CargoConnect March 2016 by Surecom Media

www.surecommedia.in

VOL VII ISSUE IV march 2016 `20

Postal Registration No.: DL (S)-01/3372/2016-18 Postal at IPMBC on the 4th-5th same month RNI No.: DELENG/2009/31040 Published on the 2nd of the same month

SPECIAL FEATURE

Inland Shipping:

In Search of the Lighthouse

PFT: A Fillip to CostEffective Logistics

Budget 2016: Great Expectations

aeo: Securing the Supply Chain

Bonded Trucking: Rough Roads Ahead?

Pharma Logistics: One Mistake Can be Fatal

Contents

Volume VII • Issue IV • MArch 2016

Editor and Publisher Smiti Suri Executive Editor Samaya Chhabra Assistant Editor Dr Kirti Mudgil Pathak Principal Correspondent Ritika Arora Bhola Roselin Kiro

22 COVER STORY

SPECIAL FEATURE

PFT: A Fillip to Cost-Effective Logistics

Inland Shipping: In Search of the Lighthouse

FEATURE

Special Correspondent Joydeep Banik Deepannita Chakraborty Feature Writer Kiran Sabherwal Director Marketing Ajeet Kumar Manager Marketing Niti Chauhan Marketing Executive Chetan Pathak Rajesh Basu Asad Mohammad

AEO

Marketing Support Suman Kumari

• AEO: Securing the Supply Chain ......................38

• Bonded Trucking:

Rough Roads Ahead? ..48

• Pharma Logistics: One

Mistake can be Fatal ...56

NEWS ...................6-10 & 90-100

#Budget Pe Charcha

We bring you a wide spectrum of updates that will keep you informed about the industry’s plans, performance and initiatives.

Budget 2016: Great Expectations ...........68

focus ................................6 EVENTS ...................102-105 supply change .............88 GUEST COLUMN ...............87 People Connect .........106

INTERVIEW David Philips, MD, Freight Systems .......78 Srinivas Sattiraju, CEO, Delex Cargo India Private Limited .....................................80 Paul Kettle, Business Development Director, Defence, TVS SCS, UK ....................82 Sanjay Goel, CEO- India, Bollore Logistics ..............................................84 Brian Pearce, Chief Economist, IATA .....86 TOTAL PAGES: 108 (inclusive of covers)

Administration Vipin Marwah Lavish Thakur Designer & Visualiser Shaique Ahmad All material printed in this publication is the sole property of CargoConnect All printed matter contained in the magazine is based on the information of those featured in it. The views, ideas, comments and opinions expressed are solely of those featured and the Editor and Publisher do not necessarily subscribe to the same. CargoConnect is printed, published and owned by Smiti Suri, and is printed at Compudata Services, 42, Dsidc Shed, Scheme–1, Okhla Industrial Area Complex, Phase–II, New Delhi-110020, and published at 6/31-B, Jangpura–B, New Delhi-110014. Editor–Smiti Suri

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6/31-B, Jangpura-B, New Delhi-110014 Tel: +91-11-24373365, 24373465 Mob: 9711383365, 9810962016 Email: cargoconnect@gmail.com info@surecommedia.in Website: surecommedia.in

focus

Rail Budget 2016:

Takeaways for Logistics Sector • Five-year action plan to transform Indian Railways • `8.8 lakh crore to be spent on infrastructure in five years • Capital expenditure doubled from an average `48,100 crore in 2009-2014 to `1, 21, 000 lakh crore in FY17. The likely key beneficiaries from the move will be Siemens, BEML, Texmaco, Titagarh Wagons and Timken • Finalised bids for two new loco factories under ‘Make in India’ initiative • Three dedicated freight corridors envisaged

for North-South, East-West and East Coast alignments • Average speed of freight trains to be increased to 50 km per hour and freight tariff to be reviewed • Increased focus on building rail-linked logistics parks and warehouses • Cost management strategies to be adapted, especially for the energy sector. Also, its plan for inventory reduction through tracking system is predicted to be extraordinarily useful for the cargo sector • IR envisages investment of `8.5 lakh crore in the next five years to be mobilised from multiple sources to cater to funding, i. e. multilateral development banks, pension

funds • Focus on coastal connectivity and implementation of rail connectivity for Nargol and Hazira ports under PPP • Transport Logistics Corporation of India (TRANSLOC) to be set up for developing common user facilities with handling and value-added services to provide end-to-end logistics solutions at select railway terminals through Public Private Partnerships • Overhaul of parcel business by liberalising current parcel policies including the opening of the sector to container train operators

news

Oman Air and Cargolux introduce freighters to Mumbai Oman’s flag career and Luxembourg’s cargo airline have expanded their partnership with the addition of two weekly cargo flights to Mumbai from next month. “The new service builds on the success of the second frequency to Chennai that we launched together in August last year. It will enable us to further strengthen our presence within the Indian market,” said Abdulrahman Al Busaidy, Chief Operating Officer, Oman Air. He said Oman Air and Cargolux will offer a new twice- weekly cargo service between Luxembourg and Mumbai starting from March 8, 2016. “Customers in Europe as well as in Oman have welcomed our service to India and can now enjoy our proven reliability and dedication to excellence in an even wider market. With India’s growing importance as a manufacturing nation, we see a lot of future potential and possibilities for both our companies,” said Niek van der Weide, VP Sales and Marketing Executive, Cargolux. The agreement provides Cargolux with access to the belly capacity of Oman Air’s passenger fleet which operates to 11 destinations in India and East Africa.

CargoConnect - march 2016

JNPT eases cargo delivery to boost ‘Make in India’ Just when PM Narendra Modi launched the ‘Make in India’ project in the financial capital of the country, Jawaharlal Nehru Port Trust (JNPT) started a new system of cargo clearance that will make it easier and faster for importers to import goods through this port. Christened Direct Port Delivery (DPD), the system allows government accredited reputed importers and importing agencies to take delivery of goods from the port soon after the arrival of ships, provided they comply with all the necessary paperwork in advance. The logistics project at the port, which was initiated by the shipping ministry, will ensure greater competitiveness both for domestic and export-oriented manufacturers. Anil Diggikar, Chairman, JNPT informed that a decision has been taken to dispense with the minimum import volume criteria that was in force till recently. It will now extend DPD facility to all accredited importers from the port’s container terminal with immediate effect, irrespective of their import volume. This will be on a trial basis for six months.

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CargoConnect - march 2016

Road projects to use hybrid model by March To expedite highway building, the government will award projects worth more than `40,000 crore on the new hybrid model by March while 100 projects will be bid out next fiscal, Union Minister, Nitin Gadkari said in a statement. “Under hybrid mode 40 per cent grant in aid will be given by the government to the project with 60 per cent contribution from the contractor of which 30 per cent will be his investment and remaining 30 per cent from the bank,” Gadkari stated.

Varanasi to get India’s 1st multimodal hub Five multimodal logistics park are being set up, including one in PM Narendra Modi’s Lok Sabha constituency, Varanasi, at a cost of `5,000 crore for hassle-free, costeffective cargo movement across the country. Adesh Sharma, Managing Director, Dedicated Freight Corridor Corporation said that the process of acquiring land for five multimodal logistic parks in Gujarat, Punjab, Rajasthan, Uttar Pradesh and Maharashtra along the 3,342 km long freight corridor is in progress.

Air India may begin air cargo service from Surat airport Air India (AI) may begin air cargo service from the Diamond City in the next two months. AI is planning to replace small aircraft from Surat, including the morning CRJ flight between Surat and Delhi and the Mumbai-Surat flight with Airbus 320 and Airbus 319, looking at the cargo potential in Surat and south Gujarat. A team from AI’s cargo division visited the city and met textile and diamond associations and also members of ‘We Want Working Airport at Surat’ (WWWAS) for their views on air cargo potential. Sources said senior officials from AI’s cargo division were impressed with the huge cargo potential of south Gujarat. The members from the trade and commerce, including the WWWAS, made a detailed presentation of air cargo potential from the airport.

news

Quickjet Cargo to ply Dublin-Bengaluru

APM Terminals Pipavav gets first Ro-Ro shipment

Quickjet Airlines, majorly owned by Dublin-based ASL Aviation is all set to launch its freighter services in the country with its maiden cargo flight to Bengaluru. The airline said it has deployed a 21.2 ton capacity B737-400SF jet freighter in India. Quickjet would initially connect Delhi, Chennai, Bengaluru and Hyderabad, offering four daily flights and operating overnight to link Delhi with Chennai, Bengaluru and Hyderabad in the first phase. In the second phase, it will connect Mumbai and Kolkata as the airline seeks to cover all major metro hubs, a release said. “Quikjet will now offer a neutral cargo service and as it grows it aims to serve multiple customers, airlines, business and industry to help enable growth. In turn, this will benefit the Indian economy and this benefit will be felt more and more as Quikjet expands its operations in the years ahead,” said Hugh Flynn, Chief Executive, ASL Aviation Group.

In a move that could boost trade along the country’s coastline, the APM Terminals Pipavav received its first domestic Ro-Ro shipment of 800 Hyundai cars from a Chennai port. The development is also likely to decongest rail and road traffic. The cars, which are destined for western India dealerships, originated at Hyundai Motor India Ltd’s (HMIL) manufacturing facility near Chennai. The development follows ministry of shipping’s decision to relax cabotage regulations on special vessels under which foreign flagged Roll-on/Roll-off (Ro/Ro) vessels can ply on domestic coastal routes.

G ITH N I W RV CE ENT E S EN M L EL MIT C EX COM

Shipping firms seek reservation in cargo imports Hit by a downturn in the trade cycle, Indian National Shipowners’ Association (INSA) demand that 25 per cent of the country’s imports of crude oil, liquefied petroleum gas (LPG) and dry cargo be reserved for them in order to minimise the incidence of Indian flag ships lying unutilised. Union shipping minister Nitin Gadkari, said in a statement that his government is doing its best to come up with measures to revive the shipping industry.

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SPECIAL feature

Inland Shipping: In Search of the Lighthouse Inland waterways as a mode to transport cargo has a green advantage since it lowers carbon dioxide emissions and also curbs roadblocks and road accidents. Despite these tangible advantages, policymakers have, over the years, continued to focus on the railways and road sectors and completely overlooked the potential of coastal shipping. Dr Kirti Mudgil Pathak talks to experts to explore the reason for this negligence and also about the future of this industry

12 CargoConnect - march 2016

SPECIAL feature

s t a bl i s h m e n t o f transport network is an essential of infrastructure development, an inadequacy of which can seriously affect the development process of a nation. Despite continuous efforts since l95l to augment the capacity of various modes of transport in India, the transport sector, barring Railways and Road has been exposed to bottlenecks and capacity shortages inhibiting smoother and faster growth of economy. The fact is that the established transport network faces serious bottlenecks in meeting the growing requirement of our economy. Despite nearly 14,500 km of navigable inland waterways that can be used to ease transport congestion on land, India’s coastal shipping sector is still in its infancy. The union government is working on a strategy to increase the movement of goods and passengers through waterways by nearly fivefold from a mere 3.5 per cent now to 15 per cent by 2019. But not many entrepreneurs are willing to invest in inland vessels and this has resulted in underutilisation of whatever infrastructure is created, thereby spelling trouble for the development of the sector. Inland waterways transportation in India is a paltry 3 per cent with less than 1,000 vessels estimated to be using the Indian inland waterway systems.

Underutilised Water ways: Issues Confronted RPS Kahlon, Chairman, Kolkata Port Trust analyses, “It appears that underutilisation of inland waterways in our country is mainly attributable to a lack of sufficient investments for the development of waterways/terminal facility (as compared to road and railways). Some other factors are lack of availability of low draft in waterways, inability to guarantee sustained depth throughout the year, non-availability of night navigation facilities on all the stretches of our national waterways, lack of multi-modal terminals with state-of-the art handling facilities, high construction and operational cost of Indian barges and non-availability of subsidy on fuel, etc.” He adds on an optimistic note, “However,

under the Saga r ma la Project of the Government of India, one of the focus areas is development of inland waterways for transportation of cargo and passenger throughout the country and an ambitious scheme viz. Jal Marg Vikas has been taken up by the Ministry of Shipping for development of inland waterways over a 1,620 km stretch between Haldia and Allahabad on National Waterway No 1, with the development of multi-modal terminals at Haldia, Sahebgunj and Varanasi. Inland Waterways Authority of India (IWAI) is the implementing agency of the project and the work is likely to commence from March, 2016.”

The IWAI has been actively working on dredging, surveys, channel marking, river conservancy works, construction of terminals and procurement of hardware like dredgers and demonstration barges. Speaking on the same issue, Capt Naresh Kundlas, General Manager- Business Development, Wallenius Wilhelmsen Logistics (India) Private Ltd shares that the core problems behind the severe underutilisation of waterways is that “non-availability of adequate navigational aid results

in unsafe passage and high travel time. There are inadequate vertical and horizontal clearances for plying vessels of economic size in many traditional waterway routes. Besides, there is a lack of adequate terminal facilities at loading and unloading points since the existing facilities are not adequate for handling the size of vessels available.”

Government Apathy Talking about why inland waterways remain underutilised in a vast country like India where it is needed badly in order to ease traffic and make transportation of cargo more convenient and economical, Capt Bharat, Chief Executive Officer, BSL Freight Forwarding Solutions Pvt Ltd says, “Inland water transport for carriage of goods and passengers is utilised just 3 per cent as compared to Europe / China where it is utilised 40 per cent. Several issues confronted are inadequate quality infrastructure and insufficient funds allocation by the government. IWT was not considered a priority sector by previous regimes. Identified routes including NW-1 have not been able to attract private sector investment for developing due to lack of proper institutional framework. Absence of political will and reluctance of various states in interlinking waterways causes a major impediment.” Kundlas believes that the lack of focus on development of waterways in government policies also does not attract investors.

Economically Viable Speaking on the issue of the cost effectiveness of rivers, Kahlon informs, “For inland waterways, no pathway/fairway is required to be constructed as the same is naturally available and congestion free. Studies have shown that 1 litre of fuel moves 24 ton-km on road, 85 on rail and 105 on IWT. Studies have also shown that emission from container vessels ranges from 32-36 gm of CO2 (gCO2) per km, while that of road transport vehicles (heavy duty vehicles) ranges from 51-91 gCO2 per km. Besides, connectivity of inland water to sea/river port provides facility of movement of EXIM cargo from hinterland direct to the user and also facilitates movement of over dimensional cargo/ project cargo.” River transportation proves to be gainful for a variety of reasons. From the economic viability point of view for any river service , two-way traffic is essential , which is missing, or one may say, not explored. For e.g.

March 2016 - CargoConnect 13

SPECIAL feature 1 litre of fuel moves 24 ton-km on road, 85 on rail and 105 on IWT. Studies have also shown that emission from container vessels ranges from 32-36 gm of CO2 (gCO2) per km, while that of road transport vehicles (heavy duty vehicles) ranges from 51-91 gCO2 per km.” RPS Kahlon Chairman, Kolkata Port Trust

NW-1 sees a large volume of cargo in one direction- upstream of Kolkata. Bharat endorses the same thought, “Inland waterways is the cheapest mode of surface transport and the cost of moving one ton of cargo is just 50 paise per km compared to `1 by railways and `1.50 by road. It also guarantees cost advantage due to low capital. Maintenance of road and rail network is huge as compared to water transport. IWT competition will always be with railways and roadways vis a vis time and fuel cost. The low cost through inland waterways is also due to direct taxes being negligible for inland water transport.” Waterways can carry more goods per voyage as compared to rail and road transport. Economies of scale are higher and positive. Decrease in fuel cost benefits the operator and provides benefit to the end consumer, as per Bharat. Capt Deepak Tewari, Chief Executive Officer, MSC Agency India Pvt Ltd says, “Every year congestion on roads increases. This in turn increases cost and journey time, making economy less and less competitive. Inland waterways are the alternative that bypasses clogged transport routes and reliably gets freight to its end point on time. Shifting the transport of goods to waterways reduces the amount of money needed for investments in transport infrastructure. With comparably low investments, transport volumes on waterways can be significantly increased. Inland waterways also have comparably low maintenance costs. Inland vessels offer an enormous carrying capacity per transport unit. One motorised cargo vessel with a load of 2,000 tons carries as much cargo as 50 railway cars at 40 tons each or 80 trucks at 25 tons each. Combined

14 CargoConnect - march 2016

Even in Bangladesh, about 35 per cent of the freight movement is by inland waterways, according to ADB figures. with comparably low transport costs, inland vessels show an excellent cost-benefit-ratio.” Use of inland waterways as part of key logistics channels will not only be environment friendly but will also offer significant cost reduction. Besides, “due to their size and loading capacity, inland vessels are especially suitable for transporting goods with unusual sizes and weights. Transformers, turbines, silos, boilers, aircraft sections, locomotives, helicopters, etc., can often only reach their destination by ship due to limitations in road and rail transport (e.g. low bridges, narrow roads and roundabouts),” Tewari adds.

Problem With the River Maintaining the required depth of a river is another hurdle facing transport via inland waterways. The government plans to include inland waterways as a mode of transport in near future. However, retention of water

level and removal of encroachments will pose a major challenge. Kahlon comments, “Maintaining the river level for providing sustained depth throughout the year is a big challenge as it depends on the upland discharge which is variable in different seasons. However, adequate depth can be provided through river training and dredging. Very little land is required for construction of cargo terminals along the river banks and providing connectivity thereto. Therefore, the issue of removal of encroachments, if any, can be addressed through the state administration.” Other problems are silting, low bridges and narrow barrages which makes navigation of large vessels difficult. The problem with transportation of cargo through river , as per Bharat is, “Rivers have bridges which are quite low and barrages which are not wide enough. This makes navigation of large vessels difficult. For example, Farakka bar-

SPECIAL feature The success of inland ports has already been

acknowledged in places such as Duisburg, Germany

and Nanjing, China which have been competing well with sea ports. It clearly defines the objective of lowering carbon dioxide emissions.” Capt Naresh Kundlas General Manager-Business Development, Wallenius Wilhelmsen Logistics (India) Private Ltd

rage in NW-1 is not wide enough to allow the passage of big vessels. Low and varying draft across river streams makes navigation uncertain. River draft varies seasonally and beyond certain locations. The draft in NW-1 reduces to the north of Farakka, so large vessels cannot navigate. Silting in rivers also poses problems. Topography of the river with low depth and heavy meandering makes navigation through rivers difficult. There are inadequate vertical and horizontal clearances for plying vessels in many traditional waterway routes.” Tewari shares that maintenence of navigable waterways is a costly affair. “Waterways are really slow when compared to other bulk modes like railways. Although fast boats are available, they are not as economical. Maintaining navigable waterways is an expensive matter. The cost advantage for waterways comes from their huge carrying capacities, but for large boats to navigate rivers and canals, regular dredging needs to be done throughout. Indian waterways tend to be muddy and carry a lot of soil, which is good for agriculture but not for navigating. This is a major reason why port operations have shifted majorly from the river port in Kolkata to the sea port at Haldia. Waterways, like rivers and canals, have other uses like generating electricity by building dams and helping irrigation by building canals. These activities interfere with navigability. Waterways require road or rail to transport goods from the factory or warehouse to the inland port to be loaded on vessels and thereafter from the vessel to the end user or customer. Further, the Roll on and Roll off vessels for

16 CargoConnect - march 2016

Shipping more goods on water will help to reduce greenhouse gases and traffic congestion. trucks to carry from port to inland may not be economically feasible in India in the absence of infrastructure.”

Why Roads are Preferred It is widely felt that trucks are more efficient to carry smaller loads. Tewari also shares his

observations and points out the following factors concerning why road transport is preferred over waterways. “Waterways are very convenient for bulk transportation. But the reason why so many industries prefer trucks to waterways or even railways is that trucks are more efficient for smaller loads. If you are an SME or a smaller unit of a large company, you can load a truck with all your goods and not worry about fitting in with a larger cargo shipment in train or ship. Trucks are owned by individuals and companies which manage their stuff independent of government bureaucracy and control. Hence, you deal with a single entity instead of a plethora of bureaucrats and union labourers in railways and also waterways. Indian companies still deal in written challans and receipts rather than an automated trackable network. This makes transporting point-to-point by trucks a lot more safer and convenient compared to bulk modes where loading and unloading multiple times can make goods or their receipts go missing. If the river Ganga is navigable only from Kolkata to Allahabad, it is not really useful because most bulk goods from Kolkata (like chemicals) or Dhanbad (like coal and steel) need to be transported to industrial centres like Delhi, Jalandhar, Alwar, etc., which can be easily, cheaply and directly done by the railways or road” he adds. Most waterways in the country require constant dredging on account of heavy silting and draft is available only seasonally. Very few entrepreneurs are willing to invest in inland vessels, and this has resulted in underutilisation of whatever infrastructure is created, thereby spelling trouble for the de-

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SPECIAL feature For bulk cargo movement, waterways provides the best, eco-friendly option. Hazardous cargo can be moved without any significant danger to life and environment.” Capt Bharat Chief Executive Officer, BSL Freight Forwarding Solutions Pvt Ltd

velopment of the sector. In China, navigable inland waterways total more than 1,00,000 km and there are a large number of inland port facilities with berths for large vessels, with the inland waterways transportation making up to 47 per cent of the total transport available there. In the European Union it is 44 per cent. However, inland waterways transportation in India is a paltry 3 per cent.

Waterways are Environment Friendly Kundlas elaborates, “The success of inland ports has already been acknowledged in places such as Duisburg, Germany and Nanjing, China which have been competing well with sea ports. It clearly defines the objective of lowering carbon dioxide emissions

18 CargoConnect - march 2016

and curbing the rate of road accidents (which are a cause of concern In India.) However, the benefits will only be seen after a few years of matured business as it requires huge capital investment in the development of infrastructure.” Tewari is of the view that inland waterways should be promoted and encouraged because “there is a very low probability of accidents, and should an accident happen, the cost of that accident is low in economic and human terms. Barges lead the way in safe transport, especially for dangerous cargoes, with extremely high standards of inspection, training and licensing.” Bharat says, “The roadway and railway services have been saturated and to address this, we need to develop waterways which will boost trade and transportation in India.

The different industries which are looking for developments in this area are thermal power plants, cement, fertilisers and edible oil companies. Less traffic on the road will lead to low pollution levels, thus creating a better habitat for citizens. For bulk cargo movement , waterways provides the best , eco-friendly option. Hazardous cargo can be moved without any significant danger to life and environment. Many new power plants are expected to come up on NW-1. If waterways are connected to the ports, they can be used for transportation of coal, especially imported coal, to different power plants.” All studies carried out to quantify environmental costs ultimately show the same result: Inland waterways transport is the most environmentally-friendly mode of transport. Shipping more goods on water will help to reduce greenhouse gases and traffic congestion.

Uniting User States: A Challenge As per Kahlon, “Very little land is required for construction of cargo terminals along the river banks and providing connectivity thereto. Therefore, the issue of removal of encroachments, if any, can be addressed through the state administration.” Kundlas adds, “ The river water usage policies are more defined by states and uniting the user states is always a challenge when we have different political parties ruling in these states. The present central government has emphasised that developing the IWT sector is a priority, with the Union Shipping, Road Transport & Highways Minister, Nitin Gadkari throwing his weight behind the sector and a bill in this regard has already been

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SPECIAL feature Waterways are very convenient for bulk transportation. But the reason why so many industries prefer trucks to waterways or even railways is that trucks are more efficient for smaller loads.” Capt Deepak Tewari Chief Executive Officer, MSC Agency India Pvt Ltd

moved in the Parliament recently. On March 25 this year, the Union Cabinet had taken the decision to approve for enactment of Central legislation for declaring 101 additional Inland Waterways as National Waterways (NW) for navigation.” Failure of monsoon can play a big hurdle resulting into fall in the water level of rivers making navigation difficult. “Rivers suffer from silting and this requires continuous dredging of the waterways which is an expensive affair if returns are not remunerative. The basic pre requisite for waterbased transport is the availability of water flow. In the main waterways, this may have decreased over the years because of increased usage arising from habitation, industrial and agricultural needs. The extent of regular flow may also have decreased because of the impact of dams on river streams,” opines Bharat. Encroachments can also bring about development but may not be suitable for inland waterways.

Last Mile Connectivity and Inland Shipping Kah lon in forms, “In the last year, a Memorandum of Understanding was signed between Inland Waterways Authority of India and the Dedicated Rail Freight Corridor Corporation of India Ltd for providing rail connectivity to the IWT terminals. They may like to form an SPV for implementing the last mile connectivity, as has been done in the case of last mile connectivity to major ports by forming an SPV viz. Indian Port Rail Corporation Ltd with equity from major ports and Rail Vikas Nigam Ltd.” However, progress on operationalising waterways and keeping them navigable has

20 CargoConnect - march 2016

been limited. The ‘Make in India’ dream cannot be achieved unless logistics costs are reduced and the use of waterways could prove to be the solution.

A World Bankassisted project has started to develop Varanasi in Uttar Pradesh to Haldia in West Bengal for water traffic, which will stretch upstream till Allahabad and Kanpur in later phases. Kahlon comments, “For Indian industries to flourish, the goods or cargo generated by them needs to be exported or moved to other places in India at a competitive cost in the

shortest time. Considering the congestion in rail and road, IWT mode is a better option. This, however, requires the connectivity of inland waterways/ hinterland to the port and would help evacuation of cargo generated by Indian industries. In order to reduce the logistic costs, Sagarmala Project has been envisaged which intends to develop new lines and linkages for transport (including road, rail, inland waterways)as well as logistic hubs and establishment of industries and manufacturing centres to be served by the ports in EXIM and domestic routes.”

Afterthought Coastal shipping could be used as a means to remove the bottlenecks in the existing transport network, especially in a country like India, which is blessed with a very long coastline. India has to exploit this cheap mode of transport to her best advantage. Indian ship owners and shippers may like to make immediate efforts for transportation of goods by inland waterways instead of by road, in view of the overall increase in vehicle on national highways which has lead to high density of traffic, excessive fuel consumption due to poor maintenance and tremendous increase in the accident rate as well as pollution. This is very important in view of the fact that the Government of India had introduced a new subsidy scheme for transportation of goods by inland waterways to reduce congestion and pollution on national highways. It appears that inland shipping in India that is currently sailing in dark and troubled waters, is finally set to reach the lighthouse it desperately needs.

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PFT

A Fillip to Cost-Effective Logistics

22 CargoConnect - march 2016

cover story In the recent past, Indian Railways has taken several steps to involve the private sector in the development of its infrastructure and services. The government is actively pursuing policies to promote and encourage the same to develop freight terminals. With increased private participation, the customer-facing activities will become more efficient and customer-friendly. Roselin Kiro, with inputs from experts in the industry, scrutinises how beneficial and successful PFT is for stakeholders and the industry at large

March 2016 - CargoConnect 23 march

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inistry of Railways came out with the proposal of private participation for setting up of freight terminals with integration to Railway network. The sole purpose was diversion of chunk of road traffic to railway thereby, increasing rail coefficient of surface transportation and the commodity basket of the Railways. Though the proposal calls for huge investment to some extent, Railways have succeeded in inviting private investment. Indian Railways is one of the largest railway systems in the world. By carrying about 11 million passengers and over 1.20 million tons of freight per day, the rail system occupies a unique position in the socio-economic map of the country and is considered a means and a barometer of growth. Rail is one of the principal modes of transport for carrying long-haul bulk freight and passenger traffic. It also has an important role as the mass rapid transit mode in suburban areas of large metropolitan cities. However, there has been a continuous decline in the share of railways in total traffic. A multimodal common user platform with integrated facilities can substantially reduce the huge costs related with any logistics operation. Private Freight Terminals are such multimodal logistics hubs with facilities like ICDs, CFS, warehousing and sufficient space for stocking and other related activities.

As per the policy guidelines on Private Freight Terminals issued by the Railway Board, some private parties have come forward for setting up Private Freight Terminals. So far, 59 proposals of Private Freight Terminal have been received, out of which 24 terminals have been notified and 35 granted ‘in-principle’ approval. The PFT would integrate rail transport with supply chain to provide cost-effective logistics to end-users. This would extend to registered container train operators and users having private siding on private land. Accordng to KU Thankachen, MD, Central Railside Warehouse Company Ltd, “PFT concept is a laudable initiative launched by the Railways and through this, IR will certainly benefit in many ways. It will release untapped capacities for storage and handling of bulk cargoes at various location all over the country. Private sector will bring in much needed efficiencies and benefits of mechanisation in bulk handling. In the process, IR will gain in terms of enhanced terminal network and diversion of high rated traffic from rail to road.” Under the PPP policy, the main purpose of inviting private parties for setting up Private Freight Terminals was to develop additional infrastructure by private funding to capture the diverted high rated traffic, revenue sharing with the parties under certain terms and conditions, and to generate extra revenue for the Railways to achieve the target of Vision 2020.

inside Benefitting Private Players and Logistics Industry Revised PFT Policy Policy Benefits Private Investment in Capital-Intensive Railways Sector Eco-Friendly Pre requisite for setting up PFT Leading to Smooth Cargo Operations

24 CargoConnect - march 2016

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March 2016 - CargoConnect 25

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Dr P Alli Rani, Director (Finance), CONCOR The Indian Railways has once again reviewed and modified the policy, making it more attractive towards private investment. This will definitely increase the flow of private investment into the rail sector.

Benefitting Private Players and Logistics Industry PFT is expected to enable the rapid development of a network of freight terminals and integrate rail transport with the supply chain to provide efficient logistics to end-users. This would extend to registered container train operators and users having private siding on private land. Railways has allowed private firms to use its network for goods transportation and allowed PFTs. This is a progressive policy and will be a game changer in the Indian logistics services industry. Both Special Freight Train Operators (SFTO) and PFT policies will increase investments in rail infrastructure

So far, 59 proposals of Private Freight Terminal have been received out of which 24 terminals have been notified and 35 granted 'in-principle' approval. and give a fillip to rail transportation as well as the overall logistics sector. The idea of PFT has opened up the possibility of logistics players to develop their own terminals with rail access and value-added facilities for warehousing, last mile services, storage, handling, etc. This will hopefully create a network of dedicated and general use terminals for the sector with better facilities and access to markets than the current goods sheds of the Indian Railways that tend to be crowded, located in hard-to-reach places, and also require double handling from rail side to a secondary distribution or value-added warehouse facility. AK Tandan, GM (Logistics), Kribhco Infrastructure Limited avows, â&#x20AC;&#x153;At a PFT, the Terminal Management Company (TMC) can set up supplementary services like warehousing, packaging, distribution, labelling, fumigation, etc. which are generally not available at Railways terminals. Under multimodal transport, a customer can leave first mile or last mile transportation to the TMC. Shippers are ready to pay a little premium for the value-added service as

March 2016 - CargoConnect 27

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Dinesh Goyal, Head-Rail Division, Darcl Logistic Limited PFT will help improve all operating statistics like track capacity, wagon turnaround, wagon utilisation, wagon availability, throughput, interchange commitments and manpower utilisation, etc. This in turn will help bring down the operating cost with optimum asset utilisation to serve the customer better.

• Minimising local transportation, cargo safety and security • Warehousing facilities, including bonded warehouse • Packaging facilities and cargo handling round the clock

Revised PFT Policy The PFT policy was issued in 2010 and revised in 2015 to open this segment for private investment. Under this policy, a private investor can develop and operate a freight terminal on private land on the basis of a revenue-sharing model with the railways. IVS Murlidhar, CEO, Continental Warehousing Corporation (Nhava Sheva) Limited says, “There are many ar-

they are relieved of all other unseen irritants in the entire network of movement. However, emergence of PFT concept is still nascent to the logistics industry but once the network of PFTs gains strength in the days to come, it will be advantageous to one and all associated with the logistics Industry because of ease of handling operations.” Broadly, it will bring in the much needed expertise in the field. IR is mainly into rail movement or operating the railways but all aspects related to cargo handling and delivery are not dealt with as per the need of the cargo and the customer. Customers need an ‘end-toend’ product or service, i.e. they would need one service provider to pick the cargo from the sender’s doorstep to the receiver’s doorstep and this involves a lot of other aspects than

28 CargoConnect - march 2016

just pure rail transportation. With the advent of private players into the industry, each cargo will be handled as per its need with different kinds of equipment and semi-skilled/trained manpower. This will reduce losses/damages apart from bringing the benefits of scheduled services for the ultimate customer, which as of date, IR is not equipped to provide. As a whole, PFT is beneficial for the industry at large for the following reasons: • It will augment terminal capacity with greater mobility • Faster transit time • Greater mobility • Greater asset utilisation, higher customer care level • Cost saving by way of eliminating demurrage and wharfage

PFT has opened up the possibility of logistics players to develop their own terminals with rail access and valueadded facilities

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IVS Murlidhar, CEO, Continental Warehousing Corporation (Nhava Sheva) Limited By merely liberalising its PFT policy and dismantling entry barriers by slashing application fees and one-time charges, the traffic diversion will not happen. This step shows the IR intent but has to be followed through with steps like transparent freighting policy.

eas where IR needs to invest in for augmenting the existing infrastructure. Huge amount of funds are needed for the various areas of improvement. The IR has taken the correct direction in deciding to themselves invest in their core activity of transportation i.e. increasing carrying capacity and speed on the IR network while allowing private funds to invest

and enhance the land side handling capacity. Both these steps will help bring traffic back to rail.â&#x20AC;? The basic policy has many positive points, but at the same time, some constrains as well. According to Manish Puri, Managing Director, IndiaLinx, â&#x20AC;&#x153;The concept of revenue sharing does not make sense. The entire cost of development, acquisition of land, etc., is to be

borne by the private operators. The Railways only provides permission and access to its network, from which it has a direct benefit in terms of getting additional free networks from which rail freight can be moved. Since there is no capital investment or other financial benefit or support being given by railways, asking for revenue share only for providing permission

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Manish Puri, Managing Director, IndiaLinx The pre requisites are access to land-at least 50 acres or so, availability of funds to the tune of 75-100 crore INR, and understanding and ability to implement a project within two years to ensure best returns on investments.

is anachronistic in these times. This is a call back to the days of licence/permit raj, and the stated policy of the current government does not seem to support this. The revenue sharing model also adds unnecessary cost to the PFT model for the developers of terminals and makes it more economically difficult to set up a viable project.” The PFT policy is a progressive step taken in the right direction. However, certain constraints in the policy made it less attractive than it could have been to private investment. Speaking on the same note, Dr P Alli Rani, Director (Finance), CONCOR says, “The Indian Railways has once again reviewed and modified the policy, making it more attractive to private investment. This will definitely increase the flow of private investment into the rail sector. The sharing of revenue is a distant dream. It is expected that revenue sharing of Greenfield PFT will start after five years notification of PFT and for Brownfield it will start after two years of notification of PFT.” Tandan adds, “As per the terms of the PFT Policy 2010, revenue sharing for Greenfield PFT was to start after five years from the date of notification of the PFT and for Brownfield PFT, revenue sharing was to start after two years from the date of notification. Revenue share at 50 per cent of the terminal charges leviable at Railways’ goods sheds or `20-PMT whichever is higher was payable to Railways. Share of revenue to the Railways was further increased to `16-PMT. However, revenue sharing has now been withdrawn effective from June 5, 2015, which can be considered as a very positive move by Indian Railways.”

Policy Benefits The railway ministry has begun liberalising its PFT policy, dismantling entry barriers by slashing application fees and one-time charg-

32 CargoConnect - march 2016

More PFTs in PPP mode in Pipeline Railways will set up 500 private freight terminals (PFTs) in publicprivate partnership (PPP) mode in the next three years across the country. Speaking at an inauguration of a PFT in Viramgam recently, Manoj Sinha, Minister of State for Railways said, "We want to set up more and more green-PFTs." PFTs are platforms that handle third-party freight. "There are currently 27 PFTs in the country made by railways. Freight traffic contributes around 68 per cent of the Railways' income. I have asked Railway Board Member (Traffic) to meet those who want to set up PFTs and suggest the changes needed to bring in more PFTs," said Sinha. Around 47 PFTs have been given permissions and are in the process of being set up.

es to attract greater private-sector participation. This is a good step, and fewer entry barrier and lower entry fees will help attract further investment. With a view to make private investment a little more attractive, a few terms of the PFT policy have further been revised as under: • Application fee has been reduced from `one crore to `10 lakh. • Refundable security deposit also reduced from `1 crore to `10 lakh. • One time fee of `5 crore for loading of iron ore from a PFT has been waived. • Revenue sharing of terminal charges has also been withdrawn vide FMC 10 of 2015. Dinesh Goyal, Head-Rail Division, Darcl Logistic Limited states, “Such a step will augment terminal capacities. PFT will help improve all operating statistics like track ca-

pacity, wagon turnaround, wagon utilisation, wagon availability, thoughtput, interchange commitments and manpower utilisation, etc. This in turn will help bring down the operating cost with optimum asset utilisation to serve the customer better.” This step will garner private investment into rail infrastructure and help Railways to increase its share in goods transport. Murlidhar has a different tale to tell. He says, “By merely liberalising its PFT policy and dismantling entry barriers by slashing application fees and one-time charges, the traffic diversion will not happen. This step shows the IR intent but has to be followed through with many other steps like transparent freighting policy, which is based on the objective of bringing the traffic that has turned to road back onto rail and increasing

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KU Thankachen, MD, Central Railside Warehouse Company Ltd PFT concept is a laudable initiative launched by the Railways and through this, IR will certainly benefit in many ways. It will release untapped capacities for storage and handling of bulk cargoes at various locations all over the country.

the carrying capacities on the network like the long pending western and eastern DFC.” This move by the Ministry of Railways is encouraging but a lot more needs to be done. TMC is required to pay for cost of installation of FOIS and TMS apart from cost of one commercial staff per shift per handling location. “Whenever Railways sets up its own freight terminal, it has to bear the costs; be it towards installation and implementation of FOIS or TMS and staff deployment. Since setting up of PFT calls for huge investment, Railways should come forward to bear these costs also as payback period for investment in such a project is very long. TMC needs to be considered as an extended arm of Railways.The reduction in Application Fee and Security Deposit are prospective and the benefit would not accrue to the existing PFTs which were the front-runners under the PPP model of the Railways.” says Tandan.

Private Investment in CapitalIntensive Railways Sector The liberalisation of the policy is in line with the government’s emphasis on encouraging private investment in the capital-intensive railways sector. The railway’s share in transport sector will for sure increase with these measures and this will help divert the traffic from road to rail. This is necessary in the interest of national economy to grow and have a greater share in GDP which at the moment is abysmally low at 1 per cent. Alli Rani confidently states, “This is the motive of the Indian Railways and IR has now laid the route and made it attractive. There is no doubt that private investment now will flow into this route, since logistics is seen by many as a reliable investment proposition especially by those looking for long term in-

34 CargoConnect - march 2016

vestment opportunities.” Contradicting this point, Puri comments, “There has been only one successful PPP initiative in the railways, which has been the opening of the container rail sector. However this has faced extreme difficulties and the health of container train operators is in jeopardy today. IR needs to be careful that this should not become the fate of the PFT. All investment models require a win-win model, and while this is often formulated on paper, Indian Railways operating practices and working experience has shown that they are extremely investor-unfriendly so far. This needs to be addressed.” Therefore, this step itself will not bring back the cargo to rail. There are many more steps that need to be taken in conjunction like freighting of cargo; operating trains as per schedules; expediting the process of clearing the projects itself; having a desk for addressing the needs of this nascent industry before the funds in-

vested start becoming stale.

Eco-Friendly It is claimed that the use of PFT will ensure that the traffic is diverted from the roads on to the railway network, thus reducing pollution congestion on the roads and improving the environment. This would also no doubt reduce operating cost. Through this, more and more efficiently operated private rail terminals will certainly attract traffic away from the roads- which is certainly a good thing from the environment perspective. This is the need of the hour. Tandan opines, “Setting up of PFT will provide multimodal logistics solution under a single umbrella and most of the journey will be covered by middle leg, undertaken by Railways. This will be a win-win situation for all stockholders as road transport at both ends shall be taken care of by the local agencies.” But Murlidhar

March 2016 - CargoConnect 35

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AK Tandan, GM (Logistics), Kribhco Infrastructure Limited Setting up of PFT will provide multimodal logistics solution under single umbrella and most of the journey will be covered by middle leg undertaken by Railways. This will benefit all stockholders as road transport at both ends shall be taken care by the local agencies.

also shows the other side of the coin and says, “It will absolutely bring environment consciousness and everyone would be gaining from this, but it needs to be followed up with the next steps or else this too, will be lost in the noise of subsidy/cross subsidy.”

Prerequisite for Setting Up PFT Land is the most important asset that is required for an establishment of PFT. “Since the basic asset is land, initial investment would be significant,” says Alli Rani. There has to be a roadmap for setting up of PFT as it calls for huge investment. Adding more about the importance of location, infrastructure and policy matter, Tandan says, “Rapid study need to be conducted on expected traffic and possibility to divert it to PFT. Assessing the cargo basket followed by the legal/statutory requirements of land acquisition, feasibility of Rail connectivity, etc. before making a proposal to Railway is paramount in setting up of the PFT. Once it is decided to set up PFT, it should be completed in the given time frame as time overlap shall result in cost overlap and we all know that cost of capital is always high.” Puri informs, “The pre requisites are access to land - at least 50 acres or so, availability of funds to the tune of 75-100 crore INR, and understanding and ability to implement a project within two years to ensure best returns on investments.” Emphasising the importance of land, Murlidhar adds, “Most important requirement is Location, Location, and Location. Basically it needs to be easily accessible by road, close to the industrial or agricultural belt and be serviceable from an IR station close to it.” Goyal says that the pre requisites for setting up of a PFT are as follows: a. A company registered under the Companies Act, 1956

36 CargoConnect - march 2016

b. PSU c. Registered as a co-operative society under Co-operative Society Act, 1912 d. Entity owning a private or assisted siding e. A subsidiary of an entity f. A joint venture company g. A consortium

the main purpose of inviting private parties for setting up Private Freight Terminals was to develop additional infrastructure by private funding.

Leading to Smooth Cargo Operations Trust is building up for the private players for movement of cargo on Railways’ network as is evident from the fact that more than 21 PFTs with an investment of around `400 crore have become operational and around 30 more PFTs with an investment of more than `750 crore are likely to be operational in the coming days. Now Railways is equally conscious that it is facing a stiff competition from Road which is not only cheaper but provides door to door services. Railways need to come with point to point freight in some of the sector to compete with road. Further, in case of Railways, transit time is another factor which needs to be looked into for greater reliability. Railways need to improve average speed of goods trains, which for the present, is around 25 kmph. Setting up of PFT would mean additional rail infrastructure. Any expansion in rail infrastructure would be welcomed by the customers since the current rail infrastructure is definitely over-burdened. Since numerous new industrial areas are coming up, additional rail infrastructure would be a great source of relief to those relying on rail logistics for the transport of their goods. PFT operators will be in a position to offer a bundled product which addresses the entire chain of logistical requirements of the cargo and customer. The customers, therefore, will have a greater transparency over the pipeline of their cargo- be it receiving the raw material or dispatch of the final product. This in turn will enable them to reduce inventory costs, control transit and storage losses, reduce the investment needs of primary and secondary storages and have a bouquet of services by just one source.

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AEO Securing the Supply Chain An Authorised Economic Operator (AEO) is a defined party involved in the international movement of goods and approved by a national customs administration as complying with WCO security standards. The AEO scheme was introduced in India by the Central Board of Excise and Customs (CBE) in 2005, but has not gained much popularity. Joydeep Banik with inputs from industry experts discusses the implementation of this programme in the current scenario as well as the importance of the AEO recognition for secure as well as the efficient flow of the supply chain

38 CargoConnect - march 2016

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feature

nternational trade, an essential element for the economic development of any country, has been vulnerable to terrorist exploitation in recent years. The Authorised Economic Operator (AEO) programme, now considered an important element of international trade security compliance, is an outcome of the Customs Trade Partnership against Terrorism (CTPAT) scheme which was introduced by USA Customs Border Protection (CBP) in the backdrop of the devastating terrorist attack on the World Trade Centre in 2001. As the name suggests, the CTPAT scheme aims to recognise all those supply chain partners who are considered to be safe enterprises for the international EXIM trade and includes importers, exporters, highway carriers, rail and sea carriers, custom brokers, marine port authority/terminal operators, freight consolidators and other stakeholders in the international EXIM trade supply chain. It is a known fact that customs plays a significant role in providing increased security to global trade while facilitating the legitimate flow of goods. Encouraged by the USA CTPAT scheme, t he World Custom s O r ga n i sat ion (WCO), an organisation of 178 customs administrations, adopted the ‘SAFE Framework of Standards’ in the year 2005 to secure and facilitate global trade which included the concept of Authorised Economic Operator, whereby a party engaged in the international movement of goods is approved by customs as compliant with supply chain security standards, and is given benefits of simpli fied customs procedures and reduced customs intervention in the trade route. The AEO concept is being increasingly adopted by customs administrations in various countries with the objective of securing the supply chain. In India, the Central Board of Excise and Customs (CBEC) launched the AEO programme in August 2011, consistent with the ‘SAFE Framework’ as developed by WCO. The AEO programme in India is headed by the Directorate General of Inspection (DGICCE) and managed by the Additional Director General, DGICCE. The programme is currently implemented in our country on a voluntary basis, i.e., those who are interested in getting benefits of the programme may apply for authorisation, which is being

40 CargoConnect - march 2016

granted to an entity after detailed precertification verification and validation by the AEO programme team. Although the AEO programme is capable of providing safety and security to the international supply chain with various other benefits, the acceptance of this programme worldwide is slow and it has a long way to go in achieving its whole objective.

Why is AEO Certification Important? As international trade has evolved within the global economy, incompatible and inefficient customs procedures have been recognised as a costly constraint.Also, it has been deliberated time and again that customs must also continue to combat cross-border crime and terrorism which have grown and become more sophisticated over the years. WCO is an intergovernmental organisation which advocates an honest and transparent customs environment.The Indian AEO scheme of CBEC is based on WCO’s ‘SAFE Work of Standards’. An AEO status holder such as a freight forwarder, importer, exporter, or a road/ rail carrier is considered to be a ‘secure trader’ and ‘reliable partner’ in the international supply chain and their customs procedures are believed to be efficient. Speaking on the issue, R K Mehrotra, Managing Director, R K Clearing Pvt Ltd states, “The AEO scheme of WCO has been accepted by 168 countries as of now and is under various stages of implementation. The concept of AEO was to develop a seamless, safe and secure f low of international trade with strict compliance of the TRUST of recognised entities, and with least intervention of customs at all stages with the aim to help the EXIM trade in several ways.” According to Vipin Vohra, Chairman & Managing Director, Continental Carriers (P) Ltd, “In view of the growing concern among customs administrations about the threat posed through misuse of channels of import and export, there is a need to ensure security in the global supply chain. Keeping this in view, CBEC has finalised the ‘Authorised Economic Operators (AEO) programme in India. The objective of the AEO programme is to provide businesses with an internationally recognised ‘quality mark’ which will indicate their secure role in the international supply chain and that

AEO is being increasingly adopted by customs administrations in various countries with the objective of securing the supply chain. their customs procedures are efficient and compliant. Safety and security of import/ export cargo, conveyances, premises, etc., is ensured by regular monitoring by the AEO programme team with the compliance of security parameters by the entity holding the AEO status.” In the view of Jeevan Rao Sahib, CEO, Indelox Services Pvt Ltd, “Increased threat of terror, contraband sale of goods (especially tobacco and liquor), concealment of arms, sale of dual use material, etc., risks liability of innocent businesses as well. To end this, the entire supply chain participants need to organise the function and ensure safe transportation complying with the regulatory norms of the trade. At a global level, it will be encouraging if legitimate businesses carry on confidently with trusted partners at every level and on both sides of the chain. 30 per cent of the trade is between related parties-so one can imagine the time and effort we can save in a mutually trusted environment.” Benefits may vary vis-à-vis a stakeholder; but undoubtedly, the primary benefit for the AEOs will be the status itself as potential customers see this as an important factor in choosing their business partners. Stressing on the significance of the AEO status,

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feature R K Mehrotra Managing Director, R K Clearing Pvt Ltd

"The AEO scheme of WCO has been accepted by 168 countries and is under various stages of implementation. The concept of AEO was to develop a seamless, safe flow of international trade with strict compliance of the TRUST of recognised entities."

Mehrotra also says that this status “will be recognised worldwide, with: • Safe, secure and compliant business partners in international trade • Lower risk score in risk analysis system when profiling • Reduced data sets for entry and exit declarations • Benefits from simplified procedures • Reduced financial security • May find easy to qualify for select transit

guarantee waiver The AEO status holders with increased safety and security standards may also benefit from reduced theft and losses, fewer delayed shipments, improved planning, improved customer loyalty, reduced security issues and improved communication between supply chain partners.” On the other hand, Vohra outlines categorically, “Following are some major benefits which can be availed by different

types of organisations involved in global trade with the implementation of AEO:  Importers: Reduced examination and inspection, higher facilitation than ACP clients, and acceptance of pre-arrival import declarations  Exporters: Reduced examination and inspection, acceptance of export declarations without bringing goods into customs area  Warehouse Operators: Faster approvals

feature Jeevan Rao sahib CEO, Indelox Services Pvt Ltd

"If the Indian trade has to derive the benefits of doing business elsewhere, it becomes imperative that the destination country also facilitates and accords the facilitation that Indian customs have extended."

for a new warehouse, reduced audits  Custom House Agents: Acceptance of pre-arrival import declarations for client importers.  L o g i s t i c s P r o v i d e r s (C a r r i e r s / Forwarders, etc.): Transit of goods without customs escort.”

Is India Lagging Behind? Most members of WCO have acceded to the ‘SAFE Framework’. However, in India, full utilisation of the AEO programme is still a distant dream. In its first release for AEO certification in July 2012, Directorate General of Inspection, Government of India, awarded AEO certificates to three entities with a validity of three years. However, the validity of the certification has now been increased to five years. Since November 2012, when the government launched AEO on a full scale, there have been a total of 18 entities in India who have received the certification. It can be clearly said that the freight forwarding community is lagging behind in receiving the certification and there is also a lack of awareness. The number of freight forwarders recognised under the AEO scheme by the Indian customs is negligible (there are only four freight forwarders out of a total 30 AEO entities so far provided with AEO status). Mehrotra further clarifies, “As a matter of fact, the Indian customs AEO programme started in February 2012 could attract only 30 international supply chain partners in their scheme. This is a poor response for the scheme and therefore it cannot be called successful in any way. The responsibility for this poor performance squarely lies with the CBEC for not taking into confidence the EXIM supply chain partners with them, to convenience the benefits of AEO

44 CargoConnect - march 2016

scheme. There are certain issues which the CBEC is aware of and this is the major cause of the ‘lukewarm’ response from the Indian freight forwarding fraternity. As per the study made by CBEC, there are 11,000 potential trade partners in Indian supply chain international trade who could be considered eligible for the AEO status.” Raosahib agrees, “There are very few who have been certified and many Indian MNCs certified elsewhere have not yet joined the bandwagon which is hampering the efforts of Indian customs to integrate into the global scene.” He also feels, “the measures taken by the Indian customs are not enough as the information and the objectives have not yet percolated deep at the base level. But I understand that the plans are on table to seriously engage with the trade very soon so that the awareness and need are spread far and wide. Recently, the Trade Facilitation Committee is being set up as part of the AEO programme to involve other agencies and ministries who have delegated their task to customs, due to which cargo is often held back seeking clarification. For example, the US Customs co-ordinates with 47 departments at Border control.” Vohra is also hopeful about the ‘serious’ implementation of the programme and informs, “The customs authorities in India are holding workshops at regular intervals to publicise the concept of AEO among eligible entities.” Mehrotra elaborates, “The CBEC AEO programme is being managed under the Director General of Inspection, Office of Customs and Central Excise, New Delhi since the year 2011. The department’s approach to popularise this scheme and to introduce awareness among the supply chain trade partners had been negligible. It has so

As a matter of fact, the Indian customs AEO programme started in February 2012 could attract only 30 international supply chain partners in their scheme. far failed to reach out to those who are engaged in the international supply chain. Majority of the supply chain partners are not even aware of the benefits of the AEO scheme. The trade will get attracted once the benefits are made to be known for their ‘Ease of Doing Business’ in the international market.” He goes on, “To make the AEO programme successful, the Indian customs administration must reach out to the supply chain partners earnestly. Once a large number of entities are added to the scheme and the Indian customs administration signs Mutual Recognition Agreements (MRA) with the customs administrations of other countries who have adopted the AEO programme, the Indian international supply chain partners will be immensely benefitted.”

Mutual Recognition The WCO’s SAFE Framework identifies Mutual Recognition as a key element to strengthen and facilitate end-to-end security of international supply chains. A Mutual Recognition Agreement is the document based on which the guidelines and certification pro-

feature Vipin Vohra Chairman & Managing Director, Continental Carriers (P) Ltd

"The objective of AEO programme is to provide businesses with an internationally recognised ‘quality mark’which will indicate their secure role in the international supply chain and that their customs procedures are efficient and compliant."

cess are mutually accepted and recognised between two countries. Therefore, it is important for the Indian government to sign MRAs with other AEO programme operating countries to achieve optimum utilisation of the programme. As of 2014, there were 23 MRAs in place. Speaking on the issue, Vohra says, “For customs administrations to deliver the benefits associated with mutual recognition, it is imperative that they can recognise each other’s AEOs. There are two different types of Mutual Recognition: A. Where one customs administration recognises the AEO status granted by another country. B. Where one customs administration recognises the customs security standards, risk assessment controls and control results of another country.

The object ive of mut ua l recognition of customs’ security standards, controls and control results is that two customs ad m i n i st r at ion s r e co g n i s e r e c i p r o c a l l y t h e m e t ho d s carried out by the other customs administration, thus avoiding duplication of interventions. This will allow international trade to run smoothly while maintaining a consistent level of security.” Raosahib ref lects, “If the Indian trade has to derive the benefits of doing business elsewhere, it becomes imperative that the destination country also facilitates and accords the facilitation that Indian customs have extended.” Meanwhile, Mehrotra renders a detailed outlook, “An MRA refers to the signing of a formal document between custom administrations of two or more countries highlighting the conditions and circumstances

46 CargoConnect - march 2016

under which AEO programmes were recognised and accepted between the signing parties. The Indian customs signing MRA with the AEO programme of customs administrations of other countries will ultimately benefit the Indian supply chain partners in international trade due to the following reasons: • Improved economic efficiency through reduced cost and time in international trade due to priority treatments • Reduced theft and pilferage by improved security of the bilateral supply chain • Only targeted examination of cargo and allowing non targeted cargo to reach the destination without delay • Improved timely and precise movement of goods from Indian territory to other countries’ territory, thus accelerating competitiveness of business • Reduced cost and time delays through priority examinations facilitating on time deliveries • Compliance benefits whenever comparable, and reciprocal equivalent AEO programme of Indian custom and another country are provided. Overall, the MRA with other countries will help the AEO recognised Indian trade to strengthen and maintain security in the international supply chain. This will also help the Indian customs to avoid duplicate checks of security and compliance checks.”

Conclusion For organisations not compliant with AEO standards, this programme may require additional investments. Considering the benefits of the AEO programme, and its proven success stories, this additional investment appears to provide a competitive advantage in this rapidly growing global trade environment.It is important for Indian customs to first popularise and bring in more and more EXIM trade stakeholders under its AEO programme umbrella. This will offer a level playing field to such AEO status holders in the international market with better competitiveness in overall international trade elements. It will also improve the rating of ‘Ease of Doing Business’ in India and produce faster and efficient business for our trade and supply chain players, and also help us to identify the security gaps and implement specific security measures with best practices. Implementation of AEO scheme is, therefore, a welcome step for the Indian trade community, but continuous monitoring of the key processes and necessary corrective measures (including training) need to be taken to ensure effective compliance.

feature

Bonded Trucking:

Rough Roads Ahead?

Bonded Trucking

48 CargoConnect - march 2016

feature

The concept has picked up really fast among industry players in India and cargo is transported in bulk via bonded trucks to remote areas where airlines cannot operate. But complex customs procedures, higher dwell time, toll taxes, poor road conditions, etc., hamper smooth cargo operations. Ritika Arora Bhola, with the help of experts explores the current scenario and future of ‘Custom Bonded Trucking’

50 CargoConnect - march 2016

ustom Bonded Trucking has been benefitting the Indian logistics industry in many ways for the last 15 years. Bonded trucks carry cargo in remote areas where airlines cannot operate. All types of cargo-perishables, machinery, equipment, apparel, dangerous goods, etc., are transported via bonded trucks from air freight stations (AFS) to the final destination (warehouses/ customers). Though the industry has a sufficient number of bonded trucks with huge capacities to carry the cargo as quickly as possible, there are a few hindrances which need to be addressed for smoother and faster cargo transportation. Experts aver that due to higher dwell times, cargo lies at the AFS for many days; it leads to delays and somehow affects the relationship and rapport between end-users and customers. Taking this into consideration, Airports Authority of India (AAI) has, in reports, mentioned to use small, unused airports as container stations and link them to the remote areas for efficient bonded trucking logistics. It will definitely prove beneficial for manufacturers, service providers and customers. Agreeing with the same, Dileepa B M, CEO Bonded Trucking, Shreeji Transport Services Pvt Ltd states, “AAI is planning to utilise unused, small airports as container stations to improve the efficiency of cargo operations for Custom Bonded Trucking. Once, if

these smaller airports are developed, the exporter can clear the cargo at his doorstep itself. He need not depend on major airports for clearance and can get his drawback at his station itself, provided there is provision of customs clearance at those smaller airports. Also, there should be custom officers, EDI, ADC, etc. But before that, AAI has to analyse why the volume of bonded trucking cargo has drastically dropped from their major airports like Chennai, Kolkata and Coimbatore. Because of their double charges for the same cargo in different names, volume of bonded cargo has reduced more than 1,000 tons in a year. Due to these double charges, not only the AAI, even trucking companies have lost the business.” On a positive note, Reshma Zaheer, COO, TT Aviation, says, “We welcome any move by AAI and Customs to open more airports for bonded trucking services. Currently there are approximately 15 airports from which bonded trucking activity is happening. The more airports open up, the more options we will have to offer the logistics community near their factories or in the same state.”

Less Complicated Procedures at AFS No doubt, the concept of bonded trucking has been very well-adopted by the industry as it has improved cargo operations in remote areas. But industry experts still seek simplified procedures

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feature for security compliance at air freight stations so that the cargo is moved faster and more efficiently. Dileepa states, “Certain airports are given importance or prominence only for online carriers. At this point of time, AFS is the alternative option for bonded cargo. But we need to have a proper setup of cargo handling equipment, manpower and customs facilities.” Zaheer feels, “Simplification of processes and speed of execution of those processes is critical. Air freight, by nature, is extremely time-sensitive. Any simplification of process which allows us to shave off processing time would go a long way in today’s competitive world. Security compliance, however, is something that cannot be compromised. All countries have stringent security requirements, and we need to bear those requirements in mind when we review security compliance at the AFS.

Bonded Trucking:

We do not want our cargo delayed at destination or held back in transit as our security is not deemed adequate. This would have a negative impact on the entire air freight industry.”

Delays in Loading/Offloading Cargo Though the transport sector has welltrained bonded trucking professionals at airports who can proficiently load and unload the cargo, the problem lies in delay in unloading bonded trucks arriving with import/export cargo, especially during peak hours. Dileepa says that the company has 280 closed body trucks with different specifications, like 20ft 30ft and 32ft, and adds, “We do have well-trained personnel at all airports to handle bonded trucks. But Export Bonded Truck cargo is always time-bound, where each and every minute counts. Delays happen only in peak hours, that too in certain airports, not in all airports.” Zaheer feels that sometimes

52 CargoConnect - march 2016

warehouse personnel fail to understand the criticality of the shipments. “Our staff is trained to the highest possible standards. Our challenge is with some warehouse personnel who fail to understand the criticality of our shipments. As we do not have a direct contract with the warehouse custodians, we often have to involve the airline partners concerned to get the cargo offloaded,” she adds.

Dileepa B M CEO Bonded Trucking, Shreeji Transport Services Pvt Ltd

“At present, we are having good roads with bad traffic. Also, entries are restricted for big vehicles during peak hours in cities like Delhi, Mumbai, Chennai, Kolkata, Ahmedabad, etc. We have an achievement of 48 hours from Hyderabad to Delhi and 40 hours from Kolkata to Delhi. We have educated drivers. They know the importance of cargo. Also, all our trucks are under the GPS systems. Hence, movement of trucks can be monitored.”

High Dwell Times: Issue of Concern In India, as compared to the other countries, dwell time is much higher. Transporting cargo from one state to another via road or railways usually takes 3-5 days, whereas in other countries it’s just a matter of a few hours. The problem is poor road conditions, traffic snarls, checkpoints, higher toll taxes and other unnecessary delays. Private players demand action every now and then, but nothing fruitful has come out till date. Commenting on the dwell time taken by bonded trucks for transporting cargo to the required destinations, especially in tier 3 and tier 4 cities, Dileepa assures, “Bonded trucking cargo will always be time-bound cargo. At present, we are having good roads with bad traffic. Also, entries are restricted for big vehicles during peak hours in cities like Delhi, Mumbai, Chennai, Kolkata, Ahmedabad, etc.”

AAI is planning to utilise unused small airports as container stations to improve the efficiency of cargo operations for Custom Bonded Trucking.

feature Road conditions, traffic snarls, tolls, border checkpoints and tax collections, etc., all impact us. For example, the transit time between Chennai to Bengaluru is 12 hours and Chennai to Delhi or Kolkata is almost 4-5 days.

He explains, “We have an achievement of 48 hours from Hyderabad to Delhi and 40 hours from Kolkata to Delhi. We have educated drivers. They know the importance of cargo. Also, all our trucks are under the GPS systems. Hence, movement of trucks can be monitored.” However, Zaheer stresses that the dwell time or transit time varies, depending on the distance between the airport of origin to the destination. “Road conditions, traffic snarls, tolls, restrictions to trucks entering city limits, border checkpoints and tax collections, etc., all impact us. For example, the transit time between Chennai to Bengaluru is 12 hours and Chennai to Delhi or Kolkata is almost 4-5 days,” shares Zaheer.

Safety & Security Bonded trucks can be operated to destinations where airlines cannot operate their flights. Therefore, it is the job of the truck driver to take necessary precautions while transporting cargo from the air freight station to the warehouse in a remote area, safely and securely. From apparel, perishables, heavy lift products, machinery, to dangerous goods and odd dimension cargo, customs bonded trucks are used to carry all types of cargo.

54 CargoConnect - march 2016

Reshma Zaheer COO, TT Aviation

“We welcome any move by AAI and customs to open more airports for bonded trucking services. Currently there are approximately 15 airports from which bonded trucking activity is happening. The more airports open up, the more options we will have to offer the logistics community near their factories or in the same state.”

Dileepa assures, “We do carry all types of cargo including perishables, dangerous goods, and other odd dimensional cargo. For perishables and pharmaceutical products, we use temperature-controlled trucks, and maintain the temperature advised by the airlines and exporters. And the same is handed over to custodians at their perishables warehouses. In case of dangerous goods, we first examine the class of dangerous goods. It moves in separate trucks, but can be co-loaded with general cargo. For odd dimension cargo, if the cargo size is bigger than the normal truck size, we operate open trucks with the help of cranes. We usually obtain special permissions from the concerned departments like customs, custodians, RTOs, etc., to move the odd dimension cargo.” Dileepa adds that in tier 3 and tier 4 cities, customs facilities are not available to clear/unload cargo at the air cargo complexes. Hence they take export cargo as there are many exporters. Meanwhile, Zaheer opines that there is a greater diversity of cargo being sent to tier 3 and tier 4 cities. “There is no differentiation in the cargo being sent to these areas. Large industrial belts and SEZs are located there. We move a lot of sensitive cargo like dangerous goods, temperature- sensitive pharma, odd size cargo, etc. We have a number of trained staff certified by IATA and TAPA to handle this special cargo. The precautions taken for handling perishables, dangerous goods, etc., are always in compliance with either the internal/agreed SOP or DG regulations,” she elucidates.

Conclusion Even though Custom Bonded Trucking has come a long way, it still remains underutilised because of the complex policies framed by the government of India and fewer airlines operating, as compared to other countries. For transporting cargo via bonded trucks, special permissions have to be taken by the gateway customs office, which is time consuming and expensive. Also, consolidation of cargo should happen. One truck should be allowed to carry mixed cargo for different locations. If taken seriously, it will help the industry in the coming years.

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Logistics:

One Mistake Can be Fatal 56 CargoConnect - march 2016

Organisation (WHO) recently maintained that 25 per cent of all vaccine products arrive at their final destination in a degraded state. This makes it imperative to sit back and take stock of the situation. Dr Kirti Mudgil Pathak discusses the issue with industry stalwarts

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feature

ogistics is a vital component in the entire supply chain of pharmaceutical and biotech products. The big question is, whose responsibility is it to maintain the safety and efficacy of drugs? From foreign control, to domestic grass-roots growth, the Indian pharmaceutical segment has evolved over the last three decades. But this rapid growth has yet to create radical changes in the distribution system. This situation has forced both pharmaceutical and biotech companies to consider alternate distribution systems since India is a geographically diverse country with extreme climates that make distribution a critical function. The long channel of distribution and high incidence of brand substitution makes it mandatory for a company to make all its stock keeping units (SKUs) available at all levels at all times. In India, most brands have generic versions of drugs and retailers can usually obtain higher margins with generics than for branded products. To reduce risks of substitution, innovator companies must make sure their products are made available to the stockists and retail shops. Drug distribution in India has witnessed a paradigm shift. Before 1990, pharmaceutical companies used a different distribution system, in which they established their own depots and warehouses that now have been replaced by clearing and forwarding agents (CFAs).

Very Few Players of Pharma Logistics In the current scenario, there are only a few big pharma logistics players in India. Why has this field remained largely unexplored so far? Rahul Agarwal, Director, Kool-ex Cold Chain says, “Pharmaceutical goods are of very high value and are prone to thefts and hijackings enroute. They also can result in claims of much higher value in the event of damage or accident, thereby increasing the risk burden on logistics service providers. Due to the above factors, many logistics players are wary of working in this segment. If you compare this to FMCG, the value of the cargo carried in a vehicle of the same capacity is usually 10-15 per cent as against pharmaceuticals. This is a major factor. Additionally, quality and hygiene play an equally important role and this requires a lot of time and effort to be spent by logis-

58 CargoConnect - march 2016

tics players in the training of manpower, building systems and in creating an own infrastructure. All these act as deterrents for LSPs.” India’s current distribution situation creates greater risks for biotech products, which require careful climate control throughout their transit period. The lack of awareness towards the importance of these requirements makes bio-therapeutics even more vulnerable to spoilage during distribution. Moreover, the infrastructure for cold chain management is still developing in India. Srinivasulu Reddy V, Vice President Demand Planning & Logistics, Glenmark Pharmaceuticals Limited opines, “Yes, there are only a few big logistics players in India. The reason is that this requires huge man-

Complexity reduction, end-to-end inventory management and greater agility is required for pharma supply chains to attain their full potential

power, infrastructure and working capital, which led to the development of regional local players. However, there is an improvement in infrastructure and with foreign direct investments, the existing players are consolidating their presence across India and new players are also emerging.” Pharmaceutical companies are also chal-

lenged with increasing competition, the pressure to increase revenue and growth while improving innovation, and the need to align with constantly changing FDA and cGMP (current Good Manufacturing Practices) rules and regulatory requirements in a global business environment. In the face of these obstacles, a flexible and optimised supply chain is crucial which can reduce operating costs and increase transparency while at the same time integrate industry specific processes. According to Binaifer Jehani, Director, Crisil Ltd, “Pharma logistics is a very niche field requiring a lot of care in order to maintain the integrity of drugs across the entire supply chain. Even a 1˚C change in temperature can impact the quality of the drugs. Hence, specialised temperature-controlled warehouses as well as vehicles are needed which requires higher capital investments. Moreover, warehouses and transportation vehicles have to adhere to strict regulatory guidelines as well as stringent quality requirements which is difficult for smaller players. In India, since power supply is irregular, it becomes necessary to invest in fail safe mechanisms to preserve drugs which also require higher investments. Consequently, the field is dominated by a few big players.” The main hurdles include the highly fragmented nature of the distribution network, limited advancement in regulatory reforms, and presence of strong resistance from lobbies of traders involved in the supply chain of pharmaceutical products. Joydeep Som, GM, GTA, Icetrail Logistics Pvt Ltd says, “In the pharma segment, one is required to practice very high standards of good manufacturing practices (GMP) during manufacture and satisfy very strict quality assurance requirements for the finished products. Having done so in the best possible manner, the moment a manufacturer releases his finished goods stocks for distribution to the market, it is the responsibility of the transporter to deliver the goods to company depots or distributors and ensure the quality norms are maintained throughout the supply chain cycle. Be it transportation, warehousing or transshipment, the logistics needs of the pharma industry are by and large met by logistics service providers who are not so sensitive towards the need of the pharma industry. As of now, the cold chain does exist but the services are fragmented and do not have a basket full of services like

feature Rahul Agarwal, Director, Kool-ex Cold Chain

"Quality and hygiene play an equally important role and this requires a lot of time and effort to be spent by logistics players in the training of manpower, building systems and in creating an own infrastructure."

In India, most brands have generic versions of drugs and retailers usually obtain higher margins with generics than for branded products. storage and distribution. Therefore, though there is a very big market available, very few logistics services providers have got the process capability.” For the pharmaceutical industry, keeping all regulatory requirements is a top priority – not only in development and production, but also for the storage and distribution of drugs, active substances and medical products. Government and industry regulations require that pharmaceutical companies perform continuous quality monitoring and process control. To tackle the challenges that come with international compliance, companies need approved customised solutions that provide absolute accuracy and visibility, as well as continuous and immediate availability.

Neglect of Remote and Rural Areas A large proportion of the rural population still does not have access to proper medication and the situation may take long to

60 CargoConnect - march 2016

improve. Rural areas contribute around 21 per cent to the total pharmaceutical market. Nearly 70 per cent of India’s population lives in rural areas where healthcare infrastructure is poor though with increasing household incomes, the rural market is becoming more attractive. According to estimates by the Planning Commission, rural households now spend 12 per cent of their income on healthcare. With the introduction of VAT, medicine prices have been standardised and price discrimination, in which different states pay different prices for the same products, has reduced. Som is of the opinion that “poor infrastructure is one of the major causes for stock out situation in the remote parts of the country. In pharma supply chain, there are more than two channels- manufacturer to distributor to whole seller to retailer and to have an uninterrupted flow of stocks through these channel partners, proper infrastructure like road network, electricity, storage arrange-

ment should be in place. Apart from this, a rigid regulatory systems such as sales tax, and octroi are major bottlenecks in the efficient flow of stocks from the point of production to consumption.” The efficiency of the current system has clearly not been demonstrated. It is estimated that more than three-fifths of Indians still do not have access to modern medicines. This clearly shows that the rural market is largely unattended and untapped. Pharma products are often ‘Out of Stock’ in remote parts of the country. Pondering on how these bottlenecks can be removed, Agarwal says, “The stock out is usually due to production constraints and not directly related to logistics. Sometimes, lack of ram material or improper demand forecast planning leads to shortage of goods. This can best be planned by the pharma manufacturer.” Reddy also says that “Pharma companies have to play a major role by extending their branches deep inside the remote areas by appointing new stockists and more coverage by field force.”

When Temperature Slips When temperatures slip, companies lose a huge amount even on a small package shipment. Sharing information on the techniques used by shippers and their service providers to preserve their cargo, Jehani opines, “There are fundamentally three types of drugs based on temperature requirements: • Drugs which can be stored at room temperature • Drugs which have to be stored at less than 25˚C but not at a very low temperature • Drugs which need to be stored between 2-8˚C The first category of drugs does not require temperature control systems. However, they may need to be stored away from direct light. Temperature controlled logistics is required for the latter two categories. It becomes im-

“Continually Innovative”

feature Srinivasulu Reddy V, VP-Demand Planning & Logistics, Glenmark Pharmaceuticals Limited

"Pharma companies have to play a major role by extending their branches deep inside the remote areas by appointing new stockists and more coverage by field force."

perative for the company to invest significantly in cold chain logistics to preserve the integrity and quality of the drugs during warehousing and transportation, at every point in the supply chain. The equipment needed will also vary according to the temperature required to be maintained.”

One Mistake can be Fatal Poor infrastructure results in break in cold chain of pharma logistics especially for vaccines and life saving drugs, resulting in adverse impact on the products, the consumption of which may be fatal. Speaking about the measures taken to ensure that drugs remain safe till they reach the consumer, Reddy suggests, “Adopting premier mode of dispatch e.g. cold chain vans, air mode, use of specialised multi-layered insulated shippers which maintain temperatures up to 90 hrs, skilled and dedicated manpower

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The pharmaceuticals distribution process is a cycle of complex actions that require the highest security standards and constant information sharing.

across the supply chain to manage the cold chain operations could be extremely effective.” There is no foolproof system for recalling drugs in India. Once a medicine is released into the market, it becomes a daunting task for a pharmaceutical company to recall because of the highly fragmented nature of the distribution network. Newer technologies such as RFID would help in keeping track of products along the entire chain and would limit counterfeit drugs to enter into the system. International competitiveness prompts Indian pharmaceutical companies to increasingly seek opportunities to supply drugs to the world market. More developed cold-chain management practices will be required to achieve this goal Agarwal is positive of the current scenario. “Over the last five years, there has been a reasonable improvement in the infrastructure. More players are entering the pharma logistics space and pharma companies are also encouraging players by promising long term contracts. The primary chain is reasonably covered from manufacturing to mother warehouse and onward to warehouse (CFA) levels. The secondary chain from CFA to stockists and distributors and finally onward to chemists is still highly underdeveloped. This requires concentrated efforts by the government (through regulatory bodies such as FDA) in close co-ordination with the pharmaceutical companies and their stockists and distributors to design the most economical and sustainable model, keeping in mind demand and sales patterns. Logistic companies are there to support this and provide the requisite infrastructure.” One small mistake in distribution or shipping may lead to a real tragedy. That is why large companies cannot operate without state-of-the-art warehouse management and supply chain solutions. It is not hard to imagine the entire healthcare system being paralysed if all healthcare units receive the wrong shipment. With the large number of deliveries one has to deal with, it is very easy to make a simple, human error. That is why

feature Binaifer Jehani, Director, Crisil Ltd

"End-to-end logistics service providers can handle the entire outbound logistics operations for pharmaceutical companies right from moving the goods from the factory to the delivery of goods to the distributors or retailers."

different drugs in various warehouses, which will help the company plan its production activities accordingly. It also helps companies manage inventory by providing the company with real-time data of deliveries from different points in the supply chain. As the end-to-end logistics service provider handles secondary transportation too, it can effectively reduce storage costs and turnaround time by employing modern practices such as cross docking. Thus we see that an end-to-end logistics service provider takes over the entire supply chain management, allowing the company to concentrate on its core business.” today our safety has to be protected by stateof-the-art IT solutions. Som suggests, “Use of RFID technology should be made mandatory for the pharma industry to ensure that the product integrity is maintained.” The pharmaceuticals distribution process is a cycle of complex actions that require the highest security standards and constant information sharing. Keeping full control over the system, and having insight into even the smallest components determines the quality and efficiency of the product. This stems from restrictive legal and industry regulations related to comprehensive distribution systems. The drug’s road from its manufacturer to the patient is easy only in theory. It requires solutions recording even the smallest movement of goods, accelerating their circulation and increasing the precision of deliveries. Reddy is of the view that “Multi-layered supply channels and state wise different tax structures are the major bottlenecks to run in full potential.” Legislation requires drug distributors to use state-of-the-art packaging and transportation technologies to eliminate human errors from the logistics processes.

64 CargoConnect - march 2016

Unfortunately, the human factor is, in fact, the weakest link in the entire process. For the pharmaceutical market, monitoring the so-called usable life end date is a priority. It is the warehouse’s responsibility to deliver the right batch to the final recipient. There have been instances when drugs with shorter expiry dates were left on the shelf, while the ones with longer dates shipped out. There should be systems in place to eliminate such errors, and protect companies from any possible damages.

Need of the Hour: End-to-end LSPs Complexity reduction, end-to-end inventory management and greater agility is required for pharma supply chains to attain their full potential. Jehani feels that “end-to-end logistics service providers can handle the entire outbound logistics operations for pharmaceutical companies right from moving the goods from the factory to the delivery of goods to the distributors or retailers. Moreover, an end-to-end logistics service provider would also provide the companies with real time information of the status of

Current Scenario and Solutions Industry interactions indicate that pharmaceutical companies are looking to shift away from C&F agents and to consolidate freight operations. Jehani adds, “The industry is seeking the services of professional players who can provide organised and customised transportation and warehousing services. We believe that end-to-end players offer an answer here by developing better and more reliable cold chain facilities, given their wide geographical presence, allowing the companies to save significant investments in cold chain warehousing and transportation. Eventually, end-to-end players would also need to provide insightful analytics that deliver supply chain visibility, and planning capabilities that improve sales, traffic flow, space utilisation, and labour planning. At the supply chain consolidation phase, end-to-end service providers have to build capabilities in last-mile connectivity and develop a good rapport with local regulatory authorities to enhance penetration in the sector.” Som adds, “Total use of technology on a common platform could help in achieving greater agility, e.g. the supplier of RM should be managing their inventory based on

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the consumption happening in the market, thus the supplier, manufacturer, distributor and other channel partners are on the same platform to have a more agile and predictable inventory management.”

GST and Pharma Logistics How is GST expected to impact the pharmaceutical logistics industry? Jehani replies, “On consolidation and creation of larger warehouses post GST, the number of warehouses would reduce, bringing down underlying costs. However, actual savings may be less since companies will find it hard to completely shake off C&F agents. For instance, a company will typically have warehouses in neighbouring states located within 100-150 km of each other. In a post GST scenario, a larger consolidated warehouse in any one state can serve the demand in its neighbouring states as well. We also expect C&F agents to realign as per logistical rather than CST considerations. Post GST, pharmaceutical companies may employ 2-3 C&F agents for serving 4-5 states rather than one agent per state. Let us consider an example. Currently, a company typically has a C&F agent in Ahmedabad to service the whole of Gujarat. Surat, a major consumption centre, is serviced through a distributor in Navsari. Navsari is located 300 km from Ahmedabad and only 150 km from Mumbai. Yet, CST considerations necessitate that the Navsari distributor be serviced by the Ahmedabad agent. Once the GST kicks in, the Mumbai agent will begin servicing the Navsari distributor, thereby reducing transportation costs. Over the long term, companies can set up 4-5 regional hubs to supply to superstockists/ large distributors. These distributors would then ensure timely delivery to the smaller stockists. Companies may look forward for setting up of regional hubs or ex-

66 CargoConnect - march 2016

panding existing warehouses.” The challenges for 3PL players in pharmaceutical logistics post the implementation of GST according to Jehani, are that although a move to end-toend logistics is favourable, it would be hard to eliminate C&F agents in the near term. These players have strong long-term relationships with stockists and can influence their buying decisions. Pharmaceutical companies may run the risk of losing business if they completely replace these agents. C&F agents are also critical in ensuring that stockists have just the right amount of inventory, by keeping a tab on the transit time for stocks to reach stockists is not extended. This relationship with stockists also offers C&F agents a certain bargaining power with the company. Thus, consolidation of warehouses and removal of C&F agents at non-strategic locations will be a gradual process and cannot be accomplished in the immediate aftermath of the GST. Complexity reduction, endto-end inventory management and greater agility is required for pharma supply chains to attain their full potential.” Agarwal comments, “This principally depends on proper demand forecasting and its planning by the pharma companies. Logistics is always available on demand and today the customer has many options to choose from. Additionally, taxation also plays an important role and if and when GST comes in, ushering in the concept of barrier free trade across states, it will definitely help reduce complexity and help better plan the supply to enable goods reach the sale point faster and as per demand.”

Conclusion Well designed, correctly sized, suitably located and well managed pharmaceutical stores, pharmacies and other facilities, combined with an efficient distribution system can significantly improve the operational

India's current distribution situation creates greater risks for biotech products, which require careful climate control throughout their transit period. efficiency of a health service by ensuring that patients receive the correct medicines in good condition and in a timely fashion. Manufacturers must ensure that their drug reaches customers with uncompromised quality. In India, because manufacturers do not retain control over the multilayered distribution system, the cold-chain management process continues to be difficult and expensive. However, manufacturers are increasingly realising the importance of an effective distribution system all the way to the end-customer. Coping with the challenges of streamlining the systems in India will ultimately benefit the patient and the healthcare system.

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#Budget Pe Charcha

Budget 2016 Great Expectations

“The budget is not just a collection of numbers, but an expression of our values and aspirations.” -Jacob Lew

Budget 2016, the annual financial statement of the Union Government of India is being preceded with diverse expectations from the transportation, warehousing and supply chain sector. As the ‘D-Day’ approaches, CARGOCONNECT feels that the

logistics industry is bullish on

growth. Joydeep Banik presents a

comprehensive analysis of the pre-

68 CargoConnect - march 2016

budget market scenario along with reactions from industry stakeholders

#Budget Pe Charcha

rior to this year’s budget, the Finance Ministry introduced a pre-budget economic survey suggesting the big bang reforms required to conceptualise the growth story. Even though the country’s recent GDP growth numbers are above seven per cent, market stakeholders sense that somewhere, things have slowed down. The overall industry expectations from the upcoming Budget session will be to address the glut of issues - some pending and some half-addressed that await viable solutions. Palpable outlining of goals backed by action plans and accountability is likely to be the theme for this year’s budget. India is on the threshold of exponential growth, with the entire world seeking an opportunity to collaborate with its growing might. However, it must be stated that a sustainable growth path cannot be achieved without taking steps to boost the country’s creaky supply chain infrastructure. The previous year’s budget had announced several investments in new port projects, national highways, airports and policies to improve the Indian logistics industry infrastructure. With the year’s Union Budget round the corner, not only does the government need to increase spending on infrastructure, it also needs to announce steps towards fasttrack decision making, lowering cost of capital and encouraging private sector investments by streamlining rules and providing a definite framework for PPPs. And all these because the Indian logistics industry awaits rejuvenation, banking upon opportunities from the economic reforms that the industry will witness on February 29, as Finance Minister Arun Jaitley takes the hot seat in the Parliament to present the Union Budget 2016-17.

Precursor Every budget is treated as a policy document to formulate the government’s economic reform agenda. While much of the limelight last year was absorbed by GST, the NDA government made some significant changes in the existing framework of indirect taxes with increasing focus on Make in India, encouraging investments, reducing compliance and litigation, improving tax administration and enhancing revenue collection. In spite of the reasonable improvement in tax administration, sources say that the tax payers have sig-

70 CargoConnect - march 2016

nificant expectations from this year’s budget. Prime Minister Narendra Modi has vowed to wipe out tax terrorism from India. The much talked about Goods and Services Tax (GST) is most probably to be rolled out on and from April 1, 2016. Now, the logistics industry is looking for details and seeking transparency on it with respect to goods that will come under it (or be exempted) and more importantly, what will be the crucial revenue-neutral rate. There are also more issues that logistics professionals are looking forward to, such as clarity on special economic zones. The finance ministry has indicated that that this year’s Union Budget may not be a populist budget. However, experts predict that this budget has the potential to outline a clear economic roadmap by phasing out tax exemptions and incentives and rope in game changing legislations that everyone in the transport, supply chain and warehousing sector is waiting for, like the GST and the Real Estate Bill. Since the growth of these sectors is pivotal to the economic transformation of the country, it is no wonder why industry stakeholders are abuzz and have been debating extensively on a plethora of related topics.

Convergence or Divergence of Thoughts? With the Indian economy riding the recovery wave, the logistics sector seems ready to grab its share banking on the progressive outlook of the government. Ahead of the Union

Budget, veteran logisticians are pinning high hopes on the budgetary push to remove the fault lines in the supply chain. The Indian logistics industry as a whole is a highly fragmented one and already plagued with a rigid tax environment. Setting up of a uniform tax regime with the implementation of GST can possibly be a major relief. Aliasgar Hajee, Managing Partner, SHM Group avows, “Ease of Doing Business, integrated with favourable tax reforms, which includes implementation of GST, removal of tax exemptions, keeping a uniform tax rate across the board and reduction of unwanted red tape should be the areas of focus to attract FDI and more importantly, support Indian companies to invest in its capabilities and grow its offerings. Infrastructure, rural development and enhanced security measures are the need of the hour and we hope the budget 2016 prioritises these requirements.” Chandrajit Banerjee Director General, CII feels that “regarding indirect taxes, the budget should stick to current excise, customs and service tax rates. Once the economy is on a sound GDP growth path above eight per cent annually, tax revenues would rise in tandem.” D a n ie l C hopr a , C h a i r m a n a nd Managing Director, Elektrans Group opines, “The Indian tonnage tax regime should be further streamlined to be in sync with tonnage tax regime prevailing in other parts of the globe. The implementation of GST could also act as a major facilitator for

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#Budget Pe Charcha of GST and benefits which can be gained through land reforms as these are subjects already in discussion since the last budget. He sees, “an immense need for tax benefits for investment in warehousing sector.” According to him, “Special tax holidays should be given up to five years for warehouses constructed in rural areas. Similarly, higher benefit of depreciation rates should be given for investment in the warehouses and material handling equipment manufactured in India.There is a need to look into applicability of the taxes on rental costs for the industry. The rental cost currently is subject to service tax of 14.5 per cent and is attracting tax deductible at source of 10 per cent. If

making the logistics sector seamless across the country. The logistics industry is hopeful to see a decline in the prevailing Indian logistics costs, which is about 13 per cent of the GDP. This will render the necessary thrust to lower the cost of logistics and suc-

sessment year should be given benefit of the concession in the tax rates and exemption from the deduction of tax at source. Also, there is a need for efforts to speed up the process for approval for change of land use. There are significant parcels of land in and around metro cities under agricultural land category. If there is no agricultural activity over the past eight to ten years, they should be allowed to be converted into commercial use. This will create ample space available for construction of quality warehouses and significantly reduce storage costs and at the same time, increase the land revenue for the government.” Bohm also stresses on the significance of eco-friendly logistics as he says, “The budget should provide special incentives for the use of solar energy in warehouses. The increase in efficiency of the railway network, improved conditions of expressways, timely completion of freight corridors and development of coastal shipping routes will add significant value towards an environmentfriendly supply chain.” Sudhir Gharpure, Vice President, MP Group highlights another important point, “The state/central government should encourage and support organisations dealing in PPP projects which will enhance the transport industry to grow further. Transport service providers should also be exempted

OlIver Bohm, CEO, Schenker India Private Limited “The Budget 2016 should include all possible allocations needed to sustain growth. There is no better way than to wholeheartedly support the campaigns like ‘Make in India’ to withstand challenges arising out of global economic and political conditions.” cessfully increase Indian exports by providing cutting edge to our exports in the global market. It will reduce the landed cost of imports, thereby giving a further thrust to the economy.” On similar lines, Rahul K Patwardhan, CEO, NIIT Limited expects “a firm roadmap from the government for GST implementation.” On the other hand, Oliver Bohm, CEO, Schenker India Private Limited feels that there is no need to reiterate the importance

72 CargoConnect - march 2016

rent is considered as services being provided, TDS should not be charged at the same rate applicable to interest in deposits.” He goes on saying, “There are a lot of difficulties for the industry in managing the records of tax deducted at source and subsequently collecting tax certificates. For the benefit of revenue and to simplify processes, the tax payer who deposits more than 75 per cent of the estimated tax liability of any assessment year before the beginning of the as-

from service tax and excise duty so that they can do business with ease.” The intention of the government to provide a ‘robust physical infrastructure,’ connecting each of the key manufacturing clusters in the country has been widely accepted and is very welcome for the logistics industry. To put it in a nutshell, stakeholders and policy makers are expecting an infrastructure and investment oriented budget that is able to address the associated regulatory

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#Budget Pe Charcha

concerns and provide the required stimulus to the growth engine of the logistics and transportation sector.

Sector-Focussed Concerns

the right infrastructure and policies will serve as a key enabler for economic growth, employment creation and tax revenues. It is imperative that success of civil aviation is seen as a national priority, a goal shared by different ministries, government agencies and the industry.” Voices have been heard in recent times appealing to encourage coastal shipping through subsidies to manufacturers/exporters, which will not only decongest roads but also promote cost efficiency in transportation. Chopra comments, “The Indian Shipping Minister has stated the significance of laying emphasis on the maritime sector to ac-

With the country at the cusp of gaining recognition as the fastest growing major economy of the world, there are optimistic expectations from the Union Budget, 2016 from various sectors. Underlining the concerns of the civil aviation sector, Ankur Bhatia, Executive Director, Bird Group discusses, “The Indian aviation industry is on a high growth trajectory and is poised to become the third largest travel market by 2026. The draft aviation policy, as well as airport development in tier-I and tier-II cities is a welcome move in identifying certain

tional job prospects in the manufacturing sector will be catalysed by a boost in the logistics industry. The logistics industry is hopeful of being acknowledged as a distinct industry and receiving infrastructural status as a whole. It is crucial to remove the discrimination between the abatements on the different modes of transport.” With a host of proposed moves likely to impact the logistics sector in the upcoming Union Budget, various skill development initiatives getting into the mainstream operational mode are also on the wishlist.” Bohm highlights, “The budget should allocate funds for education and skill development in the area of transportation and supply chain. This will address the area of current deficit of skilled professionals in the area of logistics and is also within the ambit of ‘skill development programme’ launched by the government in this year.” Patwardhan echoes, “We hope that the Finance Minister will announce specific measures in the Union Budget to help make education and skilling more affordable to the masses. Skill India and Digital India are two key and highly ambitious initiatives of the Government of India, and in the forthcoming budget, we expect specific indirect tax rebates for the companies and its partners that are working towards making these initiatives a success. The Government has set an ambitious target of skilling 500 million people by 2022. In a country where less than 4 per cent of the population is formally skilled, FM needs

Aliasgar Hajee, Managing Partner, SHM Group “Infrastructure, rural development and enhanced security measures are the need of the hour and we hope the Budget 2016 prioritises these requirements.” relevant aspects affecting the aviation sector. Yet there are several challenges related to complex policies, aggressive price cuts, multi-tiered tax system and infrastructure deterring the true potential of the Indian aviation industry. I look forward to these challenges being addressed in the upcoming union budget. There is an immense growth potential for the Indian civil aviation and

74 CargoConnect - march 2016

celerate the booming of the Indian economy. He has laurelled this sector as the most economical route for bulk transport. While the ‘Make in India’ campaign is reaching scaling heights, it is the need of the hour to generate more employment opportunities for the Indian youth. Demographic dividend will turn into demographic disaster unless we can provide jobs. The generation of addi-

to substantially increase fund allocation to the sector to draw youth to the skilling programmes. FM should also spell out specific incentives and policy framework to boost the start-up sector by announcing tax rebate and allocating more funds for the development of the sector.” The MSME industry is set to tap the potential of the ‘Make in India’ initiative. Union

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#Budget Pe Charcha Minister of Commerce Nirmala Sitharaman recently expressed hope that in the Budget 2016-17, the finance ministry will allocate the required funds for Start-up India programme. With e-commerce industry taking huge strides, the phenomenal boom of logistics and hyperlocal delivery start-ups have been the talk of the town in the year 2015. Therefore, it is obvious that these start-ups have their own set of expectations from the 2016 budget. Vipin Pathak, Co-Founder & CEO, Care24 states, “Budget 2016 is highly awaited where everyone is expecting policy level changes to promote growth. At the juncture where global growth is not so promising, everyone is eyeing the Indian growth story and we have to leverage this situation. Government has started great initiatives like ‘Make in India’, ‘Start-up India’ and the budget has to support at the monetory, infrastructure and policy level to realise these dreams. Some of the expectations we have are further easing FDI investment norms, licensing and start-up support (tax, documentation, licensing, legal). Entrepreneurs should feel protected and supported on the ground level to make an actual difference.” Whereas Dinesh Agarwal, Founder and CEO, IndiaMART stresses on technological brilliance, “Start-ups in India are holding the highest stakes following the Prime Minister’s initiatives around Ease of Doing

the supply chain infrastructure has reached critical levels, roadways, rail and shipping– each sector awaits guidelines from the Union Budget to bring down transportation costs as well as resolve other issues.

CARGOCONNECT Perspective and Final Words

Budget which will give shape to Digital India.” He continues, “The MSME industry is set to tap the potential of the ‘Make in India’ initiative. This industry has the potential to employ over 60 million people and will be

The clock is ticking and we are getting closer to the day of the release of the Union Budget. The slowdown on the global economic front has least impacted the Indian economic scenario. The Union Budget 2016 will hopefully include all possible allocations needed to sustain the growth. At this point of time, expectations are floating, rather, soaring high from our country’s supply chain arena. The Government has already embraced several initiatives that have ensured steady development of the logistics industry and has also ably implemented the contours of the country’s growth framework through its all-encompassing vision to boost digital inclusion, local manufacturing and entrepreneurial spirit. We keep our fingers crossed for a very positive economic outcome from the Union Budget 2016, especially for the logistics industry. However, it must not be forgotten that the key to unleash the power of the Indian economic growth lies in the speedy

Daniel Chopra, Chairman and Managing Director, Elektrans Group “It is crucial to remove the discrimination between abatements on the different modes of transport. The Indian tonnage tax regime should also be further streamlined to be in sync with tonnage tax regime prevailing in other parts of the globe.” Business and building a start-up friendly ecosystem. Faster setting up of enterprises, correction to duty structures and streamlining of procurement processes are some of the areas where the industry expects key announcements. Development of infrastructure is a prerequisite for growth. Similar to road and rail, creation of digital highways is elementary providing high bandwidth network of internet across India. We’d like to see avenues of PPP in the coming Union

76 CargoConnect - march 2016

a growth driver for the economy. Providing a special package for the MSME sector will help sustainable growth.” Favourable budgetary steps for all the above mentioned sectors would on the one hand reassure the growth prospects of the supply chain and logistics industry; and on the other hand, it would also open new avenues like single window clearances, information nerve centres and setting up of industry corridors. As the need for improvements in

implementation of various projects and reforms, post announcement. By the time you are reading this, the ‘Secret Santa’ game is supposed to be over as the policies and proposals in the Union Budget get unveiled by the Finance Minister. However, we don’t think that #BudgetPeCharcha gets over too soon. Wait till the next time as our team will be back with the most comprehensive post-budget analysis and reviews from the logistics and supply chain fraternity.

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Interview

â&#x20AC;&#x153;Soft infrastructure must precede hard infrastructureâ&#x20AC;? Having been associated with the industry of freight forwarding for quite some time, David Philips, Managing Director, Freight Systems is an expert in this field. Extremely enthusiastic and vibrant, through a candid interview with Roselin Kiro, he shares his experiences, the initiatives taken up under his leadership and his mantra to sustain in the industry

For how long have you been associated in this industry? How do you see yourself growing in the industry till date? This is the only job I ever had, which I started in 1974. I worked for other people right up till 1988. Then in 1988 I started Freight Systems in Dubai. I was one among the lucky few and

78 CargoConnect - march 2016

we were successful and had the opportunity to grow the business. From where I started, to where I am today, I never thought that this would happen and I donâ&#x20AC;&#x2122;t think that anyone can look so far ahead into a crystal ball and predict the future. But having said that, there are a lot of people who worked much harder than me but they could not make it. I believe

luck also played a role in it. And so it worked out for me.

What is the role of IT in the industry today? Our industry, i.e. freight forwarding, is among the last few to embrace technology in their business. We are such a transactional

industry with low margins and so people are not ready to embrace technology fearing that anything related to technology is costly and expensive. A lot of companies that are well established today are owned by people as old as me and either they love technology or they hate it. Unfortunately, they hate it because they don’t know much about it, but I was the one who loved it. With the passage of time, people have realised and the industry has realised that we don’t have any other option than to embrace technology. We don’t control the price of our product or our services in the market; our selling price is decided by the market. But what is in our control is the cost. So, if my cost of handling a transaction is higher than competition, then I will for sure lose market to competition and vice versa. If I have manual processes, I am not going to be cost efficient. So, technology is the most important factor in our industry which is going to change the business and not only because of the cost, but also because customers demand transparency and information on a real time basis.

What is the scope for medium size industries, especially with the ‘Make in India’ programme, considering the current trend of mergers with bigger companies? One of the manufacturing problems that India has is scale when compared to China. India always is compared with China. But I don’t see any comparison. They have their role to play and so does India, and both are at completely different levels. With the ‘Make in India’ the manufacturing that is going to happen, I am sure India is going to be a manufacturing hub. What really is going to make a huge difference, is infrastructure . Most people associate infrastructure with good airports, good sea ports, good road and rail network, etc. I think that soft infrastructure is more important than hard infrastructure because if I have a fancy airport or sea port and policy does not allow me to use it efficiently, then there is no point in building that hard infrastructure, because I have to go through permission hurdles and paperwork before I make use of the hard infrastructure. So, soft infrastructure which is policy and law must precede hard infrastructure. Once this is in place, hard infrastructure has value. And that cost of business will drive manufacturing

efficiently in this country. If we don’t have good policy, the cost of doing business in India will not be competitive.

Freight Systems provide multiple services to meet the customers’ needs. Which is the strongest segment you cater to? When we started this business 28 years ago, the concept of a forwarder and a logistician was to move freight from point to point and port to port and then it merged and matured to where the industry analysed that the manufacturer is involved in picking up goods from a factory and handling it over to a freight forwarder. Why should a freight forwarder not do that? There is no reason why a logistician or a freight forwarder should not be doing an end-to-end service. It is more our job than anybody else’s. From the customers’ perspective, if they find a service provider who can provide all the elements in the supply chain, they will have to deal with only one entity. They don’t have to go to multiple parties to find out what is going on for the goods that are moving. And that is how it emerged over the years and we were forced to get involved in the other parts of the supply chain and the logistics chain, otherwise we were focussed only on the transportation part. We had to integrate backward and forward because it was the customer’s requirement that there is transparency and they are allowed to see what is happening right through the value chain. A lot of companies closed down because they did not change their values, and those who did, were able to sustain. That is how freight forwarding has evolved and I don’t think that is the end. If I am offering a service from an end- to- end perspective, that is a value addition not from my perspective, but it has to be from the customer’s perspective. When you get to this point, the relationship with the customer changes to one of a partner and not just a vendor.

shipping containers out to Europe and Far East because there was a lot of movement of garments. We noticed that shippers, despite having just 20 per cent of a container load, had no option , other than paying for the entire container. Why should a shipper or a buyer spend so much money in taking a full container and utilise only ten or twenty per cent of the container space? This is when we started to question the logic and challenge established norms and legacy.We talked to some operators in Rotterdam who could distribute within Europe and also tranship across the Atlantic, to the Americas. We loaded our first consolidation box to Rotterdam in March, 1990 and the rest is history. Over the next 10 years we dominated the LCL business in the Middle East and India. Innovation, driven by customer value was the main reason behind this success.

Tell us about your expansion plans. What are the other products and services in pipeline? What we have done in the last four to five years was to consolidate what we have and we have over 40 offices in 17 countries. Four years ago when my son joined the business, he came up with a suggestion of consolidating what we have, and create a robust and strong foundation. This is what we did for the last few years. The biggest pillar of this strong foundation, was our human talent and management bandwidth. We now feel ready and confident to embark upon our expansion and growth strategy. We see Africa as an opportunity and our first African operation will commence in Kenya, in the next few months. Uganda and Tanzania will follow as soon as the Kenyan operations settle down.

You are considered to be a pioneer What is your mantra for success? in LCL consolidation. How did you Common sense and hard work. I don’t think achieve this position? there is any mantra different to any business. No It is very simple. Sometimes you go through life and legacy dictates things we do, and if you take a step back and start questioning everything that is going on, you will find that change is needed. When we started this company in Dubai in 1988, we were

business is complex and difficult. It is essentially common sense. The problem is that common sense is not so common. Everybody works hard, but we have to work smart too. Everyone works hard, that is no longer a differentiator.

march 2016 - CargoConnect 79

Interview

“We are aiming to scale greater heights with our innovative solutions” Delex, the name chosen by merging the words ‘Delivery Express’ is an idea actively developed and implemented into a successful business model by a group of experienced supply chain professionals with extensive functional experience from diverse industry backgrounds. Delex specialises in integrated supply chain solutions and highly optimised and customised logistics solutions for every client requirement. Srinivas Sattiraju, Chief Executive Officer, Delex Cargo India Private Limited discusses with Joydeep Banik the profile and the nature of products, services and solutions offered by the organisation and projects in the pipeline

Tell us about the nature of your products and services. Delex Cargo India Private Limited is in the business of providing innovative, best value technology- laced logistics services and solutions. Delex is a Full Service Domestic Logistics company, specialising in: • Domestic air cargo door-to-door service across India.

80 CargoConnect - march 2016

• Surface parcel delivery covering all major market locations of India. • 3 P L w a r e h o u s i n g a n d i n v e n t o r y management solutions. • Intra-city Last Mile Delivery through bikerbased delivery solutions. • Forward stocking locations for spares logistics management. • Technical logistics solutions – taking care of aftersales services related logistics.

• Delcart–E-commerce last-mile SMART delivery services.

Tell us about the growing significance of last-mile delivery. With the rapid advent of e-commerce logistics players and hyper local companies competing with each other to deliver their products within the fastest possible time to their

customers, we are witnessing a rapid growth and expect a significant further growth for ce providers in the LMD space. Consumers’ expectation is growing over the period and all the e-commerce companies are competing in promising their customers best deals and faster deliveries. This vertical has its own ups and downs for service providers. There is a huge volume to deliver, but managing a large army of delivery boys/bikers and controlling an error- free, cash-on-delivery process through them is becoming challenging. The current scenario is that there are too many players in the market. New ones are entering with large expansion plans, but the resource pool remains the same for everyone. This scenario might push up operational costs for service providers, and will prevail for some time, till major consolidation process starts. But the LMD sector is here to stay and grow as long as the e-commerce industry thrives.

partnership is growing strong day by day. Some examples of the services and solutions offered were packing and kitting services at the customers WH before despatch, customised PVC boxes for fool proof movement, EDI integration with customer systems, separate track and trace systems, installing specific apps in delivery vehicles for real time tracking, 24x7 pickup and delivery, etc.

3PL/Contract Logistics is one of the key areas of strength for Delex. Explain. Delex, by virtue of its highly experienced professional staff has been able to bag some prestigious 3 PL contracts with large MNCs and Indian companies. The collective expertise of the team at Delex has enabled us to roll out some very complex, large 3PL warehousing projects for our customers from the Automotive, Pharma, and FMCG sectors. Our 3PL operations from the start of relationship over the years have helped our customers in streamlining their inventory management processes and improving and maintaining distribution efficiencies.

Tell us about your clientele in India and your competitors. Our major clients are large FMCGs, automotives, consumer durables, pharmaceuticals, telecom, electronics, IT, electrical and consumer durable manufacturers, major industry giants that are MNCs and large Indian business houses. We do not directly compete with existing service providers in similar segments as we focus on providing customised solutions in all our services which are unique to the respective customer requirements. But yes, any company providing similar services is our direct competitor.

Delex aims to provide ‘innovative’, ‘best-value’ and ‘technology- laced’ logistics services and solutions for domestic cargo distribution. How do you justify How do PUDOs/forward stock- Please elaborate on the upcoming PFT prothe claim? Delex was set up to provide innovative ing locations for field service ject in your pipeline. logistics services and solutions by using organisations help in saving Our parent company, Continental Warehousing Corporation the latest technology available in the time and money? (NhavaSeva) Limited is setting up a network of Private Freight industry. Some of our large MNCs and Indian customers often look for a logistics partner to provide tailored, out- of -thebox solutions, which in many cases, their current service providers are unable to measure up to, due to various reasons. When such situations are offered to Delex, we closely work with the customers’ teams and develop a fully customised solution set that helps customers in improving the overall logistics delivery process that in turn improves the given operations scenario to a better one. Such solutions, when designed and rolled out, in many cases, will have a technology intervention that could range from using a simple tool for MIS, track and trace, to a more complex EDI integration with customer systems. We, at Delex, in the last six years since inception, had implemented such solutions with some of the top customers that Delex works with, and all these customers continue to use Delex and the

Forward Stocking Locations (FSL) are best suited for companies having a large area of operations in terms of after sales product service and warranty repairs. These companies need to reach the critical spares for repair of their products at the shortest possible time. In such cases, it is necessary to have your spares available at all locations that are closer to their customer installation locations. The FSL helps service engineers receive their spares at the shortest possible time due to the proximity, and allows them to complete the repairs and thus efficiently satisfy their customers. We provide our clients with FSL ranging from 50 sq ft to 1,500 sq ft to stock their spares with shared manpower and infrastructure which ensures they get the cost benefit and also provide Last Mile Delivery services within the targeted TATs ranging from 1 hour delivery inside city limits and next day delivery for pin codes within 180 km.

Terminals across India, near major markets. These terminals are set up in more than 90 acres of land, and with its own railway line connecting to the main railway line of Indian railways, will have dedicated zones for bulk loading and unloading operations, ICD zone, bonded warehousing, cold storages, general warehousing, space for truck transshipment, all in one location. The PFTs shall be fully equipped with the required infrastructure for a quick turnaround of trains. The bulk loading and unloading line will be a covered track inside the warehouse that is almost 700 meters long. Of these, the terminals at Hyderabad (near Timmapur), Ahmedabad (near Sachana) are fully functional. Panipat (near Delhi) is expected to be operational by March, followed by PFTs at Bengaluru and Chennai. The PFTs offer the following services to its clients: • Rake handling • Storage facilities • Container handling – domestic & EXIM • Customs notified warehouse • Warehouse and Inventory Management • Specialised equipment for handling of steel cargo • Transportation and distribution • Ancillary Services like Weighbridge, Container Repairs, etc.

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Interview

TVS to “provide real benefit to Indian Armed Forces” TVS LSL’s UK based subsidiary – TVS SCS, is one of the largest Indian employers in the UK and a key player in defence logistics to the UK Ministry of Defence (MoD). TVS are a sub-contractor to Team Leidos on the Logistic Commodities & Services Transformation programme with MoD UK, which in total is worth £ 5bn over a 13-year period. TVS are playing a key role in data management, inventory management, procurement and product sourcing for the full range of military and nonmilitary commodities required by the Ministry. Paul Kettle, Business Development Director, Defence, TVS Supply Chain Solutions, UK discusses with Dr Kirti Mudgil Pathak how TVS will prove immensely beneficial to the Indian Armed Forces in many ways

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What is new in your procurement solutions, inventory and data management that will be of benefit to the Indian Armed Forces? Today,TVS provides the UK MoD with Procurement and Inventory Management services to support a large number of its military vehicle fleet (c: 11,000) and its commodities such as clothing, medical equipment, packed food, packed fuel and general commodities, including pharmaceuticals. This is our core business, and these services have been developed and perfected in an incredibly demanding and competitive commercial marketplace. We invest heavily in our IT systems (Msys), people and infrastructure to enable TVS to deliver a truly world class service. The benefits to the Indian Army will be the same as to the UK MoD and our other defence customers: • Improved visibility & control • Improved speed & reliability of information • Improved service at less cost These three things ensure the Armed Forces (Army, Navy and Air Force) get what they want, when they want it.

TVS has the ability to manage obsolescence across a variety of defence equipment. Please tell us the specifics. Obsolescence can affect all equipment, software, standards and specifications and impact all stages of the life of the equipment. The effects of obsolescence can be expensive but the impact and cost can be minimised by planning for that eventuality. TVS manages and resolves obsolescence issues on a daily basis for a range of defence equipment, including armoured vehicles,

function, thereby not compromising the quality and performance of the vehicle. We have a comprehensive global automotive supply chain across all commodity groups and multi manufacturers, developed through decades of experience in Automotive and Defence. This includes applied engineering and technical knowledge, allowing us to source the right items from the right place, at the right cost and at the right time.

The defence services require supplies to far flung areas of the country which are difficult to reach by whatever mode of transport. What innovations do you have in store to overcome the harsh weather conditions and the rough terrain specific to India? In India,TVS has over 15,000 people working in our logistics business (Logistics Services Ltd) and has over 10 million sq ft of warehousing and a distribution network covering even J&K and states in the North East. This makes TVS ideally placed to support the Indian Armed Forces. In the UK, TVS has seven warehouses and we deliver to a ‘Purple Gate’ which is the UK MoD’s distribution network, ultimately supporting the UK Armed Forces on a global basis either during active operational engagement, training camp manoeuvres or peacetime operations. We recognise the need to deliver a service to remote, harsh environments. To complement our defence logistics services, TVS is currently reviewing the opportunity to offer the Indian Armed Forces a fleet of proven military vehicles that have superb

TVS is a distinct differentiator and provides real benefit to the Indian Armed Forces. construction vehicles, field infrastructure and missile support systems. This includes full through life management, reverse logistics and strategic product re-sourcing. TVS tackles obsolescence in a proactive manner while having the ability to react to emerging issues. We specifically focus on the supply of articles and support of repairable items. We use the list of parts relevant to equipment to manage obsolescence and we then categorise all the articles in a systematic scheme and treat them in different ways.

The Indian Armed Forces face challenges in supporting their legacy vehicle fleets. What skills and capabilities do you plan to offer in support? TVS supports a number of legacy fleets for the UK MoD including Land Rover, Leyland Construction Vehicles, Challenger 2, Warrior and LPPV. Our customers appreciate the skill set, systems and processes we provide to overcome their challenges, specifically the network of suppliers we have developed that gives us the ability to resource components and ensure that any replacement is the same in fit, form and

cross-country performance and thus provide protected mobility for infantry troops as well as the capability to deliver essential supplies to the harshest environment. This will give TVS a distinct differentiator and provide real benefit to the Indian Armed Forces.

How would the TVSSCS UK experience transform India’s defence logistics landscape and deliver military supply at minimal cost? TVS’ proven capability can deliver the Indian Armed Forces: • Better infrastructure – state- of- the- art warehousing throughout India, with the additional benefit of a global footprint • Better equipment – proven procurement expertise as demonstrated by equipping the UK Armed Forces with vehicle parts and commodity items such clothing, medical equipment, packed food, packed fuel and general commodities • Better systems – leading IT systems, proven in a defence environment • Better flexibility–ability to deliver day to day support to operations and deliver a 24/7 service and provide a scalable response for exercises and surge • People development - investment in the development of people is critical to our success. A key feature of the investment in the enhancement of systems is the accompanying development of expertise of everyone involved. What this means for the Indian Armed Forces is: • Improved visibility & control • Improved speed & reliability • Improved service at less cost We look forward to demonstrating how TVS can help modernise and transform the current logistics capability into a streamlined, end-to-end commodity support chain, fully able to meet the needs of the Indian Armed Forces. TVS will be exhibiting at DEFEXPO in South Goa from March 28-31. Stand No 7.1 in the UK pavilion.

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Interview

“We place clients at the centre of our growth and success” Bolloré Logistics, which has recently undergone rebranding,

For more than 150 years, SDV served as an intercontinental air and ocean freight forwarder. How has the journey been so far?

has left no stone unturned to

As of January 2016, SDV is now known as Bolloré Logistics. The group decided to rebrand the whole transport and logistics division under a new name to make the organisation more efficient and transparent. For over 150 years, we have considerably grown as a global leader in international transport and logistics. Constantly adapting to our customers’ changing needs, the company has enriched its expertise to become a tier-one supply chain partner and one of the top ten transport and logistics companies in the world with the largest integrated logistics network in Africa, Europe and other continents.

create a milestone in the global transport and logistics sector. Sanjay Goel, CEO-India, Bolloré Logistics in a heart-to-heart conversation with Roselin Kiro, gives a ringside view about the company and how they plan strategically on some new projects to step up to new heights of success

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Tell us about your products and services. What is the main domain in your portfolio e.g. pharma, automobile, retail, etc.? We have managed to adapt our sales structure over time through an approach consisting of developing our expertise and improving the efficiency of our teams. We have introduced an approach by the industry sector with the product managers. We have made major structural changes to our key account markets, the share of which is growing constantly in our portfolio. Thanks to our network, we have been able to meet the main need of these customer namely cross-border expansion, by supporting them on a global basis. Their needs have evolved requiring a global response, and now, the challenge for us is to not only guarantee an identical and uniform service, but also offer value-added solutions and the implementation of a complete supply chain offering by reinforcing our logistics and flow management offering. In India, we have three major verticals, which are healthcare, industrial projects and aerospace, with a dedicated team of specialists based in the corporate office and different strategic locations in the country. In addition, we also have a devoted team for Africa and France trade lane.

quotes, which represents a major operating expense. In future, we must be productive and adapt our offering and our organisation to each of these segments.

You are one of the very few MNC logistics service providers who possess customs brokerage operation. Tell us something about it. Customs clearance is one of our key products. A dedicated centralised team of experts is based in Delhi. We provide full solutions from consultation to clearance and that too, 24X7. We also conduct awareness and training programmes among our customers to make them understand the customs policies, duties impact, octroi, etc.

What is stated to be your USP? Our brand is itself our USP. We are the strongest ones in African and French business with a great variety of logistics and warehousing solutions. We know Africa for 200 years. We are everywhere for any kind of solution and that is why we are no. 1 in Africa. I can also say that we are one of the leading freight forwarders in handling aerospace business in India.

Indian logistics sector is poised for accelerated growth with initiatives like ‘Make in India’. Your take. ‘Make in India’ will insolently help to increase the supply which leads towards more opportunities in the logistics and freight forwarding sectors. MNCs are attracted to set up their production units in India, but I think it will take a little more time to mature, maybe two or three years.

Two years back, Bolloré Logistics had launched a tracking app LINK with the aim to enhance the company’s supply chain management. How successful is the app? LINK is a tool for communicating with the whole word, i.e. with the customers, suppliers, ports, airports and customs. It is our advance tracking application designed for our key customers. It gives real time visibility and end-to-end shipment tracking, KPIs, shipment booking request, PO management, document management, etc., are some of the unique features of LINK. A continuous updatation is being done from our central CBS and the IT team maintains the utmost advanced level of customer-specific requirements. Currently, it has been implemented for our tier-I customers and tier-II and tier-III will be done in the next phase.

Please tell us about the strategies adopted to hold on to customers. Our aim as a global supply chain leader is to place the client at the centre of our growth and future success. This aim depends upon investments and long term mutually beneficial partnerships. Investment in people, expansion of worldwide network, and partnerships with global carriers and development of IT systems-- these four strategies bring value to our customers. Till now, we meet our customers’ needs, regardless of their potential, mainly through human channels. Thus each year, we process more than 3, 50,000

Tell us about the new products and services that your company will be introducing in India. Share with us your future plans and expansion details. 2016 is dedicated to Healthcare and Pharmaceuticals. We are setting up a temperature-controlled warehouse in Mumbai, with continued focus on African and French routes. We have opened two new stations in South India, in Vishakhapatnam and Mangalore. We are also investing in Tuticorin port with the collaboration of ABG Ports. Already $ 5.5 million has been injected in the project and we have ordered $ 5.5 million of handling equipment which will be commissioned within 21 months. We are switching to a matrix structure to combine the advantages of a local and global organisation, which includes: • Maintaining proximity to the personal knowledge of the customer, responsiveness and the spirit of entrepreneurship enjoyed by a local set up • Efficient implementation of sales and operational strategies • Facilitating internal communication within Bollor Logistics • Greater management involvement in taking strategic decisions • Developing innovation related business through the efficient coordination of expertise and hierarchical authority • Optimising the consolidation of technical expertise through the implementation of communities. We are more ambitious now than ever. Our goal is to increase growth, vision is to develop global capacity to operate worldwide and to establish Bolloré Transport and Logistics among the top five IFFs in the world.

What, according to you, are the megatrends 2020? Highly customised industry-specific solutions with usage of high-end technology for logistics operations, favourable policies and regulations to promote investments. Europe and USA are at saturation level, also, we can’t expect more from China. The next growing market is Africa, which is a continent of huge opportunities. The more complex and huge it is, the more opportunities you have.

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Interview

“India is the fastest growing market globally” Brian Pearce, Chief Economist, International Air Transport Association (IATA), in an interview with CargoConnect sheds light on how the aviation and cargo industry performed in 2015 and which regions stood out. Citing a 20 per cent growth, he also highlights India as the fastest growing market across the globe last year. Excerpts:

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How did the industry perform in 2015? We had a very strong end to 2015 for air travel and cargo was up too, but nowhere near as strong. For the year as a whole, we saw growth in air travel market- if you measure it by passenger kilometers flown of 6.5 per cent, which is a really strong year well above the trend of 5 per cent. Cargo though much weaker, only saw a growth of 2.2 per cent which is very disappointing after a much stronger 2014. How has the fall in oil prices affected travel costs? Well, the fall in jet fuel prices has started to pass through in lower travel costs. That has given an additional kick to air travel. We are seeing much stronger growth in travel than we would expect, given the relatively subdued economic backdrop. And that’s the key reason we are seeing such strong travel growth over the past year and in the beginning of 2016. Has there been any regional variation in the demand for travel? The strongest areas of growth for air travel have been in the Asia Pacific region and also the Middle East. Airlines from both these regions have seen double figures or close to double figure growth. The outstanding market has actually been India, where we see a growth of 20 per cent. On the other end of the spectrum, there are some very weak markets as well. For example, Brazil has barely grown in 2015 and the African airlines have also been struggling, growing by a

little more than 3 per cent. Just as many other markets were affected by conflict and unrest, the African airlines too, have been struggling to be competitive in many markets.

What is the reason for the poor cargo performance, and what can we expect in 2016? Cargo has been disappointingly weak. It is not that shippers are switching to other means of transport. Air cargo has managed to hold its share of world trade. The fact is that world trade itself has been very weak, and I think, given the economic growth we have got, we are seeing a structural change with much weaker cross border trade. We are seeing supply chains being shortened. I think prospects are for a much slower growth environment of air cargo. That’s the new normal for cargo.

guest column

LMD to be Game Changer for E-com Logistics

LR Sridhar

he year 2016 and India stands on the brink of another e-commerce boom. A recent report by ASSOCHAM suggests that the Indian e-commerce industry will touch USD 38 billion this year, a 67 per cent jump over the USD 23 billion revenues in 2015. In 2009, it was worth about USD 3.8 billion, which

First Mile

Origin moved up to USD 17 billion in 2014 and to USD 23 billion in 2015. While bigger discounts and several new options within e-commerce will set the ball rolling for the industry, it is the last mile delivery (LMD) that will prove to be a game changer in the success of ecommerce delivery. With this expected scale in growth in the coming months, it will become imperative for e-commerce companies to get their logistics and most importantly, their last mile delivery in

place. Simply put, LMD is infrastructure at the neighbourhood level and it is the final leg of the supply chain. It is the moment the customer finally receives the order. Interestingly, it is considered to be the most expensive, least efficient, and a problematic part of the overall delivery process. LMD is also the only customer-facing organisation involved in this portion of the supply chain as far as e-commerce industry is concerned. Any supply chain is only as strong as its weakest link and LMD is the ultimate example of the clichĂŠĂŠ last-but-not-least and explains why LMD plays a key role in every small and big aspect of the supply chain. India spends around 14.4 per cent of its GDP on logistics and transportation as compared to less than 8 per cent spent by the other developing countries. An effective LMD can help an e-commerce company gain a customer for life or alienate them completely. The logistics market in India 2015 - 2020 report says the Indian logistics market is expected to grow at a CAGR of 12.17 per cent by 2020 driven by growth in the manufacturing, retail,

Mid Mile

Switch FMCG and e-commerce sectors, and 3rd party logistics market in India is expected to be worth US$ 301.89 billion by 2020. In a country like India, where private players can provide e-commerce platforms access to only a marginal 5,000 to 6,000 pin codes, it provides a significant opportunity for LMD companies to utilise the existing infrastructure to penetrate deeper into smaller towns and villages, considering the rural population forms a majority in the country and will be a game changer in the days to come.

e-commerce, helpS e-commerce players to save money and more importantly ensure that the entire process of LMD is highly effective and fool proof. When consumers spend a sizeable amount of money on buying all kinds of products online, it becomes vital for every e-commerce company to ensure they deliver it on time and free of damage. 2016 is going to be the year of logistics, when LMD companies will come up with innovative technology to make it automated, simple and effective. It is also important for e-commerce companies to focus on strengthening their core features rather than becoming a jack of all trades. Niche players specialising in logistics and last mile delivery will play a crucial role

Last Mile

Destination in e-commerce, helping e-commerce players to save money and more importantly ensure that the entire process of LMD is highly effective and fool proof. A distribution model like that of Connect India will not only bring a revolution in the logistics industry, but also create commerce and livelihood to the large rural population by connecting Rural India to the Urban India and India to the world through international partnerships. (The writer is the Founder and CEO, Connect India)

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sUPPLY CHANGE

E-com Logistics: Backbone of Timely and Efficient Delivery Significance of Logistics Today, the success of any e-commerce player is defined by its service. With the pressure of meeting the needs of the consumer being at an all-time high, it has become absolutely necessary to ensure excellent service, including speedy and convenient delivery.

Technology: Key to Innovation

Flipkart, founded in 2007, has emerged as one of the giants in the e-commerce space in India. To become profitable and maintain growth, Flipkart has invested hugely in its logistics arm, eKart. Amitesh Jha, VP, eKart in an interview with Joydeep Banik discusses the growing importance of logistics in the e-commerce space and of technology and automation in warehouse management

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The key lies in bringing in the right technological interventions at the right place to smoothen back-end processes and increase efficiency. Fl ipk a r t h a s u nd e rstoo d t h is differentiator early and invested in fortifying logistical abilities by leveraging capabilities such as automation and other innovative devices to build an effective supply chain. The organisation, along with partners, is in continuous efforts to firm up our technological back-end to deliver the promise of customer delight at every step. We have ramped up the number of fulfilment centres in 2015 from 13

to 17, so that customers from smaller cities can shop with us, too. To further smoothen the back-end process, we have been investing in automation from the technological front. We have also started implementing automation technology to pick and move packages to designated pick up stations, among several other applications that make warehouse processes faster and smoother. Additional ly, we launched a unique alternate delivery model last year with the primary objective of redefining â&#x20AC;&#x2DC;customer convenienceâ&#x20AC;&#x2122; as we know it today. The model allows customers to pick up the products they have ordered on Flipkart at a location and time of their convenience. Flipkart kicked this off by setting up experiential zones at select locations in Bengaluru. To further improve and expand the existing delivery model, we have tied up with partner stores, where the store will act as an alternate d e l ive r y ch a n ne l f rom whe re

Today, the success of any e-commerce player is defined by its service. The key lies in bringing in the right technological interventions at the right place.

Flipkart and MapmyIndia will work together to add a new layer of excellence to Flipkart’s existing supply chain customers can pick up their shipments as per their own convenience. The model will also benefit retailers through increased footfall and the extensive support from Flipkart through higher brand visibility. Integrating technology in logistics has been a key focus for us. Reinforcing that vision, we acquired stake in the only home-grown mapping company in India, MapmyIndia (MMI). With this association, Flipkart and MMI will work together to add a new layer of excellence to Flipkart’s existing supply chain with the objective of making the customer experience timely and hassle free.

Coordination We have a strong internal communication system that helps our blue collared workers and transport staff stay well connected. We have also invested heavily to ensure there is seamless interaction between various departments that are processing orders. We have operating systems that give real time i n for m at ion of var ious parties involved and also at what stage a shipment is at.

3PL v/s eKart The technology boom in the country has definitely led to the growth of a lot of sectors, e-commerce being one of them. However, taking the lead

in this aspect is logistics. Be it first mile or last mile, newer logistics ventures have come up owing to the great market demand as a result of rise in online commerce in recent times. With the growth of e-commerce companies and their aim to reach out to the masses in every part of the country, there exists great scope for more technologically-advanced logistics companies like MapmyIndia. In the phase we are currently in, we are leveraging our service providers very effectively. We have reduced dependence on third party logistics by utilising eKart’s capabilities. LSPs offer an allin-one solution for assembly, packaging, warehousing and distribution. Utilising a 3PL provides us with a reliable logistics advantage and maximises profitability through combined knowledge and resources. All our deliveries are taken care of by a combination of eKart Logistics, our dedicated last-mile delivery partners, along with third-party courier services. Today we are using 4-5 partners for delivery-which includes our dedicated logistics partners. eKart handles about 75 per cent of the total number of the orders we receive. Our other logistics partners help us with almost everything that eKart does, the only difference being the region and volume serviced by our individual partners. The in-house logistics comes w it h cer ta i n cost adva ntages as compared to third party vendors who come with additional margins. Also, internally we are focussing majorly on technology and leveraging that on a big scale as compared to our third party vendors- which contributes largely in cutting down cost.

Warehouse and Inventor y Management Flipkart has about 17 warehouses in the country in total at the moment, with the largest state-of-the-art warehouse located in Telangana. The recently inaugurated fulfilment centre is spread across an area of 2,20,000 sq feet, bearing a storage capacity of 5,89,000. Some of the prominent features of this warehouse are: • Weight and volumetric measurement systems (VMS) are installed to ensure accuracy and a tight check on quality, while

handling the surge in demand volume. • 1 km long conveyer belt that has been uniquely designed to reduce motion wastage by 75 per cent. • Inbound capacity and outbound capacity per day: 1,20,000 units • Installation of LBH-Profilers for automated material storage • 1KM flexible conveyor belts • Automated sorting enabled • It is fully automated and like our other warehouses, designed to provide easy access to sellers and seamless services to customers. All our warehouses located in different parts of the country are focussed on addressing critical supply chain challenges arising from ever-increasing consumer demands in the e-commerce space in these regions.

Expansion Plans In the coming years, we see that technology will play a vital role in the business of logistics. We are thus going to leverage automation significantly to be able to bring in advantage and help manage our costs far more efficiently. Flipkart, in the past year, has made a conscious effort to expand the number of warehouses in the country with the objective of timely delivery. Flipkart announced the launch of adopting a region wise approach. With the existence of warehouses in cities like Luhari and Dadri, customers in this region are benefitted with quality assured products within the 24hour time frame. Very soon we will reach 95 per cent of customers within a day.

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news

DP World eyes opportunities in Indian ports DP World Pvt Ltd has plans to invest over $1 billion in India for augmenting its port-related operations. Sultan Ahmed Bin Sulayem, Chairman and Chief Executive Officer, DP World Group said that the port firm will invest over $1 billion in brownfield container terminals, greenfield container terminals, logistics parks, inland container depots, container rail facilities and basic infrastructure facilities. “We are bullish about the prospects of India,” Sulayem said. Anil Singh, Senior Vice-President and Managing Director (subcontinent), DP World said that the firm is identifying opportunities to invest in container terminals, among other projects, across India. DP World currently operates six container terminals in India, including Chennai, Mumbai, Kochi and Mundra. DP World’s decision to invest in Indian port facilities comes at a time when private equity (PE) funds that invested $1.2 billion in India’s ports since 2007 are staying away from the sector.

Griffin Logistics Pvt. Ltd. I.B. Tiwari (Managing Director) M: 9910699322 Alok Mishra (Director) M: 9810449051

Our Services: Custom Clearance | Air Freight Forwarders Transportation | Sea Freight Forwarders Liaisoning / Consultation | Warehousing Cargo Consolidation Total Logistics Solutions | International Freight Forwarders Contact us: 405, H-17A, 2nd Floor, Kalkaji, New Delhi 110019, Mob: +91-9910699322, Tel: +91-11-26236230 E-mail: logisticsgriffin@gmail.com, ibtiwari@griffinglobal.in Website: www.griffinlogistics.in

Thailand & India sign coastal logistics pact Prime Minister Gen Prayut Chan-o-cha and Vice President of India Hamid Ansari presided over an agreement-signing ceremony for coastal logistics cooperation. Under the agreement, Thailand and India will join hands to set up a transport route between a seaport in the Andaman Sea and those in India. Thailand will study a new Indian investment law before proposing the subsequent establishment of a free trade area (FTA) agreement with India. Another deal for tourism cooperation will allow India to study Thailand’s tourism management.

Govt to give broader e-commerce definition After scrapping plans for defining the marketplace model followed by online retailers in India, the commerce ministry will soon come out with a broader definition of e-commerce. This has also been necessitated as customs officials are demanding clear rules for the incentives declared under the foreign trade policy (FTP) for e-commerce exports. A commerce ministry official said the department is in discussion with the Department of Industrial Policy and Promotion (DIPP) to finalise a definition of e-commerce.

IndoSpace to invest $1 billion in India in next five years Leading developer of industrial and logistics parks IndoSpace plans to invest $1 billion in the country in the next five years to take its total investment to $1.75 billion. This additional investment will increase IndoSpace’s development pipeline from 20 million sq ft to 50 million sq ft. “In addition to growth in consumption and e-commerce, we see India’s great manufacturing potential being unlocked by the government’s Make In India programme,” said Rajesh Jaggi, Managing Partner, Everstone Real Estate and Co-Chief Executive Officer of IndoSpace. Currently, IndoSpace, a joint venture between Everstone Group and Realterm, operates industrial and logistics parks in Pune, the National Capital Region, Bengaluru and Chennai.The company has plans to fund and expand its 17 industrial real estate projects across the country to support manufacturing, consumer and third-party logistics companies operating in India.

news

Andhra Pradesh to focus on ports to drive industrial growth

Indian airports facing capacity crunch: CAPA

Highlighting its abundant coastline, existing port capacity and planned infrastructure development, Andhra Pradesh pitched itself hard as an investment destination at the ongoing ‘Make in India’ event. Chief Minister Chandrababu Naidu said, “I had several brainstorming sessions with experts and we have decided to take up ports and coastline development in a big way.” Naidu said the state has a vast 974-km long coastline, six existing ports and six more under development, adding that several countries have grown rapidly on the back of coastline development. Besides, the state also highlighted its second position in the Centre’s index for ease of doing business, vetted by the World Bank, and the several infrastructure projects, including the green-field development of its capital Amaravati. “There would be great potential due to the Vishakhapatnam-Chennai industrial corridor and the ChennaiBengaluru corridor. Also, we are also working on developing a ring road around Amaravati,” Naidu said.

Painting a grim picture over the infrastructure at airports, consultancy firm CAPA said India needs to immediately add capacity. Falling fares and more flights combined to drive air passenger growth in India. To handle this, the country would need to build 50 new airports at an investment of $40 billion (`2.72 lakh crore) in the next 10-15 years. According to CAPA, with exponential rise in Indian air traffic and passengers, capacity at airports in metro cities is going to reach saturation limits. The six metros would require new airports by FY26 and in some cases, much earlier. The situation is similar at the busier non-metro airports. CAPA said of 30 large non-metro airports, 60 per cent will reach the projected saturation level in the next two years. The report pointed out that capex for airport is around $4.9 billion which is far less than that of developing economies like China’s which stands at $130 billion.

JSW eyeing Indian port assets Indian conglomerate, JSW Group is looking to buy debt-laden port assets in the country as part of a strategy to expand its ports capacity, according to a report by Reuters news agency. Seshagiri Rao, Chief Financial Officer told that JSW Infrastructure, the company’s ports unit, plans to increase the current capacity of 33m tons to 200m tons by 2020. At the same time the company, which operates in the steel, energy, minerals, cement, and port and infrastructure sectors, also plans to cut debt at its steel unit.

AP to set up Logistics University The Andhra Pradesh government is likely to set up a Logistics University in East Godavari district on the lines of Indian Institute of Logistics, Chennai. At the time of bifurcation of the state, the Centre had promised setting up a Petroleum University in Andhra Pradesh. Following this, Chief Minister Chandrababu Naidu had announced that the university would be located in Rajahmundry or some other place.

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Sovika launches domestic freighter

Online tracking of cargo at Chennai port

Sovika began the domestic freighter operation from February 16,2016. Last year, the company had announced the launch of its dedicated domestic freighter service. Sovika had then leased a 737-400F from QuikJet, the ASL-owned, Bengalurubased carrier, which has already secured its Scheduled Air Operators Permit from the Indian Directorate General of Civil Aviation (DGCA). The aircraft, with a 19-ton payload, operates in the domestic network between Delhi, Chennai, Hyderabad and Bengaluru The aircraft features a new livery featuring both Sovika and QuikJet Airlines. It is based in Delhi. According to an official at Sovika, the company started services on March 1, 2016 and it optimised and rationalized the network operations. The official also added that the freighter service will ride on the rapid growth in the eCommerce sector and the air express sector. The service will operate at night perfectly serving the need of the e-commerce logistics sector which demands next-day delivery. Sovika has offices in every major city in India and at strategic business locations globally. Over the years it has gained substantial experience in every aspect of aviation.

Uncleared cargo at the Chennai port and airport can now be tracked online through a software developed by the Chennai Customs Zone. The online monitoring system which will enable ease of doing business with faster disposal of cargo and quicker realisation of government revenue was unveiled on International Customs Day.

Paytm to double investment in logistics Paytm, a payment wallet to e-commerce companiess, plans to more than double its investment in the warehouse or fulfilment centres. The company plans to invest `500 crore in the coming fiscal from `200 crore it spent this year to expand its logistics network across the country for it merchants. â&#x20AC;&#x153;We are aggressively investing in increasing our logistics services for merchants and aim to have 50 third party fulfilment centres by the end of this year from 19 now,â&#x20AC;? said Sudhanshu Gupta, AVP Business, Paytm.

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Shipping projects to be unveiled at Maritime India Summit

SpiceJet plans to benefit from e-commerce boom

From ports-and ship-led development to projects pertaining to connectivity and logistics, the Ministry of Shipping will showcase all its investable opportunities to domestic and global investors in the first-ever Maritime India Summit (MIS) to be held in Mumbai from April 14-16, 2016. The ministry is likely to showcase over 200 detailed projects in the maritime sector, targeting an investment of `35,000 crore-`50,000 crore. The summit will be inaugurated by Prime Minister Narendra Modi on April 14. It is an attempt by the central government to attract investment. South Korea will be the partner country for the summit. The ministry is seeking investment opportunities such as port-led development under the Sagarmala project and ship building under the ‘Make in India’ scheme. Besides, investment is likely to be sought in inland waterways, coastal and cruise shipping, specialised cargo handling and port mechanisation.

SpiceJet has readied plans to cash in on the e-commerce boom, as the no frills carrier looks for new streams of revenue after a near-death experience more than a year ago. The Gurgaon-based airline plans to buy 100 mini trucks and open as many as 40 warehouses across the country to provide fast delivery options to the click-happy Indian consumer who increasingly buys everything from groceries to expensive gadgets from e-commerce platforms. It is not just the belly of the aircraft that the Ajay Singh- promoted airline is trying to fill with cargo. It is also experimenting to carry cargo, especially related to e-commerce companies, inside the cabin, strapped to seats. “A pilot (study) was conducted on the BengaluruMumbai late-night flight last month,” said an executive aware of the development. There are various issues around carrying the cargo by fixing it to the seat through ropes, the first one being the damage it causes to the seat, the executive said. With moves like these, the airline is also targeting an increase in its ancillary revenue that has increased to about 17per cent as of today from about six per cent a year ago.

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Iran invites Indian investment in projects worth $8 billion Iran has invited India to invest in infrastructure projects worth $8 billion following the lifting of the sanctions imposed by the West and offered the country a stake in expansion of the second phase of Tehran’s Imam Khomeini international airport. An Iranian delegation visited India recently and invited the country to invest in various infrastructure projects in sectors including railways, ports, bridges and rail electrification, Iran’s ambassador to India Gholamreza Ansari told ET. “Given the fact that India maintained commercial contacts with Iran after sanctions were imposed over the nuclear issue, Delhi will get priority when our government invites partners for investments,” Ansari said.“We are hoping that some of the investments will kickstart soon as Iran offers huge potential,” he said. The bilateral economic and political partnership is expected to receive a further boost, with Foreign Minister Sushma Swaraj likely to travel to Iran in the near future to prepare for Prime Minister Narendra Modi’s trip to the country. Iran is geographically positioned to serve as India’s gateway to Afghanistan, Central Asia, Caucus and Russia.

5 multimodal logistics parks along DFC

Five multimodal logistics parks including one on the river front at Varanasi at an estimated cost of `5000 crore are being planned to set up along the Dedicated Freight Corridor (DFC) spanning across the country to facilitate seamless movement of goods. We are in the process of acquiring land for five multimodal logistics parks along the 3342 km long freight corridors, said Dedicated Freight Corridor Corporation Managing Director Adesh Sharma. The logistics hubs are proposed to come up in Gujarat, Punjab, Rajasthan, Uttar Pradesh and Maharashtra. The logistics parks would facilitate the last mile connectivity in terms of door-to-door services for customers besides giving value addition including packaging, retailing, labelling, and transportation of the goods on the dedicated tracks. Sharma said various options such as PPP route, state government participation and debt equity are being explored to develop logistics parks.

Gati to invest in logistics start-ups Logistics major Gati recently said it will invest in start-ups in the delivery space as the firm tries to achieve its target of delivering 1 million packages per day by 2020. The express delivery and supply chain solutions firm is exploring strategies for growth to achieve its vision, it said in a regulatory filing. “Gati is exploring the burgeoning start ups environment and is looking at strategic investment in start ups in the logistics sector,” it added. The firm has progressed ‘considerably’ in this direction, Gati said adding that it will shortly announce a strategic investment. “We are engaging with the start- ups that are aligned with our business to make a strategic investment. These alliances and investments will help us build capability and capacity,” Dhruv Agarwal, Chief Strategy Officer, Gati said. The firm reported a 33 per cent decline in consolidated net profit at `7.67 crore for the lat quarter. Total income fell to regular `417.80 crore as against `423.31 crore in the corresponding quarter of the previous fiscal. Gati has over 3,100 business partners across India and operates a fleet of more than 5,000 vehicles.

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Xpressbees raises `85.43 crore

Indian road sector reviving policy measures

Busybees Logistics Solutions, which operates under ‘Xpressbees’ brand, has raised $12.5 million (nearly `85.43 crore) funding from existing investors, including SAIF Partners, IDG Ventures India, NEA, Vertex Ventures and Valiant Capital. Incubated by Ratan Tata-backed FirstCry.com, Xpressbees started operations in last year September. Xpressbees is an e-commerce logistics specialist company, providing reliable and fast logistics solutions to its partners.

Indian road sector is showing signs of revival drawing on several measures announced by the government over the last 18 months, including a policy decision to award projects only after acquisition of 80 per cent of land. There has been a 69 per cent increase in project awards by National Highways Authority of India (NHAI) during the first eight months of 2015-16 to 2,649 km from 1,572 km in the same period of the previous fiscal. It also said that under the new land law though the cost of land acquisition has risen by 122 per cent to `30 million per hectare from `13.5 million in FY 2015, it would not impact the private sector. ICRA said efforts made by the government to clear bottlenecks in execution have started yielding results and are reflected by the 45 per cent increase in the pace of execution to 4.96 km/day during April November 2015 from 3.41 km/day during April-November 2014.

India eyes 20,000 jobs in air cargo In a marked departure from the average minister’s opening address at an industry event, Renu Singh Parmar, Senior Adviser for India’s Ministry of Civil Aviation, clearly knew what she was talking about – and showed that the government had made big strides into improving its infrastructure and processes.

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events

Safexpress Go Green art event Safexpress has partnered with this year’s edition of public art festival PUBLICA. Anchored by Surbhi Modi, PUBLICA is an art initiative that involves top Indian and international artists create site specific works. Safexpress has been driving its ‘Go Green with Safexpress’ campaign for the last decade. Speaking on the same, Divya Jain, Founder and CEO, Safeducate , India’s premier supply chain training institute said, “This remarkable public art festival will involve the creation of a very unique artwork, where an artist will spend two weeks in a truck container, painting it and making it the canvas for his expression. Trucks are rarely the subject of casual conversation, unless of course one is voicing their many negatives. This extraordinary project, however, seeks to change that.” This incredible project of converting a truck container into a piece of art has been conceptualised by Divya Jain.

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Ajeet Kumar- +91-9810962016 cargoconnect@gmail.com, Rajesh- +91-9874971551 rajesh@surecommedia.in 102 CargoConnect - march 2016

events

India Manufacturing Supply Chain Summit 2016 The fifth edition of the India Manufacturing Supply Chain Summit & Awards was recently held in Mumbai. The theme of this edition was “Industry 4.0 Creative Solutions for the Next generation.” The summit gathered over 50 experts who shared their knowledge on various topics, like ‘Industry Vision and the New Rules of Leadership, What Must Procurement do to Remain a Viable and Sustainable Business Function’, ‘The Art of Supply Chain: Creative Solutions for the Next Generation’, ‘Championing a Socially Responsible and Sustainable Supply Chain for Long Term Global Growth’, ‘Making the Dream a Reality-the Next Generation Lean Manufacturing ‘ and ‘Disruptive Technologies - the Case of Logistics Planning and Optimisation’.

March 2016 - CargoConnect 103 march

events

PHD organises Aviation Summit 2016 PHD Chamber’s Civil Aviation Committee recently organised PHD Aviation Summit 2016- ‘Indian Civil Aviation-Benefits beyond Borders’. The successful summit brought together aviation stakeholders from both the passenger and cargo sectors , including representation from airports, airlines, regulators, investors, airport infrastructure companies, cargo Industry, private charter companies, end-users, tourism Industry and other related national and international industry stakeholders on one platform for further ideation. Hon’ble Union Minister for Civil Aviation, Ashok Gajapathi Raju Pusapati was the chief guest for the summit.

Logistics Asia Expo 2016 held in Gujarat The first edition of a three-day Logistics Asia Expo, an international exhibition was recently held in Gujarat. A conference was held on the first day of the show. The show was conceptualised with the background to provide a platform to enhance the network of the Indian firms engaged in logistics and export/import oriented businesses for providing the strategic inputs of government policies and incentives. The show was dedicated to the logistics and supply chain industry and covered key sectors like infrastructure, transport, warehousing, MHE, LSPs to name a few. The event which showcased new technology , quality services and trends pertaining to the logistics sector, witnessed participation from over 55 exhibitors across the globe.

104 CargoConnect - march 2016

EVENTS

Etihad wins Airline of the Year award

Freight Systems moves to new office

Etihad Airways wins Airline of the Year 2016 award by the USbased aviation industry publication Air Transport World (ATW). Etihad Airways was chosen for the top honour by ATW’s distinguished editorial board in a highly- contested competition, with entries from more than 100 airlines around the world.

Freight Systems, a leading freight forwarding, logistics and supply chain company, today, announced relocation of its Mumbai branch into a custom-built corporate campus covering 17,000 square feet of space in the Summit Business Bay, Mumbai. The inauguration of Freight Systems newest facility was celebrated with a ribbon-cutting event on February 1, 2016 and was attended by key officials of the company. Strategically located at M-001, Mezzanine Floor, Next to Baba House, Andheri Kurla road, Andheri (East), Mumbai-400093, the facility will be home to roughly 200 Freight System employees. The center will serve as a hub for delivering logistics needs of the customers in the region. “The decision to relocate to a bigger and better facility is part of our company’s ongoing commitment as we continue to seek out ways to better serve our customers here and around the world. The new facility brings our team members together under one roof, increasing collaboration and enabling us to provide even better support for our internal and external customers” said David Philips, Managing Director, Freight Systems. “This new location permits us to comfortably accommodate the growing employee base as well as allows room for more growth”, added Kunal Singh, Chief Executive Officer, Freight Systems. The new office location will house the key business and operations teams of Freight Systems in Mumbai.

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(L-R) David Philips, MD, Freight Systems and Kunal Singh, CEO, Freight Systems.

Emirates wins Favourite International Airline Emirates Airline was recently honoured with the award for ‘Favourite International Airline, 2015’ category at the fifth Condé Nast Traveller Readers’ Travel Awards, India.

March 2016 - CargoConnect 105

PEOPLE CONNECT

“Biggest challenge is to create best teams” I would like to encourage the young generation to join the logistics industry and bring in their thoughts and ideas,” says Huned Gandhi, Managing Director India, Air & Sea Logistics, Dachser India Pvt Ltd. Gandhi, an international business expert, who loves to play tennis with his daughter during weekends, in a candid interview with Ritika Arora Bhola talks about his journey in the industry, interests and hobbies, challenges and mantra for success. Excerpts:

Journey So Far… International business has always been an area of high interest for me and this industry has provided me a great platform to pursue my interests. Also, the high pace of this industry keeps me going and I keep learning new things every day.

Biggest Challenge The biggest challenge is always in finding the right people and creating the best teams. I’m happy that we have built up a strong and consistent team over the years. We also strive to provide excellent growth opportunities and a congenial working environment for our teams to bring out the best in people.

Beliefs & Values I strongly believe that core values like integrity, loyalty, solidarity, commitment are very important for success and cannot be compromised with at any time.

Definition of Success Success to me is creating a win-win situation for all the stakeholders (customers, employees, company and the society)

Interests & Hobbies My interests are music, travel (to understand cultures around the world) and sports. I enjoy a weekend tennis game with my daughter and am always looking forward to it.

Message for Logistics Aspirants I would like to encourage the young generation to join the logistics industry and bring in their thoughts and ideas. They will certainly provide a strong “tail wind” and take us forward faster.

Industrial Transformation Technology has transformed everyone’s life and I am glad that the logistics industry has done well by making constant efforts towards making the supply chain more and more IT-driven and efficient. The initiatives taken by the industry (logistics companies, airports, airlines and customs) are remarkable and government regulations are also directed towards the ease of doing business. I expect this to change dramatically in the near future.

106 CargoConnect - march 2016