Radical Thinking

Arshiya is a supply chain management company with a difference.

An Indian multinational listed on the main board of the Bombay Stock Exchange, the two year old company already has a market cap exceeding USD 350 million.

Arshiya President Paul Bradley, who worked closely with world ranked supply chain company Li and Fung’s Dr Victor Fung as part of the IDS senior management team that set up some of the company’s global entities, describes him as a real visionary.

After a long and fruitful affiliation with another transformational thought leader, Ajay Mittal from one of India’s top business families, Bradley recalls Mittal approached him to help build a new supply chain model for India.

Mittal, Arshiya’s Chairman and CEO had a challenge.

“India is about to rise and the market potential in the Middle East is also growing,” Bradley says.

“In four and a half years, 10 per cent of consumer purchasing in India will take place in retail malls, making India the fifth largest retail market globally. This equates to more than USD 124 billion in consumer spending.”

“There are over 800 malls being constructed in India today,” Bradley says.

“In 9 to 10 years India will become the third largest retail market on the planet. Just those numbers alone will tell you how much the supply chain will play a pivotal role.”

“So do we look at incrementally improving logistics in India? No.”

Bradley says he and Mittal searched the world for the most radical ideas and how they could integrate them.

“Our answer was to create a value chain umbrella with many different participating companies. A partner company can enter any part of it, but imagine the power when you connect them all!”

“That’s a radical concept for India.”

Under the ‘umbrella’, Arshiya customers can access 3PL logistics, 4PL supply chain services, standalone IT, FTWZ infrastructure and rail networks.

“All these services can converge through an integrated platform providing a unique competitive advantage,” Bradley explains.

“Arshiya is also affiliated with two US multi-billion dollar companies, with more strategic alliances likely to evolve,” Bradley adds.

“We can take the best global practices and networks, yet drive the company as an Indian multinational.”

“As an example of the transformation, our new 4PL entity is actually going to the CEOs and Presidents of Indian companies and saying, ‘Let us send a strike team of supply chain professionals from the Arshiya Group to fully analyse your product life-cycle, and map current processes and product distribution across your entire network,’” Bradley says.

“We then provide ideas to completely redesign the customer’s supply chain process.”

“We insert ourselves underneath them to execute the solutions with responsibility as a single point of contact and total transparency of costs and performance.”

“We ask for full access to the company for a month or two, including all its costs, salaries, product, manufacturing, interest rates, logistics, forecasts and minimum order quantity, everything.”

“These customers are providing us with information a traditional logistics company would never pursue,” Bradley asserts.

“And we do it for free. But if we can show them at the end of that month, that we bring savings and efficiencies, they agree to outsource control to us on a long-term basis, typically for a minimum period of 3 to 5 years.”

According to Bradley, managing a customer’s entire supply chain across all of India with every cost open and transparent has never been done before.

“There are no hidden spreads, but we charge a management fee and gain share,” Bradley says.

“And the management fee neutralises all of our core costs. It’s allocated to our senior management cost, where the real knowledge is and we build in our profit.”

“In addition, if we exceed certain KPIs, the company gives us a special bonus each year,” Bradley adds.

“If we can find new ideas to save money, a client will share part of it with us for the first year. This is a completely new concept to India.”

“Drawing from Li & Fung’s concept of aggregating volume in its factories, Arshiya has developed a new method of collaboration to aggregate warehouse capacity.”

“Li & Fung now has 7,500 factories which they don’t own but they negotiate a certain percentage of capacity in each,” Bradley explains.

“They’re buying raw material, aggregating it, connecting all these factories around the world and controlling the production on excess capacity.”

“If you buy a product in Australia, chances are Li & Fung had something to do with sourcing it.”

Arshiya on the other hand, is beginning to launch a multi-billion dollar investment in Free Trade Warehousing Zone Logistics Parks of 200 acres and more, connected by its own rail networks across India that extend into the Middle East.

Bradley says these hubs, along with the rail network will provide a leading edge advantage for product distribution across India while other parts of Arshiya offer global shipping services (Air and Ocean), Project Logistics services and 4PL supply chain capabilities capable of creatively adapting to the changing requirements of customers.

“We’ll use the warehouse space to our advantage for our own customers,” Bradley says, “but we’ll also open it up to a wide range of other companies because that provides mutual aggregation benefits.”

According to Bradley, warehouses in India are still very basic and mediocre by international standards.

“The real global state-of-the-art warehouses are still to be built and we’re building some of them,” he says. “Those are state-of-the-art strategic assets that we want to own.”

“But India’s a subcontinent. We need hundreds of other warehouses. Do we really want to build all these small, mid-sized warehouses across India? The answer is no.”

“We’d rather build five fully integrated super hubs, connect them using our own rail network, and virtualise the smaller tactical warehouse assets.”

Bradley says the process involves approaching warehouse operators who have eight or nine warehouses in Delhi, or five in Mumbai, Chennai, or Bangalore and offering to drive in business in exchange for extra competitive rates.

“We say to the owner ’Look, your warehouse is half empty. We’re a global company, we can aggregate the inventories of several companies, but we want to use your asset,’” Bradley says.

“You already own the building or you’ve put in a long-term lease on the building, you already have racking; we want you to invest in more racking.”

“You can depreciate and charge the depreciation costs back into the storage fee. But you provide the ground labour to un-stuff and stuff the container.’”

“We already have some warehouse partners who’ve gone out to lease new warehousing space because of business we’ve given them. It’s a win-win model,” Bradley says.

Unlike any other 4PL, Arshiya owns its own IT network and intellectual property through Singapore based company Cyberlog.

“Arshiya might have 10 different warehouses in India with completely different operators, but customers can go online using our Cyberlog system, and see the product on rack three, level two with full visibility,” Bradley explains.

“We’re a single point of contact. The IT system links several warehouses yet they’re all different companies.”

Bradley says Arshiya has freight forwarding, shipping, documentation, warehousing, cost component visibility and finance, all attached.

“We interface to SAP and INTTRA but we have no license restrictions. We sell new web-enabled, modular, cutting edge tools to other logistics companies around the world.”

“No version one, two or three. With hundreds of programmers, we can design new IT systems any time we want and our costs are controlled.”

“Importantly, this enables us to easily shift and adapt,” Bradley points out.

“One of our customers had a warehouse in Bangalore for example. But his sales started to change, increasing heavily in Chennai.”

“So within 60 days, we flipped his whole warehouse to Chennai instead. Without our system, he would’ve been stuck with a two-year lease on the Bangalore building.”

“We just said, ‘Dynamic supply chain. Why don’t we shift the warehouse to Chennai?’”

“The Bangalore warehouse said, ‘Well, we can’t because everything’s in Bangalore.’ But it’s all virtual. We made Chennai the hub in the south and they might not even have known we shifted it.”

“We’re now building our case studies,” Bradley proudly adds. “That’s part of our umbrella and we’re actually inside four different Indian retailers including a major group which has outsourced its supply chain to Arshiya.”

“Our customers have very visionary CEOs who are embracing this approach for competitive advantage.”

“Soon everyone will be trying to get into logistics in India, but they’ll all be moving product using basic logistics concepts”, Bradley enthuses.

“That’s why we’re excited. There’s huge potential because we’ve already jumped ahead to create a new business model for India with a menu of integrated value chain services.”

“This will define Arshiya’s future as a leader in both in India and Middle East marketplace.”

Leave a Reply

Send this to a friend