Tax & Accounting Blog

Global Trade Management: A Logistics Value-Add

Blog, Global Trade, ONESOURCE October 7, 2016

Infrastructure is critical to the growth of economy. In particular, logistics infrastructure with a well-designed, extensive network of roads, bridges, railways, ocean and air routes, ports, and airports is one of the vital growth drivers for industry and trade.

India is one of the fastest growing major economies in the world with an expected GDP growth rate of over 7.5%. However, its logistics infrastructure is considered highly incapable of supporting its existing and projected high growth rates. Currently India spends around 14.4% of its GDP on logistics and transportation as compared to less than 8% by the other developing countries. Realizing the importance and urgency to develop India’s logistics infrastructure and enhance its operating efficiency, the government of India has undertaken a number of initiatives towards facilitating trade. As Mr. Nitin Gadkari, Minister of Shipping, Road Transport and Highways, said, “Shipping is just not ferrying of goods and passengers. It is all about the growth of the nation as it promotes trade.”[1]

The Indian freight transport market is expected to grow at a CAGR of 13.35% and will be worth US$ 307.7 billion by 2020, driven by the growth in manufacturing, retail, Fast-moving Consumer Goods and e-commerce sectors. Of the total freight movement, road travel constitutes around 63% and is expected to increase at a CAGR of 15%. Meanwhile, sea transport constitutes around 9% and is a primary means for imports and exports. Air constitutes around 1% and is expected to grow approximately 12.5% CAGR over the next five years.

India boasts certain geopolitical advantages, including a 7,500 kilometer-long coastline and navigable inland waterways of over 14,000 km. It’s also recognized as the fourth most attractive Foreign Direct Investment (FDI) destination in the world as per United Nations Conference on Trade and Development (UNCTAD), having an absolute single-party majority government at the center focused on developing this sector. Such development initiatives include port modernization and development, inland waterways and Hinterland [2]Connectivity and Multimodal Logistics. Plus, with National Integrated Logistics Policy (NILP) focused on the implementation of infrastructure development programs for rail and coastal Dedicated Freight Corridors (DFC), national expressways and last-mile roads and rail, it would not be surprising if the logistics market in India exceeds the estimated CAGR of over 12% by 2020.

Are logistics companies in India ready for this growth? With the highly unorganized logistics market and gross under-utilization of resources, what must India do differently or unconventionally to equip itself with this increase in demand and competition? The answer is innovation. While growing demand would always mean more quantities are shipped across wider geographical areas at faster speeds and lower costs, innovation through value-added services and with automation and technology adoption would seem to be the most essential component to the success of logistics companies.

As a result, if logistics is to be the game changer in this growth-oriented economy as is predicted by most researchers and market analysts[3], then logistics companies in India will need to see far beyond the conventional services of loading, unloading, packing, transportation, freight forwarding and warehousing as discrete functions. They would need to invest in value-added services like trade process automation, global trade compliance, customs clearance and documentation, integration across trading partners, technology-powered supply chain execution, real-time order and vehicle tracking and data analytics for demand forecasts and turnaround time reduction, to name a few.

Each of these services is a venture in itself. The logistics company must operate differently than in years past by embarking on a business transformation program to achieve this goal.  Some of the leading e-commerce retailers have already identified this need and are reaping the advantages as early adopters of value-added services and technology. For instance, Snapdeal, Amazon and Paytm have invested in various strategic technology solutions that are leveraged by their third-party logistics partners. Some include smart devices running on fast and reliable internet connectivity, satellite-based vehicle tracking data capture, and web-based software systems working on optimization algorithmic engines for operational planning and execution.

Global trade management software is another value-added service that logistics companies can include in their scope. The complexities of managing global trade range from import and export compliance and clearance, product classification, trade documentation, digitization, trade finance, license management, benefits utilization, screening and risk management, and trade dispute settlement. Increasing technology adoption proves to be the most powerful tool to manage these complexities and maintain customer satisfaction.

Thomson Reuters ONESOURCE™ Global Trade offers a comprehensive set of solutions for operating, controlling and managing the various processes in global trade: Imports, Exports, Special Programs, Restricted Party Screening, Free Trade Agreements and Trade Finance.

ONESOURCE Global Trade is a cloud technology-based, enterprise software solution that is powered by trade compliance content and trade facilitation tools which help simplify the entire global trade management process by automating routine tasks and opening up the opportunity for companies and professionals to focus on value-added activities. Logistics companies can achieve a new level of accuracy, compliance and efficiency that will save them time and costs with the first truly global solution of this kind.

To learn more about ONESOURCE Global Trade and global trade trends, visit our website.

Source:

Maritime India Summit 2016 (MIS 2016), MINISTRY OF SHIPPING

India: Economic Survey 2015-16 and Union Budget 2016-17

Building India: Transforming the nation’s logistics infrastructure, McKinsey & Company

Your Story: E-commerce Logistics to be the game changer for e-commerce in 2016

[1] Maritime India Summit 2016 (MIS 2016) from April 14-16, 2016, by the Ministry of Shipping, Government of India, an initiative to provide a unique global platform for investors to explore potential business opportunities in the Indian Maritime Sector.

[2] McKinsey & Co.’s report recommending policy initiatives to move the logistical development plans from the strategy stage to actual implementation and augment maritime infrastructure

[3] Your Story: E-commerce Logistics to be the game changer for e-commerce in 2016