Supply Chain Sustainability in India

Flexible, Easy-to-implement, and Scalable Supply Chains are

Needed for Todays Organisations

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March 2013
 Contents

Section Slide Numbers

Executive Summary 3

Key Trends Impacting Supply Chains in India 7

Supply Chain SustainabilityGetting Started 15

Appendix 19

The Frost & Sullivan Story 24

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 Executive Summary

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 Country SnapshotIndia

Country name: India

Government type: Federal Republic
Capital: New Delhi
Population 1.19 Billion
Population growth rate: 1.3%
Labour force (% of total population): 523.5 Million
Unemployment rate: 10.5%
Industrial production growth: 8.2%
Gross domestic product (GDP) 20112012: INR86.46 Trillion

GDP (official exchange rate) 20112012: $1.826 Trillion

GDP per capita (PPP) $1,495.85
GDP real growth rate 6.8%
Agriculture: 17.2%
Industry: 26.4%
GDP composition by sector Services: 56.4%
Exports: $303.7 Billion

Image source: www.world-geographics.com

Imports: $488.6 Billion
2009: 47.74
Note: All years mentioned in this study are calendar years
Exchange rates (INR per USD): 2010: 45.90
except when mentioned as financial years; for instance, FY
2011 refers to the financial year from 1 April 2010 to 31 2011: 48.53
March 2011. All values except those mentioned as FYxx are
for calendar years. Source: CIA World Factbook, World Bank; Frost & Sullivan analysis.

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 Indias Geographic and Economic ScenarioAn Overview

India strives to establish itself as a preferred manufacturing and trading hub in Asia.
India has a strategic geographic location between nations in Asia-Pacific, and nations in Europe and the
Middle East.
India has a fast-growing, high-potential economy and is surrounded by a large number of developing
nations.
India is the worlds second-most populous nation and has the second-largest number of young people in
the work force.
The country has extensive domestic manufacturing and consumption bases for a wide range of consumer
and industrial products; it is also an emerging global manufacturing hub.
India is one of a few nations in the world that were less affected by the global economic recession of 2009.
India has strong trade relations with the worlds leading economies, including the United States, the United
Kingdom, Germany, Japan, and Russia; it is also a member of several global trade associations and
agreements.
The country is focused on developing world-class logistics infrastructure facilities, including transhipment
ports, railways that are dedicated freight corridors, free trade zones, and express roadways.
Most leading multinational logistics service providers have well-established operations in India, offering
domestic and international logistics solutions.
Source: Frost & Sullivan analysis.

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 Summary of Key Findings and Insights

Six Mega Trends are affecting the logistics industry in India, and each of them will have a
1
profound impact on the supply chains of companies operating in this country.

Most of the logistics service providers and users are not prepared to deal with the scenarios that
2 will emerge from these Mega Trends.

Managing supply chain sustainability will maintain the integrity of a brand, ensuring business
3 continuity and balancing operational costs.

Implementing a supply chain sustainability program involves developing a business case,

4 understanding external forces and internal expectations, and establishing a vision.

Organisations that adopt sustainable supply chains become more efficient in resource utilization
5 and, thereby, attain cost savings.

Source: Frost & Sullivan analysis.

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 Key Trends Impacting
Supply Chains in India

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 Six Key Trends Impacting the Logistics Industry in India

A globalized Asian market drives changes in the supply chain.

Multinational companies with an Indian origin are emerging.

Multimodal transportation, which relies on an optimal mix of multiple transportation

modes to move a single consignment from origin to destination, has entered the realm of
decision making.

Dedicated freight corridors along Indian Railways and industrial corridors aligned along
these freight corridors are being developed.

The Goods and Services Tax (GST), which was designed to implement a country-wide
uniform taxation system in the next 1 to 2 years, is expected to have a lasting impact on
the Indian logistics industry.

Green initiatives to reduce the environmental impact of logistics functions are on the rise
in multiple manufacturing industries, such as the automotive and telecommunications
industries.
Source: Frost & Sullivan analysis.

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 Key Trends Impacting the Logistics Industry in India
Explained

Key Takeaway: A globalized Asian market drives changes in the supply chain.

Supply Chain Sustainability: Share in Global Manufacturing Asia has emerged as the leading
and Consumption Value, Asia, 2010 and 2020
manufacturing region in the world,
60.0 and it is also expected to become the
leading consumer region by 2020.
Asias Share in Production

50.0
New trade corridors from Asia to the
and Consumption (%)

40.0 rest of the world are being created,

and sourcing from Asia is increasing.
30.0
As one of the major manufacturing
and consumer bases in Asia, India
20.0
has been heavily impacted by the
regions economic growth.
10.0
Companies in India are expanding
0.0 their presence in overseas markets
2010 2020
Share in through exports, and in some cases
40.0 50.0
Manufacturing they are establishing manufacturing
Share in Consumption 15.0 35.0 bases abroad.
Year
Source: Frost & Sullivan analysis.

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 Key Trends Impacting the Logistics Industry in India
Explained (continued)
Key Takeaways: Multinational companies with Indian origin are emerging.
Supply Chain Sustainability: Revenue Breakup of Domestic and International MNCs,
India, FY 2011
Tata Motors Reliance Industries Ltd. Dr. Reddy Labs
Domestic
Domestic Domestic Revenue
Revenue Revenue 22.0%
39.0% 43.0%

International
International Revenue
Revenue 57.0% International
61.0% Revenue
78.0%

Total Revenue = $27.6 billion for FY 2011 Total Revenue = $58.0 billion for FY 2011 Total Revenue = $1.7 billion for FY 2011

The globalization of Indian companies, particularly in the automotive, pharmaceutical, and electronics
sectors, is redefining supply chain needs.
The globalization of industries has allowed for transnational companies in India and is transforming their
supply chains.
The globalized supply chains of leading Indian manufacturers has resulted in large shares of international
revenue. Source: Frost & Sullivan analysis.

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 Key Trends Impacting the Logistics Industry in India
Explained (continued)
Key Takeaway: Dedicated freight and industrial corridors are emerging.
Supply Chain Sustainability: Transportation Market Breakup by Mode, India, 2011 and 2016
2011 2016
CS&IW Pipeline Pipeline
3.0% 2.0% CS&IW
3.0%
Air 6.0%
4.0%
Air
5.0%

Rail
27.0%
Rail
32.0%
Image source: Megapuerto Group Road
Road 54.0%
64.0%

Coastal shipping and inland waterways are emerging choices for logistics managers, but railways
continue to attract attention.
The lack of complete transportation solutions from logistics service providers (LSPs) is a major
challenge for 59 per cent of end users.
Providing an end-to-end transportation solution using the multiple modes of transportation is urgent: 83
per cent of end users rated it as the next growth area for LSPs.
Source: Frost & Sullivan analysis.

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 Key Trends Impacting the Logistics Industry in India
Explained (continued)
Key Takeaway: Upcoming DFCs of Indian Railways and their adjacent industrial corridors will
transform logistics operations in India and lead to a major shift in transporting cargo by rail.

Supply Chain Sustainability: DFCs and Industrial Corridors, India, 2011

Western DFC Eastern DFC Delhi-Mumbai IC

Image source: Dedicated Freight Image source: Dedicated Freight Image source: Delhi-Mumbai Industrial
Corridor Corporation of India Ltd. Corridor Corporation of India Ltd. Corridor Development Corporation

Dedicated freight corridors (DFCs) and industrial corridors will lead to major changes in the logistics
industry since well-integrated transport connectivity between road and rail is part of their development.
The efficient transportation connectivity offered by these corridors is likely to encourage rapid growth in
manufacturing bases (especially export-bound operations) to this region.
Source: Frost & Sullivan analysis.

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 Key Trends Impacting the Logistics Industry in India
Explained (continued)
Key Takeaway: GST is expected to have a lasting impact on the Indian logistics industry.
Supply Chain Sustainability: Distribution Centres
Before and After GST Implementation, India, 2011
In India, after GST
implementation, 6 to 8 major
Srinagar
regional hubs are expected to
be formed.
Shimla
Amritsar Haridwar
Chandigarh
Delhi
Jaisalmer
Jaipur Lucknow Darjeeling Dispur
Gandhinagar Patna
The coverage radius for each
such regional hub is expected
Ahmedabad Bhopal Ranchi to be about 500 km, a 1-day
Kolkata
Surat Raipur
reach.
Nagpur Bhubaneshwar
Aurangabad
Mumbai Gulbarga
Pune Current state-level
HyderabadVishakhapatnam distribution centres
Goa Vijayawada
Bengaluru
Expected future In India, 88 per cent of LSPs
Tirupati hubs after GST and 81 per cent of end users
Mangalore implementation
Mysore Chennai are still unprepared to deal
Coimbatore Expected major with the challenges of the
Kochi regional zones after
Madurai post-GST business
GST
Thiruvananthapuram environment.
Image source: www.world-geographics.com
and Frost & Sullivan. Source: Frost & Sullivan analysis.

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 Key Trends Impacting the Logistics Industry in India
Explained (continued)

Key Takeaway: Innovative green initiatives in logistics can have cost-saving economical
impacts for companies.

Sansera Engineering saved over 80 per cent of packing costs, above $2 million, just
by shifting from traditional cardboard and wooden boxes to reusable packaging
boxes.

Nokias drive to procure a used mobile phone to offset every new mobile phone sold
and to recycle the waste has resulted in substantial savings because the plastic
parts and packing material produced from recycled phones reduced the overall cost
of new products by at about 5 per cent.

Source: Sansera Engineering, Nokia, and Frost & Sullivan analysis.

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 Supply Chain SustainabilityGetting
Started

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 Supply Chain Sustainability Overview

Most companies do not realize the importance of evaluating their supply chains scalability and
sustainability to match market trends and suit future needs, and of undertaking necessary modifications
so as to gain from market drivers and safeguard from industry challenges.

Thus, having a sustainable supply chain is critical for maintaining brand integrity, ensuring business
continuity, and managing operational costs.

However, the sustainability of a supply chain relies on managing the impact of key trends and on using
best practices throughout the life cycles of goods and services.

Companies need to undertake focused supply chain sustainability programs with the following
objectives:

o To create, protect, and grow the long-term value for all stakeholders involved in the supply chain.

o To protect the long-term viability of the business.

o To secure social and economic licenses to operate.

Source: Frost & Sullivan analysis.

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 Process for Developing a Supply Chain Sustainability
Program

Identifying business drivers

Managing risks
Develop Business Case
Realizing efficiencies
Creating sustainable products

Benchmarking best practices within your industry

Understand External
Auditing supply chains
Forces and Internal
Understanding and evaluating the expectations of
Expectations
shareholders

Keeping in mind Mega Trends, a business strategy

needs to be put in place
Establish a Vision Developing a suitable supply chain strategy
Developing a vision to define your companys
commitment
Source: Frost & Sullivan analysis.

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 Appendix

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 List of Acronyms and Abbreviations Used

Acronyms and
Abbreviations Expanded Form of the Abbreviation
CS&IW Coastal Shipping and Inland Waterways

LTL Less than Truck Load

GST Goods and Services Tax

DFCCIL Dedicated Freight Corridor Corporation of India Limited

MNC Multi National Corporation

DFC Dedicated Freight Corridor

LSP Logistics Service Provider

GDP Gross Domestic Product

NSR North-South Railway

EWR East-West Railway

GHG Green House Gases

IC Industrial Corridor
Source: Frost & Sullivan analysis.

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 How Frost & Sullivan Can HelpSupply Chain Strategy
Audit and Benchmarking

Our Supply Chain Strategy Audit is designed to provide a quick and comprehensive assessment of the key
issues in the various supply chain functions of an organization and to identity opportunities for addressing or
rectifying these issues to accordingly provide an road map for the organizations improvement.

The process includes the following:

One-on-one discussions with senior executives

A review of existing business plans to provide a context for the supply chain

Clarification of key supply chain objectives to support the business

Comprehensive mapping and review of existing supply chain metrics, services, and costs

Supply chain industry benchmarks to quantify improvement opportunities

A prioritized implementation roadmap

Source: Frost & Sullivan analysis.

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 Supply Chain Strategy Audit and BenchmarkingCase
Study

Key Takeaway: Reduced inefficiencies result in the lowering of logistics costs by over 30 per cent.

Challenge
To assess and optimize the end-to-end supply chain of a leading industrial valves manufacturer

Consulting Approach
Frost & Sullivan adopted a comprehensive methodology that considers vendor management and in-
plant operations as well as provides an optimal inbound and outbound logistics solution.
The study addressed the following information areas:
Streamlining and identifying suitable vendors for future growth
Streamlining in-plant operations
Providing a cost-effective logistics strategy

Impact
The transportation strategy was revamped and 46 per cent of existing logistics costs were saved.

Source: Frost & Sullivan analysis.

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 Providing a Flexible, Easy to Implement, and Scalable
Supply Chain Strategy
Supply Chain Sustainability: Supply Chain Structure of an Industrial Valves Manufacturer Before and
After Supply Chain Strategy Audit, India, 2011

Castings suppliers Domestic customers

upcountry Readies suppliers (local)
Before Small shipments

Castings suppliers
same state
LTL* shipments
Sea Port/Airport
Company manufacturing
facility

The company used a non-consolidated form of transportation Overseas

services, which added cost and complexity to its supply chain. customers

A supply chain strategy audit identified an

Castings suppliers
approach for the consolidation of raw
material shipments and finished goods
Consolidated Primary logistics shipments, which resulted in a savings of
After shipment operation
about 30 per cent in transport costs.
Consolidated
shipments To be serviced as
Readies suppliers
return load
Use milk runs to
Mumbai/Chennai/Bangalore
consolidate the
for exports
shipments *Key: LTL: Less than truck load. Source: Frost & Sullivan analysis.

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 The Frost & Sullivan Story

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 Who is Frost & Sullivan

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To join our Growth Partnership, please visit http://www.frost.com.

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