Imagine buying toiletries for about 40% less. And not because of a budget sop. You have been paying extra bucks all these days for costs incurred in reaching the product to you. Studies have shown that excluding taxes, companies spend between 17% and 50% of the labeled price in moving goods from the manufacturing plant to shop shelves. The cost includes intermediary margins, logistics and that of holding inventory. While margins are an incentive to the seller, the other two are system inefficiencies and can be controlled, optimized, and reduced.

Apply the above to the Rs 50,000 crore Indian FMCG sector alone with a supply chain of 30,000 odd- distributors, thousands of clearing and forwarding agents, wholesalers, and 12 million retailers—the results would turn out to be amazing.

Here we are talking of prudent supply chain management and logistical excellence enabled by a slew of information technology solutions. And the gains are not only in cost savings but improved competitiveness, definitive customer service levels and overall gain in profitability for organizations.

Managing logistics is a nightmarish situation and adds costs and processes that drain resources. The logistics chain extends from supplier management at the procuring-end to delivery to the end customer. The members of this chain include surface, sea, and air transport providers; air express/couriers, custom brokerage houses, warehouse specialists, and 3PLs (third party logistics providers) who handle all of it. Beyond this, the logistics chain is pressed into service for handling after-sales service and repairs. The global trend is to outsource parts or whole of logistics management to specialists. These specialists rely heavily on IT to deliver value to customers.

Monitoring the flow
Says Santosh Kumar, consultant, Logistics, Gati Intellect Systems, "Logistics professionals have an array of digital logistics weapons that can be strategically deployed to unlock significant value and customer-focused logistics systems that build a long-term competitive advantage. In fact, logistics without IT as an integral part of it, is unthinkable. The flow of goods is as important as flow of information."

Technology in logistics has been advancing in three phases. The first phase is to monitor the logistics chain. Herein, technology helps companies monitor orders, inventory and shipments with all parties. Since logistics is a business process at the most basic level, IT is used to automate the process to gain visibility. This is primarily done through an enterprise-wide software developed in-house or procured third-party. Blue Dart, the Rs 256 crore integrated air express carrier and Fedex service partner uses an in-house developed package called as COSMAT II (Computerized online system for monitoring and tracking). Says Malcolm Monteiro, senior VP- Sales and Systems, Blue Dart, "We realized the importance of having a core system and have been evolving it since 1989. The system would not have lasted had we used any standard software at that time".

Gati, a pioneering Indian multimodal express cargo company, too uses an in-house system that links various processes in the logistics chain. Some of the IT applications that Gati has used over the past few years are trace-and trace tools, vehicle monitoring systems, and web-enabled access to various application systems. Similarly, Lemuir Group, the Indian arm of the AEI-Danzas, the $8 B international logistics company also uses an in-house developed software that links up order processing, warehousing, transportation and distribution with full visibility over the process and automated document processing throughout. Says S L Chopda, GM- Systems and Information Management, Lemuir Group, "Our enterprise software has helped us to be flexible but yet adhere to standards. It has also helped us to react quickly to external requirements". Adds Chopda, "When the customs department changed the entire format for submission, we could adapt to the new format within hours. This would not have been possible without a sound backbone information system".

Geo-Logistics, another global leader with a presence in India, uses its internal technology backbone called GeoVista. GeoVista runs the entire global multi-modal shipment database consisting of information derived from our global tracking, warehouse management and purchase order management applications. It helps from system tracking and exception reporting to complex custom supply chain management and optimization programs. That is, triggers have been built into the system so that when certain planned events occur or do not occur, the appropriate parties are alerted and workflow activity occurs to resolve those events. All such core applications being enterprise-wide, almost all of the logistics companies have good connectivity infrastructure in terms of wide area network, connectivity with international carriers, and strong internal messaging systems.

The second phase of maturing technology adoption focuses on management capabilities in which the technology must provide the data and intelligence gathering tools necessary to manage the flow of goods and establish business rules to manage exceptions. More evolved technology backbones like GeoVista are capable of handling this level of sophistication.

The final phase of technology in logistics is that of optimization wherein discrete parts of the chain as well as the entire chain is mathematically optimized to suggest actions which will lead to achievement of preset objectives within constraints. Specialized SCM tools like i2 and Manugistics help in achieving this.

The big brother syndrome
The use of IT in the logistics industry is still immature because many of the players who make up the numbers are from the trucking and transportation background. This represents 80% of the logistics industry in the country and is highly fragmented and unstructured. The rest comprises the organized part of the logistics industry with players who have embraced IT in the past decade.

Implementing technology solutions in the logistics industry is fraught with challenges. For one, a centralized IT architecture extended to multiple locations is quite investment heavy. Secondly, though logistics-specific packaged software is available globally, the use of the same in India is largely untried because of issues in localization according to the Indian legal framework and topography. Developing software in-house would take its own time and require domain expertise.

As a way out, logistics companies themselves have extended their in-house IT expertise in this area to other companies. Gati Intellect Systems Ltd. (GISL) and AFL Infotech are examples. GISL is the IT arm of Gati and helps corporates manage their supply chains. The company also offers products in this area—iEM Warehouse Manager, iEM Distribution Manager, Actinic eStore, and Commercial Service Provider.

The Internet has helped the logistics industry by lowering communication cost, create VPNs, intranets, and making applications available at multiple locations through web-enablement. It has simplified the technical complexity of spreading IT across the multiple-entity logistics chain. Also, the move towards well-defined open standards like Electronic Data Interchange (EDI) and eXtensible Markup Language (XML) has helped disparate systems to exchange information seamlessly. Open source software is another force to reckon with. Says Salim Affendi, FND Service Solutions and Systems, "Low-cost solutions are a must. The rise of open source software has made a huge economic impact in the usage of IT. Linux is fast, secure, and low-cost. MySQL- the database engine again is low-cost since there are no license fees involved, unlike commercial databases. Besides, it ensures high-speed delivery to a portal like Yahoo Finance. Perl, the programming language can be used to read data from the database and create a human readable web page from it". An increase in available bandwidth makes it possible to send massive amounts of data in a short time thereby allowing the synchronizing of databases.

Adds Affendi, "Software will enable the making informed decisions on an individual load and network-wide basis. Information is analyzed and delivered in a fraction of the time taken to accomplish this manually. This in turn, delivers powerful, strategic line-haul load and network planning."

LogisTech
Blue Dart, AFL, Gati, and DHL have used the Web for processes like tracking, data download, order booking and processing. Says Monteiro of Blue Dart, "All we had to do was to build a front-end system because the back-end was already in place". Blue Dart started offering web-based services to its clients in 1996. The services were re-launched in July 2000 with real-time updates, full interactivity, and security.

There are several examples of the use of technology in this segment. Blue Dart has partnered with high-traffic e-commerce sites to fulfill their delivery chain. For example, when someone orders for CDs from FabMart and logs into the site to check the status of the transaction, he is directly connected to the Blue Dart database. Says Monteiro, "This is achieved because Blue Dart has shared its Application Program Interface (APIs) called as ShopTrack which connects its database directly to FabMart’s system".

Similarly, APIs are also shared with other B2B customers like call centers to track the exact status of a product in transit. The buyer doesn’t need to call up Blue Dart; he can get his delivery status through the call center of the company he has bought the product from. Regular customers of Blue Dart are also given a proprietary solution called as ShipDart, which is installed on the customer premises and enables user control over entire shipping and tracking processes. And for cellular phone users, status information is delivered via SMS or email. In case you have a WAP-enabled phone, you can send back the exact status via email or SMS by entering your waybill number.

AFL effectively uses a Personal Digital Assistant (PDA) –based airway bill scanning and data capturing system for pick-up and delivery developed by Mumbai-based Lauren Software. This has reduced manual data entry resulting in cutting down customer response time and improved customer services. The location master is downloaded from the desktop to a PDA integrated with a barcode scanner every day. This contains the setup of the route with relevant customer information for delivery. For the pick-up process, the airway bill is scanned and the customer’s signature is captured on the PDA. The airway bill is scanned at each stage- handover, arrival, and final delivery. All this is then downloaded on to the desktop, which synchronizes with the enterprise system. Similarly, another leading air express company uses the PDA to maintain and monitor sales processes.

Global positioning systems help pinpoint the location of a moving target and then with the help of a GSM network, transmit the information to the location required.

But it is quite a costly proposition and has not found any takers in the logistics industry in India. Again bar code technology, though not expensive and despite its advantages, is still to be used widely by the logistics industry. Barcodes help in inventory control, simplify warehousing and streamlining movements of material and information. RF (radio frequency) Tags beam radio waves containing data to a reader connected to a host computer system. It can be used in tracking devices and warehousing applications. Advances in voice recognition technologies will help logistics companies capture and deliver data through voice.

So how will all this make your shampoo cheaper by 40%? By making the supply chain more effective and efficient, reducing average inventory levels, lowering transport costs, lowering warehousing costs- among other ways.

It is no surprise that some of the top FMCG companies in India like Nestle, P&G, Godrej Consumer Products and Hindustan Lever, have teamed up with logistics companies like TCIL and Concor in an initiative called as Efficient Customer Response (ECR) with a one-point mission to clean up India’s supply chain. If a mature banking and financial system riding on technology is a sign of maturity in a capital market economy, a robust IT-driven logistics industry signifies maturity in global trade.

Easwaradas Satyan in Mumbai