To match up with the growing bilateral ties and fluctuating EXIM trade, the freight forwarder’s job is not any easy task. Though, they have been working hard to match international standards, they are habituated to fighting infrastructure bottlenecks and honouring commitments to customers. But now with better government intervention and technology adaption opportunities are on the rise.
The emphasis placed by the new government in India on development and good governance has created a new opportunity to reinvigorate bilateral ties and enhance cooperation. Prime Minister Narendra Modi’s visit to different nations from Asian countries to the US to now planned visit to Europe and the new initiatives like ‘Make in India’, ‘Clean India’, etc., have opened up new avenues. However, unfortunately, as of now, according to the ministry of commerce and industry, the trade deficit for April-February, 2014-15 was estimated at USD 125220.94 million which was higher than the deficit of USD 124844.53 million during April-February, 2013-14. The reasons could be economic meltdown and pending free trade agreements and some other economic and political disturbances.
To match up with the changing trends in the bilateral ties and fluctuating EXIM trade, the freight forwarder’s job is not any easy task as it used to be, simply moving cargo on time from A to B. However, there is an immense scope. Recently a report named ‘freight forwarding market in India 2015’ stated that India is expected to witness considerable growth in freight market provided freight companies diversify their business to other logistic segments. The Indian freight market is rapidly being aided by improved warehousing infrastructure and growth in containerized cargo, which necessitates a robust freight network. Amongst the segments, air and sea freight together contribute maximum to the market in terms of value.
Manish Saigal, Managing Director at Alvarez & Marsal – Leader for Strategy and M&A/ PE consulting, said, “In today’s fast-moving business environment, many shippers rely on forwarders as key building blocks in creating and implementing a logistics programme pertaining to their ‘special’ demands. In a global scenario, customers benchmark the services in India against the best players in the world. Today, the customer expects delivery on the same day the cargo is offloaded from a ship or aircraft. They are looking for scheduled hinterland connectivity from ports and airports matching with the arrival time of a vessel or aircraft. They demand state-of-the-art warehousing and distribution through bonded warehouse,” adding, “Time being a critical factor; they demand IT-enabled real time information systems. Freight forwarders have to match the best global standards to retain their business in India.”
During a trade show, Shantanu Bhadkamkar, immediate past chairman of the Federation of Freight Forwarders Association said that the growing Indian marketplace has a huge demand for technological inputs in the logistics sector which represents a runway to India’s USD385 billion EXIM trade by 2015. With new security regulations, technology tools, and infrastructure improvements, forwarders today need to pull up their socks to meet a full range of logistics needs with an innovative approach.
Impact of EXIM trade
Corresponding to the recently announced economic survey 2014-15, it has been stated that India’s export-import trade has been slightly affected due to weakened demand in key developed markets of Europe and the US. However, if handled with a positive attitude, this opportunity can herald a scope for value creation.
Samir J Shah, owner, JBS Group of Companies, said, “Economic challenges in the European Union, political instability and unrest across multiple areas of the globe, and a series of natural disasters have highlighted the often fragile nature of the freight forwarding and logistics business and the industry’s customer environment. However, on the positive side, rising demand is being experienced for advanced logistics capabilities and industry-specific solutions, especially in emerging markets. The increasing number of assembly plants in several markets, including Turkey, Mexico and Thailand has positively pushed up the dynamics of the logistics industry.”
Yashpal Sharma, Director, Skyways, says, “Freight forwarding is directly impacted by the global business scenario. The current slowdown is negatively affecting most of the forwarding companies across the world, including India. The companies who actually stay with their strengths and do value additions will continue to be outperformers and the rest will have to work harder to keep their head above water.” Another veteran freight forwarder, Cyrus Katgara, Partner, Jeena & Co is of the opinion that the freight forwarding industry will survive only through value creation. “We must all realise that the present and the future is for the intelligent only. Deep pockets and relationship management would take a back seat once thinking freight forwarders increase in number. Value creation will happen in finding innovative solutions which are time bound, cost reducing, technology intensive and result finding through detailing.”
Biju Thomas, Managing Director, Sevenseas Global Express Logistics, shared, “The overall global economic scenario has been grim and that surely has had an effect on the overall trade. There is a marginal improvement lately and there is still a lot of hope based on predictions being made by the industry experts. During such a trend, the ideal solution for an organization to sustain itself is through diversification and value addition to the existing product.”
Customs & excise policies
Improvements in the customs and excise policies benefits importers and exporters and consequently, smoothens the working of freight forwarding agents. Exports from and imports into India, need a lot of regulatory requirements to be complied with at various stages. Yet if properly planned, exports and imports can utilize a lot of benefits that are available under various provisions of the policy. Self-Assessment, introduced in April 2011, is expected to usher in a new era of trust based customs-trade partnership, leading to greater facilitation of compliant traders. Therefore, it is important that the trade take its responsibility for making correct self-assessment seriously. Pertaining to this, Shah averred, “EDI and self assessment are great initiatives and can result in wonderful streamlining of the cargo movement through customs and excise. However, implementation of the same remains the biggest roadblock. The ground reality is very different than what is said. Capacity building and a change of mindset is what the departments need to work on fast.”
The Customs department as facilitator has emerged in India and they have facilitated the growth of EXIM Trade by the timely introduction of Customs EDI System, Ice gate and RMS System. “The Customs EDI System has negated the effect of various constraints of infrastructure. The trade facilitation meet of Customs to co-ordinate with all players has brought the players in the Industry to resolve issues amicably. The proactive issue of trade facilitation circulars by customs has increased the confidence level of EXIM Trade and Freight Forwarding Industry with regard to Customs Policy and Procedures. The major road blocks faced by the Industry are due to the fragmented and disintegrated structure of the logistic Industry. There is need for an integral approach of all players to work for the EXIM Industry to whom they serve,” Sharma remarked.
Though a lot of initiatives have been taken for infrastructure, the major concern of the freight forwarding community is connectivity to the terminals, airports, freight stations, etc. The freight forwarding industry has to face the challenge of inadequacy of infrastructure when their customers demand a committed delivery time for cargo. The impediments of infrastructure are the root cause of bottlenecks, delays, high cargo dwell time, increased transaction costs, and overall escalation of logistics costs.
Connectivity to terminals, airports, container freight stations, etc., according to Thomas, “is surely a concern which seems to be growing rather than getting corrected. A good case in review was the congestion at Chennai and Mumbai ports which remained an eyesore for the global industry with fancy photographs of the mayhem being published. At a point when India is being projected as a market which is looked at and predicted to overturn China, such bottlenecks dissuade business transactions to a great extent.” On the other hand, Shah feels that freight forwarding issues can be resolved by an all round involvement. “All stakeholders need to be continually involved and work harmonically with each other. Users are always in the best position to ascertain and judge roadblocks as well as anticipate future problems. A continual dialogue amongst all stakeholders backed with immediate changes in all possible functions is the need of the day.”
Sharma is of a clear opinion that sheer implementation of infrastructure is not good enough. It is the people who will run these that will make a big difference. “We can see even with better infrastructure the processes at these terminals are not in sync and thus the trade is not benefitting from the improvement in infrastructure. There is also a need to address infrastructure issues at some of the ports and airports of the country. Even the road connectivity is not adequate. The last mile movement always happens through road, so this aspect must be addressed and improved by the relevant authorities.”
Several freight forwarding companies invest in latest software solutions so as to enhance their freight operations. The IT industry has made a lot of advancements and is adopting latest software solutions that are beneficial for businesses across different industry verticals. The freight forwarder software essentially provides the best and lucrative solutions for supply chain and logistic operations. Small, medium or large freight forwarding companies can ideally use the software with web tracking feature to obtain better visibility of shipment and orders.
Sharma mentions that there are only two things that separate the company’s growth after a level and they are its team and IT systems. “Companies who constantly invest in them will outperform their peers in the market. Just to repeat, the key word is ‘constantly’. Just investing once will not be enough. Technology and intelligence change every day now.”
Technology is a proven way to improve performance and efficiency. It meets with most requirements of quick solutions, believes Shah, adding, “However, software cannot replace human beings. While I welcome all the investments and innovation in software solutions, I feel equal importance, if not more, in terms of time and money should be spent on the people who run the systems. There are a number of installations where the software is not used as proposed and only to finish routine jobs. Replicating manual processes through the computer needs to be immediately dropped.” Thomas comments, “Major companies are investing large sums of money in customizing and upgrading their IT capability. Many others have in house software development teams. It is all about tracking, document uploading, real time status and everything that makes the system replace the individual. For the logistics service provider it becomes a tool that gives them real time information at the click of a mouse and enables tracking status and information.”
The silver lining is that the freight forwarding industry, especially related to the EXIM trade, is extensively affected due to poor infrastructure and other issues. However, once an integrated approach is adopted, the streamlining of the supply chain process, in terms of cost, route and customs, will become effective. Freight forwarding companies are diversifying into the fast-growing logistics business and are diverging from their traditional activities to adapt into a new avatar. Opportunities are galore and it’s time to make the most of being the “travel agents” of the cargo industry.