Yesterday, Dr D Subbarao, Governor of the Reserve Bank of India gave a fascinating Lecture on “India and the Global Financial Crisis” to the GITAM School of International Business at Vizag in Andra Pradesh, India. Emphasising the need to diversify the economy he referred to the inclusive agenda and, the opportunity to develop rural markets as part of sustaining economic growth.

These two priorities, inclusivity and rural markets, were covered in a ground breaking series of lectures given at GITAM over the past two weeks on Transformational Logistics; an umbrella term for logistics and supply chain thinking in emerging, developing and devastated markets. This course explored these markets not as “an act of charity”, not as an “act of corporate social responsibility” but as a viable option to build sustainable, inclusive and innovative growth beyond the mature – but largely stagnant – developed world. This is not about sharing best practice from those “that know” but building fresh practice from markets that have an acute survival instinct and an ability to adapt that can be an inspiration elsewhere. All businesses can benefit from these markets beyond the mainstream in many ways.

At the invitation of the Director of GSIB, Professor V.K. Kumar Rob Bell led the sessions with Dr P.R.S. Sarma and Assistant Professor Ram Bhagavatula.  This is a detailed overview of the Course. These are the core units.

1.      Mainstream Logistics. Drawing from the work of Martin Christopher (2011), John Gattorna (2006) and, a sample of key Papers from the Logistics and Supply Chain discipline the sessions started with an overview of mainstream logistics highlighting all sorts of examples from lean to agile supply chains and, logistics and supply chains as a source of competitive advantage. This revision session linked to GITAM’s established Logistics Course.

2.      Checking our assumptions. The three F’s crisis (Food; Fuel and Finance) has accelerated a number of trends (the pace of the BRICs; G7 to G20) and, questioned a number of fundamentalisms – not least, as George Soros coined the term – market fundamentalism.

The Group explored ideas on Globalisation; Growth and free markets in this fresh context and, explored the impact such global shifts have on logistics and supply chains in all industries.

3. The Brands New World.With Global population rising from 6 to 9 billion by 2050 As Dr Subbarao had said in his talk earlier today, there is a need for greater inclusivity and, exciting potential to develop rather than ignore rural markets. Equally, there is a role for traditional industries in the business mix.

The Rushikonda fishing community

The sessions highlighted a range of highly relevant developments in design. For example, the work of CavinKare and single use shampoo, the Godrej fridge aimed at the rural markets; the bamboo bike from Zambia with the longer wheelbase to support the carriage of boxes – all were used as examples of the need for adaptable, affordable and accessible products in this fresh context of fast growing and frontier markets.

4. A Transformational Agenda. Starting from the baseline of the World Banks invaluable LPI (Logistics Performance Index), the Group was taken through the need to understand better the middle ground between the highest ranking Singapore and Germany and the lower reaches of countries whose logistics are dislocated and hardly viable.

Emerging and developing markets are characterised by a mix of formal and informal markets; strong, weak and non-existent infrastructure. These are asymmetrical supply chains characterised by traditional; low tech; low skill operators supplying modern, high tech, high skill and well capitalised businesses – often MNCs.

This is CK Prahalad’s Bottom of the Pyramid territory and a useful discussion ensued over the need to go beyond BOP as a market for MNCs to enter and dominate in or, as a means to develop inclusivity and respect diversity. The work of Wharton’s Mauro Guillen on the Limits of Convergence informed much of the debate on diversity as opposed to a globalisation hell bent on one size fits all markets.

Which brings us to the need to challenge ideas on markets themselves – in particular the trade concentration that sees the top ten players in everything from autos to pesticides; retail to consumer durables with market shares of between 30 and 85%. As Vince Cable the UK Business Minister highlighted recently, “outright monopoly is the death knell of capitalism itself”.

The “invisible hand” of Adam Smith was used to highlight free markets and, using Amartya Sen’s work, Smith’s earlier “The Book of Moral Sentiments” was used to highlight the need for an ethical dimension in business. Sen, with a Nobel Prize for “having restored an ethical dimension to Economics” was discussed; highlighting that “self-maximisation does not provide the best approximation to actual human behaviour nor does it lead to optimal economic conditions.” As Alan Greenspan, for long the custodian of monetarist practice in the G7, put it to the Congressional Committee after the 2008 Financial crash saw $40 trillion wiped off the value of markets worldwide – “Yes, I have found a flaw. Those of us who have looked at the self-interest of companies to promote a free market Capitalism are in a state of shock.

Sen has shown how prolonged celebration of utility and wealth has obscured the central value of freedom itself. And in this transformational context, his four freedoms (1. Economic facilities; 2. Social opportunities; 3. Political freedom and 4. Protective security) read more like the basic requirements of a viable supply chain than a philosophic tract.

More needs to be done to understand this challenging environment where logistics is as much about livelihoods as feeding the lifestyle choices of the developed world – values as well as value. Here are some of the topics covered:

  • Transformational Logistics. This session explored a number of traditional industries – the cotton trade and textiles in Asia and Africa; the leather trade in India; fruit and vegetable growers in South America and, traditional fishermen in India. Rob Bell explained the preliminary work being done through Nahro Zagros on this loom to room supply chain in the mountain economy of the Kurdish Region of Northern Iraq. Of this more later.
  • Transformational Retail.The developed world sees the Modern trade dominant – over 85% of US Retail and, in the UK over 80% – but this is not the case in Emerging, Developing and Devastated markets. For example, in India the modern trade has around 6 to 10% of the market and, traditional Mom and Pop stores (kirana play a significant role.The group explored the supply chains supporting these traditional outlets and reviewed Bharti Walmart’s cash-and-carry venture as a form of distribution hub that could transform this traditional sector. The point is that there is more to Retail than shopping malls and, supermarkets designed in mature markets and led by MNCs.
  • Transformational Agriculture.The demographic shift from 6 to 9 billion demands a 70% increase in food production. It is not just a case of building everything from a MNC perspective – though their contribution will be considerable – it is about added value as locally as possible to create inclusivity and improved livelihoods for the majority world. This is about rural markets and, it is a packed agenda.Drawing from the work of Malcolm Harper on Inclusive Value Chains in Orissa, the group looked at Transformational Agricuture – taking in the sweep from subsistence farming to major MNCs and highlighting the need for hybrid business models – how can we support local solutions.A major discussion took place on the use of mobile phones all over rural and devastated markets – as an aggregator – and, IT examples from eChoupal and mobile phone work with AgRisk were covered.Agriculture in trade corridors around Africa were explored; ideas around model villages that can serve a hinterland of other villages with a clinic, schools, skills capacity training centres and, even a bonded warehouse. Again, the transformational agenda acts as a catalyst.
  • Humanitarian Logistics.Reviewing the sheer scale of disasters from Haiti and Pakistan to Queensland and now Fukishima; the impact on stretched supply chains was highlighted. For example, the volcanic ash from Iceland dislocated Kenya’s $1 billion horticulture industry as $15m stock went for compost within a week; and the impact of the Japanese disaster for the high tech industry.Equally, the damage to global coal supplies as Queensland mines were flooded was put into the mix. H L covers the Emergency agenda well but, Rob Bell highlighted the need for a better understanding of what happens next.The three core phases of a Humanitarian emergency – Resilience > Response > Reconstruction – were discussed. Transformational Logistics was explored as a catalyst for efforts to build the hard soft and intermediate (warehousing to truck fleets) necessary to either get an economy back on its feet or, take the opportunity to build a viable economy from scratch. Rob Bell is a member of the Cardiff Cranfield Humanitarian Logistics Initiative which is exploring this fresh dimension.

5. Tool box.

  • Process mapping. So much is done on the computer these days that walking the talk is a lost art and, the learning potential to work with traditional supply chains and encounter all sorts of challenge is an area worth pursuing. Drawing from Archomai’s work in various emerging and developing markets, the group were taken through basic routines from end-to-end of various supply chains from Steel and Aluminium Plants to Fruit and Vegetables. In particular, the links between traditional and modern industries, informal and fragmented to formal and consolidated were examined. Rob Bell used examples from work in Africa with Rod Stout and his team at businessmodelling (supply chain optimisation software) right through to a brown paper excercise using live documents from the field. The students then went out to map a series of traditional supply chains such as the fisheries example – see below.
  • Presentation methods and statistical representation. Some examples were covered to equip the teams with the insight to build a better case study and the studenst were encouraged to carry the ideas into the field.  The idea is to open this out into an Executive Programme for those businesses wanting to know more about market access into rural markets and the links between rural sourcing and urban markets for all manner of companies. This breaks fresh ground. So to the Case Studies.

6. Case Studies. This is work-in-progress. The plan is for Rob Bell and Dr P.R.S. Sarma to develop Transformational Logistics Case Studies around the rural economy and extend this into other relevant areas. Meanwhile, various groups from the Course worked with the following projects.

  • Cooperatives. The Dairy industry acts as an indicator of growing affluence in emerging and developing countries. Meat and dairy products follow the growth curve. So, as part of the T L exercise, the group were taken through ideas on historical Cooperative thinking (from the Rochdale Pioneers, 1840s UK; to Amul, India and their $1 billion business). Workgroups discussed the potential for Cooperative solutions to act as a catalyst for inclusive growth in traditional areas. Examples from Northern Italy; Mondragon in the Basque lands; the Cooperative and Arup in the UK were discussed. The sessions explored the potential for Cooperative firms to deliver on values as well as value.
  • Warehousing. Starting with a review of basic principles of warehouse design, the group was challenged to design their own white goods warehouse and, locate a network of them around India.
  • A series of traditional “perishable” supply chains from traditional fisheries; fruit and vegetables; bakery to a newspaper were assigned and groups of 5 went off to trace the supply chain from end-to-end. For example, one group started at the Rushikonda Beach landing area close to GITAM; engaged with local fishermen and, traced the supply chain right through to the market in Vizag. This Blog will carry details of this and other such traditional supply chains shortly. This was a unique learning experience.
  • Developments in Logistics and Supply Chain thinking and practice. Here, the sessions turned to a number of ideas relevant to Emerging and Developing markets.
  • The Green Supply Chain. Nature bats last. Over time, people have grown tired of CSR programmes that are little more than brochureware. C3 (Cross Company CSR) highlights the need to deliver CSR from end-to-end. The same holistic logic should apply to those championing Corporate Environmental responsibility.Other work was done to map various supply chains and model their shape as the global energy mix shifts. For example, a supply chain will be radically different at $50 and $100 a barrel of oil!
  • Logistics and Supply Chain thinking for a Region.This session started with the demographic shift from rural to urban areas and, the trends that will see roughly 50 City Regions dominate global supply chain networks by 2050. This is where the majority world will work and live. So, what can be done to establish and sustain economic growth momentum in these City Regions. Starting with the Pearl River Delta (open with an infrastructure and construction cluster; build connectivity and then, trigger light manufacturing – all as a FDI “magnet”. Oresund in Scandinavia – a new Region formed out of older Regions from Southern Sweden and Denmark – was founded as the Bridge was built. It is a Case Study in Regional development.The group were challenged to develop their thinking on the Regions of India and how logistics and supply chain initiatives can sharpen their competitive edge.
    Skills in the Supply Chain. A CII Report on the Indian Skills deficit highlights the need for 450 million skilled people by 2022. Current vocational skills training capacity stands at no more 3.1 million and needs to rise dramatically to achieve its objectives.Drawing from the work of Archomai, Rob Bell explored the use of simulation, simulators and training technologies to deliver improved performance across a range of supply chains. For example, Quayside crane operations in a Port; Truck and welding simulators. In addition, the work on wind farms and other power plants.The sheer scale of vocational skills needs in these markets is such that classroom techniques will fall short. These technologies offer the ability to move to specific performance issues along the supply chain; create a learning environment on site and, simulate accidents rather than having them. The benefits are considerable – not least the significant insurance cost reduction. Above all, we explored the need to ensure that gender issues are addressed – there is no credible reason why women cannot be part of the solution when the skills gap is so acute. This session used posters from the Soviet Union; the UK in World War 2 – with women at the wheel and, cracking codes. What happened next?
  • Visibility, Transparency and Accurate date. None of the enthusiasm for these markets makes sense if there is little or no progress on the fundamental freedoms Sen speaks of. Corruption and opacity will de-rail any well meaning initiative. For this reason, more work needs to be done on a dashboard of relevant, accessible and accurate measures – KEY VALUE INDICATORS – for emerging, developing and devastated markets.

This course built from mainstream logistics experience and, highlighted the need for Transformational Logistics as a means to understand better the realities of Emerging, Developing and Devastated markets. These are the ideas and techniques that will equip future leaders to build more inclusive and ethically sound business practice and, open their eyes to the potential in the rural markets as well as more conventional outlets.

Transformational Logistics is a branch of an emerging business agenda to understand and perform better in Emerging, Developing and Devastated markets. It is an umbrella term and will draw from a host of disciplines and, through better understanding of local context, make an impact through changed behaviours as much as concrete outputs. Above all, it is part of what Amartya Sen has done for Economics – putting an ethical and inclusive dimension into the business equation in the Majority world.

As with the Blog, this is at an early stage but momentum gathers and, as the University of Hull Logistics Institute launch a T L Research Club in September and, with others in South Africa; Kurdish Iraq and South America in the pipeline, the potential for Transformational Logistics to add value to the Logistics and Supply Chain discipline gathers momentum.

In parallel, a number of initiatives with companies throughout Europe, India and beyond are being developed to understand and explore rural markets; supply chain design and resilience and, improve synergies between traditional and modern players in a range of complex supply chains. Watch this space.

Thanks must go to Dr Omera Khan of the University of Hull Logistics Institute for an inspiring guest lecture and, to Terje Stolte for his support on TL content that went into the course lectures prior to the trip. Above all, many thanks to the MBA class at GITAM who took this course and the tremendous support from the Director, Professor Kumar and his team (cited above). The sweep of concepts and detail has been challenging but the enthusiasm which saw the students following fish from the landing stage to the local Vizag market at 05:00 a.m. says it all. The final Case Study presentations on a variety of supply chains (Newspapers; Mango; Banana; Vegetables; Bread; Dairy and Fish) was a tribute to the hard work of all concerned. There is a need for this T L agenda and, there can be no doubt of its value as a learning experience. We look forward to repeating the Course and, opening this up to a network of other Institutions in the Majority World. Not every supply chain is modern, fully funded and serving the developed world alone.