Industry leaders look forward to better days as the maritime sector treads on the revival track slowly, supported by favourable policies and focus on infrastructure development.
All’s well that ends well,” these lines by William Shakespeare sound synonymous to the current condition of the Indian maritime sector. No wonder the industry has been through a lot of turmoil in the past twelve months but towards the year-end the announcement of infrastructure status to the logistics sector gave the industry leaders a new reason to revive hopes in the new year. The regulation will pave the way for logistics players to put their hands on easy funding. There will be more infrastructure development in the form of logistics parks, container terminals, private ports, modern warehousing etc. The logistics sector is expected to ride on a growth rate of 10 to 12 per cent in the next couple of years thanks to the major push through GST implementation.
While infrastructure development picks up steam, the pace of revival in the industry is under question right now because, shipping was on the upturn, but the most recent slide in container freight rates means the recovery which was expected will be a little delayed.
Technology will drive transformation for all kinds of businesses and 2018 promises to be a significant year in this process. The global scenario is changing its course to provide the much needed impetus and encouragement to the logistics and supply chain sector. The surge in e-commerce, the changes in trade policies across the globe and the focus by agencies like IATA, TIACA, IPSCA, IMO, WTO and the UN to push for trade facilitation as a key part of their programmes augurs well for the industry. The future of logistics will be shaped by the level of digitization and automation it undertakes.
While rail and road will remain the preferred mode of logistics atleast for some more time, the freight forwarding industry is poised for consolidation and the major players are looking for forward/ backward integration for sustainability. In general, there will be more consolidation on a smaller scale as strong owners and operators flex their muscles to acquire tonnage and smaller companies find going tough. With more visibility of departure/arrival schedules, timelines maintained by liners, relatively lower tariff offered vis-a-vis air movement, ocean movements are likely to score big time over air. E- Sealing procedure for exporters will greatly help in reducing turnaround time.
Coming to the global scenario, “We do not expect a material improvement in market fundamentals in 2018 due to lingering overcapacity,” revealed Fitch Ratings.
Both container and bulk show signs of revival, but the longevity of this trend remains uncertain due to limited adherence to capacity discipline in the sector. Improving market sentiment and a focus on scale and vessel size have stimulated new orders. The supply and demand dynamics are likely to support container, bulk and LNG rates, but tanker rates could remain under pressure.
The tanker shipping segment is the most exposed following a glut of new vessel deliveries in 2017. “We expect demand for tankers to grow by around 4 per cent in 2018, helped by rising global oil consumption, higher US exports and declining oil inventories. But this would still only broadly match the expected growth in tanker supply. Rates therefore may not fall further, but a sustained increase is unlikely,” reveals Fitch.
Container shipping freight rates have increased this year, but overcapacity makes this recovery fragile and previous rate increases have proved short-lived. Vessel supply growth is expected to be over 5.5 per cent in 2018, outpacing a likely over 4.5 per cent increase in container transport volume growth. A sustainable recovery in rates will need continuous and consistent capacity discipline in the industry driven by consolidation. The recent recovery in dry bulk shipping rates may also prove short-lived, although unlike for the other segments demand is expected to outstrip the growth in vessel supply in 2018. The market balance will be helped by the low level of new vessel orders for the last three years. China will remain the key driver for dry bulk commodities imports and trade, and the sector is therefore particularly sensitive to Chinese GDP growth, which is expected to be 6.4 per cent in 2018.
Member states should seize the opportunity to set bold and ambitious goals when they adopt an initial strategy for reducing greenhouse gas emissions from international shipping in 2018. Next year really will be a time when the world will expect IMO member states to deliver a clear vision as the first stage of the approved roadmap. I urge you, be bold; set ambitious goals that really will make a difference. You have a real opportunity here to do something of lasting significance. Make the most of it.
The seven strategic directions point us now towards more effective rule-making and implementation processes by integrating new and advancing technology to respond to our challenges, among others, to increase ship safety, including addressing new emerging technologies such as autonomous vessels, our contribution to combat climate change, engagement in ocean governance, mitigation of cyber crimes, and facilitation of international trade, whilst continuing to take due consideration on the human element factor.
The aim is to transform IMO into a “knowledge-based organisation,” with appropriate analysis to support and improve the already effective rule-making process and enhance implementation. The rapidly increasing pace of change in every sphere raised a fundamental issue, since technology will move far quicker than the regulatory process.
Digital disruption will arrive in the shipping world very soon; and, when it does, IMO must be ready. For me, this means the regulatory framework for shipping must be based firmly around goals and functions rather than prescriptive solutions. This is the only way to ensure that measures adopted by IMO are not rendered obsolete by the time-lag between adoption and entry-into-force. I know we have already made good steps in that direction but we must go further and faster in the coming years.
We are in the era of digitalisation and at the United Nations level we are already looking at frontier issues that include emerging technologies such as artificial intelligence, and the benefits they could have in society as a whole, and to remain relevant.
For IMO, we need to have more detailed and deeper analysis of statistics and data so that we can really understand underlying trends and causal factors behind shipping casualties; and we must make sure that additions and amendments to the regulatory framework are also based, wherever possible, on relevant statistics, studies and analysis. This would pave the way for better regulation, one that not only takes into account the work carried out to reduce administrative burdens, but to avoid disproportionate requirements, as well as addressing obsolete and unnecessary ones.
Q How was 2017 for the maritime sector? What were the major achievements and disappointments?
2017 for maritime sector was better compared to 2016 with some key sectors showing recovery. Container freight rates showed improvements over first 2 quarters helping carriers to reverse their losses of 2016. Similarly, Dry bulk market showed good recovery, with BDI touching a three year high. Owners have shown greater discipline in managing supply leading to narrowing of demand supply gap. However other sectors like Tanker and offshore are still under stress.
Disappointment- Subdued activity in the Indian port sector with limited participation of private players in Brown and greenfield projects. Some of the new ports are struggling due to increasing competition and changing trade dynamics. This has adversely impacted confidence of banks and private investors.
POSITIVE MOMENTUM SEEN IN 2017 IS EXPECTED TO CONTINUE IN 2018. ON ACCOUNT OF IMPROVED GLOBAL CONSUMER DEMAND AND INDUSTRY CONSOLIDATION THE OVERALL OUTLOOK FOR THE CONTAINER SECTOR LOOKS A LOT BETTER. INFRASTRUCTURE STATUS TO LOGISTICS SECTOR WILL LOWER FUNDING COST AND HELP IN ATTRACTING PRIVATE INVESTMENT AND INCREASE THE COMPETITIVENESS OF THE SECTOR.
Q How do you expect the industry will perform in 2018? Any significant expectations?
Positive momentum seen in 2017 is expected to continue in 2018. On account of improved global consumer demand and industry consolidation the overall outlook for the container sector looks a lot better. Similarly, narrowing gap between supply and demand should aid freight rates in the dry bulk sector. However, 2018 is expected to remain tough for tanker shipping as supply growth is expected to outpace demand growth.
Container and logistics sector will focus on consolidation and managing supply. However, increasing oil prices could impact margins and can lead to lower profitability.
Q What are your plans in the next 1-2 years?
Drewry as a leading Maritime research and advisory firm will be focussing on expanding its product and service portfolio to provide in-depth and dynamic market intelligence to various industry players. Further, we would be focussing on technology to improve our quality, productivity and market penetration.
Q We have seen some key regulatory changes? How did they impact the shipping and logistics business and moving forward what policy changes you are looking for?
GST implementation was the key regulatory change, which India witnessed in 2017. We are still in a transitional phase and businesses are facing some initial challenges in adopting the new system. However, in the long run GST should lead to lower logistics costs and reduced transit times. New tax regime will also assist in promoting Hub and spoke warehousing and distribution network to take advantage of economies of scale and to achieve optimum network cost.
Second important policy decision of the Indian government was giving infrastructure status to logistics sector. This was a long pending demand of the logistics industry. This would lower funding cost and help in attracting private investment and increase the competitiveness of the Indian logistics sector.
These policy changes should act as a catalyst and give push to Make in India initiatives as this would make Indian companies more competitive in the global market and help them in achieving higher margins and profitability.
Outlook for 2018
The fundamentals for the industry have improved greatly in 2017 on the back of two trends – first is the strong demand for the service that we do, due to which trade has been growing at a pace faster than what we have seen for the past three years and we expect that to continue in the coming couple of years. The other thing is the industry consolidation with bigger players emerging out of this trend and being able to put in place networks that can generate economies of scale that we didn’t have before and that can also employ the assets and the capacity that we have developed. So I think the combination of these two trends is quite positive.
2017 has seen the strongest growth in containerised trade than we have seen for about a decade. We expect the recovery that we are seeing in the emerging markets on the back of higher oil price will continue. Global trade should be growing after a few years of subdued growth. The current overcapacity will be absorbed with the growth in trade in the coming years.
Q In the current recovery phase the industry is going through, do you think the big players will add capacity again?
Earlier it has happened so, but this time we have to see if it is different or not. I think the fundamentals with respect to the consolidation may be a bit different from what we have seen in the past. We have made clear atleast that our intentions are not to order ships in the immediate future and we currently have enough capacity to cover the needs of our customers.
Q Your competitors have made recent purchases, does that make you change your strategy?
The order book right now is lower than what it has been in a decade, including the last few orders. So we don’t believe that this alone will change the fundamentals. If the trade grows pretty strong and better than what we expect and if we get clear signals that our current fleet is falling short for serving our customers then we may very well plan for more vessels.
“WE HAVE A VISION TO BECOME THE GLOBAL INTEGRATOR OF CONTAINER LOGISTICS TO SIMPLIFY AND CONNECT TO OUR CUSTOMERS’ SUPPLY CHAIN. WE ARE WORKING TO OFFER A WIDER ARRAY OF PRODUCTS ON THESE LINES. GLOBAL TRADE SHOULD BE GROWING AFTER A FEW YEARS OF SUBDUED GROWTH. THE CURRENT OVERCAPACITY WILL BE ABSORBED WITH THE GROWTH IN TRADE IN THE COMING YEARS. THE FUNDAMENTALS WITH RESPECT TO THE CONSOLIDATION MAY BE A BIT DIFFERENT FROM WHAT WE HAVE SEEN IN THE RECENT PAST.”
Q Do you see more consolidation happen?
Many of the recently announced mergers and acquisitions have yet to complete. We are into the day-2 of the integration of Hamburg Sud into Maersk, so this is still very much in the making. The merger of three Japanese carriers is yet to come and the merger of COSCO and OOCL is also not yet fully finalised. So whether there is going to be more activity than this is really hard to say. At Maersk all the focus right now is on making the current integration a success because it is quite fundamental for the viability of the deal.
Q What does Hamburg Sud bring for Maersk?
Maersk is very good on the east-west trade lanes and Hamburg Sud is good in the North-South trade lanes. We are gaining a very significant position in Latin America and Oceania where we are really able to reinforce our offering and we will be alone able to offer an array of products which will be unmatched. With the acquisition of Hamburg Sud we have a capacity of more than 750 vessels which is sufficient to cope with the demands of our customers in the next couple of years.
Q Will the industry implement capacity restrictions?
Well, time will tell this. Each of the players have to make decisions right for their strategy. We have a vision to become the global integrator of container logistics to simplify and connect to our customers’ supply chain. We are working to offer a wider array of products.
Q How do you see contract rates in 2018?
We are seeing some increases in the negotiations currently in progress. The rise in the oil price that happened in the second half of 2017 is supporting the rise in rates. It is important for us that this is reflected in the new contract rates going forward.
Business in 2017
Shipping was on the upturn, but the most recent development that is the freight rates for containers are again sliding down, which means the recovery which was expected will be a little delayed. Of course we have to see whether this will be a temporary phase or is it the effect of Christmas new year plus the Chinese new year that is coming up. So all the shipments that had to move for the new year have already been delivered. So is it because of the slump in the season or is it the actual downturn due to crisis of trade. So if that prolongs to beyond the end of January then it will be a cause of concern.
Industry recovery
The industry was in recovery mode, but the question now is whether the recovery will be fast and good or slow and painful. The container industry is in a bit of a limp, but again we should remember that containerised cargo only accounts for 17 per cent of Indian trade and at the global level it is only 16 per cent of the total cargo, and the rest is bulk, break-bulk, gas and liquid cargo.
Plans for the next one or two years
I will retire as the President of MANSA in the next 8 or 9 months. In September I will hand over the baton to the next incumbent who will be elected. Our aim is to assist our members from operational point of view and at the same time try to influence the government and the authorities into further policy relaxation and for formulation of correct policies which will be friendly to the nation and the common man.
The problem is the government tends to take decisions in the form of band-aid solutions, instead of providing a wholesome thought to it. This is understandable to some extent because they are bureaucrats and politicians and not shipping industry professionals and this is the reason that I have always advocated that we should always have a maritime think-tank in the country so that trade and shipping can be given the right boost. On this, MANSA is planning a conference on “Why India is not a major maritime nation?” in spite of having such a large coast line and we are also not a major ship owning nation. Indian tonnage is just one per cent of the global tonnage.
Impact of regulatory changes
Logistics industry getting infrastructure status is a very good move by the government. The logistics providers will be able to access loans from financial and banking institutions at cheaper and more manageable rates which will actually lead to reduction in logistics cost. When business is able to find easy funding it will be able to expand and improve its efficiency
Business in 2017
Allcargo traversed a largely stable business trajectory across verticals in 2017. Our customers are getting settled with the changing trade dynamics brought on with the implementation of GST. As they were altering their existing models to adapt to the revised accounting standards and deal with tax compliance issues, logistics decisions have been kept on the back-burner. However this will change in the months to come.
We are optimistic on our domestic – India business. A slew of reforms for infrastructure push have been introduced by the government like Bharatmala, Sagarmala,etc. Our contract logistics segment through Avvashya CCI Logistics, a subsidiary company, has been growing at an expeditious pace. While we are on course to start a Container Freight Station (CFS) in Kolkata, approvals have been granted to rail connectivity for the upcoming Multimodal Logistics Park (MMLP) at Jhajjar in Haryana.
A slowdown in the capex cycle has led to a marginal slowdown in the growth momentum of our Projects and Engineering Services (PES) division. But in the years to come we will take a course alteration to better our ROCE.
On the international front, ECU Worldwide, one of the global leaders in NVOCC services and the biggest LCL service provider, has increased its global market share substantially and we will continue to grow both organically and inorganically in this segment.
Expectations in 2018
We foresee a positive outlook for the logistics sector in 2018. As GST-induced volatility wanes and organizations adopt GST compliant business practices, numbers are expected to improve from Q1 FY 2018-2019. The granting of infrastructure status for logistics, is a huge boost to the sector in itself and will help it access institutional finance from diverse funding instruments at concessional rates, fast-pacing its growth and development.
The impetus on infrastructure investment and increased fund allocation to large-scale infrastructure projects will not only bring logistics costs down and reduce transportation downtimes, it will also lead to improved efficiencies and asset turnaround.
The demand for seamless and diversified logistics services is expected to be bolstered owing to a recovery in capex and a consumption driven economy.
Plans for the next 1-2 years
In India, logistics sector has come to the forefront, especially in the last few months. We have already devised a forward driven roadmap to leverage this sentiment. There are definite plans in the pipeline to build multi-modal logistics parks along key freight corridor routes in the country. Upcoming logistics parks in Jhajjar outside Delhi and land banks at strategic locations – Nagpur, Hyderabad and Bengaluru – will help us further strengthen our pan-India service offerings for clients. A crucial factor here would be to bring the cost of logistics down and enhance ease of doing business since logistics parks will have the right modal mix which will bring in economies of scale.
The contract logistics segment is growing aggressively, especially with the implementation of GST. The emphasis will also be on augmenting the competencies of our contract logistics business. Avvashya CCI has a stated objective of reaching 10 mn sq ft of warehouse operating space from the current 3 mn sq ft by 2020 – 2021.
We will be focusing on expanding the efficacies of the ECU Worldwide business through a series of organic and inorganic growth initiatives. As a young and dynamic organization, we are also in the process of deploying new-age IT processes and platforms for streamlining our operations and rolling out technology based solutions to provide a better experience.
Impact of regulatory changes
2017 witnessed some remarkable policy changes. Such policy changes are long term and hence their benefits will accrue in due course. GST is a boon for logistics and a key enabler to streamline transportation.
The business momentum for us has largely remained stable in 2017 however we have robust plans to scale the business to the next phase of growth. Going ahead, we expect the government to speed up environmental clearance processes. The Sagarmala project for modernizing port infrastructure and port automation should be expedited to leverage the coastal assets of the country and transforming India into a global maritime trading hub. There should be focus on creating a digital roadmap for providing logistics services through online delivery platforms.
Business in 2017
The year 2016 ended with growth of traffic at Major Ports by 6.91 per cent which was the highest growth during last 3 years and it is very similar to the average trend of the global ports. Traffic handled by major ports grew from 606.47 Million Tons (MT) to 648.40 mt. During the year 2017 ports have seen regular improvement in their performance including reduction in Turn Around Time (TAT) of ships and increase in average berth day output. The 12 major ports put together handled 439.66 mt of cargo during April to November of the current financial year as against 424.96 mt handled during the corresponding period of last year.
Achievements
Several new initiatives were launched by various ports during the year 2017:
- Eight new connectivity projects at JNPT costing `1117.03 Cr.
- Vizag port initiated container service to land-locked Nepal.
- First train carrying 90 containers took off from Vizag on 4th August 2017.
- Smart industrial port cities have finally started taking shape at Kandla and Paradip Port.
- Kolkata Port Trust has invited bids for outer terminal at Haldia Dock Complex.
- Starting with JNPT all major ports initiated a consulted effort to improve ease of doing business for port users. 42 specific initiatives were identified of which most have already been implemented at JNPT. The recent WB report shows distinct improvement, and this is being monitored very closely by the ministry.
- Passenger services between Gogha – Dahej in Gulf Cambay was inaugurated on 22nd Oct 2017
- Ro Ro services started at Deendayal, Mumbai, Chennai and Kamarajar Ports
- Ro-Ro service introduced from Hatsingmari to Dhubri on NW-2 and Manihari to Samdaghat on NW-1.
However, port sector, particularly PPP operators were keenly looking forward to passage of Major Port Authorities (MPA) bill which would grant greater autonomy to ports. The bill was introduced in Parliament in December 2016, but it is still awaiting getting a proper legislative concurrence.
“PORT SECTOR IS OPTIMISTIC TO WITNESS FURTHER GROWTH DURING THE YEAR 2018. WITH SEVERAL NEW PROJECTS (APPROXIMATELY 55 IN NUMBER) COMING UP IN 2018 IT IS EXPECTED THAT CAPACITY OF PORTS WILL SUBSTANTIALLY INCREASE. CONSEQUENTLY, THERE WOULD BE A VOLUME INCREASE OF CARGO HANDLED. LINKAGE TO THE DEDICATED FREIGHT CORRIDORS WOULD ENHANCE REACH AND THUS IT WOULD PLAY AN IMPORTANT ROLE IN SHIPPING LOGISTICS. ADVANCED VERSION OF PORT COMMUNITY SYSTEM WILL SMOOTHEN THE ROUGH EDGES BETWEEN THE STAKEHOLDERS.”
Expectations in 2018
Port sector is optimistic to witness further growth during the year 2018. With several new projects (approximately 55 in number) coming up in 2018 it is expected that capacity of ports will substantially increase. Consequently, there would be a volume increase of cargo handled.
As per the vision of the union government, ports are to undergo a major transformation in the years to come. From being mere gateways for export and import of cargo, ports are expected to turn into pivots of economic activity. Port led industrialization is one of the pillars of Sagarmala Programme and it is expected that the year 2018 will see Ports emerge as centers around which industrial and commercial activities will flourish.
Ministry of Shipping has already identified large number of projects centered around ports to add to economic activity and these would finally lead to more maritime clusters being created.
Plans for the next 1-2 years
Various plans and projects are in pipeline to transform India’s major ports into world class facilities. These include:
- RFID systems in all ports
- Additional gates, realignment of gates and gate Automation to improve entry and exit of goods
- Streamlining of port processes to cut down time and cost
- Deeper draft at selective Indian ports to enable larger sized ships.
- Increased emphasis on mechanization and reduction of human interface.
- Improved connectivity with hinterland including road and rail corridors. Linkage to the Dedicated Freight Corridors would enhance reach and thus it would play an important role in shipping logistics.
- Advanced version of Port Community System to be made available and the rough edges between the stakeholders would be smoothened
- Introduction of Green Technologies in ports to reduce cargo footprint etc.
Impact of regulatory changes
Most of the regulatory changes are still under observation as far as their applicability is concerned. Major Port Authorities Bill has been worked upon for a long time and has been subject of intense debate and the bill is likely to come up in the parliament soon. It is expected that the new legislation will provide for redesigned role of the Tariff Authority for Major Ports (TAMP).
Also, the Model Concession Agreement (MCA) is yet to get a final shape. Once it is implemented, we expect a new era of PPP operation in ports involving more PPP operators in the port projects.
Among some of the initiatives taken during 2017 were New Berthing policy and Stevedoring policy These are likely to enhance revenues in Ports and also add transparency in administration and governance.
Business in 2017
We as a company are mainly dealing in bulk cargo movement on and around the coast of India. In spite of major push from the GOI towards modal shift of cargo to coastal shipping, not much improvement was seen as far as commercials of the business are concerned. Competition from foreign carriers offering cheaper rates remained a big concern. Volumes remained stagnant and road rail has remained the preferred choice.
Expectations in 2018
We don’t see much change happening in 2018 as far as coastal shipping is concerned, unless of course the course correction in global shipping picks up to reasonable levels. The new building orders have picked up in all segments. Nearly 28 per cent of the fleet orders in 2017 were for bulk vessels and close to similar numbers for tankers. Add to that the previous year’s order and decline in scrap activity, well it is anybody’s guess how the market will shape up.
Plans for the next 1-2 years
Wait and watch before investing for plying in spot market.
Business in 2017
Export and import volumes for Safmarine was very strong, and the company has achieved targets for 2017. We have also noticed positive movement in certain trade such as from Europe and China which fueled export and import for the company. The company’s growth in North America has been impacted because the market has not been very strong there. Our pricing policy have been little bit restrictive, and the company has not been able to achieve target in that market. Though volume wise it could have been better but overall the company has been able to achieve good revenue performance.
Our South Asia business consists of cargo movement from India to Sri Lanka and Bangladesh. And the company has performed well in this market. Cotton movement to Pakistan was expected to take place but that trade didn’t happen where the company could have gained.
EXPORT AND IMPORT VOLUMES FOR SAFMARINE WAS VERY STRONG, AND THE COMPANY HAS ACHIEVED TARGETS FOR 2017. WE HAVE ALSO NOTICED POSITIVE MOVEMENT IN CERTAIN TRADE SUCH AS FROM EUROPE AND CHINA WHICH FUELED EXPORT AND IMPORT FOR THE COMPANY.
WE ARE HOPEFUL IN PREVAILING SCENARIO INDIA WILL REGISTER A HEALTHY GROWTH OF 5-6 PER CENT IN 2018. HENCE, WE NEED TO POSITION OURSELVES TO GAIN FROM THE GROWTH MOMENTUM. WE WILL BE FOCUSING ON NORTH AMERICA, MEDITERRANEAN, EUROPE AND AFRICA, PARTICULARLY CENTRAL WEST AFRICA AND EAST AFRICA. THESE FOUR MARKETS WILL FORM THE CORE OF OUR GROWTH STRATEGY IN 2018.
Expectations in 2018
We have started to evaluate the business targets that could be achieved in the upcoming year. EXIM container trade is expected to grow 5-6 per cent in India, and accordingly we are planning budgets to gain inline with the market growth. We look to grow as per market conditions and improve market share in the prevailing market conditions.
Due to some policy decisions and actions of the government such as demonetization and implementation of GST, EXIM cargo volume was slowed down as a result the industry faced a difficult time in few quarters in 2017. In Q3 in particular was the most difficult phase for exporters and importers. But gradually towards the end of the year, the market condition has improved for the EXIM trade. We are hopeful in prevailing scenario India will register a healthy growth of 5-6 per cent in 2018. Hence, we need to position ourselves to gain from the growth momentum. We will be focusing on North America, Mediterranean, Europe and Africa, particularly Central West Africa and East Africa. These four markets will form the core of our growth strategy in 2018. Hence overall Safmarine has a positive outlook for 2018.
Infrastructure status to logistics
industry It is a good start on part of the policy makers. However, there is a lot of time lag between the time the sector gets infrastructure status and the infrastructure actually develops. The government has taken some key decisions pertaining to shipping and containerized trade which is facilitating the trade such as DPD and improving efficiency of cargo clearance. There are lot of public-private participation taking place in CFS and port sector. As a result the bottlenecks are reducing as compared to earlier time. However, the next level of growth will depend a lot on not only on the growth of physical infrastructure but IT solutions. Seamless exchange of data and clearance through various agencies like Customs, digitization, ease of container movement, etc will pave the way for the future growth of the industry. Similarly, EXIM trade also need to grow and it could be possible through simplification of export procedures such as the documentation required for an export or the number of signatures needed on a shipping bill, among others. Process, documentation and use of IT in the entire supply chain of EXIM cargo movement is going to drive the future growth of the industry. Digitization is catching up at a very fast pace in the shipping sector which is a positive trend. For example, one can transact with Safmarine and carry out entire process of cargo shipment without any face-to-face interaction and it has been possible due to IT implementation available through various platforms available through Safmarine website and apps. The customers have also positively responded to the implementation of IT-enabled service offerings.
Business in 2017
The year 2017 has been a mixed year for Tiger Logistics. This quarter end results were closed with more than 20 per cent growth. The company hopes to keep the growth momentum high in the next year too. This year company has opened two international offices at Singapore and UAE respectively and expanded its footprints in foreign countries. The company has strengthened with some of new employees, a team of young professionals and individuals who have chosen Tiger Logistics from bigger MNC’s. We are having many reputed agents and associates around the world. Tiger Logistics management has always been keen in growing the corporate customer base in order to give leeway to company to always reinvest its profit for the future organic growth.
Well the sluggishness in the export market remains a worry as commodity market is not picking up and the reefer business is also down. The company is looking at new avenues which could be the future growth engine for the company. Demonetisation and just after implementation of GST made market struggling. But GST would be a game changer in coming time and we are optimistic about this. Tiger Logistics is a leading logistics service provider involved in MTO (multimodal transport operations), Transportation and Customs clearance activities for handling of project cargo across North, West and East India. And it made Tiger Logistics to be a first choice of Customers. Today the company has a staff strength of 350+ persons, a fleet of 59 vehicles with 16 Pan India offices – New Delhi, Mumbai, Nashik, Pune, Kolkata, Ahmedabad, Veraval, Mundra, Hazira, Morbi, Vadodara, Veraval, Kanpur, Ludhiana, Jaipur and Chennai.
Expectations in 2018
In my point of view industry deals in the disorganized nature of the logistics. India, is a man power heavy industry and lack of adequate training institutions has led to a shortfall in skilled management and client service personnel. This can be easily underscored as a growing concern across the industry, affecting both 3PLs and shippers: a shortage of supply chain and logistics talent. The Indian consumer is in great shape and will be increasing his and her spending levels in 2018. Companies need to have the right levels of qualified labour, working capital, and equipment to successfully manage their growth and be profitable. If they aren’t prepared in advance, they’re going to find that these key resources (labour, capital, and equipment) are in short supply. Labour is obviously already an issue across many sectors, and you can’t get new capital equipment at the drop of a hat. The companies that have to scramble to create capacity won’t be as profitable as those that prepare ahead. High logistics cost reversal is also a problem in the industry. Some issues are also very vital to work on like upfront efforts and costs to implement solutions, increased emphasis on regulations and requirements and liquidity crunch. For example – the people who lead the company or sitting in senior positions are very knowledgeable and good at what they do but once you go below that top management layer, you can see many lower level people who are less confident about the skills and capabilities they have. This can be easily underscored as a growing concern across the industry, affecting both 3PLs and shippers: a shortage of supply chain and logistics talent. Hence, there needs to be a concerted effort to bring in fresh talent and also to spruce the skills of those already working in the logistics sector, so that the industry does not face a dearth of skilled workforce when demand for manpower grows in the near future.
Plans for the next 1-2 years
Being an International logistics company Tiger logistics is one of the leading service providers involved in shipping of equipment and supplies for the project sector throughout the world. The Company plans to enter the Domestic Logistics market in the coming two years. We are in the process of setting up warehouses, participate in container freight stations (CFS), inland container depots (ICD), logistics parks, distribution centres and other facilities to leverage the abundant opportunities. Our aim is to have a 100 per cent reach anywhere and everywhere. Tiger Logistics has major expansion plans, where the company is planning to have a PAN India presence and venture majorly into domestic logistics
“THE INDIAN LOGISTICS INDUSTRY SPENDS AROUND 14 PER CENT OF THE GDP ON DIFFERENT TYPES OF COST INCURRED IN LOGISTICS OPERATION. 3PL LOGISTICS MARKET IN INDIA IS EXPECTED TO BE WORTH $301.89 BILLION BY 2020. THIS GROWTH RATE IS BASED ON THE EXPECTATION THAT THE NEW GOVERNMENT HAS IMPLEMENTED GST AND REMOVE ‘CHUNGI’ TARIFFS”
with warehousing distribution and transportation. The company plans to open its own offices into different countries such as U.S., China, Mexico, and Panama by 2019. Tiger Logistics has its own offices at all ICD’s and ports in India and reputed agents and associates offices around all over the world. And company also plans to set up cold chain logistics warehouses in coming years.
The company plans to invest in owing the CFS (Container Freight Stations) in Gujarat Location not only to assist in doing the backward integration for our present corporate customer base but also to complement our various north India offices by providing end to end solutions for the entire cargo base moving by road to Gujarat Gateway Ports. The Company would like to enter the Defence Forces arena and be a preferred vendor for Logistics. Today the Defence Forces does not use any Private Logistics Company and spends a huge amount of money in Logistics and Transport.
Impact of regulatory changes
The Indian logistics industry spends around 14 per cent of the GDP on different types of cost incurred in logistics operation. The amount of cost incurred is very high in comparison to the logistics cost incurred by different nations. 3PL logistics market in India is expected to be worth $301.89 billion by 2020. This growth rate is based on the expectation that the new government has implemented GST and remove ‘chungi’ tariffs and with this help logistics companies can optimize their operations to reduce cost and increase their margins. The logistics firms are moving from a traditional setup to the integration of IT and technology to their operations to reduce the costs incurred as well as to meet the service demands. The industry as a whole has moved from being just service provider to the position where they provide end to end supply chain solutions to their customers. With the help of GST, the logistics companies, which are currently forced to set up many small warehouses across multiple cities can set up just a few, big warehouses region wise and can follow the hub-and spoke model for freight movement from the warehouses to the different manufacturing plants, wholesale outlets, retail outlets and the various POS. The Indian transportation and logistics industry is emerging rapidly to an efficient level along its growth trajectory. Rising investments, rapidly evolving regulatory policies, mega infrastructure projects, and several other developments in recent times have driven the Indian logistics market to a global extent. As the Indian Government introduces MAKE IN INDIA and PPP model program globally, our country continues to emerge as a biggest manufacturing source/partner.
This year has been one of changing business and economic dynamics which presents a huge opportunity for businesses to grow internationally, going forward. UPS is an enabler of global trade for local businesses in India and is well positioned at the intersection of connectivity, technology and efficiency to provide a SMART business network to realize that goal. Therefore, our focus has been on not just business consolidation but also how we can partner our customers in growing their businesses by connecting them to the international marketplace in the most efficient way possible.
Small & Medium Enterprise (SMEs) will continue to be a key focus area for UPS in India. This year, UPS opened an integrated facility at Hyderabad to support local businesses and SMEs, looking to expand trade with the global marketplace. UPS will provide integrated services for small package, supply chain solutions and contract logistics for faster and more efficient access to international markets. It is also easily accessible for walk in retail customers. For the industry, as part of the government’s ‘ease of doing business’ commitment, roll out of a single tax regime in the form of the Goods and Services Tax, is a landmark policy initiative. It aims to facilitate better business conditions, increase speed to market and eliminate redundancies. We will see its impact in the year ahead. India’s Make in India initiative is likely to create opportunities to invest in value-creating businesses.
We will continue to offer a smart network that combines three key areas:
- Connectivity to 220 countries and territories worldwide,
- Investment of over $1billion annually on an unmatched technology infrastructure worldwide that ensures the smooth delivery of 19.1 million packages daily to more than 8.7 million customers and
- Efficiency which ensures there is no idle inventory on either the supplier or the buyer side of the business. In terms of priorities, we have a deep segment focus in India across automotive, hi-technology, healthcare and aerospace.
In Automotive, UPS in India works with some of the prominent automotive brands in the industry. We have a dedicated task force for the auto industry in India. We offer solutions that help build efficiency and improve on a constrained supply chain. Healthcare is a sector that continues to be a focus area for us. UPS PharmaPort™ 360 provides shipment monitoring and protection for temperature sensitive pharmaceuticals and vaccines. In Aerospace we provide solutions ranging from critical part supplies, routine maintenance requirements to Aircraft On Ground (AOG) situations. This precision engineering industry needs fast, reliable and safe movement of goods, last minute deliveries and complex handling requirements.
Overall, UPS has a strong growth potential in India driven by our focus on sectors, speed to market, reduction in costs and increase in efficiencies.
Business in 2017
Demonetisation was a speed breaker and has slowed down the economy though for a good end goal.
Expectations in 2018
Make In India is yet to make an impact on volumes till then we continue to live on hope. Despite this feel 2018 should be better.
Plans for the next 1-2 years
There are major challenges for intermediaries and feel that we shall face fierce competition, due to this intermedi- aries like us need to redefine our roles which is my goal.
Impact of regulatory changes
Demonetisation and GST both have impacted business volumes as well as profitability. I look forward to government simplifying GST rules so that cost of compliance reduces. I am particularly looking forward to government amending the act to give legality to a white paper on GST. Thereafter government along with industry associations should make and ratify a white paper for each industry which should thereafter be the bible for GST implementation. This will ensure there is no litigation between trade and government for difference in opinion on implementation. This will greatly reduce burden on trade as well and will reduce the cost of compliance for GST.
The maritime world is in the middle of a period of rapid change, with increasing digitalisation, new regulations and shifting markets. Classification societies can help to remove barriers, speed up the process, and assist stakeholders make the most of the new landscape. “One of the major contributions of Class in current times of transformation is to bring familiar assurance processes to new and unfamiliar technologies. This will help to ensure a quick uptake and smoother implementation of new technologies which can enhance safety and increase efficiency.
IACS is working to adapt regulations to new needs and remove regulatory barriers. An effective regulation is one that rewards early adopters. At the moment, it could be argued that those who adopt last get the best financial return. Instead, let us embrace the opportunities which arise from the digital transformation and be proactive in addressing challenges.
“GST WILL PLAY A HUGE ROLE IN REDUCTION OF COST IN THE LOGISTICS INDUSTRY IN 2018. WE WELCOME THE E- SEALING PROCEDURE FOR EXPORTERS THAT HAS BEEN BROUGHT OUT BY CBEC. E- SEALING WILL GREATLY HELP IN REDUCING TURNAROUND TIME FOR EXPORTERS. CUSTOMS WILL ALSO RECEIVE COMPLETE DATA OF A CONSIGNMENT FROM THE POINT OF STUFFING BY SIMPLY SCANNING THE E- SEAL.”
Ship systems are becoming ever more complex and increasingly controlled by software. This is leading to new risks, like hacking and cybercrime. Accordingly, the role of Class would expand into new verification fields, e.g. cyber safety, assurance of data quality and sensor-equipped cyberphysical systems. Even so, the methods and processes might change but the purpose of classification remains the same: ensuring safe operations at sea while protecting life, property and the environment.
Business in 2017
Various favourable regulatory policy changes came in to effect in 2017 and therefore it was a great year in terms of transformation of the logistics industry. We experienced a positive approach of all Government officials and we feel that the ‘Ease of Doing Business’ model is being thoroughly worked upon to facilitate better exports and imports and also attract foreign investments into the country. A huge potential is still present in the field of digitalisation, especially in Ports, logistics and Customs area. Digitalisation is fast catching up in the logistics sector and will help in improving efficiency while reducing the cost of logistics. Kolkata Customs has gone ahead with usage of ‘UCC’ Software wherein unclaimed containers lying at CFS, ICD and Port Area can be recorded in a systematic manner. If the container is not cleared in time, proper action can now be taken with the help of the software.
Kolkata Customs will now automatically receive complete records of all containers carrying import cargo which arrive at ICD, CFS and Port Area. On behalf of NACFS, I would like to thank Customs for taking this issue forward under ‘Ease of Doing Business’.
One of the major disappointments has been the insistence to stick to cash payments by certain sections of the Shipping Industry.
Expectations in 2018
GST will play a huge role in reduction of cost in the logistics industry in 2018. I agree that the implementation of GST has not been ideal as the industry was perhaps not completely ready for it. However, now that the stakeholders are getting accustomed to GST, I am confident that GST benefits will assist in the development of logistics industry.
The Govt. of India has come up with a Policy wherein the Logistics Sector has been given ‘Infrastructure’ Status. This will help attract more investments in the sector and lead to its growth.
We welcome the E- Sealing Procedure for exporters that has been brought out by CBEC. E- Sealing will greatly help in reducing turnaround time for exporters. Customs will also now receive complete data of a consignment from the Point of Stuffing by simply scanning the E- Seal. Therefore, exporters will now be able to independently plan their export process and Customs will have complete data at their fingertips. This is a win- win situation for the trade and we expect it to positively impact the EXIM Trade in 2018.
Plans for the next 1-2 years
We see huge opportunity in EXIM Trade with Bangladesh and Bhutan. Keeping this in mind, we intend to expand our presence in the Bangladesh sector. We also intend to have a strong presence in Bhutan by the next 1-2 years. We are confident that multiple modes of transport will be available for EXIM Trade when dealing with Bangladesh and Bhutan.
Zonal Development is expected to take place in Eastern India in the upcoming years. Keeping this in mind, we plan to increase our ICD’s Rake Movements to Haldia Port.
Impact of regulatory changes
Kolkata Port Trust was unable to come up with a proper Land Policy in 2017. There are various Sitting Occupants who have a Formal Agreement with their Original Tenant and are paying full Monthly Rent to Kolkata Port on behalf of their original Tenant. However, the Port is declaring the Sitting Occupant as a Trespasser. Keeping in mind the severity of this problem in Kolkata region, we strongly hope that Kolkata Port Trust comes up with a One Time Scheme for regularisation of Land for bona fide Occupants.
I am also expecting the Government to continue its strong emphasis on Digitalisation under ‘Ease of Doing Business’ with both Port and Customs.
Business in 2017
The Import volumes of major PSUs/Government are on the decline due to Govt’s initiative on Make in India and Import substitution. The Freight Forwarding Industry in India is overcrowded with small Freight forwarders who are offering rock bottom rates with indiscriminate credit to grab market share. This is unnecessarily causing blockage of funds for the Large Corporates thereby affecting further investment and diversification. The Freight Industry is poised for consolidation and the major players are looking for forward/ backward integration for sustainability.
Major achievement for our company has been in sustaining the business despite odds. During the year, we handled a major Ocean Charter including delivery of the cargo after crossing over 1250 kms by Road with Heavy equipment transported on Goldhofer Axles and hydraulic / mechanical trailers. Overall, business scenario during 2017 is moderate. As a freight forwarder we felt that there is slow down in logistics activities in Europe and USA. There is no growth in Export volume.
One major concern for us was the uncertainty amongst the trade in taxability of some services under GST. To a large extent this issue has been settled with the trade taking a uniform stand.
Post implementation of Direct Port Delivery (DPD) especially from JNPT, the volumes available to the CFSs came down sharply and for some CFSs, the fall was even more than 50 per cent of their regular volume. The impact was felt from the last quarter of the last year and presently the volume through DPD is hovering around 35-40 per cent. We have not felt the impact of DPD in other major ports till now although the CFS Association is of the view that the role played by the CFS in the last few years in ensuring that the port works effectively through immediate evacuation of the loaded containers, is no longer relevant in the eyes of the Government. The government feels that DPD will actually reduce the cost of logistics for the importers / exporters by reducing the need for the cargo / container to move through CFSs. Post implementation of DPD, CFSs are trying to re-work their strategies to stay relevant in the Industry. Providing value added services, earmarking a part of the CFS for receiving DPD containers at much lower tariffs etc. are being considered by CFSs.
Expectations in 2018
The Logistics sector has witnessed two major reforms in the recent past viz., implementation of GST and awarding “Infrastructure” status to logistics industry. This will facilitate major reforms in the Industry with consolidation of activities and more and more investment in development of infrastructure like logistics parks, container terminals, private ports, modern warehousing etc. The recent incentive given to the textiles and garment for export will definitely act as a catalyst for growth of these industries which are labor intensive. Govt. should actively consider reducing the GST applicability on freight and origin charges to facilitate the exporters to compete in international markets.
We do hope that 2018 will witness growth in import as well as in export by air and sea. With the thrust on the growth of manufacturing sector and export of manufactured articles, we feel there will be adequate business for CFS and freight forwarders.
We expect growth in sea export activity with the few engineering project exports to East African countries, executions of which are likely in 2018. We also hope that exports from Garment manufacturing units will surely go up in 2018.
Govt. should encourage on a massive scale modernization of big industries and improvement of technologies and enhancement of production capacity particularly in oil refineries, water / irrigation schemes.
We anticipate growth rate of 10 to 12 per cent in Logistics sector in the next couple of years thanks to the major push through GST implementation. Many corporates have a vision to reduce the logistics costs and it appears that ocean shipments may have a different dimension in the overall perspective of the freight forwarding business. With more visibility of departure/arrival schedules, timelines maintained by Liners, relatively lower tariff offered vis-a-vis air movement, ocean movements are likely to score big time over air.
Plans for the next 1-2 years
Our company has already identified the potential of developing the Infrastructure in Logistics and invested in development of multi modal logistics hub in 53 acres of land in Visakhapatnam with state of the art facility and full-fledged railway connectivity with the hinterland. Company has also invested in temperature controlled logistics and opened its first TCW in Hyderabad in March 2016 and the second one in Rai is ready for full scale operation. One more TCW in Mumbai is in advanced stage of commissioning. Company is always on the lookout for meaningful investments in Logistics sphere to shore up its revenues and earnings. Riding on the back of the expertise gained over the years in Exim trade management through our presence in freight forwarding, CFS and warehousing, Balmer Lawrie expects to play a significant role in logistics. The company is working towards its commitment to the trade to provide a single window solution for all its requirement.
Impact of regulatory changes
Our company has always been nimble footed and molded its businesses with the changing dynamics of the Industry. We always keep ourselves updated with the changes in regulatory framework and start preparing well in advance. Accordingly, the accounting, billing and operations platform of the organization were made ready much before implementation of GST. This preparedness has enabled us to transistion smoothly our systems and operations once the GST bill was announced. Hence, we did not have to do firefighting and our system stabilized quickly after initial hiccups.
In today’s business environment post implementation of GST and other customs regulations in place for a quicker release of cargo from Port/airport (which is yet to gain acceptance of trade), business has become difficult and new challenges are thrown almost nonstop to the trade. Currently trade is sulking but quickly coming to terms with the changes imposed by regulatory authorities as most of these are international best practices and India cannot be found wanting in delayed implementation of such practices. A major milestone marked last year was according of the infrastructure status to the logistics sector. The move will help logistics companies access easy finance.
Global container throughput has improved and the prospects for the small and medium-sized orders for container handling have strengthened.
Business in 2017
The sales in 2017 are expected to be lower than the comparable combined company sales in 2016 (€3,278 million). The comparable combined company’s opera- tions comprise Konecranes’ operations without the divested STAHL Crane Systems business, but include the acquired Material Handling and Port Solutions (MHPS) business. Group sales in Q3 were 7.2 per cent below the previous year on a comparable combined company basis. The decrease in the Business Area Port Solutions’ sales related to the timing of deliveries and exceptionally high sales of RTG cranes in the comparison period. The sales in Business Area Service and Business Area Industrial Equipment were affected by similar factors as the order intake, prioritizing the margin improvement through integration activities over the growth.
Expectations in 2018
Economic indicators related to manufacturing industries continue to be strong. Demand situation in Europe is stable within the industrial customer segments. Business activity in the North American manufacturing industry remains mixed. Demand in Asia-Pacific is showing signs of bottoming out. Global container throughput growth has improved and the prospects for the small and medium-sized orders related to container handling have strengthened.
Plans for the next 1-2 years
The integration of MHPS is running ahead of our expectations. In the third quarter 2017, we made progress in optimizing our manufacturing operations in several countries, most notably in India, Italy, and the US. We are building a good starting point for our integration activities in 2018, and laying the ground for the growth initiatives that will be started gradually during 2018.
Business in 2017
2017 was a year about sustainability of business. During this recessionary period we used the time to re- invest in our business and improve the infrastructure at Moloobhoys and strengthen our verticals. We bought new offices in Chennai, Kandla and Visakhapatnam (before the offices were on rent; now we own all our branch offices, except Kolkata).
We are also constructing our own office building in Turbhe which will house our state of the art Liferaft Servicing Station, Lifeboat Servicing Station and FFA Station.We revamped our Life Saving Appliances Servicing business and began Calibration of Gas Detectors. For our FFA Divison, we are going ahead with setting up of hydrotesting facilities at our stations. We sent many of our engineers for several OEM trainings; in order to empower them with the required knowledge and skill set. The disappointments were; that there aren’t many government tenders and new ship building orders are few and far between. As a result of this; too many vendors are chasing too little business – the rates have come down significantly and are sometimes not economically viable. Besides, extremely low rates leads to suppliers taking short cuts – in the liferaft business it is especially appalling at how many liferaft service stations have cheated the customer and shortchanged the Authorities.
The use of date tampered Pyros in almost all liferafts is seriously worrying. Even in the servicing of FFA extinguishers – we have seen such sloppy work being undertaken and in one instance only the label was changed.
Expectations in 2018
2018 will probably be slow recovery for the shipping sector where we limp back to normalcy. Hopefully 2019, would be a fuller and more healthy recovery. However, I personally feel, recession is the best time for infrastructure building and consolidation of activity or for starting new verticals.
This lean period allows us to access good people at reasonable salaries and enlist outside third party services at affordable rates. We are concentrating on the UAE and GCC countries and establishing our subsidiary there. Our new vertical of Maintenance of Boats is exciting and creates new business opportunities.
All this we are nurturing in a slowdown period so that when the boom comes we are well positioned to participate in the “Ache Din”
In terms of expectations, we believe that under the leadership of our dynamic Shipping Minister Shri Nitin Gadkari, coastal shipping will get a big boost and this will lead to small shipyards building River Sea Vessels (RSV) which will give an impetus to the shipbuilding industry. We even see the Defense Sector giving us business opportunities as it readies itself to take on the challenges of terrorism and threats from neighbouring countries.
Plans for the next 1-2 years
In next couple of years we plan to capitalize on the infrastructure that we have built; both in terms of brick and mortar infrastructure and manpower. We want to expand in the area of Boat Maintenance, since we feel there will be a huge requirement of professional maintenance of boats of the Indian Navy, Indian Coast Guard and Marine Police.
We have begun calibration of gas detectors, hydrotesting and refilling of cylinders and expanding our life saving department. We also plan to start an automation section – this will make us a one stop shop for marine customers. Our plan is also to start subsidiaries in GCC countries over the next couple of years.
Impact of regulatory changes
The “CONCEPT” of GST in particular did not affect us much; since all IGST and SGST paid to the government could be offset from the same recovered from customer.
However, the “PERCENTAGE” of GST which is a whopping 28 per cent on most goods and 18 per cent on services, serves as a major disincentive for foreign companies to undertake various jobs in India and most of them postpone their annual inspections to next port of call, which is outstide India. This has seriously affected our business. Relatively high rates of interest make the cost of capital still unaffordable and it stymies growth.
We really wish the Shipping Ministry would relook at some of the policies; especially with regard to importing transmitting equipment. The nightmare we go through to obtain various WPC (Wireless and Planning Commission) licenses is demotivating besides being time consuming, leading to delays which result in ships picking up the equipment in countries like Singapore and UAE, and as usual Indian loses out.
What we really look forward to is that the government delivers on its promise of ease of doing business in India. As the country has significantly notched up its position in the World Bank’s global index for ease of doing business in 2017, this is attracting multinational players to India for setting up manufacturing and export units which will add to the growth in India’s export/import trade.
Business in 2017
LCL Logistix witnessed 2017 as an incredible ride of both ups and downs – a mixed bag. The company witnessed all – from business pressures to regulatory surprises, a lot of challenges have surfaced. We at LCL Logistix now setting our radar for all the forthcoming shifts in the logistics industry. We have achieved holding 2017 better than the last year, integrating our operational bandwidth and driving business synergies.
Expectations in 2018
We see 2018 with a positive outcome of the regulatory proceedings that have ruled 2017 and reward the much awaited comfort zone for all the industry participants. The signs till now seem to be on track and we expect it to meet the industry expectations.
Plans for the next 1-2 years
Today LCL Logistix is part of the French shipping conglomerate – CMA CGM and all set into integrating its position and driving out the synergies that will unleash its renewed long term business vision and objective.
Impact of regulatory changes
The company embraced the regulatory changes and is ready to uphold the short term shakes for a long term standing. Some policy changes like DPD indeed have taken toll in certain segments of our business, but still we are in the position to outperform taking advantage of the new outlook of the industry, especially the initiatives by the government towards ‘ease of doing business’. We are glad to watch the industry slowly gaining importance in the government portfolio and rising its status carving a niche in the federal vision and perspective.
Business in 2017
“WHILE DISRUPTIVE INNOVATION IS RISKY, IT’S NOT AS RISKY AS CLOSING OUR EYES AND STICKING TO BUSINESS AS USUAL. THAT’S WHAT KODAK AND NOKIA DID. IDENTIFYING PROBLEM AREAS FOR THE CUSTOMERS IS KEY . IF YOU MANAGE TO INNOVATE ON THOSE YOU MIGHT BE FORTUNATE TO FIND SOME FIRST MOVER ADVANTAGES.”
This year, 2017 was a marked improvement over 2016. Failures of major players such as Hanjin posed a grim picture for containered trade. While there were no disappointments, we were careful to tread and happily exceeded our targets. Cost cutting tools and running a zero wastage policy helped us tremendously. People management is most essential and we believe in training our people well which is essential in this ever changing industry. The survival of the containered sector is at the mercy of market forces. We have to navigate in stormy seas.
While container shipping operations seem simple enough to understand and operate, failure to read market forces can spell disaster for players-big or small. While big companies got it wrong, one wonders whether decisions are based on foresight or experience or rather both.
Expectations in 2018
There will be more consolidation on a smaller scale as strong owners and operators flex their muscles to acquire tonnage and smaller companies find going tough. This could herald the start of a series of mergers especially for companies operating mixed fleets where cash flow is tight. Asset play is very much in evidence with distress sale acquisitions very much the order of the day.
Plans for the next 1-2 years
Sitara has always been focused on the niche market of ODC cargo. We plan to strengthen this niche, add new fleet, target more difficult to handle shipments and strengthen our clientele base. So far we were only operating between the gulf and Indian sub-continent but now we are looking at our destinations as well. Several times i have been asked why we remain of this “size” and it reminds me of what Peter Drunker says about being the “right size”
Absolute size by itself is no indicator of success and achievement, let alone of managerial competence. Being the right size is.
Impact of Technology
The shipping industry is facing more threats than ever from technology changes and from environmental regulations. We should embrace different technologies that could disrupt existing businesses.
Companies such as Amazon, Google are looking to deliver new digital technologies into the shipping sector, which could revolutionise the industry. They could become digital disruptors to the traditional shipping industry. Depending on how you approach innovation, it doesn’t always have to be expensive. It’s not necessarily about inventing new technology, but about smart thinking. Shipping is one of few industries yet to experience the huge digital shift, and we need to be proactive to stay ahead of new competitors from outside of our own industry.
An innovation strategy is needed for each company to take on the regulatory challenges and to find ways of being more sustainable – environmentally and financially.
Business in 2017
The year 2017 was phenomenally special for Kale Logistics Solutions. We have not only grown in terms of business but have also progressed as an enterprise. We have seen triple digit percentage growth in volumes across our solutions as well as customer base spread across 54 global locations.
Kale Logistics has set-up a “Centre for Innovation for IT in Air Cargo Industry” with an initial seed investment of $25,000. The objective of this ‘Centre of Innovation’ is to ground groom the Air Cargo industry in adopting IT for an agile, effective and equipped Air Cargo business.
Kale has augmented it presence in the Middle East and Africa with a new customer service and business development set-up at Dubai and Mauritius respectively.
Expectations in 2018
We believe that technology is meant to drive transformation for all kinds of businesses and 2018 promises to be a significant year in this process. The surge in e-commerce, the changes in trade policies across the globe and the focus by agencies like IATA, TIACA, IPSCA, IMO, WTO and the UN to push for trade facilitation as a key part of their programs augurs well for the industry.
It is amply clear that technology is going to be the key disruptor as far as the global logistics and supply chain industry is concerned. I expect the Logistics Service Providers (LSP) to come together in a unified manner to charter a plan that would focus on how to optimise the sector. Transition from legacy systems to complete digitization could be a way to attain that. The future of Logistics will be shaped by the level of digitization and automation it undertakes. However, adoption of technology on this scale will need robust technical solutions, fairly insightful research and smart financial investment.
Another expectation is an introduction of new financing schemes from policy makers for developing modes of transport and the infrastructure surrounding them. It is important for the government to facilitate development of waterways and logistics parks for faster and efficient cargo movement. Currently India spends about 14.4 per cent of its GDP on logistics and transportation. The Indian Logistics industry is expected to exhibit a robust growth of 10-15 per cent annually, leading the pace of economic growth.
Plans for the next 1-2 years
We are slated to grow significantly in the next 2 years. We have invested and will continue to invest in business development, product development and cutting edge technology. We will also be expanding our customer base and portfolio in Maritime space and aspire to become the World’s undisputed best logistics technology company in the next 3-5 years’ time. We will be investing more in R&D on solving the trade facilitation problems with our community platforms like UPLIFT and CODEX across the Logistics domain.
Investment in logistics infrastructure
A recent study by industry experts expects India’s logistics market reach $307 billion by 2020. The government has already shortlisted about 15 locations India-wide with a budget of approximately `32,853 crores for setting up Logistics parks. The Railway Ministry has proposed to set up a Railways of India Development Fund with initial corpus of $5 billion, with the World Bank as the anchor investor. The fund is essentially to mobilise private participation in remunerative projects, mostly catering to freight movement.
