eventual winners in the long-term.

collAborAtion is the WAy forWArd…

PwC firms provide industry-focused assurance, tax and advisory services to enhance value for their clients. More than 161,000 people in 154 countries in firms across the PwC network share their thinking, experience and solutions to develop fresh perspectives and practical advice.

At PwC, we push ourselves - and our clients - to think harder, to understand the consequences of every action and to consider new perspectives. Our goal is to deliver a distinctive experience to our clients and people around the world.

In India, PwC (www.pwc.com/India) offers a comprehensive portfolio of advisory and tax & regulatory services; each, in turn, presents a basket of finely defined deliverables.

Complementing our depth of industry expertise and breadth of skills is our sound knowledge of the local business environment in India. We are committed to working with our clients in India and beyond to deliver the solutions that help them take on the challenges of the ever-changing business environment.

PwC has offices in Ahmedabad, Bangalore, Bhubaneshwar, Chennai, Delhi NCR, Hyderabad, Kolkata, Mumbai and Pune.

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DISCLAIMER The information contained in this document is for general guidance on matters of interest only. The application and impact of laws can vary widely based on the specific facts involved. Given the chang-ing nature of laws, rules and regulations there may be delays or omissions in information contained in this document. Accordingly, it should not be used as a substitute for consultation with professional and competent advisors. While we have made every attempt to ensure that the information contained in this document has been obtained from reliable sources, PricewaterhouseCoopers (PwC) is not responsible for errors or omissions, or for the results obtained from the use of this information. All information provided in this document is with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability, and fitness for a particular purpose. In no event will PwC be liable for any decision made or action taken in reliance on the information in this document for any consequential, special or similar damages, even if advised of the possibility of such damages.

KNOWLEDGE PARTNER

CONTACTS

• MUMBAI S.V. Sukumar, Executive Director E-mail: [email protected]

Akash Srivastava, Managing Consultant

Nikhil Pingle, Prinicipal Consultant Phone: +91-22- 6669 1500

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Aditya Saxena, Senior Consultant

Manikandan Balsubramaniam, Principal Consultant Phone: +91-44-4228 5000

• GURGAON K. Jayaraman, Executive Director E-mail:[email protected]

• BANGALORE Suneetha Nagaraj, Principal Consultant Phone +91-80-4079 6000

expectations among the partners are set at the very start. For a successful collaboration, it is also essential for the

parties to not work in a transactional mode. For instance, companies (user organisations) are used to negotiate price on a regular basis and depending upon their buying power force the partner to accept low price. However, this idea is

directly conflicting with the thought of collaboration, which is essentially achieving a win-win situation for the partners. It is important for the partners to view it as a repeated game. This enables ready sharing of information amongst the partners and the enhanced visibility will allow the partnership to maximise value.

pwc report - leadershipseries

Documents

logistics cost

growth trajectory

growth bandwagon

indian logistics industry

cent of gdp

cent higher

manufacturing sector

poor logistics quality