From the Desk of The National President

Dear All, Greetings from your National President. Northern Region Conference was hosted by Rae Bareli Branch and it was a Grand Event. My special compliments to Mr. O P Longia - Vice President (North), Chairman Rae Bareli Branch, Mr. V V Chaturvedi and his full team. It was indeed well attended and the Chief Guest for the Event was Lt. Gen. B. S. Sisodia, AVSM, VSM, Member, Armed Forces Tribunal. I am for promoting Signature Events across regions to build the image of our Institute in this context "Scale 2011 is being hosted by Bangalore Branch during August 2011. I request all our Members and Readers to gear up for excellent support for this event. This is one of our Signature Events and I request participation from one and all. Asian Supply Chain operations can benefit greatly from recycling their packaging when it is appropriate. Forms of transport in logistics operations are often only running at a percentage of their storage capacity. Utilizing the spare space of collect goods that can be put back into the supply chains can yield significant benefits. A growing recognition of green supply chains. Commitment to greening the supply chain is growing significantly across the Asian region. The formation of the Sustainable Supply Chain Centre of Asia Pacific in Singapore in June of 2010 shows that places such as Singapore are positioning themselves as hubs for sustainable activity in the region. Other organizations, such as SWITCH-Asia - a think-tank originating from a joint initiative between the United Nations Environment Programme and the Wuppertal Institute for Climate, Environment and Energy are implementing programmes to increase engagement, among others, these include programmes in Cam-bodia, Laos, Vietnam, Mongolia, China, India and Vietnam, among other With the increasing number of industry bodies emphasizing and encouraging initiatives to go green supply chains in the region will become increasingly environmentally sensitive. Technology has a key role to play in this process and new technologies that enable more sustainable supply chains will continue to come on stream. Operators who ignore these are not only acting irresponsibly towards the environment but also their own profit margins. The solutions are inexpensive, have a good risk-reward ratio, and are environmentally aware. The future of supply chains in Asia lies in sustainable practices that benefit the bottom line. I look forward to greater participations and out of the Box Thinking.

SURESH KUMAR SHARMA National President Email Id : iimm4@vsnl.net IIMM - In Pursuit of Excellence in Supply Management
Materials Management Review
August 2011 1

From the Desk of Editor-in-Chief

Public Procurement represents the major economic activity of all government, public sector and autonomous bodies. The related regulations have considerable impact on government spending. Studies indicate that government spending on goods and services roughly amount to 10 to 15% of GDP for developed countries and perhaps more for developing countries. Many developed and developing countries have brought out reforms in their national procurement system so that public funds are used in most efficient and economical way. The main objective of public procurement reforms are value for money, efficiency, transparency and accountability. As regards opening up of procurement to international competition, the studies have shown that competitive procurement practices help public authorities acquire cheaper, better quality goods and services at lower cost. In India there is still no National Law exclusively governing procurement of goods and services in the country. Public Procurement drives strength from article 299 of constitution which stipulated that all contracts by central government departments should be concluded on behave of President of India and for state governments, the contract should executed on behave of the Governor. Other contracts for sale/purchase of goods in general are governed by Indian Contract Act 1872 and sale of goods act 1930. However comprehensive rules and directives have been laid down in General Financial Rules (GFR) rules 2005, delegation of financial power rules, and manual on policies and procedures for purchase of goods issued by Ministry of Finance and similar manual governing procedure for purchase of goods and services issued by individual ministry/department like ministry of defence. Government orders regarding price and purchase preference and other benefits to sellers in the handloom sector, cottage and small scale industries and to central public sector undertakings, etc. and guidelines issued by Central Vigilance Commission to increase transparency and objectivity in public procurement. All these rules, regulations and guidelines provide regulatory framework for public procurement by government bodies. In addition to this certain sectoral laws like telecom regulatory authority act 1997, the electricity act 2003 and petroleum and natural gas board act 2006 guide the public procurement process. Further wide notification dated November 2, 2010 issued by department of expenditure, ministry of finance, the central government has made the GFR rules applicable to autonomous bodies as well. The text of the bidding document should be self contained and comprehensive without any ambiguities. All essential information, which is bidder needs for sending responsive bid, should be clearly spelt out in the bidding document in simple language. The bidding document should contain, inter alia. The criteria for eligibility and qualifications to be met by the bidders such as minimum level of experience, past performance, technical capability, manufacturing facilities and financial position along with criteria for evaluation of bids. Contract should ordinarily be awarded to the lowest evaluated bidder whose bid has been found to be responsive and who is eligible and qualified to perform the contract satisfactorily as per the terms and conditions incorporated in the corresponding bidding document. Negotiation with bidders after bid opening must be severely discouraged. Same may be resorted to only with the lowest evaluated responsive bidder. The specifications of the goods shall meet only the actual and essential needs of the user. Specifications should aim at procuring the latest technology and avoid procurement of obsolete goods. Specifications should have emphasis on factors like efficiency, optimum fuel/power consumption, use of environmental friendly materials, reduced noise and emission levels, low maintenance cost etc. Wherever Indian Standards exists for the required goods, the same should be adopted. Preference should be given to procure the goods, which carry BIS mark. In cases where Indian Standards do not exist, International Standards like ISO etc. may be adopted. Except in case of proprietary purchase from a selected single source, the specifications must not contain any brand name, make or catalogue number of a particular manufacturer. The tender is usually awarded to the lowest evaluated tender. All the tenders are to be evaluated strictly on the basis of the terms and conditions incorporated in the tender enquiry document (based on which offers have been received) and the terms, conditions etc. stipulated by the tenderers in their tenders. No new condition should be brought in while evaluating the tenders. Similarly, no tender enquiry condition (specially the significant/essential ones) should be over looked while evaluating the tenders. After completing the entire evaluation process for the responsive tenders on equitable basis, the bids are to be put into a ranking statement (like L1, L2, L3 etc.) along with other relevant details, so that a clear picture of their standing as well as comparative financial impact is available at a glance. Before placing the contract on the lowest evaluated responsive tender (L1), the purchase organization is to ensure that the price to be paid is reasonable.

(M. K. BHARDWAJ)
2 August 2011

Materials Management Review

MATERIALS MANAGEMENT REVIEW

IFPSM

Volume 7 - Issue 10

(AUGUST 2011)

IIMM is a charter member of International Federation of Purchasing & Supply Management

CONTENTS

PAGE NO.

Editor in Chief :

M. K. Bhardwaj
Past President, IIMM & Former Director Ministry of Defence

Publisher :

Suresh Kumar Sharma

National President, IIMM

Core Committee : Ashok Sharma, President 5M India V. K. Jain, Former ED, Air India Tej K Magazine, Management Advisor Editors : Mr. C.Subbakrishna, Sr. VP - IIMM Mr.V.Pathak, VP (Central) - IIMM Mr. O.P. Longia, VP (North) - IIMM Prof. R.N.Singh, VP (East) - IIMM Mr.L.P.Patel, VP (West) - IIMM Mr.P.M.Bidappa, VP (South) - IIMM Mr. G.K.Singh NS&T - IIMM Mr. B.V.Iyer, Imme. PP - IIMM Prof.(Dr.) V. K. Gupta - IMT, Ghaziabad Correspondence : MATERIALS MANAGEMENT REVIEW Indian Institute of Materials Management Veer Sadan, 4239-A/2, 1, Ansari Road, Darya Ganj, New Delhi - 110002. Tel : (011) 23266089, 23242124 Fax : (011) 23277207 E-mail : iimmmmr@vsnl.net

SUPPLIERS CODE OF CONDUCT: PERSPECTIVE AND EXPLORATION INDIA MANUFACTURING EXPANDS AT SLOWEST PACE IN NINE MONTHS BEST PRACTICES IN INTERNATIONAL LOGISTICS TRENDS IN CONTAINERIZATION: GLOBAL AND INDIAN SCENARIO CURRENCY EXCHANGE RATES LEAN SUPPLY CHAIN: MANAGEMENT & TRAINING COMPETITIVE ADVANTAGE DECENTRALISE INDIAS FOOD STORAGE SYSTEM TOTAL LOGISTICS COST MANAGEMENT PROCUREMENT EXCELLENCE: TODAYS AND TOMORROWS LEADING EDGE GREENING SUPPLY CHAIN : ISSUES & CHALLENGES RELEASING BRAKES ON MANUFACTURING PROCUREMENT IN INDIAN PETROLEUM INDUSTRY LOGISTICS - A KEY STRATEGIC DIFFERNTIATOR CSR IS ABOUT DOING BUSINESS ETHICALLY, NOT MONEY CROSS CONNECTION - FORMULATING SERVICE-LEVEL AGREEMENTS OUTSOURCING VS. INSOURCING: WHATS BEST FOR YOUR ORGANIZATION? OUTSOURCING - THIRD PARTY LOGISTICS FUNCTIONS PRICE RISE AND INVENTORY MANAGEMENT MANUFACTURING - FOR TECHNOLOGICAL DEPTH INTERNATIONAL NEWS WTO UPDATE : INDIA DEVISING ITS FUTURE NEGOTIATING POSITION COMPARISION OF INDIA & CHINA V/S MAJOR COUNTRIES OFFSHORE OUTSOURCING MODELS ENABLING SUPPLY CHAIN EFFICIENCES THROUGH COLLABORATION BRANCH NEWS EXECUTIVE HEALTH

4 6 7 12 14 15 17 19 23 26 27 28 31 33 34 36 37 38 39 40 41 42 44 46 49 55

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

Edited, Printed & Published by :

INDIAN INSTITUTE OF MATERIALS MANAGEMENT

Veer Sadan, 4239-A/2, 1, Ansari Road, Darya Ganj, New Delhi - 110 002. Phones : (011) 23266089, 23242124 Fax : 011-23277207 E-mail : iimmmmr@vsnl.net, Website : iimm.org Printed at : Power Printers, 4249/82, 2 Ansari Road, Darya Ganj, New Delhi - 110002.
(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

August 2011

Suppliers' Code of Conduct: Perspective and Exploration

Dr. R. Jagadeesh
Adjunct Faculty: Fox Business School, Temple University, Philadelphia, USA Editor: SDM IMD Journal of Management Professor, SDM Institute for Management Development, Mysore jagdeeshraja@gmail.com

ntroduction : Supply chain management is one of the rapidly growing disciplines of management and has become a popular area of research worldwide. The reasons are easy to comprehend: proliferation of goods and services, globalization, transnational movement of products, components, and sub-assemblies, and integration of information technology which has enabled fast and constant information exchange across all the parties along the chain. This means while the manufacturers and assemblers are looking for reliable suppliers on one hand, on the other suppliers would be looking for buyers who offer best prices to them. This has created a kind of huge information exchange which companies are happy to utilize while sourcing for their requirements. However in the recent times severe cost cutting measures taken by the companies to make their products competitive in the market has created a major impact on the suppliers to be highly competitive to bag the contracts. The big buyers like Walmart and retail giants apply all possible conditions on the part of the suppliers and in turn the suppliers put maximum efforts to get the orders to keep their business going. With pressure building up on both the sides, no doubt the game has seen all kinds of tactics being adopted by the parties. It is in this context one has to examine the ethical and legal issues to ensure good practices are being followed by all the players along the chain. This is where a code of conduct would be required to maintain fairness in the transactions between any two parties concerned. But more than the mutual benefits to the two parties involved it is the larger implications on the society that needs to be kept in mind. This paper explores the various issues of code of conduct required for better supply chain management. What is a code of conduct? A code of conduct is a set of guidelines which prescribes the procedure and the policies to be practices for a specific application. Some other definitions are : a set of conventional principles and expectations that are considered binding on any person who is a member of a particular group a set of rules to guide behavior and decisions in a specified situation Definition from Wikipedia, the free encyclopedia: A code of conduct is a set of rules outlining the responsibilities of or proper practices for an individual or organization. Related concepts include ethical codes and honor codes.
4 August 2011

In its 2007 International Good Practice Guidance, Defining and Developing an Effective Code of Conduct for Organizations, the International Federation of Accountants provided the following working definition: "Principles, values, standards, or rules of behavior that guide the decisions, procedures and systems of an organization in a way that (a) contributes to the welfare of its key stakeholders, and (b) respects the rights of all constituents affected by its operations." According to Dominick (2006), today more than ever, the public judges a business by the companies with whom it spends its money. And such judgments are usually negative in nature. He cites the example of actress Pam Anderson who rallied supporters to boycott the KFC food chain, claiming that KFC used suppliers that abused animals. Several years ago retailers in Netherlands refused buy carpets from India accusing that the carpet making industry used child labor. It is further stated that a simple Google search will provide links to many supplier codes of conduct from top companies like HP, Pizza Hut, Federated Department Stores, Apple, Hallmark, and countless others in a variety of industries. Thus there is no reason for not to use a supplier code of conduct. Further Dominick comments that, while an infinite number of items can be addressed in a supplier code of conduct, the ten most commonly addressed points are: 1. All employment must be freely chosen 2. All employees must be of specified age 3. All employees must work less than a specified number of hours per week 4. The supplier must comply with wage laws 5. All employees must receive humane treatment 6. The supplier may not be discriminatory in its employment decisions 7. The supplier's facility must meet safety standards 8. The supplier must have a plan for emergencies 9. The supplier must notify its employees of the applicable supplier code of conduct 10. The supplier's compliance with the supplier code of conduct is subject to audit Why suppliers' code of conduct? Stiff competition among the manufacturers has prompted the suppliers to think of various ways of cost cutting so that the final product can be sold at competitive price. Materials Management Review

This in turn has intensified the pressure on the suppliers to reduce their prices. As lowering of prices would affect their margins, the suppliers examined the different options to help them reduce the prices. This resulted in adopting unethical practices or doing unlawful business in different parts of the world. Further the suppliers started looking at unethical means to bag the orders, and to get the contracts favorably written in their favor. While these practices to some extent helped the suppliers to survive in the business, they later proved to be detrimental from the point of overall economy. Further such suppliers were unable to provide the usual guarantee and warranty for their products and the end users got affected. Also the governmental agencies realized that these practices could lead to loss of revenue and erosion of goodwill among the end users. Hence the industries and the concerned agencies felt that it is necessary that certain rules and regulations are followed to protect the interest of everyone along the chain. Thus the code of conduct started coming up across the companies. In particular, the big companies with well established brands wanted to project an image of being fair and clean and hence started implementing code of practice. Soon this was followed by other companies around the world. Overview of some examples of suppliers' code of conduct In this section, several examples of code of conduct are given to provide a better understanding of the concept and also to indicate how much extra care is being taken by international companies to protect their image. Whirlpool Corporation : This Whirlpool Corporation Supplier Code of Conduct ("Code") formalizes the key principles under which suppliers to Whirlpool Corporation and its global subsidiaries ("Whirlpool") are required to operate. In selecting suppliers, Whirlpool works hard to choose reputable business partners who are committed to ethical standards and business practices compatible with those of Whirlpool. Suppliers are required to comply with this Code and to have and maintain practices similar to those in the Whirlpool Code of Ethics (available at whirlpoolcorp.com). The code further includes details about Laws and Regulations, Child Labor, hours of work, wages, working conditions, and the handling of certain materials. It also cautions about Forced Labor, Harassment, Health and Safety, Nondiscrimination, Women's Rights, Freedom of Association and Collective Bargaining. The company further insists on communication of the code, and Monitoring and Compliance. Avon, USA : This company through their Supplier Code of Conduct, vendor audits and product compliance testing, seeks to hold their suppliers accountable for compliance with all applicable local and national laws and regulations regarding product safety and quality, environmental performance and human rights. Through monitoring, ongoing engagement and, if necessary, termination, they seek to ensure that all suppliers of Avon non-beauty products sold in the United States comply with their Supplier Code of Conduct. They have engaged several third-party auditing firms to monitor suppliers' compliance with the Supplier Code of Conduct. They are currently reviewing the effectiveness of supplier Materials Management Review

monitoring program, in particular as it applies to suppliers of products sold in countries outside the United States. McDonald's Code of Conduct for Suppliers : McDonald which has spread its outlets outside USA in many countries has also included most of the clauses used in other companies' code of conduct. These include compliance with applicable laws and standards, employment practices, and inspections. Further the company insists that a agreement be signed by the suppliers in acceptance of this code of conduct. Sony Corporation : As stated in their web site, the Sony Group Code of Conduct declares that Sony Group's policy is to comply with all applicable laws and regulations of the countries and regions in which it operates and to conduct its business activities in an honest and ethical manner. Simultaneously, the Sony Group Code of Conduct declares that Sony Group expects its suppliers to uphold the policies of Sony Group concerning compliance with all applicable law, respect for human rights, environmental conservation and the safety of products and services. The Code is made up of five sections: Sections 1, 2, and 3 outline standards for Labor, Health and Safety, and the Environment, respectively. Section 4 outlines the elements of a minimally acceptable system to manage conformity to this Code. Section 5 adds standards relating to business ethics. Staples' Supplier Code of Conduct : Staples Company known for quality office supplies in USA and many other countries has included most of the commonly quoted clauses. The code of conduct specifies about 1. Forced Labor, 2. Child Labor, 3. Harassment and Abuse, 4. Nondiscrimination, 5. Health and Safety, 6. Freedom of Association and Collective Bargaining, 7. Wages and Benefits, 8. Hours of Work, and 9. Overtime Compensation, UN Supplier Code Of Conduct : The values enshrined in the United Nations (UN) Charter, respect for fundamental human rights, social justice and human dignity, and respect for the equal rights of men and women, serve as the overarching goals that suppliers to the UN are expected to achieve. The code specifically addresses labor, human rights, bribery and corruption and environment. Apple Supplier Code of Conduct : Apple is committed to ensuring that working conditions in Apple's supply chain are safe, that workers are treated with respect and dignity, and that manufacturing processes are environmentally responsible. Apple's suppliers ("Suppliers") are obligated, in all of their activities, to operate in full compliance with the laws, rules, and regulations of the countries in which they operate. This Supplier Code of Conduct ("Code") goes further, drawing upon internationally recognized standards, in order to advance social and environmental responsibility. In addition the code mentions about the management information systems being a part of the procedures. Conclusion : The suppliers' code of conduct promotes healthy and fair practices among the suppliers and ensures safety of the products and safety to the
August 2011 5

environment and end users. Because of the variations in the laws and policies from country to country, it is necessary that some common clauses be made mandatory in the code. As illustrated in the examples here, most of the codes contain similar references and insist upon certain well accepted policies and recommendations. Besides, the territorial standards are also made compulsory in many companies. Indian companies too should move forward and adopt good code of conduct. It may be mentioned here that long ago, Toyota Motor Company insisted that its suppliers follow clean and green practices and effectively implemented this policy among all its plants worldwide. Adopting and implementing a suppliers code of conduct is definitely a contribution to the society through good practices.

References: 1. Dominick, Charles, "Who Is Using A Supplier Code of Conduct? Trend Alert: The Supplier Code of Conduct, PurchTips" - Edition #97 April 4, 2006, http://responsibility.avoncompany.com/page-67supplier-code-of-conduct http://www.nextlevelpurchasing.com/articles/ supplier-code-of-conduct.html, w w w.w h i r l p o o l co r p . c o m / re s p o n s i b i l i t y / quality_operations_suppliers/ supplier_code_of_conduct.aspx

2. 3. 4.

PURCHASING MANAGERS INDEX FALLS TO 55.3 IN JUNE FROM 57.5 IN MAY

India Manufacturing expands at slowest pace in nine months

ndias manufacturing grew at the slowest pace in nine months after the Reserve Bank of India raised interest rates by the most in a decade to tame prices.

forecast to 8.6% for the year ending March 31 from an earlier estimate of 8.1%. Policymakers allowed state-run refiners including Indian Oil to increase diesel costs by R3 (7 cents) a litre, kerosene by R2 a litre and cooking gas by R50 for every 14.2 kg bottle. The decision was aimed at reducing government subsidies and help limit losses at companies selling fuels below cost. Opposition parties including the BJP organised protests in the country against the move. Inflation erodes purchasing power in a nation where the World Bank estimates almost three-quarters of the people live on less than $2 a day. RBI has lifted its benchmark repurchase rate by 275 basis points since the start of 2010. The economic expansion is finding support from exports, which rose 56.9% in May from a year earlier to $25.9 billion, according to a statement from the commerce ministry on Friday. Imports rose 54.1% to $40.9 billion. In China, policy makers on June 14 increased lenders reserve requirements to drain cash from the economy after consumer prices rose 5.5% in May, the biggest jump since 2008. China has so far boosted rates four times since September. A Chinese manufacturing index fell to the lowest level since February 2009, signaling that the worlds secondbiggest economy is cooling as export demand weakens and the government reins in credit to control inflation. Source: The Financial Express Materials Management Review

The Purchasing Managers Index fell to 55.3 in June from 57.5 in May, HSBC Holdings and Markit Economics said in an emailed statement on Friday. A number above 50 indicates expansion. Factory output has weakened in India and China, the fastest-growing major economies, as policymakers tightened borrowing costs to curb price gains. Indias inflation may quicken after the government increased diesel prices last week, Goldman Sachs and Kotak Securities said. India is not going to see any respite from inflationary pressures after the fuel price hike, said Suvodeep Rakshit, economist, Kotak Securities, Mumbai. RBI will continue tightening despite signs of growth moderating. Rakshit expects the central bank to lift borrowing costs for the 11th time since the start of 2010 in the next monetary policy meeting on July 26. The Bombay Stock Exchanges Sensitive Index fell 0.2% and the yield on the 7.8% bond due in April 2021 gained three basis points to 8.35%. The rupee strengthened 0.2% to 44.61 per dollar. The wholesale-price inflation accelerated to 9.06% in May from an 8.66% gain in April, according to the commerce ministry. The governments June 24 decision to increase diesel tariffs for the first time in a year will spur living costs, Goldman said June 27 as it raised the countrys inflation
6 August 2011

Best Practices in Internatioal Logistics

How Top Companies Use Technology and Logistics Partners to Improve Performance

Executive Summary

usiness success is increasingly linked to effectively managing international logistics. Growing lowcost country sourcing and rising sales to international customers are triggering companies to seek new ways to manage the costs, complexities, and uncertainties of moving goods across borders. In November and December 2005, Aberdeen researched companies that are transforming their international logistics operations to ?nd out how they are achieving improvements. Eight companies were selected as best practice winners, two in each logistics management category: global inventory control, transportation spend management, import/export process management, and international logistics outsourcing. These companies are able to invest less capital in international logistics yet provide better service to customers. Key Findings and Recommendations : Analysis of the best practice winners found that greater process automation, improved technologies, and increased reliance on logistics partners were instrumental in driving their successes. Although winners focused on different areas of international logistics improvement, they shared common views on how to achieve success. Companies seeking to improve their international logistics performance should consider these best practice tenets as they construct their transformation roadmap. Envision the future, act on the foundation. Best practice winners set the strategy for international logistics in the context of how their companies compete as businesses. However, they realize logistics excellence is a journey. As a result, they focus their actions on transforming specific foundational components on which they can drive future improvements. Visibility, trade compliance, and transportation contract management are some of the most common cornerstones. Partner for success. Unlike in domestic logistics, its impossible to go it alone in the international arena. To drive their success, best practice winners Materials Management Review

are creating better ways to leverage the skills (and technology) of partners. They are figuring out new ways to synchronize activities and increase process visibility and control with customs brokers, freight forwarders, ocean carriers, logistics service providers, and others. Best practice winners stress that it is vital to choose partners that provide the best value, not the lowest contract cost. Automate with Internet-based technology. Without exception, best practice winners logistics strategies revolve around decreasing manual processes and increasing automation. Internet-based technology is enabling a new level of transaction automation and partner synchronization previously not practical or possible. On-demand global trade management platforms and data gateways are driving more electronic collaboration for signi?cantly reduced IT costs. Create visibility to create control. International logistics is all about managing a network of thirdparty providers. The foundation for controlling this process is visibility. For a number of best practice winners, visibility does not stop at identifying a shipment delay or inventory issue. Rather, an alert is the first step in a structured notification, resolution, and root cause analysis process. In particular, those companies with strong Six Sigma heritage are using that discipline to create improved international logistics reliability. Use inventory more effectively. A number of international logistics leaders are focusing on extracting more value from their inventory. In some cases, this means creating better in-transit visibility so they can redirect inventory around port congestion or other bottlenecks or to higher points of demand. In other instances, the focus is on optimizing where and how much inventory to hold in the first place. Better leveraging the networks of logistics partners and using multi-echelon inventory optimization tools are some of the success tactics being applied. Implement transportation spend management. Although companies have focused on spend
August 2011 7

management discipline in areas like office suppliers, travel expenses, and telecom costs, they have mostly ignored ocean and air freight costs. Two of the best practice winners focused specifically on aspects of transportation spend management to jump-start their improvement initiatives. Streamline customs processes and maximize trade agreements. Without a solid foundation of trade compliance and documentation, purchasing will make the wrong sourcing decisions, goods will be delayed clearing customs, and the business will be put at risk of regulatory infractions. Trade agreement management and integration with broker partners to avoid data keying errors and costs are among the key trade compliance initiatives for best practice winners. Obsess about organizational buy-in. Best practice winners are intensely focused on gaining and maintaining organizational buy-in for their logistics transformation initiatives. This includes gaining the CFO and ?nance organizations support by focusing not just on logistics-related savings but also translating the initiatives to tangible, direct benefits for them.

are transforming their international logistics operations to find out the details of how they are achieving improvements. Out of this research, eight companies were selected as best practice winners, two in each logistics management category: global inventory control, transportation spend management, import/ export process management, and international logistics outsourcing. The Challenges of International Logistics In most companies, international logistics processes mirror domestic supply chain practices in the 1970s: logistics staffs keep their supply chains moving through experience-based problem solving, and insistent phoning and faxing of logistics partners. At nearly twothirds of companies, spreadsheets, department-built Access database applications, and emails round out the technology portfolio. Many international logistics groups have reached the breaking point, however. As global sourcing and selling increases, so do transactions, partners, and problems to be managed. But budgets dont allow logistics departments to continue throwing people at these issues. The current manual-intensive process of global logistics is becoming unsustainable. Companies adopting automation are starting to experience cost and speed advantages over their competitors. These companies are using automation to tackle both physical distribution challenges and cost control challenges. Physical Distribution Challenges Companies are seeking to improve international logistics processes because of longer lead times, greater supply chain uncertainty, and increased business risk (Figure 1). The greatest handicap to logistics performance, according to two-thirds of ?rms, is the lack of visibility and metrics for managing overseas vendors and logistics service providers. (See New Strategies for Global Trade Management, March 2005.)

International Logistics Best Practices Key Takeaways Internet-based technology is instrumental to better performance. Outsourcing to logistics service providers can drive leaps in performance when paired with visibility and control technology. Spend management in international logistics is an emerging area of focus. Creating organizational buy-in is the most important factor for success.

The heat is turning up on logistics processes as sourcing and manufacturing activities are increasingly being done internationally. Companies going global are experiencing unexpected transportation costs, higher inventory investment, and longer and more unpredictable cycle times, while at the same time their local customers are demanding lower prices, more unique execution, and improved responsiveness. As a result, companies are seeking ways to make their international logistics processes more reliable, more flexible, and less expensive. Aberdeen surveyed and interviewed more than 400 international logistics and trade managers in 2005 to find out how companies are coping. In November and December 2005, Aberdeen researched companies that
8 August 2011

Figure 1: Top Pressures Driving Companies to Improve International Logistics Source AberdeenGroup, January 2006

Cost Challenges A parallel issue is cost control. In our domestic supply Materials Management Review

chain, we can easily attribute freight costs and even understand the impact of truck fuel surcharges at a carton level, says a retail international transportation director. But on the international side, we were challenged to answer even basic questions such as, Whats the average ocean freight spend per month, by lane? Because we lacked integrated systems and normalized data. Companies are finding that inadequate transportation spend visibility is leading to unanticipated budget discrepancies, unexpectedly low product margins, and, in some cases, higher rather than lower total costs when sourcing from low-cost countries. As Figure 2 shows, international transportation expense is the top area for budget discrepancies. Learning from the Top Performers Top performers are succeeding in using international logistics transformation to drive quanti?able business benefits for their corporations, including cost and speed advantages. These companies are able to invest less capital in international logistics yet provide better service to their customers. They are arming their logistics staffs with up-todate technology and integration-friendly logistics partners to support todays global-intensive business environment. Analysis of the eight best practice winners found that greater process automation, improved technologies, and increased reliance on logistics partners were instrumental in driving their successes. Although winners focused on different areas of international logistics improvement, they shared common views on how to achieve success. Companies seeking to improve their international logistics performance should consider these best practice tenets as they construct their transformation roadmap. Envision the Future, Act on the Foundation The strategy for international logistics has to be set in the context of how a company competes as a business. We have a highly leveraged business model based on product leadership, says the senior vice president of operations for a mid-size high-tech winner. We needed a logistics strategy that supported our corporate strategy. For us, this meant outsourcing logistics to a domain expert and creating an international distribution network that was simple, visible, and accountable. The logistics strategy must envision the future but action needs to be taken on the discrete, foundational components. These elements include such areas as ocean contract management, trade compliance, and visibility. For instance, automating the trade compliance process lays the groundwork for better total landed costing and Materials Management Review

margin management, smarter sourcing and inventory management decisions, and fewer supply chain delays. Best practice winners seek rapid time to bene?t on their logistics transformation projects, often achieving payback on their initiatives in less than a year.

Figure 2.: Top areas for Global Trade Budget Discrepancies Source Aberdeen Group, January 2006 The other aspect of a sound international logistics strategy is that it needs to be built for ?exibility. Expect and prepare a foundation for change, says the vice president of global logistics for an apparel company. C-TPAT, advanced manifest requirements, changing trade agreements and free trade zones, new partners and events to track, new distribution bottlenecks to avoid change is constant. Our next core competency, says an appliance manufacturers global value chain leader, is focusing on the speed and velocity in which we can execute the results of new logistics strategies. Being able to ?ex the international supply chain quickly to avoid cost and service issues and take advantage of new productivity advances requires technology and partners built for change. Key areas to address in building an international logistics strategy are shown in Figure 3. Partner for Success Unlike domestic logistics, its impossible to go it alone in the international arena. Best practice winners are figuring out new ways to synchronize activities and increase visibility and control of processes with customs brokers, freight forwarders, ocean carriers, logistics service providers, and others. These companies are leveraging the skills (and technology) of partners to achieve cost and lead time benefits. Rather than displace our brokers, we want to automate our interactions, says a logistics manager. The manual process of interacting with them results in high document fees and additional errors because they are re-keying data. We want to fix that, not take over their activities. Two of the best practice winners embraced total logistics
August 2011 9

outsourcing. Dont do outsourcing for the sake of outsourcing, says an executive of one of the winners. Your strategy needs to take into account the complexity of your products and business model or it will fail. For this company, logistics outsourcing was the right strategy and resulted in a 30% decrease in logistics costs. If you do outsource, never go with the lowest contract cost, continues the executive. Go with the best value proposition. If outsourcing is right for you, move immediately to a single end-to-end logistics provider that can provide you with flexibility, reliability, and visibility, urges another logistics executive. But make sure youre diligent in your evaluation to pick the right partner and consider not just cost but also quality and communications capabilities. Automate with Internet-Based Technology Without exception, best practice winners logistics strategies revolve around decreasing manual processes and increasing automation. Automation translates into speed, says one best practice winner. Manual processes translate into delays and errors. According to another winner, Having technology that lets you manage by exception is instrumental to boosting efficiency. Internet-based technology is enabling a new level of transaction automation and partner synchronization previously not practical or possible. On-demand global trade management platforms and data gateways are driving more electronic collaboration for signi?cantly reduced IT costs. Best practice winners report very little internal resistance to using on-demand technology, also known as software as a service or hosted, web-based systems.

area rather than having to reprioritize their projects and reallocate staff for traditional software installations. Supplementing existing enterprise systems with advanced optimization is another favored strategy of best practice winners. They realize that optimizing endto-end inventory or optimizing lane-by-lane awards to carriers or forwarders is too complex to figure out on spreadsheets. Multi-echelon inventory optimization and ocean bid optimization are two areas driving quick, multi-million dollar savings for companies. Lay the Foundation for Visibility and Control International logistics is all about managing a network of third-party providers. The foundation for controlling this process is visibility. Some of the best practice winners have integrated their enterprise customer service and logistics systems with the visibility systems of their logistics providers to obtain automatic status and alert information. Other winners are using on-demand visibility solutions that are independent of their logistics providers technology. This provides more control of how the technology can be used and also enables easier plugand-play of logistics providers because technology does not have to be reinstalled when switching providers. Companies that still rely on phone calls, emails, or manual web lookups to track down shipments are at a competitive disadvantage. Real-time knowledge of the location of goods throughout the supply chain makes for faster-moving inventory speeds, cash ?ow, and receivables, all while reducing inventory carrying costs. For a number of best practice winners, visibility does not stop at identifying a shipment delay or inventory issue. Rather, an alert is the first step in a structured noti?cation, resolution, and root cause analysis process. In particular, those companies with strong Six Sigma heritage are using that discipline to create improved international logistics reliability. Use Inventory More Effectively Best practice winners also focus on extracting more value from their inventory. In some cases, this means creating better in-transit visibility so they can redirect inventory around port congestion or other bottlenecks or to higher points of demand. In other instances, the focus is on optimizing where and how much to hold inventory in the first place.

Figure 3. International Logistics Framework Source Aberdeen Group, January 2006 International logistics has historically been on the bottom of the corporate IT priority list, so CIOs are generally supportive of trying on-demand models in this
10 August 2011

Aberdeen research shows that traditional inventory target setting practices are insuf?cient for situations where there is varying demand and supply uncertainty, often resulting in a company holding 20-30% too much inventory across its supply chain. Many companies use Materials Management Review

weeks of supply and rules of thumb based on past history to set raw material and work-in-process (WIP) inventory buffers. Whenever the supply base has poor performance, inventory planners ratchet up the inventory targets but they rarely ratchet them down to account for better performance. So over time, companies can find themselves holding more and more of this just-in-case inventory. By using multi-echelon inventory optimization, which more accurately accounts for supply and demand variability, companies can take out redundant and unnecessary inventory while improving customer service levels. (For more information on multi-echelon inventory optimization approaches and vendors, see Are Your Inventory Management Practices Outdated, March 2005.) Implement Transportation Spend Management A missing discipline in many companies is transportation spend management. Although companies have focused on spend management in areas like of?ce suppliers, travel expenses, and telecom costs, they have mostly ignored ocean and air freight costs. Yet international transportation costs can be two to three times higher than domestic costs and much more variable. Two of the best practice winners focused specifically on aspects of freight spend management to jump-start their improvement initiatives. Electronic contract management is the foundation for spend management, explains an international transportation director. We can exploit this foundation to improve product costing and margin management, automate freight audit processes, and take preemptive action on cost and allocation issues. Streamline Customs Processes and Maximize Trade Agreements Another foundational focus for best practice winners is trade compliance and documentation, which drives streamlined, cost-efficient, and low-risk international logistics processes. Best practice companies that focus on trade compliance excellence are realizing improvements in a number of areas: Automating import/export compliance and documentation processes; Maximizing free trade agreement program benefits and automating certificate of origin management with suppliers; Creating paperless workflows with brokers to lower document costs and increase classification consistency. (For more information, see The New Buying Guide for Trade Compliance Technology, Materials Management Review

December 2005.) Obsess about Organizational Buy-In Universally, the eight best practice winners are intensely focused on gaining and maintaining organizational buyin for their logistics transformation initiatives. Communicate and educate everyone on the costs, risks, and benefits involvedmake them aware of how it personally affects them, advises a global logistics manager. Start with a small, manageable piece, gain success, and build on it. In addition to the usual executive support needed for corporate initiatives, international logistics initiatives need to focus on securing: Local operational support. Involve subject matter experts and local logistics, manufacturing, and purchasing managers early and often. Early, collaborative review of workflow, data feeds, and optimization models is vital to creating buy-in and realizing the savings of new logistics strategies. Focus on changing the culture from a Weve always done it this way mentality to an innovation mentality where operations staff actively thinks of how to create better ways to do business. Intimately involving the operations staff in the transformation project is the most effective way to foster an innovation mentality. Vendor and logistics provider support. Similarly, engage vendors and logistics providers as early as possible in the process. Look for ways to leverage their expertise while laying the groundwork for paperless transactions. Finance organization support. CFOs and finance organizations increasingly realize the value of enhanced international logistics automation and visibility. Key to gaining their support is not just focusing on logisticsrelated savings but also translating the initiatives to tangible, direct benefits for them (e.g., improve margin management, enhance cash flow forward visibility, automate human-intensive freight audit and settlement processes, and decrease cash-to-cash cycles). (See The CFOs Agenda for Global Trade Benchmark Report, September 2005.)

To succeed, you absolutely need your ?nance community and the functional groups in lockstop with you throughout the process, says one logistics manager. Other companies cite Lean and Six Sigma leadership and staff as being key centers of support for international logistics transformations. Source : Supply Chain Insight

August 2011

11

Trends in Containerization: Global and Indian scenario

Dr. N. Chandrasekaran
Director, Centre for Logistics and Supply Chain Management,

Dr. M.Ramasubramaniam,
Assistant Professor, Centre for Logistics and Supply Chain Management, Loyola Institute of Business Administration chandrasekaran@liba.edu, rams@liba.edu
Importance of container shipping in international trade countries like United States, still there are concerns because of the rising unemployment rates and the scale of the losses incurred during the downturn. The economy of US is expected to remain flat during 2010. Recovery in European Union and Japan is expected to be much fragile with rates of less than 1%. Developing countries, on the contrary, is expected to recover at a higher pace with a 5% growth which is still less than the pre-crisis figures of 7% per annum growth figures. China and India are expected to lead the recovery in Asian economies. Table 1: Real GDP values for different countries Country 2007 2008 2009* 2010* China 13 9 6.5 7.5 India 9.3 7.3 4.5 5.6 Pakistan 6 6 2.5 3.5 Bangladesh 6.3 5.6 5 5.4 Indonesia 6.3 6.1 2.5 3.5 Thailand 4.9 2.6 -3 1 Philippines 7.2 4.6 0 1 Malaysia 6.3 4.6 -3.5 1.3 Vietnam 8.5 6.2 3.3 4 Korea 5.1 2.2 -4 1.5 Taiwan province 5.7 0.1 -7.5 0 Hong Kong 6.4 2.5 -4.5 0.5 Singapore 7.8 1.1 -10 -0.1 Turkey 4.7 1.1 -5.1 1.5 Estonia 6.3 -3.6 -10 -1 Latvia 10 -4.6 -12 -2 Lithuania 8.9 3 -10 -3 Hungary 1.1 0.6 -3.3 -0.4 Poland 6.7 4.8 -0.7 1.3 Russia 8.1 5.6 -6 0.5 Argentina 8.7 7 -1.5 0.7 Brazil 5.7 5.1 -1.3 2.2 Colombia 7.5 2.5 0 1.3 Iran 7.8 4.5 3.2 3 Saudi Arabia 3.5 4.6 -0.9 2.9 UAE 6.3 7.4 -0.6 1.6 United States 2 1.1 -2.8 0 Germany 2.5 1.3 -5.6 -1 France 2.1 0.7 -3 0.4 Italy 1.6 -1 -4.4 -0.4 Materials Management Review

lobalization has had multitude of effects on global trade. One of the obvious effects is growth of interdependency of nations and connectivity between them. Among the available modes of transportation between nations, water as a mode specifically container shipping has played an important role by providing economies of scale. History of modern container shipping can be dated back to 1956 when a refitted oil tanker was used to ferry a convoy of containers between two US cities Newark and Houston. From days of being an unorganized sector, when a tanker would be full only with few containers, the container shipping industry has grown in enormous proportions and has become highly automated, highly standardized industry on a global scale. The loading and unloading times for container ships which were high in during early days have drastically come down. In line with increasing automation, the crew size used to manage the container ships has also come down significantly. A crew size of less than 20 is all what it takes to manage an oceangoing vessel longer than two cricket stadiums. Over a period of time, the industry has evolved to an extent that using the containers for shipping not only lower freight bills, but also total transit time and in-transit inventory, in turn reducing the cost of inventories. Modern container shipping, along with advances in information systems, also paved way for implementation of concepts like justin-time manufacturing to companies like Toyota and Honda. Macroeconomic outlook of nations The key to growth of container shipping industry is largely influenced by the economic growth. This fundamental relationship between container trade growth and economic growth is believed to persist for at least a decade or so. Therefore it is imperative to look at the current macroeconomic climate prevailing in different parts of the world. The IMF report indicates that the downfall that was persisting in the most of the economies around the world has stopped and there are signs of economic recovery. The economic recovery in most of these countries is primarily due to the macroeconomic policy actions initiated by the respective governments and this has restored consumer confidence to some extent. But in
12 August 2011

Spain 3.7 1.2 -3 Japan 2.4 -0.6 -6.2 United Kingdom 3 0.7 -4.1 Canada 2.7 0.5 -2.5 Australia 4 2.1 -1.4 Taiwan 5.7 0.1 -7.5 Sweden 2.6 -0.2 -4.3 Switzerland 3.3 1.6 -3 Source: IMF Economy Outlook 2009,*Projections The world container ship fleet

-0.7 0.5 -0.4 1.2 0.6 0 0.2 -0.3

as much as 13 ports from Asia with remaining ports from Europe(4) and United States(3). Container throughput in these top 20 ports has grown over 4% during 2008. Container Port Traffic: Indian Trend India is world's 4th largest economy in terms of Purchasing Power Parity (PPP) next only to United States, Japan and China. The GDP for India is projected to grow at 5.6% in the upcoming year which is relatively better compared to the global outlook. The geographical location of India is also strategic if one looks at the global maritime map. The coastlines extend up to 7500KMs with 12 major and about 200 minor ports catering to the domestic and global demand. A major chunk of merchandise trade is handled through ports. The container traffic throughput in India during 2006 07 was at 5.4 million TEUs. In 2008, container traffic grew 19% over previous year primarily due to strong demand for shipping raw material and exporting finished goods. The 12 major Indian ports handled 6.6 million TEUs by March 2008. At this growth rate, capacity is expected to reach over 20 million TEUs by 2016. The major contribution for this traffic is by JNPT accounting for 4.06 million TEUs which is about 60% of the total container traffic. This, in comparison to china's capacity of handling over 100 million TEUs, is still meager. Year 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2011-12* 2013-14* 2015-16* Table 2: Container Traffic in India Million TEUs 3.3 3.9 4.2 4.9 5.4 6.6 12 15.1 20

The growth of containerized trade can materialize only if the growth in economy is accompanied by investment in expansion or modernization of ports, container ship fleet and underlying capacity utilization. According to the international maritime report 2009, the world fleet of container ships has expanded significantly in 2008. By early 2009, there was an increase of 8.5% in number of ships and 12.9% in TEU capacity over the previous year which indicates development in size of container ships. Ship sizes have also continued to increase with the average carrying capacity per ship growing from 2,516 TEUs in January 2008 to 2,618 TEUs in January 2009. But, because of the financial crisis, towards end of 2008 there were many container ships which were grossly underutilized. Most of the top container terminal operators saw their valuations decline to an all-time low. Albeit, the recent trend of port throughput which is an important revenue indicator shows a positive development. Since the revenue depends on quantum of international trade and with the sluggish global economic outlook, port revenues are likely to remain flat, if not worse.

*Projections, Source: KPMG report, Maritime report In 2007-2008, the Chennai container port was the second biggest container port handling 1.02 million TEUs, a 28% increase over the previous year. Tuticorin port handled about 0.43 million TEUs during the same period. The Container traffic at the Port stood at 1.2 million TEUs during the year under report as compared to 1.1 million TEUs handled in 2008-09. This is once again the highest container traffic at Chennai Port Trust. Tuticorin Port handled all time record cargo traffic of 180.0 lakh tonnes exceeding the previous year's traffic of 171.39 lakh tonnes, registering a growth rate of 5.03 per cent. TPT handled 0.37 million TEUs during 2006-07, registering a growth rate of 17.46 per cent against 0.32 million TEUs of containers handled during previous fiscal. This is the highest volume of containers handled in a year in the history of the Port.
August 2011 13

Figure 1: World Container Fleet. Source: Maritime report 2009

Container Port Traffic: Global Trend As per the latest figures from maritime report, world annual container port traffic in all the developing economies has crossed over 100,000 TEUs. In 2007, the movement was 487.1 million TEUs which is a 12% increase over 2006. In the same year, the growth rate for almost 50% of the developing countries registered double-digit growth figures, with china topping the table for the highest container throughput. The statistics also show that the world's top 20 container ports list includes Materials Management Review

Challenges India's inadequate state of infrastructure is evident. Almost all the links both rail as well as road in golden quadrilateral are already congested. Most of the major ports already operate under severe capacity limitations. To augment this problem, only 6% of total freight transport is currently handled through water in India as opposed to nearly 30% in China and 14% in United States. Even a modest 2% increase in freight traffic in coming years will severely affect the handling capabilities of ports.

prospect of utilizing coastal lines extending from West to East. If these intended projects and prospects are implemented and exploited without any unduly delay, India might be at the forefront of developing economies to drive international container trade. References 1. IMF report 2010 Global Economic Outlook 2. Review of Maritime Transport, 2009 and 2008. 3. Transforming the nation's logistics infrastructure, McKinsey&Company Report, 2010 4. Ministry of shipping website: http:// www.shipping.nic.in 5. India Port Association. http://www.ipa.nic.in 6. Indian maritime Landscape, CII-KPMG report, 2006. 7. News: http://www.livemint.com/2008/04/ 09232040/Container-cargo-traffic-at-maj.html

CURRENCY EXCHANGE RATES

INR
Australian Dollar (AUD)
Figure 2: Global Demand and Supply situation. Source: maritime report, includes multi-purpose and other vessels with container carrying capacity The supply - demand situation looks grim with the demand expected to fall down during 2010 (Fig. 2). The supply trend is such that it lags demand by about twothree years. Based on this trend, it is expected that the supply situation will weaken during the near future. Opportunities : Even under the current outlook, the developments happening in major ports across India should ease the traffic to considerable extent. The major on-going projects across India are listed below: Building of third and fourth container terminal at JNPT Navi Mumbai at a total estimated cost of Rs. 15000 crores with capacity addition of over 30 Million Tonnes per annum Construction of container terminals at Visakapatnam, Tuticorin at a total estimated cost of Rs. 2000 crores Chennai-Ennore port road connectivity project covering 30Km at an estimated cost of Rs.600 crores Chennai mega Container Terminal at an estimated cost of Rs. 3600 crores Integrated dry port & multi-modal logistics hub near sriperumbudur SEZ Globally, coastal shipping as a mode of domestic freight transport is effectively utilized by countries like China and United States. For China, the huge coastline and extensive connectivity of inland waterway network may be the key factor behind this influence. With better penetration of coastal shipping, India also has the
14 August 2011

48.04 117.44 72.39 46.65 6.89 8.56 63.84 5.70 0.04 0.57 162.30 115.31 0.51 12.19 11.84 36.75 S 6.53 7.01 54.61 12.09 44.41

Bahraini Dinar (BHD) British Pound (GBP) Canadian Dollar (CAD) Chinese Yuan (CNY) Danish Krone (DKK) Euro (EUR) Hong Kong Dollar (HKD) Iraqi Dinar (IQD) Japanese Yen (JPY) Kuwaiti Dinar (KWD) Omani Rial (OMR) Pakistani Rupee (PKR) Qatar Rial (QAR) Saudi Arabian Riyal (SAR) Singapore Dollar (SGD) outh African Rand (ZAR) Swedish Krona (SEK) Swiss Franc (CHF) UAE Dirham (AED) US Dollar (USD)
Source : Rediffmail.com dated 25th July, 2011

Materials Management Review

Lean Supply Chain: Competitive Advantage

R V Ramakrishnan Management and Training Consultant Logistics & Supply Chain Management rvrk@gmail.com
Todays manufacturers operate in an increasingly demanding environment that includes global competition, increasing pressures for cost reduction, quality-driven compliance and improvements in on-time & in-full orders. Each of its core business functions is affected, ranging from product design, manufacturing, supply chain operations, sales and customer service. It is in this context that many manufacturers are initiating enterprise-wide lean cultures and programmes in order to compete in the 21st century. Lean procurement, which is a web-based and automated process Lean manufacturing, producing what the customer wants, in the right quantity, at the right time and with minimum resources Lean warehousing, eliminating waste in product storage processes Lean transportation, creating flow and using pull Lean customers, who value speed & flexibility and expect high levels of delivery performance & quality. Benefits The benefits of lean supply chain are the following: Speed and responsiveness to customers (time reduction 10-30 per cent) Reduced inventories (10-30 per cent) Reduced costs (10-25 per cent) Enhanced customer satisfaction Supply chain as a competitive weapon In moving towards a lean supply chain, it is important to focus on reducing waste within the organisation and partner members, from all points in the supply chain. We should define the value stream and map the supply chain processes that the product goes through, from creation to consumption. We need to determine where waste can exist, does exist and can be eliminated. However, creating a lean supply chain is a challenge, which requires changes in peoples behaviour, business processes and technology. Case study: Blue Stars lean supply chain Principles The principles of lean supply chain are: Product value has to be defined from the customers point of view Supply chain and the information that supports it should flow continuously Product should be pulled by the customer, not pushed by the company The entire organisation should work towards achieving perfection, concentrating on wastereduction and value-addition in all of its supply chain processes Components involved The components involved include: Lean suppliers, who can respond to changes, maintain lower prices, improve quality and deliver on time Indeed, lean supply chain management can lift troubled companies operating in mature markets into the realm of competitiveness. Blue Star was suffering from an average on-time-delivery record of just 33 per cent at its chiller-manufacturing plant at Thane (Maharashtra). The plant was struggling to break-even due to high inventories. An internal audit revealed that 10 per cent of its 500 vendors accounted for 60 per cent of the business, but still the company was devoting 90 per cent of its resources to deal with the remaining 400 vendors. As a result, 85 per cent of the time was wasted on non-value-added activities, like issuing as many as 3,000 purchase orders. The company realised that it needed a leaner supply chain and its managerial resources had to be focussed on those vendors who supply critical components, which demanded downsizing of the supplier-base. Therefore, it reduced the number of vendors to 140 and concentrated on them to yield better results and improve the performance of its supply chain. Simultaneously, the
August 2011 15

lthough lean concepts and disciplines have long been associated with dramatic improvements in the manufacturing arena including waste elimination, supply chains today face enormous pressures linked to competitive forces and ever-exacting customer demands. Lean supply chains are those where end-customer demand permits smooth, synchronised flow of materials, information and physical assets based on period-specific demand requirements.

Materials Management Review

company introduced a two-bin system of Kanban on the shopfloor, for automatic replenishment of C-class items.

The company also installed special software, which requisitions supplies from vendors in the right quantity and at the right time. The plants order-to-delivery cycletime has dropped from 103 days to 34 days. As a result, it can produce an average of 30 chillers per month, up from 17. Its work-in-progress has dropped from an average of 22 chillers to 6 chillers, while on-time deliveries stand at 94 per cent; while the tangible savings amount to Rs 1.5 crore a year, lean supply chain management is yielding Rs 22 crore in additional revenues. The success of lean supply chain management is - from inability to meet orders, Blue Star has reached a stage where marketing is under increased pressure to sell what the plant can produce. Creating agile supply chain One of the biggest challenges facing organisations today is the need to respond to the ever-increasing volatility. For a variety of reasons, products & technology lifecycles are shortening, competitive pressures are forcing more frequent product changes and demanding greater variety than ever before. To meet this challenge, organisations need to achieve greater agility, so that they can respond in shorter time-frames, both in terms of volume change and variety change.

with volatile demand. The lean paradigm requires that fat be eliminated, whereas the agile paradigm must be nimble since sales lost are gone forever. The combination of lean and agile paradigms, recently coined as leagile, can optimise the total supply chain and enables organisations to obtain both efficiency and responsiveness. However, a truly agile supply chain possesses a number of distinguishing characteristics such as: Market sensitive - capable of reading and responding to real demand Virtual - use of information technology to share data between buyers and sellers Process integration - shared information between supply chain partners Network based - confederation of partners linked together A major problem in most supply chains is their limited visibility of real demand. The point at which real demand penetrates upstream in a supply chain is termed as the decoupling point and is the echelon at which market pull meets upstream push. The aim of the agile supply chain should be to carry inventory in as generic a form as possible ie, standard semi-finished products awaiting final assembly. This is the concept of postponement, a vital element in any agile strategy. The challenge to supply chain management is to seek to develop lean strategies up to the material decoupling point, but agile strategies beyond that point. There is a fundamental difference between the traditional approach to supplying products to markets and the newly emerging model, which suggests that the supply chain should become demand chain - in other words, everything that is produced, handled or moved, should ideally be to a known customer requirement. A demand chain is focussed on effectiveness in the sense that it seeks to be market-driven by responding to the needs of the market more rapidly. The key to this transformation - from supply chain to demand chain - is agility. A global leader in semiconductor business made tens of thousands of different varieties of logic chips, but the demand was hard to predict since few customers provided forecasts. While the overall volume of demand was quite predictable, constant changes in how demand was distributed among products & regions challenged the companys forecasting efforts. The root of the problem was that no fixed plan could accommodate dynamic demand. In fact, this company needed a more flexible, demand-driven approach to inventory management that would continuously update the plan. The solution was to postpone the last stages of product manufacturing, so that the company could delay making decisions about the final form of work-in-process products until demand trends were clearer. The postponement strategy provided far greater flexibility and brought the company closer to the optimal, demand-driven approach to inventory management. The changed conditions in the global marketplace demand a much more agile response from organisations and their partners in the supply chain. True competitive advantage is gained when an organisation can consistently meet customer needs more precisely and more timely.

Agility should not be confused with leanness. Lean is about doing more with less by eliminating wastes in operations. Paradoxically, many organisations that have adopted lean manufacturing as a business practice are not agile in their supply chain. Lean works best in high-volume, low-variety and predictable environments, while agility is needed in less predictable environments where the demand for variety is high, such as that experienced by fashion goods. An important difference is that lean supply is associated with level scheduling, whereas agile supply means reserving capacity to cope
16 August 2011

Materials Management Review

Decentralise India's Food Storage System J. George

Indian policy makers should think beyond erecting huge silos at selected locations to overcome the limitation in proper food storage and delivery. To ensure food security to all, augmenting grain storage capacity in the villages is the best way forward. conscious and transparent engagement with grain storage augmentation issues must precede and inform the national food security discussion. The yawning gaps in the performance (2004/05-2009/ 10) of different constituents of the rural infrastructure business plan template disprove any hope of a balance between equity-efficiency trade-offs in 'India' and 'Bharat'. These flaws should not carry over to the 12th Five Year Plan (2012-2017). We must recognise that efficiency gains in food management are critical. That is the way of improving future streams of farmers' income. Since the distribution of farmers holding is dense at the mean, ensuring market access to marginal and smallholder producer necessarily demands nuanced participation in time, space and form utility creation by this deprived segment. In the livelihood security dilemma, accessible storage facilities are known to enhance socio-economic benefit streams. Kaushik Basu, in his September 2010 Working Paper makes a spirited case for profit maximisation by grain trader and millers. The Supreme Court, on the other hand, is gravely concerned about the rotting grains and open storage of procured food grains primarily due to lack of storage infrastructure. The traders and millers in this milieu are the major recipient of the central government's PAT? procurement, allocation and transport ? largesse. Storage is subsumed to be integral to procurement by designated statutory agencies. The Standing Committee on Food, Consumer Affairs and Public Distribution (2009-2010 FCAPD) in its 6th Report presented to both the houses of Parliament on 12 August 2010 severely indicts the central government on 12 counts (the "dirty dozen") including reneging on scientific storage capacity augmentation programme. In the food management's 'games theoretic' underpinning, a la Kaushik Basu, storage infrastructure concerns have been dismissed as 'populist view'. It is perhaps pedestrian and pedantic to be on the same league as 'India'. Kaushik's concern are synthetic even if the storage typology is restricted merely to capital intensive, heavily carbon emitting, labour displacing and welfare depleting silos. Kaushik Basu failed to
August 2011 17

ood security in its operational details has a consumer focus with 3-As? availability, accessibility and affordability at one end of the supply chain spectrum. Given the stubbornness of the food price inflation, a conscious and transparent engagement with grain storage augmentation issues must precede and inform the national food security discussion. Hopefully the expert panel charged by the Prime Minister to examine whittled down NCA recommendations on Food security legislation will reckon with it. These 3-As are critically dependent on the two sides of the coin called grain storage and supply schedules (GSSS). Revisiting GSSS is imminent to identify and remove blockages in the flow of arbitrage advantages to the supply chain's other extreme particularly the marginal and smallholder farmer producers. Against this backdrop, current embarrassment of surge in multidimensional food insecurity must be placed for a dispassionate discussion. The construct of discourse on rural infrastructure development, sadly, is divisive between 'India' and 'Bharat'. Seamless infrastructure, the Asian Development Bank's flagship programme, could not incorporate inputs of Montek Ahluwalia on the correct mix of rural and urban infrastructure development. By proceeding to build on the public private partnership mode for progress (PPP4P) template the blueprint of affirmative action-plans can avoid the pelf seeking infrastructure induced inconvenience index-PIIII (akin to the commonwealth games syndrome and the 2-G scam). The only sensible corrective demands immediate replacement of rural telephony with investment surge towards augmenting decentralised grain storage capacity in the rural areas. This is a sure shot remedy for the abuse of monopoly power by statutory agencies as well. Given the stubbornness of the food price inflation, a Materials Management Review

appreciate that smaller lot open market sales scheme (OMSS) in the absence of a decentralised storage (feederbalancing) network will inherently suffer from the internal and external diseconomies of large storage. His medicine, thus, is worse than the malady itself. The three entities of money supply have helped India to conceive the grain storage policy. The mother legislation, essential commodities act, and all derivatives thereof have these three as their micro-foundation. Such ground and statutory realities cannot be assumed away in any 'games' framework. Be that as it may, isn't economics everyday business of life, where growth with social justice forms the firm foundation? The Standing Committee on Food, Consumer Affairs and Public Distribution (2009-2010 FCAPD) in its Report severely indicts the central government on 12 counts (the "dirty dozen") including reneging on scientific storage capacity augmentation programme. The reason for the refrain, "why invest in failure" (i. e. storage) is the void of failure and hopelessness in the event of crop failure or bad year (peak-trough 'mechanical trap'). Unfortunately it gets precedence over poorest (amongst six rural infrastructure menu template) performing rural telephony. Moreover, the arbitrage driven income transfer protocol of the decision criterion embedded in recent expressions and construct of discourses like calculus of atta, chawal, dal, chini unambiguously concentrates on the processing segment of the food chain. The food chain spectrum thrives on escalating exclusion errors at both the thickly populated extremes. The advantage of a price difference between two or more markets must be tailored to reach the producer through appropriate policy instruments. Augmenting decentralised scientific storage facilities is the easiest and cheapest of such instruments. The multi-media flash of how Bharat Sanchar Nigam Ltd. (BSNL) distributed free mobile handsets to the hapless villagers falling in the constituency of the minister of state for communication and technology is a prime case in point demonstrating how arbitrage is used to widen the 'India-Bharat' rift. Certainly rhetoric of the corporate social responsibility (CSR) implanted template is immune to the funds crunch virus. Imminent necessity for a network of decentralised covered storage infrastructure cannot be contested. The stylized facts emerging from any dispassionate engagement with GSSS will bring this out. Besides, this will also act as a feeder-balancing intermediate backbone to the food management system in the country. Notably, IS code 607:1971 is claimed to provide the scientific foundation to the storage construction and hence a norm for deriving storage cost function.
18 August 2011

The advantage of a price difference between two or more markets must be tailored to reach the producer through appropriate policy instruments. Augmenting decentralised scientific storage facilities is the easiest and cheapest of such instruments. The central government by (i) expressing helplessness in affidavits filed in the Supreme Court in connection with the right to food campaign writ petition (11th August 2010, further reiterated on 6th September); (ii) transferring onus to state/UT governments, (iii) obscuring into oblivion the gross underutilisation of allocated funds under internal and external budgetary resources (IEBR) scheme for augmentation of storage capacity, has effectively widened the India-Bharat chasm. The storage construction axiom can be briefly stated as the linear dimensions-length, width and height- of a structure increase in a given dimension, the volume or the capacity of the structure increases as a cube of the increase in the linear dimensions. The diseconomy of height, however, needs a cautious watch over space and time. This truism has direct relevance to the construction cost of the covered storage structure provided we attend to other contingent issues of fixed capital and expected capacity utilisation. Should not the producers and consumers benefit by leveraging the basic theoretical underpinning of the storage economics, namely, construction cost per unit of volume stored is an even more rapidly decreasing function of volume of grain stored? By creating storage capacity critical mass in their vicinity the opportunity cost disadvantages suffered by over 80 per cent vulnerable producer segment thus can be converted into an advantage. The sure shot mechanism to ensure price stability as well as enhancing share of producers in the consumers rupee is available by allowing the panchayati raj institutions to own and operate these utility creating activities (in the rural nonfarm and arbitrage genre) and developing a healthy networking relationship with the urban local bodies. Small holder farming system requires small capacity covered grain storage infrastructure lest we succumb to what the yesteryear gurus( Andrew Shepherd and A.M. Khusro) termed the obsession with sophisticated bulk technology-silo's- as 'rusting monuments to bad planning' and captured into a 'mechanical trap'. Neither the Chinese nor the US models are suitable for the Indian grain production landscape. Hence, the triple P must be tweaked towards attaining the single P as in progress with decentralised storage expansion. Source: www.d-sector.org

Materials Management Review

Total Logistics Cost Management

M.Ravichandran Assistant Professor, Department of Management Studies ravichand2000miba@rediffmail.com
ABSTRACT : chain? iii. Whether the costs create any value addition? iv. How does a company control logistics cost structure? v. How to determine the optimal logistics cost structure relate to their performance 2. OBJECTIVES OF THE STUDY i. To identify the costs involved in total logistics chain. ii. To identify a framework model for Total Logistics Cost Management. 3. METHODOLOGY : This is an empirical study on logistics cost management for the entire supply chain network. 4. NEED OF LOGISTIC COST MANAGEMENT : There is a need to examine the logistics costs in terms of the percentage represented in the finished product or service. These may determine whether there is a relationship between logistical cost structures and economic competitiveness in terms of performance. 5. LOGISTICS FRAME WORK : Logistics activities involve the total sequence of business processes that moves in the form of materials (or inventory) from their source to the end use. Apart from raw materials and consumer products, logistics also include the information flow, money and people. This flow is aided by business functions such as purchasing, sales, marketing and transportation. Logistics of a product essentially involve in three process namely, a) Inbound Logistics b) Outbound Logistics and c) Reverse Logistics a) INBOUND LOGISITCS Inbound logistics is mainly concerned with the way product flows into a production plant or manufacturing unit. In a manufacturing concern , product flow in the form of raw materials, large shipment of parts, and subassemblies are in bulk nature. Inbound systems are generally more complex because the number of materials and parts usually exceed the number of finished products. For example, automobile manufacturers handle more than 10,000 parts to make a car. The cost of logistics activities at this stage include: i) ii) iii) Transportation Ware housing Inventory Management
August 2011 19

continuous recession trends around the world created a greater pressure for cost reduction to maintain at least a nominal profit margins. In this competitive world, there is an emerging need, to examine the logistics cost structures to lead overall economic competitiveness in the trade. Generally speaking the logistics management is not only included the transportation alone, but also this includes the value added services such as materials handling, trucking, packaging, order processing, information and etc., Previous research studies on cost reduction strategies failed to include the effect of Logistical Costs with their analyses of traditional costs such as manufacturing and business process costs. Therefore, the focus needs to fall not only on cost minimization, but also relying upon logistical costs specifically within the total supply chain. This is an area that has not received much attention in the previous cost reduction analysis and therefore, it has a larger opportunity for optimization. This paper clearly explains the Logistics cost framework to identify and compute the total logistics cost. 1. INTRODUCTION : Logistics is the physical movement of goods and services from the suppliers to the people who really needs it. In other words, it is the moving process of supplying materials that include purchasing, checking, storing, loading and unloading etc., A recent survey revealed that there is a need for cost reduction remains the greatest single pressure on the entire logistics operations. The survey was undertaken in sectors which work with public utility and transport service providers, constructionrelated companies, engineering and packing product manufacturers. Majority of them responded that the logistics cost include in the cargo movement from the point of origin to the point of consumption is accounted for about 3 to 30 percent of its market value. Generally speaking logistics is not only included the transportation alone, but also this involves the value added services such as materials handling, tracking, packaging, documentation and etc. modest attempt has been made in this paper to framework to identify or compute the total logistics cost. In order to manage the logistics with cost effective and efficient, a firm should answer the following questions. i. What are the logistic costs associated in the movement of cargo? ii. How these costs are managed along the logistics Materials Management Review

Inbound Logistics process

Reverse logistics activities are as follows: i. Processing returned merchandise for reasons such as damage, seasonal, restock, salvage, recall or excess inventory. ii. Recycling packing materials and reusing the containers. iii. Reconditioning, remanufacturing or refurbishing products. iv. Disposing of obsolete equipment v. Hazardous material programs vi. Asset recovery. 6. STRUCTURE OF LOGISTICS COST The simple structure of total logistics structure is given as following:

b) OUTBOUND LOGISTICS The outbound side of logistics is often called physical distribution. It is concerned with the movement of finished or semi-finished goods from the point of production market.

Many of the Outbound logistics activities are essentially the same as inbound logistics, but the magnitude of costs may differ. Finished goods have more value than inventory because of the cost of inventory, distribution, warehousing and transportation costs are associated with the finished products. c) REVERSE LOGISITCS Reverse Logistics is the process of moving goods from their typical final destination to production point or warehouse.

i.

ii. iii.

iv. v.

vi.

Transportation costs include the freight charges paid by the shipper (principal of the cargo) or his agent, transfer fees, pick up and delivery charges. Inventory holding costs include the holding costs, pipeline holding and safety stock. Handling and packaging costs: Handling Costs include the costs of terminal a handlings, materials handling, cost of disposal, costs involved in handling of equipment operations including cranes and fork lifts. However, the packing costs include the cost of packing materials. Administration costs include the costs of communication process or order processing. Customs costs include the customs clearance charges, customs brokerage fees and customs duty paid upon the cargo. Risk and damage cost: These type of costs arise out of damage or loss or delay.

All the costs are considered to be important in the overall logistics cost structure. However, the transportation
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Materials Management Review

involves very high costs and they are followed by inventory holdings. Handling and packaging are considered the third largest cost in the logistics chain. Administration Costs and customs costs are followed by the risk and damage and they are considered to be less and they represented only a small portion of the total logistics cost structure. 7. PROCESS OF LOGISITCS COST MANAGEMENT : The following are process of logistics cost management that helps to compute quickly as well as perfectly. Process of Logistics Cost Management

costs to budgeted costs on a regular basis and the actual costs are to be retained. In an emergence the overall logistics costs are comprised the actual labour hours and logistics expenditures for the month. c) Cost reporting and metrics : In order to assist with tracking the actual logistic costs against the baseline, the following reports are used namely, i) Spending Plan (by fiscal year) : A run chart showing the actual costs against the baseline by month for the fiscal year and the cumulative total to date for the fiscal year. ii) Logistics cost variance : A chart can be prepared to find out the gap between actual logistics costs against the baseline to date. d) Cost control and changes : Cost variance can be analysed with the staff members of respective section. If the variance does not affect the overall logistics activities cost baseline, no other actions are required. e) Cost Closeout : At the end of each period, the cost historical information pertaining to logistics is completed by the logistics financial Manager and that are reviewed by the logistics manager and the same is forwarded to the company management as well in an effective way. At this stage, these are two essential processes involved namely preparation of annual cost summary and lessons learned on cost management as follows. i) Annual Cost summary : At the end of the year, the logistics manager summarise the actual hours and costs expanded against the baseline for the year. The annual summary is archived for historical purpose. Lessons learned on cost management : Lessons learned related to costs and cost estimation are used in the development of the subsequent fiscal years logistics cost baseline.

a) COST PLANNING Resource planning: Planning of inputs used to establish the resource estimates and resource skills are determined based on the needs of logistics operations. Planning of logistics cost includes determination of staff management plan and needed human resource skills. Resource planning is a part of cost planning that are determined based on the needs of the logistics activity. Cost estimating and establish the cost baseline are also a part of cost planning. i) Cost estimation : Cost estimation include cost allocations to the logistics activities based on estimated hours. ii) Establish the cost baseline : After getting the approval for the budget, there is a need of review upon the cost allocations by a financial analyst. b) COST TRACKING The hours are converted in to cost for tracking the cost of current logistics activities. It is expected to complete / perform the logistics activities within the budgeted cost. Cost tracking essentially involve labour hours tracking and overall logistics cost tracking. i) Labour hours tracking: The labour hours are rolled up in to the overall tracking of labour hours against the logistics activities. ii) Overall logistics cost tracking: The overall logistics cost tracking requires the actual costs to be recorded by cost category, comparison of actual Materials Management Review

ii)

9. STEPS IN MANAGEMENT OF LOGISTICS COSTS

a) Good relationship with liners (the owners of trucks / vessels)

August 2011 21

It is very important to companies in logistics chain that there is a need of strong relationship with liners due to the size and volume of shipments resulting in lower prices and batter service. Better service was experienced in two different ways. The first one is container availability during peak seasons and the next is long terms contract negotiations. b) Maximum utilization of port facilities Port utilization was seen as important to the logistics chain due to congestion at the major ports. Companies needed to understand their own business in order to create competitive advantages through their port selection. Using small ports may lead less traffic time and cost. c) Speedup the transport operations Speed may reduce the total cost of logistics operations because the time taken by a truck to carry products from one place to another is a basis for the calculation of freight rate. d) Considering possibility of outsourcing the operations The choice of sourcing regions are based on the speed and cost of logistics for the product. Regardless of market, the need for a third party Logistics is a function of company size, number of suppliers and sourcing area. In order minimize the logistics costs, companies felt that there is a need for supporting hands from outside company who has more knowledge about logistics. 10. LOGISTICS AND ECONOMIC IMPACT Logistics is an important sector of any economy. In the UK, it accounts for approximately 4% of gross output or GDP, valued in the region of 55 billion a year. In the US, this is closer to 10% and amounts to $450 billion (1996) the expenditure on Logistics at a global level exceeds $1 trillion. The Primary economic importance of Logistics is in its role as a contributor to economic growth include, a) b) Extended market reach and Reduced waste

b) Reduced Waste Efficient logistics system should support to reduce the waste of time and cost at each point of supply chain. In a production concern, this objective can be achieved by adopting learner production technologies, whilst in the deployment of capital, it si achieved by more effective management of stockholdings. 11.CONCLUSION To sum up at organizational level, logistics is a fundamental part of business. A business firm must ensure that a customer for getting right products the right place at the right time. In todays economy when speed and agility are increasing important and rapidly as well. It is the effectiveness of the Supply Chain network that determines the difference between market leaders. logistics provides a key opportunity to improve both organizational profitability and competitive performance through its contributions to revenue growth and cost reduction. REFERENCES 1. Aminoff, Anna, Pajumen-Muhonen Hanna, Hypoonen Risto, 2002. VTT Industrial Systems, EPlogistics Ltd., Logisma Ltd., 2002. Present state and development of purchasing in demand and supply network. Assigned and published by Ministry of Transport and Communications. Publication 40/2002 ISBN 951-723-803-7. Distributed by Edita Plc.68 pages. Ellram, Lisa M. and Martha C. Cooper (1990). Supply Chain Management, Partnerships, and the Shiper-Third Party Relationship. The International Journal of Logistics Management, 1 (No.2), 1-10. Bowersox, Donald J. and Closs David J., 1996. Logistical Management. The integrated supply chain process. McGraw-Hill. ISBN 0-07-114070-0. 730 pages. Copper, Robin and Kaplan, Robert S. 1991. The design of cost management systems. Text, cases, and readings. Prentice-Hall Inc. ISBN 0-13202789-5. 580 pages. Cooper.R, Slagmulder.R. 1999. Supply Chain Development for the Lean Enterprise Interorganisational Cost Management. The IMA Foundation for Applied Research Inc. Productivity Press. Portland. 510 pages.

2.

3.

4.

a) Extended market Reach Logistics helps extended market reach by giving manufacturers access to a wider range of raw materials and suppliers from different sources. Similarly, consumers are given access to a wider range of manufactured goods and services, both in domestic and International.

5.

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August 2011

Materials Management Review

Procurement Excellence: Todays and Tomorrows Leading Edge

Jonathan Wright Senior Director, Accentures Supply Chain, Singapore

Buying stuff is no longer enough. On a regular basis, procurement organisations around the world must now help their companies deal with globalisation, supply market volatility, supply chain disruption, rising costs of raw materials, regulatory overload, talent shortages, and much more. If ever there was a need for procurement mastery, now is the time

What masters do While many procurement organisations focus predominantly on improvements to cost and cash, masters have continued to evolve (Figure 1). More than most, masters take a broader view of their role migrating total cost of ownership (TCO) principles into total value of ownership (TVO) perspectives that concurrently seek to: Enhance materials sourcing and labour Reduce fixed cost structure Optimise/automate processes Eliminate activities that add little or no value Increase working capital efficiency Eliminate excess/unnecessary demand Accelerate product design and introduction Increase revenue Reduce supply risks Minimise risks to brand reputation through suppliers Shrink the carbon footprint for external and internal stakeholders.

he good news is that many procurement departments are rising to their new challenge. Procurement people, activities and results are becoming more visible across the organisation, and more procurement executives are gaining a seat at the top management table. Moreover, it is all happening for the right reasons: Regardless of sector or geography, many companies have come to recognise that well-run procurement operations contribute significantly to cost reduction efforts and in many cases help drive revenue growth. For the first time, in fact, procurement may be starting to acquire brand appeal: the perception that (like finance, sales and marketing) procurement has the potential to augment a business fortunes. Of course there are questions associated with all this progress: What constitutes excellence in procurement? What kind of procurement organisations qualify as leaders? What do those leaders do differently from the rest? And how will the nature and focus of procurement leadership change in the near future? These are some of the issues that Accenture recently explored with 432 procurement executives across a wide variety of industries and geographies. Not surprisingly, we found that the procurement universe can be loosely segmented into two kinds of organisations: masters (which regularly and successfully create new ways to improve their organisations results) and contenders (the rest of the procurement population, whose progress may be notable but is rarely leading edge and usually spotty). For survey purposes, masters (less than 20 percent of the survey population) were identified based on the high level of cost savings they secure for their companies and the exceptional innovation they apply to procurement. Comparing the activities, priorities and plans of these two groups can be a useful tool for any organisation looking to improve more rapidly or contribute more fully. Materials Management Review

Through the course of its research, Accenture also identified five hallmarks: behaviours that clearly distinguish todays masters from contenders. Regardless of sector or geography, many companies have come to recognise that well-run procurement operations contribute significantly to cost reduction efforts and in many cases help drive revenue growth. For the first time, in tact, procurement may be starting to acquire brand appeal: the perception that - like finance, sales and marketing - procurement has the potential to augment a business torrunes. 1. Masters revere strategy According to our findings, 77 percent of masters have developed formal procurement strategies that integrate fully with overall corporate strategy, as well as with the strategies of relevant business functions such as finance, operations and engineering (Figure 2). One good example is a global vehicle manufacturer that recently redefined the role of its procurement organisation by: 1) aligning procurement more closely with the companys business strategy; 2) mapping procurement activities and capabilities against its product lifecycle stages; and 3) charting relevant capabilities, processes and
August 2011 23

technologies. Significant savings resulted - most notably from the enhanced ability to involve procurement earlier in the product-development process.

Cost sheets for packages and various equipment types. These were used to aid supplier negotiations during the economic downturn. New approaches and targets for low-cost-country sourcing. Acquisition efforts were redistributed across China, South Korea and Eastern Europe as well as other regions.

2. Masters build better relationships Masters understand the importance of collaborating with suppliers and holding them to consistently high standards. Consider that 67 percent of masters collaborate with more than just first-tier suppliers, compared to 11 percent of contenders (non masters). Masters also were found to be four times more likely to actively monitor supplier performance (Figure 3). To illustrate, a supplier-development initiative at an international apparel company helped boost production efficiency at suppliers plants by up to 30 percent. The programme emphasised four things: measuring supplier performance, building social responsibility, increasing production efficiency and raising quality. Establishment of key performance indicators and a tailored data collection approach also were key. 3. Masters excel at sourcing and category management Procurement masters are better able to leverage spend within and outside their companies. They naturally seek the best deals by capturing volume discounts, but they also strive to improve their organisations demandmanagement capabilities and to refine long-term category strategies that drive ongoing cost improvements and ensure contract controls and compliance. This was the path followed recently by a key division of an Indian engineering, construction and manufacturing conglomerate. As part of an organisation-wide procurement transformation programme, several cutting-edge enhancements were applied to sourcing and category management. Resulting in savings of five percent to 30 percent of the addressed cost base (as well as better customer service and improved project management capabilities) the initiatives included: A category solution theme matrix that emphasises frame agreements, global sourcing and the use of cost sheets and make-versus-buy analyses.

4. Masters manage spend more effectively Masters work extra hard to ensure that spend is tightly monitored throughout the requisition-to-pay process. This implies use of a controlled, managed process supported by clear buying channel strategies and maximum data visibility. Eighty one percent of masters (versus 34 percent of contenders) use leading-edge tools to integrate the end-to-end source-to-pay process. By leveraging vendor-managed replenishment technology, a telecommunications services company reduced inventory costs, freed up working capital and slashed obsolescence expenses. The resulting $30m savings could not have happened without the companys rigorous focus on seamless requisition-to-pay processes within procurement and across the supply chain.

5. Masters do more with human capital Even masters have a way to go in this area. However, its clear that leading practices (accomplished far more by masters than by contenders) include launching Materials Management Review

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August 2011

management-by-objective initiatives, developing formal talent-attraction and career-opportunity programmes, and fielding teams focused solely on supplier and procurement innovation (Figure 4). One good example is a decentralised resources-extraction corporation, which recognised the need to become a more integrated business. Procurement was one group selected to spearhead this change, which included organisation design, competency management, recruiting, training and skills assessment. Numerous company factions have successfully followed procurements lead. Masters of tomorrow More than most procurement organisations, masters have made themselves integral to their companies success. But what will they do next to augment their achievements? Following are some of the things we expect procurement masters to focus on in the years ahead. Sharpen risk management competencies Studies have determined that the most common and potentially dangerous procurement risk areas relate to supplier reliability and price volatility. They also show that risk issues have a greater cost impact - and take up far more time - than most buyers efforts to capture savings through negotiation. Knowing this, leading practitioners can be expected to further manage risks on every front. There already are clear signs that intensified risk management is on masters radar screens. For example, they tend to be particularly proficient at using specially developed risk-focused tools and services, and they are far more likely than contenders to include risk-sharing contract clauses. Masters also address supplier- and price-volatility risks early in the development of their procurement strategies. Lastly, procurement masters suffer fewer risk incidents than contenders, most likely because they already have made investments in supplier risk management tools and capabilities. A global vehicle manufacturer recently redefined the role of its procurement organisation by: 1) aligning procurement more closely with the companys business strategy; 2) mapping procurement activities and capabilities against its product lifecycle stages; and 3) charting relevant capabilities, processes and technologies. Significant savings resulted - most notably from the enhanced ability to involve procurement earlier in the product-development process. Harness analytics to drive new insights Many procurement masters already use descriptive analytics in areas such as spend analysis, supplier performance assessments and cost modeling. Their next big move will likely be Materials Management Review

more forward looking, e.g., using predictive analytics to evaluate commodity price volatility and develop models for price forecasting. Improved price forecast ing capabilities should allow companies to become even more proficient at supplier negotiations and the management of rebates. Astute price forecasting also allows for quantitative estimates of risk exposure and helps show how each supplier affects the overall risk profile. These advanced analytics allow a company to balance risk exposure with reducing costs, helping them answer questions about when to buy, how much to buy, and at what price to buy. Forecasting prices will require more expertise in commodities markets, as well as the application of complex analytical techniques such as time series modelling or stochastic differential equations and processes. Additionally, forecasting prices demands the ability to translate mathematical approaches into effective solutions, such as scenario planning or mitigation strategies for anticipated risks. These sharpened forecasting capabilities should enable procurement professionals to reduce their reliance on historic trend-line data.

Dedicate more effort to closed-loop spend-management practices Masters know that accountability for savings is vital and that doing so requires maximum visibility into spend, clear ownership of category spend within the business, bottom-up category budgeting, clear direction for buyers and users on how to appropriately procure goods and services, and tight control and monitoring of spend. In essence, these organisations are ensuring that key process elements are in place so they can circle back close the loop - on spend over time. An interesting example of closed-loop principles exists in the management of general and administrative (G&A) expenses - traditionally a tough area to control. One of the worlds largest consumer goods companies operates at a ratio of G&A costs/ revenue of only 6.5 percent, which is 40 percent below the average of the companys peer group. The management team has made a best practice of closed-loop spend management. The control
August 2011 25

and monitoring routine drives company-wide, bottomup corrective actions where necessary, with control and responsibility rolling up to the executive owners of each cost category. This routine closes the loop and powers a flywheel of continuous improvement. Look for behaviours like these to characterise more procurement masters in the near future. The future is now Its clear that, in the near future, no procurement master will rest on its laurels. In fact, survey results show that masters are working hard to extend their effectiveness and their lead over companies with less drive or focus. For example, nearly three quarters of masters are

building sustainability initiatives into their three-or fiveyear plans. Nearly two thirds are actively seeking new ways to leverage spend (e.g., through aggregation). And more than one third are increasingly placing their emphasis on managing large-scale outsourcing contracts and forging tighter working relationships with their companies sales and marketing organisations. So are companies that do not currently emulate masters achievements doomed to play perpetual catch-up? Perhaps not. As companies throughout Asia are especially aware, change happens fast, and smart ideas and diligent execution are often rewarded more quickly than many expect.

Greening Supply Chain : Issues & Challenges

any people argue that being environmentally friendly increases costs. In the past, more companies were focused on reducing unit costs. Many companies later evolved into looking at total landed costs with the on-set of global trade. Companies also started looking at the usage costs with a piece of equipment. In todays Sustainable world the thinking should be what is the life cycle costs of a part, piece of equipment or Supply Chain process. There is no denying the fact that Sustainability could be a tremendous weapon for companies to reduce costs. There are many facets of supply chain that could be improved by looking at it from a sustainability stand point. In the coming years, Supply Chain Sustainability or the Green Sustainable Supply Chain would become priority for all companies. A Green Sustainable Supply Chain can be defined as the process of using environmentally friendly inputs and transforming these inputs through change agents whose by-products can improve or be recycled with in the existing environment. This process develops outputs that can be reclaimed and re-used at the end of their life-cycle thus, creating a Sustainable supply chain. The whole idea of a Green Sustainable supply Chain is to reduce costs while helping the environment. The first issue that sustainable companies should focus on is the design and production of the product. The redesigned system incorporating simple variation in design specifications costs less to build and involves no new technology and works better in all respect. Many examples are known to support this argument. Whole system thinking can help managers find small changes
26 August 2011

that lead to big savings that are cheap and free. Many forward thinking companies are using the environmental issues to their advantage. They are innovating and coming up with cutting edge solutions that help them become more profitable while helping the environment. One of the bigger issues facing companies these days is the actions of suppliers. Companies today are being held accountable for environmental problems created by suppliers. Unfortunately, the press is quick to link companies who deal with environmentally unfriendly companies especially if a catastrophe occurs. No company can afford that type of exposure. Many companies are performing environmental audits or implementing rules of conduct to check the actions of their suppliers. In order to develop a sustainable supply chain a company can first identify environmental costs within the process or facility. The next step would be to determine opportunities which can yield significant cost savings and reduce environmental impact. The third step would involve estimation of the benefits of the identified alternatives. The last step would be to decide, implement and monitor the identified improvement solutions. The harsh reality is that we need to change what we are doing from a supply chain standpoint in order to ensure that future generations will have resources to use in their lifetime. The benefit of implementing a green sustainable supply chain would entail improved profitability of the company and simultaneously help the environment. Source : Productivity News, May-June 2011 Materials Management Review

Releasing Brakes on Manufacturing

Arun Maira Member, Planning Commission
Policy must focus on competitive positioning, competencies and constraints to realise Indias potential
tool rooms, testing services, etc within industrial clusters. Software and communication technologies are powerful enablers of production flexibility and networked enterprises. Indias missed opportunity so far has been that while its vaunted IT industry has been equipping clients in industrially advanced countries, its own manufacturing enterprises, especially small ones, are lagging hi the application of IT tools. Applying FT to manufacturing must be a national thrust, with the same vigour now put into the development of skills. Skills, of course, are a key for Indias manufacturing competitiveness. The country has an abundance of raw material in its vast resources of young people. However, this raw material must be refined into the many capabilities required for competitive manufacturing enterprises,, A large variety of production skills are required for different industries machining, tool making, CNC machine programming, textile weaving, leather finishing, etc. Skills to manage people and production systems are critical, especially for managing high variety production. While a competitive strategy with associated competencies is necessary constraints on manufacturing growth must also be removed. And there are many in India. Availability of multi-faceted skills, already mentioned, is one. Land is another. Problems with workforce management yet another. Availability of technology is crimped by FDI rules, even while the government is not leveraging the attraction of Indias growing domestic market to induce more domestic production, which China has done successfully. Also, hassles with bureaucracy on the ground and poor coordination amongst policy-makers are chronic complaints of investors and manufacturers. Until these constraints are eased, productivity will not improve, and investments will not flow into Indias manufacturing sector. Manufacturing is a complex system with many wheels within wheels, and friction amongst them. Policy-makers are pressed with conflicting demands from producers of raw materials, basic materials, components, assemblies, and capital goods. Moreover, the interests of various stakeholders must be resolved: land-owners, Iocal communities with stakes in natural resources, labour unions, and customer lobbies. Lack of trust among the stakeholders of the manufacturing system is the problem, not moving fast forward. A key to increase trust is improvement of the institutions that represent stakeholders business bodies labour unions,even political parties. Each of them is a wheel in the system. All of them must be democratic, transparent and competent. Interactions between these wheels must be systematic and smooth, too. So, the ability to listen and hear anothers aspirations as well as fears, and the ability to consider new options and thereafter, to synthesise win-win solutions is essential. This is the lubricant that will make the wheels turn more smoothly and make manufacturing grow. Source: The Economic Times
August 2011 27

ndias populationis continuing to grow. In a few years, it will be the largest in the world, overtaking Chinas. Jobs must be created rapidly to avoid the inevitable social and political problems when youth are unemployed. There is recognition amongst policy-makers that, whereas manufacturing has grown more slowly than GDP in the past decade, it must now grow 2% to 4% faster than GDP to create millions more jobs, and also to contribute more to reduce Indias trade deficit that is growing with energy imports as well as a flood of imports from China. The three challenges to grow manufacturing in India are: competitive positioning, competencies and constraints. Building walls for protecting Indian manufacturers is not a feasible strategy any longer. World trade is open. Manufacturers in India must compete with manufacturers in other countries. Indias manufacturing strategy must build upon its competitive advantages in a changing global manufacturing landscape. Global manufacturing is evolving. Almost a century ago, Henry Ebrd, with a massive, integrated factory in the US, feeding iron ore at one end and producing inexpensive Model T cars at the other, demolished competition from smaller producers. You can have any colour car you want so long it is black, was his slogan. Times have changed. Now auto producers must offer a variety of cars to suit many requirements. And product life cycles have shortened to less than a third of what they used to be the content of the modern automobile has changed, too: much of the cost is electronics and software, notmetals and materials.
Moreover, automobile enterprises have become global networks with activities spread across many countries: design in some, parts production in others, and assembly in yet others. Networks, product variety and rapid change have become critical sources of competitive advantage in theauto industry and most other industries too - electronics, textiles, pharmaceuticals, etc. Abilities to design and engineer rapidly, and to work in networks have become sources of competitive advantage. Scale is an advantage, no doubt. Scale canbe grown by product variety and rapid model changes: think of Apples iPods, iPhones and iPads. And scale can be obtained with networks rather than elephantine factories. In fact, the smallness and nimbleness of Indian manufacturers, supported by software, canbe their sources of strategic advantage in the new world of manufacturing where competitiveness is in the scope of the networked enterprise, not the scale of its units: strategies of guerillas against set-piece armies. Competencies must be built to support a strategic position. Design, engineering and production flexibility in any industry require skilled people, IT capabilities and innovation especially in production methods. Indias small and medium scale manufacturers are known for their innovativeness to produce more with less. These abilities must be celebrated rather than being denigrated as jugaad. They must be improved by providing modern

Materials Management Review

Procurement In Indian Petroleum Industry

Indresh Kumar Sawhney - Researcher Jodhpur National University under Guidance of Dr. S.L.Gupta indresh@hpcl.co.in

rocurement is the acquisition of goods and/or services. It is favorable that the goods/services are appropriate and that they are procured at the best possible total cost of ownership to meet the needs of the purchaser in terms of quality and quantity, time, and location. Corporations and public bodies often define processes intended to promote fair and open competition for their business while minimizing exposure to fraud and collusion. Almost all purchasing decisions include factors such as delivery and handling, marginal benefit, and price fluctuations. Procurement can be defined as the purchase of merchandise or services at the optimum possible total cost in the correct amount and quality. These good and services are also purchased at the correct time and location for the express gain or use of government, company, business, or individuals by signing a contract. The synonyms for procurement, which are gain, purchase, buy, and acquire, can throw light on the meaning of procurement. The process of procurement may differ from company to company, and a government institution may have a slightly different procurement process compared to a private company. The process of acquisition of goods or services required as raw material (direct procurement) or for operational purposes (indirect procurement) for a company or a person can be called procurement. The procurement process not only involves the purchasing of commodities but also quality and quantity checks. Usually, suppliers are listed and pre-determined by the procuring company. This makes the process smoother, promoting a good business relationship between the buyer and the supplier. The procurement procedure may differ according to the product and the uses of the product. Healthcare equipment needs to be efficient and reliable, and the procurement process is carried out meticulously in order to avoid the purchase of faulty apparatus. Another important factor that is usually included in the definitions of procurement is the amount in which the product is bought. This is important because the amounts of goods bought are inversely proportional to their cost. Thus, procurement is a process that is carried out by almost every company and individual for its own personal gain or for profits, which involves

buying of commodities by choosing the appropriate bidder. Procurement provides detailed information on Procurement, Procurement Software, E Procurement Solutions, Procurement Management and more. Procurement may be defined as the acquisition of appropriate goods or services at the best possible total cost of ownership. This is done to meet the needs of the purchaser. The factors or quality and quantity are taken into account in the act of procurement. On the other hand purchasing is a form of buying that consists in getting the goods or services by paying a certain amount of price or money. The amount of money or price paid in the case of purchasing will be in accordance with the quality and quantity of the goods or services. This is the main difference between procurement and purchasing. There are two types of procurement called the direct procurement and the indirect procurement. Direct procurement involves the acquisition of raw materials and production goods. Indirect procurement involves the acquisition of maintenance, repair and operating supplies. An example of direct procurement is crude oil in petroleum industry. Similarly an example of indirect procurement is lubricants. Acquisition of spare parts can also be cited as an example under indirect procurement. Purchasing is normally done by both individuals and groups such as companies and organizations. On the other hand procurement is done mainly by companies and organizations or such other groups. It is important to know that procurement is a process in business organization and is said to contain seven steps. These steps include information gathering, supplier contact, background review, negotiation, fulfillment, consumption, maintenance and disposal and renewal. Purchasing can also be divided mainly into two called direct purchasing and indirect purchasing. Direct purchasing involves the method of paying cash or money directly and getting the goods or the services delivered to your house. Indirect purchasing involves buying of goods or services through the third party sources. It is interesting to note that timing of purchases plays a very important role in the procurement systems. Procurement Materials Management Review

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has always been a profit centre of organization in India as well as in World. Procurement in the petroleum industry in India has contributed heavily to the manufacturing industry in the country in foreign trade in petroleum products. Rapid globalization, fastchanging technology, and the changing methods in the way business is conducted have brought significant changes and enormous opportunities in the procurement process particularly in petroleum companies in India. Economic liberalization brought Private Petroleum Companies resulting in competition. The Job security to PSU employees Vs performance orientation of employees by Private Petroleum Companies made a drastic change in Procurement system. Excessive control on PSUs restricted the PSUs from functioning as independent entities. This resulted in lack of competition between the IOC/HPC/BPC etc & affected the general Procurement as a whole. Similarly, the Regulated petroleum pricing also affected commercial functioning of PSUs as Government protected PSUs by compensating them with Oil bonds /reimbursement thru pool account on subsidiaries especially on LPG & Kerosene. The last decade of the last century (1990's) ushered in a set of reforms for Indian Petroleum industry, which remained largely protected due to political reasons. Entry of Private Petroleum Companies (RELIANCE INDUSTRIES LIMITED, SHELL & ESSAR OIL) and restructuring of the Public Sector Petroleum Companies (IOCL, BPCL, HPCL, GAIL & ONGC), unleashed liberal changes in India's oil economy. More emphasis was placed on purchasing strategy as the ability to obtain needed items from suppliers at realistic prices increased. Purchasing strategy that is widely cited today as the beginning of the transformation of the function from "purchasing," something that is viewed as highly tactical to procurement or supply management, something that is viewed as very strategic to the business. In the post liberalization period, procurement starts to become more integrated into the overall corporate strategy and a broad-based transformation of the business function is ignited, fueled strongly by the development of supply management software solutions which help automate the source-tosettle process. The leader of the procurement function within many enterprises is established with a C-Level title - the Chief Procurement Officer (sometimes called the Head of Procurement). Websites, publications, and events, and that are dedicated solely to the advancement of Chief Procurement Officers and the procurement function arise. The global recession of 2008-2009 places procurement at the crux of business strategy. The elevation of the function continues as Chief Procurement Officers are recognized as important business leaders and begin to take on broader operation responsibility. Materials Management Review

Procurement is buying a right product/service at right time & at right cost & at right quality. It has been observed that in spite of the transparency there has been instances of poor/non performance of contract with Public Sector Petroleum Companies (IOCL, BPCL, HPCL, GAIL & ONGC) no major statistic is available with Public Sector Petroleum Companies (IOCL, BPCL, HPCL, GAIL & ONGC) and it has always refrained from publishing these figures. Beyond looking at the number of Public Sector Petroleum Companies (IOCL, BPCL, HPCL, GAIL & ONGC) identifying and analyzing the reasons thereof also appeared to be an interesting area for researcher to study. For contract awarded by Public Sector Petroleum Companies (IOCL, BPCL, HPCL, GAIL & ONGC) if payment is not paid on due date period results in poor/non performance of contract. The Public Sector Petroleum Companies (IOCL, BPCL, HPCL, GAIL & ONGC) is then devoid of the benefits of Procurement. In order to accomplish the objectives of the study the researcher has adopted a working definition of poor/non performance of contract. This definition provides a holistic view of poor/non performance of contract in procurement. Public Sector Petroleum COMPANIES (IOCL, BPCL, HPCL, GAIL & ONGC) document mentions that the payment shall be paid by due date (which is either 7 days/15 days /30 days from the date of receipt of bill from Vendor by Finance dept ( Paying authority) & in case the payment is delayed abnormally than contract can be deemed to have poor/non performance . But in case of private companies (Reliance Industry, Essar Oil) interest is paid for delay in payment hence does not result in poor/non performance of contract. Considering the intricacies of the payment systems, the researcher would therefore define a Public Sector Petroleum Companies (IOCL, BPCL, HPCL, GAIL & ONGC) as poor/non performance of contract d where the payment is not paid in time. Preliminary studies by researcher shows that there are certain gaps present in the procurement sector, which lead to poor/non performance of contract of the Public Sector Petroleum Companies (IOCL, BPCL, HPCL, GAIL & ONGC). The factors that lead to poor and non performance of contract need to be co-related. It was the endeavor of the research to identify the gaps leading to poor/non performance of contract and how they could be plugged. The present endeavor aims at bridging this gap to an extent by focusing attention only on identifying the determinants of poor/non performance of contract. Further, the present effort aims to see if there is any positive linkage between the determinants of Buyer/
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Vendor Satisfaction and renewal of the poor/non performance of contract in Procurement. This shall help in minimizing the occurrence of Buyer/Vendor dissatisfaction and formulating a retention model of healthy Procurement business through Buyer-Vendor Relationship Management (CVRM). To formulate a theoretical framework for the tendering the process in procurement we have to review/analyze the following key objectives: 1. 2. To identify and analyze the reasons for purchasers/Vendors non satisfaction. To understand the buyer's perception & the gaps where the Procurement processes have to improve upon To understand the Gaps in procurement mechanism from the Vendors perspective. To examine how effective Buyer Relationship Management cap help an organization to maximize Buyer/Vendor Satisfaction.

LIMITED, SHELL & ESSAR OIL) is better than that of Public Sector Petroleum Companies (IOCL, BPCL, HPCL, GAIL & ONGC). This study has been undertaken to meet the objective of the study and validate the hypotheses. Essentially, flowing from the objectives of the study it is targeted to minimize the buyer/vendor Satisfaction. Academicians, Procurement professionals, and researchers have carried out a number of studies on Procurement and various articles have been published over the time. To take up the study in this area of poor/ non performance of contract in Procurement business, the researcher has scanned the available literature and concentrated here on the important studies and Public Sector Petroleum Companies (IOCL, BPCL, HPCL, GAIL & ONGC) & Private Oil Companies w.r.t. tendering for Procurement and service Industry. Anuj Saxena, "Enterprise contract management - A practical guide to successful implementing an enterprise contract management" (2008) gives step by step guidance for successfully developing and implementing ECM in procurement. Globalization, increased economic and geopolitical uncertainty, technological advancements. Inspite of these global changes many organizations still manage the contracting process in a fragmented, manual and adhoc manner resulting in poor and in effective contract management. Donald H. Sheldon, "Lean Materials Planning & Execution - A guide to internal & external supply management excellence" (2007) in his book explores the roots of high performance materials management to guide today's professional towards the right process controls at right time. A general introduction to the concept of Procurement and Indian Petroleum Industry has been made. The problem underlying the thesis, with special reference to the Indian petroleum industry has been introduced and objective and scope are being outlined. A section is devoted to the review of the main findings of important studies relating to different concepts of procurement. First a brief review of procurement policies in Indian petroleum industries in India is presented. This supplements the review of the literature provides the necessary background for the study of the Indian petroleum industry. The conclusions are arrived at and the relevant policy implications are highlighted. Some of the limitations of this study along with certain suggestions for further research are listed towards the end.

3. 4.

In this study, we seeks to identify the set of determinants of poor/non performance of contract in Procurement and to formulate a theoretical framework for the poor/ non performance of contract in procurement business with the following key objectives: 1. 2. To identify and analyze the reasons for the nonpayment/delayed payment by the Buyers. To understand the Vendor's perception & the gaps where Procurement organizations have to improve upon. To understand the Gaps in Service mechanism from the Buyers perspective. To examine how effective Buyer Relationship Management can help an organization to maximize Buyer/Vendor Satisfaction.

3. 4.

Based on the objectives, the researcher has identified the following hypotheses to be empirically verified while carrying out the study of the poor/non performance of contract. 1. When assurance on payment is the most important reason leading to participating in tenders by vendors than the probability of poor/non performance of contract is low. Being a commercial activity financial constraint is the most dominant reason for performance of the contract. Vendor's service satisfaction with respect to their queries /response to vendor with the Private Petroleum Companies (RELIANCE INDUSTRIES
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2.

3.

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Materials Management Review

Logistics - A Key Strategic Differntiator

S.N.PANIGRAHI G.M. Procurement, Utkal Alumina International Ltd. snpanigrahi@rediffmail.com
ogistics is one of the oldest elements of business operations. No commercial activity - big or small domestic business or international trade - is possible without logistical support - in-bound or outbound or within manufacturing or warehousing touching every part of every commercial business as well as providing the link to and amongst all of the trading partners in the supply chain - it is such an essential and integral part of any business. Logistics is the art and science of managing and controlling the flow of goods, information and other resources like products, services, and people, from the source of production or orgin to the marketplace or place of destination. Logistics management is that part of the supply chain which plans, implements and controls the efficient, effective forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers' requirements. According to the Council of Supply Chain Management Professionals (CSCMP), a professional organization for Logistics and SCM professionals, Logistics is defined as: "the process of planning, implementing and controlling the efficient, effective flow and storage of goods, services and related information from point of origin to point of consumption for the purpose of conforming to customer requirements"

and the demand is growing ever stronger and stronger. There is a growing recognition that through logistic efficiency and effective management of the supply chain both cost reduction and service enhancement can be achieved. Since logistic function has been identified as a key value lever in delivering the business effectiveness, in order to capture this value, the focus has been on taking logistics from a somewhat least understood and least utilized business discipline, internally facing, supportive service function to a proactive, market facing, business capability. Unlocking its potential will create significant opportunities for corporate success, performance, and profit - it can become a key strategic differentiator and a corporate contributor. Logistics is evolving driven by increasing customer demands and expectations of higher value added services, cost compulsions, competition and technological advancements. Competitive prices and better services have always been critical competitive variables determine the success of businesses. The myriad of changes around the world posed greater challenges. The global economy has significantly increased competition; to successfully compete and gain the competitive advantage all the resources need to be optimized, processes synergized and need to collaborate with all the concerned stakeholders. With globalization, organizations have reached for newer horizons and to support their net work of operations, they are strengthening the logistics to integrate with their business operations. The goal of logistics is to link the marketplace, the distribution network, the manufacturing process and the procurement activity in such a way that customers are serviced at higher levels and yet at a lower total cost. Recognizing the importance of the logistic discipline as a higher value-added service integral to any business - within the business and between businesses, logistics is undergoing dramatic shift in it's philosophy, outlook, operations and strategic features for achieving overall corporate goals and objectives. The major shifts and value propositions of logistics function are :

In today's fiercely competitive global business environment, corporations are under compulsions to find new ways to create and deliver value to customers Materials Management Review

Companies increasingly integrating their logistic function with their supply chain systems to plan their availability of input goods and services
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accurately, plan production cycles better, adhere and improve to delivery schedules of finished goods, reduce lead time and provide innovative value added services to the customers. Cost reduction on continued and sustainable basis being a key strategic issue, logistics as a major cost element (roughly account for around 10 - 30% of income - depending upon the type of industry, nature of product and distribution pattern adopted) providing opportunity to improve the bottom line profits of the company. There is fast shift in adopting services of specialized logistic service providers in the corporate world. Outsourcing helps the company to focus on its core competencies and better utilize its financial and non- financial resources. 3PL and 4PL becoming very common modes and means of improving value propositions in the supply chain. Information technology at the core of this shift is the key enabler of the integrated logistics concept. The availability of timely, accurate, inexpensive information is opening the door for unprecedented quality and productivity improvements in the logistics process. Technology interconnecting and integrating with all the stakeholders of business; Improving coordination, minimizing idleness and/ or loss of resources, increasing the quality of services; Boosting logistics performance and reducing operating costs; Easing in identifying and monitoring performance metrics. Logistics service providers are leveraging technology to improve customer service and streamline back-office work, leading to reduced costs of internal operations and increased growth. Technology will be a key enabler for logistics service providers to differentiate themselves from their competitors. Real-time availability of information in e-space revolutionalised the logistic industry. Logistics vendors are using the internet to provide 'just-intime' delivery and 'just-in-time' information to their customers. This is dramatically bringing in improvements in speed, reliability, accuracy and efficiency; providing flexibility and highly responsiveness by automating the processes; scalability to quickly ramp up larger amounts of information, and have multiple compatibilities. Tracking a vehicle that is on the run is a crucial part of the total fleet management operation. An effective real time vehicle tracking system can make the overall fleet management activity more secured, cost effective and efficient. Present day vehicle tracking GPS systems provide real time positional data of the vehicles on the move and it has many benefits. As we can get the correct location of the vehicle through facilities like GPS, Google Earth and online map database, operations of the commercial fleets
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can be more effectively planned. It reduces the idle time of the vehicles as well as helps the fleet managers to take crucial decisions on the go, resulting in more efficient service and reduction in the operational cost. Up to now the barcode has been the most common and fastest method to read encrypted information such as prices or addresses. The rapid progress in the field of microchips and the development of a completely new technology the Radio Frequency Identification (RFID), associated with it offer previously unimaginable opportunities in the field of data storage and protection. Due to RFID, mainly logistic companies benefited from a decisive acceleration and facilitation of storage management. Moreover, the information saved on the chip can not only be read without contact by means of radio waves, but also extended by further contents. This new technology allows companies to gain a detailed overview of their current stock as automatic booking of the goods in stock is provided. This is enabled by the use of a so-called smart label, a label with semi-conductor chip and antenna, to which data in the HF (high frequency; 13.56 MHz) or UHF (ultra high frequency; 860-930 MHz) range is transferred. The use of modern tools and techniques of optimization methods from the area of Operations Research (Operations Relations) and the implementation of the latest trends in the domain of Logistics Management leading to significant improvements in an enterprise's operations and contributing in the effective reduction of the Logistics cost, which is a significant percentage of the value of a finished product. Six Sigma, a methodology for continuously improving manufacturing and product quality, is now being used by leading manufacturers to improve their extended supply chain and logistics capabilities; they are improving reliability and reducing costs. Integrating Lean, Six Sigma and Logistics into a cohesive process will help to eliminate unnecessary inventories through disciplined efforts to understand and reduce variation, while increasing speed and flow in the supply chain. In particular, lean six sigma logistics focuses on logistic flow, capability, and discipline as the guiding principles for solving logistic challenges. Logistics being a major cost element, advanced cost accounting systems like Activity Based Costing (ABC) are in use. ABC is a system of calculating the costs of individual activities and assigning those costs to cost objects such as products, customers and delivery channels on the basis of the activities undertaken to produce each product or service. The application of this analysis method to every point in the chain of distribution allows : to measure the Materials Management Review

real cost sustained for every logistic operation made with a specific client, supplier or distribution channel; to link at every logistics activity cost to their respective performance; to reduce the wastes of the resources used in the logistics activities. Logistics has now evolved beyond a mere supportive service function into a core competency and source of competitive advantage because of its impacts on customer services, cost and efficiencies of operations. In the highly competitive marketplace where product, price, quality, delivery and service are key fundamentals, the speed to market, reduced costs, and optimum lead times, add further value and plays critical role for the achievement of the competitive advantage by the company. Superior customer value and services can

become key elements that rank one firm above another. Improved logistic services may translate into reduction in operating cost, interest cost, reduced inventory levels and storage cost and increase business focus. Through reducing the logistics activity cost it is possible, in turn, to pass this reduction onto the price paid by the consumer, thus making the company's offering more competitive and economic and improving the economics of the whole supply chain. Revenue maximization, cost reduction and added value to customer service by tapping the promising opportunities and fending off competition through effective and improved logistic services, plays a vital role in the success or failure of a company and proves as a competitive differentiator.

CSR is About Doing Business Ethically, Not Money: Govt

Ministry of Corporate Affairs to unveil new norms on business responsibility

orporate social responsibility will get redefined under new guidelines set to be unveiled on Friday that aim to encourage ethical practices in all spheres of business operations, ultimately shifting the focus away from merely shelling out cash on social causes. The new guidelines, now being referred to as business responsibility norms, will replace the ministry of corporate affairs voluntary directions on CSR introduced two years ago. The new norms require a company to be responsible in its handling of issues related to environment and society where it functions. Apart from prescribing best practices on how a company should address concerns on human rights violations, the guidelines will suggest ways in which India Inc should interact and lobby with the government. While the norms would still be kept voluntary, a strict process of reporting has been devised that would be periodically reviewed by regulators. An independent evaluation mechanism of how a business is performing is also being devised through rating agencies. The fear of losing credibility and goodwill is way bigger than money spent, said a ministry official requesting anonymity. Planning Commission member Arun Maira said, It is the way profit is earned by the companies that is important, not the expenditure incurred on CSR. The commission, which is separately looking into the aspect on business responsibility and industrys interface with the government, will come up with suggestions on how to make the new structure efficient. A Maira-led group is looking into the relationship of industry and government to suggest as part of promoting business responsibility. The new norms will be kept separate from the purview of the Companies Act. We should not immediately incorporate something which the industry does not Materials Management Review

understand right away, Maira said. The business responsibility framework has been jointly prepared by the Indian Institute of Corporate Affairs, a think tank under the ministry, and Germany-based international enterprise GIZ as part of a bilateral cooperation effort. Companies will be asked to report their activities in their annual reports. While larger companies will be required to report as per the global reporting initiative (GRI) format, which is an internationally recognised format on sustainability reporting, smaller companies will have an option of just declaring their in-principle acceptance of these norms. Rating firms have already started ranking companies based on their performance on environment social norms. Crisil had recently launched its Environment, Social and Governance (ESG) index, which measures company performance on voluntary disclosures on governance and environment issues rather than financial performance. The index ranks Indias top 500 listed firms, using publicly available information to measure their performance. Since June 2009 the ESG index has outperformed the Nifty 50, said Sunil Sinha, senior economist and the person in charge of creating the index. This shows that investing in environment friendly companies with good corporate governance will yield good return too. The social responsibility debate was revived this year when the corporate affairs minister wanted companies to spend at least 2% of their annual net profits on CSR activities by including the clause in the new Companies Act. The industry, however, managed to keep CSR spending voluntary although a provision on earmarking at least 2% of their net profits is likely to be maintained. Source : Economictimes.com

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Cross Connection
Formulating Service-Level Agreements

ack of proper communication and understanding between clients and service providers leads to friction when it comes to formulating service-level agreements. Remya Philip gets behind the details. Each time we sign a contract with a service provider, it is a learning experience," says Tej Nirmal Singh, Head Supply Chain, Ericsson India Pvt. Ltd., from his infinite experience with service level agreements or SLAs. "Every contract teaches us something new and is an improvement over the last one we signed." An SLA, as the name suggests, is a contractual agreement signed between the customer and the service provider that states the terms and conditions of their relationship. Although it seems simple, in reality establishing this relationship is quite complicated and is the reason for much chaos and dysfunction in supply-chain management. Depending on the nature and breadth of the contract signed there are multiple kinds of SLAs. However, essentially most of them consist of clauses mutually agreed upon by the parties involved, in relation to timely deliveries, quality of products and relevant transportation. Hitesh Gossain, Senior Vice-President, Credence Logistics, says, "Matters related to turnaround time reduction, uptime on equipment, total cost savings, reduction of losses like those caused in in-transit, moisture content losses and pilferage are some of the terms stated in an SLA." Defining exactly what goes into an SLA is a tedious task. It could vary depending on the service that needs to be rendered as well as on the parties involved. "Scope of work, desired LSP profile, pre-requisites needed, contractual period, standard operation procedure, user obligations, rate schedule with tax applicable, MIS customized reporting, penalty and bonus schedule, share of business, arbitration, and termination, all fall under the purview of an SLA," says Mayank Kaushik, Manager (MT-9), Supply Chain Division, Maruti Suzuki, emphasizing on the broad nature and scope of an SLA. Ramanand Bhatt, Chief Technical Officer, VRL Logistics, classifies SLAs into two types - time-sensitive agreements and non-time sensitive agreements. "The non-time sensitive agreements do not specify when the goods would reach but the delivery happens within eight days. Such a delivery naturally costs lesser. Time-sensitive delivery agreements, on the contrary, define the transit time based on a matrix we have prepared." Penalties are issued on the LSPs if they fail to deliver as per the stated conditions and incentives are obtained in

cases when the LSP concludes a service before time. Penalties could be equivalent to direct and indirect losses owing to SLA deviation. Mr. Gossain says, "Failure to live up to stated agreements could result in revoking of the associated bank deposits/earnest money deposits, or even a pre-closure of contracts." Confirming this, Mr. Kaushik says, "Assigned penalties are levied for non-performance or non-compliance with the set standards which will affect the LSPs periodic performance rating. This will be followed with reduction in the share of business. After having left no stone unturned, if there is still no improvement over a period of time, which is actually in the rarest of rare cases, the concerned LSP may have to exit with due notice." The Blame Game Unreasonable SLAs set up by the client and agreed to by the LSP is one of the biggest pain points facing the service level agreement predicament. Elaborating on this, Col. Vijay Nair, General Manager - Supply Chain, HyperCity (India) Retail, says, "Often clients demand for things that they themselves cannot attain but expect the LSP to, which is very irrational on the part of the client." In the area of manpower, often the manpower that is employed is not skilled as per the requirements agreed upon while signing the contract. This naturally affects the quality of service. "They are one-sided and are typically accepted by vendors who are desperate to get in for business expansion and are unaware of the possible on-ground realities. By the time this is realized, the same process initiates for a new vendor again," explains Mr. Gossain, as being one of the reasons for concern. Mr. Bhatt says clients have high expectations leading them to make unreasonable demands with respect to turnaround time or transshipment specifications. "Sometimes the demands may not make practical sense to the way we function. For example, a client asking for nine tons of material to be moved over a long distance but insisting that the service must involve no transshipment." Stating extreme customer dependency as one of the main reasons of concern for clients, Mr. Singh says that LSPs are often quick at pointing fingers at the client companies for inappropriate information given by us, for their poor performance. There is also constant resistance by the LSPs to accept their faults and failures by looking for escape routes, excuses and trying to take advantage of any lacunae Materials Management Review

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that may be present in the existing system. "Initial reluctance to comply with the desired key performance parameters citing uncontrollable environmental factors is a common trend among LSPs," says Mr. Kaushik. The deplorable infrastructure issues in India only add to the complexities. Mr. Bhatt explained this stating, "When going by road, the documentation that needs to be carried out is highly unorganized and complicated. The goods and service tax is supposed to solve this problem but the question is when." Problems with the roads and funds, and creating permits for trucks are plenty, and are seriously affecting the seamless movement of trucks and thereby the observance of several SLA parameters. "The way the supply chain functions is not always constant," points out Col. Nair. "Factors related to transportation, infrastructure, warehousing or labor standards are constantly changing. Such vagaries in the supply chain often make functioning as per the SLAs difficult." There's a set process of going about the service that an LSP is expected to follow but it is not infrequently that LSPs take short cuts and try to get things done in the cheapest possible manner. According to Mr. Bhatt, owing to the high transportation costs packaging is compromised on to keep the costs low, eventually encouraging overloading. Better Safe Than Sorry Given the volatile nature of a client-LSP relationship, there are several things that client companies can watch out for while formulating an SLA. "Detailed logistics cycle flow, desired and achievable key performance indicators and key result areas, communication network and reporting hierarchy to be followed and user-friendly system facilitation are some of the important aspects that need to be discussed and clearly stated in an SLA," says Mr. Kaushik. A clear understanding of the traffic regulations and relevant laws of the land are factors that client companies tend to underestimate. Reading and understanding the entire agreement in absolute detail is essential before signing it. "The agreement must be clear on each and every thing mentioned in the SLA and we must take in writing that there will be no hidden charges," asserted Col. Nair. For example, loading may be mentioned in the agreement but the labor involved for the same may not. LSPs often cite such loopholes as hidden charges. A perfect SLA is almost utopian but the key to attaining one lies in learning from experience. Mr. Singh stressed on the need to refine SLAs based on experiences in order to make them foolproof. "Setting the right parameters that should be inculcated in the SLA is the most crucial decision that needs to be made. And it is these parameters that determine whether the SLA is measurable and achievable," he adds. All legalities related to the insurance of products should be taken care of and clients should always be equipped with contingency plans in times of failure. "Any arbitration needed must be under the client's jurisdiction," insists Col. Nair. Materials Management Review

Mr. Gossain says, "If the SLAs are mutually agreed upon and the screening criteria is more than just commercials, and includes competency mapping and technical evaluation, then delivery of SLAs would definitely be better." There must also always be in place a review system to keep checking that the stated parameters are being adhered to and this check must happen periodically. "The root cause of the problem lies in the lack of courage by LSPs to state certain things precisely, hence leaving much of it to a benefit of doubt situation. Such situations always give the LSPs an advantage of twisting and turning things according to their convenience," says Mr. Singh. However, all said and done, there are unforeseen factors like the catastrophic failure of infrastructure, drastic changes in government regulations, strikes, or sudden spikes in equipment costs, etc. that can crop up anytime and cannot be accounted for. Working Together Fruitfully From what can be seen, much of the problem lies in the initial stages of formulating an SLA, and revolves around stating what needs to be stated, sufficiently and at the right time. The client and the service provider need to find ample time to discuss the various parameters and ensure they are reasonable and mutually agreed upon. This will surely offer clarity in the relationship. The LSPs could do with more understanding from their clients, especially at times when uncontrollable factors play spoil sport. Mr. Singh recommends, "We need to behave like a partner facilitating collaborative relationships, and discuss the SLAs with the service providers hearing them out as well, rather than simply forcing it on them." A two-way relationship, by which clients share their value systems, concerned costing and business models can help the two parties to discuss their needs adequately and also find scope for further improvements. "It is important to treat your LSPs as equal partners and not with a myopic view of the relationship being a principal-agent one. Work together especially in the initial stages of the project until it matures and operations stabilize. Continuously monitor the operations and key performance indicators to ensure that they are on track," says Mr. Kaushik when asked how the client-LSP friction can be resolved. "Both the client and LSP need to be honest in their intent and capabilities. At a time of crisis the issues should also be resolved by discussions that both the parties are equally involved in. Once resolved the arrangement can continue as planned, if not, clients must be able to put their feet down and terminate the arrangement in a professional manner," advises Col. Nair. Therefore a collaborative relationship between the clients and service providers is definitely the need of the hour. Source : Weekly E-Newsletter July 13, 2011 CII Institute of Logistics
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Outsourcing vs. Insourcing: What's best for your Organization?

What is Outsourcing?

utsourcing began in the early eighties when organizations started delegating their non-core functions to an external organization that was specialized in providing a particular service, function or product. In outsourcing, the external organization would take on the management of the outsourced function. Most organizations choose outsourcing because outsourcing offers a lot of advantages. When organizations outsource to countries like India, they benefit from lower costs and high-quality services. Moreover organizations can concentrate more on core functions once they outsource their non-core functions. Outsourcing can also help organizations make better use of their resources, time and infrastructure. In outsourcing, the outsourcer and the outsourcing partner have a greater relationship when compared to the relationship between a buyer and a seller. In outsourcing, the outsourcer trusts the outsourcing partner with vital information. Outsourcing is no longer confined to the outsourcing of IT services. Outsourcers in the US and UK now outsource financial services, engineering services, creative services, data entry services and much more. Most organizations are opting to outsource because outsourcing enables organizations to access intellectual capital, focus on core competencies, shorten the delivery cycle time and reduce costs significantly. Organizations feel outsourcing is an effective business strategy to help improve their business. What is Insourcing? The opposite of outsourcing can be defined as insourcing. When an organization delegates its work to another entity, which is internal yet not a part of the organization, it is termed as insourcing. The internal entity will usually have a specialized team who will be proficient in the providing the required services. Organizations sometimes opt for insourcing because it enables them to maintain a better control of what they outsource. Insourcing has also come to be defined as transferring work from one organization to another

organization which is located within the same country. Insourcing can also mean an organization building a new business centre or facility which would specialize in a particular service or product. Organizations involved in production usually opt for insourcing in order to cut down the cost of labor and taxes amongst others. The trend towards insourcing has increased since the year 2006. Organizations who have been dissatisfied with outsourcing have moved towards insourcing. Some organizations feel that they can have better customer support and better control over the work outsourced by insourcing their work rather than outsourcing it. According to recent studies, there is more wok insourced than outsourced in the U.S and U.K. These countries are currently the largest outsourcers in the world. The U.S and U.K outsource and insource work equally. What is best for your organization? If your organization has a number of non-core processes which are taking plenty of time, effort and resources to perform in-house, it would be wise to outsource these non-core functions. Outsourcing in this case, would help you save on time, effort, manpower and would also aid you in making quicker deliveries to your customers. If you require expertise services in areas which do not fall under your core competency, then outsourcing will be a good option as you can get access to expertise services. For reducing costs and making faster deliverables, outsourcing is again a good option. If your work involves production, then it would be more ideal for your organization to opt for insourcing, as you can save on transportation costs and exercise a better control over your project. It is not necessary to choose outsourcing over insourcing or vice versa. Your organization can outsource and insource at the same time. By outsourcing and insourcing simultaneously, you can have the best of what both offers and your business can get a competitive advantage! Source : Outsourcing2India

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Outsourcing - Third Party Logistics Functions

Prem Narayan, Life Fellow IIMM Director of Estates, Ministry of Urban Development premnarayan66@yahoo.com

ntroduction : The Outsourcing of third party logistics functions, world over, has increasingly become a powerful alternative to the traditional, verticallyintegrated firm. A growth in the number of outsourcing partnerships is contributing to the development of more flexible organizations, based on core competencies and mutually beneficial longer-term relationships. The development of logistics outsourcing can be broadly defined as long and short-term contracts or alliances between manufacturing and service firms and thirdparty logistics providers. It has been largely based on the needs that companies have to obtain cost savings and to concentrate on their core competencies. These services range from single transportation activities to integrated warehousing, distribution, and information management activities. The study shows that across many industries, logistics outsourcing has become a rapidly expanding source of competitive advantage and logistics cost savings. Further, some firms routinely have achieved up to 30 per cent to 40 per cent reductions in logistics costs and have been able to greatly streamline global logistics processes as a consequence of outsourcing. Logistics as a functional system : In general, a functional system can be defined as a "collection of interrelated objects and the therefore interrelated activities in which these objects are engaged". The conceptualization of logistics as a functional system (figure 1) is crucial to improving the efficiency in the flow of goods and information and to meeting low-cost, fast, and reliable delivery objectives within a firm and throughout a network of firms. A system of logistics functions can be divided into five broad areas i.e. i) Facility location, ii) Transportation, iii) Inventory, iv) Communication and v) Material movement.

Figure 1 shows that all logistics activities can be divided into two categories. The first category includes the "physical activities that are required to create form, time, and quantity utilities of customer need". These activities encompass Fleet Management, warehousing and product returns for customer service operations. The second category includes the "transaction activities that follow or initiate the physical activities previously presented". The activities in this category are centered on transaction negotiation areas (i.e. the interaction between firms through the purchasing of inbound materials, supplies, and products) and order cycle management areas (i.e. the management and control of information flows necessary to create customer service in the logistics system). The integration of third-party logistics services In order to understand, how the firms are bundling the services of third-party logistics provider, the outsourced logistics functions can be grouped into six functional areas i.e. i) transportation/transactional, ii) transportation/physical, iii) inventory/transactional, iv) inventory/physical, v) customer service/transactional and vi) customer service/physical. Complementarily, logistics information systems can be kept as a separate linking instrument. There is an association between outsourced logistics functions in the transportation/physical and inventory/ transactional areas. This outsourcing relationship indicates that firms tend to jointly outsource logistics areas that share an active flow of goods and information. Indeed, logistics functions in the transportation/physical and in the inventory/transactional areas involve a sequence of complementary transactions that will routinely begin with the forecasting of inventory and the planning of shipments and will end with the transportation of goods to and from the firms' warehouses. In addition, there is an association between outsourced logistics functions in the inventory/physical and in the customer service/physical areas. These two logistical areas share a steady flow of goods. They involve a sequence of operations that originates with the packaging of goods for storage and ends with the operations needed to consolidate and repackage the goods for delivery. The outsourcing association between inventory/
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Figure 1 : Logistics as a Functional System Materials Management Review

transactional and customer service/transactional functions indicates that firms tend to integrate the services of third-party logistics firms across a well defined sequence of activities that share information from the reception of customer orders and from the execution of shipping orders between the firms. Conclusions Transportation, inventory, and customer service as distinct functional areas within generic logistics systems. In deciding to contract the services of thirdparty logistics providers, firms bundle functional areas and activities in distinct patterns which, might enable the achievement of efficiency gains reflected in the achievement of economies of scale, scope, and conjunction. The results indicate that firms outsource bundled transactional and physical functions within inventory and customer-service areas. Firms might adopt this outsourcing practice in order to achieve

economies of scale resulting from the coordination of complementary routine operations such as stocking of finished goods and the planning of inventory and shipping requirements. Firms might also bundle these outsourced logistics functions in order to obtain a higher efficiency in the utilization of capital assets such as warehouses. In addition, firms outsource groups of logistics functions which share common transactional elements and information flows and logistics functions which share complementary flows of goods. Firms bundle the outsourcing of logistics information systems with the information flows across transactional functions such as inventory management and shipment planning. Firms might choose to adopt these outsourcing practices in order to improve their customer service without having to commit significant.

Price Rise and Inventory Management

Shyamal Gupta Chief Business Officer, NCMSL
When two elephants fight, it is the grass that gets trampled -African Proverb understanding the demand and supply realities and help make profitable buy-andsell decisions. This stockpiling model of commodities is becoming more and more accepted as the newest method to influence prices and secure trading advantages. It has been seen in silver with physically-backed ETFs. During the recession in late 2008 and 2009, Metro began stockpiling aluminum. With reduced demand, producers needed a place to put their aluminum output to maintain production. They could do this by housing the metal in warehouses and selling the warrants of the metal on the LME. Metro charges a storage fee of 42 cents a tonne each day to the LME warrant holder on aluminum sitting in its warehouses. It uses an incentive system to bring in far more aluminum than it allows leaving its warehouses, causing long delays in the delivery of the metal and, in turn, inflating prices. Once the metal is in the warehouse, the producers who are paying rent sell ownership of the metal on the LME. But the created bottleneck of delivery leaves new owners waiting for months for their product to be released. According to LME rules, only 1,500 tonne of aluminum is required to leave the warehouses each day, but an unlimited amount can enter. The LME created the rules in a different era when stockpiles were much smaller. The issues weren't as glaring as they are today, and it's unfair for the LME not to change dynamically with the system. Source : ET, July 8, 2011

he next time you find that a can of your favourite beverage to be expensive then dont blame it to governments mismanagement. The battle of price has gone beyond the realms of monetary and fiscal policies. It is now being fought between a financial giant Goldman Sachs and a beverage giant Coca Cola. The centre of the issue is a warehousing company Metro International Trade Services. The price of aluminum (a key input needed for the canning) has gone up by 13% since January this year. The current price of $2500 is way above the price of $1700 in June 2009. The increase is occurring despite rising inventory. Global aluminum stockpiles on the London Metal Exchange have grown from below a million tonne in 2007 to currently more than 4.5 million tonne. Metros stockpile totals 25% of the aluminum on LME or about 12% of the worlds warehoused aluminum. In February 2010, Metros acquisition for a reported $550 million by Goldman was one of the deals where financial institutions entered the littleknown world of warehousing operations. If the current stockpile remained even over a year, Goldman Sachs would earn revenue of $230 million from Metro's warehouses. However, space rental is hardly the reason for owning a warehouse. Direct connection to the physical markets for metals can give metal traders an enormous edge in

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MANUFACTURING
For Technological Depth
Free Trade agreements can derail even the current technology inflows

Anil Bhardwaj Secretary General, Federation of Indian MSMEs

ardly a handful of sectors in India can boast of having the technological depth, that is, the capability to manufacture all the items of a value chain sustainably. But technological depth in manufacturing is a prerequisite to create a virtuous cycle of higher productivity, higher income and higher spending in the economy. Only then can local industries reap the benefits of the vast Indian market. India's experience in technological development is not very impressive. Hardly any technological base for manufacturing existed at the time of Independence. Much of technological acquisition and diffusion took place through two routes: public sector undertakings (PSUs) making joint ventures/collaborations with global industry leaders in the '50s and '60s--- their aggressive vendor development programmes contributed immensely to technology diffusion, particularly amongst MSMEs in the '70s and '80s. And the second route was import substitution, through indigenous ways adopted by both large and small companies under the safety net of quantitative restrictions and high import tariffs. For MSMEs, there was another layer of protection: the policy of reservation. Import substitution efforts were complemented by an elaborate network of government labs and R&D institutions. Post-1991, the policy space has shrunk considerably: quantitative restrictions have been lifted; tariff levels have come close to the lowest; and free trade agreements have become common. In the changed context, a new set of motivations are required to offset the additional cost of technology development over the ease of importing finished items from competitive foreign sources. The first area of intervention in this regard is developing strong partnerships between industries and government labs. Currently these links are weak and tenuous. All sources of technologyacademia, PSUs, government departments, R&D centres, etc have to be tapped for the linkage. While liberal funding is needed for the labs and institutions, customer-orientation is also need to be emphasised, to make earnings from transfer of technology/ knowledge/ skill especially to MSMEs as a key performance criterion. Institutions also need to be encouraged to document, brand and market their capabilities. Secondly, a preferential dispensation is required for Materials Management Review

indigenously developed products so that there is incentive to develop technologies and to ensure that the profits and capital remain in the country for reinvestment. Currently new indigenous products are viewed with suspicion and are actually discouraged in government procurement. As a rule, indigenously developed products without prior performance/ track record may be treated as eligible for trial orders. Also, suppliers of indigenous products/ services should be allowed to match their prices with overseas vendors. Major government buyer sectors like defence production, power, railways and telecommunications may be encouraged to set up special teams to closely work with their vendor industry, extend them technological assistance and take reasonable risks in trying out products based on new ideas/developments. Annual reporting of data on purchases by government/ departments/ PSUs of indigenous vs imported products may also accelerate indigenisation. An important dimension that has to be added to public procurement is a comprehensive offset policy that covers all types of public contracts given to foreign companies, including defence, aerospace, civil aviation, power and infrastructure projects. Such a policy must aim to ensure mandatory technology transfers wherever the technology was non-existent domestically. The ministry of defence has started taking tentative steps in this regard but a coherent offset regime is yet to emerge. Thirdly, the intellectual property rights (IPR) regime needs strengthening to enable collaborative and indigenous innovation. Because of weak enforcement, there exists a substantial trust deficit between private enterprises and R&D institutions. Also, MSMEs are reluctant to spend money on technology acquisition as it is difficult to protect their investment. Such a situation is a big disincentive for innovators. Special courts or tribunals may have to be set up for expeditious disposal of matters concerning IPR infringements. Fourthly, special policies have to be formulated for promoting joint ventures between foreign companies and their Indian partners to attract latest technologies. Such policies could have facilitative elements as incentives (e.g. protection from imports through tariffs, standards, certifications etc) and persuasive interactions (that only
August 2011 39

FDI offers with technology transfer are preferred). Fifthly, there is no denying that fiscal and tax concessions attract immediate attention and business decisions can be effectively oriented towards strategic goals. There are two dimensions of it. One relates to import duties and the other to fiscal incentives. The policies of rushing towards a zero-duty regime through regional trade agreements (RTAs) can have a devastating effect on efforts to attract technology and investment in Indian manufacturing. The problem is compounded by anomalies in the import duty regime. On the fiscal incentives side, the following may have a salutary effect: encouraging investments in R&D through self-certified tax breaks like weighted deductions and

also on expenditure incurred on acquisition of technology; subsidising capital expenditure for setting up R&D labs, testing centres; subsidised search/ scouting of technologies similar to market development assistance for exports; exempting income earned from transfer of technologies and viability gap funding for critical technologies. Finally, can anything be achieved through policies if they are not clear, executable, predictable and are not coordinated among different ministries? Countries that have developed technological competencies have worked on mission mode. Laissez-faire is no substitute for strategy.

INTERNATIONAL NEWS

V. K. JAIN Sr. Delegate of IIMM to IFPSM iimm3@vsnl.net

HHLA introduce self service terminals in Germany: HHLA Container Terminal Altenwerder (CTA) is the first in Germany to introduce intuitive self-service terminals where truckers can check in their standard containers within around 130 seconds. COSCO spending on armed guards to protect vessels COSCO Shipping is reported to be spending $12 million on armed guards and other measures to protect its vessels from pirates, according to China Military News. COSCO will buy bullet-proof vests and on-board equipment to deter attacks and protect its ships and crews in the Gulf of Aden and the Indian Ocean. The UN Security Council has warned that Somali pirates are attacking growing numbers of ships in the Indian Ocean, and the attacks are becoming more violent and extreme. Furthermore, attacks have become increasingly common off the coast of India as pirates seek to evade the international maritime force patrolling the waters off Somalia. Ports in India, Africa and Latin America favored by private investors Private investors, returning to the global port industry following the credit crunch, are targeting projects in Africa, India and Latin America, as investment in Chinese ports becomes trickier attracting the highest number of private investments in recent years. China drew almost $4 billion of private funds in 2006-2009, India, $2.5 billion and Brazil, $1.5 billion. HKIA most efficient airport in Asia Hong Kong airport has retained its position as the most efficient airport in Asia, with Singapore in second place
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and Guangzhou, China in third place in the annual Global Airport Benchmarkin . The lowest airport costs in Asia were in Kuala Lumpur, Malaysia plus Chennai and Mumbai in India, while the highest were Japan's Kansai, Nagoya and Narita airports. Atlanta's Hartsfield-Jackson Airport, USA retained its position as the most efficient aviation hub globally. Product integrity a challenge in Pharma Supply Chain Counterfeit drugs are a major concern to pharmaceutical companies, doctors and patients alike, but one other major concern that often gets overlooked is the degradation of pharmaceutical products as they move along the supply chain. The storage and movement of pharmaceuticals is of great importance so that the product remains at optimum efficacy. However in many countries the product is stored in warehouses with inadequate cooling and not properly transported. New container terminal to be built at Kolkata The Kolkata Port Trust (KoPT) is to move forward with plans for a container terminal to be built at Diamond Harbour after the project was given the green light by the Indian government. India ports continue to show strong growth Cargo volume moving through major ports in India surged 7 percent during April to June compared with a year earlier, according to preliminary traffic figures released by the Indian Ports Association.

Materials Management Review

WTO UPDATE
India devising its future negotiating position

he Department of Commerce held consultations with industry on May 31, 2011, to devise Indias future negotiating position in respect of sectoral tariff negotiations in WTO with respect to chemicals, electronics and electrical products and industrial machinery. The stakeholder consultation, organized by FICCI and Centre for WTO Studies (CWS) and industry partners, sought industries interests and concerns on the sectoral initiatives including the Product Basket Approach (PBA) and the EUs proposal in respect of the three identified sectors. Industry representatives were asked to identify products in each of the three sectors in which India can afford to reduce tariffs and were urged to pinpoint the sensitive products that must be excluded from tariff elimination in the three sectors. PBA is a tool to construct sectorals with broad product coverage that reflect the interest and sensitivities of members. The PBA builds on longstanding sectoral discussions that have been occurring amongst members. Addressing the meeting, Tapan Mazumder, Director, Ministry of Commerce and Industry, observed that as per the Hong Kong Ministerial declaration, participation in sectoral initiatives would be voluntary, not mandatory. However, some developed WTO member nations are arguing that trade flows in recent times have been in favour of emerging economies such as India, China and Brazil and were therefore seeking mandatory participation by India and some other developing countries in some of the sectoral initiatives. Mazumder explained that developed countries were of the view that even after the agreement to reduce bound tariffs based on a nonlinear Swiss Formula, there was a lot of difference between the applied and the bound rates and therefore there was room for further tariff reduction. Under the sectoral tariff initiatives proposal in WTO, a number of countries have demanded that India bring down its import duty to zero (or close to zero) for various product groups including chemicals,

pharmaceuticals, dyestuffs & plastics, electronics & electrical products and equipment and machinery, appliances, engineering goods & machine tools. According to Abhijit Das, Head, CWS, sectoral tariff negotiations were being portrayed as a possible roadblock to any progress in WTO trade talks. In an effort to allay the apprehensions of industry he said that there was no consensus as yet on the recent EU compromise proposal on PBA. Even if the proposal goes through, developing countries will have 5-6 years to implement the new bound rates. Representatives of the Consultation partners - CEAMA, EEPC India, ELCINA, FIEO, IEEMA, MAIT, CHEMEXIL, ICC, IDMA and PLEXCONCIL, also addressed the meeting. Earlier on May 10, 2011, FICCI and Centre for WTO Studies (CWS) jointly organized a seminar on WTO Doha Negotiations: An Update, in New Delhi. The speakers at the seminar updated trade and industry representatives and other stakeholders on the latest state-of-play regarding WTO Doha Negotiations and the possible way forward. According to Rajeev Kher, Additional Secretary, Ministry of Commerce & Industry and Indias chief negotiator at the Doha Round, the new proposals on sectorals would not be acceptable to India. Kher implied that the new proposals mark a paradigm shift from the development round to greater market access for industrial goods for developed countries. Furthermore, the definition of re-manufactured goods remains unclear. Indias stand is to first come up with a clear definition as it would help exporters to build a consensus on the issue. Ramu Deora, Chairman, FICCI Foreign Trade and Trade Facilitation Committee, maintained that sectoral tariff negotiations should remain non-mandatory if the negative impact on Indias domestic industry and employment is to be avoided. Abhijit Das, Head, CWS, also shared his perspective with the participants. Source : Business Digest, FICCI

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Comparision of India & China V/s Major Countries

Rajesh Sund Dy. Director, NPC

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Source : The Global Competitiveness Report 2010-11

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Offshore Outsourcing Models

K. Mohan Babu, Author of Offshoring IT Services and Senior manager with Infosys' Consulting Group

he term "offshoring" conjures a vision of work flowing from large corporations to technology vendors halfway across the globe. Perhaps the burgeoning Indian IT and BPO industry that is notching upwards of $15 billion to $18 billion a year makes it sound like the work "just flows." The facts of outsourcing, however, are a bit different. Behind each program, initiative or project that is offshored lie complex decisions involving selecting the right models to suit a particular business need or scenario. I dedicated a section to the topic of offshoring models in my recently published book, Offshoring IT Services: A Framework for Managing Outsourced Projects. In this article, I abstract some of the key ideas from the book and my research regarding offshoring models. Selecting an appropriate offshoring model is a crucial aspect of developing your company's outsourcing plan. The process involves several factors, including aspects of international business strategy, selecting the country, scanning the landscape and deciding on the outsourcing strategy. The three models most popular currently among business leaders are joint ventures, subsidiaries and outsourcing to a service provider. Joint Venture Offshoring In a joint venture (JV), an organization ties up with a local firm or company either by taking an equity stake or forming an independent company in which each company contributes resources. The goal is generally to work towards a "win-win" deal where both organizations hope to benefit from the other's strengths. By capitalizing on the strengths of a local player, the client organization can mitigate some of the risks of internalization; similarly, the local player can benefit from partnering with a strong player and the opportunity to scale up the value chain. A joint venture contract may sometimes include buildoperate-transfer (BOT) clauses to motivate both parties to work towards a clearly defined exit strategy. The BOT or its variation, build-own-operate-transfer (BOOT), may involve an option for the domestic company to sell its stake to the foreign company after a stipulated period or after agreed-upon milestones. There are several advantages to a JV model, especially if the company is also looking to "learn" the intricacies of managing local business customs and mores from the

domestic partner, which will pave the way for a subsidiary down the road. An excellent example of this strategic evolution from a joint venture to a fully owned subsidiary is that of EDS' entry into India. Though a few articles in the media portray EDS' strategy as a dramatic step, it is, in fact, the culmination of a gradual evolution that began with a joint venture-like relationship with vendors in India a decade ago. Subsidiary/Captive Development Center Offshoring Companies may decide to bypass the JV model altogether and go directly in for a subsidiary or local office if the management is comfortable in dealing with the nittygritty of internationalization and local market operations. Some of the popular terms used to describe the model include offshore development center (ODC), captive development center or in some cases simply branch or local office. Subsidiaries operate as independent business units or branches, executing programs and projects for onsite teams. From this perspective, the mode of managing a subsidiary is similar to managing projects and programs in a global delivery center (GDC) model promoted by software service delivery and offshoring companies. The key challenge in a subsidiary model, apart from internationalization and localization of business management, pertains to management of expatriate staff, line workers, technical experts and line managers from multicultural backgrounds. The local office model is extremely popular among hightech organizations that are comfortable in management of technology development and innovation and look to offshoring as an extension of their diversification strategies. Large software development companies including IBM, Microsoft and Oracle are already comfortable doing business in a global marketplace. Moving development or maintenance of some of the projects and work is a way to extend their geographic footprint. Similarly, software giants like Accenture, EDS and Deloitte Consulting, among others, have been at the forefront of bundling newer services for their clients; offshoring being the latest in their suite of services. Service Provider Offshoring The JV and subsidiary models of outsourcing may involve Materials Management Review

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deep commitment on the part of a client organization, a move that management at traditional companies may sometimes be averse to. To counter the perceived risks of these models and to capitalize on the benefits of offshoring, companies resort to outsourcing projects, programs and individual work orders to offshore vendors. Interestingly, outsourcing to service providers is also the most visible offshore outsourcing model, and it encompasses a wide range of work, from small projects to multi-year contracts amounting to millions of dollars. Here are the most popular forms of outsourcing to offshore vendors. Onsite Subcontracting with Offshoring This is perhaps the simplest outsourcing model, where a firm places its skilled people "on site" at the client's location. The people thus placed become a virtual part of the client's team. The model is also called staff augmentation. Most offshore outsourcing firms trace their history back to their software services model and continue to offer onsite project support along with some staff augmentation. This model of outsourcing is typically adopted by smaller firms that have a relationship with the client organization and the means to hire and staff people. Pure Offshore Projects A pure-offshore project involves instances where the scope is well defined and the work is discrete enough to be done remotely with little supervision. Examples of this model include work farmed out by smaller organizations and individuals to freelancers around the world using online tools provided by vendors like Guru and RentACoder. This model of offshoring is less prevalent and generally seen only in a small scale development of software component or modules. The model is also being adopted by innovative organizations looking to capitalize on foreign talent that isn't very mobile. An example is the drug-research consortium that runs innocentive.com. Offshoring Individual Projects Organizations that have a well defined outsourcing program mitigate their risks of outsourcing by dividing the work into small, more manageable projects that they outsource to vendor organizations. Managers at client organizations who have well defined deliverables, programs or modules to be developed outsource them to vendors with whom they may have relationships. Global Delivery Onsite/Offshore Model This is the classic offshoring propagated by most software service providers, where they take on the project, module or program from a client organization, deploy a small team onsite that works with the client managers and teams and coordinates work with the Materials Management Review

offshore team that does the bulk of the work. This is a more mature stage of the "offshoring individual projects" approach. In this model, multiple projects, and programs at the client organizations are outsourced to a vendor, which also takes on the end-to-end program management and delivery on behalf of the client. For the outsourcing vendor organization, it's a step up the value chain; for the client organization, it's a value-added service since their employees don't have to manage the nitty-gritty of individual projects. Rather, the outsourcing organization's employees focus on managing the relationship and program and ensure that the vendor delivers as agreed. Multi-vendor Offshoring (Multisourcing) In the discussion on offshoring models, we've assumed that the relationship is between a client and a single vendor. However, in reality, a client may have multiple vendors working on a project or initiative. Organizations attempt to de-risk their outsourcing strategies by empanelling a selected list of vendors ("preferred vendors") from which individual projects and managers opt to select and source work. Offshoring can be a complex strategic decision. Since it's hard and expensive to change course midstream, organizations and business leaders need to spend considerable time strategizing and planning the model suitable for their specific business needs. The models highlighted in the discussion are some of the most common ones encountered. Clients in the west are learning about the pros and cons of the different models offered by players in the marketplace, in some cases specifying a hybrid model tailored to their businesses. Many large service providers also offer a mix-and-match portfolio of options to clients and sometimes draw a roadmap to migrate from one model to another as the client's understanding of the offshoring business matures.

Economic Indicators
YoY (In %) Inflation (30/06) IIP (31/05) GDP (31/03) CPI (31/05) CRR (23/04) Bank rate (29/04) Current 9.44 5.60 7.80 8.72 6.00 6.00 Qtr Ago 9.54 6.70 8.30 8.82 5.00 6.25 Yr Ago 10.25 8.50 9.40 13.91 5.00 6.50

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Enabling Supply Chain Efficiencies through Collaboration

M.Rammyaa, Research Scholar and P.Chandiran Associate Professor Loyola Institute of Business Administration rammyaa.scmcoe@takesolutions.com chandiran@liba.edu

ntroduction : There is nothing permanent except change. Change is the only invariable factor which drives the world today. The business setting is constantly evolving and technology advancements have brought the spectacular shift in the nature of supply chain management. The rising complexities and unpredictability of the supply chain has totally altered the way business value is created. In the last decade, supply chain management has changed its focus, centering now on value creation, by taking into consideration the recent trends of partners integration and implementation of internet technologies. Within this context this article presents how collaboration enables supply chain efficiencies. Collaboration in supply chain management : Since its origins, supply chain management has changed its focus from purchasing and logistics between the mid-1960s and 1990s to an updated focus on value creation since the mid-1990s and the new millennium (Kampstra, et al., 2006). According to the Council of Supply Chain Management Professionals (CSCMP), supply chain management encompasses the planning and management of all activities involved in sourcing, procurement, conversion, and logistics management. It also includes the crucial components of coordination

and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies. CSCM (Collaborative Supply Chain Management) is a strategy that was first outlined in the 1990's and was destined to enable a smooth information flow and the sharing of knowledge and profits mention that successful collaboration requires a change from standard business practice and especially when it concerns to information exchange. Even the most refined manufacturing and distribution environments finally depend on the accuracy and efficiency of their information flow. Most of the practitioners and academicians highlighted the need for supply chain collaboration constantly, as it helps to achieve supply chain objectives and improved efficiencies. Practitioners define collaboration as a means by which all companies in the supply chain are actively working together towards common objectives. In a collaborative supply chain, partners' own supply chains are intricately interwoven. Table 1 outline about key elements of collaboration.

Table 1 Essential Elements of Collaboration Key Elements of Collaboration Information Sharing Description/Purpose The downstream partner transmits demand and other related information to the upstream in a timely manner. Helps create a trusted environment and also reduces the bullwhip effect Coordination of pricing, transportation, inventory planning,etc. Examples of practice Companies like Wal-mart, P&G Reduced bull-whip effect through Collaborative Planning, Forecasting and Replenishment.(CPFR) practice Dell through Vendor Managed Inventory practice managed its inventory and transportation effectively By improving Supplier Relations Management and Customer Relations Management, JIT practice Toyota , Honda reduces inventory cost and lead time

Channel Alignment

Operations Efficiency

Reduces uncertainty and variability of the supply chain processes. Ensures a reduction in costs and lead time.

Source: Key elements of collaboration (Simatupang and Sridharan, 2008)

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Need for collaboration: The emergence of supply chain relationships and new technology solutions has created endless new opportunities for companies. Firms can buy and sell products and services from anywhere any part of the world.However, in spite of extensive opportunities, managing supply chain worldwide carries risks and challenges. Reduction in product development time, demand and supply uncertainty, gap between demand and supply, rising uncertainty and variability of supply chain process are some of the factors that drive companies to improve their collaborative practices. In present business environment firms need to be efficient in all aspects, especially when it comes to supply chain. This is because customers are expecting the best products and services, at the lowest possible cost. This is one of the biggest challenges for companies. Firms need to decrease costs at the same time without compromising the customer service and responsiveness. Understanding the complexities: With many business challenges in front it is necessary for firms to contain costs across the supply chain is as strong as ever. Firms must understand the complexities in a supply chain because it is the significant driver which increases the cost. Some of the most common causes for complexity in a supply chain are listed below When firms move beyond its sphere globally, the supply chain becomes complex. The more complex the supply chains the more difficult it becomes to integrate. In the competitive world the success of a firm is ever more dependent on organization's capability to put together its business operations, technology, people, and process. This integration not only inside the enterprise but also across extended enterprises i.e. entire eco-system. Firms must have regular updates and accurate visibility across supply chain to meet out the growing needs of the customers. The objective of Supply chain visibility is to improve and build up the supply chain by making information available to entire supply chain from original suppliers to final customer. In India cargo transportation and logistics industry is extremely fragmented in nature. Increased expectations of customer, unpredictable demand, shorter product life cycle, competition, fuel price increase pose challenges to the firm. India's poor infrastructure facilities further increased the complexity. Though third party logistics providers (3PL) help firms to take the edge off logistics risks, there are very few such organized providers in India. In short, most of the above complexities in the supply chain are due to i) Lack of co-ordination among trading partners. ii) There is no proper information sharing resulting in poor visibility. iii) Each player in supply chain tries to maximize their own profit rather than maximizing entire supply chain profit. Materials Management Review

Collaboration to reduce complexity: Integration of three flows namely product flow, information flow and funds flow is essential across supply chain to address these complexities. Collaborative SCM systems are designed to support enhanced information sharing and collaborative planning among partners in an effort to reduce information asymmetries in the supply chain, which contribute to the bullwhip effect and result in excess inventories (Lee,2000) In the entire network information is the essential component of supply chain. For instance Wal-Mart, through collaborative planning, forecasting, and replenishment (CPFR) saved its cost and increase its earnings. Any information distortions (Bullwhip effect) increase inefficiencies, ultimately impact the entire supply chain. For instance in U.S. food industry study, it was estimated that poor coordination among supply chain partners was wasting $30 billion annually. The co-ordinate efforts among supply chain players are imperative now because it impact on bottom line. Supply chain co-ordination happens only when product flow, information flow and funds flow are synchronized. A great deal of partnering effort is required today to address the complexities in supply chain. But thanks to the arrival of the internet, through technology advancements firms can minimize their complexities to a great extent. Technology plays an important role in coordinating trading partners across supply chain. Nowadays, almost all ERP/SCM product vendors provide supply chain solutions. Selecting the right collaborated supply chain solutions will not only minimize risks but it optimizes performance across supply chain. Oracle, SAP, Microsoft, Logility, JDA software, Infor, Sterling commerce, ILOG, i2 Technologies, ecVision, RedPrairie, RR Donnelley Logistics are some of the companies that provide Supply chain collaborative solutions. Collaborating with the right supply chain partner's increases efficiency for firms. Companies must select supply chain partner based on collaborative capabilities, service capabilities, and technology integration etc. Though many service providers in supply chain domain, only very few players addressing the customer's requirements in a structured and organized manner. Benefits of Supply chain collaborative solutions include improved co-ordination, visibility, and increased efficiencies. Exhibit 1 outlines about one of such supply chain collaboration application from Take solutions. As global markets nurture more and more efficient, competition no longer takes place between individual entities, but across entire supply chain. Firms are under pressure to improve service and reduce costs. As a result, a growing number of firms are looking for innovative products and services to improve efficiencies. Therefore Organizations are developing promising supply chain collaboration/ partnerships in an effort to trim down their costs, improve performance and to gain competitive advantage.
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Exhibit 1 Multi-enterprise supply chain collaboration Software Application from TAKE Solutions Ltd OneSCM' application enables businesses to collaborate seamlessly with multiple customers, suppliers, service providers and other supply chain partners. A key element in OneSCM is not just oneto-one collaboration but multi- enterprise supply chain collaboration. It connects all trading partners to a single ecosystem-from buyers to suppliers, contract manufacturers to logistics carriers. Operating on SAAS model OneSCM helps organizations to manage supply chain operations from procurement through invoicing. The OneSCM process cycle consists of Purchase order review and acknowledgement, Supplier license plate number creation, Advance shipment notification control and communication ,Invoice and payment collaboration and reconciliation, Material requirements planning collaboration, Auto-requisition/purchase order creation, Drop ship order management, Supplier non-conformance collaboration. OneSCM currently delivers the following supply chain components Procure-to-Pay (P2P), Order-to-Cash (O2C), Accounts Payable Automation, Accounts Receivable Automation. Improving visibility: TAKE's Mobility and Auto ID application increases visibility across entire supply chain network. In Manual entry of item and shipping data, there is the greater possibility for errors that can lead to manufacturing delays, lost shipments and reduced supply chain visibility. Using radio frequency (RF) devices manufacturers collect data to increase the availability of real-time information on receiving, shipping, manufacturing, and inventory activity. Through automating data capture technology with handheld devices, users can collect data and perform transactions directly on the shop floor, in the warehouse, and on the loading dock. Conclusion: Companies are facing complexity in their supply chains than ever before. Due to increasing customer service needs and rising logistics cost companies are under pressure to improve performance and cut down costs. As a result, a growing number of firms are looking for innovative products and services to increase efficiencies for all areas of their organization. In this context, need for collaboration becomes imperative. When organizations across supply chain collaborate, benefits are enormous; It significantly impact the bottom line by increasing sales, better visibility, better customer service , lowest cost, better returns. This results in better performance, and thus a competitive advantage over other supply chain. References:
1) Kioses, Eleftherios; Pramatari, Katerina; Doukidis, Georgios; and Bardaki, Cleopatra, "Measuring the Business Value of Electronic Supply Chain Collaboration: The Case of Electronic Invoicing" (2007). BLED 2007 Proceedings. Paper 53.

2)

Kampstra, R. P., Ashayeri, J. and Gattorna, J. L. (2006) Realities of supply chain collaboration. The International Journal of Logistics Management (17:3), 312-330 Simatupang, T. M. and Shridharan, R. (2002). The collaborative supply chain. International Journal of Logistics Management, Vol. 13 Lee, H.L. (2000), ``Creating value through supply chain integration'', Supply Chain Management Review, September/ October, 2000.

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Indian Institute of Materials Management

MISSION
To promote professional excellence in materials management towards National Prosperity through sustainable development.

OBJECTIVE
To secure a wider recognition of and promote the importance of efficient materials management in commercial and industrial undertakings. To safe guard and elevate the professional status of individuals engeged in materials management faculty. To constantly impart advanced professional knowledge and thus improve the skill of the person engaged in the materials management function. Propagate and promote among the members strict adherence to IIMM code and ethics.

CODE OF ETHICS
To consider first the total interest of ones organisation in all transactions without impairing the dignity and responsibility of ones office : To buy without prejudice, seeking to obtain the maximum ultimate value for each rupee of expenditure. To subscribe and work for honesty and truth in buying and selling; to denounce all forms and manifestations of commercial bribery and to eschew anti-social practices. To accord a prompt and courteous reception so far as conditions will permit, to all who call up on legitimate business mission. To respect ones obligations and those of ones organisation consistent with good business practices.

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BRANCH NEWS
BANGALORE BRANCH CHANDIGARH BRANCH RAE BARELI BRANCH VISHAKHAPATNAM BRANCH

BANGALORE BRANCH
30.06.2011 : An evening lecture program was organised at Hotel Woodlands Hotel on the topic "Issues and Challenges in Supply Chain Management" by Dr. K.N. Subramanya, Professor-Dept. of industrial Engg. And Management & Director -Administration, R.V. College of Engineering. He highlighted on Emerging Challenges in Supply Management in today's economy.

August 2011 at Hotel Lalit Ashok, Bangalore and IIMM IDOL competition. Mr. D. Subramani, Branch Secretary, proposed vote of thanks. The programme was very interesting with lively interactions by participants with the Speaker. 7-8.07.2011 : Two days workshop on "Negotiation" based on Modular Learning Systems, ITC UNCTAD/WTO was organised at Hotel Royal Orchid Central. Workshop was handled by the Sr. Faculty and Trained, and certified by MLS,ITC.The interaction and feedback was extremely encouraging which was attended by delegates. ---------------------------------------------------------------------------

CHANDIGARH BRANCH

Mr. K. Ramprakash, Faculty, Handling the Session

Sh. V.S. Maniam,Ms. Kamalpreet Kaur, Dr.A.K. Saihjpal & Sh. S.K. Sharma

Mr. D. Subramani, Honorary Secretary, Proposed vote of Thanks Mr. V. Harish, Branch Chairman, welcomed Speaker and Members. Mr. K. Ramprakash, Course Co-ordinator and Executive Committee Member, introduced Speaker. Mr. C.Subbakrishna, Sr. Vice President briefed about forthcoming mega event SCALE 2011 will be held on 20th Materials Management Review

Branch Chairman Dr. A.K. Saihjpal & Speaker Ms. Kamalpreet Kaur with delegates
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IIMM Chandigarh Branch along with Pinnacle Innovative Solutions (PIS) organized two day workshop on Emotional Intelligence for IIMM students. Branch Chairman Dr. A.K. Saihjpal inaugurated the session. Ms. Kamalpreet Kaur was the speaker for the technical session. Mr. S.K. Sharma, Former National President of IIMM & Mr. V.S. Maniam Hony. Secretary of IIMM Chandigarh Branch made efforts for the success of workshop. It was a new experiment & participants were able to identify their personal traits like Self Awareness, Self Management, Social Awareness & Relationship Management. All the participants appreciated the workshop & certificates are also distributed. Hony Secretary Mr. V.S.Maniam concluded programme with Vote of Thanks. ---------------------------------------------------------------------------

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Executive Committee Member Mr. P.K. Bhui Executive Committee Member Mr. G.P. Singh Executive Committee Member Mr. Ashish Kumar Executive Committee Member Mr. Vikram Yadav

RAEBARELI BRANCH
Minutes of AGM-2010-2011 held on 10th July at RaebareliBranch : The Annual General Meeting (AGM) of Indian Institute of Materials Management (IIMM) Raebareli Branch Held on 10th July 2011 at 7.30 PM in Saras Hotel Civil Lines Raebareli in the chairmanship of Mr. V.V. Chaturvedi and in the presence of National President, IIMM, Mr. Suresh Kumar Sharma. The entire executive committee and most of members of IIMM Raebareli Br. were present in the meeting. First of all, Hon. Secretary of branch, Dr. A.K. Singh called the AGM 2010-11 in order and mentioned about the previous AGM 2009 held on 29th August 2009 at Hotel Angan Civil Lines Raebareli. Following activities had been done. 1. 2. The Minutes of the last AGM were read and approved unanimously. Dr. A.K. Singh requested Hon. Treasurer of the branch Mr. B.K. Pandey to read the audited report of our national auditor deputed by IIMM NHQ-Navi Mumbai for Balancesheet as on date 31.03.2011 which was proposed by Mr. R.S. Shukla and confirmed by Mr. S.C. Shukla and was approved unanimously. Dr. A.K. Singh requested to Chairman of IIMM, Mr. V.V. Chaturvedi to address the branchs Members. After the Chairman address Dr. A.K. Singh requested to Senior & Distinguished Member of IIMM, Advisor of Delhi and Raebareli and presiding officer Mr. S.C. Chaturvedi to conduct the election of office bearer of the branch for the year 2011-2013. After going through valid nominations received, Mr. S.C. Chaturvedi announced unanimously the election of following office bearer. Chairman Mr. S.K. Bandopadhyay Vice Chairman Dr. A.K. Singh Hon Secretary Mr. B.K. Pandey Hon Treasurer Mr. Rajesh Pathania Executive Council Member Mr. V.V. Chaturvedi Executive Council Member Mr. V.K. Pandey Executive Council Member Mr. Harendra Kumar
August 2011

In the address of Members Mr. S.C. Chaturvedi made the following suggestions, which were accepted unanimously. (i) Mr. A.K. Sharma & Dr. B.D. Singh, both Ex-Chairman of branch would be helping the branch when and as required. (ii) Mr. S.C. Shukla would be chief coordinator as well as course coordinator for the year 2011 to 2013 as prior. (iii) Mr. V.V. Chaturvedi, the out going Chairman of the branch, strongly suggested that as per our past practice, Mr. S.C. Chaturvedi, the distinguished member IIMM & Chief advisor of IIMM Raebareli branch would be continue Chief Advisor of Branch for the year 2011-2013 which was accepted unanimously with voice vote. (iv) Mr. V.V. Chaturvedi also thanked Mr. S.C. Chaturvedi that even at such an old age he had been giving tremendous support to the branch for its various activities. (v) Mr. S.K. Bandopadhyay had extended the vote of thanks to all the members for their presence in the AGM. (vi) Meeting was ended with dinner. Northern Region Conference at Raebareli-Branch Indian Institute of Materials Management Raebareli Branch has conducted Northern Region Conference on Competitive Advantage through lean supply chain on July 10th , 2011 at Hotel Saras Civil Lines Raebareli. This conference was attended by the 175 participants from the various part of country.

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The conference was organised in the Chairmanship of National President of IIMM, Mr. Suresh Kumar Sharma. Chief Guest of conference was Lt. General B.S. Sisodia AVSM, VSM, presently member Armed forces Tribunal, Lucknow Bench, Lucknow, Former Director General Ordance Services and Senior Colonel Commandant. In his address Mr. Suresh Kumar Sharma described the National & International activities done by Institute as well as about the future of IIMM. Materials Management Review

and presided the conference. Bouquets and mementoes were given to all VIPS come from different branches, NHQ , many organisations. Chief coordinator of conference Mr. S.C. Chaturvedi has awarded some important dignitaries who had done something special in their areas like best young materials Manager, Best students, Best Industry, life time Achievement awards etc. National President of IIMM Mr. Suresh Kumar Sharma awarded Gold Medal to Mr. V.V. Chaturvedi, Mr. S.C. Shukla, Mr. R.S. Shukla and Mr. S.C. Chaturvedi for the out standing performance of Institute.

Mr. V.V. Chaturvedi the Chairman of Raebareli Branch welcomed to all participants and brief about the branch activities. He also told about the strength of Members which is about more than two hundred in this year. Chief Guest Lt. Gen. Sisodia emphasized on personal discipline to build the great nation. The conference was addressed by Many diginitaries of IIMM & eminent speakers, Among them the speech of Mr. M.K. Bhardwaj, Mr. S.K. Sharma & V.K. Jain all Ex National President of IIMM was appreciated very much by the participants. Mr. H.K. Sharma, Chairman IIMM Delhi Branch and Mr. O.P. Longia, Vice President (North) expressed their views on subjects in very interesting manners. Mr. O.P. Longia described about the progress of branches situated in Northern Region of the country, Mrs. Meena Singh, a student of Raebareli branch also shared her views. Vote of thanks was extended by Mr. Sapan Kumar Baudopadhyay, National council Member of IIMM. The conference was organised in very cordial atmosphere, the entire air cooled conference hall was full of participants. The conference was grand success. High tea and Lunch provided by the staff of Hotel Saras was appreciated by the participants. ---------------------------------------------------------------------------

VISHAKHAPATNAM BRANCH
Material Management Day Programmes : A series of Materials Management Day Programmes were organised by IIMM, Visakhapatnam branch on 22 to 24 Apr 2011. The details are as follows:-

Mr. S.C. Chaturvedi, distinguished member of IIMM and chief advisor of Delhi and Raebareli branch was the master of ceremony who has come all the way from Delhi Materials Management Review
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Karnataka State Open University as well as announcement of Diploma in MLS-SCM by ITC. Mr. AV Rajendra Kumar, Secretary proposed vote of thanks. Local TV channels as well as local and national newspapers have taken note of IIMM activities in their publications. QUIZ COMPETITION. : A Quiz Competition was organised on 24 Apr 2011 : covering the topics of general management and supply chain management area. Mr. JC Narayannapa was the Quiz Master. The programme was quit interesting and all members enjoyed it. Ms Sweta won the first prize and Mr. Hitesh Kumar Joshi won the second prize. GUEST LECTURE ON THE THEME OF MM DAY : A Guest lecture was organised at Seminar Hall at ICWAI Bhavan on the theme "Contain Inflation-Optimise Supply Chain" on 24 Apr 2011 at 1700 hrs. Around 80 members and students of IIMM participated. Secretary, IIMM, Visakhapatnam branch Shri AV Rajendra Kumar welcomed all. Mr. B Durga Prasad, NC Member, IIMM give brief details of IIMM, Visakhapatnam activities. He stirred the Members to create leaner supply chain management by examining each area of supply chain of the company. Supply Chain Managers can achieve these by choosing the right and reliable sources of supply that can provide quality products at optimum costs within shortest possible delivery. Mr. D Ramana Murthy, Dy FA & CAO, Visakhapatna Port Trust and Secy, ICWAI explained the members the financial aspect of inflation. He expressed the demand pull theory of inflation and expressed his most concerned about the non food manufacturing inflation which has gone up to more than 6%. Chief Guest Shri JC Narayanappa, Addl GM(Contracts & Materials), NTPC, Visakhapatnam and NC Member of IIMM expressed serious concern over use of import as substitute for containing inflation as it can hamper growth of the nation. He told Supply Chain Managers to take reducing cost as a challenge and achieve efficient procurement outcome. PRESS BRIEF:- A press brief organised at 0900 hrs. 22 Apr 2011. : Atleast 30 TV media and Print media have recorded their presence and take the note of IIMM activities in the Visakhapatnam. Mr. Hitesh Kumar Joshi welcomed all dignities as well as media personnel. Mr. JC Narayannapa, Addl GM (Materials and Contracts), NTPC(Simhadri) and NC Member of IIMM briefed the media about role and functions of IIMM. He also explained the importance of Materials Management Day and its celebrations by IIMM at all branches. Mr. B Durga Prasad, NC Member, IIMM briefed the medial personnel about branch activities and achievements of branch. Mr. S Prabhakara Rao, Member, Board of Studies, IIMM briefed about the educational activities of IIMM as well as announce the MBA in Supply Chain Management by IIMM in collaboration with
52 August 2011

He also emphasized on adoption of latest technology and processes which can certainly enhance the productivity and optimize supply chain to achieve overall objective to contain inflation. The Guest lecture was quite interesting through his own examples and experience. He called on Supply chain Managers to take the lead. The programme followed with Branch awards. Mr. Hitesh Kumar Joshi gave presentation on new international course MLS-SCM introductory offer. The programme followed by filicitation to Sri S. Vinayak, Course co-ordinator, Vizag branch. Then, Mr. Hitesh Kumar Joshi proposed Vote of Thanks to all and the programme concluded with dinner with new desire amongst members to contain inflation.

Materials Management Review

IIMM - IDOL 2011 CONTEST

IIMM ANNOUCES FOR SCM PROFESSIONALS TO PARTICIPATE IN IIMM-IDOL 2011 CONTEST Ultimate Knowledge in SCM

IIMM initiated this contest in the year 2010 to unearth the hidden talent on a continuous basis by conducting an enterprising and exciting event called IIMM IDOL. The event will be conducted in two phases. The initial part will be held at respective IIMM Branches, which is called Intermediate Level. The second part is known as Final Level, which will be conducted at Bangalore.

The contest is open to all IIMM Members. Non-members can also participate. However, if they are successful they should become members immediately before they their name is sponsored for finals.
1. 2. 3. Should have minimum 10 years experience. Should be working in the arena of Supply Chain Domain at the time of registration. Entry fee of Rs.500/- to be paid by DD or Cheque to the IIMM along with the entry form.

The contestants will be tested in the various rounds like Quiz on SCM, objective and descriptive written test, Case Study Solutions, Crossword Puzzle, Extempore Talk on professional affairs, Role Play, Designing Formats, Knowledge on Current Business Affairs etc. The fulcrum of IIMM IDOL Contest will be played on with the entire gamut of Supply Chain Management Subjects with above mentioned rounds. Branch Level winners at the Intermediate phase will participate in Final Round at Bangalore. The winner of IIMM IDOL 2011 can walk away with a coveted and the most prestigious Trophy & Cash Prize of Rs.25,000/-. The Runner Up can take home a Cash Prize of Rs.10,000/- with a Trophy. All the Contestants will get Participation Certificate. This will be one more credential in your CV. DATE AND PLACE OF INITIAL PHASE AT BRANCH LEVEL : 7th August, 2011 DATE & PLACE OF FINAL PHASE : 19th August, 2011 at 11.00 am

Venue

: The Atria Hotel, # 1, Palace Road, Bangalore 560001

THE DECISION OF IIMM IDOL COMMITTEE SHALL BE FINAL WITH RESPECT TO SELECTION OF CANDIDATES, THE PROCESS AND THE FINAL RESULT.

The Branch participants can register for SCALE 2011 at a Concessional Delegate Fee of Rs.2,000 per head

Cash Prizes & Trophies

For any clarification, please contact Mr. C. Subbakrishna, Sr. Vice President, Cell: 98459 64929 e-mail : srvp.iimm@yahoo.com, csubbakrishna@yahoo.co.in

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E X E C U T I V E
Health Tips
High salt diet lowers heart disease risk Doctors have been telling us for long that too much salt is bad for our health. However, the controversial results of an eight-year study by Belgium scientists have suggested that eating a diet high in salt is not only good for you, but could also reduce the risk of dying from a heart attack or a stroke. "The study indicates that those who eat the least sodium - about one teaspoon a day - don't show any health advantage over those who eat the most," reports the Daily Mail. In fact, those with less salty diets actually had slightly higher death rates from heart disease . The study, which followed 3,681 healthy European men and women aged 60 or younger, also found that aboveaverage salt intake did not appear to increase the danger of developing high blood pressure. Sodium was measured in the urine of those taking part, at the beginning and end of the study. A little more than six per cent of the participants suffered a heart attack, a stroke or some other cardiovascular emergency during the eight years. About a third of these were fatal. Those who consumed the least salt had a 56 per cent higher risk of death from a heart attack or stroke compared with those who consumed the most. This was even after obesity, cholesterol levels, smoking, diabetes and other risk factors were taken into account. There were 50 deaths in the third of participants with the lowest salt consumption, 24 in the third with medium intake and just ten deaths in those with the highest salt levels. Lead researcher Jan Staessen, head of the hypertension laboratory at the University of Leuven, in Belgium, said, "Our findings do not support a generalised reduction of salt intake in the population." The scientists, however, did not have a firm explanation for their results, but they reportedly speculated that low levels of salt in the body could cause more stress in the nervous system, decrease sensitivity to insulin and affect hormones that control blood pressure and sodium absorption. The findings appear in the latest issue of the Journal of the American Medical Association . The truth about sugar Sugar has earned a bad reputation as it is linked to various diseases like diabetes, obesity, heart disease

H E A L T H

and cancer. The truth is that sugar is not only important for your body, it is also important for your life. However, it is important to understand what kind of sugar is good for you and what is not. Understanding sugar The sugar sold in grocery stores is an unnatural substance, i.e. it is produced by industrial processes mostly from sugar cane or sugar beets. It is refined with chemicals such as sulphur dioxide, phosphoric acid, calcium hydroxide, and activated carbon, and stripped of all the natural nutrition it originally had. By refining it down to sucrose and stripping away the vitamins, minerals, proteins, enzymes and other beneficial nutrients, what is left is a concentrated unnatural substance that the human body is not able to handle, let alone use. Sugar plays a major role in altering one's mood. Refined sugar has a chemical reaction on the brain by releasing serotonin - the 'feel good' hormone; this tricks the body into a temporary high, causing a rise in blood glucose levels. This 'feel good' lift is followed by the crash where you feel tired, irritable and even depressed. So what's good for you? Intrinsic sugars are natural sugars found in fruits and vegetables. These sugars are not harmful to your health nor are they fattening. Natural sugars found in honey, fruits and vegetables are unprocessed and therefore rich in fibre and nutrients. A diet high in fruits and vegetables will ensure that your body gets the small amounts of sugar it needs, while providing you with far more health benefits than refined sugar. Black tea is as healthy as green tea It might be virtuous and exotic, but buying expensive green tea for its health-boosting properties may be a waste of money, according to a new study. The study says a mug of bog-standard black tea with a splash of milk is just as good for both your heart and circulation. The claim comes in a review of the health properties of green and black tea commissioned by the industry's Tea Advisory Panel. Dr Carrie Ruxton, a freelance dietician, said that just like the green variety, black tea has been shown to reduce the risk of cancer, stroke, diabetes and tooth decay. Studies that have looked at both types of tea have confirmed similar improvements in vascular function when black or green teas are drunk, leading to significant reductions in stroke risk, the Daily Mail quoted her as saying.

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Ruxton concluded that black and green tea, which both come from the plant camellia sinensis and contain similar compounds, offered the same health benefits. In 2001, a review of 17 studies concluded that the risk of heart attacks was 11 per cent lower, on average, when people drank three cups of black tea each day. Black tea continues to demonstrate a whole host of health-giving properties. Black tea is the new green for those in the know, said Dr Catherine Hood from the Tea Advisory Panel. The finding appears in the journal Network Health Dieticians. Foods you shouldn't eat daily While you may be making the utmost effort to eat healthy for the majority of your day, it is possible that there are the small daily mistakes you maybe making in your diet, which make weight loss, or weight management more difficult and a slower process than it should be. Sometimes it is these innocuous morsels of food that make a big difference when it comes to proper weight management. So what are these foods in your daily diet that you should avoid? 1. Glass of milk - While milk is a healthy addition to your meals, it could possibly be the one food that is hindering your progress. If you are used to having a glass of milk before you sleep, at breakfast, or even for a snack in the evening, take a break from drinking milk for a month. If you feel that its making a difference - making you less sluggish, helping you lose weight, clearing up your skin etc - this maybe the solution to your problems. Give it a go. 2. Something sweet after meals - Many people have this habit of wanting just a little something sweet after every meal. This is absolutely unnecessary and you probably know it. Just that addition of sugar after your meals is worth cutting down on if you have it on a daily basis. Let dessert be a treat you save for the weekends and you will probably savour it more. 3. Heavy carbs for your evening snack - How often have you felt so hungry in the time between your lunch and dinner, that you can eat anything without giving a thought as to whether it is right for you or not? You may land up knocking off a sandwich or a samosa. This may be the only unhealthy addition to your diet in the entire day, but consumed daily, this evening snack could be hindering your efforts. Therefore, carry something that has healthy proteins and fats like nuts, with you so that you don't succumb to hunger. 4. Potatoes - Recently dubbed by a study conducted by Harvard, as one of the foods that definitely makes you gain weight over time, potatoes have a way of turning up in our daily food unannounced. You maybe eating a healthy sabzi but a whole potato may have been added in there to improve the flavour. Fresh veggies taste good on their own if you try, so give it a shot. 5. So called 'healthy snacks' - Baked chakris and chips, all of these so called healthy snacks, should be substituted with real nutritious food. Many people eat
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these unaccounted, thinking they are healthy and will not make a big difference to their health and weight. This is a misconception and you are better off without these highly processed snacks. 10 Exercises to burn 200 calories daily! There is nothing better than being in great physical shape. You look attractive to yourself, and to your partner, not to mention how you light up every party. So look and feel on top of the world by trying out these exercises which will help you burn at least 200 calories daily. Qigong: These exercises involve various breath control techniques, meditation and relaxation. It is similar to pranayama. While doing Qigong , the practitioner spends little energy, but at the end of a session there is profuse perspiration, little elevation in blood pressure, but increased levels of energy. Budokon: If you enjoy yoga but are also in love with the high-intensity kickboxing class across the hall, try a fusion class like Budokon (bu-do-kon) and get hip with the Hollywood crowd. Spinning: This is a relatively new phenomenon, which is performed on a specialised cycling machine. The classes take place in a fitness studio with specialised lights and music that create an upbeat atmosphere. Aerobics: A great form of exercise to fast paced racy music makes you lose enough calories. Whether it is for 45 minutes daily or every three days, there's something about aerobics that will bring a smile on your face. Yoga: Whether it is power yoga, artistic or ashtanga yoga, the lightness of body, serenity and bliss you feel will keep you hooked for ever. You may never want to try out another form of exercise ever. Hooping: A form of aerobic exercise, it uses the hula hoop and has moved from being a toy to being a dance and exercise aid. It is fun, childlike, and meditative, all of which make it good for the spirit. Walking: 20 minutes of brisk walking everyday will make sure you don't put on an ounce of weight. It will keep you in such great shape that you wouldn't ever feel the need to go on a diet! Dance: The best form of exercise, it helps you lose plenty of weight apart from keeping you lithe! US research shows that a vigorous dance class can burn as many calories as a gym workout. Calories danced away per hour: Ballroom: 180-480; Belly dancing: 180-300; Jive/ swing dance: 250-400 Salsa: 400. Jump rope: Single-rope freestyle jump roping is one sport that is increasingly becoming famous among fitness freaks, both as a competitive activity and a way to increase strength, balance and cardio-respiratory endurance. Aero boxing: The workout involves a combination of aerobic exercises with boxing techniques and has been formulated for the first time to help people stay fit. Source : timeswellness.com

Materials Management Review