Lankan forwarders need to raise the bar

Monday, 14 July 2014 00:59 - - {{hitsCtrl.values.hits}}

Elevate standards as real logistics providers
Be professional, ethical and meet customer demands

As we know it, the supply chain dynamics have changed drastically over the last decade, but to be honest, Sri Lankan freight forwarding industry must question themselves and ask how many of Sri Lankan freight forwarding companies have raised the bar in terms of quality, choice, standards, ethics and have established forward and backward integration compared to global standards. United Nations Economic and Social Commission for Asia and the Pacific [UNESCAP 2002] says: “Logistics and supply chain management are seen as the fields in which logistics providers, by virtue of their particular expertise, are able to offer the most added value to transactions in the freight trade. Freight forwarders, as ‘logistics service facilitators,’ play an important role in supply chain management, as an increasing number of firms outsource their logistics.” Drop in quality The international trading actives of Sri Lanka have expanded since liberalising the economy in 1977, reaching a $ 30 billion import export trade. The number of new forwarders too have mushroomed over the last decade, however the quality of services and professionalism and ethics of most of them have decreased except for a few companies. As a trainer of the industry and being associated with the industry, my observation is that a large number of freight forwarding companies in Sri Lanka have just changed their names from freight forwarding to logistics providers today, just as a fashion and a tool which really does not reflect value to clients, nor to the industry and the country. The majority of them only buy and sell freight to make a commission as brokers. The mushroomed operators survived with surcharges and markups for many years without any value addition and probably increased the cost of the supply chain. Logistics provider’s role ADB institute says: “The logistics provider’s role is not only to organise the supply chain, but also to service it. As such, the logistics provider can

be described as the ‘engineer’ or ‘architect’ of the supply chain. The duty of the logistics provider is not only to forecast customers’ requirements, but also to provide value-added services that will contribute to the enhancement of customers’ competitiveness. However, forecasting customers’ requirements is not an exact science and the logistics provider must also be able to respond rapidly to unforeseen events or requests involved in the provision of logistics services to clients.” A logistics provider cannot operate successfully in isolation. A professional logistics provider will rely on a credible agency network worldwide, subcontractors, and most importantly with their clients. A close partnership has to be formed between the service provider and the client. This relationship and trust, in turn, will facilitate the creation of more realistic supply chain designs and operational processes which will deliver a win-win situation for both parties and to expand trade itself. It is the duty of the logistics provider to be aware of all the options available and to design a cost effective supply chain flexible enough to cope with unforeseen events and work with different boarder control and national laws. Competition is the catalyst Recent industry publications, circulars and remarks made by some members representing the forwarding industry in Sri Lanka in my opinion, will only isolate the industry further from their own membership, Government and their clients. In a free market no industry should worry about competition, transparency and accountability. Competition is the catalyst to build the ‘critical mass’ in economic terms for an emerging hub operator like Sri Lanka. As a maritime nation, Sri Lanka is an attractive location for logistics, hence the role of the Lankan forwarders is not to look inward into the relatively small Sri Lankan market only and fight for a small piece of the pie, but they should focus outwards towards the Indian subcontinent (ISC) and rest of Asia, and emerge as top supply chain solution providers in the region which accounts for $2.5-3 trillion economic value with an emerging consumer market and a population of 1.5+ billion. They should take advantage of the new hub act for this purpose. Macro-economic issues The Government has heavily invested on the logistics industry, expanded reforms through hub activity and new laws, Custom and port system modernisation with greater trade facilitation. Proposed a new corporate tax reduction to shipping related activities from 28% -12%, which certainly encompasses logistics. However more has to be done and it is the duty of the logistics industry to address and propose such macro-economic issues of the country and engage the Government and other stakeholders and help change the landscape of logistics in this country and move forward and benefit from the reform agenda rather than waste time on petty matters. All forwarders must be educated of new opportunities. The industry must raise standards in professionalism, ethics and improve skills with greater capacity building, adapt new technology and learn to operate leaner business models. The biggest mistake a trade can do is to be short-sighted and to alienate themselves with their customers and the Government. The logistics provider’s role and image which was equated to an ‘engineer’ and an ‘architect’ for the supply chain by the ADB has to be taken seriously by top Sri Lankan industry professionals and must make the effort to raise the bar to elevate the sector and its image in Sri Lanka and to be proud about the industry. (The writer is the CEO of Shippers’ Academy Colombo, an economics graduate from the Connecticut State University USA, and immediate past secretary general of the Asian Shippers’ Council.)

Lankan forwarders need to raise the bar

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