“We always try to mould ourselves as per customers’ and market demands,” asserts KK Kaul, MD, Pantos Logistics India, a subsidiary of LG Group Korea. LG always strives to serve its customers with products & services that are nothing less than perfect. With the supply chain strategy revolving around ‘meet the market’, the company’s entire emphasis has been on meeting consumers’ demands in the shortest possible time to gain an edge.
LG’s tagline says ‘Life’s good’, how do you strive to live upto the customers’ expectations all time?
LG Electronics India Pvt. Ltd., a wholly owned subsidiary of LG Electronics, South Korea was established in January 1997 in India. It is one of the most formidable brands in consumer electronics, home appliances, IT hardware and mobile communications space. In India, LG has earned a premium brand positioning and is the acknowledged trendsetter for the industry. LGEIL's manufacturing unit at Greater Noida is one of the most eco friendly units among all LG manufacturing plants in the world. The second Greenfield facility is located at Ranjangaon; Pune has the capacity to manufacture LED TVs, air conditioners, washing machines, refrigerators, and monitors. LG Electronics India has emerged as the Most Attractive Brand of 2016 in a study of consumer influencers released by the Trust Research Advisory. LG was ranked No. 1 brand in India in the study that spanned across 16 Indian cities. All these aspects are testimony of the fact that LG remains a preferred choice of customers and would continue to rule in the years to come as well with its undaunted innovative spirits to deliver better than the best.
You have a vast experience in streamlining SCM operations in consumer electronics space. How have the dynamics changed from then to now?
The changes have been dramatic over these years. The customer demands have increased. Inventory management at the customer level has reduced. Today it’s the time to ensure immediate delivery and overall inventory control at the customers’ end. So, the entire supply chain dynamics have changed from stocking to sell. It has also resulted in faster delivery and minimum inventory carrying at the manufacturers’ and traders’ end. We call it ‘meet the market’. Our entire emphasis has been shifted to meeting consumers’ demands in the shortest possible time to gain an edge.
What are the complexities involved in managing SCM of consumer electronics space?
As you know consumer electronics industry is a very dynamic market and the models keep on changing rapidly depending on the upgradations and application expanse, the major issues arise in making the newest model available to consumers in minimum time. Consumer perception is also changing and he has become very demanding in terms of advancements. The biggest challenge is to meet customers’ demand and the availability of the product at the counter in the fastest way and how to achieve the turnaround of the product in no time so that customers’ demands are met immediately. In this scenario, as our manufacturing units are spread across the country, the major issue comes in terms of seasonality, transportability and the handing of products while in-transit.
The government hasn’t laid out any rule & regulation for transportation and the current infrastructure is not at par with the demand that we have to serve. It’s a time consuming process if we have dispatched a consignment from Noida to Kochi and sadly, it takes 10 days. The transit times are very high because of poor infrastructure.
What are the USP's of LG Electronics that make it stand apart from its competitors?
We always try to mould ourselves as per customers’ and market demands. Because of large network that we have, we have developed warehouses based on hub & spoke model. We have small warehouses across the country near the market and we have large warehouses in the vicinity of our factories through which we cater to small regional distribution centres. We have developed large network of transportation business through which we are catering to all our customers. We are also deploying all the channels of transportation be it rail, road or water to meet the seasonality. In consumer electronics, we have to work on two seasons – summer seasons where the demand for compressor products are high and second is Diwali season where again the demand is extremely huge. We have to prepare ourselves well in advance to serve to our customers.
With so many varied product ranges, how complex is the supply chain @ LG?
Forecasting is very important for managing supply chain. We do 12-week forecasting. Based on which we organize raw materials for our products. The accuracy of forecast may not be 100% but it gives us a fair idea about the demand pattern and give us a lead time to streamline the entire value chain be it inventory planning, distribution, logistics, warehousing space, etc. The key remains as to how good you are in forecasting the demand for your products. One has to be very dynamic in terms of accessing the sales data because essentially sales may or may not be happening every day. Accordingly you have to change your distribution pattern so that inventory management is ensured and the appropriate inventory reaches where the demand is. These dynamics need to be checked every day every hour. You need to keep on changing your distribution pattern as per the changing matrix.
What are the many firsts achieved by supply chain wing @ LG?
We were the first ones in bringing forecasting model for consumer electronics. We were the first ones to transport goods in close body vehicles. We were the first to operate & organize standard warehouses in India. In India, earlier there was no standard followed in warehousing design and management. We were the first to start built-to-suit warehouses for consumer electronics. We were the first ones to set up network optimized warehouses based on tax structure of each states. At that point in time companies used to feel that there is no need for n number of warehouses. They always believed in the concept of one warehouse catering to the demand from each zone but that was not a feasible idea knowing the poor state of affair of infrastructure in the country. We started opening the need based warehouses depending on the size of the market. That gave us an edge in meeting the customers’ demand in the fastest time frame. Long term contract with transport partners and warehouse management companies also helped us in achieving our goalpost.
What was the intent of setting up Pantos Logistics?
LG is a manufacturing & sales company and the management thought that the company should have an independent company to look after the logistics requirements of the company. Our role is to manage the logistics & supply chain of the entire LG Group globally. It’s basically a pick-up to delivery service arm of LG. We have also started taking 3PL operations of other companies. The idea was to channelize energies in bringing out the best products while Pantos Logistics would focus solely on reaching those products into the market in the shortest time. This resulted in systematic functioning because now there were not many people involved in transportation.
Pantos Logistics is the sole entity to deal with any challenges related to logistics but earlier there was an involvement of multiple parties which resulted in lot of ambiguities and ultimately made the entire value chain cost heavy. The communication has also been reduced drastically.
What are the complexities in managing such a gigantic business?
The major issue is the quality of operations, which are not upto the global standards. We are trying to bring in global best practices in operating warehouses and material handling. We are deploying racks in the warehouse and operational manuals in India which will help in imparting training to the people handling equipment. We are planning to develop standard transport activities wherein we can standardize the size of the vehicles. It should be based on the people skills who are loading the product. The person should exactly know the loading dimensions of the products.
Similarly, we are trying to standardize all the operations to enhance the quality of logistics & distribution. The aim is to root out any single occurrence of breakage of products or mishandling. We have also started home delivery of high-end products directly from the warehouse to again rule out chances of damages during transit. This way the product can also get installed simultaneously as per customers’ requirements. This significantly reduces lead times as well as handling. In turn, damages have been reduced and customer satisfaction has increased in terms of timely delivery and installation of the product. It’s been two years and we are witnessing significant customer traction from the time we have offered home delivery services to our customers. It has improved quality of delivery as well.
What are the innovations in packaging you have carried out?
We always keep on doing research with the packages in our manufacturing. We perform drop test for every product from all the angles of the box and all the corners of the box to examine if the quality of the box is appropriate during transportation.
We also perform transportation test. We simulate the transportation conditions at our factory lab where we keep the boxes in the real-time conditions and check the ability of the box to withstand adverse road conditions. We also impart training to loading & unloading people on the handling of products. We have also developed simulation of the product in the vehicle to determine the exact number of items to be loaded as per sizing dimensions. We also give training to the dealer team because they would be the end point of contact with the retailers or customers.
These days every company is going omni-channel to attract major market share. What are your thoughts on the same? How is LG poised to capture the growth trend?
In India, there are many formats available for reaching to the customer such as normal shops in neighborhood, large retail chains, regional specialty stores and online stores. I don’t think that one should limit the channels to reach to the maximum number of customers. India is a growing market and except TV, penetration of consumer durables is fairly small. We have a big market and the government is promoting digitization in a big way. There is a big scope for every player to co-exist.
At LG also, we are trying to optimize all the channels of retail to best serve our customers. We are working out on a strategy wherein we can leverage all the channels to gain access to the remotest part of the country. As far as our products are concerned, people want to visually see and then buy it as per their specifications & requirements. Most importantly, customer wants to be assured of the supply, and the after sales service. Online business is also supporting the new way of business, but primarily, it’s the traditional channels of sales that are still reigning when it comes to consumer electronics.
What are the complications that exist in today’s supply chain landscape and how can one root out the same?
The biggest point of supply chain will be decided once the GST is implemented in its entirety. Majorly supply chain is based on taxation. We need to see the supply chain taxation of India and the market. Currently we have to supply products based on state taxation policies. After GST when the cross-border sales will open, the logistics & warehousing paradigms will witness a dramatic transformation.
The warehousing will be based on the market, the infrastructure availability of the warehouse, the connectivity to the market and the distance to the market. The current logistics infrastructure, which is based on the market will change based on distance.Today I have to open a warehouse within a radius of 50km due to cross-border taxation issues, but post-GST all these will be null & void. After GST, transportation will also improve drastically. Everyone is preparing themselves to serve in the post-GST era.
Strategies to be GST ready
We are taking one step at a time. We are seeing if we can consolidate certain warehouses immediately and how can we best leverage hub & spoke model. We will reduce the warehouse size in the near future. Inventory pooling would be the biggest benefit that we aim to achieve. Instead of supplying to RDCs and then keep high & low inventory, if we can keep inventory in the hub, we can pool it based on the demand generated from the spokes.
Overall impact of the same would be reduced cost, controlled inventory and it will ultimately improve customer satisfaction. But for this to happen, all the IT systems need an upgrade. The taxation system will go for an overhaul. Networking modes will need to be changed to follow the targeted date of July 1. It’s a big shift from the usual working process and companies really need to start implementing the changes from now to reap the benefits in the post-GST era.
What are the policy initiatives that are needed to be brought forth to eradicate supply chain inefficiencies?
There is no government policy on logistics be it transportation, warehousing, etc. When we develop an industrial sector, the government needs to develop a logistics park along. After GST, it will be the need of the hour. Our transportation policy is critical to develop logistics industry. There are n number of various size of vehicles moving around carrying goods. Size of vehicles, weight of vehicles and the regulations to move those vehicles on the road need urgent standardization. No transporter since the last 5 years has invested into vehicles because of hurdles when they move on the road. There should be specified route planning for the easy movement and connectivity from one part of the country to another. Then there are additional challenges that are plaguing the growth of the industry. We need to have a better control of manpower movement.
Unionization needs to be abolished. Government needs to come up with a crystal clear logistics movement policy. There needs to be minimum & maximum norms as per seasonality of business. We don’t have port to operate, which is the biggest logistics bottleneck in India. There are not sufficient berths to support movement of goods. Manpower is a big issue in terms of strikes. Land development issue is also an issue. We have vast inland waterways but there is extremely poor network connectivity. If the government finds a way to develop inland waterways transportation, it will be a tremendous help to the industry.
What’s your message to young logistics professionals who would like to make supply chain as their chosen profession?
Of late, since last 3-4 years, people are taking up supply chain as a preferred stream which was never the case earlier. Supply chain is a continuous learning curve. There is a big scope for change and an equally big scope for doing something new. So you learn and implement new ideas and change business dynamics. One needs to learn from the past and apply best practices to enhance business prospects and make our products more saleable. I always tell my colleagues that profit can’t come from increasing the price, it will only come from controlling supply chain, improving your supply chain in terms of reducing time, faster turnaround and controlling cost as well as by improving delivery to your customers.
Your future plans…
We want to integrate for GST and set up our activity for GST. There will be integration of networks going ahead. We will be investing in warehousing and primary & secondary transportation in the near future.
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