smart logistics - august 2011

Vol. 02 | Issue 05 | AUGUST 2011 ` 100/-

AUGUSTAUGUST 2011 2011 • SMART LOGISTICS SMART LOGISTICS • 5

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VIEWPOINTIt is a smooth sail, but the question is… is it well steered? The sea transportation

segment is riding the growth waves and the figures substantiate this fact. About 90 per cent by volume and 70 per cent by value of the country’s international trade is

carried through maritime transport. The total volume of traffic handled by all the Indian ports during 2009-10 was 849.9 million tonne. While this is a reason to cheer, this segment still remains underutilised and its potential needs to be tapped in its entirety. The success of this segment becomes all the more crucial as the gap between the expected and the delivered has a direct impact on the EXIM figures and ultimately, on the earnings of the nation.

And there is hope… lots of it. India has the potential to become the fastest growing economy for the next 30 years and is more likely to occupy the second position after China by 2030, predict experts. The economic upsurge will be one of the important growth drivers of Indian ports in the years to come.

Talking about the future, as per the Maritime Agenda: 2010-20, the traffic at major ports is likely to grow at a compound annual growth rate (CAGR) of 8.03 per cent

from 561.09 million tonne by 2009-10 to 1,214.82 million tonne by 2019-20, whereas the traffic at non-major ports is expected to grow at a CAGR of 15.96 per cent from the present level of 288.80 million tonne to 1,269.59 million

tonne by 2019-20. Thus, the anticipated traffic at Indian ports would grow to 2,484.41 million tonne by 2019-20 from the present level of 849.89 million tonne at a CAGR of 11.32 per cent.

To achieve these glorious growth figures, this segment will have to really brace itself by developing new outlets, augmenting existing service centres, inducting state-of-the-art cargo handling equipment and improving logistics & allied services in order to meet the challenges emanating from the anticipated growth in the trade. Structural changes in the administration of ports will also improve organisational effectiveness. The ports must also attempt to operate with lean staff by extending IT to the entire gamut of operations.

While all this action is happening at the ports and this segment is gearing up to meet the anticipated demands, the need for additional path-breaking initiatives from the industry & the government has also been felt. To achieve the desired fortune and figures for this segment, it is utmost important to review the policies periodically to keep them relevant to the changing times and tides. If we, as a nation, are able to do all that is desired, through these initiatives, we are sure to navigate and steer the Indian maritime sector to the shores of success!

Archana Tiwari-NayuduExecutive Editor

[email protected]

RIDING ON THE VALUE & THE VOLUME WAVE

6 • SMART LOGISTICS SMART LOGISTICS • AUGUST 2011AUGUST 2011

Witnessing A Sea Change

INSIGHTS & OUTLOOK: SEA TRANSPORTATION

VOL. 02, NO. 05 AUGUST 2011

ALSO IN THIS ISSUE

VIEWPOINT 5

NEWS, VIEWS & ANALYSISLatest Happenings In The World Of Logistics 8

NEWS ANALYSISFood Storage & HandlingBuilding On Warehousing Capabilities 14

PRICE TRENDS 17

PRODUCT & ADVERTISERS’ INDEX 66

PRODUCT & ADVERTISERS’ INQUIRY FORM 67

CONTENTSThe sea transportation segment is witnessing a sea change and how! With the global trade registering a new high and the emergence of Asian economies as manufacturing superpowers, there is a transition in the globe trade. This shift is duly supported by the modernisation of port facilities, novel vessel designs, technology advancements and so on & so forth. With India aiming to achieve the logistics hotspot on the back of strong manufacturing capabilities, it remains to be seen how the government plays an enabling role in ascertaining smooth EXIM movement.

20

Indian Maritime SectorQuest To Achieve International Standards 27

SECTOR FOCUSChemical LogisticsTaking The ‘Green’ Route 43

One ‘Q’ Many ViewsHarbouring Success 24

INTERVIEW‘We Are About To Witness A Paradigm Shift In Sea Transportation’AR RAMAKRISHNAN, MD, Essar Shipping

18

Effi cient Utilisation Of Sea TransportationEnhancing Connectivity To Attain Profi tability 32Shipping Lines & Connectivity To Asia Offering Buoyant Trade Prospects 36

SMART STRATEGIESCollaborative Approaches Collaboration Not Competition, Is Key 38

Hazardous Chemicals TransportationExploring A Safe Mode 46Outsourcing LogisticsA Profi table Deal? 49Akzo Nobel Surface ChemistrySelecting The Right Freight Auditor 50

SL EXCLUSIVEAllied Segments Dredging For A Better Future 40

TECHNOLOGY TRENDSTech Track 52Xiameter Standardising An Effective Supply Chain Strategy 54

Control Tower Building Effi ciencies & Agility 56SUPPLY CHAIN MANAGEMENT

Laws & Regulatory Framework Optimising Growth Opportunities For Warehouses 62WAREHOUSING & DC


NEWS, VIEWS & ANALYSISNEWS, VIEWS & ANALYSISL A T E S T H A P P E N I N G S I N T H E W O R L D O F L O G I S T I C S

AIMA’S SIXTH GLOBAL SCM SUMMIT TO FOCUS ON GLOBAL

COMPETITIVENESS The underlying supply chain needs to be responsive, flexible and agile to be able to act accordingly. It is important to understand that every enterprise participates in and sustains not one but many parallel supply chains in order to ensure flexibility and responsiveness that allows the enterprise to respond to opportunities and threats appropriately.

Recognising these imperatives, AIMA’s Sixth Global SCM Summit, in partnership with Smart Logistics would focus on Managing Dynamic Supply Chains for Global Competitiveness. The summit shall take place in New Delhi on August 18-19, 2011, would also showcase the innovative practices and SCM success stories of leading companies that have leveraged supply chains as a game changer for global success. Vineet Agarwal, Executive Director, Transport Corporation of India will be the summit Chairman and Dr G Raghuram, Indian Railways Chair Professor – Public Systems Group, IIM Ahmedabad and SL Ganapathi, COO, NTL Logistics Plus India, will be the summit Directors. Accenture is the knowledge partner for the summit, which will focus on the managing factory to customer value chains in dynamic environment; best practices in forecasting & inventory management; developing suppliers and service providers as extended business partners to manage supply chain complexities, etc.

319METRE-LONG SHIP BERTHS AT VALLARPADAM TERMINALThe International Container Transhipment Terminal (ICTT) operated by DP World at Vallarpadam recently witnessed the berthing of the largest-ever container vessel to call on a south Indian port.

The Singaporean flagged vessel, Maersk Sembawang, has a length of 319 metre with a capacity of 6,478 TEUs, it is also the largest Maersk Line vessel to call in India. The previous largest container ship was also a Maersk Line vessel, the Maersk Kalamata, which berthed at the Chennai Port (length of 303.83 metre, capacity of 6,416 TEUs).

Anil Singh, Senior VP & MD, DP World Subcontinent, said in a statement that the ICTT, with its crucial location in the subcontinent, is fast emerging as an important catalyst to India’s growing trade and to meet the ambitious target of the Ministry of Shipping’s Maritime Agenda 2020. Speaking on the occasion, KK Krishnadas, CEO, DP World Kochi, said, “Maersk Line’s decision to bring the Maersk Sembawang to Kochi reflects the growing faith of global shipping lines in the potential of the infrastructure at the Kochi port.” Equipped with the most modern equipment and dedicated rail connectivity with hinterland destinations, ICTT offers customers a unique value proposition. Connecting key south Indian markets, the port has convenient access through rail, road and sea, thus making it a crucial backbone to the south Indian hinterland, which contributes to a quarter of India’s trade volume. Barging operations using the inland waterways of Kerala, give the terminal safer and eco-friendly connections to the markets, seldom seen in most other terminals, he said.

SCHENKER INDIA INTRODUCES NEW ENHANCED DIRECT LCL SERVICE TO AUSTRIASchenker India, one of the leading providers of integrated logistics services in the region, has introduced an enhanced weekly direct consol service to Austria. Operated under full control of DB Schenker, this new improved service aims at offering customers best-in-class connectivity, price and further reduced transit times by eliminating previous transhipments through other hubs.

With the introduction of this service, DB SCHENKERcombine now serves various destinations in Europe from

Nhava Sheva, including Vienna/Salzburg, Hamburg, Gothenburg, Antwerp, Le Havre, Rotterdam and Felixstowe, thereby providing a more comprehensive regional coverage for the group’s LCL product.

This service enables DB Schenker to serve its customers from India to Eastern European countries more efficiently and quickly. DB Schenker offers value-added services such as door-to-door delivery and tracking as an integrated part of DB SCHENKERcombine.

DB Schenker has been operating its direct boxes to other major economic

centres in Europe, America and the Asia-Pacific. These include Singapore, China, Hong Kong, Israel, the UAE, Germany, Italy, France, the UK, Belgium, Sweden, Canada and the US. All these direct consolidation services are backed by strong trade lane infrastructure for providing world-class service levels and the advantage of a competitive pricing structure. With the help of its strong global network and dedicated management for LCL services, DB Schenker assures reliability, reach, transparency and value to its customers in India and the world.

TATA’s DIESL ON AN AGGRESSIVE EXPANSION SPREETata Group’s logistics arm, Drive India Enterprise Solutions (DIESL) said it has embarked on an expansion drive to emerge as the market leader in the US$90-billion domestic supply chain industry and would consolidate its presence in the retail segment by 2012. It also plans to set up nine major hubs in the country by 2013 to provide logistics, transportation, warehousing and distribution among other services.

DIESL, a joint venture between Tata Industries and Tata International will set up five hubs in Delhi, Mumbai, Chennai, Kolkata and Guwahati in the next 18 months. “We are among top four players in the domestic logistic industry and aim to occupy the top slot by 2015. We have added one million square feet in 2010 taking the total area of our 176

warehouses to 5.3 million square feet and would set up nine hubs in the next 30 months,” said Ajay Chopra, CEO, DIESL.

The remaining four will be set up at other strategic locations by 2013, Chopra said, adding that the company was also focussed on bulk logistics in the eastern and north-eastern region, setting facilities for cement and steel production.

Besides consolidating its domestic presence, DIESL may explore overseas markets, especially in the South East Asian countries like Singapore, under Noel Tata who has taken over as Chairman of DIESL, Chopra said.

Expressing hope that the GST regime will boost the domestic sector, he said that with innovative services and technology, DIESL would be well armed to compete with the global players.

RVCF INVESTS `15 CRORE IN

LEEWAY LOGISTICS


NEWS, VIEWS & ANALYSISL A T E S T H A P P E N I N G S I N T H E W O R L D O F L O G I S T I C S

NEW MANGALORE PORT CARGO HANDLING REGISTERS

4.81% GROWTH IN Q1Despite a steep shortfall in the handling of iron ore fines, the New Mangalore Port Trust (NMPT) registered a growth of 4.81 per cent in overall cargo handling in the first three months of 2011-12. P Tamilvanan, Chairman, NMPT, attributed this to growth in handling of coal, LPG, crude oil and container cargoes among others. The total cargo handling at the port in the first quarter of the current financial year stood at 8.53 million tonnes (mt) as against 8.13 mt in the corresponding period of the previous fiscal.

The export of iron ore fines cargo from the port came down to 49,000 tonne during the April-June 2011 period. The handling of iron ore pellets by Kudremukh Iron Ore Company (KIOCL) stood at 4.04 during the first quarter of 2011-12 as against 4.31 lakh tonne in the corresponding quarter of the previous year.

Tamilvanan said that the port handled 5.12 lakh tonne of LPG cargo during the first three months of the fiscal as against 4.24 lakh tonne in the corresponding period of the previous fiscal. During the first quarter, the import of crude oil for Mangalore Refinery and Petrochemicals (MRPL) stood at 3.41 mt, and the export of petroleum, oil and lubricant (POL) products stood at 1.70 mt.

He said that the import of edible oil through the port increased to 1.47 lt. Of this, the import of crude palm oil touched 1.23 lt in the first three months of 2011-12 as against 94,000 tonne in the corresponding period of the previous fiscal.

Stating that coal import through the port has already crossed the one-million mark during the first three months of the fiscal, he said that the port handled 1.25 mt of coal (8.61 lt) during the period. The port handled 13,142 TEUs of containers during Q1 of 2011-12, as against 11,283 TEUs in the corresponding period last year, thus recording a growth of 16.48 per cent.

ESSAR PORTS EXPANDS VADINAR TERMINAL Essar Ports has recently commissioned the 12 million tonne a year (MTPA) expansion of its Vadinar terminal at a total cost of `1,065 crore. The additional capacity is in the form of a new jetty handling petroleum products, storage tanks and a road gantry. The total capacity of the Vadinar terminal thus goes up 58 MTPA. The additional capacity is in line with Essar Oil’s refinery expansion to 18 MTPA as part of the phase one of its expansion and further to 20 MTPA post an optimisation project.

The second phase of expansion is due for completion by September 2012. Essar Ports is also carrying out expansion projects at its terminals in Salaya, Paradip and Hazira. The projects will double the company’s capacity to 158 MTPA by 2013. Total capital expenditure for planned by the company is `9,300 crore out which the company has already spent more than `6,300 crore.

Rajiv Agarwal, MD, Essar Ports, said, “The building of this additional capacity is in line with the future growth of the company. Essar Ports has committed to take the total port capacity to 158 MTPA by 2013. The company expects to see a revenue growth of over 35 per cent every year for the next few years based on increased realisation and incremental traffic.”

Essar Ports currently has two ports in operation and three under construction. The two ports in operation are at Hazira and Vadinar. The cargo handling capacity at Hazira is 30 MTPA, which will be ramped to 50 MTPA. At Vadinar, the capacity has been ramped up to 58 MTPA with this additional 12 MTPA. Apart from this, Essar Ports, is developing a 16 MTPA iron ore berth and 14 MTPA coal terminals at Paradip. Essar Ports is also developing a 20 MTPA dry bulk terminal at Salaya taking the total port capacity to 158 MTPA by 2013.

PORT FEDERATIONS HAIL MOVE FOR BILL ON NEW REGULATORY BODY

The Water Transport Workers Federation of India, one of the five major federations representing the port and dock workers, has hailed the Shipping Ministry’s plans to introduce the new Port Regulatory Authority Bill, saying that it will give government ports more flexibility to fix tariff and help streamline operations.

The proposed Bill to be introduced in the monsoon session seeks to bring all ports, including private sector ports, under a common regulatory body, which will fix tariff and monitor the performance. Currently, the Tariff Authority for Major Ports (TAMP) is regulating vessel and cargo-related tariff as well as regulating rates for lease of properties in respect of major ports and the private operators located therein.

However, TAMP has limited autonomy and lack of power to regulate the tariffs of non-major ports. Non-major or private ports regulated by the respective state maritime boards are free to formulate tariff charges. This scenario has benefited private sector ports, providing them with greater flexibility, T Narendra Rao, General Secretary, Water Transport Workers Federation of India, said.

The proposed Bill would obviously

have an impact on certain important issues of the performance of private ports. The state regulators would also have the freedom to prescribe tariff rates, but they will have to follow the common guidelines issued by the Ports Regulatory Authority Bill. The authority would also monitor performance at all ports and frame performance norms. The Bill would also have powers to call for information, investigate, and inspect the books or other document of any port authority or private operator, he said.

According to Rao, minor ports, especially private ports, by virtue of their existence, are providing competition to major ports. A map of new private ports in India will show that they are being developed close to the existing major ports (Kandla-Mundra, Paradip-Dhamra, Chennai-Karaikkal and Krishnapatnam, Vizag-Gangavaram), which are competing for the same hinterland. These non-major ports have always been less regulated and they are governed by policy directives from the ministry under the Major Ports Trust Act, 1963. However, in recent times, non-major ports have also been witnessing growth in traffic. The overall capacity of these ports is expected to double by 2011-12.

KALINDEE RAIL SEES `600-1,000 CRORE

INCREASE IN ORDER BOOK


NEWS, VIEWS & ANALYSISNEWS, VIEWS & ANALYSISL A T E S T H A P P E N I N G S I N T H E W O R L D O F L O G I S T I C S

KOCHI PORT LEVERAGING STRENGTHS FOR SHIP REPAIR COMPLEXTo garner additional revenue from commercial ship repair business, the Cochin Port Trust is planning to lease out its land with water frontage for a ship and container repair complex at Willingdon Island. Considering the location advantage of the international east-west shipping route, Kochi holds a distinct advantage for ship repair business, which has earned the label of an evergreen industry.

A report prepared by the consultants in this regard suggested that the port offers a good potential for vessels ranging from barges to VLCC’s of bulk and liquid cargoes. The presence of Vallarpadam Container Transhipment Terminal, which is likely to achieve 2.5 million TEUs within 3-4 years, also has added to the advantage. Besides, the existence of the public sector Cochin Shipyard, the largest shipbuilding facility in India, at the backyard, offers significant advantage to the port in terms of presence of ancillary industries.

According to consultants, ships require periodic inspection and maintenance of hull and machinery. These binding

requirements of commercial ships ensure a steady flow of business. This makes ship repair revenue predictable with a reasonable degree – unlike in shipbuilding, which is cyclic in nature with its periodic ups and downs.

Singapore, Dubai and Colombo excel in this field. India has strong demand for ship repair facilities arising out of a domestic fleet of 1,071 vessels (coastal 722 and 349 on overseas trade) amounting to 17 million dead weight tonnage as on March 31, 2011. In addition, there are a large number of foreign ships calling on Indian ports.

The impending commissioning of the LNG terminal make Kochi a suitable location for a ship repair facility that can service commercial vessels, offshore supply and service vessels, Coast Guard and Naval vessels, port service vessels and dredgers. It would be possible to dock 30-40 vessels annually under the normal circumstances considering a product mix of only underwater hull inspection, cleaning and painting of hull to special survey repairs.

SHIPPING MINISTRY TO AWARD PROJECTS WORTH `13,000 CRORE UNDER PPP MODE

The Shipping Ministry plans to award seven projects, worth `13,000 crore, under the public-private partnership mode in the next three months, as it rushes to kick-start capacity addition at ports in the current fiscal. Four of them were to be awarded in the first quarter, but were held up for want of security and environmental clearances. For FY12, the government aims to award 23 PPP projects worth `16,700 crore in 2011-12, adding 230 mt to India’s yearly cargo handling capacity of one billion tonne.

Although the ministry adopted a new model concession agreement in 2008, it could award only 13 projects in 2009-10 and just nine in 2010-11. “We could not award any project in the first quarter due to some issues,” said a ministry official, admitting his department’s failure in securing approvals. According to project calendar, the four projects would have created an annual capacity of 75 million tonnes at an estimated cost of `5,700 crore. While the installation of mechanised handling facilities at the Visakhapatnam Port was delayed because of pending security approvals, the construction for the mega container terminal at the Chennai Port could not begin as it could not get the environmental clearance. The other two projects include development of a dry bulk terminal at the Kandla Port.

In the second quarter, the government plans to award three projects of `7,500 crore. These will include the development of a fourth container terminal at Jawaharlal Nehru Port, a multi-user liquid terminal at Kochi, and a container terminal at the Tuticorin Port. These projects will add a yearly capacity of about 80 mt. “Issues like environmental clearance and absence of a regulatory authority at the national level are some of the problems while awarding PPP projects,” said Samir Kanabar, Partner – Infrastructure Practice, E&Y India.

TATA STEEL, CWC SEEK CONSENT TO BUILD FREIGHT TERMINALSFollowing the Railway’s decision to relax the eligibility criteria effective from June 21, eight firms, including Tata Steel and Central Warehousing Corporation (CWC), have sought permission to set up freight terminals to transport third-party cargo. It may be recalled that although the Railways had issued a policy in June 2010 permitting companies to build private freight terminals (PFTs), the response from the corporate sector was poor, which found fault with the special purpose vehicles and claimed that they could not meet the net worth criterion.

The Railways had made it mandatory for the implementing firms to have a net worth of at least `10 crore in the previous year. The Railways then revised the policy in June this year and allowed subsidiaries and joint ventures of companies to set up terminals even if they had a lower net worth. As regards eligibility, it now takes into account the net worth of the holding company or the lead partner of the joint venture. Moreover, the operators of private sidings, i.e. the freight terminals used for captive use, have been asked to convert the sidings into PFT in case they wanted to service third parties.

Following the policy revision, a senior Railway Ministry official confirmed that it had received 15 proposals, of which 11 were for converting private sidings into PFTs. Another official in the ministry disclosed that the proposals of CWC and Lloyd Steel, to convert their private sidings into PFTs, had got the go-ahead from the Railways.

TAMPA PORT TO INVEST

US$12.9 MILLION IN EXPANSION

INDONESIAN GOVERNMENT PLANS

TO DEVELOP 14 PORTS

SHIPPING COs EXPECT 20% RISE IN

OPERATIONAL COSTS

NEWS, VIEWS & ANALYSIS


NEWS, VIEWS & ANALYSIS NEWS, VIEWS & ANALYSISL A T E S T H A P P E N I N G S I N T H E W O R L D O F L O G I S T I C S

The Railways has generated `16,507.8 crore revenue from commodity-wise freight traffic during April-June 2011. This was an increase of 10.68 per cent from `14,914.47 crore during the corresponding period last year, an official statement said on Wednesday.

The Railways carried 233.66 million tonne freight traffic during April-June 2011, up seven per cent from 218.35 million tonne (mt) during the same period last year.

The net tonne kilometre rose from 1,45,359 million to 1,54,492 million – an increase of 6.28 per cent. Of the total earnings of ̀ 5,360 crore from commodity-wise freight traffic during June, `2,160.66 crore came from the transportation of 35.66mt of coal.

This was followed by `662.64 crore from 8.81mt of iron ore for exports, steel plants and for other domestic users, `513.35 crore from 8.33mt of cement, `332.67 crore from 3.37mt of food grains and `311.12 crore from 3.55mt of petroleum oil and lubricant.

The earning also included `326.35 crore from 2.71mt of pig iron and finished steel from steel plants and other points,

`323.35 crore from 4.18mt of fertilisers, `87.61 crore from 1.19mt of raw material for steel plants except iron ore, `259.71 crore from 2.94mt by container service and `382.55 crore from 5.69mt of other goods.

Meanwhile, the South Central Railway (SCR) has registered total freight loading of 24.73mt in the first quarter ending June 30, 2011, as against 22mt in the same period last year, showing a growth of 12.4 per cent. For the quarter, the zone earned originating earnings of `1,916 crore – 70 per cent of it coming from freight operations.

“We are confident of crossing the 100mt-mark for the full year. For the year 2010-11, we registered loading of 96.2mt as against 86mt tonne in the previous year. Going by the growth rates, we are confident of crossing that mark this financial year,” said, Sunil K Agarwal, Chief Operations Manager, SCR.

He said coal topped the list with 12.77mt (11.16mt) in the quarter, showing a growth of 14.4 per cent. Cement, which continued to occupy second position in volumes, however, saw a decline at 5.95mt as against 6.41mt in the corresponding

quarter last year, thus witnessing a decline of 4.54 per cent.

Commodities that witnessed steep growth included food grains. This account grew by 80.5 per cent to two mt from 1.1 mt. “We loaded an average of 85 rakes a day as against 74 in the comparable period. Coal topped the list with 37, followed by 24, food grains nine and fertilisers four,” he said.

The contribution from the two ports in the zone – Krishnapatnam and Kakinada – too witnessed a significant jump in the first quarter. It doubled loading to two mt (as against one mt in the same quarter last year), with coal taking a lion’s share with 1.87mt. The zone recorded loading of seven mt in 2010-11 as against 3.5mt in 2009-10.

As part of the national level policy, the Railways approved two plans from two players to set up private freight terminals in the zone.

The first terminal, which would come up at Thimmapur, Hyderabad, would be set up by Continental Multi-Modal Logistics in association with Kribhco. The second terminal would be taken up by CONCOR at Nagulapally, Hyderabad.

RAILWAYS’ FREIGHT EARNINGS RISE 10.7% IN Q1

VOLTAS MATERIAL HANDLING TO SET UP NEW PLANT IN PUNEVoltas Material Handling (VHM), a company formed through the joint venture of India’s Voltas and Germany’s KION Group has set up a new plant in Pune. The plant was inaugurated by Dr Daniel Signorini, Director, VMH & Senior Advisor, KION Group and Milind Shahane, Director, VMH & EVP, Voltas. Approximately `12 crore has been invested in the state-of-the-art machinery and set up of the 90,000 sqft plant, which will initially manufacture diesel and electric forklift trucks.

Speaking on the occasion, Dr Signorini said, “India has a huge potential and VMH has ambitious plans to become No. 1 in next 2-3 years by increasing its production capacities and enlarging its product portfolio.” VMH sees a large potential in for its warehouse equipment in the Indian logistics sector. Initially some of this equipment will be imported from Europe and will eventually be increasingly localised in India.

According to Milind Shahane, last year the entity produced 1,700 units of forklifts from its Thane plant. The new plant in Pune will have the same production capacities by the end of this year, thereby effectively doubling the capacities of VMH. This plant has an efficient manufacturing set up and will be critical to VMH operations. Commenting on how Voltas plans to leverage on KION Group’s technology, Sanjay Johri, MD, Voltas, said, “KION Group has unrivalled know-how and technological leadership in the forklift truck business. Thus, the partnership will help VMH further consolidate its leading position in India.”

Dr Dirk Panhans, Head – Finance & Controlling, VMH, said, “VMH has adopted a five-pronged action plan for the joint venture, which includes increasing production capacities to enable lower delivery lead times for customers, thereby ensuring technological learning from other KION Group companies; extending the existing product portfolio, especially for warehouse; growing the sales and after sales network to reinforce service coverage & responsiveness to customer demands and making VMH a more entrepreneurial company.”

KUEHNE + NAGEL BUYS DUTCH PERISHABLE FORWARDER

Kuehne + Nagel expanded its perishable transportation and logistics network by buying J van de Put Fresh Cargo Handling of Amsterdam, a Dutch perishable goods handling agent, for an undisclosed amount.

J van de Put, a family-owned business, has specialised in handling perishable air freight cargo, such as flowers, plant cuttings, fruits and vegetables, since it was founded in 1976. The Dutch company, located at Amsterdam Airport Schiphol, handles logistics and customs processes for import and export shipments.

J van provides a range of services such as vacuum cooling, temperature-controlled storage, customs clearing and inspections as well as delivery and distribution across Europe. The acquisition is subject to the approval of relevant European competition authorities.

ENGINEERING EXPORTS PROJECTED

TO GROW 27%


NEWS, VIEWS & ANALYSISL A T E S T H A P P E N I N G S I N T H E W O R L D O F L O G I S T I C S

India’s port capacity expansion plans could go awry, thanks to a stalemate between the Shipping Ministry and Planning Commission over policy framework for awarding projects.

The government plans to invest over `16,700 crore in ports this fiscal to raise the cargo-handling capacity to 1.2 billion tonne from the current one billion tonne, and `2.77 lakh crore over the next decade to take it over three billion tonne by 2020.

The Shipping Ministry, in charge of 12 major ports, is miffed with the Commission for proposing a slew of changes in the model concession agreement (MCA), a document used to award port projects on a public-private partnership basis. The two had finalised the MCA in 2008 after three years of deliberations, but it has failed to attract the intended investments into the sector.

“The Planning Commission has sent us a letter with 100 pages of recommendations on the changes that need to be made in the Model Concession Agreement,” said a senior Shipping Ministry official. He, however, refused to give details on the changes sought in the document. The official said that the ministry has told the commission that it is practically impossible to incorporate so many changes. The

ensuing stalemate has thwarted all work on revising the MCA. The Planning Commission, however, denies that it has called for an overhauling of the policy.

“We have only suggested fine-tuning of certain clauses in order to bring greater clarity and predictability, which would minimise the possibilities of any claims or disputes being raised by the concessionaires,” a senior Planning Commission official said, requesting anonymity.

The official said that the suggestions had been made by the legal counsels of the Commission and were in line with MCAs in other sectors as well as international best practices.

“The Ministry of Shipping has agreed to an in-depth discussion to decide on the modifications that may be necessary,” he added.

The Commission and the ministry commenced the talks to alter the framework in March, less than two years after the government settled on an MCA for public-private partnership mode in port projects.

“The concession agreement has kept on refining to suit various requirements and even include foreign players,” said Samir Kanabar, Partner – Infrastructure Practice, E&Y.

INDIA’S PORT CAPACITY EXPANSION PLANS IN ROUGH WATERS

JAPAN’S TRADE BALANCE BACK IN BLACKJapan’s trade balance swung back into the black in June amid growing signs of a recovery in exports hit hard by the catastrophic March 11 earthquake and tsunami. Japan posted a surplus of $883.7 million in its trade with the rest of the world in June, according to preliminary figures recently released by the Finance Ministry. It was the first trade surplus in three months, although the June surplus was still down 89.5 per cent from a surplus of $8.38 billion registered in the same month last year.

The March 11 twin natural disasters directly affected many auto, electronics and other parts makers’ plants, causing disruptions to supply chains. They also resulted in the shutdown of many nuclear power plants, including the Fukushima No.1 plant at the centre of the ongoing nuclear crisis. As a result, many factories in a wide range of industries, even in the unaffected areas, have been forced to stop or curtail operations due to parts and electricity shortages, while electric power companies have been forced to sharply increase imports of alternative fuels to atomic power generation, such as oil and gas.

Japan, now the world’s third-largest economy after the US and China, relies heavily on exports for growth. Japan’s exports to the US fell for four months in a row in June on a year-on-year basis, declining 6.1 per cent to $10.74 billion, although the pace of decline slowed significantly from 23.3 per cent in April and 14.6 per cent in May.

Japan’s imports from the US dropped for the first time in three months in June on a year-on-year basis, declining 4.7 per cent to $6.40 billion. Japan’s trade surplus with the US narrowed for three months in succession in June on a year-on-year basis, shrinking 8.1 per cent to $4.34 billion.

APL SETS EAST ASIA-US EAST COAST SURCHARGE

Singapore-based container carrier, APL, will impose a peak-season surcharge on all cargo shipped from Asia and the Middle East to the US and Canada, starting August 1. The proposed surcharge will be $320 per 20-foot container, $400 per 40-foot container, $450 per 40-foot high cube container and $505 per 45-foot high cube container. The surcharge applies to dry and refrigerated cargo.

“The PSS applies to all cargo moving on vessels via the Suez Canal and all cargo discharged at Pacific coast ports or Vancouver,” APL India said. APL’s move comes after Maersk Line recently implemented a similar surcharge on the same route, citing growing demand and pressure on space & equipment.

“K” LINE JOINS FAR EAST-INDIAN SUBCONTINENT

DIRECT LOOP“K” Line will soon join a vessel-sharing agreement that is currently operated by Evergreen Line and Simatech on the booming trade lane between the Far East and Indian subcontinent. When it joins the intra-Asia service on August 10, “K” Line will deploy one vessel on the string of six vessels with capacities of 2,500-2,800 TEUs.

The port rotation of the fixed-day weekly service, which “K” Line calls the CIX-2, will be: Xingang, Qingdao, Shanghai, Ningbo, Singapore, Tanjung Pelepas, Port Kelang, Nhava Sheva, Karachi, Colombo, Port Kelang, Tanjung Pelapas, Singapore and back to Xingang. “K” Line presently operates another weekly service known as INDFEX that calls the Nhava Sheva port. The new CIX-2 service will double the sailing frequency for Nhava Sheva and add Xingang & Qingdao as direct calling ports.

CONCOR REPORTED A TOTAL INCOME OF AROUND `949 CRORE, AND NET PROFIT OF

`234 CRORE IN Q1

SINGAPORE’S IMPORTS FROM INDIA

JUMP 48% IN H1

NEWS ANALYSIS FOOD STORAGE & HANDLING

14 • SMART LOGISTICS • AUGUST 2011

WAREHOUSINGBUILDING ON

CAPABILITIESINDIA’S system of grain management is facing a crisis. Huge public stocks have been built up, foregoing consumption in the past few years. These stocks are deteriorating because of shortage of storage space. To curtail these, the Centre is spending more than what it expends on agriculture, rural development and on irrigation & flood control taken together, states a high-level committee report. The government’s decision to stock under inadequate warehousing conditions further worsens the situation.

Union Minister of State for Consumer Affairs, Food and Public Distribution KV Thomas recently announced that the government is planning to pump in about Rs7,000 crore towards adding 15 million tonne of additional warehousing storage capacity in the country by the end of 2012. The step is big boon as it will help prevent the food stocks from being wasted. Hundreds of tonne of food grains rot in godowns across the nation and government estimates state that about 77,000 tonne of grains get wasted. According to Varun Kumar, GM – 3PL &

Warehousing, DRS Group, “More than 30-40 per cent of the food produced gets wasted due to improper or insufficient warehousing facilities. As per estimates and reports, presently, the storage capacity in warehouses is somewhere between 60 and 70 million tonne, and the requirement is almost double.”

SHORTAGE OF FOOD GRAINSEarlier, in August 2010, Vilas Muttemwar, MP & Chairman, Standing Committee on Food, Consumer Affairs and Public Distribution presented to Lok Sabha the Eighth Report of the Committee on ‘Food Subsidy and its Utilisation’. The committee pointed out some important observations and recommendations.

One of the observation was that there is an acute shortage of covered space in the procuring regions i.e. Punjab, Haryana, Andhra Pradesh, Chhattisgarh and Orissa, etc. leading to damage or rotting of a large quantity of food grains every year even though the Planning Commission allocates huge funds to FCI for the construction of godowns. The Committee expresed

concern over such careless losses while noting that the High Level Committee (HLC) has approved the construction of 127.65 lakh tonne capacity of godowns. It strongly recommended the department to construct storage spare in the major wheat and rice producing states of Punjab and Haryana, and also in other states in a decentralised and time-bound manner by using modern scientific technology.

“The Committee has noted that the claim of a huge amount of Rs43,14,32,404, is still pending with FCI for being paid to Sikkim, Jammu & Kashmir, Himachal Pradesh, Mizoram, Tripura and Arunachal Pradesh on account of cost of transportation of food grains under the Hill Transport Subsidy (HTS) Scheme since 2006 for one or the other reasons. The Committee is not happy with the situation and has, therefore, recommended that FCI make sincere efforts for the liquidation of the outstanding dues of these states or union territories so that they may be able to lift the food grains periodically and the poor people of the hilly and inaccessible states may also get the benefits of subsidised

Stocks of food grains get wasted due to reasons like shortage of space to store them, varying weather conditions and rodent attacks. Developing adequate and sufficient storage facilities will a play a crucial role in achieving the objectives of preserving the food stock, thereby weakening the supply chain constraints and further bringing down the prevailing high levels of food inflation in the country.

ARINDAM GHOSH

WAREHOUSINGBUILDING ON

CAPABILITIES Pho

to ©

DIN

OD

IA

AUGUST 2011 • SMART LOGISTICS • 15

foodgrains under the HTS scheme,” Muttemwar presented in his report.

INCREASE STORAGE CAPACITY Adequate and suitable warehousing storage facility is of critical importance for our country’s agricultural production. These measures will not only prevent food grains from getting wasted but also control the rates of food inflation, which fell to a 27-month low of 7.58 per cent for the week that ended on July 9, 2011 down from 8.31 per cent in the previous week. The overall inflation rate was 9.44 per cent in June. Reports claim that presently, the gap in warehouse storage facility has been estimated at 32 million tonne. Due to the lack of storage facilities in India, the overall value of damages to food grains is more than $11.11 billion (approximately `50,000 crore) annually.

State-owned Food Corporation of India (FCI) has already sanctioned the construction of a 73.75 lakh tonne storage capacity. During the course of this year, about 40 lakh tonne is likely to be completed. The government has taken some important steps in this direction. It has established Warehousing Development Regulatory Authority (WDRA), to promote the development and promotion of warehouses in the country. In India, all the warehouses need to be registered with WDRA, without which no warehouseman can issue a negotiable warehouse receipt as per the provisions of Warehousing (Development & Regulation) Act, 2007. Over 51 warehouses have been registered under WDRA. The amount of food subsidy increased to Rs68,198 crore in 2010-11 from Rs31,260 crore in 2007-08 despite various measures taken by the government to contain the Food Subsidy Bill. Government-owned Central Warehousing Corporation is currently operating 476 warehouses across the country with a storage capacity of 10.18 MT.

THE MISSING INGREDIENTS Although the Central Government has taken several positive steps in this direction, experts feel that a lot more could still be done. Confirming the same, Anil K Choudhary, MD & CEO, National Bulk Handling Corporation (NBHC), opines, “The investment of Rs7,000 crore is a positive and a welcome step, but I feel that the investment for creating new warehousing capacity as well as upgrading existing ones would need anywhere from

Rs19,000-Rs20,000 crore and Rs20,000-Rs23000 crore, respectively.” NBHC plans to create an additional storage facility of about 1-2 million tonne over the next 3-5 years, under their belt, he informs.

Choudhary highlights, “In agri-warehousing, it is important to understand and appreciate that it is a low return kind of an activity. Also, the sector seems to have predominant government presence as almost 25 per cent of cereals are being procured by the government. Moreover, since food is a sensitive sector, a lot of policy opaqueness and uncertainty prevails. Owing to these factors, the private sector prefers to stay away.” “Schemes like the Private Entrepreneur Guarantee Scheme, under which FCI offers 10 years usage guarantee, are a welcome step. But I think there should be more transparency. Unless it becomes a commercially viable proposition for the private sector, where it is certain that the policy will offer long-term stability, the sector will continue to feel discomfort,” Choudhary adds. Kumar, however, feels that the government should to give industry status to the warehousing sector and thereby make access to funds much easier. Kumar says, “The government may look towards sanctioning separate land and terming them as warehousing zones.”

MARKET POTENTIALDuring a recent forum, Sankalpa Bhattacharya, Associate Director – Strategic & Commercial Intelligence, Transaction Services, KPMG, explained that at US$80 billion, the logistics sector is large and it is growing at 10 per cent per annum. Substantiating the fact, Vineet Kanaujia, GM – Marketing, Safexpress, claims that supply chain management and logistics is a $110-billion dollar industry and the warehousing sector accounts for 20 per cent of the total domestic logistic industry. In India, about 85-90 per cent are traditional warehouses and godowns & only about 7-8 per cent are modern warehouses. He adds, “Presently, the warehousing sector is dominated and controlled by the government. But the trend is set to witness more private participation in the next 4-5 years.” He highlighted that the process of funding and the methods to acquire land at strategic locations, which is close to the production or consumption area or an area which is close to the national highway should be easier. Overall, the regulations need to be more flexible and a conducive atmosphere needs to be created where private players

can come in and make investments. According to Shoummo K Acharya, MD & CEO, eTrans Solutions, India has a GDP of Rs6.5 million crore and the logistics occupies about 13-14 per cent of the GDP. A major chunk of the investment in logistics goes into transportation, which is about 60 per cent. The private sector has to enter in the country’s warehouse segment in a major way to meet the warehousing requirements. Presently, they only cater to about 15 -17 per cent.

SCM IMPROVEMENTSS Varadadarajan, Chief Executive, Shreyas Relay Systems, says that presently, a large segment of logistics is handled by unorganised service providers. About 76 per cent of the logistics service in India is handled by the unorganised sector. According to Prabhakar Shetty, VP – Enterprise Consulting, KPIT Cummins, “A distributed warehousing system will bring about a socio-economic parity in the country and so, if a distributed and multiple warehousing storage capacity mechanism is created across the country, farmers from all the regions could easily register with these warehouses.” Due to the presence of a central warehousing facility in the country, only big farmers are able to register and store their produce in these places, he adds. Shetty believes that the country’s warehousing system needs to be upgraded and modernised. “Like it or not, the retail mode of consumption will put some efficiency on the consumption side of it. It needs more transparency and visible data of what needs to be available. An efficient inventory management system needs to be put in place,” he avers.

Amitabh Panda, Group Director – Shipping & Logistics Operations, Tata Steel Group & MD, Tata Steel Logistics and Shipping BV highlighted the need to spend more in last mile connectivity as 30 per cent of the production and consumption centres are not on national or on state highways. Kanaujia added that some of the steps, which need to be taken to improve the warehousing and supply chain management as a whole, include increase in the spend on infrastructure. The investment needs to be done in a manner so that it percolates to the bottom of the pyramid. Tax breaks and incentives should be introduced to encourage infrastructure investors. In the end, remember, one American can be fed with what we waste!


EVENT REPORT INDIA CONTAINER LOGISTICS AND INFRASTRUCTURE SUMMIT

THE last decade has been exciting for the Indian container logistics industry across its components – deep sea shipping, rail, road, coastal shipping and ports. While the industry has registered stupdendous growth throughout this phase, it faced rough weather during the global trade slowdown. However, now the industry is witnessing a transitional phase. As signs of a firm revival appear on the horizon, the Indian container logistics industry, its stakeholders and its custodians have a clear and present opportunity, based on the learning from the past, to create a firm and sensible platform for growth in the coming decade.

To discuss the trends determining the future shape and direction of the Indian container logistics and infrastructure industry, Supply Chain Leadership Council organised the second edition of ‘India Container Logistics and Infrastructure Summit’. Over 125 senior stakeholders of India’s container focussed transportation industry gathered at the summit, which was held on July 15, 2011, in Mumbai.

CONTAINER BUSINESS During the course of the summit, it became apparent that investment, integration and innovation in container logistics are central to the future of transport in India. The discussions were pivoted around container business in the Indian context, which can be viewed in two individual, but related, industries viz., container transport infrastructure and container logistics services. It further became evident that there are definitive trends that are significantly shaping each of these two industries.

On the container infrastructure side,

these trends include a significant demand chasing the already-choked capacity; especially evident in ports, road & rail infrastructure and India’s rapidly rising trade with the rest of Asia forcing gradual, but significant, infrastructural focus on the east coast of India. Besides, parcel sizes of large shippers are expected to increase significantly. This is increasingly prompting service users to reduce the number of suppliers to a few capable ones, which offer multi-modal and well integrated logistics solutions.

SUGGESTIONS GALORE The summit offered tremendous scope for discussion on ways to improvise the prospects of supply chain management. Commenting on the same, Rajesh Lihala, CEO, Fourcee Infrastructure, said that the excessive focus on EXIM has left a wide demand-supply gap in the domestic rail market. He, therefore, suggested that identifying cargo niches in this space will be the key to success.

N Sukumar, Sr VP – SCM, Reliance Industries and Shashank Raodeo, GM – Automotive Logistics, Mahindra & Mahindra, on the other hand, were of the view that as global competitive pressures increase amid persistently weak market conditions, traditional vanilla transportation will have to make way for collaborative, thought-leading and innovative supply chain management.

While L Radhakrishnan, Chairman, JNPT, expressed his optimism about capacity improvements at JNPT in the short-term after recent events, including the commissioning of new cranes at JNPT and the award of the fourth terminal tender; NN Kumar, Deputy Chairman,

JNPT, said that the current situation at JNPT did not warrant any congestion surcharges. Talking of success factors, Sachin Johri, Sr MD, IDFC Project Equity, suggested that success factors in the container rail industry include access to Inland Container Depot (ICD) or Container Freight Station (CFS) terminal facilities at right locations, route selection and cargo identification, the ability to generate full loads at regular time intervals and good foothold on EXIM routes.

In his keynote presentation, Manish Saigal, Executive Director & National Industry Head – Transportation & Logistics, KPMG India, suggested that the following key trends are likely to shape the industry over the next decade: • As Intra-Asia trade gains prominence,

eastern ports are likely to continue outperforming western ports in terms of container traffic growth rate.

• Positioning as a specialised high-end niche cargo focussed container logistics service provider can be a key differentiator and wide, flexible & end-to-end capability will take precedence over narrow modal focus.

• EXIM logistics players will enter the domestic arena and vice-versa to create global third-party logistics (3PL) delivery capabilities

BRIGHT PROSPECTS Industry stalwarts brought together fresh perspectives on the evolving container logistics landscape and shared examples of innovation and experimentation in container logistics being witnessed across the country. With such a plethora of opportunities, the Indian container logistics industry certainly has miles to go.

Providing an able platform for meaningful interaction within the industry as well as for consolidating the industry’s opinions and concerns towards policymakers, Supply Chain Leadership Council organised a summit on ‘India Container Logistics and Infrastructure’. Held on July 15, 2011, in Mumbai, with Smart Logistics as its media partner, the second edition of the summit discussed the unforeseen trends determining the future shape and direction of the Indian container logistics and infrastructure industry. A report…

UPPING THE ANTEUPPING THE ANTE

Unveiling Adding Wings – An Industry in Transition Powered by Innovation, a white paper on innovations in logistics during the summit


PRICE TRENDSIRFI TREND FOR JULY 2011:

The RFI stood at 174 points for the month of July 2011, which is same in comparison to the corresponding

period last year.

ZONAL FREIGHT TRENDS

The overall freight rates have decreased slightly by 0.42% as compared to the previous month. This is due

the monsoon season affecting dispatches. Ex-Mumbai rates have registered the highest increase in rates

by 1.29% whereas Ex-Kolkata rates have registered the highest decrease in rates by 2.18% as compared

to other metros. The freight rates from

Ex-Mumbai are high due to hike in fuel

price as well as more demand and less

availability of vehicles.

COMMERCIAL VEHICLES:

The cumulative sales of commercial

vehicles registered a growth of 14.10%

for April–June 2011 as compared to the

same period last year and the production

grew at 16.14% in the month of June 2011

as compared to June 2010. Medium &

heavy commercial vehicles grew at 5.12%

and light commercial vehicles grew at 22.11%.

FORECAST FOR AUGUST 2011:

The RFI in August 2010 over August 2009 had registered an increase of 3 points. It is expected that as the

festival season draws nearer, volumes and freight rates will witness an increase.

Knowledge Partner: Transport Corporation of India (TCI); website: www.tcil.com; e-mail: [email protected]

Indian Road Freight Index (IRFI), a service introduced by Transport Corporation of India (TCI), is an index of weighted average lorry freight rates across various routes, calculated based on the route density and the dynamic freight rates of routes across the country.

Road freight index chart for July 2011

Index trend for six years

2007-08 2008-09 2009-10 2011-122010-11

172 171174

TRENDS FOR JULY (Y-o-Y)

174

167

VIEW FROM THE TOP MD, ESSAR SHIPPING

“The need of the hour is to quickly implement the policies and create benchmarks in terms of cost competitiveness. I think that the Ministry of Shipping’s initiative of launching Maritime Agenda 2010-20 is a step in the right direction,” avers

AR Ramakrishnan, MD, Essar Shipping. During a conversation with Prerna Sharma, Ramakrishnan provides insights into coastal shipping – the mode of transportation that deserves significant

attention. Excerpts…

EVOLUTION OF THE INDIAN SEA TRANSPORTATION SEGMENTShipping is a global industry. Therefore, there is a need to make sure that we are truly competitive. While Indian ship owners have proven their ability to perform shipping effectively, efficiently and in a very safe manner, there is a need to grow the volume of tonnage under the Indian flag. There is also a need to take certain policy measures, which will help augment the tonnage. It is our strong belief that India has a huge amount of EXIM trade opportunities, which currently stands at about a billion tonne. This figure is set to

double very soon. Nonetheless, the share

of Indian ships carrying

Indian cargo is a miniscule eight per cent. This implies that there is not only an opportunity for greater participation by Indian flags in cargo related to India, but also in global trade, wherein we can play a major role. However, investing into tonnage and acquiring ships will call for certain policies, which could be in terms of fiscal incentives, cargo support-related matters or tax benefits. It is pertinent to note that a vast majority of the global shipping fleet operates from zero-tax regimes.

Indian shipping companies have been continuously making suggestions to the government on various aspects that will help India build global competitiveness in the shipping arena. There are countries, which have clear-cut shipping policies and those countries are really doing well in global trade. We also need to work on such crucial factors to make this industry globally competitive. Launching Maritime Agenda 2010-20 is a welcome step taken by the government. It shows their commitment towards this segment. We are about to witness a paradigm shift in sea transportation. Therefore, the need of the hour is to quickly implement the policies and create benchmarks in terms of cost competitiveness, volume of tonnage

‘‘

’’TRANSPORTATION

WE ARE ABOUTTO WITNESS A

PARADIGM SHIFTIN SEA



handled and so on & so forth.

WHAT PROMPTED YOU TO SET UP A SEPARATE LOGISTICS WING?Essar Group has been growing by leaps & bounds and such growth demands a streamlined flow of movement of raw materials and products. We are dealing with commodities such as iron ore, steel, coal, crude oil & petroleum products etc., which demand specialised handling and transportation methods. With the volumes rising, we thought of bringing a specific focus on one of the most critical cost factors – logistics. If we are able to achieve cost optimisation in this segment, we can help enhance the bottom line. We also had the advantage of expertise and know-how to handle such a complex supply chain. The new setup was not only a strategic move to enhance the growth prospects of the organisation, but we also wanted our companies to avail our services and build competitiveness at their own end. Essar is also making significant investments in ports and there are tremendous opportunities that one can capitalise on. I strongly believe that you need to be able to chase the market opportunities as they come. You need to be able to develop your own resources as you grow your business.

For any company, cost determines your bottom line. If a company is able to provide logistics services, which can enable clients to reduce cost and bring in efficiency, then that company will become a service provider of choice.

Essar Shipping’s operations span across sea transportation, logistics and oilfield services businesses. The sea transportation business provides crude oil and dry bulk transportation services to leading Indian and global oil majors, core sector industries and commodity traders. It has a diversified fleet of 26 vessels including VLCCs, Capsizes, Supramaxes, Mini-bilk carriers and tugs. The company has on order 12 new ships, including 6 Minicapes and 6 Supramax dry bulk carriers, expected to join the fleet in a phased manner by FY13.

The logistics business provides end-to-end intermodal logistics services from ships to ports, lighterage services & intraplant logistics and dispatching finished products to the final customer. It manages a fleet of 5,000 trucks for inland transportation of steel & petroleum products and has a strong presence across

road, rail & costal sea movements.The oilfields services business provides

contract drilling and related services to oil and gas companies worldwide, operating both offshore and onshore. It owns a fleet of 13 rigs, which includes one Semi-Submersible rig and 12 onshore rigs. The company has on order two new jack up rigs that are expected to be delivered during FY13.

CRITICAL ENABLERS FOR BUILDING A STRONG LOGISTICS COMPANY There are tremendous amounts of intricacies involved in planning the smooth movement of goods. One must have the expertise and skill set to achieve this goal. One must also have a team of people, who are equipped to handle the specific type of cargo and commodities that one wishes to transport. Each team member should be well versed with the nitty-gritty of handling complex cargo, be it bulk or unitised. Apart from this, one must also have to invest in certain amount of assets – be it owned assets or leased assets. Additionally, one must understand that e-enabling is also a very important aspect of any business today especially when you are handling large volumes, tracking the consignment and getting the delivery at the expected time. Once you have all these critical enablers in place, you will be able to build a strong logistics company.

GREEN MEASURES IMPLEMENTEDThere is a lot of material which has been traditionally moved by road. It is a known fact that road transportation has certain disadvantages when it comes to carbon emissions. In order to preserve the environment, we are chalking out plans to transport via intermodal routes by using coastal shipping wherever feasible. Subsequently, to attain last mile connectivity, we will be using roads. This implies that we will minimise the use of roads as far as possible and would harness coastal capabilities, which has not yet been utilised in India. This would certainly help us reduce our carbon footprint to a great extent. In instances where utilising coastal shipping is not possible, we would plan out road movement in the most optimal manner. We also utilise the concept of hub & spoke model to harness efficiencies. It will also significantly reduce per tonne cost, which will offer the dual benefits of cost optimisation and reducing carbon footprint.

HARNESSING COASTAL MODESWe have been involved with various governing bodies on finding ways to harness this mode of transportation to the fullest. For a country like India, if we can achieve that, I think, we would be able to dramatically reduce logistics costs. The government is actively working on the Coastal Shipping Policy, which should address various critical issues; the foremost is to bring down the capital cost to lower levels in terms of regulations being applied on those particular ships. Also, there should be a simplified tax structure. Additionally, the procedures and formalities in deploying coastal shipping – whether it is related to inward & outward movement of ships or in terms of creating specific berths for cargo ships – should also be reviewed so that cumbersome and time-consuming procedures, which ultimately hinder efficiency, can be avoided. These would ease out coastal shipping to a great extent. Coastal shipping is one of the best alternatives for the movement of goods.

RETAINING FRESH TALENTI think the scenario is changing with the logistics industry witnessing the most promising phase and the approach of fresh talent would also change in time to come. Logistics is bound to grow and therefore, the demand for people would also grow manifold.

TRENDS THAT THE INDUSTRY CAN WITNESS IN THE YEARS TO COMEIndia will be playing a crucial role in global trade activity. In this continuous improvement process, we would see the following trends emerging:• Presently, we are witnessing a lull

in economic activity because of international factors. India is definitely seen as a high-growth market globally, which calls for a greater demand for logistics activities.

• There will be greater e-enabling of functions and IT will become a crucial factor.

• People will need to focus on infrastructure development. In fact, we can already see certain amounts of consolidation happening.

• Bigger unitised commodities will emerge as key opportunity areas.

• There would be a thrust on skill enhancement and continuous improvement of employees.

INSIGHTS & OUTLOOK SEA TRANSPORTATION


INTERNATIONAL containerised liner trade began on the trans-Atlantic routes just over four decades ago. The centre of gravity of containerised trade gradually shifted to the trans-Pacific services as new global trading patterns evolved. This evolutionary process continues. By 2009, China had overtaken Germany and the US as the leading exporting nation, having already surpassed Germany as the third largest economy in the world in 2007. Asia has become the new hub of global container trade. The brightest spots in the container industry are now in the economically emerging markets of South East Asia, the Indian subcontinent, sub-Saharan Africa, Latin America and the Middle East.

The biggest container ship deployed has grown at a tremendous rate over the past few decades. The driving force has

been international globalisation. Increased competition and economy of scale have fuelled the development of bigger ships. In the early 1970s, the biggest ship was about 2,000 TEU, compared to 14,000 TEU today. Is this development going to continue or will it be curbed by global warming and the carbon footprint? Large ships are green ships by virtue of the fact that the fuel consumption per TEU transported is lower. The cost is also lower due to the economy of scale.

Two decades ago, studies were published comparing two 4,000 TEU ships to one 8,000 TEU ship and showed a reduced total cost per unit. Today, a comparison between two 8,000 TEU ships and one 16,000 TEU shows the same trend. The capital cost for the bigger ship is in the order of 20 per cent less and the fuel cost around 40 per cent less, the

exact numbers depend on the building price and fuel price. There is a gain to be made by going for bigger units, in terms of not only the cost, but also the carbon footprint.

Slow steaming will also contribute to lower fuel consumption, even if more ships are needed in the loop to maintain the service schedule. So, bigger ships going at lower speeds are what the world may be looking for in the years to come. But, we all know that big ships need to be filled up to be able to reap the benefits. In times of fluctuating transport volumes, it is prudent to ask if big units provide the best solution for adjusting the transportation service supply to the demand. To accommodate such vessels, container hub ports must have access channels of sufficient depth, along with advanced and highly efficient terminal facilities.

The sea transportation segment is witnessing a sea change and how! With the global trade registering a new high and the emergence of Asian economies as manufacturing superpowers, there is a transition in the globe trade. This shift is duly supported by the modernisation of port facilities, novel vessel designs, technology advancements and so on & so forth. With India aiming to achieve the logistics hotspot on the back of strong manufacturing capabilities, it remains to be seen how the government plays an enabling role in ascertaining smooth EXIM movement.

WITNESSING ASEA CHANGE P

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INDIAN PORT’S EFFICIENCYIndia is a major maritime nation by virtue of its long coast line of around 7,517km on the western and eastern coasts of the mainland and also along the islands, bejewelled with 13 major and 176 non-major ports. It is strategically located on the world’s shipping routes and has a long tradition of seafaring with a large pool of trained maritime personnel. It has a dynamic and rapidly globalising economy with a vast potential to expand its participation in trade and development.

In India, when productivity parameters in major ports are discussed, traditionally, the following parameters are reckoned to assess the effectiveness and efficiency of a major port: • Average pre-berthing detention of

vessels (in hours)• Average turnaround time of ships (in

days)• Average output per ship berth day (in

tonne)• Average idle time (per cent)• Average berth occupancy (per cent)• Percentage of capacity utilisation of

berths• Average gang output per shift.

Of course, the total traffic, number of vessels and total number of TEUs handled are also computed to indicate how big or small the port is. But, these parameters definitely do not indicate how efficient a port is, unless they are correlated with the number of berthing points a port possesses and the kind of cargo it handles viz., bulk, break-bulk, liquid bulk and containerised cargo. Further, after commissioning of container terminals in the country, calculation of average moves per crane-hour in each of the terminals, which ultimately show the productivity of the terminal, was also considered.

However, when internationally acknowledged practices are discussed, the above parameters are not much in vogue in international ports either in Asia, South Africa Europe or the US. There is no concept of pre-berthing detention as such because in world-class ports, the capacity is much more than the actual traffic and the planning is also done on those lines. Hence, there is no question of any ship waiting at anchorage.

When average turnaround time is discussed, they may generally be referred to in informal business conversations, but not formally calculated, since it all depends on the parcel size of the vessel

calling, length of the channel in which pilotage takes place, type of commodity and the mode of discharge/loading. It cannot be generalised as the averages of such anomalous elements only distort the real picture and convey wrong results and interpretations because weightages of different commodities are different in each port. One commonly used parameter, which could be attributed to the port‘s internal efficiency is the quantum of cargo that the port discharges or loads from or to a ship in a day, which is nothing but Output per ship berth day.

One parameter widely used internationally is average moves per crane per hour. With the advent of full-scale containerisation of general cargo all over the world due to its obvious advantages, ports have seen a metamorphosis in terms of commissioning of container terminals in a majority of ports in the world and relatively less emphasis is given on the analysis of handling of traditional bulk cargo since the container vessels are more modern & costly and hence, turnaround should be faster.

Many innovative methods and handling systems are found to achieve more productivity in a container terminal. As a consequence, monitoring of terminal performance takes an important seat. Monitoring is done by meticulously watching the performance of shore cranes. The best parameter for the purpose is average moves per crane hour. Associated and derivative parameters like number of moves per hour (meaning total moves of all cranes working for vessel – also

known as vessel throughput per hour), terminal throughput (meaning the total TEUs handled by the terminal in a day), yard productivity (meaning the number of containers handled in a yard) etc., have subsequently emerged. This could be a real yardstick to measure and compare the different terminals in the world on an even keel.

If one expands the productivity parameters from turnaround time to dwell time and compare it with the Port of Singapore, in general terms, the position emerges as indicated in Table 2. It could be seen from the above table, that there is a difference in three chief performance indicators viz., crane productivity, vessel evacuation rate and turnaround time between a world-class port like Singapore and major ports in India. The reasons for this variation could be many and some of them are underlined in Table 3.

In fact, the most important issue of cost competitiveness of our trade has been the inability to take large size vessels in ports and inefficiency due to more turnaround time. The delay in turnaround time is mostly on port account, which is around 65 per cent of the total turnaround time. The factors responsible for port account delays are vessel waiting for berthing, berth after completion of unloading and before commencement of loading, breakdown/non availability of handling equipment, non availability of port labour gangs, spillage of the cleaning/ bagging/stitching, etc. Similarly, the non-port account factors contributing to the delays are customs formalities, want of cargo/container, weather conditions,

Port

Crane productivity

for small vessels

Berth productivity

for large vessels

Crane productivity

for small vessels

Berth productivity

for large vessels

Singapore PSA 23 45 36 140

Port Rashid and Jebel Ali 22 40 30 110

Khor-Fakkan, Fujairah 20 32 28 100

Salalah N/A N/A 29 90

Aden N/A N/A 28 70

IndiaNSICTJNPCT

Tuticorin

181614

302414

2220-

4036-

Colombo -SLPA Colombo -SAGT

14 13 23 25 18 24-25 45

Belgium Port - - 30-35 -

Shanghai - - 35 -

International Standards - - 27-33 -

Table 1: Crane and berth productivity for small and large vessels


documents not ready, want of barges, poor clearance of cargo, breakdown of ship gears, etc.

Several Indian ports experience high dwell time because of customs and port side constraints like inadequate infrastructure and various IT-related bottlenecks. For container handling, which is increasing rapidly adequate electronic environment with Enterprise Resource Planning (ERP), to enable the efficient use of port resources, is yet to be established.

The Electronic Data Interchange (EDI), which ensures flow of data electronically between ports, customs, shipping lines and users, is still to be commissioned on a common platform. The implementation of Risk Management System (RMS) by the customs is expected to bring about significant reduction in detention of cargo for assessment and examination at ports. An assessment of working of RMS needs to be made so that corrective measures, if necessary, can be taken. Taking the overall position of the Indian ports‘ performance, in order to really improve the performance in terms of pre-berthing detention, turnaround time and berth productivity in Indian ports, the following broad strategies could be envisaged: Capacity creation: Although it is ideal to maintain a gap of 30 per cent between the installed capacity and the traffic according to the conventional international norms, it may not be possible to maintain the exact gap all the time. The gap of 30 per cent is generally required to be maintained in order to take care of maintenance works at the berths, approaches to the berths, equipments etc.; it is not mandatory to maintain this ideal gap. In fact, if the traffic outweighs capacity, capacity utilisation of berths will be maximum, which again indicates effective utilisation of berth capacity. However, leaving this short-term gain, it is better if the ports create capacity in excess of 30 per cent of actual traffic over a period of time. In such a case, pre-berthing detention on account of the port

could be brought to almost zero.Adequate drafts: Due to various reasons, the drafts at Indian ports (both in the channel and at berths) have historically been very low and not commensurate with the developments taking place in the world in terms of change of ship sizes, higher parcel sizes, changes in cargo trends such as containerisation, project cargoes etc., If one would glance through the drafts available in Indian ports, it goes as low as 7 metre in older ports and upto 16 metre in newer ports. Higher drafts are only available in very few ports. Internationally, top 20 container ports in the world had drafts ranging from 14 metre to 16 metre even in 2003. Thereafter, some ports in China and other countries have enhanced drafts still further to accommodate Super Post Panamax and above vessels. Hence, another important measure that ports are required to take is to increase the drafts at least to 14 metre and upto 17 metre according to the potential of bigger-sized vessels calling at a particular port. Massive mechanisation: With the kind and size of vessels with higher parcel sizes calling at ports, loading and discharge rates should go phenomenally up from the present low productivity levels at berth. Some ports in India discharge fertilisers as low as 2,277 tonne per day and maximum discharge is to the tune of 10,931 MT per day. With manual loading, iron ore is getting loaded into the ships at some ports to the tune of 12,028 MT per day whereas mechanised ports in India itself load around 50,136 MT per day. It was also a fact that a ship. which was loaded in four days in a Chinese port, took 15 days to discharge at an Indian Port, despite the efforts made at all levels. It only goes to say that mechanisation is the need of the hour at all Indian ports, not a nominal or limited mechanisations but a massive world-class mechanisation.

It is a fact that till recently and even now, ports have been grappling with handling of cargo with the electric level luffing cranes with capacities of 3T, 6T

and 10T. With this kind of mechanical aids, Indian ports might find it difficult to achieve international norms and standards of performance. Hence, it is high time, Indian ports take up heavy mechanisation programmes and each berth should be equipped adequately with high capacity versatile cranes, conveyer systems, silos, harbour mobile cranes, grab unloaders and gantry cranes.Development of adequate storage areas: If one examines the entire chain of cargo flow from and to the port, he will find that the immediate concern for all the stakeholders in the port is to feed or remove the cargo from the wharf so that the turnaround of ships shall be faster. There should not be congestion at the wharf and wharf clearance is of utmost importance.

Towards this objective, apart from deploying and achieving the manual and mechanical efficiency at wharf, clearance of cargo from the wharf to and from some other plots, viz., storage areas, have to be targeted. It is a general impression that the cargo should not dwell at the port for longer periods; rather, it can be taken to individual factory or consumption centres for feed in case of exports. Although it is ideal to aim at, practically, it may result in so many snags because the ultimate consumption centres or cargo generating centres are far away from the ports. All over the world, land is always regarded as a leverage point for a port‘s development.

If a port has adequate land, it should develop adequate open stacking areas or closed warehouses near the port, with sufficient disincentive to dump for longer periods and resort to stock & sale from such port areas. However, ports need to develop or cause to develop storage areas near the port so that cargo can be cleared from the port faster and achieve lower turnaround time. Incidentally, it may be mentioned that warehousing is one of the port-related functions and providing transit is one of the primary responsibilities of a port. The strategy of providing storage space for attracting traffic is well adopted by private ports like Mundra and Gangavaram.Hinterland connectivity: In order to make Indian ports comparable to international ports, improvements inside the port as well as in the logistics network outside is ensured. One of the important factors apart from wharf clearance, inside

Sea transportation, continued

Ports Dwell time (days)

Crane productivity (Moves/hr)

Evacuation system

Vessel evacuation rate (Containers/hr)

Turnaround time (days)

Major Indian ports 3.78 20 Manual 40 1.77

Singapore 0.60 30 Automatic

flow through gate system

100 0.50

Table 2: Comparison of major Indian ports with Singapore


evacuation network, augmentation of storage space, etc., is to evacuate the cargo from the port to hinterland. This holds true for every port – be it a bulk port or a container port or a specialised cargo port or terminal. In Europe, all the ports have such seamless connectivity that cargo flows in Europe and even between the countries uninterrupted and smoothly. This ensures minimum delays at the port as well as port area. Hence, Indian ports, to be at par with international ports, should have minimum four-lane road connectivity as well as double line rail connectivity.Cost efficiency: Shipping lines have been protesting time and again about how charges at Indian ports are very high as compared to other international ports. As a matter of fact, vessel-related charges are perhaps higher than some of the international ports; whereas cargo related charges are much lower in some Indian ports in comparison to ports abroad. If the actual cost of handling per tonne is reckoned, we find it is as low as `41.41 at Mangalore, `44.74 at Tuticorin and `45.20 at Kandla (meaning, less than US$1 per tonne). Hence, a generalised statement based on a common perception by incorrectly grouping together vessel and cargo-related charges may not reflect a correct picture.

If we take the vessel-related charges alone, the reasons for higher charges are mainly two – higher cost of dredging in certain ports, requiring perennial dredging and lack of subsidy on the part of the

government. We have seen, in many parts of the world that some part of dredging (at least the capital) is funded by provincial governments or federal governments. If the same approach is adopted by Central Government or state governments, the vessel-related charges could also be brought to the reasonable levels. The whole position stated above is with regard to port cost.

But, if we look at the overall cost at port, including a ship‘s waiting cost; stevedoring charges, C&F charges, vessel agent charges, etc., the cost may be higher than that of international ports. The best way to deal with it is to reduce pre-berthing time to zero, bring down ship turnaround time to the minimum levels, and achieve higher productivity levels for which the abovementioned strategies may really work wonders.

GROWTH AHOY!In its revised outlook for the global shipping industry from neutral to negative, Moody’s Investors Service, reported while the dry bulk sector is most vulnerable in 2011, it also believes the tanker market faces challenges and the container segment could deteriorate in 2012. “Even though the demand for shipping services is likely to remain solid in 2011, underpinned by positive trends in world trade, we believe industry conditions will deteriorate over the next 12-18 months, primarily because of a continuing oversupply of vessels,” the report said. The rating house said

that the dry bulk segment is likely to be the hardest hit this year because of a large order book equal to 46 per cent of the tonnage on the water, with 80 per cent of those ships due for delivery in 2011 and 2012. That, it predicts, will create a supply-demand imbalance that will continue to depress freight rates.

Carriers with large numbers of ships on spot charter are likely to be most vulnerable to lower rates than firms with long-term contracts. Tonne-mile demand will rise from seven per cent to nine per cent in 2011, while the fleet is estimated to grow 51 million tonne this year, equal to a 13 per cent expansion of the global tanker fleet, 10 per cent after postponements and cancellations. So supply will still outstrip demand.

Talking about the Asian market, investment in ports located in South East Asia’s fastest growing economies will accelerate in the coming years. They agree that while in some of the region’s, every states’ further regulatory and institutional hurdles must be overcome before private finance can be enticed on a large-scale; the lack of investment opportunities in mature economies, such as the US, is tipping the reward versus risk balance in favour of emerging markets.

The South East Asian region has considerable historical experience of the virtues of private sector participation in the maritime and transport sector from early developments in Singapore and successful privatisation programmes in Malaysia, through to more recent reform successes in Indonesia and Vietnam. As a result, the idea of ports as drivers of economies’ export-driven growth, and of private finance and operators as a means to speed that growth, is well established.

To leverage on such promising prospects, Indian ports have to lay their emphasis and focus on improving berth productivity for container vessels as also the turnaround time of ships. Indian ports, as of now, irrespective of public or private, are not comparable to world-class ports due to various reasons. The broad strategies to make Indian ports achieve international standards are capacity creation, increase in the drafts, massive mechanisation, and the development of adequate storage areas, thus providing seamless hinterland connectivity and attaining cost efficiency.

Compiled by Prerna Sharma

BASIC PHYSICAL FEATURES

Indian ports PSA Singapore

The total number of terminals for handling containers at India‘s biggest container port – JNPT – is three terminals with a linear quay length of 1,992 metres, which makes it adequate for nine vessels at a time.

PSA Singapore has four terminals having a quay length of 11,754 metres, which can accommodate about 41 container vessels at a time.

The area available at JNPT for the three terminals is about 133 hectare.

The area available at Singapore Port for the four terminals is about 425 hectare.

The expansion of JNPT is dependent on the acquisition of land behind the terminal, which is fraught with problems of resettlement and rehabilitation.

Though land is scarce in Singapore, the expansion of terminals is done by reclamation of land from sea and therefore, though costly, it can be well planned and is not limited by the constraint of land acquisition.

The draft at JNPT is (-)13.5 and there is a limitation on the latest generation vessels.

The maximum draft is more than (-)16M. There is no limitation on the most modern and latest generation container vessels.

There are draft limitations in the channel.There are no draft limitations in thechannel. The biggest ships in the world canvisit Singapore Port at any point of time.

The total number of quay about 24 Nos. The number of quay cranes at the fourTerminals at PSA Singapore is 131.

Table 3: A comparison of the basic physical features of Indian ports with PSA Singapore


ONE ‘Q’ MANY VIEWS SEA TRANSPORTATION

HARBOURINGThe global sea transportation segment is at an evolutionary phase. While some will witness focus on the design aspect, eco-friendliness as well as turnaround time to boost the profitability thought-provoking insights into the trends that the sea transportation segment is about to witness

Our export and import trade is growing at almost 30 per cent year-on-year, but the developments in our infrastructure are not keeping pace with it. Until the government does something about this, managing the sea transportation segment is going to be a challenge as far as the outward and inward moves are concerned. The relatively poor infrastructure provides us an opportunity to be more innovative in terms of competing with the world. So, as far as the growth prospects are concerned, it will only prosper.

– NAREN DAYAL,GM, Far N Par India (End-to-end logistics service provider)

PRERNA SHARMA

The fuel parameter will probably be an issue in the coming years and there will be a need to invent a different type of reasonable and workable fuel that will operate the vessels, thus reducing dependence on crude oil. As a result, the freight will get more expensive and some of the shipping lines will not be able to survive and continue in the market. Meanwhile, there will also be a need to create more hubs and quays.

– SAMEH NASHED,GM – Business Development, Universal Center for Freight, Cairo Egypt (Leading freight forwarding company)

The growth in India’s international trade mainly drives sea transportation and we should make the most of this opportunity by utilising the empty containers for reverse transportation of goods, which would, in turn, reduce the total transportation cost. India needs to adopt an integrated approach at the national level so that domestic and international shipping routes are well aligned with other modes of domestic transportation such as rail & road. Besides, domestic waterways will offer a major advantage in terms of reducing total transportation cost. In addition, dedicated corridors are a must to ensure smooth fl ow of goods from the interiors of the country to the ports. We need to build the shipping industry in a big way for which we require private participation. The integration of the shipping industry with the domestic transport system will reduce the total transportation cost. On the international front, the Indian Ocean Ring is emerging as a major trading ring. India, on the other hand, has a natural advantage of a long coastline as compared to China, which will help it serve emerging markets in the Indian Ocean.

– PROF RAJU GUNDALA,SCM, Alliance University (Business school)


modernisation and capacity expansion on their way to become globally competent, others will curve and, at the same time, add to their sustainability quotient. Here’s presenting some of the in the years to come…

SUCCESS

In the coming years, new vessels equipped with next-generation engines having higher carriage capacity than the existing vessels will be introduced. For instance, a vessel operating with a carriage capacity of 3,200 TEUs will be replaced by a vessel carrying 8,000 TEUs. In line with the growing trade demands, the vessels on the Europe-Asia route will have to fi nd new possible trade lanes, such as the US Gulf Area and the Middle East. In addition, the port structure will need to be redesigned in order to gear up for berthing prospects of newly designed vessels, addition of more gantry cranes, improved draft capacity of port, etc. In order to reduce carbon footprint, new engines will be designed to ensure less carbon outfl ow. There are also possibilities to shift from diesel engines to steam engines, which require further technical expertise.

– ABHIJEET KALE,Branch Manager, Meridian Shipping Agency (Transworld Group of Companies)

A big problem in the medium-term is that ships will have to produce less sulphur oxide (SOX) and nitrogen oxide (NOX) emissions. This means that they may not be able to burn the high sulphur level of fuel oil (bunkers) in their existing engines and will have to install new engines or emission control equipment, such as scrubbers, to remove the SOX and NOX emissions. This will rack up shipping cost in addition to the cost of crude. This will have a spin off effect on refi neries as well, as they heavily rely on ships to consume that ‘cut’ of the crude distillation. In addition, the cost of port security now is going to increase, which implies higher port cost.

– GAVIN HARRYLALL,Manager – Supply Caribbean, Chevron Miami/Fort Lauderdale Area (Diversified manufacturing player)

One trend that should produce ripples throughout the supply chain world is the arrival of larger vessels, which are gaining prominence in regular schedules. Loading and unloading these ships are going to add days on each end of the voyage as well as cut the number of regularly scheduled sailings to and from most major ports. Lead times and inventory carrying calculations will be thrown off if companies do not plan for these consequences. For an industry, which, in its current operating process, is on time 51 per cent of the time, the consequences that will come along with larger ships will be disruptive.

– JOSEPH K,Managing Partner, New Deal Logistics, Greater New York City Area (Solution provider to retail SMEs)


Fuel costs are on the rise across all transport modes, but there is no denying that the impact is far greater on road transport than on sea. The expectation is that high fuel prices will stay, so people are now seeking long-term alternatives. The maritime and freight industries are under huge pressure to reduce their costs both, fi nancially and in terms of emissions. Matching that with increasing landside logistics cost pressures means that they also need to fi nd cheaper options, and, in many cases, short sea shipping solutions provide the answer. Short sea shipping will increasingly play a key role in the delivery of cargo worldwide. In Europe, it already accounts for 40 per cent of all European Union (EU) maritime movements, and with signifi cant benefi ts compared to road haulage, it is understandable why the European Commission has placed it at the forefront of its sustainable transport policy. Short sea shipping provides a sustainable ‘green’ alternative to road and rail, producing much less CO2 per tonne-kilometre (only 16 per cent of road emissions levels). The movement of goods by water also helps to alleviate congestion on road & rail networks and reduces the need for public sector infrastructure investments.

– STEPHEN CARR,Head – Business Development, Peel Ports Mersey (Britain’s largest group of ports)

In the US, there will be a lot of concern with the time delays and cost of the Panama Canal. Work is being carried out to make it larger, but the costs are increasing. The use of landbridge across the US from the west to east by rail will become more prevalent in order to reduce both, cost and transit time affecting the ship calls. There is a possibility of getting direct routes between the US west coast and Asia and fewer stops by those providers through the canal to the East.

– MARTY COLBECK,Regional Sales Manager, Auto Warehousing Co, Greater Detroit Area (Specialised auto logistics provider)

Indian seaports in the East – Krishnapatnam & Visakhapatnam – are going to handle bulk cargo. This, in turn, will open new vistas in sea trade between India and the Far East. In addition, seaport authorities will introduce key features such as automated handling and improvised container handling tracking. Other aspects are design features, which have been engineered as per the port regulations & facilities and investments made at both these ports.

– VIDYASAGAR TALAVAJHULLA,Deputy Manager – Supply Chain, Nagarjuna Agrichem (Pesticide manufacturers)

As the population in countries like India and China get higher disposable incomes, one can expect more global imports going into these areas. As the demand for consumer goods increases, the container rates from the US and Europe into these regions will increase and the reverse will see a fall in rates. The impact on the cost of exports for China will be minimal, but with their wage infl ation, it must, at some stage, impact their manufacturing cost effectiveness.

– CLIVE L,GM – Business Development Healthcare, Yusen Logistics UK (Air/ocean freight forwarders and contract logistics company)

Sea transportation, continued


INDIAN MARITIME SECTOR INSIGHTS & OUTLOOK

PORTS play a vital role in the overall economic development of the country. About 90 per cent by volume and 70 per cent by value of the country’s international trade is carried on through maritime transport. The development of India’s ports and trade-related infrastructure will continue to be critical to sustain the success of accelerated growth in the Indian economy. Despite record growth rates, the merchandise trade intensity of India’s GDP is still below 30 per cent. This indicates that there is still a lot of

untapped potential for the growth of trade and consequently, the demands on the country’s ports and trade infrastructure will continue to mount as trade diversifies and grows. Hence, there is a need to expand the country’s ports in a timely and efficient manner.

The total volume of traffic handled by all Indian ports during 2009-10 was 849.9 million tonne. Non-major ports account for around one-third of the total seaborne trade. The growth in cargo handled at major and non-major ports in 2009-

10 was 5.8 per cent and 35.4 per cent, respectively, as compared to 2.2 per cent and 3.3 per cent achieved in 2008-09. In order to achieve the coveted goal of transforming Indian ports into world-class facilities suited to the requirements of the future economy of India, the Ministry of Shipping, Government of India, has initiated many path-breaking measures, which will facilitate enhanced private investment, improve the service quality and promote competitiveness, apart from achieving the expansion of capacities

In order to navigate and steer the Indian maritime sector into becoming one of the premier maritime nations of the world, the Indian logistics sector needs to develop rapidly to synchronise with the dynamic growth of the Indian economy. The ports infrastructure and shipping play vital roles as parts of the logistics chain. The Ministry of Shipping has been continuously engaged in designing and implementing various projects for the development of the sector. In this context, the recently unveiled Maritime Agenda: 2010-20 proves to be a foundation stone for the promising growth of the Indian sea transportation segment.

QUEST TO ACHIEVE INTERNATIONAL STANDARDS INTERNATIONAL STANDARDS


Indian maritime sector, continued

in the country. Such measures include formulation of Maritime Policy, revision of various operational policies, preparation of perspective plans for the major ports, commissioning of two more major ports – one each on the East Coast & the West Coast – introduction of Port Community System (PCS), paperless regime, etc.

Although a Maritime Policy was attempted at the national level sometime in 2004 and a draft hosted on the website of the Ministry of Shipping, it could not be finalised due to various reasons. A comprehensive policy is necessary as a foundation for an ambitious development plan; it provides the right framework for the development of the sector. Keeping in view the above perspective, policy framework and policy issues are formulated and provided in the subsequent chapters. It is in this context that the Ministry of Shipping embarked upon the challenging task of preparing an ambitious Maritime Agenda for the decade (2010-2020) to create, build and sustain the maritime infrastructural needs of the country for the next decade.

POLICY AGENDA India has the potential to become the fastest growing economy for the next 30 years and is more likely to occupy the second position after China by 2030, predict experts. This economic upsurge will be one of the important drivers for the growth of Indian ports in the years to come. Coupled with this, the technological changes in shipping and information technology will trigger the growth in Indian ports and provide a stimulus for cargo handling.

Hinterland connectivity and Information & Communication Technologies (ICT) integration among all port community members are the two vital elements, which drive the port sector in India towards comprehensive development of efficient world-class ports. Various ministries in the Government of India viz., Ministry of Shipping, Ministry of Road Transport & Highways and Ministry of Railways as well as state governments should lay specific emphasis and focus on hinterland connectivity. Major and non-major ports in the country should initiate and update various ICT measures and also integrate themselves with stakeholders to vitalise themselves into world-class ports.

In the recent past, major ports in India have exhibited very strong change

management capabilities and have made significant strides in modernisation and capacity augmentation. Port capacity development was possible mainly due to the various policy initiatives taken by the government for increasing the pace of privatisation, which include, among others, standardisation of RFQ, RFP & MCA and formulation of guidelines for the fixation of upfront tariffs. Maritime states have also come up with several policy initiatives and identified potential locations for the development of new outlets. Thus, the major & non-major ports have assumed complementary roles, besides creating healthy competition, which, in turn, enabled the sector to provide cost-effective and quality service to the customers.

As per the Maritime Agenda, 2020, the traffic at major ports is likely to grow at a compound annual growth rate (CAGR) of 8.03 per cent from 561.09 million tonne in 2009-10 to 1214.82 million tonne by 2019-20, whereas the traffic at non-major ports is expected to grow at a CAGR of 15.96 per cent from the present level of 288.80 million tonne to 1269.59 million tonne by 2019-20. Thus, the anticipated traffic at Indian ports would grow to 2484.41 million tonne by 2019-20 from the present level of 849.89 million tonne at a CAGR of 11.32 per cent.

Having set the tone for the growth path, Indian major & non-major ports have made ambitious plans for the development of new outlets, augmentation of existing service centres, induction of state-of-the-art cargo handling equipment and improvement in logistics in order to meet the challenges emanating from the anticipated growth in the trade. As per these plans, the capacity at 13 major ports is likely to increase to 1459.53 million tonne by 2020 from the present level of 616.73 million tonne. The capacity at non-major ports is poised to increase to 1660.02 million tonne by 2020 from the present level of 346.31 million tonne. Thus, the Indian ports are aiming at a surplus capacity of above 25 per cent over the projected demand. This will enable the ports to provide berthing facilities on the arrival of the ships, thus achieving zero waiting time for the vessels. The proposed investment during the next 10 years is expected to be `2.77 lakh crore — `1.09 lakh crore for major ports and `1.68 lakh crore for non-major ports.

In addition to capacity augmentation, all the major ports are aiming at bringing

structural changes in the administration of the ports to improve organisational effectiveness. To this end, all the ports are planning towards implementing the ‘landlord port‘ concept, thus duly limiting their role to maintenance of channels and basic infrastructure and leaving the development operation management of terminal & cargo handling facilities to the private sector. The ports are aiming at lean staff by extending information technology to the entire gamut of operations. Thus, the Indian ports are marching forward on a confident note and gearing themselves to meet the anticipated demand from the trade in the years to come.

PRIORITY FACTORSWhile the present policies in the Central Government and State Government are dynamic and investor friendly, it is strongly felt that additional path-breaking initiatives may be required to be taken over a period of time to boost the sector to the huge anticipated levels of growth and development of ports in terms of traffic as well as capacity. It would also be necessary to review the policies periodically, say once in three years, to keep them relevant in changing times. Some of the future foreseeable priorities are as follows:Major ports to be landlord ports: The major ports have been working towards implementing the ‘landlord port‘ concept. This approach will continue and total realisation of this concept is expected by 2020.Policy on PPP projects: Public private partnerships will be the preferred mode for the development of port terminals and other commercially viable activities in the major ports. The standardisation of RFQ, RFP and MCA and the formulation of guidelines for fixation of upfront tariffs have served to make the PPP process transparent and give confidence to investors. These documents will be reviewed in 2010-11 and subsequently, after five years.Land policy: This is one of the significant policy frameworks guiding the overall functioning of the port sector. In all the major ports, the world over, land has been leveraged for optimising the throughput and increasing the revenue of ports. It is an established practice globally for ports to allot land for carrying out economic activities, including establishing the industry to ensure captive cargo to


the port, thereby enhancing the sustainability of that port. Port land has also been used to set up special economic zones (SEZs) aimed at encouraging industrial development in and around that port. Other than the above, ports are generally expected to utilise their land, thereby giving the first priority for the purpose of port-related activities and treating the activities incidental to the port as secondary. Ports located in large cities present port planners with special challenges in land management. Major city ports offer opportunities for the economic development of their host cities in terms of utilisation of land. Keeping all these factors in view, the land policy shall be frequently reviewed and a new vibrant land policy will be put in place to make sure that it is in tune with time.Policy for preventing monopoly in the major ports sector: In terms of the Regulatory Framework‘ of the private sector participation (PSP) guidelines (1996), the ports were directed to ensure that private investment does not result in the creation of private monopolies and that private facilities are available to all users on equal & competitive terms. Accordingly, it was felt that a policy may be formulated for the prevention of private monopoly in the port sector for ensuring healthy competition among private operators and smooth award of projects for capacity augmentation at the major ports. In exercise of the powers conferred upon the Central Government under Section 111 of the Major Port Trusts Act, 1963, and in consultation with Chairpersons of all major ports as well as stake holders, the following policy has been laid down with effect from August 2, 2010 for preventing private sector monopoly in major ports. If there is only one private terminal or berth operator in a port for a specific cargo, the operator of that berth or his associates shall not be allowed to bid for the next terminal or berth for handling the same cargo in the same port.Corporatisation of major ports and commercialisation: Corporatisation envisages conversion of major ports into commercial organisations operating with minimum costs, thus offering improved services and having a quick market-oriented commercial response mechanism. Towards this end, the corporatisation of ports has

been recommended by experts and will be achieved in phases. Corporatisation will be taken up for three ports in the first phase, beginning with Jawaharlal Nehru Port Trust (JNPT). Deserving ports could be conferred with the Navratna or Mini Ratna status, thus giving them substantial autonomy in functioning. Public ports under the control of both, the Central Government & State Government should completely re-tune themselves and focus on commercialisation and corporatisation, with professional management in place and free access to financial markets without recourse to government support.Tariff regulation at major ports: Tariff Authority of Major Ports (TAMP) is the economic regulator for major ports with the key function being tariff determination for major ports and their private terminals. TAMP follows a consultative process with the stakeholders before the fixation of tariffs. A set of guidelines on tariff setting was notified on March 31, 2005. This was a cost-plus approach with an assured return on gross capital deployed. It was clarified that royalty or revenue share payable to the landlord port by the operator will not be an admissible cost for tariff computation. It thus implied that royalty will be paid out of the operating surplus of the concessionaire. The tariff setting guidelines were revised in February 2008, since it was felt that the bidders were facing difficulties in quoting the revenue share, on account of the tariff being determined after the bidding process was completed. As per the February 2008 guidelines, a tariff cap (defining the ceiling) is set upfront by TAMP prior to inviting bids. TAMP follows a normative cost-based approach, which recognises capital and operating costs and allows a reasonable rate of return on capital deployed, which is 16 per cent, as of now, based on a capacity utilisation of 70 per cent of the capital deployed. While the whole tariff fixation mechanism has to be reviewed, there are several improvements possible in the guidelines in the short-term, which will be attempted soon.

Port Regulator: While TAMP is the economic regulator for major ports, with the main function as tariff setting for major ports and private terminals commissioned therein, the non-major ports, operating in the same environment, do not have any

economic regulator and non-major ports, including private ports, have the liberty to fix their own tariffs. As a result, there is no level playing field. Hence, there is a need for a port regulator for all the ports for setting, monitoring and regulating the service levels, technical & performance standards. All the ports should be left free to fix their tariff, depending upon interplay of market forces. The regulator can be entrusted with the responsibility of dispute resolution as appropriate. The regulator may also be empowered with judicial powers to issue regulations & policy guidelines, and take specific regulatory actions upon finding inadequate competition, anti-competitive practices or unsafe or environmentally detrimental practices. The regulator could also act as an ombudsman to deal with consumer grievances.Environmental clearance mechanism: India is in the process of creating huge capacity through PPP basis. One of the major factors for the delay in the fructification of projects is the long environmental clearance mechanism. Project authorities have to undergo different processes at state and central levels to get the project environmentally cleared. It is in the interest of the port sector that the environmental clearance process be reviewed in respect of existing ports where further development works are being undertaken. It should be possible to have clear guidelines laid down by the Environment Ministry and leave it to the Administrative Ministry or the State Government to strictly comply with those guidelines and clear the projects environmentally. A master plan for the entire port, covering different projects, may be prepared and in-principle clearance be taken from Environment Ministry and thereafter, specific clearance for each project may be obtained from the Administrative Ministry/State Government. These could also be subject to subsequent environmental audit. It would also be desirable to look at the global best practices for environmental clearance.

While the Maritime Agenda 2010-20 envisages an ambitious programme to reach 3.12 billion tonne port capacity within the next decade, the Indian maritime sector needs simultaneous multiple interventions to achieve certain goals, which are concomitant with the economic growth of the country.

FACT

FACT

FACT


Indian maritime sector, continued

Environment policy and green ports: The Ministry of Shipping is committed to the protection of environment, as it is an indispensable factor for sustainable economic growth. Steps are to be taken by ports in their endeavour to become clean, green and environment-friendly ports. Environmental issues, including the handling of hazardous and noxious substances in a port, prevention of air, water and soil pollution in ports, treatment of harmful aquatic organism in ballast water, etc., are being addressed and tackled. The port industry in general has been faced with sustainability issues – compliance to international and national regulations vis-à-vis demands for bigger port capacity & increased productivity without compromising on environmental quality. Without regulation, it is difficult to implement greener practices, as these may put operators at a competitive disadvantage. In addition, there are several other issues that appear across the marine and port sector. These include the availability of incentives to encourage green practices, cost & availability of clean fuel, the need to do more research on green technologies, use of shore side power, training programmes for such industry and designating emission control areas.

There is a need to develop green policies supported by incentives to encourage ports to implement green practices. JNPT has already taken a lead in this regard. Green practices in the marine and port sector would need collaboration with other sectors. Some of the measures for the control of emission and development of green ports are:Easy and low-cost approaches• Use of cleaner fuels such as low sulphur

diesels (LSD), biodiesel and Fischer-Tropsch diesel in all port equipment

• Well-enforced idling time restrictions of the vehicles in the port area

• Measures such as terminal gate improvements, simplifying trade procedures, designing logistic chain, which produces less traffic and less air emission

• Controlling temperature of bunker during storage or using a scavenging agent to reduce emissions during bunkering operations

• Speed reduction, use of specially designed paints to reduce drag and vessel assignment planning for harbour crafts

• Formulation of ‘green tariff‘ for vessels, which are reducing speed and using distillate fuel in the port limits

• ‘Water curtains‘ for the coal storage area to prevent the coal dust flying from the storage yard and spreading through the port.

Capital-intensive approaches• Replacing or retrofitting cleaner engines

for cargo handling equipment, vehicles and harbour crafts

• Repowering of the old, highly polluting locomotives and tugboats with several low-emitting new engine options, including natural gas (NG) and hybrid battery-electric

• Cold ironing for ships and port‘s tugs• Building of infrastructure, such as

separate corridors for cargo, widening of roads & flyovers and improving intersection for better traffic

• VOCS for oil installations, gas fill stations and bunkering barges in the port area

• The use of renewable energy such as wind, solar power or biogas or alternative fuel, such as natural gas or propane, for the port‘s energy needs.

Capacity building and human resource development: Recognising the need to impart structured training to all port personnel including officers, it is essential to re-train them towards multi-skilling. Every employee shall undergo different tiers of training programme during his service. Training will be made compulsory before consideration of an employee for promotion. In order to incentivise the port personnel and induct professionalism, cadre restructuring of officers in major ports will be fully implemented, which brings in uniformity as well as fresh induction of professionals at different levels of management through direct recruitment. The present classification of ports into ‘category I’ & ‘category II’ will be reviewed and if considered necessary, done away with. The remuneration package for the port personnel will be on the lines of public sector companies to induce corporate culture in the ports. Manning scales, datums and piece-rate incentives for port employees will be rationalised from time to time and realistic & productivity-oriented ones will be put in place. Performance appraisal of CEOs of Ports will depend upon the agreed targets and objectives by way of a memorandum of understanding. Incentives for officers will depend on the achievement of such

stated targets and objectives.Indian maritime cadre: The maritime sector is a specialised sector. In this sector, most of the decisions in most of the areas are driven by the experience of executives in the sector, who through their professional experience and expertise can contribute to the growth and development of the sector. In addition, executives in the sector do not have any proper career progression plans. As a result, they lack motivation and are unable to contribute their mite to the sector in spite of their specialisation. Hence, there is a need to form an Indian maritime cadre and encourage specialisation in this field.Pilots’ pool: Indian ports suffer, many-a-time, from inadequacy of pilots to navigate the vessels in their channels. As a result, ports are unable to achieve zero pre-detention time for vessels and long-waiting of vessels are also common in ports. It is advisable to start a three-year pilots’ course consisting of one year theoretical training in Indian Maritime University and two years practical on-the-job training in ports so that a candidate can be given a pilot licence by the government after successful completion of the course, to pilot vessels in any port. These pilots can move from one port to another. Dredging: Ports need to develop the capacity to receive bigger ships, for which capital dredging to achieve the desired level of draft and maintenance dredging to retain that level, have to be undertaken. In most of the maritime nations, dredging in the channels, both capital as well as maintenance, is taken up with budgetary support from the either the national government or local governments. Financial support for dredging is necessary for reducing the port charges. The channels leading to the major ports could be declared as national or state channels. If considered necessary, each port may be asked to remit certain dredging contribution to the concerned government in proportion to the quantum of traffic handled by the port. A policy on this has to be prepared in 2011-12.Rail-Road connectivity: Although major ports have reasonably adequate rail-road connectivity, many non-major ports are suffering from severe constraints. Such non-major ports must work with the state governments and other authorities to commission a four-lane road connectivity and two-lane rail connectivity at their ports to ensure seamless flow


of cargo. Major ports may endeavour, in consultation with National Highways Authority of India (NHAI) and Ministry of Railways, to expand their connectivity to eight-lane road connectivity and four-lane rail connectivity, respectively, by 2020. Links with the Western Dedicated Freight Corridor and Eastern Freight Corridor are a must for the Indian ports to live up to the challenges of burgeoning trade and must be pursued to be in place at the earliest. Hub Ports: India should commission at least four hub ports, two each on the east (Chennai and Visakhapatnam ports) and the west coast (Jawaharlal Nehru and Cochin ports) to receive the 13,500+ TEU containerships. These should have:• Ability to berth vessels up to 400 LOA

(length overall)• Depth of water to be available for

vessels at least of 15m draft• Crane reach for vessels having 24 rows

across• Container handling speed of 250-350

moves per hour.Tax Regime: Since the beginning, the major ports in this country have been treated as local authority by virtue of a provision in General Clauses Act and have been exempted from income tax, as ports are considered the nation‘s vital infrastructure and the surpluses generated in the ports could be ploughed back for the creation of more infrastructure both, within and outside the port. However, during 2002, the Income Tax Act was amended and ports were taxed. Nonetheless, the taxation system must also promote investment in infrastructure.Cruise Shipping: Cruise shipping is an area, which has vast potential for Indian ports – India being a major tourist destination. Although a policy has been formulated, cruise shipping has not really taken off as it should have. A comprehensive policy needs to be evolved and adequate arrangements in terms of state-of-the-art passenger terminals, baggage screening, customs clearance, immigration and tourism-related ancillaries backed by effective publicity needs to be in place so that Indian ports also become truly world-class destinations. Indian maritime finance corporation: Most of the maritime projects are specialised in nature and require a specialised scrutiny and appraisal for obtaining the finances for such projects. Moreover, there are no specialised agencies to

fund such projects. As a result, many-a-time, project authorities in the maritime sector find it difficult to raise finances and achieve financial closure. Many ports possess considerable cash reserves which, otherwise to be utilised for expansion and developmental activities, are deposited in banks, because of the induction of PPP in the sector. These deposits yield low returns. On the other hand, a good maritime project, if appraised properly, might yield very good returns. Hence, it is quite desirable to float a specialised maritime finance corporation with the equity of ports and financial institutions to fund the port projects.Approach to international cooperation: To widen the port‘s horizon, a continuous coordination and cooperation is to be maintained with international organisations like World Bank, European Union, etc. In fact, ports are aligned to International Maritime Organization (IMO), and Safety of Life at Sea (SOLAS) convention documents for safe and secure handling of various types of cargo. Most of the leading ports have already implemented International Ship and Port Facility Security (ISPS) code. Though a number of major ports have established sister-port agreements with some of the world-class ports, there is further need to strengthen such co-operation for sharing the expertise in cargo handling operations and port management, exchange of information, cooperation in training needs & modules development, establishing joint ventures of mutual interest, promoting synergy and trade facilitation in the areas of their expertise, etc. The sister-port arrangements may cover bilateral financial and technical cooperation through the exchange of technology relating to infrastructure development & environment, management and operations, collaborations on dredging, marketing of port services, etc.Competition and cooperation among ports: In this era of globalisation, where the economy grows at a brisk pace, every industry is witnessing competition between its players. The port sector is no exception. The inter-port competition as well as intra-port competition is quite evident in recent times. In India, inter-port competition is hindered mostly by insufficient hinterland connectivity, since all ports cannot offer similar type of cargo handling facilities at their terminals. Further, there are rigidities in pricing, as, a result of which, traffic of nearby

ports cannot be enticed by value-added services or reduction in tariff. These issues need to be resolved to promote inter-port competition in an efficient market. One can expect more competition to emerge once more ports are developed by the private operators in the bigger maritime states. The Central Government has taken a considered decision to not allow a particular player to dominate a port and this should promote intra-port competition in future. With the emergence of new ports and terminals lined up in the future, a government policy to meet these challenges of competition (or the lack of it), is needed. Legislative Framework: The Central Government and State Government should transform the legislative framework in tune with the current requirements. Necessary amendments to the Major Ports Act, 1963, Indian Ports Act, 1908 and Maritime Board Acts of respective state governments have to be carried out. Indian ports’ global: In the era of globalisation, infrastructure sectors all over the world have gone global in the form of acquisitions, equity stakes in companies abroad, commissioning of greenfield projects, partnering with companies abroad by way of joint ventures, etc., and port sector is no exception. The Port of Singapore Authority has established its wings in different parts of the world by an instrument called PSA International. Similarly, Dubai Ports have too spread its wings internationally by the consolidated company – DP World. Likewise, some ports in Europe, too, made their presence in the rest of the world. It is in this context felt that since India is bestowed with rich maritime heritage and immense expertise in operating ports with highly skilled manpower and specialised knowledge in port operations, India must also float a special purpose vehicle for making investments in ports abroad and become a truly global power in the port sector worldwide. It is envisaged to incorporate a new special purpose vehicle – Indian ports‘ global and commence pursuing its objectives as stated above.

Through these initiatives, the country will successfully navigate and steer the Indian maritime sector into becoming one of the premier maritime nations of the world.

Courtesy: The article is an excerpt from the Policy Document, ‘Maritime Agenda: 2010-20’.

INSIGHTS & OUTLOOK EFFICIENT UTILISATION OF SEA TRANSPORTATION


TRANSPORTATION modes can be broadly categorised into three types – land (including road, rail and pipeline), air and water. The main water transport routes are oceans, coasts, seas, lakes, rivers and channels. While oceans and seas are used for international cargo transportation, the other water transport routes are used for domestic cargo transportation. Sea cargo transportation is the most ancient mode of international transportation. Even today, sea (ocean) transportation is the primary mode of international transportation for commercial cargo, not only for transnational companies, but also for modern, large & average business entities. Around 80 per cent of the world’s cargo moved today is seaborne and almost 100 per cent of hydrocarbon transportation between nations is via ocean. Approximately 95 per cent of India’s trade by volume and 70 per cent by value are moved through maritime transport.

Coastal and inland waterways are

considered to be the most economical, safe and environment-friendly modes of transportation for domestic cargo movement across the world; the practice is widely used by large industrial nations including China. Further, coastal shipping has proved to be the most energy-efficient and the cheapest mode of transport for carriage of bulky goods like iron and steel, iron ore, coal, timber, cement, etc., over long distances. It is also well-suited for the transportation of petroleum products.

It is estimated that using the waterways mode offers savings ranging from 25 per cent to 50 per cent in the overall transportation cost, especially when considered over long distances. India

has an extensive network of coastal and inland waterways in the form of rivers, canals, backwaters and creeks, with a total navigable length of 14,500km. Of this, about 5,200km of river and 485km of canals can be used by mechanised vessels.

But unfortunately, freight transport by waterways has been a highly underutilised mode in India as compared to other large countries. Frost & Sullivan’s research found that only about 3-4 per cent of total transportation within the country occurs through this mode.

At present, the developing and governing body – Inland Waterways Authority of India (IWAI) has five

declared national waterways for inland waterway transport, which are being developed further for large-scale navigation by the governing body.

ROADBLOCKS ON THE WAYThe challenges associated with

Sea transport is essential for the functioning of the global economy. For international trade, it remains the most economical mode of transportation that moves all kinds of bulk goods around the world. Therefore, without effective and economical sea transport, the viability & efficiency of the world economy would be adversely affected. Indeed, economic growth has become closely related to developments and improvements in sea transportation.

Advantages of Sea Transportation of Cargo

Disadvantages of Sea Transportation of Cargo

Low cost Long transportation time

High reliability Dependence on weather conditions.

Low risk per cent of damage and loss of cargo.

ATTAIN PROFITABILITYATTAIN PROFITABILITYENHANCING CONNECTIVITY ENHANCING CONNECTIVITY TOTO


developing the coastal and inland waterways into a major transport mode for domestic cargo movement in India include limited capacities & lower preference for domestic transportation and cargo handling by existing shipping companies & seaports. This is largely due to the high transportation costs especially for movement on hinterland, port delays, poor turnaround time, lack of mechanical handling, facilities, etc. The slow handling of the cargo at a port and undue port delays inflict heavy losses on shipping companies. According to estimates, 70 per cent of ship time is presently spent at ports, and only 30 per cent on voyage. This scenario results in delayed consignments even for short distances and scope for damages, as most ports do not have substantial warehousing infrastructure, thus resulting in high overall costs of transportation by sea.

Also, a lack of integration with other modes of transport, especially rail, except in the case of a few select major ports, results in partial usage of the coastal mode. Hence, there arises an additional need to employ the road mode for the remaining distance and minimise the intended cost savings on transportation. Weak hinterland connectivity is a serious challenge for most Indian ports, with many ports still without interconnected multi-modal transport network accessibility, which reduces the scope for faster clearance of cargo bound for domestic or international transportation. This dilutes the utility value of ports. In addition, this makes it difficult for transport service providers to offer an efficient multi-modal transport solution

(except in very few select routes), in spite of heavy demand.

Despite investment from the private sector being driven toward the modernisation and development of ports, not much effort is being put to develop an integrated transport system on a national scale, which can then be integrated with all the ports. As a result, shipping lines and trade are adversely affected, thereby leading to time and cost inefficiencies.

Also, there is an imbalance in coastal traffic movement, as traffic is not equally available in both the directions. This makes it necessary for coastal ships to sail in ballast, at times, on the return journey. Another major reason is the over-aged vessels used in coastal shipping. The coastal fleet is ageing fast. Over half the fleet is already overdue for replacement.

IMPROVEMENT AREASExpanding port capacity to accommodate domestic cargo: In early February 2011, the Indian port sector – including major ports and minor ports – crossed 1,000 MT capacity. This is double the capacity of Indian ports in 2001. But, this is not sufficient to meet the growing traffic volumes of cargo handled by ports. The traffic and capacity of Indian ports has grown considerably from 2001 to 2010, each witnessing about eight per cent compound annual growth rate (CAGR) during the period. In 2009, due to low economic growth, the traffic volume at major ports witnessed just 2.2 per cent growth from the previous year and reached 530.0 MT, whereas the capacity reached 574.5 MT, with less

than a 10 per cent gap. In 2010, with slight recovery in the economy, the traffic at major ports rose by 5.6 per cent to reach 560 MT, whereas capacity reached 599.4 MT, again with a gap of less than 10 per cent. In comparison, the traffic almost matched capacity in 2008, which was a year of economic boom. This implies that the capacity growth at major ports is not sufficient to accommodate any rapid increase in traffic. Further, the existing capacity of ports is almost completely consumed by international trade cargo leaving little or no scope for the availability of capacity to handle domestic cargo. Hence, a significant level of capacity expansion is needed, indicating the immense growth potential of this sector.

However, the new Maritime Agenda aims at attaining a port capacity of around 3,200 MT by 2020, while the forecast annual cargo volume by that year would reach about 2,500 MT. This would mean achieving approximately 30 per cent spare capacity, which is considered optimum for efficient port operations. The availability of such additional capacity enhances the scope for utilising the ports for domestic cargo movement. But, building massive additional capacity of 2,200 MT requires an estimated investment of approximately $66.51 billion (Rs3 lakh crore). The agenda aims to procure almost two-thirds of this investment from private participation through public private partnerships (PPP), thereby providing immense opportunities for companies operating in various maritime sector activities such as port construction, development, operation and manufacturing of port equipment.Greater focus on developing minor ports to build capacity for domestic cargo: Focussing on developing additional capacity at minor ports (non-major ports), if possible, exclusively for domestic cargo transportation operations, is also a good initiative to enhance the use of the sea mode for domestic transportation. Since non-major ports can be allocated easily to the private sector for development through PPP mode, the pace of development can be faster and more effective in quickly enhancing the usage of sea transportation mode for domestic transportation needs. Non-major ports in the country have attained tremendous growth by increasing their share in the total traffic handled by the entire port sector, from 10 per cent in 1995 to 31 per cent in 2010.

Indian Ports on West and East Coast and Nature of Cargo Handled, 2010

Source: Frost & Sullivan


Increasing containerisation of cargo to accommodate domestic cargo: The containerisation of cargo is another good measure to enhance the efficiency of ports and thereby improve the usage of the sea transportation mode. Containerisation enables faster loading & unloading of cargo at ports and therefore, reduces congestion at ports. Since currently, most Indian ports are operating at almost full capacity and are totally focussed on international cargo, any capacity that can be freed by using higher containerisation can be made available for domestic cargo transportation. Within the total volume of commodities that can be containerised, only 35 per cent is done in India and most of this is done at the major ports and private ports. The top commodities that are containerised in the country include engineering goods, textile & garments, pharmaceutical products, leather goods, electronic and consumer durables & processed food. The containerised commodities market is expected to grow at a CAGR of 16-18 per cent from 2010 to 2015, while the volume of non-container cargo is likely to grow at only 10-12 per cent during the same period. Currently, the sea mode is largely used for dry bulk cargo transportation within the domestic market, but facilitating transportation of several other products such as agri produce, food products, consumer products and industrial goods through the increased use of containerisation and other advanced formats such as temperature-

controlled transportation through containers would significantly enhance the scope for using the sea mode in domestic transportation.Expanding number and scale of domestic shipping service providers: Despite the fact that coastal shipping was reserved exclusively for Indian ships after independence, there has not been an encouraging growth in the number and scale of operations of large shipping companies providing these services. At the end of 2010, India had an estimated capacity of 10million Gross Tonnage (GT), with a fleet size of about 975 ships, combined across all the above said categories. However, most (around 92 per cent) of this shipping capacity is focussed only on international trade cargo, leaving very low prospects for growth of domestic sea transportation volumes. There are very few notable domestic shipping service providers such as Shipping Corporation of India, Poompuhar Shipping Corp, Reliance Industries, Essar Shipping, Shreyas Shipping, Seaways Shipping, Gati, SKS and Caravel Logistics. Further, each of these companies’ scale of operations for domestic sea transportation is very low. Increased focus of large shipping service companies on domestic sea transportation services would improve the available capacity and quality of services in this segment.Realising Sethusamudram ship channel project: The much-debated and pending project of creating a shipping channel between the coasts of India and Sri

Lanka will provide a continuous navigable sea route around the peninsula within India’s own territorial waters, avoiding the current need of ships to circumvent Sri Lanka. It will also be of significance to Tuticorin Harbour, which has the potential to transform itself into a nodal port. Realisation of the Sethusamudram channel has the potential to shift a significant proportion of domestic cargo movement from land transport mode to the sea mode.

OPPORTUNITIES BECKON In India, the sea transport mode has been drastically underutilised in domestic transport operations by both, transportation service providers and end users until recently. Though a few challenges exist in the enhanced usage of sea mode for domestic cargo movement, these can be easily addressed over time with greater participation by large shipping organisations and enhanced support from the government. Recent developments such as, the growth of dedicated private cargo sea ports across the country’s coastline, growth of new domestic coastal cargo transport providers and rising capabilities of existing providers have added momentum for considering this mode as a viable alternative by manufacturers and transporters at least in select routes within the country. In addition, the Indian government’s New Maritime Agenda 2020 has brought greater focus in this segment, among both transport service providers and end users.

In terms of volume, the coastal shipping segment of waterways transportation in India had been growing at almost 1.5 times the growth of international shipping in the past 2-3 years. Hence, the segment offers significant growth prospects for shipping service companies. Manufacturing industries, on their part, should actively seek coastal shipping and inland waterways as a major mode of transportation for their domestic operations, so as to transform the transportation industry scenario in the country, apart from gaining significant transport cost efficiencies for themselves.

Srinath Manda, Program Manager, Transportation and Logistics Practice, South Asia, Middle East and North Africa, Frost & Sullivan

Efficient utilisation of sea transportation, continued

Share of Sea Mode in Domestic Transportation of Key Industries,

2010Industry Name Share of Sea Mode in

Domestic Transportation

Automotive 4.0%

Cement 5.0%

Chemicals 4.5%

Electronics 1.8%

Electricals 3.8%

Engineering Goods 2.3%

Food Processing 4.0%

Metals 5.0%

Pharmaceuticals 3.0%

Telecom Equipment 2.0%

Textiles 1.5%

Oil & Gas 6.0%

Mining & Minerals 15.0%Source: Frost & Sullivan

Major Ports,560.0, 68.8%

Minor Ports,254.1, 31.2%

Source: Indian Ports Association, Frost & Sullivan Analysis

Total Traffic Handled - Major versus Minor Ports (India), 2010

INSIGHTS & OUTLOOK SHIPPING LINES & CONNECTIVITY TO ASIA


AN increasing number of shipping lines introducing newer direct and transshipment services from Indian ports to Europe, US & other Asian destinations and vice versa has offered connectivity to Indian major and non-major ports, thus supporting the growing trade between India, US, Europe and other Asian destinations. India’s high economic growth has been propelling the robust exports, which has led the Ministry of Commerce to contemplate on the target of doubling India’s exports from

its present share of 1.52 per cent and thus make it to a stupendous $400 billion by 2014. India stands to benefit from the robust growth in the world trade, which reached an all-time high in the last 50 years, thereby clocking a 13.5 per cent growth during 2010 and bypassing the previous recorded growth rate of 11.8 per cent in 1976.

To facilitate growing trade, major and non-major ports are undertaking capacity addition programmes. According

to Rakesh Shrivastava, Joint Secretary – Ports, Ministry of Shipping, “Capacity addition at ports in terms of additional berth capacity will allow ports to add to their cargo handling capacity. This, in turn, will make vessel calls attractive for both mainline and transshipment services.”

NEW SERVICES INTRODUCED ICON Service Taking cue from this, Maersk Shipping line

Shipping, in Indian waters, holds a great promise, more so, because it is the most energy-efficient and cheapest mode of transport. As India’s export profile undergoes a sea change with new emerging sectors like engineering, petroleum, pharmaceuticals and chemicals, shipping lines are expected to find it lucrative to call at Indian ports. Providing proper connectivity services for timely shipment of cargo to the ports and its timely evacuation will help the Indian shipping industry sail in the right direction.

OFFERING BUOYANTTRADE PROSPECTS

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has introduced its new India Colombo – North Europe Service (ICON) service from Chennai port to Felixstowe Port in the UK. With the launch of the new ICON service, Maersk Line will now have two direct sailing services calling at Chennai Container Terminal. The operational services for Chennai Container Terminal are being provided by Dubai Ports World. ICON has been arranged by Chennai Container Terminal due to the growing need for faster connectivity to North Europe base ports with Southern India. The new service is expected to provide faster transit to apparel, engineering and other cargo originating from Southern India hinterland to Europe, US and other parts of Asia. With the launch of the new service, major retail giants like Debenhams, Tesco, Carrefour would be able to avail faster and reliable connection for importing garments and textiles from India.

The new service will provide a transit time of 20 days for the cargo leaving the Chennai port to reach Zeebrugge, 21 days to Felixstowe in the UK, 23 days to Rotterdam and 24 days to Bremerhaven from Chennai Container Terminal. The service, apart from providing direct connectivity from Chennai, is also expected to provide exporters with considerable cost and time benefits to eliminate transshipment and extra handling at Colombo. On the east-bound trip, the service will be useful to sub-continental importers of automobiles, chemicals, wastepaper, etc.

The ICON service deploys 7x3,400 TEU capacity vessels and has the following port of rotation: Chennai, Colombo, Salalah, Zeebrugge, Felixstowe, Rotterdam, Bremerhaven, Salalah, Colombo, Chennai.TMT ServiceA major new service from Chennai Container Terminal will also be provided by Evergreen, Wan Hai and Interasia Lines. The shipping lines have jointly introduced a weekly Taiwan Madras Trunk (TMT) Service from the Port of Taichung recently. The TMT service will have a voyage duration of 28 days covering the ports of Taichung, Keelung, Hong Kong, Port Klang, Chennai, Singapore, Hong Kong. The shipping lines will deploy one each of 1,300 TEU capacity vessels. CPX & CIX2 ServicesA new service has been launched by Orient Overseas Container Line (OOCL) and Yang Ming Marine Transport Corporation

as well. The shipping lines have recently announced the enhancement of the China Pakistan Express (CPX) service and the launch of CIX2 service. CPX is currently operated with five vessels of 3,500-4,000TEU on the following rotation: Shanghai, Ningbo, Shekou, Singapore, Karachi, Pipavav, Nava Sheva, Penan, Port Klang (facilitating connectivity from Kolkata port), Hong Kong and Shanghai. The services have been restructured to provide a dedicated call to Karachi from Shanghai with the following rotation on a 35-day round trip: Shanghai, Ningbo, Shekopu, Singapore, Karachi, Mundra, Penang, Singapore, Hong Kong, Kaosiungh and Shanghai.

The new CIX2 service is being operated with five vessels of 2,700 TEUs. The first vessel MV Thorscape set sail in March from Shanghai with the following rotation on a round trip of 35 days: Shanghai, Ningbo, Kaohsiung, Shekou, Singapore, Nava Sheva, Pipavav, Colombo, Port Klang, Pasir Gudang, Singapore, Hong Kong and Shanghai. Yang Ming and OOCL are offering the new service to meet the increasing demand from the growing trade between India and China. The joint service is expected to provide faster transit times.EPIC Service NYK and Orient Overseas Container Line (OOCL) have announced a direct service between Europe and North West India, Pakistan and Middle East. The new service, known as Europe Pakistan India Consortium (EPIC), will be a part of a joint service agreement pertaining to the existing CMA CGM EPIC service. The service will commence with the westbound voyage of ‘OOCL San Francisco’ arriving at Jebel Ali and the first eastbound sailing will be ‘OOCL San Francisco’s’ departure from Southampton.

The EPIC service will have a 56-day round voyage with the port of rotation involving, Jebel Ali, Port Qasim, Nava Sheva, Mundra, Jeddah, Port Said, Malta, Tangier, Southampton, Rotterdam, Hamburg, Antwerp, Le Havre, Khorfakkan and Jabel Ali. With its participation in the EPIC service, NYK can now offer a second weekly service from Europe to Middle East as well as a comprehensive fixed day, weekly westbound service from Pakistan (Port Qasim) and India (Nava Sheva and Mundra) to Northern Europe (Southampton, Rotterdam, Hamburg, Antwerp and Le Havre).

AEF Service NYK has also commenced a new service between Asia and East Africa. The Asia-East Africa (AEF) service began its operation in April and links major South East Transshipment hubs and Kenya and Tanzania. The port of call for the 42-day round AEF Trip are Singapore, Port Klang, Dar Es Salam and Tanzania. The service commenced with the westbound voyage of vessel MV Damali, which departed from Singapore in April. RCL & CIS Services Newer services will be also offered by Regional Container Lines (RCL) along with Hapag Lloyd. The shipping lines will be commencing new weekly services from China and Korea to Sri Lanka, India and Pakistan and will operate under the names Regional Container Lines (RCL) and Hapag Lloyd (CIS). The service will be offering direct and reliable connections through fixed day sailings between key ports. The first departure of the service will be from Qingdao. RCL & CIS service will involve the port rotation consisting of Qingdao, Xingang, Busan, Shanghai, Da Chan Bay, Singapore, Colombo, Nava Sheva, Karachi, Singapore and Qingdao. The shipping lines will deploy three ships having an effective capacity of approximately 2,000 TEUs each.

SET TO SAIL SMOOTHLY As India’s export profile undergoes a sea change with new emerging sectors like engineering, petroleum, pharmaceuticals and chemicals, shipping lines are expected to find it lucrative to call at Indian major and non-major ports. These new emerging sectors will dominate the export sectors in the new decade. This will also call for vessel lines to provide value-added services like refer services, etc.

However, to ensure that the mainline and feeder vessels make increasing calls to India, it is essential to regularly keep the draft levels increasing, wherever necessary. This is because vessels calling at ports carrying less parcel load than the designated quantity set make it uncompetitive for exporters.

Issues like better yard planning will have to be focussed on to ensure smooth working of equipment. However, most importantly, it would be essential to provide proper connectivity services for timely shipment of the cargo to the ports and its timely evacuation. This will keep the berths released for increased vessel occupancy.


SMART STRATEGIES COLLABORATIVE APPROACHES

WE are in the era of cutthroat competition. We watch our competitors closely and strategise our actions to gain one-up position. Traditionally, ‘compete & gain’ has been seen as the only way of doing and growing business. The primary assumption of competing is that there are limited opportunities and we have to make the most of it. For this, we go all out and do everything that is required, to project us as the most preferred option.

COLLABORATIVE APPROACH NEEDEDAt this point in time, the overall Indian economy is changing, and so are the rules of running businesses. The size of the Indian supply chain industry is slated to be 13 per cent of the GDP. With the economy projected to grow at a consistent rate of around nine per cent, the benefits of the growth cascades down to the supply chain industry as well. There

are increasing opportunities and hence, it would be prudent to have a selective approach towards accepting new accounts. The vast market gives an option to select new accounts, which suits ones business model in terms of capacities, offerings, strength and margin expectations. That is where the need to have a collaborative approach becomes important.

There are two ways of collaboration viz., vertical collaboration and horizontal collaboration. In vertical collaboration, the stakeholders involved in the supply network, e.g. vendors, manufacturers, logistics partners, distributors, etc. collaborate; whereas, in horizontal collaboration, organisations with similar product or service offerings join together to improve service levels and overall demand.

COMPETITION BETWEEN LSPsI have been a part of a logistics service

provider (LSP) organisation for about 10 years and an LSP user for the same tenure. I have closely watched competition between LSPs where every fair & unfair action takes place to stay ahead of competitors. This has only resulted in a loss to one or the other LSP. The maximum advantage of competition goes to their clients or vendors, thus making LSPs weaker by the day. I worked on some of the collaborative opportunities with my competitors and was delighted with the results. It gave me the confidence that collaboration will definitely work. What is important is to maintain trust and transparency among collaborators. It is equally important to have some quick wins to sustain the collaborative approach.

By the term collaboration, I do not mean a mere written agreement in which two or more players decide to work together on certain terms; but rather an understanding within the

IS KEYLack of visibility of demand, inventory holding status across the supply chain apart from hostile relationships between trading partners are some of the factors that pose barriers to the growth of logistics service providers. Adopting a collaborative approach promises to overcome these barriers and ensure overall growth of the industries, the supply chain industry in particular, where the growth will be in terms of size and quality.

COLLABORATIONNOT COMPETITION,


third-party logistics (3PLs) organisations, which work on agreed protocol and try to leverage on the collaboration – horizontal collaboration. This need not necessarily be a legal agreement.

VARYING APPROACHES Let us see how the collaborative approach works in each of the stated cases: Infrastructure/CapacityCompetitive EnvironmentIn this scenario, you construct or invest in capacities independently and believe this is strength; but then, you may end up paying a big price as the capacity risk is fully on you. Moreover, you do not share your capacity with competing players. Also, you play your price depending on demand & supply rather than your cost.Collaborative EnvironmentHere, you share the facility, which implies that your facility is available for others to use, and others’ facilities are available for you to use, thus ensuring overall capacity optimisation. Also, there is rationalisation of price in the market. In addition, everyone focusses on their strengths, rather than focussing on everything from infrastructure to service levels.PeopleCompetitive EnvironmentIn such a situation, you poach the best people from your competitors so that your service levels are the best in the industry; but you forget that the same thing is done by your competitor as well. By poaching, the demand for limited resources goes up and so does the cost. This limits the development of new resources in line with industry requirements.Collaborative EnvironmentHere, you work closely with your collaborated partners; there is no poaching, unless approved by the partners. Thus, you retain your people for a longer time and can invest on their learning and development. Also, confidential matters of the business remain in your system and reference check of new recruits becomes easy. This helps in aligning compensation with skill sets and industry standards.Collaborated training and investments helps develop new talent to meet increasing needs.Business DevelopmentCompetitive EnvironmentHere, you strive towards winning the customer, even if it is not within your core competency, only to ensure that it does not go to your competitor.You go to the extent of engaging with the client,

even if you do not find the business or client’s approach promising. You discount prices to grab market share and take business risks and, above all, you hide your weaknesses and limitations.Collaborative EnvironmentIn such an environment, you do not waste time on clients who are not transparent and responsive. Such clients waste time analysing, drilling down costs, etc. rather than taking decisions. This also indicates that you too are not ideal for them. It is best to recommend the most appropriate alternative to them and focus more on clients who show interest in your services. If you cannot meet all the requirements of the clients, do a joint representation with your collaboration and win the business jointly. Make sure you have a price benchmarking done with all your collaborations and ensure that the price is a ‘win-win’ for you and the client. You can also do a reference check of the client with other collaborated partners, if they had any business relation in the past. Contingency PlanningCompetitive EnvironmentHere, you will have to invest for contingency arrangements and cannot look at competition for support in times of crisis. This results in duplication of resources and higher operation cost. Moreover, unattended contingency leads to service failure and makes client retention difficult.Collaborative EnvironmentThis creates a contingency plan based on a common pool of resources. In times of crisis, you can approach collaborated partners for support to ensure continuity.Consolidated buyingCompetitive EnvironmentLSPs negotiate individually with vendors for limited volume. However, the pricing of the terms of trade are kept confidential and vendors take advantage. In addition, the cost of doing business goes up, and thus impacting the industry.Collaborative EnvironmentCollaborated LSPs consolidate their requirements and negotiate with the vendor for favourable pricing and terms. Moreover, a consolidated approach helps a vendor to get the advantage of scale.Industry representationCompetitive EnvironmentHere you will find an individual approach with varied views, which is why it fails to put across the requirement of the industry at the appropriate time.

Collaborative EnvironmentThe group discusses & debates on what is good for the industry & client and makes a joint representation in the relevant forum. The authority also positively recognises and acts on group representations.

A COLLABORATIVE PLATFORM The following are typical the steps to create a platform to collaborate: • Interact with other LSPs and form a

group. Share each other’s strengths and challenges in terms of infrastructure, operations, region, seasonality, etc.

• Identify projects and areas for collaboration & form cross organisational teams to attend projects

• Discuss and arrive at a protocol for a collaborated approach and review the status of projects

• Celebrate successes.It is important to understand that

collaboration does not erase your identity, but helps you achieve some of it jointly, and most of it by strategising and executing your business more efficiently. Collaboration will only free you from some of the worries on which you would have spent a lot of time and money. Hence, collaboration helps you focus more on your clients and business.

Another benefit of the collaborative approach is that you spend minimum time on investigating and double guessing what your competitor is up to. Thus, the available time is focussed on sustaining the current business and strategising growth. Since your competitor faces a similar scenario, no one gains with the time wasted. Thus, the benefit, in the case of the collaborative game, is the overall growth of the industries, the supply chain industry in particular, where the growth will be both, in terms of size and quality. Hence, to me collaboration always wins over competition. It is important, at this juncture, to understand that collaboration is not a cartel. A cartel is a formal agreement between competing organisations to create a monopolistic position, which can be exploited by the cartel partners to their benefit. In most of the cases, the cartel arrangements are detrimental to the interest of the client and the trade. The secret is to gang up on the problem, rather than each other. It is time to collaborate.

Sunil Nair, Director, ImpelPro SCM Solutions E-mail: [email protected]

SL EXCLUSIVE ALLIED SEGMENTS


DRIVEN by the increase in port infrastructure development, use of larger vessels, increased attention on coastal shipping, inland water transportation and changes in technology, the dredging industry in India is slated to witness exponential growth in the years to come. The Maritime Agenda 2010-2020 envisages increasing the draft in all major ports to a minimum of 14 metre (and in some ports to 17 metre). Dredging projects worth over `200 billion have already been planned till 2020. However, the growing demand is not complemented by a commensurate increase in the Indian dredger fleet and skilled manpower. There are only a few dredging players in the country and most of them have their dredgers tied up with ongoing contracts.

The dredging capacity in India needs to be significantly enhanced and there is a need and opportunity for new players, especially global companies, to enter into the dredging business in India. This escalated growth in the industry also urges companies

to invest not just in technology upgradation and advanced equipment, but also in skilled manpower resources, to operate these hi-tech dredgers in order to meet the demands of the industry.

As of December 2009, the Indian shipping tonnage stood at 1,360 vessels. Of the 9.8 million gross registered tonnage, dredgers constituted 3.7 per cent and 16 per cent of the total vessels and tonnage, respectively. Notably, during the past decade (1999-2009), the Indian dredging capacity nearly doubled. Currently, about eight tonne of cargo moves on every cubic metre of sand dredged in the channel, as against five tonne, a decade ago. India has about 90 million cubic metre to be dredged, inclusive of all major and non-major ports.

ROADBLOCKS TO OVERCOME There is no doubt that the Indian dredging segment offers

In the last two decades, dredging has carved a niche for itself in the global arena and the industry still has scope for expansion. India is experiencing giant expansion, but the dredging industry is not able to handle the high volume of work, thereby forcing the country to source from the free dredging market. The growing demand for dredging calls for the need to have the right technical minds and manpower with the required skill sets that can operate technologically advanced equipment to accelerate the dredging process and thus meet the growing demand. Therefore, in order to become competitive, Indian companies need to invest not just in technology upgradation but also on acquiring and developing skilled manpower.

BETTER FUTUREBETTER FUTURE

PURNA PARMAR

FOR A


huge potential. However, some issues, such as the ones elaborated below, need to be addressed to ensure that the segment utilises its full potential and thus becomes competitive vis-à-vis foreign players. Lack of trained manpower Availability of trained and certified manpower is one of the major concerns observed in the industry. As per industry experts, there is a need for structured training rather than temporary measures that have been taken or are being taken. According to a senior nautical advisor, “People trained on dredgers do not stick to this profession for long because dredging is not an ongoing process and takes place once in a year. As a result, these professionals have to either wait for other projects to come their way or sit idle since they are not allowed to work on other ships even though the pattern of examination is almost the same, barring a few sections. Hence, these trained professionals tend to either seek employment in better paying jobs in private ports or foreign shipping companies. A more structured maritime coaching is still to be put in place.”

India has just 60 professionals to navigate dredgers, even as harbours need their services to receive bigger vessels so that ship owners, exporters and importers can chase economies of scale and achieve lower costs. Government estimates reveal that the industry needs at least 1,000 specialised staff to operate dredgers along the country’s coast in 3-4 years. The country needs at least 100 dredgers in five years to meet the growing demand. Currently, about 30 dredgers are operating on the coast, of which only 17 are Indians, said a senior government official.

Explaining how this trend will have a negative impact on the future of this industry, Mehernosh Shroff, Chief Engineer, Seaworthy Shipping Services, explains, “Ports and shipping have traditionally been the growth engines of a country. With this kind of shortage of personnel and equipment, the country will never get to the desirable level of growth. The shortage will also force India to depend on foreign dredging companies, which will result in increase in costs.” Foreign companies forming a cartel?The possibility of foreign companies forming a cartel to dictate terms of channel deepening cannot be ruled out, claims a port official, on condition of anonymity. “But since India lacks equipment and talent in this industry, the country cannot afford to shun these foreign majors from India either,” he adds. Salary constraints There is a need for trained manpower because, even though dredging is one-time operation, it needs to be monitored continuously for production output. Also, in dredging activity, about 99 per cent of the work is related to dredging, and the remaining one per cent is surveying. However, in terms of emoluments, only one per cent of the cost is paid as salary for dredging. There is a need to address this disparity. Hire more professionals According to the port official, the shortage can be mainly attributed to the fact that India’s biggest dredging firm, the state-owned

Dredging Corporation of India (DCI), employs only 60 dredging professionals. Although private firms have entered the dredging business, there is a shortage of talent to man the dredgers. Commenting on the same, Shroff says, “There is an acute shortage of dredging professionals. A dredger requires about 40 people onboard, while in comparison, a ship requires a minimum of eight officers to meet the safe manning requirements.” Dredging – a liability

Even though dredging may seem like an attractive business proposal, one needs to understand that it is lucrative only if dredging activity is carried out 365 days a year, as it requires huge capital investment. In India, there is hardly any company

that has a dredger operating 365 days a year. Besides, many port developers like Marg and the Adani Group are carrying out dredging activities at their respective ports on their own without recourse to the industry.

Elaborating on the same, a senior official, from a leading logistics company, comments, “Many private companies got into the business of dredging mainly on the basis of one-time contracts that they acquired. However, once the contact is over, they find it difficult to maintain the dredger as they do not have the required staff to take care of the equipment. Later, when they

In 2010-11, the combined capacity of Indian ports is expected to cross 1,000 million tonne – a milestone in India’s maritime history. By 2011-12, the major ports alone will contribute 1.52 billion

tonne per annum.


do not get much dredging contracts they do not know what to do with it, as it is a huge investment. Most of these companies have either sold off their dredgers or are trying to recover their investments by acquiring some small maintenance dredging contracts.” Poaching effect According to industry experts, the dredging industry faces growing manpower requirements. In fact, a Vizag-based, state-run firm is feeling the heat of this huge demand. Private firms are poaching its trained staff and offering them attractive salaries & perks to run newly acquired dredgers. About 15 employees have left the state dredger in the past one year. The official believes, “More people are likely to leave. When there is a demand, people will cross over.” To prevent more workers from quitting, the government-operated ports recently approved a proposal to provide the staff an interim relief of 20 per cent of basic pay till the increased pay on the recommendations of the Sixth Pay Commission is finalised, the official informs.

The company runs an in-house training centre, where 60 people can be trained in a year. It takes 27 months to complete training dredging masters and chief engine officers. The centre needs to shorten the period for engineering graduates, the official adds.Contracts and documentation Apart from the abovementioned factors, the clauses of normal dredging contracts are also proving to be a cause of concern for dredging professionals. Discussing the issues, Hemant Meka Rao, Director, Meka Group, opines, “Dredging contracts are being treated like other civil engineering ones, even though the tasks are quite different in nature. The gestation period between the detailed project report and the actual project award should be reduced since dredging contracts face risks in long bidding processes. Also, contracts are supposedly biased in favour of

ports and users. Going ahead, more needs to be done to ensure contract uniformity. Also, more equitable clauses of risk sharing can be considered. Major ports and dredging companies together may come forward to form a standardised contract, barring a few conditions that can be changed on an individual projects basis.”

Modernisation of equipment, technology upgradations, operating methodology and other technical handicaps are some of the other issues that hamper the growth of the dredging

industry, Rao says, adding that these issues can be sorted only when India has adequate numbers of qualified trained people to handle these dredgers.

GOVERNMENT INITIATIVES The Shipping Ministry often organises training programmes, both in India and abroad. Officials involved in dredging activity are also sent abroad for training. Dredging is now considered an important activity for enhancing the capacity of ports. In 2010-11, the combined capacity of Indian ports is expected to cross 1,000 million tonne – a milestone in India’s maritime history. By 2011-12, the major ports alone will contribute 1.52 billion tonne per annum.

The Shipping Ministry undertakes dredging activities through its public sector undertaking (PSU) – Dredging Corporation of India (DCI). DCI purchased its last dredger about 10 years ago. The ministry has placed an order for two dredgers, each of 5,500 cum capacity, with IHC Holland, and a decision on a third dredger is likely to be taken soon.

The Dredging Policy 2007 that expired in February 2010 was extended for another three months. The ministry is in the process

of coming out with a new policy. There are concerns regarding the ongoing dredging projects about whether they would follow the conditions of the old or new policy.

ON THE PATH TO PROGRESS The initiatives taken by the government have had a positive outcome on dredging companies. Consequently, with a large number of Indian companies venturing into the market, dredging costs have fallen.

Moreover, a few key dredging contracts are expected to be awarded by the government in the short-term. These include dredging of the main channel of Tuticorin port, likely to be awarded very soon; a long-awaited dredging contract of the common channel of the Jawaharlal Nehru Port Trust (JNPT) and Mumbai Port and a maintenance contract at Kandla port. Besides, a dredging project at Paradip port is about to be completed. Dredging of the Haldia dock channel is continuously being carried out and will continue to receive government attention; at least till the ministry finds another alternative.

With so many initiatives taken by the government and private players, the dredging industry in India is slated to witness prosperous growth prospects. However, there is also a need for improvement in dredging methods and for the introduction of new technology & equipment.

There are other key issues and requirements that need to be addressed and the skills and knowledge of dredger operators need to be upgraded continuously. In addition, the frequency of the depth survey process needs to be standardised across all ports. The national waterways need to be dredged properly to make them navigational. And finally, the environmental concerns need to be dealt with in a better way.

Indian dredging industry, continued

Currently, about eight tonne of cargo moves on every cubic metre of sand dredged in the channel, as against fi ve tonne, a decade ago. India has about 90 million cubic metre to be dredged, inclusive of all major and

non-major ports.

• India has just 60 professionals to navigate dredgers, even as harbours need their services to receive bigger vessels so that ship owners, exporters and importers can chase economies of scale and achieve lower costs.

• Government estimates reveal that the industry needs at least 1,000 specialised staff to operate dredgers along the country’s coast in 3-4 years.

• The country needs at least 100 dredgers in five years to meet the growing demand.

• Currently, about 30 dredgers are operating on the coast, of which only 17 are Indians, said a senior government official.

UICK TAKE


THE concerted effort to reduce carbon footprint in the environment has become the onus of all industries. The difference lies in the adoption of procedures. In simple terms, the activities undertaken to achieve the goal differ from sector to sector. And in this context, green logistics has a significant role to play. However, when it comes to the chemical industry, the concept of green logistics is at an embryonic stage in India.

ROADBLOCKS IN PROMOTING GREEN LOGISTICSAccording to Lars Sorensen, CEO,

Damco South Asia, the concept of green logistics in India is still at a nascent stage. “Although logistics service providers are offering propositions that aim at helping clients to reduce their carbon footprint, the interest & acceptability of these is yet to gain full steam,” he says. This can

partly be attributed to the perception that implementing a green-certified logistics programme might lead to higher costs. Cost is an issue when asking companies to reduce their impact on the environment.

In a rapidly growing economy, like India, customers often ask whether it makes

Poor infrastructure in India is the biggest stumbling block for promoting green logistics. Cost is yet another factor that poses challenges for those who attempt to take the green route. Currently, the scenario is far from satisfactory. In this backdrop, logistics service providers must communicate the benefits of going green to one and all.

PRASENJIT CHAKRABORTY

CHEMICAL LOGISTICS SECTOR FOCUS

There needs to be an emphasis on shared or common-user facilities such as a chemical warehousing zone or transport hub. Allowing companies to use common facilities will reduce waste and duplication, optimise the utilisation of resources and reduce carbon emissions by consolidated transport arrangements.

FACT

FACT

FACT


Chemical logistics, continued

Cost implications for implementing green logistics in India

• People believe implementing a green-certified logistics programme might lead to higher costs

• Customers often ask whether it makes sense to spend the extra money required to go green

• Pressure is always on cutting costs, which makes it hard for many players to embrace green initiatives

• Service providers must be able to communicate the value proposition that the client will derive from implementing green logistics

• A detailed cost-benefit analysis can prove to be an effective tool for clients to assess the advantages as well as help them adopt an ‘earn and contribute’ approach towards green logistics.

sense to spend the extra money required to go green. “The logistics industry is fragmented, particularly when it comes to warehousing and transportation, and competition is fierce. So, the pressure is always on cutting costs, which makes it hard for many players to embrace green initiatives, even if they want to,” points out Pavithran M Kallada, MD, BDP (International).

Another difficulty in pursuing green logistics is the state of the nation’s infrastructure. Poor road conditions, lack of expressways and traffic bottlenecks result in increased carbon emissions. “The level of pollution could be lowered by creating expressways, transport hubs and using clean fuel applications (including CNG) in trucks,” exhorts Kallada.

According to Sorensen, infrastructure is the foremost challenge being faced by logistics service providers and clients alike. Moreover, underdeveloped infrastructure intrinsically results in cost escalations and delivery delays. “So, we see this as a vicious circle that hinders the growth of green logistics,” he says. As far as the mindset is concerned, Sorensen feels that the industry understands the benefits and importance of green logistics, and from a long-term perspective, clients want to reduce the environmental impact of their supply chain. Hence, the mindset and willingness are definitely there, but there are practical challenges to implement green services in a cost-effective manner.

The industry is unanimous in saying that the lack of adequate infrastructure and qualified & trained personnel are the biggest hurdles faced by the chemical logistics sector in India. The highways are heavily congested and there are a few expressways and transport hubs.

“Transport corridors are often surrounded by densely populated urban areas, which pose several challenges when moving chemical products. We need more trained people to meet the unique requirements of handling chemicals,” explains Kallada.

The availability of latest equipment and technology is another area of concern. “The lack of world-class specialised equipment to handle or store hazardous cargo is another area that calls for attention. Additionally, since chemicals call for high-quality handling, there is a need for specifically trained industry professionals who can efficiently execute the job,” opines Sorensen.

GOING GREENTo effectively promote green logistics in India, the service providers must be able to communicate the value proposition that the client will derive from implementing green logistics. A detailed cost-benefit analysis can prove to be an effective tool for clients to assess the advantages as well as help them adopt an ‘earn and contribute’ approach towards green logistics. “The government

can provide some relief in the form of tax cuts for companies practising green logistics. Moreover, the government can support the construction of environment-friendly warehouses and other storage facilities, thereby acting as a facilitator of green logistics,” suggests Sorensen. Echoing a similar view, Kallada says, “Priority should be given to damage-free handling processes, consolidated transport arrangements and the construction of environment-friendly warehousing & distribution facilities.”

There needs to be an emphasis on shared or common-user facilities such as a chemical warehousing zone or transport hub. Allowing companies to use common facilities will reduce waste and duplication, optimise the utilisation of resources and reduce carbon emissions by consolidated transport arrangements.

EMERGING TRENDS According to Kallada, the Indian chemical sector accounts for 13-14 per cent of total exports and 8-9 per cent of total imports in the country. Currently, the per capita consumption of products pertaining to the chemical industry in India is about 1/10th of the world average, but this will grow over time.

As the demand for chemicals grows, so does the demand for experienced transportation companies for moving chemical products safely, and in compliance with the numerous domestic & international regulations. Chemical manufacturers are looking for supply chain management (SCM) or logistics partners that can offer the required expertise.

Another trend witnessed is that some manufacturing companies are leasing storage facilities and dedicated transportation fleet themselves, so as to better control health, safety and

The lack of world-class specialised equip-ment to handle or store hazardous cargo is another area that calls for attention. Additionally, since chemicals call for high-quality handling, there is a need for specif-ically trained industry professionals who

can efficiently execute the job. We are committed to ensuring fast, reliable connectivity to all the custom-ers from Gateway of India to all the major market centres in the country, providing concrete, reliable lo-gistics solutions and contributing to the development of infrastructure in the country. LARS SORENSEN, CEO, DAMCO SOUTH ASIA


environment (HSE) matters. “Recently, we have seen the establishment of a few warehousing facilities that do meet global standards for safety,” opines Kallada.

Sorensen strongly believes that the Indian chemical industry is focussing on innovations to produce environment-friendly technologies and products. The logistics services in India, thus, can play a significant role to address the specific needs of the chemical industry and help promote exports, which is slowly witnessing a rise. “Increasingly, chemical exporters and importers want their logistics partners to not only provide specialised as well as customised services, but also adhere to better HSE,” he observes.

INVESTMENT SCENARIOCurrently, the production of chemicals in India mainly caters to the strong demand from the domestic market. However, through government initiatives

and investments in setting up Petroleum, Chemicals and Petrochemicals Investment Regions (PCPIRs) and SEZs, the export levels are all set to rise significantly in

the days to come. “To support the export-related activity, we need dedicated chemical warehousing zones for storage & distribution, decongested highways and easily available transportation equipment to handle hazardous & specialty chemicals. We are seeing some industry and government initiatives; however whatever gap remains needs to be bridged for immediate progress of the chemical logistics segment in India,” exhorts Sorensen.

Anticipating growth, several companies have taken initiatives in this direction. For instance, Damco India has a dedicated

chemical industry vertical to provide specialised chemical logistics services to its clients. “We have a team of experts that caters to the requirements of clients

and offers the best logistics solutions, keeping in mind HSE aspects of the cargo. Moreover, to provide a seamless service experience, we have tied up with multiple vendors across India and can successfully manage any chemical logistics-related requirement,” he says.

For BDP, its investment is more on manpower training. “Our investment in India focusses on getting the right people, and training & development of our staff,” says Kallada.

LONG ROAD AHEADLet us take a look at India’s standing in chemical logistics when compared with that of the developed world. The country lacks majorly on the infrastructure front and also on storage capabilities for chemicals. “Ambiguity in existing policy framework regarding material handling and transportation is one of the areas that calls for attention in greater detail,” opines Sorensen. As compared to the developed economies, which have invested heavily in building efficient infrastructure to support chemical logistics, India still has a long way to go before it can claim to have met international standards in this arena.

Unlike the West, India does not have earmarked chemical logistics or manufacturing hubs. In the developed world, there are clear guidelines on the transportation/storage and handling of chemicals and they are adopted by every logistics service provider. “In contrast, in India, these processes and guidelines are still not clear,” laments Kallada.

What is important is that the industry, by and large, has realised what must be done on a priority basis. Looking at the growth of the chemical industry, the logistics service providers should immediately concentrate on their weak areas. Introducing latest equipment and technology is equally important to facilitate growth. Besides infrastructure, the government should come out with a clear policy, as far as transportation of chemicals is concerned.

Courtesy: Chemical WorldBarrels loaded with chemicals.

Cou

rtesy

: Dam

co

Transport corridors are often surrounded by densely populated urban areas, which pose several challenges when moving chemical products. We need more trained people to meet the unique requirements of handling chemicals.

PAVITHRAN M KALLADA, MD, BDP (INTERNATIONAL)

To effectively promote green logistics in India, the service providers must be able to communicate the value proposition that the client will derive from implementing green logistics. A detailed cost-benefit analysis can prove to be an effective tool for clients to assess the advantages as well as help them adopt an ‘earn and contribute’ approach towards green logistics.

FACT

FACT

FACT

SECTOR FOCUS HAZARDOUS CHEMICALS TRANSPORTATION


THE unprecedented growth of the chemical industry in India has led to an increase in the proportion of hazardous chemicals in the total freight traffic. There is a rising demand to store and distribute temperature-sensitive products in potent conditions, which has further intensified the need to monitor cold chain supplies in the country. Hazardous materials transportation risk management

involves establishing, organising, planning, executing and monitoring a set of operations that aims to decrease the probability of accidents and reduce the relevant potential consequences. This risk management process pertains to preventive and repressive safety measures.

The preventive measures aim to eliminate the potential causes of

accidents, i.e., the roadway system defects, mishandling by drivers, mechanical errors in vehicles, etc. Besides, drivers’ training, policies related to driving hours, container specifications, vehicle & mechanical conditions monitoring equipment and routing through safe roadway segments are other important elements. Such norms are hardly being followed in India, despite the growth of logistics business. “While

The encouraging growth of the chemical industry in India has brought issues concerning hazardous chemical transportation to the fore. Besides the bottlenecks pertaining to infrastructure, suitable storage facility, equipment & technology, the lack of continuous interaction between the chemical industry and logistics service providers is posing serious challenges to the growth prospects of the sector. However, with the government providing a few sops in the areas of storage facility, equipment, etc., the logistics sector seems to be heading in the right direction.

PRASENJIT CHAKRABORTY

SAFE MODESAFE MODEEXPLORING AEXPLORING A

Courtesy: DHL


logistics business in India is on the rise, transportation of chemicals is still marred by certain challenges with respect to real-time tracking & tracing, qualified personnel to handle chemical cargo, cost-effective special packaging solutions, immediate custom clearance, retaining the temperature at trans-shipment hubs & gateways, and compliance to regulatory requirements at

the origin & at the destination,” says Sanjay Tejwani, Director – Ocean Freight, DHL Global Forwarding India.

FREQUENT CHANGES IN REGULATIONSThe rules for transportation of chemicals in India are quite stringent. The Government of India has constituted various regulations to ensure that proper precautions are taken while transporting chemicals in the country by road, railway and sea in order to avoid any accidents during transportation. Many-a-time, it has been seen that people complain about frequent changes in policies by the government, when it comes to chemical transportation. But one has to keep in mind that change in policy aims at ensuring safety of people and product, and it is not meant to bother the logistics industry. What is important here is to follow the norm, the moment it is made effective. Reputed companies follow the norms, and hence, stay ahead of their competitors. Such companies work closely with their customers to make sure all the requirements pertaining to safety are adhered to. “DHL has a highly secure transportation system to ensure the smooth movement of chemicals throughout India as well as abroad. Any change in the regulations is implemented in the supply chain at the earliest and due care is taken to ensure that it does not affect the customer’s consignment, thus reducing the time taken at port,”

maintains Tejwani. There is a need for frequent interaction

between chemical manufacturers and logistics service providers. This will benefit the chemical industry in many ways when it comes to reduction of losses, handling issues related to environment and difficulties in transportation, etc. “Over the years, we have been working closely with

our customers in the chemical industry, thus enabling the Indian chemical industry to become environmentally responsible and globally competitive,” he asserts.

ROAD Vs RAILThe process of globalisation is expanding India’s position in the world trade, thus leading to a rapid climb in transport volumes in recent years. The expansion of the logistics infrastructure has been unable

to keep up with this pace of globalisation and increase in transport volumes in the country. That is why, transport capacities have already reached their limits. This calls for the need to look at other avenues.

“We have been making efforts to shift freight from road to rail,” reveals Tejwani. However, the rail infrastructure in India, although the largest in the world, is still at a nascent stage as far as freight transportation is concerned. The Government of India is currently striving to exploit the potential of its railroad infrastructure and the same has resulted in investments into this particular sector. Perhaps, in the next decade, India’s railroad network would emerge as an important part of the logistics matrix. “Currently, railways has its own constraints in terms of end-to-end connectivity, time-bound distribution of cargo, etc. This makes road transport a preferred option,” points out Pradyumn Sharma, General Manager – Operation, JWC Logistics Park.

The industry players are optimistic about the initiatives taken by the government as far as rail transport is concerned. In future, it is likely that the share of railways in terms of freight transportation may go up substantially. Sharma states, “There are some positive steps by the government in terms of dedicated rail-freight corridors. But all these measures are at a nascent stage to overtake transportation by truck.”

In future, many companies will definitely opt for transportation via rail route more than what is currently being seen. “We plan to improve the existing freight capacities in the country and implement further techniques to ensure the smooth movement of hazardous chemicals, while also trying to gauge the possibilities of boosting transportation of hazardous chemicals in India by rail,” says Tejwani.

INDIA VIS-À-VIS DEVELOPED COUNTRIESDespite its unique production and distribution qualities, matching supply to demand has specifically impacted the chemical industry. While the shift means increased use of ocean transport for imports and exports, companies managing smaller shipments are opting for truckload and rail intermodal services in place of rail bulk. Forward staging of inventories in tank storage and bulk facilities appears to be declining Safety measures being taken before transportation

Courtesy: DHL

The infrastructure facilities for the storage and transportation of hazardous chemicals are not up to the mark in the country. The poor road conditions and the age-old technology that is used by the Indian rail lead to excessive time

consumption and delay in the transportation of hazardous goods. SANJAY TEJWANI, DIRECTOR – OCEAN FREIGHT, DHL GLOBAL FORWARDING

INDIA


as many third party logistics (3PL) service providers report more products moving directly to consumption.

“The infrastructure facilities for the storage and transportation of hazardous chemicals are not up to the mark in the country. The poor road conditions and the age-old technology that is used by the Indian rail lead to excessive time consumption and delay in the transportation of hazardous goods,” points out Tejwani.

The government regulations in the country are stringent, but are ignored. The lack of trained staff to handle the packaging and transportation of hazardous chemicals, lack of awareness about the new trends and technologies used in the developed countries and clustered 3PL supply chain are some of the issues that

plague the transportation of hazardous chemicals in India and have prevented the emulation of the current trends in the market. Elaborating on the adoption of technology, Sharma says that in foreign countries, temperature-sensitive cargos are tagged with temperature measuring

units and are monitored through GPS throughout the supply chain system. “If at any given point in time it is noticed that there is an imbalance in set temperature, corrective measures are immediately taken. Whereas, in India, though such facilities are available, due to the cost factor, such practices are not in use, except in a few reputed companies,” laments Sharma.

ON A POSITIVE NOTEAll in all, the picture is not grim for the hazardous chemical transportation segment. The growth of the chemical industry has been the most encouraging factor for players in the logistics space. That is why, many domestic and international logistics service providers are investing extensively in this space, which will result in best practices and added expertise being brought into this particular segment. “In

the next few years, we shall also see a lot of innovation being brought into this space as Indian customers will look to expand as they try and meet global demand,” opines Tejwani. It is worth mentioning here that DHL Global Forwarding has invested $10 million in its Free Trade Zone facility in Tamil Nadu earlier this year and has sections devoted to packaging & transporting of hazardous chemicals.

The Government of India has been making positive moves to promote the growth of the hazardous chemicals industry. Grants to establish new storage facilities to the tune of 25 per cent of capital expenditure, reduction in peak import duties on equipment imported for storage facilities and taxes on them, are some of the incentives provided. The measure will definitely boost the morale of the logistics players and facilitate the smooth functioning of the hazardous chemical logistics sector.

Courtesy: Chemical World

Hazardous chemicals transportation, continued

Currently, railways has its own constraints in terms of end-to-end connectivity, time-bound distribution of cargo, etc. This makes road transport a preferred option. There are some positive steps by the government in terms of dedicated

rail-freight corridors. But all these measures are at a nascent stage. PRADYUMN SHARMA, GENERAL MANAGER – OPERATION, JWC LOGISTICS PARK

Treading the path towards attaining effi cient logistics

Pho

to b

y: J

oshu

a N

aval

kar

Tracking trends of hazardous chemical transportation

• There is a need for frequent interaction between chemical manufacturers and logistics service providers.

• Perhaps, in the next decade, India’s railroad network would emerge as an important part of the logistics matrix.

• Many domestic and international logistics service providers are investing extensively in this space (in India), which will result in best practices and added expertise being brought into this particular segment.

• Grants to establish new storage facilities to the tune of 25 per cent of capital expenditure, reduction in peak import duties on equipment imported for storage facilities and taxes on them, are some of the incentives provided to the logistics sector.

• Forward staging of inventories in tank storage and bulk facilities appears to be declining as many 3PLs report more products moving directly to consumption.


OUTSOURCING LOGISTICS SECTOR FOCUS

AS chemical companies look for ways to reduce logistics costs, many are increasingly considering outsourcing as a means to save money. Other organisations, however, are realising equivalent and even greater freight savings by utilising technology-based tools and professional services that leverage the expertise of their internal logistic professionals rather than replace them. Outsourcing, a relatively common practice in the auto and consumer packaged goods industries, can reduce freight and personnel costs within specific functional departments. However, many organisations often turn to outsourcing as a fast answer to a forced reduction in the logistics budget. Companies considering a full outsourcing solution to reduce logistics costs should not disregard the resident expertise and value of their own internal logistics knowledge.

OUTSOURCING VS SUPPORT RESOURCESChemical companies, today, have the option to outsource logistics functions or contract outside resources to supplement their own in-house expertise. Rather than outsourcing logistics functions, many chemical shippers, today, are maximising freight savings in different areas of their organisation by combining the tools and services of capable LSPs with the experience of their in-house logistics staff.

Logistics costs within chemical companies average between 10 and 20 per cent of revenues. Taking a total supply

chain approach to logistics efforts to balance the trade-offs between cost and customer service, companies are saving as much as four per cent in sales, while improving customer service. This yield is significantly higher than the approximately five per cent in savings in shipping costs promised by many 3PL providers.

It is, therefore, important to revisit the age-old debate as to whether logistics is a core business function. While chemical companies struggle with their supply chain activities, they are discovering that complete outsourcing can create additional barriers. As the changing business climate warrants increased responsibilities in security and asset visibility, chemical companies are finding that most 3PL providers are simply not prepared as their people lack the required skill sets to handle these issues. Consequently, for most chemical shippers, logistics is truly a core competency.

PROS & CONS Before outsourcing the logistics function, chemical companies should weigh the impact of their actions and examine how others have reduced their logistics costs without outsourcing. The following market factors also should be considered:• Many 3PL providers propose freight

rate savings solely based on their larger volumes with carriers. Recent studies, however, have concluded that lane and carrier market intelligence can have a far greater impact on freight negotiations than the size of a pooled freight budget, especially when

combined with the availability of online RFQ technology.

• Supply chain experts agree that the majority of cost savings go well beyond people and freight savings. Additional savings and service improvements are realised in product visibility, inventory & asset reductions, demand planning, improved procurement and freight optimisation.

LEVERAGE INTERNAL EXPERTISENumerous advantages can be derived from using the tools, expertise and technologies to leverage, rather than eliminate core internal logistics resources. Whether the internal resource is a senior supply chain manager or a team of logistics professionals, they can add value based on their specific industry expertise.

But before you begin outsourcing your transportation and logistics, be sure to have fully tapped the value of your current resources. You cansave money without completely outsourcing your logistics function. Chemical shippers – and businesses in other industries – are already heavily invested in internal logistics expertise. Do not lose that expertise; leverage it by providing those individuals with the tools needed to drive cost reductions – reductions that go beyond freight rates and people cuts and provide continuous, not one time, results.

Steve Hamilton, President & CEO,ChemLogix LLC

Outsourcing is a viable business strategy as it enables companies to leverage their resources, spread risks and concentrate on issues critical to ensure survival & future growth. But before outsourcing transportation and logistics, a company has to ensure that it has tapped the value of its current resources. Here’s a quick fix guide to enhance profitability...


CASE STUDY AKZO NOBEL SURFACE CHEMISTRY

FREIGHT payment is often characterised as a process that creates a lot of back office noise. Thousands of invoices generated by multiple carriers featuring rate variances, exceptions, missing bills of lading and unhappy carriers clamouring for their past due payments are a few factors that can create a deafening roar of disturbance for a logistics manager. Further contributing to the cacophony are demands from accounting departments for reductions in accrual variances – to improve the accuracy of shipping fees that are issued to clients in advance of the shipments arrival – to comply with new finance regulations.

Fortunately, with the implementation of the right freight payment and audit systems, this roar can be reduced to a quiet murmur and great efficiencies can be gained. Such has been the case for Akzo Nobel’s Surface Chemistry LLC unit upon implementing the ChemLogix freight payment solution.

A BACKGROUNDER Akzo Nobel, an Amsterdam-based global

company, makes and supplies a huge range of paints, coatings and specialty chemicals. The Akzo Nobel Surface Chemistry LLC business unit headquartered in Chicago is a leading supplier of surfactants. A majority of compounds offered by Akzo Nobel Surface Chemistry LLC are surface-active agents used in hundreds of commercial applications that are shipped all over the world. The products range from formulations for industrial and household cleaning, to paint and building additives, to emulsifiers and more.

Al Wiener, Manager – Transportation Services & Operational Efficiency, Akzo Nobel Surface Chemistry LLC, is responsible for the transportation of these products throughout North America via truck, rail, bulk, intermodal and LTL. Given his position, Wiener is familiar with the limitations of processing freight bills using traditional accounts payable methods. He is also well acquainted with the challenges of providing reliable freight rate quotes for Akzo’s clients. That is exactly why Akzo Nobel selected the ChemLogix freight payment platform with its electronic

invoice payment environment and online rating tool.

According to Wiener, “Significant efficiencies have been gained. What once took three people to manage, now only takes one.”

Of course, a system is only as good as the people who support it. ChemLogix has also earned high praise for its customer service. Elaborating on the same, Wiener claims, “We have a good relationship with ChemLogix. Their support personnel are responsive to our needs and can be relied upon to follow up on requests.”

HOW EFFICIENCIES ARE GAINEDBy utilising the ChemLogix freight payment and audit service, companies like Akzo Nobel gain access to expertise and/or resources, which are typically not available to them in-house. As a result of using ChemLogix for freight payment, Akzo Nobel has experienced efficiencies in several areas, such as:System Improvement: ChemLogix’s web-based technology has improved the payment process through automation

With the implementation of the right freight payment and audit systems, great efficiencies can be gained. Understanding the criticality of the same, Amsterdam-based company Akzo Nobel, when faced with the challenge of reducing inefficiencies and back office noise associated with paying thousands of freight invoices, implemented the ChemLogix Freight Payment & Audit Solution, a web-based technology, to streamline the payment process. This solution not only helped the company improve accrual accuracy, but also enhanced its access to freight rates.

RIGHT FREIGHT AUDITORSELECTING THE


and by placing critical freight rate & payment data at the fingertips of relevant stakeholders.Reduced Labour: Utilising ChemLogix for freight payment has reduced the number of internal personnel to process the freight invoices and carrier inquiries. Further, ChemLogix’s exception management process resolves disputed invoices with carriers, thereby reducing unnecessary research later on. Thus, following the implementation of the system, reductions in labour have been realised.Fewer Errors: Automating the process of freight payment has greatly reduced user errors associated with manually inputting data. ChemLogix’s superior audit functionality has ensured that carrier rates are correct and the incidence of overpayment is reduced.Accurate Carrier Rates: With access to a robust online database of carrier rates and routing information, Akzo Nobel now has accurate shipping information available on demand. Having this data readily available to their plants, sales and customer service departments has greatly reduced the amount of time their logistics department spends fielding rate requests.

Decreased Accrual Variances: ChemLogix’s freight payment system accurately quotes freight rates. This has helped Akzo Nobel decrease their

freight accrual variances – which is crucial given the stringent financial regulatory environment they face today.

CHEMLOGIX VALUE PROPOSITIONAkzo Nobel has benefitted from the value of the ChemLogix freight payment platform through: • Elimination of payment errors • Reduced expenses associated with

accessorial charges and surcharges • Improved visibility to the entire

payment process• Flexibility to view shipping data by

product line and customer• Greatly enhanced reporting and

access to critical carrier data, including rates.Commenting on the above, Al Wiener

asserts, “We are very pleased with the freight payment service that ChemLogix has provided. Through their advanced systems and technologies, we have gained significantly greater control of our freight payment process. Good carrier relationships are maintained through timely, error free payments.”

Courtesy: ChemLogix, LLC

ChallengeReduce inefficiencies and back office noise associated with paying thousands of freight invoices.

SolutionAkzo Nobel Surface Chemistry LLC implemented the ChemLogix Freight Payment & Audit Solution utilising a web-based technology to streamline the payment process, improve accrual accuracy and enhance access to freight rates.

Results• Payment process is streamlined

through automation

• Reduction of personnel required to process invoices

• Fewer payment errors

• Decreased accrual variances

• Improved carrier relationships

IT TRENDS IN LOGISTICSIT TRENDS IN LOGISTICSTECHTRACK


HONEYWELL has recently announced the introduction of Dolphin 6000, a new class of mobile device, which bridges the gap between consumer mobile phones, industrial mobile computers and bar code scanners, thus empowering mobile information workers to connect, collect and communicate at the point of customer service. Dolphin 6000 Scanphone automates the data collection process and delivers real-time access to business data, thereby leading to improved productivity, more informed decision making and lower operating costs.

Shailesh Deshmukh, Country

Manager India, Honeywell, said, “Dolphin 6000 delivers more reliability, more powerful scan performance and greater

line of business application support than any other

smartphone in the market. It is an improvement over

consumer-grade smartphones used for enterprise applications. Hence, it

genuinely meets the bar code scanning needs of mobile information workers.”

The device comes equipped with a long-lasting battery, which allows for uninterrupted productivity throughout an entire shift. Dolphin 6000 also has an integrated megapixel camera and is optimised for voice communication. This

eliminates the need to carry a separate digital camera and mobile phone. Multiple wireless options, including GPS, Bluetooth and Wi-Fi, help users stay connected in a variety of environments. Dolphin 6000 will first be launched in Australian and Indian markets. “As Honeywell’s partner for over 15 years, Intellicon has been at the forefront in bringing new products, which help address various verticals and applications for today’s ever-growing need for mobility solutions. The latest addition to the family, Dolphin 6000, helps to address the requirements of field force automation solutions with an enterprise-class rugged mobile platform, which, till recently, was being serviced by highly failure-prone Lifestyle Mobility solutions from competitors,” said Sameer Parekh, MD, Intellicon.

New technology introduced for mobile computing

TAKE Solutions, a global player in supply chain management and life sciences, has recently announced the availability of Gemini R12.0c, an upgrade (technological version) for process and discrete manufacturers to automatically collect data using radio frequency (RF) devices to increase the availability of information on receiving, shipping, manufacturing and inventory activity as it happens.

Gemini R12.0c enables manufacturers to automatically gather data at the source on mobile devices, thus reducing the potential for errors, improving control and increasing the visibility of key processes as they occur. Gemini R12.0c complements existing Oracle MSCA/WMA functionalities with advanced capabilities in areas such as receiving, inventory management and shipping execution, which allows enterprises to extend their existing Oracle environments without making any costly modifications to Oracle applications.

“The latest release of Gemini provides Oracle R12 compatibility for both our installed customers and users of Oracle-based mobile solutions to ensure such activity. Our commitment in addressing critical areas of receiving, manufacturing, inventory, shipping and quality within the Oracle mobile environment is solid. As organisations implement Oracle R12, in which process and discrete inventory records are merged into one set of inventory records, process manufacturers find that they continue to benefit from Gemini data collection specific to their business needs,” said Grant Woolf, Vice President – Strategy & Business Development, Take Solutions.

Manufacturer’s data collecting device upgraded and launched

A globally leading firm offering Four Soft (4S) and software solutions for the logistics & transportation industry has recently announced that its global customs compliance application – 4S eCustoms – has been officially certified by the US Customs & Border Protection (USCBP). This certification has been successfully processed through Four Soft USA Inc., a wholly owned subsidiary of Four Soft in India.

Rajshekhar Roy, CEO, Four Soft, said, “We are excited to begin this new fiscal year with our 4S eCustoms application being certified after passing stringent customs clearance requirements set by the US Customs. This product release and certification completes our product suite for the US market and will help us significantly penetrate the market in this financial year. We already have three clients scheduled to deploy 4S eCustoms operationally this July.”

Cathy Clausen, Sr General Manager – Client Services, Four Soft USA Inc, who completed the testing, said, “We have the knowledge and experience to know when a transaction is right, but we did not want to cut corners, and we made this achievement a key milestone in our project plan.”

Four Soft is a public listed and CMMI level 5 certified company, which provides innovative software solutions, IT consultancy and BPO services for the logistics & supply chain management marketplace. It is the market leader in the transportation and logistics segment with a large international client base, including a majority of the top logistics companies in the world.

USCBP officially certifies global customs application

Dolphin 6000 Scanphone automates the data collection process and delivers real-time access to business data.


GLOBAL research major Fraunhofer Institute for Industrial Mathematics (ITWM) has developed a prototype software platform that will enable freight service providers to set up a collective organisation with shared access to orders. “Our software provides an auction platform with integrated planning functions. It offers several advantages over the existing Internet-based freight exchanges used by transportation companies to offer and accept loads,” said Dr Heiner Ackermann, Scientist, ITWM. “The online freight exchanges only handle single shipments. At present, it is not possible to group multiple shipments because of the time and effort involved in coordinating transactions over the Internet,” he added.

In Germany, around 20 per cent of trucks on roads travel empty. As a result, transport companies incur huge costs. Also, from an ecological and traffic-management standpoint, it would be better if such journeys could be avoided. A new auction platform aims to improve truck space utilisation. In the German road freight sector, the number of kilometres driven without a load has stagnated at around 20 per cent since 2006. But experts expect the volume of road freight to increase dramatically in the near future, and innovative concepts will be needed to prevent a parallel increase in the number of empty trips.

Software developed to improve space utilisation of trucks in Germany

WITH an aim to achieve efficient energy management in the aircraft, global research major Fraunhofer Institute for Industrial Mathematics (ITWM), has developed an additional piece of equipment – the thermal test bench – which will help in the development of new systems such as the aircraft power supply, air conditioning and lighting. Further research on the system is also being carried out by the scientists.

“The thermal test bench comprises a number of different elements, but the main one is the aircraft calorimeter, which is integrated into the low-pressure chamber of our flight test facility,” explained Dr.-Ing. Gunnar Grün, Project Manager, Fraunhofer IBP. “We can simulate environmental conditions inside the aircraft, as well as external conditions on the ground or in flight, and see how the equipment copes,” Grün added.

The research is being conducted on technical systems and materials to tackle the challenges posed by varying temperatures prevailing in different parts of the globe. Researchers are also trying to ensure that the onboard equipment functions under all circumstances. “With the thermal test bench, we will be able to show how the waste heat from the lights, the power electronics or the in-flight entertainment impacts the environment in the aircraft interior and vice versa,” said Grün.

Thermal test bench to tackle varying weather conditions

A leading logistics security services provider, Freightwatch International, has recently announced that it will be offering real-time temperature monitoring service in conjunction with its suite of cargo monitoring capabilities. “Temperature monitoring is an integral part of the complete layered security solution, which provides clients with real-time information when their shipment becomes compromised by out of bounds temperature or humidity readings,” said Barry Conlon, CEO, FreightWatch. “By adding these new capabilities, our clients are immediately alerted to ambient temperature changes, which expose susceptible freight to spoilage or contamination,” said Conlon.

The temperature capabilities are an add-on option to the state-of-the-art tracking device – the FreightWatch Geo F2 Tracker. Also known to pharmaceutical and food/beverage clients as the ‘Pill Bottle Tracker’, it can be covertly placed within a pill bottle for theft recovery or diversion visibility. In the event of a temperature exception outside a specified range, clients are immediately notified by the FreightWatch Command & Control Center, thus enabling immediate corrective action. This approach varies greatly from other market offerings, which report after the shipment is delivered, and do not afford the ability to correct problems in real-time. The Geo F2 Tracker has the capability to monitor temperatures in ranges from -4°F to 140°F (-20°C to 60°C), which is ideal for companies transporting goods requiring normal refrigerated temperature ranges to maintain product integrity.

FreightWatch International offers the only active monitoring solutions that give organisations complete cargo visibility from origin to destination. Using the solutions, organisations can mitigate the risks associated with theft, spoilage and counterfeiting among others. A complete inter-modal offering including cross-border solutions, FreightWatch International allows companies to improve freight security & visibility from dock to stock, thus enabling them to streamline inventories, lower insurance premiums & reduce the impact of stolen goods entering the marketplace all while protecting their brand value.

Temperature sensing enables corrective action

A new auction platform aims to replace the pen-and-paper method of journey planning.

Fraunhofer IBP’s fl ight test facility is about to be expanded with the addition of a thermal test bench for studying the thermal behavior of aircraft systems.

TECHNOLOGY TRENDS XIAMETER

To manage a complex supply chain, a supply chain management

solution that uses specialised

functionality tailored not only for the current

climate, but also for that particular business has become the need of the hour. The solution has to increase profitability, competitiveness and ensure growth that will improve a company’s performance. It has to work for a specific industry and tackle associated challenges. Efficient and effective implementation of supply chain strategies will

help meet a growing enterprise’s future

needs.

STANDARDISINGSTANDARDISINGAn Effective SUPPLY CHAINSUPPLY CHAINSTRATEGYSTRATEGY



RECESSION-induced fluctuations in customer demand, rising prices of fuel & raw materials and stricter regulatory environments are some of the issues that are creating fierce competition between chemical companies. This scenario is further exacerbated by unrelenting pressures owing to globalisation. As a result, many chemical companies are facing the dilemma of reducing costs while meeting customers’ needs. The solution to this crisis can be addressed by focussing on two business fundamentals viz., efficiency and effective implementation of supply chain strategies.

THE NEED FOR BUSINESS RULES AND DISCIPLINE While many companies do a good job in developing a supply chain strategy, most fail in its execution. Effective implementation requires having and enforcing clear business rules, so that both, customers and employees know what to expect. For example, agreeing to special orders or smaller-than-optimal size shipments reduces efficiency and increases labour costs. Having the internal mandate and discipline to enforce strict business rules can reduce or eliminate these problems, thereby saving a company’s valuable human resources, time and money.

Instituting standard processes and ensuring that they are consistently used as part of day-to-day operations can also drive efficiency. This is especially important for multinational companies facing increasing freight costs, excessive inventories and warehousing inefficiencies that are borne from inadequate processes. Standardising processes create uniformity and provide a guide for employees in the commercial (front end) and operations (back end) organisations, which reduce questions and sources of confusion. It is also important to have a dynamic planning process in place in order to fine-tune operations depending on the changing external conditions.

Standardisation is also important in the warehouse, where some standard services, such as shrink wrapping, are required; but it is possible to avoid customised requests, such as special labels. In addition, space in the warehouse can be maximised by focussing on full-cube utilisation. In fact, effort can be made to avoid warehousing whenever possible by directly sending the product from the manufacturing site to the customers. In such a scenario, the required order lead times should be based on stocking strategies and SAP-

based tools should be used by teams to enable them to check the production schedules and inventory.

Automation reduces manpower and inventory management requirements, thus ultimately benefitting the bottom line and improving asset utilisation. Freight logistics, such as customs and duties, can be more efficiently managed with a standardised strategy for International Commercial (Incoterms) terms. If companies can find a way to standardise their products & services, significant savings would be possible. Aligning the core business with the capabilities of a company’s supply chain is an important step. Beyond that, companies have an opportunity to help shape demand, motivate large-volume orders and increase profit on high-demand products with limited supply. They can do this by adjusting pricing and promotional strategies. For example, depending on the supply and demand situation for a product, customers might receive a discount – or pay a premium – if they lock in their supply and price over the course of a year. Also, tiered pricing can incentivise full-truckload orders. In addition, effective supply chains also integrate with commercial activities, so it is possible to optimise operations by aligning lead times and quantities.

WEB-ENABLED BUSINESS MODELSE-commerce has brought significant opportunities to the supply chain, such as access to product information, pricing, online ordering and order tracking. By eliminating paperwork, XIAMETER’s web-enabled business model automates many of the processes and empowers customers to conduct business online.

The business model leverages the power of the Internet and Dow Corning’s global SAP-based IT platform, which consolidates orders and improves inventory management. In addition, XIAMETER brand’s global reach and ability to source materials from multiple plants around the world have provided flexibility in the supply chain and assured reliable supply for customers.

The model’s ease of use has been a major factor in customer acceptance. Seconds after a purchaser places an order, confirmation of the price and quantity is provided along with the ship date, freight terms and credit terms. Thus, steps such as calling a customer service representative, faxing an order and waiting for a response are eliminated,

which helps save time and effort. All the related product & delivery documentation are on the website and customers receive electronic invoices. The purchaser does not have to call his receiving department or accounts payable group. The job is done the moment the customer clicks on the option to complete the order.

In addition to the efficiency benefits, customers appreciate the convenience of an online purchasing model. The flexibility of the model permits customers to place orders from office, home or other locations at night or even early in the morning. There are numerous instances of customers placing orders on the Internet and mobile phones, which have helped save time and ensure that the factory is stocked. Also, this model works effectively to address customers’ requirements for standard silicones, limited or no technical service. It can also help customers plan their material needs in advance.

KEY FACTORS FOR SUCCESS There are several other success factors beyond business rules and standardising products & processes. Minimum order requirements – in full pallets or full batches of material – create efficiencies by reducing the number of customer shipments, thereby ensuring full truckloads and streamlining inventory management. In addition, mandatory lead-time requirements support just-in-time manufacturing and shipping, which also reduces the incidence of late shipments.

While credit terms have been standardised (30 days), customers can choose from 15 days at a discount, or 45 or 60 days at a premium. The brand’s transparent volume and pricing tiers allow customers to choose among these options based on their preferences.

But having clear rules does not mean that one size fits all. Factors like minimum order requirements, lead times and pricing can be tailored to the standard way of doing business in each market. However, customer compliance to the business rules determines the level of success in driving efficiencies throughout the supply chain.

The demands on supply chain managers to rapidly respond to change and reduce costs are stronger than ever. The good news is that the right strategies and effective implementation can deliver an immediate return on investment.

Aparna Khurana, Head, XIAMETER India


SUPPLY CHAIN MANAGEMENT CONTROL TOWER

MORE than a decade after its emergence as a critical corporate function, Supply Chain Management (SCM) has not, for the most part, significantly advanced – at least when compared to the forward charge of globalisation. Businesses all over the world have invested heavily in Enterprise Resource Planning (ERP) and planning & execution systems, but only a few can credibly claim positive return on investment (RoI). The problem is that these systems were built to manage discrete scopes of activity, in relatively static environments, and address change only on a periodic basis.

Today’s business environment consists of volatile demand, constantly changing

product mixes with relatively short lives and ever-changing supply partnerships attempting to serve them. Decision making in this environment is therefore, challenging.

SCM can be described as daily Sales & Operations Planning (S&OP) – planning between the plans – characterised by frequent, complex challenges requiring urgent response. The stakes continue to increase, as the value of customer expectations, supplier responses, inventory & shipping costs weigh heavily on decisions and timing. To effectively compete in this environment, supply chain professionals have to address both, common (e.g., missed shipment) and crisis

(e.g., tsunami, fire) situations.

FACTORS DRIVING THE URGENT NEED FOR CHANGE• The game has changed, but

technology has not kept up: The progressive dismantling of vertical integration and linear supply chains (in favour of outsourced manufacturing and fulfillment) has left brand owners struggling to manage supply & demand with software tools that were designed for factory-centric supply chains. Instead of ERP and planning systems that focus on factory asset-utilisation, brand owners now need centralised, cross-network visibility, recognition

The competitive dynamics of globalisation have led most companies to increasingly rely on outsourcing to a web of loosely connected manufacturing and distribution partners to better satisfy the ever-increasing demands of their global customer base. The extended nature of these trading partner networks requires a more agile, flexible control structure – a supply chain control tower – to provide a centralised view of supply chain operations while enabling faster response to frequent change.

BUILDINGEFFICIENCIES & AGILITY


and responsiveness to assure lean product velocity. These capabilities require a many-to-many relationship synchronisation across a network of partners and heterogeneous systems. Brand owners need a different solution to tackle this new class of challenges.

• Data sharing is no longer taboo: The lack of trust and reluctance to share demand data have long been the hallmarks of many supply chain relationships. As a result, many suppliers second guess their customer orders and pass along distorted views of demand to their own suppliers, who, in turn, treat the information with equal suspicion. The end result of this dynamic is commonly known as the ‘Bullwhip Effect’. But in an age that values time above all other commodities, companies are quickly recognising the need to restructure their relationships with external partners in favour of more open and

collaborative operations. The most profitable & innovative supply chains in the world share this critical ability to collaborate and exchange data (e.g., exceptions & forecast changes) in near real-time.

• Frontline decisions must be made quickly and confidently: In this environment of complex demand fulfillment networks, sensing change and being responsive is straight-jacketed by information fragmentation and latency. For example, with an increasing number of partners, systems and spreadsheets, it has become exceedingly difficult to gather, consolidate and rationalise data quickly & reliably. Supply chain professionals

are therefore forced to either make decisions based on partial information or wait until the complete information is received. Both these approaches result in sub-optimal decisions that are often too late to affect positive change. This failure lowers customer service levels, strains supply partner relationships, increases costs for the entire network and damages both, brand reputation and financial results – sometimes irreparably. In the absence of effective technology,

even leading companies bridge the intercompany information and process gaps with band-aid workarounds, relying on ‘management by spreadsheet’ and offline communications via phone, fax and email. In an attempt to prepare for unforeseen shifts in demand, they also build up high levels of buffer inventory at all major nodes in the network.

The impact: Precious working capital

is tied up in excess inventory, expediting costs skyrocket and profitability suffers as a result of high inventory obsolescence. These, and other dynamics, have positioned the supply chain field for a new stage in its evolution – a stage in which multi-tier network coordination is a foundational, and not aspirational, element of how leading companies approach their trading network planning and execution.

NEED FOR AN END-TO-END VISIBILITY SOLUTIONIn today’s highly volatile, complex and outsourced marketplace, cross-network visibility is one of the key requirements for profitable demand fulfillment. With suppliers, contract manufacturing service providers, third-party logistics (3PL) providers and customers spanning the globe, the lack of timely, accurate information can result in high levels of supply chain risk, strained supplier

Some quick decisions

Supply chain professionals struggle to make simple & complex decisions quickly and confidently. Some examples of these decisions include:• Can I accept a ‘hot order’ from a key customer and let them know

right away?• How is end demand impacted by a sudden supplier component

shortage?• What orders should I prioritise to minimise late shipment impacts?• Can I fulfill orders earlier to meet my end of quarter numbers?• How should I respond to the widespread disruptions generated by a

natural disaster?• With complex, global fulfillment networks far flung and filled with

communication gaps, how can frontline professionals better manage continuous change?

Figure 1: The complexities of global supply chain integration

TTHE LACK OF EFFECTIVE BUSINESS INTELLIGENCE TOOLS HINDERS A COMPANY’S ABILITY TO MONITOR OPERATIONS AND TRADING PARTNER PERFORMANCE, OFTEN LEADING TO POOR OPERATIONAL EFFICIENCY AND LOST REVENUE.


relations, poor planning, excess & obsolete inventories and missed revenue opportunities. It is therefore critical to enable near real-time visibility and collaboration across major operations & transactions, including forecasts, orders, shipments, receipts, inventory information, and stock-in-channel & point-of-sale (POS) data. Without this visibility, it is

nearly impossible to make intelligent, timely decisions to correct supply chain disruptions or to meet fluctuating customer demand.

Furthermore, obstacles to collaboration hinder the establishment of truly strategic partnerships, which require working across both, financial and operational boundaries. All too often, brand owners make decisions to advance their own financial advantage at the expense of their partners. In order to develop trust & symbiotic relationships, it is imperative to enable near real-time information exchange and collaboration across all tiers and to share value among all parties

involved in the extended supply network.Another key enabler of multi-tier supply

network coordination is solid business-to-business (B2B) connectivity and seamless supply chain process management, both of which will help create a solid foundation for sophisticated business intelligence.

This business intelligence ‘foundation’ enables event recognition during supply

chain disruptions and facilitates more effective risk mitigation. Supply chain business intelligence also provides an advantage by integrating data across the entire value chain to provide unique insights about demand patterns, operations and customer service requirements. The lack of effective business intelligence tools hinders a company’s ability to monitor operations and trading partner performance, often leading to poor operational efficiency and lost revenue.

USING A SUPPLY CHAIN CONTROL TOWER TO GAIN VISIBILITY A supply chain control tower can provide

the extended supply chain with a more flexible and agile control structure – one that offers a centralised view of planning & execution systems and a consolidated platform for enabling rapid recognition and faster response to change. A control tower turns raw data feeds into ‘right-time’ information in a central location that monitors the flow of orders, inventory and consumption across the network. Much like the control towers used by regional utility companies, telecommunication carriers, or even NASA space centres, a supply chain control tower monitors system status and highlights business rule exceptions in real-time. Frontline supply chain professionals are able to leverage the control tower functionalities to collaborate with partners online for faster and more intelligent decision making.

The control tower continuously projects future demand and required inventory levels based on the latest macro and micro customer demands, planned production, in-transit and hub inventory, as well as near real-time customer consumption. However, information without action has little value, and beyond its critical role as an aggregator of supply chain execution data, the control tower should also drive frontline decision making in response to exceptions. Given the fragmented nature of today’s supply chains, it is imperative that the control tower has a dedicated team of cross-functional professionals that is willing to work closely with strategic trading partners to ensure data accuracy and facilitate goal alignment.

CONTROL TOWER MATURITYAMR Research, a leading industry research firm, developed a maturity model, indicated in Figure 2, that demonstrates the margin and market share improvements that come with an increasingly sophisticated ability to balance supply and demand. At each stage of the model, companies can benefit from improving their business processes and supporting information technologies.

DESIGN PRINCIPLES OF A SUPPLY CHAIN CONTROL TOWERThe following design principles outline the functional criteria for developing a successful supply chain control tower:• Partner connectivity is critical: The key

challenge of a fragmented supply chain is the many-to-many synchronisation of

Control tower, continued

Multi-tierFederation

Single-tier Partnering

Every company for itself

Every department for itself

Multi-tiervisibility,

collaborationData sharing with 1st tier partners

Internal optimisation

Slow & sequential planning

Orchestrating

Collaborating

Anticipating

Reacting

Demand network optimisation

Impr

oved

mar

ket s

hare

Process maturity Information maturity

Impr

oved

mar

gins

Supply network yield management

Figure 2: AMR Research supply chain maturity model

• The implementation approach should be based on the specific business requirements derived from the business objectives for the control tower to ensure visibility and control.

• Successful implementations rely on a process that takes the objectives and matches them to the strategies & practices to be deployed by taking the current capabilities into consideration and then building upon them to deliver the control tower. The design should include KPIs for the measurement of success, with targets set as part of the roll out.

• The most successful implementation approach to date has been to break the delivery into a series of iterative ‘business releases’ that meet specific business requirements with each release forming a building block of the control tower.

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the information flows that are needed to source, make and deliver a product as well as handle all the planning and execution exceptions that need prompt response. A solid integration backbone that accommodates various information systems and data formats, including management by spreadsheet, is a foundational element of the control tower.

• Establish meaningful key performance indicators (KPIs): Defining and building a performance measurement platform will define the underlying logic to the control tower mission. The tracked KPIs must be meaningful and their number manageable. Furthermore, a good rule of thumb when defining or selecting a KPI is to measure only what you can influence.

• Define a clear governance model: Ensure that the cross-functional team that forms the full-time staff of the control tower has the authority and underlying processes to act on exceptions. Periodic assessments of the group’s performance will help fine-tune the working model (with regard to exception thresholds).

• Do not underestimate the importance of change management: Ensuring cross-functional alignment and partner adoption will be critical to the success of a supply chain control tower. Working across organisational boundaries by ensuring full-time functional representation and tight integration with key trading partners (e.g., suppliers, contract manufacturers, etc.) cannot be underestimated.

• It is not planning. It is execution: The primary mission of a control tower is superior execution of supply chain plans and management of change in between plans. The modus operandi is ‘sense and respond’, which requires constant monitoring of system health indicators and exceptions (for e.g., a delayed shipment or non-adherence to schedule) and prompt intervention to resolve or mitigate the impact of the exceptions.

• Define an exception handling model: The exception management framework – which outlines the metrics to be tracked based on business needs, the tolerances that trigger alerts and the work flows that implement corrective actions – needs to be properly defined and built. Furthermore, a continuous

improvement mindset is needed to ensure that this exception handling model is constantly assessed and improved.

IMPLEMENTATION APPROACHThe implementation approach should be based on the specific business requirements for the control tower. It is therefore important to make sure that those requirements are derived from the

business objectives to ensure visibility and control. Successful implementations rely on a process that takes the objectives and matches them to the strategies & practices to be deployed by taking the current capabilities into consideration and then building upon them to deliver the control tower. The design should include KPIs for the measurement of success, with targets set as part of the roll out.

The most successful implementation approach to date has been to break the delivery into a series of iterative ‘business releases’ that meet specific business requirements with each release forming a building block (e.g., functionality, data, business and system processes, policies, performance measurements, new customer and trading partner B2B connections) of the control tower.

At the end of each major programme phase, a phase gate exit meeting should be held with appropriate stakeholders to review the status and major deliverables of the project. The sign off on a particular phase gate indicates that all the deliverables in the current phase have been completed to the stakeholders’ satisfaction, all critical issues have been identified & reviewed and the project is ready to progress to the next phase.

Change management and adoption, within, both, the lead company and its trading partners, are critical to the success of the control tower. This starts with clear

executive sponsorship of the initiative. The executive sponsor is responsible for ensuring that the implementation and operation of the control tower is accorded adequate staff and that success can be measured. This includes holding the teams accountable for measurable targets on the specific KPIs that will be used to drive performance improvement and measure the success of the control tower. Typically, some of these KPIs are directly related to the business case, thus requiring participation from the finance organisation to ‘audit’ the business benefits.

In the most successful supply chain control tower implementations, the metrics cascade down to individual performance metrics and incentive compensation plans for control tower and trading partner users to ensure alignment with KPIs, including bonuses for successful business releases and trading partner onboarding & solution adoption.

A continuous improvement process should also be put in place, whereby exceptions and business trends are analysed after each business release and root causes of problems are addressed.

Finally, executive sponsors need to incentivise their staff to embrace the changes driven by the supply chain control tower. A critical starting point is to ensure that all participants view the control tower as the main execution platform and ‘single version of the truth’ for all supply chain-related exceptions.

CONTROL OVER CHAOS Today’s brand owners and global manufacturers get their products to market through the orchestration of a complex network of trading partners; including suppliers, outsourced manufacturers, logistics providers and distributors. They rely on thousands of businesses across the globe to work together to deliver the right products to the right customers at the right times. That is why, supply chains today are perhaps better described as ‘business networks’, sprawling across different geographies and tiers of trading partners. To profitably manage the delivery of their products to market, brand owners require a supply chain control tower to provide visibility and control over their multi-tier business network.

Courtesy: E2open

IIN TODAY’S HIGHLY VOLATILE, COMPLEX AND OUTSOURCED MARKETPLACE, CROSS-NETWORK VISIBILITY IS ONE OF THE KEY REQUIREMENTS FOR PROFITABLE DEMAND FULFILLMENT.


WAREHOUSING & DC LAWS & REGULATORY FRAMEWORK

The need for a warehouse arises due to the time gap between production and consumption of products. Thanks to the retail boom across the country, a number of warehousing companies have been steadily increasing their capacities over the last two years. However, the warehousing sector in India is witnessing an increasing number of illegal practices. It needs to have stringent rules and regulations in place to keep a watch over these practices.

THE Indian economy is one of the fastest-growing economies of the world. Increasing buying capacity and focussed approach across the industries are, in turn, enhancing the productivity of the nation. The growing markets are feeding all the industries to grow at a phenomenal pace. One such growing sector is the warehousing sector in India, which holds a vital position in supply chain management and is the backbone of any production unit. According to estimates, a boom in the commodities and retailing sector has helped Indian warehousing to grow at the rate of 35-40 per cent annually to become a $55-billion industry by 2011. The country would have around 45 million sqft of warehousing space and more than a hundred logistics parks. The turnover of warehousing was $20 billion in 2007-08 and since then, it has witnessed a sharp rise. Increasing demand for storage space and efficient handling & timely delivery of goods have encouraged private players to invest in gross numbers in this sector. This has necessitated the need for more and more state-of-the-art logistics parks in the country. With the increase in consumption,

the timelines are shrinking. There is a definite need for technology to replace human efforts. Technology plays a very vital role in achieving the targets along with the use of sophisticated equipment.

FUNCTIONS OF A WAREHOUSE Warehousing or storage refers to the holding and preservation of goods until they are despatched to the consumers. There is a constant need for storing goods in order to make them available to buyers as and when required. Storage enables a firm to carry on production in anticipation of demand in future. Warehouses enable businessmen to carry on production throughout the year and sell their products, whenever there is adequate demand. The ultimate need for a warehouse arises for goods produced in a particular season, which are supplied throughout the year. Similarly, certain products are produced throughout the year, but supplied only during a particular season.

Warehouses can be classified into three categories: • Public Warehouses: These warehouses

are generally owned by individuals,

government agencies or cooperative societies and provide storage facilities to the public upon the payment of a particular amount of fees. Certain public warehouses are also required to obtain a licence from the government to operate. They are very crucial in the case of storage of agricultural and other products without the need for huge investments. Generally, small manufacturers and traders utilise the services of public warehouses. The public warehouses receipts are good collateral securities for borrowings.

• Private Warehouses: These warehouses are generally owned by big manufacturers, corporate houses and wholesale traders to meet their own captive storage needs. These warehouses require huge investments in terms of set up as well as ongoing operation cost of the warehouses.

• Bonded Warehouses: These warehouses are generally located near the ports and are licenced by the government to accept imported goods for storage until the payment of customs duty. These warehouses and

GROWTHGROWTH

WAREHOUSESWAREHOUSESOPPORTUNITIESOPPORTUNITIES FOR FOR

OPTIMISINGOPTIMISING


the in-flow and out-flow of goods are generally under the control of customs authorities. These warehouses assist the imports. So, if an importer is unable to pay the custom duties immediately, they store the goods till the customs duty is paid.

WAREHOUSING (DEVELOPMENT AND REGULATORY) ACT 2007 Warehouses in India are regulated and governed under The Warehousing (Development and Regulatory) Act, 2007. The main objectives of the Act is to make provisions for the development and regulation of warehouses, negotiability of warehouse receipts, establishment of warehousing development & regulatory authority and for matters connected therewith or incidental thereto.What is a warehouse?A warehouse is defined as any premises (including any protected place) conforming to all the requirements, including manpower specified by the authority by regulations wherein the warehouseman takes custody of the goods deposited by the depositor and includes a place of storage of goods under controlled conditions of temperature and humidity. Therefore, a warehouse can be called a storage structure constructed for the protection of the quality and quantity of the stored produce.The need for registration The Act makes it compulsory for a person to carry on warehousing as a business and issues a negotiable warehouse receipt to obtain a certificate of registration under this Act. Although registration is granted only to warehouses issuing negotiable warehouse receipt, such registration does not restrict the ability of the warehouse to issue non-negotiable warehouse receipts. Warehouseman, his duties and liabilitiesThe person who is granted registration in respect of a warehouse and carries on the business of warehousing is called a warehouseman. The Act lays down several liabilities and duties of the warehouseman, such as liability in case of failure to exercise care & diligence, loss or damage to goods, loss due to negligence, destruction, maintenance of proper records, acknowledging receipts of goods, etc.

The warehouseman has a lien on goods deposited with him for storage against the lawful charges of storage, preservation of goods & maintenance charges, including

reasonable expenses incurred for the sale of goods in the case of non-payment of charges. The warehouseman is not duty bound to deliver the goods until the due charges are paid and the warehouse receipt is surrendered for cancellation. Issuing warehouse receipts The warehouseman is required to issue receipts only upon receiving the goods of the quantity, quality or grade and other particulars as may be mentioned in the receipt and not otherwise. Also, only one receipt can be issued for the same goods deposited by any person, except in cases of loss or destruction, wherein a duplicate receipt may be issue with a mark ‘duplicate’ on the face of the receipt. Any duplicate receipt issued by the warehouseman shall be considered an accurate copy of the original receipt. Non-compliance of these terms will make him liable for all such damages caused to any person, who has transacted on such receipt for valuable consideration, believing it to be an original.Benefits of a warehouse receipt One of the most important aspects of a warehouse receipt is that the Act itself provides for free and unconditional negotiability of warehouse receipts. Any terms limiting its negotiability shall be void. Any warehouse receipt, which is non-negotiable, is required to clearly differentiate by endorsements – ‘non-negotiable’ or ‘not negotiable’ in English or in the language in which it is issued – marked upon its face. In case the terms of delivery of goods to the order of a named person, and that person or a subsequent endorsee has endorsed it, then such receipt may be negotiated only by its delivery.

The holder, who has purchased a negotiable warehouse receipt for valuable consideration, shall be conclusive evidence of the goods described in it as against the warehouseman or any person claiming through him.Defining warehousing businessA Warehousing Development and Regulatory Authority has been constituted under the Act. This authority regulates and ensures the implementation of the provisions of this Act and promotes orderly growth of the warehousing business. The powers and functions of the authority shall include: i Granting registration and renewal/

modification/withdrawal/suspension or cancellation of such registration

ii Specifying the qualifications, code of conduct and practical training for warehousemen and staff engaged in warehousing business

iii Regulating the process of pledge, creation of charges and enforcement thereof in respect of goods deposited with the warehouse

iv Promoting efficiency in the conduct of the warehouse business

v Regulating the rates, advantages, terms and conditions that may be offered by warehousemen in respect of warehousing business, etc.

Offences under the ActOffences by warehouseman: The Act considers the following actions as offences, by a warehouseman or an agent or servant of the warehouseman, who: a Knowingly issues a negotiable

warehouse receipt without taking the actual physical delivery of goods or without reasonably satisfying himself that the goods for which such

• The total share of organised warehousing space is less than eight per cent of the total warehousing space in India.

• The industry is fragmented, largely unorganised and is dominated by small players with small capacities.

• The warehousing sector is expected to positively impact many global manufacturing majors wanting to make India a hub for skill-intensive manufacturing given the abundant supply of well-qualified engineers.

• Given the current shortage of quality warehousing space, rentals in some locations closer to the city have touched as high at `30 per sqft per month.

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warehouse receipt has been issued, have actually been received

b Fails to ascertain the number, weight or grade of the goods that corresponds to the number, weight or grade specified in the warehouse receipt or the goods are under his actual control at the time of issuing such a warehouse receipt

c Knowingly issues a duplicate negotiable warehouse receipt without substantially following the procedure for the issue of a duplicate warehouse receipt

d Despite knowing that the negotiable warehouse receipt in respect of such goods is outstanding and is not cancelled, delivers the goods without obtaining the possession of such a negotiable warehouse receipt at or before the time of such a delivery

e Fails on the surrender of a negotiable warehouse receipt by the depositor or endorsee and payment of all his lawful charges and cancellation of encumbrances endorsed on the receipt, to deliver the goods represented by the receipt.

Offences by Depositor: Any person, who is depositing the goods, has declared the value of the goods delivered by him for storage with a warehouseman an amount does not believe to be the proper value of the good actually deposited.Offences by Company: In case of any offence committed by any party, which is a company, every person, who at the time the offence was committed, was in charge of the company or was responsible for making the deposit, as the case may be, shall be deemed guilty of the offence, except where such a person proves that the contravention took place without his knowledge or that he exercised all due diligence to prevent such contravention.The penaltiesThe offences committed under this Act shall be punishable with imprisonment of a term of up to three years or with fine of `1,00,000 or with both and, in certain cases, it may extend to four times the value of the goods.

MARKET FOR WAREHOUSING The development of organised retail in India and the rising fortunes of the manufacturing sector following India’s emergence as a low-cost outsourcing hub have buoyed its warehousing market. With both, domestic retail chains and international retailers experiencing a boom, there is a greater demand for

advanced and comprehensive warehousing services. To cash in on the substantial opportunities, the private sector of the warehousing market must shape up and reorganise itself. Currently, it is in a highly fragmented state and comprises numerous competitors ranging from small truckers to non-registered business entities, which only offer some space for storage of goods. In many cases, manufacturers have their own chains of storage facilities either owned or controlled by their stockists or distribution agencies, since the limited numbers of professional warehousing providers across the country are not enough to meet their extensive distribution needs. According to an industry report by the Associated Chambers of Commerce and Industry in India (ASSOCHAM), India is short of 10 million tonne of cold storage capacity, which results in the wastage of over 30 per cent of agricultural produce every year. Warehousing infrastructure developments will also receive a thrust from the improvements in transport modes. Analyst note that major projects, such as dedicated freight corridors of railways and private sea ports & airports, are being undertaken to increase the cargo handling capacity of the country. The resulting growth of cargo transportation is expected to augment the capacity as well as create a demand for storage and warehousing services suitable for each transportation mode. Meanwhile, top-of-the-line property developers that have identified significant opportunities in warehousing in India are planning to build warehouses, especially since the traditional realty market is slowing down. This interest by realtors is expected to markedly enhance the availability of warehousing services and capacity in the country.

ILLEGAL WAREHOUSINGOwing to enormous growth and a rapid boom in the warehousing sector, certain superfluous factors emerged, which created a negative impact on the warehousing sector. One such negative impact is illegal warehousing. The absence of laid out rules or a framework for the development of the warehousing segment – considered to be the first building block of the logistics value chain – has led to the mushrooming of illegal warehousing on the outskirts of most cities. For example, in Mumbai metropolitan region alone, there are more than 40 million sqft of illegal warehousing space in operation. It is possibly the single-largest location

of illegal constructions in the world. The lack of understanding of infrastructure specifications & services of warehouses aids and abets proliferation of such illegal structures. However, the proper implementation of the Warehousing (Development and Regulation) Act will definitely do some good to the sector.

According to a recent news report, the recent legal backing for warehouse receipts will help farmers and traders get cheaper bank loans against their produce. In a meeting with the Warehousing Development and Regulatory Authority (WDRA), leading banks have said that they will lower the rates of interest on loans against warehouse receipts. The statutory backing to the regulator and authority to take penal action against defaulters has also helped lower the risk perception of lending against warehouse held commodities. The registration of warehouses is, at present, optional, but the authority’s plan is to pressure state governments to make it mandatory. WDRA was set up in October 2010 to regulate the development of warehouses in the country and prevent post-harvest distress sale by farmers. A greater legal backing to the warehouse receipts will help farmers get loans and hold on to their produce till they get a better price.

Another factor responsible for illegal warehousing is the difficulty in acquiring land. The laws of the state play a very crucial role in the development of land-based facilities. States, such as Maharashtra, where the land laws are extremely complicated and restrictive, one would find more illegal structures as compared to states, where the regulations facilitate developers to get the necessary approvals.

NEED FOR BETTER CONTROL The warehousing sector has achieved tremendous growth in recent years. Although the warehousing sector in India is witnessing a boom, it needs to have stringent regulations in place to keep a watch over the increasing number of illegal practices with regard to warehousing. The existing set of rules and regulations do not cover illegal warehousing in their domain. However, to tackle the crisis, legal patronage and strict compliances will not only help abolish illegal warehousing, but also offer remedies for several allied activities.

Courtesy: Solomon & Co. Advocates & Solicitors

Laws & regulatory framework, continued


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Knowledge process outsourcing

Logistics solutions

Management development programmes

Pallets

Plastic pallets

Taxation regulatory compliance under export promotion schemes

Warehouses

Warehousing

AIMA

Engineering Expo

Frost & Sullivan

Hannover Milano Fairs India Pvt Ltd

Indian Institute Of Management-

Ahmedabad

Kamikaze B2B Media

M&M Connect Advertising & Promotions

Majha Transport Pvt Ltd

Satvik Logistics Pvt Ltd

Sintex Industries Ltd

Uniworld Logistics

Vijay Logistics Pvt Ltd

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Please complete the following & get a quick effective response from suppliers: 1. Your company’s business function is (�one only)

� Wholesalers � Manufacturer � Distributor � Agent � Other, please specify ______________

2. Your role in your company’s buying process can best be described as:

� I buy � I identify potential suppliers � I approve purchases� I negotiate contracts � I select suppliers.

3. Your line of business

4. Specific product requirement

Name: Designation:

Company Name:

Address:

City: Pin:

Tel: Fax:

Email:

08 /

2011

Business Reply InlandBR Permit No. 555

Bhavani Shankar Post Office,Mumbai 400 028.

POSTAGEWILL BEPAID BY

ADDRESSEE

NO POSTAGESTAMP

NECESSARYIF POSTED

IN INDIA

‘A’ Wing, Ruby House, J. K. Sawant Marg, Dadar (W)Mumbai 400 028,INDIA.

SPECIAL PROJECTS - SMART LOGISTICSINFOMEDIA 18 LIMITED

70

RNI NO. MAHENG / 2010 / 34343 Postal Registration No. G / NMD / 124 / 2011 - 13Posted at P.C Stg. Offi ce, GPO, Mumbai 400 001. Date of Mailing: 5th & 6th of Every month issue. Date of Publication: 2nd of every month

smart logistics - august 2011

Documents

limited infomedia18

behalf of infomedia

sawant marg

ruby house

navi mumbai

dadar w

hong kong tel

china tel