mmr-july-2013

Materials Management Review 1July 2013

From the Desk of The National PresidentFrom the Desk of The National PresidentFrom the Desk of The National PresidentFrom the Desk of The National PresidentFrom the Desk of The National President

My dear readers,

Greetings from National President.

Morse Code is given a decent burial by BSNL which has been handling since 1990s.

Physical proof of communication is definitely missed out. In rural areas it is still hard to

reach by other means in emergency. But now Large majority of villages are covered by phones. In the domain

of IIMM also we were heavily depending upon Telegram. Thanks to IT and Communication, there is unbelievable

development in day to days communication. Skype , social networking , tele conferencing , video conferencing

etc are the order of the day. I wish all our IIMM fraternity adopt the latest tools and techniques to improve

efficiency of SCM .

There is a common notion that people over 50 years are averse to computers and electronic media of

communication. It is a question of attitude only. I personally feel this is only a matter of small attention to be

given. In fact it is much more comfortable to adopt the latest technology.

It is here IIMM think of introducing more youngsters in helm of affairs so that tomorrow’sIIMM is managed by

contemporary leaders. Even at the cost of repetition i would like to remind that India is the youngest country in

the world with an average age of 26 years. Young India will rule for the next one century. I encourage and

appeal to all our young leaders to take more interest and active part in the IIMM programs and feel the

ownership. The future of IIMM will be in the hands of young leaders. All the seniors are always available in the

advisory roles.

It is a matter of great concern that our flagship educational courses are not being preferred with the lethal

competition around. We have to totally change and adopt to the state of the art publicity, improve visibility,

besides revisiting the course content with an young mind and strategies. This reminds me the return of Mr.

Narayan Murthy to Infossys to the top place when faced with new challenges.

Although with a minor hiccups and fluctuation factors, India has taken it’s place as one of the world s great

economies having overtaken Japan as the world s third largest economy in purchasing power parity terms. This

is a remarkable transformation by any standard. it is good for India and good for the world.

Innovation in SCM, adoption of futuristic technology and obsession to Quality will drive the growth of the economy

and Govt policies to combat the slowing economies of USA and UK who are our major overseas business partners

will matters much. All our IIMMites are fully equipped and developed to face any challenges.

Regards,

C. Subbakrishna

National President

[email protected]

Materials Management Review2 July 2013

From the Desk of Editor-in-ChiefFrom the Desk of Editor-in-ChiefFrom the Desk of Editor-in-ChiefFrom the Desk of Editor-in-ChiefFrom the Desk of Editor-in-Chief

Indian Exports are finding it difficult to lower trade deficit on account of ambiguous global

economy driven by Western Economies, particularly because of debt-ridden Europe & slow

growth of US & other economies. Fiscal Year 2012-13, has seen the decline of 1.76% of Indian

Exports to USD 300.6 billion while imports grew by 0.44% to USD 491.48 billion pushing up

Current Account Deficit to USD 190.91 billion. This deficit is a matter of serious concern and

keeping this in view, Govt. has announced Annual Supplement to Foreign Trade Policy intended

to increase Indian Exports from current level.

The Annual Supplement announced by Mr. Anand Sharma, Commerce, Industry & textile Minister, has emphasized

the need to aid exporters and make them competitive and effective in the global markets. Measures have been taken

to achieve the export target of USD 500 billion by 2013-14.

Zero duty EPCG scheme extended beyond March 2013 and now all sectors to get benefit, specific export obligation

reduced by 10% to promote domestic manufacturing of capital goods, Incremental Exports Incentivisation Scheme,

widening of Interest subvention scheme to 134 sub sectors of engineering sectors, exports of High Tech product

would be incentivized. Served from Indian Scheme (SFIS), service providers are entitled to Duty Credit Scrips at the

rate of 10% of free foreign Exchange earned during a Financial Year.

Labour –intensive sectors like Textiles have been the thrust area of the foreign trade policy. Incentives to textile

sector include 2% interest Subvention, 2% Market Linked Focus Product Scheme to US & Europe. The positive move

of allowing duty free scrips under export promotion scheme for payment of excise duty is welcomed by the Industry.

The focus on giving low-cost credit to key export industries and extending the benefit of incentive schemes to

greater number of sectors is a very welcome move as it would provide some stability to our exporters in an

uncertain global environment. The focus on rewarding value-addition is also very welcome as it creates greater

incentives for the integration of our entrepreneurs into global value-chains. Logistics sector is especially heartened

by trade facilitation reforms included in the FTP such as the decision to dispense with the requirement to submit

hard copy of EP copy of shipping bills as they have a direct positive impact on our operation costs”.

Export bans are still on the policy agenda. Exports for basic farm produce are banned, but products derived from

this are exempt. Castor Oil, Coconut Oil are also permitted from the prohibition on export of edible oils. This

should be a positive move for the food processing industry.

A no. of measures are announced to revive Investor’s interest in SEZs like reduction of Minimum Land Area

Requirement. Status holder Incentive scheme (SHIS) was extended for the year 2012-13. Second task force on

Transaction cost in International Trade has been constituted, who will submit their report in 6 months on recognizing

scope for further reduction in Transaction Costs which are the main hurdles to our exports. Clearances for Land

Acquisition to shipping goods overseas are constrained by expensive regulations, inadequate infrastructures etc.

increases the cost of doing Business & Export.

Further, Micro, Small and Medium Enterprise (MSME) exporters are in intense need of comprehensive interventions

to survive global competition. The industry expects the government to lessen taxes, improve infrastructure, and

enhance marketing and manufacturing support. Industry participant believe that rising costs of raw materials, a

weak global competitive environment, diminishing demand from the international markets, increasing oil prices

and inadequate infrastructure are the primary causes of decline in exports.

Supply Chain Managers can avail the opportunities extended by Govt. through recent change in Foreign Trade

Policy to make the Industries most competitive, enhancing domestic production and increasing the export target

thereby reducing the fiscal deficit to boost the GDP growth of the economy.

(M. K. BHARDWAJ)


IIMM is a charter member ofInternational Federation ofPurchasing & Supply Management

Editor in Chief & Publisher:Mr. M. K. BhardwajPast President, IIMM &Former Director Ministry of Defence

Core Committee :Mr. Ashok Sharma, President 5M IndiaMr. V. K. Jain, Former ED, Air IndiaMr. Tej K Magazine, Management Advisor

Editors :Mr. L.P.Patel, Sr. Vice PresidentMr. T.G.Nandakumar, VP (North)Mr. N.K.Kabra, VP (East)Mr. Anant Kembhavi, VP (West)Mr. N. Udaya Bhanu, VP (South)Mr. Madhu Sudan Pathak, VP (Central)Mr. O.P.Longia, NS&TMr. Suresh Kumar Sharma, IPPProf.(Dr.) V. K. Gupta - IMT, Ghaziabad

Correspondence :MATERIALS MANAGEMENT REVIEW

Indian Institute of MaterialsManagement

Veer Sadan, 4239-A/2,1, Ansari Road, Darya Ganj,New Delhi - 110002.Tel : (011) 23266089, 23242124Fax : (011) 23277207E-mail : [email protected]

Printed at :Power Printers,4249/82, 2 Ansari Road, Daryaganj,New Delhi - 110002

Edited, Printed & Published by :INDIAN INSTITUTE OF MATERIALS MANAGEMENTVeer Sadan, 4239-A/2, 1, Ansari Road, Darya Ganj, New Delhi - 110 002.Phones : (011) 23266089, 23242124 Fax : 011-23277207E-mail : [email protected], Website : iimm.org

(Published material has been compiled from several sources, IIMM disowns any responsibilityfor the use of any information from the Magazine if published anywhere by anyone.)

MATERIALS MANAGEMENT

REVIEW

Volume 9 - Issue 9 (July 2013)

C O N T E N T S

� AN INTERVIEW WITH SHRI B.K.SINHA, ADDL. MEMBER,

RAILWAY (STORES) 4

� INDIA - NEXT WAVE OF INCLUSIVE GROWTH 5

� GOVERNMENT CONTRACTS : FAIRNESS OBLIGATIONS FORGOVERNMENT CONTRACTS IN INDIA 7

� THE GST’S EXEMPTION COMPLICATIONS 9

� BIS NEWS : PALLETS - AN EFFICIENT AND SAFE WAY OFMATERIAL HANDLING 10

� CORPORATE CHALLENGE’S - OUTSOURCING IN

VALUE CHAIN 13

� INLAND WATER TRANSPORTATION - A TOTAL APPROACHFOR MULTIMODAL TRANSPORT SOLUTION 17

� EXCISE DUTY EXEMPTED FOR LOCAL GOODS AT AIRPORTSTORES 18

� GREEN IMPROVEMENT PROCESS 19

� BENEFITS OF COMPETITION POLICY IN PUBLIC

PROCUREMENT WITH SPECIAL REFERENCE TO INDIA 20

� EXPORT PROMOTION BONANZA - CAPITAL GOODSIMPORTS @ 0% DUTY 26

� SUPPLY CHAINS OF THE FUTURE - LEAN AND AGILE 27

� WTO UPDATE : HON’BLE PRESIDENT OF INDIASHRI PRANAB MUKHERJEE’S SPEECH AT THEGOLDEN JUBILEE CELEBRATIONS OFINDIAN INSTITUTE OF FOREIGN TRADE 30

� INNOVATION - VALUE CHAIN 32

� LOGISTICS AND SUPPLY CHAINS MANAGEMENTA CASE STUDY WAL-MART 36

� MANAGING RISKS IN SUPPLY CHAINS 38

� CURRENCY EXCHANGE RATES 40

� MATERIAL MANAGEMENT FOR HEALTHCARE SECTOR 41

� NEGOTIATION SKILLS 45

� FACILITATOR OF CROSS-BORDER TRADE 46

� E-BUSINESS AND SUPPLY CHAIN MANAGEMENT 47

� COMMODITY INDEX 49

� BRANCH NEWS 50

� EXECUTIVE HEALTH 55

� LIST OF IIMM BRANCHES 56

PAGE NO.


Q1. How do you perceive Supply Chain Management inRailways?

Indian Railways supply chain management (SCM)encompasses the management from conceptualizationto condemnation of roughly 1.5 lakh discrete items. Ittranslates into an annual procurement of about Rs30,000 crore worth of materials. Railways stock theseitems at around 250 warehouses spread throughoutthe country and uses a complex mix of rail and roadnetworks for ensuring the material availability at theend users. It normally uses the annual consumptionmethod for forecasting of requirement and ‘Bill ofMaterials’ for assessment of quantities in differentproduction units of Railways which manufacturelocomotives, coaches and wagons. Procurementpractices in Indian Railways are based on GeneralFinancial Rules(GFR), guidelines issued by CentralVigilance Commission (CVC) and follow the establishedprinciples of public procurement. For its specificguidance, it uses Indian Railways Stores Code (firstpublished in 1938) and a more recent ‘Rules for enteringinto supply contracts’ as the basic policy documentsfor material procurement. This book and also itsupdates thereafter are available on the internet(www.indianrailways.gov.in) for wider disseminationand transparency.

Q2. Transport plays an important role in overalldevelopment of a Nation’s Economy. How IndianRailways is contributing towards this cause?

Indian Railways play a very important role in theeconomic development and social welfare of thecountry. It stimulates development of the nation’seconomy by transporting goods and passengers andtherefore is rightly called as the lifeline of the country.It transports about 2.33 crore passengers and 3 milliontonnes of freight traffic per day and has recently joinedthe select group of ‘one billion club’of nationstransporting more than one billion tonnes of freighttraffic per year . The number of passengers beingtransported per day is more than the population ofmany countries. Our earnings from passenger andgoods services are about Rs 32000 cr and Rs 86000 crrespectively.

Q3. In the current economic scenario, what are thesignificant challenges to enhance the efficiency ofMaterials Management deptt. of Indian Railways andsteps have been taken to overcome?

The challenge remains to retain the service levelnotwithstanding economic constraints as any out ofstock situation has serious implication on trainoperations. How the SCM strategy followed by IndianRailways has resulted in meeting the twin challenge of‘reduction in total system wise cost and yet maintainingthe system wise service levels’ can be seen from theTable below:

Parameter 2008-09 2009-10

Value of purchase (other thancivil engg items) 27495Cr (a1) 27876Cr(a2)

AN INTERVIEW WITH SHRI B. K. SINHA,

ADDITIONAL MEMBER, RAILWAY (STORES)MR. M.K. BHARDWAJ

CHIEF EDITOR – MMR, IIMM

Iron & Steel index 288.4 (c1) 300.6 (c2)

Value of Purchase at constantprice of 2008-09 (other than 27495Cr 26750 Crcivil engg items) (c1/c2)*a2

Ratio of total purchase values/(freight tonne KM + Passenger Kmof train services) 0.0197 0.0185

Q4. What are your views regarding e-procurement andwhat steps have been taken by railways in this direction?

The Electronic Procurement System (EPS) implementedby Indian Railways is a shining example of use ofInformation Technology (IT) for achieving the twinobjectives of efficiency and transparency in supplychain management. The system (EPS) was started inAugust 2008 and was rolled over in entire IndianRailways. I am happy to share that so far more than3.80 Lakh tenders have been uploaded on the CentralizedWebsite www.ireps.gov.in and more than 16800vendors are registered with this website. The EPS hasbeen a success story for vendors too. Vendors havegained in terms of increased transparency, increasedand easy access to tender and purchase basedinformation across all Zonal Railways and ProductionUnits and reduced transaction costs for participationin tenders. The bid submission and opening being online,not only can the vendors participate in tenders but theycan also access other informations like comparativestatement of rates as soon as the tender is openedelectronically.

Q5. IIMM being a professional body of Supply ChainManagement, what are your expectations from ourInstitute towards railways & Profession?

Effectively managed procurement – properly plannedand executed – are essential to achieve value for money(VFM) for the taxpayer. This requires a great deal ofexpertise and knowledge in managing and monitoringpublic procurement. Thus, there is a need to understandthat public procurement has emerged as a specializeddiscipline in itself. Its importance is increasing day-by-day due to present day economic scenario. However,barring a few departments (Railways and DGS&D), thereis a lack of trained man power in the area of publicprocurement in the government. There is, therefore aneed to actively encourage capacity building in thearea of public procurement. Capacity building need tobe tackled at three levels:-

(a) Competence building of public procurementmanagers

(b) Knowledge management in government on publicprocurement

(c) Dissemination of best practices

Indian Institute of Materials Management(IIMM) hasbeen playing a very important role in Capacity buildingreferred to above for last so many years. It is expectedthat it would not only continue its praise worthy role inthis area but also expand its activities in the years tocome.

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INDIA - NEXT WAVE OF INCLUSIVE GROWTH

P. CHIDAMBARAM

UNION FINANCE MINISTER OF INDIA

1. My confidence stems fromthe fact that while India maynot be insulated from thedifficulties plaguing theworld, India„s economicfundamentals are strong.With the economic and fiscalreforms already put in placeincluding those on the anvil,I expect India s growth to berobust and sustainable. I amconfident that it will gatherfurther momentum in thecoming years. India hasbecome an attractivedestination for foreigninvestors. We have openedup the economy further toforeign direct investments.

2. The Indian growth story isfascinating. Let s look at itin the global context:

� The global economy is yet torecover from the economicmeltdown of 2008 which has impacted on bothgrowth and employment opportunities acrosscountries. Compounding the problems further is theEuropean debt crisis.

� Recent signs of economic recovery have been weakand is uncertain. Global economic growth hasslowed down from 3.9 percent in 2011 to 3.2percent in 2012. According to IMF projects, it isexpected to recover only to 3.5% in 2013. The growthrate in the advanced economies, which are ourmajor markets, declined from 1.6 per cent in 2011to 1.3 per cent in 2012. The US fiscal difficultiescontinue, with sequestration and the prospect ofyet another fight over debt still holding back growth.The crisis in the Euro-zone also continues to poseserious risks for the global economy,notwithstanding the OMT announced by the ECB.Actions in even a tiny economy like Cyprus, haveripple effects across the world.

3. While, the Indian economy grew at 6.7%, 8.6%, 9.3%and 6.2% in the four years from 2008-09 to 2011-12, respectively, GDP growth is expected to declineto 5.0 to 5.5 per cent in fiscal 2012-13. Clearly, thepersistence of the global slowdown has finallyimpacted us significantly. I must, however, candidlyadmit that some of the reasons for our slowdownare home-grown. The boost to demand given by themonetary and fiscal stimulus following the globalcrisis of 2008 was significant. This helped in strongrecovery with final consumption growing at anaverage of over 8 per cent annually between 2009-10 and 2011-12. An unfortunate consequence of

this, however, was somewhathigh and stubborn inflation. It isthis that led to a strongcontractionary monetaryresponse that slowedconsumption demand. Starting2011-12, corporate investmentshave been adversely affected. Asthe growth slowed down andGovernment revenues failed tokeep pace with welfare spending,the fiscal deficit emerged as amatter of concern. WithGovernment savings falling andprivate savings also shrinking,the current account deficit (CAD)widened to 4.6 per cent in H1 of2012-13 from 4.0 per cent in H1of the previous year.

4. We are addressing thisproblem proactively. However, wemust remember that even in faceof worst possible confluence ofadverse global and domesticfactors, we remained, even in

2012-13, one of the fastest growing large economiesin the world. Nevertheless, I am not satisfied withthe 5%+ growth rate. India s potential growth rateis 8%+ and we cannot afford to become complacentand sit back. We are a mature and vibrantdemocracy. We have taken effective steps to rein ineconomic slowdown and fiscal stress in the pastfew months. These measures have begun takingeffect.

5. India s Inherent Strengths: At the forefront of allthis is the focus on inclusive growth. What is“inclusive” growth? It is growth that is broad-based,shared and one that focuses on the poor. A recentestimate was that for every one percent of GDPinvested in infrastructure, India creates almostthree and a half million direct and indirect jobs.With our focus on investments in the infrastructuresector, I want you to consider the reasons why Ithink India s growth is likely to be high andsustained for decades:

� First, India s population is young. According to arecent IMF study, India s demographic dividendcould add about 2% to per capita GDP growth overthe next two decades.

� Second, India is focusing on building world classinfrastructure. This policy thrust has spin-offs interms of job creation and enhanced investments inthe manufacturing. For instance, the Delhi MumbaiIndustrial Corridor, entailing over $ 90 billion ininvestment, will link Delhi to Mumbai s ports,covering an overall length of 1483 km passingthrough six States. This project will have nine mega


industrial zones of about 200-250 sq. km. each,high speed freight lines, three ports, six airports, asix-lane intersection-free expressway connectingthe country s political and financial capitals, anda 4000 MW power plant, and provide a plug andplay environment for manufacturing investment.

� Third, India has a large portion of its populationengaged in agriculture. We intend drawing this largeworkforce into the high value addition jobs createdby investments in manufacturing. An ambitious skilldevelopment programme is underway to equip ourpopulace with requisite skills and integrate intothe emerging job market.

� Fourth, India s household final consumption is ahealthy 57 percent of GDP. As incomes grow, asignificant portion of it will be spent. In recent years,growing rural demand has added to healthy urbanmiddle class consumption demand growth,buffering India somewhat, though not entirely, frompaucity of aggregate demand that plagues the world.

6. These factors underlying India s growth prospectsare supported by many other drivers like the energyand vibrancy of our entrepreneurs, a strongservices sector, emerging knowledge spheres andsunrise sectors, and a large and growing numberof engineers and scientists.

� Our fiscal deficit in 2012-13 is estimated at 5.2%.We may better this target. The Budget 2013-14estimates a fiscal deficit of 4.8% at the end of thefinancial year. I am confident that this will steadilyreduce to 3% or even less by 2016-17.

� For fiscal consolidation, we have focused oncontrolling outgo on subsidies through bettertargeting. These include rationalisation of fertilizersubsidies, capping of the number of subsidized LPGcylinders, decontrol of petrol prices, gradualrationalisation of diesel prices and introductionof direct benefit transfer system to substantiallyeliminate leakages and to help better targeting ofsubsidies in various programs. Measures to passthrough fuel prices will also help reduce demandfor oil imports, and thus the CAD. However, let mestress that our fiscal consolidation has a humanface and the Government will continue to providesupport for the poor and the needy.

� We have set up a Cabinet Committee on Investmentto address and resolve bottlenecks impactingimplementation of large projects. It has alreadycleared investments to the tune of USD 27 billion.

� FDI regime in areas like multi / single brand retail,airlines etc. have been further liberalized and I amconfident there will be forward movement in areaslike insurance and pensions.

� A 15% investment allowance for capital investmentexceeding Rs. 100 Crore or about USD 20 millionwithin a specified timeframe has been announced.This is in addition to the normal depreciationavailable for new plant and machinery.

� Tax incentives for first-time home buyers have beenprovided. This is expected to give impetus toconstruction industry.

� Public Sector Units have been advised to acceleratetheir capex investments.

� Concerted steps have been taken to provide impetusto P&NG exploration and coal production (withlikely medium term benefits for the CAD).

� An independent regulatory authority will beannounced shortly for the road sector and coalsector, and for tariff setting in the Railways.

� Alleviation of coal shortages affecting powergeneration is being addressed by importing coaland assuring supply of definite quantities ofdomestic coal.

� The Bengaluru-Chennai Industrial Corridor andBegaluru-Mumbai Industrial corridor have beenconceived to provide robust infrastructure supportfor industrial growth in these high potential areas.

� MSME sector is being given special attention.

� Two new major ports have been identified fordevelopment.

� Fillip is being given to green, sustainable energyprojects.

� Steps have been taken to address CAD by moderatinggold demand through higher import duties andefforts to monetize idle gold stocks lying withcitizens and Gold ETF AMCs.

� Steps are also being taken to address food priceinflation through efforts targeting higherproduction of protein foods, and improved supplychain logistics to enable comprehensiveprocurement, processing and distribution of agriproduce that would potentially reduce wastage andcontrol food price inflation.

7. Simultaneously, steps are being taken to cover themost remote, least developed areas and populationsin the widening infrastructure and financial scope.Integrated action is being taken in primary health,education, low-cost housing and food distribution.Pilot schemes are being launched throughinnovative public private partnership models.

8. For financial inclusion, the central bank, the RBI,has asked rural banks to set up 25% branches inun-banked regions. As on March 31, 2012, regionalrural banks had a network of 16,914 branches inthe country. Roll-out plans have been drawn up foropening upwards of 1700 more per year. Privatebanks have also started rural branches. A privatebank opened 101 rural branches in December last,across six states as part of its financial inclusionplan to provide banking services in unbankedvillages.

9. The government is, separately, aiming at skilling500 million youth by 2022 through the ambitiousSkill Development Program. About USD 2.5 billionis spent on training rural below-the-poverty-lineyouth.

10. I am sure that today s discussions will lay out thecontours of the half a trillion dollar opportunityavailable to the private sector to invest in ourinfrastructure during the next four years as well asdemonstrate how this is going to be atransformational change that will benefit thelowest rungs of society.

Excerpt from Union Finance Minister ’s Speech atIndia Day at ADB Meeting at IEML

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GOVERNMENT CONTRACTS :

FAIRNESS OBLIGATIONS FOR GOVERNMENT

CONTRACTS IN INDIASANDEEP VERMA, IAS & DIR. PLANNING & COORDINATION,

DEPT. OF DEFENCE PRODUCTION, MIN. OF DEFENCE

[email protected]

In a recent public tender2 that was open only to Indianentities for bidding3, the accompanying technicalspecifications4 contained a rather unique and

interesting stipulation. Other than mentioningperformance parameters for the product in question,the technical specs also required (Indian) bidders tosupply only those products that were fully imported. Ineffect, the eligibility criteria and technicalspecifications, when read together, transformed this“open to Indian entities only” tender into one that wasopen neither to Indian manufacturers nor to foreignmanufacturers, but appeared to limit the zone ofparticipation only to Indian representatives of foreignmanufacturers, making it perhaps the first and only oneof its kind ever witnessed worldwide in procurementhistory.

Without commenting upon the merits of that case,continuing glitches of this nature in the acquisitionprocess highlight the critical importance ofunderstanding certain basic principles governingeligibility and technical requirements for participationin Indian public tenders. Procurement practitioners arealways cognisant of the fact that these two keydimensions, if used injudiciously, can sway the outcomeof a proposed contract away or towards a particularsupplier or group of suppliers. Adequate understandingof these aspects is therefore vital both from a procuringentity standpoint, who should be fully aware of thediscipline that it is expected to observe whileprogressing its procurement actions; as well as fromthe bidders’ perspective, who may need to know thecircumstances and the fora where such mistakes anderrors, whether intentional or unintentional, can bechallenged.

Keeping this backdrop in mind, this brief note outlinessome of the typical sources to look for executiveguidance on the principles underlying a fairprocurement process, as well as the different fora whereprocurement actions of government entities can bequestioned by dissatisfied bidders. It also containssome pointers to key relevant aspects of the PublicProcurement Bill 2012 (No. 58/2012) that was recentlyplaced before the Lok Sabha5 for deliberations by India’slawmakers.

Locating Fairness Requirements

Within the regulatory domain, fairness requirementsare to be found in General Financial Rules 2005 (GFR-2005) in respect of procurement by governmentdepartments6, whereas individual procurementmanuals govern actions by PSUs and other state-ownedenterprises (SoEs) in India. These requirements usually

relate to both the design of eligibility/ pre-qualificationcriteria for participation7, as well as the principlesgoverning formulation and/ or approval of technical orperformance specifications8.

The foremost fundamental principle underlying publicprocurement in India is that the eligibility conditionsand technical criteria must reasonably relate to userrequirements, without causing adverse impacts oncompetition. Insofar as PSUs/ SoEs are concerned, thespecific details, however, tend to vary from one entityto another. As a basic starting point, it is thereforeextremely important for all stakeholders to familiarisethemselves with specific principles under applicableprocurement rules of the particular procuring entity9.

An important source of procurement guidance thatapplies uniformly to government departments and toPSUs are office memoranda issued by the Chief VigilanceCommission (CVC)10, although this guidance tends to bedispersed across multiple circulars11, and is generallynot available as a single, unified code of practices. Inaddition, even some reports and compendia12 of theCVC are regarded (both by the CVC itself and by ChiefVigilance Officers (CVOs) exercising oversight on behalfof the CVC in various government Ministries/Departments/ SoEs) as inviolable guiding principles forpublic procurement. It is therefore vital that procuringentities and bidders also fully understand their rightsand obligations under this set of documents, eventhough these may not be directly related to a particularcontract or to a particular department/ PSU.

Finally, mandatory technical aspects for participationin public contracts can also be found in independentgovernment policies, where for instance, the NationalManufacturing Policy (NMP) contains importantrequirements on specifying minimum domestic contentin certain specific sectors13—a requirement largelyunknown to procuring officers as well as potentialbidders participating in such tenders for high-techequipment.

With the introduction of a Public Procurement Bill (the“Bill”), the regulatory landscape shows some promiseof consolidation of guidance. Part A, Chapter II of theBill contains preliminary guidance on general principlesof procurement, including qualification and eligibilityof bidders (sections 11, 12 and 13) and the design oftechnical specifications (section 9). An informedassessment of the Bill’s potential in bringing clarity tothe existing regulatory landscape may however have toawait the promulgation of detailed rules and guidelines/instructions under sections 56 and 57 of the Act once it


is passed, that may perhaps allow for deeper insightsinto the actual nuances of the eligibility and othertechnical requirements.

Challenging Unfair Actions

While the GFR-2005 entrusts all procuring officials withresponsibility of ensuring due process in their respectiveroles, the Manual on Policies and Procedures specifies adesignated “appropriate administrative authority” ofthe concerned procuring Department with an oversightfunction in case a tenderer feels that the properprocurement process is not being followed and/or if itstender has been rejected wrongly14. In addition, the CVCand CVOs also discharge an important oversightfunction under the prevailing regulatory scheme.

Almost all departments/ ministries are yet to designatesuch authorities as required by the Manual, with theresult that dissatisfied bidders tend to file complaintsat all possible administrative venues—includingvarious higher levels of the political executive, relateddepartments of the Government as well as theDepartment of Expenditure—as well as beforepractically all possible oversight institutions. Inaddition, a violation of a sector-specific policy such asthe NMP could also potentially be challenged beforethe issuing Ministry or the National ManufacturingCompetitiveness Council, further adding to the list ofpotential fora for bid-challenge.

While overlapping jurisdictions has the benefits ofpermitting unending forum-shopping to a dissatisfiedbidder, the flip side is that disposal of procurementcomplaints tends to be haphazard and ad-hoc, with nocertainty of disposal within guaranteed timeframes orguarantee of final authority for reforming a procurementprocess gone wrong.

With effect from last year, the Central Governmentrequires all departments15 and PSUs16 to include anintegrity pact (IP) in their bidding documents—arequirement that is typically mandatory for high-valueprocurements. While the IP mechanism is generallyregarded merely as an anti-corruption tool, a relativelyunknown fact is that the pact includes a promise onpart of the (government/ PSU) buyer to treat all biddersalike at the pre-contract stage17, thus providing anadditional, formal venue for challenging unfairdeviations or actions without attributing criminalmotives.

In practice, however, the disposal of complaints byIndependent External Monitors (IEMs) has not beeninstitutionalised, and little or no exchange of ideas andinformation takes place between IEMs appointed forvarious procuring entities, or those appointed fordifferent contracts under the same procuring entity/Ministry. While the IP mechanism may therefore be anextra forum available to dissatisfied bidders, it has notbeen a generally effective or an efficient one18, also onaccount of the fact that the recommendations made bythe monitors need not be mandatorily disclosed to thecomplainant, or to other potential bidders, who aretherefore deprived of the benefits of information-sharingand the development of common principles inprocurement.

This fundamental problem experienced with IPs mayrecur to some extent with the “Procurement RedressalCommittees” (PRCs)19 to be constituted under proposedPublic Procurement Bill, as the recommendations ofthese PRCs are not mandated to be disclosed to thecomplainant or to the general procurement community,with the result that development of common-lawprinciples may not take place as expected during theredressal process. In contrast, most advancedjurisdictions in other countries ensure (i) that the forumis an institutionalised one, rather than being constitutedon an ad-hoc, case-by-case basis; and (ii) that therecommendations/ orders of such fora—not merely thefinal decision of the administrative procuring entity—are made publicly available, with obvious advantagesfor enhancing the knowledge base and expectationsfrom future buying actions amongst all procurementstakeholders.

However, PRCs are certainly expected to bring in somediscipline in the complaint handling process in thegovernment contracting landscape in India. Of course,the final outcomes may largely depend upon therestraint shown within procuring entities themselves,as they remain the first forum of appeal even under theproposed Bill, and they will have the final say onaccepting, rejecting, or party acceptingrecommendations made by the PRCs. One remainingimportant area of concern with the proposed Bill isthat there is some potential for endlessly spiralingcomplaint-making, since a decision of a procuring entityto reject the recommendation of a PRC is not debarredfrom being appealed against before the PRC all overagain20.

Conclusions

The regulatory and legal landscape for meaningfulparticipation in government contracts in India can be afairly challenging one; and procuring entities as wellas bidders need to keep themselves updated onimportant aspects such as eligibility to participate anddesign of technical specifications, as both thesedimensions have potentially strong impacts oncompetition and best economic value for goods andservices sought or supplied. It is equally important fordissatisfied bidders to be aware of various permissibleavenues for bid-challenge outlined in this short paper,in order to protect their interests and for maximisingtheir returns on efforts made for bid-preparation andfiling.

(Footnotes)

1 © 2013, Sandeep Verma.

The author holds an LLM with highest honours, havingspecialised in Government Procurement Law from TheGeorge Washington University Law School, WashingtonDC. In 2009, he established www.BuyLawsIndia.com, awebsite dedicated to the advancement of publicprocurement law in India. Views expressed are personaland academic; and do not reflect the official position orpolicy of the government of India or any of herdepartments or agencies.

2 AAI’s “Notice Inviting Tender” (NIT) No. 05/11, availableonline http://www.aai.aero/corrigendum/Hindi.pdf.


3 See para 3.1 of NIT No. 05/11, supra n.2.

4 See para 1 of “Technical Specifications” accompanyingNIT No. 05/11, ibid.

5 The Public Procurement Bill, 2012 is available onlineat http://164.100.24.219/BillsTexts/LSBillTexts/asintroduced/58_2012_LS_EN.pdf.

6 GFR-2005 are available online atfinmin.nic.in/the_ministry/dept_expenditure/gfrs/GFR2005.pdf.

7 See, e.g., Rule 137 read with Rule 167, GFR-2005,supran.6. See also para 6.4 read para 8.5 and Appendix6-A of AAI’s“ANS Procurement Manual“, available onlineat http://www.aai.aero/aai_employees/ANS_Procurement_Manual2012.pdf, as an example ofPSU procurement requirements.

8 See, e.g., paras 5.2-5.3, 8.6 of AAI’s ANS ProcurementManual, supra n.7.

9 In the case of purchases by government departments,the GFR 2005 are required to be read in conjunctionwith (separate) manuals for procurement of goods,works and services/ consultants (available online athttp://finmin.nic.in/the_ministry/dept_expenditure/acts_codes/index.asp). Certain ministries, such as theMinistry of Environment and Forests, have issuedfurther subsidiary instructions on procurement ofgoods, works and outsourcing of services, availableonline at http://www.cpcb.nic.in/Instruc_eng_consultant_firm.pdf.

10 The various circulars and compendia issued by theCVC are available online at http://cvc.nic.in/proc_works.htm.

11 For instance, http://cvc.nic.in/six.pdf and http://cvc.nic.in/seven.pdf issued by the CVC contain somepreliminary principles underlying pre-qualification ofbidders.

12 See, e.g., http://cvc.nic.in/cte_man_2002.pdf, a “Reporton Common Irregularities and Lapses “that containsimportant guidance on designing technicalspecifications, qualification criteria and ensuringtransparency in government tenders. Similarly, variousCVC reports, both generic (http://cvc.vigeyegpms.org/skins/default/pdf/CompcirculCTE.pdf), as well as sector-specific (http://cvc.nic.in/Preface.pdf), contain equallyimportant guidance on these design aspects. SeparateMinistries, government entities and PSUs also have theirown vigilance manuals, such as Indian Railways (Vigilance Manual available online at http://w w w. i n d i a n r a i l w a y s . g o v. i n / r a i l w a y b o a r d /view_section.jsp?lang=0&id=0,1,304,366,546,842), AirIndia (Vigilance Manual available online at http://vigilance.airindia.in/images/Vigilance_manual.pdf),and KIOCL Ltd. (Vigilance Manual available online ath t t p : / / k i o c l l t d . i n / d o w n l o a d s /VIGILANCE_DEPT._MANUAL_VOLUME-II.pdf). All thesedocuments typically contain importance guidance tobe observed by procuring officers in deciding eligibilityconditions and/ or technical specifications.

13 See para 8, NMP, available online http://india.gov.in/allimpfrms/alldocs/16395.pdf.

14 In respect of PSUs (SoEs), this oversight is dischargedby Chairmen/ Managing Directors and/ or the respectiveCompany Boards.

15 See http://finmin.nic.in/the_ministry/dept_expenditure/gfrs/Integrity_Pact_ARC.pdf.

16 See http://dpe.nic.in/sites/upload_files/dpe/files/glch03477.pdf.

17 See clause 1.2 of the “Pre-Contract Integrity Pact “,annexed to the above MOF/ DPE circulars, supra n.14and n.15 respectively.

18 Verma, S. (2009), Integrity Pacts and Public ProcurementReform in India: From Incremental Steps to a RigorousBid-Protest System, available online at http://p a p e r s . s s r n . c o m / s o l 3 /papers.cfm?abstract_id=1656722.

19 Part B, Chapter III of Draft Public Procurement Bill2012, supra n.5.

20 Verma, S. (2012), http://www.financialexpress.com/news/no-buy-india-clauses-for-us-thank-you/945606/0.

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THE GST’S EXEMPTION

COMPLICATIONS

RAJ KUMAR RAY

As the empowered committee (EC) on goods and

service tax (GST) gets down to handling the specific

issues, difference in the composition and handling

of exemptions at the State and the Central level has

thrown up a major challenge requiring deft handling.

While there are only 96 items exempted under VAT,

handled by the States, more than 300 items are in the

exempted category under CENVAT, which comes under

Centre’s purview. This means that if the exempted list of

items under VAT is adopted in GST, then more than 200

items, which are not subject to CENVAT currently, will be

subjected to Central GST in addition to the State GST in

the new tax regime. This would lead to increase in prices

of these commodities, which also include foodgrains.

The EC committee on dual control threshold and

exemptions in the GST regime, has suggested a common

list of exempted goods, both for SGST and CGST.

The panel has favoured VAT exempted list to be taken as

base for both SGST and CGST and then removal of

exemptions in case of the other items exempt under

CENVAT in phases. In case of services also, the committee

has recommended common exempted list for SGST and

CGST.

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BIS NEWS

PALLETS - AN EFFICIENT AND SAFE WAY OF

MATERIAL HANDLINGSHRI R R SINGH, TRANSPORT ENGINEERING, BIS

Stacking, Storage and movement of goods andmaterials are essential elements of almost all thebusinesses. Unfortunately many serious as well

as fatal accidents are also witnessed while goods arebeing stacked or destacked and put into or taken out ofstorage.

Various methods of storage and stacking systems areused in the industry now a days. Material handlingequipment are also extremely diverse, ranging fromhand trolleys to various types of forklifts, trucks tosophisticated warehouse robots. It makes materialhandling all the more interesting and challenging.

It is the responsibility of the employer to take allreasonable steps to ensure that all goods, materials,substances and equipment in the workplaces arestacked, stored, secured and kept that they do notconstitute a danger to persons in their vicinity duringthe course of daily operations and in the event of anearthquake. Such steps should ensure that these itemscannot, whether of their own accord, or by virtue of anyexternal force (intentionally applied or otherwise), flow,move, roll or collapse, as to constitute a danger topersons in their vicinity. All workers who are or may beresponsible for stacking, storing, securing, or keepingany goods, materials, substances, or equipmentsshould be fully trained in safe methods of doing so.Keeping in view the great diversity of goods andmaterials to be stored and the wide range of storagemethods and handling equipment in use now, it hasbecome imperative that a safe system of work isdeveloped that will integrate the three maincomponents of material handling that is people,materials and machinery within a safe and healthyworking environment.

Pallets are an integral part of any basic materialshandling and storage system common to a wide rangeof stores and warehouses. A pallet (sometimes called askid) is a flat transport structure that supports goodsin a stable fashion while being lifted by a forklift, palletjack, or other jacking device. A pallet is the foundationof a unit load design, which can be as simple as placingthe goods on a pallet, and securing them with straps orstretch-wrapped plastic film, or as exotic as a ULD minicontainer.

Containerization for transport has spurred the use ofpallets because the containers have the clean, levelsurfaces needed for easy pallet movement. Most palletscan easily carry a load of 1,000 kg.

DEVELOPMENT OF THE PALLET

The pallet was developed in stages. Spacers were usedbetween loads to allow fork entry, progressing to theplacement of boards atop stringers to make skids.Eventually boards were fastened to the bottom to createthe pallet. The addition of bottom boards on the skid,which appeared by 1925, resulted in the modern formof the pallet. With the bottom deck, several problems

common to the single faced skid were addressed. Forexample, the bottom boards provided better weightdistribution and reduced product damage, they alsoprovided better stacking strength and rigidity. Lift truckmanufacturers promoted the idea of using more verticalarea of a plant for stock storage.

In size, skids started narrow in order to pass throughordinary doors. As facilities were rebuilt, manyorganizations optimized their buildings for largerpallets in order to reduce labor costs. The earliestreferenced U.S. patent on a skid is Hallowell’s 1924 ‘LiftTruck Platform.’ In 1939, Carl Clark patented arecognizably modern pallet, although with steelstringers. In World War II, palleted material handlingwas rapidly perfected in order to transfer Allied warmaterials. The patent activity picked up again after thewar, as inventors claimed items they improvised for thewar effort. The first four direction pallet was claimed in1945 by Robert Braun. At the end of 1948, SullivanStemple claimed the basic idea of a pallet designed tobe used with a fork lift the pallet was to be stampedfrom steel. During World War II, to reduce the resupplytime of warships, the first modern disposable four-wayblock pallet was developed, and patented in early 1949by Norman Cahners, a U.S. Navy Supply Officer in theordnance depot at Hingham, Massachusetts. The firstcompletely modern 2-direction stringer pallet wasdescribed in 1949 by Darling Graeme.

TYPES OF PALLETS

Although pallets come in all manner of sizes andconfigurations, all pallets fall into two very broadcategories: ‘stringer’ pallets and ‘block’ pallets.

STRINGER PALLET :

Stringer pallets use a frame of three parallel pieces oftimber (called stringers). The top deckboards are thenaffixed to the stringers to create the pallet structure.Stringer pallets are also known as ‘two-way’ pallets,since a pallet-jack may only lift it from two directionsinstead of four. Forklifts can lift a stringer pallet fromall four directions, though lifting by the stringers ismore secure.

BLOCK PALLET :

Block pallets are typically stronger than stringer pallets.Block pallets utilize both parallel and perpendicularstringers to better facilitate efficient handling. A blockpallet is also known as a ‘four-way’ pallet, since apallet-jack may be used from any side to move it.

MATERIALS USED :

The cheapest pallets are made of softwood and are oftenconsidered expendable, to be discarded as trash alongwith other wrapping elements, at the end of the trip.These pallets are simple stringer pallets, and can belifted from two sides.


Slightly more complex hardwood block pallets, plasticpallets and metal pallets can be lifted from all foursides. These costlier pallets usually require a depositand are returned to the sender or resold as used. Many‘four way’ pallets are color coded according to the loadsthey can bear, and other attributes.

Wooden pallet construction specifications can dependon the pallet’s intended use: general, PDA, storage,chemical, export; the expected load weight; type of wooddesired: recycled, hard, soft, kiln dried or combo (newand recycle); and even the type of fasteners desired tohold the pallet together: staples or nails.

Paper pallets are often used for light loads, butengineered paper pallets are increasingly used for loadsthat compare with wood. Paper pallets are also usedwhere recycling and easy disposal is important.

Plastic pallets are often made of new HOPE or recycledPET (drink bottles). They are usually extremely durable,lasting for a hundred trips or more, and resistweathering, rot, chemicals and corrosion. They oftenstack. Plastic pallets are exempt by inspection forbiosafety concerns, and easily sanitize for internationalshipping. HOPE is impervious to most acids and toxicchemicals clean from them more easily. Some

plastic pallets can collapse from plastic creep if usedto store heavy loads for long periods. Plastic palletscannot easily be repaired, and can be ten times asexpensive as hardwood, so they are often used bylogistics service providers who can profit from theirdurability and stackability.

Steel pallets are strong and resist plastic creep. Theyare used for heavy loads, high-stacking loads, long termdry storage, and loads moved by abusive logisticsystems. They are often used for military ammunition.

Aluminum pallets are stronger than wood or plastic,lighter than steel, and resist weather, rotting, plasticcreep and corrosion. They are sometimes used for air-freight, long-term outdoor or at-sea storage, or militarytransport.

STANDARDIZATION OF PALLETS :

A lot of efforts have been made in the field ofstandardization of pallets, but a lot still remains to bedone. Since pallets may be subjected to a variety ofuses depending upon the industry in which they areused a single standard on pallets is difficult to beestablished and enforced. However, the dimensions andstrength requirements have been standardized by manynational standardization bodies.

DIMENSIONS OF PALLETS :

In a pallet measurement, the first number is the stringerlength, the second is the deckboard length. Square ornearly-square pallets help a load resist tipping.

Two-way pallets are designed to be lifted by thedeckboards. So, in a warehouse, the deckboard sidefaces the corridor. So, for optimal cubage in awarehouse, the deckboard dimension should be theshorter. This also helps the deckboards be more rigid.

Four-way pallets, or pallets for heavy loads, or general-purpose systems that might have heavy loads, are bestlifted by their more rigid stringers. So, a warehouse hasthe stringer side facing the corridor. So, for optimalcubage in a warehouse, the stringer dimension shouldbe the shorter. Pallet users want pallets to easily passthrough buildings, stack and fit in racks, forklifts, palletjacks and automated warehouses. To avoid shipping

air, pallets should also pack tightly inside containersand vans. The most commonly used pallet sizes are1000 mm x 1000 mm, 1200 mm x 1000 mm etc.

ISO TECHNICAL COMMITTEE 51: PALLETS FOR UNIT LOAD

METHOD OF MATERIALS HANDLING :

At international standardization level, ISO TC 51 ofInternational Organization for Standardization isactively engaged in the work of standardization ofpallets in general use in the form of platforms or trayson which goods may be packed to form unit loads forhandling by mechanical devices. This TechnicalCommittee works in conjunction with other TechnicalCommittees focused on transportation infrastructureto develop interrelated standards. The ISO Standardsformulated on pallets are as follows:

ISO No. Title

445 : 2008 Pallets for materials handling -Vocabulary

6780 : 2003 Flat pallets for intercontinentalmaterials handling - Principaldimensions and tolerances

8611-1 : 2011 Pallets for materials handling - Flatpallets Part 1 : Test methods

8611-2 : 2011 Pallets for materials handling - Flatpallets Part 2 : Performancerequirements and selection of tests

8611-3 : 2011 Pallets for materials handling - Flatpallets Part 3 : Maximum workingloads

DTS 8611-4 Pallets for materials handling - Flatpallets Part 4 : Procedure forpredicting creep responses instiffness tests for plastic palletsusing regression analyses

12776 : 2008 Pallets - Slip sheets

12777-1 : 1994 Methods of test for pallet joints Part1 : Determination of bendingresistance of pallet nails, otherdowel-type fasteners and staples

12777-2 : 2000 Methods of test for pallet joints Part2 : Determination of withdrawal andhead pull- through resistance ofpallet nails and staples

12777-3 : 2002 Methods of test for pallet joints Part3 : Determination of strength of palletjoints 13194 : 2011 Boxpallets - Principal requirements andtest methods

15629 : 2002 Pallets for materials handling -Quality of fasteners for assembly ofnew and repair of used, flat, woodenpallets

18333 : 2002 Pallets for materials handling -Quality of new wooden componentsfor flat pallets

18334 : 2010 Pallets for materials handling -Quality of assembly of new woodenpallets

AWI 18597 Dolly pallets - Principal requirementsand test methods

18613 : 2003 Repair of flat wooden pallets


INDIAN STANDARDS ON PALLETS : Transport EngineeringDepartment of Bureau of Indian Standards, the nationalstandards body of India is also actively involved informulation of Indian Standards on Pallets. FollowingStandards on pallets have been formulated so far byFreight Containers and Pallets Sectional Committee, TED12 of BIS:

IS No. Title

3971 : 2005 Pallets for materials handling -Vocabulary (Second Revision)

4300 : 1989 Box pallets for through transit ofgoods - Specification (First Revision)

5325 : 1989 Box pallets for through transit ofgoods - Methods of test (F irstRevision)

6219 : 1989 Methods of test for general purposeflat pallets for through transit ofgoods (Second Revision)

6865 : 1973 Specification for pallets for use in ISOseries 1 Freight containers

7276 : 1989 Non-expendable general purpose, flatpallets for through transit of goods -Specification (Second Revision)

7804 : 1983 Guide for palletization of tea chests(First Revision)

8005 : 1976 Classification of unit loads

8006 : 1988 Recommendations fo’ handling oftimber pallets (First Revision)

9208 : 1979 Guide for palletization of mica forexport

9340 : 1993 Expendable pallets - Specification(First Revision)

11076 : 1984 Guide for palletization of cashewkernels for export

11982 : 1987 Design rating and safe working loadfor general purpose flat pallet forthrough transit of goods

11983 : 1987 Guidelines for marking of generalpurpose flat pallets for through transitof goods

13546 : 1992 General purpose flat pallets forthrough transit of goods - Performancerequirements

13608 : 1993 Sheet pallets - Specification

13609 : 1992 Pallets - Quality of timber - Guidelines

13664 : 1993 Polly pallets for bag storage godowns- Specification

13714 : 1993 Dunnage pallets - Ware housing -Specification

13823 : 1993 Guidelines for palletization - Generalcargo

BENEFITS OF USING PALLETS :

Pallets are crucial part of any supply chain. They ensurethe shipping of products efficiently with minimaldamage to goods. Pallets make it easy to move heavystacks. Loads with pallets under them can be hauled byforklift trucks of different sizes, or even by hand-pumpedand hand-drawn pallet jacks. Movement is easy on awide, strong, flat floor.

Organizations using standard pallets for loading andunloading can have much lower costs for handling andstorage, with faster material movement than businessesthat do not. The exceptions are establishments that movesmall items such as jewellry or large items such ascars. But even they can be improved. For instance, thedistributors of costume jewellry normally use palletsin their warehouses and car manufacturers use palletsto move components and spare parts. The current trendin any supply chain management is use of returnablepallets system in which a company using pallets doesnot need to own and maintain an inventory of pallets.

UNIT LOAD AND RETURNABLE PALLET SYSTEM :

A unit load combines individual items or items inshipping containers into single ‘units’ that can be movedeasily with a pallet jack or forklift truck. A unit loadpacks tightly ,nto warehouse racks, intermodalcontainers, trucks, and boxcars, yet can be easily brokenapart at a distribution point, usually a distributioncenter.

Returnable pallet system is a system operated by palletrental companies where the pallet users need not ownthe pallets and have merely to pay the rent for usingpallets. In this way pallets are used by multiple userswhich permit the economical and efficient utilizationof resources. EPal system in Europe is being successfullyimplemented in various countries of Europe.

The advantages accruing from a returnable palletsystem are:

� Reduction in costs by focusing on the cost per useof the returnable pallet.

� Disposal of the pallets is the responsibility of thepallet rental company; not the customer and thus asavings in disposal

� The system ensures that the pallets are properlymaintained which reduces the possibility ofdamage or injury caused by low quality and inferiorpallets.

� The system allows managers and executives to focuson their core business and let the pallet rentalcompany take care of its logistics, tracking andcollection.

For the pallets to be of best possible use, it is importantthat pallets are of sound construction, and be ofadequate strength for the loads and conditions underwhich they are used. Where pallet loads are stackedtier on tier, the lower pallets should be of suitablestrength and in good condition and the unit loads mustbe able to support the weight above.

The stability of stacked pallets or unit loads should bemaintained by suitable bonding, avoiding excessivestack heights to ensure that the contents of any palletor unit load can not collapse.

The stability and structural strength of each pallet orunit load should be assured by bonding, taping, shrinkwrapping or other means. When pallet or unit loads ofcartons or sacks are stacked, care should be taken thatthey are not damaged by equipment. Pallets or othersupports used for forming unit loads should be regularlyinspected for damage and wear. Items which could causedamage to material should be taken out of use untilrepaired, or be destroyed. An approach of care andcaution can put pallets to the place it deserves in thematerial handling and logistics area.

Source : Standard India, Vol. 26, No.12, March 2013

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CORPORATE CHALLENGE’S – OUTSOURCING IN VALUE CHAIN

RABI NARAYAN PADHI

Life Member, IIMM VIZAG

[email protected], [email protected]

Abstract:

Outsourcing is the contracting out of an internalbusiness process to a third-party organization. Theterm “outsourcing” became popular in the United

States near the turn of the 21st century. Outsourcingsometimes involves transferring employees and assetsfrom one firm to another, but not always.[1]

The definition of outsourcing includes both foreign anddomestic contracting, [2] and sometimes includesoffshoring, which means relocating a business functionto another country.[3] Financial savings from lowerinternational labor rates is a big motivation foroutsourcing/offshoring.

The opposite of outsourcing is called insourcing, whichentails bringing processes handled by third-party firmsin-house, and is sometimes accomplished via verticalintegration. However, a business can provide a contractservice to another business without necessarilyinsourcing that business process.

Two organizations may enter into a contractualagreement involving an exchange of services andpayments.

Outsourcing is said to help firms to perform well intheir core competencies and mitigate shortage of skillor expertise in the areas where they want to outsource.[4]

In the early 21st century, businesses increasinglyoutsourced to suppliers outside their own country,sometimes referred to as offshoring or offshoreoutsourcing. Several related terms have emerged to referto various aspects of the complex relationship betweeneconomic organizations or networks, such asnearshoring, crowdsourcing, multisourcing[5][6] andstrategic outsourcing.[7]

Outsourcing can offer greater budget flexibility andcontrol. Outsourcing lets organizations pay for only theservices they need, when they need them. It also reducesthe need to hire and train specialized staff, brings infresh engineering expertise, and reduces capital andoperating expenses.[8]

One of the biggest changes in the early 21st centurycame from the growth of groups of people using onlinetechnologies to use outsourcing as a way to build aviable service delivery business that can be run fromvirtually anywhere in the world. The preferentialcontract rates that can be obtained by temporarilyemploying experts in specific areas to deliver elementsof a project purely online means that there is a growing

number of small businesses that operate entirely onlineusing offshore contractors to deliver the work beforerepackaging it to deliver to the end user.

One common area where this business model thrives isin providing website creation, analysis and marketingservices. All elements can be done remotely and delivereddigitally, and service providers can leverage the scaleand economy of outsourcing to deliver high-valueservices at reduced end-customer prices.

The Benefits of Outsourcing

“Do what you do best and outsource the rest!” – TomPeters, Management guru

Outsourcing as an idea is not novice; it has been forover a thousand years now, the only difference beingthat it’s gaining lot more popularity since a decade forwhatever reasons. Outsourcing basically means askinga third-party vendor to work for you on a contractualbasis. Companies outsource primarily to cut costs. Buttoday, it is not only about cutting cost but also aboutreaping the benefits of strategic outsourcing such asaccessing skilled expertise, reducing overhead, flexiblestaffing, and increasing efficiency, reducing turnaroundtime and eventually generating more profit.

Like any other business venture proper planning andresearch is necessary before choosing an outsourcingpartner whether it is on shore or offshore. But byoutsourcing to a third party, your business can focuson what it does best and gain a competitive edge in themarketplace.

Here are the top ten benefits of outsourcing:

1. Get access to skilled expertise :One of the primary reasons why a business maywant to outsource a task is when it requires skilled


expertise. This skill set may not be a corecompetency of its business. To allow you to focuson your core mission in providing a high qualityproduct and service to your customer what makessense is offshoring the task to people can performit better. Moreover, as a double whammy, you notonly spend less on employee trainings and saveprecious man-hours but cut costs as well.

Outsource to india has dedicated teams to providewide range of outsourcing services, which help usoffer specialized business process outsourcingsolutions to clients globally. We leverage on ourmulti-domain expertise and skills acrossvariegated industry verticals and technologies toachieve superior quality and unmatchedproficiency in the outsourced process.

2. Focus on Core ActivitiesWorkload increases with additional non-corefunctions and the quality of your core activitiessuffers as your business grows. Outsourcing insuch scenario to a third party plays an importantrole by allowing your key resources to focus onprimary business tasks.

3. Better Risk ManagementOutsourcing will allow you to share anyassociated risks with your outsourcing partnersthere by reducing your burden. For example - byoutsourcing to a competent outsourcing partneryou reduce the risk involved in having the sametask done in-house by staff that may not be ascompetent in that field.

4. Increasing in-House EfficiencyAfter you allocate tasks to your outsourcingpartner, they share the workload of youremployees. This allows you to develop yourinternal task force and use them more efficiently.

5. Run Your Business 24X7Offshore Moutsourcing to a country like India,which is on a different time zone, gives you theadded advantage of making full use of your 24hour day. Since your night is their day, youroutsourcing partner can take over and continueyour work even after your employees go home andto bed. They can complete critical tasks and sendit back for your review the next day. So the benefitof outsourcing here is that you get more work donein a day, increasing your overall productivity. A24X7 customer support is a dream come true foryour customers and this can be fully realizedthrough offshore outsourcing.

6. Staffing FlexibilityOutsourcing certain independent tasks, allowsyour business to maintain a financial flexibilitywhen there is an uncertainty in demand. You canscale up or down comfortably. At a much lowercost, offshore outsourcing provides additionalbenefit of running your business in full throttleeven during off season and holiday months.

7. Improve service and delight the customer

Your outsourcing partner, with their skilledexpertise will produce quality deliverables faster,increasing your turn around time to the customer.With on-time deliveries and high-quality servicesyour customers will be delighted! Outsourcing canhelp you benefit from increased customersatisfaction and thus creating a stream of loyalcustomers.

8. Cut costs and save BIG!All the benefits listed above come with the bonusbenefit of lower cost and big savings! When yououtsource services like medical billing, call centerand teleradiology, etc. to a low-cost country likeIndia or Philippines, you are getting access toquality services that are offered at a much lowercost (You can save up to 60% costs)!

Maintaining an infrastructure can be an extraburden for some businesses, which outsourcingcan remove. Outsourcing your businessrequirements to a trusted vendor can help yousave on the capital expenditure, time, and extraefforts of your personnel. Additionally, you are nolonger committed to invest on employee training,or purchasing expensive software, or investing inlatest technologies. All this add up to higherreturns in the longer run.

9. Give your business a competitive edgeThe ultimate benefit of outsourcing is that it helpsyour organization gain a competitive edge in themarket. Through strategic outsourcing to anoutsourcing partner, you are not only providingyour customers with best-of breed services, butincreasing your productivity while managing yourin-house resources intelligently. Outsourcing canhelp you surpass competitors who have not yetrealized the benefits of outsourcing.

10. See an overall increase in your businessOutsourcing shows an increase in yourproductivity, customer loyalty. level of quality,business value, profits, and much more.

Advantages and Disadvantages of Outsourcing

Outsourcing brings in a lot of flexibility and financialfreedom but it also has its pitfalls. Any company lookingto outsource must keep in mind the pros and cons ofoutsourcing before deciding to take the plunge. Take alook at this list of advantages and disadvantages ofoutsourcing.


Advantages of Offshore Outsourcing

� Core activities of the business take center stage.Outsourcing non-core activities such as administrationand back-office operations helps to put the focus backon the core functions of the business, such as sales andmarketing.

� One of the biggest advantages of outsourcingto India (or any other location) is cost savings.The lower cost of operation and labor makes itattractive to outsource.

� Outsourcing reduces overhead costs thatusually come with running back-endoperations.

� When certain functions of an organizationbecome operationally uncontrollable,outsourcing helps to overcome suchdifficulties.

� A company’s cash-flow can be streamlined.

� By increasing productivity and efficiency, abusiness can be more successful and better-prepared for market challenges.

� Outsourcing frees an organization frominvestments in technology, infrastructure and peoplethat make up the bulk of a back-end process’ capitalexpenditure.

� Outsourcing gives businesses flexibility instaffing and manpower management. Since theservice provider is responsible for managingthe workforce, you save costs and can alsopick the best people to run your core functions.

� Offshore outsourcing gives businesses theability to develop new competencies and skill-sets thatcan be used as a competitive advantage.

Disadvantages of Offshore Outsourcing

� One of the biggest disadvantages ofoutsourcing is the risk of losing sensitive dataand the loss of confidentiality. It is important,therefore, to have checks in place to avoid dataloss.

� Losing management control of businessfunctions mean that you may no longer be able

to control operations and deliverables ofactivities that you outsource.

� Problems with quality can arise if theoutsourcing provider doesn’t have proper processesand/ or is inexperienced in working in an outsourcingrelationship.

� Since the outsourcing provider may work withother customers, they might not give 100% timeand attention to a single company. This mayresult in delays and inaccuracies in the workoutput.

� Hidden costs and legal problems may arise ifthe outsourcing terms and conditions are notclearly defined.

� If important functions are being outsourced,an organization is mightily dependent on theoutsourcing provider. Risks such as bankruptcyand financial loss cannot be controlled.

� Not understanding the culture of theoutsourcing provider and the location where yououtsource to may lead to poorcommunication and lowerproductivity.

� Though outsourcing has its share ofadvantages and disadvantages, the manybenefits that outsourcing brings far outweighits disadvantages.

� Many of the pitfalls of outsourcing can beavoided by choosing the right company to workwith. Before taking the decision to outsource itis important that you align the goals of yourcompany and employee considerations withthe objectives of outsourcing.

Why Outsource Work?

Industry trends show that companies that have beenasking the question ‘why outsource’ have become vocaladvocates of the offshore model. Outsourcing work hascome to be a tried-and-tested model and is recognizedas a long term competitive strategy for success. Thequestion going around now is not ‘why outsource?’ but‘why not outsource?’

Reasons for Outsourcing

The economist, Adam Smith, says in his treatise TheWealth of Nations, “If a foreign country can supply uswith a commodity cheaper than we ourselves can make


it, it is better to buy it of them.” Outsourcing as we knowit today is merely a progression of an idea that hasexisted since early days of trade.

As companies grow in size and operations, it becomesincreasingly clear that their focus has to be redirectedto their core activities while the non-core functions canbe ‘sent out’ or ‘outsourced’ to vendors specialized inthat particular function.

Why Outsource Work !

Have you found yourself faced with any of the followingdoubts in recent times?

� Are my resources being utilized effectively?

� Are my current resources capable of supportingnew technology?

� Is there a quicker, more effective method to handleprocesses?

� Does my team have the operational expertise todo the task assigned?

� Are we working at optimum costs?

If you are asking yourself the question ‘why should Ioutsource’, consider the following top reasons foroutsourcing cited by companies that have successfullymade offshore outsourcing work for them.

Strategic Reasons for Outsourcing

Focus on core functions: Companies that outsourcecertain routine functions to offshore experts are capableof focusing on their core competency. Before outsourcingcaught on in such a big way, healthcare practices hadto deal with functions liketranscription, medicalbilling and claims processing which consumed a lot oftheir time and resources. However, now by outsourcingthese processes to external locations these practice areable to focus on their primary concern - ‘patient care’.

Redirect strategic internal resources for core activities:

Outsourcing processes to external third party ensuresthat an organization’s internal resources are freed upfor more mission-critical activities.

Accelerate migration to new technology:

Migrating to newer technologies allows companies tomake better use of their investments and enjoy enhancedproductivity and quality. Companies with outsourcedIT processes are better enabled to migrate to newtechnologies with minimum downtime and productivitydisruption.

Enhance risk management: In any outsourcing modelthe offshore partner supplements the operations of theoutsourcing company with redundancies and back-upmechanisms. In the event of any natural calamities,accidents, market fluctuations or technical crises therigorous disaster recovery mechanisms and detailedback up plans at the offshore vendor’s end can helpcompanies to rapidly respond to the situation and getoperations back on track within remarkable turnaroundtime.

Lower infrastructure investments:

Companies that decide to outsource find thatexpensive infrastructure requirements are cut backdrastically as some of the functions move to externallocations. Cutting edge IT systems, state-of-the-artcustomer servicecall centers and technical helpdesksentail heavy investments to companies. By outsourcingthese functions to external vendors, companies can keeptheir investments in these areas very low.

Access to world-class capabilities: Apart from thefinancial benefits associated, another reason whycompanies outsource work is to have processesdelivered by teams that have operational expertise inthe outsourced process. Outsourcing gives companiesaccess to world-class capabilities and infrastructurein the outsourced function.

Tactical Reasons for Outsourcing

Control operating costs: One of the most talkedabout advantages of outsourcing to locations like Indiais the cheap labor costs in these countries. Processesoutsourced to these locations are done at much cheaperrates and same quality levels as in the donor location.This translates into major cost savings for companies.They also save on operational costs such as payroll,administrative costs, HR, power, rentals and utilitiesas processes move to other locations.

Improve operational performance:

Companies outsource to vendors who have domainexpertise in the outsourced process. Their experiencein the field translates into greater operationalefficiencies for the outsourcing company.

Overcome seasonal workflows:

Industries in the U.S. and UK are subject to seasonalfluctuations in work and lack of workers during holidaysand off-seasons. One of the advantages of outsourcingsuch processes to countries like India and Philippinesis that companies can deal with peak workloads andpoor staff strength during vacations and holidays.

One time applications:

Companies often need to build one time applications.Such ad hoc or one time applications will require whichrequire high manpower resources and companies findthat they are faced with the need to ramp up in relativelyshort time spans. Outsourcing such needs is the bestsolution for companies that want to avoid expensiveoutlays for the short term.

Outsource to india is a provider of world-classoutsourced services to a global clientele. Headquarteredin Bangalore, we have multiple delivery centers acrossIndia and offices functioning in the U.S., South East Asiaand South America. We have proven competencies in arange of services such as Data Entry Services,Engineering Services, Healthcare Services, FinancialServices, Software Development, Web-analytics Servicesand more. Read about the range of services offered byOutsource to india.

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INLAND WATER TRANSPORTATION—A TOTAL APPROACH

FOR MULTIMODAL TRANSPORT SOLUTION D N Chakravarti,

Best Faculty Awardee & Distinguished Member-IIMM

Retd.-HOD- Kolkata Port Trust

Visiting Prof. IISWBM ,St. Xavier’ s College, Paper setter&examiner, Cal. University

[email protected]

From the time immemorial, transportationhas takenthe shape mainly on shifting , transferring,migrating by utilizing the land based and water

based flows,that too using a country’s own land andinland river navigational system . Movement of thehuman resources had taken place because of mainly

the following reasons —

** scarcityof food or other essentials

** Feeling insecurity because of the powerful grouptaking over

** Natural calamity—disaster.

** Fear of cannibals /Animals etc. etc

All these left no options but a migration of theinhabitants,aboriginals from one place to other place—and obviously when they shifted they took their ownbelongings in the form of the freight/load—If we see thetransport scenario chronologically, we find ,human

resources moved their freights/loads with their head/shoulder/spinal chord muscles through plains/hillyregion as the case may be—next, they took the help ofliving attachments by taming the animals or theattachments like trolley, wheel –burrow but this forwardflow logistics was restricted only on the horizontaldirection till the concept of pulley with help of skin andgrooved stone was put to use, this helped to verticalmovement as lifting device from below ground level—but all these movements were also restricted in theirown land front and waterfront only till the ocean/airtransportation took place. At one side country boat,sailships were replaced after the invention of steam engine,disel engine. Transport and logistics got a newdimension of speed & for which, till date weowe to thegreat scientists like James watt, Stevension, Carnot,Rankine, Right Brothers and others or inbound and outbound logistics from one country of origin to the otherinthe form of Import/Export through ocean transport, air& pipeline transport.

Now the logistics metrics became very much important

with the variables like L/M/F/R or simply the load/Mode/Flow/Route and their combined resultantapproaches for a cost effective and time effectivelogistics solution. To take the further advantage for acost-effective and time-effective solution from thedifferent types of single modal transport i.e.Road, Rail,Aviation, Inland water transport, ocean transport,coastal transport, traditional transport etc, the concept

of multimodal transport took place—which combinesmore than one mode of transportation. The traditionaland the authentic riverine inland water transport mixedup with road/rail to give the present day’s MMT or themultimodal transportation systemcoming to the globalscenario on inland water transportation. Around3,00,000 kms of waterways carry the freights of differentnature including live stock and the 30% of the freightare transported by river or the canal waters—traditionalmovement of rafts of timber logs , bamboos throughrivers like Brahmaputra(NWW-2), Ganga-Bhagirathi(NWW2)still exists

A comparative analysis shows that a floating barge cantake 1500 Tons, Rail can take 100 Tons, Truck/Tractortrailer 30Tons at one time where a truck can go 59miles,rail202 miles, floating barge 514 miles per gallonconsumption of fuel, more over through riverinetransportation there is less congestion on water front,air pollution/noise pollution is less. As the fuelconsumption is less the green planet is on the saferside in the context of fossil fuel reserve—the controversyrelated land use & acquisition impact for infrastructuralgrowth in the road front is also on the lower side andthe system is totally environment friendly.

Like other countries our nation has also giventremendous stress on the growth and development ofcountry’s own water front in the form of IWT. Out of14500 kms of Navigational waterways, 4552 Kilometersof Waterways have been declared as National Waterways under government of India with our navigationalriver and canal flows— The governance is on the properadequate measures for improvement of rivertransportation by IWAI for identification, demarcation,feasible study for utilization, sustainability, proper rivertraining \, continuous dredging for maintaining river /canal draft as to make the IWT system absolutelynavigable. Adequate measures are also taken forprovision of buoy lights for utilization of night shiftoperations and to make the floating barges containerfriendly —

The Nationalized rivers of our country are

1/Ganga-Bhagirathi-Hoogly-Haldi——NWW1—1620Kms

2/Brahmaputra——NWW2 —————————————891Kms


3/West Coast canal-Champakara-Udyogamaddalcanal—————205kms

4/Kalluvelly tank——River Godavari——River Krishna——————1095Kms

5/Brahmani River—————620Km

6/Barak River———121Kms**(to be operative shortly)

More the IWT becomes viable,more is theinterconnectivity with Major/Minor Ports for easing outboth for inbound/outbound/reverse logistics—in termsof environment friendly and economized transportationsystem.

Now I have come to Sydney for two months and observinghow they are utilizing their lifeline river Parrammattafrom the source of Toonga Bay to the mouth of PortJackson—It is helping the eco-friendly riverinetransport—by ferry service. The river is having creeksand canals ,estuaryrivers falling from both left and rightsides.Mooring and jetties are the responsibilities ofroad and maritime group under Australian Ministry.

Along with the rivers, back water and canal water are

also the water resources for any country.26th world canalconference would take place in September this yearwhere the agenda points for discussion are to be on thepoints of

*Canals and heritage*Canals as eco-system*Canals and the economy in transport.*Waterways network—current situation*Governance of IWT towards new models*Country wise strategies etc.

River and the canal transportation requires the toppriority attention to give a combined effect for thesuccessful achievement of multimodal transportationand awareness requires to be embedded at all the levels,to keep our rivers free from pollution, waste disposaland routine active measures for de-siltation such thatwe do not lose our old heritage riverine ports likeKorkai(Near tuticorin port) or port of tamralipta,Saptagram ,legendary ports in west Bengal

Supports—*Wikipedia

*website of IWI/IWAI/Parramattariver, Sydney

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Govt seems to be getting a hang of all theinternational trends in order to make inroads intothe hearts and wallets of the people across the

world.

The Indian government, in a very progressive move, hasexempted all indigenously manufactured goodsfrom excise duty when being sold at duty free shops, soas to encourage sales and maintain margins for thesellers even in troubled times.

The Indian government seems to be getting a hang of allthe international trends in order to make inroads intothe hearts and wallets of the people across the world.In a recent move targeted at the redemption of thepopularity levels of the local manufacturers amongstforeign tourists, the government has decided to exemptall locally manufactured goods sold at the duty freeshops, present in the airports across the country, fromexcise duty.

The reduction in the excise duty would bring down theprices of the products significantly, with the actualfigure being around 10 per cent. The change comes as apleasant one, especially in the current times, since alongwith the different aspects of the global economy, theaviation sector in India has been having a torrid time.

The economic predicament has made it difficult for theIndian manufacturing sector, to maintain its growth rate,as it has added to the woes that the Chinese competitionwas presenting it with. The airport duty free stores area great opportunity for local manufacturers to getpremium pricing for their products, which helps in thesustaining of operations even in the most difficult oftimes, and this is what makes this move by thegovernment a very important one.

EXCISE DUTY EXEMPTED FOR LOCAL GOODSAT AIRPORT STORES

The indigenous items being sold at these shops wouldnow cost almost 10 per cent less than what theconsumers have been traditionally been charged. Thiswould help the local vendors fend off the competitionthat the imported products have been giving them,helping them to see through difficult times.

The move would also help in enhancing the image ofIndia as a brand across the world, since all touristsand Indians travelling abroad, would be able to carrywith them exclusive souvenirs representing the homelyand warm feeling associated with the country.

The parity with the imported products though, would bethe single largest advantage that the step would provide,as it would help out both the manufacturers and theaverage person visiting the airport.

Cheaper goods have registered great buying in airports,according to the official data from airports across theworld, and Indian airports do not promise to be anexception. The popularity of Indian merchandise andexclusive products is well known and well understoodboth by the local vendors and the manufacturers, andthus the implications for them are great, as the saleswould get a major push because of the price fall.

The government has been treading on sticky grounds inthe recent times regarding concerns over the falteringeconomy and the lack of substantial measures intackling it, which has led to it taking a series of steps inprogressive directions and the move to exemptindigenous goods is another one on the right track.

Source : The Economic Times, 12th June 2013

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Designing and deploying a “green” supplychain requires optimization expertise, astrong understanding of all operationalprocesses and involves participation frommany key stakeholders in your organization.

Green Optimization is Profit Point’s next generationof supply chain design.

Here are 7 steps we can take to integrate yoursustainability goals into your supply chain:

1. “Sustainability” is a term that is used very broadlythroughout industry, regulatory agencies, communities,and the news media. We need to determine what,precisely, we are trying to accomplish with respect tosustainability. Are we trying to reduce our impact onthe watersheds in which we operate? Are we trying toreduce packaging waste? Are we involved in a regionalplan to cut certain types of emissions or reduce peakenergy consumption? Are we trying to reduce our carbondioxide (CO2) footprint? And, for any of these questions,is there a certain targeted reduction that we have inmind? Without answers to these questions, it is verydifficult to analyze your alternatives and develop a planto meet your goals.

2. We need to determine the boundaries of the supplychain we are trying to improve. Are we looking at ourentire global supply chain, or are focusing on ourdistribution operations in a single region of the world?Are we bounding our analysis within assets andprocesses that are totally controlled by our company,or are we including our suppliers and/or customers inthe analysis? Are we trying to achieve our sustainabilitygoals within our existing supply chain infrastructure,or do we need to factor in potential expansions orcontractions of the supply chain?

3. Once we have unambiguously defined your goal andhave clear boundaries around the supply chain we mustimprove, we need to collect and understand theinformation that is available to analyze and model oursupply chain. This will be information will includethings like production capacity, plant operating costs,grams of CO2 produced per kg of finished goods,transportation costs, and product pricing. We may wantto include the sources of electricity used by ourmanufacturing facilities or raw material suppliers tofavor those sites using renewable sources of electricityover those that use coal-based electricity. Likewise, wemay want to include our transportation suppliers sothat we favor carriers with more fuel-efficient fleets.This step is usually the most time-consuming step inthe process but is critical to the generation and

GREEN IMPROVEMENT PROCESS

implementation of the changes you will make to meetyour goals.

4. With this collection of information, we need to modelthe supply chain (this needs to link to our 5 step processon the website) to generate options that both meet oursustainability goals and maximize our profitability. Inthis step, the “art and science” of green optimizationcomes to bear. It is here that we may need to make trade-offs between sustainability goals and profitability orcost goals. For example, we may be able to make a verysignificant reduction in our CO2 footprint with a veryslight increase in cost or reduce peak energyconsumption by carrying more inventory. Where thesetrade-offs can be accurately quantified, the “science”is used. However, where the sustainabilityimprovements cannot be quantified, then we use the“art” to bracket the value and the cost of theimprovement.

5. Now that we have selected the top options, we needto discuss them with the key stakeholders and decision-makers to get buy-in for a single option so that asuccessful implementation can follow. This discussionis especially important when future-based assumptionshave been made in the analysis. For example, if we’veassumed a 5% growth in demand and assumed the priceof crude at $85/bbl to choose the best solution, will ourchoice still be the best one if our demand only grows by2% and the price of crude moves to $100/bbl? If there isa lot of uncertainty in these key parameters, it isimportant that all stakeholders have a goodunderstanding of the risks associated with each of theoptions presented. In fact, it may well be time for amore robust type of optimization analysis, but that willbe the subject of a future blog article.

6. With all stakeholders on board, it is time to implementour new plan to achieve our sustainability goals. Inaddition to the communication, selling and training/education facets of our change management plan, weneed to include a measurement system ensure we aregetting the improvements we anticipated and to checkfor unintended consequences of our change. Thismeasurement system will also directly feed the last stepin this process…

7. … which is to periodically recheck our assumptions andrefine our analysis and plan as external events likenew customers or unanticipated costs presentthemselves, or as we find that a key assumption doesnot hold true for our sustainability gains.

Source : profitpoint.com��


BENEFITS OF COMPETITION POLICY IN PUBLIC PROCUREMENTWITH SPECIAL REFERENCE TO INDIA

DR. S CHAKRAVARTHYCIVIL SERVANT, ADVISOR/CONSULATNT ON COMPETITION & CONSULTANT FOR

THE WORLD BANK, ASIAN DEV. BANK & OTHER [email protected]

Performance of Government procurement in mostcountries (particularly developing ones) impactsgovernance and the interests of their citizens. It

cannot be gainsaid that performance is positivelyimpacted, if procurement is competition driven. Forprocurement to be pro-citizen interest and pro-goodgovernance, overt and conscious policies promotingeffective competition among potential bidders/suppliersare imperative. In absence of such policies, procurementsystem is unlikely to be healthy. In turn, a healthyoperation of competition depends upon measures thateffectively checkmate collusion among bidders andsuppliers.

Effective competition can be and is a tool for reducingcorruption and imparting integrity in the process ofprocurement. This in turn enhances the quality ofgovernance.

For promoting competition, transparency, integrity andenhanced value for money in national procurementregimes, an appropriate legal instrument is a sine quanon.

The author suggests that the instrument should bedesigned to secure better value for the money spent bythe Government on its procurement. It should thereforemandate increased level of competition, transparencyand discipline.

By providing fair and clear procedures, the instrumentshould seek to increase efficiency within procurementagencies. This will help check overt corruption savingfinances by increasing efficiency of resource allocation.

The instrument needs to incorporate provisions limitingdiscrimination in awarding tenders. WTO provisionson national treatment and non-discrimination shouldinform the overall approach of the instrument towardsentities and sectors covered by it. This is likely toengender the general benefits of greater competition -lower prices, better quality and more efficient firms.

The instrument needs to incorporate a transparentframework of laws, regulations, procedures andpractices regarding Government procurement. This will,likely encourage transparency in the transactions of theprocurement agencies and provide non-discriminatory,timely, transparent and effective procedures enablingsuppliers to challenge alleged breaches of theinstrument.

The article attempts to identify several areas ofprocurement policy in India that could benefit from thetransparent rule based system such as that provided bythe WTO GPA. Government of India is understood to have

identified tangible benefits from accession to WTO GPA.India is committed to improving its procurement marketsand to underpin its reforms, as a first step, has chosento become a GPA observer.

I. Introduction.—

Government procurement is of great potential interestfor most developing and developed countries, as itaccounts for a substantial proportion of GDP. But theprevalence of discrimination in this area of Governmentprocurement, as well as other practices, createssignificant barriers to trade, ultimately impactingadversely the countries growth and their GDP. Essentially,barriers to efficient and sustainable development areidentified as corruption and clientism in publicprocurement policies.1

This article lists the challenges that exist in Governmentprocurement and gives an overview of the need for andthe features of an appropriate instrument to governGovernment procurement policies. It further seeks toaddress the Indian scenario covering procurementpolicies, practices and institutions, the reformsundertaken in 2005 and the specific problems andchallenges faced by India in this area.

II. Government Procurement, Competition and itsSignificance for Governance.—

Performance of Government procurement in mostcountries (particularly developing ones) impactsgovernance and the interests of their citizens. It cannotbe gainsaid that performance is positively impacted, ifprocurement is competition driven. For procurement tobe pro-citizen interest and pro-good governance, overtand conscious policies promoting effective competitionamong potential bidders/ suppliers are imperative.Absent such policies, procurement system is unlikely tobe healthy. In turn, a healthy operation of competitiondepends upon measures that effectively checkmatecollusion among bidders and suppliers. The economistand jurist Frederic Jenny takes this proposition furtherwhen he says that promoting competition involves notonly preventing collusive practices but also removingbarriers that unnecessarily impede healthy competition.2

Procurement jurisdictions in many parts of the worldaccord a high role for competition law. Competitionpolicy and law frown upon collusive practices and bidrigging. In most competition laws, collusive practices(including bid rigging) are a part of cartelisation andare prohibited. Indeed, they are declared anti-competitive and illegal per se. Such practices areperpetrated even in countries with effective competition


regimes, imposing a heavy cost to the Governments andtheir citizens/ consumers. Clarke and Evenett have notedthat as much as a quarter of documented competitionlaw enforcement actions in developing economiesinvolve bid rigging in relation to public procurementactivities.3 Anderson, Kovacic and Muller have surveyedthe experiences of some developing countries andsuggest that gains (cost savings) from implementationof transparent and competitive Government procurementregimes “can be substantial”.4 At a Conference in earlySeptember 2009 of BRIC countries (Brazil, Russia, Indiaand China) in Kazan, Capital of Tatarstan, an estimateplaced the benefit (cost savings) flowing out ofcompetition driven government procurement at US $10billion.5 The possibility of bid rigging is particularlyrelevant to public sector purchases, given their legalobligations to award contracts by competitive tenders.Further, parties involved in bid rigging often perceiveGovernment to be blind to collusive practices andconsequently indulge in bid rigging while responding totenders.

Another beneficial dimension of the impact ofcompetition, besides cost savings and protecting theinterests of the procuring agencies, Government andconsumers, is the engendering of integrity in theadministrative process of procurement. Governmentprocurement, massive particularly in food grains, ishandled by an army of functionaries at the village andfarmer levels. Many of them are low-paid employees ofthe Government (and of PSUs) and integrity is not alwaysassured. In procurement operations, rent-seekingactivities and corruption at the level of lower orderfunctionaries obviously result in higher prices. Bidderssensing the presence of corruption tend to factor it inwhile finalising and submitting their bid amounts/tenders. Higher prices of procurement mean higher costsfor the Government with the attendant lower economicgrowth impeding development.6

Corruption, as noted earlier in the first paragraph ofthis article, constitutes a barrier to efficient andsustainable development and is a scourge on welfare ofcitizens in many countries, particularly the developingones. Corrupt practices are a subset of the genericphenomenon of (rent-seeking), which means thedissipation of a society’s resources through activitiesthat enrich individual market participants at the expenseof others, without contributing to the welfare of societyas a whole.7

Corruption is an internal issue for all Governments andnot just a trade issue. Transparent procedures willreduce the adverse effects of corruption on procurementand incidentally send positive signals for foreigninvestors.

Effective competition can be and is a tool for reducingcorruption and imparting integrity in the process ofprocurement. This in turn enhances the quality ofgovernance.8

III. Need for an Appropriate Instrument.—

For promoting competition, transparency, integrity andenhanced value for money in national procurementregimes, an appropriate legal instrument is a sine qua

non. An instrument that readily comes to mind is theWTO Agreement on Government Procurement (GPA). GPAis an important international legal instrument, whichcan and will facilitate procurement reform. But, it is notthe only available tool for countries to addressprocurement reform. Countries could negotiateprocurement provisions in Bilateral and Regional TradeAgreements (RTA) or adopt and implement unilateralreforms based on UNCITRAL Model Law, for instance.The selection of an appropriate instrument andestablishing a scheme of procurement around itsprinciples despite the costs and challenges that thiswould involve, would provide an unparalleledopportunity to promote good governance andcompetition in procurement practices, in addition toimportant export market opportunities engenderingsustainable economic and social development.

IV. What the Instrument Needs to Inher

(1) As a general proposition, the instrument should bedesigned to secure better value for the money spent bythe Government on its procurement. It should thereforemandate increased level of competition, transparencyand discipline. By providing fair and clear procedures,the instrument should seek to increase efficiency withinprocurement agencies. This will help check overtcorruption saving finances by increasing efficiency ofresource allocation.

(2) The instrument needs to incorporate provisionslimiting discrimination in awarding tenders. WTOprovisions on national treatment and nondiscriminationshould inform the overall approach of the instrumenttowards entities and sectors covered by it. This is likelyto engender the general benefits of greater competition -lower prices, better quality and more efficient firms. Theevidence on the impact of nondiscrimination provisionsare based on first principles. Baldwin and Richardsonnote that bans on procurement discrimination lead togreater imports from foreign suppliers when thedomestic industry is substantially or predominantlydependent on the Government as the buyer of the goodsthat it produces for the domestic market, and the pricepaid by the Government exceeds the price paid bydomestic private customers to import the same product.9

It would be apposite to say that national treatment andnon-discrimination commitments such as those set outin the GPA can induce more foreign bidders and are likelyto generate the greatest improvements in value-for-moneyfor Governments and enable them to spread their scarcebudgets further across their populations.

(3) The instrument needs to incorporate a transparentframework of laws, regulations, procedures andpractices regarding Government procurement. This will,likely encourage transparency in the transactions of theprocurement agencies and provide nondiscriminatorytimely, transparent and effective procedures enablingsuppliers to challenge alleged breaches of theinstrument. A Government that implements such aninstrument is therefore likely to reduce rent-seekingtendencies and corruption. This is likely to lead toprocurement being based on more objective criteriathereby further reducing costs. Greater clarity in the termsand conditions for applying for State procurement


contracts is likely to attract larger numbers of bothdomestic and foreign firms to bid. Small and Mediumsized enterprises, which many Governments historicallyseek to protect, would welcome and respond positivelyto increases procurement-related transparency.

(4) The instrument could be bilateral or a Regional TradeAgreement or even multilateral. As noted supra, GPA isone such instrument.

If a country were to assign its signature to the GPA, accessto its market for GPA signatories would follow as aconsequence. Notwithstanding the legitimate need toprovide protection to some sensitive sectors of theeconomy, this should lead to various benefits flowingfrom opening up domestic public procurement tocompetition, including improved value for money frombetter-value goods and services offered by foreignindustry and from pressure on domestic firms to improvetheir own competitiveness as a result of foreigncompetition. It should also result in the greater easeand propensity for transfer of technology, which shouldbenefit certain high technology procurement areas.

Finally, membership of a binding plurilateral agreementon Government procurement sends powerful signals toboth governments and foreign investors that there is acommitment to the principles of transparent, fair andcompetitive procurement markets in a country. The GPAprovisions require both a transparent and effective bidchallenge mechanism to monitor the system and offerfirms redress. It incorporates the WTO Dispute SettlementMechanism, which offers a binding independent forumto any party that feels its rights under the agreement arebeing denied.

V. India - Procurement Policies, Practices andInstitutions.—

Definition of Government procurement differs fromcountry to country. In India, it is defined as procurementmade for and on behalf of the Government, and includesCentral Government, State Governments, Public SectorUndertakings (PSU) and Public Bodies.10 While data fromcross-national studies suggest that Governmentprocurement typically constitutes in the range of 1015per cent of total economic activity or more,11 in India, itsoverall value is very likely significantly higher given therole of public companies in key sectors of the economy,such as the Railways. The value of Indian procurementmarkets in 2003, according to the World Bank wasestimated to be in the order of $100 billion, representingover 20 per cent of GDP.12

Indian procurement policy has been discriminatory, atleast to a degree, as it admonishes GovernmentDepartments and entities to follow certain hierarchy ofpreferences. The said hierarchy requires them to - first,prefer purchase of goods wholly produced in India;secondly, for goods manufactured in India from importedmaterials; thirdly, for foreign manufactures held in stockin India and last, for imported products received forsupply through Indian agents or India-basedestablishments. Participation by foreign firms has beenaccorded welcome in particular sectors. Purchasingentities have been accorded the discretion to give pricepreference to domestically produced products overimported ones and also to articles produced by cottage

and small-scale industry over those manufactured bylarger ones. For instance, in 1980 the Bureau of PublicEnterprises mandated Central Government Ministriesand Departments as well as PSUs to grant a pricepreference to PSUs up to 10 per cent and even more inappropriate cases. If the price quoted by a PSU waswithin 10 per cent of the lowest quotation, negotiationswere held with the PSU and the tender awarded to it atthat lowest quoted amount.13

Social responsibility informs the rationale for pricepreferences in India. Small firms, cottage industries andwomen’s employment schemes operate in economicallybackward regions and procurement can provideemployment to these sectors of the population. The IndianGovernment has used procurement contracts to directemployment towards marginalized groups such as thescheduled castes, for example, in labour-intensive publicworks contracts or by unbundling or splitting up largecontracts into smaller packages to enable domestic firmsand particularly SMEs to fulfill them. The procurementof specific pharmaceuticals has also been restricted tosome PSUs for similar social welfare arguments. PSUshave been protected from competition throughreservation, and mandates have allowed both CentralGovernment Departments and public sector enterprisesto apply price and purchase preference in favour of thepublic sector.14

At the federal level, there is no single law exclusivelygoverning public procurement of goods in India.15 Thefederal regulatory framework in place consists of:

(i) the General Financial Rules (GFR;

(ii) the Delegation of Financial Powers Rules (DFPR);

(iii) the Manual on Policies and Procedures forPurchase of Goods issued by the Ministry ofFinance (Manual);

(iv) Government orders regarding price or purchasepreference or other facilities to sellers intheHandloom Sector, Cottage and Small ScaleIndustries and to Central Public SectorUndertakings, etc.; and

(v) the guidelines issued by the Central VigilanceCommission to increase transparency andobjectivity in public procurement.16

Acknowledging the need for enhancing administrativeflexibility and ensuring full accountability for the use ofpublic funds and appropriate transparencymechanisms, the Indian Government ushered in reformsin 2005 in the area of procurement by Government andits entities. The General Financial Rules (GFR) governingCentral level procurement in India were overhauledlaying down certain basic underlying principles andproviding that every authority delegated with thefinancial powers of procuring goods in public interestshall have the responsibility and accountability to bringefficiency, economy and transparency in matters relatingto public procurement and for fair and equitabletreatment of suppliers and promotion of competition inpublic procurement. All Government purchases weremandated to abide by the principles outlined in the GFR.Organizations with a website must publish their tender


notices and enquiries on those websites, while thosewithout a website must post the notices on the NationalInformation Centre (NIC) website. Central procurementagencies are required to follow the procedures set outbelow17 depending upon the circumstances and factorsunderlying the procurement:

The normal procedure for procurement over Rs. 2.5million (1 US Dollar is approximately 50 Indian Rupees)is through open tender. However, Department heads havediscretion in deciding whether to advertise tendersabroad. Open tenders are invited through advertisementspublished in the Indian Trade Journal, and in twonational daily newspapers.

Limited tendering is allowed for procurement up to Rs.2.5 million, advertised to pre-selected approvedsuppliers. This is also allowed in cases of urgency andwhere justification is provided by the Ministry/Department; where it is considered not to be in the publicinterest to procure goods through open tender; and wherethe possibility of additional suppliers being tapped isdeemed to be remote.

Commonly used goods required by Central Governmententities on a recurring basis typically are purchasedunder rate contracts administered by the Directorate-General of Supplies and Disposals (DGS&D) in theDepartment of Commerce. These contracts are intendedto allow the procurement of goods from reliable sourceswithout the need for recurrent tenders. It is important tonote that, in principle, there is no preference for domesticas opposed to imported goods for such procurement.Foreign manufacturers may be registered, with or withoutIndian agents.

However, both Indian and non-Indian suppliers must beable to provide after sales support in India, and theproducts purchased must be “suitable for use” in India.

For petty purchase of goods or works, cash purchase isresorted to. A minimum of three quotations is obtainedfrom suppliers and the order given to the lowest.

The GFR also provides for purchase of goods withoutquotation (up to Rs 15,000) and purchase of goods bylocal purchase committee (up to Rs. 100,000). (Rule 151GFR).

Procurement in the Railways, Postal System, Telegraph,and Defense sectors is subject to specialized proceduresbut within the overall framework of the GFR. Competitionfrom foreign suppliers is generally permitted in respectof high technology or high value items. In the Railwayssector, foreign firms are free to participate in tendersadvertised in India. Payment against such contracts mustbe made in Indian Rupees at par with indigenoussuppliers. Global tendering is frequently used inprocurement of rolling stock, wheels, machinery andplant equipment, including technology transfer.

As a part of the modernisation of federal procurement,tender documents have been substantially standardisedon the basis of national or international standardspecifications. In respect of global tenders, more time isgenerally given for submission of overseas bids than inthe cases of domestic tenders and notices are publishedor disseminated through Indian Embassies.

The reforms of 2005 were designed with the specificobjectives of promoting competition and of ensuringfair and equitable treatment of suppliers, but yet forpolitical reasons and for inhering social responsibilityapproach, the preferential policies were retained inpractice for Central public-sector and micro and smallenterprises. The 2007 WTO Trade Policy Review notedthat for tenders valued between Rs. 50 million and Rs. 1billion, a Central public-sector enterprise whose bid iswithin 10 per cent of that of a large private unit is allowedto revise its price downward and is eligible for a contractor parallel-rate contract. Further, micro and smallenterprises (MSEs) receive purchase and pricepreferences in procurement by Central GovernmentMinistries and Departments and public-sectorenterprises. Under the purchasepreference system, 358specified items must be procured exclusively from MSEs.The price preference system also provides that if theprice offered by the micro or small enterprise is notmore than 15 per cent above the price offered by a largeenterprise, the product must be purchased from theformer.18

Transparency takes a back seat for unsuccessful bidders.They are informed of not having been successful througha regret card. Experience of unsuccessful bidderssuggests that the competent authority deciding on thetenders does not generally furnish reasons for therejection of their bids. There also is no requirement topublish details of the contracts awarded.

However, India has a good dispute resolutionmechanism. In the event of a dispute, the parties areencouraged to resolve differences with the purchaser bymutual consultation. If this fails to resolve the disputewithin 21 days, then, either the purchaser or the suppliermay give notice to the other party of its intention tocommence arbitration. Citizens can also lodgecomplaints with the Central Vigilance Commission (CVC)or with ombudsmen to trigger investigations into allegedacts of corruption in procurement by public officials orpoliticians. This is complemented by the Right toInformation Act, 2005 which enables general access toinformation about procurement decisions within aspecified time frame. Internal and external audits ofprocuring agencies and offices at the federal and locallevels are other instruments in place to curb and detectcorruption in public procurement. The reports of externalaudits are made publicly available.19

There is one important valve for redress for unsuccessfuland disappointed bidders. They can avail of invokingthe writ jurisdiction of the High Courts and the SupremeCourt (Articles 226 and 32 of the Constitution of India).They are entitled to challenge any administrative actionthat violates fundamental rights.

Having said this it cannot be gainsaid that, whencompared to challenge mechanisms set out in the WTOGPA or most Regional Trade Agreements, the Indianframework for challenge is incomplete andunsatisfactory.20

Chakravarthy and Dawar note that “Overall, whilevarious regulations governing Government purchasingpractices exist in India, in general procurementlegislation and bid challenge mechanisms in India are


incomplete and in places ill-defined. Furthermore, theprocurement framework does not have the quality ofParliamentary Law and therefore not all deviations fromthe rules are subject to judicial review”.21

VI. Suggestions for a Road Map for India22.—

(1) Given the problems and challenges facing India inthe area of Government procurement, it needs to positan appropriate instrument to inher the elements oftransparency, integrity, fairness and efficiency in theprocurement apparatus and schema. GPA is one such,despite reservations on accession to it.

Presently, India has decided to become a GPA observer.India could evaluate the pros and cons of becoming aparty to GPA and become a signatory.

(2) As noted supra, the Government of India still usespreferential treatment in Government procurement as atool of industrial policy. The existing preferential policyin favour of the small scale sector and PSUs and otherorganizations is likely to continue as a part of India’sstrategy for economic development, social responsibilityand protection of the small and vulnerable sections ofthe society.23 Discontinuing preferential treatment maynot be either desirable or politically feasible. Mentionmust however be made that it is the declared intentionof the Indian Government to eliminate purchasepreferences. At present, the purchase preference policyfor PSUs is extended from year to year. Policies ofpreference to smallscale and cottage industries havecontinued, although the list of products is graduallybeing reduced.

Accession to the GPA could offer the Indian Governmentthe vital legislative push that is needed to overcomeinertia and vested interests, while still protecting thosesectors of the economy and population that can genuinelybenefit from preferences.

(3) Acceding to the GPA poses nondiscrimination andnational treatment requirements on all tenders abovethe GPA thresholds on those entities and sectors coveredby the Agreement. This necessarily restricts the use ofad hoc and discriminatory policies as an importantcomponent of fair and transparent procurement. Indianeeds to strike a balance between its social obligationsand the need for nondiscrimination and nationaltreatment in procurement policies as mandated by theGPA. This implies that India may negotiate and get specificsectors and agencies (sensitive and critical) excludedfrom the coverage of GPA, as the Agreement provides forsuch exclusions.

(4) The challenge for India, therefore, is in defining thosesensitive and critical sectors of the economy that needto be excluded from the coverage of the GPA during theaccession negotiations. On the obverse side, the IndianGovernment has to mount an effort to form coherent andcomprehensive development policies towards sensitivesectors of the economy and society, withoutcompromising on the need for transparency and integrityreforms in these sectors. The more sectors ofprocurement that are sheltered from good governanceprinciples, the less likely reform measures will ensureefficient procurement markets.

(5) In many cases, as Hoda et al24 point out, the weaknessis not in Indian procurement legislation or policies butin its weak implementation. If the Central Government iscommitted to reform, it needs to strengthenimplementation through greater oversight and devisingstronger bid challenge mechanisms.

(6) There will be financial costs in implementing therequirements of the GPA associated with itstransparency and procedural requirements. It isimportant to acknowledge the resource costs not only interms of setting up new bodies and training staff, butalso the costs associated with publishing changes inprocurement practices and publishing statistics onprocurement decisions. Moreover, the benefits of greatertransparency to potential bidders for State contractsare likely to be maximised or fully realised only whenadditional steps are taken to ensure due process and tochallenge the decisions of procuring entities. This tooinvolves expense and new expertise.

Despite these costs, the benefits of transparency, dueprocess, and rights of appeal would be enjoyed both bypotential domestic and foreign bidders for Statecontracts. Some of these costs are a necessary elementof reforming a domestic procurement system, rather thanbeing specific to the GPA.

It is interesting to note that in some respects, Indianprocurement procedures are already broadly in line withthe requirements of the GPA. For instance, the proceduresrelating to invitation to participate in the intendedprocurement, selection procedures, time limits fortendering and delivery, submission, receipt and openingof tenders are all in broad conformity with the GPAstipulations. In these cases, the problem is withimplementation because the procuring agencies are seento have deviated from the rules in practice. There havebeen very few complaints of the absence of rules butmany of failure to observe them in letter and spirit. IfIndia accedes to the GPA, such fai lures may beactionable. This would have a positive impact on theimplementation of procurement rules.

While some Indian procurement procedures may be inde jure conformity with GPA requirements, Hoda et alhave given a call for promoting transparency inprocurement transactions and for fostering competitionin procurement and supplies. The current practice ingovernment procurement is opaque. Accession to theGPA would provide the welcome clarity and certainty tobidders. It would also improve implementation becausedisappointed bidders are those with most interest inhaving the rules of procurement observed. Again, as Hodaet al note, “making these changes would really betantamount to bringing about much needed reform tothis area of Government activity.”25 That is, the costs ofaccession are typically the costs of reform.

VII. Finale.—

This article has attempted to identify several areas ofprocurement policy in India that could benefit from thetransparent rule based system such as that provided bythe WTO GPA. Such a system would provide a fair, efficientand transparent system for spending public resources,besides providing for greater competition, value for


money, technology transfer and ultimately more efficientuse of public money.

To conclude, the Government of India’s decision tobecome a GPA observer indicates that it has identifiedtangible benefits from accession to this Agreement.Firstly, India believes it can take advantage of the marketaccess it gains to other Parties’ procurement markets,and also that it will benefit from the greater choice it isexposed to by allowing more foreign firms to bid forprocurement tenders. Secondly, it is clear that the costsand challenges associated with India’s accession to theWTO GPA are by and large the same costs as thoseassociated with implementing comprehensive policiesto ensure a transparent, fair and effective domesticprocurement system in India. India is committed toimproving its procurement markets and to underpin itsreforms, as a first step, has chosen to become a GPAobserver.

1. R. Wade, “The System of Administrative and PoliticalCorruption: Canal Irrigation in South India”, Journal ofDevelopment Studies, 18, 1982 and R Wade, “Governingthe Market: Economic Theory and the Role of Governmentin East Asian Industrialization,” Princeton UniversityPress, 2003.

2. F. Jenny, Competition and Anti-CorruptionConsiderations in Public Procurement in OECD (eds.),“Fighting Corruption and Promoting Integrity in PublicProcurement”, OECD, Paris, 2005.

3. Robert D Anderson, William E Kovacic and AnnaCaroline Muller, in “The WTO Regime on GovernmentProcurement: Challenge and Reform,” WTO, CambridgeUniversity Press, UK, 2011 (Chapter 4, p.136 and Chapter22)

4. ibid.

5. Information provided by Mr. D. Kumar, formerChairman, Competition Commission of India, New Delhiis referred to in Chapter 4 in “The WTO Regime onGovernment Procurement: Challenge and Reform”, WTO,Cambridge University Press, UK, 2011 (note 3)

6. K.A. Elliot, “Corruption and the Global Economy”,Institute for International Economics, Washington, DC,1997; A. K. Jain, “Economics of Corruption”, KluwerAcademic Publishers, London, 1998.

7. Robert D Anderson, William E Kovacic and AnnaCaroline Muller, “Ensuring Integrity and Competition inPublic Procurement Markets: A Dual Challenge for GoodGovernance,” in “The WTO Regime on GovernmentProcurement: Challenge and Reform”, WTO, CambridgeUniversity Press, UK, 2011 (Chapter 22).

8. This paragraph and the four preceding paragraphslean on Section 4 of Chapter 4 of the book “The WTORegime on Government Procurement: Challenge andReform”, WTO, Cambridge University Press, UK, 2011

9. Baldwin, R.E., ‘Non Tariff Distortions of InternationalTrade’, Brookings Institution, Washington, DC, 1970,Chapter 3; Baldwin, R.E. and Richardson, J.D., ‘Government

Purchasing Policies, Other NTBs, and the InternationalMonetary Crisis’, in H. English and K. Hay, (eds).,‘Obstacles to Trade in the Pacific Area: Proceedings ofthe Fourth Pacific Trade and Development Conference’Carleton School of International Affairs, Ottawa, 1972.

10. World Trade, S/WPGR/W/11/Add.14, dated 17thJanuary, 1997.

11. See, ‘The Size of Government Procurement Markets’,OECD, Paris, 2001.

12. World Bank, India Country Procurement AssessmentReport, 2003

13. A. Hoda and B. Suchi, “Transparency in GovernmentProcurement”. Indian Council for Research onInternational Economic Research in InternationalEconomic Relations. Working Paper No. 129. April 2004.

14. V. Srivastava, “India’s Accession to the GPA:Identifying Costs and Benefits” in A. Mattoo and R. Stern(ed), “India and the WTO” Oxford: OUP, 2003.

15. Certain State Legislatures have enacted such laws,for example, Tamil Nadu.

16. Chapter 4 in the book “The WTO Regime onGovernment Procurement: Challenge and Reform”,Cambridge University Press, UK 2011.

17. WTO Secretariat, “Trade Policy Review”, India, 2007(WT/TPR/S/182/Rev.1).

18. ibid note 16.

19. “Curbing Corruption in Public Procurement in Asiaand the Pacific”, ADB/OECD Anti-Corruption Initiativefor Asia and the Pacific, Paris, 2005.

20. See for background on the WTO requirements in thisarea, S. Arrow smith, ‘Government Procurement in theWTO’, Kluwer, The Hague, 2003.

21. http://go.worldbank.org/DKSUMKG4D0

22. Chapter 4 in the book “The WTO Regime onGovernment Procurement: Challenge and Reform”,

Cambridge University Press, UK 2011.

23. Raghavan, Chakravarti, “Behind the Talks onTransparency in Government Procurement” in ThirdWorld Network, 2002. Details at http://www.twnside.org.sg/title.

24. A. Hoda and B. Suchi, “Transparency in GovernmentProcurement”. Indian Council for Research onInternational Economic Research in InternationalEconomic Relations. Working Paper No. 129. April 2004(See note 13).

25. A. Hoda and B. Suchi, “Transparency in GovernmentProcurement”, (note 24).

This article / paper was presented by Dr. S. Chakravartyat the 7th ASCOLA Conference on State InitiatedRestraints of Competition in Sao Paulo, Brazil held onApril 12-14, 2012.

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EXPORT PROMOTION BONANZA- CAPITAL GOODS IMPORTS @ 0 % DUTY

B.B.PUROHIT, EXIM, [email protected]

Commerce ministry has reintroduced capital goodsimport @ 0 % duty scheme w.e.f. 18.04.2013 alongwith other changes in Foreign Trade Policy 2009-

14 offered to all sectors of products. Now only onescheme is operative : Import @ 0% duty with exportobligation : six times duty saved. The scheme isprevailing without benefit of 1% to status house holderscheme.

Prior to 18.04.2013, there existed two types of schemes.For reference purpose, it is essential to know these twoschemes mentioned as under :

The exporter can import their capital goods atconcessional rate of duty. The scheme is named asEPCG ( Export Promotion Capital Goods Scheme ) Ascompared to normal duty, the exporter has to pay 3 %duty under the scheme subject to undertaking specificamount of export obligation to be completed in eightyears as specified in the scheme. The detailed schemeis mentioned at Chapter 5 of Foreign Trade Policy 2009-14. It is in real sense export promotion scheme andoffers various financial benefits to the exporter. Thescheme was offered to all sectors of products.

An additional modified scheme was introduced in theyear 2012 wherein exporter had to pay NIL duty for importof capital goods provided he undertakes exportobligation @ 6 times of duty saved to be completedwithin 6 years of issuing the licence. At present normalimport duties for capital goods is 25 .61 % / 22.7 % asper the type of capital goods. The exporter does nothave to pay ANY duty to customs and can clear thecapital goods by submitting necessary undertaking. Thescheme ( 0% duty) was discontinued on 31.03.2012 andre- introduced w.e.f. 05.06.2012 with modified and moreattractive features.

Both the Schemes( 0% & 3% duty) are pre importschemes i.e. one has to take licence with either benefitand then clear the capital goods from customs. Thescheme is operated vide customs notification no. 102/2009 . EPCG scheme is also available for EOU ( 100 %export oriented units ) units which propose to convertstheir units into DTA units(normal unit).

The exporter saves substantial amount of fund by wayof duty and has direct financial benefit on his workingcapital. The scheme 0%duty) is available for certainsectors of industries which are manufacturing valueadded manufactured items and covers most of the items.We have to take reference of another export incentive

scheme known as SHIS(Status House Incentive Schemes)as it has impetus on 0% duty EPCG scheme. SHIS benefitoffers duty licence ( duty scrip ) @ 1 % of FOB value ofPhysical export. The said scheme is not available to theexporter who opt for 0 % EPCG Scheme.

While adopting % duty EPCG scheme, the exporter hasto carry out a critical comparative analysis of thisscheme with respect to SHIS benefit. For the particularfinancial year. The exporter, holding Status housecertificate, has to work out projected benefit under boththe the scheme i.e . export projection & projected importof capital goods to be cleared under 0 % duty scheme.

SHIS benefit scheme and 0 % duty scheme are mutuallyexclusive and hence it is important to carry out thisexercise.

As a further modification to above scheme, the importpolicy offers the same scheme ( EPCG Scheme) as a postimport capital goods scheme. After import of capitalgoods the exporter has to undertake necessary exportobligation. A duty Scrip for the equivalent amount ofduty paid at the time of import, is issued which can beutilized for import of various goods. Its serves asreplenishment of duty paid by the exporter while importof machines.

The regular EPCG scheme — import of capital goods @3 % duty is also equally popular and beneficial. Theexporter has to pay duty @ 3 % only irrespective ofduty prevailing for particular capital goods item. Hehas to under take export obligation for 8 times of dutysaved amount ( i.e normal duty leviable of an item less3 % ) and export obligation is to be completed within 8years from the date of issuance of licence. This schemeis scrapped off w.e.f.18.04.2013.

That is : the EPCG scheme offers two types of options.:- (a) Pre-Import : Duty payable @ 0 % at the time ofimport (b) post Import - duty licence available afterimport of any capital goods.

As usual, export made by the firm under any of the dutyexemption scheme will be sub assumed for fulfillmentof export obligation under this scheme i.e. export madeunder any of scheme will also be consider under thisscheme as fulfillment of export obligation. The scheme( 0% duty) has proved to be export incentive scheme inreal sense and exporters are availing benefit in a bigway.

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SUPPLY CHAINS OF THE FUTURE - LEAN AND AGILER V RAMAKRISHNAN

MANAGEMENT & TRAINING CONSULTANT, CHENNAI

[email protected]

Business Challenges

Today, manufacturers operate in an increasinglydemanding environment that includes globalcompetition, increasing pressures for cost

reductions, quality driven compliance andimprovements in on-time and in-full orders. Andy Grove,CEO, Intel, talked about “Business of the future” with aninteresting example -

� Every morning in Africa, when a gazelle wakes up, itknows it must run faster than the fastest lion or itwill be killed.

� Every morning, when a lion wakes up in the samejungle, it knows that it must out run the gazelle or itwill be starved to death.

� It does not matter whether you are a lion or a gazelle– when the sun comes up, you would better berunning.

To stay ahead of competitors, organizations have toraise their performance standards in areas of design,manufacture and introduction of new products. Thishas resulted in a shift in the focus of companies fromone that is totally internal to a model that is customer-centric. A company’s ability to be an industry leaderdepends on how quickly it can respond to changes incustomer demands and come out with the right productsand services. The evaluation of a supplier and his statusuntil the nineties was based on factors such as productperformance, price, quality and timely supply but latelytwo more requirements have got added. They areresponsiveness and reliability. It was the practice inthe past to manufacture products in bulk and stock themwhile their sales force went in search of customers.This model, also known as the ‘push production’resulted in the production of large runs of standardizedproducts that were produced based on sales forecastthat may turn out to be inaccurate and unreliable feed-back from sales. Today there has been a turn aroundwith the customer dictating what products are producedand when. “The shift has been from the ‘push’ model toa ‘pull’ model where products are made to order. This iscalled ‘Lean Manufacturing’. The system is no longerstatic and organizations have to cope with continuouschange. In the context of the world shrinking into a globalvillage, Supply Chains have become complex.Manufacturing plants are being set up in developingcountries to reduce cost while searching for markets indeveloped economies. Li & Fung is the largest tradingcompany in Hong Kong innovating in Supply ChainManagement, producing genuine global products bymanipulating the manufacturing value chain andoptimizing each step with the help of the ’pull’ strategy.In today’s turbulent business environment a number ofchallenges are faced by many organizations. They arerelated to the rate, scale and predictability of change.The new millennium faces the following challenges:

� unpredictable changes in a turbulent market

� rate of innovation in technology affecting productsand processes

� competition demanding frequent product changes� declining life time of products and technology� forecast-based projections of demand is no longer

viable� execution against actual demand

In order to face the above challenges, organizationsare initiating corporate-wide Lean Programmes so asto compete in the 21st Century.

Lean Wins the Race : Let us look at this story. Laurel andHardy are ready for a 100-metre race at the CommunityClub. They are eagerly waiting for the gun shot to startthe race. The race is on and Laurel is well ahead ofHardy to reach the win-post and to grab the trophy.Hardy is left far behind and struggling to run. Obviously,what is the moral of the story – Lean Wins the Race.This applies to Organizations as well. Manyorganizations are struggling since they have beenaccumulating fat in the form of wastes. Only suchorganizations that can shed their wastes can enhancecompetitiveness and remain in business. At this stage,many questions come to our mind. What are the typesof wastes, how do we identify them, what are the toolsavailable, how do we implement and sustain Lean cultureand what are the success stories? The followingchapters explain the concepts of Lean & Agile SupplyChains so as to Win the Race in this competitiveenvironment.

Lean Supply Chains : Basically, “Supply ChainManagement (SCM) is the network of organizations thatare involved through upstream and downstreamlinkages, in the different processes and activities thatproduce value in the form of products and services in thehands of the ultimate consumer.” The need forinnovation, because of competition among companieshas compelled them to seek new ways of business andSupply Chain Management perhaps could be consideredas an effective tool that might be used to gain leverageover competitors. The two-fold aim of reducing cost andincreasing value for the customer requires a totallydifferent approach in the way business responds to thedemands of the market. ‘Lean Thinking’ is imperative intoday’s market if there is to be an improvement in cycletimes, work-in-process, inventory levels and quality. Theidea behind ‘Lean Thinking’ is to shorten the time betweenorders from the customer to the delivery of the goods byeliminating waste.

“A Lean Supply Chain is a set of organizations directlylinked by upstream and downstream flows of products,services, finances and information, that collaborativelywork to reduce cost and wastes by efficiently andeffectively pulling what is needed to meet the needs ofthe individual customers.” Lean Supply ChainManagement techniques are ways to simplify andstreamline how organizations work with their suppliers,customers and their own production processes. The


components of Lean Supply Chain include the following:

� Lean Manufacturing - producing what the customerwants at the right quantity at the right time andwith minimum resources

� Lean Suppliers - who can respond to changes,maintain lower prices, improve quality and deliveron time

� Lean Logistics covering Warehousing & Distribution- eliminating waste in product, storage andprocesses, transportation & distribution, creatingsynchronized flow

The benefits of Lean Supply Chain are the following:� speed and responsiveness to customers (Time

reduction of 10 to 30%)� reduced inventories (10 to 30%)� reduced cost (10 to 25%)� on-time performance of 99%� reduction in cost of quality by 60%

Robert Martichenko, CEO of LeanCor, US, says:“Successful organizations going forward will be thosethat focus on the customer, eliminate all non value addedactivities, and reduce lead times and inventories, andbuild leaders who can navigate the Supply Chain from across-functional perspective.” He added that ”whenLean is successfully implemented in the Supply Chain,revenue will go up and costs will go down. This is themodel of margin management and cash flowimprovement required for today’s success.”

Lean Manufacturing : Toyota Production System (TPS)introduced the concept of Lean several decades ago andthis turned Toyota into an industrial and automotivegiant. As a consequence manufacturing organizationsworld-wide accepted TPS as a model for eliminatingwaste, since that is the ultimate goal of industry in orderto survive in a competitive environment. Toyota haveidentified seven types of wastes – Over production,Waiting, Transporting, Inappropriate processing,Unnecessary inventory, Unnecessary motions andDefects which are detrimental to Supply Chainperformance. “The principal objective of LeanManufacturing is the elimination of all wastes which isfacilitated by JIT systems. JIT makes use of a “pull” strategyas its operating principle as opposed to a “push”strategy.” This means that there is no production untila customer has placed his order. If the system is towork efficiently it is essential that there should be asmooth flow of information upstream through theSupply Chain along with a synchronized flow ofmaterial, downstream to the customer. What a customeris willing to pay towards a product is its value, in thecontext of Lean. Anything that does not add value to aproduct from a customer perspective is called waste. Itis thought provoking to learn about Toyota’s LeanStrategy – “Brilliant process management is our strategy.We get brilliant results from average people managingbrilliant processes. We observe that our competitorsoften get average (or worse) results from brilliant peoplemanaging broken processes”. The book, “The Machinethat Changed the World” had such a global impact thattwo of its authors Prof. Jim Womack (USA) and Prof.Daniel Jones (UK) started a study of how several westernbusinesses had emulated and implemented the Leanapproach in different sectors. The success stories werechronicled in the book ‘Lean Thinking’

Lean Procurement : “Lean Procurement is a conceptthat goes along with Lean Manufacturing and utilizesits principles to identify, recommend and implement a

seamless process using e-commerce as a means to placeorders, get confirmations and use reports for controlsand invoicing. Information sharing and collaborationwith suppliers are effective tools to optimize performanceand achieve an advantage over the competition”.Organizations are constantly upgrading theirtechnologies to improve their procurement processes.Vendor Managed Inventory (VMI) makes the supplierresponsible for replenishing the customer’s inventory.VMI makes it unnecessary for the customer to generatepurchase orders or check order confirmation againstpurchase orders. Further invoices do not have to beverified against goods received since these tasks takeplace automatically. These features result in a reductionof transaction cost by as much as 50%.

Lean Logistics : “Logistics Management is the process ofplanning, implementing and controlling the efficient flowand storage of goods, services and related informationfrom the point of origin to the point of consumption forthe purpose of conforming to customer requirements.”Logistic function being a key value lever in achievingbusiness effectiveness, its potential will createsignificant opportunities for corporate success,performance and profit. In today’s context, thewholesalers, distributors, manufacturers, retailers andsuppliers and others connected with business find itdifficult to cut costs, balance time and inventories,retain their profits, all the while satisfying the customersin both domestic and global economies. “In order toachieve their goal the best method would be toimplement Lean Logistics which would eliminate wastefrom their internal and external Supply Chains.”Reduction of excessive inventories, replenishment timesand unnecessary costs will all help in reducing waste.Lean Logistics helps business by compressing cycletimes, reducing logistic costs, decreasing inventorylevels and improving supplier and logisticsperformance besides enhancing Supplier Chainvisibility. Lean Warehousing activities eliminate non-value added activities by a re-arrangement of layoutand routings besides optimizing storage and picking. ALean Warehouse serves customers faster with the useof less space, less inventory and a greater accuracy atreduced over-all costs. New technologies are alsointroduced that include Bar Code, RFID and cross-docking.

Information Technology for Lean Supply Chains : In orderto enable Managers to make more informed and betterdecisions, information within the Supply Chain iscrucial. Information on customer demand, inventorylevels, production and shipments are included forappropriate decisions to optimize the flow of materialsthroughout the Supply Chain. Information sharingthrough integrated information systems is verynecessary to achieve increased visibility of demand andresponsiveness. Information on everything from SupplyChain inventories to production planning and shop-floor scheduling is very essential because collecting,analyzing and sharing information by manufacturershas become a basic requirement for global Supply Chainoperations. “An integrated ERP system has the potentialto offer manufacturers the opportunity to reduce coststructures, increase speed and improve transparency andthereby enhance customer satisfaction and theprofitability of the company.” Many leading SoftwareCompanies are now offering Lean Supply ChainSolutions, for streamlining manufacturing processesand reducing waste within the enterprise and acrossthe entire Supply Chain.


Agile Supply Chains : “Prof Martin Christopher hasdefined Agility as the ability of an organization to respondrapidly to changes in demand both in terms of volumeand variety. Agility is a business-wide capability thatembraces organizational structures, informationsystems, logistics processes and the key characteristic ofan agile organization is flexibility”. Lean Supply Chainsare more suited to functional and stable products whileAgile Supply Chains are preferable for innovativeproducts that are less predictable. ‘Leanness’ aims atdeveloping a value stream that eliminates all wasteincluding time to achieve a level schedule. ‘Agility’ refersto the ability to grab profitable opportunities in avolatile market scenario by making use of marketknowledge and virtual corporation. “Leagile’ is atelescopic combination of ‘Lean’ and ‘Agile’ which aimsat optimizing the management of the Supply Chain. Animportant element in the Agile Supply Chain Strategy isthe concept of “Postponement’. The real challenge inSupply Chain Management is to develop ‘lean strategies’up to the decoupling point and shift to ‘agile strategies’beyond that. Up to the decoupling point the flow ofproduct may be forecast driven while after that point itcould be driven by demand.

Implementation of Lean Supply Chain : Although LeanThinking tools are good to learn and appreciate, thereal challenge is in the implementation of the systemand its sustenance to achieve optimum results. Cultureand Strategy are the double helix in the Lean process.Because it has tools and techniques that can be taughtand understood, implementing the strategy is easy. Tochange the way a company thinks and acts, that is, tobuild a culture is difficult. Reluctance to change, effortinvolved in laying down a foundation on a soundphilosophy, taking decisions every day and the need forstrong leaders stand in the way of achieving lean resultsthough there is a great desire to do so. For a successfultransformation, the changes in thinking must begin atthe top. Then there is the problem of training managers,supervisors and workmen on tools and techniques andto create a sense of involvement. “Lean Supply Chainshave been implemented by many corporationssuccessfully and they have reaped rich rewards andremained competitive even in difficult times.”

Challenges of Supply Chains in India : Most Indian firmshave focused on Production and Sales aspects,neglecting Logistics, which include inventory-carryingcosts across the Supply Chain and transportation costs.The following are the factors contributing to poorperformance of Supply Chains:

� Taxation structure : Most decisions on facilitylocation have been based on taxation benefits andnot by customer service requirements. Further,companies are forced to have one stocking point ineach state to avoid taxes on inter-state sales. It ishoped that the proposed GST (goods and servicetax) will remove this anomaly. Many of the highwayshave stretches of roads managed by private partiesand they collect toll for entry; many cities have“octroi” collection centres at the entry. Thesecollection centres create bottle-necks for themovement of vehicles.

� Poor infrastructure : The national highways are inpoor condition, resulting in unreliable lead times.Both the transportation and warehouse industryare in the unorganized sector. To take care of therisk in uncertain led-times, companies tend toincrease inventory. In most of the sea ports, we see

accumulation of containers awaitingdocumentation and customs clearance, both forinbound and outbound cargoes. Most of the Stateshave severe power shortages, affecting themanufacturing operations of large-scale and small/medium scale industries; they are forced to havepower back-up with use of Generators, whichobviously increase operations cost. However, oflate, the government has initiated actions toimprove national highways and sea ports to world-class standards.

Success Stories : In spite of the above constraints, manyIndian organizations have faced the challenges andconverted these constraints into businessopportunities:

� Retail industry: To reduce transport complexitiesand cost, the bicycle manufacturers limit theiractivities to production of frames, handle bars andtransmission parts. Other suppliers provide thetyres, tubes, seats and fittings. The manufacturersoffer a high variety of bicycles for the threesegments – men, women and children. They find itconvenient to send the bicycle parts to their dealers,who assemble the right product based on thecustomer order. Thus the manufacturers achievethe “postponement” strategy in the assembly of thebicycles.

� Auto industry: India has become a global hub forcompact cars and many of the leading automanufacturers like Maruti, Hyundai, Tata Motors,Toyota, Ford, General Motors, Nissan Renault,Honda, TVS-Motors, Bajaj Auto and Hero Honda,have considerably increased their manufacturingcapacity. It is interesting to note that both the autocompanies and component industries has focusedon global best practices like TQM, TPM, Six Sigma,Lean Manufacturing and Lean Supply Chainmanagement.

� Auto ancillaries : The success of the Indian AutoIndustry is very much dependant on the capabilitiesof the auto component industries, supporting them.It is regrettable to realize that they have beenlagging behind in the implementation of Leanconcepts in their manufacture. In view of this, theGovernment of India under the Ministry of MicroSmall and Medium Enterprises (MSME) isimplementing the Lean Manufacturing Programme(LMP) for the benefit of these enterprises. Thisprogramme is highly significant in relation to theproductivity and competitiveness in the MSMEsector. The main objective of LMP is to enhance themanufacturing competitiveness for the MSMEs byapplying Lean techniques to identify and eliminatewastes in their manufacturing processes and alsoto streamline the system. The Lean techniques willbe of assistance to MSME units in reducing themanufacturing cost through proper personalmanagement, better space utilization, scientificinventory management, improved process flows,reduced engineering time etc. Lean ManufacturingProgramme also brings in improvement in thequality of the products and lower costs, which areessential for competing in national andinternational markets.

(Extract from the Book – Lean & Agile Supply Chains bythe author and released on 1st Feb 2013 at SPECTRUM2013, IIMM, Chennai)

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WTO UPDATE :

HON’BLE PRESIDENT OF INDIASHRI PRANAB MUKHERJEE’S SPEECH AT THEGOLDEN JUBILEE CELEBRATIONS OF INDIAN

INSTITUTE OF FOREIGN TRADE

1. It gives me great

pleasure to be here

today for the

Golden Jubilee Day

celebrations of the

Indian Institute of

Foreign Trade (IIFT).

This is an occasion

to recognize the

e n o r m o u s

i n t e l l e c t u a l

contribution made

by the Institute in

foreign trade and

i n t e r n a t i o n a l

business.

2. I have fond

memories of my

association with

the Institute during

my two tenures as

the Commerce

Minister. During

one of my visits to

the Institute in

1994, I remember

releasing a book,

titled “Trade in

Services: The Uruguay Round and After”. I am told

that this book continues to be an important

reference for understanding the nuances of Trade

in Services. As the Commerce Minister, I had the

privilege to contribute to the negotiations that led

to the formation of the World Trade Organization

(WTO) in January, 1995.

3. The IIFT, since its inception in 1963, has been at

the forefront of research and capacity building in

international trade. This Institute has provided

able support to the Government in responding to

the challenges faced by our trade and industry

from the very beginning. The country’s external

sector was stressed on several occasions. In 1966,

the foreign exchange position became unstable

due to increased food imports necessitated by

drought. The oil price shocks of 1973-74 and 1979-

80 had similarly

strained our foreign

exchange reserves. In

1991, a host of factors

like the Gulf crisis, fiscal

imbalance, and

weakening of

i n t e r n a t i o n a l

confidence led to a

balance of payment

problem. In July of that

year, we had foreign

exchange reserves

enough to finance

imports for only a

fortnight. Crises of such

proportions required

deft handling that called

for sound policy advice.

Seminars, research

projects, and other

academic programmes

conducted by IIFT have

rendered valuable

inputs to our policy

makers for better

understanding of the

problems.

4. The setting up of the WTO marked an important

event in international trade and investment. To

facilitate greater understanding of the multilateral

trade regime and to build expertise in the

Government, a Centre for WTO Studies was

established in IIFT in 1997-98. I am told that this

Centre has been instrumental in assisting the

Government to formulate our country’s strategy

in the WTO and other fora.

5. Ladies and Gentlemen, our approach to the external

sector has been guided by our country’s economic

position. We have viewed exports as a means of

employment generation and have given a thrust

on employment intensive industry. To reduce

dependence on imports, we have encouraged

domestic manufacturing for inputs to export

industry. To build export competitiveness, we have


promoted technology up-gradation. We have

pursued market diversification to evade the risk

of global downturn. We have also encouraged

exports from the North Eastern Region, which has

a special place in our economy.

6. Experience of many economies has shown that

reducing trade barriers increases the efficiency

of resource use leading to higher growth. In the

Union Budget for 1991-92, the maximum rate of

import duty was reduced from 300 to 150 per cent.

After progressive liberalization, the peak rate of

customs duty for non-agricultural products today

stands at only 10 per cent.

7. We have been following a policy of globalization

as a strategy to achieve higher economic growth.

The international trade to GDP ratio, which was

just 15 per cent in 1991-92, is now 44 per cent.

Our export sector has done well. From US Dollar

17.9 billion in 1991-92, the value of exports has

increased to US Dollar 300.6 billion in 2012-13.

The compound average growth rate of our exports

during 1991-92 to 2000-01 was 10.7 per cent. This

has increased to 19.1 per cent during the period

2001-02 to 2012-13.

8. India is today the world’s largest rice exporter and

second largest wheat exporter. While we must be

proud of our performance in commodity exports,

there is a need to monitor and exercise caution.

We must ensure the availability of enough food in

the country at all times. Every citizen should have

access to affordable food.

9. Higher export growth has contributed to an

improved economic performance in the last

decade. The average annual growth rate during

the last 10 years was a healthy 7.9 per cent. The

recovery of India’s economy from the impact of

the 2008 global crisis was much stronger than

initially believed. During 2009-10 and 2010-11,

India’s economy grew by 8.6 per cent and 9.3 per

cent respectively though the growth rates earlier

estimated for these years were much lower. The

ongoing global financial crisis has decelerated

our economic growth in the last two years. The

GDP growth in 2012-13 has been estimated at a

muted 5.0 per cent but I am confident that we will

bounce back.

10. Ladies and Gentlemen, the increased integration

of our economy with that of the world calls for

managing our economy from the risk of any global

financial crisis. We have diversified our export

market, by focusing on countries in Asia, Africa

and Latin America. These geographies accounted

for two-third of our exports in 2012-13. The

slowdown of the global economy has impacted

our external sector. But due to the market

diversification strategy, we have been able to

mitigate the impact considerably.

11. A matter of concern is the current account deficit,

which at 5.4 per cent of GDP during the period

April to December, 2012 is very high. Though we

have managed this deficit through capital flows,

we have to increase our exports to bring it to a

sustainable level. A strong revival of the global

economy is expected in 2014. At a time when global

demand is yet to firm up, there is a need to

strengthen our export industry.

12. Our efforts have for long been to build the

competitiveness of our export sector. To give

greater thrust to export promotion, over 158

Special Economic Zones have been set up. The

Export Promotion Capital Goods scheme has

enabled exporters to import machinery and

equipment for producing quality goods for export.

13. We have taken a proactive stance at forging trade

and economic partnerships with several

economies and trading blocs. Comprehensive

Economic Partnership Agreements have been

entered into with Singapore, South Korea, Japan

and Malaysia. Such an agreement has recently

been concluded with ASEAN. Similar agreements

are being negotiated with India’s prominent

trading partners like the European Union.

14. Increased trade liberalization and economic

cooperation will not count much unless they result

in tangible benefits for our people. Hence, thrust

should also be placed on meeting other objectives

like employment generation and regional

development. Our export sector should be able to

drive the socio-economic development of our

country.

15. Over the years, IIFT has broadened its academic

framework by providing management education

and PhD courses. Its endeavour should not only

be to produce successful managers, business

leaders and academic thinkers but also to prepare

them as socially conscious citizens who have the

capacity and willingness to respond and

contribute to our society’s needs.

16. I am confident that IIFT will continue to impart

relevant training and undertake intellectually

sound research in the area of foreign trade and

international business. I wish the Institute all

success for the future.

Source : PIB

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INNOVATION – VALUE CHAIN

S.N.PANIGRAHI

[email protected]

“Innovation is the specific tool of entrepreneurs, themeans by which they exploit change as an opportunityfor a different business or a different service. It iscapable of being presented as a discipline, capable ofbeing learned, capable of being practiced.Entrepreneurs need to search purposefully for thesources of innovation, the changes and their symptomsthat indicate opportunities for successful innovation.And they need to know and to apply the principles ofsuccessful innovation.”- Peter Drucker

“..if we want to succeed as a company – and as an industry– we must drive innovation into everything we do: intotechnology, into safety, into design and into real-worldsolutions for environmental issues, like the impact ofenergy usage on our world.”

-Chairman Bill Ford’s speech, NATIONAL PRESSCLUB WASHINGTON, DC November 22, 2005

In today ’s fiercely competitive global businessenvironment, corporations are under compulsions

to find new and unique ways to create and delivervalue to customers through innovations and the demand

to innovate and deliver better value addition is growingever stronger and stronger.

There is a growing recognition that through effectivemanagement of the Value Chain both cost reduction andvalue enhancement can be achieved. Since value chainfunction has been identified as a key value lever linkingdemand to delivery, in order to capture this value, thefocus has been on taking Value Chain to a central stageof business strategy. Unlocking its potential will createsignificant opportunities for corporate success,performance, and profit - it can become a key strategicdifferentiator and a corporate contributor.

Moreover, many organizations acknowledge thatinnovation is very important to create business valuein turn for their growth and success. Innovation iscreating value by implementing new ideas. Innovationconcerns the search for and the discovery,

experimentation, development, imitation and adoptionof new business models, new products, new processesand new organizational set ups. Un-leasing innovationin the value chain drives organizational growth.

VALUE ADDED IN VALUE CHAIN :

In a value chain additional value is created at each stage.Value added refers to any additional value created (the

difference between input cost and output value infinancial terms and / or also perceived / intangiblevalue enhancement in services) at a particular stagethat include both tangible value added through rawmaterial transformation, through various stages ofproduction / processes by using man, machines andmoney and intangible value added through services,intellectual capital and capabilities of a firm (firmattributes, firm controlled information, use ofknowledge assets and experience) and relationalexchange like building of collaborative relationshipsto enhance efficiency and effectiveness. Value added(both tangible and intangible) at different stages makingdifferent levels of contribution towards valuegeneration are being transferred along the supply chainfrom point of origin to point of consumption creatingvalue chain.

INNOVATION : VISION TO ACTION :

“Vision animates, inspires, transforms purpose intoaction.” - Warren Bennis

“Good business leaders create a vision, articulatethe vision, passionately own the vision, andrelentlessly drive it to completion.” - Jack Welsh

“All achievements, all earned riches, have theirbeginning in an idea.” - Napoleon Hill

“You can have brilliant ideas, but if you can’t getthem across, your ideas won’t get you anywhere.” -Lee Iacocca

“The air is full of ideas. They are knocking you in thehead all the time. You only have to know what youwant, then forget it, and go about your business.Suddenly, the idea will come through. It was there allthe time.” - Henry Ford

The starting point for innovation is vision with objectiveand generation of creative ideas to attain the objective.Innovation is the process of taking those ideas to marketor to usefulness

Innovation is a process of identifying an opportunity orneed and developing an idea, imagination, concept orcreative thinking, coupled with use of knowledge,information, skill, ability and other resources (includingfinancial resources) and taking risk to translate theseinto an outcome or change(Commercialization) that issubstantially different, creative or new and the resultant


product or service / process / method or way to dothings is intended to create value by solving a problem,satisfy wants / needs and make some-thing or some-body better off strategically, technologically,economically, intellectually, socially and that is widelyaccessible and adoptable.

� Innovation� Idea / Creativity� Commercialization�

Commercialization�Put into Use by Application of

Resources�

Taking Risk�

� Change� Value to Customer�

INNOVATION IS CHANGE :

“Without change there is no innovation, creativity,or incentive for improvement. Those who initiatechange will have a better opportunity to manage thechange that is inevitable.” ¯William Pollard

“I begin with an idea and then it becomes somethingelse.” - Pablo Picasso

Innovation and change are more than just words; theyare critical challenges in today’s workplace. Vision ofchangeis center to enterprise transformation. Changein different platform is possible only through innovationand innovation and change can make the differencebetween success and failure.

Change may be described as the adoption of aninnovation, where the ultimate goal is to bring in newor improved outcomes through an alteration ofpractices or doing things altogether in a new way.However, the process of change may turn to be complex,with many different types of change possible. Further,there are a number of differing strategies forimplementing these changes, with the success ofimplementation being highly variable. Factors that drivechange may be internal or external to the environmentand innovations may be initiated at any level in theorganizational structure and may bring in success.

“I know quite certainly that I myself have no specialtalent. Curiosity, obsession and dogged endurance,combined with self-criticism, have brought me to myideas.” - Albert Einstein

“Kites rises highest against the wind and not with it”- Winston Churchill

NECESSITYIS MOTHER OF ALL INNOVATIONS :

It is true that necessity and crisis precedesinnovation.Very often, crisis events, situations, dareneed / necessity or a set of extreme conditions andsurvival challenges, forcingto look at things in a differentway, finding ways for something different and this searchto mitigate the situation forces to make some newinitiatives, thinking for creative problem-solving, triggerfor new ideas that lead to very different types ofsolutions even challenging the present believes and

practices and in this process forces one to look forvarious options and this allows for innovation spaceand opens up new innovation trajectory. That is crisisopens up options. Options provide opportunity to tradeoff with resources and strategy. Crisis challengesprecedence and existing practices drives mindset to newideas to face the problem and a real test starts fromthere. Crisis, Chaos, disruption, confusion and even infrustration and dent when stared at with the right lenswith strong desire to come out of the situation can leadto opportunity and re-energize thought process togenerate ideas and put into action those ideas formsinnovation.

Crisis driven innovation takes advantage of situationas an opportunity for change and improvement. Thereare many real life and historical facts of Innovation intimes of crisis that lead tosuccess.

INCREMENTAL & RADICAL INNOVATION:

Innovation may vary in degree of newness thatdifferentiates Radical and Incremental Innovation.Incremental innovation seeks to improve the productsand systems that already exist, making them better,faster, cheaper or improved version in its perceived orfunctional value. This is sometimes called “Market Pull”Innovation. Radical innovation is more focused on newtechnologies, new business models and breakthroughbusinesses. This is sometimes called “Technology Push”Innovation

INVENTION &INNOVATION :

Innovation differs from invention in that innovationrefers to the use or application of a novel ideaintocommercial success or widespread use resulting invalue addition or better way of doing, whereas inventionrefers more directly to the creation of the idea orconcept or method itself. Moreover, all inventions maynot lead to innovations as many inventions may die outat the inception itself or may not translate into customervalue or commercialization and similarly allinnovations may not come out of great revolutionaryinventions as small ideas may proves to be great valueto the customers.

TYPES OF INNOVATION :

In his book “ Innovation With IT” MrSanjiva ShankarDubey described that in business and economics,innovation is often divided into five types:

1. Product innovation, which involves theintroduction of a new good or service that issubstantially improved. This might includeimprovements in functional characteristics,technical abilities, ease of use, or any otherdimension.

2. Process innovation involves theimplementation of a new or significantlyimproved production or delivery method.


3. Marketing innovation is the development ofnew marketing methods with improvement inproduct design or packaging, productpromotion or pricing.

4. Organizational innovation (also referred to associal innovation) involves the creation of neworganizations, business practices, ways ofrunning organizations or new organizationalbehavior.

5. Business Model innovation involves changingthe way business is done in terms of capturingvalue e.g. Compaq vs. Dell.

INNOVATION DRIVERS :

Drivers for innovation are centered on to increasinglycomplex challenges with constrained resources. Thechallenges may be the pace and scale of change;operational pressures; demands for efficiencies;pressure for improved service delivery; financialpressures to reduce costs;increased competition;shorter product life cycles; value migration; stricterregulations; increased demend for accountability;industry and community needs for sustainabledevelopment; increasing and changing government andcommunity expectations; rising awareness regardingservice and quality; demographic, social and maketchanges; changing economy; technologicaladvancements and challengesetc.

Since innovation is considered as a major driver ofvalue, growth and change, the factors that lead toinnovation are also considered to be critical toorganizational growth and transformation. Although thefactors that drive value creation differ by industry, someof the major areas of innovation include strategy,technology, alliances / collaborations, managementcapabilities, employee relations, customer relations,community relations, and brand value.

Innovation drivers may be broadly classified as :

� Individual Drivers – Individual need, initiation,involvement, interest, inner motivation, out of box/ creative thinking, creative bled of mind; Driven byexternal compulsions / crisis situations

� Organizational Drivers – Complex organizationalchallenges with constrained resources; operationalpressures / demands for efficiencies / profits / costreductions; competition / survival / entry barrierto competitors; customer / social / cultural drivers;Market opportunities & Threads; technology drivenchallenges; regulatory compulsions;Organizational strategies / tactics, organizationstructure / systems, conducive environment,(effective utilization of business resources andknowledge, to develop, sustain and enhance itsmission effectiveness and /or competitiveadvantage.) also drive innovation.

� Customer Driven Drivers :In customer-driven

innovation programs, the customer is the keyplayer—innovation is done by customers, withminimum involvement by the organization.Customersare the primary source of ideas -customerbecamedriving force in the process.

� Technology Driven Drivers : Considers technologya core input. Practically every breakthroughinnovation is based on a technology drivenorientation. Scientific / Technological break-through to meet demands of competitive advantage/ differentiation; cost reduction through IT

� Socio-Economic-Political-Environmental Drivers:Shift in the inter-dependent roles of business,society & politics and environment andtransformations; Changing values, systems,practices etc compel for innovate and change. Theseinnovations focus attention on the ideas andsolutions that create social or economic orpolitical or environmental value.

� Regulatory Drivers :Social / political / Regulatorycompulsions drive for change.

INNOVATION LEADS TO VALUE CREATION :

“Creativity is thinking up new things. Innovation isdoing new things.” - Theodore Levitt

Innovation is a function of creativity and risk taking tocommercialize an idea. Risk is to invest resources andexperimenting with creative idea for something newoutcome which has some element of uncertainty. Anessential element for innovation is its application in acommercially successful way. Innovation drives valuecreation that is transformation of ideas into vitalproducts and processes into customer value intorevenues in turn into increased stakeholder value. Thatis innovation in both products and processes contributepositively to company growth, prosperity andsustainability if it translates into business valuethrough value added in the value chain.

INNOVATION – VALUE CHAIN :

This innovation translated into value in a chain of events,forms “Innovation – Value Chain”. Organizations areinvesting in the time, energy, creativity, research,planning, refining, modeling and retesting with the hopethat innovation driven value chain will pay off in termsof improved product, process, better teamwork, a newbusiness model, a refined brand – and value additionto customers in terms of improved product, price,distribution and service levels. These are assets thatadd value to the company, therefore innovation drivenvalue addition in the value chain become absolutenecessity for organizational growth, prosperity,enhance long-term competitiveness and sustainability.

INNOVATION :THE HEART OF THE KNOWLEDGEECONOMY Innovation is the central issue ineconomic prosperity – Michael Porter


An economy that is driven by research, ideas, skills,knowledge and innovations can help promote greatereconomic growth and spur competitiveness and generatehigh-impact economic advantages for all out benefitsthat create wealth, prosperity and high-wage jobs.Astrong, sustainable knowledge-innovation driveneconomy can stimulate growth for individuals,organizations, nations and community as a whole. Theimplementation of a knowledge and innovation-baseddevelopment strategy requires a vision, strongcoordination at the top level of government, seniorexecutives of an enterprise and a participatoryapproach to mobilize the resources backed with neededreforms and right policies. Managing knowledge driveninnovation, is a critical driver for enhancingproductivity that in turn offers higher and sustainableeconomic growth.

In the knowledge-economy model, a new kind ofdevelopment strategy with a knowledge and innovationat its very heart is essential in organizing, creating,developing, disseminating and transferringknowledgein proper integration and positive contribution.

INNOVATION INNOVATES THROUGH COLLABORATION:

“The organizations of the future will increasinglydepend on the creativity of their members tosurvive. Great Groups offer a new model in whichthe leader is an equal among Titans. In a trulycreative collaboration, work is pleasure, and theonly rules and procedures are those that advancethe common cause.” - — Warren Bennis

As innovation becomes more pivotal in businessdecisions, and innovation based strategies and actionsbecome critical to the generation of business value.However innovation does not often happen with oneperson. Research shows that most innovation is theresult of multiple people working together to generateideas and identify new opportunities. It is wellrecognized that collaborative innovation is one of themost powerful means of creating new ideas that impactbusiness success and also recognized that differentials

in thinking are the primary source of innovation, andthis can only come from having a broad series ofalliances both internally and externally. Collaborationincreases the chances of ASSOCIATIONS between ideasthat result in an innovative combination and also resultsin more CONNECTIONS to people that can help push agood idea forward and speeds up actions throughbroader networks and social circles. Teams incollaboration provide ENERGY and help overcome theexpected resistance.Thusmost of the innovations inbusiness where advancements and successes are stemdirectly from collaborative relationships developedamong key stake holders and participants.

ORGANISATION WIDE FOCUS ON INNOVATION :

Innovation requires multiple skill sets, whether it’sinvention, development, funding, marketing, patenting,operations, etc. Those skill sets almost never exist in

one person or in one organisation. So multiple peopleare needed to move it forward. Involving the team in acommonly understood creative and innovation processincreases the probability that value driving innovationwill see the light of day. For achieving an organization-wide focus on Innovation - Value creation is to understandthe sources and drivers of value creation within theindustry, company, and marketplace. Understanding thecustomer / stakeholder or market need and identifyingopportunities that what creates value will help focusonnew ideas, creative thinking, brainstorming andmobilizing resources.

Value need not be always in financial terms, it can be inthe form of various intangible factors like delivery ofservices, consistent quality, delivery of variety inshorter lead time, new product developments, productor market or service differentiation, timely delivery,loyalty of customers / suppliers, good will, customer /supplier relationship, personalized offerings, sense ofcommunity, technology support, knowledge /information sharing,image enhancement or co-brandingopportunities, collaborative service aspects etc.

DRIVING PROFITS AND GROWTH THROUGH VALUE CHAINSYNCHRONIZATION : Myriad of changes around theworld are posing greater challenges characterized bydifferent levels of value added but also by diverserelationships among the various actors involved, aswell as by heterogeneous characteristics in termsoflabour, technology, knowledge, capability andinfrastructure requirements. The global economy hassignificantly increased competition; to successfullycompete and gain the competitive advantage all theresources need to be optimized, processes synergizedand need to collaborate with all the concernedstakeholders. This Integration is all about tosynchronize within and across the value chains - andrelated strategies and operations / processes — and toleverage their strengths in collaboration, flexibility,visibility and technology to drive profits and growth.

UNLEASH THE POWER OF THE VALUE CHAIN

In an era of rapid shifts in technology, consumerdemands, and public awareness challenges, a capacity

for organizational innovation isn’t a luxury – it’s an

imperative – the imparative isto demonstrate how tobuild organizational Innovation-Value Chain thatfacilitates transfer of value both within the firm andacross the value chain to gain the capability to positionthe organization for future growth.That is un-leasingInnovation in Value Chain drives organizational growth

References :1. Innovation Drives Value Creation By Pete Harpum,

Affliate Professor, University of Manchester2. What Drives Innovation By Renee Hopkines

Callahan & Gwen Smith Ishmael3. Customer Driven Innovation By Kevin C Desouza,

YukikaAwazu, SanjeevJha, Sridhar Papagari

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LOGISTICS AND SUPPLY CHAINS MANAGEMENT

A CASE STUDY WAL-MARTMohd. Ziya Quadri, IIMM Member

Govt. Industrial Training Institute Washim

[email protected]

Abstract

The paper attempts to establish the relevance andimportant of logistic and supply chainManagement Every organization supplies products

that satisfy customer demand. Creating and deliveringthese products needs an efficient flow of materials.Logistics is the function responsible for all aspects ofthe movement and storage of materials. It movesmaterials into organizations from suppliers, throughoperations, and out to customers. This is an essentialfunction in every organization, even those providingintangible services No organization works in isolation,and each forms a link in broader supply chains. Asupply chain consists of the series of related activitiesand organizations that a product moves through on itsjourney from initial suppliers through to final customers

Introduction : In olden days , the goods that peoplewanted were not always produced where they wantedto consume them, or these goods were not accessiblewhen people wanted to consume them. Food and othercommodities were widely dispersed and were onlyavailable in abundance at certain times of the year.Early peoples had the choice of consuming goods attheir immediate location or moving the goods to apreferred site and storing them for later use. However,because no well developed transportation and storagesystems yet existed, the movement of goods was limitedto what an individual could personally move, andstorage of perishable commodities was possible foronly a short time. This limited movement-storage systemgenerally constrained people to live close to the sourcesof production and to consume a rather narrow range ofgoods

There is a need of, a well-developed and inexpensivelogistics and supply chain system that wouldencourage an exchange of goods with other producingareas of the country, or even the world.

Definition of Logistic and Supply Chain Management

A dictionary definition of the term logistics is, “Thebranch of military science having to do with procuring,maintaining, and transporting material, personnel, andfacilities.”

A Logistics is the function responsible for all aspects ofthe movement and storage of materials on their journeyfrom original suppliers through to final customers.

“Logistics is that part of the supply chain process thatplans, implements, and controls the efficient, effective flowand storage of goods, services, and related informationfrom the point of origin to the point of consumption inorder to meet customers’ requirements.”

A dictionary definition of supply chain Managementof material and information flow in a supplychain to provide the highest degre of customersatisfaction at the lowest possible cost.

A supply chain consists of the series of activities andorganizations that materials move through on theirjourney from initial suppliers to final customers

“Supply chain management is defined as the systematic,strategic coordination of the traditional business functions

and the tactics across these business functions within aparticular company and across businesses within thesupply chain, for the purposes of improving the long-term performance of the individual companies and thesupply chain as a whole.”

Activities of logistics : Logistics is a broad function whichconsists of a series of related activities. You can imaginethese by following some materials on their way throughan organization

1-Procurement or purchasing : The flow of materialsinto an organization is usually initiated by a purchaseorder sent to a supplier. To prepare this a purchasing,or procurement, department finds suitable suppliers,negotiates terms and conditions, organizes delivery,arranges insurance and payment, and does everythingneeded to get materials into the organization

2-Inward transport or traffic : Moves materials fromsuppliers to an organization’s receiving area. For this,managers have to choose the type of transport

3-Receiving : Receiving makes sure that materialsdelivered match an order, acknowledges receipt,unloads delivery vehicles, inspects materials fordamage, and sorts them.

4-Warehousing or stores : Warehouse moves materialsfrom the receiving area into storage and makes surethat they are available when needed.

5-Stock control : Stock control means sets the policiesfor inventory. It considers the materials to store, overallinvestment, customer service, stock levels, order sizes,order timing, and so on.


6-Material handling : It is the general term for movingmaterials within an organization. Every time thatmaterials are moved around operations, it usesmaterials handling, whose aim is to give efficientmovements, with short journeys, using appropriateequipment, with little damage,

7-Order picking : Order picking means finds and removesmaterials from stores

8-Packaging : It is a process of wraps materials to makesure that they are properly protected during movementsso that damage is kept to a minimum.

Activities of Supply Chain

1-Production : Production refers to the capacity of asupply chain to make and store products. The facilitiesof production are factories and warehouses Whatproducts does the market want? How much of whichproducts should be produced and by when? This activityincludes the creation of master production schedulesthat take into account plant capacities, workloadbalancing, quality control, and equipment maintenance

2-Inventory : Inventory is spread throughout the supplychain and includes everything from raw material towork in process to finished goods that are held by themanufacturers, distributors, and retailers in a supplychain. The primary purpose of inventory is to act as abuffer against uncertainty in the supply chain. However,holding inventory can be expensive, so what are theoptimal inventory levels and reorder points

3-Location : Location refers to the geographical sittingof supply chain facilities. It also includes the decisionsrelated to which activities should be performed in eachfacility Where should facilities for production andinventory storage be located? Where are the most costefficient locations for production and for storage ofinventory

4-Transportation : This refers to the movement ofeverything from raw material to finished goods betweendifferent facilities in a supply chain How shouldinventory be moved from one supply chain location toanother?

5-Information : Information is the basis upon which tomake decisions regarding the other four supply chaindrivers. It is the connection between all of the activitiesand operations in a supply chain Timely and accurateinformation holds the promise of better coordinationand better decision making. With good information,people can make effective decisions about what toproduce and how much

EXAMPLE OF EFFCTIVE USE OF LOGISTIC AND SCM IS WAL-MART

Wal-Mart is a company shaped by its supply chain andthe efficiency of its supply chain has made it a leader inthe markets it serves. In 1962 Sam Walton opened adiscount store in Rogers, Arkansas. He started with theidea that, ‘The secret of successful retailing is to giveyour customers what they want’ and this includes ‘a

wide assortment of good quality merchandise; thelowest possible prices; guaranteed satisfaction withwhat you buy; friendly knowledgeable service;convenient hours; free parking a pleasant shoppingexperience’. Sam called his store Wal-Mart, and was sosuccessful that his chain grew quickly. In 1983 he openeda Sam’s Club warehouse for members, and in 1988 thefirst ‘Supercenter’ selling groceries. During the 1980sWal-Mart became the leading retailer in the USA, andstarted its international expansion. Early moves intoMexico, Puerto Rico and Canada were followed by SouthAmerica, Asia and Europe – with most of the laterexpansion from buying local companies (such as ASDAin the UK and Interspar in Germany).

Wal-Mart is a classic example of how to manage rapidgrowth without changing the company’s underlyingvalues – in this case ‘the basic value was, and is,customer service’. This is emphasized from the frontdoor of each store, where someone greets each customerand tells them about special offers and promotions.Wal-Mart is now the world’s largest retailer and in 2007had 6700 stores, serving 176 million customers a week,employing 1.9 million staff – or ‘associates’ – and aturnover of US$345 billion.

A large Wal-Mart store stocks 120,000 different items,each of which has its own supply chain. Not surprisingly,the company needs a huge logistics effort, with 61,000suppliers delivering $4 billion dollars’ worth of goodsa week. In the mainland USA products move through ahundred distribution centres, and on to 1000 Wal-Martstores, 2300 Supercentres, 600 Sam’s Clubs andNeighbor hood Markets. Efficient logistics plays a largepart in Wal-Mart’s success, and it uses the ‘industry’smost efficient and sophisticated distribution system’.This includes high levels of automation, sophisticatedcommunications, utilization of resources, andguaranteed availability of products. The logistics costsare so high that small improvements can have aconsiderable effect on profit. For instance, improvingfuel consumption in their fleet of 7000 trucks by onemile a gallon would save more than US$50 million ayear. In 2006 installing auxiliary power units in trucksthat made overnight stops (meaning that the mainengine could be turned off for longer) saved 10 milliongallons of diesel fuel a year, US$25 million and 100,000tones of carbon dioxide emissions.

References1- Shapiro, R.D. and Heskett, J.L. (1985) Logistics

strategy, West Publishing,2- Bowersox, D.J., Closs, D.J. and Cooper, M.B. (2007)3- Supply chain logistics management (2nd edition),

McGraw-Hill, New York, NY.4- Malone, R. (2006) Logistics costs soar, Forbes.com,

18 July 2006.5- International Journal of Logistics Mgt, 8(1), 26- Industrial Organisation and Management OP

Khanna7- Indian Institution of Industrial Engineering Journals

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MANAGING RISKS IN SUPPLY CHAINSDR. V. K. GUPTA

FORMER CEO INDIA, JMA MANAGEMENT CENTER, JMA GROUP, JAPAN

PROFESSOR, IMT GHAZIABAD

[email protected]

Abstract : Main goal of supply chain managementis to efficiently and effectively match supply anddemand for a product or services or both.

Demand by its nature is uncertain and most commonlyused methods to estimate demand are forecastingmodels with varying degree of complexity. Demandinherently pose a risk for the producer or the supplierand as actual demand is known only when it actuallyoccurs. Supply side too is full of uncertainties due tocomplexity and multiple locations, value additionprocesses, multiple agencies and ownerships havingspecific interests.

Purpose of this paper is to identify major risks affectingdemand and supply and suggest a practical approachto manage the risks of mismatch in demand and supply.

Introduction : Corporations, big or small, continue toface a challenge of managing demand and supplyvariability. The variability comes from a lot of factorsboth on demand side as well as on supply side. Demandside variability is caused due to many global and localfactors such as state of the economy, changes ingovernment regulations, taxes, level of competition inthe industry, disposable surplus with the consumers,overall business and economy outlook and the need ofthe consumers. Supply side variability is also causedby global factors, competition, and availability ofcompetent suppliers, availability and cost of inputs,locations of suppliers and manufacturing locations aswell as location of the markets. Transportation plays amajor role in supply side variability and sometimedisruptions causes in supply. Longer the supply leadtime, larger is the possibility of supply side variability.

Demand Side Variability

Variability in Demand : Demand for goods and servicesat the customer facing end of the supply chain is knownonly when it actually happens. Since there is a leadtime required from the time a customer places the orderto the time the order can be fulfilled by product andsupply of goods and services, one of the very commonlyused method is keeping inventory of finished goods asnear to the customer as possible. Organizations needto plan how much inventory is required and when orwhen it is required for each stage of the supply chaindepending upon the lead time needed. Some of thetechniques

Demand Forecasting : Most commonly used method istime series forecasting technique such as movingaverage method. More sophisticated methods are

exponential smoothing adjusted for trends etc. However,generally forecast needs to be adjusted for expectedtrend and seasonal variations. More accurate aforecast is less is the variation between demand andsupply. Cos are still struggling to find more accurateforecasting method.

Demand shaping : Marketing research has led toexpectations that the demand can be shaped or shiftedto match the supply constraint. Some of the methodsare to give huge discounts when supply is excess andwithdraw discounts when the supply is expected to beconstraint. During festival seasons, discounts and otherpromotions are given to ensure that the expecteddemand is fully realized.

Inventory positioning : It is possible to position theinventory of finished goods or service providers atstrategic locations in the supply chain so that in caseof shift in demand from one geographic location, theincrease in demand in another can be met withoutincurring any extra cost.

Lead time reduction : One of the most effectivetechniques to reduce the gap in demand and supply isto reduce the lead time. Some companies have beenvery successful in reducing the lead time such as Toyota,Zara, Dell etc. However it the most difficult system toreplicate as it required a cultural change in the entiresupply chain. Some of the methods for lead timereduction include:

Delayed differentiation: Manufacturing a commonproduct or providing facilities or a standardized serviceand customizing as per specific customer order onlyafter receiving the specific order. This leads tosubstantial reduction in the cycle inventory withoutcomprising on the service level. Domino, Asian Paintsetc use this method to reduce lead time substantially.

Locating manufacturing and service facilities near thecustomers: Outsourcing and subcontracting has beenwidely accepted as the best strategy adopted by manycorporations to reducecost to remain competitive.However, frequent changes in customer demand manytimes lead to loss of sales due to long lead time fromfar off low cost locations. Leading companies haverealized that even though cost of operating ofmanufacturing or service facility in the home marketsuch as Europe or US may be much higher, locatingfacilities near to customer help to meet changingdemand thereby gaining customer preference and alsooverall profitability. This also leads to overall lower


cycle inventory and less obsolescence in a fastchanging market.

Redesigning business processes: Redesigning businessprocesses (commonly known as BPR) is one of the mosteffective methodology to reduce lead time and demandsupply gap. One of myth is that our processes shouldbe robust and comprehensive to take care of allpossibilities and all types of customer requirements.This leads to making the processes very complex andnaturally slow. In addition it becomes difficult to makechanges and adjust the processes in case of change inrequirements. Redesigning processes leads to severalindependent processes each suited to one type ofcustomer requirements and thereby increasingthroughput and speed and accuracy of delivery. Multiformat outlets are an example of redesigning businessprocesses where each type of customer is serviced byseparate retail formats. Toyota successfully did thisfor their high end, mid segment and low end cars. Manycar rental companies are also following similar processredesigns.

Supply Side Variability

Suppliers : Outsourcing and procurement has becomeinherent part of business today. No longer is it possiblefor any one company to produce everything it needs inthe finished product or neither service nor it can do itas efficiently as another company using outsourcingand procurement as a competitive practice. Reliabilityof supply in terms of quality, quantity and timelinessdepends a great deal on the supplier. Identifying,developing and nurturing a supplier are the mostimportant activities to reduce this risk.

The growing pressure to innovate is driven by thecompetitive environment in which firms operate. Inview of individualized customer preferences andglobalized markets, depending upon past success bymanaging current assets and optimizing existingprocesses endanger tomorrow’s success. The speed andintensity of change ultimately leads to new challengesto corporate and individual capabilities of dealing withchange. Instead of operating according to rules andregulations, all functional areas and organizationlevels, from the top management to the shop-floor level,require ever greater innovative competence andespecially own initiative, self-development andcreativity.

Various important supplier related activities are:

a. Supplier identificationb. Supplier evaluationc. Supplier certification – ISO 9001, EMS, OSHA etc.d. Supplier performance measurement - Vendor

ratinge. Supplier education and up gradationf. Supplier support program through cluster

mechanismg. Supplier integration – VMIh. Involving suppliers in product or service design

process from the beginning.

Supplier support activities

Economics of scale in purchase of raw materials andservices: Providing continuous support in sourcing ofraw materials and services by identifying andnegotiating with major suppliers by clubbing all thedemand for the entire supply chain including suppliersof components and sub-assemblies.

Economics of scale in fund requirements: Identifyingand negotiating loans with leading banks for ownrequirement as well as requirement of the suppliersallowing suppliers a lower cost of finance.

Economies of scale in warehousing and transportation:Negotiating with third party logistic companies (TPL)for incoming and outgoing transportation requirements.Encouraging suppliers to share transportvehicle (milkround system) to reducetransportations cost whilereducing the lot size for each supplier.

Cluster for sharing experts for supplier certificationand quality improvement initiatives: by using a clustermethod rather than each supplier engaging the servicesindependently.

Information sharing and Integration: It is very helpfulto standardize on information systems andcommunication software for uninterrupted flow ofinformation amongst the supply chain partners. Sharingof information on production plan and supply statuscan be very helpful to cut down uncertainty and keepcycle inventory low.

Conclusion

Some of the strategies discussed above may helpcompanies to reduce gap in demand and supply therebymanaging the risk more effectively.

References

1. Gupta, V.K., “Strategic framework for managingforces of continuity and change in Inward SupplyChain in Indian Automotive Industry”Proceedingsof GLOGIFT 08, June 14-16, 2008, Stevens Instituteof Technology, Hoboken, New Jersey, USA, pp. 467-489.

2. Gupta, V.K., “Strategic framework for managingforces of continuity and change in Supply ChainManagement,” Proceedings of PICMET ’09 -Technology Management in the Age of FundamentalChange held at Portland USA, 2-6 Aug 2009, IEEECatalog Number: CFP09766-PRT, ISBN: 978-1-8908-4319-9. pp. 3014-3022.

3. Gupta, V.K. “Strategic framework for managingforces of continuity and change in RiskManagement of Banks in India”,Global Journal ofFlexible Systems Management, 2009, Vol. 10, No. 2,pp 1-13.ISSN: 0972-2696, A Springer Publication.

4. Gupta, V.K., “Flexible strategic framework formanaging forces of continuity and change in ValueEngineering Processes: Study in Indian Context”,Global Journal of Flexible Systems Management,2009, Vol. 10, No. 4, pp 43-54. ISSN: 0972-2696, ASpringer Publication.


5. Gupta, V.K., “Flexible strategic framework formanaging continuity and change”, KnowledgeManagement and Intellectual Capital – EmergingPerspectives, (Edited by Batra S.K. and FranciscoJavier Carillo), 2009, pp 477-488, publisher AlliedPublishers Pvt. Ltd. India

6. Gupta V K, “Flexible strategic framework formanaging forces of continuity and change – studyof outbound automotive supply chainmanagement in India”, International Journal ofValue Chain Management, Vol 4. No 4, 2010, pp.365-379

7. Gupta, V.K., “ Flexible strategic framework formanaging forces of continuity and change: Studyof Supply Chain Management of Lighting Industryin India”, Global Journal of Flexible SystemsManagement 2010, Vol. 11, No. 3, pp 39-50.ISSN: 0972-2696, A Springer Publication

8. Gupta V K, “Flexible strategic framework formanaging forces of continuity and change – studyof inward supply chain of a leading automotivecompany in India”, Internationals Journal of Business Excellence, Vol. 4, No. 2, 2011, pp. 142-159

9. Gupta, V.K., “Flexible strategicframework forManaging Forces of continuity and change inRetail Banking Business Processes in India”,Business Process Management Journal, 2012, Vol.18, Iss 4, pp. 553-575.

10. Gupta, V.K., “Flexible strategic framework forKnowledge Management in Supply Chain with theperspective of continuity and change: Study of KMin Supply Chain Management”, Proceedings SixthInternational Forum of Knowledge Asset Dynamics,Tampere Finland 15-17 June, 2011, pp. 470-491(Selected for Publication in Journal of KnowledgeManagement, Emerald Publication).

11. Gupta, V.K., “Flexible strategic framework forKnowledge Management in Supply Chain with theperspective of continuity and change”, GlobalJournal of e-Business & Knowledge Management,2011, Vol. 7, No. 1, pp. 34-44.A Springer Publication

12. Gupta, V.K., “Flexible strategic framework formanaging forces of continuity and change insupply chain management of fast food ( quickservice restaurant) industry”, International Journalof Business Continuity and Risk Management, Vol.3, No. 2, 2012, pp. 148-166.

13. Gupta, V.K., “Flexible strategic framework for KMfactors with the perspective of continuity andchange: study of supply chain of MNCs in electricaland lighting industry”, International Journal ofValue Chain Management, 2012, Vol. 6, No. 4 (under print ).

14. Gupta, V.K. and Bindu Gupta, “Innovation in smalland medium auto ancillary enterprises in India”,International Journal of Business Innovation and

Research (IJBIR), 2012 (under print).

15. Gupta, V.K. and Bindu Gupta, “Flexible strategicframework for managing innovation andtechnology from perspective of continuity andchange: a study of auto ancillary SMEs in India”,Accepted for presentation and publication atPICKMET, 2013 at San Jose USA from July 28-Aug 1,2013.

16. DividSimchi-Levi, Philip Kaminsky, Edith SimchiLevi, Ravi Shankar, “Desing and Managing SupplyChain”, Text Book, 3rd Edition, Published by TataMcGraw Hill Co, 2008

17. Sunil Chopra, Peter Meindl, D V Kalra, “SupplyChain Management”, Text Book, 5th Edition,Published by Pearson, 2013

18. Handfiled, Monczka, Giunipero, Patterson, “Sourcing and Supply Chain Management”, TextBook, 5th Edition, Published by Cenage Learning,2011.

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US Dollar (USD) 59.20

Source : Rediffmail.com dated 21st June 2013


MATERIAL MANAGEMENT FOR

HEALTHCARE SECTOR

PROF. AKHIL CHANDRA

CONSULTANT LOGISTICS & SUPPLY CHAIN MANAGEMENT

[email protected]

Abstract: Healthcare sector is a mission criticalapplication due to huge risks involved in life ofpatients and there is a lot of capital investment

and recurring costs involved in hospitals. Hospitalmanagement team has a huge challenge to control everincreasing costs in terms of their inventory to becomecompetitive in the market place. An efficient MaterialManagement in hospitals coupled with robust supplychain management can result in increased efficiencyand improved quality service levels thereby increasingresponsiveness to the patients. RFID technology inproviding visibility of the movement of material,patients and machine within the hospital supply chaincan be a boon to this critically important sector

Healthcare sector is one of the largest and fastestgrowing sectors in the world. For this phenomenalgrowth, the prominent key drivers are-

- Globalization and the advancement of informationand communication technologies

- Control and automation techniques embedded indifferent and changing governance systems.

Supply chain management techniques which are part ofmodern material management and which havesuccessfully been employed almost throughout thesegments of Industry are employed in health care sectoralso. Like other segments, here also these techniqueshave successfully been employed to match supply anddemand so as to supply the material in the right quantity,at the place and at right price.

Why Supply Chain approach to Hospitals?

A popular notion is that supply chain concepts can beapplied largely to manufacturing operations and arenot applicable to service operations. But this is not true.Like every Enterprise, hospitals and health systems areequally under pressure to control their rising costs ofsupplies primarily locked up in inventories consistingof pharmacy, surgery, medicines and drugs and yetmaintain their ultimate obligation in providing timely,efficient and effective treatments to their customers(patients). The supply chain costs represent today thesecond largest expenditure category of hospital’soperating expenses next to costly manpower. Thesecosts are increasing exponentially due to

� Growth in usage of medication and very expensiveand very clinically sensitive devices and implants

� Service lines such as interventional cardiology andtotal joint replacement surgery using high valuesupplies such as supplants and drug coated stunts.

� The rise in IT budgets at healthcare institutions

� Increased cost of drug development, production anddistribution

� Cost of packaging and labeling requirements ofDrugs

It is as such important to have a close look on supplychain management system of hospitals with anEndeavor to make it efficient, integrated andsynchronized. The subject popularly known as HSCM(Hospital supply chain management system) due to itspotential in saving heavy costs and in satisfyingpatients has gained its prime importance in healthcareindustry. Senior financial executives as such these daysneed to recalculate the strategic significance of thesupply chain and plan accordingly

Inefficiencies in supply chain unlike in other domainsof industry may result in extreme cases even into deathof patients. As such apart from cost reductions, aneffective supply chain is very vital to human life and itslongevity. Ultimate objective of this subject is to managematerials/equipments and manpower like doctors,nurses and other supporting staff and treat patientsand transform them into a healthy person at areasonable and optimum cost in minimum time so as tosatisfy their expectations through quality treatment.Innumerable flows between suppliers and customers,both upstream and downstream, have to be consideredto strike a balance.

Supply Chain of Hospitals :Supply Chain (also can be characterized as value Chain)of hospitals integrates suppliers, transport andwarehouses and hospital services (includingoutpatient, emergency, in-patient, laboratory, radiology,stores and purchase, food, laundry and medicines /equipments) so as to serve the patients by optimumutilization of resources. The resources in terms ofmaterials/medicines used in the hospital can beclassified majorly based on their applications such asdiagnostic, Surgical, Therapeutic, Bedside, Service,Engineering, Housekeeping and ICT to substantiallyreduce supply-related costs, a hospital must develop afully integrated enterprise wide supply chain in whichall processes as mentioned above are coordinated andsupported by state-of-the-art technology. A pertinentquestion which should be asked to hospitals is whetheryour organization delivers the right product to the rightplace at the right time and for the right price? If not thensituation demands for a thorough check up of yourprocesses and give your hospitals a treatment of ‘SupplyChain Management’.


How Improvements in supply chain in healthcare sectorcan be affected?

Basically the process improvement opportunities existin five key areas: (1) contingency plans (2) supply chainintegrity; (3) Demand pull model (4) Cutting down ontoo many intermediate partners (5) value visibility.

Contingency plans

As the supply chain involves factories producingmedicines and diagnostic equipments, temperaturecontrolled warehouses and distribution facilities tokeep the material flow in order, what happens if a factoryproducing life saving medicine gets destroyed or thedistribution facilities disruptions hamper the productflow endangering human life? The most effective actionis to develop systematic contingency plans, includingfactors like alternative production sites, manufacturingflexibility, factory-direct shipping capabilities, offsitebackup distribution center capacity, and critical safetystocks.

Supply chain integrity

Quality assurance, such as lot integrity and tracking, isa crucial healthcare supply chain function. It ensuresthat patients receive safe therapies, and that problemsare contained and minimized. New technologies, suchas radio frequency identification (RFID), offer theprospect of ensuring supply chain integrity. Throughautomatic identification, traceability and visibilitytools, healthcare companies are given the opportunityto make the Healthcare supply chain more efficient andaccurate, and thus safer by:

� Reducing medication errors� Making counterfeiting more difficult� Enabling efficient and effective traceability� Decreasing the production and supply chain cost

Demand Pull Model

Healthcare supply chains need to move toward anintegrated “demand-pull” model, so that manufacturershave much earlier visibility into actual consumption.In many other industries, this integrated supply chainsystem has enabled the participants to align productionand distribution much more closely with actualdemand. All the channel participants can see andunderstand what they need to do individually andtogether in order to successfully lower costs andincrease service levels. Healthcare supply chains wouldfree up tremendous amounts of valuable resources byadopting this channel model; important elements, suchas ICT and process control systems to provide real-time information at point of patient infusion/injection,are now being put in place.

Cut down too many intermediate partners

The prospect of disintermediation, moving productdirectly from manufacturers to providers, is growingstronger in healthcare supply chains. This process offersimportant economic benefits. But it is only appropriatein certain situations, and it requires that manufacturersand providers develop new expertise and trust. To givea successful example from other segment of industry,

Wal-Mart and Proctor and Gamble built a strong andsustainable relationship between them and the rewardswere in terms of win-win situation for both of them tobecome world leaders in their respective areas.

Value Creation by individual partners

At present health care supply chains are fragmentedand the current pricing structures and channel policiesreinforce the inefficiency of this fragmented sector.Distributors negotiate volume discounts frommanufacturers, and offer discounts to providers. Whatis important is to have trust in each partner and worktowards common goal of value creation, which is theprecondition for major improvements in supply chainefficiency. In well-functioning supply chains, eachparticipant has an important role in creating unique,visible value as product flows from source toconsumption. Instead of competing within the valuechain, one supply chain of the hospital should competewith another value chain of the hospitals forsustainability, survival and competitive advantage.

Role of RFID Technology in material management ofhospitals

Foremost technology which contributes to the efficientand visible material management is RFID Technologywhich is now widely accepted by Hospitals and Healthcare providers throughout the world. The rewards arehuge in terms of its vital applications like trackingpatients and precious assets like diagnostic andsurgical instruments and drugs in the hospitals andensure patient’s safety. The pilot tests are beingconducted and it is a well known fact that theapplications shall bring far reaching effects in thehealthcare segment. At times, during the catastrophicsituations like out-break of human version of mad cowdisease, it is important to track the contaminated andinfected equipments to avoid exposure to patients. RFIDTechnology makes such tracking and identification fastand smooth. Proper protocols and the use of radiofrequency identification (RFID) technology could preventsuch outbreaks by ensuring instruments are properlytracked and classified. This and other RFID

Applications can provide significant benefits to thehealthcare industry to ensure patient safety and improvesupply chain efficiency.

RFID technology can greatly contribute to the healthcareindustry creating a single information system that cantrack patients and hospital assets, improve patientsafety, play a role in running clinical trials of drugs,manage critical care assets and hospital equipment,reduce counterfeiting of pharmaceutical products,reduce medical errors, and cut costs improvingefficiency.

The applications are plenty and can be broadlysummarized as:

� Patient tracking and identification

� Asset and Equipment management and tracking

� Reducing drug and blood administration errors

� Making newborns more secure


Simply put these potential applications provideadvantage to healthcare industry in terms of: taggingpatient wristbands with ID and care information,managing distribution of medications, coupling withNano sensor technology to remotely monitor patientsvia implant, provide inventory control, and prevent theft.

A popular and vital application of RFID is to tracksurgical sponges to ensure they are not inadvertentlyleft behind inside patients. And many hospitals are nowtracking patients to ensure the right patient is given theproper care. These systems tend to reduce the data-entry workload of nurses, and also let them spend moretime caring for patients. Additionally, hospitals aretracking high-value assets, including, wheel chairs,oxygen pumps and defibrillators. These systems reducethe time employees spend looking for assets, improveasset utilization and enhance the hospitals’ ability toperformed scheduled maintenance.

What is RFID Technology?

RFID is a wireless technology working on UHF range offrequencies. RFID system consists of transceiverequipped with an antenna, a tag and a reader acting asan intermediary between the identification and thebackground system consisting of computer system andassociated software displaying the information aboutGoods like country of origin, description, expiry date,destination, handling details etc. Electronic productcode is the key standard for RFID in Retailing driven byEPC global which works in close collaboration with GSI.RFID tags were earlier used for marking cattle and petsand as such are not a new invention. However duringthe last few years plans encompassing entire value chainusing RFID Tags right from procurement of material upto the finished goods available on the shelves at thepoint of purchase for the customers have emerged. Tagsmake it possible to identify each Logistics unit or eveneach individual product and track their way throughthe supply chain.

RFID

systems

includ

Acquisition of Information by computer system fromRFID TAG

RFID Tags are used in different shapes and sizes andtheir costs have been brought down to few cents. TheTags are divided in two parts viz. Active and passive:

Active Tags can usually be complemented with newinformation as they proceed in the supply chain.Whereas Passive Tags are for one time use and onlysend data which is stored in them initially. A passivetag draws energy from the reader whereas an active taghas its own battery and draws power from there. Read –write tags can be erased and can be used many timesalong with the ability to rewrite the data. Wal – Martmade it mandatory the use of RFID Technology by its top100 suppliers at the case level.

Jewelers tag

HF/LF Ring Tag

Laundry Tag used for costume tracking

Tag directly used on metals

Nail Tag for non-metal objects

Wrist Tag for personal tracking

RFID Tags cost few cents only

Variety of RFID TAGS

Advantages of RFID Technology over traditionalidentification methods like bar code

� RFID Technology makes it possible to read largenumber of items simultaneously

� The process is automatic without involving manualintervention.

� The devices are always on and ready to read.

� Code reading does not require a visual line of sightso it can take place even through the side of truckwithout unloading.

� Tags can contain large amount of information.

RFID is now generating significant interest in themarketplace because of its robust applicationcapabilities. RFID enables healthcare facilities improveoverall safety and operational efficiency because itoperates without line-of-sight while providing read/write capabilities for dynamic item tracking. Surgicalinstruments and other devices must be properly cleanedand packaged between uses. Tags on the instrumentsand readers on the sterilization chambers and storagecabinets can validate proper cleaning and help locateneeded instruments. Since medical devices are oftenmounted on portable carts, smart tags placed on thedevices and readers installed in the doorways canenable personnel to quickly locate a crucial piece ofequipment and immediately determine its fitness foruse.

Category of Application in Healthcare segment

Patient Tracking

Patient identification and location assistance are oftenneeded to ensure patient safety when urgent medicalattention is needed. Patient tags with RFID chips will


meet this need.

Product Tracking

Hospitals currently have to track health hazardousradioactive isotopes throughout the facility fromstorage to transport and then from administration todisposal. RFID tags and readers can automate thesetasks thereby saving time and resources. Active RFIDtags with read/write capabilities can be used to detectseal integrity for containers and individual packages.The tag can record the time and duration of seal loss,allowing even problems that occur mid-shipment to bedetected. Asset tracking by RFID thus can minimize theftsand losses increasing thereby return on investments.Due to RFID Tags being read in automated operationwithout requiring manual intervention, unattended andconstant tracking is provided by the well designed RFIDsystems.

Inventory Management

Large amounts of inventory need to be managed inhospital operating rooms. RFID technology can providean accurate account of both official and unofficialinventory levels.

Drug Counterfeiting

Pharmaceutical companies, distributors, and hospitalsneed technology to deter drug counterfeiting. Accordingto world Health Organization, t between 5 to 8 percentof global pharmaceuticals is counterfeit. While in somecountries this percentage may still go higher rangingbetween 25 to 40 percent. The losses reported arearound $2 billion per year due to counterfeit drugs.Counterfeit drugs adversely affect people’s lives bypreventing patients from receiving needed medicationand in country like India, many patients fall prey to itdue to its low cost. Fortunately, RFID tags can help detectproducts that are, Counterfeit or fake, Tampered with,adulterated or substituted expired.

Clinical Trials

As new drugs go through the clinical trial phase, RFIDtechnology is used for accurately tracking patient usage.In fact It improves the tracking of drug usage throughoutthe clinical-phase testing protocols.

Medical Device and Asset Tracking

RFID has strong application potential with medicaldevice companies. Medical device companies needbetter control on consignment with hospitals becausereturns can occur more than 50 percent of the time.RFID technology that improves visibility into returnscould enable faster redeployment since the companywould know sooner when an unused product could bereturned.

RFID (Radio Frequency Identification) Technology helpsPharmaceutical Companies and Retailers to improvetheir supply chains and resulting in reduction of costand improvement in Efficiency RFID technology helpsin tracking movement of medicines and items throughthe supply chain of Enterprises helping in reduction ofcosts and improvement in efficiency. The movement ofgoods starts right from supply of raw material from

initial suppliers to manufacturing unit of suchcompanies and then movement of finished goods toCustomers through distribution channels consisting ofdealers, Wholesalers and retailers. The transportationof material in cartons and pallets to warehouses takesplace via ships, rail road, air and trucks. Companieslike Wal-Mart have successfully used the RFIDTechnology and rose to become number one companyin the world after beating big Conglomerates like K-Mart and Sears in their own game of retailing.

RFID technology has been used by major pharmaceuticalcompanies and Retailers like Wal-Mart, Target, Tesco,Metro, and Albertsons and by Government departmentslike U.S. Defense.

Indian Scenario

In India, RFID will be used extensively across the countryin near future. Apollo hospital uses RFID technology tospeed checkups of the patients. As of now, the Departmentof Posts and Companies like BHEL have stated usingRFID to track parcels. The awareness of RFID applicationis catching up and bar codes shall soon be replaced byfar superior and potent technology like RFID withindustries, utilities and service organizations likehospitals.

Conclusion : Supply Chain Management is an integralpart of material management applied to almost everysegment of industries. The subject has got its duerecognition and this subject now is considered to be aboard level topic. Now conditions are right for majorhealthcare supply chain improvements due to pressureon management to reduce costs and increase efficiencyand have a customer responsive approach. This hashappened especially after hospital chains ofmultinationals have arrived in India. Healthcare budgetsare very tight, supply chains have criticalvulnerabilities, and providers have significantopportunities for much-needed process improvements.

The supply chain as such should be part of the enterprisestrategic plan, incorporated across all components andservice lines of hospitals. A hospital’s or health system’sstrategic plan should include supply chain managementas a key strategy for maintaining fiscal goals, improvingquality and satisfaction levels, and addressing industrytrends and developments. There is a tremendous scopeof applying IT, telecommunication techniques andAutomation in hospitals. The mantra is to concentrateon improving efficiency, quality, and responsiveness topatients and apply innovative methods of supply chaincoupled with technology to achieve the end goals.

References :

1. Supply Chain Management by Stanley E. Fawcett,Lisa M.Elram , Jeffrey A. Ogden –Pages 411-413

2. Designing and Managing the Supply Chain : By DavidSimchi Levi, Philip Kaminsky, Edith Simchi Levi,Pages 8 to 10

3. Business Logistics/Supply Chain Management : ByRonal H. Ballou , Samir Srivastava-Page 22,23

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NEGOTIATION SKILLS

ARUN BANAVALI, VICE PRESIDENT – SOURCING & SUPPLY CHAIN,

M/S. HINDUSTAN CONSTRUCTION CO. LTD.

[email protected]

Negotiation is a business process. It is a demandingactivity. It helps to settle a deal. It clarifies the termsand conditions. It can give the fighting edge in thecompetitive world. It smoothens relations

Negotiation is an art. There are very few books onnegotiation skills. As such this art can be learnt by:

a. Practicing it with seasoned personnel.b. Get good feedbackc. Correct yourself in this processd. The skill will come over a period.

Negotiation process consists of

¨ Good preparation¨ Understanding the goal¨ Use of communication skill¨ Adding presentation technique¨ Power tactics¨ Body language

With privatisation, globalisation and liberalisation, themarket has become more and more competitive. To facethis competition, we have to be like the Kite. Kites riseagainst and not with the wind.

Preparation for Negotiation

One minute negotiation means 10 minutes ofpreparation. With this statement we can visualizesignificance of preparation for negotiation. Successbehind every good negotiator goes to their preparationor homework.

a. Where to begin?b. Who will talk?c. What matter is to be talked about?d. Who all will be involved in negotiation?e. Directly or indirectly?f. Who is to be called for negotiation? These are

all parts of preparation.

Stages of preparation for negotiation

¨ Team selection¨ Fix time and appointment¨ Information collection¨ Decide one stage or multistage¨ Study of available information¨ Set goal short term & long term. Look for totality.¨ Place of negotiation¨ Strategy¨ Conclusion¨ Who will minute?

Team selection depends on value and criticality of thenegotiation. It is advisable to stick to the time andappointment of negotiation as prefixed. However,sometimes a purposeful delay is adopted as a pressuretactic.

Past data, market trend, competitors and their status,importance of quality, cost and delivery are validinformation required for negotiation. More, correct andlatest information means adding trump card to yourside.

In recent times information has acquired vital place.Crucial decisions are based on available information.Therefore, for correct decisions, study of reliable andlatest information is a must. Some information needsto be sent to the other side prior to the negotiation.Whereas few information need to be kept tight lipped,as you know even fish would not get into trouble if he’dkeep his mouth shut.

Time available, criticality of requirements and value ofdeal decides the negotiation as single stage ormultistage.

While setting a goal whole package or look for totalityis to be kept in mind.

Place of negotiation could be at buyer’s or at sellersend. Some time it could be at third place like a dealer’send.

Depending upon needs, the conclusion could be a win,win lose, lose win or lose lose situation. However, thewin win is always preferred.

Strategy for negotiation depends on:

To set high target & then come down OR Set one targetand stick to it (saves time. Target set must be realistic)Is bargaining required?

Who has to be active & do the talking in negotiation?First make the team come for negotiation comfortableOR Charge with all the problems, we had in their lastsupplies. Show them your application first OR finishdiscount/commercial terms and conditions first.

Use of body language during negotiation.

What is body language?

It is language which you want to convey in which thereis not a word to be used.


“Yes” still it is called language as it conveys message. Itcould be expression by coded signs which is understoodby your team alone. Otherwise it could be just silencefor a while creating impatience or bringing a neededpressure. Body language plays important role whennegotiation is by a team. It can act as a tool to bringpressure tactics.

Techniques of good Negotiator

¨ Good Preparation¨ Well placed argument¨ Use of body language¨ Well planned proposal¨ Bargaining power¨ Right time conclusion

Requirement of good negotiators:

¨ Good Knowledge¨ Presentation skills¨ Be a good listener¨ Be tactful

¨ Leadership qualities¨ Free, frank, fearless¨ Good confidence¨ Good sense of humor¨ Having good analytical thinking abilities¨ Able power to influence�

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NEGOTIATION ��

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Effective logistics services and communication

technologies level the field for trade

A RECENT IHS and DHL Express survey on smallbusinesses presents some interesting insights onSMEs. A key finding of the survey is that

international trade & cooperation has become a keydriver of small business success. SMEs engaged ininternational markets are twice as likely to be successfulthan those that only operate domestically, according tothis survey of 410 SME directors in G7 and BRICM (Brazil,Russia, India, China and Mexico) economies. Of thesurveyed SMEs—those with 10-249 employees and anannual turnover of under 50 million euros— 26%companies that were trading inter-nationallyoutperformed their market significantly, while only 13%of those with operations limited to their home countrydid so. SMEs cited the key bene-fits of an internationalapproach as ac-cess to new markets, know-how andtechnology, and diversification of their products/services.

The report does however highlight that inadequatebusiness infrastruc-ture has constrained SMEcompetitive-ness by reducing business efficiency, andthat SMEs are having to work harder to overcomeinfrastructure inefficiencies compared to largercompa-nies. The biggest concerns of SMEs re-lating tointernational trade are the lack of information on

foreign markets, high customs duties, and the difficultyin establishing contacts with foreign partners andcustomers.

In India, some industry estimates state there are roughly30 million SME units, which employ 60 million andcre-ate 1.3 million jobs every year. Twelve millionpersons are expected to join the workforce in the nextthree years. The contribution by SMEs to the Indian GDPis expected to increase by 22% by 2020. Indian SMEs,given their entre-preneurial approach, are eager toadapt to the best practices, and the fact that logistics is13% of any business cost here as compared to 6-7%globally, efficiency in this area can make themcompetitive globally.

Effective logistics services, along with cost-effectivecommunication technologies, can be level-playing fieldsof trade that could help SMEs compete internationally.In cross-border trade, it is important for SMBs to choosea supply chain partner who has interna-tional expertisein dealing with cus-toms regulations and access todestina-tions worldwide.

SMEs have to appreciate that logis-tics is a truefacilitator of trade and in-ternational players in thisfield can help SMEs overcome barriers, and in somecases even remove them altogether.

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FACILITATOR OF CROSS-BORDER TRADE

R S SUBRAMANIANCOUNTRY MANAGER, DHL EXPRESS INDIA


E-BUSINESS AND SUPPLY CHAIN MANAGEMENT

PROF. KAVITHA VENKATACHARI

IBS MUMBAI

[email protected]

Abstract: The web is having a significant impacton how firms interact with each other and theircustomers. Past stumbling blocks for supply chain

integration such as high transaction costs betweenpartners, poor information availability, and thechallenges of managing complex interfaces betweenfunctional organizations are all dissolving on the web.In this article, we examine how the web is changingsupply chain management. We classify the work intothree major categories: e-Commerce, e-Procurement, ande- Collaboration.

Introduction: Nothing has rocked the young field ofsupply chain management like the emergence of theInternet. While the management of information flowshave always been a key aspect of supply chainmanagement, the rapid growth of web-basedinformation transfer between companies, theirsuppliers, and their customers has decided to increasethe importance of information management in creatingeffective supply chains. Indeed, the Internet hasemerged as a most cost-effective means of driving supplychain integration. We define e-Business as the linkbetween the Internet and supply chain integration. Thislink is transforming many processes within the supplychain from procurement to customer management andproduct design.

In this article, we explore how e-Business is changingsupply chains and examine the rapidly evolvingresearch in this area. Following the framework of Leeand Whang (2002c), we divide the various forms of e-Business applications into three categories – e-Commerce, e-Procurement, and e-Collaboration . E-Commerce helps a network of supply chain partners toidentify and respond quickly to changing customerdemand captured over the Internet. E-Procurementallows companies to use the Internet for procuringdirect or indirect materials, as well as handling value-added services like transportation, warehousing,customs clearing, payment, quality validation, anddocumentation. E-Collaboration facilitatescoordination of various decisions and activities beyondtransactions among the supply chain partners, bothsuppliers and customers, over the Internet. For example,coordination of engineering changes in the bill-of-materials for a product that is manufactured by anoutsourced partner.

E-Commerce : E-commerce (electronic commerce or EC)is the buying and selling of goods and services on theInternet, especially the World Wide Web. In practice,

this term and a newer term, e-business, are often usedinter changeably. For online retail selling, the term e-tailing is sometimes used. E-Commerce has had aprofound impact on the supply chains of many products.Clearly, the supply chains of information goods haveseen the most change (for example, see Dewan, Freimer,Seidmann (2000)). Manufacturers of physical productshave also turned to the Internet as a direct channel ofdistribution. The direct channel poses a different set ofdecisions and challenges from those in the existing“bricks-and-mortar” retail channel. These two channelsdiffer in customer types, operations of order fulfillment,cost structure, profit contributions, priority inrationing, logistical requirement, expectations ofservice quality, degree of market segmentation, accessto demand/supply information, and returns policies.Much of the early work on consumer related e-Commercefocused on the changes in channels and the downwardmarket pressure on prices.

E-commerce can be divided into:

� E-tailing or “virtual storefronts” on Web sites withonline catalogs, sometimes gathered into a “virtualmall”

� The gathering and use of demographic data throughWeb contacts

� Electronic Data Interchange (EDI), the business-to-business exchange of data

� E-mail and fax and their use as media for reachingprospects and established customers (for example,with newsletters)

� Business-to-business buying and selling

� The security of business transactions

E-tailing or The Virtual Storefront and the Virtual Mall

As a place for direct retail shopping, with its 24-houravailability, a global reach, the ability to interact andprovide custom information and ordering, andmultimedia prospects, the Web is rapidly becoming amultibillion dollar source of revenue for the world’sbusinesses. A number of businesses already reportconsiderable success. As early as the middle of 1997,Dell Computers reported orders of a million dollars aday. By early 1999, projected e-commerce revenues forbusiness were in the billions of dollars and the stocksof companies deemed most adept at e-commerce wereskyrocketing. Although many so-called dotcom retailersdisappeared in the economic shakeout of 2000, Webretailing at sites such as Amazon.com, CDNow.com, andCompudataOnline.com continues to grow.


E-Procurement : Modern manufacturing requiresflexibility due to stiff competition, fast changingcustomer preferences, shortening product life cycle andproduct variety proliferation. Along with dynamiccapacity allocation, efficient material procurementforms a pillar to support flexible manufacturing. TheInternet again offers a natural platform to facilitateefficient procurement as numerous buyers and sellersfind each other and transact according to some pre-specified protocols (governed by the marketplace ortraders’ internal rules). While e-Procurement is themirror image of e-Commerce, they have many differentaspects. For example, e-Commerce often faces a largenumber of individual consumers, while e-Procurementusually involves dealings with companies. Of course,many e-Procurement ideas such as dynamic marketsand auction theory have been long studied areas withineconomics (e.g. auctions, see Milgrom and Weber (1982)or Riley and Samuelson (1980)). Recent work has begunto explore how on-line exchanges impact theprocurement process and the supply chains ofindividual companies.

E-Collaboration : While e-Commerce and e-Procurementhave captured most of the business press headlinesover the past five years, the promise of e-Collaborationmay be far greater. We define e-Collaboration asbusiness-to-business interactions facilitated by theInternet. These interactions go beyond simple buy/selltransactions and may be better described asrelationships. These include such activities asinformation sharing and integration, decision sharing,process sharing, and resource sharing. Lee and Whang(2002b) provide this taxonomy of e-Collaboration andlink the idea to earlier research in supply chainmanagement. Of the three areas, information sharinghas seen the most research. With widespread interestin the bullwhip effect (Lee, Padmanabhan, Whang(1997)), many researchers have worked to quantify theimpact of the bullwhip (Chen et al 2000) and examinethe benefits of sharing information (for examples, seeCachon and Fisher (2000), Iyer and Ye (2000), Moinzadeh(2002)). There has also been significant work tounderstand the benefits of IT investments within anenterprise (for example, the impact of ERP (McAfee2002)).

Process sharing like collaborative innovation andproduct design is also another exciting opportunity.Many researchers are wondering how the web willchange innovation within and between companies(Sawhney and Prandelli (2000)). In a pair of papers,Johnson (2000, 2002) examines web-centriccollaboration for product design in both the high techand apparel industries. He develops a framework forunderstanding the supply chain benefits of designcollaboration.

For example, the Solectron case focuses on how the useof information has transformed Solectron from a simplecontract manufacturer into a full service supply chainintegrator. Likewise, the “Third-Party Logistics Services”case examines how companies like transportationprovider Flying Cargo are using information to enhance

their service offerings in a near commodity business.On the other hand, cases like General Motors andLufthansa illustrate how information can be used toincrease customer loyalty and manage the prices.Hewlett-Packard examines the reverse supply chain andthe information integration issues of managing returns.Finally, Marks & Spencer and Zara examine competitionbetween two apparel companies, including the role ofintegrated design and manufacturing.

E-Supply Chain Management

Electronic Supply Chain Management (e-SCM) is anoptimization of business processes and business valuein every corner of the extended enterprise - right fromyour supplier’s supplier to your customer’s customer.It uses e-business concepts and Web-technology tomanage beyond the enterprise, both upstream anddownstream. This strategic approach unites al the stepsin the business cycle, from initial product design andprocurement of raw materials, through shipping,distribution, and warehousing. Right up to the pointwhen the finished product is delivered to the customer.

The scope of an e-SCP solution covers:

� Online integration through the internet

� Demand planning

� Supply planning

� Fulfillment planning

� Consistent predictability of flow of goods

� Improved relations with channel partners

� Better control over budgeting and investments

An e-SCM solution can bring about a dramatic reductionin your costs, and integrate your enterprise closelywith all the other players involved in your processes.And in doing this, it goes one big step beyond a mereERP solution.

Fig :1 Key SCM Concepts

Here, is what it can do for your company:

� Tie together all the players in the extendedenterprise, from raw materials to final point ofdistribution

� Give real-time market information to these players,allowing them to anticipate and adjust their


operations in response to market conditions

� Help eliminate costly stockpiling against demandspikes, fee up resources and reducing costs

� Lower costs, improve speed and increase theaccuracy of data sharing within the extendedenterprise

A truly integrated supply chain creates value- for theenterprise, its supply chain partners, and itsshareholders. e-SCM is particularly relevant todiversified business houses with complex supply chainnetworks, to companies with wide distribution systems,and to enterprise that depend on a large number of out-sourced products.

Conclusion: Internet-based software products developedby start-up companies have recently experienced amajor setback. But while the Internet bubble may haveburst as an opportunity to make quick money, we believethe influence of Internet on supply chain managementis still alive and well. Rather than disappearing, it isexpanding in breadth and depth alike. More companiesare opening Internet channels, and more buyers areordering over the Internet. Also applications are gettingmore sophisticated. For example, industry exchangesdo not only handle transactions, but also generate data.This in turn creates a whole new stream of researchand a new breed of “execution” software products thatenable a company to take real-time data and makedynamic decisions. They complement traditional“planning” systems such as ERP. Indeed, SAP recentlyunveiled plans to enhance manufacturing applicationsto better interact with their planning systems and addeda freight-tracking program to its transportationmanagement system.

At the same time, the huge amount of data coming fromInternet transactions leads to information “overload.”This also creates an opportunity to develop solutionsto aggregate, summarize and interpret them in amanager-friendly manner. Indeed software products and

solution providers have emerged to address the needsin various terms like “dashboard,” “cockpit” and“command center.” For examples, see Broadvision, Powermarket (part of Tradec), and Manugistics. Given thenumerous challenges in global supply chainmanagement and the unlimited creativity in the businesscommunity, it is only a cliché to say that the new powerfultool called the Internet would find its way to more andbetter applications for a long time.

References:

� Boyer, K.K. and J.R. Olson (2002), “Drivers of InternetPurchasing Success,” Production and OperationsManagement, Vol. 11, No. 4.

� Brynjolfsson, E. and M.D. Smith (2000), “FrictionlessCommerce? A Comparison of Internet andConvetional Retailers,” Management Science, Vol.46, No. 4, 563-585.

� Cattani, K. and G.C. Souza (2002), “InventoryRationing and Shipment Flexibility Alternatives forDirect Market Firms,” Production and OperationsManagement , Vol. 11, No. 4.

� Cachon, G. (2001), “Stock Wars: InventoryCompetition in a Two Echelon Supply Chain withMultiple Retailers,” Operations Research , Vol. 49,No. 5, 658-674.

� Cachon, G. and M. Fisher (2000), “Supply ChainInventory Management and the Value of SharedInformation,” Management Science, Vol. 46, No. 8,1032-1048.

� Chen, C-Y, Zhao, Z-Y, and M.O. Ball (2002), “A Modelfor Batch Advanced Available- to-Promise,”Production and Operations Management, Vol. 11,No. 4.

� Chen, F., Drezner, Z. Ryan, J.K., and D. Simchi-Levi(2000), “Quantifying the Bullship Effect in a SimpleSupply Chain: The Impact of Forecast,” ManagementScience, Vol. 46, No. 3, 436-443.

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COMMODITY INDEX

Commodities Days’s Index Prev. Index Week Ago Month Ago

Index 2428.5 2453.7 2437.2 2394.6

Bullion 4679.2 4868.7 4834.3 4597.2

Cement 1848.3 1848.3 1848.3 1841.7

Chemicals 1788.7 1776.3 1721.8 1734.2

Edible Oil 1401.5 1405.7 1417.6 1403.1

Foodgrains 2097.7 2100.9 2108.5 2104.4

Fuel 2216.9 2216.9 2139.7 2139.7

Indl Metals 1817.0 1817.0 1817.0 1816.9

Other Agricom 2064.9 2064.9 2061.1 2106.5

Plastics 2015.3 2013.6 1988.1 1952.4

Source: ETIG Database dated 20th June 2013


BRANCH NEWS� DELHI BRANCH

� VADODARA BRANCH

� VISHAKHAPATNAM BRANCH

DELHI BRANCH

MATERIALS MANAGEMENT DAY CELEBRATIONS

TRIBUTES TO THE FATHER OF THE NATION : Delhi Branchlaunched MM Day celebration programme after payingtributes to Father ofthe Nation, Mahatma GandhiSamadhi at Raj Ghat, Mr. C Subbakrishna, NP-IIMM,Mr.Sanjay Shukla, Chairman, IIMM Delhi Branch Mr.Suresh Kumar, IPP-IIMM & Mr. M KBhardwaj, Co-Chairman, BOS-IIMM alongwith the EC team of DelhiBranch were present.

GREEN RALLY : Green Rally was organized by DelhiBranch which was flagged of Hon’ble Minister Sh.HaroonYusuf, Power, Food & Civil Supplies Department,Industries, Employment, Govt. ofNCT of Delhi. The rallyhas proceeded to various industries to propagate theconcepts ofGreen Purchasing & the importance GreenEnvironment & plantation. Sr. Vice President(Materials)of M/s. Bhushan Steel Ltd, Mr. Kishi Saxena appreciatedthe efforts made by the Institute for the development ofthe profession. IIMM has earlier decorated him withthe fellowship of the Institute. In recognition of thesupport given by M/s. Bhushan Steel Ltd. or thepromotion of the professional activities a memento waspresenting to Mr. Kishi Saxena by National PresidentMr. C Subbakrishna, IIMM.

L to R: Mr. Mr. Sanjay Shukla, Chairman IIMM, DelhiBranch, National President - IIMM Mr. C Subbakrishna

felicitating to Mr. Kishi Saxena, Sr. Vice President(Materials) Bhushan Steel Ltd.

FACTORY VISIT :

The factory visit was organized by Delhi Branch at M/s.Denso India Ltd where most of the membershaveparticipated. Mr. Manoj Mehra of M/s. Denso IndiaLtd has coordinated the programme. Mr. Hemant Jainhasshown the innovative concepts launched by thestores department. A memento was given by ChairmanIIMM Delhi Branch Mr. Sanjay Shukla to Sr. GeneralManager Mr. Kiyoshi Furuoka M/s. Denso India Ltdinreconition of outstandincontribution made forimlementinnew concets in stores and urchase dett.In

Denso India Ltd.

Chairman IIMM Delhi Branch Mr. Sanjay Shukla presentthe memento to Mr. Kiyoshi Fukuoka, Sr. General

Manager Denso India Limited

MM QUIZ PROGRAMME :

Mr. Sanjay Shukla, Chairman IIMM given the first prizeto Mr. Amitabh Kumar, inmiddle Mr. T G Nandakumar,

Vice President(North)


Delhi Branch has organized MM Quiz progamme. Mr. TG Nandakumar, VP (North) & Head of the EducationCommittee has coordinated. The first prize given to Mr.Amitabh Kumar. The programme ended vote of thanks to

all the participants.

SEMINAR ON THE THEME OF MM DAY : Delhi Branchalso organsied the seminar on the theme of the MM Dayat Hotel Connaught, New Delhi.National President IIMMwas the Chief Guest and the Key note Speaker of thisseminar was Prof. AkhilChandra. Chairman Delhi BranchMr. Sanjay Shukla welcomed the National President,Delegates and otherpersonalities sitting on the dias.Mr. T G Nandakumar Vice President (North)-IIMMhighlighted the activitiesof Northern Region. Mr. M KBhardwaj, Co-Chairman Board of Studies hashighlighted about the educationalactivities. Mr. SureshKumar, Immediate Past President has spoken on thetheme of the MM Day and aboutthe IFPSM activities.Mr. V K Jain, Former President has spoken on the themeof MM Day and asked thedelegates to take maximumbenefit from the professional activities & educationalprogrammes of theInstitute. Mr. M K Mittal, Hony.Treasurer Delhi Branch proposed vote of thanks to allthe dignitaries andspecially the National President whohas come along come from Bangalore and participated

the MM Dayactivities of Delhi Branch.

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VADODARA BRANCH

MM week was celebrated with great vigor by IIMMVadodara Branch.

Swami Deveshya nand with EC members in IIMMconference room

Swamiji addressing the audience

The MM week celebration started on 20.4.2013 withSwami Deveshanand Saraswati giving his spirituallecture on the topic of ‘U Turn’. The event was wellattended, which was held in IIMM lecture hall.

Section of audience

Second event was the main celebration held on MMday on 23.4.2013 in Hotel Surya Palace. Chief Guest forthe occasion was Shri Ajit Telang Managing PartnerSynergesic Management Market Research andcounseling Firm and Guest of honour was Mr. MilindPhulse VP strategic sourcing with RR Kabel.

Mr. L.P.Patel addressing the audience

Mr. Anand Purohit addressing the audience


Mr. Milind Phulse making presentation

Mr. Ajay Padhye giving interview to the media on theoccasion of MM day

Shri Ajit Telang addressing the audience

Section of audience

Shri Ajit Telang giving certificate of Merit toFor coming 1st in GDMM

Mr. L.P.Patel giving best faculty award toProf. Tere Desai

Mr. Malay Mazumdar(Vice Chairman) addressing theaudience

Third event in the series was MatQuiz contest was heldon 27.4.2013 in Hotel Surya palace in which 20Companies from in and around Vadodara hadParticipated. Team from Deepak Nitrate stood 1st in thecompetition, Team from Daniel Measurement camesecond and Team from Linde Engineering came third.


Dr. Bharti Trivedi as Quiz Master

Participating Teams for MatQuiz

Mr. Malay Mazumdar(Vice Chairman ) as Quiz Master

Mr. Bharat Sodha(NC Member) giving prize to2nd Runners Up Team from Linde Engineering

Mr. D.B.Trivedi(NC Member) giving prize to1st Runners Up Team from Daniel Measurement

Mr. L.P.Patel(Sr. VP IIMM) giving prize to the winningteam from Deepak Nitrate

Mr. L.P.Patel giving memento to Dr. Bharti Trivedi

Mr. L.P.Patel giving memento to Mr. Malay Mazumdar.Also seen in the photo Mrs. Malay Mazumdar

Fourth event in the series was Industrial visit on28.4.2013 to Polycab Ltd. And HNG Float Glass Ltd. AtHalol.--------------------------------------------------------------------------


VISHAKHAPATNAM BRANCH

IIMM Vishakhapatnam Branch has conducted a PressMeet on 18.4.2013 at CMA Bhavan, Vishakhapatnam inlieu of material management Day, week celebrations2013. The news was covered in Hindu and all the localnews papers. Sri N. Udayabhanu, VP (South), Sri U.Prakash, VC ICAI, Vizag, Sri S Prabhakara Rao, CourseDirector, Sri A.V. Rajendra Kumar, Hon. Secy. Vigaz Branchconducted the Press Meet and informed objectives andcourses offered by IIMM and ICAI and the MM Day weekprogramme.

22-4-2013 : Quiz & Industrial Visit :

Sri J.C. Narayanappa, Chairman, Vizag Branch conductedthe Quiz Programme. Thirty two members and studentsof various organizations actively participated forIndustrial visit to Visakhapatnam Steel Plant.

23-04-2013 : Valedictory Celebrations at Ukkunagaram,Sri S.K.Gupta, ED (MM) Visakhapatnam Steel Plant wasthe Chief Guest. members from VSP, NTPC and otherorganizations were attended. Sri S.K.Gupta, ED(MM)delivered an excellent speech with power pointpresentation on “INNOVATIVE SUPPLY CHAINMANAGEMENT” which was the highlight of the completeweek programme. The Chief Guest presented thecertificates and gifts to the winners of the various MMDay competition during the week.

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EXECUTIVE HEALTHFIVE HEALTHY DRINKS FOR SAFE WEIGHT LOSS

SEAN JOHN JACKSON

Many obese people successfully lose those extrapounds by just not being cautious about whatthey have on their plate, but also by watching

what they have in their glass. Yes! By simply watchingyour drinking menu and drinking habits, you can alsolose a considerable amount of body weight. It is ageneral assumption that what we eat counts to our bodyweight; however, the fact is that even what we drinkadds up to our body fat. There are many liquids thatcontain high amount of calories that can quicklyincrease fat consumption in your body; however, if youbecome somewhat careful on what kind of liquid youconsume, you will be able to contribute to weightloss safely and much effectively.

Below suggested are some healthy ways of consuming

liquid without adding to unwanted body fat. On top ofthat, these liquid diet options help stimulate safe andsuccessful weight loss much quickly and successfully.

Ice Cold Water

You all must be aware that water helps reduce bodyweight safely; however not many people know that youwill burn an extra 300-500 calories a day if you drink8-10 glasses of chilled water. This is because when youdrink ice cold water, your body has to burn calories inorder to heat the ice cold water back up to your bodytemperature. So, in this process, you can lose up to 1 lba week. Try drinking about 2 extra glasses of watereveryday so that you can boost your metabolism bymore 40% and can safely shed some pounds.

Fat Free Milk

We all know that milk is high in calcium and calciumhelps stimulate weight loss by breaking down fat fromfat cells. However, this does not imply that simplydrinking milk will work. Only milk that is low in fat candouble the rate of fat breakdown from your body. Trydrinking fat free milk or at least milk that is low in fatcount.

Benefits of Green Tea with Lemon

Studies show that you can burn 40-50% more fat bydrinking 3-5 cups of green tea every day. Green tea helpsimprove metabolism and stimulates weight loss muchfaster than any other beverage does. Plus, it containshealthy antioxidants that are good both for your healthas well as skin. Drink a cup of green tea an hour beforeyour meals as it will help to speed up your metabolismand will help you consume less food. You can go forother healthy options likeblack tea and black coffeetoo.

Green tea is rich in antioxidants and polyphenols thathelps increase metabolic processes of the body. It alsohas no known side effects, and it helps reduce the riskof heart diseases, diabetes, and etc. But most green tealovers like their green tea strong and aromatic, andthey gulp it as easy as drinking a glass of water.Moreover, some green tea lovers add some squeeze andzest of lemon to their green tea, not just to add moreflavor, but to also enhance the health effects of theirdink. When combined, both green tea and lemon withprovide two-fold weight loss effects.

When you ingest lemon or its juice, you actuallystimulate your digestive processes. When your systemdigests really slow, more chances of fat storage andunhealthy accumulation of fat cells. Thus, when youhave a good working digestive tract, your metabolismis actually at its best levels, and you can lose moreweight, faster. Additionally, when you regularly havelemon intake, you are also allowing healthy hydrationof the body.

Vegetable Juice

Like fruits, vegetables also are rich in nutrients. Thebest part is that veggies contain lesser calories thanfruits as they are void of any sugar content. Drinking aglass of vegetable juice before your meals also helpsyou to consume less calories than you usually intake.Carrots, spinach, cucumber and celery are somecommonly known veggies that account for best tastingjuices.

Coconut Water

Replace your usual liquid beverages with coconut wateras it contains more electrolytes than most fruit juicesand energy drinks. In addition, it is without the extrasugar and artificial flavorings. Coconut water naturallyspeeds up your metabolism and aids in giving your bodymore energy so you can work out for longer times withmore intensity to lose weight much faster.

Author’s Bio:

Sean Jackson is a health freak. According to Sean, ahealthy body is the index of a healthy mind. He believesthat besides a healthy diet and proper exercise regime,weight loss dietary supplements also aid in quickweight loss. He himself is a regular user of Calotren,and inspires others too to use it in order to stay taut, fitand healthy.

Source : EzineArticles.com

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AHMEDABAD

Harish Kumar Gupta, Chairman-IIMM

C/o SPR International, B-34, Circle-B,

Behind Pakwan-2, S G Road, Bodakdev,

Ahmedabad-380015Tel: (079)26872567

E-mail : [email protected]

[email protected]

AURANGABAD

Anil Pimpalkar, Chairman-IIMM

C/o. IMTR, 2nd Floor, Arth Complex

Near. IMA Hall, Off: Adalat Road,

Aurangabad – 431001

Tel: (240) 2331039


BANGALORE

Mr. Channbasappa, Chairman-IIMM

# 304, A-Wing, III Floor,

Mittal Tower # 6,

M G Road, Bangalore – 560001

Tel: (080) 25327251/52


BOKARO

Chairman-IIMM

C/o. Pur. Dept. Ispat Bhavan,

Bokaro Steel City -827001, Bokaro

Tel: (o6542) 240263/280768


BILASPUR

M. Pande, Chairman IIMM,

C/o. Chief Gen. Mgr (MM),

South Eastern Coalfields Ltd,

Seepat Road, Bilaspur-6 (CG)

Tel: (07752) 241087/75014


BHARUCH

Ravi K. Jain, Chairman, IIMM303, Vinay

Complex,

Near Dudh Dhara Dairy, Old N.H. 8,

Bharuch – 392015

Tel: (02642) 237405


BHILAI

Chairman - IIMM, Room # 316,

Ispat Bhavan,

Bhilai Steel Plant, Bhilai-490023

Tel: (0788) 2853850

BHOPAL

Dr. Sameer Sharma, Chairman-IIMM

C/o.4/9-B, Saket Nagar, Bhopal – 462023

Tel.: 0755-2451802, 8085856437

BURNPUR

R.K. Agrawal, Chairman-IIMM,

Matls. Dept. New Matls Bldg. IISCO,

Bunpur Works, Burnpur – 713325 (W.B.)


CHANDIGARH

A.N. Chaudhary, Chairman-IIMM,

SCO 19-B, Swastik Vihar, Mansa Devi

Complex, Sector-5, Panchkula – 134109

Tel: (0172) 2556646


CHENNAI

V. Seetharaman, Chariman-IIMM

4th Floor, Chateau D’Ampa,

110 (New # 37) Nelson Manickam Road,

Aminjikarai,

Chennai – 29

Tel: (044) 23742165


COCHIN

Chairman – IIMM

GCDA Shopping Complex,

Gandhi Nagar, Cochin -682020, Kerala

Tel: (0484) 2203487/2317687


DURGAPUR

Shantanu Chakravarty,Chairman IIMM,

C/o. GM (Comml ) Pur Dept,

Alloy Steel Plant,

Durgapur-713208

Tel: (0343) 2545301


DHANBAD

Himendra Prasad, Chairman-IIMM

C/o CGM (MM), B.C.C.L,

Koyla Bhawan, Koyla Nagar,

Dhanbad-826005 (Jharkhand)


DEHRADUN

Nikhil Gaur, Chairman-IIMM

Chief Manager (MM) ONCG,

Central Store, Kaulagarh Road,

Dehradun – 248195

Tel: 0135-2795617


GANDHIDHAM

M.G. Agrawal, Chairman-IIMM,

Shop # 14, Gokul Park, Plot # 356,

Ward-12B, Tagore Road,

Gandhidham -370201, Kutch (Guj)

Tel: (02836) 231295/231711


GOA

G.B. Palankar, Chairman-IIMM

S-6 & S-7, 2nd Floor, Vasco Citicentre,

Opp: Canara Bank, Swantantra Path,

Vasco-da-GamaGoa – 403802


HYDERABAD

C. Harinath, Chairman-IIMM

Indian Institute of Matls. Mgmt.

No. 8-3-483, Flat # 105Sun City Apts,

Yellareddyguda, Hyderabad – 500 073

Tel: (040) 65504252


HUBLI

S. Halal, Chairman-IIMM

# 47-50, 2nd Floor, Laxmi Balakrishna Square

(Harsha Complex), Railway Station Road,

Hubli-580020

email- [email protected]

Ph # 0836-2264699 Cell # 9972703336

HOSUR

Chairman – IIMM

C/o. Mr. J H Shastri,

G.M-C/M Wendt India Ltd,

# 69/70 SIPCOT Industrial Complex,

Hosur -635126 (T.N)


JAIPUR

Anil J Dalvi, Chairman-IIMM

48, Mohan Nagar,

Gopalpura By Pass, Jaipur,

Mobile: 09799299157


JAMSHEDPUR

Shivaji Sinha, Chairman – IIMM

Room # 6, Russi Modi Centre for

Excellence, Jubilee Road,

Jamshedpur – 831001

Tel: (0657) 2224670


KANPUR

G.K. Agnihotri, Chairman-IIMM

C/o. IGM Computer Academy, Mallick

Comp. Nr. Rama Devi Churaha, G T Road,

Kanpur-208007 Tel: (0512) 2401291


KOLKATA

Sudhin Mitter, Chairman-IIMM

8/B, Short Street, Kolkata – 700017

Tel: (033) 22876971/22834963


KGF

Chairman-IIMM

C/o. Bharat Earth Movers Ltd, EM Divn.

BEML Nagar Post,Kolar Gold Fields – 563115

Tel: (08153) 265176


LUCKNOW

Mrigendra, Chairman-IIMM

C-757, Indira Nagar, Lucknow (UP) – 226016

Tel: (0522) 2353210


LUDHIANA

S. K. Arora, Chairman-IIM

C/o. Weltech Equipts & Infrastructur

Plot # 3, Giaspura Road, Nr PSEB Stn.

Dhandari Kalan, Ludhiana -141010 (Punjab)

Tel: (0161) 4696021/30


MUMBAI

N.D. Sadri, Chairman IIMM,

2-A Arihant Bldg. Opp: Anupam Theatre,

Goregaon (East) Mumbai – 400063

Tel: (022) 26863376/26864528


MYSORE

Chairman-IIMM

B-96, Hebbal Indl. Estate, Mysore – 570 016

Tel: (0821) 2500305


MANGALORE

Chairman-IIMM

O/o. Sr. Mgr. Stores, KIOCL Ltd, Panambur,

Mangalore – 575010

Tel: (0824) 2407361/62


NAGPUR

N.K. Singh, Chairman-IIMM

404, Suryakiran Comml. Complex-1Bajaj

Nagar, Nr VNIT Gate, Nagpur -10

Tel: (0712) 2229446


NASHIK

A.A. Hasabnis, Chairman-IIMM,

1, Parag Bldg, Patel Lane # 4,

College Road, Nashik – 5

Tel: (0253) 2314206


NALCONAGAR

Chairman-IIMM

Qtr. # C-352, Nelco Township,

Nalco Nagar -759145, Dist: Angul, Orissa

Mobile: 09437021092


NEW DELHI

Sanjay Shukla, Chairman-IIMM

Veer Sadan, 4239-A/2,1 Ansari Road,

Daryaganj, New Delhi – 110002

Tel: (011) 23266089/23242124


PUNE

Pratibha Towers, Plot No. 22,

Old Pune Mumbai Rd, CTS No. 15/2,

Above TVS Showroom, Wakdewadi,

Shivajinagar, Pune - 411 005

[email protected]

RANCHI

G.K. Singh, Chairman-IIMM

O/o. Gen Mgr (MM)Central Coalfiields Ltd.,

Darbhanga House, Ranchi-834001

Tel: (0651) 2360716/2360198


RAE BARELI

S.K. Bandopadhyay, Chairman-IIMM

497, Near CMO Office, Jail Road,

Rae Bareli -229001

Tel: (0535) 2703818

ROURKELA

Chairman-IIMM

Rourkela Steel Plant, 6th Floor,

Admin. Bldg. Rourkela -769011

Tel: (0661) 2522466/2448425


SURAT

S.U. Chaudhari, Chairman-IIMM

C/o. Gen. Mgr (Comml) Krishak Bharati Co

Ltd, PO: Kribhaco Nagar, Surat -15

TelL (0261) 2802073


TRIVANDRUM

Chairman-IIMM

TC-9/1447, 2nd Floor, Future HouseTemple

Road, Sasthamangalam,

Thiruvanathapuram – 695010

Tel: (0471) 2724952


UDAIPUR

P.S. Taleara, Chairman-IIMM

2nd Flr. Above Manohar Furnityre,

Ashwini, Marg, Udaipur – 313001

Tel: (0294) 2411969/2421530


VADODARA

Ajay Padhye, Chairman-IIMM

Vishal Chambers, 2nd Floor, 34,

Vishwas Colony. Alkapuri,

Vadodara- 7,

Tel: 0265-2359060


VISAKHAPATNAM

J.C. Narayanappa, Chairman-IIMM

#45-35-63, Flat # 401,

Vigneshwar Apts, Jagannadhapuram,

Akkayyapalem,

Vizag – 530016

Tel:2726690


VAPI

Mukesh R Patel, Chairman-IIMM

223, C.B.Desai Chamebers, GIDC,

Gunjan Char Rasta,

Vapi -396195

Cell: 0982450114


V V NAGAR

Bharat R Patel, Chairman-IIMM

C/o. Dy. Gen. Mgr. (Matls)

Elecon Engg. Co. Ltd., Gear Division,

Vallabh Vidya Nagar,

Dist: Anand (Gujarat)


IIMM HEADQUARTERS AND BRANCHESIIMM NHQ : Plot No. 102 & 104, Sector-15, Instl. Area, CBD Belapur, Navi Mumbai-400614. Tel.: 27561754 / 2756 5831, Fax : 022-27571022

E-mail NHQ : [email protected] E-mail Edu. Wing : [email protected], Website : www.iimm.org

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