Logistics Integration A Driver For Growth


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Need for integrating various logistics aspects in India is increasingly felt by the industry participants. This document brings document puts forth a perspective.

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Logistics Integration A Driver For Growth

  1. 1. Trade 1975 49% 17% 13% 1
  2. 2. Trade 2005 40% 16% 26% 2
  3. 3. Shrinking of the global market place has mounted pressure on logistics processes….. Global shift in trade and manufacturing  De-industrialization in North America and Europe and re- industrialization in Asia-Pacific (China, India etc.) ; not only for low cost industries but high technology products as well  Companies going global are faced with challenges with respect to high transportation and inventory cost and also higher cycle times  On top of it, customers are demanding lower prices, customized delivery and faster response cycle 3
  4. 4. Global Trends Impact on Supply Chain  Globalisation is forcing the pace of growth in the transportation sector ‒ Demand at times outstripping supply ‒ New players, new ideas, innovation  Supply chains shifting as companies relocate production ‒ Exporting finished goods ‒ Importing raw materials ‒ Intra - asian trading, new markets and components  Outsourcing of non-core competencies are restructuring transportation  Consolidation is providing scale and leading to move from domain management to industrial management  Information and data are becoming all pervasive 4
  5. 5. Multiple players with varied roles operate in the logistics chain, resulting in a need for seamless interaction for efficient movement of goods Interactions between maritime trade related players Major actors Agents Shippers Terminal Operating Shipping Companies Hinterland Owners Companies (handling and Transport storage) Companies Forwarders Other Service providers Banks Customs Insurance brokers Legend Relations based on financial flows : from supplier to customer 5
  6. 6. Global trends has resulted in logistics processes being transformed into a comprehensive supply chain management (SCM) Key changes in logistics processes over the years  New information and communication technologies driving the SCM framework  Minimal inventory across the supply chain (integrated chain)  Global manufacturing expansion leveraged on best practices of logistics (Dell is a case in point, it is known as a supply chain company rather than a IT company)  Modular production concept driven by contract manufacturing (vertical disintegration and horizontal integration across value chains). This helps to be across products / services and enhance revenue 6
  7. 7. Shippers are transforming their international logistics operations, addressing four key areas Best Practices by Shippers  Global inventory control  Transportation spend management  Import/export process management  International logistics outsourcing Shippers are primarily trying to improve service to customers through international logistics improvement and also by investing less capital 7
  8. 8. Logistics providers are focusing on three key issues in their transformation initiatives Key building blocks  Visibility (by deploying IT, management systems.  Trade compliance (global regulatory and business regulations need to be monitored)  Transportation contract management (managing alliance relationships) Leading logistics providers are actively creating better ways to leverage the skills (and technology) of their partners 8
  9. 9. Evolution in supply chain models have resulted in logistics market players re-thinking their role….1 Key changes in logistics processes over the years  Emphasis of Shippers on, ‒ greater process automation ‒ improved technologies and ‒ increased reliance on logistics partners  Shipping companies have displayed flexibility to discover ways to, ‒ synchronize activities with client need ‒ transparency in process ‒ better co-ordination / control with partners (terminal operators, brokers, etc.) 9
  10. 10. Evolution in supply chain models have resulted in logistics market players re-thinking their role….2 In-land and ocean logistics chain evolution  In-land distribution has become an important dimension in global logistics  Information technology enabled services such as e-commerce, communications and automation have facilitated global expansion plans of integrated players  3PL and 4PL players have emerged - Integrated freight transport, warehousing, physical distribution solutions  Major international shipping companies have themselves now started integrating their services into a broader spectrum of door-to-door delivery systems, incorporating rail-road haulage movements of cargo, thereby substantially supplementing their ocean freight income 10
  11. 11. Evolution in supply chain models have resulted in logistics market players re-thinking their role….3 In-land and ocean logistics chain evolution  Functional role of ports across the value chain has evolved driven by logistics integration need and freight distribution  Worldwide trend in port development is now veering towards terminalisation of ports with focus towards freight specialization. e.g. LNG terminals, Container terminals etc  Separation of Port Authority And Port Operator  Increasing customer pressures towards logistics rationalization of cargo movement is leading to new ports being developed with consequent shift in movement of cargo  Growing clout of port users: Freight service providers have become a significant part of the value chain 11
  12. 12. Case Examples  Let us look at few cases which depict how every market player’s role in the logistics chain has evolved in last couple of decades  Integration across value chain had these benefits, ‒ Increase scope for touch-points with customer and hence revenue streams ‒ Control over the maximum part of supply chain process to manage customer expectation 12
  13. 13. A port in U.K. is aggressively marketing its services to not only shipping agents, liners but also to potential shippers in India  A leading port called XFL in United Kingdom was eager to Background increase its container traffic from India by taking a share from its competition within U.K.  The end to end logistics cost from India to the key destinations in U.K. (which is Midlands) such as Manchester, Birmingham via competing port is significantly higher than that via XFL. The savings are in the range of 20% to 40% of the logistics cost  Lack of direct service from an Indian port to XFL was the key reason for poor Key developments container traffic to the port from India  Hence XFL took the following initiatives with an intention to attract Indian exporters, importers in UK and Shipping lines to their port; ‒ Identified Indian exporters in India and put forth a business case to them justifying attractiveness of XFL over other ports in UK ‒ Marketed XFL port to number of shipping liners ‒ Met importers in U.K. in order to influence them to opt for XFL and there by save significantly costs ‒ Nominated a shipping agent to market the port’s attractiveness to Indian exporters on an ongoing basis ‒ Facilitated inland logistics in the U.K. from port to end consumer locations 13
  14. 14. Shipping companies are offering integrated services across the logistics chain  A leading shipping company amongst the top 10 container liners Background in the world  Global logistics and supply chain dynamics demanded that a shipping company have control over greater part of the supply chain in order to manage customer needs, optimize overall cost and also expand revenue streams Key developments  Shipping companies have more to gain by undertaking logistics integration of their cargo operations than just handling oceanic leg of cargo haulage  This shipping line expanded started investing in terminal operations and management then entering in the in-land transportation arena and also into 3PL services such as warehousing , last mile distribution  Today, many shipping liners have evolved into end to end integrated logistics providers 14
  15. 15. Logistics service providers are expanding across the value chain in order to provide an integrated solution to the end- customer  TM International Logistics Ltd a logistics service provider with a vision of being the most preferred and competitive Background end-to-end customer oriented logistics solutions service provider  Offers logistics services pertaining to port and terminal handling, maritime shipping, ship agency, custom clearance and freight forwarding Key developments  Ship operating business involving diverse dry break bulk and bulk cargoes  Port operations activity at Ports of Haldia and Paradip at east coast of India backed by fully dedicated custom clearance and ship agency services at both ports  Runs a clean dry cargo terminal at berth # 12 at Haldia which is equipped with modern handling facilities including heavy equipments, shore cranes, vast large open storage area as well as covered warehousing facility 15
  16. 16. A port state logistics authority in US changed its area of focus from the waterfront area to every other sector of logistics to gear up for a major growth surge  Ports in Georgia, US expected growth surge in its container Background traffic in the short-term (2.3 mn TEUs to 4.4 mn TEUs in 8 years)  This growth in port traffic would impact every other sector of logistics  It was estimated that daily round truck trips to the container terminal in Savannah would rise from 3500 to about 5000 plus (this increased demand would mean a shortage of licensed truck drivers) Key developments  In addition to trucking needs, road, rail and support systems would need to be augmented to manage the growth surge  Each logistics sector uses new ideas, technology and funding to stay ahead of the curve, an integrated platform to discuss inter-connected growth and industry issues, solve problems and share technology solutions across board was created  Centre for innovation in logistics became the platform to address logistics issues, leveraging strengths to create new jobs and investment etc.  Hence objective was not only to enhance the competitiveness of the logistics industry in Georgia but also boost economic development of the state 16
  17. 17. Logistics integration is an imperative for growth, however there exist a lot of barriers which need to overcome in the journey Conclusion  Legal  Institutional  Custom  Physical  Technical Ways and means to overcome these barriers have to be evolved 17
  18. 18. Every maritime logistics player needs to brace himself for the dynamic changes in global trade and its impact on maritime logistics Conclusion  With global trade supply chains set to further expand, the shipping industry is bound to go through a major re-definition as a part of a larger maritime logistics web  Logistics players need to constantly evaluate their position in the bigger game plan- both externally and internally  Be in tune with the end-customer needs, anticipating moves from players across the value chain (a) Either align with someone who is making a move or (b) initiate change to be present across more elements of the value chain, to be of consequence  internally, leverage technology to your advantage to have better visibility, with sound systems comply to trade needs and better relations with alliances 18