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.
<![if !vml]><![endif]>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:
<![if !supportLists]>♦ <![endif]>Realise the importance of infrastructure and demonstrate a strong commitment towards improvising the same.
<![if !supportLists]>♦ <![endif]>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.
<![if !supportLists]>♦ <![endif]>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.
<![if !supportLists]>♦ <![endif]>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.
<![if !supportLists]>♦ <![endif]>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:
<![if !supportLists]>♦ <![endif]>Become more agile with the help of enterprise solutions which will provide industry specific infrastructure to businesses.
<![if !supportLists]>♦ <![endif]>Reduce total cost of ownership.
<![if !supportLists]>♦ <![endif]>Ensure accessibility and reliability.
<![if !supportLists]>♦ <![endif]>Streamline processes and increase efficiencies across global supply chain.
<![if !supportLists]>♦ <![endif]>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.