Bloody supply chain of Retail

US retailer GAP had recalled some of its garments which it intended to sell in US and Europe for this Christmas because children were involved in manufacturing these fabric. Yes, the demon of child labor rises again for foreign retailers. The irony is that GAP wanted to use the same fabric for a kids line of clothing.

The hearsay began when British newspaper The Observer quoted that children as young as 10-13 were making clothes for Gap in filthy conditions, in a derelict building in Shahpur Jat, Delhi.

They had been sold to the sweatshop in Delhi by their families. The children, some of who worked for as long as 16 hours a day sewing clothes by hand, said they hailed from Bihar and West Bengal. They added that they were not being paid because their employer said they were still trainees; nor would they be allowed to leave till they could repay the amount for which they were bought from their families.

But this is not the first time that retailers have messed up with labor issues. This has been repeated numerous times. Recently another daily reported Calvin Klein contractors employing child labor in Bangladesh. Nike too had labor problems in China. It is evident that unless and until the media or social activist raise these issues these retail giants don’t seem to be bothered how their fabric is woven as long its cheap!

New dimension for Indian logistics: 'On Time Every Time'

India 2^nd fastest growing economy booming with growth rate of 9.4%, number of Indian sectors are uprising i.e. retailing(growth rate@ 18%-20%), automobile (growth rate 18%), FMCG (10%) & manufacturing sector (nearly 11.3%) and market become more customer driven. Now every customer expect better quality at cheapest price on time.

Do companies will satisfy customer demands ON TIME EVERY TIME……………….

'On Time Every Time' a big challenge for Indian logistic companies today. According to one report India spend 13% of its GDP on logistics which is more than worlds’ average expenditure on logistics. Today we are facing this problem because of inadequate national highways, poor infrastructure, preconceived mindset, taxation, lack of high technology & regulatory loopholes.

According to Li & Fung asia’s best supply chain company statement:

Rs 5 (price of product)= Rs 2 (manufacturing cost)+ Re 1 (marketing expense)+Rs 2 (supply chain or transportation cost).

This distribution of cost structure shows that nearly 40% - 45% of product cost is incurred in transportation which is much higher than expectation but its beared by customers only.

As per Li & Fung statistics all manufacturing units are using number of operations techniques i.e. TQM, Benchmarking, Kanban, Six sigma etc to reduce its manufacturing cost. The scope of cost reduction is left with Supply chain.

Role of Indian Government in logistics:

Indian government is dealing this issue very seriously. In road sector alone government will see investments of about Rs 1,52,000 crore between 2006 and 2012. Airports, which together handled a cargo of 1.4 million tonnes last fiscal, as against 0.65 million in 1995-96, will also see significant expansion and development.

Major projects in respective field are:

freight corridor project (railways)

Golden Quadrilateral Project (roadways)

Opportunities for logistics companies:

There is biggest opportunity for logistics companies and in response according to Edelweiss estimates that the six major players in this sector — Concor, Gateway Distriparks Ltd (GDL), Allcargo, SICAL, Transport Corporation of India and Gati — will spend Rs 3,400 crore over the next three years to cash in on the growth opportunities. These companies together invested about Rs 500 crore in the last fiscal.

For optimization of service, logistics companies will have to work upon following:

Reduce transport costs

Improve customer service

Improve utilization of people

Reduce inventory holding costs

Lead time

Technology i.e. RFID, Tracking systems, supply chain softwares & EDI (ectronic data exchange) for proper coordination.

Lets see upto what extend these logistics companies will be able to satisfy customers ON TIME EVERY TIME.

References: Business Line 15 jan, 2007

Business Line 12 apr,2007