Country in focus


In an interview with the Indian Economic Times [03/03/12] Marc Llistosella, CEO of Daimler Commercial Vehicles (India), made it clear. His company would support a hike in diesel prices and an increase in excise duties on diesel vehicles. In other words, India’s logistics infrastructure is poor; policy measures to remove interstate taxes and create a single internal market are log jammed and post-harvest losses are over 40% on the route to market. The list goes on. The hike in diesel will help to bring matters to a head. India has to sort out its supply chains or risk losing out to global competitors. Let’s look at this in terms of costs.

Indian transport costs at 13 per cent of GDP are higher than the USA, 9% GDP and the EU, 11% [2010 figures]. Mind you, China’s figures are far higher but this is distorted by the sheer scale of their manufacturing industry. It costs more on transport to be the factory than the office of the world. The real numbers come from each individual supply chain in its proper context benchmarked against peers.

It is not as simple as saying that Indian logistics costs are too high. Whilst many studies talk of waste in the supply chain; walk around the streets and hawkers are not selling rotten fruit or vegetables. Go to Temples and see the array of fresh flowers and go to farmers markets to see what is available. Transport in India works – after a fashion. It is the same with traditional retail. Few modern retail models can match the home delivery and credit services that are out there. But India is entering a different phase. Even the kirana stores can benefit from better logistics. Look at those that now benefit from cash and carries – their very own regional distribution hubs! Logistics and supply chains are not just about big business.

For a moment let’s imagine that all the players are the same but, we change a few of the rules for a better game – see how cricket overtook hockey and now, how hockey is fighting back. No one can stand still. In India, policy – the rules of the game – plays a big role in success or failure. The delays on the GST (Goods & Services Tax – otherwise known as VAT) tax are costing the country badly. GST is a long overdue change in the rules that will level the playing field. This is India’s most far-reaching tax reform and aims to integrate the country into a common market by dismantling fiscal barriers between states.

This will all go ...

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On the dining room table a candle burns, the house is silent and yet, this is far from romantic. It is a weekday morning in Chennai, South India and the computer on the table is running out of battery; all of the electrical appliances in the house lie still and living in one of several apartment blocks clustered together; natural light is poor. Welcome to the age of the power outage: up to 2 hours scheduled; sequenced by zones to share the burden and, even more that is not expected from time to time.

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The T L Blog is delighted to introduce a new contributor – Tielman Nieuwoudt. Based in Johannesburg and for several years working out of Vietnam, Tielman brings a huge level of experience in frontier markets to the TL table. This and other posts to follow have featured on the Supply Chain Lab Blog previously. And so to Africa …

With low projected growth in the US and EU, and the realization that the BRIC countries won’t be able to do it all on their own, there is renewed interested in Africa. It is a continent with enormous potential with some of the fastest growing economies on the planet. However, for any company new to the African continent, there are a number of challenges to consider.

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Mature markets are struggling and emerging and developing markets are becoming increasingly attractive to companies and investors looking for growth. Put this in perspective. Despite a 25% depreciation in sterling since 2007, only 4% of UK Exports go to the so called BRICs combined – this is less than the UK exports to Sweden! The developed world has woken up to the potential in emerging and developing markets. Now is the time to do something about it and that means more than BRICs. Where else and, what are the challenges that have to be faced?

The Economic Intelligence Unit coined the term Civets (Columbia; Indonesia; Vietnam; Egypt; Turkey and South Africa) in 2009 to refer to a second division of developing markets which will grow three times as fast as mature markets this year. The EIU predicts growth rates of .9 per cent for Civets countries over the next 20 years compared with 1.8 per cent for the G7 countries.  Although it was only established in 2007, the S&P CIVETS 60 index is ahead of the S&P BRIC 40 and S&P Emerging BMI over one and three years.

There's life beyond BRICs ...

CIVETS countries all have large, young populations, with an average age of 27. This, or so the theory goes, they will benefit from fast-rising domestic consumption. CIVETS are also all fast-growing, relatively diverse economies, which means, unlike the BRICs, they should be less heavily dependent on external demand. This is a sketch and more details will follow in other blog posts on each CIVETS economy and, another group centred on Jim O’Neill of Goldman Sachs concept of the Second 11; the next eleven economies after the BRICs.  Meanwhile, here are some quick notes…

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On Monday near Church Street, Mumbai I met one of my supply chain heroes. He is a member of a team that has been invited to Prince Charles wedding; lauded by Bill Clinton; followed by Sir Richard Branson and accorded the Six Sigma Award for their superlative delivery performance. One of the protagonists in Salman Rushdie’s novel Satanic verses, Gibreel Farishta, was born to a Dabbawallah and, TL would add another tribute describing them as a master class in a simply modal approach. So, there I was talking to Shaurya who had just finished delivering tiffin boxes to teachers in an International School. He was keen to try his English – he is doing a course at the moment “because many address can’t read without it.” We turned the corner and there they were maybe fifty Dabawallas interchanging tiffin boxes with their symbols and colour codes designed to be read by men who had little schooling.

Five fingers of one hand pack the supply chain punch

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So, what do you think of the Commonwealth Games in Delhi? It depends where you are in the world – better said, the Commonwealth. In the UK the press coverage was all about the bio-degradable running tracks and the poor standards of accommodation. Here in India talk has moved swiftly to the medals table though leaders in the major papers have focussed the ineffective and often corrupt management of this signature Event. In particular, management has been slated for failing to deal with the queues for tickets leaving stadia empty as the sporting events kicked off. And yet, just like an Indian Wedding, it was alright on the night and, who could fail to be impressed by the spectacle of the opening ceremony. Let’s move away from the media spotlight and explore the real losers in all of this – the Kirana stores and street hawkers of Delhi.

You can't buy what you can't see

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The worst floods in Pakistan’s history have affected at least 14 million people. Some 1,500 people have been killed to date; 1.4 million acres of crop land has been flooded; 10,000 cows killed; roads and power supply networks have been shattered and, food will be needed for 1.8 million people for the next three months at least. There is a serious threat from water-born diseases and cholera in particular. Pakistan is facing weeks, months and years of need. Sadly, major disasters like this and others such as in Niger occur frequently in the developing world where vulnerability is high, resources are limited and, all too often build back does not mean build back better. In other words, infrastructure and buildings are re-built piecemeal, cheaply and, not always to a standard resilient enough to the next calamity.  To improve response to such disasters, Humanitarian agencies are developing tools to assess vulnerability and prepare regions at risk with the resources and know how to respond more effectively and efficiently to hurricanes, monsoons, droughts and volcanoes.

In Humanitarian Logistics terms each disaster has three core phases: preparation and readiness; response and, rehabilitation. Here, we look at how vulnerability is assessed and the impact this has on response. Then, we explore what happens after the weather or the rubble clears and, highlight the potential for Transformational Logistics to be a catalyst throughout the rehabilitation phase to deliver livelihoods, self-sufficiency and, sustainable growth.

What happens next?

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