Saturday, August 9, 2014

Indian Port Sector


International seaborne trade grow and fall in tandem with the developments in world economy and global merchandize trade. Maritime transport is the backbone of international trade and a key engine driving globalization.  Indian economy is at the threshold of a golden age of growth and maritime trade has a significant role to play. Around 95% of Indian trade by volume and 70% by value are carried by sea.  It is anticipated that the surge in trade will demand enhanced sophistication in logistics infrastructure and services across modes.

Goldman Sachs economists say that over the next 50 years,  the BRIC economies (Brazil, Russia, India and China) could become a much larger force globally. The Goldman Sachs economists predict that India will overtake Italy in 2015, France in 2020, Germany in 2023 and Japan in 2032.   Also they say: “India has the potential to grow the fastest over the next 30 to 50 years.” Its GDP growth rate will stay above 5 per cent till 2050 (Source : Report of working group for the port sector for the 12th five year plan (2012-2017) , GoI, MoS, October 2011).
Indian Port Sector
India has an expansive coastline of about 7517km, studded with 12 major and 200 notified Non-Major  ports.  The 12 Major Ports are administered by the Central Government, while the 200 Non-Major Ports are under the state governments and union territories. 

India’s Major Ports, with the exception of  Ennore, are administered by port trusts  under the Major Port Trusts Act, 1963. The Port Trusts function as semi-autonomous bodies under the administrative wing of the Ministry of Shipping. The major ports are Kandla, Mumbai, Jawaharlal Nehru Port Trust (JNPT), Mormugao, New Mangalore, Kochi and Port Blair on the west coast; and Kolkata, Paradip, Vishakhapatnam, Ennore, Chennai and Tuticorin on the east coast . Ennore, a satellite port of Chennai, has been corporatised with the Government of India holding a two-third stake, and the Chennai Port Trust the rest. 

The responsibility for the development of Non-Major Ports vests with the concerned state government.  They are  administered under the Indian Ports Act, 1908. The department in charge of ports or the State Maritime Board is responsible for formulation of  policies and plans, regulating and overseeing the management  , attracting private investments  , enforcing environmental protection standards and so on. Maritime boards have so far been constituted in Gujarat, Maharashtra and Tamil Nadu.

Traffic Trends
The volume of cargo traffic handled by ports depends mainly on the performance of the global and domestic economy. Trend in cargo traffic handled both at Major and Non-Major ports are given in the below table
Cargo Handled at Indian Ports (Million Tonnes)

Ports/Year
2010-11
2011-12
2012-13
2013-14
 
Major Ports
570.09
(1.6)
560.19
-(1.7)
545.83
-(2.6)
555.49
(1.8)
Non-Major Ports
315.36
(9.1)
353.74
(12.2)
387.92
(9.7)
420.24
(8.3)
All Ports
885.36
(9.1)
913.93
(3.1)
933.75
(2.2)
975.73
(4.6)


Note : Figs in parenthesis indicate growth over the previous year, Source : Update on Indian Port Sector 31.03.14, Transport Research Wing, MoS, GoI

Commodity Profile
The cargo composition of traffic handled in major ports in 2013-14 is POL 33.7%, Container 20.6%, Others 19.9%,Coal 18.8%, Iron Ore 4.5% and Fertilizer 2.5%. It is to be noted that about 53% of the traffic handled in Major port is POL and Coal, two major energy sources. Coal and POL shows a growth of 20.4% and 3.6% respectively with respect to the previous year and the upward trend is expected to continue in the coming years too. Container, fertilizer and Iron ore slipped by 4.4% (-3.3% in terms of TEU) , 7.4% and 9.2% respectively. The decline in Iron ore is mainly due to the restriction of mining of iron ore in Karnataka and the ban in Goa.

Container traffic depends mainly on manufacturing sector and the negative trend is the reflection of world economy slowdown, especially the advanced economies.  The only major ports which showed growth in container traffic during 2013-14 are Vizag, Tuticorin, Cochin and Mangalore. JNPT and Chennai continue to be the No.1 and 2 ports in container handling at a rate of 55.8% and 25% respectively in terms of TEUs.

Non-Major ports handled about 43% of the total seaborne trade of India in 2013-14. Gujarat, Andhra Pradesh and Maharashtra are the leading maritime states in promoting Non-Major ports. Mainly POL and Coal accounted for about 70% of the cargo handled at Non-Major Ports.  

Traffic Projections
The economic slowdown in the world trade and domestic growth slowdown  adversely affected cargo traffic handled by Major Ports in 2012-13, growth was -2.6%.  However , 2013-14 shows a positive growth rate of 1.8%. For Non-Major Ports, the annual growth in cargo traffic is assumed at about 10-11%. Keeping in view the trends in the share of commodities, total cargo traffic at Indian ports is estimated to increase from 976 million tonnes in 2013-14 to 1,278 million tonnes by 2016-17. 

Commodity wise traffic projections (in million tonnes)from 2016-17 to 2031-32 are as under  

Year/         2016-17     2021-22     2026-27    2031-32    CAGR%

Cargo       

POL                468              569             693                843            4

Iron Ore        107              118              131                144            2

Coal                258              379              556                817           8

F&FRM            42                 49               56                 65             3

Container     206              302            444                652              8

Others           198              278             390                 546           7

Total            1,278          1,695       2,269             3,068 

Source : NTDPC Report,2014. 

Port Capacity
The existing capacity available in million tonnes at Major Ports as on 31.03.14 for each commodity is as under (Source : Update on Indian Port Sector 31.03.14, Transport Research Wing, MoS, GoI):                 

                          Commodity      Port Capacity

                                                 In Million Tonnes

POL                291.90

Iron Ore           72

Coal                  65.95

Fertilizers         11.30

Containers      140.21

Others             219.16

Total              800.52

From the above traffic projections and the existing capacity status, it is evident that port capacity needs to be planned and developed in a big way , separately for each commodity group as each requires different facilities. The international practice for ports is to plan for cargo handling capacity of 30% more than the projected traffic so that pre-berthing detention of ships is minimised.

Thursday, June 26, 2014

What is EDI ?


EDI is the short form for Electronic Data Interchange , exchange of electronic data using inter-organizational information system.  In other words, EDI is an inter-organizational computer to computer exchange of standard business docs, in a structured and machine processable format, with the objective to  eliminate duplicate data entry and to improve the speed and accuracy of the information flow.

 

How EDI Works ?

EDI require set of hard ware and soft ware and standards that accommodate the EDI process.

 

Who uses EDI ?

 

What is ERP ?


ERP is the short form for Enterprise Resource Planning,   a business process to integrate all functions across a company to a single computer system that can serve all specific needs of the company. ERP is  an integrated set of application software modules ,providing operational, managerial and strategic information, to improve the productivity, quality and competitive advantage. It may also integrate key customers and suppliers as part of the enterprise’s operation and provides integrated database and custom-designed report systems. It also adopts a set of “best practices” for carrying out all business processes. Integration” is the key word for ERP implementation.

 

Major reasons for adopting ERP

ü  Integrate financial information

ü  Integrate customer order information

ü  Standardize and speed up operations processes

ü  Reduce inventory

ü  Standardize Human Resources information

Monday, March 17, 2014

Third Party (3PL) and Fourth Party (4PL) Logistics

OUTSORCING - paved way to 3PL & 4PL

  Outsourcing is one of the important features of SCM . It is the usage of other agencies to carry out non-core activities of an organization.
  First , the parent organization separate the value adding and non-value adding activities. They concentrate only on value-adding core functions and leave the other activities to those who have the expertise.
  In other words ,  do what you are best at and leave all other non-value-added activities to more suited players. This is the concept behind 3PL & 4PL.

            Third Party Logistics or 3PL

  3PL and 4PL are terms coined by Accenture, an international research and consulting firm to describe the outsourcing of certain key business fulfilment tasks to other companies.
  The outsourced functions include service managements in - demand, supply, transportation , materials , production, green supply chain and financial supply chain
  Outsourced tasks such as warehousing, picking, packing, shipping and inventory management helps to manage the supply chain more efficiently and effectively.
  Some 3PLs might also help with the administrative side of these tasks, such as invoicing and accounts receivable.
  Logistics planning, customized logistics  solutions, warehouse management, Inventory Management , shipment consolidations , carrier selection, rate negotiations, fleet management, LIS , tracking/tracing ….etc….. are the functions carried out by 3PL firms.

ADVANTAGES OF 3PL

ü  Cost Reduction
ü  Maximizing Revenues
ü  Facilities
ü  Cost control
ü  Working Models
 

WHY 4PL ?

ü  3PL often lack broad set of skills, integrating technologies, strategies and global reach.
ü  To build up this, 3PLs go for collaborations with consultancies and technology providers
ü  Corporations outsource their entire set of supply chain requirements to one organization, who will assess , design, make and run integrated comprehensive supply chain solutions.
ü  This evolution is Fourth – Party Logistics or 4 PL.

Fourth Party Logistics or 4PL

ü  In 4PL, logistics is controlled by a service provider that does not own the assets to carry out logistics activities but outsources to subcontractors, the 3PL
ü  Globally, about 75 % of the Fortune 100 companies and about 45% of Fortune 500 firms have now gone in for 4PLs.
ü  A 4PL provide effective transport along with an entire distribution system, high reliability, transparency, quality, efficiency and design new distribution scenarios
ü  A 4PL company serve as consultants who manage the relationship between the principal company and one or more 3PLs to make sure all operations are running smoothly.
ü  They can carry various levels of responsibility, from advice on choosing the best companies, right up to the day-to-day management of essential logistical tasks being performed for the principal company.
ü  4PL caters to various clients, economies of scale is attained as the investment is spread across clients.

STAGES  OF 4PL SOLUTIONS

ü  Reinvention - Align business strategy with supply chain strategy
ü  Transformation – Focus on improving supply chain functions. (sales, ops, distribution, customer support )
ü  Implementation – Implement recommendations for efficient use of SCM
ü  Execution – Takes operational responsibility for multiple supply chains functions and ops.

3PL / 4PL COMPARISON

  3PLs adopt a scientific approach to logistics, to optimise cost and improve service levels and response. They also help clients achieve efficient inventory turnover and working capital management.
 
  4PLs facilitate single-point reference for all logistics needs, possess knowledge of logistics to obtain most efficient and effective solutions, have manpower resources of higher quality to supervise vendors and ensure continuous process improvements and, above, all an IT base to network customer systems.
 

Tuesday, February 18, 2014

MANAGEMENT STRATEGIES OF EMPTY MARINE CONTAINERS


THE BACKGROUND
Since the beginning of containerization , the shipping industry has shown enviable developments in increased productivity, vessel capacity, speed ,safety , reduction in service time and cost. Despite these achieved efficiencies, marine container logistics has been suffering from severe trade imbalances between the major trading regions. And these imbalances cause one of the biggest hidden costs to the shipping industry– repositioning of empty containers!  As per an article appeared in the  Shippingwatch , every year Maersk Line moves around 4 million empty container from point A to point B which costs around USD 1 billion. 
Drewry Shipping Consultants estimated that there were over 82 million port to port moves of empty TEUs worldwide in 2010.  The Port of Los Angeles alone reported 831,370 empty TEU shipments during the first half of 2011, representing over 42% of their outbound container traffic.
 
                                                 

 
Empty Containers are repositioned at various levels , namely Global ,interregional, regional and local.
 
(b)   The inter-regional level involves either balancing repositioning inside a wide geographical area ( within Asia , Europe , ISC) or on a leg finally leading to global repositioning ( Tuti / Chennai > Colombo / Port Kelang > Europe / USA).
(c)   The regional level involves the empty balancing between ports / ICDs of same region  (Cochin to Tuti / Mangalore /Bangalore/Coimbatore) by road , rail or by sea using coastal services.
(d)    The Local level involves empty shunting between marine terminal and depots, the  storage and maintenance issues.
 

Each empty container move involves fuel and electrical consumption by ships, terminals, trucks, and railroads and results in excessive unproductive empty vehicle miles in a region. Hence, another important aspect to be considered associated with repositioning empty containers is the carbon footprint. 
Due to insufficient port / depot infrastructure and poor logistics management strategies of the carriers, the whole process of empty container evacuation used to be cumbersome , time consuming and expensive. This situation demands for an empty container management strategy which rationalizes the repositioning, storage and maintenance of empty containers in major importing regions. For formulating a suitable management strategy, issues mentioned in the below chart are to be addressed.
MANAGEMENT STRATEGIES
Various empty container logistics management optimization strategies for minimizing the cost to carriers are currently either being explored or implemented to a certain extent. The most popular strategies includes :  
(i)            Effective service net work design with empty container reposition considerations to avoid vessel calls dedicated to empty repositioning.
(ii)           Matching cargo to empty containers to reduce empty frequency
(iii)          Design of a empty storage & maintenance network
(iv)          Transportation options for less expensive repositioning.
Among the upcoming management strategies to reduce the energy, cost and effort to reposition empty container , the most popular one is  the concept of folding containers.  Presently a number of options are under various stages of implementation, including Staxxon folding/nesting container technology (New Jersey), Holland Container Innovations (Delft), CargoShell (Rotterdam) and Foltainer (Brisbane), all of them have developed their own collapsible or composite container designs.  If empty containers can be folded and nested and moved in sets of 2 or more,  occupying the same space and dimensions as one container,  operators  could  save huge money on account of transportation, handling and storage. 
Another recent innovation is the Tworty Box, two 20 ft containers that can be linked together to form a single 40 ft unit ! The first tworty box completed its maiden voyage from Hamburg to Montreal on the containership OOCL Montreal.  
Even though the empty container repositioning is a non-revenue generating, complex, expensive and undesirable exercise, it is an integral part of the maritime sector, which balances demand and supply between regions. Ultimately only time will tell whether it is folding containers, tworty  boxes, trans-loading, or some other solution to address this growing global issue .