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2007- The Year that was from a India Supply Chain standpoint December 31, 2007

Posted by Ramnath Rangaswamy in Blogroll, Business, Emerging Markets, India, Indian Economy, Logistics, Supply Chain.
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untitled2.jpg 2007 is coming to an end! As the last post for the year 2007, I will pen my thoughts about how I will remember this year from a supply chain standpoint.

The year that was- 2007

This is the year when India signed the Trans-Asian Railway agreement in June 2007. Private train operators completed a full year of operations.

Modern retail chains, like Big Bazaar and Reliance Retail began making their presence felt in India. Reliance Fresh stores were sprouting and many of them were closed, because of protests.

India was ranked 39th as per the world bank LPI rating . I would like to see India improve it’s rank.

My most memorable supply chain events for 2007 are Maersk exporting banana’s from India and the Hutch to Vodafone conversion.

book.jpg The best Supply Chain book I read in 2007 was on supply chain was Supply Chain Redesign by Robert B. Handfield, Ernest L. Nichols Jr.

What are my wishes for 2008

In 2008 I would like to see more companies begin to think of supply chain as a key competitive advantage. I would like to see them use S&OP processes in India, drive waste out of the supply chain and increasing capability of the supply chain team members in organizations.

I would like to see more supply chain articles appear in the newspapers and magazines.

Wish you all a Very Happy, Prosperous and Sucessful 2008!

To quote the Thirukural, on the passage of time,

“Though it seems a harmless gauge of time, a day [ or in this case a year],
To those who fathom its form, is a saw steadily cutting the tree of life.”

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Trans-Asian Railways [TAR] December 27, 2007

Posted by Ramnath Rangaswamy in Blogroll, Business, Emerging Markets, India, Indian Economy, Logistics, Railways, Supply Chain.
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I just happened to read about the Pan -Asian Railway line,or Trans Asian Railway [TAR} as it is called as it was celebrating 50 years of it’s being envisaged. It made interesting reading, because it was a deadly mix of two of my favourite topics -railways and supply-chain!

The Pan-Asian Railway was envisaged to connect Asia to Europe by rail. It currently has a total length of rail line is 81000kms across 4 gauges. 4 trial runs have been made with container loads.

Currently, all freight traffic originating from Asia destined for Europe goes by sea. The TAR will enable containers from Singapore, China, Vietnam, Cambodia, India, Bangladesh, Myanmar, Thailand, Korea to travel all the way to Europe over land by train. This provides an alternate mode of freight movement and will be a competitor to sea-freight and shipping.

TAR Corridors
There are 4 lines or corridors that have been identified.

  • Northern corridor: This connects Korea to Europe via Russia, Mangolia, China and Kazhakistan. The container traffic would originate from Pusan, Tianjin, Hong Kong, Shenzen, Nakhoda and Rajin for destinations in Europe.
  • Southern corridor: This is the corridor which is of significant importance to India. It connects Yunan In China and Thailand with Europe via Turkey. The line passes through the infamous death railway from Kanchanaburi to Nam Tok, Myanmar, India, Bangladesh, India again, Pakistan, Iran and then Turkey.
  • ASEAN corridor: Connecting Singapore, Malaysia, Vietnam, Cambodia, Indonesia, China, Laos, Thailand and Myanmar. This corridor would connect Singapore to China and would also link ASEAN to Europe via the Southern corridor.
  • North-South corridor. Linking Northern Europe to the Persian Gulf via Russia, Iran and the Central Asian Republics.

Map of the Trans Asian Railways
tar_1.jpg
Routes in the Southern corridor

The Southern Corridor has 2 routes one of which is ;
Route 1
CHINA:
Kunming-Dali-Xiaguan-Ruili-MYANMAR: Mu-se-Lashio-Mandalay-Tamu- INDIA: Imphal-Silchar-Mahisasan- BANGLADESH: Shahbazpur- Kulaura- Tongi-Tangail-Darsana- INDIA: Gede- Attari- PAKISTAN: Wagah-Lahore-Raiwind-Khanewal-Lodhran- Rohri-Sukkur- Jacobabad-Spezand- Nokhundi-Koh i Taftan- IRAN: Zahedan-Kerman-Bafq-Qom-Tehran-Razi- TURKEY: Kapicoy-Van-Malatya- Cetinkaya- Ankara- Haydarpasa- Istanbul- Kapikule- BULGARIA: Svilengrad and onwards to Romania, Hungary and Austria.

From Kapikule, the corridor would allow access to Western Europe via Bulgaria, Romania, Hungary and Austria. From Kunming to Kapikule, it would have a total length of 11,700 km of which 9,790 km (or 84 per cent) is in place, 95 km (1 percent) comprises ferry links, and 1,820 km (15 per cent) would need to be constructed, most of it through difficult mountainous terrain. This line passes has 3 gauges and 5 inter-gauge transfers.

Route 2
The next route would be THAILAND: Bangkok [ which is linked to Singapore via Hatyai-Pedang Besar/ Sungei Kolok-Butterworth-Gemas-Johor Baru]- Kanchanaburi-Nam Tok- Three Pagoda Pass-MYANMAR: Thanbyuzayat-Mawlamyaing-Moktama-Bago-Mandalay to join the above route. An alternate alignment is Nam Tok-Ban Bong Tee-Dawei-Ye-Thanbyuzayat

Missing Links in the Southern corridor
Nam-Tok [ Nam Tok is the last stop on the”Bridge on the River Kwai” line. 3 years back I took the morning train from Bangkok, which passes Kanchanaburi, then goes over the “bridge on the river Kwai” and passes through some breathtaking viaducts to reach Nam-Tok, which is the end of the line] in Thailand to Three Pagoda Pass to Thambyuzayat in Myanmar. The alternate route Nam-Tok-Ban Bong Tee to Dawei is also missing.

Between Mawlangyiang and Moktama there is a missing crossing on Thanlwin river, 4kms wide.

Kalay to Tamu in Myanmar. From Tamu the line would move to Imphal on the same alignment as highway 39 then westerly to Jiribam along highway 53, crossing into Bangladesh at Mahisasan.

In Iran between Zahedan to Kareman. there is a missing link of 550kms, which is under construction.IRCON [ Indian Railways Construction Company was given the contract to lay the signaling on this line]

For traffic originating from Kunming the Northern corridor is shorter and involves fewer border crossing 4 vs 7 and fewer break of gauge Also the Northern corridor is complete while the Southern corridor has missing links.

Issues to be sorted before the TAR becomes a reality and commercially viable
Issues that have to be resolved are (i)gaps in the network (ii) change of gauge, (iii) border crossing procedures and (iv) technical issues like axle loading, maximum moving dimensions and (v) commercial issues like pricing, linkages with freight forwarders.

To compete with shipping the Railways will have to ensure that the transit times offered by rail is lower than shipping. To poach business from shipping the transit time difference between shipping and railways for containers originating from Singapore or China should be at least 5- 7 days.

The Railways will have to offer a lower price than shipping. For this to happen the Railways will have to adopt commercial costing methods. Currently Railways price their services based on government policies, subsidies and other criteria which has little relation to the cost of transporting the goods.

The process and procedure at the break of gauge has to be streamlined so that they do not become bottlenecks. Similarly, customs procedures should be coordinated with customs authorities so that time spent at border crossings is minimal.

Impact for India
Go West
From India shipping distance from Delhi to Rotterdam will be reduced by approximately 3500kms by using rail instead of shipping. Between India and Netherlands there would be only one change of gauge at Zahedan on the Iran – Pakistan border. Between India and the EU it will have to cross 4 borders – India-Pakistan, Pakistan-Iran, Iran-Turkey, Turkey-EU [Bulgaria]. Transportation by rail will be shorter if the destination is Eastern Europe, Central Europe and Germany.

Look East
On the link to ASEAN the issue are many more missing link Silchar to Tamu to Kalay, Thambyzayat (or Dawei – Ba Bong Tee-Nam Tok) to Nam Tok and a bridge across the Thanlwin river between Mawlangyiang and Moktama.

The rail link will ease the pressure on the Indian Ports, which are already bottlenecks in the export supply chain.

Let us see when and how the rail link to Europe becomes a reality.

Currently, it takes 15 days for a container to travel 11700kms from Mumbai to Roterrdam by ship and 8 days by train from Mumbai to Delhi- a distance of 1500kms !

GMP and the Warehousing (Development and Regulation) Authority December 10, 2007

Posted by Ramnath Rangaswamy in Blogroll, Business, Emerging Markets, India, Indian Economy, Logistics, Supply Chain.
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untitled1.jpg

The Warehousing ( Regulation and Development) Bill, 2005 seeks to establish a Warehousing Development and Regulation Authority, similar to Director General Civil Aviation or TRAI.
That got me thinking about the need for a Warehousing Development and Regulation Authority? Why should there be a Warehousing Development and Regulation Authority? What would be it’s role and responsibility? This is like similar to setting up a Software Development and Regulation Authority!

After all market forces dictate the price, quality and other parameters of warehouses.

There are global standards in warehousing, the most well known being the GMP [ Good Manufacturing Practices].

What is GMP?
GMP stands for Good Manufacturing Practice. These are the global standards for manufacturing, warehousing and transportation. Here, we will talk about GMP for warehousing.

GMP covers all areas of warehousing- design, construction, fire safety, pest control, FIFO, batch control, training of warehouse team, self-inspections, safety in the warehouse, stock counts, shrinkage, truck quality etc.

What is GMP for warehousing?
Warehouse construction
GMP starts from even before you enter your warehouse. How is the approach road? Will the stocks in the truck shake and get damaged even before they reach the warehouse? Will the truck be able to reach the warehouse in the rainy season? Is there garbage outside the warehouse which might create a pest problem? Can the stocks be unloaded without the stocks getting wet in the rain? Do the roofs leak?

Warehouse Safety
Does the warehouse have sufficient safety against a fire? Are there sprinklers? Are there sufficient fire extinguishers? Is the warehouse team trained on handling fires? Is there a first aid box? Is there a first-aid team?

Pest Control
Is there a effective pest control is place? Is there evidence of pest ingress? Are the windows sealed to prevent birds from coming in?

Warehouse Stock Release
Is FIFO followed? What processes are in place to enable FIFO? Is there a process to track batches, especially for food and drugs?

Training
Are the warehouse teams well trained on the jobs they are supposed to do? How often do they get refresher trainings?

Are the teams trained in safety? Are there operators given regular refresher trainings in handling forklifts, high reach trucks?

Trucks/ Transportation
Are trucks inspected for leakages? Are they inspected for damaged flooring, nails and screws protruding out, which could damage the product?

What is the benefit for a company on following GMP standards?
Following FIFO and batch control reduces the cost of obsolescence. Ensuring effective pest control ensures that consumers get quality products, especially in the case of food and drugs.

This ensure that the consumer gets a quality product. Else, you could get worms in your chocolate or a cockroach in your aerated drink

A GMP warehouse can lead to better customer satisfaction. In the company I worked for, we took our distributors/stockists and retailers on a tour of our depot and DC. We explained to them the processes and care we took to handle the products we sold them. The distributors/stockists and retailers were impressed with the cleanliness and appearance of the warehouse, the care we took of the products we sold them, the FIFO process and the batch traceability. After the visit, product complaints from retailers and stockists reduced, we got requests from stockists to train them on warehousing/ FIFO and best of all, in the yearly customer satisfaction survey, in which we survey retailers, our scores went up!

For the warehouse operator, GMP standards could be a minimum standard. In India where warehousing quality is abysmal and dismal [ there are exceptions, of course] , warehouse rentals could have an incentive components linked to the GMP rating achieved.

What’s in it for the consumer? GMP is a basic minimum standard to ensure your consumer gets the right quality product. It could be a mater of survival!

“Customers today want the very most and the very best for the very least amount of money, and on the best terms.
Only the individuals and companies that provide absolutely excellent products and services at absolutely excellent prices will survive.”
Unknown

Kolkata Port congestion December 6, 2007

Posted by Ramnath Rangaswamy in Business, Emerging Markets, India, Indian Economy, Logistics, Supply Chain.
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untitled.jpgThere was this news item about vessels which planned to skip Kolkata Port [ Kidderpore Dock System KDS] and unload their containers at Haldia. This was because of congestion at Kolkata Port due to slow rate of unloading and loading of containers at the terminal. This was because of the equipment at the Ports.

It is known that as India’s economy has grown. Hence the number of containers flowing through all the ports in India has increased and continues to increase.

Loading and Unloading Issues
Kolkata Port witnessed an increase of 9.58% in TEUs this year versus last year. Kolkata Port unloads containers at an average rate of 1000 TEUs per day [ assuming a 35.48% Idle Time; as per http://www.kolkataporttrust.gov.in . A post -Panamax ship carries about 5000 TEUs and this means 5 days of unloading at the Port.

Contrast this with JNPT in the Mumbai Area, [ Jawaharlal Nehru Port Trust, http://www.jnport.gov.in]] which handled ~360000 TEUs in October 2007, with 3 berths which translates to 4000 TEUs per day per berth! [ assuming By the way, JNPT can handle Super Post-Panamax container ships with ~100000 TEUs capacity.

Any decent port [ example, Karachi] having 4 quay side cranes, assuming a very modest 20 container moves per hour and assuming 20hours of work per day, can handle 1600 TEUs per day. [ 4 cranes x 20 container moves per hour x 20 hours per day = 1600 TEUs per day]. Thus a post-Panamax vessel gets unloaded in 3 days.

So, low quay-side productivity could be one reason for the Port congestion.

Systemic and Comprehensive View

However, to solve the problem, a comprehensive and systemic view of the problem has to be taken.

The port has to be considered as production line and capacity at each of the ‘workstations’ has to be balanced. So while unloading capacity is enhanced, the number of trucks to carry the containers to the staging/storage area has to adequate so that it does not become a bottle neck. Similarly, the cranes that have to unload the container and place it in the storage/staging area has to be perform at the same rate as the unloading for it to not become a bottleneck.

For the faster unloading time to become customer meaningful , the customs clearance, taking the container to the customer premises by road /rail has to be hastened.

This will involve a complete analysis and lead time mapping of the end-to-end process. The process would start while the vessel is in the high seas. What activities can be done even before the vessel arrives. Can documents be submitted to the customs? how can the number of crane handlings be reduced? How can containers be staked in the yard so that lateral movement distance is minimal and number of crane movements are minimized. Are the road and rail connectivity adequate? What are the other delays? How can they be minimized?

This would need a multi-organization team – Port, Customs, Railways, Stevedore Unions, Transport Operators etc.-effort to implement.

Metrics
Kolkata Port should adopt revised metrics to measure it’s productivity and efficiency. What gets measured gets done!

Modern Port Measures

Element of Terminal Measure of Productivity Measure
Crane Crane Utilization
Crane Productivity
TEUs/year per Crane
Moves per Crane-Hour
Berth Berth Utilization
Service Time
Vessels/year per Berth
Vessel Service Time (hrs.)
Yard Land Utilization Storage Productivity TEUs/year per Gross Acre
TEUs/Storage Acre
Gate Gate Throughput Truck Turnaround Time Containers/hour/lane
Truck Time in Terminal
Gang Gang Labor Productivity Number of Moves/man-hour

Source: Container Terminal Productivity: Univ of South California:Hanh Dam Le-Griffin and Melissa Murphy

Being customer meaningful
The changes have to be customer meaningful. What this means is that the customer should get a shorter lead time for exports and imports. It should lead to lower costs and delays. Timeliness and reliability of container shipments passing through Kolkata port should improve.

This will help improve India’s LPI rank which currently stands at 39.

Kolkata Port has been sanctioned money to modernize it’s container terminals.

It should use this opportunity to form a clear direction and goal and sail towards it. Alongwith the infrastructure it should revamp and re-engineer the end to end processes so that it results in sustainable and tangible improvements to the Port’s customers.