“We see the transformation across the chain in near future. Our focus is on lean logistics and advance warehousing for optimization of value chain along with collaboration with our suppliers through online portals sharing information on real-time basis. Supply chain of the future, while more complex, will be less expensive and more efficient with money spent across the four key variables: energy for transportation, labour, inventory carrying, and rent, which will further undergo a notable change,” envisions Sachin Chhabra, Head of Procurement and Supply Chain, India, Bombardier Transportation.
Bombardier has to its credit a global accreditation when it comes to building rail transportation. What were the challenges in managing supply chain in India?
India is the fourth largest country in the world from a Purchasing Power Parity (PPP) perspective and with 1.3 billion people, one of the youngest consumer base, rapidly expanding middle class, all these factors make a huge market for every kind of company in the world. We are young, ambitious, developing and fast paced growing country with our unique set of challenges. Some of challenges to manage supply chains in India are pertaining to quality of infrastructure which also has a direct impact on overall costs.
» If we compare supply chain costs, in developed economies like the US is in the range of 8~8.5% of GDP while in India, it goes as high as 13%.
» Historically, we have had complex tax structures which never made your life easy, we are simplifying by introduction of GST, and is a very welcome move of the government.
» National highways in India comprise around 2% of the road network but carry around 40% of the load. Shipments by roads generally take 2~3X time as compared to the developed world.
» Ships can stay up to five days to dock at ports, which can be improved significantly..
» Due to the presence of large number of intermediaries, product costs get artificially boosted, which decreases margins at the retail point of sales.
How do you see the rail infrastructure growing in India? How can it be brought at par with the global standards?
According to the UITP, by late 2014, there were 157 cities with metro systems across the world, with 53 added since 2000 and in 2016, some 2,700 km of metro lines are under construction. This trend for metros is expected to continue, especially in Asia. Government of India is encouraging cities of over two million citizens to develop mass transit systems. This translates into a healthy market for approximately 3,000 metro cars in the next five years just for India. Indian Railways has a bold and ambitious vision for our country. Ambitions of Indian Railways are huge and focused, with emphasis on improving safety, expanding rail infrastructure, increasing track capacity, reducing congestion, raising passenger comfort levels, technological innovations, and faster train speeds.
Rail is considered a significant engine of inclusive growth for India, with potential to contribute up to 2% of GDP, compared to current 1% levels. To maintain historic levels of national growth at 7-8%, railway needs to grow by ~9.5% every year. This will create millions of direct and indirect new jobs, save energy and improve the environment, while moving people, raw materials and goods more efficiently nationwide. Bombardier aims to partner in transforming rail transportation in India by not just bringing it at par but by setting up new benchmarks for the world.
How does the entire value chain look like specifically talking about supply chain?
By streamlining work processes, developing stronger relationship with suppliers and using technology, you can significantly improve company’s profitability. Supply chain is a vital part of this value chain where manufacturers, suppliers and contractors put concentrated efforts in providing value to direct and indirect customers to support company’s objectives. At Bombardier, Integrating the concept of sustainability into our sales strategy is a specific focus area at the operating level. We accordingly concentrate our sustainability activities on those parts of the value chain and interact where our influence on processes relevant to sustainability is the greatest. This reorientation is designed to optimize and standardize all supply chain and logistics processes as well as to increase supply chain transparency. Our entire supply chain comprises the following areas: procurement, production & processing, transport, warehousing and stores, customs & dispatches.
What are the latest trends in rail transportation globally as well as in India?
Around 8,000 new metro cars and 3,200km of new urban tracks were added in the last two years globally. Capacity and safety are very important for cities, it’s an unstoppable trend. Digitization is not just the new buzzword but a new future. Digitization helps us to increase capacity and deliver more and increased automation in everything we do: preparation, driving and maintenance. Digitization is both a challenge and an opportunity for companies. With possibilities provided by Big Data, Bombardier is using fresh ideas from start-up scene to reinvent itself and whole concept of mobility.
In terms of the environment too, it is imperative that the key issues of transport are addressed in a way that continually strive to improve ecological standards and protect the environment at large. The transport industry in India is now coming under a huge amount of scrutiny wherein issues concerning environmental standards and sustainability are concerned. Use and application of rail transportation solutions are an answer to this problem as rail transportation accounts for only 1% of the world’s CO2 emissions.
In addition, with government’s strong focus on e-mobility vehicles across the world, PRIMOVE is a complete e-mobility portfolio developed by Bombardier allowing cities and transportation industry to easily incorporate electric mobility. It includes wireless charging, compact battery and efficient propulsion systems for electric rail and road vehicles. PRIMOVE makes sustainable mobility a reality by reducing local CO2 emissions to zero. It eliminates noise pollution and integrates seamlessly into the environment.
Supplier selection is one of the most crucial aspect of your entire operations. How do you do that? What are the stringent measures that are being followed?
Choosing the right supplier involves much more than scanning a series of price lists. Choice depends on a wide range of factors such as value for money, quality, reliability and service. How to weigh up the importance of these different factors is based on our business' priorities and strategy. A strategic approach to choosing suppliers also helps us to understand how our potential customers weigh up their purchasing decisions. We follow a step-by-step approach that helps us to make right choices. It helps to decide what we need in a supplier, identify potential suppliers and final supplier selection. Some of key criteria are: willingness and ability to share market risk; ongoing performance; systems or services facilities capabilities; financial strength; location; and certifications.
Supply chain holds a critical connect in the entire business. What are the USPs of Bombardier in brining innovative SCM practices?
In today’s competitive landscape, though basics always remain the same, companies need to improvize ways of operations to maintain its lead position in the industry. At Bombardier, we aim to continuously optimize our supply chain and ensure efficient project and commodity management. We engage our suppliers early in the process to ensure flawless execution of our projects and enhance competitiveness through standardization and innovation.
Our plan is to establish strategic partnerships with suppliers and work out supplier development plans in the future. As a strategic level, we deliver top performance, leverage Bombardier’s global scale and integrate suppliers in mutually beneficial partnerships. At Bombardier, we are focusing on few initiatives:
» ‘Variablization’ of costs which is a paradigm shift from pure cost reduction. Supply chains must be agile and flexible, taking full advantage of increased instrumentation, interconnectivity and intelligence.
» Enhance real-time information and sophisticated modelling to predict outcomes and take actions ahead of time over vanilla inventory reduction exercises.
» Smarter supply chain operations matching demand with sourcing and manufacturing capacity around the world, instead of running each facility separately. Today, through Intelligent business analytics, we can track and synthesize demand & supply trends to evaluate the ‘what if’ scenarios.
How aligned are you with your global counterparts?
To leverage Bombardier’s full scale and combined knowledge, we have implemented a centralized global procurement & supply chain organization, not just for Bombardier Transportation but also Bombardier Aerospace. India is a very important part of this organization, which has common goals & objectives tied to the overall objectives for the company. This organization oversees company’s procurement, as well as their supply chains. It provides globally shared & united teams speaking with one voice to our key suppliers. Our ambition is a robust & cash positive supply chain across all business segments.
What are the SCM best practices being brought by you in India?
Companies that view themselves as dynamic and global establish prospects for themselves. At Bombardier, we have value propositions and supply chain best practices that separate us from competitors. For us, we know these value propositions are about surpassing the expectations of our customers from a total cost of ownership stand point. We not just try to understand trends but strive to lead them. We have a clear understanding in our organization that supply chain management can not only create service advantage but also acts as a catalyst for gaining new business. Few of Best Practices are: standardized product platforms; implementation of lean logistics; optimized inventory levels; balanced scorecards on supplier performance; and supply segmentation.
How has technology impacted the supply chain? What are tech tools implemented by you to streamline operations?
Technology is shifting the centre of gravity in supply chain world. With delivery time frame getting shorter and shorter, material flow is at centre of this shift. Traditional warehouse model is getting obsolete. On production end of supply chain where upstream parts feed the factories & then to start downstream journey which is end-to-end supply chain. We see the transformation across the chain in near future. Our focus is on lean logistics and advance warehousing for optimization of value chain along with collaboration with our suppliers through online portals sharing information on real-time basis. Supply chain of the future, while more complex, will be less expensive and more efficient with money spent across the four key variables: energy for transportation, labour, inventory carrying, and rent, which will further undergo a notable change. At Bombardier, we are working on each one of them to keep our pencils sharpened always and stay competitive in market.
How do you aim to deliver transportation excellence and innovation?
Expertise, creativity, market knowledge, sharing best practices across regions and vision are just some of the reasons why Bombardier is setting the industry pace in providing most innovative and cost-effective rail solutions in today’s market. We strive continuously to improve reliability, availability, maintainability and safety while supporting and strengthening sustainable rail transport. Predictive Asset Management, a ground-breaking capability, combines data gathered from rolling stock with Bombardier’s fleet knowledge and engineering expertise to enhance active management of vehicles and infrastructure maintenance, performance and operation.
We ensure product quality meets customer needs by developing standardized methodology and tools across the global organization. In the end, we can view the developed vehicle on high resolution ‘powerwalls’ – and even touch it. This innovative technology enables our team, as well as at management levels, to make considerably more precise and quicker decisions in real time and in different locations around the globe.
What are the sustainable supply chain initiatives taken by you?
For us, sustainability in supply chain encapsulates number of different priorities which is over and above the focus only on bottom line: Environmental stewardship; conservation of resources; reduction of carbon footprint; financial savings and viability; and social responsibility. Our recently launched MOVIA Maxx metro’s appeal with consideration given to best value for money in terms of passenger capacity, acquisition costs, energy consumption, reliability and availability is focusing on our priorities. In addition, we are in process of adopting supply chain sustainability practices like Collaborative Planning, Forecasting & Replenishment (CPFR) by making use of our online portals to collaborate with our suppliers. This is an important initiative that provides supply chain collaboration and visibility.
You have spoken about building a customer-centric supply chain. Can you please elaborate on that?
Customer centric supply chain and customer centric behaviors do become important topics for sloganeering and the latest buzzwords but cascading and translating customer centricity into DNA of organizations is yet to happen and is need of the hour. Historically, division of labor has been used to manage businesses which in today’s set ups, gets reflected in form of product organizations; functional organizations; regional organizations, etc. Customer centricity needs to dissolve these segments and create a bigger theme or mission of solving / easing a basic problem and that needs to become enterprise thinking. To build a customer-centric supply chain organization, I would focus on the following:
» Map the supply chain process which begins from the customer and ends with customer
» Implement Cost to Serve analysis to drive actionable results
» High Say/Do ratio; deliver as promised
» Establish Listening Posts
» Use measurables like balanced score cards cross functionally to drive behaviors.
What are the aspects that make up for an exceptional supply chain network?
A supply chain network can be strategically designed in such a way as to reduce the cost of final product. But unfortunately, it is observed that many companies, to begin with, have a divide between procurement and supply chain operations that robs the organization of vital efficiencies. Bombardier has worked hard globally to firstly recognize that gap and then to close it envisioning sizeable benefits.
Our Procurement and supply chain teams share responsibility of integrating between themselves and extending that integration outward, strategically, to suppliers. By considering both, their individual organization’s supply chain requirements and supplier organizations, supply chain costs and capabilities during contract negotiation or renegotiation, procurement professionals also gain access to some important new levers that they can pull to reduce total cost of ownership and improve the overall value of the supply relationship. Some key aspects related to drive these objectives are: demand forecasting and inventory planning; optimization of material lead times; and capacity planning both at suppliers’ and at our factories.
Has GST impacted your business?
Implementation of GST in India is a welcome sign for the industries and one of most important moves administration has made post liberalization. GST would be good economic driver for the country, which eventually will result in more investment for improvement of railway infrastructure. GST will bring more transparency and process driven approach with less documentation, which will give confidence to MNCs like Bombardier to operate, invest and Make in India.
With modernization and restoration of balance in the intermodal transport, rail transportation can be a significant engine of inclusive growth and development for India and can potentially contribute upto 2% from the current 1% GDP levels. With the impetus of GST, rail transportation will then, create new jobs, save energy, improve environment, while moving people, raw material and goods more efficiently nationwide.
As a supply chain leader, certainly, there has been minor impact in the way we handled business transactions as tax levies concept has changed, from pre-GST days where it was mostly on manufacturing (Excise) and sales (VAT) to post GST concept of supplies. It’s a journey which requires some re-alignment and planning and with this transformational approach, we are modifying some of our processes, realigning our business models to drive efficiencies and boost profitability.
What are the opportunities that India possesses for Bombardier?
Over the next 5-7 years, various cities in India will procure approximately 3000 metro cars and plan 20 signaling lines. The Indian Government expects 50 cities will have population over 2mn by 2050 and is encouraging them to develop mass transit systems. This will generate demand for the urban transit solutions that we excel at. We are focused on projects, which we consider as strategic and have long term prospects for our operations in India. We are closely pursuing various metro projects in the cities of Delhi, Mumbai, Pune and Bengaluru along with light rail projects in the state of Kerala amongst various other projects across cities in India. There are various projects of Indian Railways for delivering rolling stock, components, signaling and services and Bombardier is keen to participate.
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