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Integrated Project Plan & Logistics Planning
Figure 2. Integrated Road Construction Project Plan
The three major blocks that make up the integrated project plan are construction plan, material plan & financials of the project. This paper will focus on the material planning part of the project plan.
Challenges in Material Planning
Material planning which includes Sourcing Identification, Inventory Planning & Logistics Planning is a derivative of Construction Plan. Any Changes in the construction plan invariably call for changes in logistics planning.
Large changes in the scope of work during implementation (often effected to placate local and political demands), can lead to significant changes in construction plan which will in turn call for a review of the Logistics Plan. Apart from this any significant changes in material cost from one particular location due to demand-supply mismatch will again require a review of the Logistics Plan. Thus the Logistics Planning has to be agile so that it can respond quickly to changes in the new environment.
Logistics Cost Variability for different cost heads
COST HEADS
VARIABILITY
Material Cost
Sand,Soil -Low; Diesel - Medium; Bitumen, Aggregates, Cement, Steel - high
Plants & Equipments Depreciation Cost (Lease Cost)
Low
Manual Labour Cost
Medium
Last Updated On:7/7/2011 1:00:38 PM
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Road Constructions: Increased Profitability via Better Project & Logistics Planning
Road construction: Opportunity
Over the last few years, the Indian economy has been in a phase of unparalleled growth of about 8-10% per year, making it one of the fastest growing economies in the world. Sustaining this rate of growth will need huge investments in physical infrastructure such as roads, water, power and urban sectors.
Roads is the second-largest infrastructure segment after power in terms of investment requirement - US$135bn over the next five years .
Profitability in Road construction Projects is a concern
But even with this huge opportunity, the interest in road construction among major infrastructure companies is low. This is mainly because contractors in road construction make much smaller profits (average typical margins of 6-10%) than those engaged in construction in real estate (about 20-25%), hydropower and industrial sectors (about 15%) .
Reasons for Low Profitability in Road Construction Projects
These thin margins are mainly due to the delays in overall project implementation. According to a World Bank report about 56% of the completed national and state highway contracts had cost overruns limited to 25% of the initial contract price. An alarmingly large 40% of completed contracts had cost overruns in the range of 25-50%2.
Figure 1. Cost & Time Overrun in Road Construction Projects in India2
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India Infrastructure Report (Nomura, 2009)
World Bank Report –Indian Road Construction Industry (Nov 2008)
The main reasons for delays in overall project execution & cost overruns are -
(a) Land acquisition & clearances delays
(b) Planning inefficiencies
(c) Challenging logistics as the projects are linear in nature & spread over several kms
Delays due to Land acquisition & clearances
Last Updated On:7/7/2011 1:04:05 PM
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THE RFID ADVANTAGE IN THE SUPPLY CHAIN
RFID technology basics & supply chain benefits across key industries
INTRODUCTION TO THE RFID TECHNOLOGY
RFID forms part of technologies classified under Automatic Identification Systems. There are several types of Auto Identification Systems used in industries such as barcodes, smart cards, Optical character recognition (OCR) and RFID. Each of these has benefits/issues of their own:
• Barcodes: These are very cheap and probably the most widely used Automatic Identification System globally. However, one of the issues is that the product has to be in the line of sight of the reader.
• OCR: OCR is capable of storing huge amount of information compared to the barcodes. However they are very expensive to use, probably one of the reasons why it has found very limited audience.
• Smart Cards: These are very secure and used the world over for storing secure information and making transactions. Readers are very expensive and malfunction issues keep cropping. Also this being contact-based detection there is issues of corrosion and wear & tear.
• RFID: RFID is very similar to smart cards, the only difference being this is a contactless transfer of information between a tag and a reader. Also compared to barcodes, these RFIDs need not be in the line of sight of the readers. A reader automatically detects a tag if the tag is within its range.
RFID is perhaps the latest addition to the Auto Identification landscape which promises to revolutionize the way we track and manage our inventory. Contrary to popular perception, RFID (Radio Frequency Identification) is not a specific technology that is used. RFID encompasses all radio enabled tracking devices. Globally the use and hype of RFID started in the last decade. US DoD and Wal-Mart are the two biggest contributors (directly/indirectly) to the development of RFIDs. Historically the main reason for its extend
Last Updated On:7/11/2011 11:17:59 AM
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COLLABORATIVE PLANNING, FULFILMENT & REPLENISHMENT
The VICS committee, who have originally defined CPFR and consists of leading retailers, manufacturers and solution providers, defines it as a business practice wherein trading partners use information technology (IT) and a standard set of business procedures to combine their intelligence in the planning and fulfilment of customer demand. By linking sales and marketing practices to supply chain planning and execution processes, it enables trading partners – retailer and manufacturer – to improve visibility into one another’s critical activities through a structured process of information sharing and joint decision making across firm-level boundaries. CPFR helpsaddress uncertainty, of customer demand and all dependent upstream variables. The retailer doesn’t want to lose a sale; neither does a business want lose an order and similarly the material supplier. But customer demand is uncertain and affected by numerous macro & micro economic and environmental factors. Given this situation, usually the above parties protect their sales revenues by building inventories which entail excess procurement, production, logistics and storage thus driving up costs. Information sharing between all trading and internal parties about demand signal, capacities and inventories across the network allows for reduced individual risk hedging measures and productive utilization of effort and resources. By linking sales and marketing practices to supply chain planning and execution processes, CPFR improves visibility into critical activities across the value chain and thus enabling across-enterprise joint decision making.
The VICS committee prescribes a 4 stage guide to implement CPFR. The adjoining figure shows the CPFR reference model explaining the four stages. This model can fit multiple partner relationship scenarios and we discuss here the four most popular deployments 1 .
Retail Event
Last Updated On:7/11/2011 6:09:57 PM
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Sourcing and Procurement and Supplier Partnership
On an average, Indian companies typically have more number of suppliers compared to global best practices. For example, in the automotive industry, typically an auto company sources materials from 250 suppliers compared to the best practice of 100 suppliers (According to a CII 2002 report). This increases the complexity of the whole sourcing and procurement process. Supplier consolidation not only simplifies the purchasing but also leads to better utilization of resources. A number of Indian automotive companies are reducing the number of suppliers to achieve this.
Typical procurement cost management strategies include negotiating price by leveraging volume, price and cost analysis (industry cost profiles, process cost models, total cost of ownership models).
Supplier partnership is also needed to enable processes such as cross docking. Cross docking can be an effective way to keep costs low. But implementation issues abound. A huge percentage of suppliers still use email as their primary means of order related communication, with telephone and fax coming as other means of communication. Cross docking requires Advance Shipment Notifications (ASNs) and barcoded shipping labels.
ESourcing/eProcurement is another important step that can lead to substantial cost savings. Many Indian companies are now using the power of internet to source materials internationally. This gives the companies 2 advantages: 1) get best quality raw materials 2) at the best prices. Also the use of technology increases transparency in the whole process.
Aggregation of purchasing across all business units can result in substantial cost savings. Typically in India, most of the business units may be sourcing same raw materials from the same company, but the orders are placed separately. On the other hand, if the companies aggregate their purchasing across all business units, it gives them greater purchasing power in t
Last Updated On:7/23/2010 5:30:45 PM
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How are Indian Companies Performing on Key Supply Chain Metrics
Now, a key question to ask here is: how are Indian companies performing on key supply chain planning metrics?
The on-time delivery performance of Indian companies has improved over the years and compares favourably to global counterparts. However, this is primarily due Indian companies using less stringent metrics for this measurement; leading companies are redefining key supply chain metrics and setting up programs to monitor and improve their performance.
For about one-third of these respondents, the standard lead time from order to shipment is within a week. The cash to cash cycle of about half the respondent companies in India is less than a month; however, 30% of respondents have a cash to cash cycle of greater than 2 months.
To take this one step higher, the break-up of typical supply chain costs in India is as indicated in the figure below. This clearly indicated how over 55% of costs come from transportation whether outbound or inbound. Other major costs include inventory carrying costs and warehousing costs.
Now let’s take a look at the Automobile industry in India, which is the tenth largest in the world. In today’s competitive landscape and economic down-turn, automobile companies worldwide are shifting their attention towards understanding & implementing an integrated supply chain. In such a context it is important to understand the current supply chain metrics being followed by the Auto and Auto Ancillary Industries in India.
A recent IIMM (Indian Institute of Materials Management) survey of the supply chain management practices in India revealed the major supply chain practices and metrics being followed. This survey was carried out among 27 Auto and 51 Auto Ancillary companies.
In this context, Automobile companies can be broadly grouped into the following categories:
1. Cars & utility vehicles,
2
Last Updated On:7/23/2010 6:03:16 PM
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Transportation Management Systems : An Indian Perspective
Thumbs-Down to the Global Meltdown
The global melt-down is here and the nay-sayers are all on a roll about the impending doom. Companies are looking at multiple options to manage the challenging situation that the occurrences in the global economy have put them into. Supply Chain costs therefore are of special significance in such market conditions as they hold the key to managing profitability and ensuring better health of the organization.
India is no exception!
Logistics costs in India are estimated to be nearly 13-14% of the GDP of around $1 trillion. This cost is significantly higher as compared to the developed economies where the logistics costs are around 7-8% of the GDP. What this means to companies is that there is a huge potential to optimize the costs of logistics.
Supply Chain costs are spread over multiple domains starting from Import-Export Logistics to Transportation to Warehousing and finally Distribution. In a country like India which has a large geographic dispersion and manufacturing clusters based at key locations, transportation becomes a key link to managing the costs. In fact, Transportation accounts for the largest single cost component of logistics, estimated to be nearly 35%-40% of the total logistics costs.
There are multiple reasons for this. India has traditionally been a country that thrives on the entrepreneurial spirit of the hinterland. Hence all transportation needs, especially ground transport, were being met by small transport operators (more than 80-85% of the market) who own less than 5 trucks of smaller tonnage. This leads to an extreme fragmentation of the industry and thereby the cost of managing the overall delivery is high.
In addition, the Indian transportation industry has multiple layers of demand and capacity agents who are essentially people who play the intermediary role of matching demand and capacity albeit a
Last Updated On:7/30/2010 1:39:54 PM
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