Wednesday, December 12, 2007

Impressions of India - Part 2

Part 2 - The Cargo Explosion

In part one I briefly mentioned the Jawaharlal Nehru Port Trust, the enormous complex of container terminals that handle over 60% of all sea freight that comes in and goes out of India. At the moment JNPT serves 25 ICDs (inland container depots) with plans for another 9 over the next few years. The port sees textiles, foodstuffs and medicines exported worldwide while at the same time chemicals, oils, petrol, plastics and heavy machinery are imported to aid the phenomenal growth in the Indian manufacturing economy.

JNPT is made up of 3 terminals: Gateway Terminals India is a container port with the capacity to process 1.3m TEUs a year, there is also a liquid cargo jetty capable of handling 5.5 million tonnes annually (including industrial and edible cargo such as molasses and vegetable oil), and finally the Nhava Sheva International Container Terminal, India's first private port.


Vessel loading at Nhava Sheva (NSICT)


We were fortunate enough to have an extensive tour of the facilities at Nhava Sheva, facilities that rival those anywhere else in the world (and I've seen a lot of container ports in my time...!). With the capacity for 100 moves per hour I was impressed by the efficiency of the operation, I was even more impressed when the CEO, Capt Rustom Dastoor, mentioned that they are on target to move 1,400,000 TEUs by the end of the year.

For those of you who don't speak logistics jargon, a TEU is a 'twenty-foot equivalent unit' - a container that is about 20ft by about 8ft. At the moment the TEU is the standard size of container, there are a smaller number of 10ft containers in use, and an increasing number of 40ft containers, these are sometimes referred to as 2 TEUs or logically FEUs. If all of the containers that NSICT moved in 2007 were laid side by side and end to end they would cover over 8 sq miles of land. To put it another way, if you were stood in the centre of this sea of containers, you wouldn't be able to see the edge. By 2015 JNPT as a whole is expecting to be handing 8m TEUs a year - That's 43 sq miles of containers. If you were driving at 30mph it would take you over 5 and a half hours just to drive round the perimeter.

To prepare for this, as well as the work I mentioned on the roads supplying the port, hundreds of crores (in India 1 crore = 10 million) of Rupees are being spent on expanding the container berth, improving the rail network to the ICDs and digging out the harbour channel so that it is deeper and wider to accommodate the ever expanding size of the ships that carry the containers all over the world. They are also planning a 4th terminal that will be bigger than the rest of JNPT put together.


Aerial view of NSCIT Terminal and Gateway To India Terminal


But the Nhava Sheva terminal isn't just some multinational company moving in and exploiting the natural resources of the area, they also have a real sense of what corporate social responsibility means. Many of the staff are recruited from the surrounding villages and given training above and beyond what is needed to carry out their day to day jobs. In addition to this DP world, the company that manages NSICT has also adopted the local community college with work beginning this summer on a new school building which will include science labs and a library.

Congestion is still a problem at JNPT though. The average container can wait up to 7 days to clear the port complex due to the sheer volume of containers being processed. Cargo throughput surged 26.4% in the 1st seven months of fiscal 2007/8 to 2,700,000 TEU across the three terminals and JNPT and Customs officials are looking at ways to cut down the waiting times while maintaining this phenomenal growth.

It is this sort of dual progress which is propelling India into the forefront of international trade, providing not only world class facilities but a world class workforce to run them to a world class standard.

If you have any queries on freight to and from India, please do not hesitate to contact one of our team on +44(0)121 713 7250 or by email for advice or further information.

Impressions of India - Part 1

Having just returned from a 2 week tour of India I thought I would record some of my observations that may give you a flavour of this amazing country.

Part 1 - A Tale of 2 Countries



India has been described as a 'Rich country where poor people live.' The last few years have seen incredible growth in the Indian economy with huge organisaitions such as Reliance, Tata and Mittal making their presence felt on a global scale. Tata for example shocked many in the UK by buying Corus Steel, and is now going on to purchase Jaguar and Land Rover, which would make them one of the largest overseas investors in UK manufacturing. From 2000 to 2005, The Indian Economy grew from $460.2 Billion USD to $906.3 Billion making it the second fastest growing economy in the world after China.

The worlds' largest democracy, India is making huge investment in infrastructure which was evident while travelling round the country. In Mumbai, for example, more than 4500 crore INR (over 5 Billion GBP) is being spent on a project to link the port complex with downtown Mumbai via a 6 lane bridge across the bay, linking two of the most crucial areas in India - downtown Mumbai is the commercial capital of India, and the JNPT / Nhava Sheva port complex handles over 60% of the seafreight in India. This 22km bridge would cut average driving times between the two by 1.5 hours with a projected traffic by 2011 of 46,580 cars per hour. The area of Navi Mumbai (New Mumbai) where the bridge would terminate looks like any western city, with Malls, a state of the art railway and 30+ storey apartment buildings as far as the eye can see.



Downtown Mumbai


On the other hand, 26% of the 1.1 Billion population lives in poverty, that is, they earn less than 560 INR (£6.89 GBP / $14.20 USD) per month as explained in this interesting article. Any Indian would agree that this is the problem that needs a solution. To see such poverty at the side of some of the most expensive real-estate on the planet drives this home forcibly.

Progress is being made, with over 90% attendance at primary school, even in rural areas, and the development of low-cost, heavily subsidised housing to replace the slums that sprawl across every major city. Looking back at our own (UK) history, it is a similar picture to the Victorian / Industrial Revolution era. The big difference with Indian development is that they are going from the Industrial Revolution to the 21st Century and missing each of the steps in between..!

It was incredible to be hundreds of miles away from anywhere in rural India, to pull out a mobile phone and have a full signal...! Even in the middle of the jungle, we could text and phone home. The shop pictured below sold phone cards and DVD's! This is typical in this country of contrasts. India is definitely a rich country. India definitely has a lot of poor people. But the pace of development is incredible, and it is a country 'on the up.' It remains to be seen if it can get to grips with the dichotomy of rich and poor which is at the heart of its future, if it can, then India is without a doubt a superpower in the making.


Rural shop in Karnataka, India


All images and text copyright John Cave / Statistics from the World Bank Group

Logistics and Globalisation - An Inside View

Logistics and Globalisation - An inside view

Globalisation

The world is changing. Last year, more than 50% of the growth of the global economy came from 'developing' countries. We are all well aware that the powerhouse that is China has been growing from strength to strength, and with India poised to eclipse China in the next few decades the manufacturing base is well and truly settled in the East.



The graph above demonstrates the incredible growth in GDP in India and China in comparison to the G7 countries combined growth.

This change in the global economy over the last 30 years has had a profound effect, and will continue to do so. When we look closer to home, we can see the decline of the UK manufacturing Industry. The second graph shows the extent of this decline over recent years:



There have been, and will continue to be debates about the effect of globalisation overall, but whatever your view - Globalisation is here to stay.

Jack Walsh, the CEO of General Electric once said: "An organization's ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage" and that sums up the current situation in the UK.

For those companies that are willing to look at the future and to embrace the changes, the rewards are substantial.

The Logistics Industry

The seismic shift from being the world's greatest exporter to one of the largest importers has had an effect on all industries, especially the Logistics sector. Even 10-15 years ago companies dealing in international Logistics and Transportation could easily afford to become niche players as either an 'import specialist' or an 'export specialist.' This is not so easy in the current climate, as companies are required to be more flexible in dealing with the customers' requirements, and specialist companies have given way to a 'one stop shop' approach that can be seen with the major third-party logistics companies (3PLs) and even amongst smaller operators.

This one stop shop approach has led to a number of high profile mergers and acquisitions involving major logistics names such as DHL, Exel, Kuehne and Nagel, ACR (formerly Hays) Wincanton and P & O. Deutsche Post, the German post office, has acquired companies across the logistics spectrum, including Danzas (Freight Forwarding) Air Express International (air freight), DHL (Express deliveries), Exel and Nedlloyd Districenters (Contract logistics) to enable them to provide a comprehensive portfolio of logistics services including purchasing stock on behalf of their clients.

The requirement for warehousing is also likely to be on the increase as lead times for stock become longer and companies strive to meet customer demands. This is a paradigm shift from the utopian position of Just in Time concepts of the 1980s and 1990s.

Pressure on margins as a result of overseas manufacturers entering the market has meant that any UK manufacturers have had no alternative but to drive costs down, and transportation is often the first area that companies look at to reduce costs.

The trade imbalance has also had an effect on the viability of specialising in export logistics. A combination of the huge volumes coming inbound, and the advent of the new 'super-vessels' has meant that shipping lines are desperate to get containers re-positioned. The same is true of European transport. The influx of European hauliers carrying goods into the UK has meant that a great number of these trailers go back empty. The result is that you can pay as little as £250 for a full trailer of goods to some areas of Belgium, France and the Netherlands and as much as £1300 to bring goods in from the same area. These figures illustrate the imbalance.

The combination of the downward pressure of the manufacturing sector and the imbalance of trade has had the effect that many logistics companies are now working on unsustainable margins, as costs are pushed ever lower. Combined with the rise in fuel prices this has lead to companies operating large fleets of vehicles re-assessing their position, or getting into difficulty. It is estimated that the cost of operating a vehicle has risen between 15-20% over the last 12 months, while rates have actually decreased. Average margins for 3PLs in the UK are currently in the region of 2.5%

Technology

We cannot think of Global Logistics without looking at the leaps and bounds taken in recent years on the technology front. Track and trace systems, RFID technology, real-time web interfaces and many other tools have revolutionised the way we work. The 3PLs have put a great deal of their resources into developing tools to assist in the flow of information, and now some of the companies lower down the supply chain are experimenting as well.

In a recent presentation on technology in logistics it was stated that, in the not-too-distant-future it will be possible, via telematics, to trace any piece of cargo in real time, anywhere on the planet, across any mode of transport or warehouse. This is still relatively new technology, but it is coming to market, and will change the way logistics companies operate once again.

The idea of a unified, cross-platform, track and trace system is truly mind-blowing - but it is a real possibility.


Moment of Truth

In these uncertain times, Logistics companies have to look at a strategy that can sustain them financially for the medium to long term, and for many this has meant some major changes.

Many companies are now looking at allied areas such as inventory management, purchasing, factoring, sourcing and complete supply chain solutions. These 'integrators' are leading the way for other Logistics companies. The DHL/NHS Logistics contract is a typical example of this.
Diversification in this global market is the key. Those organisations that can listen to their customers, see their changing needs and adapt to cater for their supply chain requirements are the ones who will succeed in the long term.

Napoleon Hill said "Opportunity often comes disguised in the form of misfortune, or temporary defeat." And for many in the Logistics sector, especially the smaller companies there are some major opportunities that have been opened up through Globalisation. It is an exciting time, but a risky one as well.


About the Author: John Cave is the General Manager of Westhaven Worldwide Logistics, and founding partner of Novatus Global Solutions. He comes from a background in the Manufacturing Industry as a Logistics Manager and has always been fascinated by International Trade.

All content copyright John Cave 2006.

All graphs are copyrighted by HSBC Trade Services and used with permission.

Dummies Guide to Importing - Part 2

In part 1 (written over a year ago...!) we looked at the information required to ensure that you can get an accurate freight cost for goods coming into the UK.

As mentioned in the article, freight costs are often the largest chunk of the bill, but what else is there to consider? Most obvious:

Products and Suppliers

When thinking about importing you are probably in one of 3 camps:
1. You have an existing product and are looking for outsourced production to cut costs
2. You have an idea for a specific product and are looking for outsourced production partner
3. You are a "trader" - looking to make money on the transaction of many different types of goods

Existing products:

In the UK we often hear about the decline of manufacturing with many businesses unable to compete with the low cost base of overseas production. This is a fact, and it is not going away. There are still a great number of (mainly) small businesses that are still manufacturing goods in the UK, and there will always be niche areas where production lead times outweigh the emphasis on cost, but there are many that are afraid to look at overseas partners and are facing difficult times as a result. So how can you limit the risk of outsourcing?

Like any business transaction, it has to come down to your trust in suppliers to deliver on their promises. Just because the supplier is on the other side of the world, it makes no difference. Some tips to get started:

  • Meet face to face: You can never underestimate the power of going out and meeting potential suppliers face to face, preferably at their premises. It gives you a chance to start building a relationship and getting a feel for the people involved - just the same as you would do if it was a local business.


  • Be culturally aware: There is a need to be culturally aware of differences between Western and Eastern cultures as this can be the first stumbling block to building a healthy relationship. Just making the effort to understand is often appreciated by the supplier and can help to build the initial bond. For example, in China it is considered rude to discuss business over a meal, when it is the normal thing to do in Western culture. Also (my favourite) never finish your meal completely in China as it is seen as an indication that you are still hungry! Have a look at www.cybor.com/besite/ for more tips on this


  • Use your Bank!: The financial transaction is the most worrying part for most people. If you have a good relationship with your International Trade team at your bank, they can be an excellent source of ideas and information. Trade finance of some type is a pre-requisite for most larger overseas transactions whether it be a Letter of Credit or another arrangement it offers a safeguard for both parties.


  • New Products:

    One of the greatest additional fears of having new products manufactured overseas is the protection of your IPR, and rightly so! There is an excellent article here written by the China-Britain Business Council, and the same is true of any supply overseas. Do not suspend your common sense and business sense. Check your suppliers thoroughly or even better go into Joint Venture or a "Wholly Foreign Owned Enterprise."

    Traders:

    The key to being a very successful goods trader is spotting the potential in a product before anyone else does! Again, it comes back to the face to face approach. If you are serious about trading goods you need to visit the country you plan to source from and meet your contacts face to face. There are a huge number of trade shows in India, China and many other emerging markets and these are a great place to try and look for the next "big thing." Again, do not suspend your normal due diligence just because of the distance.

    Some people rely on a google search or a website link to find a new supplier, and for very small businesses and speculative trading it may work.......but it may not...! The risks lessen considerably if you make the effort to see how things work on the ground and understand them. Do not be afraid to ask people for advice - use your Bank, your Chamber of Commerce, your Logistics company, your friends, anyone with the right experience could savee you some painful experiences!

    Please let me know if you found this information useful, and I am always happy to answer specific questions and offer advice.

    Dummies Guide to Importing - Part 1

    Thought I may save myself some e-mails in the long run by trying to put a decent idea of what to look for when importing products from overseas.

    This is not an advert, this is what we do (there, that's the only plug you will get!)

    The UK has been a net importer of products for some time, and as manufacturing companies in the UK struggle to compete on costs with their overseas partners, many large companies and SME's are changing their strategy to become stockists and distributers.

    Also, the massive boom in online trading through E-Bay has lead to people doing the same from their home - and many of our customers are home traders.

    Depending on comments, I am happy to go into any amount of detail, but I will try to keep this a brief overview at the moment. I will concentrate on imports from China, as they are the largest volume, but the same goes for anywhere outside the EU. India for example, is becoming a real manufacturing powerhouse, and will be challenging China especially for industrial goods.

    If you are considering bringing something in from overseas, the most important thing is the product. I am sure there are garages full of products that nobody ever bought..... Market research is vital.The second is the supplier. The third is the supply chain.

    I will concentrate on the information needed for Freight rates at the moment, but in following blogs I'll try and pick up on the Market Research and developing the right partner overseas. Freight costs are the largest cost of most imports from China, often more than the goods themselves, so it is very important to be able to get an accurate picture of costs you are going to face.

    I often have people coming on to me asking "I've got this idea of bringing widgets into the UK from China - how much will it cost?"

    These are the questions that need to be answered first:

    Question 1
    How much do you have?
    To be able to give any real idea of costs, any freight company needs some fairly accurate details. The ideal way is to get weights and dimensions of the whole shipment from the supplier when you are negotiating rates etc. with them. Manufacturers are more than used to giving these details out, and will have them at hand.


    Question 2
    What are the terms of supply?
    You may have come accross 3 letter acronyms such as FOB, CFR, CIF, DDP, DDU, FAS etc. These are vitally important, as they say when the suppliers liability ends, and yours begin. To give an example. If a supplier gives you a term of FOB, they will take responsiblility for the goods to get "Free On Board" the vessel. In other words they will pay for the goods to be delivered from their factory, to the port, and any terminal handling costs at the port as well.
    If they say DDP. That means they will deliver to your door, and pay all duties and taxes in the UK. Quite a difference.



    Question 3
    How quickly does it need to get here?
    Does it need to come via Air or Sea? Airfreight can take from 3-6 days, and seafreight can take around 4-5 weeks. This obviously has a bearing on the cost of a shipment. For small amounts (up to 200kg, depending on volume) it is often cheaper to send via Air, as the minimum costs at the ports outweigh the total airfreight rate.


    Question 4
    How important is cost / transit time?
    It is no different to any business. Customers often want the cheapest possible price, for the best possible service. This doesn't work. Especially when dealing in Airfreight this can be a problem. The cheapest rates may only be based on one flight per week, that travels via another airport, and has to wait there for 3 or 4 days before connecting on the final flight to the destination.
    The more expensive rates will offer a better service, possibly a daily service, direct to the destination. This is very important to think about before approaching a freight company, as you will rarely be comparing like with like.


    Question 5
    Have you researched Customs Duties / Licenses etc.?
    I have come across a number of people who have called me when their goods are sitting at the port, and they have been faced with a Duty rate of 20% asking me if there is any way round it? The answer is no! Make sure you have your tariff code well researched, and if applicable lodged with customs, so you know what your costs are going to be.
    Another one that I have come across recently, was someone that had brought in a load of cotton t-shirts from India via air, but hadn't done any research. He had paid for the goods, and the airfreight and called in a panic because Customs wanted an Import License. Sadly, he had to apply for the license, and wait for it to come through. This took 3 weeks and left him with a hefty storage bill from the airline.


    Hope this is a helpful introduction, please feel free to contact me for further information.

    Tuesday, December 11, 2007

    What we get up to....!

    Over the past few years we have had some wierd and wonderful shipments, we thought we might share some of the highlights:


    Highlight 1 - Causing Mayhem in Manhattan!

    We were contacted recently by one of our customers, a UK Manufacturer of Flight simulator machines. They had secured a contract to supply their Simulators to the prestigious American toy store FAO Schwarz. The only problem, was to get the simulator there....

    We had to pack and load the simulator in the UK, transport the goods to New Jersey where we built a custom built rig and frame to enable us to lift the simulator without damaging the delicate fibreglass panels.

    The store is on 5th Avenue, on the corner of Central Park - one of the busiest junctions in the world. We had to close it.

    The delivery had to take place at 11.00pm and the road was closed by the NYPD. The Custom built rig was then erected to take the simulator off the delivery vehicle and onto the 2nd floor!

    Flight Simulator in Willenhall, UK

    Flight Simulator in 2nd storey of FAO Schwarz, New York

    Our Customer said:

    "Thanks for all your assistance with the New York and Las Vegas flight simulator jobs, things couldn't have gone more smoothly."

    Nick Hughes, Project Manager


    Highlight 2 - Keeping the A380 on course..

    A Client secured some lucrative engineering work for the new Airbus A380 assembly. These pieces, made in Birmingham (UK) were over 2 tons each, and had a highly polished steel surface. The manufacturer asked us to provide a door to door airfreight solution for these pieces to Alabama (USA) where they would undergo further work. We had to collect the finished goods, pack them in custom built crates and airfreight them on the first available flight.

    The shipments varied from 2 tons to 9 tons, and up to date we have shipped over 70 tools. Every one on time.

    Tools in custom built crates

    Our customer said:

    "This is a very important contract for our company and with Westhaven's help we have kept to schedule and on budget. I would also like to add that the personal service and support provided by the whole Westhaven team has made the whole process very easy. This level of service would make us go straight back to Westhaven in the future"

    Chris Blanco, Project Manager


    Highlight 3 - The show must go on......

    We were contacted by a Theatre Production company who were arranging a tour of the Hit US musical "Kiss me Kate." The set was in the US and needed to be transported in 5 containers to the UK. The timescale was critical - as the first show was less than a week after the ship was due to arrive.

    Also, because of the value of the set (over $1million) we were able to arrange for an ATA Carnet to offer exemption on Customs Duty, as the goods were only on loan to the UK - saving the company thousands of pounds.


    Highlight 4 - An unusual request.....

    Our final highlight caused some amusement in the office. When a Marketing company enquired about sending a cow from Glasgow to Ibiza, we wondered... As it turned out, "Daisy" was a Fibreglass cow made for a drinks marketing campaign - complete with Leather boots, Hat and goggles.

    She had to be handled very carefully, and again timing was crucial to coincide delivery with the product launch.

    "Daisy" on her summer holiday


    We hope that this brief insight has been both interesting and useful to you. Please do not hesitate to call us if you have any Logistical nightmares, or urgent deliveries.