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From the Desk of The National President

Dear Readers,
At the outset let me wish all the members a very happy prosperous and eventful new
year. By the time you receive this edition of MATERIALS MANAGMENT REVIEW in your
hand, Deepavali celebrations would be over and you would have already enjoyed the
biggest festival in our country i.e. Festival of lights. I am sure, you all must be looking
forward for the new year with new idea, thoughts and innovation.
The National Seminar on Public Procurement on 13th September, 2014 at Hyderabad followed by National Seminar
on Greening the Supply Chain on 21st September, 2014 at Rai Bareli where the great events. The 2nd MAT
SELECT organized by IIMM, Aurangabad branch on 29th September, 2014 was simply memorable one.
I got an opportunity to attend all the three events held last month in three dynamic branches. I was highly
impressed by the initiative and efforts taken by the branch chairmen and their entire team at each branch. At all
these places I could see large number of delegates from various organisations/industries/corporate sectors. The
Chairmen of all the branches promised to fulfill their target for membership growth as well as enhancement in
students enrollment without fail. Each branch could demonstrate their strength and I expect lot of positive
results in terms of their participation and subsequent expansion of activities in their branches. I would request
all other branches in the country to take the lead in arranging similar events which is essential for the growth and
development of our institute. In my earlier communication, I emphasized to make vide publicity about our
strength in Supply Chain Profession through our colleagues and friends amongst Corporate Sectors, MNCs,
Industries, Institutes and MSME sector which will not only be beneficial to their own organisation but also to
society and the Nation.
I am happy to inform you that CRIMM centers are extended to four more branches in addition to Kolkatta.
Prospectus have been received by these branches and it is the best opportunity for Materials Professionals to
take advantage of the facilities available at different centers to persue research like Vadodara, Delhi, Chennai,
Nagpur. If other branches volunteer, we can increase the number of centers. All Chairmen have been asked to
take initiative to take advantage of E-learning programme run by Bangalore Branch at present. All technical
supports are available and let us promote this programme in all regions vigorously.
You are all aware that NATCOM 2014 is being organized by our Chandigarh branch on 28th & 29th November,
2014. Chandigarh is a beautiful city which is very well planned and surrounded by Hill stations and forests as well
as many other tourist spots. The weather is pleasant one in November and therefore let us join NATCOM 2014 in
large numbers to make it grand success and make it memorable one. I would request your support and participation
from one and all.
To recognise the contributions of the branches and members I would like to remind you that any branch or an
individual whose performance in terms of increase in membership strength and enrollment of students is highest
will be honoured with special award during NATCOM at Chandigarh.
I look for your active participation in the various activities of the institute. My strong desire is to build a Good
Brand Image of IIMM and towards this I seek your co-operation and participation from one and all.
My best wishes to all our readers.

LALBHAI PATEL
National President - IIMM
Mobile - +919662019638
Email : lppatel09@yahoo.com
Materials Management Review

November 2014

From the Desk of Editor-in-Chief


Dear Members,
Over the years, Supply Chain Management has evolved as a tool to lower down the
costs, enhance the quality and increased business agility. In todays world, the long
term survival of any business entity is dictated by the Supply Chain Strategy adopted by the business
entity. Supply Chain optimization has become vital for the success of business entity.
India is one of the fastest growing economies of the world with huge population base and variety of
needs of the people. To fulfill the need, Industries, Business Houses have to have robust supply chain
network which can work efficiently and effectively to satisfy customer, enhancing their profit level.
Managing supply chain in such a vast country is most challenging because of the existing business
practices, Government Rules & Regulations, Poor Infrastructure, complex tax structure, fragmented
market, weak distribution system, Bad conditions of Roads and Poor Connectivity to National Highways
or State Highways. Supply Chain Cost in India is much as 13% of GDP while it is as low as 8% in developed
countries like USA.
To keep pace with the rapidly changing global scenario, companies in India should focus on three
dimensional strategy i.e. Objectives, Process and Management strategies. As the market continues to
mature, companies must recognize the difference between supply chain execution and supply chain
optimization and focus efforts on optimizing operations to become more efficient. An enhanced level
of competitiveness would require Indian Companies to align three dimensional strategies with the
agenda set by business strategy.
Companies should build resilience in to supply chain so as to avoid negative events during the whole
supply chain process. Resilience means building in the ability to recover quickly and reduce the effect
of negative events. There are four key attributes i.e. Visibility, Flexibility, Collaboration (integration of
Suppliers) and Control, which are critical to resilient Supply Chain.
One more thing to be remembered here is about the Future Supply Chain. Current supply chain aims at
improving accessibility, reducing cost, enhancing efficiency & customer satisfaction and supporting
profitability. In future, we need to think and come up with innovative solutions to deal with additional
environmental factors like CO2 emissions reduction, reduced energy consumption, better traceability
and reduced traffic congestion. The impact of these parameters may not be visible now but will grow
substantially in the coming years. All stakeholders in the supply chain will need to play their part to
accomplish this change.

(M.K.BHARDWAJ)

November 2014

Materials Management Review

MATERIALS MANAGEMENT
REVIEW
Volume 11 - Issue 1
IIMM is a charter member of
International Federation of
Purchasing & Supply Management

CONTENTS



Editor in Chief & Publisher:

Mr. M. K. Bhardwaj
Past President, IIMM &
Former Director Ministry of Defence
Core Committee :
Mr. Ashok Sharma, President 5M India
Mr. V. K. Jain, Former ED, Air India
Mr. Tej K Magazine, Management Advisor
National President :

Mr. Lalbhai Patel


Editors :
Mr. O.P. Longia (Sr. Vice President)
Mr. H.K. Sharma, VP (North)
Mr. Samiran Basu, VP (East)
Mr. G.B.Palankar, VP (West)
Mr. R. K.Rastogi, VP (South)
Mr. A.K.Mehra, VP (Central)
Mr. P.M.Biddappa, NS&T
Mr. C. Subbkrishna, IPP
Prof.(Dr.) V. K. Gupta - IMT, Ghaziabad















Correspondence :
MATERIALS MANAGEMENT REVIEW
Indian Institute of Materials
Management
4598/12 B, Ist Floor, Ansari Road,
Darya Ganj, New Delhi - 110 002.
Phones : 011-43615373
Fax: 91-11-43575373
E-mail: iimmdelhimmr@gmail.com &
iimm2delhi@gmail.com
Website : iimm.org

(November 2014)








PAGE NO.

PM ANNOUNCES LABOUR REFORMS TO BOOST


EASE OF BUSINESS
4
SUPPLY CHAIN CHALLENGES IN RAPIDLY CHANGING
GLOBAL SCENARIO
6
GST SHOULDNT BE OLD WINE IN NEW BOTTLE
11
SKILL DEVELOPMENT AND EMPLOYMENT
GO HAND IN HAND
12
MANUFACTURING IN INDIA: FUTURE SCENARIOS
13
CUSTOM EXCHANGE RATES
17
SUPPLY CHAIN EFFECTIVENESS : KEY TO PHARMA
PROFITABILITY
18
NEXT TRENDS OF HR, FROM BUSINESS PARTNERS
TO KEY DECISION MEMBER IN BOARD
21
PREIGHT RATES
21
BENEFITS OF INTEGRATION OF ISO 9001, ISO 14001
& OHSAS 18001 MANAGEMENT SYSTEMS
22
AN INVESTIGATION OF LOGISTICS COST FOR STEEL
INDUSTRY: ACTIVITY BASED COSTING APPROACH
24
INVESTMENTS ON LOGISTICS INFRASTRUCTURE VITAL
FOR SUPPLY CHAIN & ECONOMIC GROWTH
30
COMMODITY INDEX
31
RETAIL SECTOR IN INDIA: PRESENT SCENARIO,
EMERGING OPPORTUNITIES AND CHALLENGES
32
INDIAN LOGISTICS INDUSTRY : CURRENT
SCENARIO & FUTURE OUTLOOK
40
INNOVATION AND ENTREPRENEURSHIP WOULD
TAKE INDIA FORWARD
41
BIS NEWS : BIS PUSHES FOR STANDARDS FOR ALL
PRODUCTS
42
WTO UPDATE : AID FOR TRADE MEETING HIGHLIGHTS
NEED TO GIVE GREATER SUPPORT TO SMALL
BUSINESSES
43
INTERNATIONAL NEWS - IFPSM
44
BRANCH NEWS
45
EXECUTIVE HEALTH
56

Edited, Printed & Published by :


Printed at :
Power Printers,
4249/82, 2 Ansari Road, Daryaganj,
New Delhi - 110002

INDIAN INSTITUTE OF MATERIALS MANAGEMENT


4598/12 B, Ist Floor, Ansari Road, Darya Ganj, New Delhi - 110 002.
Phones : 011-43615373 Fax: 91-11-43575373
E-mail: iimmdelhimmr@gmail.com & iimm2delhi@gmail.com
Website : iimm.org
(Published material has been compiled from several sources, IIMM disowns any responsibility
for the use of any information from the Magazine if published anywhere by anyone.)

Materials Management Review

November 2014

PM ANNOUNCES LABOUR REFORMS


TO BOOST EASE OF BUSINESS
NARENDRA MODI
PRIME MINISTER OF INDIA

ndustry welcomes
the move, says it
will
boost
manufacturing sector
growth
Prime
Minister
Narendra
Modi
unveiled a slew of
measures aimed to
change labour laws for
the better and to make
inspections
more
transparent
and
devoid of unnecessary
harassment.
The
measures include a
taking
away
of
i n s p e c t o r s
discretionary powers, easy portability for
provident fund users, a worry-free labour law
compliance web portal and a scheme for training
apprentices.
Modi announced these measures at a Deendayal
Upadhyay Shrameva Jayateprogramme here, with
the government also sending around 20 million
SMS text messages apprising organisations,
labourers and youth about these schemes.
Deendayal Upadhyay was a key founding figure
and organiser of the Bharatiya Jana Sangh,
ancestor party to Modis Bharatiya Janata Party,
now the countrys ruling one.
Modi asserted these steps would lead to greater
ease of doing business. For the success of Make
in India (his recently announced programme to
promote manufacturing), ease of doing business
should be given priority, said the PM. Chambers
of business welcomed it, saying these had been
long-pending demands of the sector. We
welcome the Shram Suvidha Portal to facilitate
a single window for compliance with labour laws.
Simplification of procedures has been a longstanding concern for industry(this) will bring in
4

November 2014

a lot of transparency
and accountability,
said
Chandrajit
Banerjee, directorgeneral
at
the
Confederation
of
Indian Industry.
He said with greater
ease
of
doing
business
and
availability of skilled
personnel, growth of
themanufacturing sector
will get a big fillip. The
Union government
also announced that
work was in progress
on reforms in the area
of child labour (in the news following the Nobel
award to Kailash Satyarthi for work in this area)
and the micro, small and medium enterprises
sector. The labour ministry is working on these.
The details will be revealed in the coming days,
minister Narendra Singh Tomar said.
Modi on labour, governance: Modi said whitecollar jobs were seen as dignified but people
often look down upon the working classThe
labour class provides solutions to many problems
surrounding our lives.
Terming the new inspection scheme a part of egovernance, he said it would save industries from
needless harassment. Through technology
intervention in the new inspection system, it will
be easy, effective and economic governance
which will lead to transparency, he said.
He said a computer will decide where the
inspector has to go for inspection and he will have
to file his report within 72 hours, helping both
labour and industry. The area of inspection will
be divided into three parts: mandatory (extreme
situation), optional (system-generated) and
Materials Management Review

compliance-based. The inspector will get an autogenerated list. The government also made
operational the Universal Account Number (UAN)
facility for EPFOsubscribers, for ease and quick
portability of PF funds on switching jobs anywhere
in the country. It was possible, noted Modi, to
easily switch mobile numbers while shifting to a
different state but a poor labour is unable to
mobilise his own PF while switching his job.
He underlined the fact that Rs 27,000 crore was
currently with the Employees Provident Fund
Organisation (EPFO) in inoperative accounts. I
want to return the money to those poor people,
said Modi. He termed the UAN a good initiative to
link industries and banks. Modi said these steps
were directed towards his governments motto
of minimum government and maximum
governance.
He also announced a unified labour portal for ease
of compliance with four central government
organisations EPFO, Employees State Insurance
Corporation, Directorate General of Mines Safety
and chief labour commissioner.
This will facilitate a common window for online
registration of units, reporting of inspections,
filing of annual returns and redressal of
grievances. Modi said a single-sheet compliance
system had been introduced online for 16 labour
laws.
He termed skill development a big opportunity
for the country. By 2020, we need millions of
skilled people. Either he becomes a job creator or
a job opportunity comes knocking on his doors.
He added people do not give due respect to
students of Industrial Training Institutes.
Another scheme, Apprentice Protsahan Yojana,
announced on Thursday, is aimed to increase
apprenticeship coverage to 2.3 million from the
490,000 at present. The labour ministry will
reimburse manufacturing units half the stipend
paid to apprentices during the first two years of
training. The scheme will support 100,000
apprentices up to March 2017.
The Centre also announced convergence of three
schemes for the unorganised sector Rashtriya
Swastha Bima Yojana, Aam Aadmi Bima Yojana and
Indira Gandhi National Old Age Pension Scheme.
Initially, the government will link all these
schemes to a single smart card and will have a
Materials Management Review

\single point of contact for service delivery\.


Launch of labour schemes:
1) New inspection scheme
Aimed to take away discretionary powers of
inspectors
Inspectors have to file report within 72 hours
Inspection divided in three areas: mandatory,
optional and compliance-based
Inspector to get auto-generated list about
inspection location
At present 175,000 inspections by 8,000
inspectors take place in a year
2) Unified labour portal (named Shram Suvidha)
for four Central government organisations
Employees Provident Fund Organisation
(EPFO), Employees State Insurance
Corporation (ESIC), Directorate General of
Mines Safety (DGMS) and chief labour
commissioner
Compliance sheet reduced from 80 pages to a
single sheet
A common window for online registration of
units, reporting of inspections, submission of
annual returns and redressal of grievances
A unique labour identification number or LIN
will be allotted to each employer after
registration.
3) Universal Account Number (UAN) facility for
2 million EPFO subscribers for portability of
PF funds on switching jobs
4) Apprentice Protsahan Yojana
Union labour ministry to contribute 50% of
stipend cost to train youths during first two
years of training programme
282,000 apprentices undergoing training
under on-going government scheme; aim to
raise this to 23 million
Amendments to Apprentice Act already
passed in Lok Sabha
Source: Somesh Jha , Business Standards, 17th Oct.
2014

November 2014

SUPPLY CHAIN CHALLENGES


IN RAPIDLY CHANGING GLOBAL SCENARIO
S.N.PANIGRAHI, PMP
snpanigrahi@rediffmail.com

lobalization of the world economy has


substantially changed the market landscape and
dynamics of both domestic and international
business. Integration and greater international cooperation between the developed and the developing
countries in the field of business, investment and the
exchange of technology has helped the global economy
grow remarkably. Most of the developing and under
developed nations, across the globe are now reforming
and liberalizing their economies to integrate with global
economy to gain global level advantage and
sustainability. These emerging markets are fueling about
two-thirds of global GDP growth. With young
populations, growing middle classes, and rising
purchasing power and consumption, these markets are
becoming more dynamic, flurrying yet growing and
prospering very fast. Between 2009 and 2020, the size
of the global middle class will expand from 1.8 billion
to 3.2 billionand nearly all of the new members will
live in emerging markets.
Being part of this global economy is high on the priority
list of most companies today, whether it is to capitalize
on global sourcing opportunities to reduce costs, take
advantages of business opportunities and growth
prospects, mergers & acquisitions, cross border trading,
offshore investments, private labeling strategies, or to
tap into the surging business and consumer markets in
other prospecting markets in the world and expand
business. Many of the companies in these markets are
also growing up rapidly, relying on innovation, talent,
and other strengths to win. The factors of economic
growth and integration into the global system has
fosteredan increase in companies that expanded their
operations overseas, including sourcing & procurement,
production, sales and marketing, distribution and
customer services. With these integrations through subcontinental business and trade, foreign direct
investment and cross-border M&A, Brand
Buildingetc,the growth in global business and
corresponding movements of supply in both scale and
scope, intra and inter country boarders, thus have
advanced substantially at an almost unbelievable speed
and exceeding ever many folds. Technological
advancements and their adoption and integration into
business and social needs and applications further
broadened the opportunity and scope for business
operations to expand and markets are now changing
6

November 2014

with unprecedented speed and to grab the newer


opportunities, companies are expanding businesses
even into new business lines and unfamiliar areas and
territories.
Thus the globalization created tensions in managing
strategy, people, costs, and risk on a global scale and
its challenges are more diverse, proliferating
multidimensional, rapidly changing, fast forwarding
through innovation and technological advancements
in products and services and helping consumers
improve their lives and lifestyles and companies
strengthen their capabilities and strive harder for their
success in the future and sustain growth.
Supply chain being at the core of all the businesses,
thus become a pivotal corporate function that has
rapidly emerged as the central field of business
necessity, competitiveness and for survival. As a result,
the traditional supply chain is transforming fast
towards a Globally Integrated Supply Chain - that
operates as a more integrated, optimized and
collaborative network across functions, geographies
and business partners.
Supply Chain Redefined : A supply chain is a network of
activities from supply side to demand fulfillment via
various channels till the end customers; it is not an
isolated process; it is an integrated system and a
collaborative network interlinking various activities
interwoven with value chain.
Supply Chain Management (SCM) is defined asa
management of the supply chains as an integrated
process of acquisition and management of flowby
balancing supply and demand in collaboration with all
the channel partners by establishing relationships for
maximizing value for mutual benefits through optimal
management of resources and minimizing risks to
achieve economically, socially and environmentally
sustainable benefits. (redefined by the author of his
earlier definition - Ref. Authors Article published in
Aug2010 issue of MMR)
In this definition the focus was made on acquisition,
management of flow, value addition, integration,
balancing supply and demand, collaboration and
establishing relationships, optimal management of
resources, maximizing value for mutual benefit and
sustainability. Supply Chain Management encompasses
Materials Management Review

the planning and management of all activities involved


in sourcing and procurement, conversion, and all
logistics management activities inbound & outbound
including reverse logistics.
The management of flow (both ways to & fro) includes
five flows (as described by the author in his article
published in Jan2013 issue of MMR). The five flows are
:
1.

Flow of supply (of goods or services - inputs from


the point of origin to the point of consumption and
delivering further value added output or result to
the next level point of consumption and including
reverse logistics);

2.

The flow of information (between channel partners)

3.

The financial flow (payments, refunds and other


financial related matters)

4.

The value flow (with value addition at each stage


or activity) and

5.

The flow of risk

Supply chain management also includes coordination


and collaboration with channel partners, which can be
suppliers, intermediaries, third-party service providers,
and customers. In essence, SCM integrates supply and
demand management within and across companies.
Being a complex function involving various activities,
supply chain challenges may crop up from any of the
above discussed functions and activities. However in
this article we shall confine our discussions to
challenges arising from rapidly changing global
scenario.
Supply Chain Challenges in Rapidly Changing Global
Scenario : Supply chain management is a very complex
process impacted by internal as well as external factors
and various forces directly or indirectly acting upon
throwing potential challenges. The challenges may be
opportunities for growth as well as negative risks on to
the supply chain and therefore impacting it s
formulation of strategy, planning, design and
operational tactics. The major challenges among those
shaping the topography of supply chain strategy and
operational landscape are : accelerated pace of ongoing
globalization of markets- increased cross border
sourcing and selling; overseas market differences and
difficulty in understanding markets and protectionism,
multi-currencies and multiple valuation methods in
different countries, different tax laws, different policies
and different trading protocols in different countries,
lack of management expertise in building up the
overseas logistics and distribution networks,demand
and supply imbalances or sudden demand or supply
shocks, country or regional trade regulations &
restrictions, political & social turmoils and conflicts
in certain regions of the globe and its spiral proliferation
of impacts on trade, dynamic expectations of customers
and their demands, ever increasing quality
Materials Management Review

consciousness, applying the right metrics to manage


supply chains effectively,difficulties in prioritizing
supply chain activities, technological advancements,
shorter economic life cycles of products & technology,
societal demands for higher environmental
performance, and government regulations &regulatory
complications; financial market demands for increased
profitability and capital productivity; collaboration of
stakeholders across the value chain, shared service
centers for logistical and administrative functions;
complex stakeholder requirements and changing work
environments etc. Increasing global operations also
require increasingly global coordination and planning
to achieve global optimums and associated complex
problems with increasing degree of operations and post
M&A supply chain global integration problems as well
as organization level hurdles such as organization
structure, immature collaboration mechanism, resource
mobilization and distributions.
Serving many different customerswith a wide variety of
products and servicesin a right way, finding the right
suppliers, managing factories and warehouses,
transporters, fostering trust with the right partners have
a great impact on todays as well as future business
performance and the challenges of supply chain are in
strengthening linkages with customers, suppliers and
other stakeholders; Understanding long-term
technology needs, trends and adoption; Forming
collaborative relationships with all the stakeholders;
Reducing risks and costs of operations; Gaining access
to global network; Promoting sustainable growth;
Enhancing public perception of the service industry etc.
In the ever raising globalization process most of the
companies are still in the early market entry stage of
globalization and therefore facing a number of supply
chain challenges. All of these supply chain challenges
are major obstacles which may hinder the growth of
both in micro level in the individual company
perspective in the marketplace and at macro industry
and country levels.
Supply Chain Challenges : 10 Cs
The Supply chain challenges in a rapidly changing
global scenario, may be opportunities for growth or
risks to mitigate. These challenges may be classified
into ten categories :
Commercial & Economic Challenges
Challenges of Competition
Challenges of Competitive Advantage
Challenges of Capability Building & Competency
Challenges of Conceptualization & Innovation
Challenges of Collaboration
Compliances & Regulatory Challenges
Challenges of Customers & Market
Challenges of Culture & People Issues
Climate & Environmental Challenges

November 2014

These challenges are discussed here :


Commercial & Economic Challenges: It refers to both
macro & micro economic factors and markets that have
commercial relevance on companies. The outlook of
macro &micro-economic factorspotentially impact the
economic activities and thus prospects of supply chain
arediscussed here :
Macro-economic factors - are broad economic factors
that either directly or indirectly affect the entire
economy and all business participants. Some of the
macro economic factors such as Interest rates, Taxes,
Inflation, Currency exchange rates, Consumer
discretionary income, Savings rates, Consumer
confidence levels, Unemployment rate, Recession,
Depression. Apart from these some other major factors
are :
Shifts in Economic Power : In the recent past there has
been significant shift in global economic power from
the United States and Europe to a number of fast-growing
and large developing countries. The remarkable growth
of emerging markets in general and the BRICs in
particular transformed the global economy. These
economies account for rising shares of global GDP,
manufacturing, and trade and shifting the nature and
direction of capital flows, and the patterns of natural
resource consumption. These shifts are driven by
growing economic integration and interdependence
among economies, particularly through new global
production and supply chains that incorporate inputs
from many different countries. Moreover these
economies are holding huge foreign exchange reserves,
borrowed capital from international capital markets,
and attracted substantial foreign investments.
Global Population Growth : UN projections show a
continued increase in population in the near future with
global population is expected to reach between 8.3 and
10.9 billion by 2050
Governmental policies of future job creation and
economic growth are shaped by the population growth
and age structure of a countrys population. The median
age of the worlds population was estimated to be 29.7
years in 2014 - as per the UN report. The youth bulge
may substantially impact growth prospects of economy.
Middle class population is another positive factor
impacting global economy. In Asia alone, 525 million
people can already count themselves middle class
more than the European Unions total population. Over
the next two decades, the middle class is expected to
expand by another three billion, coming almost
exclusively from the emerging world. For Companies
used to serving the middle-income brackets this is
opportunity to grab the markets of new bourgeois of
Africa, Asia and beyond.
Rising Buying Power : Buying power is an enormously
important force in the economy, indicates general
8

November 2014

wealth of the economy. Countrys economic growth is


mainly attributed to increasing purchasing power of its
people. Purchasing power measures the value of goods
that can be bought with a specific amount of a currency.
Inflation and exchange rates are major factors that
impact the purchasing power. As inflation rises
purchasing power falls. Fluctuating exchange rates
affect purchasing power in relation to other currencies.
As one nations currency devalues against another,
goods in the second country will be higher in the first
countrys currency. The increasing levels of buying
power and associated quality of life and consumption
desires of emerging economies indicates rising
trajectory of economic prosperity and boom in the
business.
International Trade & Business : International trade,
industrialization, exchange of technology, multinational
corporations, and outsourcing are all having a major
impact on the globalization and in turn on economy.
There are several factors affecting economic growth,
mainly demand side and supply side factors. Supply &
demand volatility will remain unpredictable, fuelled
by global economic fragility. Trading is a value-added
function: it is the economic process by which a product
finds its market
Cost of Doing Business : One of the biggest challenges
that companies are facing is reducing costs to conduct
their business and to reduce their supply chain cost.
The supply chains of many businesses are increasingly
shouldering the burden of cutting costs, to boost the
bottom-line for the company, to meet customers price
expectations and to expand or sustain in the business.
To achieve these goals companies are opting to relocate
manufacturing to low cost countries around the world
in an effort to reduce direct and indirect costs and to
minimize taxes.
Global Risks Remain a Concern : The major global risks
impacting economy is fiscal crises in key economies,
global governance failures, profound geopolitical and
societal instability, wars and terrorism, energy and
other resource crises,
environmental risks,
technological risks trading policies and the changes,
government regulations, volatility of local markets,
country risk, and currency risk etc Global scale and
geographically diverse businesses face these global
level economic risks mostly unfamiliar risks that many
find difficult to evaluate. The challenge is to turn the
market opportunities into favor and right riskmanagement and skills to support the operations.
Microeconomic factors - these factors are far less broad
in scope and do not necessarily affect the entire
economy as a whole, but influence business such as
market size, demand, supply, competitors, suppliers,
distribution chain etc. It represents the study of how
members in a society use available resources to make
choices in the marketplace. Understanding
microeconomics helps in effectively researching and
Materials Management Review

promoting products, understanding supply and demand,


designing and implementing business and pricing
strategies etc
Challenges of Competition : Global competition allows
free flow of goods and services across the globe based
on principles of core competency. As global challenges
make the companies move outside of the protective field
of their home markets, they should field their business
based on their strengths. Similarly foreign competition
is also impacting local markets and the
competitiveness. The success mantra is survival of the
fittest recognizing the need to adapt to the ever-rapidly
changing ways to do business in the global environment.
The challenge is to build competitive advantages around
the core competencies of the organization knowing other
domestic and foreign competitors potential strategies,
as well as their competitors strengths and weaknesses.
Challenges of Competitive Advantage : Sustainable
competitive advantage is major factor in the success of
all businesses. Supply chain management is a source
of getting competitive advantage and sustainable
growth for the firms. Globalization, technological
advances, and the rise of entrepreneurship with
innovative ideas and concepts have ushered in a new
era where competitive advantages are hard to attain
and sustain. It is a very dynamic environment where
change is constant and challenges are continuing. Since
competitive advantage isnt sustainable and defensible
businesses need to evolve new concepts, ideas, products
and services and add value propositions to the
deliverables in an agile and cost effective manner to
maintain and grow
Challenges of Capability Building & Competency : As
companies gained global reach, capabilities in respect
to production, fulfillment, customer management,
demand forecasting & planning, sourcing & procurement
capabilities and the subsequent network &
technological skills need to match the global levels in
order to capture growth in a globally connected world,
core competencies across various levels need to build.
The capabilities that required are at business strategy
to operational level at micro business and at macro
national and global level. Competency in general may
be defined as the capability to apply or use a set of
related knowledge, technical / functional know-how,
skills, proficiency, experience, and abilities required
to succeed or accomplish or successfully perform
critical work functions or tasks in a defined work
setting and ability to continuously learn and adapt to
new environment. Building the capabilities necessary
to capture and deliver the increasingly complex
business demands.
Challenges of Conceptualization & Innovation : In todays
fiercely competitive global business environment, with
ever changing customer demands and inevitable shifts
in the businesses corporations are under compulsions
Materials Management Review

to find new and unique ways to create and deliver value


to customers through innovations and the demand to
innovate and deliver better value addition is growing
ever stronger and stronger.
Innovation is creating value and competitive advantage
by implementing new ideas. Innovation is a process of
identifying an opportunity or need and developing an
idea, imagination, concept or creative thinking, by
application of knowledge, information, skill, ability and
other resources (including financial resources) and
using suitable tools and techniques and taking risk to
translate these ideas or concepts into an outcome or
result or change (Commercialization) that is
substantially different orcreative or new or altered
product or service or process or method or way to do
things or systems or new plans or programs or
technology or practice or know-how or a radically new
approach or novelty and diversity that is intended to
create value by solving a problem, satisfy wants / needs
and make some-thing or some-body better off
strategically,
technologically,
economically,
intellectually, socially and that is widely accessible and
adoptable.
Innovation is about creating customer value, and doesnt
necessarily require a new invention, technology or
product. However the challenges are continuously
innovating to create customer value.
Challenges of Collaboration : Collaboration is a process
of mutual co-operation, understanding and willingness
to work together by partnering and establishing
relationships by interdependent parties and engage
with each other with trust by sharing some of the
business values like vision, knowledge, technology,
systems & methods, processes, resources or exchange
of views, data & information of mutual interest through
proper interactions and communication for better
integrated planning, managing, executing and
performance measurement in synchronism for
achieving collective win-win goals by taking joint
ownership of decisions and collective responsibility of
the outcomes to create value proposition for mutual
benefits and to secure the best possible commercial
benefits and gain competitive advantage on sustainable
basis.
In a global environment, the partners in the supply chain
need to work together in a collaborative way with longterm objectives and are therefore need to engage in a
win-win strategy. However bilateral or multilateral
effort by all the supply chain channel partners to jointly
improve the performance and/or capabilities in one or
more of the business functions such as cost, quality,
delivery, time-to-market, technology, environmental
responsibility, and managerial capability, and financial
viabilityetcthrough improved trust and cooperation is
really a challenge.
Compliances & Regulatory Challenges : Dealing in global
November 2014

business needs good understanding and compliances


of various rules and regulations that govern the goods
and services not only of the country of origin but also
that of the destination country apart from internal
policies and practices of the organization.
Regulatory requirements may be country related and
industry / product specific regulations, tax laws of
different countries as well as statutory trade
regulations, labor, health, product safety, security,
packing and the like.
As businesses are challenged by demands of both
internal and external requirements mandated by
various regulations and statutes and increasingly
varied number of global environmental, social and
economic policies and are being pushed to disclose
more and more information about their sourcing and
supply chain practices, they need to balance business
growth and compliances.
Challenges of Customers& Markets : Global businesses
face a range of challenges. As a business grows, different
problems and opportunities arise. Business conditions
change continually. Markets differ and vary. As business
and markets change, business strategy needs to evolve
to suit the changed circumstances. Customers
expectations nowadays are more demanding than ever
and the challenge is even greater. The key to success in
global market is offering products and services for
which customers have a compelling need. Identifying
the true needs of varied numbers of customers across
many countries is not easy given the cultural differences
and value systems, constantly changing product
features, difficult to be locally flexible and adaptable,
barriers to effective communication besides obvious
language differences, difficulties in building
relationships, geographic distances and time zone
differences that make it difficult to coordinate and
collaborate between people. To keep pace, companies
are under intense pressure to continually innovate,
adapt, and reevaluate their business models. Otherwise
they run the risk of making business decisions based
on out-of-date information, which can lead to business
failure.
The Challenges of supply chain are to promptly react to
changes in customer needs and wants or in market
conditions to gain the trust of consumers who are
familiar with their own local brands. Companies have
to establish a shared vision, encourage product or
service innovations, global networking, coordinating
across far-flung geographies and managing
geographically diverse business portfolios, deal with
market agility and quickly respond to demands and
demand fulfillment, optimize the value chains in order
to stay competitive.
Challenges of Culture & People issues : Global market is
a diverse, complex arena where each state, each region
has a culture of its own and it is imperative for any
corporate to understand the multiple sensitivities of
10

November 2014

this market to conduct business responsibly.Culture is


defined as the commonly held standards of what is
acceptable or unacceptable, important or
unimportant, right or wrong, workable or unworkable,
etc., in a community or society. While dealing with
overseas stakeholders there may be issues that needs
to navigate like cultural differences, values & believes;
ethics & fairnesss; attitudes & behaviors, norms &
knowledge structures, expectations & priorities;
differences of region & religion; races & its diversities;
traditions & practices; social & political; gender & age;
natures & temperaments; perceptions & personalities;
tastes & habits; rights & duties and language barriers
that may crop up in communications.
Supply chain management also covers multiple
disciplines and it can therefore be difficult to find true
supply chain talent. Vast reserves of skills, knowledge,
and experience within the global workforce represent
an invaluable asset; however pose greater challenge of
effective people management in tailoring, recruiting,
retention, training, and development processes for
different geographies.These cultural & people related
issues pose greater challenges to supply chain.
Climate & Environmental Challenges : Environmental
security has emerged as the primary issue on the global
agenda as climate change is one of the greatest threats
facing the planet. The climate is changing. The earth is
warming up, and there is now overwhelming scientific
consensus that it is happening, and human-induced.
With global warming on the increase and species and
their habitats on the decrease, chances for ecosystems
to adapt naturally are diminishing.There is potential
long-term economic and societal damage from
environmental catastrophe, as well as the intense need
for technological advances that can provide lowpolluting and secure energy sources
Companies are facing environmental pressures to use
fewer natural resources and offer products made with
environmental friendly materials,efficient production
through the use of cleaner technologies, process
innovations, and waste reduction, Improved product
quality with minimal waste, energy saving, recycling,
reduce the carbon footprint, locate or relocate factories
where the damage to environment is minimal or
regulations are less severe etc.
Globalization brings nations closer together. Tremendous
benefits will reap from an interdependent global trade,
economy and supply chain. All nations have a stake in
the global supply chains success, and only through
international cooperation, the benefits be shared by
all. Every nation has its role for promotion of competition
in the marketplace, prevention of fraud, education of
customers, andto better secure the global supply chain,
better promote unfetteredcross border trade and travel
and ensure future economic growth, prosperity and
harmony.

Materials Management Review

GST SHOULDNT BE OLD WINE


IN NEW BOTTLE
PRADEEP SINGHAL

ndia with a market over 1 billion consumers is one of


the faster growing economies in the world.
Transportation and logistics industry play an
important part in countrys economy.
However, the evolution of the transportation sector has
been plagued by inefficiency due to poor road
infrastructure and sub-optimal supply chain networks.
Supply chain design and implementation in India has
been dictated more by tax considerations rather than
efficiency. Goods are subjected to a multitude of taxes
like excise duty, central sales tax (CST), value added tax
(VAT), entry tax and octroi, among others resulting in
cascading taxes and higher administrative work. This
in turn entails longer lead times and higher costs. These
taxes administered at various levels by the central
government, state governments and local municipalities
lead to a multiplicity of authorities, multitudinous
documentation, bureaucratic impediments and
escalating taxes.
To overcome the taxation problems, Goods and Services
Tax (GST) is the need of hour for country as well as
transportation and logistics industry.
Finance Minister Arun Jaitley has announced to
introduce the Constitution Amendment Bill for
introducing GST and get it passed by the end of financial
year 2015. It s notable that in 2000, Vajpayee
Government first started discussion on GST by setting
up an empowered committee. While presenting the
Budget for 2007-2008 then finance minister P
Chidambaram had announced that that GST would be
introduced from April 1,2010.
However, the implementation of the new tax regime is
yet to see the light of the day and has missed several
deadlines now due to the flip-flop of states on important
issues and an overall lack of consensus.
Several states are still not comfortable with the GST
design. Apart from demanding petroleum, alcohol,
natural gas, purchase tax and entry tax be out of the
ambit of GST, the states fear that the GST will take away
the fiscal autonomy they enjoy. There is also the issue
of compensation to states in lieu of the phase-out of the
central sales tax.
Why is GST a crucial element of change for the road
transportation sector? How much is GST a game changer
and what is its impact on the commercial vehicle space?
To answer these questions one needs to look closely at
how these legislative changes impact the storing and
sales of goods from the manufacturer to consumption
centres.
The GST modelling has indicated that India can be
efficiently served by stocking goods across 5-6 key
locations or hubs: National Capital Region (NCR Delhi)
Materials Management Review

to service the northern market; Mumbai/Pune to serve


the western market; Chennai/Bangalore for southern
markets; Kolkata, the eastern region, and one location
each to service central and north eastern regions in the
country. This change is expected to create a true hub
and spoke system of transportation.
In effect, we would have large warehousing spaces in
each of the hubs to cater to the markets in the vicinity.
In the initial phase of GST implementation, it is expected
that large number of warehouses across multiple states
(that were around only for tax purposes) will be closed
leading to consolidation of goods, which in turn will
require large-sized warehouses in select 5-6 hubs that
will dispatch goods directly to consumption centers.
Consolidation due to GST changes can impact the road
transportation sector in many aspects.
For example, reduced paper work and lower waiting
times at check posts will result in quicker turnaround
time for trucks that means higher asset productivity,
leading to better prof its for transporters.
Higher containerisation of cargo could lead to higher
efficiency of loading and unloading and it will reduce
the pilferage and damage during transit.
In the short- to medium-term, post-GST implementation,
the demand for large tractor-trailers and higher powered
commercial vehicles could increase with a
corresponding increase in demand for vehicles for last
mile connectivity.
If development of new micro markets fructifies and future
warehouse location strategy reflects upon the current
scenario, medium duty trucks and lower end (power) of
the heavy duty range trucks could grow significantly
A direct fall out of GST would be increased
competitiveness: efficient sourcing. This can lead to
higher exports of goods from India translating to higher
demand for trucks
Higher load carrying vehicles means that a fewer
number of vehicles are required. With driver shortages
hitting the industry hard, an unlikely benefit could less
pressure to increase the talent pool of truck drivers.
There are undeniable benefits of GST, and will have a
positive impact on the transportation and warehousing
provided GST should not be old VAT in new form but new
law with all product and services in it without exception
of entry tax, octroi or any other tax. Also the there should
be system of interstate credit, and that material is
always transported tax paid so that there is no need of
in transit forms, behati etc.
Source : Newspaper

November 2014

11

SKILL DEVELOPMENT AND EMPLOYMENT


GO HAND IN HAND
UMA GANESH
CEO GLOBAL TALENT TRACK
The crucial first step is for the industry to wholeheartedly
support the certification processes laid down by the sector
skill councils.

ecognition of the importance of skilling the youth


of the country has led to setting up of the National
Skill Development Authority, the star programme
under the aegis of National Skill Development
Corporation and definition of job roles and qualification
frameworks. The mission mode approach to skill
development by various State governments to encourage
youth to get skilled with the objective of making them
employable has led to 0.6 million getting skilled between
2010 and 2013, going upto 1 million in 2014. Yet
employability cannot be enhanced by skills training
alone, it is a complex problem impacted by several
factors. It would be feasible to find solutions for
enhancing employability of the youth only by
appreciating and decoding the underlying factors that
determine the success rate.
The first and most critical dimension related to
employability is the recognition of skills certification
and the value it is accorded to by the industry. Industry
often laments on the lack of skilled workforce both in
terms of quality and quantity which has led many
companies to create their own models of talent sourcing
and developing the required skills. In the 90s, IT industry
started the trend of hiring engineers from tier 2 colleges
and putting them through the intensive three to six
months training programme that was designed and
delivered through in house R&D departments and post
training putting them through on the job training for
another six months before they could become billable
resources.
Although the number of employees have not been as
large as in the case of IT industry, manufacturing industry
too has been grooming engineering and other technical
talent through apprenticeship programmes and
customised training programmes. In both these models,
all aspects of training, namely design, content, pedagogy,
prerequisites of the candidates who undergo the
programme, assessment and final certification are
defined by the respective organisations. With the setting
up of the sector specific skill councils which are
supported by industry representatives, it is of paramount
importance that corporates adopt the qualifications and
certification as the benchmark for recruitment and career
development within their own organisations. Specially
since the assessment is carried out by third party
agencies, such unbiased processes would help create
standardisation of roles and job specifications and
strengthen the case for acquisition of the right skills
and acquiring industry certification as pre requisites
for employment opportunities.
In reality, it has been observed that many organisations
are slow to adopt the industry standards and continue
to follow their own selection and training processes
despite being the advocates of sector skill councils. The
reasons for this could be manythey may be waiting
for the standards to mature, some of them would be
keen for majority of the corporates to adopt these
standards, in some other organisations, the
12

November 2014

representative of the company in sector skill council


has limited mandate to make suggestions of their
requirements with no authority to implement for
themselves and some others face the challenge of
dismantling their well set methods of training and
development function they are used to, over the years.
Skill development and employment go hand in hand and
the crucial first step is for the industry to wholeheartedly
support the certification processes laid down by the
sector skill councils making it mandatory for hiring with
a defined set of timelines. So long as large employers
continue to follow their own hiring and assessment
processes, the goal of the nation to improve the
percentage of skilled resources from 5% of the workforce
will not become a reality and the demographic dividend
would remain a mirage.
The second important dimension is understanding the
aspirations of the youth and helping them develop
relevant skills and capabilities aligned with these
aspirations. It is also possible that the aspirational job/
emoluments may not be practical expectations based
on their qualifications. In such cases, counselling and
helping them with the road map to get to their aspirational
goals forms a vital part of the skill development process.
In our keenness to foster skill development, various
schemes are being designed by governments such that
they would motivate the youth to undergo the skill
development programmes. Yet the youth are unable to
fully comprehend the relevance of skills certification
and hence in many cases their attendance in the training
programmes is also a matter of concern. When they find
their peers and colleagues joining organisations without
skill certifications and drawing similar salaries as those
who have undergone the skill development programmes,
they are unable to fathom the significance of time, effort
and money spent on skill acquisition. Further, if there
are alternates available for them which provide more or
less similar value as post skill acquisition based jobs,
skills acquisition is not viewed seriously by the youth.
Therefore it is imperative for the industry to discuss and
agree on the adoption rates with timelines for skill
certifications to become the prerequisites for hiring and
promotions. At the same time, it is extremely important
to create awareness about the National Skills
qualification framework and the alignment it offers with
the formal education qualifications recognising the
related work experience with respective to NOS (National
Occupation Standards). There is an urgent need for
educating the youth about how this framework could
help them move towards their aspirational employment
and beyond on the strength of skills, step by step.
While India is not a small country where it would be
possible to come up with the perfect plan and a match
for skill gaps, industry requirements and the supply of
talent and therefore the dynamics of multiple models
and channels for employability need to be in the play,
the efforts towards skill development would be
successful only when the linkages of employability,
awareness, counselling and certification adoption rates
are all simultaneously addressed and orchestrated.


Materials Management Review

MANUFACTURING IN INDIA: FUTURE SCENARIOS


SOUMITRA BISWAS-ADVISOR (DEPT. OF S&T)-TIFAC, M THAMARAI SELVAN
SURESH BABU MUTTANA JANCY A, GAUTAM GOSWAMI-SCIENTISTS-TIFAC
soumitra2000@gmail. com
Indian manufacturing is currently at the crossroads
braving more competitive manufacturing means and
strategies from other nations. Thus, it would be
interesting to portray the likely scenarios, which may
prevail 20-25 years from now and how they will influence
the manufacturing sector in India.

ANUFACTURING ACTIVITIES act as the


multipliers in value-chain starting from cheap
raw materials to more expensive
intermediates to sought-after products, which can be
positioned to command a very high value appreciation.
The entire gamut of manufacturing by adding value at
every stage of production can thus have a positive
impact on national economies. Indian manufacturing
sector currently contributes around 26 per cent to the
GDP, which amounts to a mere 1.8 per cent of the world
manufacturing output. With the number of middle-class
households swelling by 12 times and urbanization of
population increasing to 38 per cent by 2025, India
would be the fifth largest consumer market in the world.
This promises a huge opportunity for Indian
manufacturers to cater to the domestic demand in
addition to the international market.
In Indian economy, agriculture while employing 37 per
cent of the workforce contributes 16 per cent of GDP
vis-a-vis manufacturing sector employing 12 per cent
of the manpower contributing to 26 per cent of GDP. It is
often said and seen from international experiences that
the development of a country is directly linked with the
share of tertiary sector (services) to the countrys GDP
as the tertiary sector enjoys the highest value-addition
potential. In India, services sector enjoys the major
share (~58 per cent) of GDP while employing ~20 per
cent of the workforce. For poverty reduction and better
prosperity of people, creation of more employment
avenues assumes importance. It is anticipated that with
the increased productivity in agriculture, the sector
would disengage surplus manpower, .which is expected
to be absorbed in the manufacturing sector. Even the
highly performing services sector alone cannot
meaningfully employ 250 million new job seekers in
the coming 15 years. Moreover, the sector typically
employs less people with specific skill sets. As skilling
or re-skilling of people requires a longer time horizon,
the emphasis on tertiary sector based economy tends
to leave out majority of people from the development
Materials Management Review

process in the near term. Hence, manufacturing assumes


key role especially for developing countries like India,
where the sector can potentially generate large scale
employment and meaningfully engage sizable populace
in economic activities.
The aforesaid discussion establishes the contribution
and criticality of manufacturing sector in Indian
economy. It is important to note that Indian
manufacturing is currently at the crossroads braving
more competitive manufacturing means and strategies
from other nations. Thus, it would be interesting to
portray the likely scenarios, which may prevail 20-25
years from now and how they will influence the
manufacturing sector in India.
Methodology : The first step of scenario building
exercise involves identification of key Drivers grouped
under broad categories (STEEP - Social, Technological,
Economic, Environmental & Political) for the specific
sector. They are the most important factors, which have
almost direct cause-effect relationship with the sector.
For the manufacturing sector, the key drivers can be
summarized as:






Technological (R&D, innovation, energy efficiency &


emissions, access to energy, design & quality, IT
enabled & embedded manufacturing, digital
business etc.)
Economic (entrepreneurship, access to funds,
financial & tax systems, marketing & export
support, FBI, aligning with global business,
domestic market, infrastructure, merger &
acquisition, IPR etc.)
Environmental (regulatory framework, clean
technologies, reuse & recycle etc.)
Social (demographics, access to education,
urbanization, disposable income, life style changes,
skill levels etc.)
Political (geo-political stability, economic reforms
& industrial policies, labour laws, land acquisition
& availability, transparency in governance etc.)

The drivers as per their nature of uncertainty and impact


on the manufacturing sector were subsequently ranked
High and Low and tabulated as follows:
The drivers having low impact are not considered for
November 2014

13

further analysis due to their insignificant influence on


the future. The drivers grouped under the quadrant, low
uncertainty & high impact are expected to occur in all
probabilities and thus they would be inevitable across
the scenarios. The drivers grouped under the high
uncertainty & high impact, can be considered as the
game changers for the future of manufacturing in India.
From the aforesaid quadrant, drivers were grouped
under two categories of overarching and critical
uncertainties namely, technology and economics for
generating the scenarios.

Manufacturing Sector -Likely Scenarios


SCENARIO 1 : Trouncing Tiger (Break-through Innovations
& Economic Buoyancy)
This is India of our dreams poised like a Royal Bengal
tiger symbolizing majesty and magnificence. We
imagine India has been reinventing its golden past when
the world came here to share her pie of prosperity. The
double-digit GDP growth for more than a decade has
placed India in the top three of global economies. India
now commands around 10 per cent share of world trade
and has been championing technology led growth. India
is now home to high-end manufacturing operations
producing low-volume high-value special purpose
applications for the world. On occupying the global
leadership role, India promotes peace and prosperity
among all her neighbours by strengthening and
augmenting bilateral and regional ties. With the overall
improvement in economic performance, Indians enjoy
better access to and affordability of quality healthcare
and habitation. The enhanced societal values, human
rights and gender equity have all contributed to position
India several notches upward in the Human
Development Index scale.
The demography has shaped like a perfect diamond with
more than 45per cent population in the productive range
contributing effectively to economic activities. The entire
productive band of the population has been
meaningfully and effectively employed.

The extremes of critical uncertainties (technology &


economics) were considered as follows :

The aforesaid extreme of uncertainties, when plotted


would depict four scenarios as below:

The big cities have long stopped growing as economic


activities are more widespread and decentralized, thus
turning smaller towns into near-metros with urban
population touching 40 per cent with smaller cities
enjoying excellent road, transportation, optics
connectivity with improved urban amenities, health,
education and recreational infrastructure thus
attracting and retaining talents for creation of wealth
in dispersed locations.
All this have brought out perceptible changes in lifestyle
with double income family being the accepted norm.
People are concerned and conscious about healthy
lifestyle and food habits with greater sensitivity about
environment. With a burgeoning middleclass (50 per
cent of population), India is now the third largest
consumer market in the world.
Additive manufacturing technologies, adopted earlier
for prototyping have been deployed and used
extensively for developing various industrial
applications. These technologies have been found to
have manifold growth, specifically in medical and
healthcare applications. Modularity introduced in
manufacturing has enabled flexibility of the operation
both in terms of its range of functions and also its ability
to be easily reconfigured in the face of changing
conditions (thereby focusing on low volume production).

14

November 2014

Materials Management Review

Machine vision, diagnostic tools (acoustic/ vibration),


machine-to-machine (M2M) communications, wi-fi
enabled workstations are effectively being used.
Interactive decision support expert systems have helped
capturing and documenting expertise generated and
assimilation of knowledge gained by individuals.
Application of high end advanced sensor and fuzzy logic
systems have led to advent of novel products, with more
active interactive surfaces, specifically in automobiles.
Virtual reality labs and online design clinics have acted
as catalysts for growth of SMEs in the country. The
erstwhile sprawling and huge complexes for heavy
chemicals, petroleum refineries and petrochemicals are
now smaller, compact and more efficient, thanks to
process intensification techniques deployed. These
techniques have also enabled significant reduction in
energy consumption and emissions. Near net processes
adopted in component manufacturing helped in effective
use of material resources and energy for production.
The improved affordability has fuelled the level of
aspirations amongst Indians demanding products of
superior design and performance quality. The
consciousness for better quality and services has been
pervading thus prompting the manufacturers to tone up
their quality of inputs, methods of manufacturing and
after-market services for their existing products. The
technological breakthroughs have simultaneously
enabled manufacturers offer innovative products to
novelty savvy clientele with their higher disposable
incomes. Manufacturers now spend more than 4 per
cent of their annual turnover for their research and
design development.
With stricter norms on emissions, substantial efforts
are directed to improve the energy efficiency of any
production operation and transportation. Clean energy
technologies have been well established with reduced
raw material consumption, effective reuse & recycle
and carbon emissions. With the adoption of
environmentally benign technologies, climate change
is under controlled realms limiting the global warming
levels within 2 deg C as targeted.
E-Governance has taken its roots with complete
enumeration of individuals across the country and all
C2G activities have been computerized. Operations such
as birth/death registration, registration of properties,
vehicle and business, payment of all taxes, issue of
passport, driving licenses have all been brought on eplatform for efficient and transparent operations.
All the relevant Government policies both at the Central
and State levels concerning the manufacturing sector
are in unison creating highly conducive business
environment. Major hurdles such as labour laws, land
acquisition, women employment have been resolved
amicably with a win-win approach for the stakeholders.
The companies are allowed to retrench surplus labour
Materials Management Review

force only when they contribute 1 per cent of their total


turn-over to the National Skill Development Fund. The
fund, professionally managed for effective returns, is
deployed in skill development programmes of the
retrenched labour. This is essentially a safety net, where
a worker is trained for newer or higher skills and
supported by the minimum wages payable during the
training period. The programme also helps in suitable
placement of trained workers thus providing an
opportunity in upward career mobility.
India is completely aligned with the global economy
with seamless transfer of funds, technology and even
manpower. Indian corporate houses have been
routinely accessing capital from International sources
on the assurance of higher returns. The corporate sector
has now mastered the game plan of mergers &
acquisitions especially for technology & IPR related
issues trying to transcend geo-political boundaries.
Small scale entities and start-up entrepreneurs are being
supported by angel investors and venture capitalists
for really worthy innovations by helping them achieve
global market or by enabling them get gobbled up by
bigger players. Entrepreneurship has been the new
mantra of success in India creating wealth, generating
employment, fostering innovation and projecting Indian
cerebral success stories to the world.
The fiscal system put in place by the Government offers
no ambiguity; they are simple, transparent and
encouraging for the economic activities. With the
application of IT enabled tax collection & payment
infrastructure, human interfaces have been totally
eliminated.
Deployment of appropriate technologies coupled with
break-through innovations, astute fiscal management
and prudent governance, manufacturing sector has truly
leapfrogged with the employment of factors of
production in an effective manner. With the balanced
resource allocation and progress among agriculture,
manufacturing and services, India has been on the right
path to sustainable development.
Healthiest situation, where the innovation led growth
has created great national wealth, effectively employed
the entire productive band of population and positioned
India as the knowledge-power. The economy has
witnessed major transition from agriculture to
manufacturing to services deploying the surplus
manpower from the primary sector. There has been
simultaneous upgradation of skill sets across the
productive population. The scenario fuelled by innovation
has generated a whole lot of aspirations & ambitions
among the people. In order to sustain the growth
momentum, the country should steadfastly pursue a
steep innovation trajectory buoyed by vibrant economy.
India stands tall among all the nations in the world for
her dogged pursuit of non-violence, promotion of
November 2014

15

fraternity, and extending helping hand to others in


distress. The knowledge-based growth and economic
prosperity have gone a long way to promote the
happiness and confidence exuded by her citizens.
SCENARIO 2 : Swaying Elephant (Economic Prosperity
but Low Novelty Regime)
Indian economy has progressed well with 10 per cent
YoY growth in this scenario ushering in simultaneous
changes in urbanization and life style of people. India
has been successful in attracting substantial share of
FDI, which has bolstered the infrastructure and basic
manufacturing operations. Huge funds have also flown
in as FII in Indian equity market. This has created a
strong tertiary sector based economy strengthening the
services sector and generated jobs with fancy pay
packages. Sectors such as banking, financial services,
insurance etc. have all flourished well catering to the
international trade and commerce.
People are content with their basic needs being met
with easy efforts. India has long forsaken the journey
towards technological excellence. Indian innovations
are at low key with the gifted scientific minds leaving
the country for better intellectual pursuits elsewhere.
India has reconciled itself to be a cheap manufacturing
base where the global players with their patented
technology know-how congregate to convert them into
products for domestic consumption.
India has done rather well in primary industrial sectors
such as manufacturing steel, aluminium, cement,
textiles, power generation, petroleum refining, mining
and has been meeting the domestic demands. The entire
industrial sustenance depends on acquired
technologies. The national economy has bloated in size
and the domestic market has occupied huge elephantine
volume without any cutting edge technology while
missing out the global leadership and esteem.
This scenario may not be sustainable in the long run as
international investors are on a continuous look out
for cheaper options. With any such economically
attractive locations, India may lose all her competitive
edge and the investments may leave Indian shores
denying the economic benefits to the country.
The economy tends to portray a happy situation without
strong fundamentals. With the services sector leading
the pack, the wealth distribution is skewed benefiting
only the select section of people. India is placed rather
lowly in the world in technology value-chain. The
situation will lead to creation of low-skill job
opportunities in basic industrial sectors. By neglecting
technology innovation in manufacturing sector, the
economy may not be sustainable in the long run and
may be quite vulnerable to vagaries of the extraneous
forces threatening the countrys stability.
SCENARIO 3 : Foraging Fox (Technological Excellence faced
16

November 2014

with Economic Slowdown)


This scenario depicts India where technological
development and economic progress are not in tandem.
This is rather a sad story where the individuals are
worshipped around the world while India whines in
agony.
India has been squabbling with fiscal policies tweaking
them on short-term emergencies. Without aligning with
the global economy, India has focused more and more
for indigenization. The world has moved on. The
developed countries have located greener pastures to
park their FDIs. With the investments from overseas
sources (FDI & FII) drying up, Indian economy is in
doldrums. Confronted with burgeoning energy import
bill, India has hardly any surplus to invest in
manufacturing, education and health. So while economy
has been stagnating without newer employment
opportunities and creation of wealth in real terms, it
faces the fangs of inflationary pressure for acute
resource constraints.
With the overall gloom in the economic scenario, the
national research and educational institutions of
international standing have achieved great intellectual
heights. They have been working on cutting edge
technologies adding to their kitty of breakthrough
innovations on a regular basis. Their scientific
dissertations are world class; intellectual properties
are protected globally. The industrial R&D outputs have
also kept pace. But in a stagnating economic set up,
their innovations are not exploited commercially in
India. International companies routinely approach
these pathfinder Indian institutions lapping up their
technologies with handsome handout of royalty. Sadly
enough the fruits of such innovations, which could have
been the game changers for Indians have eluded them.
The scenario goes to prove that economics alone can
nurture and nourish innovation. Innovation has been
the key to a smarter nation creating high skill-high value
jobs, promoting entrepreneurial spirit, promising great
economic returns thereby carving out the global
leadership role. But to foster innovation and reap these
benefits to society in general, economic prosperity is
the effective enabler.
The scenario typically depicts cunning but opportunistic
foxes foraging the best for themselves in a forest.
SCENARIO 4: Marauding Monkeys (Economic Downturn
along with Technological Obsolescence
This is the scariest of them all where, India is delegated
to dark dungeons. Due to extreme fallouts in geopolitical
scenario and also for the lack of political will and
leadership, governance has gone into complete
disarray. Enhanced hostility by its neighbours and
mindless acts of terrorism are threatening the nations
stability at times. Self-serving, priorities of political
Materials Management Review

leaders have taken over the national interests. Regional


imbalances have cropped up resulting in a whole lot of
internal strife, inequitable development has caused
widespread discrepancy and the federal structure is
too constrained tending to collapse. All these have
resulted in irreversible damages to Indian economy
shoeing away the global investors. The technological
prowess has taken a backseat and socio-economic
system is in tatters. World has firmly stamped seal of
the failed state on India.
Industrial activities are at the lowest ebb and
intellectual pursuits are no longer respected. The total
darkness of despair has descended on India. The people
are the worst sufferers with no employment
opportunities and augmentation of disposable income,
faced with spiraling double digit inflation. In such a
gloomy scenario people have lost their self respect and
social values, always trying to fend themselves from
impending perils and pitfalls. The scenario typifies
when the monkeys take over the forest with no orderly
hierarchy, no laws and rules of the games but might
and muscle are deployed for immediate sustenance.
The scenario is the most pessimistic depiction of the
future, where not a single parameter has worked in the
countrys favour. Economic bungling, delinquency in
governance and geo-political strife have all pushecHhe
country to its nadir, to almost an irreversible regression,
where India is writhing with pain. In such a gloomy socioeconomic backdrop, intellectual pursuits have taken a
backseat and technological excellence is long forgotten.

consumption. Hence, it is imperative that the economic


progress should pervade worldwide and the geopolitical strife be minimized. While scripting the
countrys future, India runs the risk of slipping into
Scenario - 2 (economic prosperity but low novelty
regime) by choosing an easier path to contentment. It is
hoped that Indians with their preference for education
and allied skill development, would champion the
knowledge creation activities especially by exploring
entrepreneurial avenues. This is expected to steer the
country firmly into knowledge leadership regime.
The scenario analysis may be construed as wishful
thinking for the collective good of people along with a
wish list of actionable options but it cannot be
considered as the forecast outcome unless buttressed
with the right intents and initiatives.
Source : YOJANA, July 2014


CUSTOM EXCHANGE RATES


CUSTOM EXCHANGE RATES (All rates per unit)
w.e.f. 20th October, 2014
IMPORT

EXPORT

54.35

52.90

168.65

159.45

Canadian Dollar

55.75

54.50

Conclusion : Thescenarios attempt portrayal of India


20-25 years from the current time frame. Hence, in the
best case scenario, India would have attained the
developed country status by treading the path of rapid
economic progress and adopting appropriate policies
in the intervening period. With such economic
attainment, manufacturing activities in the basic
industrial sectors of steel, cement, power generation
etc. while following a steep growth trajectory initially
would tend to taper off eventually. The bulk
manufacturing operations would be expected to grow
@ 3-4 per cent purely on incremental and renewal basis.
Indian manufacturing sector would be positioned in
high-end of the value-chain focusing mostly on
customized & flexible production, end-use specific
applications development and precision engineering.
Such high-value manufacturing activities may not create
large-scale job opportunities in the long run and
services sector in the developed economy is expected
to offer valued career options for majority of the
population with higher skill sets.

Danish Kroner

10.65

10.30

EURO

79.00

77.10

8.05

7.90

220.65

208.10

Newzealand Dollar

48.75

47.35

Norwegian Kroner

9.75

9.45

101.25

99.00

48.95

47.90

South African Rand

5.60

5.30

South Arabian Riyal

16.95

16.00

8.70

8.45

Swiss Franc

65.40

63.85

UAE Dirham

17.30

16.35

US Dollar

62.30

61.30

An important inference in the best case scenario is


simultaneous prosperity of the global economy. India
being a large country with a humongous domestic
market can absorb shocks to some extent but cannot
prosper in isolation purely on the merit of indigenous

Japanese Yen

56.90

55.55

Kenya Shilling

71.35

67.25

Materials Management Review

CURRENCY
Australian Dollar
Bahraini Dinar

Hong Kong Dollar


Kuwaiti Dinar

Pound Sterling
Singapore Dollar

Swedish Kroner

Source : www.dailyshippingtimes.com/customexchange-rates.php
November 2014

17

SUPPLY CHAIN EFFECTIVENESS : KEY TO PHARMA PROFITABILITY


To survive and stay profitable, pharma companies will need to restructure their supply
chain design, build innovation and stability into the organisations culture
PALLAB DE, ARJOON ROY, ABHISHEDK KUMAR
pallab@techie.buzz.com

t present the pharma market in India is


approximately US$22.6 billion and expected to
grow by 14.4 per cent to reach US$ 27 billion
in2016.Thetop 10 companies make up for more than a
third of the market. The Indian pharma in-dustry is highly
fragmented with about 24,000 play-ers (330 in the
organised sector). Globally, the Indian pharma market
(IPM) is ranked 3rd largest in volume terms and 10th
largest in value terms.

improving time to market for new drugs. Over the last


decade, the requirements and restrictions for the
pharmaceutical supply chain have become a more
complex system of hospital, provider and physician
networks. As a result, the channel through which
pharmaceutical sales occur has become more complex
with an increasing need to develop improved supply
chain capabilities.

The pharmaceutical industry had enjoyed high gross


margin and patent protection for years to-gether and
there had been little need to balance costs, inventory
and customer service. Hence less focus was given to
improve operational efficiency and supply chain
effectiveness. Most of the top 10 players had growth
rates of over 18 per cent for the 12 months ending July
2010 However, this picture is now changing.
Generics are going to dominate the market while patentproducts are likely to constitute 10 per cent of the pie
till 2015, PricewaterhouseCoopers and Evaluate Pharma
estimate that from 2012 to 2018, nearly $150 billion of
profit will be lost to generic drugs. With this impending
loss of revenue, pharmaceutical companies face a
challenge. Not only must supply chain leaders make
their supply chains more effective, they must also
improve the effectiveness of research and development
(R&D) spending. With fewer new products successfully
navigating the drug approval process, and more drugs
leav-ing patent protection, the pharmaceutical
compa-nies market is becoming more competitive.
Effective R&D spending has always been a critical part
of a successful pharmaceutical company.
Pharmaceutical production is getting more complex as
companies expand their portfolios in order to align to
rapidly changing markets. The in-dustrys current
supply chain model will not be able to meet these
challenges forever. There is an urgent need to develop
new capabilities and ways of working to transform the
entire value chain on every front from speed, efficiency,
flexibility to reliability. To survive and earn profit moving
forward, companies will need to reconsider their supply
chain design and build both innovation and stability
into the company culture.
The first decade of the pharmaceutical supply chain
was based on molecule discovery. The his-toric focus
of the pharmaceutical supply chain was building a
strong personalised relationship with the doctor and
18

November 2014

The pharma industry can learn much from FMCG and


other industries that have developed efficient and
effective supply chains. Inventory holding for a pharma
company is about 258 days whereas it is about 72 days
for a FMCG company. A typical pharmaceutical
Materials Management Review

manufacturer has a lead tune of about 150 days to


deliver to distribution centers out of a formulation and
packaging plant whereas the lead time is about 5 days
for a FMCG company. Product obsolescence is 3 per
cent in pharma but it is only 0.5 per cent in FMCG.
FMCG companies linked their supply chain strategy to
their business strategy. They have developed strong and
responsive supply chain. Their capabilities in these
areas have become a sustainable source of competitive
advantage, delivering superior service and flexibility
at dramatically lower cost.

Pharmaceutical companies have historically high cashto-cash (C2C) values in the range of 200 to 250 days.
Despite large investments in Enterprise Resource
Planning (ERP) and Advanced Planning Systems (ARP),
cash-to-cash values have gone up, not down, over the
past decade. The pharmaceutical industry has long been
a laggard in the use of new techniques and technologies
to manage in-ventories. In the world of high gross
margins and global expansions, it has just not mattered
as much. Although, inventory is only one of the three
com-ponents of C2C; along with Payables and
Receivables, each of the three levers plays a large role
in the overall movement of the C2C value.
Companies in FMCG, metal, mining, automotive,
chemical etc. started operations excellence initiative
in manufacturing areas of the Supply Chain cniite some
time back and achieved phenomenal results to reduce
the conversion cost and all wastages. With continuous
drive on operations excellence, these companies were
successful in bringing down their OEE (Overall
Ecruipment Effectiveness) to 70 to 80 per cent range.
These were achieved through reduction of downtime,
setup time and improvement of performance rate.
Pharma companies had little focus in these areas and
their OEE hovered around 40 to 50 per cent. High
downtime, setup time and low performance rate leads
to many other problems across the supply chain such
as high inventory of raw materials, finished goods, low
utilisation of manpower, late delivery, product
obsolescence. Manpower cost for a typical pharma
company is about 15 per cent of their total cost which
is very high as compared to other manufacturing
industries where it is 8 to 10 per cent. By focusing on
operations efficiency improvement, pharma companies
can become lean and agile to respond to changing
de-mands of market.
FMCG manufacturers build their production plans on
the basis of point of sale information from their retail
customers. So far the healthcare sector has only
managed it in pockets. In order to scale in a costeffective way, these pockets must be con-nected. In fact,
because these efforts are not con-sistent or global, they
may actually raise the cost and complexity of the global
Materials Management Review

healthcare supply chain by spawning incompatible


requirements and systems. To build cost-effective global
interconnectedness, the healthcare industry could align
around a single set of global standards that support
data interchange, processes and capabilities required
to cost-effectively achieve the kinds of benefits.
Pharma companies have to design supply chain suitable
for its own product, market, and customer groups with
appropriate segmentation like high volume, high
margin, generic and patented drugs. Post-ponement
strategies will reduce overall inventory lev-els and SKU
complexity and will add flexibility to product design
and packaging. Manufacturing plants need to be
restructured into most efficient and economical
configuration for delivering mature products and
innovative drugs more efficiently and with high
responsiveness.
Understanding the supply chain tradeoffs and striking
the right balance between them is critical for managing
the performance of supply chain. Key performance
indicators must be identified and aligned with the
business strategy. Target setting has to be done against
industry benchmarks. Understanding waste in all its
forms, identifying them and implementing actions to
eliminate them will give an edge in performance
management.

Cash-to-Cash Cycle (days) for other industries


Automotive
Chemical
Consumer products
Food and beverage
Hard disk drives
Hi-tech and electronics
Retail
Pharmaceutical

94
77
18
40
15
5
13
179

November 2014

19

On technology front, pharma market leaders have


started using new technologies to track and trace
product movement, to check counterfeiting and analyse
demand. Technologies that are widely used for
forecasting and replenishment are 2D Bar Codes, Radio
Frequency Identification (RFID), Digital Mass
Serialization (DMS)Dig-ital Mass Encryption (DME) and
Data analytics.

Disciplined business planning processes have to be


deployed to support the companys portfolio
management strategy and product transition plans.
Daily management team involving sales, marketing, and
finance functions is required to generate a forecast for
individual drugs and family of drugs. Quarterly, monthly
and daily plan has to be prepared as per business plan
for the year us-ing a mix of forecast based (for mature
products) and replenishment based model (for newly
developed drugs).
20

November 2014

Pharma companies may adopt collaborative approach


to logistics management by engaging with specialised
pharmaceutical LSPs (Logistics Service Provider).
Suitable logistics network according to product
categories (high volume/low margin ver-sus low
volume/high margin) can be developed. In-novation in
IT may help in a great way to ensure supply chain
integrity and OTLF (On Time Delivery in Full). Pharma
companies are required to adopt operations
improvement initiatives such as Lean, TPM and Six
Sigma with the common goal of achieving excellence
across all functions.To make this initiative successful
companies have to develop a core team supported by
multiple cross func-tional teams and di-rected by senior
man-agement to drive change and improve Pharma
companies may adopt collaborative approach to
logistics management by engaging with specialised
pharmaceutical LSPs ment. Training on problem solving
methodologies, soft skill, and technical know-how have
to be major focus area to build internal capability.
Business goals to be aligned with departmental and
functional goals and to be linked individual goals till
floor level managers.
Improvement in supply chain performance will enable
the pharma companies to overcome the prob-lems they
are facing today and will add huge strate-gic benefits
to them. Multifold benefits will be achieved in reduction
of lead times, inventory lev-els across the value chain
and cutting product ob-solescence. It will reduce drug
shortage and provide affordable healthcare to
thousands of people.


Materials Management Review

NEXT TRENDS OF HR, FROM BUSINESS


PARTNERS TO KEY DECISION MEMBER IN BOARD
MR. BHAVESH UPADHYAY
SR. VP-HR, INTAS PHARMACEUTICAL LTD.
bhavesh_upadhyay@intaspharma.com

here are three kinds of HR professionals, one


they work as good HR manager, Play the role of
Management of Human Resources. Second one
is slightly batter who also focuses on people
development and work as business partnershipAnd
third category is very rare, where HR person see from
Entrepreneurs perceptive. Seeing things from CEO or
MD perceptive and dont wait for instructions from
management.
Here, we would like to talk about third category of HR
professionals where there are working hard to match
the expectation of common vision and goal. You can
see huge change in mind set of HR professionals soon
as expectations of Management is increasing day by
day. Now time has come where together, HR
professionals and management can work in
conjunction to deliver innovative solutions to the
challenges facing companies across the board. Solving
complex problems, communicating with stakeholders,
and creating productive processes are all tactics just
part of the skillset of HR professionalsmaking the
partnership with leadership a win-win.
As business growth becomes a top priority for
organizations across the country and the globe, The
Third category of HR leaders will be expected to
partner with senior leadership at companies to devise
and implement strategic plans dealing with an
effective growth, retention, engagement, and total
compensation. Working together from the beginning
to define strategic values and develop innovation
initiatives will help create a more agile organization,
as HR becomes more integrated within the business
function. How can human resources and businesses
improve decision-making and organizational
processes? The answer: data. But the next question is
how do you sort through it? For that we turn to
analytics, the next big must on our list of skills within
HR. There are so many ways to collect, analyze, and
report on data, and its key to have software analytics
and tools to do this complicated work. Once you sort
through the heaps of data and find whats relevant,
leadership and HR can see whats going on throughout
the organization and make more informed decisions.
This shift toward data-driven decision-making is what
can separate a good HR department from a great HR
department.
With each election, world event, software
implementation, or restructuring comes a new
challenge for HR professionals, as the world becomes
smaller via 21st century practices, corporate
objectives, and communication avenues.
Understanding all aspects of the globalization of
Materials Management Review

functions has become essential at all levels of an


organization, but particularly in HR. Moving into 2014,
we except going global to become more
commonplace as professionals face the challenges of
hiring, marketing, technology, management, and
finance at the international level. From varying
leadership models to processes for global human
resource functioning, the professionals in the HR field
will need to work with business leaders to create and
apply HR solutions to the global market.
HR professionals have many challenges to consider
during these rocky times. One solution is to continue
the path of being a lifelong learner, either through
local or national HR associations or going back for
formal education. Days are not far where you can see
HR leaders are part of Key decision of Company and
as per of Board members.


FREIGHTS RATES
(Trucks per 9 Tonnes)
Delhi - Lucknow

19,500

Delhi - Jaipur

12,000

Delhi - Ahmedabad

22,500

Delhi - Indore

26,500

Delhi - Patna

36,000

Delhi - Ranchi
Delhi - Panipat

50,000
8,000

Delhi - Chandigarh

15,000

Delhi - Jalandhar

14,500

Delhi - Ludhiana

15,500

Delhi - Mumbai

42,000

Delhi - Hyderabad
Delhi - Bangalore

59,500
64,000

Delhi - Kolkata

46,500

Delhi - Chennai

81,500

Source : NNS on 10.10.2014


November 2014

21

BENEFITS OF INTEGRATION OF
ISO 9001, ISO 14001 & OHSAS 18001
MANAGEMENT SYSTEMS
SHAILESH SHRIVASTAVA,
SR. DY. DIRECTOR, NPC

ntroduction: Integrated Management Systems (IMS)


that combines ISO 9001, ISO 14001 and OHSAS 18001
into a single management system is being readily
adopted by Indian industries in view of its several
merits. NPC introduced such a system in the power
generation industry in recent years.

The three systems individually improve an


organizations quality, environmental and occupational
health & safety aspects. This paper discusses the
common elements and the differences amongst ISO
9001 Quality Management Systems, ISO 14001
Environmental Management Systems and OHSAS 18001
Occupational Health and Safety Assessment Systems to
reinforce the view that IMS is better than individual
stand alone systems.
The most commonly adopted standards by
organisations is ISO 9001: Quality Management
Systems (QMS), ISO 14001: Environmental Management
System (EMS) and OHSAS 18001 or Occupational Health
and Safety Assessment System (OHSAS). Traditionally,
there has been a need for separate and specialist
quality, safety and environment management sections/
departments within organizations. This has been so
because each has evolved at different time and it has
been difficult for both corporate and project
management to rapidly understand all the concepts
involved.
The fast emergence of EMS in 1996 was due to the
growing concern over environmental issues concerning
businesses, followed by OHSAS in 1999, many
companies adopted these standards. However, they
were managed separately. It was in 1999 that the idea
of integrating QMS with EMS and in 2000, integrating
OHSAS with EMS and QMS permeated the industries
since these standards had significant similarities in
the certification process. Since then, the integrated
system involving QMS and EMS has gained worldwide
recognition. Integrating ISO 9001, EMS and OHSAS is
still a relatively new idea in the Indian industry.
This paper examines the benefits that can be achieved
by integrating the three systems into a common
management system for the organizations. It may be
argued that the implementation of an IMS appears to
duplicate stand-alone QMS, EMS and OHSAS that
already exist in an organization, thus leading to
increase (rather than decrease) in time and cost as well
as decrease (rather than increase) in quality. However,
it is observed in the long run, that an IMS that
encapsulates all three QMS, EMS and OHSAS under one
umbrella helps to eliminate unnecessary duplications.
This is a strategic factor in terms of reducing time &
cost and increasing quality standards.
Comparison of the Three Systems: Although the three
22

November 2014

systems are designed to be compatible, there still exists


some differences between them. Firstly, the stakeholders
for ISO 9001 are the end users, i.e. buyer of products or
services, while for OHSAS 18001 it is the workers and
staff who produce or manufacture the products/
services. The stakeholders for the EMS can be both i.e.
within the organization (e.g. employees) as well as
outside the organization (e.g. statutory bodies, public
etc).
As for interests, the QMS involves the product or service
quality, the EMS focuses on improving a companys
environmental performance through prevention of
pollution created by the operations and activities of
the company whereas the OHSAS addresses
Occupational Health & Safety in the process of
manufacturing the products / services.
What is an Integrated Management System?
An integrated management system is a management
system that integrates all of an organizations systems
and processes into one complete framework with
unified objectives and with each function aligned
behind a single goal. Instead of silos, a genuinely coordinated system exists with one thats greater than the
sum of its parts, and can achieve more than ever before.
An integrated system provides a clear, holistic picture
of all aspects of tiie organization, how they affect each
other, and their associated risks. There is less
duplication, and it becomes easier to adopt new systems
in future.
An integrated management system allows a management
team to create one structure that can help to effectively
and efficiently deliver an organizations objectives.
From managing employees needs, to monitoring
competitors activities, from encouraging best practice
to minimizing risks and maximizing resources, an
integrated approach can help an organization achieve
their objectives.
The Integrated Management Process: Before getting
started there is a need to assess implementing
organizations ability to integrate and it is better to
review the following in advance:

The extent to which integration should occur.


The political & cultural situation within the
company.
The levels of competence necessary.
Legal and other regulatory requirements.
Clear objectives for the integration project.

When introducing another standard and those


responsible for the introduction, should look very
carefully at the similarities within the standards to
ensure there is no duplication. Communicating what is
being done is also vital to the successful introduction

Materials Management Review

of an integrated management system, so that everyone


in the organization knows what is being done and most
importantly why. Below are some suggested steps in the
process.

of significant savings in the following four areas;


1. Time - The time needed to construct an IMS is nearly
half compared to doing the three systems separately.
Surveillance time too, is halved, keeping process
interruptions to the bare minimum. These interruptions
can be destructive especially for companies that need
to meet tight deadlines and cannot afford to stop their
production. By having only one audit, the disruption is
kept to the minimum and this may help to increase
productivity. Time is very important in any organization
because any delay can be very costly.

Step-1: Combine Separate systems being used at the


same time.
Step-2 : Integratable Common elements have been
identified.
Step-3 : Integrating Common elements have been
identified and are being integrated.
Step-4 : Integrated One system incorporating all
common elements.
Integration involves introducing EMS and OHSAS
elements into a mature QMS. This requires an
understanding of the similarities and differences
between the three standards so that the existing quality
procedures and other activities can be used to fulfill
EMS and OHSAS requirements wherever possible. Where
the standards differ slightly, an IMS must conform to
the more stringent requirements. For example, QMS
requires that the company establishes a documented
procedure for control of records while the records
procedure required by EMS does not need to be
documented. In a fully integrated system designed to
fulfill requirements imposed by both standards, the
procedure for records must be documented or it will
not fulfill the QMS requirements. It is contended that
the management of quality, safety and environmental
issues are linked by a common base in systems theory
and that strong philosophical and structural linkages
exist.

2. Costs - Maintenance (surveillance) costs can be


lowered through the combined audits of IMS. An IMS
will be much less costly than implementing numerous
systems for different requirements. On top of that, it
also jieeds fewer resources to maintain the IMS. Most
companies spent a large amount of money implementing
QMS. Typically, about 10-20% of this cost is for out of
pocket expenses such as registration and training. The
remainder is for the reallocation of resources like
people taking time out of their primary responsibilities
to define, document and implement the system. If this
type of effort was duplicated each time a new
management system is implemented, the costs would
be high. This improved effectiveness translates into
reduced costs. This will help to achieve long-term winwin solutions that make more commercial sense. The
use of existing QMS procedures also creates significant
savings in the costs of developing and implementing
EMS and OHSAS.

Integration can be accomplished in two ways: partial


integration or full integration. A partially integrated
system keeps separate the quality management,
environmental management and occupational health
and safety system manuals. However, their manuals
are not totally different. Those that bear similar
procedures are integrated, for example, document
control. In addition, QMS procedures, with some
similarities, can be modified and enhanced for the EMS
and OHSAS. Assignment of unique EMS and OHSAS
document numbers ensures that modifications apply
only to the EMS and OHSAS itself, leaving the quality
procedure unchanged for quality management purposes
and avoiding problems at future surveillance or reregistration audits.

3. Manpower- Multi-tasking is possible in IMS; thus


avoiding duplication of manpower for each system.
What used to take three men to do, may possibly need
only one man now. This will free more manpower to do
other things, hence increasing the productivity of the
company. The span of control for top management can
also be reduced with only one management
representative looking after the three systems, leaving
the technical details of checking to competent
specialists. The staff will also have a better
understanding of the manual and this will help to
reduce misinterpretation to the minimal.

A fully integrated system contains only one manual that


addresses the three different management
requirements. Existing QMS procedures are modified
to capture the specific elements mandated by each
governing standard. To implement a partially or fully
integrated system will depend on the organizations
structure, management style, aim and scope of the
system. In fact, the fully integrated management system
gives more benefit than partial integration. It is not
feasible for a company to have three separate systems
because operations will be interrupted by the various
audits conducted on several separate occasions. There
may be a risk of the staff working for the auditors
instead of for the company, and unable to meet the needs
of the customers as they are to focus on the audits of
the three separate systems. IMS will have the advantage

Materials Management Review

4. Paperwork- Substantial paperwork can be reduced


through the documentation process be it in Procedures
or Records and in particular, on the part of system
control. Mismanagement in document control can easily
cost the company money. By having an IMS, the
possibility of mismanagement is greatly reduced
because the documents are integrated to make the
system simple to manage. Other than the four main
areas above, there are also other benefits such as
enhanced confidence of customers and positive market
image. This will give the company a competitive edge in
the international market. Technology development and
transfer in the company would also improve in the
future. In the long run, operation costs can be reduced,
leading to better profits.
Conclusion: Based on the above facts it is quite clear
that companies should favour an integrated
management system against individual systems.
Source : Productivity News, August 2014

November 2014

23

AN INVESTIGATION ON LOGISTICS COST FOR STEEL


INDUSTRY: ACTIVITY BASED COSTING APPROACH
N. JENA AND NITIN SETH,
INDIAN INSTITUTE OF FOREIGN TRADE, NEW DELHI
nitinseth@iift.ac.in
ABSTRACT:

ndias steel industry logistic cost is still very huge and


challenging. The logistics industry in India is evolving
rapidly and it is the interplay of infrastructure,
technology and new types of service providers that will
define whether the industry is able to help its customers
to reduce their logistics costs. Logistics has been treated
as one of the most potential area for the companies to
provide a base for cost reduction. Typically, in Indian steel
sector, the total cost of inbound and outbound costs taken
together range around 13-14% of the turn-over.
To be effective control, it needs to track the origin and
dynamically reflect. Activity Based Costing is a tool used
by strategic managers at a corporate management level
to closely monitor the True Costs applicable on day to
day operation and un-interrupted movement of material
without any further hidden costs. The application of
Activity Based Costing in entire logistics operation is more
appropriate today as operational has become the
deciding factor to meet the customers requirement. This
research paper attempts to understand the application of
Activity Based Costing on entire logistics operation for
the steel industry in India. Using this costing approach
this paper identified various cost elements in inbound,
operational and outbound logistics cost for steel sector in
India.
Key words: Activity-Based Costing, Indian Steel Industry,
Logistics cost, sustainability, competitiveness,
Transportation cost.
1.0 Introduction:
The logistics comprises the entire inbound, operational
and outbound segments of the manufacturing and
service supply chains. Of late, the logistics has received
lot of attention both from business and industry as well
as policy makers. Logistics in steel sector constitutes a
major cost as there is bulk material handling on account
of heavy cost of inbound logistics. Since past, different
researchers, reviewed and explored the subject of costs
in logistics for example, Scarsi, (2007) views that
transportation costs is highly significant to steel
industry and generally the location of the plant is
decided based on the logistics cost. Their work also
explained that why, most of the steel plants in the world
are located on the waterways, where ships can deliver
raw materials and pickup finished products, with no
transshipment operations and no cargo handling.
24

November 2014

It is seen that Inbound and outbound logistics are key


factors for total logistics cost in Steel Industry in India.
Inbound logistics works in a parallel form between
foreign suppliers and customers. It includes additional
activities, such as Customs clearance, documents
handling, and international packaging and Outbound
logistics cost related to the transportation and related
documentation of the finished products to the final
point of consumption. The different elements associated
with these costs are:


Inbound logistics is one of the primary processes


and it concentrates on purchasing and arranging
inbound movement of materials, parts or finished
products from suppliers to manufacturing plants
(Goren Sevnsson-2005).

Operational logistics is the process related to the


movement of the raw material and related
information with in the production line.

Outbound logistic is to meet the challenge of


international competition and to deliver the goods
to the customers in the best condition, in the
shortest time, with the least logistics cost (Helena
Forslund, 2005).

There are many factors which drive up the logistics cost


and it is very necessary to identify the most cost
sensitive elements within a logistics system so that
appropriate actions can be taken immediately to control
the cost if not to at least reduce the cost, one such way
to analyze the logistics cost is Activity Based Costing
approach (Lambert,1994). Activity Based Costing (ABC)
is a tool used by managers to more closely approximate
the true costs of operations. Sound tracking of
operational costs is critical when pursuing the logistics
objective of providing desired customer service at the
lowest total cost.
This paper aims to analyze the importance of ABC based
costing and its importance on the entire logistics cost
on the present environment and the challenges required
to meet for the future growth on logistics requirements
in Indian Steel Industry. The paper is organized as,
initially the relevant literature is presented along with
the identifications of gaps, this is followed by the case
of Indian steel Industry and understanding the cost
elements, finally a framework is proposed and
concluding remarks are presented.
Materials Management Review

2.0 Challenges on logistics cost in Indian Steel Industry:

3.0 Literature Review:

Since past, Indian steel sector faced a major challenge


on account of high logistics costs. Majorly select key
raw materials required for steel production are
imported and hence high cost of inbound transportation
is witnessed. Realizing the high costs involved because
of global purchase of raw materials like iron ore, coal/
coke and other alloys. There are three associated costs
of logistics i.e a) inbound logistics b) operational
logistics and c) out bound logistics. Out of these,
inbound and outbound constitute a major portion of
total logistics cost.

The Literature review in the present case has been


categorized as presented in Figure 2.

The globalized and open world environment on one side


provides tremendous oppourtunities for growth, on
other side poses several challenges to continuously find
the ways for cost reduction and value addition. A
number of steel companies in India have learnt to adopt
the competitive practices, which fulfill their cost
optimizations and service maximization objective.
Realizing the pressures from International and National
policy bodies and regulators, they are continuously
attempting to shift for minimizing the logistics coat at
each and every process. Figure 1, is an attempt to
understand logistics cost in Indian steel sector , with a
view to understand the different factors/reasons for
increased logistics cost.

3.1 Logistics cost:

Figure 1: A schematic view of Logistics costs in Indian


Steel Industry.

3.2 Activity Based Costing:

In order to further understand the various elements of


logistics costs, the present paper is an attempt to study
one the components of logistics and its applicability
at individual process in Indian Steel Sector and with a
view to understand their logistics operations and costs.
Based on the ABC based costing , this research attempts
to present different environments impacting the cost
elements involved in both inbound and outbound
logistics and finally develops a research framework
and directions for future researchers in this area. This
paper may be considered as a serious attempt to
understand and document the real need and impact of
ABC based costing of Indian steel industry.
Materials Management Review

>Z

>




>
/^^

Figure 2- Literature categorization

The greatest challenge of this study is to identify the key


cost elements for higher logistics cost. In the
manufacturing industry, research studies on logistics
cost are usually based on the logistics process.
Ferguson (2000) distinguished the logistics process that
facilitates the flow of products or service from the point
of origin to the point of consumption which includes
the customer service, demand forecasting, inventory
management, material handling, packaging,
procurement, transportation and warehousing. In
general, increased visibility of costs is required in
logistics (Kemppainen and Vepsalainen, 2003). While,
Drucker (1962) comment that Logistics costs and goals
are often in conflict with one another, a situation
normally resolved by finding a compromise solution,
aimed to produce an acceptance outcome, balancing
cost and quality. Scarsi, (2007) worked on transportation
costs in steel industry and views that transportation
costs explain why most of the steel plants in the world
are located on the waterways, where ships can deliver
raw materials and pick up finished products, with no
transshipment operations and no cargo handling. Cooke,
2002, in a logistics survey found that as many as 71 per
cent of responding organizations ranked cost control/
cost reduction as their top concern owing to obvious
increase in their profitability. Inspite of the proven
benefits the organization are finding cost accounting
systems in companies often lag behind and a major
challenging area (Sievanen et al, 2004).

In steel industry, the key elements of logistics are totally


different because of bulk purchase and regular
transportation. The inbound cost of transportation is
highly significant and needs proper attention. Further
data to be derived from on site visits to representatives
of corporate managers engaged at different port areas
and locations where material vessel un-loading and
material loading are taking place.
Activity based costing has been applied to logistics
since the late 1960s. The re-engineering efforts of 1990s
are widespread with making logistics managers more
aware of ABC. The whole process and logistics channel
has also motivated its adoption (Lambert, 1994).
November 2014

25

Activity-based costing and management is an


accounting and management approach for determining
accurate costs especially the overhead costs. ActivityBased Costing/Management (ABC/M) can overcome
some of the limitations of traditional cost accounting
for decision-making in logistic. The combination of ABC
in orders management decision-making models of can
improve the quality of decision. ABC focuses on the
activities associated with the costs and assigns costs
by using multiple cost drivers (Stapleton et al., 2004).
Activity-based costing (ABC) is a costing methodology
that identifies activities in an organization and assigns
the cost of each activity with resources to all products
and services according to the actual uses at operational
level. ABC focuses on cost elements on both inbound
and outbound logistics for the movement of goods from
suppliers warehouse till the place of actual
consumption. ABC helps to segregate




Fixed cost: Procurement cost, inventory cost.


Variable cost: Vessel chartering and inland
transportation.
Overhead cost: other customs procedure and
documentation.

The split of cost helps to identify the true cost incurred


for getting the cargo moved from one destination to
another one. Physical movement of goods in case of
bulk purchase of materials are relatively easy to
understand the real components logistics cost incurred.
Realizing the importance of ABC it seems that logistics
thought to be the richest area of application for ABC
(Lewis, 1991; Lambert, 1994).

sector have not covered it and the elements of


inbound, operational and out bound costs are not
defined for the sector.
Visualizing a potential gap, Using ABC approach, this
research is an attempt to define the different elements
of logistics cost and highlights the potential area for
future research.
4.0 ABC Costing Approach in Indian Steel industry:
Since past, different researchers from time to time,
reviewed and explored the subject of costs in logistics,
but till date it seems a real challenging area. Logistics
in steel industry in India continues to evolve and develop
tremendously during the last two decades. Rather than
being a merely supporting industry in the last two
decade, logistics in steel industry has become a strategic
industry on its own (Zakariah and Pyeman, 2011). As a
result, both scope and strategic importance of logistics
in steel industry have grown and revolutionized.
Meanwhile, logistics cost has been used as an indicator
to determine the efficiency of the logistics function.
Several researchers such as Havenga (2010), and Zhao
and Tang (2009), have also identified logistics cost as a
major driver which affects both firms and national
competitiveness.
Logistics cost is the important component in the steel
industry in India because of bulk procurement of raw
material and dispatch of finished goods at bulk volume.
Using ABC approach an attempt is made to define and
break up the different logistics costs in to their sub
elements. These costs are:

3.3) Logistics cost in Indian Steel Sector:

4.1 Inbound Logistics cost:

India ranked as the fourth largest producer of crude


steel in the world during January- November 2011 after
China, Japan and USA. After a sharp increase in world
consumption of finished steel in 2010, the consumption
slowed down to 6.5 percent for 2011 and 5.4 percent in
2012 as per world steel association estimates (http://
www.indianmirror.com/indian-industries/2012/steel2012.html). The recent data of January, 2013 shows that
India out-placed all major steel producing nations,
including China in terms of growth rate till November
last year 2012, but its position in the world order still
remains at number four. India had produced 70.115
million tone steel till November 2012, clocking 4, 2
percent growth over the first 11 months of the last year,
according to the world Steel Association (WSA) data.

Typically, in Indian steel industry, inbound logistics is


defined as the associated logistics from the source to
the factory. It is one of primary processes and it
concentrates on purchasing and arranging inbound
movement of material, part or finished products cum
suppliers to manufacturing plants (Goren Sevensson2005). It is seen that for the Indian steel sector which is
importing major raw materials, this cost constitutes a
major portion of the overall cost as the input quantity
of material (bulk i.e, iron ore, coke, chromium,
vanadium, etc) is very large and hence a precise control
is required for not only appropriately selecting the mode
of transportation, but their scheduling also. It works in
parallel form between foreign suppliers and customers.

3.4 Observations from review of Literature


From the review of literature, following observations
may be summarized:
 The literature is replete with the importance of
logistics cost and related studies in different
sectors.
 Researchers exploring the area of logistics cost
have strongly advocated for more frameworks.
 In spite of appreciation of the importance of ABC
based costing approach, researchers in Indian steel
26

November 2014

An attempt has been made to study different components


of Inbound Logistics cost for Indian steel sector. Table
1, presents the select compilation of different inbound
costs in Indian steel sector along with their significance.
Further, the attempts are extended to understand these
costs and highlight which of these costs have a higher
value and thus impact on the overall cost.

Materials Management Review

Table 1 Elements of Inbound Logistics Cost for Indian Steel Sector


S.No.

Cost

Definition/ Explanation

Shipping

Charges
paid
to
the
shipping
Company/ Carrier for moving the
cargo from supplier s warehouse to
the destination port in India

Inland Port
handling Cost

Charges paid to port authority in


India
for
Vessel
berthing,
Wharfarge (Keeping the material at
Wharf), and off-loading the cargo
within the stipulated time as per the
shipping terms.

Custom
Clearances and
Documentation
Cost

This is transaction cost paid to the


service providers for making the
cargo ready for dispatch.

Inter-shifting to
Rail siding/
Storage Area Cost

Cargo gets shifted from port area to


the designated place as allotted by
the port authority.

Inland
Transportation
Cost

Lifting up cargo from port area to


the manufacturing unit/plant by
rail/road or with the help of
multimodal approach which is the
combination of both.

Significance in Steel
Industry
Bulk procurement of the
raw-materials at one point
of time and the shipping
cost involvement is very
high, Which is controlled
by market demand and
supply all the time also.
The charges vary from port
to port keeping in view of
the
infrastructural
availabilities.

Relative Wt.
H
M
L

The-inbound
movements
quantities are quite huge all
the
time,
the
agency
charges paid to the service
providers is at the higher
side which reflects directly
the inbound logistics cost.
These
charges
are
controlled by port tariffs
which is payable on time to
time basis.
Because of poor railway
connectivity,
road
conditions the movements
from the port to plant is not
adequate
as
required
resulting
additional
abnormal
logistics
cost
incurring all the time.

Key: H: High, M: Medium, L: Low


4.2 Operational Logistics cost:
Outbound logistics cost is the complete process cost for shifting the raw material from the point of storage to the
point of consumption and movement of finished steel from the point of production to the point of storage with in the
factory/plant. This is purely movement of the raw material, work in process and finished goods within the plant and
its related cost. Relatively this cost is less significant as compared to inbound and out bound cost, but simultaneously
it can be more easily monitored and controlled. Table 2 presents an attempt to understand various elements of
operational logistics cost along with their relative impact on the operational cost
Table 2 Elements of Operational Logistics Cost for Indian Steel Sector
S.No.

Cost

Definition/ Explanation

Significance in Steel
Industry

In plant Material
Handling Cost.

Loading and un-loading of raw


material and finished product
inside the plant.

The activity takes place for both


incoming and outgoing material
in side the plant premises.

In plant material
movement as per the
production plan or
Outbound delivery.

The charges vary from port to


port keeping in view of the
infrastructural availabilities.

Custom Clearances
and Documentation
Cost.

Shifting of material required on


daily basis as per the requirement
of
steel
melting
shop
for
production of particular grade of
steel.
This is transaction cost paid to the
service providers for making the
cargo ready for dispatch.

Inter-shifting to Rail
siding/ Storage Area
Cost.
Inland Transportation
Cost.

Cargo gets shifted from port area


to the designated place as allotted
by the port authority.
Lifting up cargo from port area to
the manufacturing unit/plant by
rail/road or with the help of
multimodal approach which is the
combination of both.

Relative Wt.
H
M
L

The-inbound
movements
quantities are quite huge all the
time, the agency charges paid to
the service providers is at the
higher side which reflects
directly the inbound logistics
cost.
These charges are controlled by
port tariffs which is payable on
time to time basis.
Because
of
poor
railway
connectivity, road conditions
the movements from the port to
plant is not adequate as required
resulting additional abnormal
logistics cost incurring all the
time.

Key: H: High, M: Medium, L: Low


Materials Management Review

November 2014

27

4.3 Outbound Logistics cost :


Outbound logistics cost is the process cost related to outwards movement of material from the storage to the first
point of consumption (upto distributor/dealer level). In other words, it is the storage and a movement of finished
product and related information from the end of production line to the end user. (Helena Forslund, 2005). After
inbound cost, Outbound logistics cost also constitutes a significant portion of logistics cost. This outbound
movement is very significantly important as it defines the responsiveness of supply chain. A faster movement of
cargo might lead to faster replenishments but on other side high cost of logistics. An attempt is made to understand
various elements of outbound logistics cost, Table 3 presents the select compilation of various associated costs of
outbound logistics.
Table 3 Elements of Outbound Logistics Cost for Indian Steel Sector
S.No. Cost
Definition/ Explanation
Significance in Steel
Relative Wt.
Industry
H
M
L
1

Fumigation and
Packing Cost

Lashing and
choking Cost

Placement of
Trailers and a
movement to port
Cost

Custom clearance
and documentation
Cost

Shipping and
deliver at buyers go
down Cost

Wooden Pallets are getting


fumigated as per the latest
fumigation norms and to make
the packing as international
standards also.
Charges paid to the service
providers to stuff the steel coils
inside the containers with a
balancing way after tightening
from all the sides.
This is movement of material
cost from plant to port with
excise supervision.

Cargo gets inspected at CFS /


Port area after opening the
containers and then allowed to
put on the Vessel.
Getting correct vessel at cheaper
shipping cost and delivering the
material at buyers warehouse.

The cost is too high since steel


coils and pallets are getting
packed by wooden crates as per
the latest shipping line guild
lines.
The
charges
are
fixed
irrespective with the size of steel
coil / Sheets and pallets.
These Steel Coils / Sheets are
very heavy in terms weight and
movement is very risky also
because of road conditions.
Every time, we have to move
these coils to port area with full
of safety and security with
proper road survey also.
Charges paid to the service
providers for getting the customs
formalities and out of charges
for shipped on Board.
It is observed that In Indian
scenario, there is poor railway
connectivity to major sea ports,
road conditions are also not
good for the movement of heavy
lift cargo like steel items
resulting additional abnormal
logistics cost incurring all the
time.




Key: H: High, M: Medium, L: Low


5.0 Concluding Remarks
Steel sector in India spends about 14-16% of its turnover
on managing the logistics cost on the entire process at
inbound, operational and outbound level. Out of these
costs few costs are fixed and other is variable which
can be considered on transaction basis. It can be
visualized that steel sector provides tremendous
opportunities for the logistics companies towards
optimization of various cost elements by using ABC
based costing.
Realizing the importance and contribution of logistics
cost in Indian steel sector, the present study was
undertaken to understand the logistics cost and its
significance in the steel sector. By using ABC based
28

November 2014

costing the relevant costs in each of the categories were


detailed into individual activity-wise in order to
understand the true cost incurred in order to get the
particular process completed at an operational channel.
The study reveled that the inbound logistics contributes
to highest cost followed by outbound logistics. The
reasons for this may be attributed to the fact that
inbound in steel sector mainly deals with bulk coal and
iron ore along with other minor ingredients like Nical,
Manganese, Chromium, Copper etc. and hence there
seems strong need for the suitable modes like an
appropriate combination of rail with land
transportation system might have a significant
reduction on logistics cost on one side but may demand
a heavy investment for infrastructure on the other side
Materials Management Review

and hence there is a strong need for developing and


determining the customized ways of optimizing the
logistics costs in steel sector.
Finally, this study has presented a series of research
directions as to understand in details the impact of
these environments on logistics costs. Analyze whether
the strategic decision of sourcing, transportation
through multimodal system will lead to cost reduction,
becomes a key research issue which need to be
addressed. Hence this study may be seen as a step
further in understanding the logistics cost in steel sector
in India.

478, 2010.
11.

X. Zhao and Q. Tang, Analysis and strategy of the


chinese logistics cost reduction, International
Journal of Business and Management, vol. 4, pp.
188 - 191, 2009.

12.

K. Rantasila and L. Ojala, Measurement of


National-Level Logistics Costs and Performance,
presented at the International Transport Forum,
Leipzig, Germany, 2012.

13.

Roberta Scaris, Recovering Supply Chain Cost


Efficiency Through Multi Modal Logistics
Solutions: Supply Chain Forum, An international
Journal, Vol.8-No1-2007.

14.

Bretzke W-R, Klett M (2004) Multi Modal Logistics


management als Entwicklungspotenzial fur
Logistikdienslenster. In Beckmann H (e) Supply
chain management. Strategien und Ent
wiccklungstendenzen in Spitzenunternehmen.
Berlin, Heidelberg, p145 ff.

References
1.

Scarsi, R., The bulk shipping business: market


cycles and shipowners biases, Maritime Policy
& Management, vol. 34, no. 6, pp.5778-590, 2007.

2.

Forslund, H. (2005). Logistics performance


management in dyadic relationships.
Proceedings of the 17th NOFOMA conference in
Copenhagen.

15.

3.

S. Zakariah and J. Pyeman, An Overview of Pricing


Strategies Applicable For Third Party Logistics
Services, presented at the 2 nd International
Accounting & Business Conference, Johor Bahru,
Malaysia, 2011.

Slusarczyk B., Modrak V. (ed), The Role of business


in Achieving Sustainability. Part 2: Implication
for industry. Wyd. Techn.univ. kosice,presov,2010

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Maltz, A.B. and Ellram, L.M. (1997), Total cost of


relationship: an analytical framework for the
logistics outsourcing decision, Journal of
Business Logistics, Vol. 18 No. 1, pp. 22, 45-66

Beier, F.J (1989), Transportation contracts and


the experience effect: a framework for future
research, Journal of Business Logistics, Vol.10,
No2, pp 73-89.

17.

Halldorsson A, KOTZAB h, Skjott-Larsson T. (2009)


Logistics cost Analysis on the cross road to
sustainability: a blessing or a cruse? Logist Res
2(1):S. 83 ff.

18.

Mikko Varila Marko Seppnen Petri Suomala,


(2007),Detailed cost modelling: a case study in
warehouse logistics, International Journal of
Physical Distribution & Logistics Management,
Vol. 37 Iss 3 pp. 184 200.

19.

Kemppainen, K. and Vepsalainen, A.P.J. (2003),


Trends in industrial supply chains and
networks, International Journal of Physical
Distribution & Logistics, Vol. 33 No. 8, pp. 70119.

4.

5.
6.

Drucker, P.F. (1962), The economys dark


continent, Fortune, April, pp. 103, 265-70.
Helena Forslund, Patrik Jonsson (2007) Dyadic
integration of the performance management
process: A delivery service case study,
International Journal of Physical Distribution &
Logistics Management, Vol. 37 Iss: 7, pp.546
567.

7.

Havenga, J.H. (2010), Logistics costs in South


Africa the case for macroeconomic
measurement, South African Journal of
Economics, Vol. 78 No. 4, pp. 460-478.

20.

8.

Tang, Z., Chen, R. and Ji, X. (2005), Operational


tactics and tenets of a new manufacturing
paradigm
instant
customerisation,
International Journal of Production Research, Vol.
43 No. 14, pp. 2873-94.

Drew Stapleton Sanghamitra Pati Erik Beach


Poomipak Julmanichoti, (2004),Activity based
costing for logistics and marketing, Business
Process Management Journal, Vol. 10 Iss 5 pp.
584 597.

21.

9.

S. Zakariah and J. Pyeman, Integrating Customer


Costs in Logistics Costs Analysis: An Application
into Logistics Companies, presented at the
National Postgraduate Seminar Kuala Lumpur,
Malaysia, 2010.

Cooke, J. (2002), Inventory velocity accelerates,


Logistics Management, Vol. 42 No. 9, pp. 33-8.

22.

Sievanen, M., Suomala, P. and Paranko, J. (2004),


Product profitability: causes and effects,
Industrial Marketing Management, Vol. 33 No. 5,
pp. 393-401.

10.

J. Havenga, Logistics Costs in South AfricaThe


Case for Macroeconomic Measurement, South
African Journal of Economics, vol. 78, pp. 460Materials Management Review



November 2014

29

INVESTMENTS ON LOGISTICS INFRASTRUCTURE VITAL FOR


SUPPLY CHAIN & ECONOMIC GROWTH
L.S. BISHT
iimmlsb@gmail.com

ith the growing worlds population, it is


imperative that the basic services namely,
water, electricity and transportation are also
modernized and expanded with the same speed.
Development of proper infrastructure, Agriculture and
Manufacturing is critical for economic growth and to
control the inflation.
Emerging India is faced with the Supply Chain Challenge
for sustaining its rapid economic growth. Government
and Local Bodies decision makers rarely consider the
impact of infrastructure investments on supply chain
and overall economic growth. Lack of infrastructure
investments may stifle nations economic
competitiveness. Transportation infrastructure has
become a frequent subject of discussion. Transportation
plays a vital role in enhancing the effectiveness and
efficiency of Supply Chain. Improvements in
transportation infrastructure will increase
transportation systems capacity, eliminate congestion
and this in turn will reduce transit time and enhance
accuracy in predicting on- time delivery/performance.
The biggest problem India faces is that of slow down of
infrastructure projects to nearly a standstill. Drastic
revamp by amending the land acquisition act for fast
tracking of infrastructure projects is required. Right
from permission from relevant Ministry to environment
clearances and land acquisitions, projects have to run
through a vicious circle. The state needs to take
ownership for land acquisitions and should not
abdicate its responsibility to private sector. Government
should set up an infrastructure fast tracking board/
Ministry for removal of the obstacles for
implementation of the projects that have been publicly
announced. The Chinese do it as a state whereas we
leave the private sector to fend for itself. This is one of
the main reasons for India lagging behind China in
infrastructure. This sector needs to be kick started for
economic growth.
Development of world class cold chains is another very
important project to prevent massive wastage of food.
This is economically possible only by embracing FDI
and Public Private Partnership (PPP). The feasible
solution lies in building cold storage facilities backed
by its own electricity generators to maintain
refrigeration. For better performance, Indias
Governance system is required to be totally transformed
and the system needs a total shakeup.
30

November 2014

Following developments and some of the important


announcements made by the newly formed Government
at centre are certainly positive & welcome steps
towards developing infrastructure and manufacturing
sectors.
1.

Declaring Infrastructure and Manufacturing as the


major themes of the 2014-2015 budget, gives a
ray of hope towards creation of more jobs and
world class infrastructure, a surge in the economic
development.

2.

Investment allowance @15% to manufacturing


companies on investment in plants or machinery
of more than Rs.25 crores from 01/04/2013 to 31/
03/2017.

3.

Permission of 100% FDI in construction and PPP


projects has given a clear hint for the invitation of
more private players in key segments.

4.

Single window clearance mantra by integrating


the services of related central Government
departments to provide single window portal to
provide all business & investment related
clearances.

5.

Launching of Indian Customs Single Window


Project to allow importers and exporters to lodge
their clearance documents at a single point without
having to approach multiple agencies. Required
permission, if any, from other regulatory authority
would be obtained by the trader online, without
approaching these agencies.

6.

Setting up of an Institution called 3P India to


provide support to mainstream PPPs and find
solutions to the problems facing them

7.

Launching of a $100 billion bank by BRICS (Brazil,


Russia, India, China and South Africa) block aimed
at funding infrastructure projects in developing
nations. The bank will be based in Shanghai and
India.

8.

10 years tax holiday on generation, distribution and


transmission of power, provided the plant goes on
steam by 31 March 2017.

9.

Within a few days of budget announcement, the RBI


has come out with guidelines for infrastructure
bonds with a view to get banks to participate in
Materials Management Review

infrastructure growth in the country.


10. Developing 100 smart cities to boost the Indian Real
Estate Industry and civil infrastructure.
11. Declaring a range of infrastructure projects like
setting up 16 new ports, new air ports in tier I &
tier II cities,, Ma I Marg Vikas for connecting
Allahabad and Haldia as an inland national water
way, High Speed Train (HST) corridor from BKC
(Bandra Kurla Complex), Mumbai to Ahmedabad,
covering a distance of approximately 520 km at an
expected speed of 350 kmph with 7 stations in
between, Thermal & Solar power corridors and
other projects.
12. Appeal of Government to all political parties to
resolve and pass the GST(Goods and Services Tax)
laws & DTC(Direct Tax Code) in 2014-2015
The rank of India on the world banks ease-of-doingbusiness survey is very low. As per the World Bank
report, 2014, Indias rank is!34 against 96 of China.
India needs to take prompt action to address the
numerous problems for upgrading the rank. One
immediate step would be to revive the SEZs (Special
Economic Zones). Since the year 1991, a large number
of Industrial Parks/Zones like industrial Parks, Mega
Food Parks, IT Parks and SEZs have emerged in India.
But none of them could trigger a significant flow of
investment and employment creation. These parks/Zones
offer attractive incentives, grants and concessions. One
of the major corrective measures would be to restore
investor s confidence by reinstating the original
benefits.
Projects like National Highways Development
Project(NHDP), responsible for connecting 4 Metro
cities with 4 lane highways (The Golden Quadrilateral)
and connected with the development of 5 Free Trade

Warehousing Zones (FTWZ), as under, are required to


be completed urgently to attract the investments and
for ease of doing business in India.
1.

West ( Panvel,Mumbai) 165 Acres of mega Logistics


Park, partly operational.

2.

North ( Khurja,UP, near Delhi) 315 Acres of mega


Park, partly operational.

3.

Centre ( Butibori, Nagpur) 110 Acres of mega


Logistics Park, to be made operational.

4.

South Land is yet to be earmarked and Infrastructure


created/arranged.

5.

East Land is yet to be earmarked and Infrastructure


created/arranged.

FTWZs are the mega trading hubs with integrated


Logistics infrastructure like special storage area, world
class Material Handling Equipments, container yards,
customs office, unique operational (security, 8 lane
entry & exit areas, fuel station, etc.) and conducive
regulatory (24x7 custom clear facilities, service tax
exemption, reduced lab our cost, packaging /cross
docking facilities, etc.) environment.
Infrastructure development is the greatest challenge
facing India if it is to sustain high levels of economic
growth. A strong and dedicated supply chain
management system plays a key role in the timely
completion of any successful project. With a stable
Government at the centre, giving importance to good
governance and development, the business scenario in
India is definitely expected to improve with more
investment in various projects. India holds a huge
potential for growth in multifarious fields but urgently
needs suitable infrastructure to be created.


COMMODITY INDEX
Commodities

Dayss Index

Prev. Index

Week Ago

Month Ago

Index

2464.1

2465.0

2471.3

2485.1

Bullion

4433.4

4433.4

4461.7

4565.5

Cement

1811.5

1811.5

1834.5

1734.9

Chemicals

1915.9

1915.9

1915.9

1903.4

Edible Oil

1329.5

1329.5

1341.7

1272.5

Foodgrains

2160.8

2161.8

2151.1

2177.4

Fuel

2468.2

2468.2

2468.2

2474.5

Indl Metals

1791.6

1795.8

1804.4

1812.9

Other Agricom

1953.5

1953.5

1962.4

1993.0

Plastics

2365.7

2365.7

2370.8

2421.8

Source: ETIG Database dated 15th October, 2014


Materials Management Review

November 2014

31

RETAIL SECTOR IN INDIA: PRESENT SCENARIO, EMERGING


OPPORTUNITIES AND CHALLENGES
PROF. KALPANA SINGH
AMITY SCHOOL OF ECONOMICS/ AMITY UNIVERSITY

bstract: The Governments initiative to allow 51


per cent foreign direct investment (FDI) in multibrand retail has been a subject for debate for quite
some time now. Indian retail sector has therefore attracted
the attention of people from various fields including
academia, industry, research organisations. The present
study is undertaken to gain an insight about the present
structure of Indian Retail Sector, the major sub-sectors in
organized and traditional retail and changes in the relative
share of various sub-sectors over last few years and
penetration of organized retail in various segments. The
analysis also covers the opportunities and emerging
challenges before Indian retail sector in view of recent
policy changes by Government of India. With Indias large
young population and high domestic consumption, the
macro trends for the sector look favorable. The Indian
retail sector is highly fragmented with more than ninety
per cent of its business being run by the unorganized
retailers like the traditional family run stores and corner
stores. During 2005-07 and 2007-10, the share of
organized retail increased by 13.9 percent and 21.9
percent respectively. However thereafter organized retail
is penetrating the market at a more rapid pace. During
the period 2010-12 share of organized retail rose by 60
percent and is expected to increase by 2.6 times during
2012-15. Clothing/Apparel segment is the biggest
contributor in organised retailing in India in both the years
of study. In 2012 it alone accounted for 33 percent of
organized retail followed by Food & Grocery and Mobile
and telecom with each having 11 percent share in
organized retail. Organized retail had highest penetration
in Apparel both in 2007 and 2012. Food and Grocery
segment is dominated by traditional retail but in 2012,
organized retail penetration in this sector had more than
doubled. In view of the recent policy changes, both the
existing traditional retailers and modern organised
domestic and foreign retailers would have opportunities
and face challenges. On one hand, the policy exposes the
domestic retailers to competition from foreign retailers;
while on the other hand, it seeks to safeguard them
through a slew of protective measures. The future
prospects of Indian retail market are likely to have some
macro-economic impact too. Prospective reduction in
supply chain impediments may help in reducing supply
side inflationary pressures. Future growth of Indias retail
sector is also expected to increase employment. The
nuances of FDI in retail are still to be worked out.
Keywords: challenges and Emerging opportunities,
Market Penetration, Organised, Retail Sector, Traditional
I. Introduction : The word retail means the sale of goods
or commodities in small quantities directly to
consumers Retailing can be defined as a distribution
32

November 2014

channel function, where an organization, buying the


products from supplying firms or manufacturing the
products themselves, sells these directly to consumers.
Many a times, consumers buy from an organization who
is not the manufacturer of the products, rather it is a
reseller of the products obtained from others. However,
in some cases we may find the product manufacturers
operating their own retail outlets in a corporate channel
arrangement. Retailing is beneficial to both consumers
and sellers. On the one hand it enables the consumers
to purchase small quantities of an assortment of
products at a reasonably affordable price, on the other
it offers an opportunity to suppliers to reach their target
market. Through retail promotions they can build
product demand and provide consumer feedback to the
product marketer [1]. Thus retail consists of sale of
goods and services from individuals or businesses to
the end-user. A retailer earns profit by purchasing large
quantities of goods and services either from
manufacturers directly or through a wholesale and he
is a part of an integrated system called the supply chain
[2].
The size of Indian retail market in 2010 was estimated
at US$ 353 billion and by 2014, it is expected to increase
up to US$ 543 billion [3].Further, the estimated value of
current size of Indian retail market is about 500 billion
USD and by 2020 its value is pegged to be at 1.3 trillion
USD. Over 20 per cent of Indias gross domestic product
(GDP) is contributed by retail sector and in total
employment it contributes eight percent [4]. India is
Home to one of the top five retail markets in the world
and in retail, India offers immense scope of growth and
opportunities [5]. According to A T Kearney s Global
Retail Development Index (GRDI) 2013, the global
slowdown has impacted India s growth also and as a
result India s growth rate fell from a 10-year average of
7.8 percent to 5 percent and in GRDI ranking India
slipped to 14th. India s previous low ranking was 6th
place in the inaugural Index in 2002 but in 2009 it stood
first. However the GRDI report points out some positive
factors leading to optimistic expectations. These factors
are: strong long-term fundamentals and young,
increasingly brand- and fashion-conscious population.
The report projects 14 to 15 percent growth per year in
retail sector through 2015 and due to more urbanization
and more potential new investment by retailers, expects
a higher proportion of modern retail which is 7 percent
in 2012[6].
In Sector profile of Indian retail sector, FICCI (2011)
also projects an optimistic future. An important
contributory factor in growth of India s retail sector is
growing middle class which is expected to increase from
Materials Management Review

21 million households today to 91 million households


in 2030.It expects, 570 million people to live in cities in
2030, which is nearly twice the population of the United
States today. High and growing domestic consumption
is another factor expected to contribute in potential
growth of India s retail sector. Indias modern
consumption level which presently is US$ 750 billion
may double within five years to US$ 1.5 trillion [7].
Thus, India s huge population with large proportion of
young population, high potential growth in consumer
expenditure, the macro trends for the sector look
favorable.

segment to be the worst hit in 2013. According to the


Report, for the first time in the history, in 2012, the
retail sector registered a single digit growth, and overall
revenue is likely to grow at 3-8% year-on-year across
large retailer. According to the report, the major factor
accounting for sales growth in 2012 was discount offers
by companies and the trend is likely to continue in
2013.The agency expects that a sustained reduction in
consumer price inflation, coupled with rise in wages
may restore the discretionary spending of power of
consumers and liberalisation of FDI in multi-brand
retail could have a positive impact on the retail sector.

Optimism about high potential of growth in organized


retail in India has also been shown by Equitymaster
[3]. The views expressed here indicate that in past, a
large part of India s consumption needs was accounted
by food but now transition is taking place from
traditional retail to organised retailing due to changing
consumer expectations, demographic mix, etc. The new
generation appreciates mall culture which makes it
convenient to shop with multiplicity of choice under
one roof (Shop- in Shop). Over the long run, these are
expected to be the growth drivers of organised retailing
in India. Further, FICCI states that despite the
downturns,, the organized retail market in India is
growing exponentially due to growing consuming
classes resulting from economic growth and organized
retail is attracting more and more existing shoppers
into its open doors[7]. By 2015, organised retail segment
is estimated to grow (at a rate of almost 30%,) at a
much faster pace than the overall retail market which
is forecast to grow by 16% in the same period [8]. The
Government s initiative to allow 51 per cent foreign
direct investment (FDI) in multi-brand retail has been a
subject for debate for quite some time now. Indian retail
sector has therefore attracted the attention of people
from various fields including academia, industry,
research organisations etc.

A report published by Corporate Catalyst India, focuses


on segment analysis of Indian retail market, Key players
and profiles of Key players, business models for entry
in Indian markets and opportunities and challenges in
retailing [11]. Expressing experts opinion, the report
states that in future, the retail industry in India will be
a major employment generator. It further says that the
market share of organised modern retail being just over
4 per cent of the total retail industry in 2009, it leaves a
huge untapped opportunity. Fashion retailing, which
commands a large chunk of the organised retail
business in India, has indeed been responsible for single
handedly driving the business of retail in India.

1.1

Literature Review

Several studies have been undertaken in the field of


retail sector in India. Besides, one may also find articles
in newspapers, business magazines relating to retail
sector in India. Few of them are mentioned here.
Subhadip Mukherjee s study examines the government
policies of different countries including India in respect
of unorganized and organized retail sector [9]. The study
examines whether, for the small and unorganized
retailers to sustain in this big fight the government
provides a tight legal framework along with economic
support. The study finds that small as well as big
domestic retail chains had been helped by the
governments of different countries (including India)
through formulating appropriate policies over time, by
providing capital support and/or formulating strict
legislations to restrict entry of foreign retailers in their
respective countries. In India, all the regulations
regarding retail sector varies across states and their
impacts are also heterogeneous since these regulations
are still in state level and are being influenced by the
existing political parties of different states.
An article in Business Standard, summarises the
findings of India Ratings regarding future prospects of
Indian retail sector [10]. These findings presents a
negative outlook for the retail sector and expects luxury
Materials Management Review

A report titled Indian Retail Industry: Challenges,


Opportunities and Outlook (2009), published by Dun &
Bradstreet, the world s leading source of global business
information, describes the Global Retail Scenario,
Evolution of organised retail, Size of the Indian retail
industry, Industry segmentation, and Regulatory
Framework [1].
Deloitte, a business specialist and consulting firm has
also published some reports containing several aspects
relating to retail sector in India. The report titled Indian
Retail Market Embracing a new trajectory, 2011 covers
issues- the size and trends in retail sector, FDI into retail,
market opportunities, tax and regulatory structure,
sector analysis etc [12]. The report states that although
all the retail segments offer growth opportunities for
foreign retailers, the largest opportunity in terms of
potential market size and scalability is in grocery
retailing, particularly for the supermarket and
hypermarket formats. However, the large population of
mom-n-pop/kirana grocery stores is likely to be a
force to reckon with for new foreign entrants.
An another report published by Delloite titled Indian
Retail Market Opening more doors (2013) is mainly
focused on government policy on multi-brand retail
trade-its evolution, policy implications and political
landscape with respect to new FDI policy[13]. The report
states that various policy conditions for FDI in multibrand retail makes mass grocery and apparel the two
most favorable segments. Multi-brand specialty retail
segment such as Beauty & Wellness and Consumer
Electronics are still in their nascent stage. Their current
market size may not hold a big potential for foreign
retailers.
Research article titled Sector Profile, gives a brief
description of current status of the retail sector, its
future scope and challenges faced by the sector [7].
PricewaterhouseCoopers (a multinational professional
November 2014

33

services firm), India s report, Winning-in-India sretail-sector, Factors for success, 2011, focuses on the
main drivers, trends and issues in India s retail sector
[14]. It also presents an overview of the key tax and
regulatory issues, a discussion on the benefits of modern
trade, factors for succeeding in the Indian market. The
report states that large size of Indian retail market, low
organised retail penetration, strong GDP growth,
increasing personal incomes, large number of
aspirational consumers (middle-class, young Indians,
rural population, etc.) make India an exciting and
dynamic retail destination. It further states that the
Indian retail market is evolving rapidly, becoming more
competitive and retailers understand the importance
of meeting consumer demands. In such a competitive
environment, the main driver of competitive advantage
will be supply chain mastery. The use of supply chain
and logistics will make retailers agile and costcompetitive in a more crowded retail sector. ASA and
Associates (2012) report titled A Brief Report on Retail
Sector in India, gives an overview of India s retail sector,
growth in retail sector. It also describes government
policy with respect to retail sector and major global
players in Indian retail [15].
1.2

Objectives

1) To analyse the present structure of Indian Retail


Sector and changes therein during last few years.
2) To make a segment analysis of Indian Retail Sector
in order to know about the major sub-sectors in
organized and traditional retail and changes in the
relative share of various sub-sectors over last few
years and penetration of organized retail in various
segments.
3) To understand and analyse the emerging challenges
before Indian retail sector in view of recent policy
changes by Government of India.
4) To find out some measures/steps need to be taken
by Indian retailers to meet successfully the
emerging global competition in the sector.
1.3

Methodology

The present study is based on secondary data and


information collected from a variety of sources. An
attempt has been made in the present study to make a
systematic analysis of changes in the size and structure
of Indian retail market over last few years. This analysis
is useful to understand the expected future changes in
the Indian retail market and the implications of recent
policy changes adopted by Government of India.
Collecting and compiling data and information from
various available sources, relevant ratios and
percentages have been calculated and analysed.
II. Structure Of Retail Market In India
2.1 Organised and Unorganised (Traditional) Retail
The total retail sector in India can be divided into
organized and unorganised sectors. The trading
activities undertaken by licensed retailers are
categorized as organized retailing. Licensed retailers
are those who are registered for sales tax, income tax,
etc. These include the corporate-backed hypermarkets
and retail chains, and also the privately owned large
34

November 2014

retail businesses. Unorganized retail or traditional


retail on the other hand, include a large number of small
retailers that consists of local kirana shops, ownermanned general stores, chemists, footwear shops,
apparel shops, paan and beedi (local betel leaf and
tobacco) shops, hand-cart hawkers, pavement vendors,
etc [16].
Retailing is one of the most prominent industries in
developed markets whereas in developing economies
the concept had occurred much later. The contribution
of US retail sector to the GDP was 31% at current market
prices in 2008. In developed economies, organised
retail has a 75-80% share in total retail while in
developing economies; it is the un-organised retail that
has a dominant share [1]. The figures regarding relative
shares of organized and traditional retail in total retail
for few countries are presented in Table 1.
As shown in the Table, the share of organized retail is
very high in US (85 percent). In Taiwan also it is more
than eighty percent. India is far behind so far as
organized retail is concerned. In India the share of
organized retail is currently eight percent [13].
Table 1: Relative Share of Organized and Traditional retail
in Selected Countries, 2009
S. No. Country

01.
02.
03.
04.
05.
06.
07.
08.
09.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.

USA
Japan
China
United Kingdom
France
Germany
India
Brazil
Russia
Korea (South)
Indonesia
Poland
Thailand
Pakistan
Argentina
Philippines
Malaysia
Czech Republic
Vietnam
Hungary

Total
Retail
Sales
(US$ bn)
2983
1182
785
475
436
421
322
284
276
201
150
120
68
67
53
51
34
34
26
24

Share of
Organized
Retail
85
66
20
80
80
80
4
36
33
15
30
20
40
1
40
35
55
30
22
30

Share
of Trad
itional
Retail*
15
34
80
20
20
20
96
64
67
85
70
80
60
99
60
65
45
70
78
70

Source: Girish K. Nair and Harish K Nair (2011), FDI in


India s Multi Brand Retail Sector: How to Get Ready for
the Big Play, Munich, GRIN Publishing [17].
* Author s Calculations
The Indian retail sector is highly fragmented. More than
ninety per cent of its business is being run by the
unorganized retailers like the traditional family run
stores and corner stores. The organized retail in India
is at a very nascent stage. However, in order to increase
its share in total retail, attempts are being made so as
to bring in a huge opportunity for prospective new
players. Indias retail sector is heading towards
modernization. New formats such as departmental
stores, supermarkets and speciality stores, Westernised
Materials Management Review

malls are fast appearing in metros and tier-II cities


[16]. Table 2 presents the figures for relative shares of
organized and traditional retail in Indian retail market.
Table 2: Indian Retail Market (Organized & Traditional)
percentage share
Year
Organized
Traditional
2005
3.6
96.4
2007
4.1
95.9
2010
5.0
95.0
2012
8.0
92.0
2015E
21.0
79.0
2020E
24.0
76.0

2.2

Segment Analysis

Tables 3 and 4 gives an account of the relative


contribution of various segments in Indian retail market
along with the Penetration of organized retail in years
2007 and 2012 respectively.

E - Expected
Source:
1.
2.
3.
4.

Deloitte (2011), Indian Retail Market: Embracing a


new trajectory, September, [12] (For 2005 and
2015)
FICCI(2011), Sector Profile, 2 December,[7] (For
2010 and 2020)
Deloitte (2013), Indian Retail Market Opening more
doors, January,[13] (For 2012)

1.

For columns 2,3 &4, ASA (2012), A Brief Report on


Retail Sector in India, August, ASA and Associates
chartered accountants[15]

2.

For columns 5,6 &7, Author s calculations

ASA(2012), A Brief Report on Retail Sector in India,


August, ASA and Associates chartered accountants,
[15] (For 2007)

Note: Figures in parentheses show the percentage share


in total.

Figure 1
Source: Author s Compilation
The Table 2 reflects that during the periods 2005-07
and 2007-10, the increase in share of organized retail
was not much. During these periods it increased by 13.9
percent and 21.9 percent respectively. However
thereafter organized retail is penetrating the market at
a more rapid pace. During the period 2010-12 share of
organized retail rose by 60 percent, its share in total
retail had just doubled and is expected to increase by
2.6 times during 2012-15. As mentioned in FICCI (2011),
over the next 10 years Indias retail market is expected
to grow at 7% and by 2020 it is expected to reach a size
of US$ 850 billion. The expected growth in traditional
retail is estimated to be at 5% while organized retail is
expected to grow at 25%.The traditional and organized
retail are expected to reach a size of US$ 650 billion(76%
of total) and US$ 200 (24% of total)billion respectively
by 2020[7].
Materials Management Review

Source: Author s compilation and calculations using


information from (i) Deloitte (2013), Indian Retail
Market Opening more doors, January[13], (ii) ASA
(2013). A Brief Report on Retail Sector in India,
August[18], and (iii) Michael Page (2013), The Indian
Retail Sector Report 2013[8]
2.2.1 Total Retail Market
As shown in Table 3 and4 (also in Fig.2 and Fig.3), in
both the years (2007 &2012), Food and Grocery is the
biggest contributor in total retail .This segment
contributed about 60 percent of total retail. The next
two major contributors in 2007 are Clothing & Footwear
(9.30%) and Non Institutional Health care (7.95%).
Sports goods, Entertainment, Equipment and Books
segments together contributed the least (2.71 percent)
followed by Beverages (3.55%) and personal care
(4.23%) from the bottom end. Furniture, Furnishing,
Appliance & Services and Jewellery, Watches etc
occupied 6.77% and 5.92% shares respectively in total
retail in 2007.
In 2012, after Food and Grocery (60%), the next two
segments at second and third place, as per their relative
share in the retail market are Apparel (8%) & Mobile
and telecom (6%). Food service and Jewellery had 5%,
November 2014

35

4% shares respectively in total retail market. Consumer


Electronics and Pharmacy had equal share (3%) in total
retail market.

Source: Author s compilation


As revealed by Table 3, in the year 2007 penetration of
organized retail in Food and Grocery segment was
negligible (0.7%) i.e. this segment was dominated by
traditional retail. Organized retail had highest
penetration in Clothing & Footwear(18.51%) followed
by Sports goods, Entertainment, Equipment and
Books(15.95%) and Furniture, Furnishing, Appliance and
Services(10.24%).In Jewellery, Watches etc & Personal
care penetration of organized retail was 5.68% an 5.35%
respectively.
In 2012, the Food and Grocery segment is dominated by
traditional retail but organized retail penetration in
this sector had more than doubled. It rose from a meager
0.7% in 2007 to 1.5% in 2012.In this year organized
retail had highest penetration in Apparel (33.0%)
followed by Consumer Electronics (21.4%) Mobile and
Telecom (14.7%), Jewellery (12%) and Food service
(11.20%) segments.
Source: Author s Compilation
2.2.2 Organised Retail Market
Fig. 4 and Fig.5 clearly indicates that Clothing/Apparel
segment is the biggest contributor in organised retailing
in India in both the years of study. In 2012 it alone
accounted for 33 percent of organized retail followed
by Food & Grocery and Mobile and telecom with each
having 11 percent share in organized retail.
2.2.3

Penetration of Organised Retail

III. Opportunities And Challenges Emerging In View Of


Recent Policy Changes
The proposal for permitting FDI in multi-brand retail
trading, subject to specified conditions had been
approved by Government of India on September 14, 2012.
It is to note that in its meeting on 24.11.2011, the Cabinet
had earlier approved the proposal but in order to evolve
a broader consensus on the subject the implementation
of the proposal was deferred. However, after having
discussions with State Governments, representatives
of consumer associations/organizations, micro & small
industry associations, farmers associations and
representatives of food processing industry and
industry associations, it has finally been approved
subject to the introduction of adequate safeguards [19].
Various sub-segments of the retail industry in India will
be affected differently by The FDI policy conditions. One
segment might have a low impact of a policy condition
while at the same time it may be a major hurdle for
another segment [13].
3.1

Opportunities

The Competitive environment created through new FDI


policy norms offers a variety of opportunities to various
stakeholders of Indian retail sector. Fig.6 aptly
summarises the opportunities to various stakeholders.

36

November 2014

Materials Management Review

Mastering supply chain to drive competitive


advantage

Product Localisation

Securing the right retail real estate

Source: Prepared by Author compiling information from


(i) (Government of India (2012).Permitting FDI in multibrand product retail trading[19] (ii) Deloitte (2013).
Indian Retail Market Opening more doors[13], (iii) Mitra
Amit (2012). FDI in multi-brand retail can strengthen
supply chain links [20], (iv) Joshi Sandeep (2010).
FDI in multi-brand retail would impact the unorganized
sector[21] & Tondon Suneera (2013). Govt notifies
changes in FDI norms for multi-brand retail[22].
3.2

Challenges

The major challenges which Indian retail sector would


face include shortage of skilled manpower, lack of
industry status, Policy induced barriers, challenges
resulting from Inappropriate planning and forecasting
and financial risk due to high and substantial leverage
etc. F ig. 7 presents a brief elaboration of these
challenges.

Source: Prepared by Author compiling information from


(i) FICCI (2011Sector Profile [7], (ii) PWC (2011) Winning
in India s retail sector[14], (iii) KPMG (2009) Indian
Retail: Time to change lanes[23]& (iv) Corporate Catalyst
(2009) Retail Industry in India[11].
3.3

Solutions

For the retailers to be able to successfully face the


challenges emerging in new competitive environment
due to Indian Government s policy of permitting FDI in
multi-Brand retail, some of the key solutions as
presented in Fig. 8 are:
Materials Management Review

Source: Prepared by the Author using information from


PricewaterhouseCoopers (PWC) 2011. Winning in India
s retail sector [14] & Dun & Bradstreet (2009). Indian
Retail Industry: Challenges, Opportunities and Outlook
[1]
IV

Conclusion

The present study finds that The Indian retail sector is


evolving rapidly. The size of Indias retail industry is
expected to more than double to $1.3 trillion by 2020.
Further organised retail s penetration in India s total
retail is on increase. Recent policy changes and greater
external liberalisation of retail sector will bring many
more foreign retailers to India. It is expected that FDI
will accelerate the growth of organized retail. India s
huge population with large proportion of young,
increasingly brand- and fashion-conscious population,
high potential growth in consumer expenditure, growing
middle class are some of the factors due to which the
macro trends for the sector looks favorable.
Organized retail whose share in total retail was 8% in
2012 is expected to assume 24% share of total retail
market in India in 2020. Among organized retail
segments, Mass Grocery and Apparel are segments
growing faster than other segments. In next few years,
multi-brand organized retail is expected to expand in
specialty stores such as Consumer Electronics,
Footwear, Furniture and Furnishing etc. But the
requirement of 30% procurement from Indian small
industries may prove to be a major bottleneck for FDI in
many of these segments.
The global heads of retail chains keeping a mum on
India in recently held World Retail Congress in Paris
supports this viewpoint. While Mexico and the
Philippines were being touted as the next big markets
for commencing retail ventures, India s policies
November 2014

37

regarding sourcing and investments have put a question


mark on prospective investments.
Analyst say that if Walmart indeed pulls out of India, it
may not have any impact on consumers as only eight
per cent of the total retail is organised. But, confidence
on India as a potential investment destination could be
greatly marred [24]. However, recently Government of
India has liberalised some FDI norms wef 22 August,
2013 to boost investors sentiments.
In view of the recent policy changes, both the existing
traditional retailers and modern organised domestic
and foreign retailers would have opportunities and face
challenges. On one hand, the policy is making the
environment for the domestic retailers more and more
competitive; it also intends to safeguard them through
a variety of protective measures.
Urban markets being highly competitive and saturated,
it is expected that domestic retail players would divert
towards small cities to tap the potential existing therein.
Similarly, for international retailers to succeed in India,
the choice of partner is very crucial. They should partner
with such Indian retailers who will help them reach the
end customers and who already possess lucrative frontend retail infrastructure.
Thus, partnering with each other can prove mutually
beneficial. An established domestic retailer will help
foreign player bring in customers while the foreign
player will benefit domestic retailer through its
expertise in supply chain and logistics to further
enhance the operational efficiency.
Lastly, the future prospects of Indian retail market are
likely to have some macro-economic impact too.
Expected positive impact of new policy on back-end
infrastructure and better prospects of an efficient supply
chain (linking farmers and small manufacturers directly
with retailers) will minimise agricultural wastages
(especially of fresh foods and vegetables). In
agricultural sector, it can be expected that there will be
higher use of technology in farming, packaging and
storing. This would lead to a reduction in supply chain
impediments, thereby, reducing supply side inflationary
pressures.
Another important macro-economic impact that is
expected from expected expansion of modern retail is
increasing opportunities of nonagricultural employment
for rural youth and a better quality of living for the
existing agricultural society. Once individuals become
absorbed in retailer operations, they can access more
equitable wages and benefits. These changes may make
economic growth more inclusive.
Further, modern participants in trade are tax-compliant
and are large tax-payers. The organized retail sector
would facilitates the generation of significant tax
38

November 2014

revenues through the building of a sophisticated supply


chain. This impacts the logistics, transportation,
warehousing, freight forwarding and other similar
service sectors, all of which contribute to the exchequer
through payment of indirect taxes, primarily the service
tax.
However, to the above optimistic expectations, we also
find fearful expressions that traditional retail may be
competed out by organised retail in terms of prices,
variety and quality. Modern retail offers a convenient
shopping experience to consumers and is bound to
affect kirana and small traders. Many experts including
Mr Rangarajan hold the view that kirana stores will
survive and can become part of modern retail by
organising themselves and getting assimilated into the
organised sector[25], Similarly, in the opinion of some
other experts, in India, the so-called mom-and-pop
retailer is a very savvy businessman, and has customer
relationship management skills and service levels that
are very hard to beat[26].Therefore there is no need for
great celebration or for deep despair over FDI in retail.
The nuances are still to be worked out.
Scope for Future Research
a.

Further studies need to be carried out to make a


comparative analysis of role and performance of
Indian and foreign organized retailers so as to give
some direction to future policy framing

b.

Studies relating to retail sector may also be


conducted at state level to find out the variations
in performance of organized and unorganized
retailers as well as Indian and foreign retailers
across states. Such studies may also be useful in
establishing fundamental causes of such
variations.

References
[1]

Dun & Bradstreet (2009). Indian Retail Industry:


Challenges, Opportunities and Outlook. 26 August.
Retrieved April 5, 2013 from www.dnb.co.in/
IndianRetailIndustry/overview.asp

[2]

Crown Stars (2013).Retail. Retrieved November 1,


2013, 2013 from crown stars.com page id 64

[3]

Equitymaster (2012). Retailing Sector Analysis


Report. 7 November. Retrieved March 23, 2013
from www.equitymaster.com Research It

[4]

F inancial Express (2013). Retail sector can


support existence of various formats.22 Feb.
Retrieved
March
26,
2013
from
www.financialexpress.com/.../retail-sector-cansupport-existence-of-v

[5]

India Brand Equity Foundation (2013). Retail


Industry in India. September. Retrieved November
Materials Management Review

7, 2013 from www.ibef.org industry retailindia.aspx


[6]

A.T. Kearney (n.d.), Global Retailers: Cautiously


Aggressive or Aggressively Cautious? 2013 Global
Retail Development Index, Retrieved November 8,
2013 from https://www.atkearney.com/...retail/
global-retail-development-index/full

[7]

FICCI (2011). Sector Profile. 2 December. Retrieved


April 5, 2013 from www.ficci.com/sector/33/
Project_docs/Sector-prof.pdf

[8]

Michael Page (2013).The Indian Retail Sector


Report 2013. Retrieved November 7, 2013 from
w w w. m i c h a e l p a g e . c o . i n / w e b s i t e p d f /
IN_Retail_sector_report_2013.pdf

[9]

Subhadip Mukherjee (2011): Policies of Retail


Sector of India and Other Selected Countries. UTMS
Journal of Economics 2 (2): 171180. Retrieved
April 5, 2013 from www.utms.cc/e-student/
index.php?option=com_docman..

[10] Business Standard (2013). India Ratings maintains


negative outlook for retail sector. January 15.
Retrieved April 4, 2013 from www.businessstandard.com/.../india-ratings-maintainsnegative-outl
[11] Corporate Catalyst India (2009). Retail Industry
in India. 24 June. Amazon Web Services. Retrieved
April 9, 2013 from.pagalguy.s3.amazonaws.com/
forum/files/.../indias_retail _sector.pdf
[12] Deloitte (2011). Indian Retail Market: Embracing
a new trajectory. September. Retrieved March 29,
2013 from www.deloitte.com/assets/Dcom-India/
.../Indian_Retail_Market.pdf
[13] Deloitte (2013). Indian Retail Market Opening more
doors. January. Retrieved from www.deloitte.com/
. . . I n d i a / . . . /
Indian_Retail_Report_Opening_more_d...
[14] PricewaterhouseCoopers (2011). Winning in India
s retail sector, Factors for success. Retrieved April
5, 2013 from list2.pwc.fr/assets/...retail.../
pwc_winning_in_india_retail _sector_1.pdf
[15] ASA (2012). A Brief Report on Retail Sector in India,
August, ASA and Associates chartered
accountants. Retrieved April 2,2013 from
www.asa.in/pdf/surveys_reports/Retail-Industryin-India.pdf
[16] FICCI (n.d.). Retailing - Welcome to India in
Business: Industry& Services. Ministry of External
Affairs, Government of India, ITP Division.
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5,
2013
from
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infrastructure/...sectors/retailing.htm
[17] Girish K. Nair & Harish K Nair (2011). FDI in India
s Multi Brand Retail Sector: How to Get Ready for
the Big Play. Munich, GRIN Publishing GmbH
Retrieved April 9, 2013 from http://www.grin.com/
en/e-book/183618/fdi-in-india-s-multi-brandretail-sector-how-to-get-ready-for-the-big
[18] ASA (2013). A Brief Report on Retail Sector in India,
August, ASA and Associates chartered
accountants. Retrieved November 7, 2013 from
w ww.asa.in/asa-knowledge-bank-sur veysreports.asp
[19] Government of India (2012).Permitting FDI in multibrand product retail trading. Press Information
Bureau, Government of India. Retrieved April,5
2013
from
pib.nic.in/newsite/
erelease.aspx?relid=87767
[20] Mitra, Amit (2012). FDI in multi-brand retail can
strengthen supply chain links.18 November.
Retrieved
March
27,
2013
from
www.thehindubusinessline.com/.../fdi-inmultibrand-retail-can-streng
[21] Joshi Sandeep(2010). FDI in multi-brand retail
would impact the unorganized sector. The Hindu,
August 22. Retrieved August 5, 2013 from
w w w. t h e h i n d u . c o m / . . . / t p . . . / f d i - i n multibrand...would.../article587583.ece
[22] Tondon Suneera (2013): Govt notifies changes in
FDI norms for multi-brand retail, Live Mint and
The Wall Street Journal,23 August Retrieved
November 7, 2013 from www.livemint.com/.../
Govt-notifies-changes-in-FDI-norms-for-...
[23] KPMG (2009). Indian Retail: Time to change lanes.
Retrieved April 5, 2013 from www.kpmg.com/cn/
en/.../ pages/indian-retail-o-200904.aspx
[24] Menon Bindu D. (2013).Multi-Brand Retail: Has
India fallen off global players radar The Hindu
Business Line. Retrieved November 7, 2013 from
www.thehindubusinessline.com/.../multibrandretail...india.../article5210
[25] The Hindu (2012). Organised retail out-competes
Kirana.21 September. Hyderabad. Retrieved April
9, 2013 from www.thehindu.com Business
Industry
[26] Bijapurkar Rama, R Sriram & S Raghunandan
(2012). Decoding the Detail in Retail. 26 October,
Forbes India. Retrieved March 27, 2013 from
infostreams.in/2012/10/26/decoding-the-detailin-retail/
Source : www.iosrjournal.org

November 2014

39

INDIAN LOGISTICS INDUSTRY: CURRENT


SCENARIO & FUTURE OUTLOOK
ABHISHEK CHAKRABORTY
EXECUTIVE DIRECTOR DTDC COURIER & CARGO LTD.

bhishek Chakraborty writes about the key


challenges facing the logistics industry while
throwing up possible solutions. He also looks into
estimated future growth and main growth drivers for the
logistics industry.
Logistics is the backbone of the economy, providing the
efficient, cost effective flow of goods on which other
commercial sectors depend. The logistics industry in
India is evolving rapidly and it is the interplay of
infrastructure, technology and new types of service
providers that will define whether the industry is able to
help its customers reduce their logistics costs and
provide effective services.
Despite weak economic sentiments, the logistics &
warehousing industry continued to witness growth
largely due to growth in retail, e-commerce and
manufacturing sectors. The Global Logistics sector is
expected to grow at around 10-15% in the period 201314. With this forward looking attitude and a promise of
growth and improvements, the service oriented logistics
industry is all set to expand beyond the horizons in the
latter half of this decade, utilizing this fiscal year as its
launch pad. Following are the key challenges faced by
logistics industry:
Poor Infrastructure : One of the major critical challenges
faced by companies today is of insufficient integration
of transport networks, information technology (IT),
warehousing and distribution facilities.
Trade Regulations : Regulations exist at a number of
different tiers, imposed by national, regional and local
authorities. Regulations often differ from city to city,
hindering the creation of national networks.
Trained Manpower : Trained Manpower in both the third
party logistics sector and the manufacturing and retailing
sectors is very weak at a practical level, i.e., IT, driving
and warehouse as well as at a higher strategic level.
Lack of Training Institutions : The disorganized nature of
the logistics sector in India, its perception as a
manpower-heavy industry and lack of adequate training
institutions has led to a shortfall in skilled management
and client service personnel.
Information and Communications Technology : There are
a lack of IT standards and poor systems integration and
equipment.
40

November 2014

Poor Warehousing and Storage : Poor facilities and


management are to blame for high levels of loss, damage
and deterioration of stock, especially in the perishables
sector. Part of the problem is insufficient specialist
equipment, i.e. proper refrigerated storage and
containers, but it is also partly down to lack of training.
Lack of research and development (R & D) of the industry
: Although both the practitioners and the academicians
are increasingly aware of the importance of logistics
and supply chain, however the field is still under
penetrated as far as research is concerned. It is
important to prioritize research and development so that
various weaknesses in the industry could be identified
and improved.
Possible solutions to some of the challenges:
Infrastructural Improvements : Needless to say,
infrastructure is the backbone of every countrys growth
and prosperity and for the logistics industry to flourish
in the developed countries, special emphasis has to be
laid on the enhancement of the infrastructural facilities.
Particular focus needs to be given on building worldclass road networks, integrated rail corridors, modern
cargo facilities at airports and creation of logistics parks
which need to be given a status equivalent to Special
Economic Zones.
Creating Awareness & Establishing Training Institutions :
Overcoming the skill gap in Indian logistics industry
requires establishing training institutions. It is necessary
to realize the benefits which best practice in logistics
can bring to the companies so that the overall service
quality of the sector is improved. Gaps in training have
to be filled not only at the entry level but also in the
management cadre which could be made possible
through specialized graduation and post graduation
courses focused on Operations and Supply Chain
management.
Improving Warehousing facilities : Good storage and
Warehousing facilities are essential to the growth of
the logistics industry. With the increase in the
transportation of perishable products, agencies
associated with logistics will have to give a lot of
importance to enhancing the Warehousing facilities.
Warehousing will also need to go to the next level taking
into account the changing dynamics of JIT manufacturing,
global procurement and new models of sales and
distribution.
Materials Management Review

Encouraging Research and Development (R&D) :


Emphasizing on R&D is essential mainly because it
encourages the use of indigenous technology which can
make the industry more cost competitive and it also
leads to the improvement in services due to the use of
better and more streamlined services. Particular focus
needs to be given on research in process excellence which
can help eliminate inefficiencies and bring Indian
logistics on par with global practices.
Estimated Future Growth: The Indian logistics sector
growth depends on the growth of its soft infrastructure
like education, training and policy framework as much
as the hard infrastructure. To support Indias fast paced
economy growth of logistics industry is very essential.
It is estimated that the Indian logistics sector will
continue to show robust growth of 10-15% annually,
leading the pace of growth of the economy at large.

Main demand drivers: In 2014 the Global economic


outlook and indeed that of India is expected to
significantly improve as India Inc begins to tackle the
economic downturn. With a new government set to be in
place in 2014, many policies are expected to be
implemented which will give a fresh impetus to Indias
growth engine particularly in the corporate and SME
sector which in turn will expand demand for the logistics
sector. The biggest boost to the growth of the industry is
coming from the increasing consumer demand,
particularly in the Tier 2 and 3 sections of the country.
This is being further fueled by the revolutionary growth
being seen in e-commerce which is leading to logistics
companies responding with new innovations in service
since logistics is the most critical ingredient in the
success of an online business.
Source : projectvendor.com


INNOVATION AND ENTREPRENEURSHIP WOULD


TAKE INDIA FORWARD
NITIN GADKARI
MINISTER ROAD TRANSPORT
There is a great potential for India to train its
manpower as the world is going to need over
5.5 crore skilled manpower in coming years.
Citing example of making ethanol from
agriculture bi-products.

nnovation and entrepreneurship is the biggest power


that can help India grow, he said while adding social
entrepreneurship would have greater social impact
and help in alleviating poverty in India. We need
development with maximum job creation and right
vision, technology and strong political will can help in
achieving the desired growth, the Minister said. He also
advised management professionals to take inspiration
and ideas from people and their problems in order to
propel the economy.
He also said that there is a great potential for India to
train its manpower as the world is going to need over
5.5 crore skilled manpower in coming years. Citing
example of making ethanol from agriculture bi-products,
Mr. Gadkari said if it is promoted on large scale, it can
help in reducing countrys dependence on petroleum
imports.
Mr. Gadkari also released Management Capability Index
Report prepared by KPMG. Mr. Sachin Pilot, Former Union
Minister and Rajasthan State Congress President
speaking on Corporate Governance: A New Reality said
that everything cannot be legislated, self-regulation and
self-disclosure should be the underlying philosophy of
the corporate culture.
Materials Management Review

Many corporate governance disasters could have been


avoided if companies believed in self regulation,
transparency and heeded to voice of minority
stakeholders, he said.
Talking of CSR provision in the new Companies Act, Mr.
Pilot said that this provision can help the economy
substantially by directing funds to socially relevant
projects. However, we need to give a makeover to CSR
initiatives to active role from passive role of just
allocating funds, he added. In a special session on
spirituality in management, Sadhguru Jaggi Vasudev said
what is wrong with India today is that we have still not
shed our colonial hangover of wanting to import
everything in place of manufacturing ourselves. Notion
of superiority elsewhere stifles creativity, he added.
Focus on individuals and survival is creating a conflict,
Sadhguru said. He added, Nurturing to full psychological
growth is important as the whole humanity is in a state
of compulsive pursuit of happiness.
The National Management Convention (NMC) is the
anuual flagship event of AIMA which addresses a theme
of topical national interest, where eminent spheres share
their views with participants through interactive
sessions. Conducted over two days, the Convention
traditionally attracts large number of speakers and
delegates from Industry, government, media and
academia.
Source : SME World


November 2014

41

BIS NEWS
BIS PUSHES FOR STANDARDS
FOR ALL PRODUCTS
DIPAK K DASH

o check the sale of non-standard electrical


and electronics Chinese items and even
Indian products like helmets, toothpaste and
razors etc, Bureau of Indian Standards (BIS) has
approached the government to do away with the
clause that allows several such items to be sold in
open market without complying with any
standard.
Sources said that BIS has pushed for an ordinance
or comprehensive change in the laws to make it
mandatory for all products to comply with
standards set for each product. At present, there
are mandatory standards for only 122 category of
items as per the Industrial Development
Regulation Act. We want to have freedom so that
more items can be brought under the mandatory
regime for health and safety of consumers, a
consumer affairs department official said.

stage, he added.
Sources said that the agency has already taken up
the issue of enforcement of the standards by
manufacturers with other departments or wings
that also set standards such as Bureau of Energy
Efficiency (BEE). TOI has learnt that BIS can set up
a special wing that can pick up random samples
from the market and carry tests to find compliance
so that actions can be initiated against those
selling spurious and sub-standard goods.
However, considering there will be a flood of
applications for standard certifications, the
government is now pushing for more self
certification by the manufacturers. Soni said
across the world, about 80% business is on self
certification mode. But this does not mean that
the manufacturers will have a free run.

Corroborating this, BIS director general Sunil Soni


said, We strongly feel that all items sold in the
country must meet certain standards. So, its not
just imported items but even our domestic
products are sold without complying with any
standard. Once its made mandatory it will be an
offence to sell a non-BIS mark product.

The manufacturers have to get their products


tested through our laboratories or test centres
before self certification. If later products are
found flouting the norms there will be stricter
penalty. We cannot have a uniform standard for
such fines. All these are now being worked out,
Soni said.

He added that international trade agreements


permit no country to have separate standards for
imported and domestic goods But it gives full
freedom to any country to make standards for
goods being sold in that particular country to be
of certain minimum quality...so only solution is
to make certain standards mandatory for
manufacturers, Soni said.

In the proposed amendment in the BIS Act, the


consumer affairs department has pushed for the
mandatory recall of non-standard items and
compensating the consumers.

The DG said that in Europe there is 100%


compliance and India is gradually moving towards
that direction. Standards for lot of products
already exist but someone has to make them
mandatory. One way for that is amendment to
law and another is ordinance. We have proposed
an ordinance and work for that is in advanced
42

November 2014

Soni also said that the BIS is approaching all


agencies involved in specifying standards to come
together and have a comprehensive mechanism
so that consumers can get all information just from
one panel placed on the products. The panel can
specify the energy efficiency and whether the
product is child friendly. All these can be done by
convergence, Soni said.
Source : Times of India, Oct. 14, 2014

Materials Management Review

WTO UPDATE
AID FOR TRADE MEETING HIGHLIGHTS NEED TO
GIVE GREATER SUPPORT TO SMALL BUSINESSES

t a meeting of the Committee on Trade and


Development on 10 October 2014, WTO members
were updated on a recent ITC-WTO workshop that
called for greater support for small and medium-sized
enterprises (SMEs) to help them integrate into global
trade. Members also discussed the monitoring and
evaluation exercise that will feed into the Fifth Global
Review of Aid for Trade to take place in June 2015.
Joint ITC-WTO Workshop on Aid for Trade and SME
Competitiveness : The meeting heard a report on
the Workshop on Aid for Trade and SME
Competitiveness jointly organized by the WTO and the
International Trade Centre (ITC) on 9 October 2014. The
workshop noted that SMEs play an important role for
employment, income growth and gender empowerment.
At the same time, SMEs have a high failure rate due to
limited access to finance, lack of institutional support,
non-tariff trade barriers and an unfavourable business
environment. Participants in the workshop discussed
areas where more could be done to support SMEs and
help them integrate into global trade. A joint ITC-WTO
background note on Aid for Trade and SME
competitiveness can be found here.
Enhanced Integrated Framework : The meeting included
a briefing by representatives of the Enhanced Integrated
Framework, a multi-donor programme that promotes
trade in least-developed countries (LDCs). The EIF has
recently launched a new trade mainstreaming facility
to further help countries put trade at the centre of their
development agenda. Since its launch in June 2014,
members have submitted requests to access the facility
for additional support. Uganda (representing the LDC
Group), Nepal and Benin commended the EIFs work and
called for an extension of the programme beyond 2015.
Uganda noted that since 2008 the EIF has funded 120
projects in 45 countries. The EIF Annual Report 2013
highlighted that 90 per cent of EIF Tier 1 countries, which
receive support for identifying constraints to trade, had
included trade in their national development plans.
National Aid for Trade initiatives : China, Dominica
(representing members of the Organisation of Eastern
Caribbean States) and Chinese Taipei shared their
experiences on Aid for Trade. China said that it has
helped developing countries boost trade by promoting
infrastructure development, providing export market
opportunities for LDCs and assisting in trade-capacity
building. Dominica highlighted how Aid for Trade has
Materials Management Review

helped OECS countries develop regional strategies and


prioritize trade in their development agendas. Chinese
Taipei described its four-year project aimed at helping
Belize improve efficiency by introducing information
technology solutions.
Mobilizing resources to support trade integration : The
European Union presented findings of its Aid for Trade
monitoring report for 2014. It noted that EU support for
Aid for Trade in 2012 was 20 per cent higher than in
2011, making the European Union the worlds largest
trade assistance provider. Africa has received the largest
share of this assistance, and the European Union has
maintained its commitment to LDCs. Uganda pointed
out that LDCs attracted only 24 per cent of total Aid for
Trade in 2012. It called upon members to prioritize the
needs and interests of LDCs and to ensure that at least
one-third of Aid for Trade is disbursed to LDCs. The
meeting also heard presentations from the ITC and the
United Nations Industrial Development Organization
(UNIDO) on their Aid for Trade work.
Monitoring and evaluation exercise for Fifth Global
Review of Aid for Trade : Members reviewed the
questionnaires and case story templates to be
disseminated as part of the monitoring and evaluation
exercise that will feed into the Fifth Global Review of
Aid for Trade to take place in June 2015. The Review will
focus on reducing trade costs for inclusive, sustainable
growth. Once finalized, the questionnaires and requests
for case stories will be circulated to partner countries,
bilateral and multilateral donors, regional economic
communities and South-South partners to assess the
aid needed to reduce trade costs. The request for case
stories will also be circulated to the private sector.
Background : Aid for Trade is a WTO-led initiative that
helps developing countries and least-developed
countries trade. At the Ninth Ministerial Conference in
December 2013, a Ministerial Decision on Aid for Trade
(WT/L/909) reaffirmed WTO members commitment to
the initiative, recognizing the continuing need for Aid
for Trade in developing countries, and in particular
least-developed countries. The Aid for Trade Work
Programme for 2014-2015 is focused on reducing trade
costs for inclusive, sustainable growth.
Source : WTO Website

November 2014

43

INTERNATIONAL NEWS - IFPSM


M.K.BHARDWAJ
CHIEF EDITOR MMR

nline Course Designed to Teach Social


Responsibility in Procurement : Getting bad
publicity, losing customers and being subject to
criminal consequences are just a few of the risks an
organization can face when its procurement
professionals are unaware of constantly changing
social responsibility concerns.To combat this disturbing
trend, the Next Level Purchasing Association (NLPA), a
procurement training provider, unveiled a full-length
online purchasing course, Exemplary Supply Chain
Social Responsibility. Every day, the news reports about
shameful things like child labor, human trafficking,
hazardous working conditions, and animal cruelty being
discovered in the supply chains of once-respectable
companies, said Charles Dominick, president and chief
procurement officer of the Next Level Purchasing
Association. The companies are pressured to fix those
situations, he said, but the new course helps them
prevent these atrocities from happening under their
watch in the first place.
With laws like the California Transparency in Supply
Chain Act and the Dodd-Frank Act, and the Securities
and Exchange Commission requiring full public
disclosure in the use of conflict minerals in all goods,
an organizations exposure to substantial fines and
penalties is greater than before if if s not in compliance
with these laws and regulations. Founded in 2000, the
Next Level Purchasing Association provides online
training and purchasing certification.
Direct Materials & Commodity Sourcing Strategies Improving Results with Advanced Sourcing : Accounting
for up to 80% of the cost of finished goods, direct
materials that make up the final product sold are often
commodity items - but significant effort is spent on
minimizing the impact of commodity price volatility on
supply chain operations. Hedging is one strategy that
companies use to reduce commodity volatility risk, but
advanced sourcing strategy through the use of
technology has proven to have a more significantly
beneficial impact on the supply chain. This white paper
highlights two case studies where advanced sourcing
has provided strong results and risk mitigation.
AERCE - E-learning purchasing courses : AERCE is
developing several e-learning purchasing courses,
based on self-training. Each one is focused on an area
within the purchasing function, and their methodology
allows the student to obtain specific, qualified abilities
and knowledge at a reduced cost and in a short period
of time.
Innovation, Collaboration and Leadership Take Centre
Stage at Procurement Success Summit 2014 : At
Procurement Success Summit 2014 (November 12-13),
44

November 2014

sessions on innovation, collaboration and leadership


will take center stage as current trends of global and
regional market and economics have brought these new
challenges into the limelight.
Global SCM, the event organizer, has conducted detailed
research to find out what procurement and purchasing
leaders want to hear right now. Hot topics such as the
future of procurement, procurement leadership and
CPOs new role are all reflected in the conference agenda
with expert speakers from Siemens, Accuride, KimberlyClark, VF Corporation, Nokia and Air France - to provide
insights that are currently in demand. The conference
will provide a roadmap that CPOs can follow, to enable
them to begin emulating the practices of outperformers.
It will ensure delegates have a holistic understanding
of practices that select top-performing procurement
organizations have developed and mastered; the
capabilities, influence and innovation which enable
them to contribute to the competitive advantage of their
enterprises. View the full agenda and entire list of
sessions here: http://anldk.com/mmxibr/
Aras Issues PLM Platform on SQL Server 2014 : Aras
Corp. has made available its Aras Innovator Suite for
product lifecycle management (PLM) on Microsoft SQL
Server 2014. The tool provides^calability for datacenter, cloud and hybrid deployments. Aras on SQL Server
2014 provides a performance benchmark database for
1 million named users with 250,000 concurrent users.
The Enterprise Edition introduces a wide range of
performance and scalability enhancements into the
database engine. Features include In-Memory OLTP and
Buffer Pool Extension to SSD along with a new design
for cardinality estimation logic. Other improvements
include greater processing, memory capacity and
partition support.
FORTHCOMING EVENTS
APICS 2014 Conference, Dubai : This conference takes
place on 12-13 November 2014 in Dubai, United Arab
Emirates.
-PSCMT Annual Conference - 12 November 2014 : For
further details visit PSCMTs website: www.pscmt.or.th
PASIA Annual Conference - 19 November 2014 : For
further details on the conference visit PASIAs website:
www.pasia.org
SMIT Annual Conference - 22 November 2014 : For
further details visit SMITs website: www.smit.org.tw
IFPSM Europe Meeting : The next IFPSM Europe Meeting
will be held in Dublin on 12 December 2014, Dublin,
Ireland

Materials Management Review

BRANCH NEWS
 AHMEDABAD BRANCH
 AURANGABAD BRANCH
 KOLKATA BRANCH

AHMEDABAD BRANCH
Ahmedabad Branch had a Multi Event on 11th October
2014 in Lecture Hall of Ahmedabad Management
Association.

 MUMBAI BRANCH
 VADODARA BRANCH

Branch Chairman Mr. H K Gupta than gave his welcome


address:
Chief Guest Shri Ravi Bhandari, Speaker of evening Mr.
Himanshu Vaidya, Fellow Members of Ahmedabad
Branch, Invited Guests, Ladies and Gentlemen, I extend
a very warm welcome to you all on behalf of Executive
Committee of Indian Institute of Materials Management
Ahmedabad.

Branch Chairman Mr. H K Gupta Welcoming Audience.

Audience taking Swachhata Pledge.


We have amongst us a senior Material Management
Professional who is steering destiny of Shalby Group of
Hospitals as its CEO.

Audience Enjoying the Talk.


Shri Ravi Bhandari CEO, Shalby Group of Hospitals
unveiled Maiden IIMM Ahmedabad News Letter. Mr.
Himanshu Vaidya an Eminent Management Expert gave
a talk on a current explosive topic Career Counseling
for Career Growth -Better Career -Better Life More
than 70 senior Professionals from industries in and
around Ahmedabad participated in the programme.
Programme started with Lighting of Auspicious lamp by
Dignitaries.

Mr. D K Goswamy Programme Coordinator Introducing


Speaker & Subject.

While The Honorable Prime Minister of India, Shri


Narendra Modi, launched the Swachh Bharat Mission
at New Delhi on October 2, 2014, Swachhta Pledge
was taken by member s present in, which was
administered by Branch Chairman Mr. H K Gupta.

We were looking for an accomplished Materials


Management Personality to Launch our Maiden News
Letter. Our search committee is proud to Zero in their
choice on Mr. Bhandari. We are informed Shalby is
going Pan India and Material Management function is

Materials Management Review

November 2014

45

playing an important role in sourcing world class


equipment and requisites. They use latest Material
Management techniques to procure their requirements
at optimum prices ensuring receipts meet bench marks
fixed by indentors. Mr. Bhandari is known to keep up
Deadlines i.e. the reason Material Management team at
Shalby is always fit.

Mr. Rajesh Chhatrala DGM, Zydus Hospira, Presenting


Memento to Speaker.

Mr. Himanshu Vaidya Speaker of Evening Making a


Point.

Mr. Ravi Bhandari and Others with Unveild News Letter.


Besides launching our news letter, he has agreed to share
his thoughts which will be like Guru Mantra for our
members who are always striving to improve their
knowledge by listening to experienced personalities like
Mr. Bhandari. We all will agree that his towering
presence is a source of inspiration to members of IIMM.
Mr. Manoj Pandey, DGM, Apollo Hospital presenting
Memento to Mr. Ravi Bhandari.

Mr. Ravi Bhandari giving his Words of Wisdom.

Mr. Pankaj Panchbhai Hon. Secretary Wrapping


up the Session.
46

November 2014

Unveiling of News letter will be followed by talk of Mr.


Himanshu Vaidya who will be talking to us on a current
volatile subject. Mr. D K Goswamy our program
coordinator will introduce him and subject of talk soon.
Friends, we conduct such programs once in a month to
augment knowledge of our members and do invite some
Materials Management Review

likeminded guests who subsequently become our


member.

IIMM conducts various courses for its members both


for improving their professional knowledge and helping
them in their carrier advancement post their acquiring
these specialized academic qualifications.
These courses are recognized both by private and public
sector to meet their needs of material management
professionals.
He then read out following mission statement of
institution.
To promote professional excellence in materials
management towards national Prosperity through
sustainable development.

m
aLp.

Mr. Ravi Bhandari Lighting Auspicious

Mr. Ravi Bhandari Chief Guest Unveiled IIMM Ahmedabad


News Letter in August company of Mr. H K Gupta, Mr. D
K Goswami, Mr. Pankaj Panchbhai, Mr. Anil Patil, Mr.
Sudhir Shah, Mr. H K Shah, Mr. Sanjeet Singh & Mr.
Himanshu Vaidya.
Mr. Manoj Pandey, DGM, Materials, Apollo Hospital and
Life Member of the Institute presented memento to
Chief Guest Mr. Ravi Bhandari as a mark of gratitude
and remembrance.
Mr. Ravi Bhandari than gave his words of wisdom, which
were like Guru Mantra for Materials Management
Professional of the city, who came from long distances
to hear him and attend this evening lecture.
Mr. D K Goswamy Programme coordinator introduced
speaker and subject.
Abstracts of Mr. Goswamys submission are as follows.

Question Answer Session in Progres.


May I request those who are still not member to kindly
pick up form from registration Desk and return form
duly filled and we will do rest. You will enjoy company
of a very vibrant management group.
Let me take this opportunity to place before you a few
facts about IIMM. IIMM is Head Quartered at Navi
Mumbai and have 11000 members served by 49
Branches spread across the country and Ahmedabad
Branch is one of them. Ahmedabad Branch has 282
members representing 200 companies from various
cross section of industry.

A piece of information from Mr. Vaidya that we circuited


to all over email say - in India 75% people are into
wrong jobs and 75% in to wrong marriages. And 75% of
this 75% are into both wrong jobs and wrong marriages.
I started calculating the number of miserable people in
India. 30% are below the age of 14 and must be happy.
Almost 60 to 70% population is either married or in
employment and is prone to unhappiness. Almost 100
Crore Indians must be unhappy with these estimates!!!
I can already see long faces in the audience. Just cheer
up and smile When we talk about careers, we look at
the designation and pay packages. We feel that better
position and pay would give us happiness.
Hum 11 rupye ka Prasad chadhaten ke he bhagwan
mujhe ye job mil jaye. Kuch din baad hum phir bhagwan
ko kahte hain ke 21 rupye ka Prasad chadhaunga tu
mujhe yahan se nikal
Todays speaker Mr. Himanshu Vaidya would help us
find Better career and better life by selecting the right
career and improving our happiness.
Mr. Vaidya - a life member of IIMM is B.E. (Mechanical),
MBA (Marketing) and a Chartered Management
Consultant. He is holding a PG Certificate in
Psychoanalysis & Psychotherapy.

Speaker of Evening Addressing Enlightend Audience.


Materials Management Review

He is working as Director Gujarat Institute of


Competitiveness. He remained Director United World
School of Business, Dean (AVP) - Globsyn Business
November 2014

47

School & Chairman - The Institute of Management


Consultants of India, Gujarat & Director of IVO
Consultants.
He is a regular trainer in the field of Marketing as well
as Strategic brand management.
Mr. Himanshu Vaidya also runs an NGO called Brick
Foundation with a focus on Education, Mental Health,
Employability and Helplines. We wish him a Nobel peace
prize soon for this social work.









Mr. Himanshu Vaidya speaker of the evening made a


very enlightening talk.

Synopsis of his talk is as follows.



Career is among the top three most important
elements of our life

Yet WE DONT PLAN OUR CAREERS

75% of Indians are in the Wrong Jobs

75% Indians are in the Wrong Marriages

75% of the above two are in both Wrong Jobs and
Wrong Marriages

Planning is always better than default

Career can be Planned for faster Career Growth

Career PlanningH Career GrowthH Quality of life

You cant succeed doing something you dont like

You have to find out what you like

CEOs become CEOs because they are doing what
they like (Indra Nooyi, A M Naik, Chandrasekhar,
Bill Gates)

Few people know what they like and even fewer are
able to do what they like. When you do or do too
much of what you dont like you reduce your Quality
of Life

Career Counseling helps you find out what you like
and how to do it

Career Counseling helps you in synthesis of Career
Growth with Quality of Life

Better Career and Better Life is the goal

Counseling is of many types,

Career Counseling

Relationship Counseling

Educational Counseling

Clinical Counseling

Career Counseling is one type of Counseling

Career Counseling is a discipline and a profession
that helps Individuals Plan and Grow (in) their
Careers

Career Counseling is a very popular profession in
the West

Every University, Every Corporate has a Career
Counselor on the Rolls to help Individuals Plan
their Careers

Career Counseling is a Scientific Process that
includes,

Self Profiling

Job Searching

Job Performance

Career Counseling is a sustained long term process

Career Counseling is done both online and offline

Indian minds resist systems, reason, transparency,
they love freedom of impulse, secrecy and self
destructive behavior

At senior levels it is called CXO Coaching or Life

48

November 2014















Coaching or Leadership Development


Client comes to the Career Counselor
Client History is taken
Client is given Psychological Tests to map out his
Strengths and Weaknesses
MBTI Multiple Intelligence Test
16 PF (it is a paid test) Decision making styles
People relating inventory
Client Profiling is done considering his Personal
Strengths and Weaknesses, Family Situation, Stage
of life, Personal Interests, Education and Experience
Career Planning is done sitting with the Client to
work out Future Goals and Path to the Goals
Career Counseling is a 3-6 months process spread
over 15-25 sessions
Job Profile What you want to do?
Sector, Company, Department, Role
How to reach there? Education, Job Experience,
Public Relations
Personal Issues and work place performance
Early Childhood Experiences and work place
performance
Is there a need for behavioral counseling to help
him?
Professional Networking and Social Networking
How to get a Job?
Resume Writing
Interview Preparation
Reference Bank
Global Opportunities
Strength Building

Talk was followed by extensive question answer session,


which gave opportunities to members present to find
ways and means to implement suggestions of learned
speaker.
Mr. Rajesh Chhatrala, DGM, Zydus Hospira Onclogy Pvt.
Ltd., and life Member of the institute presented a
memento on behalf of the Participants to Mr. Himanshu
Vaidya speaker of the evening.
Mr. Pankaj Panchbhai, Hon. Secretary summarized the
evening and thanked members and the speaker in his
wrapping up remarks.
He also expressed his gratitude on behalf of Ahmedabad
Branch to Chief Guest Shri. Ravi Bhandari for accepting
their invitation at short notice and his grace in mixing
with members and appraising members and guests of
strengths of IIMM. Members dispersed with fond hope
of meeting soon to hear words of wisdom from another
learned speaker.
EC meeting to discuss and adopt "Un Audited Accounts
For Period 01-04-2014 to 30-09-2014" : "Ahmedabad
Branch had its special Executive Committee Meeting on
17th October to discuss and adopt Half Yearly results.
This is first time,this concept is being implemented in
Ahmedabad Branch.EC Members enthusiastically asked
lot of questions to clarify details.Mr H K Gupta Branch
Chairman clarified all the points to satisfaction of
members present.He highlighted that we are providing
funds in Life Fund equivalent to Life Members as on 3009-2014 multiplied by current Branch share of Rs 5000
Materials Management Review

per Life Member.Branch can only spend accrued interest


and not principal amount.He also mentioned that we
have transferred Rs 555000 to office fund from savings
generated after publishing Members Directory.All future
savings from operations will be transferred to this
account.Over a period of time Ahmedabad Branch will
go for its own office and funds thus blocked will come
handy for this dream project of Ahmedabad
Branch.Members present also showed their enthusiasm
in implementing conversion scheme of Annual members
to Life Members.Meeting closed with member';s
determination to bring membership to 1000 level in
very near future."
--------------------------------------------------------------------------

Patel said that for competing in international market,


standards of goods supplied is very important and thus
role of supply chain management is very vital. He
asserted that IIMM is taking measures by arranging
such educational programs like Mat Select, so that India
can stay ahead in global market.

AURANGABAD BRANCH
IIMM Aurangabad organized a Mega Signature program
Second Mat Select - Signature was held on 29th
September 2014 at Hotel Rama International ,
Aurangabad. Theme of the program was INNOVATIVE
WAYS OF PROFIT OPTIMISATION. Chief guest for this
program was Mr. Rishikumar Bagla. Chairman &
Managing Director, Bagla group of industries and guest
of Honour was Mr. Lalbhai Patel, National President,
IIMM.

Second Mat Select - Mega Signature Programme. By the


hands of Dr. Narendra Joshi memento offered to Mr.
Rishi Bagla - Chief Guest
Session was started by traditional way of lamp lighting
by Mr. Rishikumar Bagla , Mr. Lalbhai Patel , Mr. G.B.
Palankar , Vice President West , Mr. Anant Kembhavi ,
immediate past Vice president - west , Mr. Jitesh Gupta,
Chairman IIMM Aurangabad , Dr. Narendra Joshi Vice
Chairman , NC Member and Conference Chairman Mr.
P.P. Reddy , NC Member and Technical committee head
Mr. S.J. Sanghai.
During inaugural speech , Mr. Bagla urges to take
measures to tackle future challenges . He said that
Purchase and SCM department are the main pillars of
industries Innovations will not help only in upgrading
quality but will also lower down the cost and bring
customer satisfaction. SCM professionals should work
hand to hand with their vendors & give importance to
their vendors. Treat vendor is part of your organisation
Guest of Honor - IIMM National President Mr. Lalbhai
Materials Management Review

Honoured by Presidents outstanding Performance


Award for the Region by National President Mr.
L.B.Patel to Mr. Sushant Executive Committee Member
of IIMM Aurangabad Branch

IIMM Aurangabad 2nd Mat select Mega Signature


Programme. On this occasion a souvenir released by
Chief Guest Mr. Rishi Bagla, Mr. L.B.Patel National
President and all diginatries with Souvenir & publicity
chairman Mr. Sudhir Patil & Mr. Govind Shastri.

Honoured by Presidents outstanding Performance


Award for Region to Mr. R.D. Jaulkar, Treasurer of
Aurangabad Branch by Mr. L.B.Patel National President
November 2014

49

systematically improving that constraint until it is no


longer the limiting factor.

Memento offered by Mr. Anil Pimpalkar past Chairman


of IIMM Aurangabad Branch to Mr. Lalbhai Patel
National President of IIMM at the time of Second Mat
Select Mega Signature Programme.

Honoured of Mr. Lalbhai Patel Elected as a director of


IFPSCM by the hands of Mr. Jitesh Gupta Chairman of
IIMM Aurangabad Branch
Session 2 : Subject : Profit Maximisation through
Innovative Ways in SCM
Faculty for this session was Mr T.A.B.Barathi, Chairman
of Chennai Branch, Vice President of M/s Wheels India,
Chennai.
Mr. Barathi emphasized that, Progression to holistic
or enterprise-wide and innovative planning of supply
chain can provide additional benefits . He further
stressed that Planning supply chain innovatively can
be seen having significant impact on cost minimization
and hence profit maximization.

Mr. S.B.Lovekar - Faculty at the time of speech of Second


Mat Select Mega Signature Programme.

Session 3: Subject: Organisational Excellence through


Collaboration

Mr. Lalbhai Patel was honoured for being elected as a


director IFPSCM by the hands of Mr Jitesh Gupta,
Chairman, IIMM Aurangabad . Mr Jitesh Gupta,
Chairman, IIMM Aurangabad has briefed about
achievements & activities of Aurangabad branch.

Faculty for this session was Mr S. B. Lovekar, senior


personality of IIMM , Director, Bosch Management
Services India. Mr. Lovekar, with the help of case studies
explained how an organization achieve excellence with
collaborative efforts. He suggested that we should study
case studies of successful companies and trying to
understand, what things they have done differently. And
see that what you can implement in your organization.

IIMM Auragabad Chairman Mr. Jitesh Gupta, Vice


Chairman Dr. Narendra Joshi , NC Member, Mr. P.P. Reddy,
Treasurer Mr. R.D.Jaulkar, Executive Committee members
Mr. Sudhir Patil, Mr. Sushant Patare , Mr. K. Srihari was
honored by Presidents outstanding performance award
for the region, by National president Mr. Lalbhai Patel.
On this Occasion a souvenir is released by Chief Guest
Mr. Bagla, Mr. Lalbhai Patel and all dignitaries
alongwith Souvenir and Publicity Chairman Mr. Sudhir
Patil, Mr. Govind Shastri. Four 4 technical sessions along
with panel discussion concluded as below.
Session 1 : Subject : Production through T.O.C. (Theory
of Constraint) Way for Profit Optimisation .
Faculty for this session was Mr. Manuraj, who is
Founder and Managing Consultant at Bottom-line
Matter; Associate of Goldratt India.
Mr. Manuraj very nicely acquainted TOC - which is
methodology for identifying important limiting factor
that stands in the way of achieving a goal and then
50

November 2014

Session 4 : Subject : Innovative Opportunities for Cost


Savings through Logistic Avenues
Faculty for this session was Mr. S. Seshasaye, who is
Vice President of SCPS at Mahindra and Mahindra. Mr.
Seshasaye explained how reduction in the logistics
cost can be brought about by improving the national
logistics infrastructure to facilitate smooth transfer of
materials and information. He asserted that at the micro
level, the logistics service providers need to infuse better
management practices, employ technology that
facilitates its logistics process to reduce its service
cost. Logistics if planned strategically and innovatively
can help realize the bottom and better service levels
Second Mat Select Committee was honored with
Mementoes by Mr. Lalbhai Patel.
During panel discussion Mr. Anant Kembhavi asked
Materials Management Review

theme relevant questions like how to minimize waste to


the panel comprising of Mr. Manuraj, Mr. Barathi Mr.
Seshasaye, Mr. S.J. Sanghai.
Question Answer session was held after panel
discussion. Lucky draw of delegates visiting cards was
done and three lucky winners were awarded.
Overall program was very successful as more than 150
delegates from various industries like Endurance Group,
Aurangabad Electricals, Videocon, Varroc, SIEMENS.
Cosmo Films. Gaware Polydters, Lupin, Wockardt, Skoda,
Endress+Hauser etc. were present.
Vote of thanks was offered by Dr. Narendra Joshi.
Program was concluded by National anthem. A Curtain
raiser program for this Second Mat Select was also
organized on 28 th August , 2014 . Chief Guest for this
program was Mr. Mukund Kulkarni , former president
of CMIA . Senior SCM people from different industrial
sectors of Aurangabad industries were invited . Inputs
for current industry requirements were gathered . All
faculties incorporated these requirements in their
presentations. Second Mat Select received good
publicity in local news papers . All the activities for
these program were planned 100 day advance.
-------------------------------------------------------------------------

The Adoption of the Agenda was proposed by Mr. V K


Man! and seconded by Mr. P K Ghosh. The approval of
the Minutes of the last AGM held on 19th July, 2013 was
proposed by Mr. S K Mukherjee and seconded by Mr. D N
Chakravarti. Mr. Sukalyan Sarkar, Chairman of the
Branch, addressed the august gathering on the activities
of the Branch and the achievement made throughout
the year. In addition to the printed Annual Report, he
reiterated the goal of ensuring propagation of IIMM
fraternity for overall up-liftment of the profession and
contribution towards the Institute, Industry and
Professional Education. In his audio-visual
presentation, the Chairman highlighted the growth and
achievements in clinching National Awards in various
segments, increased number of intake in GDMM Regular
Course, various Short-term Courses and In-house
Training Programmes, organization of MM Day
synchronizing Annual Convocation in a befitting manner,
organizing of NC Meeting, functioning of Branch Website
featuring Blog (with facebook like feature) and Chat
(to promote education online), placement services,
increased enrolment in Membership, substantial growth
in income and surplus and the administrative reforms
made throughout the year keeping in mind staff welfare
and enhancement of faculty honorarium.

KOLKATA BRANCH
Annual General Meeting : The Annual General Meeting
(AGM) of Kolkata Branch was held on Friday, the 18th
July, 2014 at the Senator Hotel, Kolkata. Good standing
members of the Branch were served Notice of the AGM
along with the Branch Chairmans Report, Auditors
Report, Balance Sheet and Income & Expenditure Account
as at 31st March, 2014 well in advance. The Meeting
was well attended by 75 members and few invitees. The
activities of the Branch throughout the year were
discussed by the attending members and appreciated
the enthusiastic Executive Committee for their untiring
efforts to keep the Branch vibrant. Members were
welcomed to the AGM venue with snacks and tea. Mr.
Koushik Roy, Hony. Secretary, steered the proceedings
according to the Notice of the AGM welcoming all sharp
at 6.30 p.m.

From L to R : Branch Chairman Mr. S. Sarkar handed


over S.C. Bhattachary Memorial Award for Most Active
Member of the Branch for the year 2013 to Mr. Koushik
Roy.

From L to R : Mr. Koushik Roy, Hony. Secretary, Mr.


S.Sarkar - Branch Chairman, Mr. N. Chatterjee - Hony.
Treasurer

Inauguration of GDMM Regular July 2014 Session IIMM Kolkata Branch - Mr. D.K.Acharyya - Course
Coordinator IIMM Kolkata Branch & BOS Member, Mr.
D.N.Chakravorti - Sr. Faculty Member, IIMM Kolkata &
BOS Member, Mr. S.K.Mukherjee - Sr. Faculty Member,
IIMM, Kolkata, Mr. Sanjay Mukherjee - Sr. Faculty, IIMM
Kolkata

Materials Management Review

November 2014

51

Finally, the Chairman announced that the Branch was


all set to move to its very own Building soon. With
applause and appreciation, he informed that the Branch
had booked a suitable accommodation for housing
Office with Lecture-Rooms in SIDCO Global Tower, Sector
V, Salt Lake. According to him, this property would cost
Rs. 1,25,00,000.00 + Registration + lnterior
Decoration+Air-Conditioning and the Branch by that
time made a provision of Rs.57,00,000.00 and the
remaining fund, i.e., Rs.68,00,000.00 would have to be
arranged accordingly. He also envisaged his planning
towards fund mobilizing as follows : -

Bhattacharya Memorial Award. Eventually Mr. Koushik


Roy being the Hony. Secretary, has been toiling to the
cause of the Branch. The Chairman handed over that
most coveted Branch Award which was a crafted Silver
Memento engraving the name of the owner and the IIMM
Logo. The house stood up and appreciated Mr. Koushik
Roy in applause.

Organizing Seminars.
Selling of Bricks.
Roping in Corporate.
Engagement of Professional Publicity Consultant.
Donation by Members.
The Chairman also announced that a Building Subcommittee had been formed to facilitate the whole
process as follows :
Mr. Sudhin Mitter, Chairman, Mr. Animesh
Chattopadhyay, Convenor, Mr. Samiran Basu, Mr.
Sukalyan Sarkar, Mr. Koushik Roy, Mr. Niladri Chatterjee,
Mr. V K Mani, Mr. J B Roy Chowdhury, Mr. S B Sarkar and
Mr. Suranjan Mukherjee.

The members comprising Past Chairpersons & EC


Members attended the AGM 2014

Finally the Chairman appealed for support from the


valued members of the Branch to this cause. Accordingly
the valued members assured him to extend their hearty
support in achieving this dream project. The appeal of
the Chairman prompted senior members assuring
generous contribution from their own as follows : Prof. P P Sengupta : Rs.1.00 Lakh.
Mr. S B Sarkar: Rs.1.01 Lakh. He readily handed over the
amount by a cheque.
Mr. N K Kabra : Rs.1.00 Lakh.
Mr. VK Mani : Rs.1.00 Lakh.
Mr. S N S Mahapatra : Rs.1.00 Lakh.
Mr. Amal Chakraborty : Rs.1.00 Lakh.
Mr. Koushik Roy : Rs.0.50 Lakh.
Mr. D K Acharyya : Rs.0.50 Lakh.
Mr. S K Mukherjee : Rs.0.25 Lak
Mr. Sukalyan Sarkar : Rs.0.25 Lakh.
Mr. D N Chakravarti : Rs.0.25 Lakh.
Mr. K Gupta : Rs.0.25 Lakh.
The Chairman placed on record sincere thanks and
gratitude to the members for their, instant gesture to
the cause of IIMM.
The Approval of the Income and Expenditure Accounts
of the Branch as on 31.03.2014 and the Balance Sheet
as at that date were made as proposed by Mr. S B Sarkar
and seconded by Mr. Amal Chakraborty. The other
statutory agenda items were also placed, discussed and
approved accordingly.
Finally the Chairman announced that the Sub-Committee
consisted of Mr. D K Acharyya, Mr. Sudhin Mitter, Mr. D
N Chakravarti and Mr. S K Mukherjee adjudged Mr. Mr.
Koushik Roy to be the Most Active Member of the Branch
for the Year 2013 and to be awarded the S C
52

November 2014

GDMM Students are sitting in the hall.


The AGM ended with a Vote of Thanks proposed by Mr.
Niladri Chatterjee. Finally, the Chairman invited all to
the Dinner.
INAUGURATION OF GDMM REGULAR JULY 2014 SESSION
Graduate Diploma in Materials Management (GDMM)
Course, the most prestigious and coveted professional
management course, being conducted by IIMM through
its Branches and Chapters throughout the country and
the Kolkata Branch is the pioneer in imparting this
professional management course since the inception
of the course. GDMM Regular Course, July 2014 Session,
was formally inaugurated in Kolkata Branch on Monday,
the 8th August, 2014 at 6.30 p.m. at Branch premises.
Mr.D K Acharyya, Coordinator, NHQ related Courses,
Mr. S K Mukherjee, Co-ordinator, Short-term Courses
along with Mr. D N Chakravarti and Mr. Sanjoy
Mukherjee graced the Inaugural Ceremony of the Course
and welcomed the students to the IIMM fraternity.
During inaugural session, they discoursed on Course
Contents, its potentiality and the market scenario to
give an integrated approach to the budding
Materials Management Review

professionals. Altogether 55 aspirants enrolled for


GDMM (Regular) July 2014 Session. The students were
handed over the Class Schedule for entire 1st Semester,
Reading Materials and stationery along with a befitting
professional kit. The students were advised to attend
the regular classes so as to fulfill their dream to be a
sharp professional in the wide gamut of supply chain
management.
--------------------------------------------------------------------------

this program and the next batch is scheduled on 1st of


November, 2014 at RCF, Chembur followed by a program
at their Thal plant in Raigad district.

MUMBAI BRANCH
In-house Training Program at Rashtriya Chemicals &
Fertilizers Ltd (RCF) : On 20th September, 2014, IIMM,
Mumbai branch conducted a one day intensive Training
Program on Costing Estimation - Supporting Skills &
Knowledge for the employees of RCF at their Trombay
Plant, Chembur, Mumbai.

A view of the participants

Nearly 25 participants were present from various


departments of RCF at their Trombay Plant.
Mr. Arun Banavali, Chairman, Mumbai Branch & Mr. A R
Sarkar, Advisor, Mumbai Branch were the two
distinguished faculties who conducted the program very
competently making it more and more participative and
interactive.
Mr. Sarkar referred to the various examples from his
workplaces like BPCL, L & T etc. about costing and
covered the theory part of it while Mr. Arun Banavali
gave more stress on practical and live case studies from
the corporate to understand the costing and estimation
fundamentals more clearly. Mr. Sarkar talked about Pubic
Procurement and its procedures while Mr. Banavali
came out with solutions from public as well as private
sector companies based on his rich experience in the
field.

Mr. A R Sarkar conducting the Session

The participants were very lively and raised many


queries and asked many questions related to their
workplace and these were answered well by both the
faculties to their fullest satisfaction. About 87% of the
participants rated the program as excellent or very
good.
This program was specially designed for RCF based on
request from their top officials their Chairman, Mr.
Rajan, as well as Executive Director, Mr. Abir Banerjee.
It was a fully customized Training Module for RCF, and
was developed based on inputs from their senior
officials such as Mr. A S Kashikar, Mr. Sanjeev Doshi, Mr.
Patankar, and Mr. Mankar

Mr. Arun Banavali conducting the Session

The Chairman Mr. Rajan himself was very much


interested to have such programs for their employees
who are involved in the process of costing & estimations
as per procedures in public procurements.
Dy. Director, Mr. Shirish Joshi from IIMM, Mumbai Branch
coordinated the program after having detailed
discussions with RCF officials & IIMM faculties.
Participation Certificates were issued to all the
delegates at the end of the program.
Nearly 200 employees are required to be trained under
Materials Management Review

Mr. Arun Banavali addressing the gathering


November 2014

53

Mumbai Branch, will be the eminent Faculty covering


the Training Session.
ITC - MLS Based One Day Workshop on Module 7
Negotiating : IIMM Mumbai Branch is planning to
hold a One Day Workshop on ITC MLS Based Module 7
Negotiating The program is planned to be held in
our Thane Campus, during first week of December 2014.
The exact dates will be finalized in due course.

Mr. Arun Banavali issuing Participation Certificate

Disha 2015 : The annual signature program of IIMM


Mumbai Branch Disha 2015 is being planned during
the last week of January 2015. The tentative dates are
30th & 314st January 2015. A Brainstorming Meet for
deliberating on the theme and other details was held
on 12th October 2015.
--------------------------------------------------------------------------

VADODARA BRANCH
An Evening Talk on the Topic of How To be Successful
Entreprenuer in Materials Field? by Shri VIJAY J. SHAH
had been arranged on 13th Sept. 2014 from 6.30 pm to
8.00 pm at IIMM Hall wherein more than 30 participants
comprising of Members & Students attended the same.
Mr. Vijay Shah shared the experiences from the tenure
of 30+ years which get appreciation by all. The students
enriched their knowledge to utilize in their Materials /
Procurement Profession.

Mr. A R Sarkar issuing participation Certificate


In-house Training Program for Nuclear Power
Corporation of India Ltd (NPCIL) : A two-day in-house
training program was organized by IIMM Mumbai
Branch at NPCIL on 11th & 12th September, 2014, at their
Learning Center. The topic for the program was Strategic
Purchase Management & Recent Trends in Purchasing.
This was a repeat of the earlier programs conducted
during July & August 2014 and was organized to cover
the next batch of their senior level management
personnel. Eminent faculties from the portals of IIMM
covered different topics relevant to the theme of the
training program. The program was attended by
approximately 35 participants and the feedback was
very good.

The speaker Mr. Vijay J. Shah being felicitated with


Flower Bouquet by BoS Member, Mr. H.M.Bhatt. Also
seen Hon. Secretary, Mr. Alok Gupta applauding the
moment.

Dr. Shete, Director Programs organized and


coordinated the event. At the end of the program,
participation certificates were issued to all the
participants
Forthcoming Events
One Day Intensive Training Program on Modern Supply
Chain Management: IIMM Mumbai Branch will be
conducting a One Day Intensive Training Program on
Modern Supply Chain Management on 18th October
2014 at the Thane Campus of the branch. Approximately
25-30 participants from various sectors of industry are
expected to attend the program. Mr. Arun Banavali,
Management Consultant SCM, & Chairman, IIMM
54

November 2014

The speaker, Mr. Vijay J.Shah delivering lecture on How


to be Successful Entrepreneur in Materials Field?
Materials Management Review

Mr. Vijay Shah being honoured with Memento by


Comm. Members, Mr. S.S. Pandya, Mr. H.M.Bhatt & Mr.
Alok Gupta, Mr. D.Pushparaj, Mr. Gautam Chowdhry
A Seminar on Topic of Selection & Procurement of
Clothing by Shri PREMAL KHAROD (Asst. Manager - Sales
& Mktg.) from DIHJAM Ltd. & Shri Sushrit Vaiyata from
SACHINS had been arranged on 20th Sept. 2014 from
7.00 pm to 8.00 pm at IIMM Hall wherein more than 40
participants comprising of Members & Material
Professionals attended the same. Mr. Premal Kharod
shared information about different types of Clothing &
its selection procedure. He also answered various
queries of participation successfully. The programme
was followed by Dinner.

The Hon. Secretary, Shri Alok Gupta introducing the


Guest, Shri Premal Kharod from DIGJAM Ltd. Also seen
Shri Anand Purohit - Vice Chairman.

Shri H.M.Bhatt felicitating Shri Premal Kharod from


DIGJAM Ltd. with Flower Bouquet.
Materials Management Review

Shri D.B.Trivedi-NC Member felicitating the Dignitaries


from DIGJAM Ltd. with Flower Bouquet.

Shri G.M. Bahudhanye-EC Member felicitating Shri


Sushrit Vaijata from SACHINs with Flower Bouquet

Shri Premal Kharod delivering the talk on Selection of


Clothing.

Shri Sushrit Vaiyata being honoured with Memento by


Shri Anand Purohit Vice Chairman.

November 2014

55

EXECUTIVE HEALTH
OUR HEALTH: ARE WE REALLY AWARE?
DR R S KHAMBETE
GROUP VICE PRESIDENT SHALBY HOPSITALS, GUJRAT
rajendra.khambete@shalby.org
Do we know consequences of our behaviours and
lifestyles and health risks they present?

ealth Awareness is a phrase used very often. But


do we really have sufficient knowledge of the
present and future consequences of our
behaviours and lifestyles and the risks they may
present? Some readers may yes, some may say no, most
may say dont know! Dr R S Khambete begins a series
of investigative articles about the need to know and
what to know about the different parts of our body and
their diseases. Being forewarned is being forearmed.
Knowing what might hit you and when is the only way to
remain ahead in the game of health.
Uncertainty : While 2+2 always equals 4 in maths, it
may not be so logical and predictable in health matters.
Eg... being overweight and obese is supposed to lead to
diseases like diabetes and high blood pressure. Most
diabetics and high BP patients are overweight. Yet, why
do some normal weight people suffer from both the
above conditions?
Similarly, smoking and smokeless tobacco are known
to cause cancer. But why non smokers not exposed to
passive smoking sometimes get the same cancer of the
lungs?
Genes transmit disease traits from parents to children
Ideal Life : Another myth many people foster is: If live
very carefully, eat properly and take exercise regularly,
I should not suffer lifestyle diseases like obesity, high
BP, diabetes, osteoporosis or joint diseases.
Unfortunately the same people sometimes become
victims of those very diseases! Reasons? Heredity,
environment and contagion.
Heredity : My father had stroke. Am I likely to have
stroke? asked a young person a few years ago. The
answer unfortunately is yes. Morbid and often fatal
disease conditions like brain stroke, heart attack, breast
cancer, and other organ damaging conditions like high
blood pressure and diabetes mellitus are often passed
from parents to children.
I had once heard a very affluent person tell his children:
You will inherit my property. But I am afraid you will
also inherit my diseases. So you all better take care.
This self aware person has diabetes, high blood
pressure and cervical spondylitis and is still surviving.
While his son, poor fellow, a victim of heredity and
56

November 2014

poor living style due to lack of exercise and rich food,


fell a victim to a heart attack at the age of 30. He
underwent angioplasty and now lives very carefully.
Environment : The CO2 content in the atmosphere is
increasing, the worlds average temperature is
increasing. The amount of poisonous gaseous chemicals
in the air we breathe is increasing. The food we eat may
have pesticides. The water we drink may have fluorides
and heavy metals, both of which are toxic. All the above
may cause many diseases ranging from cancer to
respiratory diseases or heart diseases.
Industrialisation leads to pollution
While we cannot do much to improve the environment,
we can surely learn what to do and what not to do. We
must learn how to avoid air pollution, what to eat and
what not to eat.
Contagion : It refers to the passing of diseases from one
person to another by close contact. Most upper
respiratory infectious diseases and sexually
transmitted diseases are transmitted from one patient
to another. Living well helps, but poor immunity due to
lack of outdoor life is the cause of many such diseases.
Lifestyle : Our ancestors walked to work a hundred
years ago, then came horses and horse drawn vehicles.
Later they used bicycles, public transport [buses, trains
or rickshaws] and eventually became owners of vehicles.
At each change they lost the opportunity for physical
exercise. The mean weight of people kept on increasing.
Obesity: Bane of human life
The percentage of over weights and obese persons
increased. Now there is a spate of lifestyle diseases
which have now surpassed deficiency diseases.
In 1905 AD most Indian patients were victims of poor
nutrition and infections, diseases of want.
In 2005 AD most Indian patients were victims of high
BP, diabetes and obesity, diseases of plenty.
Let us be Aware...
Next issue onwards we will ask different medical
specialists about specific health awareness issues and
disease prevention. And also how to manage in case we
are unlucky to fall ill. It is better to be aware, because
in medical science, 2+2 does not make 4 all the times. It
may be 5, 7, 13 or even one million!

Materials Management Review