FT Issue 20_V1.2.
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H O W A G I L E
INSIDE
Starved For Credit
Mohan Suresh, the FISME
President, talks about financing
challenges for SMEs
BEATING THE DOWNTURN
A framework on how to
cut operating costs and
improve productivity
amid the economic
slowdown
BINAY GUPTA
ow quickly things can change!
H
Just around this time last year,
everyone in the country – the
government, media, industry,
capital markets – was bullish
about the continuing growth
prospects for the Indian economy. An 8.5-9 per
cent rate of growth in gross domestic product
over the coming two to three years was taken as
a given. The stock markets were at an historic
high. Ambitious Indian companies were making
historic acquisitions abroad, on a scale never
seen before. Quite simply, it was a win-win sce-
nario for all.
Well, as we enter into the New Year, the
change in the mood couldn't have been more
transformational. With an unprecedented global
financial crisis translating into recession in lead-
ing global economies including the United
States, Europe and Japan, the wind has certainly
been taken out of the Indian economy's sails. A
7-7.5 per cent GDP growth this year would now
be a good showing in the eyes of many. The stock
markets have had a spectacular crash. And India
Inc. is confronted by a significant slowdown in
consumer demand both domestically and
abroad. Moreover, access to credit has never
been tougher in recent times.
And the near-term outlook doesn't look too
bright either. So what should companies do in
this extremely challenging environment? Here is
a set of concepts, both financial and operational,
which sheds some light on the problem.
Cash-to-Cash cycle
With cash flows assuming greater importance
in the overall analysis of corporate health, par-
ticularly in the current scenario, the Cash-to-
Cash cycle becomes a crucial supply-chain per-
formance metric.
Minimising the time between cash payable
and receivable could prove really beneficial, con-
sidering the value it unlocks from the supply chain.
What is a cash-to-cash cycle? Put simply, it is
the length of time for which inventory must be
I S Y O U R
Rewriting The Rules
A look at how the balance of power
at workplaces has shifted back to
employees from employers
pg 3
financed, i.e., the time between when you spend
your money to when you get money for your
products.
In mathematical parlance, the cash-to-cash
cycle (C2C) is calculated based on three drivers
of working capital:

Days in inventory (DI) – the time taken to
turn raw material into sales of finished product.

Receivables outstanding (RO) – the number
of days from product sale to receipt of cash from
the customer.

Payables outstanding (PO) – the time taken to
provide cash payment for purchases from suppliers.
For an e-zine version for your friends and colleagues, write to us at fasttrack@safexpress.com
C O M P A N Y
Design in Partnership
collaboration between product
design and supply chain teams
pg 4
MESSAGE
The formula for C2C is: C2C = DI + RO - PO.
Let's assume, a company has 30 days of
inventory (DI), gets paid for its products in 45
days (RO) and pays its suppliers within 45 days
(PO). Hence, its C2C equals 30 days.
In terms of real businesses, these C2C cycles
differ for every company, subject to the respec-
tive business model.
The cycle is shorter for those who get
paid at the point of sale and have manage-
able inventories. It's longer for those who pay
Continued on Page 2
ISSUE 20, JANUARY-MARCH 2009
A survey exploring the level of
pg 6
LOOKING
FORWARD
The year gone by was a mixed bag as far as the
industry was concerned. The mood was bull-
ish in all quarters at the beginning of the year
as the India growth story continued to gather
momentum, and an 8.5-9 per cent growth in
gross domestic product over the next two to
three years was considered a given.
However, the script took a turn for the worse
in the second half as the extent of the global
financial turmoil became evident and Indian cor-
porates realised that they, too, would be affected
from the fallout – even if relatively less so, as com-
pared with other global markets. A sharp reduc-
tion in exports, growing number of layoffs,
reduced domestic demand, cutback in produc-
tion and a scale back in overall growth outlook for
the Indian economy – all are consequences of this
unfolding story.
And the shocking terror attacks of 26/11
have hardly helped improve sentiments
among investors – particularly since the target
was the country’s financial hub.
In such an environment, how can business-
es combat this slowdown? While minimising
operating costs would be the overall guiding
principle for many, a detailed micro-level
analysis of one’s core competencies might also
hold the key. Specifically, the challenge of
ensuring an efficient logistics network. And
this is where organised logistics service
providers could serve as ‘in-sourcers’ for their
partners, through their skilled manpower,
domain knowledge and dedicated infrastruc-
ture. This could go a long way in helping busi-
nesses better integrate their distribution net-
works and achieve operating efficiency.
While the forthcoming quarters will, no
doubt, be challenging, this just might be
the perfect opportunity for businesses to
lose the excess flab they have acquired in
the recent past. And an earnest focus on
logistics efficiency could yield significant
benefits.
Wishing you all a very happy New Year!
PAWAN JAIN
Chairman & MD, Safexpress Pvt Ltd
FT Issue 20_V1.2.qxd 12/30/2008 3:21 AM Page 2

their suppliers sooner than they get paid, keep-

ing inventory levels steady.
Why should it be reduced? The answer is
simple – long cash cycles mean bearing addition-
al costs for keeping the supply chain running. On
the other hand, a shorter cash cycle would help
in more frequent replenishment of stocks, thus
speeding up supply chains and increasing inven-
tory turns. The result? A reduction in capital
costs to feed that engine.
How can you reduce it? While individual
ways of shortening the cycle time depend on an
enterprise's business model, the three variables
constituting the C2C equation are the most
generic parts that one must work on.
Reduce inventory
This is the prime area for unlocking value in
terms of reducing working capital. One can adopt
the following measures to cut inventory levels:

More accurate demand forecasting – Ensure
that the production guys in the plant operate
based on real-time sales information. This will
ensure better demand forecasting accuracy and
hence, eliminate the need to carry inventory.
If a company sells into the channel and not
directly to the end user, it becomes imperative to
track end-user sales – the idea being to find out
what is the lag between production and sales. A
simple number, such as the ratio of finished
goods inventory to raw materials inventory could
help. Rising finished goods inventory could sig-
nal a lack of end-user demand. On the other
hand, an increase in raw materials inventory
might suggest growing demand, as a company
gears up for production.

Boost production cycle efficiency – Remove
inefficiencies through proper systems and
processes, which will ensure raw material getting
translated into finished goods quickly.

Increase supply chain turns – Buy your raw
ASSETS VS LIABILITIES
How to ensure that your bottomline follows the trajectory of your
topline? Flow ratio is an excellent indicator in this regard.
This idea is based on a contrarian view of what really makes for
assets and liabilities. Traditionally, all accounts receivables and
inventories are treated as assets and all accounts payables as lia-
bilities. Assets are good and liabilities are bad. Or is that really the
case? What makes you so certain that you'd be able to collect all
receivables? Or for that matter, can anyone guarantee that the
inventory – assuming it can all be sold – will hold its price? On the
other hand, payables are what you owe – most often devoid of
any interest. Thus it's an interest-free loan. That can't be so bad,
after all.
The Flow Ratio is a quantitative measure of this relationship
between assets and liabilities.
Flow Ratio = (Current Assets-Cash)/(Current Liabilities-Short-Term
Debt)
If the Flow Ratio is increasing, then one must take a hard look
at its three key components – receivables, inventory, and payables
– to try and make out why. As a firm grows in size, each of these
variables, almost by default, is bound to grow in size. What is crit-
ical is a fix on the relative rate of growth.
Therefore, compare the rate of growth of a company's rev-
enues with that of its receivables and inventory. If sales are being
outpaced by receivables or inventories, you have a warning sign –
the revenues might not be real. Ideally, and this is purely a statis-
tical thing – your flow ratio should not be more than 1.25.
If however, you are a small or emerging business, the number
to really watch out for is debt-to-cash ratio; it helps indicate if a
company is growing its earnings from operations, freeing it from
interest payments. This ratio suggests how well a company is man-
aging its working capital (current assets and liabilities), and if cash
is being used efficiently.
Inability to manage working capital is the biggest reason for
failure of such enterprises as bankers lose faith easily and credit
can dry up at the first signs of trouble. Therefore, it is unwise to
let the debt-to-cash ratio go beyond 1, that is, you should be gen-
erating enough cash to service your debts at all times. The aim,
however, should be in the range of 1.5, though admittedly it's a
tough ask for a growing company.
CASH IS KING – For small businesses, at least
Financing presents the trickiest part of managing growth for
small enterprises who must manage their cash inflows/outflows
amid the ongoing volatility.
The consequences of growth –

Cash burner – Growth eats cash, fast, particularly if you offer
credit to individuals/customers while also funding your expansion.

Need to invest in resources – Be it labour or equipment, one
has to invest in these resources, which will invariably not be oper-
ating at full capacity and become productive immediately.

Difficulty in hiring the right talent, and that too in ample num-
bers.

Challenge in getting your suppliers to deliver on time.

Lack of systems to handle business becomes an impediment.

Growing money pressures as rising sales may not reflect in
immediate cash.
Of all the above, the final outcome can be killing; undercapi-
talisation is a small business' worst nightmare.
THE WAY OUT –
Apart from keeping in mind the debt-cash ratio, sales is anoth-
er area to be very careful about. While sales do indeed bring prof-
its, sometimes they don't yield enough cash, at least in time. The
lure of sales is hard to resist but you must know your limits and be
willing to forego sales.
Companies – at least the young ones – run on CASH, not on
profit.
capital cycles by extracting more value from their

material more frequently in smaller quantities to

increase cash flow and slash the carrying cost of
inventory. However, this may result in an increase
in the cost of acquisition per unit. So, figure out
the trade-off before making changes.

Reduce safety stock – The need to keep safe-
ty stocks will be reduced through improvements
in the first three variables. Set a target to elimi-
nate the need for safety stocks.

No purchasing errors – A reduction in pur-
chasing errors will mean less overstocking and
will minimise stock-outs.

Eliminate delivery variance – Devise a strat-
egy, in conjunction with vendors, that leaves no
room for delivery ahead or behind schedule.
Provide suppliers with forecasts of future
requirements. Better still, implement vendor
managed inventory (VMI) systems.

Streamlining product portfolio – Focus on
"maximising efficiency" and push less number of
varieties into the market. This is in contrast to
the idea of "maximising sales" in good times
when inventory and distribution points are
increased for the obvious reasons.
The rationale behind this approach is that
companies must realign their plans with the
changing patterns in consumer behaviour in an
economic downturn, where excessive buying
gives way to "what I need" mindset.

Sale at incremental margins – Clear your
inventory, particularly the relatively non-core
assets, through discount sales, at marked down
prices. The real estate sector is a good example
of this where the industry is trying to free up cash
through sale of non-prime properties.
Payables outstanding
There are several ways to do this, such as
increasing automation through paperless invoic-
es, electronic data exchanges, electronic fund
The Efficient Consumer Response
initiative could, in the current
economic environment, go a long
way in streamlining the supply chain
and serving consumers both
better and faster – and at lower
costs as well
transfers, etc.; integrating enterprise resource
planning systems; negotiating payment terms in
your favour; taking up payment discounts; per-
sistently improving your purchasing process by
eliminating inefficiencies internally as well as at
supplier ends; and reducing errors in processes.
Receivables outstanding
This has a lot to do with the industry one
operates in and the business model followed by
the firm. If your supply chain is able to ensure
delivery, in time, exactly as per the customer's
needs, reducing the days to receivables won't be
difficult.
Other means of slashing account receivables
include reduction of collection cycle, tighter
credit policy, reducing the terms of credit, short-
ening the invoicing process, reducing billing
errors and reviewing the accounting process peri-
odically.
Collaborative approach
It might also be useful for companies to
explore potential areas of collaboration with sup-
pliers and even competitors, to share costs – con-
sidering the volatility in business outlook. This is
because the ability to react to change is often
determined by the behaviour of the network
rather than any one player in the network.
One can remember the instance in 2003, the
last time India encountered a significant slow-
down, when leading companies in the FMCG
industry – HLL, P&G, Godrej, Marico, Nestle,
etc. – came together, along with some logistics
solutions providers, to roll out the Efficient
Consumer Response (ECR) initiative.
Under ECR, companies will share their sup-
ply chain infrastructure so as to enable real-time
exchange of data between suppliers, manufac-
turers, logistics companies and distributors, with-
out any additional costs.
This approach, in the current environment,
could go a long way in streamlining the supply
chain and serving consumers better and faster –
at lower costs.
The logistics way
Companies can also reduce their working
logistics operations, the objective being to cut
stock-outs and improve response times.
De-linking logistics with sales, wherein the
former operates independently of sales, can be a
good start. Instead of the sales force pumping
excess stocks into the channel, one could try out
a system in which the front-end sales force mere-
ly books orders from the channel and the move-
ment of stocks is decided by the logistics man-
agers.
Channel-based distribution could be another
approach, albeit a more radical one. So far, the
bulk of distribution strategies have been worked
out according to product categories – e.g. deter-
gents, cosmetics, personal care, etc. in case of fast
moving consumer goods sector. However, quite a
few players in the FMCG space are experiment-
ing with a distribution model segmented by the
type of retailer – namely Key Accounts, A-class
Outlets and B-Class & Kiosks.
Key Accounts are large grocery chains such
as Subhiksha and Foodworld, whereas A-class
Outlets represent large neighbourhood stores
with sales of over Rs. 30,000 per month. Finally,
the smaller shops and the kirana stores, which
come under the B-Class & Kiosks segment.
Such segmentation makes sense because the
drivers for each channel are different. In depart-
mental stores, consumers can shop at leisure,
pick up the stuff and read about the product.
Optimising shelfspace is the key. In large outlets,
the consumer is attracted by the pull created by
advertising. For the smaller outlets, trust and
saleability are the most important.
Having separate managers for primary distri-
bution – between the factory and clearing and
forwarding agents – as well as secondary distri-
bution, from stockists to retailers, could also be a
way out. This would help moving from a "push"
distribution to a "pull" system, where forecasting
is driven by what the retailer wants.

JANUARY-MARCH 2009
2
FT Issue 20_V1.2.qxd 12/30/2008 3:22 AM Page 3
LEADERS
DESPERATELY SEEKING CREDIT
Mohan Suresh,
President, Federation of
Indian Micro and Small
& Medium Enterprises,
talks to Saheem Wani
about the financing
challenges for SMEs
owing to the current
economic slowdown
mall and medium enterprises in
S
India provide livelihood to 31mil-
lion people through 13 million
units. The industry accounts for 13
per cent of the country's gross
domestic product and 40 per cent
of the entire industrial production. However, a
massive credit crunch over the last few quarters
amid global economic slowdown has meant that
the SMEs are hard-pressed to ensure the sustain-
ability of their businesses over the medium term.
What are the major challenges being faced by
SMEs owing to the current economic slowdown?
SMEs are reeling under a sudden fall in
demand in domestic and export markets, and the
drying up of long and short-term financial
sources. Also, there is high volatility in raw mate-
rial prices. The worst hit are the SMEs that
undertook expansion plans in the last couple of
years. Consequently, meeting sales targets and
profitability have become major issues. Based on
the feedback of 525 SME associations working
with FISME, textile and handicraft sectors have
suffered due to a demand slump in major mar-
kets. Moreover, housing, auto, white goods and
capital goods sectors have been affected by high-
er interest rates and tougher loan terms.
How has the slowdown, amidst tightening of
lending procedures by banks, affected credit
flow?
Industry estimates suggest that there has been
more than 50 per cent drop in lending to micro,
TIME TO FIND VIABLE SOLUTIONS
small and medium enterprises. Moreover, SMEs
that supply goods to large corporate sectors are
struggling, as their sales proceeds are stuck for
payment.
As the liquidity crunch is spreading across the
world, access to long-term finance has become
difficult for SMEs. In the third quarter of 2008,
money supplies became so constricted that SMEs
faced problems in even daily activities such as
getting overdrafts, financing letter of credit, etc.
SME exporters that subscribed to exotic forex
derivatives to manage their forex risks took a
severe beating as losses mounted owing to an
unexpected fall of the rupee against the dollar. A
whopping loss of Rs. 2000 crore has been report-
ed by the SME exporters alone.
Has there been any initiative by the government
to help SMEs survive in the current scenario?
So far, only the Reserve Bank of India has
Damodar Avanoor,
Vice President, Kerala
State Small Industries
Association, talks to
Saheem Wani
Has there been any initiative by the government
to help SMEs survive in the current scenario?
Prime Minister Dr. Manmohan Singh had
called a meeting in December, with representa-
tives from 20 SME associations across the coun-
try. We have given some proposals and Dr Singh
has assured us that they shall be taken up for
consideration. One major step that could
enable SMEs to perform better would be bring-
ing down the high transactional costs by the gov-
ernment.
JANUARY-MARCH 2009
taken steps to fuel liquidity. Substantial rate cuts
are being debated and perhaps would be
announced soon. A comprehensive package is
being considered by the central government,
which might include fiscal and sectoral measures.
What measures are being taken by SMEs?
Cost-cutting and holding onto cash have become our
top priority. Production has been reduced and temporary
jobs have been slashed, especially in sectors like textiles
and garments, leather, capital goods, gems and jewellery,
and auto components. The credit crunch has also
coerced many SMEs into shutting down temporarily.
What operational efficiencies is the industry
focusing on?
Restructuring of high-cost loans and realisa-
tion of sales proceeds are the top priorities.
Management of employees is equally important.
SMEs need to train employees for multitasking.
What options do SMEs have in order to handle
low credit flow and rising operational costs?
Under the present scenario, SMEs may turn
to the Credit Guarantee Fund Trust for Micro
and Small Industries, a credit guarantee scheme
jointly launched by the central government and
Small Industries Development Bank of India in
May 2000. Under the scheme, the lender has to
extend credit without any collateral or third-
party guarantee. Hence the collateral dilemma
enforced by banks on SMEs can be subjugated
to a large extent, making it easier for an entre-
preneur to tackle liquidity problems.
Are there any global best practices that can be
implemented by SMEs in India?
A major difference that lies between the US
and India is the ease with which one can gain
entry into the SME industry. While in the US, it
3
Also, global practices, such as lean manufactur-
ing and adoption of IT, need to be looked upon.
Considering the decline of old markets for
exports, is the industry tapping new markets?
The focus will now shift from the Western
markets to ASEAN and our own neighbouring
countries. Also, there are new opportunities in
the Middle East due to massive investments
underway in mega infrastructure projects.
What are the lessons learnt from the current
slowdown?
The biggest lesson is that excessive use of
monetary policy in containing inflation backfires.
In the last couple of years, continued tightening
of liquidity by raising cash reserve ratio has killed
the growth in rising sectors. Monetary policy
cannot be a substitute for deepening of reform
process to induce efficiency in supply side.

does not take more than ten days for clearances
from different bodies, in India an aspirant has to
approach a host of regulatory bodies, which
takes him around 45-100 days. If the procedures
were to be made less complicated, it would ben-
efit the existing and planned enterprises.
This difference is mainly due to the reliance
on the internet, which acts as a one-point inter-
face for getting clearances from all quarters such
as pollution control, legal departments, manu-
facturing standards, etc. Hence, the work
becomes fast and hassle-free in the US. This is
difficult in India as there is no such system in
place. However, steps are being taken in this
direction.
N.B. The interviews were conducted before
December 6 when the RBI unveiled its latest
rate cuts.

FT Issue 20_V1.2.qxd 12/30/2008 3:24 AM Page 4

INSIDE OUT
MONALISA DAS

t's the economy, stupid – this immortal

I
line from Bill Clinton during his success-
ful 1992 presidential campaign aptly
sums up the current job market situation
in India, and indeed around the world.
With the severe global financial crisis of
the past 12 months now translating into a full-
blown recession in the US, Europe and Japan,
stories about layoffs have become too frequent as
companies seek to cut costs in every possible way.
It's no surprise, then, that Indian corporates
too are feeling the heat as the domestic economy
suffers a significant slowdown – a 6.5-7 per cent
growth in gross domestic product would now be
considered a robust showing, as compared to the
8.5-9 per cent of recent years. And this is reflect-
ing in the job market as well – in several ways.
"Even if recession hasn't hit the Indian cor-
porate world directly, it has created a huge “Decisions have to be based on humanitarian grounds, raising
impact in the minds of both the management as the motivation level of people, and not cutting costs blindly”
well as employees across different industries," Dr Anamika Bhargava Mehra, Manager, Learning and Development,Tech Mahindra
remarks Dr Anamika Bhargava Mehra,
Manager, Learning and Development at Tech
Mahindra. "Earlier, there was no sense of inse-
curity among employees. Now they know they
need to go into a compromising mode in order to
save their jobs. Similarly, for the management,
the fear of financial crunch is dominating their
decisions. This insecurity is getting reflected in a
transition of power. While previously, the power
of employers and employees was aligned to meet
organisational goals, today, it is dispersed to save
individual interests," she explains.
With the constant fear of layoffs gripping the
minds of working professionals, corporate India
is witnessing a shift in the balance of power from
employees back to employers. "The ball is in our
court now," quips Sabu Thomas, HR Chief at
Ansal Housing & Construction Ltd.

Impact on employees

Salary “The unrealistic expectations of a 20-30 per cent increase in
A direct impact of the current scenario has salaries have withered, as the focus has now shifted to survival”
been on the salary structure of employees. As Sabu Thomas, HR Chief, Ansal Housing & Construction Ltd
part of their cost-cutting drives, enterprises
across aviation, information technology, finan-

CHANGING THE RULES OF THE GAME

cial, and telecom sectors have announced salary
cuts for employees by an average of 10-20 per
cent. A recent study carried out among 150
Indian companies by Hewitt Associates, the lead-
ing HR outsourcing and consulting firm,
revealed a 100 basis point reduction in the aver-
age salary projections for 2009 – at 13.9 per cent
– as opposed to a 14.8 per cent increase this year.
Apart from salary cuts, the management is
resorting to other means as well such as tempo-
rary salary freezes, slashing compensation for
variable pay, promotion freeze, postponing
appraisals, etc. Surprisingly, these measures have
been well accepted by employees, indicating how
their expectation levels have undergone a sea
change in such a short span of time. As Thomas
points out, "Somewhere, the employees are men-
tally prepared to compromise on their expecta-
tions. Until a year ago, the time was ripe for them
to demand a 20-30 per cent increase. This unre-
alistic expectation has withered, as the focus has
now shifted to survival."
Some companies, most notably in the manu-
facturing sector, are trying out innovative meas-
ures like devising "burden sharing" arrangements
with workers. This involves the employees agree-
ing to go on leave for a fixed duration, while
plant production is stopped due to lack of
demand, and the employer paying a certain per-
centage of their salaries – not their full compen-
As the balance of power at the workplace shifts from employees back to employers amid the economic slowdown, Fasttrack explores the changes taking place in job-market dynamics
sation. Relatively new to the Indian workplace,
this practice could become an emerging trend,
particularly if the economic slowdown is a pro-
longed one. This approach offers a middle path
for both parties, with employers able to reduce
costs and staff not getting laid off outright.

Attrition
Another remarkable effect has been a sudden
reduction in attrition levels. As most companies
put the brakes on their hiring plans, employees,
too, are avoiding the risk of switching jobs in a
volatile market – something unimaginable even
12 months back. The general mood is to stay put.
Mehra explains, "Earlier, the main reason for
quitting a job was the lure for a better package.
Or else, people also left if they had some issues
with colleagues/bosses. The ongoing slowdown
has made them realise not to place unreasonable
demands and to cooperate with team members.
The current priority is to save whatever is in their
hands."

Productivity
However, not all's gloom and doom as a result
of this changed environment. Many companies
claim that they are witnessing an increase in the
productivity levels of their employees. "This is a
positive outcome of the slowdown," says Mehra.
Through longer work hours and work weeks,
the management is trying to make optimum util-
isation of its available manpower, instead of hir-
ing new professionals. "We have reworked on
processes and the systems internally which will
definitely result into higher efficiency, a higher
level of productivity and timely delivery of tar-
gets from our employees now. Currently, we need
our employees to be more innovative and work
harder, even over-time, so that we can face the
challenges of the slowdown," says Thomas.
Fifty seven per cent of the respondents in the
Hewitt survey are trying to reduce their HR
budgets by raising productivity of their employ-
ees, while 31 per cent are seeking to achieve the
same objective through redeployment of man-
power across projects.
Moreover, companies are focusing on strate-
gies such as role streamlining, whereby they are
eliminating duplicate roles that can be managed
single-handedly. Mehra explains, "The idea is to
make every employee think – can I do a little
more, can I perform a little better. The money
hasn't vanished from the market. Only its flow
has slowed. As professionals, we need to generate
the cash flow and make it flow in our direction."
Boosting morale
Amid all these transformations, the role of an
empathetic HR policy becomes all the more
important. With employees facing a more
demanding workplace, an attempt on the part of
employers to make this situation less stressful for
their staff could prove a real morale booster.
Behavioral training teams could play a crucial
role here, in motivating the employees so that their
productivity doesn't get affected by the current chal-
lenges, rather it can be further raised. As Mehra
points out, "In the current slowdown, the manage-
ment needs to realise that decisions have to be based
on humanitarian grounds, raising the motivation
level of people and not cutting costs blindly."
Agrees Thomas: "Cost control under the cur-
rent scenario is inevitable, but we have imple-
mented measures across the board not only to
achieve a sustainable business model but also for
a high morale among our people." Hence, the
management needs to evolve ways that reduce
expenses, without putting jobs at stake. Focusing
on reducing rentals, electricity consumption, and
other such expenses can be a way out.
The Hewitt study states that companies are
looking at reducing expenses that come under staff
budget, such as travel and recreation, training, etc.
These subtle ways of reducing costs are more
effective as they do not affect employees directly,
nor do they raise their sense of insecurity.
Word of advice
While the HR departments seek new ways of
combating the slowdown, it's time for employees
to be on their toes. Mehra says, "This crisis is a
way to help us see the positive side and to
improve ourselves as professionals."
Even more so for young professionals and
fresh graduates, who are having a tough time in
trying to enter the corporate world. There are
graduates from business schools and engineering
The average salary projections for
2009 have been cut by 100 basis
points to 13.9 per cent, as per a
recent study by Hewitt Associates
colleges, who qualified in their campus selection,
but were later asked not to join the company,
owing to the current slowdown. According to the
Hewitt survey, around 20 per cent companies
have either slowed or stopped their hiring
process. Even a report by the International
Labour Organisation says that global unemploy-
ment will raise by 20 million in 2009, taking the
figure from 190 million to 210 million.
Under such circumstances, there is a need for
young professionals to be very focused about
their career plans. "Almost 70-80 per cent peo-
ple I interview are not clear about their goals,
and nearly 80-90 per cent simply come for a
salary increase. This is a wrong approach," says
Thomas. "Rather, they should look at the value
that the organisation will offer in achieving their
long-term professional aspirations, and also what
they can offer in return. They should study about
the organisation and its people, and enquire
about growth prospects, induction process, etc.,
from the interview board before taking up a job,"
suggests Thomas.
Mehra suggests a three-step process that
she calls a formula for professional success. "In
the first ten years of one's professional life, one
should focus on learnings and not money. The
next ten years should be dedicated for making
money. And after this, one should work on
one's position in the organisation and the
industry."

JANUARY-MARCH 2009 JANUARY-MARCH 2009

4 5
FT Issue 20_V1.2.qxd 12/30/2008 3:25 AM Page 6
THE AGENDA
COLLABORATIVE PRODUCT DESIGN
Quick product launches that have unique specifications hold the key to grabbing consumer atten-
tion, and this calls for strong collaboration between product design and supply chain departments
MONALISA DAS
n ever-increasing array of products in
A
the marketplace has left consumers
spoilt for choice today, making their
demands highly vulnerable to moods,
trends and fashion. Under such a sce-
nario, it is becoming imperative for
manufacturers to offer innovative product s that hold
on to consumers' attention. Designing unique prod-
ucts and bringing them to market at the earliest has
become a top priority. This has brought into sharp
focus the role of interaction between the product
design and supply chain teams in an enterprise.
Fasttrack approached organisations across differ-
ent industries to explore the current status and scope
of the relationship. The survey revealed that in the
last five years the two teams have given up their dif-
ferences to work in a more collaborative environ-
ment. Around 67 per cent participants recalled that
initially their design teams expected the supply chain
Percentage of respondents
to deliver raw materials and finished products faster.
Also, 33 per cent stated that their design teams want-
ed the supply chain to provide exclusive raw materi-
als. On the contrary, the supply chain would respond
with long lead times, owing to uncertainties in
orders. Eighty three per cent respondents often faced
this problem. Moreover, 67 per cent informed that
their supply chains were under constant pressure to
keep inventory levels at their minimum. This con-
flict of interests resulted in mutual dissatisfaction,
with both sides often unable to meet their targets.
Hence, they experimented with the idea of working
in collaboration and it turned out to be successful.
Companies where supply chain and product
design teams are working in tandem have seen their
customers' satisfaction level going high. Around 67
per cent companies have recorded an increase in
their sales. Moreover, 33 per cent are enjoying a
more trustworthy relationship with their customers.
Before one addresses the impact of the collaboration
in detail, it would be useful to study how these posi-
tive outcomes have been achieved.
Means of collaboration
One of the most common ways of the alignment
has been by seeking inputs from the supply chain at
different stages of product lifecycle management.
Around 67 per cent respondents have followed this
formula. This helps the design team to make more
feasible plans, as the supply chain apprises them
about the availability of materials at the planning
stage itself. Hence, they design the product accord-
ingly. This involvement also keeps the supply chain
updated about the requirements that shall be expect-
ed from them once design is completed.
Another way of collaboration is through forming
a core team comprising some members of both the
supply chain and product design departments.
Thirty three per cent respondents have adopted this
method. Another 16 per cent informed that they
80
70
60
50
40
Reduction in inventory
30
20
10
0
Impact on SCM
Product Design
Assessment metrics of collaboration
plan sourcing of raw materials according to region-
specific design preferences. Hence, product design is
done keeping regional tastes in mind and instead of
centralised procurement, supply chain functions in
a decentralised manner, catering to regional prefer-
ences.
Impact on efficiencies
These steps have helped 50 per cent companies
reduce their inventory levels. As the supply chain is
kept updated regarding requirements, it procures
only what is needed, thus avoiding piling up of raw
material inventory. Another significant impact has
been on product specifications, claimed 50 per cent
participants. As supply chain is involved throughout,
the design team doesn't have to compromise on the
product specifications at later stages of the workflow, The design
owing to sudden unavailability of a particular raw
material. It designs the specifications in a manner
that the product can be produced.
teams, in case
Moreover, as the two teams are working togeth-
er, they are able to meet their targets faster, resulting
of around 67
in more product launches. Earlier, they were
unaware about the developments at each other's per cent of
ends, hence the work often got delayed. But collabo-
ration has expedited the work process. Sixty seven
per cent participants claimed that in the last five
the respon-
years the frequency of their product launches has
improved due to the alignment.
dents, have
Impact on relationship sought inputs
Along with improving operational efficiencies, 83
per cent participants feel the collaboration has also
resulted in a better understanding between both the
from their
Better product specifications
Frequent product launches
supply chain
teams regarding each other's constraints and expec-
Increase in sales
tations. Another 67 per cent said that the confidence
counterparts
More trust
level in each other and team spirit have increased in
the last five years. All participants unanimously
agreed that this attitudinal shift is the most valuable
Impact on Impact on Customer
achievement for their organisations. at different
Satisfaction An overwhelming majority, 83 per cent, of com-
panies are looking forward to take this collaboration
to a higher level - through further interactions
stages of
between the two departments. Sixty seven per cent
respondents informed that they are upgrading their product man-
technologies in this regard, such as implementing
enterprise resource planning and investing in com- agement
munication systems. This will enhance sharing of
relevant information between the two teams, lead-
ing to more transparency. Another 50 per cent are
planning to work as one team instead of two sepa-
rate departments. These steps are likely to further
improve operational efficiencies for organisations.

JANUARY-MARCH 2009
6
FT Issue 20_V1.2.qxd 12/30/2008 3:27 AM Page 7
CONCEPT
SUPPLY CHAIN STANDARDS
Setting the right supply chain benchmarks can go a long way in attaining
overall organisational objectives. Some guidelines on how to go about it
SAHEEM WANI
ou are on the right track when you
Y
know where you are and where you
are going. That's exactly how effective
benchmarking helps companies judge
competition and beat it. Through a
six-year study conducted across 70
diverse supply chains, AMR Research helped answer
key questions like – what constitutes a valid bench-
mark, how to compare internal data to the bench-
mark data, what conclusions to draw from this data
and finally how to modify the conclusions into pri-
oritised projects in order to achieve goals.
Adopt a holistic approach
Companies are mostly driven towards bench-
marking in order to form a baseline for comparison
with competitors, look for industry-wide best prac-
tices, or set and prioritise targets. However, they
often end up analysing each metric individually and
overlooking their interdependence.
A salient feature of ideal benchmarking lies in
totality and not in isolated metrics. This implies
looking at the relation across metrics, identifying the
trade-off each metric involves, and how these trade-
offs are aligned with the overall business objectives.
Comparisons done in isolation could lead to erro-
neous judgments. For example, a company may
lower its transportation costs to match a rival, but it
may not consider the long transit times that cheaper
transportation may result in.
Prioritise metrics and define scope
Key metrics get overlooked when companies
benchmark too many parameters. A company meas-
ures the cost for logistics, only to realise that it has
overlooked the total supply chain costs. To minimise
such errors, the number of metrics for quantitative
benchmarking should be condensed.
Besides, it is also essential to define the scope of
benchmarking. Companies usually have multiple
supply chains within their global operations. The
composition of each of these chains is unique and
varies across organisations, geographies, etc. For
example, a food and beverage manufacturer sells
both dry and frozen goods. Naturally, the transporta-
tion costs for the two would vary as refrigerated
items would require more expensive refrigerated
vehicles and cold storage facilities. Hence, aggregat-
ing the costs for both the types into one would make
the data irrelevant.
While defining the scope one needs to think at
the metric level and identify products, channels, and
geographies for which the data can be reasonably
combined to ensure that a level of aggregation is not
so large that disparate performances are combined
to give a meaningless result, and not so small that
one is so short-sighted that it becomes ineffectual.
Compare SCM characteristics
Comparison of beverage production with an
automotive supply chain – sounds strange, right?
However, this makes business sense as both have sim-
ilar supply chains. A peer group from within or out-
side the organisation should be set for comparison.
For an appropriate comparison, supply chains
with similar characteristics, such as comparable pro-
curement strategies, or equivalent distribution sys-
The Benchmarking Process
Metrics—Select the key metrics to measure and compare
Define Scope of Benchmark
Supply chains—Define the supply chain/s to measure
Identify Peer Groups
Collect and Validate Data
Analyse and Interpret Results
Role of the Coordinator

Data collection, coordination and accuracy

Identify tools and resources

Track execution of actions
Ideal benchmark-
ing implies looking
at the interdepen-
dencies across met-
rics, identifying the
associated trade-
offs and their
alignment with
overall business
objectives
tems, should be selected. Cases where different busi-
ness decisions have been made are noteworthy, as
they showcase how a certain strategy is able to
accomplish goals. There are many instances where-
in a company had outsourced some operations to
reduce its costs and failed to achieve it, but did not
realise this until it benchmarked.
Steps in benchmarking
Like any other management initiative, bench-
marking is a team effort that involves coordination,
different processes and time management.
Each benchmarking task requires a sponsor, who
is usually the head of the supply chain, to lead the
project and a coordinator to manage the data collec-
tion, people, tasks and analysis. The process for
benchmarking can be broadly catagorised into sev-
eral well-defined steps.
As explained in the figure, the basis of bench-
marking lies in the collection and validation of data.
It is a time-consuming process, full of unexpected
challenges. Hence, use of technology and data man-
agement systems that help in the collection, analysis
and retrieval of data is very important.
JANUARY-MARCH 2009
7
PRIORITY
Deliver Results
Act on Results
Source: AMR Research, 2008
Convert data into action
Often companies find themselves loaded with
stacks of immobile data, clueless how to translate
these into goals. Complexities could arise as a result
of incomprehensible data or individuals taking
offence to the shortfalls implied by the benchmark-
ing figures. However, it depends on the company's
policies how it utilises the data. Companies should
assure their employees that the results will be used
for continuous improvement and to identify problem
areas in the entire system rather than in individuals.
An even better way could be to reward people
who identified trouble areas. Successful interpreta-
tion of data needs a systematic governance model
with well-defined rules that motivate data trans-
parency, comparative analysis, overcoming cultural
differences, etc. The benchmark data might raise
innumerable areas for improvement. Hence, it is
important to categorise the data into three levels of
priorities. These include:

Instant action – These are problem areas which
need immediate rectification. Once corrected, these
will affect other areas as well. For instance, improv-
ing suppliers' performance will automatically affect
production schedules, inventory levels, etc.

Consistent improvement – The company might
be at par with the benchmarking index in these
fields, however a little boost would pay off better. For
example, if the USP of a company is to launch new
products frequently, then it needs to revise its bench-
marks of lead time and product innovation constant-
ly, in order to have an edge in the market.

Supervise – Metrics that exceed the set targets
by far and need only monitoring to ensure conti-
nuity. For instance, the transportation time may be
at par with the set targets and there may not be
scope for further reduction, considering the routes
available. Hence, this metric can be revised only
occasionally.
Be consistent
After completing a successful benchmarking proj-
ect, most of the companies find themselves amidst
heaps of data which they fail to put to lasting use.
However, strong leadership, process adherence and
a focus on continuous improvement could go a long
way in achieving that consistency.

WINNING
ACCOLADES
T
he month of October witnessed
Safexpress partnering with
National Institute of Industrial
Engineering (NITIE) as their ‘Official
Logistics Partner’ to present their
9th Annual Corporate Event –
‘Lakshya 2008’. Safexpress also pro-
vided insight into the working of
Supply Chain sector besides intro-
ducing the corporate and the NITIE
fraternity to the concept of ‘cam-
pus2home’. The third day of the
event had an award ceremony to
honour industry leaders who have
revolutionalised the Indian industry.
Mr. Vineet Kanaujia, GM-
Marketing, Safexpress was one of
the selected jury members to judge
the winners of the B-Plan Contest.
Later, in November, Safexpress,
under its
Responsibility,
Corporate
organised
Social
the
‘Voluntary Blood Donation
Movement’ at its corporate office.
The campaign saw an impressive
response with more than 60
Safexpress employees donating
blood to make this initiative a suc-
cess.
The year ended on a note of
applause and recognition. A
momentous occasion for Safexpress
was on November 20th when Mr.
Pawan Jain, CMD, Safexpress
regarded as Industry ‘Logistics
Guru’ was felicitated with ‘Indira
Gandhi Priyadarshini Award’. The
award is in recognition to his out-
standing achievements and contri-
butions to the Indian Logistics and
Supply Chain industry. The jury
comprised eminent personalities
like Dr Bhishma Narain Singh
(Former Governor), Dr. G.V.G.
Krishmanurthy (Former Election
Commissioner), amongst others.
Safexpress was recognised as the
country’s Best Logistics Company
after winning the ‘Franchise Supplier
of the Year’ Award at the Franchise
India 2008, Asia’s biggest Franchise
and Retail show organised by
Franchise India in association with
the India Franchise Association on
November 30th.
FT Issue 20_V1.2.qxd 12/30/2008 3:27 AM Page 8

OFFBEAT

COMBATING THE DTH ONSLAUGHT

A look at how local cable operators are trying to retain their consumer base amid the threat posed
by direct-to-home operators. Or is it simply a lost cause? Fasttrack finds out
SAHEEM WANI TV. This is a major challenge for cable These apart, local cable operators can call the operator to ask for their "Competitive pricing at an average of
operators, who are still learning to have to compete with DTH on other favourite movie, music etc. and it shall Rs. 100 across the nation, with the
uge promotional organise their business. It's also the fronts as well. By the looks of it, DTH be provided to them. Pay-per-view is a exception of metro cities where it is in

H
offers, star-studded ad
campaigns featuring
the Khans of
Bollywood, and high
customer services –
direct-to-home TV has hit the Indian
market in a big way. Such has been its
impact that the subscription has
almost doubled from 4.5 million in
March to 8.9 million in November. So,
does this mean that all is gloom and
doom for the 60,000 local cable oper-
ators in the country?
Challenges
Vikki Choudhry, Chairman and
Managing Director, HomeCable,
explains the scenario, "Although cable
television was launched way back,
almost 17 years ago, unfortunately it
continued functioning in an unorgan-
ised and unregulated manner. In con-
trast, DTH was launched recently in a
more organised and regulated envi-
ronment, giving it an edge over cable
main reason behind the quick success
of DTH." Delhi-based HomeCable is
one of the leading cable television
service providers in the country.
Cable operators are also a victim of
the step-motherly attitude of the gov-
ernment, vis-à-vis DTH operators,
claims Roop Sharma, Director of the
Cable Operators Federation of India.
"The Telecom and Regulatory
Authority of India has recommended
to raise foreign direct investment in
DTH to 74 per cent, whereas for cable
business it has been limited to 49 per
cent only," she says.
Sharma adds, "If you look at the
areas notified under the conditional
access system, the basic rentals for the
set-top boxes and the pay channels
have been fixed by the TRAI. This
makes cable TV services more expen-
sive than the DTH, where the compa-
ny is free to raise or slash prices. Cable
operators need equitable pricing for
the same content."
seems to be way ahead in the league.
With technology on its side, it offers a
television buff everything from high-
quality digital picture, stereophonic
sound and a wide range of channels.
It is accessible throughout the country.
Moreover, one can adjust the tariff
plan as per one's budget.
Strategies
So how are cable operators trying
to meet these challenges? Well, intro-
duction of new services is one of their
big hopes. This strategy includes pro-
vision of digital services wherein the
existing analogue mode would be
swapped for digital systems ascertain-
ing top picture quality at par with
DTH.
"There are a host of new, value-
added services that are being offered
by cable operators now, such as digital
TV, video-on-demand, and pay-per-
view," informs Choudhry. Video-on-
demand is a service where subscribers
service whereby one only has to pay
for the channel one watches instead of
the lump sum that a consumer has to
pay otherwise. "These apart, cable
operators are improving their cus-
tomer services. The focus has been on
reducing complaint response times.
There has been a realisation that in
order to remain in competition, they
have to improve their efficiencies,"
says Choudhry. With extensive band-
width to operate from, cable operators
are also increasing the number of
channel offerings.
These apart, cable operators are
expanding their range of business
operations through providing broad-
band connections to customers, local
advertising etc.
Signs of hope
Another crucial aspect in this
ongoing tussle is the pricing factor that
is likely to give cable operators an edge
over DTH. Choudhry explains,
the range of Rs. 175 to Rs. 250 per
month, inclusive of all taxes, could
make cable the cheapest means of
entertainment in the long run.
Although DTH is presently being
offered at a subsidised rate for the sake
of acquiring customers, they could
soon raise their prices, charging any-
where up to Rs. 500 to Rs. 750 for a
single household."
Sharma claims, "DTH did manage
to nab five to ten per cent of the cable
consumer base initially. This was a
direct result of excessive marketing
and promotional propaganda used by
the DTH companies. However, our
statistics reveal that the figure has now
slipped to two to five per cent. People
are backtracking to cable."
While the jury is still out on who the
eventual victor will be in this fascinat-
ing battle, cable operators might just
surprise their more illustrious rivals if
they continue to innovate and offer real
value for money to their subscribers.

Fasttrack is a quarterly magazine on management, with a special emphasis on supply chain issues, brought to you by Safexpress Private Limited. The
magazine is committed to promoting business agility. Fasttrack reaches out to CEOs, finance heads and logistics heads of companies. We would be
A MINDWORKS MEDIA PRODUCT FOR SAFEXPRESS PVT LTD
happy to take on-board issues related to supply chain that you might be facing.
contact@mindworksglobal.com

JANUARY-MARCH 2009
8