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Issue 5 2012


Big business, but you must go with the flow, says Luſthansa Cargo


Business is moving around within the Indian Subcontinent, says Carsten Hernig, regional director South Asia, Middle East & Pakistan at Lufthansa Cargo. “South Asia was mainly driven by fashion exports, but in the past 3-5 years the mix of industries has changed in India, as that country has started to focus more on higher- value goods like pharmaceuticals and telecoms. That in turn has meant that production has shifted to neighbouring countries, and Bangladesh is one country where the fashion industry is now centred – it’s a natural extension.” Bangladesh, with its low


labour costs and vastly improved production standards, has in fact also captured garment production from other countries including China, and this prompted Lufthansa Cargo to set up a weekly MD11 freight service to and from its Frankfurt hub to Dhaka - via India - in April 2011. However, it is not just a matter of


inserting capacity and expecting traffic to fill it, points out Carsten Hernig. “You do have to actively manage it – it’s not a market where you can rely on regular consolidations every week. The challenge in Bangladesh is that, because the fashion industry is so dominant, you really do have all your eggs in one basket.” If the rag trade takes a downturn – and it is one of the less recession-proof sectors – there is very little alternative cargo. However, as Dhaka is twinned with Indian stations helps keep payloads constant.


///INDIAN SUBCONTINENT


Emirates explores subcontinent opportunities


Emirates’ regional manager for


cargo commercial operations Ravishankar Mirle, says that the subcontinental economy - and India’s in particular – is doing well, despite the global recession. “It’s holding up better than the rest of the network east of Dubai. Growth in India has dropped a little, from around 8.5% to 6-7% but it’s still in better shape than Europe.” India has tended to fare


The fact that Dhaka shares its


freighter with other stations in India also helps even out the chronic and heavy imbalance


between


inbound and outbound flows. The little inbound traffic there is consists mostly of spare parts and machinery needed to keep the garment presses turning, with occasional lumps of project cargo, says Hernig. “There just isn’t a large consumer market, as in China, for example.” Lufthansa cargo is in fact the only


freighter operator to serve the six main Indian metros – Mumbai, Delhi, Hyderabad, Bangalore, Chennai and Calcutta – says Hernig, some of them five times a week. Most Indian cities are also served at least daily by passenger flights, if not more often. With the


global economic


situation as it is, it will probably be a few months before Lufthansa Cargo looks at the next phase of expansion of its freight services in the Indian subcontinent. While India itself has diversified, the subcontinent as a whole is still very dependent on the garment trade and has suffered in


the global recession as consumers put off buying new clothes for as long as possible. Lufthansa Cargo freighters also


serve Lahore in Pakistan inbound once a week (for exports it is an offline origin, served via the Middle East). “Pakistan is a more difficult case, because of the political situation,” Hernig explains. “There has been yet another change of government, and investors and even buyers are waiting to see what happens.” As in many of the world’s so-called ‘troublespots’ there is actually a big difference between the picture portrayed in the media – which is mostly of terrorist activity in remote regions - and daily life in the big cities, which carries on much as normal, but it does harm the country’s image. A more pressing problem is actually the very high crime rate in Karachi, which has made some foreign buyers wary of visiting, says Hernig. That said, “many people might


be surprised at the quality and production standards of goods produced in the country”.


better than other countries of the subcontinent because it is more diverse, both in terms of commodities shipped by air and markets served. It exports anything from garments to pharmaceuticals and auto parts to produce, not only to Europe but to Africa and the Americas, as well as the rest of Asia. Bangladesh, in contrast, is more


of a one-commodity market – garments – and most of its trade is with one region, Europe. Similarly, the Pakistan market tends to go up and down depending on the size of the mango harvest between June and August. This last season has been a good one, with around 60 tonnes of fruit exported daily, mostly to Europe. (It used to be mostly to the UK, but now Germany and Scandinavia have developed as major markets too.) Airlines like Emirates actually like produce as a traffic – yields per kilo may not be huge, but as it is relatively dense cargo they can get a lot of kilos on a pallet compared with lighter manufactured goods, so it tends to pay quite well. Back in India, if the politicians


can get the economy ticking over again, there is no reason why economic growth could not return to the heady heights of around 18%


Technology is the key for Crane Worldwide


The Indian Subcontinent is demanding not only more logistics services, but more sophisticated logistics services, says Crane Worldwide. The company, which specialises in the high service, high ‘touch’ sector of the market, is targeting areas such as oil and gas, automotive, aerospace and medical devices in India where there is demand for its sophisticated tracking and tracing and inventory management capabilities. It has also invested in Kewill systems and soſtware to give its customers the requisite level of


responsiveness. Chad Taylor, Crane’s regional


vice president for Asia Pacific, explained: “When we started up, we saw a niche in the market, where IT was going to be extremely important.” IT is nothing new in the freight industry, but the problem that large forwarders face, says Chad Taylor, “is that they have multiple systems around the world – whereas we wanted an operating system with just one platform.” Kewill provided a solution that could be customised and built up from scratch.


It offers, explains Nimish Shah, managing director of India at Crane Worldwide, “a strong, single platform that can be used on devices like smartphones or iPads anywhere in the world.” It avoids frustrating phone calls across time zones just to find out where shipments are, or whether they are on time. Chad Taylor continues:


a strategy when dealing with a relatively undeveloped country like India, but no longer. Provided people have the right information at their fingertips, they can react to any glitches in the supply chain. Instantaneous


information “Two


decades ago, customers would have had perhaps 30 days inventory, but now the supply chain is treated as part of your inventory.” Until now, this would have been considered too risky


is the ideal of many forwarders, but for many with their legacy systems, that can be quite difficult to achieve, so start-ups like Crane could have an advantage, Taylor argues. Crane Worldwide’s biggest


market in the Indian Subcontinent is the oil and gas industry.


recently enjoyed, says Ravishankar Mirle. The Rupee has devalued by around 20-30% over the past few months, and while this has helped exports to some extent – especially as the other regional currencies are linked to the US dollar and have remained relatively strong – this has reduced yields. For the moment, though, India is seeing “a surge into the Americas and Africa for pharmaceuticals and relief medical shipments” - all regions that Emirates can serve on its 185 flights a day hubbed in Dubai. Emirates currently serves ten


cities in India - New Delhi, Mumbai, Hyderabad, Calcutta, Bangalore, Chennai, Ahmedabad, Calicut, Trivandrum and Kozhikode - mostly with triple-daily flights operated by 777, A330 or A340 passenger aircraſt, offering around 15t of cargo liſt or more per flight. But the carrier was also hopeful that it would soon launch an intra-Asian 777 freighter service operating Dubai-Calcutta, Dhaka in Bangladesh and back to Dubai. There is significant traffic potential on the Calcutta-Bangladesh leg, says Ravishankar Mirle. “A lot of raw materials for the Bangladeshi garment industry come from India and there is also some traffic in personal effects, especially during religious festivals,” he explains. Given that the two countries


share a border, one would have thought


that there would be


adequate road services but the tangled politics of the region make cross-border trucking difficult. “Road transport is not that well- established and the borders are far from seamless,” says Ravishankar Mirle. Land connections between


Consolidation of components


from various suppliers is important in this sector as is ‘vendor managed inventory’, both of which need responsive IT systems. Car parts exports out of India is the next biggest area, and here the process is the opposite – making up bulk consignments in India and then breaking them down according to destination in Europe or North America. Again, adequate systems are important to keep track of the oſten quite complex flows of goods. The third most important


area are medical devices – India imports these in large and growing quantities – and it goes without saying that keeping track of


India and Pakistan are similarly difficult although there was trade in the past. However, there is a fair bit of


traffic between India and Sri Lanka, again mainly Indian-produced raw materials for the garment trade. In the days of strict quotas on clothing exports to Europe, the island country was sometimes used as a back door when India’s own quota was exhausted. Emirates serves four Pakistani


cities from Dubai – Karachi, Islamabad, Lahore and Peshawar - with 54 passenger flights a week and it also has regular services from Dubai to Dhaka and the Maldive


islands, markets just off the


southern tip of India. There are other regional such as Nepal, which


Emirates does not serve directly but via partners such as Indian Airlines and Jet Airways, or via Delhi. Nepal is on Emirates’ radar for possible direct flights, but at the moment it wouldn’t justify the return on investment. As an air cargo market, it is no more than about 3-400 tonnes a month in total. Political instability has followed the Maoists’


grab for


power a couple of years ago and this has hit exports. Myanmar (Burma) is another


interesting offline destination. “It is opening up and there is a lot of foreign investment, so we are watching it carefully,” explains Ravishankar Mirle. But direct flights are a long way off – at the moment Emirates does not have traffic rights and it would need to get itself registered there. Thai Airways is the main conduit to the country at the moment.


consignments is vital. Crane Worldwide has offices all


in


the main markets and


operational locations throughout India and it also has exclusive agency agreements in Pakistan, Bangladesh and Sri Lanka. With rapid improvements in infrastructure, it will doubtless set up further locations, though it will be led primarily by customer demand rather than a desire to put dots on the map, says Nimish Shah. But undoubtedly, as demand for


just in time deliveries increases, it will turn its attention to second- and third-tier cities – which in this country of a billion, still means places with populations of two or three million.


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