Part 1 Caselets

CONCEPTUAL FRAMEWORK IN LOGISTICS

1. GCMMF (AMUL)—Managing Logistics to Align Customer Demands
2. Gati Air Express—Redefining Logistics Connectivity
3. CEAT—Redesigning Supply Chain System

GCMMF (AMUL)—Managing Logistics to Align Customer Demands

Gujarat Cooperative Milk Marketing Federation (GCMMF) is the largest food products marketing organization in India. It is a state-level apex body of milk cooperatives in Gujarat, which aims to provide remunerative returns to farmers and also serves the interest of consumers by providing quality products and value for their money. It had Amul as the flagship brand, which is a market leader in milk products. The annual sales turnover of GCMMF in 2006-07 was INR 4278 crores ($1020 mn). The product mix includes bread spread, powder milk, cheese, dessert, health drink and fresh milk. The State Marketing Federation comprises all 17 dairies, 10,675 villages and 2.2 million milk producers in Gujarat State. The value chain of GCMMF is shown in Figure 1.

Fig. 1 GCMMF value chain

GCMMF has a very wide network of milk collection. It requires management of a very complex logistics of collection from members spread over wider geographical area, weighing the milk at collection points, determining the fat content and calculation of purchase price. The logistics of milk collection makes it further difficult owing to the limitations in delivering the milk within eight hours to the dairy for processing to avoid decay. The job of milk collection has been outsourced to third-party logistics service suppliers (3PLs). The supply chain operations are carried out with military-like precision using Information Technology. Over 3000 Automatic Milk Collection System Units (AMCUS) have been installed at village societies. AMCUS helps in collecting 2.8 billion (2006–07) liters of milk from 2.6 million members. AMCUS also helps monitoring and managing collection cycle, reduction in pilferages, reduced human errors, on-the-spot payments to farmers, wastage reduction, transparency of operation and operational integration. AMCUS schedules the ‘Milk Runs’ using operation research techniques for route planning and maximum asset (milk truck tanker) utilization considering the limitation of raw milk life. The distribution of dairy (finished) products is done nationwide through 47 depots using a network of 3000 dealers to serve 500,000 retailers. Another milestone in e-commerce and e-logistics by GCMMF is Amul’s cyberstore gifting service is capable of servicing consumers in more than 125 cities through the distributors’ network connected through Amul’s network.

REVIEW QUESTIONS

1. Explain the major issues in logistics of milk collection.
2. How GCMMF is adding value in its supply chain process through logistics activities?
3. What is ‘Milk Run’ and how it is organized?
4. Discuss the role of IT in the success of logistics activities of GCMMF.

Gati Air Express—Redefining Logistics Connectivity

Gati Ltd started in 1989 as a cargo management company and has emerged as a leading express cargo company and a pioneer in distribution and supply chain management solutions in India and Asia Pacific regions. Gati had a professional strength of 6400 dedicated employees and a turnover of INR 5679 crores in the year 2006–07. It is well ahead in identifying the segmental logistics needs of Indian markets and providing value-added services to its demanding customers in retail and other sectors. Integration of the latest and best technological innovations in the service and support network comprises the business philosophy of Gati. It has headquarters in Secunderabad, Andhra Pradesh and an office in Singapore. Recently, Gati has also ventured into cold-chain network. In a span of 18 years, Gati has explored various ways of providing premium value to the customers, thereby setting benchmarks in service quality and customer satisfaction with the help of value-added logistics solutions.

Gati Air Express specializes in delivering shipments across major locations on the very next day of the order, even during the business hours. Some of the prime locations get delivery of the order even before the noon sets in. A fleet of dedicated freighters (cargo planes) that fly during the night and a seamless multimodal network that goes down to the last mile to ensure that shipments arrive on time make this task possible. Gati has promised to its customers that freight would be refunded if the assured timelines are not met by the company.

Gati is equipped with over 4000 vehicles on road covering 594 out of 608 districts in India. It also has mechantronic as well as warehousing facilities of 1.5 million sq. ft. across all major cities. This helps them in offering world class single-window solutions to the customers. In 1996, Gati tied up with Indian Airlines to facilitate speedier delivery of shipments. This 12-year-old relationship has now been further strengthened with the launch of the co-branded (Air India Gati) air cargo and courier service leading to delivering value services to the customers from the synergies of the two majors in air and surface networks.

Gati was first to run the ‘Millennium Parcel Express’ train in October 2001 between Mumbai and Kolkata with 10 VPUs (Parcel Van Unit). Unfortunately, in the year 2003, this initiative was discontinued. Now once again Gati has taken the initiative to run the parcel express train between Kalyan (Mumbai) and Guwahiti (Assam). The parcel train is a classic example of public private partnership (PPP).

Gati’s advantage of seamless connectivity across air, road, ocean and rail has resulted in a plethora of offerings to the customer, which are unmatched in the industry. Besides having a strong network in India, Gati also has a strong market presence in the Asia Pacific region and SAARC countries. Today, Gati has offices in China, Singapore, Japan, Dubai, Hong Kong, Thailand, Nepal and Sri Lanka and have plans to foray into other markets.

Through its nationwide logistics network GATI AIR EXPRESS promises next day before noon delivery to certain locations, particularly the metro cities and national business centres. However, in other locations (B grade cities) the services are for next day delivery.

REVIEW QUESTIONS

1. What are the value additions that Gati offered in its logistics services to customers?
2. How could Gati get a seamless connectivity in its logistics activities?
3. Discuss the role of partnership in enhancing the effectiveness of logistics system?

CEAT—Redesigning Supply Chain System

CEAT top management, together with McKinsey, undertook a complete redesigning of their supply chain. It was advised first to make use of IT in CEAT for reducing costs and increasing utilization of assets. Second, supply chain management (SCM) should come out of the marketing shadow and take its place as a strategic change initiator and an independent function. The key factors responsible for this change were:

• Placing logistics division as the link between manufacturing and marketing;
• Continuous flow of information for reducing delays and ensuring 100 per cent reliability;
• Availability of right product at the right place at the right time and quantity;
• Implementation of SCM down the line for providing effective services;
• Understanding the markets and customers (3000 dealers, Original Equipment Manufactures (OEMs) and exports);
• Detailed planning of the distribution system from multiple factories and warehouses;
• Identifying factors for correction through stringent measurement tools.

CEAT designed a measurement system (for dealers and depots) according to which if 100 units were sold in a month, the minimum stock to be held would be 4 units a day. If, at any time in any of the selling locations, the stock falls below 4 units a day, it would be captured as a sales lost. To begin with, the organization had a 22 per cent ‘sales lost’ percentage due to stock outs. The present aim is to reach 5 per cent of ‘sales lost’. Days of finished goods inventory, originally at 52 days are being brought down to a desired level of 25 days.

In each of the cases, a very simple measurement tool—CLIP (committed line item production)—was introduced. A monitoring system also has the advantage of making the transporter more accountable, particularly at the time of negotiating a yearly contract. All information regarding transporter’s performance is shared with him at CEAT.

The other initiatives included putting up of a; ‘pull’ system, production planning based on sales requirements from the selling locations, inventory norms based on demand variations, transit time and load frequency, developing an IT system to record and send sales information Stock Keeping Unit-wise (SKU) daily to the Carrying and Forwarding Agents (CFA), District Distribution Centers (DDC), and the factory. Replenishment of daily-based transit time monitoring system was also put in place. Thus, the revived logistics supply chain system was created to provide ready information to enable the dealers to know when they would get the stocks.

As a result finished goods inventory reduced from 52 to 25 days, sales loss opportunity reduced from 22 to 5 per cent, factory compliance reduced to <25 per cent from >75 per cent, dispatch time reduced from (up to) seven days to <24 hours, transit delay reduced from 75 to 5 per cent and sales skew reduced from 75 per cent (week 4) to 42 per cent (week 4).

The final learning were, use technology for speed in information processing and dissemination, make your operations flexible and reliable, channel your resources for maximum leverage serve the end user, attack the inventories as Non Performing Assets (NPAs) and apply tactical solutions to changing situations.

REVIEW QUESTIONS

1. What measures were initiated by the CEAT to overcome the supply chain problems?
2. Why logistics was the major focus for redesigning the CEAT supply chain?
3. How CEAT’s logistics programs differed for serving different market segments?