impact on service level

7/29/2019 Impact on Service Level

1/23

Rise of the 3PL In a post GST market:

Shifts in 3PL service patterns &

evaluating 3PL readiness

Malay ShankarDIESL A TATA Enterprise


2/23

Scope

Rise of 3 PL ? Impact of GST

Service Patterns Impact on the Warehouses and Spread Impact on Freight Costs

Readiness Parameters

Approach


3/23


Service Patterns Impact on the Warehouses and Spread Impact on Freight Costs


Approach


4/23

Impact of GST on Supply Chains

More companies will start outsourcing supply chain. Today after market SC ishighly outsourced followed by FG Supply chain. However FG is customized

considering the fact that its Sale material. Inbound logistics is still customer

controlled and suppliers Supply chain is aligned to production line and

depended on plant location.

Inbound SC will be driven by factors like Logistics and transportationinfrastructure rather than Location of manufacturing plant.

FG which has high customized SC will be segmented based on marketdemand, Sales model and product price and outsourced to network cos.

Customers will push for End to End Outsource of SC from sourcing rawmaterials into production line, distribution of FG and after sales support Supply

chains.


5/23

Impact of GST on Supply Chains

Cost Mindset to Solution Mindset. Customer will demand Technology,Information systems, material handling equipments

Demand on increasing geographical spread. Low Volume rural thrust.

More VAS operations in Warehouse. Example: Testing, Product bundling, Kittingetc

More 4PL Opportunities. Overall supply chain outsourced to one companywhich will in turn tie up with network / regional players.

A Definite Rise in 3PL Activities !!


6/23

Scope


Service Patterns Impact on the Warehouses and Spread

Impact on Freight Costs


Approach


7/23

Significance of Numbers ??

No of Warehouses

Total Space

Presence No of Locations vs. Reach

Average Size of W/H


8/23

Illustration of Changing Dynamics


9/23

Illustration of Changing Dynamics


10/23

Impact of Fewer Warehouses

The move towards fewer warehouses would require many warehouses tocombine, close and re-locate

Consolidation

Required capacity of many warehouses will undergo changes. With fewer

warehouses, the average size of the warehouse will go upExpansion

Fewer & larger warehouses may make it feasible to route plant productiondirectly to warehouses rather than through hubs, due to larger throughputs.

Thus the size and number of the hubs could get affected

Optimization

The linkages between factories-hubs-warehouses-customers of various productswill get re-aligned with secondary & tertiary transportation shifting towardsmore reliable players as distances increase

Re-alignment &Organization


11/23

Impact on Freight and Distance

Pre - GST


12/23

Impact on Freight and Distance

Post - GST


13/23

Impact on Service Level

Service to customers could be maintained or even improved

in a network re-engineering exercise.

This would not be an issue as long as the network redesignexercise puts a minimum lead time/distance constraint whileserving customers in the new network

Longer Lead-times to

Customers

Often SKUs needed by customers are not available at thewarehouse meant to serve them although they may be idlingat another warehouse.

This is especially true for slow moving items. With stockaggregated at fewer warehouses, the planning andassortment availability improves for slow moving SKUs.

ImprovedAssortment


14/23

Pros &Cons of Network Re-Engg.

Pros

Reduced fixedwarehousing costs

Reduced Inventory(inverse square root law)

Simplified planning

and reduced warehouse

and C&FA management

Cons

Higher Lead time tocustomers

Possible higher freightcost especially secondaryfreight


15/23

Summing Up Service Patterns

There is increased reduction in the number of warehouses required tohave the same service levels.

There is a reduction in primary freight cost due to consolidation of

freight.

Secondary freight cost may increase because of increase in the weightedaverage distance between the warehouse and the customer & if re

engineering not done scientifically.

Benefits outweigh the Cons.


16/23

Rise of 3 PL ?

Impact of GST

Service Patterns

Impact on the Warehouses and Spread



Approach


17/23

Industry Views on Readiness

Crisil report says the introduction of GST will result in greateradoption of a hub-and-spoke model in infrastructure segments such

as warehousing.

"Big corporations such as XX, YY and ZZ are planning to close down

their regional warehouses in the wake of GST coming in," "Manycorporations have approached us to handles their distribution and

logistics part to cut down the cost.

most of the leading manufacturers currently have 20-25 warehousesacross the country. "With GST, this will change and companies like us

will take charge," "We are building XX logistics parks with an

investment of Rs. XXX crore by 2011. By then, we will have XXX

million sq. ft. of warehousing space. Company X Spokesperson.


18/23

Key Parameters of Preparedness

Technology / Information System

Efficiency

Skilled labour

Modernized Hub

Large sizes, high throughputs and complex operations

Increasingly level and variety of services required by customers,

Increasing scarcity of skilled labour and real estate requiring vertical and

mechanised warehouses.


19/23

Automation

Network- Last Mile Delivery

Change Management

Investments

Key Parameters of Preparedness


20/23

Rise of 3 PL ?

Impact of GST

Service Patterns

Impact on the Warehouses and Spread


Readiness

Parameters

Approach


21/23

DIESL Approach

Investment in people: Huge investments in our people across all levels toensure required skills, experience and knowledge to manage intelligent

supply chain business. Intensive training and Hiring good quality SC

professionals.

Ready to use Multi client Facility / Hubs: Build logistics parks willaccommodate multiple clients and share common resources. Thesefacilities are / will be built at strategic locations such that we cover most

ofIndias economy.

Hub & Spoke Model

Investment in Technology: To manage the exponential growth, ensureaccountability and create visibility in our supply chain

We believe that investments in people, facilities and technology

will help us support the exponential business growth .


22/23


23/23

impact on service level

Documents