From the Desk of The National President

Dear All, Greetings from your National President. Wishing everyone a progressive International Labour Day - May 1. Myself and Mr. C Subbakrishna, Sr. Vice President are back from 1st Global Supply Chain Management Networking Conference in Malaysia 4/5th April 2011 and we both were invited speakers. This was an Excellent Programme and IIMM could gain Global branding effect organizers for the Event were MAPICS- Penang and MIPMM-Malaysis. IIMM was collaborative partner. Key supporting organizations were ITC, UNCTAD, etc. In fact there were delegates from our Kanpur Branch. Surely this Seminar has added a good value to our brand. India continues to be one of the most dynamic and fastest growing telecom markets in the World. Telecommunications has been one of these key sectors to have contributed in propelling India's growth story. Indian telecom has added over 22.62 million mobile subscribers in December 2010 making it second largest in the World. The media boom in the last two decade has changed the way India lives. The proliferation in the number of news channels however, has not led to a shrinking of the print space. India is the second largest print market in the World with a readership base of over 350 million FDI of upto 26% in periodicals and newspapers dealing with news and current affairs has only helped. At present there are 69,323 News papers in the Country according to registrar of Newspapers of India. Uttar Pradesh with largest number of registrations accounts for 10,799 Newspapers. The above data clearly gives IIMM a great opportunity for growth and Membership Development both Corporate and Individuals. Still our significant area of concern is Corporate Membership and towards this I request all Branch Chairmen to work harder and send your creative suggestions to me. I look forward to greater result oriented efforts so that we can together achieve good success in all areas. My Best wishes to one and all.

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

From the Desk of Editor-in-Chief

It is recognized that there is a definite role of Micro, Small and Medium Enterprises (MSMEs) in driving economic growth and social development of the country. It has significantly contributed in the gross domestic products (GDP). Contribution of this sector can be well understood by their role in boosting employment generation, industrial production and exports. In fact the share of MSMEs sector in country's GDP has increased from 5.84% to 7.14% from 2004-05 to 2006-07. Prime Minister task force on MSME has indicated the growth rate of 8% for the year 2010. If we analyse the factors responsible for the growth of this sector, we find that technological up gradation has played a pivotal role. As such MSMEs are important for national objectives of growth with equity and inclusion. MSME sector in India is highly heterogeneous in terms of size, variety of products, services produced and the level of technology engaged. According to the report of the PM task force, the MSME sector should be strengthen to meet the requirement of planned development, growth and for high level absorption with less capital investments and to achieve the objective of rural industrialization. Mr. Arun N, DGM (SME BU, Hyderabad) of SBI has rightly mentioned that SMEs are the engines of growth for any developing country and in India SMEs contribute to 40% of industrial output and 40% of export and are the second largest employment generation after agriculture. In the past SMEs enjoyed government protection through reservation in manufacturing in government purchases. However in 1991 reforms, they have suffered the setbacks through external competition which has led to the closer of SMEs number of units. Union Minister of MSME has said that his focus will be in pushing the public procurement policy for MSMEs to assist them in increasing their market share and helping setup rehabilitation funds at the state level. He said that the clean technology is also a matter which is very close to his heart. The international economic recession has also affected the MSME sector particularly in the textile, leather, gems & jewellery and auto components. To ensure sufficient credit is available to the MSME sector to achieve accelerated growth. There has to be greater thrust on landing to MSMEs enterprises. Reserve Bank of India has advised the banks to achieve 20% year on year growth in credit to MSEs and a 10% annual growth in the number of micro enterprise accounts. 60% of MSEs advances to the Micro enterprises is to be achieved in 2012-13. Union government promulgated comprehensive legislation in the form of MSMEs development Act 2006 for giving impetus for development of MSE and for enhancing their competitiveness. The purchase preference policy in the ministry and departments including PSUs for goods and services produce and provided by industries is highlighted in section 11 of the act. The initial version of the draft procurement preference policy provided for mandatory 20% procurement from MSMEs including reservation for enterprises owned and managed by members of SC/ST committees or by women and preferences were proposed for firms with ISI and ISO certification. SMEs coating prices upto 15% higher than the lowest bidder could get preference for procuring at least 50% quantity from them in case the SMEs were willing to match the lowest price. All big industrial units whether from government or private sector have cluster of MSMEs established in its close vicinity. This has helped the big enterprises to provide the goods and services at most competitive rate. In order to sustained growth and competitiveness, we may have to ensure that our MSME sector is equally competitive. This means that if we get the raw material and other inputs at most competitive rates. Although government has given some of the incentives like easy financing and reservation for purchase preferences which will certainly help the sector to grow the further. Here the point to be kept in mind that it is not the responsibility of government but also it is the responsibility of all big industries and institutions to extend their full support for the growth of this sector. Upgrading technological solutions and bringing in new, modern and innovative ideas is a key step forward towards strengthening the growth of this sector and such strides are a positive movement to boost the growth of the SME segment. On the strength of low-cost production and world-class technology, India is being looked upon as a preferred destination for outsourcing and contract manufacturing. This has led to higher utilisation of capacity and revenue generation for the participants.

(M. K. BHARDWAJ)
2 May 2011

Materials Management Review

MATERIALS MANAGEMENT REVIEW

IFPSM

Volume 7 - Issue 7

(MAY 2011)

IIMM is a charter member of International Federation of Purchasing & Materials 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

BALANCING GROWTH AND INFLATION 4 CURRENCY EXCHANGE RATES 5 UNION BUDGET 2011-12: WHAT DOES IT IMPLY FOR INCLUSIVE GROWTH? 6 10 TIPS FOR TRIMMING SUPPLY CHAIN COSTS TO IMPROVE PERFORMANCE AND DELIVER 8 BLOCKING A CARTEL 9 GOVT LOOKS AT CHECKING SHIPPING CARTELISATION 10 EYE FOR INNOVATION 11 CENSUS 2011 - DO YOU KNOW? 14 LABOUR JUDGEMENTS BY SUPREME COURT 15 FIGHTING AGAINST EXCESS 18 CROSS DOCKING A VALUE ADDED TOOL IN SUPPLY CHAIN MANAGEMENT 20 BUSINESS PROCESS REENGINEERING-AN INITIATIVE TOWARDS STRATEGIC TRANSFORMATION OF ORGANISATIONS 22 GREEN LOGISTICS 27 'INDIA'S INFLATION WORRIES MUST NOT BE SEEN IN ISOLATION' 28 GO FOR LOGISTICS NETWORK OPTIMISATION 29 WTO UPDATE : LAMY CAUTIONS AGAINST WEAKENING THE WTO 32 THE EIGHT GREEN RULES 34 COMMODITY INDEX 35 STORAGE IS BECOMING A STRATEGIC INVESTMENT PRIORITY FOR COMPANIES 36 WEAK FORM EFFICIENCY OF INDIAN FOREIGN EXCHANGE MARKET 37 MOM AND POP STORES ARE NOT SIMPLY GOING AWAY 41 RIGHT TO CORRUPTION FREE GOVERNANCE 44 'FOCUS IS ON PUBLIC PROCUREMENT POLICY' 47 INTERNATIONAL NEWS 48 BRANCH NEWS 49 SOURCING NEWS 55 EXECUTIVE HEALTH 56

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

May 2011

Balancing Growth and Inflation

C Rangarajan Chairman, Prime Ministers Economic Advisory Council
he high level of inflation in the last two years has raised certain questions about the relationship between inflation and growth. The issue of a tradeoff between growth and price stability is usually discussed in relation to the conduct of monetary policy. A critical question in this context is whether pursuing the objective of price stability by monetary authorities undermines the ability of the economy to sustain high growth. Empirical evidence of the relationship between growth and inflation in a cross-country framework is somewhat inconclusive. This is because such studies included countries at one end with an inflation rate as low as one or two per cent and at the other end those with inflation rates going beyond 200 to 300 per cent. Most of these studies, however, clearly establish that growth rates become increasingly weaker at higher rates of inflation. The well-known Phillips curve postulated an inverse relationship between unemployment and wage rates. Several economists have challenged the basic microeconomic underpinning of the wage and price mechanism that leads to the possibility of a trade-off between inflation and growth. The Phillips curve becomes purely vertical if the role of expectations is explicitly included. An environment of reasonable price stability is considered conducive to economic growth. Many people would regard price stability as a necessary condition for long-run growth. This, however, does not rule out the possibility of some trade-off in the short run. The case of price stability as a major objective of economic policy rests on the assumption that price volatility creates uncertainties in decision making. Rising prices adversely affect savings even as they make speculative investments more attractive. These apart, there is a crucial social dimension, particularly in developing countries. Inflation adversely affects those who have no hedges against it and that includes all the poorer sections of the community. This is a very strong argument in favour of maintaining price stability.
4 May 2011

GROWTH RATES OF SELECT INDICATORS (in per cent) Year Inflation Inflation GDP Money year-end* (avg. of supply months)* 2004-05 5.3 6.5 7.5 12.0 2005-06 3.9 4.4 9.5 16.9 2006-07 6.8 6.5 9.6 21.7 2007-08 7.7 4.8 9.3 21.4 2008-09 1.5 8.1 6.8 19.3 2009-10 10.2 3.6 8.0 16.8 2010-11** 7.5 9.2 8.6 17.0 * Figures for 2004-05 and 2005-06 are on 1993-94 base; Rest on 2004-05 base. ** Expected. India has had two years of high inflation. The year 200910 was badly affected because of the deficient monsoon. Food grain production declined by 11 million tonnes. As a result, inflation was triggered by an increase in food grain prices. Inflation as measured by the wholesale price index touched the peak of 11 per cent in April 2010. We had expected that inflation would moderate through 2010-11. It, in fact, started happening till November 2010. The prices started rising after that. As of February 2011, year-on-year inflation was 8.3 per cent. While the last years food price inflation was triggered by a rise in food grain prices, this year it has been caused by a rise in the prices of vegetables, fruit, and eggs, meat and fish. The rise in vegetable prices has been significant. The late rains had a severe impact on the supply of some vegetables including onion. The last four weeks have shown a declining trend in vegetable prices and inflation is expected to come down in the coming weeks. Thus, the extraordinarily high level of inflation seen in the last two years is owing to certain severe supply constraints, particularly of agricultural products. The table that shows the inflation rate and the growth rate for the last six years clearly indicates that in the three years when the growth rate was around nine per cent, Materials Management Review

inflation rate was lower. To understand the behaviour of prices, we need to look at not only the growth rate of the economy but also the rate of increase in money supply. However, the fact that inflation is triggered primarily by supply-side shocks does not mean that monetary policy has no role to play in such conditions. Food price inflation, if it persists long enough, gets generalised. It becomes a cost-push factor as far as the manufacturing sector is concerned. Thus, monetary policy and, at one step removed, fiscal policy have to play their part in containing the overall demand pressures. There are, however, situations in which growth can contribute towards pushing up inflation. A high growth rate may result in higher inflation, when the growth rate exceeds the potential capacity of the economy. That will be the situation of over-heating. We have had examples of such situations in the recent period. In 2007, inflation picked up because the economy was operating at full capacity. But it did not last long because the investment rate was high and the output caught up with increased demand. So, determining potential growth of the economy is crucial. Since the investment rate now exceeds 36 per cent and can realistically be expected to rise to 38 per cent under favourable investment conditions, even with an incremental capital-output ratio of 4:1, we should be able to grow at 9 to 9.5 per cent comfortably. This rate of growth may be regarded as the potential of the economy. This, however, has not been the case in the last two years when the inflation rate remained at doubledigit levels for several months. Supply constraints have been the main trigger for inflation. In fact, what we need to watch out for is the impact of high inflation on growth. Persistent high inflation can distort the motives for investment, thereby undermining growth. There has been considerable debate on what an acceptable level of inflation is. I had in a different context used the term threshold level of inflation, defining it as the level beyond which inflation costs begin to rise sharply. The Chakravarty Committee (of which I was a member) regarded four per cent as the acceptable rise in prices. This, according to the Committee, will reflect changes in relative prices necessary to attract resources to growth sectors. Growth is not uniform in all the sectors. Thus, maintaining an absolute price stability, meaning a zero rate of increase in prices, may not be possible. Nor is it desirable. Obviously, there is a certain amount of Materials Management Review

judgement involved in determining the acceptable or threshold level of inflation. One has to factor in not only the impact on output but also distributional implications. In the early decades after Indias Independence, the argument that inflation was endemic in economic growth led to a very steep increases in prices. We should not let that happen in the years of high growth. We must remain committed to maintaining inflation at a low level. High growth does not warrant a higher level of inflation. We must use all our policy instruments to bring down the current inflation and re-anchor the inflationary expectations to the four- or five-per cent comfort zone. Source : Newspaper

CURRENCY EXCHANGE RATE

INR
Australian Dollar (AUD) 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) South African Rand (ZAR) Swedish Krona (SEK) Swiss Franc (CHF) UAE Dirham (AED) US Dollar (USD)
Source : Rediffmail.com dated 23rd April 2011

47.66 117.73 73.29 46.50 6.83 8.67 64.67 5.71 0.04 0.54 160.39 115.28 0.53 12.19 11.84 35.95 6.61 7.27 50.11 12.09 44.40

May 2011

Union Budget 2011-12: What does it imply for inclusive growth?

Dr. K.K. Tripathy, Indian Economic Service tripathy123@rediffmail.com

he major components of the 2011-12 Budget on agriculture include bringing green revolution to eastern India, development of 60,000 pulse villages in the rain-fed areas, promotion of oil palm plantations, diversification of crops by promoting fruit and vegetable cultivation, accelerated fodder development and expansion of agriculture credit. While these announcements are laudable, the implementation of these budget initiatives is a real challenge. 66.7% increase in Pradhan Mantri Gram Sadak Yojana 40% increase in Sarva Shikshya Abhiyan 16.2% increase in Rashtriya Krishi Vikas Yojana 10% increase in Accelerated Irrigation Benefit Programme The run-up to Union Budget 2011-12 was replete with media expectations of it strengthening rural infrastructure, revamping agriculture, reviving ernptoyment and income avenues in allied and non-farm sectors and addressing concerns like double digit and spiralling food inflation. Rightly so, because, the most recent revised poverty estimates (Tendulkar Committee of Planning Commission) show that the incidence of rural poverty on the Head Count Ratio has marked a reduction of 9 percentage point over 11 years (1993-94 and 200405). In this backdrop, it was expected that the Budget 2011-12 would strive to bridge the development deficits in the social sector not only by stepping up public expenditure on the social sector schemes/ programmes but also by ensuring the quality of expenditure backed by improved governance system of their implementation at the grass-root level. This paper examines the direction of the Budget 2011-12 towards achieving the objective of inclusive growth. Inclusive Growth : The Indian economy has witnessed a resilient growth rate in gross domestic product of around 8 per cent during the last three years (2008-09 to 201011). However, an average rate of 1.9 percent growth during this period in the agriculture and allied sector indicates that Indian agriculture has been entangled in a low growth equilibrium trap. The Union Budget, in the milieu of an emerging food crisis, prevalence of vast magnitude of unemployment and possible positive growth in the agriculture sectortried to follow the trend of prioritising the social sector expenditures and allocating adequate budgetary support to it. The previous
6 May 2011

Budgets of the government (during 2005-06 to 2010-11) have witnessed an impressible improvement in the expenditure on priority social sectors viz. education, health, rural development, water, sanitation, irrigation and housing which have a direct and lasting impact on human development. However, comparative 2011-12 Budget Estimates for two key sectors viz. agriculture and rural development vis-a-vis social sector services (Chart 1) indicate that the share of agriculture and rural development in the total social sector services have remained more or less stable over 2010-11 Budget Estimates.

Agriculture and Food Security : The share of the countrys population living on agriculture and allied activities continues to be more than 60 per cent, the contribution of this sector to GDP has been declining (24 per cent in 2001-02 to 14.2 per cent in 2010-11). In this circumstance, the commitment of Budget 2011-12 to agriculture has been a positive move. The major components of the 2011-12 Budget on agriculture include bringing green revolution to the eastern India, development of 60,000 pulses villages in the rain-fed areas, promotion of oil palm plantations, diversification of crops by promoting fruit and vegetable cultivation, accelerated fodder development and expansion of agriculture credit. While these announcements are laudable, the implementation of these budget initiatives is a real challenge. This is quite evident as the promise made in the last years budget on rolling out special production efforts in Eastern India is yet to have a perceptible impact on overall agro-productivity. Further, the government, during the each year of the Eleventh Plan Period (2007-12) has been increasing the budget allocation on a flagship Agriculture Programme i.e. Rashtriya Krishi Vikash Yojana (RKVY) to rejuvenate Indian agriculture by reorienting agricultural development strategies. Unfortunately, the initiative is Materials Management Review

yet to show the desired impact of increasing investment, income, productivity and employment in agriculture. Considering the enhancement in the benchmarked poverty line, variation in the availability of foodgrains, restricted inter-State movement of foodgrains, price volatility, slow productivity growth, it was expected that the Budget would provide a direction on rolling out the proposed National Food Security Act aiming at universal entitlement of foodgrains. While the Budget has indicated its intention to place Food Security Bill in the Parliament during 2011-12, it has not outlined an effective and appropriate strategy of food management keeping in view the food inflation, gradual reduction in the food subsidy and commitment on fiscal prudency and the overall demand and supply situation in the country. Rural Employment, Housing, Roads and Bridges : The 2011-12 plan outlay for rural employment, housing, roads and bridges (Table 1) indicates that allocations to employment and rural roads and bridges have declined in 2011-12 over 2010-11. The 2011-12 budget allocation for rural housing has remained at 2010-11 level. This indicates shifting of prioritisation of expenditure from vital social sector components like employment, housing and road and bridges to other social services. Table 1: Plan Outlay for Rural Employment, Housing and Roads and Bridges.
SI. No. 1. 2 3 4. Schemes/Initiatives Allocation (Rs. Crore) 2010-11 2011-12 Rural Employment 40,100.00 40,000.00 (-0.2) Rural Housing 10,000.00 10,000.00 (0.0) Roads and Bridges 22,886.00 20,000.00 (-12.6) Special Programmes for 2984.00 2914.00 Rural (-2.3) Development*

Next, in the context of rural self employment, National Rural Livelihood Mission (NRLM) -Swarnjayanti Gram Swarozgar Yojana (SGSY) will now have an outlay of Rs. 2914 crore. This is a decline of 2.3 per cent over that of 2010-11 (Rs. 2984 crore). NRLM-SGSY, launched in 1999, is based on a holistic approach covering various aspects of self-employment, i.e., organisation of the poor into self-help groups (SHGs); capacity building; provisioning market infrastructure, credit and subsidy linkage; and technology upgradation. However, studies point to various shortcomings coming in the way of effective implementation that reduces the impact of NRLM-SGSY. These are mainly related to coordination amongst field level agencies, the appropriate selection of economic activities, marketing, technology and brand development and the promotion of quality SHGs. Therefore, in order to derive value for money invested into this programme the activities should be selected after carefully assessing the viability of the output to ensure and realize benefits of forward and backward linkage effects. Major Flagship Programmes : This years budget allocation to the major Flagship Programmes (Table 2) indicate that out of 12 high budgeted development programmes, nine programmes witnessed a less than 15 per cent hike overtheirpreviousyear s budget allocation. The 2011-12 budget allocation of rural housing programme of the government (IAY) has not seen any increment over and above the budget allocation in 2010-11. The rise in the unit construction cost of housing in inflation-hit rural areas will pose constraints in the successful execution of this scheme. Further the unchanged allocation may not satisfactorily address issues relating to increased costs due to price variations in hilly areas vis-a-vis plain areas. The much publicized rural wage employment programme i.e. Mahatma Gandhi National Rural Employment Scheme experienced a negative increment in the budget allocation from Rs. 40,100 crore in 2010-11 to Rs. 40,000 crore in 2011-12. The reduced budget allocation to MGNREGA, prima facie, signals relatively weak growth

Note: (a) * National Rural Livelihood Mission (NRLM) (b) Figures in the parentheses are percentage increase over 2010-11 allocation Source: Notes for Demand for Grants, 2011-2012, Gol

SL. No. 1.

Programme

Table 2: Budget Allocation (Plan) for Major Flagship Programmes (Rs. Crore) 2010-11 2011-12 40,100.00 10,000.00 5,762.00 12,000.00 15,672.00 8,700.00 9,440.00 15,000.00 12,685.00 6,722.00 11,500.00 9,000.00 40,000.00 10,000.00 6,158.00 20,000.00 17,840.00 10,000.00 10,380.00 21,000.00 13,700.00 7,810.87 12,650.00 9,350.00

% increase over 2010-11 -0.2 0.0 6.9 66.7 13.8 14.9 10.0 40.0 8.0 16.2 10.0 3.9

Mahatma Gandhi National Rural Employment Scheme (MGNREGS) 2 Indira Awas Yojana (IAY) 3 National Social Assistance Programme (NSAP) 4 Pradhan Mantri Gram Sadak Yojana (PMGSY) 5 National Rural Health Mission (NRHM) 6 Integrated Child Development Scheme (ICDS) 7 Mid-Day Meals Scheme (MDM) 8 Sarva Shikshya Abhiyan (SSA) 9. Jawaharlal Nehru National Urban Renewal Mission (JN- NURM) 10 Rashtriya Krishi Vikas Yojana (RKVY) 11 Accelerated Irrigation Benefit Programme (AIBP) 12 National Rural Drinking Water Programme (NRDWP) Source: Budget Documents, Gol, 2010-11 and 2011-12

Materials Management Review

May 2011

stimulus attached to this national wage employment initiative. There was only a 3.9 per cent hike in the allocation for National Rural Drinking Water Programme during 2011-12 over 2010-11. Considering the inflationary situation in the country the real increment in the budgetary allocation to these programmes would be very marginal. Three programmes witnessed more than 15 per cent hike in their budget allocation (Table 2) in 2011-12 over 201011 are PMGSY (66.7 per cent), SSA (40 per cent) and RKVY (16.2 per cent). Keeping in view the limited absorption capacity, lack of dedicated programme management units and slow progress of implementation of these high budgeted programmes, it is not clear how the increased allocation on PMGSY, SSA and RKVY would be effectively utilized. The emphasis of the previous budgets (2005-06 to 201011) was more on rural India consolidating efforts on social sectors including agriculture and rural development. The Budget 2011-12 has stressed on catching up of a higher growth track without a clear-cut and integrated strategy for agriculture, food security and rural development. The reduced or stagnant Budget allocation towards rural employment, housing and roads

and bridges in 2011-12 over 2010-11 indicates the governments change of priority within the social sector itself and the continued emphasis on agriculture and a few social sectors like education, health and rural connectivity is aimed at ensuring inclusive growth. While increased budget allocation on Bharat Nirman Programmes, SSA and NRHM is laudable, improved governance backed by accountability and transparency in the implementation of these programmes is the need of the hour. Improved governance framework would ensure superior physical infrastructure for increased productivity, quality skill and education and health to reap the benefit of the Indias demographic dividend. While outlays are provided by the Central Government, outcomes are decided by the performance of State Governments and local self governments. Thus, to achieve the objective of social development and inclusive growth with economic stability in a resource constrained environment, a common effort is needed to (a) converge all the development funds (b) successfully implement welfare plans and programmes and (c) bring in effective monitoring and evaluation mechanism to match the outlays with the intended outcome.

10 Tips for Trimming Supply Chain Costs to Improve Performance and Deliver
1. Get Back to Basics: How and where to save time and trim down costs is the true benchmark of successful supply chain management. Take time to analyze the true source of costs before making cuts. Take a Moment to Organize : Achieve leaner supply chain through a performance-based workforce, you need a strategy. Once you identify your core focus and how effectively your company is supporting that focus, you can begin to shave costs. Develop Custom Performance Metrics : It is important to measure the effectiveness of your warehousing processes based on industry metrics. Find a 3PL that will create custom performance metrics that are aligned with your company's core competencies so you get the results you need. Implement Simple Warehouse Safety Improvements : A qualified 3PL can improve warehouse docking station safety with canopies, air-inflatable dock seals, dock levelers, extendable conveyors, adjustable carts, and more. Don't Forget about Reverse Logistics : Companies should effectively plan for the return of items that are faulty, damaged in shipping, or shipped to the wrong client. An experienced 3PL can identify inefficiencies in the return process and manage a cost effective, streamlined reverse supply chain. Cross-Dock for Leaner Operations : Cross-docking has become common practice in supply chain management. 3PLs can reduce warehousing costs
May 2011

2.

3.

4.

5.

6.

by providing expert cross-docking recommendations. Cross-docking can save a company on transportation and warehousing costs and ensure a smooth flow of goods. 7. Make Better Use of Warehouse Space : Cut the cost of warehousing by partnering with a 3PL that has the expertise to maximize warehouse space through the use of low-cost racking, mezzanine, conveyor, and multiple-level systems, and other high-efficiency practices. 8. Don't Let Less-Than-Truckload Freight Eat Your Profits : Turning to a trustworthy 3PL can greatly reduce your LTL costs because they will often have a partnership with more than one LTL carrier, ensuring your company's freight travels only with the most reliable providers. 9. More Technology is Not Always Better : 3PLs will determine which technology upgrades will increase the overall effectiveness of your warehouse and how to install these upgrades at the lowest cost. Wireless networks, hand-held scanners, and efficient bar-coding systems are some of the technological upgrades that a 3PL might recommend. 10. Know When to Outsource : By 3PL, you can pull your most valuable employees off supply chain management and direct their energies to helping your company grow and succeed. Source: Inbound logistics, Weekly Newsletter

Materials Management Review

Blocking a Cartel
Rajkumar Mitra, Executive Editor, Sourcing Insights rajkumar.mitra@mjunction.in

cartel is a group of suppliers which together attempts to control production, marketing, and pricing of a product, with an objective to increase their operating margins. Under antitrust laws in many regions of the world, cartels are illegal, because they eliminate fair market competition. However, several international cartels continue to exist despite these laws. Within nations, private cartels may control the market for certain commodities. For the members of a cartel, cooperating together has a distinct advantage. By agreeing to not compete, the members of the cartel mutually benefit. Cartels are often successful in driving up the price of the commodity they control well beyond what could be considered the fair market value. Typically, cartels are formed for commodities for which their suppliers were earlier forced to operate at a bare minimum profit and very low margins. Once these suppliers get together, the buyers are forced to pay higher. Though purchasers are at liberty to take legal recourse to break such cartel, operating in an era where supplier relationship holds the key to competitive advantage, innovative concepts are often used to break a cartel. Creating a preferred pool of suppliers, listening to them closely and awarding them for their good work are some of the latest initiatives which help to break a cartel. However, a reactive way to break a cartel is through online reverse auctions, which is also used where negotiation is done with a group of suppliers simultaneously instead of negotiating on a one to one basis. In cases where buyers find it difficult to manage things and they find it difficult to manage the increasing demand of the suppliers, they resort to the legal mode. Legal procedures are difficult to prove and time consuming. Forming strategic alliance and enhancing the market share ef the vendor to take the best return, is a one time solution, but thereafter in case the strategic partner is not continuously evaluated on every front especially on the price front, the parent company may be losing on competitive advantage. A solution to this is continuous vendor development activity and a continuous process of creating new business opportunity within the function so that the strategic partner finds it difficult to settle on firm ground. In this way, the motive to form the cartel can be rightly addressed. Motive to form cartel : A vendor is moved to form a cartel when according to his perception, the market price obtained is not sufficient to justify his value addition. After failing to convince the purchaser on every occasion Materials Management Review

and working out a remunerative deal, he goes out to convince his competitors that the problem of lower margin is a universal problem and cannot be solved in isolation. The cartel then settles among themselves to only accept a price which would justify their perceived value addition. Increasing the profit level obviously would call for increasing the selling price and if the buyer gets no other source to buy the item, he would have to shell out the set price. In case importing is a solution to bypass the domestic vendors, vendors trying to form a domestic cartel would have to convince the government that importing would be injurious to the domestic industry and an import duty needs to be implemented as a measure of safeguard. However, the item for which a cartel is being formed has to be a critical item to the buyer. Otherwise, the effects of cartelization would be nullified. Detecting a cartel : A cartel can be detected for all items which are being bought critically by the buyer on a regular interval. Obviously, the buyer would always try to strategically avoid paying higher to the seller by all possible means. Similar strategic efforts would also be made by the seller to ensure that he gets paid for his perceived value addition. In case, the seller is not able to do it alone, he would form a cartel. The seller may also try to buy stakes in competing companies where ever possible and through this consolidation would try to ensure a justified margin. Items not so critical for a company can be made critical if the specifications and terms of supply are so designed that only a very few vendor can match the competency level required to pass the eligibility criteria. This also increases the chance of cartel in non-critical items bought by the company. Breaking a cartel : The main motive of the cartel can be resolved by properly collaborating effectively with the vendor. If the vendor feels he is part of a family where buyer is a family member, he would not indulge in any cartel activity. But this may raise serious questions on the creditability of a buyer if the relationship goes beyond a professional relationship as corruption is not an unknown practice. In a transactional atmosphere, where there is a central figure initiating a cartel activity, one to one negotiation can be done to break a cartel. Alternatively, there are electronic negotiations which are breaking the cartels effectively. In case this option also fails, increasing the scope of supply and accommodating service elements along with an item supply and training selected lot of
May 2011 9

suppliers to do the same job becomes a viable alternative to break a cartel. In a one to one negotiation done after a cartel is detected, assurances are given to increase market share of the selected vendor if he discloses all financial details pertaining to his company. A vendor who has ploughed back his profit element into various research and development activity is normally preferred over a vendor who uses this profit margin in other ways. From the list of vendors so generated, the most balanced vendor is chosen who is given the larger pie on a commitment that he would give maximum value to the buying company and the selected vendor is continuously evaluated on every front. In case such a negotiation fails to deliver, the next best alternative to break a cartel is to go for an online negotiation. Here the auction engine is so programmed that if a second person wishes to give the same offer, it is automatically rejected by the system. So all the vendors involved can only get their price registered in the system, if each vendor offers a lower price than the other. Normally at the end of such reverse auctions, an order is awarded on preset terms to a limited number of

vendors out of which one gets the maximum share of business. This helps to break a price cartel. Sometimes it so happens that all the vendors have lower capacity than the share of business offered by the buyer. Vendors here sometimes form a quantity cartel where everyone commits to supply an equal quantity at the same price. In such a scenario, a reverse auction can be so programmed that the quantity and price commitments of each vendor has to be different. In extreme cases where an online negotiation does not give better results, the scope of supply of an item is increased and it involves an apply element also. The supplier here needs to maintain his own workforce at the buyers plant to do the job in totality and the buyer ensures training to all the suppliers before awarding the order to a specific supplier based on his performance and quoted price. This is an evolving process which keeps even the strategic partner guessing for the next scope might be too difficult for him to comply. In a nutshell, cartel is there to stay and evolve and a purchaser skill is proved if he is able to evolve tools to take best advantage of the situation without resorting to the legal route.

Govt Looks at Checking Shipping Cartelisation

Provision will be part of the proposed Shipping Trade Practices Act he government plans to put in place a mechanism for regulating the restrictive trade practices in the shipping sector, especially the ones which impact containerised trade. The enabling provision for the mechanism would be part of the proposed Shipping Trade Practices Act. The Ministry of Shipping that has drafted the Bill has circulated a Cabinet note for comments of other ministries. Shipping Secretary K Mohandas told Business Standard that the enabling section had been added to the draft following consultations with the stake holders. "A final decision is yet to be taken. Since the shipping industry is recovering from the downturn, we do not want to put restrictions on them," he said. Shipping professionals agree that there is an element of cartelisation in the industry. Shipping lines operate in consortia and share vessels which restricts competition putting cargo movers at a disadvantage. It occurs when shipping companies come together based on the assessment of demand and tariffs. Accordingly, the slot space is reduced on the vessel. "An invisible scarcity in the availability of the space is created which pushes the price northwards gradually," said Piyush Sinha, executive member, Federation of Freight Forwarders Association of India. A freight forwarder acts as a middle man between the exporter and the shipping line acting like an agent. He buys space on the ship in bulk at a lower price and keeps a certain margin on the price he offers to the exporter. Though there will be an enabling provision in the Bill, the government will spell out the specific regulations later. The Bill, after coming into force, will require all service providers to make their tariff public. Before a container is exported, a terminal handling charge is levied on it which varies from terminal to terminal. If the cargo is being moved by road then an inland haulage charge is levied. There is also a custom home agent charge. The freight forwarder charges the bill of lading (B/L) to the exporter. It is the official document prepared by the carrier duly accepting the goods for shipment containing information like item, quantity, value, vessel details, date, port, consigner, consignee etc. In case the exporter wants to pay after goods are offloaded, the freight forwarder is paid for transportation and documentation as well. Containerised cargo, at about 6.89 million twenty equivalent units (TEUs), roughly constitutes 18 per cent of the total cargo handled at the major ports in India. "The shippers face multiplicity of charges and there is no fixed rule. The bill is one step forward in putting some system in place to the way the tariffs function in containerised trade," said R S Deora, president, Federation of Indian Exporters. The Bill requires all maritime transportation logistics service providers to register themselves with the competent authority along with a bank guarantee of at least Rs 10 lakh and insurance cover renewable every year. The total container traffic handled in 2009-10 was 6.89 million TEUs. Source : Ruchika Chitravanshi, Business Standard

10

May 2011

Materials Management Review

Eye For Innovation

R. Harikumar GM - Supply Chain Division, Maruti Suzuki India
Maruti Suzuki India thrives on a remarkably efficient supply-chain aided by General Manager (Supply-Chain Division) R. Harikumar's penchant for innovative ideas that work. Pamela Cheema reports. eat rows of Maruti's popular models of cars, like the A-Star, Ritz and Wagon-R glint in the early morning winter sunlight in the stockyards as we drive into the 300-acre Maruti Suzuki plant at Gurgaon, Haryana. Inside the plant, there is frenetic activity as executives and workers, clad alike in pale green uniforms, are huddled over their work in austere offices. Adjacent to the offices and adding to the general clamor and din of a manufacturing plant are conveyor belts, with massive chains holding the gleaming bodies of new cars, creaking noisily above the belts. R. Harikumar, General Manager (Supply Chain Division), Maruti Suzuki India Limited, ignores the cacophony as he earnestly discusses the supply chain methods of his company which have helped Maruti grab a substantial chunk of the domestic market. Maruti has a 50 percent plus share of the domestic market and manufactures 1.2 million cars per year - this includes the domestic and export market. "By 2015 we aim to hit the 2 million mark" discloses Harikumar. "With that goal in mind, we are increasing the capacity of our plants. We already have a second plant in Manesar, Haryana, 25 kms from our Gurgaon plant and we are planning to set up another plant at the same site, thus augmenting the capacity of our plants." Delivering Value : Kumar proudly describes Maruti's supply chain or 'value chain model' (as he terms it) as "very slim, trim and robust." A large tranche of the company's domestic suppliers, around 86 percent of them, are located within a 100-km radius of the Gurgaon factory. The vendors keep up an unending supply of critical components like body panels, bumpers etc. with only tyres sourced from Ballabgarh in Haryana, Chennai and remote areas of Madhya Pradesh. Vast supplies of components, based on indents, are ordered from the vendors; keeping a watchful eye on customer satisfaction, Maruti stockpiles its components (which form a part of Maruti's Genuine Parts system) and distributes them swiftly from its central warehouse located close to its Gurgaon factory, into the aftermarket. The Transport Mix : Maruti Suzuki is said to possess the largest and most closely connected auto dealer and Materials Management Review aftermarket network in the country. The company has 877 sales outlets in 619 cities, with 2,855 workshops in 1,363 cities. It also has 346 True Value Outlets (certified used car dealer network) which cover 202 cities! Most of the company's cars are moved to their destinations by trucks and trailers, with less than 10 percent being transported by rail. Poor and snail-slow development has hamstrung rail infrastructure, which thus offers few options to auto manufacturers in the country. "We are in discussions with the railways to increase transportation by rail," says Kumar. "We also expect auto wagons to be ready within a couple of years. But even when auto wagons are ready, the poor state of railway infrastructure - insufficient number of railway tracks and wagons - will severely limit auto transportation by rail." Demand Fulfillment : Maruti's trim and efficient supply chain network has netted the company many rewards, notably the ability to assess market demand accurately, fulfill it speedily and to the entire satisfaction of its legions of customers. The company has 250 plus Tier-I vendors and 20 global suppliers who ensure continuous supplies. Maruti maintains a spare Just-In-Time inventory which is replenished on an hourly basis. Its vendors are connected to the company's much-lauded e-nagare system, which is an electronic supply chain system, through which the vendors inform the company on a day-to-day basis of diverse requirements and provision of supplies. Once informed of desired supplies, the vendors deliver the material to the factory doorstep. "Our seamless supply chain is due to the combined effort of the company and its vendors. This is what keeps our system running," says Kumar proudly. "Our production system is also very efficient and it gives an absolutely correct prediction of demand." The company's production is planned meticulously and with great attention to detail and once a target has been fixed, Maruti resolutely sticks to it. The company's target is decided by the market as well as organizational directives. Maruti's numerous dealers send their feedback through the company's IT systems which are then compiled and used as market surveys. "Our dealerships are closed and very mature," emphasizes Kumar. "Our dealers know our policies and priorities, so we know we can rely on their data." With its supple and effective supply chain strategies,
May 2011 11

Maruti has been able to navigate through the shoals of the economic downturn and even fend off stiff competition from multiple auto brands. Its inventory turn ratio has improved by 27 percent from 16.7 in 200809 to 21.2 in 2009-10. Handling Global Suppliers : The rise in inventory turn ratio has been assisted not just by deft handling of the domestic market, but also the seamless management of supplies sent by global suppliers. Maruti Suzuki receives 60 containers of components from Japanese companies every week. "Most of our shipments are on a Free on Board basis, that is, we decide the shipping schedule and the shipping company," elaborates Kumar. "Maruti is responsible for shipments from their factory to my factory here. I am responsible for shipping, port clearance, customs clearance and inland transportation. So from the foreign destination to my factory here, is my job. This makes for better control." Kumar, who has a degree in Business Economics from Delhi University and who joined Maruti Suzuki India Limited in 1984 (in marketing and later graduated to logistics), has prepared precise and detailed plans of shipping schedules for global suppliers. "I have yearly, half-yearly, quarterly and monthly plans," he explains. "When there are just four months left for the materials to be shipped, I tell my suppliers to firm up their schedules. I also give projection letters to my suppliers detailing the quantities we require. When there is just one month left, we inform the shipping companies of the schedules and tell them to liaise with our suppliers. By that time, we also know what are the volumes of material we require in our plant for the various models." Warming up to his subject, he dips into greater detail as he says expansively, "When the ship sails, through our IT systems we get to know when it will be at JNPT; we post a person there who takes the matter forward." Despite the auto maker's grueling work schedules and the rough and tumble of the auto market, Kumar insists that his company has never had to fret about vendor lead time issues. Supplies from the vendors have segued seamlessly with production schedules, with rare work stoppages, due to the maturity and finesse of Maruti's supply chain system. This in turn, according to Kumar, has spawned the attitude in the company that stoppage of production is a crime. The E-nagare Factor : Much of the credit for this uber efficiency is due to Maruti's much-discussed 'e-nagare' supply chain system. E-nagare is a Japanese word which defines continuity and flow. It was installed at the Gurgaon plant in 2003 after several experiments with various supply chain strategies. This is a system which has been pioneered by Maruti for Just-In-Time inventory, uninterrupted production and quick response to market fluctuations. It is suitable for vendors who operate in the vicinity of the plant and within a three-hour transit
12 May 2011

time from the factory. The stock position is generated daily and sent to the vendor at a particular time through this system. The vendor then plans the schedule accordingly for the next day. Every corridor of Maruti's plants is lined with movable storage cabins known as 'bins' which store auto components. As the stock in the bins is used up, information is sent to the vendor through e-nagare and it is replenished. Says Kumar: "The system is so designed that it picks up the nearest supply time for each block of production requirement. And as per our inventory norms, no safety stocks are maintained. Only advance material for about two hours production will be available at best." On the basis of the information that is supplied, the vendor ensures supplies at pre-defined timings and frequencies. Kumar is visibly proud of the e-nagare system "which enables us to roll off 4,600 cars a day. This system is now our lifeline!" Eye on Quality : Despite the hard slog of an ambitious production schedule, Maruti has devised a program called 'Shikhar' to keep a sharp check on efficiency and productivity. The HR, production and supply chain verticals of the company structured this program to halt any slide in quality. Actually, Shikhar is an incisive vendor analysis, whereby the performance of those vendors who produce the most defective equipment is measured. Kumar explains the concept carefully by pointing out that "those vendors are checked who produce defects at a monthly average of 500 per million." Vendors who exceed Maruti's sacrosanct limit are retrained and educated till their performance improves substantially. Other benchmarking initiatives comprise of performance measurements in various Key Result Areas (KRAs) which are applied to managers, suppliers, dealers, etc. with different parameters for each category. Due to this relentless quest for quality, according to Kumar, there has never been a line stop in the company. However, poor infrastructure in the country may pose challenges to Maruti Suzuki's ambitions for the future. Kumar underscores the decrepit condition of most Indian ports, the low productivity, poor connectivity, ill-trained manpower, obsolete trucks and the ubiquitous pot-holed roads! "I have seen many ports in the world, especially in Singapore and China, they are so different from ours with their high productivity and punctuality," complains Kumar. "We have to develop our infrastructure, but I will say that it's not just the government's fault, even the different stakeholders are responsible for this state of affairs." Kumar also points out the deficiencies in railway infrastructure and the urgent need to lay more tracks. "We also need to have more dedicated freight corridors all over the country. If China can have many freight corridors across the country, why not India?" Materials Management Review

No Big-Name LSPs : Maruti Suzuki's finished goods are carried across the country by more than a 100 LSPs who are on the panel of the company. The automaker avoids the pitfall of being lured by big name LSPs and prefers to nurture small-time service providers who are eager to grow with the company and form its rock-solid service provider base. The company believes that large big players are loth to shed their time-tested methods and learn new techniques. Hence it prefers to hire service providers who have just made a foray into the business, moulds them carefully and encourages them to stay with the company, with the additional carrot of long-term contracts! "Many of our transporters have been with us for 12-13 years if they live up to our performance expectations," says Kumar, "and some of our clearing agents and shipping companies have been working with us for 24 years!" Maruti keeps checking the roadworthiness of the vast fleet of vehicles maintained by its transporters. "We never use a trailer older than four years," asserts Kumar. "After every four years we change the trailers. We have a contract with our transporters about this and they are bound to make this change." Wider Net : Maruti does not transport or store the various components of its finished goods in warehouses across the country. It has a single main warehouse in Gurgaon, Haryana, in which the components of its finished cars are stored. From this warehouse, products are distributed by indents to multiple dealers. According to Kumar, the present system has been indisputably successful because dealers order spare parts along with the cars. This system was devised to ensure quality. But with Maruti's present hegemonic position in the auto market and the need to distribute its products more evenly in the market, the management is reconsidering its warehouse policies. The company now favors decentralization, with warehouses established in every region in the country. Maruti Suzuki's warehouses are fully automated with the latest loading, unloading, pick-up and carry equipment. The warehouse systems also enable on-line material identification and capture First-in-First-Out movement, periodic stock taking and inventory carrying cost analysis. With the winds of change sweeping the logistics industry and resistance to new ideas crumbling, there has been much talk recently about the concept of collaborative logistics. Tapping combined strengths could decisively lower costs in a market where inflation shows no signs of abating. Kumar is receptive to the idea and mentions that "we allow our transporters to take other vehicles, like Hyundai cars, on their return trips. But using the same stockyards is a sensitive and political issue, a decision which only the management can take." Accurate Foretelling : Globally, the market is just Materials Management Review

emerging from a harsh downturn whose lingering effects are still being felt. Maruti Suzuki is in the process of becoming a major exporter in South-East Asia and the Asia-Pacific region. The company is also attempting to make deep inroads into the European and South American markets with the assistance of its Japanese parent company. With its multiple ambitions and fierce domestic pressures, the company's market estimates and its demand forecasting projections could go awry. But Kumar maintains that the company's forecasting techniques have been finessed to exclude possibilities of error; Maruti ensures that its projections are neither too conservative nor too optimistic. This enables the company to maintain equilibrium - it fulfills its own sales projections and customer expectations and at the same time, never loses sight of ground realities. Similar care is taken to satisfy customer expectations about Maruti's products. Through the practice of 'kaizen', checks and balances are maintained to ensure that there is no slippage in the quality of its products. "We observe each and every activity and identify gaps and scope for improvement," says Kumar earnestly. "Then we make step-by-step improvements, spread out over a period of time. We also check the 'before' and 'after' scenario and only then standardize our products." The company is equally fastidious about its sourcing decisions as it will never permit consumer confidence to sag. Maruti Suzuki maintains a huge databank of vendors and is aware of the components produced by each vendor; if a new product has to be developed, the existing vendor will first be tried. If the vendor has difficulties with the product, a new vendor will be developed. Sourcing decisions also include the formulation of alternate plans to offset any negative blowback. "For every Plan A, we have a Plan B in place, but it's seldom applied, as we know and we ensure that we are right the first time and every time," says Kumar with supreme self-confidence. The Persistent Innovator : Today Maruti Suzuki India Limited has a totemic significance in the Indian auto market - a company which began small, struggled to the top and now has carved an enviable position for itself in the auto industry. It constantly seeks innovations and tries not to let a single new idea run into the sands. In keeping with the times when green initiatives are being emphasized, the company manufactures CNG and LPG vehicles. Research is in progress for the production of hybrid and electric cars in the future. Maruti uses only CFL bulbs in its factories and has invested heavily in a very effective water harvesting system. The company employs 7,000 plus workers in its various offices across the country; the Gurgaon plant alone has 3,000 plus employees on its rolls. The percentage of women in its various plants is increasing with more women being promoted as supervisors in the company.
May 2011 13

Maruti also runs an all-women ITT (Industrial Training Institute) at Gurgaon. Among other corporate social responsibility initiatives are road safety and vocational training programs, some of which the company has been conducting for a decade. Maruti established its first Institute of Driving Training and Research (IDTR), in partnership with the Delhi government in 2000. This was followed by the second IDTR in 2009 and two more in 2009-10. New IDTRs are also being established in Gujarat, Haryana and Uttarkhand. In an effort to increase consciousness about road safety issues which have remained in a state of benign neglect for years, the company launched its first Maruti Driving School in 2005 - it now has 83 Maruti Driving Schools across the country. Maruti Suzuki has also adopted four

villages around its second plant at Manesar in Haryana and bankrolls the development of their education and healthcare. Outside R Harikumar's office the conveyor belts are still grinding on relentlessly, giving one a jump-seat view of Maruti Suzuki's steadfast pursuit of its production goals and targets. Ignoring the knot of people around him urging him on to the next meeting and the klatch of people at various desks in the open office, Kumar looks at the machines with visible pride on his face. "You know," he says proudly before he walks away, "I don't remember a single day in Maruti when we planned 1,00,000 cars and ended up producing just 99,000 cars!" Source: CII Institute of Logistics, Weekly Newsletter.

Census 2011 - Do You Know?

Input from the Ministry of Home Affairs
Census is the basis for reviewing the country's progress in the past decade and monitoring the ongoing schemes of the Government. Census 2011 will be the 15th National Census of the country. For the first time a National Population Register (NPR) is being prepared as a part of Census exercise. This is a Register of Usual Residents. The NPR will be a comprehensive identity database that would help in better targetting of the benefits and services under the Government schemes/ programmes, improve planning and help strengthen security of the country. This will benefit people of the country in the years to come. Government servants duly appointed as Enumerators visit each and every house and collect the information required by asking questions and filling up Census Forms. Details such as Name, Date of Birth, Sex, Present Address, Permanent Address, Names of Father, Mother and Spouse etc will be gathered by visiting each and every household. All usual residents., will be eligible to be included irrespective of their Nationality. In the Houselisting and Housing Census, 35 questions relating to building material, use of houses, drinking water, availability and type of latrines, electricity, possession of assets etc. are being canvassed. The enumerator takes down all particulars as given by respondents. Respondents are not required to show any proof. Each household is required to provide information without any fear. The information collected about individuals is kept absolutely confidential and will not be shared with any agency - Government or private.
14 May 2011

The NPR form has to be signed by the respondents. In case one requires, he/she may ask the Enumerator to read it out and then affix signature/thumb impression. In any case, do ascertain that the details are correctly entered. The provision of false information can invite penalties under the Census and Citizenship Acts. Each and every household will be given an Acknowledgement Slip at the time of enumeration. Once the information is compiled, the data compiled will be printed out and displayed at prominent places within the village and ward for the public to see. Objections will be sought and registered at that stage. The data finalized will be entered into computers in the local language of the State as well as in English. Once this database has been created, biometrics such as photograph, 10 fingerprints and probably Iris information will be added for all persons aged 15 years and above. This will be done by arranging camps at every village and at the ward level in every town. Each household will be required to bring the Acknowledgement Slip to such camps. Those who miss these camps will be given the opportunity to present themselves at permanent NPR Centres to be set up at the Tehsil/Town level. After the NPR has been finalised, the database will be used only within the Government. Unique ID numbers will also be generated for every person. The UID Number will be available for each individual. For those below the age of 15 years (for whom biometrics is not available), the UID Number will be linked to the parent or guardian.

Materials Management Review

11 0 2 ay ay M t Is rD u o Lab
SUPREME COURT SAID 1)

Labour Judgements by Supreme Court (During 2010)

would be illegal without holding Enquiry. C.N. Malla Vs. State of Jammu and Kashmir and Others - 2009 LLR 1318 8) Enquiry Officer who is Company's Lawyer cannot be considered to be partial towards the Management of the Company. Denial to permit the delinquent to engage a Lawyer to defend himself does not necessarily amount to violation of principles of natural justice especially when the charges are specific and simple. Biecco Lawrie Ltd. & Anr. Vs. State of West Bengal & Anr. - 2009 (4) LLN 91 9) When charges are different, acquittal in criminal case by Court will not be a bar in Departmental Enquiry. Bank of India and Another Vs. Bhimsen Gochhayat 2010 LLR 113 10) When the workman did not work for considerable period, 50% back-wages will be justified on reinstatement. Bharat Coking Coal Ltd. Vs. National Coal Workers Congress - 2010 LLR 115 11) Civil Courts have no jurisdiction to decide about the legality of transfer of an employee. Apollo Tyres Ltd. Vs. C.P. Sebastin - 2010 LLR 192 12) Right to receive gratuity under the Payment of Gratuity Act cannot be negatived by any contract between employer - employee. Allahabad Bank & Anr. Vs. All India Allahabad Bank Retired Employers' Association - 2010 LLR 193 13) In the absence of any declaration by the appropriate Government, the fisheries industries cannot be held to be a seasonal industry. Director, Fisheries Terminal Division Vs. Bhikubhai Meghajibhai Charda 2009 (3) CLR 941
May 2011 15

For applying the principle of equal pay for equal work, mere volume of work shall not be relevant, there being qualitative difference as regards the liability and responsibility. Ajmer Vidyut Vitran Nigam Vs. Naveen Kumar Saini 2010 (3) CLR 816

2)

When termination is illegal, lump-sum amount of 2 lakh towards back-wages would be proper with reinstatement, in facts and circumstances of the case. Faridan Vs. State of Uttar Pradesh - 2010 LLR 87

3)

When termination found illegal and Labour Court awarded reinstatement but without back-wages, it would be proper to grant 50% of back-wages instead of full. M/s Reetu Marbles Vs. Prabhakant Shukla - 2010 LLR 93

4)

Full back-wages would be appropriate when reinstatement granted and rules provide for such back-wages in case of illegal termination. Jaipur Vidyut Vitran Nigam Ltd. & Ors. Vs. Nathu Ram - 2010 LLR 97

5)

When employee is absent for six months and tender Resignation but Management removed him from services by not accepting his Resignation, cannot be held to be justified. Chairman-Cum-Managing Director, Coal India Ltd. & Anr. Vs. Mukul Kumar Choudhuri & Ors. - 2010 LLR 109

6)

Even when dismissal of a workman is set aside by the Court, compensation in lieu of reinstatement will be appropriate. Ashok Kumar Sharma Vs. Oberoi Flight Services 2009 LLR 660

7)

Termination of doctor for unauthorized absence Materials Management Review

14) Enquiry invalid when documents relied upon, not supplied to delinquent employee. Reinstatement held to be proper. State of U.P. & Ors. Vs. Saroj Kumar Sinha - 2010 AIR 3131 15) No interference with the Notification prohibiting Contract Labour in railway truck sleeper renewal work. Baleshwar Rajbashi & Ors. Vs. Board of Trustees for Port of Calcutta & Ors. 2010 LLR 329 16) Termination of a probationer during his extended period of probation, even when stigmatic would not be illegal. Chaitanya Prakash & Anr. Vs. H. Omkarappa - 2010 LLR 225 17) While interfering with the punishment awarded by Management, Courts must give supporting reasons. Uttar Pradesh State Road Transport Corporation Vs. Nanhe Lal Kushwaha 2010 LLR 230 18) Right leg amputation of driver due to accident would be 100% earning capacity loss. S. Suresh Vs. Oriental Insurance Co. Ltd. & Anr. - 2010 LLR 250 19) In case of date of birth, municipality document will prevail over the School Certificate. CIDCO Vs. Vasudha Gorakhnath Mandevlekar - 2010 LLR 338 20) Non-furnishing of Enquiry Report will not vitiate the punishment. Sarv U.P. Gramin Bank Vs. Manoj Kumar Sinha - 2010 LLR 348 21) Reinstatement with 50% wages appropriate when workman worked for 240 days and termination was illegal. Ramesh Kumar Vs. State of Haryana - 2010 LLR 390 22) Nomination to receive payments under different laws indicated by workman does not confer any beneficial interest on nominee as benefits are to be distributed as per law of succession. Shipra Sengupta Vs. Mridul Sengupta & Ors. - 2010 LLR 447 23) Workers engaged by transport contractors for loading and unloading of milk cans at dairy will not be employees of Principal Employer for ESI purpose.
16 May 2011

Managing Director, Hassan Co-operative Milk Producer's Society Union Ltd. Vs. Assistant Regional Director, Employees' State Insurance Corporation 2010 LLR 561 24) In case of termination without retrenchment compensation, reinstatement with 50% backwages would be proper and High Court's Order modifying the Award to compensation only is liable to be set aside. Krishan Singh Vs. Executive Engineer, Haryana State Agricultural Marketing Board, Rohtak (Hr.) - 2010 LLR 450 25) Labour Commissioner's directions of paying equal wages to contractor workers without examining and considering the evidence of Management would be illegal. U.P. Rajya Vidyut Utpadan Board Vs. U.P. Vidyut Mazdoor Sangh - 2010 LLR 453 26) Dismissal of LIC Development Officer on the basis of an Enquiry held in violation of principles of natural justice and prescribed procedures would be illegal. LIC of India & Anr. Vs. Ram Pal Singh Bisen - 2010 LLR 494 27) When employer is financially weak, 50% instead of full back-wages will be appropriate. Manager, KVSS Mandwar & Anr. Vs. Mukesh Kumar Sharma - 2010 LLR 568 28) When employer case was that he did not terminate the services and reinstated worker as directed by Court, 50% instead of full back-wages will be proper. Malwa Vanaspati & Chemical Co. Ltd. Vs. Rajendra 2010 LLR 569 29) Section 25 F of Industrial Disputes Act is mandatory in nature and full compliance is required for effecting retrenchment, otherwise retrenchment would be null and void. Anoop Sharma Vs. Executive Engineer, Public Health Division No. 1, Panipat (Hr.) - 2010 LLR 627 30) No compensation will be payable when there is no nexus between the death and the accident, that too when the employee has died of heart attack. Rashida Haroon Kupurade Vs. Divisional Manager, Oriental Ins. Co. Ltd. & Ors. 2010 LLR 633 31) For passing false bills, punishment of withholding three increments is proper. Materials Management Review

Nantu Ranjan Paul Vs. Steel Authority of India Ltd. 2010 LLR 635 32) Workman cannot be granted any relief by Civil Court being remedy available under Industrial Disputes Act. RSRTC & Ors. Vs. Deen Dayal Sharma - 2010 LLR 673 33) Casuals even terminated illegally without paying retrenchment compensation will not be entitled to reinstatement with back-wages. Compensation will meet the end of justice. Senior Superintendent Telegraph (Traffic) Bhopal Vs. Santosh Kumar Seal & Ors. 2010 LLR 677 34) Mere appointment of Enquiry Officer while framing the Charge-sheet even before considering the reply of employee will not make disciplinary proceedings invalid. South Bengal State Transport Corporation Vs. Ashok Kumar Ghosh - 2010 LLR 723 35) Dismissal of bus conductor for receiving fare and not issuing tickets upheld. U.P. State Road Transport Corporation Vs. Suresh Chand Sharma - 2010 LLR 760 36) The Government is empowered to prohibit lockout under Section 10 (3) of the Industrial Disputes Act. Empire Industries Ltd. Vs. State of Maharashtra & Ors. - 2010 LLR 777 37) No prior approval for dismissal by minority school required under Delhi School Education Act. G. Vallikumari Vs. Andhra Education Society & Ors. 2010 LLR 891 38) No regular pay scales for daily wagers. Surendra Nath Pandey and Others Vs. U.P. Cooperative Bank Ltd. & Anr. 2010 (3) CLR 19 39) The question pertaining to payment of salary for the period when the employee was under suspension depends upon the final Order in disciplinary proceedings, hence, the impugned Order of the Division Bench of High Court granting back-wages is liable to be set aside. Kallakurichi Taluk Co-operative Housing Society Ltd. Vs. M. Maria Soosai & Ors. -2010 (2) CLR 495 40) Even after acquittal from the Criminal Court, dismissal not to be set aside of employee found guilty of dishonesty and misappropriation. Materials Management Review

Sushil Kumar Singhal Vs. The Regional Manager, Punjab National Bank 2010 LLR 1025 41) Dismissal justified of Bank Manager found guilty of withdrawing huge amounts for fictitious persons. The General Manager (P), Punjab & Sind Bank & Ors. Vs. Daya Singh 2010 LLR 1029 42) Special law about gratuity under Working Journalists & other Newspaper Employees Act, 1955, will prevail over Payment of Gratuity Act, 1972. P. Rajan Sandhi Vs. Union of India & Anr. - 2010 III CLR 583 43) Compensation would be appropriate relief to daily wager, though worked for many years but could not prove working of 240 days in the year preceding termination. Incharge Officer & Anr. Vs. Shankar Shetty - 2010 LLR 1137 44) Bank Management is under legal obligation to give copy of the Enquiry Report to employee with proposed punishment when Service Rules so provide. Punjab National Bank & Ors. Vs. K.K. Verma - 2010 LLR 1138 45) Functional disability is different from bodily disability arising out of accident. As a driver, he may be 100% disabled but otherwise his earning capacity is not lost. In such cases, compensation to be assessed as in the case of permanent total disablement. Palraj Vs. The Divisional Controller, NEKRTC - 2010 LLR 1146 46) Insurance Company cannot be held liable for the death of workman not arising out of accident. Mamtaj Bi Bapusab Nadaf & Ors. Vs. United India Insurance Company & Ors. 2010 LLR 1200 47) Under the provisions of Industrial Employment (Standing Orders) Act and U.P. Industrial Disputes Act, Labour Court and not the Labour Commissioner has jurisdiction to give decision on interpretation and application of the Standing Orders. Triveni Engineering & Industries Ltd. Vs. Jaswant Singh & Anr. 2010 LLR 1202 Source: Assocham

May 2011

17

Fighting Against Excess:

How a good 3PL relationship can trim warehousing costs for higher profit margins and a better performing supply chain Ron Cain, Chairman and CEO, TMSi Logistics tmsi@tmsi-usa.com

nternet-driven, customer-centric service is putting more pressure than ever before on logistics operators to run perfect supply chains. The perfect order identified as on-time, accurate and complete - is many companies most significant key performance indicator (KPI). Neglecting this crucial KPI puts companies at risk of losing customers and, ultimately, causing permanent damage to their bottom line. Improvements in warehouse management are often thought to be unattainable without the implementation of elaborate processes and the investment of a great deal of time and money. However, many cost cutting procedures can be implemented within a reasonable budget. These procedures are best implemented by an experienced warehousing firm. Since most successful companies must focus on their core competencies to remain profitable, partnering with a qualified third party logistics provider (3PL) is often the answer for companies in need of achieving real, long-term logistics efficiencies. ...many cost cutting procedures can be implemented within a reasonable budget. Why Partner with a 3PL A 3PL can initiate solutions ranging from simple, effective changes to extensive, comprehensive overhauls to increase a warehouses overall efficiency. For example: A recurring cause of warehousing inefficiency is the poor use of warehousing space, which causes companies to invest in more warehouse area than they actually need. A 3PL can implement strategies to maximize warehouse space, such as: racking, mezzanines, conveyors, and multiple levels, which will decrease the overall warehousing cost. The implementation of an efficient stock locating system, as well as timely restocking systems, may be incorporated to ensure that no time is lost attempting to locate missing product, or searching for a product that has not been restocked.
May 2011

While these concepts lie at the basis of the function of any warehouse, they are some of the areas in which the most time and money is lost. Fortunately, a trained 3PL is able to recognize where complications arise and can fix them with effective and uncomplicated solutions at low relative cost and notable ROI. Solution 1: Improve Packaging for Maximum Efficiency A qualified 3PL will tackle the challenge of leaning excess waste from warehousing operations through collaborative lean workouts with your company. A successful lean workout and the expertise of the 3PL may demonstrate, for example, that a customized packaging solution is the most practical and cost effective answer for leaner warehousing and shipping operations. A qualified 3PL will evaluate existing procedures and make recommendations for a customized packaging solution that would: Increase inventory savings Create more free rack/floor space in DCs Decrease the burden on the receiving department Reduce cube production Increase space utilization on technician services trucks Reduce cycle time on creation of boxes/cartons Minimize packing hours annually Reduced operator accumulation time Improve box design process Reduce touches on packaging a product Through a trusted relationship with a qualified 3PL, companies can realize long-terms savings through minimal upfront investment that can mean the difference between ending this year - or the next five to ten years in the red or the black. Solution 2: Cross-Dock to Cut Costs and Better Serve Customers Many companies cite capacity issues, customer demands, and inbound/outbound logistics as some of Materials Management Review

18

the greatest challenges facing the industry today. One way that 3PLs overcome these challenges is through cross-docking. Defined by the Food Logistics Industry Report as the practice of receiving goods at one door of a facility and shipping out through the other door almost immediately without putting them in storage, crossdocking has become a staple in warehouse management. This process has proven so successful because it requires minimal personnel and less time and space than traditional warehousing methods. A cross-docking scheme typically has three parts: 1. 2. 3. Inbound shipments are received and unloaded Shipments are sorted in a staging area, allowing for easy movement to a corresponding loading dock Products are loaded into outbound carriers for distribution

on a companys bottom line: Forbes Magazine estimates that US firms spend $100 billion annually on returns and that returns represent up to 7% of a companys gross sales According to research from North Carolina State University, reverse logistics account for 3-4 percent of a companys total logistics costs2 Companies can save 10 percent from their annual logistics bill by implementing an efficient reverse logistics system. Twenty percent of this amount is saved in labor costs and the remaining 80 percent is saved in lowered freight costs and reduced pipeline inventory. But money is not the only reason companies should effectively manage their return supply chain. Managing customer returns is a significant contributor to customer satisfaction - a bad return can equal a lost customer. Given the significance of the area to costumer retention and the health of your bottom line, many companies look to partner with a 3PL that is well-versed in managing this crucial part of your business operations. The Value of a Customized Solution There are countless tools a logistics operator can use to improve a supply chain operation. Custom packaging, cross-docking, and reverse logistics are only a few. The concern of smart companies is not what the tools are, however; their concern is how to optimize these tools in a customized solution that delivers the best supply chain and ROI results. Often, the ability to solve this problem is outside the expertise of the business owner or operator, and a partnership with a qualified 3PL must be solicited in order to achieve the right system. Every company depends on lean supply chain operations. For companies that ship seasonal items, promotional goods, store specific pallets, and high volume items to firms that produce kits, components, basic replenishment, and modules, getting the best product to the most consumers in the most efficient way possible is the top priority. Outsourcing logistics management to the right 3PL partner can allow you to focus on your competencies while your 3PL partner focuses on driving the right customized solution for your supply chain. Do not trust your supply chain to just any firm; it is your obligation to perform due diligence in interviewing and selecting a 3PL partner that has demonstrated expertise in your industry and supply chain challenges. With the right 3PL partner, your company can realize lower costs for greater profit margins, year-over-year.

Results published in the Food Logistics Industry Report show that nearly 43 percent of respondents had increased their cross-docking practices in the past five years. One of the largest proponents of cross-docking is Wal-Mart, and it has had a marked contribution to their success. Over 85% of its good are run through a crossdocking system according to the Isenberg School of Management at the University of Massachusetts.1 This allows them to reduce its cost of sales by 2-3%, contributing to the notoriously low prices its business model thrives on. While cross-docking is a common household term for 3PL experts, many companies not versed in supply chain management do not have the expertise to tap into this considerable opportunity. For companies already working with a 3PL, or handling their own cross-docking operations, there is often opportunity to implement leaner methods for even greater efficiency. How do you know if your cross-docking system is operating at maximum capacity? Typically, shipments should not remain at the facility for more than 24-48 hours. If this is true of your operations, you may be running a welloiled cross-docking operation. If not, it may be time to seek out a 3PL that can deliver the customized solution that best fits the needs of your company. Solution 3: Managed Returns Yield Greater Revenue Inefficient handling of returns is one of the most common wasters of time and money in any industry. The Reverse Logistics Association defines this function, reverse logistics, as all activity associated with a product/ service after the point of sale, the ultimate goal to optimize or make more efficient aftermarket activity, thus saving money and environmental resources. Reverse logistics have a large effect, for better or worse, Materials Management Review

May 2011

19

Cross Docking a Value Added Tool in Supply Chain Management

Kavitha.S.R., Research Scholar Dravidian University kavitav@ibsindia.org

ross docking: Cross docking is one of the many new techniques that have been employed to increase the efficiency of logistics operations. It can be broadly defined as unloading the materials from an incoming ship, trailer or a truck and loading it back on to an outgoing trailer or a rail car without involving any storage in between. In a conventional process, all the materials that arrive from the vendors are received at the warehouse. These materials are then unloaded and properly stored in devices such as pallet racks or shelves. Whenever any customer requests for the material, it is then removed from the shelves and is then dispatched to the desired destination. A separate inventory is maintained during this process in order to track the supply of the material. The process is entirely different in cross-docking. Here, the vendor would have a prior request from the customer regarding the material. As soon as the material arrives at the warehouse, it is then immediately loaded on to an outbound trailer going to the specific destination.

to whom the product must be dispatched. Predistribution is a coordinated effort that requires large amount of information transfer and system integration. The vendor must be clear about the specifications of the product requested by the customer. In the case of postdistribution, the material is not assigned to any customer when it comes from the vendor. However, at the crossdock site, it is later distributed to various outlets of the vendor.

Fig: 2 Process of cross docking There are various factors that influence the usage of cross-docks. Some of these include geographical details of the customer and the vendor, freight charges on the material being shipped, details and complexity of the loads, handling charges, logistics software, tracking the inventory and the cost of inventory in transit. In today's logistical environment where small orders and frequent deliveries are expected, cross docking offers an important advantage. Cross docking is a logistical activity that consolidates shipments from inbound trailers to outbound trailers in buildings known as cross docks. At each cross dock, each inbound trailer typically arrives from a different origin, carrying shipments meant for different destinations. These shipments are then quickly unloaded from the inbound trailers, sorted, consolidated, and reloaded onto outbound trailers bound for different destinations. Typically, all shipment handling is completed within a day, with little or no holding of stock in the cross dock.

Fig: 1 cross docking Cross docking process: Process of cross-docking virtually doesn't involve requirement of any storage facility for the inbound material. However, in certain conditions storage becomes unavoidable. Some of the situations include change in the conveyance or transport of the material or combining materials bound for same destination but coming from different origins or for sorting materials. Cross-docking can be classified based on when the customer is assigned to the product. In the case of pre-distribution, the vendor sends the product to the cross-dock along with the details of the customer
20 May 2011

Materials Management Review

Cross docking offers a significant cost advantage. Instead of shipping small orders directly as less-than-truckload (LTL) shipments between origins and destinations, cross docking consolidates small orders into truck-load (TL) shipments. With cross docking, more frequent and economical deliveries are now viable as inbound and outbound trailers are now more fully loaded per trip. With frequent shipments, lesser inventory is also needed at the origins and destinations to avoid stock-outs. Many companies, such as Wal-Mart and Harp's Food Stores, reported significant savings in transportation, inventory, and stock-out costs after implementing cross docking in their systems (Snyder 1995). Kinnear (1997) also reported similar improvement after implementing cross docking at Goodyear in Great Britain. Advantages of cross docking: Reduces handlings costs, operating costs and the storage of inventory Products get to the distributor and consequently to the customer quicker. cuts down or virtually eliminates warehousing costs Helps to increase available sales space. Stock comes into cross docking center already preallocated to replenish an order placed by a retailer. Retailers have the ability to streamline the supply chain from point of origin to point of sale through cross docking. Operating costs and inventory levels are reduced and perspective sales space is increased. Wall mart is so successful in cross docking: Wal mart runs 85% of its goods through its cross docking system. Cross docking is one way Wal mart reduces its cost of sales by 2-3%. This is a contributing factor to allow Wal mart to offer lower prices. While designing an efficient network of cross docks is Materials Management Review

important, the success of cross-docking also depends on how well each individual cross dock is designed and managed. A poorly designed and managed cross dock will obviously increase the cost of handling shipments in the cross dock and negate the benefit of cross docking. To improve performance, a manager faces various options or decisions. For example, they can choose to transfer shipments either directly or indirectly between the trailers in the cross dock. They can use a different layout or choose to use fewer or more forklifts to handle the shipments. To unload the inbound trailers, they can open fewer or more receiving doors. A review of the past literature shows that no study has systematically examined the impact of these decisions on the operations of a cross dock. This provides a gap in the literature which we propose to bridge by using computer simulation to study the impact of these decisions on the operational effectiveness of a cross dock. The advantage of using computer simulation is that it can realistically replicate the activities and congestion in a cross dock, and provide accurate insights on making the right decisions to improve performance.

Conclusion: In fast-moving industries such as consumer goods, food, retail, drug and grocery, and others, cross-docking is increasingly recognized as an indispensable way to increase inventory speed and throughput. Because it bypasses the put-away process. Cross-docking capabilities make it possible for warehousing operations of all sorts to mobilize their inventory by making sure that incoming loads are quickly turned around as outbound ones, thus improving customer service and effecting freight economies.

May 2011

21

Business Process Reengineering-An Initiative Towards Strategic Transformation Of Organisations

B.Swathi, Research Scholar & Associate Professor Shadan Institute of Management Studies bais_swathi@yahoo.com

BSTRACT : Much has been written about transforming organizations. At the heart of this activity is the notion of Business Process Redesign (BPR), the restructuring of a firm's basic business methods. We describe some of the forces that are behind this need for major organizational change. If contemporary organisations want to increase their effectiveness and experience enduring success, they must be willing to design and redesign themselves. To do so, they need to incorporate new strategies, structures and systems that give the strategic focus and operational support needed to thrive in an ever-changing world. Introduction : Kettinger et al. Conclude that "rather than a quick fix," BPR is increasingly recognised as a form of organizational change characterised by strategic transformation of interralated organisational subsystems producing varied level of impact"( Kettinger et al.,1997). A plethora of BPR methodologies have been developed to implement radical changes.Kettinger et al (1995) developed a multistage framework; the main components include:Envision, inaugurate, diagnose, (re) design, (re) construct and evaluate. Price WaterHouse Cooper applied four phases methodology: Evaluation (AS IS) is reserved for either identification of the existing processes or creation of a new process with identifiable scope and people involved in it. The purpose of Envision is to design the desired state of the process (TO-BE) which radically brings changes in speed,quality,cycle time, cost. Implementation in phases is named as Empowerment. The objective of Excel is to measure success of change. BPR is characterised as revolutionary rather than evolutionary. The re-engineering process may be viewed as cyclical because each phase builds on successes of others. Janson (1992) identified three phases: rethink [ paradigms, vision and critical success factors] redesign [ process analysis, whole jobs]

retool [ empower people, distributed access ]. Janson believes that the fourth step [ continuous improvement ] is not necessary because the entire process is ongoing in nature' [1993]. This article offers a framework based on existing strategic change model which may be applied to implement process-based transformation.It draws on three elements; change in general [Kettinger et al(1995) view BPR as a form of change], process -based change [TQM and Empowerment used process as a unit of focus] and BPR [offers radical improvements in business processes]; where BPR can be implemented in contextual prespective. Pettigrew et al's [1989] contextual model is applied for implementation. In this way the article offers a combination of theoretical perspective on change and a way to combine an empirical model to implement radical changes in the organisations. Change in general : Change refers to 'a modification of the way things get done in the system'[Fossum,1989]. Burns and open systems perspective. The individualists emphasise classifies theoretical foundations into three categories: the individual perspective, group dynamics personal learning as root of changing ndividual behaviour, which leads to organisational change. The group dynamists advocate existence of groups or teams in organisation. Open system experts view an organisation as a system made of four sub-systems [goals and values, technical, psychological and managerial]. Dawson groups his volutionarystance into planned change, contigent moment and contextual perspective[Dawson,1994]. Planned change : Kurt Lewin is considered as father of change theory[Fossum,1989]. He introduced planned change consisting of three phases: unfreezing, changing and re-freezing. Lewin identified the equilibrium between restraining and driving forces. For him change occurs when driving forces push back restraining force to a minimum or attain 'quasi-stationary equilibrium'. Unfreezing requires the transfer of resources to overcome a powerful network of forces, which pull organisation Materials Management Review

22

May 2011

into the current state[Rouse and Watson, 1994]. It aims to reduce resisting forces or increase driving forces. The change agents embark on moving organisations towards the required state. Contingency model : According to contingency theorists the best way to organise depends upon the circumstances. They 'reject search for universal model and develop appropriate strategies under typical conditions' [Dawson, 1994]. He further argues that the researchers can focus upon a single variable, environment or a range of variables to identify the relationship between various variables. Burnes [2004] argues that 'contingency theory is a rejection of the 'one best way' approach previously sought by managers and propounded by academics.In its place substituted the view that the structure and operation of an organization is dependant on the situational variables it faces- the main ones being the environment,technology and size ... it follows from this that no two organizations will face the exactly the same contingencies;therefore as their situations are different , so too should their structures and operations be different. Contextual approaches : A framework which is helpful in analysing change is the contextualist approach (Pettigrew 1985, 1987, 1990, Child & Smith 1987, Clark, McLoughlin, Rose & King 1988, Dawson 1994, 1996). Here, temporal characteristics are acknowledged in thinking of change as a dynamic process involving the relationship between the content of a specific change strategy, the context in which the change takes place and the process by which it occurs (Dawson 1994).The argument by contextualists is, that change can only be properly understood when it is seen as a dynamic process, which occurs over time.

A, consists of three elements, 1) substance of change, 2) politics of change, and 3) context of change. Substance refers to the type and scale of change. The second element of the processual framework, politics, refers to political activities of consultation, negotiation, conflict and resistance. Context, the third element, refers to past and present, external and internal operating environments. These elements provide a convenient grouping of factors which together shape organisational change over time. This framework, says Dawson (1994): is intended to convey the interconnectedness and complexity of dynamic processes of change through combining a threefold classification of factors shaping the process of organizational transformation with a clear representation of the temporal nature of change. (p. 45) The theoretical framework for this study is, therefore, to be found in the work of the contextualists, especially as developed by Dawson (1994, 1996). The contextualist approach provides a method of investigation, emerging within a processual framework (Dawson 1996) and, in so doing, exposes HRM issues critical to a company's transformation.It is therefore imperative that today's mangers embrace stability and learn to manage continuity if they want to survive.' Predecessor To BPR- Empowerment And TQM : Power and empower are complementary concepts in management literature. Empowerment is the reorientation of all those factors, values and beliefs so that they support and liberate the individual rather than diminish their range of thoughts and action' (Brown and Brown, 1994).It ensures employee involvement and confidence that they work as a unified body.The strength of the workforce is harnessed and used to meet customer delight through quality product. However, empowerment is a less constructive way to manage people and organisations in a rapidly changing business world and labour market (Stewart,1994).Senior managers complained loss of control in an empowered environment. As a change strategy empowerment brings limited gains.But it can be given a stronger customer focus by linking it to TQM (Blair and Meadow,1996).

Figure : 1 Determinants of Change (Adapted from Dawson 1994: 65, Organisational Change: A Processual Approach. London: Paul Chapman Publishing Ltd.)

Drawing on the work of the contextualists, especially Pettigrew (1985, 1990, 1992), and Dawson (1994, 1996) provides a framework consisting of three major determinants of change, which he describes as a processual perspective. The framework, shown as Figure Materials Management Review

TQM is 'a management philosophy embracing all activities through which the needs and expectations of the customer and community, and the objectives of the organisation are satisfied in the most efficient and cost effective way by maximising the potential of all employees in continuing drive for improvement.'It is a culture where all staff are dedicated to meeting customer needs on a "right first time" basis. The emphasis is on
May 2011 23

commitment of senior management,effective planning,education and training, teamwork, measurement and feedback and working together. It offers a range of benefits to adopters of the system:customer satisfaction, employee involvement, increased productivity, increased communication. Despite these benefits, implementation poses a number of problems. First,most TQM projects are unsuccessful as, for instance,two thirds of the initiatives in United States failed (Courdon,1993).Improving too many processes at a time could cause a loss of focus which undermines the overall outcome.TQM works in a longterm perspective because behavioural change needs time to produce reasonable results.It emphasises improved communication between departments and functions which 'may not be enough to make real improvements'(Blair and Meadow,1996). Table 1: Comparison of approaches to process-based organisational change
Distinctive factor Objective Empowerment BPR/ Process Management Holistic change Holistic in the Creating n organisation Networked Organisation -Processes -Processes -Quality -Quality -IT Step changes -Holistic -Inter organ. -Intra organ. Flat,team based Flat,team based Involvement Involvement Empowerment Empowerment Continuous Organisation -wide TQM

Business Process Reengineering came into being in early 1990s,most researchers refer to Hammer's[1990] article and Davenport and Short's work[1990] as the pioneering contribution to the concept[Jones,1994].Some hold view that BPR emerged as a theoretical concept in MIT's management in the 1990s research programme begun in 1984.One of the contributors in research programme viewed BPR as IT-enabled change because IT emerged as a core business resource in the early 1980s [Venkataraman,1994]. The second aspect of the context is related to macro impacts of international changes on the organisational / management strategy.The most memorable incident of the late 1980s was the collapse of the former Soviet Union and the end of cold war. It created fewer opportunities than threats and intensified competition because of the ease with which information can be moved within and among organisations.The nature of competition also changed: for instance, being a low cost producer or large scale production was a competitive edge in the past but innovation, quick response to markets, customer service, quality of products and reduction in the market time became the basis of competition [Bjorn-Andersen and Turner,1994].It opened the way to mergers of big companies, especially in the defence sector, and the emergence of new suppliers of cheap goods and services in the world markets. Flatter and leaner structures are more efficient than hierarchical arrangements, which compel management to reorganize the structure in a flatter way; they even lead to external partnerships and alliance[Bjorn-Andersen & Turner,1994]. Hammer and Champy [1993] name it 'crisis of competitiveness'; the components of crises include superiority of customer, competition and change. They argue that a completely new approach is needed to handle the crisis. It must be process-oriented, IT-enabled and radical in nature. The third dimension is the theoretical evolution of management techniques.TQM as a predecessor of BPR did not deliver what ought to have been delivered. Many companies who are in trouble are unable to respond to adopt the new requirements because of the high rate of change, raising customer expectations / competition and its global scope [Landeghem and Pyis , 1996].Growing complexity and greater interdependence among world economies , information explosion and world wide communication contribute towards the inability of traditional managerial approaches to resolve a contemporary complex web of organizational problems [Wood-Harper, 1995]. BPR offers the companies the potential to reinvent themselves in order to address present complex organizational problems. 'Moreover, Materials Management Review

Focus

Piecemeal improvements in the pockets of an organisation People

Nature of change Scope

Continuous Limited

Structure Tools

Hierarchial/flat Involvement

BUSINESS PROCESS REENGINEERING: Pettigrew et al [1989] suggest a research model to examine a strategic change initiative in an organisation.The purpose of the change is to understand change through a strategic perspective because strategic change is initiated at the top level and the support of top management is a key success factor in modern change initiatives. The section is divided into three sub-sections:context,content and process. Context: The context encompasses three dimensions: historical evolution of the concept;political scenario of late 1980's and early 1990's;and the inability of the management techniques to cope with the then requirements of the business community.
24 May 2011

the changes needed are considerable , they can no longer be cosmetic. This makes the traditional approach, which is evolutionary [such as KAIZEN, Continuous Improvement and the likes], no longer sufficient. In this view, BPR seems to offer the radical breakthrough possibility, that managers are seeking, including potential for creating a high quality image for the company, as well as saving costs in the process' [Landeghem and Pyis , 1996]. BPR is sparked partly by the macro-economic conditions, partly by the political scenario and partly competition. A shift in economies [especially the Far Eastern] means the rise of new nations as economic powers. Contents The MIT research programme of the 1990s commenced with two basic issues: turbulent business environment and the rapid evolution of IT. One of the researchers in the programme reported five stages of IT induced business transformation: localised exploitation, internal integration, business process redesign, business network redesign, and business scope redefinition [Venkataraman, 1991]. Corporate transformation was a sixth stage added by Drew [1994]. The first two levels are named as evolutionary and the last four as revolutionary. Selecting any of the stages or types of change determines the scope of change - the reach of change within or outside the organizational boundaries. The scope contains a single functional area: the whole organisation or a set of organizations. For example , Ford Motor Company's account payable project was limited to one functional area, IBM Credit Corporation's initiative collapsed more than one functional area and Singapore Trade net involved a number of trade-related co-ordinating bodies [Stoddard and Jarvenpaa, 1995]. Hammer [1990] has launched a prototype of reengineering in his HBR paper , 'Reengineering Work: Don't Automate, Obliterate'. He emphasised the fact that automation is not sufficient to prosper in tomorrow's competitive business environment. He defines this radical change concept [BPR] as: The fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical measures of performance such as cost, quality, service and speed'. Fundamental rethinking, radical change, dramatic improvements, and critical measures of performance are fundamental to reengineering. Pettigrew et al [1989] include prior strategy , components of strategy , objectives of change, source of strategy and measure and evaluation criteria in the context. Prior Materials Management Review

strategy provides the learning gained in the previous change initiatives that can be used in the new one. Hammer and Champy [1993] argue for a 'clean slate' approach which means everything should be new; however this arguement has been questioned by scholars on the ground that ' a blank sheet needs a blank check' [Davenport and Stoddard , 1994]. The components of the proposed strategy are the key elements or changes suggested for the new structure and operations.Organizational functions [marketing, HRM, finance] are the focus of the strategy. Nevertheless, BPR emphasises business process as the unit of change.Hammer and Champy [1993] argue in support of cross-functional business processes where business processes dominates any other structural arrangement. Another element worthy of discussion is the objectives of change. The traditional contextual approach is comfortable with increamental improvements in the outcome; the reengineering follows radical objectives i.e., Hammer and Champy [1993] argue that any improvement below 20% is not considered reengineering initiative. Process : Process involves the actual steps taken or to be taken by management to change the culture and the power structure of the organization.Walsham [1993] view it as a detailed description of unfolding of events and actions to link it with cultural and political metaphors of organization. Lee conceptualises a road map to initiate BPR: "The path to successful re-engineering begins by improving the company's understanding of the customer through focus groups,market analysis, and by listening to employees. Pinpoint excessive hand-offs, examine decision points and constantly ask 'why'? Form employees into teams , hear their ideas, and reward them for these ideas. Be open minded about reorganisation, for example , streamline by function instead of rigid bureaucratic departments. Managers may have also relinquished some controls. Due to the driving force of emerging technologies, always include internal information people on the re-engineering team, who can think across divisional lines and work with the sales and marketing people".[Lee,1995] Pettigrew [1989] and his colleagues argue that process should include triggers for change, management process and action, implementation process, availability of technology and time frame. Arrangement of these elements under process provides a unified approach within the context of radical transformation supported by technology and to achieve ambitious objectives.

May 2011

25

Pettigrew et al [1989] have the view that technology should be available to implement change. It implies that the change can happen without existence or availability of technology. Hammer and Champy [1993], however , argue that technology is the pivotal enabler of radical change programmes. It is the key difference between other process based change strategies such as TQM & Empowerment and BPR.Technology -based solutions is the imminent feature of modern business reengineering. TOWARDS A BPR IMPLEMENTATION FRAMEWORK This section is reserved to develop a framework to implement a process-based change. Again, needless to say, the framework is related to Pettigrew et al's contextualised change model based on context, content and process ingredients. Peppard and Preece [1995] examine BPR on the basis of Pettigrew's organizational change model. The following figure illustrates the steps involved in the framework.
Change in General [Planned, Contingency, Contextual] Process based Change[TQM, Empowerment] Radical Change [BPR]

three main topics: the change in general,process based change prior to radical change and BPR.The first two are important to understand the BPR. The rationale for discussing change in general is that BPR is viewed as a form of change as Kettinger et al., [1997] argue. Thus the framework combines general and process-based changes.BPR is to be implemented in the light of contextual model proposed by Pettigrew et al [1989] since the contextual models do not entertain process issues [because they are predate to process-based change and the centre of change is function i.e., Marketing, HRM, Finance etc] and BPR has little to say about context especially external context. Pettigrew et al's [1989] model consists of context - the condition within which the change is required or the divers of such a programme.They normally developed internally or externally overtime and hampered internal performance or threatened competitiveness.For instance,comparative cost disadvantage in the industry might be due to outdated machinery or increase in labour cost or in energy cost. These issues may be addressed by shortening the total process that can reduce headcount.Thus it needs improvement.The content provides the components of the strategy, objectives, and success measurement criteria.The process integrates contents with management's actions to make changes on the ground. The proposed framework modifies structure [in context], prior strategy, objectives and focus of change [in contents] and rigorous application of technology [in process] in the existing Pettigrew et al's [1989] model.Arguemets have been provided for the changes in these elements and this point of view is the rationale for the new framework being proposed here.The model can be applied in profit oriented, educational and non profitable institutions. References:1] 2] 3] 4] 5] Burns, B.,Managing Changing:a strategic approach to organizational dynamics Blair,G. And Keadows, S . A Real Life Guide to Organizational Change, Burke, G and Pepperd, J.'Examining Business Process Reengineering' Hammer, M and J.Champy,Reengineering The Corporation Dawson, P. [1994], Organisational Change:A Processual Approach. London: Paul Chapman Publishing Ltd. Materials Management Review

The first box in the model demonstrates the change in general. The second box describes the process-based change models since radical change is also a processbased change approach. The third box shows the radical change and its components in light of Pettigrew et al's contextual framework. APPLICATION TO QUALITY EDUCATION : The model can be applied in educational settings to enhance the quality of education and achieve combativeness. For example , the context of an educational institute - school, college or a university - can be analysed to arrive at present circumstances or to determine the current situation. The educational quality in a university is determined through the physical, virtual and human resources available and how effectively they are being used. And the outcome such as number of students passed out, where they are employed, academic qualifications of the faculty [for instance how many PhDs are working,how many are foreign qualified, how many are active researchers and what is the quantity and quality of research work]. And what is the ranking of the university. What is the international ranking? If any, what is the public image of the university? What is the way of teaching and how that particular style contributes towards the overall image of the university? DISCUSSION AND CONCLUSION : This paper examined
26 May 2011

Green Logistics
Amarjeet Singh Bohmra GM, Reliance Industries Limited amarjeet.bohmra@ril.com
ustainability has become a hot topic for discussion in the corporate world today. Heard SC manager saying loudly in one of the meetings , I believe in Sustainable Logistics Management so that the goods are delivered as per the requirements of my customers. Only if my customers are happy my sales will boom and the profitability of my company will see an uptrend. Immediately an idea struck my mind as these days it is all obsessed with green thinking and always wondering how my future generation will survive if the trend of polluting this mother earth continues. How this manager can help and contribute. Yes, he can if he fully understands the meaning of sustainable logistics and can implement it. It is so simple if he believes in taking care of environmental and societal factors during the operation. Once these factors are taken into consideration, we can say that he is now heading towards sustainability and his operation can be termed as green or sustainable logistics. Consumers and legislation have pushed companies to re-design their logistic networks in order to mitigate negative environmental impacts. The objective in the design of logistic networks has changed, therefore, from cost minimization only, to cost and environmental impact minimization. One has to balance profitability and environmental impacts. Logistics chains are constantly changing to facilitate increasingly global movements. In qualitative terms, long term trends in logistics services indicate a growing degree of product customization and an increased responsiveness in order delivery. These trends impact on the development of technology and the growth of welfare in different world regions in different ways. The key starting point is the need for more and more efficient transportation and sophisticated logistics processes. The main objective of logistics is to co-ordinate these activities in a way that meets customer requirements at minimum cost. In the past this cost has been defined in purely monetary terms. As concern for the environment rises, companies must take more account of the external costs of logistics associated mainly with climate change, air pollution, noise, vibration and accidents. A sustainable balance between economic, environmental and social objectives has to be achieved.

Logistics sector has contributed a lot to economic growth, increased employment and the creation of a global marketplace. It must now understand its responsibility and try to minimize the environmental impact which it creates during the operation and see that the carbon foot prints are neutralized or minimized by taking suitable actions . Just as logistics contributes to economic prosperity around the globe, it now needs to help bring about an ecologically sustainable, lowcarbon economy. Logistics industry is a major source of carbon dioxide emissions which is a major GHG leading to global warming responsible for climate change. A recent survey reveals that Road freight accounts for roughly 60% of total emissions from the logistics and transport sector with over 1700 megatons of CO2 - equivalent emissions. The most carbon-efficient transportation modes of motorized transport are rail and ocean. One of the threat for this sector is the fact that the production of the key natural resource currently required for most transportation - oil - will decline dramatically. Over the past decade, the transport sector's GHG emissions have increased at a faster rate than any other sector that uses energy. Globalization and economic growth have driven an increased need for logistics - a sector that, up to now, has largely been dependent on fossil fuels. As the logistics industry is expected to continue growing, so will its energy consumption and GHG emissions. Although the fuel efficiency of commercial vehicles and aircraft continues to improve, these gains are more than offset by the increase in their number and the total distances they travel. As a result, energy use by the transport sector is likely to increase at a rapid rate. So the challenge before this sector is uncertainty of oil supplies as well as the increasing price volatility of fossil fuels. And the solution is that it has to improve its energy efficiency and develop viable alternatives to fossil fuels, Also as the pressure of meeting the greenhouse gas emissions target is mounting, the government will increasingly look to this sector to do its part- Leading the Way Towards a Low-Carbon Future. It may also set a target for this industry which will be a great setback if corrective actions are not taken at the right time.
May 2011 27

Materials Management Review

While the need for the logistics sector to respond to the challenge of climate change is clear, low-carbon logistics solutions and flexible transport modes are not yet widely available. The option of switching the transport of goods from a more carbon intensive transport mode to rail, for instance, depends on the railway infrastructure being in place. Improving the efficiency of transport modes also presents a challenge. There are only a few market- ready technologies and solutions today that can meet the specific needs of the transport and logistics sector. This is especially true for air freight and long-distance road transport, where there is currently a lack of alternative technologies and fuels. Sustainability also seems to be a cultural issue: today, many still see a contradiction between economic growth and environmental protection, rather than realizing how they might go hand-in-hand. Governments still have a hard time reaching global political agreements on

reducing greenhouse gas emissions. The recent Copenhagen meet clearly indicates that there is no amicable solution in hand as the blame war between the developed and underdeveloped countries continues. And at the same time combating climate change has become a key topic of public discourse and media coverage. As already demonstrated by many companies and organizations today, sustainability can be a trend-setting business model, opening up new market opportunities and preparing for future scenarios. It can also help to cut costs by introducing new efficient processes . Such innovative processes have led to reduced inputs of natural resources. Still a lot of technological innovation is required to further make these processes more effective and efficient.

'India's Inflation Worries must not be seen in Isolation'

Devjyot Ghoshal

ndia's ongoing inflation-related worries must not be seen in isolation. Instead, it is a challenge being faced by several emerging economies, the finance ministry's chief economic advisor Kaushik Basu said here on Tuesday, while also calling for concerted international action to deal with the issue. Inflation has emerged as a major cause for concern ahead of the Reserve Bank of India's monetary policy announcement next week, when further monetary tightening is expected to curb rising prices. The central bank has already hiked key policy rates eight times in the last year. But inflationary pressures, Basu explained at an event organised by the Indian High Commission and ISAS, had begun building up across emerging economies for some time now, but "since India pulled out of the global recession faster than others, inflation also came to India faster than others". "Some 15 days ago, I was at the G20 meeting in Washington and also the IMF-World Bank annual meetings, (where) the dominant story was inflation, which was not the case one year ago. One year ago, it was India alone, and now is virtually all emerging economies inflating very rapidly," he said. "Unlike on earlier occasions when you would see idiosyncratic inflation behaviour - it happens in one country but doesn't in another country - what we are seeing certainly over the last 6-7 months, and now it is
28 May 2011

just across the board, is that virtually all emerging economies are inflating, and industrialised countries are not growing," Basu added. However, he emphasised the problem in India was on the ebb, contrary to what other emerging economies were currently experiencing. "For India, inflation is still high. We are inflating at about 8 per cent, but it's on a downward trajectory. In most other emerging economies, inflation is going up and several have crossed India, so now it's becoming a global story," he said. Taking the example of Vietnam, where consumer prices have risen over 17 per cent since last year, Basu said there is a feeling that "monetary and fiscal policies are not being as effective in controlling inflation as these used to be." "Yes, there are things that we can do within our own countries and we are working on policies, but this also something that has to be taken up at the level of G20 and various international fora. The whole strategy of inflation management is beginning to change and some of our current problems arise from the fact that we are really adjusting to a new world. But fortunately in India, the direction is right," he said. Inflation in India, Basu added, had come down to over 8 per cent currently from 11 per cent in April last year. Source: Business Standards Materials Management Review

Go for Logistics Network Optimisation

Logistics network optimisation can yield service improvements and significant savings in system-wide warehouse, transportation and inventory costs

ogistics network optimisation can yield significant systems-wide warehousing, transportation and inventory savings. But many companies mistakenly conduct optimisation studies that are almost exclusively data driven. Logistics network optimisation involves an analysis of data and strategy elements to determine the number, size and location of required distribution centers in order to achieve the optimal balance between service levels and logistics costs. While it's a sizable undertaking, network optimisation can yield service improvements and significant savings in system-wide warehouse, transportation and inventory costs. A growing interest in network optimisation among cost-conscious logistics professionals has driven significant growth in the market for "optimisation" software in the last five years. But many companies mistakenly conduct optimisation studies that are almost exclusively data-driven. The assumption: plug in the relevant data on size, weight, volumes, ship-to points and other factors and output the ideal network design. However, in focusing too much on the modeling exercise itself, companies can miss the strategic and practical context for the analysis. This can have serious and expensive consequences. For instance, will the customer base and shipment characteristics used for the analysis change over the next five years, driving up the cost of the once optimised network? Or, will a requirement for a large and ready supply of temporary labor for seasonal spikes cripple your service if the chosen distribution market cannot support such a requirement? No optimisation software can consider these critical, but less data-driven, factors. The capability of optimisation software has improved greatly over the last five years and now enables highly sophisticated analysis. But logistics professionals should rely on network modeling tools as decision support tools, not as the ultimate determinant of a distribution network design. A better approach is to combine these tools with a "top-down" design approach that includes a detailed understanding of the company's Materials Management Review

present and future business strategy and the practical implementation requirements that could impact the recommendation. Avoiding "optimisation as usual" Companies seeking to optimise their distribution networks spend much of their project time collecting data and developing precise operational cost estimates to meet a software package's data requirements. A significant effort is required to process, check, and validate this data. Few, if any, business meetings are held outside the analysis group, few customer meetings and not much time is allocated to defining service parameters. It's about the data. While important, compiling this data is secondary to a clear understanding of overall corporate strategy and its impact on the supply chain. The questions that don't get asked are those that are usually harder to answer, for example: What's the likelihood of future growth? Will acquisitions or divestitures play a part? What are the key service requirements of today's largest customers? Will they be changing? Who are key suppliers today and tomorrow? Will any or all manufacturing move off shore? These questions require direct interaction with the top management of the company, including the senior operations, finance, sales and marketing executives. It's impossible, therefore, for the project to be contained within "the logistics group." High-level sponsorship is necessary and should be sought at the start of the project. Example: A home-improvement products company conducted a "successful" supply chain network modeling exercise and revamped its entire distribution network. Just three months after implementation, however, the company purchased another company with distribution center locations that overlapped its own. The result: redundant distribution centers and inventory duplication. Lesson: By considering the strong likelihood of an imminent acquisition, the company could have better positioned itself by either delaying the optimisation implementation or considering potential harmonization of the two supply chains
May 2011 29

By exploring fundamental business questions at the start a company can be sure that its distribution network will support its overall business strategy, not burden it with unexpected costs. Of equal importance to the strategic business context is the practical operational context for the network recommendation. In the typical approach, locations are often selected before implement-ation issues are truly understood. Implementation is seen as a separate "Phase II" concern. But considering implementation issues early in the analysis is critical. Relevant questions would include: What's the availability of skilled labor in potential markets? Will there be an impact on the existing workforce? Are government grants or incentives available in alternative locations that could positively impact the economic viability of certain markets? Example: An importer and distributor of bearings conducted a supply chain network optimisation study to improve costs and achieve faster time to market. Besides recommending an optimal distribution network, network analysis indicated the cost effectiveness of importing through a Southeastern port. The company completely realigned its distribution based on the results of the network modeling. All worked well until demand and volume at the port increased. The port's capabilities hadn't been considered during the analysis. As a result of an insufficient infrastructure, the port was overwhelmed and unable to efficiently manage the increasing volumes. The result: delays in container processing at the port, which led to product shortages and angry customers. Lesson: Not considering all implementation-related issues directly led to the failure of the company's optimisation effort. Decision-support software is a significant aid for making sense of reams of data, but don't under-estimate the value of street smarts in conducting your network optimisation. Sometimes your best friend is the battletested veteran of 75 warehouse start-ups, providing practical insights to ensure that the recommendation makes sense and can be implemented cost effectively. Six-Step Approach to Network Optimisation Projects The accompanying diagram outlines a sequential sixstep approach to network optimisation projects that, if followed, should lead to sound recommendations that won't be second-guessed after 12 months. Following is more detail for each step. Step One: Define objectives within business strategy How does one ensure an understanding of a company's strategic goals? First, project leaders need to step outside the logistics box and listen. Logisticians should
30 May 2011

meet with senior executives to explore how the supply chain must support the company's profit model - now and in the future. To do this effectively, it's essential to secure executive-level sponsorship and involvement. Talking to key customers and suppliers to understand their needs also is important because their service requirements can dictate the extent of supply chain changes. Since an optimisation may yield an advantage that blunts competitors' approaches, time should be spent understanding their network designs. Step Two: Gather data Designated contacts should be determined to validate data accuracy and completeness; an optimisation effort's success depends upon it. This is particularly important when an outside party, such as a third-party logistic services provider, is conducting the analysis, since poor data will lead to a poor analysis. Some companies are embarrassed to discover they lack important data. The cause isn't lost, however, because data can be mined. Veteran logistics analysts are experienced at digging out information from a variety of sources, including carriers, distribution centers and ERP systems. Step Three: Analyse data Invariably, some data may appear inaccurate given the magnitude of the data collection effort, which often can surpass more than 150,000 records. Data inaccuracy issues must be discussed with the company prior to modeling to determine the proper course of action. For instance, while only a statistically small amount of data may appear incorrect, it may represent an important modeling component. Before logisticians remove or extrapolate that data, the company must understand the potential impact and agree to proceed. Analysts' assumptions must be validated. In one instance, a company wasn't aware of - therefore never mentioned the seasonal variability of portions of its business. Only when logisticians came back with data that clearly indicated inventory spikes in certain months did it realize the extent of seasonality. The information was incorporated into the optimisation analysis and also drove the establishment of better forecasting methods. In another example, data indicated some shipments left a distribution center with peculiar weight information multiple shipments of exactly 99.9 pounds. Could DC associates be keying in a "dummy weight" of 99.9 pounds to meet fast-paced shipping requirements? Logisticians were able to confirm their hunch by getting the historic data from the carrier. They pointed out the ramifications of the issue (e.g., inaccurate transportation cost budgeting) and the company launched a training program on the importance of weight-capture accuracy. Step Four: Establish accurate baseline Materials Management Review

Setting up an accurate baseline - the supply chain as it has historically operated - allows for an accurate comparison against potential future scenarios. To the extent possible, anomalies are eliminated and assumptions are carefully checked, so that the baseline is properly established. If the company believes its transportation costs are $2 million annually, for example, the data collected and reviewed by analysts should be reasonably close to that figure. If it is, the model should work well as a baseline for future scenarios. If there is a discrepancy between company beliefs and data results, logisticians must review with designated company contacts to validate the company beliefs and/or readjust baseline assumptions. Step Five: Analyse & optimise network At this stage, various scenarios - based on the previously discussed supply chain strategy - are developed for modeling. Cost is an important factor, but factors such as delivery reliability, timeliness, and compatibility with production plans are also important elements of the decision process. The network should be analysed with these multiple variables in mind. Logisticians can use sensitivity analysis capabilities of optimisation software to measure the impact of changes in one variable on others. For example, if a product currently requires 48-hour delivery service, what might the impact be if requirements were relaxed to 72 hours? Is such an adjustment possible? If so, the possible effect as product is concentrated in fewer locations could range from fewer cross-docked items, to reduced transportation costs, to a potential reduction in DCs. Logisticians now combine the power of the models with their expertise to create multiple "what-if" scenarios, directly linked to the overall business strategy. Potential solutions may range from minor modifications to dramatic overhauls impacting the entire organization. Often a company's over-familiarity with its business can blind it to opportunities that may initially seem extreme. By raising multiple scenarios, logisticians are able to offer a range of possibilities previously not considered. Step Six: Recommendation In the final stage, real-world logistics experience must be brought to bear to calculate the impact of intangible elements. For instance, an "ideal" modeling option may seem to call for locating a DC in a region that happens to be rural. The "solution" is rendered impractical, however, because the area lacks an available labor pool to allow rapid ramp up from 20 to 200 employees. In another example, one city may be the "ideal" geographical spot, but locating across the state line yields significant state incentives that more than make up for any higher transportation costs. This knowledge comes from an Materials Management Review

understanding of actual business dynamics far beyond modeling software and spreadsheet analysis. Following these six steps should yield an optimisation recommendation that can generate meaningful network improvements, as in the case of a leading manufacturer struggling with an outdated supply-chain strategy and a lack of in-house expertise. Problems included too many distribution points due to a major acquisition, which added an entire distribution infrastructure to its own. This resulted in multiple shipments from different locations to fulfill a single customer order. Making matters worse, the company faced global integration challenges, increasing inventory levels and the elimination of capital for new logistics centers. The company saw these issues as an opportunity for network optimisation. Instead of immediately creating data models, it and its 3PL partner held in-depth sessions, with senior leaders on both sides, to map out an optimised solution that was driven by long-term corporate strategy. While this delayed the data gathering and analysis process it was critical to gaining internal acceptance and full understanding of future strategies. Armed with this knowledge, the 3PL was able to recommend a solution that enhanced the company's competitiveness, establishing an integrated supply chain linking suppliers, internal processes and customers. The solution focused on customer service requirements while lowering logistics costs, including inventory, helping the company toward its objective of cutting logistics costs by $40 million over five years. Conclusion A word of caution from earned experience. As seemingly exhaustive as the optimisation process is, companies should never take the output as gospel. For instance, don't book those "savings" for budget purposes; use them as rough guides. Operational mistakes will still be made (shipping to wrong addresses that lead to returns), new systems will come on line, demand may exceed supply, etc. Instead, use the optimisation as a road map, thought out to the extent possible, but one that may require detours along the way. Remember that focusing exclusively on network modeling without regard for larger strategic or systemic ramifications can often result in sub-optimal results. Logistics professionals should rely on modeling tools as decision support, not as infallible oracles of the "perfect" distribution solution. Only by blending such tools into a detailed understanding of the company's present and future business strategy and the practical implementation requirements that could impact the recommendation, can a network optimisation generate real logistics cost savings. Source: Subhash Raturi, TransREporter Magazine
May 2011 31

WTO UPDATE Lamy Cautions against Weakening the WTO

Pascal Lamy Director General- WTO

irector-General Pascal Lamy, in a speech to the Annual Session of the Parliamentary Conference on the WTO at the WTO headquarters on 22 March 2011, said: "In the current turbulent times, the WTO must act as a catalyst of trust and global unity through the conclusion of the Doha Round. It must make a contribution to a more stable world. A WTO in crisis is not what is expected of responsible members of the international community. Let us not weaken one of the best examples of functioning international cooperation." This is what he said: Ladies and gentlemen, first a big thank you. A thank you - that is - for organising your conference under the WTO roof. It is an honour and a boost to the democratic credentials of our organisation. I have found the programme of your conference impressive, I must say. You have examined a range of different issues, such as the rising tide of bilateral and regional trade pacts, the rebalancing of the rules of the trading system in favour of the poor, and the question of sustainable development. Later today, you will also be broaching the fascinating topic of trade policy-making in an era of mass communication. Unsurprisingly your themes and messages are along the lines of what we hear from our Members. My staff is following your deliberations closely. And the entire WTO stands to benefit from the unique perspective that you - the world's parliamentarians - are able to bring to these different topics. Your views and your contribution enable WTO Members, and the Secretariat alike, to better understand peoples' needs and expectations, and to correct, or even change, the WTO's course if need be. I do not intend to be long in my remarks to you today. What I would like to do is to ensure that you are aware of the crucial moment that the WTO is now in. The Doha Development Agenda, which was launched in 2001, is now entering a critical phase - what some even call "its last window of opportunity." The Doha Round comprises many different topics, as you know. While some relate to the opening of markets, in other words to tariff and subsidy reductions on
32 May 2011

agricultural and industrial goods, and to greater trade opening in services, many other topics are of a more regulatory nature. They have to do with improving the rules-based system within which international trade takes place, placing development at its heart. They comprise topics such as reduction of fisheries subsidies which contribute to overfishing, the relationship between WTO rules and Multilateral Environmental Agreements, disciplines on trade-distorting subsidies, or the reduction of the bureaucratic red tape that slows down international trade, known as trade facilitation, to name a few. Ladies and gentlemen, the "rules-based component" of the Doha Round is just as valuable as its "market access" elements; and should not be discounted, even if it grabs less media headlines. It is the rules of the Multilateral Trading System that prevent the law of the jungle from prevailing in international trade relations. If you look at the disputes that are brought to the WTO for settlement, you will find that many, if not most, have had to do with the "rules" of trade, and not with tariff or subsidy commitments that are being violated. I say this so you are able to appreciate the full value of the Doha Round. Negotiators have made headway on many of the thorniest issues in this negotiation over the years. While these issues sometimes cut along North-South lines, they very often also cut across North-North lines, or even SouthSouth ones. Some of the trickiest remaining issues, that you will have heard about, include defining the exact set of disciplines that will prevail in the fisheries subsidies area, how the Special Safeguard Mechanism will operate in the agricultural area to protect the developing world from sudden price drops or surges in the volume of imports and how to raise ambition across-the-board in industrial goods, agricultural goods, and services trade. While some of the remaining issues are technical in nature, others are, of course, more political. In order to conclude the Round in 2011, as has been called for by the G20 and APEC leaders last year, and as is everyone's expectation now, the Membership agreed at the beginning of the year on a sequence of steps. The next step in that sequence was to have Chairs of different negotiating groups capture the level of progress that Materials Management Review

has been achieved thus far by tabling draft compromise texts. This is expected to happen around Easter. The capturing of progress by Chairs has two fundamental objectives: firstly, it gives an across-theboard transparent picture of the remaining gaps which will need to be addressed in the end game; secondly, it provides a tool to move into a more horizontal phase in the negotiations post Easter. Capturing this progress is therefore a necessary step towards our collective aim of concluding the Round this year. But it is important to bear in mind that texts are a means to an end, and not an end in themselves. They are being prepared to reflect the convergence amongst our Members, and to help us gradually bring the Doha Round to closure. It is therefore fair to say that renouncing on capturing the progress made by Easter would be equivalent to questioning the objective to conclude the Round at the end of 2011. Throwing in the towel now is not what Ministers and Leaders have given as their instructions! There are many reasons of course why we should conclude the Doha Round; not least because of the much needed boost that the Round would give to the global economy. And the boost, or vote of confidence, that it would also give to the Multilateral Trading System; to its resilience, utility, and credibility. A confirmation of the value of the insurance policy against protectionism which has protected all our Members during the economic crisis. In the current turbulent times, the WTO must act as a catalyst of trust and global unity through the conclusion of the Doha Round. It must make a contribution to a more stable world. A WTO "in crisis" is not what is expected of responsible members of the international community. Let us not weaken one of the best examples of functioning international co-operation. But there are other reasons too why we should strive to conclude the Doha Round. Take the issue of food security, a major preoccupation for many governments today across the globe. The Doha Round will help level the playing field in agricultural trade, shifting some agricultural production to the South, and giving the developing world a fairer chance to compete. This is what the developing world has fought for in this Round, and this is why many developing countries call this negotiation the Agriculture Round. By dismantling some of the artificial barriers that prevent food from travelling across the globe, the Doha Round will also enable supply to better respond to demand. After all, trade is nothing other than an international transmission belt as you know. If properly oiled, it allows food to travel from the land of the plenty to the land of the few. The Doha Round will provide more of that oil. It is also my hope that the Round will somehow address the issue of export restrictions, the beggar-thy-neighbour policies that improve the food security of some at the Materials Management Review

expense of others. The most immediate goal, in my view, should be to ensure that the World Food Program's humanitarian aid is not cut-off through such sudden measures. The Doha Round can also contribute to mitigating climate change, allowing for trade opening in the kinds of environmental goods and services that could lower our collective carbon footprint. The goods in question include solar panels and windmills, and the services include environmental consultancy services of various sorts. We should not impede trade in these goods and services through tariff or other non-tariff barriers. We should promote these technologies, rather than penalize them. The Doha Round will allow us to correct our course on this critically important issue. Making a success of this negotiation would demonstrate that the Multilateral Trading System can respond to environmental needs. The Doha Round also gives special attention to the world's least-developed countries, as you know. You are already familiar with the Duty-Free Quota-Free package that it contains, a package that LDCs have strongly fought for and now defend. It must also provide responses to the concerns of African cotton producers. In parallel to our efforts to conclude the Doha Round, we are also working on strengthening Aid for Trade, the purpose of which is to help developing countries build capacity to translate market opportunities into trade reality. The Third Aid for Trade "Global Review" that will take place in July this year will help us look at the impact that Aid for Trade is having on the ground. We have received over 250 case studies, real life stories which tell us what is working and not working on the many Aid for Trade projects that are being implemented across the globe. I would encourage you to follow the results of this review closely and to ensure that you make Aid for Trade part of your trade landscape at home. Ladies and gentlemen, in less than two months the United Nations will host its Fourth Conference on Leastdeveloped Countries in Istanbul. This will provide us with a unique opportunity to evaluate the progress that the world is making in ensuring that there are fewer LDCs. Trade has a role to play in empowering the world's poorest countries to fight their way out of poverty, and I hope that there will be a robust outcome on trade and trade capacity building. I am confident that by then we will be well on course to welcome an LDC country Vanuatu - as a new member of the WTO family. Ladies and gentlemen, the Doha Round is as relevant to the world today as it was in the moment that it was launched. But I am conscious that we cannot conclude these negotiations without your explicit support. Hence the importance of our dialogue today. The floor is yours. I look forward to your views. Source: WTO Website.
May 2011 33

The Eight Green Rules

To develop policies that are both good for the planet and good for business, corporate leaders must consider these questions Reji Pillai, Leader for Energy and Utility Industry, IBM India/South Asia feedback@livemint.com

usiness leaders across India now face the daunting task of becoming more sensitive to their companies energy consumption and environmental impact. Organizations are realizing that being green is good for business, positively affecting brand image and fast becoming a competitive differentiator for customers, partners and suppliers. The fact that going green can reduce costs and thus improve the bottom line simply increases the level of interest ingoing green. While environmental concerns may start with the chief executive, they quickly filter down to other C-suite executives and line-of-business leaders, who are being asked to quantify and reduce corporate energy use and environmental footprints, streamline supply chains, meet regulatory requirements and modify information technology (IT) departments to drive more energyefficient operations. The total data centre capacity in India is expected to reach 5.1 million sq. ft by 2012 and is projected to grow at a compound annual growth rate of 31% from 2007 to 2012, according to Gartner. These activities are not merely environmentally responsible: they can also drive cost savingsanother universal corporate mandate. For example, according to IBMs projections, energy costs eat 30-40% of a companys operational budgetand these costs are projected to double over the next five years. A single dollar in energy savings can often drive an additional $6 to $8 in operational savings. To develop policies that are both good for the planet and good for business, corporate leaders must consider these questions: 1. Are all aspects of the business, including operations, IT and product lifecycle management, efficient and protective of the environment? 2. As part of the overall strategy to increase business efficiency, should the organization be considering environmental stewardship and energy consumption as new business barometers? 3. Does the organization maintain a public commitment to meaningful and achievable goals, with transparency in reporting progress in meeting those goals? Each of these issues can seem complicated when considered individually and perhaps overwhelming when viewed as an interrelated group. They require a framework that helps identify and prioritize environmental efforts by illustrating how problems and opportunities can be broken down into distinct areas

and then segmented into manageable projects to be addressed. These projects can be joined to form a crossorganizational program managing energy and environmental issues. Framework: This framework must address the needs of various executives in developing and implementing energy and environment strategies: the CEOs need to respond to customer, government and employee expectations; the chief financial officers need to deal with changing cost dynamics for energy; the chief operating officers and line-of-business needs to design and implement new processes; and, the chief information officers need to increase computing power while managing energy consumption. Overall, this framework must cover business components ranging from strategy to business operationscommon to any organization dealing with energy and environment issues. Strategy: The creation of an enterprise-wide energy and environment strategy as part of an overarching corporate social responsibility plan can help companies address green issues, resulting in improved financial and environmental outcomes. Issues to be considered include the alignment of a companys environmental strategy into an overall business strategy and how environmental values may be translated into an improved brand image. People: The impact of employee behaviors and policies on the environment is significant. Commute time and business travel form a large part of an individuals carbon footprint. The use of online collaboration tools and policies that support reduction in commuting and traveling can also have an impact on costs. Companies also are discovering that their environmental policies and practices can impact their ability to attract and retain top talent. Information: With data compounding between 35% and 70% annually in some industries, its critical for companies to better manage their data infrastructures. Optimized collection, analysis, tiering and storage of key information helps companies comply with reporting mandates while minimizing their data footprints. These same information strategies improve business operations by improving information access and system response. They help reduce storage needs through sharing, elimination of redundancies and compression. Product: As companies begin to understand the Materials Management Review

34

May 2011

environmental impact of their products or services across the entire product lifecycle, they can design products in a manner that has a lower environmental impact. Streamlining product development and manufacturing also means less material used, less waste created and less energy consumed. Concurrently, an examination of the product or service lifecycle often helps businesses find and exploit market opportunities. Finally, the need to reduce energy consumption is driving an increase in the energy-management intelligence built into certain products. Technology: Information technology is putting increasing levels of stress on power and cooling infrastructures. According to IBM estimates, IT kilowatt-hour usage has increased fivefold in the past five years. This IT-related energy use contributes to the establishments greenhouse gas emissions. CIOs and IT managers view this situation as an economic and environmental crisis. Corporations need IT energy efficiency strategies designed to help them focus their efforts. A thorough understanding of IT energy consumption, operations and constraints is the foundation for improvement. From this foundation, companies can devise strategies to help them improve IT efficiency and resiliency, address emissions, reduce energy costs and measure their success against business goals. Property: Companies need to reduce the cost and greenhouse gas emissions of their physical assets-from office buildings to truck fleets. The process starts with determining and managing the environmental impact of physical assets and properly maintaining all property for energy-efficient operations and reduced environmental impact. Through improved maintenance and through improved tracking, deployment, location, and management of facilities and properties, reductions in environmental impact can be achieved. Business operations: Corporations need to transform business processes to reduce environmental impact for operations end-to-end. Consider energy or water consumption, as a start. Understanding and controlling

these costs can be achieved only once a company measures its existing use and compares it against conservation benchmarks. Through the use of smart systems, dramatic efficiency improvement can take place. Any transformation plan put into place must be communicated to key stakeholders. As an initiative in the energy sector in India, IBM is working with several like-minded companies to form a consortium called the Intelligent Utility Network, or IUN. IBMs IUN is an information architecture and infrastructure that enables the continuous automated monitoring of a utilitys assets and operations as well as customer electricity usage, and uses this on demand information to improve service, reliability and efficiency. This effort includes: facilitating an industry community for collaboration, knowledge sharing, education and innovation; working with energy industry and standards groups, and the development and deployment of IUN strategic solutions and technologies. North Delhi Power Ltd (NDPL) is the first Indian company to join the IUN coalition, which also includes utilities in North America, Europe and Asia Pacific regionsall working together to accelerate the development of common standards, technology solutions and processes for intelligent networks. The expansion of the coalition into an emerging market such as India is significant. By 2010, nearly 60 megacities worldwidemost of these in emerging markets will have populations of five million or more, up nearly 50% since 2001. Governments, regulators and utility companies need to ensure that these mega-cities survive under the crush of demand for access to the power grid. In conclusion, it is largely seen that addressing any of the seven key components of business can tangibly lower a companys energy usage and reduce its environmental impact. Addressing them in combination, however, can dramatically amplify those effects in making a company more competitive, successful and social responsible.

COMMODITY INDEX
Commodities Index Bullion Cement Chemicals Edible Oil Foodgrains Fuel Indl Metals Other Agricom Plastics Dayss Index 2305.8 6152.8 1765.1 1635.8 1367.1 1777.6 1728.9 1604.4 1676.4 1852.0 Prev. Index 2288.2 5996.9 1765.1 1635.8 1362.2 1790.3 1728.9 1583.1 1666.3 1852.0 Week Ago 2237.0 5555.1 1765.1 1593.7 1376.1 1790.6 1728.9 1600.1 1649.9 1886.1 Month Ago 2200.7 5095.0 1797.8 1488.5 1391.3 1826.7 1728.9 1587.3 1640.2 1926.9

Source: ET Intelligence Group Database dated 22nd April 2011 Materials Management Review
May 2011 35

Storage is Becoming a Strategic Investment Priority for Companies

ith enterprises and government making significant investments to cut down on storage costs and making more efficient and reliable use of data, IBM sees increasing demand for storage capacity across verticals and market segments in India. In an interview, Sandeep Dutta, vice-president (Storage, Systems and Technology Group), IBM India/SA, tells Debojyoti Ghosh the next big growth drivers in the storage space and how it plans to tap into the mid-market segment. Excerpts: How does IBM see its storage business growing in the Indian market and what has been the story so far? Demand for storage capacity continues to grow at a compound annual growth rate of over 43% from 20082013. Data explosion is happening at an exponential rate across verticals and across market segments in India. The explosion of information created by business is making storage a strategic investment priority for companies of all sizes. IDC projects that the storage market in India is expected to grow at CAGR of 13% in 2011. We are investing both through acquisitions and organic development to drive innovation in key storage technologies across software and hardware. Additionally, we are making multimillion-dollar development investments in high-end file storage, archiving solutions, disk virtualisation and tape density to continue to drive IBM leadership. Our storage business in India has been growing at a tremendous pace. According to the recently released IDC report, IBM maintained its leadership in 2010 with a 26.2% market share, in revenue terms, and over 4% points lead over its nearest competitor. Do you expect business to grow from the current levels? Which are the verticals that will drive this growth? Certainly, enterprises of all sizes and governments are making significant investments to address three main challenges: cutting storage costs and making more efficient and reliable use of data; increasing capacity to store data on a massive scale; and categorising and prioritising data to gain insight through analytics. We have invested billions over the last few years in innovations and believe that this will continue to help drive the momentum we are seeing in our storage business. In addition to the mid-market segment, we

believe sectors including telco, public/government sector and banking driving growth this year. How big is the small and medium business (SMB) market for IBM in India? Mid sized businesses are responsible for 75% of the GDP globally and employ 90% of the global workforce. This market is, and will remain, a key focus for IBM. We will continue to focus on aggressively increasing its presence in tier 2 and tier 3 cities through our geoexpansion strategy and building our partner base to take our new launches, such as DS3500 entry level disk storage series and StorwizeV7000 which is suited to address the requirements of mid-sized clients. Our focus on geo expansion and small deals resulted in about 75% growth in our entry level storage. We improved our share in the overall external disk storage market by upping our market share from 27.1% in Q3 2010 to 29% in Q4 2010. How are you planning to tap into the SMB segment? We are extremely optimistic about the potential for storage in the mid-market segment. To ensure that our partners keep pace with the fast growing storage business, IBM has been investing a lot in partner training and enablement under IBM's Storage Champions programme. We have over 35 mid-range storage champs and expect to increase this to 60 next year. In 2010, about 300 partners did storage business with us which is a nearly 20% growth over previous year. Going forward, what trends will the storage market in India see? 2011 and beyond, will continue to see storage as a strategic investment priority for mid-sized companies. Customers will be focused on storage efficiency or doing more with the less, and this will see an increase in the adoption of consolidation, virtualisation and deduplication technologies. We have a robust portfolio to address these pain points, including Storwize V7000 that is specifically targeted at offering mid-sized companies. Going forward, we will continue to invest in and further strengthen our partner community by constantly educating and enabling them. We expect about 70-75% of our consolidated business to be driven through our channel partners. Source: Debojyoti Ghosh, Financial Express Materials Management Review

36

May 2011

Weak Form Efficiency Of Indian Foreign Exchange Market

Dr. Yash Pal Taneja, Sr. Scale Assist. Prof., GGDSD College, dryash.pal@gmail.com Manpreet Kaur, Jr. Research Fellow, Punjab University

bstract : The present study examines the efficiency of the Indian foreign exchange market in its weak form using autocorrelation test, runs test and augmented dickey fuller test. It considers daily foreign exchange data for INR- USD exchange rate for a period of eight years i.e. from April 2002 to March 2010. The finding of this study is that the Indian foreign exchange market is efficient in its weak form and therefore follows a random walk process. Therefore, the opportunity of making excess returns in the market is ruled out. Keywords: Weak form of efficiency, Random walk

exchange traders can generate (abnormal) returns through speculation. Aroskar et al. (2004) investigated the impact of the 1992 European crisis on FX market efficiency. Four currencies (German mark, British pound, French franc, and Italian lira) were analyzed by dividing time series data into precrisis, crisis, and postcrisis periods. Strong evidence of market inefficiency was found. Further, a long-term relationship was identified by co-integration test for all currencies during all the three periods (except the British pound during the postcrisis period). Wickremasinghe (2005) tested weak form efficiency of the FX market in Sri Lanka using six bilateral foreign exchange rates: Japanese yen (JPY), the UK pound (GBP), the US dollar (USD), French franc (FRF), Indian rupee (INR) and German mark (DM) for the period January 1986 to November 2000. Results from unit root test indicated that the Sri Lankan FX market was consistent with the weak -form of the EMH. Nath (2006) examined market efficiency (weak form of EMH) in Indian FX market. The daily closing INRUSD exchange rate from March 1993 to May 2004 was used. Weak form of efficiency was tested by examining the autocorrelation structure (by ACF and PACF) of return series and by testing stationarity of prices (by Augmented Dickey fuller test). It was found that weak form of efficiency could not be rejected in Indian FX market. Oh et al. (2007) investigated market efficiency using FX market indices for 17 countries during two periods from 1984 to 1998 and from 1999 to 2004. It was found that the markets with a larger liquidity such as European and North American FX markets had higher market efficiency than those with a smaller liquidity such as the African and Asian markets except Japan. Kisaka et al. (2008) examined weak form of EMH of FX market in Kenya using run tests, unit root tests and the Ljung-Box Q-statistics. The data covered the period starting January 1994 to June 2007 for the daily closing spot price of the Kenya shillings per US dollar exchange rate. It was concluded that the foreign exchange rate market was not efficient due to significant patterns, trend stationarity and autocorrelation in foreign exchange returns. Wickremasinghe and Kim (2008) examined the empirical validity of the weak-form of EMH for the FX market of Sri Lanka, using a battery of (univariate and panel) unit root tests. Monthly exchange rates for four major currencies (Indian rupee, UK pound, US dollar
May 2011 37

INTRODUCTION : The concept of market efficiency when used with respect to speculative markets means that market prices should fully and instantaneously reflect all information available to market participants (Fama, 1970). Therefore, it should be impossible to earn excess returns to speculation. Also past asset prices should not have any predictive ability. Fama classified the market efficiency into three categories depending on the information set that is fully reflected in the asset prices. Weak - Form of Efficiency, popularly known as Random Walk Theory states that the current financial asset prices reflect all the information that is contained in the historical sequence of prices. Semi - Strong Form of Efficiency, states that current market prices not only reflect all information content of historical prices but also reflect all the information, which are publicly available. Strong - Form of Efficiency, states that current market prices reflect all information whether it is publicly available or private information (insiders information). The existing literature on random walk test in stock market is rich but there is not remarkable research on random walk and efficiency tests in the foreign exchange (FX) market in India. The premise of the random walk and efficiency hypothesis is that if price formation in a foreign exchange market is random and the return from that market is not predictable, then the hypothesis of market efficiency will not be rejected. In this (efficient) market it is impossible for an exchange trader to gain excess returns over time through speculation, because prices do reflect all relevant and available market information. Conversely, if the return from a financial market is predictable and in this sense non-random, then the markets are not efficient, which implies that the Materials Management Review

and Japanese yen) vis--vis the Sri Lankan rupee were considered. The results indicated that the four exchange rates studied follow a random walk, thus supporting the validity of the weak-form EMH. Azad (2009) tested the random walk and efficiency hypothesis for 12 Asia-Pacific foreign exchange markets. The hypothesis was tested using individual as well as panel unit root tests and two variance-ratio tests. The results indicated that the markets were efficient with the high frequency (daily) data but not with the medium (weekly) frequency data. Giannellis and Papadopoulos (2009) tested the efficiency of three Central & Eastern European Countries - members of the EU. They found that Poland/Euro FOREX market was efficient, the Czech/ Euro FOREX market was not, while the Slovak/Euro FOREX market was quasi-efficient. Noman and Ahmed (2009) examined the weak form efficiency of the FX markets in seven SAARC countries using monthly return series for each of these markets over a period of 21 years (19852005). They concluded that FX markets in SAARC countries were weak form efficient by using unit root and variance ratio tests. Chiang et al. (2010) used the traditional variance ratio test of Lo and MacKinlay (1988, 1989), the non-parametric-based variance ratio test of Wright (2000) and the multiple-variance ratio test of Chow and Denning (1993) to examine the efficiency of FX markets of Japan, South Korea, Taiwan and the Philippines. They concluded that the FX markets of Japan, South Korea and the Philippines were weak form efficient but that of Taiwan was inefficient. FX market efficiency is an important consideration for all currency market participants. An investment in a foreign security has two components: a security gain or loss and a foreign exchange gain or loss. Investors and traders in global markets frequently hedge their currency exposures, while speculators take positions in foreign currencies based on their own expectations. An inefficient foreign exchange market provides opportunities for profitable foreign exchange transactions. Participants in an inefficient foreign exchange market can use various devises such as trading rules and statistical techniques to predict the movement of exchange rates. Thus, the objective of this paper is to test the weak form of efficiency of the Indian foreign exchange market during the period 2002 to 2010. DATA AND METHODOLOGY The present study considers the foreign exchange data for INR- USD exchange rate for the period from April 2002 to March 2010. The daily foreign Indian Rupee- US Dollar exchange rate data has been taken from RBI website (www.rbi.org.in). Daily FX returns are calculated using the following equation: Rt = Ln (Pt/ Pt-1) * 100

Where, Rt is the return on day t, Pt is the exchange rate on day t and Pt-1 is the exchange rate on day t-1 Weak form of efficiency in the Indian FX market is examined in three ways: first, by examinimg the autocorrelation structure of returns series; second by employing non parametric runs test (test of randomness); and finally by testing stationarity of prices by using Augmented Dickey Fuller (ADF) test. FINDINGS Summary statistics Table 1 depicts summary statistics of FX returns for the period April 2002 to March 2010. Average FX returns during the study period is -0.0027 with standard deviation of 0.3948. Return distribution of FX returns is negatively skewed (-0.103), thus clearly indicating asymmetry of returns from normal distribution. Kurtosis indicates that daily return series of FX is leptokurtic (higher peak as compared to normal distribution). Table: 1 Summary Statistics of FX returns MeanStd. Deviation Skewness Kurtosis FX Returns -0.0027 0.3948 -0.103 7.683 Autocorrelation test Autocorrelation function (ACF) is a test of randomness of FX returns. ACF test is examined to identify the degree of autocorrelation in a time series. It measures the correlation between the current and lagged observations of the time series of FX returns. Table 2 depicts ACF of the FX return series.
Table: 2 Autocorrelation of FX returns Box-Ljung Statistic Std. Error Value Df Sig. 0.023 0.023 0.023 0.023 0.023 0.023 0.023 0.023 0.023 0.023 0.023 0.023 0.023 0.023 0.351 0.632 2.646 8.279 8.490 8.548 8.988 9.156 10.220 15.140 15.919 18.041 18.046 18.682 1 2 3 4 5 6 7 8 9 10 11 12 13 14 0.553 0.729 0.449 0.082 0.131 0.201 0.254 0.329 0.333 0.127 0.144 0.114 0.156 0.177

Lag 1 2 3 4 5 6 7 8 9 10 11 12 13 14

Autocorrelation 0.013 -0.012 0.032 0.054 0.010 0.005 -0.015 -0.009 -0.023 0.050 -0.020 0.033 -0.002 0.018

38

May 2011

Materials Management Review

15 16

0.019 -0.035

0.023 0.023

19.411 21.773

15 16

0.196 0.151

The statistical significance of individual autocorrelation coefficients is tested with help of Ljung- Box (LB) statistic. One can find from the above table that for FX returns series, autocorrelation is insignificant for all sixteen lags (as sig. value of all the lags is greater than 0.05). Therefore, it can be concluded that FX return series is insignificantly different from random series. Thus, there is no scope for profitable speculation in Foreign exchange market. Further plot of ACF at various lags known as correlogram is shown in Fig. 1. The solid vertical line in diagram represents the zero axis, observations above the line are positive and those below the line are negative values. Fig: 1 Correlogram of FX returns

Total Cases Number of Runs Z Asymp. Sig. (2-tailed) Note: a. Median

1925 967 0.176 0.860

Table 3 shows that significance value is 0.860 (greater than 0.05), indicating that there is no significant difference of FX returns series from random series. Thus, runs test is in favour of hypothesis that daily FX returns are independent to previous day returns and random walk theory persists and is therefore weak form efficient. Augmented dickey Fuller (ADF) test In this section the weak efficiency of the Indian foreign exchange market based on stationarity of prices is tested. The unit root test is conducted for this purpose. The unit root test determines whether the FX returns is a random walk process. The results of stationarity of the foreign exchange returns using the ADF test are presented in Table 4 below. The null hypothesis is that the foreign exchange return series is non stationary (i.e. have a unit root). The alternative hypothesis is that the series is stationary. Table 4: ADF test of FX returns Augmented dickey fuller test statistic = Test critical values: 1% level = 5 % level = 10 % level = -

As is very clear from the above figure, the autocorrelations at various lags float around zero. It indicates that the immediate past returns do have an impact on the present returns. This is not the violation of weak form of efficiency as mean reversion process makes the return back to its mean level and hovers around zero. Runs test The run test, also called Geary test, is a non-parametric test whereby the number of sequences of consecutive positive and negative returns is tabulated and compared against its sampling distribution under the random walk hypothesis. A run is defined as the repeated occurrence of the same value or category of a variable. The objective of a run test is to determine whether exchange returns are independent and identically distributed. Table 3 presents runs test of exchange returns. Table: 3 Runs Test of FX returns FX returns a Test Value 0.000000 Cases < Test Value 944 Cases >= Test Value 981 Materials Management Review

20.47162 3.962854 3.412163 3.128003

One can find from the above table that null hypothesis of unit root is rejected in favour of unit alternative as test statistic is more negative than critical value. This supports evidence of weak form of market efficiency. The results of three alternate tests i.e. autocorrelation, runs test and ADF revealed that the Indian FX market is efficient in the weak form and therefore follows a random walk process. Thus, the opportunity of making excess returns in the market is ruled out. The findings are similar to Wickremasinghe (2005), Nath (2006), Wickremasinghe and Kim (2008) and Ahmed (2009). However, the findings are contrary to Aroskar et al. (2004) and Kisaka et al. (2008) SUMMARY AND CONCLUSION The study examined the efficiency of the Indian foreign exchange market in its weak form using autocorrelation test, runs test and augmented dickey fuller test. The data comprised of daily foreign exchange data for INR- USD exchange rate for a period of eight years i.e. from April 2002 to March 2010. The results provided evidence in
May 2011 39

favour of weak form of efficient market hypothesis indicating that the Indian foreign exchange market is efficient and follows a random walk process. Therefore, the opportunity of making excess returns in the market is ruled out and the exchange traders cannot generate abnormal returns through speculation. REFERENCES 1. Aroskar R., Sarkar S.K. and Swanson P.E. (2004), "European foreign exchange market efficiency: Evidence based on crisis and noncrisis periods", International Review of Financial Analysis, Vol. 13, Issue 3, pp. 333- 347. Azad A.S.M.S. (2009)," Random walk and efficiency tests in the Asia-Pacific foreign exchange markets: Evidence from the post-Asian currency crisis data", Research in International Business and Finance, Vol. 23, Issue 3, pp. 322-338. Chiang S.M., Lee, Y.H., Su, H.M. and Tzou, Y.P. (2010) "Efficiency tests of foreign exchange markets for four Asian Countries", Research in International Business and Finance, Vol. 24, Issue 3, pp. 284- 294. Giannellis N and Papadopoulos A.P. (2009), "Testing for efficiency in selected developing foreign exchange markets: An equilibrium-based approach", Economic Modelling, Vol. 26, Issue 1, pp. 155- 166. Kisaka S.E., Rose N.W., Ganesh P. and Gituro W. (2008) "An analysis of the efficiency of the foreign exchange market in Kenya." Economics Bulletin, Vol. 14, No. 2 pp. 1-13. Nath,G.C. (2006), "Market efficiency and Volatility in Indian FX Market", ICFAI Journal of Applied Finance, Vol. 12, No. 1, pp. 17-29, 2006. Noman, A.M. and Ahmed, M.U. (2009), "Efficiency of the foreign exchange markets in South Asia", AfroAsian Journal of Finance and Accounting, Vol. 1, No. 4, pp. 295- 305. Oh G., Kim S. and Eom C. (2007), "Market efficiency in foreign exchange markets", Physica A, Vol. 382, Issue 1, pp. 209-212. Wickremasinghe, G.B. (2005), "Efficiency of Foreign Exchange Markets: A Developing Country Perspective", Asian Academy of Management Journal Vol.10, No.1, 1-17.

Indian Institute of Materials Management

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

2.

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.

3.

4.

5.

6.

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. Materials Management Review

7.

8.

9.

10. Wickremasinghe, G.B. and Kim, J.H. (2008), "WeakForm Efficiency of Foreign Exchange Markets of Developing Economies", Journal of Emerging Market Finance, Vol. 7, No. 2, pp. 169-196.

40

May 2011

Mom And Pop Stores Are Not Simply Going Away

Gianfranco Casati Group Chief Executive (Products), and Anish Gupta Managing Partner, Products Operating Group, Accenture India

he volatility in commodity and raw materials prices has been a major concern for manufacturing companies globally. In a highly competitive market place, passing on the rise in input costs to the consumer is not always the wisest move. Companies are trying to absorb the rising costs by investing in consistent supplies. One of the biggest priorities is to make the supply chain more efficient and resilient. Gianfranco Casati, group chief executive (products), Accenture Global, who heads the companys consulting services business for sectors ranging from consumer goods, automotive and airline to health and life sciences and freight and logistics, says operational efficiencies and growth are two effective ways to counter the impact of commodity price volatility. Casati and Anish Gupta, managing partner, products operating group, Accenture India, recently spoke to Amit Ranjan Red on the compelling issues before manufacturers and marketers today. A global resource crunch has been affecting commodity prices the world over for some time now. In many cases, commodity prices are up by 100-150 per cent or even more compared to a year or two ago. How severely is it affecting product manufacturing companies? Casati: It is a big problem and it is global. It doesnt penalise India against others - it is common the world over. It is a problem because the market is not prepared to pay higher prices for finished goods, while raw materials are costing much more. We see it particularly acute for consumer goods and transportation companies. In transportation, it is affecting airlines in particular. Every airline client we meet is extremely concerned about the cost of fuel and he doesnt want it to be reflected in the price of tickets. It is an issue but I dont think it will trigger immediate increase in prices, but there is a potential threat. Is it not already reflecting in the inflation the country is facing? Is there no connect? Casati: In the rest of the world, if I look at the mature economies Europe and North America in particular there are signs of inflation coming up. And that is an Materials Management Review

issue because normally when you see inflation, central banks raise the interest rates to cool it down. As we are just out of a deep recession, companies are still trying to come out of the crisis, and just raising the cost of money is going to put them back in a bad phase. So the fine balance that central banks are trying to work out is different from the past, and we cannot learn much from the past in this case. There is going to be a continuous evolution and I expect it to be rather volatile. I mean, they may adjust the interest rates to see how the economy reacts and then move up and down again. Gupta: Thats right. The only added dimension is that there is a bit of a supply side issue for India as well. Our incomes have risen and therefore demand has risen, and I think there is some truth there that our supply sources havent kept pace and therefore there is going to be that inherent pressure of inflation. Through appropriate fiscal and monetary policy you might be able to control it, but over the long term the only sustainable answer is that you make sure that your supply and productivity improves. What are Indian companies doing to deal with it? Gupta: First and foremost, companies are doing a lot of soul-searching to what can they do to reduce costs it is not easy to pass on higher input costs to the consumer. Second, Indian companies are trying to find, what I would call, higher value markets. Globalisation from an Indian companys standpoint means that you try to get into newer markets where your realisations are better, and therefore, to some extent, by changing your balance of portfolio in that direction, you try to improve on margin. So, I think, it is a bit of both while you are try to reduce costs, you take a harder look on managing your portfolio better to generate better results. The other way to deal with it relates to analytics. That is, how can companies use their internal data more effectively to identify new growth opportunities. Take the consumer goods space, where we know that distribution is very fragmented. A lot of our clients are looking at how to use the data that resides with them to
May 2011 41

better target mom and pop stores and increase sales to them. So there are initiatives both at the macro and micro levels that companies are taking to meet the rising commodity prices. The volatility in commodity markets affects the supply chain quite seriously. How can companies make their supply chain more efficient and resilient to such ups and downs? Casati: The scarcity of certain raw materials or commodities is a fact. The way you can make your supply chain more effective and resilient is by making it more productive that is, using less stock for the same amount of production. This is where companies are putting a lot of their efforts. The second is to put in place a multiple sources structure. A multi-sources strategy not only helps in creating efficiency and cost savings but also surviving the volatilities in commodity or raw material prices. Such a strategy means having different vendors in different parts of the world. A more strategic relationship with certain vendors in different parts of the world today is a must. Companies that already had such relationships are benefitting from it now. Others are all looking to fast implement a multi-sources strategy.

Resilience comes from trying to minimise the stuff in the supply chain; so you reduce inventories whether it is raw materials, packaging materials or finished goods
Gupta: Absolutely, those are the things that clients in India too are focusing on. Resilience comes from trying to minimise the stuff in the supply chain; so you reduce your inventories whether it is raw materials, packaging materials or even finished goods. And that is partly what companies here are trying to do. The fact is that we are a growing economy and new products are coming in. So even on the front-end of the supply chain where you deal with your distributors you try to minimise the inventory, which in turn helps you withstand the pressures on the back end. At the same time, as you launch new products, you need to make sure there is not a huge inventory of existing products that needs to be cleared out. We are helping a large number of our clients in managing their inventories better by making it more responsive to the changing conditions, both at the back-and front-end of the supply chain. How should companies decide how much of the rising input costs they should absorb and what they must pass on to the consumer?

Casati: Without squeezing the margins, you mean! As we said, it is about becoming more efficient. You have a higher cost of inputs and the same price for outputs, and you want to keep the same margins. The way to do it is by becoming more efficient in between the two extremes. Inevitably, being more efficient on the supply chain is what companies are doing. The other thing they are trying to do is to grow. If you have higher costs of raw materials and the same output price, one way to resolve the equation is to grow so that you have fixed costs in between, which could be spread out on a much higher number of units. One of the reasons why companies are so keen to grow today is that they can make synergies, and that is the way they can protect margins without changing price. Supply chain efficiency and growth are the two answers that companies are trying to provide to this equation that is out of balance. Gupta: The philosophical point that I would like to add to that is that given the highly competitive nature of industry, gone are the days when you can say (from an Indian standpoint) if there is an increase in input costs I can just offload it to the consumer. The fact of the matter is that some can do it better than others, and I can tell you that virtually every Indian company and specially our clients are really looking very hard at how do they absorb to the extent possible the increase in input costs, with, say, marginal increase in the output costs by improving efficiency and growth. What are some of the trends you see on the product innovation side? Casati: Yes, there are other elements of innovation that are more related to products rather than processes. Take the automotive sector, and you see some big discontinuities coming. One is associated with sustainability. Consumers are becoming sensitive to sustainability and react positively to such offers. So we see more cars today that use fuel more efficiently, use reusable components in manufacturing, are hybrids and so on. Second is related to mobility. We see a lot of innovations happening in making people more connected while they are on the move. It is all technology driven and confined not to just smart phones. Money, purchases, data almost everything can be managed remotely or when youre travelling. Mobility and interconnectedness are big drivers of innovation in products today. The third, which is less technology driven and more marketing driven, is to create products that are more specialised and can be targeted to specific communities. Instead of 10 shampoos and 10 soaps in the market, you find hundreds for different skin types, different seasons Materials Management Review

42

May 2011

and so on. Thus, there is certainly more propensity for the consumer to buy that product. Do you see some uniqueness in the way marketers are targeting these specific communities? Casati: We see a lot of companies creating communities of consumers around specific products. There are automobile companies creating communities for bikers who talk between themselves about bikes, accessories and so on. This triggers spending and drives companies to create more and more specialised products that go well with specific communities. The best companies create communities out of the blue communities that never really existed. A coffee major, for instance, created a community around espresso on the internet, which scanned through 15-20 different blends with different aromas, tastes and so on. Suddenly, it became extremely successful and found a lot of loyalty for its espresso brands. What about innovation on the retail front? Casati: When it comes to retail, honestly, it is quite sensitive to economic trends. As we have gone through a deep economic recession, the retailers strategy has been centred on price. Price has been the main driver of success for retailers over the past three and a half years. Moving beyond the contingency of the crisis, we see a growing trend towards multiple channels, which means companies going for multiple formats for their brands for, say, different retail formats department store, super markets, hyper markets and so on. However, a key innovation that stands out is many companies and retailers are using the internet as the direct channel to reach out to consumers. This is happening even in the case of perishable goods. Major food retailers have organised to have a short supply chain that can deliver replenishments daily or even twice a day. A further evolution we are seeing is the food retailer bringing your own basket to your house. This is becoming a trend in major North American and European cities.

with an existing supply chain and distribution system adding the direct-to-consumer framework on top, and it seems to work. We see significant innovation happening on this front. The crisis has made the difference between the consumer and retail collapse to an extent. On the one hand, we see more retailers going for private labels, on the other, more consumer goods companies are going direct to the consumer, skipping the retail channel. It is obvious in both cases they improve on margins. The private labels dont have to add the 15 per cent on marketing and going direct means you avoid the intermediation margins of retailers. This dynamics is reshaping the industry, but the change will be gradual because retailers cannot upset consumer goods companies too much and the other way around applies as well. How is the Indian retail experience different? How have global models worked in our country? Gupta: Lets look at grocery or consumer goods retail in the country. India is largely a morn and pop market. It is quite dangerous for companies to blindly adopt global business models here. Initially, the players that entered organised retail had a perspective that there is high level of inefficiency in the traditional channel and by knocking off intermediary A, B and C, they can make all this money. The reality is when they entered they found the traditional channel to be quite efficient. So from an organised retail standpoint, most companies are still finding their feet. Even the biggest retailers in the world are finding India to have some unique challenges. So they will have to be innovative both at the back and front end, on the supply chain side and so on. Even when they are getting supplies from global consumer goods companies, the supply chain efficiencies are nowhere near to what they are globally. There are a large number of commodities where no consumer goods companies operate. So the retailer has to create a supply chain from scratch to get consistent quality and supplies. Our mom and pop stores are not simply going to go away. The traditional trade may be growing slower than the modern, but the fact is it is by and far the way most Indian consumers shop. And there are interesting ways that traditional retail is innovating to keep itself relevant to consumers. A housewife can call the kirana six times a day and get almost anything, whatever it costs, home delivered. It doesnt have to be a purchase of at least Rs.1,000. So the kiranas are focused on efficient service. Source: Indian Management- April 2011

A key innovation is many companies and retailers are using the internet as the direct channel to reach out to consumers even in the case of perishable goods
There were online retailers that failed at the time of the internet bubble 10 years ago... Casati: Ten years ago the online retailers failed because they didnt have a supply chain infrastructure available. Now, the model that makes sense is the traditional retailer Materials Management Review

May 2011

43

Right to Corruption Free Governance

We need a complete overhaul of our anti-corruption set up if we are serious about tackling corruption Arvind Kejriwal, Eminent RTI & Anti Corruption Activist and Raman Magsaysay Award Winner parivartan_india@rediffmail.com

hy is it that hardly anyone goes to jail despite overwhelming evidence against corruption in public domain? Because we have such anticorruption laws and agencies, which cant work on paper itself. At the centre, we have CVC, which though independent, is an advisory body. Predictably, whenever the advice is against a senior officer, it is rarely accepted. According to one former CVC, during his tenure, whenever he felt that the officer ought to go to jail or needed to be dismissed from the job, he was let off with a warning. CBI, though independent, is completely under the control of the government. Before starting any investigation or before prosecuting any officer or politician, it has to take permission from the government, which often runs on the support of those who have to be investigated or prosecuted. The anti-corruption machinery at state level is similarly compromised. They are either in the control of the state government or merely advisory in nature. Likewise, our anti-corruption laws are highly inadequate. You would be shocked to know that even when a person is convicted of corruption, there is no provision to recover the loss that he caused to the government or to confiscate his ill gotten wealth. He can actually come out of jail and enjoy the bribe money! Therefore, we need a complete overhaul of our anticorruption set up if we are serious about tackling corruption. Many people ask me - Can India turn around? I feel Indians are by and large honest, intelligent and hard working people. They are victims of a rotten system. There was much worse corruption in Hong Kong in 1970s than we have in India today. Collusion between police and mafia increased and crime rate went up. Lakhs of people came on the streets. As a result, the government was forced to set up an Independent Commission Against

Corruption (ICAC), which was given complete powers. In the first instance, ICAC sacked 119 out of 180 police officers. This sent a strong message to the bureaucracy that corruption would not be tolerated. Today, Hong Kong has one of the most honest governance machinery. India can also turn around if we had similar anticorruption body. One thought that so much public anger was a great political opportunity for a sincere government to push for radical reforms of anti-corruption systems. However, public criticism seems to have made little difference to the present government. For the Lokpal Bill drafted by the government, which is being touted as an antidote to corruption, is an insult to the whole nation. Rather than strengthening anti corruption systems, this bill if passed, will end up weakening whatever exists in the name of anti corruption today. The principal objections to the governments proposal are as follows: 1. Lokpal will not have any power to either initiate action suo motu in any case or even receive complaints of corruption from general public. The Materials Management Review

44

May 2011

general public will make complaints to the speaker of Lok Sabha or chairperson of Rajya Sabha. Only those complaints forwarded by Speaker of Lok Sabha/ Chairperson of Rajya Sabha to Lokpal would be investigated by Lokpal. This not only severely restricts the functioning of Lokpal, it also provides a tool in the hands of the ruling party to have only those cases referred to Lokpal which pertain to political opponents (since speaker is always from the ruling party). It will also provide a tool in the hands of the ruling party to protect its own politicians. 2. Lokpal has been proposed to be an advisory body. Lokpal, after enquiry in any case, will forward its report to the competent authority. The competent authority will have final powers to decide whether to take action on Lokpals report or not. In the case of cabinet ministers, the competent authority is Prime Minister. In the case of PM and MPs the competent authority is Lok Sabha or Rajya Sabha, as the case may be. In the coalition era when the government of the day depends upon the support of its political partners, it will be impossible for the PM to act against any of his cabinet ministers on the basis of Lokpals report. If the Lokpal made a report against the PM or any MP of the ruling party, will the house ever pass a resolution to prosecute the PM or the ruling party MP? Obviously, they will never do that. The bill is legally unsound. Lokpal has not been given police powers. Therefore Lokpal cannot register an FIR. Therefore all the enquiries conducted by Lokpal will tantamount to preliminary enquiries. Even if the report of Lokpal is accepted, who will file the chargesheet in the court? Who will initiate prosecution? Who will appoint the prosecution lawyer? The entire bill is silent on that. The bill does not say what will be the role of CBI after this bill. Can CBI and Lokpal investigate the same case or CBI will lose its powers to investigate politicians? If the latter is true, then this bill is meant to completely insulate politicians from any investigations whatsoever which are possible today through CBI. There is a strong punishment for frivolous complaints. If any complaint is found to be false and frivolous, Lokpal will have the power to send the complainant to jail through summary trial but if the complaint were found to be true, the Lokpal will not have the power to send the corrupt Materials Management Review

politicians to jail! So the bill appears to be meant to browbeat, threaten and discourage those fighting against corruption. 6. Lokpal will have jurisdiction only on MPs, ministers and PM. It will not have jurisdiction over officers. The officers and politicians do not indulge in corruption separately. In any case of corruption, there is always an involvement of both of them. So according to governments proposal, every case would need to be investigated by both CVC and Lokpal. So now, in each case, CVC will look into the role of bureaucrats while Lokpal will look into the role of politicians. Obviously the case records will be with one agency and the way government functions it will not share its records with the other agency. It is also possible that in the same case the two agencies arrive at completely opposite conclusions. Therefore it appears to be a sure way of killing any case. Lokpal will consist of three members, all of them being retired judges. There is no reason why the choice should be restricted to judiciary. By creating so many post retirement posts for judges, the government will make the retiring judges vulnerable to government influences just before retirement as is already happening in the case of retiring bureaucrats. The retiring judges, in the hope of getting post retirement employment would do the bidding of the government in their last few years. The selection committee consists of Vice President, PM, Leaders of both houses, Leaders of opposition in both houses, Law Minister and Home minister. Barring Vice President, all of them are politicians whose corruption Lokpal is supposed to investigate. So there is a direct conflict of interest. Also selection committee is heavily loaded in favour of the ruling party. Effectively ruling party will make the final selections. And obviously ruling party will never appoint strong and effective Lokpal. Lokpal will not have powers to investigate any case against PM, which deals with foreign affairs, security and defence. This means that corruption in defence deals will be out of any scrutiny whatsoever.

7.

3.

8.

4.

9.

5.

On the face of it, governments Bill sounds absurd. It is meant to completely insulate the political class from any kind of action. In contrast, civil Society has drafted an alternate Jan Lokpal Bill. The first draft was prepared by Prashant Bhushan, Justice Santosh Hegde and myself. The Bill has
May 2011 45

subsequently been discussed widely at several public platforms and improved on the basis of public feedback. It has been vetted and is being supported by Kiran Bedi, Shanti Bhushan, Anna Hazare, National Campaign for Peoples Right to Information (NCPRI) and many others. The entire text of the Bill is available at www. indiaagainstcorruption.org Similar independent bodies called Jan Lokayuktas have been suggested for states. The existing Lokayuktas in some states are advisory and ineffective. How will the proposed system help in curbing corruption? For this see Chart-1. A copy of this Bill was sent to the government almost two months back, there has been no response so far. The Government would be well advised to adopt the Jan Lokpal Bill and get the country rid of corruption.

their cut. Nothing in law to recover ill gotten wealth. A corrupt person can come out of jail and enjoy that money. Small punishment for corruption- Punishment for corruption is minimum 6 months and maximum 7 years.

System Proposed by Civil Society

Lokpal at centre and Lokayukta at state level will be independent bodies. ACB and CBI will be merged into these bodies. They will have power to initiate investigations and prosecution against any officer or politician without needing anyones permission. Investigation should be completed within 1 year and trial to get over in next 1 year. Within two years, the corrupt should go to jail. Lokpal and Lokayukta will have complete powers to order dismissal of a corrupt officer. CVC and all departmental vigilance will be merged into Lokpal and state vigilance will be merged into Lokayukta. Lokpal & Lokayukta shall have powers to investigate and prosecute any judge without needing anyones permission. Lokpal & Lokayukta will have to enquire into and hear every complaint. All investigations in Lokpal & Lokayukta shall be transparent. After completion of investigation, all case records shall be open to public. Complaint against any staff of Lokpal & Lokayukta shall be enquired and punishment announced within two months. Politicians will have absolutely no say in selections of Chairperson and members of Lokpal & Lokayukta. Selections will take place through a transparent and public participatory process. Lokpal & Lokayukta will get public grievances resolved in time bound manner, impose a penalty of Rs 250 per day of delay to be deducted from the salary of guilty officer and award that amount as compensation to the aggrieved citizen. Loss caused to the government due to corruption will be recovered from all accused. Enhanced punishment - The punishment would be minimum 5 years and maximum of life imprisonment.

CHART - 1 Existing System

No politician or senior officer ever goes to jail despite huge evidence because Anti Corruption Branch (ACB) and CBI directly come under the government. Before starting investigation or initiating prosecution in any case, they have to take permission from the same bosses, against whom the case has to be investigated. No corrupt officer is dismissed from the job because Central Vigilance Commission, which is supposed to dismiss corrupt officers, is only an advisory body. Whenever it advises government to dismiss any senior corrupt officer, its advice is never implemented. No action is taken against corrupt judges because permission is required from the Chief Justice of India to even register an FIR against corrupt judges. Nowhere to go - People expose corruption but no action is taken on their complaints. CBI and vigilance departments lack transparency. Their functioning is so secret that it encourages corruption within these agencies. Weak and corrupt people are appointed as heads of anticorruption agencies Citizens face harassment in government offices. Sometimes they are forced to pay bribes. One can only complaint to senior officers. Hardly any action is taken on complaints because often senior officers also get
46 May 2011

Materials Management Review

'Focus is on Public Procurement Policy'

irbhadra Singh, Union minister of micro, small and medium enterprises (MSME), who assumed the office in January this year, is keen to push the sector's pending agendas. Though new to his role, the veteran politicianformer king of Bushahr and five-time chief minister of Himachal Pradeshis familiar with the issues stifling the sector. In his late seventies now, Singh, an alumnus of Bishop Cottons School, Shimla, and St Stephens College, Delhi, says his focus will be on pushing a public procurement policy for MSMEs and helping set up rehabilitation funds at the state level. Clean technologies is also a matter close to his heart. In an interaction with SME Worlds Monalisa Sen, Singh, who was steel minister in his prior role, shares his plans for making the MSME sector more vibrant. Excerpts: What will be the ministrys major focus areas in the next financial year? The major focus areas of the ministry include introduction of a public procurement policy for MSMEs to assist them in increasing their market share, introduction of a scheme for supporting the states to set up Rehabilitation Funds, upscale existing schemes or evolve new schemes to assist MSMEs in the acquisition, adoption and innovation of modern clean technologies, strengthening of the District Industries Centres across the country, etc. How well has the sector recovered from the economic slowdown? The international economic recession affected the export market of Indian industry, including MSMEs. Sectors such as textiles, leather, gems & jewellery, auto components were particularly affected. Keeping this in view, the government announced several economic measures for protecting the MSMEs and stimulating their growth. Further, the Report of the Task Force on Micro, Small and Medium Enterprises was presented to the Prime Minister on January 30, 2010. The report provides a road map for the development and promotion of MSMEs. It recommends an agenda for immediate action to provide relief and incentives to the MSMEs, especially in the aftermath of the economic slowdown, accompanied by institutional changes and detailing of programmes, to be achieved in a time-bound manner. In addition, it suggests setting up of appropriate legal and regulatory structures to create a conducive environment for entrepreneurship and growth of MSMEs. Has the government been able to improve the credit flows to the sector? To ensure that sufficient credit is available to the micro and small enterprises (MSE) sector, the credit to this sector has been included in priority sector lending by commercial banks. The outstanding bank credit to MSEs from the scheduled commercial banks increased from R2,13,538 crore as at the end of March 2008 to R2,56,127 crore as at the end of March 2009 and further to R 3,64,012 crore as at the end of March 2010 (provisional). However, considering the vast size of the MSE sector and its credit needs to achieve accelerated growth, there has to be a greater thrust on lending to MSEs. As per the Reserve Bank of India (RBI) guidelines to banks, 60% of MSE advances should go to micro enterprises.

The Task Force on MSMEs has made important recommendations for enhancing the flow of credit to MSMEs. These include strict adherence to the stipulated targets by the commercial banks for the micro enterprises (viz., 20% year-on-year growth for MSE lending with 60% apportionment for the micro sector). In terms of the recommendations of the Task Force, the RBI has advised the banks to achieve a 20% year-on-year growth in credit to MSEs and a 10% annual growth in the number of micro enterprise accounts. The banks have been advised that the allocation of 60% of the MSE advances to the micro enterprises is to be achieved in stages viz., 50% in the year 2010-11, 55% in the year 2011-12 and 60% in the year 2012-13. As recommended by the Task Force, a Standing Review Committee under the chairmanship of the member (industry), Planning Commission, has been constituted for monitoring the credit flow to the MSME sector and suggesting policy measures. Further, a Special Cell has been created in Sidbi to facilitate and monitor the financing of micro enterprises in the unorganised sector. When do you expect SME stock exchanges to become a reality? In pursuance of the Sebi Board decision in October 2007 regarding creation of separate exchanges for the SMEs, Sebi has now put in place the requisite framework for SMEs to access the capital markets. Based on the finalised regulations, applications have been received for setting up SME platforms. Sebi is yet to receive the detailed proposals, including the modalities for setting up of SME platforms, from both NSE and BSE. What are the major achievements of the cluster programme and what new clusters are being planned? Under MSE-CDP (cluster development programme), so far 489 clusters and 124 infrastructure projects have been taken up across the country. Out of 489 clusters, interventions in 265 clusters have been completed. A Study was conducted (Diagnostic Study) in all the clusters covering about 10,000 units to know the problems of SMEs and propose remedial measures with a validated action plan. Various technical institutions such as Central Food Technological Research Institute (CFTRI), Indian Institute of Packaging (IIP), Central Leather Research Institute and other technical institutes have been associated with the study as per the need of the clusters. Under MSE-CDP, Common Facility Centres have been provided in various clusters so as to provide them facilities for testing, design, production, training, effluent treatment etc., which otherwise individually they cannot afford to set up. As on date, 56 common facility centres have been taken up, out of which 17 have been completed and 39 centres are at various stages of implementation. The clusters for interventions have been taken up in various segments such as food & allied industries, chemical & allied industries, glass & ceramics, leather & footwear, engineering industry, ready-made garments, pharma and the artisans sector. It has been observed that the cluster development scheme has enhanced the productivity and competitiveness of the micro and small enterprises. Source : SME World, Feb-April 2011 May 2011 47

Materials Management Review

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

n the Aftermarket scenario, one of the major concerns raised by experts is the intangible costs impact on managing the reverse flows of materials to support customer needs. By September 2011, DHL Express will operate 30 American-made, battery-powered electric vans and 50 hybrid trucks that will cut down fossil fuel use and in combination reduce CO2 emissions by more than 50% each year in comparison to conventional vehicles. Taking a major step in its commitment to becoming a zero-carbon business by 2050, Tesco has installed four giant wind turbines to power three of its grocery distribution centres in Daventry and Newport using renewable energy. UPS has officially opened its new dedicated London 2012 logistics centre in Stevenage, UK, which will help transport the millions of different items that are needed to make the Olympics happen. The EU Commission has presented an ambitious plan to cut transport emissions to "at least 60%" of 1990 levels by 2050. Because of congestion, terminal management closed the export gate at Nhava Sheva International Container Terminal in India's Port of Jawaharlal Nehru. An unofficial "go-slow" campaign by a group of workers threatened serious delays to cargo moving through the country's busiest container gateway. State-owned rail operator Container Corporation of India said the increased congestion and gate restrictions at the terminal could lead to "missed" shipping connections for outbound traffic. The political turmoil in the Middle East and North Africa curbed global air cargo growth to 2.3 percent in February from a year ago. The slowdown from an 8.7 percent yearon-year increase in January also reflected the impact of factory closures due to the Chinese New Year vacation, which fell in the first part of February. FedEx Express has launched a new dedicated 777F route connecting the FedEx World Hub in Memphis, Tennessee to South Korea with four non-stop flights a week. UPS has launched direct flights from Hong Kong to Europe, enabling the company to offer the widest nextday delivery coverage for both packages and heavy freight between the two regions. Nestle has published a 94 page social responsibility report which looks at ways that the company can not
48 May 2011

only help suppliers in the developing world but can also help reduce the cost of their key raw materials. Nestle has over 165,000 vendors with nearly 52 percent of its raw material expenditure goes on the procurement of milk, coffee and cocoa. DHL has launched Logistics Without Borders, an end-toend supply chain solution that connects suppliers, carriers and end-users on both sides of the US - Mexico border. Maersk Line is to increase its piracy surcharge from next month on a variety of services, claiming the cost of protecting its crew members is increasing. The increased costs are related to sailing longer distances, sailing at faster speeds, increasing the number of vessels on services, increasing the size of these vessels and equipping vessels with extra safety measures and devices. Airbus and TAROM Romanian Air Transport, together with a consortium of key stakeholders, have established one of Europe's first projects aiming to establish a sustainable bio-kerosene jet-fuel processing and production capability. Pepsi says it will be testing a new type of bottle that is totally made of plant-based, renewable resources and will be fully recyclable. The new bottle has been developed using items such as switch grass, pine bark and corn husks, but in the future other material such as orange and potato peels, oat hulls and other byproducts from food manufacturing could be used. The University of Arkansas is raising the profile of logistics education by establishing a stand-alone supply chain management department. The department will strengthen the supply chain program at a university already ranked among the top undergraduate logistics schools by U.S. News & World Report. Agility is expanding its Southeast Asian cross-border trucking operations in response to increasing demand for road services to connect countries across the region and into China. Agility's integrated trucking network provides shippers with an option to truck directly to several major cities in South East Asia and China, as well as direct connections to major airports and ports in the region. IFPSM is hosting world congress in Stockholm during November 2011. The board meeting and council meeting will precede the event.

Materials Management Review

BRANCH NEWS
BANGALORE BRANCH HUBLI BRANCH KOLKATA BRANCH LUCKNOW BRANCH MUMBAI BRANCH NEW DELHI BRANCH
Members and their Family on 17.04.2011 at Vidya Deep College, Ulsoor Road, Bangalore 560 042. Program started with Warming up Sessions. Good number of Members and family including children participated. The function included games and competitions like Memory Skills, Throwing Ring, Hit the Wicket, Best Family, Drawing Competition, Alpha Nemeric, Pick and Speech and Housie, etc. Members and Family were enjoyed the programme. Function was concluded with Lunch. -------------------------------------------------------------------------

BANGALORE BRANCH
25.03.2011 : IIMM, Bangalore Branch conducted a Lecture Presentation on PROCUREMENT OUTSOURCING EMERGING OPPORTUNITY by Mr. Vinay Bansal, Managing Director, Strombus Synergy on 25th March, 2011 at Woodlands Hotel, Bangalore. Speaker covered various aspects, viz Procurement shift from Traditional to Contemporary, Value Proposition, Ideology vis--vis integrity in his presentation. Program ended with a very good interaction with speaker. Materials Management Week : 11.04.2011 : As part of MM Day Celebration, IIMM Bangalore Branch was conducted Quiz Competition on 11th May 2012 at IIMM Conference Hall for Members and Students of our Branch. Total 23 Team was registered for the competition. The quiz was conducted by Mr. K. Ramprakash, Course Co-ordinator & EC Member, IIMM, and judged by Mr. D. Subramani, Branch Secretary, Mr. Vijaya Vittal, EC Member. Mr. C. Subbakrshna, SR. VP, attended the program and gave tips to the participants and announced the prizes. Best two teams of this competition were nominated for the Regional NAT QUIZ competition held in Chennai on 17th April, 2011. 13.04.2011 : Essay Competition was conducted on 13.04.2011. Totally 14 entries were received for this competition. 15.04.2011 : Debate competition was conducted on Topics : 1. Agri Supply Chin, 2. Single Source, 3 Hedging. Total 5 teams participated for the competition. The debate was conducted by Mr. K. Ramprakash, Course Co-ordinator & EC Member, Mr. D. Subramani, Branch Secretary, Mr. Vijaya Vittal, EC Member. 16.04.2011 - Best Materials Managers Contest: Best Materials Managers Contest was organized by IIMM, Bangalore Branch on the Topic Contain InflationOptimize Supply Chain on 16.04.2010 at IIMM Bangaloe Branch Conference Hall. 7 Teams participated. The judges were Mr. N. Muralidharan, Past Chairman, Mr. H.S. Prasanna, CEO, Teknic Electromeconics Pvt. Ltd. Mr. K.C.Harsha, NC. Member, V. Harish, Branch Chairman. 17.04.2011 : As part of MM Day Celebration, IIMM Bangalore Branch organised Family Day for IIMM Materials Management Review

HUBLI BRANCH
The Branch Chairman Mr R.K.Aherwar inaugurated the Global Business School -GBS Utsav-2011, a State Level Undergraduate Management Fest on 25th March 2011 organised by the Global Business School - Hubli, a leading Business School offering MBA in various streams. This was attended by about 400 students from different colleges in Bijapur, Bagalkot, Hubli and Dharwad.

Inauguration and lighting of lamp The GEN Society, (the holding body of GBS -Hubli) President Mr Bharat Jain, VP Mr Mahendra Kothari, Secretary Mr Jitesh Jain and GBS-Director Dr Prashant Yatgiri were also present. Mr Babu Pyati H/Treasurer of IIMM Hubli also joined in the event. Dr Prashant Yatgiri Director GBS Hubli is also a Guest Faculty for GDMM(C) at IIMM Hubli Br. The Branch Chairman emphasized the important role of higher education, and advised the students to have the
May 2011 49

right attitude and desire to accept challenging jobs. He also emphasized the need to give back to the society the knowledge for others to also benefit. He asked the students to explore pursuing their career in the field of Materials Management that is gaining more and more importance by the day. There is tremendous lack of trained personnel in this MM field, even though most of the companies spend more than half of their working capital in acquiring materials and services. He had given an overview of the professional courses offered by IIMM including the ITC-MLS programme. The event was a great success. The students did evince interest in the field of Materials management. The event was widely covered in the print media. ---------------------------------------------------------------------------

KOLKATA BRANCH
In 2010 IIMM Kolkata Branch completed 50 years of its existence since its inception as National Association of Purchasing Executive (NAPE). The Executive Committee of the Branch at the very beginning of the year formed a Golden Jubilee Celebration Committee inducting Mr. S B Sarkar, Past Chairman of the Branch, as its Chairman. All the Past Chairmen of the Branch were inducted in the Advisory Committee of the Golden Jubilee Celebration Committee and their valuable advices were considered with due respect while finalizing the year-long celebration programme.

Projection of CD depicting the Past, Present and the Future of Kolkata Branch. Presentation of Life Time Achievement Award to Mr. A Dasgupta, Past President, IIMM, and Past Chairman of IIMM Kolkata Branch with 50 blooming red roses, a befitting Citation, a Shwal and Wrist Watch engraving Golden Jubilee Logo of IIMM Kolkata Branch. Felicitation of the all Past Chairmen of Kolkata Branch with 50 blooming red roses and a valuable Wrist Watch enaraving Golden Jubilee Loao of IIMM Kolkata Branch. Felicitation of the Spouses of the Passed Away Branch Chairmen also with 50 blooming red roses and a Shwal. Spouses of Late M L Capoor and Late Prof. S C Bhattacharya were attended the programme. Presentation of Golden Jubilee Memento in the form of Wrist Watch engraving Golden Jubilee Logo of IIMM Kolkata Branch to all Members of IIMM Kolkata Branch. Appreciation Memento in the form of Wrist Watch engraving Golden Jubilee Logo of IIMM Kolkata Branch along with a token amount to all the Staff Members. Musical Soiree. Golden Jubilee Dinner where all the Past Chairmen along with their spouse; members and their spouses and staff members with their spouses were invited.

The Valedictory Programme at the Parish Hall was attended by 230 members along with spouses. On successful accomplishment of the Golden Jubilee Celebration Programme in 2010, IIMM Kolkata Branch is looking forward to celebrate its Diamond Jubilee Celebration in 2020. ---------------------------------------------------------------------------

LUCKNOW BRANCH
Indian institute of Materials Management Lucknow Branch organized a Two Days Lecture Programme on Foreign Exchange Management for the Officers of HAL Accessories Division Lucknow. The lecture was delivered by Shri Arun Kumar Srivastava, Manager, Foreign Exchange, Punjab National Bank. During his lecture Shri Shrivastava touched upon from Basics of Foreign Exchange to the latest SWIFT, NEFT, RTGS etc. He not only delivered his lecture but also answered to the questions raised to the satisfaction of the raiser of the query. Participants were anxious to know about the Letter of Credit and its various categories like confirmed, revocable, irrevocable etc. he explained the various differences and said now LC is a gone case and more transparent and less time consuming instruments are available. Materials Management Review

The Golden Jubilee Celebration Committee launched a Day-long Seminar on Supply Chain Management - Cutting Edge Practices at The Hotel Taj Bengal, Kolkata, where more than 100 participants from reported Public and Private Sector Organizations attended. The National Executive Committee Members of IIMM and other luminaries of Industry and Trade besides CEOs of reputed organizations graced the programme. A wide and comprehensive coverage about IIMM and its activities in the print media gave enough impetus for future course of journey towards flourishing of the institutional activities. The Valedictory Programme of the Golden Jubilee Celebration was held on 22nd January, 2011 at Parish Hall, Kolkata, which included the following :50 May 2011

The Programme was attended by the officers of various Departments and presence of Two Deputy General Managers Sri Laxminarayan Our NC and Sri Mrigendra Kumar Our Life Member was pertinent. The Programme was Organised in HAL Training Department Auditorium. ---------------------------------------------------------------------------

MUMBAI BRANCH
In-house Training Program at M/s Hindustan Construction Company (HCC) Mumbai Branch organized a One-Day In-house Training Program for HCC Ltd. at their Vikhroli Works on "Negotiations" based on MLS Module 7, on March 26, 2011. This was in continuation of earlier programs on the same topic conducted for HCC Ltd. covering different batches of employees. The various sessions were handled by Mr. B V Iyer, Immediate Past National President and NEC Member, and core faculty trained by ITC Geneva and having long years of rich industry experience. Case studies were also given as part of the training program. The whole program was well attended and very well received and the feedback was very good. More such programs are planned in the near future to cover other batches of employees. The next program in this series will be held on April 16, 2011. Mr. Arun Banavali, Hon. Secretary of Mumbai Branch took the initiative in organising this program and Mr. S K Murthy, Director-Programs, coordinated the entire program.

Case Study - Discussions in progress

Mr. S K Murthy coordinating the program

Mr. Arun Banavali inter-acting with the participants A section of the audience Forthcoming Programs The first program in celebration of Materials Management Day is scheduled at Thane on April 15, 2011 as an Evening Seminar on "Risk Mitigation in Supply Management". This is followed by programs at HCC Ltd on April 16, seminar at Taloja on April 20, Evening Seminar at Goregaon on April 21, a Family Get-Together on April 23, and a 2-day Certificate Program on April 29 & 30. in addition, Convocation for award of Diplomas is also planned on May 7, 2011. The details of these events will be presented in the subsequent issues. --------------------------------------------------------------------------May 2011 51

Mr. B V Iyer addressing the participants Materials Management Review

NEW DELHI BRANCH

IIMM Delhi Branch organized a programme on Case Analysis for the benefit of students. Dr. Salma Ahmed, Associate Professor, Aligarh Muslim University explained in a simple way how costs can be analyzed and answered. During the occasion National President Shri Suresh Kumar Sharma released by book and how to write and analysis cases.

presented to Shri S. K. Vaid, DGM Incharge (C&M) Pragati Power Corporation Ltd. (IPGCL) by our National President, Shri Suresh Kumar Sharma who appreciated the contribution of IIMM in the field of supply chain and promised all support to the profession.

Chairman Delhi Branch Shri H K Sharma welcome the gathering and Hony. Secretary Shri Sanjay Shukla proposed a vote of thanks. 23.4.2011 : MM Day Celebrations IIMM Delhi Branch organized MM Day celebration by paying floral tributes to the Father of Nation Mahatma Gandhi at his Samadhi, Rajghat Delhi. An oath was taken by Executive Committee and others members to work for supply chain and uphold the ideas of Mahatma Gandhi towards exclusive and sustainable growth and to take IIMM supply chain profession to greater heights. Later a green rally was flagged off by National President, Shri Suresh Kumar Sharma paseed through various parts of the capital and educated various sectors of society about environmental protection, green supply chain, corporate social responsibility, etc. 24. 4.2011 : A Seminar was organized on the theme "Contain Inflation - Optimize Supply Chain" on 24th April which is addressed by Dr. K. K. Tripathy, Indian Economic Service, Planning Commission. Dr. Tripathy emphasized on the role of supply chain management and various innovated solutions to supply chain management problems to make available goods and services at the most reasonable rate even in inflationary times. Delhi Branch presented mementos to the past chairman and other past national office bearers of the IIMM Delhi Branch. 25.4.2011 : A programme for the benefit of supply chain professional s was organized at IPGCL on 25.4.11 on the theme "Contain Inflation - Optimize Supply Chain". The speakers on the occasion were Mr. H.K. Sharma, Chairman, IIMM Delhi Branch and Mr. T.G. Nandakumar, National Council, Delhi Branch. A Memento was
52 May 2011

--------------------------------------------------------------------------Materials Management Review

MEMBERSHIP FORM
INDIAN INSTITUTE OF MATERIALS MANAGEMENT Plot No. 102 & 104, Sector 15, Institutional Area, CBD Belapur, Navi Mumbai-400614. Tel.: 022-27565831, 27561754, 022-27565592 E-mail : iimmnhq@mtnl.net.in Name : __________________________________________________ Sex : Male Female

SERVICING BRANCH

For office use only

Designation : ________________________________________________________________________

Membership Category Fellow Member Name of Organisation : ________________________________________________________________ Life Member Full Member Office Address: _______________________________________________________________________ Associate Member _____________________________________________________________________________________ Institutional Membership
Telephone/s ___________________ Fax ___________________ E-mail _________________________ Home Address _______________________________________________________________________ Telephone/s __________________________________________ E-mail _________________________ Educational Qualification _______________________________________________________________ Work Experience (Start with present position) Please attach separate sheet where necessary)
Your Photograph Here

Date From

To

Position

Company Held

Reporting To
INDIVIDUAL FEES (Rs.) Ent.Fee Annual Fee Fellow Member Life Member Member Asso. Member 500/- 1000/500/- 7500/500/500/500/- 400/-

Membership of any other Professional Organisation_____________________ _____________________________________________________________ Your Date of Birth _______________________________________________ Where will you like to receive the IIMM Mail? Office Home
UNDERTAKING : I wish to apply for the membership of the Institute with appropriate status. I certify that all information supplied in the application is true and correct.

INSTITUTIONAL MEMBERSHIP Large 5000/Small 2000/REMITTANCE DETAIL I, certify that all information is true and correct. I hereby enclose my Annual Subscription and membership Fees of Rs............/By way of Cheque / D.D._______ ______ dt.___________ drawn in favour of "Indian Institute of Materials Management" payable at _________________.

Date : ______________

Applicant's Signature ____________

REFERENCES : It is required that referees should be executive of firm including your immediate senior (not relative) who have a personal knowledge of the candidate. They must have actual knowledge of our responsibilities and one of them should be member of IIMM. Signature 1st Referee _________________________ Name ______________________________________ Designation _________________________________ Company ___________________________________ Phone _____________________________________ Date _______________________________________

Signature 2nd Referee ________________________ Name _____________________________________ Designation _________________________________ Company ___________________________________ Phone _____________________________________ Date _______________________________________

(Important Note: Kindly ensure correct email address for efficient membership services.)

Materials Management Review

May 2011

53

MATERIALS MANAGEMENT REVIEW (MMR)

Annual Subscription (for 12 Issues) Rs. 500.00 Order Form / Renewal Form Subs. No.: P.N.____________
Name of the Subscriber / Organization _________________________________________________________ Address of the Organization _________________________________________________________________ Phone ____________________ Fax ___________________ E-mail _________________________________ Subscription Period From (month year)_________________________ to (Month, Year)___________________________________ Payment enclosed Cheque / Draft (Favouring IIMM, Payable at Mumbai) No.________________ Dated ____________________ for Rs.________________ Drawn on Bank ______________________________________________________ Branch___________________________________________. Please bill us Signature of the Subscriber___________________________ Subscription No._________________________ Please return the form to : Indian Institute of Materials Management (IIMM) Veer Sadan, 4239, A/2, 1 Ansari Road, Darya Ganj, New Delhi - 110002. Tel. : 23242124, 23266089 Fax : 011-23277207 E-mail : iimm1@vsnl.com Website : www.iimm.org

ADVERTISEMENT TARIFFS
Position
Back Cover II/III Cover Full Page Full Page Half Page Quarter Page Strip Tender Notice Placement News (4 Colors) (4 Colors) (4 Colors) (B/W) (B/W) (B/W) (F/P B/W) (H/P B/W)

Monthly Rate (Rs.)

30,000.00 25,000.00 20,000.00 15,000.00 10,000.00 8,000.00 5,000.00 20,000.00 10,000.00

Annually Rate (Rs.)

2,50,000.00 2,00,000.00 1,75,000.00 1,25,000.00 1,00,000.00 75,000.00 50,000.00

Advertisement material alongwith Cheque / Demand Draft should be drawn in favour of IIMM Mumbai and despatched at the following address INDIAN INSTITUTE OF MATERIALS MANAGEMENT
Veer Sadan, 4239, A/2, 1 Ansari Road, Darya Ganj, New Delhi - 110002. Tel. : 23242124, 23266089 Fax : 011-23277207 E-mail : iimm1@vsnl.com Website : www.iimm.org

Add Rs. 20/- Extra for Outstation Cheques.

54 May 2011

Materials Management Review

SOURCING NEWS
LATEST DGS&D RATE CONTRACTS
ITEMS ON RATE CONTRACT

S. NO. ITEMS AM 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 ES 91 92 93 94 95 96 97 98 99

R/C PERIOD FROM TO 26/02/2008 31/03/2011 01/09/2010 31/08/2012 01/10/2010 30/09/2012 01/10/2010 01/08/2010 01/10/2010 01/04/2009 12/02/2009 01/10/2010 19/04/2010 01/08/2010 31/03/2011 31/07/2012 30/09/2012 31/03/2011 28/02/2011 30/09/2012 30/04/2012 31/07/2012

S. No. Items 100 101 102 103 104 105 106 107 108 109 110 ELECTRICAL ACCESSORIES ELECTRONIC ENERGY METER ALUMINIUM CONDUCTORS (AAC/AAAC/ACSR) HPSV FLOOD LIGHT FITTINGS COMPACT FLOURESCENT LAMPS PVC ALUMINIUM CABLE COMBINATION FUSE SWITCH UNITS MODULAR TYPE ELECTRICAL ACCESSORIES MOULDED CASE CIRCUIT BREAKER SWITCH FUSE UNITS PROGRAMMABLE STREET LIGHTS CONTROL SWITCH(PSCS) EF&DEF FTL FITTINGS WITH CB WELDING CABLE COMPACT FLOURESCENT FITTINGS H.P.M.V. LAMPS P.V.C. ADHESIVE TAPES HDPE / PP BAGS GALVANISED STEEL PIPES & TUBES STEEL TUBE FOR WATER WHEELS OVERHEAD TANKS (R.M. POLY M. TANK) STEEL FOLDING COT WITH PLYWOOD MODULAR FURNITURE HOSPITAL BED INSULATING MATS FOR ELECTRICAL PURPOSE STEEL SHELVING CABINET COLD CHAIN ITEMS HELMETS FOR CIVIL LINE PIPE

R/C Period From To 14/01/2010 31/01/2011 01/10/2010 30/09/2011 01/07/2010 30/06/2011 01/11/2010 31/10/2011 31/12/2010 31/12/2011 01/04/2010 31/03/2011 01/02/2010 31/01/2011 12/01/2011 31/12/2011 29/12/2009 31/12/2010 01/01/2011 31/12/2011

TROOP CARRIER UTILITY VEHICLES BUSES SPARE PARTS OF ASHOK LEYLAND VEHICLES CHASSIS (LCV) TANKER SPARE PARIS OF TAT A VEH. M & M SPARES. AMBULANCE NON AC PASSANGER CARS CNG VEHICLES SPARE PARTS FOR MARUTI VEC. SPARE PARTS OF HINDUSTAN MOTORS. SPARE PARTS OF MICO (BOSCH) CHASSIS - HEAVY & MEDIUM A.C. PASSENGER CARS SPARF PARTS OF EICHER VEHS. TRUCKS SPARE PARTS FOR SWARAJ MAZDA VEHS VEHICULAR LAMP SPARE PARTS OF LUCAS

01/10/2010 31/03/2011 01/09/2009 31/08/2011 01/11/2009 31/10/2011 01/08/2010 30/06/2012 01/11/2010 31/10/2012 10/09/2008 31/03/2011 01/10/2010 30/09/2012 01/10/2009 30/09/2011 01/11/2009 31/03/2011 01/11/2009 31/10/2011 31/05/2011 31/01/2011 31/12/2011 30/06/2011 30/09/2011 30/09/2011 30/11/2011 31/03/2011 31/01/2012

111 112 113 114. 115. HW 116. 117. 118.

01/04/2010 31/03/2011 20/01/2010 28/02/2011 01/09/2010 31/08/2011 01/11/2010 31/10/2011 01/11/2010 30/11/2011 01/09/2010 31/08/2011 01/11/2010 31/10/2011 17/08/2010 31/07/2011 10/02/2010 28/02/2011 01/06/2010 31/05/2011 01/06/2010 30/05/2011 08/06/2010 31/05/2011 12/11/2010 30/04/2011 05/01/2011 01/10/2010 15/04/2010 01/12/2009 01/11/2010 31/12/2011 31/07/2011 31/03/2011 28/02/2011 31/10/2011 55

XLPE CABLES (LT) 20/05/2010 INTEGRATED CKL/EB. 25/01/2010 H.P.S.V. LAMPS FITTINGS 01/01/2011 UNDER GROUND ARMOURED CABLE 29/06/2010 FLOURESCENT TUBULAR LAMPS (FTL) 24/09/2010 HPSV LAMPS 01/10/2010 MINIATURE CIRCUIT BREAKERS 01/12/2010 1-5 LAMPS 29/03/2010 INFLATABLE EMERGENCY LIGHTING SYSTEM 01/02/2011

119. 120. 121. 122. 123. 124. 125. 126. 127.

Materials Management Review

May 2011

E X E C U T I V E
Health Notes
ealth hazards during air travel : The World Health Organization, on the basis of the study of the "WHO Research Into Global Hazards of Travel" (WRIGHT) project, recommends that passengers on long flights exercise their legs and resist taking sleeping pills to reduce the risk of potentially fatal blood clots. Although the danger of developing deep-vein thrombosis is small, it increases if people are immobile for long periods in cramped conditions. The risk of developing DVT doubles after travel lasting for over two hours. WHO Drinking tea daily 'as good as water in keeping you hydrated' London: A new study has found that drinking four to six mugs of tea daily is as good as a litre of water for keeping yourself hydrated. The finding disproves the idea that regular tea drinking can dehydrate the body because of its caffeine content. The research also found no negative health effects from drinking that amount of tea. In the high quality UK clinical trial, 21 volunteers drank either four 240ml mugs of tea over a 12-hour period equivalent to just under one litre of tea in total - or a similar amount of plain, boiled water served warm. The tea included 20ml of semi-skimmed milk but no sugar. The test was also repeated using six cups of tea or plain water, equivalent to nearly 1.5 litres of fluid, to investigate the effect of intakes. - ANI Eating 'handful' of walnuts best bet for healthy heart Washington: A new study has suggested that walnuts have a combination of more healthful antioxidants and higher quality antioxidants than any other nut. It positioned walnuts in the No. 1 slot among a family of foods that lay claim to being among Mother Nature's most nearly perfect packaged foods: Tree and ground nuts. "Walnuts rank above peanuts, almonds, pecans, pistachios and other nuts," said Joe Vinson, who did the analysis. "A handful of walnuts contains almost twice as much
56 May 2011

H E A L T H

antioxidants as an equivalent amount of any other commonly consumed nut. But, unfortunately, people don't eat a lot of them. This study suggests that consumers should eat more walnuts as part of a healthy diet," he added. Vinson found that the quality, or potency, of antioxidants present in walnuts was highest among the nuts. Antioxidants in walnuts were 2-15 times as potent as vitamin E, renowned for its powerful antioxidant effects that protect the body against damaging natural chemicals involved in causing disease. "There's another advantage in choosing walnuts as a source of antioxidants," said Vinson, who is with the University of Scranton in Pennsylvania. "The heat from roasting nuts generally reduces the quality of the antioxidants. People usually eat walnuts raw or unroasted, and get the full effectiveness of those antioxidants," he added. The report was presented at the 241st National Meeting and Exposition of the American Chemical Society. - ANI Nicotine raises blood sugar among diabetic smokers Washington: Researchers have found that nicotine is the main culprit responsible for persistently elevated blood sugar levels - and the resulting increased risk of serious health complications - in smokers who have diabetes. They said the discovery also might have implications for people with diabetes who are using nicotinereplacement therapy for extended periods in an attempt to stop smoking. "This is an important study. It is the first study to establish a strong link between nicotine and diabetes complications. If you're a smoker and have diabetes, you should be concerned and make every effort to quit smoking," said Xiao-Chuan Liu. The gold standard for monitoring long-term blood sugar levels in people with diabetes is the hemoglobin A1c (HbA1c) blood test. - ANI Source : The Tribune

Materials Management Review