DIGITALISE AND REDUCE LOGISTICS COST

The last year has seen Maersk evolve into an end-to-end logistics solution provider. Moving forward, the focus should be to reduce logistics cost in the overall GDP and facilitate faster adoption of technology by government and other key industry stakeholders, reveals Steve Felder, Managing Director, Maersk South Asia

Q  How has been your business in 2019? What were the major achievements and challenges?

In 2019, our focus has been on moving beyond shipping and expanding our outreach across the supply chain to provide end-toend logistics. And in reaching this goal, we have led many initiatives in the past year

  • In our efforts to bring down the costs of logistics, we partnered with BlackBuck, India’s largest trucking platform by digitizing containerised trucking and increasing accessibility and reach.
  • In order to provide better customer experience, we introduced new product offerings such as Maersk Spot, which is an online portal that ensures transparency on bookings and pricing to customers, offers instant booking and guarantees loading. Overall, this product offering was significant in improving reliability, achieving higher customer satisfaction and promoting ease of doing business.
  • Value Protect is another product we launched for our customers to extend our liability and reduce cargo risk.
  • We even launched Maersk Accelerate, a premium service which shows transit benefits and overheads reduction. This offering gave us an opportunity to deliver on our capabilities & execute premium offering at a controlled scale. In terms of expanding trade opportunities, we achieved the following:
  • We piloted cargo on the newly inaugurated National Waterways –1, thereby tapping into multimodal transportation by moving cargo from Varanasi to Kolkata, and from Kochi to Kattayam.
  • We also notably opened opportunities for refrigerated or reefer cargo for international and domestic trade with our first mile delivery reefer service to transport butter from Uttar Pradesh to Turkey and with successful shipping of mangoes from Nhava Sheva, Mumbai to Felixstowe in London.

One of the most pressing challenges in 2019 has been the softening of the global economy and weakening of the domestic demand leading to flat growth in trade in 2019 as compared to the higher growth we have seen over the last few years.

Infrastructure has also been a point of contention, in terms of last mile connectivity. Non-paved road, lack of maintenance, intersections on highways are few bottlenecks when it comes to hinterland infrastructure which ultimately leads to lack of efficiency in moving cargo.

Q  How has the shipping and logistics industry shaped up in 2019? What were the significant trends that shaped the industry?

While the global container demand was lower in 2019 due to weaker growth in the global economy, India witnessed a broadbased slowdown in its import export trade as well after a growth of several years. This is aligned closely with the weaker domestic demand, tight liquidity and working capital as well as a reflection of the overall cyclical weakening of the economic environment in all the main global economies. The escalating trade restrictions led to reduced bilateral trade between the United States of America and China, the two major manufacturing economies, resulting in shifts in the trade structures, with some sourcing moving away from China to South East Asian countries.

In terms of digitalization efforts from the Government, the Port Community System (PCS) has proven to catalyse trade processes and improve transparency. The technology enables all stakeholders to communicate one with another electronically and is helping in digitising the process of documentation, thereby ensuring transparency, avoiding errorprone transactions, improving efficiency and above all, reducing labour costs by diminishing the need for manual labour. Taking this forward, the Sea Cargo Manifest and Trans-shipment Regulations (SCMT) which came into effect on 1st August 2019, was another step towards maintaining transparency with online submission of documents and a quicker clearance process.

A year into the implementation of Cabotage relaxation, there has been a meteoric increase in transhipment volumes in India. And at Maersk, we aimed at increasing transhipment at ports in India, position empty containers in deficit locations, and optimize the ease of doing business for importers and exporters.

Q  Looking forward what are your expectations in 2020? What will be the major opportunities, challenges and growth drivers?

Moving forward, the basic requirement we see in the shipping & logistics sector in the upcoming year is the need to reduce the cost of logistics in the overall GDP and facilitating faster adoption of technology by Government and other key industry stakeholders. The problem can be resolved by developing logistics hubs at various strategic locations across the nation. While the focus should be on modernising existing port infrastructure and creating new ones, we should keep a keen eye on initiatives aimed to develop sustainable development in the industry including promoting green technology and most importantly skilling the talent to endure the evolving operation structure. The International Maritime Organisation (IMO) adopted a new regulation effective globally from January 01 2020 for reducing emissions from vessels. This will contribute significantly to making our industry more sustainable in the future, as it will bring substantial improvements to human health in coastal areas. India’s recent ratification to the Hong Kong Convention, is another such example that will set global standards for safe and environmentally-sound ship recycling in the country.

In terms of opportunities, we expect Government and other stakeholders to get onboard the more connected and transparent cloud system on a global scale, TradeLens which is a Blockchain technology that Maersk has developed in collaboration with IBM. It aims to facilitate interactions between shippers, regulatory and administrative entities in the country, amplifying the visibility of trade transactions. Per day, there are currently 1.5 million events and 10,000 documents captured. As per a recent study by QBIS (Quantifying Business Impacts on Society), TradeLens potentially could save importers trading at Nhava Sheva up to $220 million a year and exporters up to $40 million in lower transport and logistics costs, notably from shorter lead time and less frequent delays.

Q  On the regulatory front what can the industry expect from the government?

From our point of view, in the transportation industry we are on the right track, as we have major investment programmes under Sagarmala and Bharatmala. We have got digitization initiatives starting to take off. The relaxation of the Cabotage Law in 2018 was a positive measure which further helped inter-coastal trade flourish. The Multimodal Transportation of Goods Act 1993 is being revised currently. Measures such as permitting foreign direct investment (FDI) of up to 100 per cent under the automatic route for projects related to the construction and maintenance of ports and harbours is another step in the right direction.

We hope to see further progress on the country’s infrastructure and connectivity owing to Government initiatives. For instance the Ministry of Commerce & Industry for the first time is planning to set up a separate ‘Logistics Wing’ to address the micro challenges faced by the industry. The government has also initiated National Maritime Development Programme (NMDP), an initiative to develop the maritime sector with a planned outlay of US$ 11.8 billion. As of Union Budget 2019-20, the total allocation for the Ministry of Shipping is `1,902.56 crore (US$ 272.22 million). While we seem to be well on our way in meeting our targets owing to the several measures set in motion by the Government of India, there is still a long-way to travel.

The Government’s ambitious target of making India a USD 5 trillion economy requires focused approach in implementing reforms and measures in the logistics sector. This may be feasible provided infrastructure and technological investments can be progressed across the country, further supported by robust policy reforms towards strengthening connectivity, especially towards the hinterlands and coasts.