Port & Terminal Infrastructure: Building Competitiveness ...

Port & Terminal Infrastructure: Building Competitiveness through Connectivity

Innovative Logistics Consultancy –

Solutions for Your SuccessChennai, February 17th,2009

By:

Poul V. Jensen

Managing Director

TransCare Logistics India Pvt. Ltd.

Building Competitiveness through Connectivity

1. TransCare Introduction

2. Logistics Costs

2.1. Case Study

3. Transaction Costs in the Indian Scenario

3.1. Elements of Cost

3.2. Analysis of Findings

Content

© TransCare Logistics India Pvt. Ltd. 2


4. Shape of Investments Needed

4.1. Logistics Industry?

4.2. Connectivity

5. Conclusion

Foundation 1993 as Management Consultants for logistics and transportation

Specialization Improvement of efficiency in logistics systems

• Process-oriented infrastructure planning

• Transportation

• Supply Chain Management

Company Profile


© TransCare Logistics India Pvt. Ltd.

• Supply Chain Management

Approach Pragmatic concepts with tangible economic benefits

Facts Over 1000 successful projects with more than 400 clients

Team 60 international experts in the locations

• Wiesbaden (GER)

• New Delhi (IND)

• Moscow (RUS)

3

Service Portfolio



Technical & Operation Consultants

• Business Plan

• Market Entry Strategy

• Market Assessment

• Feasibility Study

• Economic Feasibility

• Benchmarking

• Commercial Due

Diligence

• M&A Support

• Logistics Audit

• Process Optimization

• Network Optimization

• Implementation

Support

• Reverse Logistics

• Supply Chain

Restructuring

• Network Planning

Management Consultants

Global Supply Chain Consultants

• Port Planning

• SEZ/FTWZ Planning

• Warehouse / Logistics

Park Planning

• Terminal Design

• Location Analysis

• Operation Simulations

• Transport Logistics

• Tender Management



2. Logistics Costs

2.1. Case Study




Content





4.2. Connectivity

5. Conclusion

2.1. Case Study

Components Factory I (85%)

Components Factory II (15%)

N. Euro PortConsolidation, Seaport

2. Logistics Costs

Source: TC Research on Service Providers


India PortCFS India

(Inland Terminal)

N.Euro Port – India Port

Consolidation/Assembly

North

West

South

2.1. Case Study

*per unit costs

Distance (%)

Time (%)

Cost (%)

Origin – India Port 89 76 61

India Port – Destination 11 24 39

2. Logistics Costs


• Skewed ratio cost vs activity

• Reasons: Inefficient processes, immature logistics systems, high prices, passenger focused rail schedules, lack of intermodal options

• Indian Trade potential not FULLY realized, uncompetitive

� Supply: Cargo owners forced to deal with delays and unreliable services

� Demand: Indian consumers face higher prices & late deliveries

� Unnecessary costs and development paradigms retard trade

Encourage competitiveness through-out the supply chain



2. Logistics Costs

2.1. Case Study




Content





4.2. Connectivity

5. Conclusion



�Total handling charges as published

�This will include Pilotage charges and port THC

Real Cost – Cost of Service

�TEU converted charges for use of port infrastructure

Real Cost – Cost of Use

TRANSACTION COST

A

B


�TEU converted charges for use of port infrastructure

� Includes Berth hire, Anchorage, and Port detention charges

�TEU converted opportunity loss

�Delay due to port inefficiency, procedural complexities etc

Time Cost

TRANSACTION COST

C

�TEU converted loss of ‘time value of money”

�Delay in receiving duty drawbacks, remittance by banks

External Transaction Cost

D

3.2. Analysis of Findings (1/2)


43% 43%

33%

55%

59%58%

48%

44.6%

% of Unnecessary Costs to Total Transaction Cost


Source : TC Analysis

Almost 45% of total port related cost for cargo owner is in fact “unnecessary” cost on all India Basis (Major Ports)

33%

29%

JNPT CCTPL TPT KOPT COPT Kandla Haldia Vizag All India

3.2. Analysis of Findings (2/2)


40,9%

Components of Transaction Costs


36.4%

2.6%

16.4%3,7%

Real Cost – Cost of Service Real Cost – Cost of Use Time Cost

Necessary Costs Unnecessary Costs

Unnecessary Time Costs are the dominant share of Transaction Costs

Chapter Summary

Unnecessary costs in the Indian scenario must be further analyzed and dealt with

• Reducing unnecessary transaction cost at Indian ports could potentially halve the total cost a cargo owner pays

• Initiatives for improvements can now be targeted to eliminate unnecessary costs



unnecessary costs

• Current economic conditions: even more focus on trade shifting to lowest cost areas. India must act now to proactively tap into this opportunity

12

India can and MUST reduce Unnecessary Costs, in order to increase competitiveness



2. Logistics Costs

2.1. Case Study




Content





4.2. Connectivity

5. Conclusion


Indian

Ports / IWT / Coastal Shipping

• Ministry of Shipping

• IWAI

• TAMP

• NMDP

• Ministry of Railways

• CONCOR

• Dedicated Freight Corridor

Railways

Container Freight Stations

• Ministry of Commerce & Industry

• State/ District Land Authorities


Indian Logistics

AviationHighways /

Roads

• Ministry of Civil Aviation

• AAI

• Air Cargo Policy

• Ministry of Shipping

• NHAI, State Authorities

• NHDP

• National Road Transport Policy• Ministry of Finance

(Not working on Sundays)

Customs Department

Numerous Government entities for industry & investors to deal with. No umbrella Logistics Authority. No Unified Logistics Master Plan.

4.2. Connectivity: Investments in Hinterlands (1/3)

Shipping Lines / Ports

Logistics Infrastructures

Hinterland Areas



Aggregated Container Volumes

Mix of Containers & Break bulk

Fragmented Break Bulk Volumes

4.2. Connectivity: Road & Rail “Backbone” (2/3)

Consolidation of volumes

• Develop a dedicated railway corridor

from Erode to Nagpur

“The Backbone of India“

• Container terminal & Shuttle service

Ports – Erode

• Sea ports to be shareholders



• Sea ports to be shareholders

� of the terminal

� of the “Backbone” infrastructure

• Partners:

� Ter minal operators of the Port

� Private container railway operators

� Other Ports....

• Key word: Reliability

16

Cochin

Erode

Integration poses opportunity for all parties

4.2. Connectivity: IWT & Coastal Shipping (3/3)


IWT and Coastal shipping not to be viewed in isolation –rather as integrated parts of supply chains

Conclusion

Supply Chain oriented investment required - holistic planning

• A single body with the mandate for India’s Logistics Master Planand its Integrated Implementation

� Currently many power centers (Ministries, State Govt., Authorities) involved in regulation, enforcement, infrastructure planning

� All sub-nodes within India growing independently without integrated guiding



� All sub-nodes within India growing independently without integrated guiding principles � super optimization of individual, sub-optimization of whole

� Planning Commission has advisory role � expand role, introduce task force.

• Connectivity to be developed

� provide options to cargo owners

� decrease burden on land evacuation

� many further ‘intangible benefits’ (environment, traffic accidents, de-bottlenecking, etc)

18

An integrated, supply-driven strategy to be developed,focusing on ease of intermodal cargo movement.



2. Logistics Costs

2.1. Case Study




Content





4.2. Connectivity

5. Conclusion

Conclusion

� India must think holistically when developing logistics

� Think supply chains, think cargo owners

� regulations, transport policies, infrastructure planning and development

� To build competitiveness & trade advantage, India cannot afford to make standalone development plans for separate modes of transport

5. Conclusion


� India must reduce Unnecessary Costs, to promote connectivity and increase its competitiveness

� An integrated, supply chain driven strategy to be developed focusing on ease of intermodal cargo movement.

20

Indian Logistics Master Plan required

Achieve integration and connectivity, amplify Indian trade

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