Shorter product cycles, multiplevendors and manufacturing locations, increasing costs, and hindrances inprocess visibility, make it imperative for textile and apparel companies tostreamline operations, do better time management, and in the bargain cut downon flabs and costs. The process of logistics or supply chain management assumesenormous significance in the context. The world is changing, but where doesIndia stand? Subir Ghosh does a rain check.
There is a supply chain management(SCM) axiom that says that it is all about having the right product in theright place at the right time at the right price. Competition has ensured thatmanufacturing keeps pushing the bar in productivity and efficiency, andmarketing becomes more aggressive and precise. Today, survival dependsconsiderably on how much a company is able to streamline it all - from thebeginning till the end. It's a lot about logistics.
Logistics is defined in Wikipediaas "the management of the flow of things between the point of origin andthe point of consumption in order to meet requirements of customers orcorporations. The complexity of logistics can be modelled, analysed,visualised, and optimised by dedicated simulation software." The term'logistics' has its roots in the 19th century French word logistique (logermeans to lodge). Others believe it comes from the Greek word:
Definitions differ, but one doesget the drift. It is a process that is still evolving, and finds precision whenthe term graduates to 'supply chain management'. According to the Council ofSupply Chain Management Professionals (CSCMP), supply chain managementencompasses the planning and management of all activities involved in sourcing,procurement, conversion, and logistics management. It also includescoordination and collaboration with channel partners, which may be suppliers,intermediaries, third-party service providers, or customers. Supply chainmanagement integrates supply and demand management within and across companies.(Source: Wikipedia).
Both the evolution of the twoterms and the ever-growing precision of the definitions indicate another thing:things are changing fast and companies are in a never-ending race to cut looseends. For the textile and apparel industry, which starts from the sowing ofcotton seeds in agricultural fields and ends with a consumer buying a product(we are not going onto the afterlife of textile products here for the sake ofconvenience), the entire chain is a long-drawn one, and many players operateacross two or more rungs in this chain. Efficiency and profitability depend phenomenallyon how much one is able to ensure a smooth and efficient functioning oflogistics.
The complexity, as well asthe import of logistics, was put across succinctly and squarely by global industryleader DHL in a white paper titled 'Fashion unleashed: The agile fashion supplychain':"Rapidly changing and often unpredictable consumer buyingbehaviour, enabled by the Internet, mobile communications and growing spendingpower, has made volatility and complexity the norm rather than the exception inthe fashion sector. It has fragmented sales channels, escalated servicedemands, shortened product lifecycles, ratcheted up cost and margin pressures,and created production challenges. Add changing demographics, rapid growth inemerging markets, and the rise of the global middle class and you have thedefinition of uncertainty."
The paper, published in September
2013, had said in as many words, "Not surprisingly, these forces are
driving tremendous change in the fashion sector, particularly in supply chain networks
and operations. The industry - including retailers, manufacturers and their
logistics service providers - is re-thinking its supply chains with an eye
toward building in appropriate speed, flexibility, responsiveness and control.
Companies must create and manage a supply chain that is 'fit for purpose' in
this environment, capable of serving multiple markets around the world - and
doing so profitably." To survive one will need to stay ahead of the times;
even "with the times" is not enough.
Making
India ready: Problems and prospects
India is among the top five
countries that accounts for close to a quarter of the global apparel market,
and with an increasing acceptance worldwide, the market share of shipments of
the apparel and textile industry are on the rise. The logistics sector is
growing at a rapid rate in India due to the increase in overall gross domestic
product (GDP) growth in the economy.
Says Siddhartha Rajagopal,
executive director of the Cotton Textiles Export Promotion Council (TEXPROCIL),
"The market size of the textile industry is also growing at an overall
rate of 9 per cent CAGR. Tremendous expansion has also taken place in the
e-commerce platform which requires efficient logistics to support it. However,
the present logistics landscape is ill-equipped to meet with the challenges
even though reports suggest that feverish activity is under way to re-energise
the sector with investments and development of end-to-end delivery
services."
There are those who believe that
India definitely lags behind international leaders in terms of being organised
in the world textiles/apparel market from the logistics perspective. Rubal
Jain, managing director, Safexpress Pvt Ltd, argues optimistically, "But
despite the presence of logistics constraints in India, there are several
optimised solutions available with the competent logistics service providers.
The retail sector and especially apparel retail companies are one of the few to
rely hugely on outsourced logistics players, thus enabling better efficiencies
in the system. In developed countries, the demand forecasting and information
sharing that takes place is much better, enabling the logistics service
providers to be better prepared to serve their clients. While in India this
transparency is absent, causing both the service provider as well as the retail
companies to struggle to find last-gap solutions during peaks or lows in
fashion trends."
Rajagopal elaborates, "The
Indian logistics and supply chain management sector is largely driven by informal
and fragmented arrangements with small holdings. There are a large number of
unorganised small truck owners and service providers. As the manufacturing
sector grows many of the non-core activities are outsourced. Warehousing
services are also limited."
Moreover, as Jain points out, the
most well-known retail brands do not invest even minimally in packing their
cartons appropriately and usually end up overstuffing, causing the cartons to
invariably tear open during the journey spraying their contents everywhere.
"In the apparel business, the look and feel of the item is just as
important as the item itself. If a particular piece is even slightly dirty it
will not sell. However, with the overstuffing and ordinary packing this is
common. Unlike the developed world where the packages are sturdy and transport
worthy," he explains.
"This is not the case though
in most unbranded retail of India - which is still a significant portion of
Indian retail. They are used to working with traditional transportation companies
which do not offer weather-proof or secure solutions. Hence, their ways of
functioning have adapted to these factors, and are much more efficient, and
error-free. Their quality of packing is outstanding, and ensures security of
goods to a very large extent," Jain asserts.
Inter-modal transport systems are
not yet in place and logistics nodes are not fully developed either.
"Urban freight logistics remains a major area of concern as there are
restrictions on movement of large trucks during peak hours. There is, thus, a
need for warehouses around a city so that goods can be moved in smaller
vehicles to various stores and retail outlets," adds Rajagopal.
Another key point is that
logistics costs are higher in India due to inefficiencies, but direct logistics
costs in the West are higher than direct costs here. Jain offers a plausible
reason for this discrepancy, "This is because companies in the developed
world have understood the hidden costs, and are willing to pay to overcome the
hidden costs. In India though, while companies are realising that there are
hidden costs (such as cost of capital, cost of inventory, losses, delays, lost
sales, etc.), they are still not willing to pay for organised and faster
services that can guarantee a turn around to their businesses simply through
efficient supply chains."
Entry of
the specialists
Success of logistics depends
largely on the three core elements: value creation; integration of key business
processes; and collaboration. The change in corporate business trends has given
rise to logistics outsourcing. "For long, the scope of the logistics
sector was limited to basic transportation of goods. However, with the passage
of time, the spectrum of services offered by the logistics companies has
increased," says Rajagopal. That marks the entry of the specialists.
Simply put, third-party logistics (3PL) involves using
external organisations to execute logistics activities that have traditionally
been performed within an organisation itself. So, third-party logistics
includes any form of outsourcing of logistics activities previously performed
in house. For example, if a company with its own warehousing facilities decides
to employ external transportation, his would be an example of third-party
logistics (Source: Wikipedia). The trend is unmistakable.
But, how are these specialists
customising logistics solutions for textiles/apparel companies so that they can
streamline their production with the supply chain (for both front-end and
back-end?
Bino George, head of Pre-Sales
with Infor India, says, "We have joined forces with the leaders in the fashion
industry to develop Infor CloudSuite Fashion, a comprehensive solution that
helps various textiles and apparel companies to deal with the specific
intricacies of global fashion supply chains. The time taken from concept to
consumer has been reduced along with improved agility and responsiveness to
consumer demands. The ability to pick, pack and ship is our key strength which
enables textile manufacturers, brand owners and private brand retailers to
streamline core processes." The emphasis, across the board, is
increasingly on cloud-based solutions.
And solutions have to be
tailor-made too. Industry leader Safexpress provides a one-stop solution to
deliver directly to retailers everywhere in India, with nationwide coverage and
reach. Jain says, "The retailers in this vertical require complex
deliveries on high streets and at malls, which are often cluttered with issues
like no entries, no parking facility, availability for delivery vehicles or
parking at considerable distance. Delivering on foot and managing complex mall
rules are other things to be taken care of while planning for the regular feeds
to such outlets. It also requires the delivery team to possess a deep understanding
of operations and requirements at malls. In order to crease out all such
challenges in their supply chains, Safexpress have pioneered a new and unique
service called 'Stock2Shelf', aimed at quickly delivering store-ready
consignments, thereby eliminating the need for the mall stores to maintain
back-end store rooms or for the company to maintain feeder warehouses in the
vicinity to keep up the stock."
Similarly, Infor CloudSuite
Fashion, says George, has helped companies to launch better collections faster
with higher product quality resulting in few markdowns hence increasing
innovation in the fashion demand chain. Therefore companies are open to ideas
now and are adopting new cloud strategies knowing that their industry is
complex and acknowledging the fact that they need an enterprise solution to
keep them ahead of competition.
How
things are changing
If the bottomlines are
increasingly about efficiencies in today's world, logistics companies have to
deliver on fast fashion. But has industry itself changed to march with the
times?
George argues, "The fashion
apparel industry has significantly evolved, particularly over the last 20
years. The changing dynamics of this industry has forced the logistics industry
to meet the demands of fast fashion because today's fashion market is highly
competitive and there is constant need to 'refresh' product ranges and change
the entire merchandise within the store frequently. At Infor we offer an
enterprise management system that is up to the challenge. CloudSuite Fashion is
built specifically to meet the latest needs of the fashion companies."
Five-Point
Path to streamlining things
Three industry experts were posed
this question: What are the major roadblocks hampering the growth of logistics
as far as the textiles and apparel industry is concerned? What would be your
5-point plan to resolve these? The answers varied a bit, but not radically.
Siddhartha Rajagopal, Executive Director of the Cotton Textiles Export Promotion Council (TEXPROCIL): The major roadblocks hampering the growth of logistics can be seen both at regulatory and at the firm levels. Changing government policies on taxation and regulation of service providers are going to play an important role in this process.
Coordination across various
government agencies requires approval from multiple ministries and is a road
block for multi-modal transport in India.
At the firm level, the logistics
focus is moving towards reducing cycle times in order to add value to their
customers. Consequently, better tools and strategies are being sought by firms
in order to enhance their decision making. A blueprint of five-point framework
for improving the logistic sector concerning the Indian textiles/apparel sector
should necessarily include the following:
♦
Realise the importance of infrastructure and demonstrate a
strong commitment towards improvising the same.
♦
Promote an integrated transport policy across the country,
also develop dedicated lanes or expressways for free passage of goods and
passengers; along with clearly addressing the safety aspects during transit.
♦
Introduce conducive regulatory framework that includes
rationalisation of tax structures, proposed GST (goods and services tax)
framework and prevention of overloading will provide the much needed favourable
environment for the sector to flourish.
♦
Provide the much-needed aid for leveraging economies of
scales in manufacturing and promoting service providers offering integrated
logistics solutions which are cost-effective by the government, as this will
opportune the service users outsource their logistic requirements and focus on
their core business activities.
♦
Statutorily emphasise the integration of IT-enabled
technology in the sector, which will help improve access of Indian
textiles/apparel sector across the markets emerging globally thus not limiting
the firms to geographical boundaries.
Rubal Jain, Managing Director, Safexpress:
Over 90 per cent of the logistics industry in India is still unorganised, which
sums up the state of this industry. Poor infrastructure and road conditions in
India and multiple tax structures in various states lead to high transit time
and high costs of logistics. A huge dearth of skilled manpower in this industry
has further led to inefficiencies in logistics in India.
Lack of alignment with and poor
understanding of the customers' supply chain cause an inability to meet
customers expectations. Moreover, shortage of expertise to manage end-to-end
supply chain and logistics and offer customised logistics services for
different industry verticals by a single logistics service provider is also a
challenge. Absence of visibility and transparency across the supply chains and
non-integrated logistics due to engagement with multiple logistics service
providers further aggravates the problem.
With hi-tech logistics parks
strategically placed at major national highways across the country, well
researched and deep knowledge about the Indian topography, over 1,000 direct
routes, all-weather proof containerised fleet of 4,000 vehicles and reach to
every square inch of India, Safexpress is well equipped to address the
infrastructural challenges in India.
We are eagerly waiting for the GST
bill to come through. Having prepared for this for years now, we are ready to
meet the demands of more streamlined logistics and warehousing that will come
up once the Bill is passed. Logistics in India is still largely an unorganised
sector and we are just waking up to the fact that it really needs to get
organised on a national and at the policy level.
Bino George, Head of Pre- Sales,
Infor India:
An inadequate logistics
infrastructure has a major effect in creating bottlenecks in the growth of the
economy. Logistics costs which include inventory holding, transportation,
warehousing, packaging, losses and related administration costs have been
estimated to be around 13-14 per cent of Indian GDP which needs to be cut down.
Service reliability of this industry in emerging markets, like ours, is also
slow and requires high engagement time of customers, thereby incurring high
indirect variable costs. Reverse logistics can no longer be accepted as the top
performing companies are recognising the need to master supply chain and
logistics to gain competitive advantage. At Infor, our 5-point plan to solve
these critical problems for the logistics industry include the following:
♦
Become more agile with the help of enterprise solutions
which will provide industry specific infrastructure to businesses.
♦
Reduce total cost of ownership.
♦
Ensure accessibility and reliability.
♦
Streamline processes and increase efficiencies across
global supply chain.
♦
Improve both regulatory and ethical compliance.
Logistics for the industry has
been streamlined across the supply chain, including improved support for
omnichannels. Both regulatory and ethical compliance has improved. Stocks can
be replenished more efficiently to avoid stock outs and maximise sales revenue.
As a result the lead times have reduced making companies more responsive to the
fast fashion, he says.
Rajagopal provides another angle,
"Many of the leading Indian textile companies work closely with
international design houses, and so do their competitors. Some of the textile
companies have a specific request to deliver their samples to these design houses
in a stipulated time, on a given day, to ensure that they have the advantage of
reaching their samples on the client's table well before competition. This is
where logistics services play a very critical role. There is an intense need to
ensure this segment faces no hassles in terms of logistics."
But how are logistics companies
ensuring this? Infor, for its part, engages in vertical integration with the
distribution network by controlling the value chain. George lays its
threadbare, "(The Company's) Cloud Suite Fashion supports the integration
by improving inventory visibility, managing all inventory commitments and
freeing up working capital to invest in business growth. Streamlined processes
help in reducing the total cost of ownership and lead times blocking
competitors from gaining access to scarce resources or important markets.
Vertical integration is also implemented by leveraging social business and
mobile tools for enhanced collaboration with 24/7 connectivity hence building
stronger network relations both inside and outside the company. With data
managed by Amazon Web Services we offer best practice protocols in application,
network, physical and operations security as well as comprehensive
monitoring."
And yet, it is not that Indian
companies don't spend; they probably spend a lot, much of which can be cut
down. In fact, India spends about 14.4 per cent of its GDP on logistics and
transportation as compared to less than 8 per cent spent by other developing
countries. Says Rajagopal, "In the Indian context, while managers are well
aware of the need to develop supplier partnerships, integrate and coordinate
the flow of goods from supplier's supplier to ultimate customer, and share
information among supply chain partners, the infrastructure necessary to
facilitate such seamless integration is as yet unavailable. There is pressure
in emerging markets to rapidly adopt logistics and supply chain integration
practices in an effort to compete globally.
The last
mile gaps that need to be filled
If there are processes, there
would be gaps. There are several challenges the industry faces: from poor
quality of infrastructure, unrealistic taxes and levies at different levels, to
shortage of skilled manpower to service the industry, and last but not the least,
issues related with technology.
Continues Rajagopal, "Last
mile connectivity remains a major issue as companies continue to search for
appropriate tactical responses to implement their strategies in reaching the
merchandise to the market as per the customer's requirements and in time. We
need to move to an era of 'just in time' logistics in order to provide tailor
made solutions to the needs of an ever discerning market place.
"Moreover, the logistics
sector in India is highly fragmented. There are several, intrastate check posts
for checking the documents, collection of toll/tax, etc. and also police
harassment and corruption. The organised players have to directly compete with
the unorganised operators who are prone to flouting rules and regulations, and
avoiding taxes."
The Darwinian theory about
adaption will hold. In fact, the DHL paper mentioned earlier uses the keyword
"adaptive" when talking of best practices. And the six trends that it
mentions: flexible networks, segmented supply chains, tailored sourcing,
postponement, shared distribution networks, and accelerated product velocity -
all point towards adaption to trends and compulsions.
The final frontier, therefore, will keep expanding, with the bottomline: adapt or perish.
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