Vehicle tracking system facilitating Real Time Logistics Management

Vehicle tracking system facilitating Real Time Logistics Management

Third party logistics Companies are under increasing pressure to maintain on time deliveries, reduce inventory levels, reduce ‘in transit shrinkage’ and deliver the right product at the right place and at the right time. And this pressure comes from who else than Retailers who are competing fiercely in the market place to make the product on their shelves  always available to avoid the much dreaded ‘stock out’   condition. Further in the cold chain management scenario, maintaining timings are still more crucial as every product has an expiry date like medicines and edible items and once the expiry dates are over due to delays in transportation, there is a huge loss to all participating partners in the value chain in terms of capital investments, credibility and survival in the cut throat environment in which Retailers and all the the value chain partners are operating.

. After the advent of E-Commerce, there has been a dramatic increase in the use of internet for retail business transactions and so has the pressure on third party logistics gone up to supply the products in rapid time to customers. The customer places an order over the internet and wants the products delivered at his doorstep. Any variability or inconsistency in being able to deliver on time can not only irreparably damage the retailer brand equity, but also often can result in cancellations.

Well, the technology has a solution to all these problems. A real time Logistics information system based on four technologies viz , GPS, GPRS, RFID and internet makes the life simpler to logistics companies providing an end to end tracking of all the assets being moved from manufacturers to warehouses/distribution centers to retailers.

How it is achieved?

1.      Assets are tagged with the help of RFID (Radio frequency identification) tags. An on line inventory for the assets within the truck can be taken with help of a sensor and RFID transceiver mounted inside the truck. The trigger to RFID transceiver and the sensor to scan the RFID tags is provided by opening and closure of the gate of the container/vehicle. An inventory created upon door closure at each delivery location of the vehicle is compared to the last prior inventory, and differences identified by the comparison are matched against a list of cargo units scheduled for removal at that delivery location. Any mismatch identifies cargo units incorrectly handled at that delivery location in time for corrections to be made. This information can be sent to central control center over a GSM or GPRS wireless network. After acquiring the valuable data by the control center, commands can be transmitted through the same route through which data was acquired. The commands could be to raise or lower the temperature inside the reefer containers, trigger alarms, stop engines, change directions or send personal messages.

2.      The asset tracking is done through GPS (Global positioning system) devices mounted in the mobile van. The GPS enabled Track transceiver collects critical data such as location, speed and vehicle and driver information. in terms of longitude and latitude with help of the signals received   from the GPS satellites and such information collected is sent to central computer system through the GPRS (general packet Radio Service ) with the help of medium provided by mobile communication towers in a wireless manner.

3.      By combining GPS information with advanced software applications , managers and dispatchers  can see current locations and routes of mobile resources on an online map, find out when a vehicle travels across a defined perimeter ,view reports on activities such as number of stops, time at each stop, speed, idling time, routes traveled, miles traveled and trailer door open or close.

4.      The movements of these vehicles can be tracked on a Google Map on a laptop/PDA or a mobile phone with help of the web interface   based on the location information thus collected in terms of Latitudes and Longitudes measured and transmitted through GPRS as explained above. 2.Advantage of the web interface is that such tracking can be supervised from any location wherever internet service is available. The customer can, at any time, login through internet, using her order number and view the status of vehicle during transit on the Google map with its expected time of delivery.

5.      A combination of onboard alarms, sensors, wireless monitoring and tracking offers the best available means to respond to cargo theft and security threats while also providing asset management capabilities.

6.      If you’re in the business of transporting high value or high risk cargo, knowing the location of every bag, package, box or pallet is an important business driver, reducing the number of lost or misplaced packages. This improves better inventory control supporting  just-in-time deliveries and ultimately, better customer service.

7.       Access to mission critical data quickly and wirelessly may mean the difference between profit             and   loss for your company. Such solutions open a new world of fleet management that gives the transporter companies the tools to monitor the status and whereabouts of trucks, delivery vans, heavy equipment, leased vehicles and marine vessels. You get a solution that offers a robust communications and position-tracking platform that supports a more productive fleet – whether it’s to improve billable miles or tractor to trailer ratios.            

 Types of vehicle tracking Devices

Several types of Vehicle Tracking devices exist. Typically they are classified as "Passive" and "Active".

"Passive" devices store GPS location, speed, heading and sometimes a trigger event such as key on/off, door open/closed. Once the vehicle returns to a predetermined point, the device is removed and the data downloaded to a computer for evaluation. Passive systems include auto download type that transfer data via wireless download.

"Active" devices also collect the same information but usually transmit the data in real-time via cellular or satellite networks to a computer or data center for evaluation sa explained above and in the diagrams.

Business benefits of Vehicle tracking system

	·         Increased fleet productivity due  to enhanced visibility in the supply process
	·         Details like speed of the vehicle, no. of stops, route taken etc. aid in better employee management and more focused shrinkage management
	·         Hands-on information on position and status of deliveries assist in better fleet management
	·         Waste elimination
	·         Reduced return trips as customer can schedule with the help of exact time of delivery made available to him
	·         The additional facility made available to the customer increases his confidence with the retailer and therefore opens doors to further business thus improving customer metrics by providing your customer with accurate status and location updates. ·         Reward drivers who keep idling and out of route miles to a minimum ·         Minimize losses due to theft or spoilage with onboard sensors that notify you immediately when your assets may become compromised. ·         Optimize asset use through visibility and control supported by real-time position mapping of mobile assets. ·         Remotely manage temperature Conclusion Such real time logistics management system provide logistics manager with complete transparency into their assets and operations, improving fleet performance and reducing costs, On demand access to time- and location-sensitive data, minimizes delays, protects assets and enhances customer service. Further they provide critical security and location information with monitoring, control and reporting capability. Solutions have the capability offering the powerful combination of onboard deterrence and immobilization in addition to instant notification and location monitoring. It effectively reduces risk while also allowing fleet managers to more efficiently operate their fleets..In order to succeed in today's global marketplace, companies must be aware of these trends and develop a logistics management strategy that capitalizes on the best-of-breed technology solutions. Only then, can they meet customer’s demands and be well prepared for the future. Written By Professor Akhil Chandra Institute Of Logistics and Aviation Management

warehouse Robotics

                                                                Warehouse Robotics

Those who have worked in Warehouses would agree that order picking is a monotonous and tiring job day in day out picking merchandize from the storage shelves either manually or through Forklifts. . Basically it involves taking different products in different quantities from different parts of the warehouse and combining them for an order involving   endless walking or travelling on forklifts  and lot of  human efforts.
Imagine if storage shelves would have been mobile and operators were stationery to save endless walking and movements by humans. In such a scenario storage racks would reach the operator themselves with the ordered items readily available to be picked.
This wishful thinking is now a reality and is no longer a figment of imagination or from a fiction book. Automation in many warehouses in U.S. and Europe has reached such a stage where Robots navigate the warehouse to find the storage unit containing the requested items, lifts the unit up by sliding under it, and bring it to a human worker at a work station. Amazing but true, these dedicated, well designed, and efficient workers in form of Robots provide unparalleled improvements in almost every major industry paving a revolution in form of Robotized warehouses.
Simply put, the racks are brought to the human workers and not the other way around. This system eliminates the need for endless walking. Instead of having many workers work on the same order, the such system allows for a single touch approach. With fewer hands used on each order, productivity increases, errors decrease and the work process is streamlined saving also rising manpower costs.


KIVA Systems is a company in U.S. which manufactures and have supplied thousand of  such Robots to  third party distribution centers and warehouses. These warehouse workhorses provide a new way of sorting, storing, and shipping products. 

The whole process operates basically with the help of following constituents.
Robotics
Robots powered by rechargeable lead-acid batteries, are typically 2 feet by 2.5 feet and stand a foot high, with blue running lights on their orange facades. They weigh 250 pounds apiece and can carry four times their weight. The Robots lift loads, called "pods," which look like stacks of shelves, by raising and lowering a platform like a corkscrew, which they accomplish by spinning in place. On the bottoms of the robots are scanners that read stickers affixed to a concrete warehouse floor. The robots navigate around the warehouse using an onboard camera to read barcode stickers on the warehouse floor. The maximum velocity of a robot is 1.3 meters per second. The Control unit of a Robot consists of Programmable Logic Controllers which are capable of issuing instructions to DC Motors mounted on the Robotic platform to provide the mobility to the Robot while the  receiving unit receives digitally coded instructions issued by the Central Computer cluster described below.
Central Computer cluster
This is the main command center and issues directions to Robots to navigate on the floor. Robots continuously communicate their positions to the central computer and are guided by the central computer system.
Wi-Fi communication system

This is used by Robots to communicate  wirelessly with the computer servers that run order-processing software and deliver directions. Conventional Wi-Fi routers, mounted in the warehouse rafters, broker these communications.

Sticker guidence system attached to the floor
Robots are guided by a very simple grid of stickers attached to the floor. . The stickers form a grid that covers the entire robot operating area

Process Functioning

When an order for an item arrives, it is transmitted wirelessly to above stated Robot, which navigates the warehouse to find the storage unit called Pods  containing the requested items, lifts the unit up by sliding under it, and brings it to a human worker at a work station. The worker picks the items needed to fill orders, while the robot returns the storage unit to the warehouse.
Robots hum around the factory floor at the speed of a walking person--3mph--delivering to human packers precisely those items needed to fulfill an order When a Robot sidles up to a human picker, an overhead laser paints a dot on the item on the pod that the human should pick up. An adjacent computer screen flashes the quantity the packer needs to put in a box to fulfill an order.

Automated order picking symphony

The robots navigate the warehouse by pointing cameras at the floor that read two-dimensional bar-coded stickers laid out by hand one meter from each other in a grid.  The robots relay the encoded information wirelessly to the central  computer cluster that functions both as a dispatcher and traffic controller, To fulfil an order, a human operator stands at a pick and pack station on the perimeter of the warehouse.  Robots crisscross the floor. When the robot positions itself in front of a worker, a laser pointer on a metal pole shines a red dot on the product.  Once the worker has retrieved the item, the robot departs and another takes its place.  Workers watch for the laser dot, pick a product, scan its bar code, throw it in a box and start over again.”

Summary

Robotics warehousing has unleashed a revolution in order fulfilment and Automation technology is enabling it.  In response to competitive market pressures for shorter cycle times and greater accuracy, warehouses are increasingly using process control and Automation Technology. Due to clear advantages in terms of cost reduction and improving productivity and safety, Robots shall create a permanent place for themselves in future automated warehouses servicing human beings.

Written by
Professor Akhil Chandra

Global Supply chain management

Importance of Global Supply Chain management for India

With multi brand retailing to open up as promised by prime minister Man Mohan Singh , Retail multinationals like Wal-Mart, Metro and Carrefour are waiting in the wings to enter India in a big way. The topic is quite hot during the incoming visit of American President Barack Obama’s visit to India. Global Supply Chain Management is bound to get utmost attention in our country which is long over due and it would be pertinent to discuss this topic more in detail.

The World is flat

In an era of globalization, global supply chain Management is contributing most significantly towards GDP of every country through enhanced efficiency and productivity of the nations. The world is said to be a global village or rather flat. The national boundaries and barriers have been destroyed through internet and PC driven globalization in today’s knowledge based economy. This was pointed out in a lucid manner by three times winner of the Pulitzer Prize Thomas. L. Friedman in his famous book ‘The World is flat’. In fact global supply chain management coupled with Information technology and telecommunications opened floodgates of progress for developing countries so as to come at par with developed countries.

How Wal-Mart managed it

Company like Wal-Mart applied the rules of Global supply chain Management successfully and rose to become number one company in the world after beating big Conglomerates like K-Mart and Sears in their own game. Wal-Mart chose their suppliers globally from countries like China and Far East and cut down its procurement and manufacturing costs and could sell every item cheaper than their nearest competitor. Wal-Mart carried out computerization with heavy use of ERP (Enterprise Resource planning) software throughout their value chain and shared the customer’s information liberally with their suppliers, distributors and dealers through IT networks resulting into complete transparency throughout their value chain.  The information concerning the buying behaviour of customer, purchase orders, prices and inventory flowed both way along the value chain resulting into reduction of inventory carrying costs both for finished goods and raw material. Wal-Mart could thus supply what customer exactly wanted at the right place, at the right time and at the right price.

With customer centric approach, Wal-Mart set up huge distribution centres in every city where merchandise  in cartons were received from various suppliers chosen globally shipped by sea, Air or Rail Road and trucks  and then unloaded on the network of conveyer belts installed at the distribution centres. The merchandise was redistributed despatching and transporting it once again to the various Malls located throughout the city. The history of content of the cartons was identified by RFID tags with information like country of origin, technical details of the content, source and destination, expiry dates of the goods inside and temperature to be maintained. This enabled the concerned handling staff to properly prioritize the cartons carrying perishable items or items like medicines and deliver it to Malls before the expiry date. This way they could make most of the items including FMCG goods always available on the shelves for the customers who came to Wal-Mart in huge numbers because of lower prices being offered. Wal-Mart was also ahead of their competitors in reducing the lost sales arising due to non availability of goods on the shelves.

Global supply chain management is now imitated by most of the companies in the world after the success story of Wal-Mart who starting from a small place called Bentonville, Arkansas in United States is now world’s largest company in the world with innovative approach of Sam Walton , the man behind the success of Wal-Mart.

Case of Boeing, the Aviation Conglomerate

Today the supply chain is no longer contained within countries borders, but encompasses all nations, whether they are vendors, manufacturers or customers. Boeing which is a premier  Aviation multinational manufacturing aircrafts is able to assemble the  Aircrafts in 3 days flat while outsourcing most of the parts and components from suppliers located far and wide throughput the world. It takes advantage of best of what is available in different countries  in terms of best of research and development facilities, cheap labor, skill set and technology and coordinates its value chain amazingly well to maximize its production delivering aircrafts of topmost quality in an unparalleled innovative approach.

In the past decade China has become a global economic leader and will soon be the world’s largest economy. Economists predict that the few of the current developing nations will be some of the most important economic powers in the next decade practicing global supply chain.

India has opened its economy after 1991 and is now recognised as among fastest developing countries. Goldman Sachs, the leading Investment bank in one of their report has categorised India among the BRIC countries (Brazil, Russia, China and India) , which are to be watched seriously due to their potential of competing with developed countries in next decade. 

Cultural nuances

Further companies will have to give due regards to cultural differences existing in various countries involving social, religious and ethical beliefs prevalent in each country and adjust themselves accordingly. American businesses have sometimes failed in countries such as Japan which has a very difficult business environment to the US. Companies can overcome these barriers by using local agents to sell the products in a foreign nation or by licensing their products. The licensing of a product is sometimes more beneficial as it allows the licensing company to terminate the agreement if the products fails to be marketed or sold appropriately. Joint ventures can also be a way of entering a new market. By using a partner company’s local expertise the product can have a greater opportunity for success.

Global Supply chain respects Green.

Further all over the world there is a growing realization of making world green by avoiding the harmful effects on the environment due to pollution caused on air, water and soil during process of extraction, manufacturing operation, physical distribution and logistics by sea, air, road and rail  and consumption of the end product by consumers. Multinationals all over the world are focussing on Green supply chain management involving negotiating policies with suppliers and customers resulting in better alignment of business processes and principles so as to improve the environment and ecology. Wal-Mart, world’s largest Retailer enforces his suppliers to follow green supply chain policies making it mandatory on his suppliers to revaluate the material content and adopt environmental practices so much so that it refuses to do business with defaulters who do not follow green practices and environmental management systems. Green supply chain management mitigates risks and speeds up innovations. Recently Chinese toys were banned by America including other countries as they were found hazardous to children due to harmful ingredients used in making of the toys. Such risks could have been avoided had the Chinese toy manufacturers studied closely the product life cycle management up to the stage of consumption. In global supply chain management, companies as such can ill afford to ignore green supply chain.

Importance of Infrastructure

Infrastructure in terms of good port facilities both for sea and air route, mobility on roads and good telecommunication infrastructure plays a vital role in handling global supply chain. Wal-Mart used Satellite communication very effectively in terms of VSATs installed in every store in reaching their Chinese and Taiwanese suppliers sharing the information such as inventory, customer’s buying behaviour and Sales data. Apart from that they used ERP software with modules like warehouse management system, transport management system, supplier relationship management and customer relationship management system to name a few. They forced their suppliers to adopt EDI

 (Electronic data Interchange) saving on time and improving responsiveness to the customer’s needs. 

Indian Scenario

Indian business conglomerates are now expanding their operations beyond the frontier of the nation and many like Tatas, Reliance and Bharti Group have taken over foreign companies. In this background of   Indian expansion of trade in foreign countries, Global supply Chain Management shall play a very vital role towards long term sustenance and growth of Indian business. As the global supply chain becomes more complex with every passing year, companies must adapt to this change and incorporate them into their supply chain strategies. This change could mean using vendors from developing nations or exporting goods to new markets. Companies that have traditionally operated within national or regional trading groups may feel ill-equipped to extend their global supply chain. Such closed door operations without knowing what is happening elsewhere in the world can be fatal and even shall be detrimental to their survival if they are unable to select and manage a foreign vendor or not knowing how to sell items in a new country. On the infrastructure front in India so much is happening with improvement of airports at Delhi, Mumbai and Bangalore and Aviation cargo hub at Nagpur and privatisation of sea ports and Rail networks. Telecommunication infrastructure with Wi-Max and 3 G facilities in the country shall improve the connectivity and  solve last mile problems for Logistics 3 PL Companies giving impetus to international connectivity as well. Indian Companies are now more receptive to ERP implementation with companies like SAP, Oracle and the home grown software companies. Time ahead is interesting to watch in India as Indian companies are bound to join global supply chain Conglomerates.  

Written By

Professor Akhil Chandra

Institute of Logistics and Aviation Management

Logistics Management

 Why-Pursue Career in Logistics and Supply Chain Management

Logistics and Supply Chain management is a topic which now no Company can ignore as this directly effects every Company’s revenue by improving its  Efficiencies and its higher profits by reducing operational costs involved in manufacturing, transportation and Warehousing inventory releasing precious working capital for other future investments for owners and shareholders of the Company.

The topic is common to all type of industries, whether textile, FMCG, Pharma , telecommunications, retail or Infrastructure verticals. You name the industry and Logistics and Supply Chain Management is there since it touches all the verticals and Domains horizontally. The subject is now a Board level topic and offers enormous growth potential to executives who get stuck up in the middle management drudgery of the specialists and reach saturation in their career early. The course is ideal for Entrepreneurs too who want to make big in life. New mushrooming domains like retail, ICT and ERP have been especially taken care off.

MBA from Institute of Logistics and Aviation management has specially been designed to the needs of young graduates of all streams. Further the course content with emphasis on macro level exposure and yet offering specialized working knowledge through the faculties with practical experience   from the industry is tailor-made    for young executives of all segments of industry.

The course fee has been made affordable. Teaching methodology is through ‘out of box’ approach with Case Studies, Blogs, On line submissions,Guest lectures and work-shops etc.

Well, opportunities in a globalized environment in India with cut throat competition are enormous and it is up-to the initiatives and pro-activity of the young generation to take the country to next quantum jump.

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Third Party Logistics

Outsourcing-To be or not to be, that is the question.

Think on the following data!

Eighty per cent of Japan Logistics is handled by  3 PL.

Sixty per cent of Logistics is done by 3PL in U.S. while fifty five per cent of Logistics is done in Europe by 3PL.

Only 10 per cent of Logistics in India is done by 3 PL.

So India has to catch up in a big way to come to the level of developed countries in terms of improvement in Logistics infrastructure and outsourcing through third party logistics and Contract Logistics is a clear road map.

What is Contract Logistics?

Contract logistics is the outsourcing of the distribution function. Contract logistics providers invest in assets, dedicate capacity and personnel, and customize information systems and communications in order to improve the productivity and customer satisfaction of their manufacturing and retailing clients. Successful companies have found that delivering the right products in the right quantity to the right place at the right time and at the right cost is a key differentiator today.

Scenario without Contract Logistics

• Costly Manufacturing space was utilized by stock and stock level were higher now only in supplier’s warehouse
• Excess inventory was lying in the plant.
• Supplier had to set up warehouse near the plant and the cost of operation was higher.
• High cost of obsolescence and high cost of a quality reject was due to desynchronized supply chain and engineering change implementation lead time was high

Benefits through Contract Logistics and 3PL

Logic of outsourcing for manufacturing Enterprise and Retailers  is to concentrate on one’s core competencies and leave distribution function on Contract Logistics players who are specialists in this field and can offer cheaper services as they take benefit of Economies of Scale operations arising due to concentrated capacities offered to many of their customers  in terms of assets and personnel and services..

Outsourcing distribution permits you to get out of the transportation and warehousing businesses altogether, reducing equipment, facilities and personnel, as well as freeing up cash and improving ROI.

 . Logistics providers can and do deliver greater savings and increased efficiencies because distribution is their business. They have greater resources and specialized expertise that is hard to find in-house.  The capacities in area of transportation and Warehousing are optimally utilized and information technology, communication technology and Automation can be carried out seamlessly by one dedicated party deriving the benefits of technology ultimately serving both manufacturers and Retailers in terms of better infrastructure, lesser logistics costs and more trade ultimately leading to better GDP growth. . Logistics providers also build integration economies that in-house transportation departments, no matter how large, can rarely match. Furthermore, the contract ensures that distribution process improvements and the resulting savings will be pursued continuously and single-mindedly automatically.

There are marketing benefits too. You'll never miss a sale again because of "out-of-stocks." Faster distribution means more selling days for retailers. Increased flexibility makes it easier to enter and to supply new markets, and to do so quickly.

Risk management becomes much easier. Outsourcing provides distribution insurance that a manufacturing company cannot secure by itself. Logistics providers have the resources to keep your distribution network running in spite of unexpected disaster, wherever it strikes.

Offerings

Contract Logistics players offer services like door pick up , brokerage , consolidation center , freight management, clearance at destination, deconsolidation center, pull to door through transparency, visibility, seamless communication and ownership among transporters, customs, labor and warehouses, forwarder, steamer agent, Airlines, clearing agent.

Through Optimized inventories, routes and trucks, there is no longer a barrier of loss of control for manufacturers and Retailers. JIT deliveries can be led to the line. 

Conclusion

India's third-party logistics (3PL) market is all set to experience a period of explosive organic growth, a high double-digit growth rates for both outsourced and contract logistics in India. "In addition, strong foreign direct investment inflows (FDI) on various sectors will lead to increased market opportunities for 3PL providers in India meaning thereby that Contract Logistics is here to stay in India and has a bright future.

Written By

Prof. Akhil Chandra

Institute of Logistics and Aviation Management

supply chain risk management

                                         Supply Chain Risk Management

Disasters don’t announce themselves when they come and mostly catch people unaware. This is also true for business organizations causing enormous losses and often organizations perish because they had not carried out their risks and threats analysis when the going was good and the business continuity plan was not put in place judiciously within the organizations.

Impact of external and internals risks have become more pronounced after the globalization and supply chains of organizations now extend beyond the boundary of nations. It is now a flat world’ a word coined by three times Pulitzer award winner Thomas Friedman in his famous book ‘The world is flat’. 

The subject of risk management has become more complex as Enterprises largely do not have their control on their vendors and suppliers downstream in the supply chain.

There are two types of risks, one where company does not have any control and are known as external risks while the other one known as internal risks can be controlled by companies.

External risks can be driven by events either upstream or downstream in the supply chain:

• Demand risks related to unpredictable or misunderstood customer or end-customer demand.

 This requires continuous interactions with the customer by the Sales Team and providing feedback to the Company.

• Supply risks related to any disturbances to the flow of product within your supply chain.

These risks can be mitigated by making the supply chain as agile, responsive and synchronized through use of technology and managerial control by taking care of four parameters viz Quality, efficiency, innovation and responsiveness to customers.

• Environment risks that originate from shocks outside the supply chain.

A disaster recovery and business continuity plan is chalked out by organizations to build back up and  redundancy in the system to minimize damages caused by such environmental risks like earth quakes, Sunami like disasters etc. ONGC has built up their computerized disaster recovery back up between Delhi and Mumbai and have used ICT technology effectively.  

• Business risks related to factors such as suppliers’ financial or management stability.

Multinational companies before choosing their suppliers thoroughly evaluate the internal operations of the suppliers to establish whether they are sound in terms of stable financial and managerial foundation.

• Physical risks related to the condition of a supplier’s physical facilities.

Big Companies do thorough investigations of the physical facilities of their suppliers before zeroing in and have tie ups with them and establish long term relationship with them treating them as partners and do not ditch them. Tatas while planning the supply chain of their NANO car selected a team of dedicated suppliers who were planned to be  physically collocated near their automobile factory and risked even to shift their plant from Singrur to Gujarat and Pant Nagar because they were not ready to locate their suppliers physically distant once Mamta Bannerjee refused to allocate the land to Tata’s suppliers planned to be located in close proximity to the plant.

Having had an overview of external risks, now let us have a look on internal risks.

Internal risks are driven by events within company control:

• Manufacturing risks caused by disruptions of internal operations or processes.

These risks can be minimized by an approach of Total quality management and six sigma  where a dedicated and motivated workforce through use of technology and human resource management create as set up which is not prone to break up in internal operations and processes.

• Business risks caused by changes in key personnel, management, reporting structures, or business processes.

Companies like Maruti Suzuki  have realized the importance of human capital and emphasize on an agile and flexible reporting structure and have the succession plan well in place.

• Planning and control risks caused by inadequate assessment and planning, and ineffective management.

Companies implement renowned ERP software like SAP and Oracle to get the benefit of best practices of enterprises and through seamless flow of information on digitized infrastructure of LAN and WAN minimize such risks.

• Mitigation and contingency risks caused by not putting in place contingencies.

Companies do not hesitate now  in making investments in disaster recovery and business continuity plans through a back up set up which takes over during the fault in main set up.

To effectively evaluate risk strategy and implement supply chain risk management, companies must balance the cost of mitigation with available resources and optimum cost management objectives. The risk management strategy should apply to everyone at all levels in the organization and focus on achieving the company’s business objectives.

Written by Professor Akhil Chandra

Institute of Logistics, supply chain and Aviation management

Goods and service Tax

The proposed Goods and Services Tax (GST), which is slated to be introduced by the Government of India from April 2010, is a part of the tax reforms aimed at putting in place an efficient and harmonized consumption tax system in the country, in opposition to, and replacing the multiple taxes currently in place.

World over, goods and services attract the same rate of tax. That is the foundation of a GST. The GST is proposed as a comprehensive indirect tax on manufacture, sale and consumption of goods and services nationally. It would result in India having a tax system at par with rest of the world and also help improve tax collections. It is also supposed to bring an end to distortions of differential treatments to manufacturing and service sector. It would lead to an abolition of taxes such as Octroi, Central sales tax, State level sales tax, entry tax, stamp duty, telecom licence fees, turnover tax, tax on consumption or sale of electricity, taxes on transportation of goods and services and multiple taxation in the country. GST will facilitate seamless credit across the entire supply chain and across all states under a common tax base.

According to the 13th Finance Commission Chairman Mr. Vijay Kelkar, the GST will reduce manufacturing cost and benefit end-customers. The implementation of the tax would also result in Indian manufacturing sector being globally competitive. It would also promote the entrepreneurial initiatives and economic activity on the whole.



Challenges Ahead



The dual GST model proposed for India comprises of Central GST and State GST being administered simultaneously on supply of goods and services. In its wake, Government has several challenges to tackle.



Legislative challenge will be the first to surface because of India’s federal structure where by, states have autonomy to collect taxes. Industry experts feel that a common GST is the need of the hour to curb the possibility of different States, especially with a dissenting political party, enacting different Acts as per their whims and fancies.



Revenue Sharing: States need revenue, and new tax regime has to ensure that states get their requisite revenue to prove successful. With the growth of economy, the need for revenue would be constantly on the rise and the Central Government will have to do a balancing act between the revenue-rich States and revenue-low States by properly sharing the revenue as per their needs.



Strong Credit Mechanism: The success of dual GST model will depend on effective credit mechanism to avoid cascading effect of multi-stage taxation in the supply chain. The credit mechanism is the lifeline of GST. Industry experts also feel that in order for the GST to successfully make India an economic ‘union’, the credit mechanism must be streamlined without the federal structure proving to be a hindrance.



Impact on Logistics Industry



The introduction of GST in India would mean that manufactures will now base their logistics decisions on operational efficiency instead of tax optimization. It will enable manufacturers and 3PLs to set-up and position their warehouses and distribution channels based on the considerations of time, cost and logic, in contrast to the present when in order to save on Central Sales Tax (CST), manufacturers had to maintain warehouses at multiple locations to show movement of goods from one warehouse to another.



GST will also have a direct positive impact on the business of logistics providers since manufacturers will now be encouraged to outsource their logistics and supply chain operations.



The Government’s proposed initiative of providing tax benefits to companies investing in warehousing for agricultural produce or in cold chain infrastructure is a positive move, being welcomed by the Logistics industry. This will result in an exponential growth of warehousing business, as well as fuel the faster growth of the entire supply chain and logistics sector.



The roadmap for GST as provided by the Government, looks promising for the sector, and the economy as a whole. With the high current growth rate of the Logistics industry, and expected exponential growth of this sector, it is certain that this sector will play a significant role in the economic development of India.