Multimodal Logistics Hub & their Future Potential in IndiaSPJIMR

AgendaqI tro d u cti n n o qS i n i ca n ce o f Lo g i cs g fi sti qD i re n t m o d a l o f Lo g i cs ffe s sti qM u l m o d a lLo g i cs H i ry ti sti sto qG l b a lPe rsp e cti o ve qI d i n p e rsp e cti n a ve qV a l e A d d e d S e rvi s & G o vt u ce p o l ci s i e qR o a d b l cks to su cce ss o qR o a d A h e a d

Era of GlobalizationqWorld undergoing significant developments. qIncrease in the trade across the nations

Efficient Logistics becomes key for Globalization

Source to Destination Logistics flowS ta tisticsqTransport dependence : If transport cost doubles, 0.5 % points dip in economic growth qToday approximately 95% of worldwide general cargo movement is in containers. qContainership of 12,000 TEUs are presently operating and 15,000 TEUs are on the drawing board. qWorld Container Throughput Zero in 1965 to 225.3 mn moves in 2000 More than doubled by 2010

Indian Logistics Sector (1/2)qI p re ssi ra te o f 8 % to 1 0 % si ce 2 0 0 2 to u ch i g re ve n u e s o f $ 1 0 0 . 1 m ve n n b ilo n i 2 0 0 7 - 0 8 li n qI d i ra n ke d n a 4 7 th amongst 150 countries in terms of logistics p e rfo rm a n ce d u ri g th e ye a r a s w e l a s i fu tu re p o te n ti l World Bank's n l ts a Global Logistics Report 10 qExpected to grow annually at rate of 15 to 20 %, reaching revenues of $385 bn by 2015 qNearly 94% of the logistics & distribution requirement is dominated by a large no. of small fleet owners (5-10 trucks) and these account for 80% of the revenues. Source:Datamonitor 2007)

Indian Logistics Sector (2/2)Picture of inefficiency : qAverage time taken to clear import and export cargo at ports is about 19 days in India, against three to four days in Singapore. FICCI-Ernst & Young (E&Y) qAs compared to the European countries, rail transportation in India is almost 3 . 5 times more expensive and the average transit time by road is three times higher. qLogistics costs, which includes transportation, warehousing, packaging, holding and inventory accounts for nearly 13% of Indias GDP which is very high when compared to developed countries such as Japan and USA. (Cushman & Wakefield 2008)

Key demand variablesThe future of the Indian logistics and warehousing industry currently governed by three key factors: qBurgeoning domestic demand Emergence of organized retail: Increase in foreign trade: India becoming a manufacturing hub qReducing logistics costs From multiple taxes to a simplified tax regime: qImprovement in infrastructure is

Transition of modals in logisticsUni - modal transportqRoad, train, Flight, Ship- Individual qMany service providers qNo synchronisation qHighly inefficient

Multimodal Transport :

The door-to-door movement of goods under the responsibility of a single transport operator known as a Multimodal Transport Operator (MTO) on one transport document MT is a chain that interconnects different links or modes of transport -air, sea, and land- into one complete process that ensures an efficient and costeffective door-to-door transport

Characteristics :

qIn tandem with containerization qCost effective & More efficient qHigh Information exchange (TCMS)

Multi-modal LogisticsThe development of a global multimodal hub strategy requires a strong focus on the development of a single mega-infrastructure incorporating a world class integrated airport and port zoneAnticipated characteristics qGood connections to the neighbouring regional markets qDevelopment of infrastructure qFree zones in the inner country, close to the relevant consumption qProduction markets

Various modals involved

qDeep-Sea shipping qFeeder shipping qBarges qAir transportation qDrayage and shuttle services qLocal road delivery

Multi-modal Logistics: History

Multimodal Transport Law 1973: Commercial community created a set of MT rules under the ICC banner. 1980: Multimodal Transport Convention singed - but received little support. 1990: Commercial parties joined with UNCTAD and introduced the UNCTAD/ ICC Rules for Multimodal Transport Documents, which replaced the 1973 Rules. - FIATA/ FBL - BIMCO COMBIDOC is now commonly used in commercial practice - Indian Law on Multimodal Transport - United Nations Commission on International Trade Law (UNCITRAL) Draft Convention (IMMTA Working Group)

Multi-modal Logistics: Global perspective

Global Trends favoring growthqGlobal logistic industry valued at US$320 billion , growing at 3-10% per year qIncreasing preference for integrated SCM outsourcing models , co-ordination of flow of goods , information , funds qProjected SCM outsourcing growth rate -15% in Asia compared to 7% in Europe and 10% in North America qAsian shippers have outsourced only 2.5% of their logistics

Opportunities & CompetitionqCurrent hubs in Europe are Rotterdam and Hamburg for sea freight and London , Amsterdam , and Frankfurt air freight qSighting huge opportunities in future on account of its location advantage Middle East is making huge investment in multimodal hubs. qEg. Panalpina opened 45000 sqft hub adjacent to the new Al Maktoum International Airport and the Jebel Ali seaport between Dubai city centre and Abu Dhabi qCountries like Singapore , Taiwan , Malaysia , Hong Kong , Thailand and Philippines are positioning themselves to be logistics hub

Multi-modal Logistics: UpdatePanalpina Open Dubai Multimodal Logistics Hub

q45,000 square feet office space qHuge multipurpose logistics operating area

Comparison of diff. Modes of TransportRoad Rail Water

Air

ADVA Network of 3.3 mn km Spread over 81,500 km, carries 25% of NTAG 2nd largest globally Accounts for 55% of total freight EStotal freight movement Low transportation Wide reach cost as compared to Easy accessibility to road small markets

Cheapest mode of Fastest mode of transport transport

DIS High cost of ADVA transportation NTAG National Highways account for only 2% of ESthe total network but carries 40% of total freight

Bulk commodities account for 90% of total freight revenues Inflexibility to reach deep interiors

Poor state of inland waterways in the country High turnover time

Low freight movement 87% of total freight traffic being handled by airports in metro cities

Key Developments - Indias Transport Infrastructure

Dedicated Freight Corridor

Dedicated Freight CorridorFeatures Western Corridor Route JNPT Ahmedabad Description Palanpur Tughlakabad/Dadri Route 1483 km Kilometer Speeds 100 kmph Traction Electrified (2x25 KV AC) Axle loads 25 ton Traffic (2021- 128 million tons (264 22) trains) projections 1516 km Feeder routes Total Cost Rs. 26,124 crore Eastern Corridor Dankuni Gomoh Kanpur Ludhiana 1806 km 100 kmph Electrified (2x25 KV AC) 25 ton 144 Million tons (160 trains) 3071 km Rs. 23,500 crore

Multi-modal logistics hubs/parks (MMLP)A multimodal logistics park is a facility which provides a wide range of logistics services like qIntegrated and accessible by multiple modes (rail, road, maritime, air) qComprising container terminals, bulk/break- bulk cargo terminals, warehouses, q3rd Party Logistics (3PL) players qInland Container Depots (ICD)/Container Freight Stations(CFS), banking, packaging, office space and facilities for manufacturing, qParking, mechanized handling, inter-modal transfers, sorting/grading, cold chain. qAggregation/disaggregation to handle domestic and EXIM freight.

A typical layout of a MML Park (Source: CII 2009)

Elaborating on major entitiesThird Party Logistics ( 3PL ) Third party logistics is a supply chain practice where one or more logistics function is contracted to a third party organization and not carried out internally. Public - Private Partnerships ( PPP ) generally refers to a government service or public business which is generally funded, managed and/or operated through private Partnerships. 1.Design-Build (DB) 2.Design-Build-Maintain (DBM) 3.Design-Build-Operate (DBO)/ (BTO) 4.Design-Build-Operate-Maintain (DBOM) 5. Build-Own-Operate-Transfer (BOOT) 6.Service Contract: 7.Management Contract: 8.Concession 9.Divestiture

Containerization - 1C o n ta i e r B ox th a t m a ke s th e w o rl g o ro u n d ! ! n d C o n ta i e r m a rke t g ro w i g 3 ti e s fa ste r th a n th e n n m e co n o m y S ta n d a rd si s o f 2 0 a n d 4 0 l n g th , 8 b re a d th a n d ze e 8 .5 /9 .5 h e i h t g

Containerization - 2Internal Container Depot ( ICD )qInterface between connecting modes of transportation qTotal package to handle export &import containers and general cargo flows between road, rail and waterways in a cost effective manner with intermediate services qContainer repair and cleaning facilities qCustoms - Examination of cargo and duty assessment for exports and verification of integrity of the material in the case of imports Container Freight Station ( CFS ) Port facility for loading and unloading containerized cargo to and from ships

Revenue sources of MMHThe MMH developer will earn revenues from the following qRail terminal/ access charges qRental Charges for the space q Rental charges of the use of Warehousing facilities/ office space and other facilities qTerminal handling charges for the use of handling q Miscellaneous earnings - advertisement, leasing/ rental and VAS

Value Added ServicesqICT, Software support, Packaging, bar-coding, security systems etc qTesting and Quality Control Facilities qCatchment areas expected to develop in to major manufacturing zones. qTesting and quality control equipments and manpower qPostponement in logistic systems are generally of three types Space postponement Time postponement Form postponement qTraining facilities for the industries, Repair Centre qFumigation- Major VAS at developed logistic parks such as Singapore , Rotterdam qBanking

Development stages of MMHMajor Steps

Government policiesTHE MULTIMODAL TRANSPORTATION OF GOODS ACT , 1993

The central government has been giving impetus to the sector through a number of initiatives such as allowing 100% FDI, eliminating CST, introducing VAT, encouraging public private partnership (PPP), and 100% income tax exemption for port development projects. A research in this area has forecasted the Indian logistics industry to be valued at nearly $385 billion with nearly 12% in the organized sector by the year 2015

VAPI- MultiModal Logistics Hubq3 tier industrial town qIn Valsad district of Gujarat. qSurrounded by two UTs - Daman & Dadra-Nagar Haveli which are high Industrial density setups qClose proximity to the districts of Nasik, Thane, Navsari: Source of additional traffic for the logistics park qMajor Industries: Chemical , textiles, electronics and cables, paper products, pharmaceutical, plastics, electrical goods, engineering items, FMCG, marble, plastic, oil and lubricant producing facilities

VAPI- MultiModal Logistics HubqProject to be executed under Public Private Partnership qCommercial developer to construct and maintain the logistics facility for an agreed period with the partnership of the Indian Railways and/or the state governments. qPresents a business opportunity for commercial developers and logistics companies qProject is partially funded by the Japanese Infrastructure Bank

Existing rail based logistics service providers : 1) Adani, Patli, Near Gurgaon 2.) The Gateway Rail Terminal, Ludhiana 3.) CGM Logistics Park, Dadri, CFS/ICD6 4.) Concor, ICD Dadri 5.)Arshiya Distripark, UP

Roadblocks to growth

Roadblocks to growth

Way aheadq Multimodal logistics hubs have a huge potential owing to exponential growth in logistics sector . q Technological innovations in transport modes, operations and communications, coupled with expanded services would ensure safe and efficient transport. q Support from authorities will ensure removal of roadblocks and smooth operations .

References1. 2. 3. 4. 5. 6.

http://www.immtajordan.org/uploads/Multimodal_Transport_and_Logistic http://www.business-standard.com/india/news/logistics-firms-eye-multi-m http://www.domain-b.com/companies/companies_I/Indian_Railways/2009 http://r0.unctad.org/en/subsites/multimod/pdfs/industryEn.pdf www.ustda.gov/program/sectors/USTDASectorBrief_Transportation.pdf