REGIONAL FRAMEWORK FOR DRY PORTS: EVOLVING LOGISTICS CHALLENGES

Working Group on Dry Ports

Second Meeting

Raghu DayalAITD

Bangkok 14-15 November 2017

• Providing an excellent account of the concept and evolution of dry ports,Secretariat’s background notes along with the Annex lay down a charter in brieffor standard setting and promoting innovative technologies conducive to thedevelopment of the network of dry ports, also Asian Highway and Trans-AsianRailway networks.

• As the notes explain, ASPA, with vast hinterland areas and 12 of the world’s 30landlocked countries, poses its own challenges. The Secretariat notes indicate away towards important features which will help garner optimal gains.

• Specifically in regard to, what has been emphasized, the critical aspect of theavailability of skilled logistics staff, it is relevant to recall the constant endeavormade by Asian Institute of Transport Development (AITD) in concert withUNESCAP to address this crucial factor: among the 22 training courses thatAITD has conducted for region’s railway executives, primacy has been accordedto multimodal transport, dry ports, and sustainable development. These subjectshave likewise been extensively deliberated in the regional railways’ CEO’s forumsteered by AITD.

• In view of the importance of dry ports’ role that you are deliberating here in thecontext of the development of international integrated logistics, I may make anoffer that AITD will be pleased to organize a workshop in India on theimportant subject of dry ports.

Doing Business 2018: Trading Across Borders

Economy Rank

Export ImportTime to export:

Border compliance

(hours)

Cost to export: Border

compliance (USD)

Time to export: Documentary compliance

(hours)

Cost to export: Documentary compliance

(USD)

Time to import: Border

compliance (hours)

Cost to import: Border

compliance (USD)

Time to import: Documentary compliance

(hours)

Cost to import: Documentary compliance

(USD)

Bhutan 26 5 59 9 50 5 110 8 50

Hong Kong SAR, China 31 2 0 1 57 19 266 1 57

Korea, Rep. 33 13 185 1 11 6 315 1 27

Singapore 42 10 335 2 37 33 220 3 40

Japan 51 22.6 264.9 2.4 54 39.6 299.2 3.4 107

Armenia 52 39 100 2 150 41 100 2 100

Taiwan, China 55 17 335 5 84 47 340 4 65

Thailand 57 51 223 11 97 50 233 4 43

Malaysia 61 45 321 10 45 69 321 10 60

Georgia 62 48 383 2 35 15 396 2 189

Turkey 71 16 376 5 87 41 655 11 142

Nepal 76 56 288 43 110 61 190 48 80

Kyrgyz Republic 84 20 445 21 145 72 512 36 200

Vietnam 94 55 290 50 139 56 373 76 183

China 97 25.9 484.1 21.2 84.6 92.3 745 65.7 170.9

Philippines 99 42 456 72 53 72 580 96 50

Russian Federation 100 72 665 25.4 92 38.6 587.5 42.5 152.5

Cambodia 108 48 375 132 100 8 240 132 120

Mongolia 110 62 191 168 64 48 210 115 83

Indonesia 112 53.3 253.7 61.3 138.8 99.4 382.6 119.2 164.4

Kazakhstan 123 133 574 128 320 2 0 6 0

Lao PDR 124 12 73 216 235 14 153 216 115

India 146 106.1 382.4 38.4 91.9 264.5 543.2 61.3 134.8

Tajikistan 149 75 313 66 330 107 223 126 260

Maldives 152 42 596 48 300 100 981 61 180

Myanmar 163 142 432 144 140 230 457 48 210

Iran, Islamic Rep. 166 101 565 120 125 141 660 192 197

Uzbekistan 168 112 278 174 292 111 278 174 292

Pakistan 171 75 406 55 257 129.3 936.6 143 735

Bangladesh 173 99.7 408.2 147 225 183 1293.8 144 370

Afghanistan 175 48 453 228 344 96 750 324 900

Iraq 179 85 1118 504 1800 131 644 176 500

Source: World Bank, Doing Business 2018

LPI GLOBAL RANKING - 2016

overall LPI score

overall LPI rank

Customs InfrastructureLogistics

quality and competence

Tracking and tracing

Timeliness

Country score rank score rank score rank score rank score rank score rankAfghanistan 2.14 150 2.01 138 1.84 154 2.15 139 1.77 155 2.61 137Armenia 2.21 141 1.95 148 2.22 122 2.21 137 2.02 147 2.60 139Bangladesh 2.66 87 2.57 82 2.48 87 2.67 80 2.59 92 2.90 109Bhutan 2.32 135 2.21 128 1.96 151 2.30 131 2.20 131 2.70 129Cambodia 2.80 73 2.62 77 2.36 99 2.60 89 2.70 81 3.30 73China 3.66 27 3.32 31 3.75 23 3.62 27 3.68 28 3.90 31Georgia 2.35 130 2.26 118 2.17 128 2.08 146 2.44 112 2.80 117Hong Kong SAR, China 4.07 9 3.94 7 4.10 10 4.00 11 4.03 14 4.29 9India 3.42 35 3.17 38 3.34 36 3.39 32 3.52 33 3.74 42Indonesia 2.98 63 2.69 69 2.65 73 3.00 55 3.19 51 3.46 62Iran, Islamic Rep, 2.60 96 2.33 110 2.67 72 2.67 82 2.44 111 2.81 116Iraq 2.15 149 2.01 139 1.87 153 1.97 150 1.98 149 2.66 135Japan 3.97 12 3.85 11 4.10 11 3.99 12 4.03 13 4.21 15Kazakhstan 2.75 77 2.52 86 2.76 65 2.57 92 2.86 71 3.06 92Korea, Rep, 3.72 24 3.45 26 3.79 20 3.69 25 3.78 24 4.03 23Kyrgyz Republic 2.16 146 1.80 156 1.96 150 1.96 151 2.39 115 2.72 126Lao PDR 2.07 152 1.85 155 1.76 155 2.10 144 1.76 156 2.68 133Malaysia 3.43 32 3.17 40 3.45 33 3.34 35 3.46 36 3.65 47Maldives 2.51 104 2.39 102 2.57 81 2.44 111 2.49 102 2.88 110Mongolia 2.51 108 2.39 100 2.05 140 2.31 129 2.47 108 3.40 65Myanmar 2.46 113 2.43 96 2.33 105 2.36 119 2.57 94 2.85 112Nepal 2.38 124 1.93 149 2.27 112 2.13 140 2.47 109 2.93 104Pakistan 2.92 68 2.66 71 2.70 69 2.82 68 2.91 67 3.48 58Philippines 2.86 71 2.61 78 2.55 82 2.70 77 2.86 73 3.35 70Russian Federation 2.57 99 2.01 141 2.43 94 2.76 72 2.62 90 3.15 87Singapore 4.14 5 4.18 1 4.20 6 4.09 5 4.05 10 4.40 6Taiwan, China 3.70 25 3.23 34 3.57 26 3.95 13 3.59 31 4.25 12Tajikistan 2.06 153 1.93 150 2.13 130 2.12 143 2.04 144 2.04 159Thailand 3.26 45 3.11 46 3.12 46 3.14 49 3.20 50 3.56 52Turkey 3.42 34 3.18 36 3.49 31 3.31 36 3.39 43 3.75 40Turkmenistan 2.21 140 2.00 143 2.34 103 2.09 145 1.84 154 2.59 142Uzbekistan 2.40 118 2.32 114 2.45 91 2.39 116 2.05 143 2.83 114Vietnam 2.98 64 2.75 64 2.70 70 2.88 62 2.84 75 3.50 56Source: World Bank - Connecting to Compete 2016

DRY PORT

• Trade development centre, hub ofprosperity

• Integrated intermodal logistics

• Inland terminals – multi-purpose logisticsparks

• Development in the region

• Transformation in the making

DRY PORT – A KEY COMPONENT

IN SUPPLY CHAIN

• Dry ports have extended seaport activities inland, thereby becoming integral part of logistics.

• A number of dry ports provide valuable space for a range of value adding logisticsservices, enabling some of them to turn into well developed logistics parks or becomethe nucleus for SEZs.

− A dry port enables a gateway seaport or airport to shift inland for the shipper tocomplete all transactions relating to maritime/air transport of the shipment.

− Shipper gets the ‘let export’ approval for shipment from customs and the bill-of-lading from the shipping line at ICD/CFS itself..

− The document(s) enable the shipper to get financial transaction for the shipmentcompleted then and there.

− It has also become a pole of attraction for the clustering of industrial activitiesand triggers economic development of specific areas.

• With the location of value added services as a first possible step towards furtherexpansion into full import/export processing zones or special economic zones.

− Not only to serve traffic to and from gateway ports, but for domestic intermodaltransport.

• International as well as domestic cargo handled at the dry port enables optimalutilisation of assets.

− Dry ports, -ICDs, CFSs, logistics zones or parks, freight villages, distriparks, et al –they all facilitate seamless, integrated transportation of goods, generally in amultimodal format.

− A dry port drives inclusive growth; relieves spatial imbalances; promotes growthin hinterlands, extending developmental impulses, many a time part of anSEZ/EPZ.

− ICDs and CFSs in effect enable and encourage integration of ports, road and railfreight operations.

− A CFS, generally an off-dock facility, close to the port, helps decongest the port, asits virtual extended arm.

− CFSs set up also inland-with road linkage to a regional rail-linked ICDs,facilitating fast formation/disaggregation of unit trains for/from a gateway.

− A network of dry ports as load centres also optimises intermodal transport withsignificant environmental benefits and energy gains; long haul between a seaportand an ICD done by rail, first-mile from the consignor at origin and last-mile shorthaul to the consignee by road.

Ports without water

Potential hubs ofprosperity

Container freight station

Environment friendly

DRY PORTS – HUBS OF PROSPERITY

INTERMODAL FACILITIES ALONG ECONOMIC CORRIDORS

• Clustering of economic activities transforms transport corridors into economic corridors.

• The Tokyo‐Osaka industrial corridor along Japan’s main rail and highway infrastructure contributed to two-thirds of country’s GDP.

• India is developing a $90bn Delhi‐Mumbai Industrial Corridor along the hinterlands of the freight corridor

➢ linking JN Port to inland industrial nodes in north and north west.

• Global trade depends on logistics, and how efficiently countries export andimport goods defines how they grow and compete in the global economy.

• Logistics become increasingly complex as they incorporate more areas suchas green logistics, jobs, or city distribution.

• An ICD/CFS enables shippers to get a complete logistics solution, whichgenerally involves multimodal integration.

• Intermodal transport and freight modal interchanges and inland portsalleviate the trade and transit cost disadvantages, particularly of land-locked countries and remote hinterlands of littoral states.

• Generally ICDs and CFSs have traditionally been linked to only maritimeand land surface services; some of the ICDs in India include within theirambit air cargo as well – joining hands with selected airlines for handlingair cargo, customs-cleared ULDs being carted between ICDs and gatewayports in customs-bonded trucks.

• CONCOR now has a fully owned subsidiary company – CONCOR AIR Ltd.that manages the domestic as well as international air cargo including atMumbai airport.

A COMPLETE SUITE OF SERVICES

MULTIMODAL LOGISTICS PARKS

RE-DEFINE FREIGHT MOBILITY

Following the complexity of modern freight distribution, andincreased focus on intermodal integrated logistics, transportdevelopment has been shifting inland (Theo Nottebom and Jean-Paul Rodrigue).

• Inland terminals are now evolving into logistics parks.

• With a clustering of logistics sites in the vicinity, several of theinland terminals have witnessed logistics polarization and thecreation of logistics zones.

• India has envisioned a string of logistics parks, besidessubstantially revamping the existing freight depots.

• Each of these integrated terminals will serve, besides as a fullfledged ICD, for warehousing for value adding services, fordomestic as well as international cargo, also for bulk freight,including silos for cement and grain, etc., besides reefers.

DRY PORT DEVELOPMENT IN THE REGION:

NEED TO COLLATE AND DISSEMINATE BEST PRACTICES

Birth of CONCOR- a seminal step − Managing change in country's logistics architecture− Building and operating infrastructure with linkages for accelerated inland

penetration of containerised cargo− Promoting containerisation of intra-country domestic general cargo,

aggregating it for unit train operation− Promoting institutional mechanisms conducive to sustainable growth of

multimodal transportation.− Synergising public-private strengths, − Eliciting Participation of operators and agencies in central and state (federal

and provincial) domains.− Outsourcing of road transport and material handling equipment provisioning,

but within its own, service package

Most of the CONCOR-owned CFSs and ICDs provided with rail/road linkages enable it to offer a complete service package - unlike what obtained in UK or Germany, for example, where Freightliner and Transfracht respectively operated intermodal services between ports and inland centres owned and operated by others.

Contd...

Step by Step

• Improving and building in stages

• To conserve resources, optimise capital spending and managing operating costs.

Concomitant institutional framework

• Attention to “software” part of multimodalism

• Facilitation, systems, procedures, documentation, service concepts

Inter Ministerial Committee (IMC)

• With representatives from Ministries/Departments of Revenue (Customs), Railways, Highways , Shipping, and Commerce.

• Applications in prescribed format analysed and approved by IMC for ICDs/CFSs considered economically viable.

Four prerequisites identified:

• appropriate location confirmed by an assessment of business potential

• coordination by and support of state government, wherever needed

• legal, financial and regulatory framework

• integrated transport infrastructure

Private sector- a major player

• Of a total of about 250 ICDs and CFSs effectively approved by IMC, two-thirds in private sector.

Assessing traffic potential and flows

• RITES carried out a countryside survey of existing and future container cargo flows with their O-D streams

• An indicative norm prescribed –a minimum two-way annual throughput of 6,000 TEU for an ICD and 1,000 TEU for CFS.

SOFTWARE OF REGULATORY FRAMEWORK

DSCT… A GAME-CHANGER

• Until lately, DSCT operation with dieseltraction and well wagons an exclusivefeature in North America since 1984.

• Chinese Railways adopted well wagon andpioneered DSCT operation on electrified railroutes in 2007.

• Well type wagons for DSCT enable increaseof train capacity by about 50%.– Flat bed container carrying cars can yield

100% capacity increase.

• In India, pending DSCT on electrified DFC-W (Mumbai–Delhi) route, diesellocomotives haul DSCTs, for example,between Pipavav/Mundra ports and ICDsin the northern belt.

The Inaugural DSCT on the Pipavav port – Kanakpura (Jaipur) route

Courtesy: Transportation Technology Centre, Inc. USA

Contd...

POISED FOR TRANSFORMATION

− DFC-W enabling DSCT operation on flat rail cars under overhead electric wires isdesigned to embody state-of-the-art technological and operational features.

− Container trains running between JN port near Mumbai and ICDs in the hinterland willcarry 400 TEU each against 90 TEU hitherto.

− The hub-and-spoke system would come to life.

• Rail infrastructure inside the port is being redesigned and the layout revamped forformation and handling of long and heavy container trains.

• For locations in the hinterland, operational plan envisages development of threeintermediate load centres along the rail corridor to serve as hub-and-spoke system.

The long liner trains will be re-formed at these intermediate hubs, which will deal also withstreams coming from/going to important feeder points.

A node between Mumbai and Vadodara may deal with traffic from/to ports of Hazira andDehej, etc.

Another with the stream from/to ports of Mundra and Pipava, etc.

Still another in Punjab for traffic from/to Ludhiana and other centres in the region.

− These intermediate load centres will receive and dispatch container trains ofconventional size from/to various ICDs/CFSs in the respective zones.

− These nodes will handle both EXIM and domestic cargo, providing integrated logisticsservices end-to-end – in close cooperation with associate road operators and otheragencies.

CHANGE LOOMS LARGE

• Critical elements

• Climate change challenge

• Death of distance, end of geography

• Evolving logistics tenets

CHANGE LOOMS LARGE: DOMINANT CHARACTERISTICS

• Demographics:

⁻ Globally, population is still growing; we are living longer.

⁻ Three billion humans lived on the planet in 1960.

⁻ In 2050, world population could reach 9 billion.

• Urbanisation:

▪ 70% of world’s population will be in cities by 2050.

▪ The 40 largest mega regions account for two-thirds of globe’s economicactivity.

• Globalisation:

⁻ As the world moves closer together, markets get closely interlinked.

⁻ Manufacturing is globalised, with “world factories” relying on complexglobal supply chains as their assembly line.

• Emerging life-styles create more diversity:

▪ In emerging economies, 3 billion citizens will join the middle class…

• Digitisation:

⁻ We have become more mobile than ever before.

⁻ The mobile society has high expectations from an interconnected transportsystem.

MILESTONES THAT TRIGGERED IMMENSE POSSIBILITIES

Industry-wise, the three major events 100 years ago were:⁻ the first scheduled flight from St Petersburg to Tampa;⁻ the first automatic assembly line by Henry Ford; and⁻ the opening of the Panama Canal.

• Today, 100,000 daily flights take people to different continents.

• Henry Ford's moving assembly line produced then an incredible 202,667 cars in1914; today's 70 million annual car production is a new normal.

• With the opening of the Panama Canal, distance from American East Coast to itsWest Coast shortened by 10,000 km.

The expansion of the Panama Canal will make room for vessels with a capacity of upto 13,000 TEU. Over time it would mean a shift of business away from Long Beach toeast coast and Gulf of Mexico ports.

• A similar short-cut is now in the making due to the melting of the ice in theNorth Pole, thereby opening up a new Northern route that will cut the distancefrom Europe to America by 6,000 km.

The melting of Arctic ice is opening new sea-routes between Europe and Asia,reducing shipping distances by over 40%.

By 2030, some expect considerable volume of world’s shipping may traverse thisroute, instead of the Suez Canal passage.

CRITICAL ELEMENTS IMPACTING TRANSPORT

• The value of trade grows much faster than its weight.

• This compositional shift is happening both across products (the shift away from bulks and towards manufacturing) and within manufacturing.

• Worldwide, transport growth has been consistently higher than the economic growth due, inter alia, to • specialization, • sourcing of material on a wider scale, • just-in-time strategies, • Increase and dispersal of retail and wholesale activities.

• Higher income countries import higher quality goods.

• There is a supremacy of demand for • precision, • speed, and • coordination in anticipating customer needs down to the store level.

• Speed in delivery today is itself an important characteristic of product quality.

• Exporters consider two costs: • the first, the direct cost of transport, • the second, the time cost.

• World’s largest private company , Walmart now demands shorter delivery time and heavier penalties for delays.

• US suppliers need to reach its distribution centres within a four-day window.

• Those who fall below a 90% month threshold incur an invoice deduction equal to 3% of the cost of the goods

THE CHALLENGE OF CHANGE

Global warming is the mostcompelling challenge

• A warming planet has panickedthe world into looking foralternatives to fossil fuels.

• The crazy quest for luxuriouslifestyle will, without reform, cookthe earth.

• Transport CO2 emissions set to double over the next 40 years.

• Sustainable mobility emerging as a necessity

• Balancing of the four “Es” – cornerstone of sustainable mobility:(i) energy (ii) efficiency(iii) economy (iv) ecology

DEATH OF DISTANCE: END OF GEOGRAPHY

Logistics : new global architecture

• Rapid growth in business: services and high-tech manufacturing

• Steady growth in international trade

• Competition: on the basis of cost, quality & speed

Global economic

change

• Outsourcing; coordination of flows of goods, information and funds

• Geographic spread of production

• Just-in-time inventory

Changing business practices

• Increasing sensitivity to transit/delivery times

• Cost competitiveness

• Customers now part of large supply chains

New pressures

SUPPLY-CHAIN MANAGEMENT : AN EVOLUTION OF LOGISTICS

• As transport costs fall, physical geography matters less.With economies of scale in production, economicgeography matters more.

⁻ With recent increases in the intensity of international trade, the demand for speed has increased.

• Firms that specialise in logistics are beginning to blurthe lines between transporter, transport arranger, andeven manufacturer.

4PL LSPs also provide a host of auxiliary services thatbecome an essential part of the product offering.

• UPS not only delivers Toshiba laptops throughous, butis also responsible for after-sales customer service, forcollection of faulty product, and for its eventual returnand repair.

• Logistics services are increasingly being offered byintegrated providers.

• Previously, separate agencies and enterprises wouldhave been responsible for customs clearances,quarantine inspections, freight forwarding, trucking,shipping, and final delivery.

Customers have more demanding and diverging requirements

INTEGRATED SUPPLY CHAIN

• Intermodal transport industry continues to evolve

⁻ In so doing, it becomes increasingly integrated with supply chain management

• Customers look for global logistics services - time-definite, money-back guarantee,competitive prices.

• Customers demand more and more for less and less.

• Increasingly, manufacturers see goods in transit as NPAs.

• Emphasis on one-stop, single window: 4 Cs

⁻ one contract - one consolidated price

⁻ one compensation system - one contact point

Integration – A new mantra

Good and Innovative Product

“What Does The Customer Want?”

Everything!

Price

Quality

Variety

Customer Service

Speed

Reliability

Competitive Price

MerchandiseAvailability

Consumers have gained massively from global outsourcing. They pay lower prices and benefit from a huge increase in variety.

And does the home manufacturer outsource?

Because it makes good economic sense

THE BOX THAT CHANGED THE WORLD

• Warehousing: a strategic function

• Steady scaling up

• Shift2Rail

• Falling price of speed

THE HUMBLE BOX THAT CHANGED GLOBAL TRADE

The Economist (1 March 2014) queried, what was the most important invention of the secondhalf of 20th century: the silicon chip, the contraceptive pill or the hydrogen bomb?

It rooted for the “box” –those humble, standard-sized steel boxes, invented in 1956 byMalcolm McLean, that have changed the world.

• Containerisation defined anew whole transport business - seamless, door-to-door,integrated intermodal transportation, extending the virtues of a single contract betweenthe shipper and the carrier, a unified freight rate from origin to destination, liabilitycover as well.

• Originally as a solution for the shipment of break-bulk cargoes, containers now holdwide range of goods, including bulk commodities, and refrigerated articles.

• Containerization allows regular transport of small deliveries (LCLs), also consolidatinggoods from different origins in the same container.

• Today, there are moves to make containers out of carbon-fibre composites – lighter,which could possibly be folded flat when empty, saving space.

It would also be more secure, easier to scan without being opened.

Carbon-fibre containers, fitted with sensors, provide a travel history and the ability to talk tothe authorities; they may even make job of customs officials much easier.

GLOBAL CONTAINERIZED TRADE, TEU: MILLION

Source: UNCTAD

WAREHOUSING: A STRATEGIC FUNCTION

High-end VAL activities, e.g., blending/mixing of granular products or liquids,

sterilization, final assembly, instruction/training, repairs and re-commissioning;

Back office activities, also known as value added services (VAS), include managing the goods andinformation flow, insurance, customs clearance, order entry or staffing a help-desk.

• Value added facilities (VAF) include such services as equipment maintenance, its renting andleasing, or cleaning facilities.

These facilities are described differently in different countries

⁻ Strategic Rail Freight Interchanges in the United Kingdom,

⁻ Freight Villages in Europe

⁻ Inland Ports or Multimodal Transport and Distribution Hubs in the United States.

They all have essentially the same function: to consolidate, modal interchange, customs clearance,storage, distribution and, in some cases, even manufacturing.

Logistics parks constitute the scaffolding on

which the entire set of other facilities rests.

• While transport and warehousing constitute key

elements in logistics, there are other activities

often described as value added logistics (VAL).

Low-end VAL activities, e.g., labelling, making the

product country- or customer-specific, adding

manuals and parts, creating new assortments of

goods or breaking bulk;

STEADY SCALING UP…

• Ships become bigger; ultra large bulk carriers ply the global waters.

• Much like the post-Panamax container vessels of up to 20,000 TEU andultra large bulk carriers for oil and minerals in maritime world, thesuper jumbo aircraft such as A-380 in aviation, and the massivegigaliners on roads in Europe, some railway corridors have respondedwith heavy haul freight trains, each carrying scores of thousand tonnesof coals and ores or hundreds of containers.

• The dedicated freight corridors now under construction on two of IR’s

busiest arterial routes are designed to run up to 32.5 tonne axle load

trains stretching to a length of 1.5 km, with trailing load of 12,000 tonne,

at 100 kmph.

The western corridor, linking Mumbai to Delhi, will also operate double-

stack container trains under electric wires, each train carrying around 400

TEU.

• Consolidation trends continue to increase for scale and capacity.Mergers, alliances and acquisitions continue to help build capabilities.

Contd...

• Like triumvirate of world’s leading integrators, FedEx, UPS andDHL, the largest shipping lines diversify away from merelyproviding transport services to also working with manufacturingcompanies in planning their supply chains.

• Shipping lines merge. As Maersk Line and MSC launched 2M inJanuary 2015, in a partnership to share space on their vessels, fourothers got together in April 2016, followed by six more. Thesethree groups accounted for three-quarters of the global market.

• Port capacities increase; cranes and gantries get bigger; megatranshipment terminals emerge.

• Logistics parks: Just as the industry has consolidated, so has theinfrastructure it requires, e.g., massive logistics parks

ECONOMIES OF SCALE• Driven by economies of scale

⁻ Potential costs difference of up to 50% between a 4,000 TEU Panamax ship and a 10,000 TEU post-Panamax vessel

⁻ 50% increase in vessel size (4000-6000 TEU) produces 21% reduction in operating and voyage costs

⁻ 1% system cost savings for each 8% rise in average vessel size

• Carriers make decisions accordingly⁻ Larger ships can only call at deep-sea (15m+)

ports

• To remain an MLO port of call, a port must beable to

⁻ Handle larger ships

⁻ Provide carriers with control over terminals,or at least guarantee high levels of efficiency

⁻ Provide sufficient cargo to merit a call

Implications for ports

Relationship between container ship size and operating costs

Source: AT Kearney

SHIFT2RAIL‘S BENIGN WORLDRailways mastered distance, computer eliminates it altogether.

Railways caught in a blizzard of change.

The very birth of railways symbolised change.

• As the railroads appeared in 1829, it for ever changed economy, society, and politics.

• The nature of freight being transported is changing from heavy bulk commodities such ascoal and minerals to lighter high-value goods which move in smaller consignment volumesand require a higher quality of service.

• To meet customer expectations, the rail freight service would need to offer short, fast,reliable and flexible trains, working in hub-and-spoke networks, on high-frequencycorridors or serving multiple stops on longer routes.

• Rail freight business needs be re-dimensioned.⁻ Railways is a preferred mode, provided there be a minimum critical mass.

Railways need to create this critical mass in partnership with others.

• Railways may break a new ground by developing a standardized pallet for loose (LWL)freight transported multimodally.

⁻ Consignments priced, as by express industry, based on weight, volume and level ofservice, and total transit time, door-to-door.

⁻ Railways may forge business partnerships with express industry, road transportoperators, integrators, etc.

• With the decline in air transport costs, the price of speed has fallendramatically.

• Faster transport speeds the changes in the geography of trade.

⁻ The EuroCarex consortium, in a demonstration run between Lyon andLondon, used a TGV train-set borrowed from French post office LaPoste.

EuroCarex believes that its proposed Express Rail network of high speedfreight trains could provide next-day delivery between European hubs.

Beginning with premium express traffic, operations could be expanded tohandle more traditional freight.

• China Rail offers regular scheduled services, similar to airfreight carriers.

⁻ High speed trains run by China’s Harbin Railway Bureau carry freightin the form of mail or parcels.

⁻ CRRC Tangshan is developing a dedicated freight EMU for suchservices, aiming at a journey time of 11-12h between Beijing andsouthern China, with next-day deliveries.

SOME TECTONIC CHANGES

TRANSPORT DRIVEN BY BITS AND BYTES

• Intelligent transport

• Autonomous vehicles

• Electric vehicles

• Freight subway

• Bicycling gains

• Drones deliver

• Giant container vessels

• E-commerce

INTELLIGENT TRANSPORT SYSTEMS

• The 19th and 20th century transport built on concrete, steel and oil is now being driven bybits and bytes.

• ICT has revolutionalised the transport domain through cutting-edge technologies andapplications, e.g., in-vehicle navigation systems, vehicle-to-vehicle (V2V) applications,vehicle-to-infrastructure (V2I) applications, and vehicle-to-everything (V2X) applications.

• The sub-systems or modules of an ITS range from CCTV surveillance, variable messagesignages, lane management, ramp metering, freight monitoring, incident and intruderdetection, weather information, container security and monitoring, smart ticketing,seamless inter-modal interchange, open road tolling, radio, TV, web and cell phone-basedinformation dissemination.

Smart Communications enable vehicles to ‘talk’ to each other, while travelling.

• Smart phones use alerts motorists of pedestrians near the roadway, and pedestrians ofapproaching vehicles.

• Autonomous car and adaptive cruise control multi-agents empower consumers, using newsensor technologies, GPS and satellites to tell motorists about the best routes and parkingspaces.

• Shipping lines make their existing ships smarter by embracing the “age of digitisation”.

⁻ Maersk Line installed sensors on its containers that track their location and contents;sensors alert when they need care.

➢ It enables port terminals to improve their turn-round.

➢ Software also helps stack containers on ships more efficiently.

FROM HORSELESS TO DRIVERLESS

• Heralding the death rattle of internal combustion engines, world is fastshifting from fuel and pistons to batteries and electric motors.

Cars were originally known as “horseless carriages” – defined, like driverlesscars today.

• Self-driving cars promise to be as disruptive and transformative atechnology as the mobile phone.

• The car stays on the same road, using cameras and a “Lidar” scanner tofollow the lane markings and maintain a constant distance from the vehiclein front.

• Technology firms, including Apple, Google, Tesla are investing inautonomous vehicles.

• Google and Uber see great potential for shared and autonomous vehiclefleets.

DB envisages running automated trains within five years, primary reasonbeing an impending shortage of train drivers.

• Rio Tinto’s Autol-haul project is pioneering the automated operation ofheavy freight trains in the sparsely-inhabited Australian outback.

ELECTRIC VEHICLES (EV)

• With a small beginning, EVs, numbering just a few hundreds globally in theearly 2000s, total 2m today, their sale marking a record 750,000 in 2016.

Their growth has been striking: from 1.26m in 2015 to 2m in 2016.

• By 2020, EV stock is expected to range between 9m and 20m; and by 2025,40m-70m.

Today, the global EV stock aggregates just 0.2% of all cars in circulation.

• China registered 336,000 new cars in 2016, 40% of the electric cars soldworldwide. With about a third of global total, it has the largest electric carstock.

⁻ In addition to electric cars, China is credited with over 200m electric 2-wheelers, 3-4m low speed EVs, and more than 300,000 electric buses.

• Commanding world’s highest EV market share at 29%, Norway is at thetop; every 4th of its cars is an EV.

• The Netherlands has a 6.4% market share; Sweden 3.4%, China, France andUK 1.5% each.

FREIGHT SUBWAY

• The Swiss Cargo Tube project may create new form of transportationto complement road, rail, air and water.

• A similar CargoCap project started in Germany, essentially with aview to alleviating congested urban areas in the Ruhr region, byadding an additional subterranean transport system. Projectedconstruction cost of such a network is in the range of EUR 6m/km.

• The plan envisaged a sort of subway system to move cargo.

• The CargoCap system aimed at delivering consignments to the outercity limits by truck or train and then loading them into speciallydesigned capsules which hurtle along underground pipes of about2m dia to other locations at envisioned distances of up to 150 km.

• It involves the construction of a system of tubes 20-60 munderground. Each tunnel would have three lanes for traffic - thetwo outer ones for electronically guided, self-propelled wagonsmoving in opposite directions, while the and one for loading, cross-loading and discharging containers that carry the goods.

HARNESSING THE BICYCLING GAINS

The bicycle has immensely transformed through infinite designs and forms, sizes andshapes, from the use of bamboo to steel, to aluminium and titanium, to chromemolybdenum and carbon fibre.

Its frames and components continue to get lighter and more aerodynamic. Its electronicgadgetry has expanded.

• Potential of public transport option

• A recent UN report: bike sharing has gone from “interesting experiments in urbanmobility to mainstream public transport options in cities as large and complex as Parisand London”.

• Copenhagen opened up the “S-trains” to bicycles to encourage seamless commuting:“flexi compartments” allow multiple bicycles on board at no extra cost.

• High-quality parking and bicycle-sharing are provided at stations.

⁻ For 146 of the 365 million annual train trips in the Netherlands travellers cycled toand from train stations - helped, of course, by an excellent network of bicycle routesthat incorporates public transport nodes.

⁻ Electric bicycle or “e-bike” popular in China catching fancy – in Europe and the US.

Contd…

Bicycle: also a beast of burden

• Bicycle delivery companies are appearing in numbersacross Europe.

In France, La Petite Reine moves over one million packagesannually with 60 cargo bicycles.

In Great Britain, Cambridge-based company OutspokenDelivery sees approximately 70 deliveries by bicycle a day.

The firm even offers a multi-modal delivery service fromCambridge to London, using a folding bicycle for collectionand delivery at each end.

Some of the “Cargocycle” bikes can carry up to 250 kg offreight.

“Frigocycles” can deliver refrigerated goods.

NOW DRONES DELIVERA Google’s research laboratory executive received a delivery by drone inSeptember 2016 as part of a test carried out in Virginia.

• When delivering a package, drones do not actually land but float abovethe recipient and use a winch to lower their cargo.

• The technology giant most closely associated with delivery drones isAmazon.

• It carried out its first trial delivery to a customer near Cambridge,England, in December 2016 – “13 minutes from click to delivery”.

• Zipline, an American start-up, began delivering medical supplies inrural Rwanda using fixed-wing drones in October 2016.

• Zipline drones can fly 150 km on a single charge.

• Other start-ups say that drone delivery in urban areas is alreadypossible – but using drones moving on the ground rather than in the air.

• Logistics firms, e,g., DHL and UPS as well as some start-ups are alsolooking at drone delivery.

BELIEVE IT...

• Mckinsey’s Steve Saxon and Matt Stone foreseecontainer ships of 50,000 TEU capacity playing theseas autonomously.

• They envisage a fully autonomous transport chainextending from loading, storage, sailing tounloading directly onto autonomous trains andtrucks, last-mile deliveries done by drones.

• Short-haul intra-regional traffic is projected toincrease as converging global incomes, automationand rolotics disperse manufacturing footprints.

E-COMMERCE: THE NEW KID ON THE BLOCK

• Growing by 20% a year for a decade.

• Two of its greatest exponents – Jack Ma, founder of Alibaba in China, and Jeff Bezos of Amazonhave used e-commerce to amass a new sort of conglomerate.

• The one-time bookseller, Amazon in Seattle now employs more than 40,000 workers, andglobally a further 340,000.

• Amazon sorts goods by zip code in big warehouses, then delivering them to post offices tohandle the last mile of delivery.

• Amazon has opened small warehouses where it keeps popular products, so they can bedispatched quickly to shoppers.

• Goldman Sachs estimates that swelling parcel volumes will require 4m express delivery staffby 2020.

• Alibaba aspires to serve 2b customers around the world within 20 years, reaching any buyeranywhere within 72 hours.

• Cainiao, the logistics network in which Alibaba now owns a majority stake, has built bondedwarehouses where foreign manufacturers can store goods, duty free, within China’s borders,ready to be shipped to consumers.

• Rather than owning its own delivery trucks, it has joined hands with a number of existingcourier firms who plan to invest billions to develop a “smart logistics” network.

• By sharing warehouses, processing centres and delivery personnel, the firm hopes to be able todeliver online purchases within 24 hours even to small cities and villages.

• Alibaba wants to build free-trade zones around the world to help small businesses withcustoms clearance, warehousing, and financing.

• Robotics have been planned to take over warehousing operations to help lower costs.

OVERVIEW OF THE E-COMMERCE RETAIL SUPPLY CHAIN

• Some stores are becoming hubs for onlineorders from third parties.

• FedEx is soon due to have package pickupcounters in about 8,000 Walgreenspharmacies across America.

• In Japan, both Rakuten, Japan’s leading e-commerce firm, and Amazon deliverpackages to convenience stores.

• Logistics cost as a percentage of revenuefor e-commerce retailers may vary from 5to 15% depending on the category ofproducts being offered.

• The most enticing ideas in logisticsinvolve unmanned delivery.

• Driverless delivery trucks may one dayhelp.

• In four Chinese provinces, drones fly onfixed routes to predetermined landingspots. A worker then carries the parcelsfor the last stretch of the journey.

Contd...

• E-commerce will not smother all retail trade. As demand for physical shopsebbs, that for warehouses will surge.

• Citi estimates that 2.3b sft of new warehousing will be needed worldwide overnext 20 years

• Since land is scarce and expensive, warehouses will get taller, as many in Asiaalready are.

• For same day deliveries, smaller distribution centres will spring up near CBDs.

• Logistics is increasingly becoming a decisive factor for the success of e-commerce companies.

• Rather than owning its own delivery trucks, Alibaba has joined hands with anumber of existing courier firms who plan to invest billions to develop a“smart logistics” network.

• By sharing warehouses, processing centres and delivery personnel, the firmhopes to be able to deliver online purchases within 24 hours even to smallcities and villages.

• Valuable goods such as integrated circuits are secured with electronic locksand tracked by GPS.

WORLD IS SHRINKINGNO NEED TO ERECT FORTRESSES

NO ROOM FOR ERECTING FORTRESSES

Amidst an endless chatter of neo-nationalism and protectionist fervour, we may wellponder the sweep and extent of globalism that permeates over planet.

• Prof. Jagdish Bhagwati illustrates in his Termites in the Trading System through ananecdote on Princess Diana’s accidental death.

• “An English princess with an Egyptian boyfriend crashes in a French tunnel, drivinga Dutch car with a German engine, driven by a Belgian who was drunk on Scottishwhisky, followed closely by Italian paparazzi on Japanese motorcycles, treated by anAmerican doctor, using Brazilian medicines.”

Speedy and easy movement across national boundaries

of goods, people, information , finance

A higher degree of national and international production systems.

A dramatic decline in transportation and communications costs

Lowering of trade barriers and tariffs, facilitating international exchanges

and investments.

Our world is shrinking, and transport has made it so.

THANK YOU