Logistics in Russia. Where to go, swim or fly?
Participants of the Russian logistics alliance ACEX comment on the business condition in the crisis period and how to hold the positions on the market.
REGION PECULARITIES. WHAT IS WRONG?
According to Denis Bobrakov, the Commercial director for Black Sea Shipping Service Ltd, Novorossiysk, the port does not have problems. Before the crisis there was lack of terminals, warehouse premises and zones for transshipment of cargo arriving or dispatching by railway. Now there are no problems with logistics organization.
“In the region there is a sufficient number of vehicles, warehouse premises, container terminals,” comments Maria Moskvicheva, the Head of “Buro perevozok”, the member of ACEX, Rostov-on-Don. – “Entrepreneurs keenly keep up with the demand and react with the offer. The problem consists in the cargo availability, namely in its absence – there is recession in all industries.”
As Sergey Shavzis, the President of the Ural logistics association, thinks, the Ural region has a rich network of roads and a sufficient number of own vehicles. Trans-Siberian railroad with branches in all regions of Ural provides railway connection; there also exists a branched network of container terminals. The region ranks the third in Russia after Moscow and Saint Petersburg in terms of warehouses of a high class. Koltsovo airport in Yekaterinburg is one of the biggest international airports in the region which can serve all kinds of aircrafts including Boeing 747.
“Nevertheless,” tells Sergey Shavzis, “70% of cargo comes to the region through Moscow. The main reason can be competition with Astana and Novosibirsk by the transit flights from Europe to China.”
Andrey Dubovik, the Head of multimodal deliveries for LLC “ATK”, Vladivostok: “In our region we have many logistics companies, vehicles, trains, etc. From 2008 till 2013 the companies managed to earn, there was a great number of clients and perfect conditions for rendering transport services. Today the competition is so tough that many companies give up, reduce and decrease wages.”
At first sight the representatives of the regional transport companies are quite satisfied with the level of infrastructure and general condition of the industry, nevertheless, the respondents expressly or by implication touch upon the problem of cargo flows concentration in the central regions. The regions feel lack of big and strong multimodal logistics operators which have own central facilities. The majority of the operators are the Moscow companies, all western companies have their offices in Moscow. And all regions are supplied from Moscow. It is difficult to forecast when the situation can be changed, but according to the alliance members there is a tendency towards changes.
WHAT THE CONSUMER GETS?
In the current crisis conditions the changes have touched both transport companies and consumers of goods and services. The competition makes the forwarders and cargo owners decrease the cost of transportation, however, in the end, after realization of all stages of transportation the final cost of the product is still growing every day. The reasons for this are numerous: among them is the high cost of purchase, if it concerns import, and also customs fees which depend of the product cost; and in connection with the weakening of the rouble rate we come across with its serious increase.
“Both logistics operators and consumers are puzzled how to find favorable means of goods transportations,” comments Andrey Dubovik.
“Everbody aims at cost reduction and goods promotion,” thinks Sergey Shavzis, “So far as a regulator gets involved (for example, state authority), the cost is increasing. Anyway, rise in price or cost-cutting fall on the shoulders of the consumer.”
WHAT IS THE FORECAST?
According to the experts, the efficiency level of 2004-2007 cannot be achieved anymore. It is necessary to learn how to work in the new economic conditions. The government gives 2-3 year to overcome difficult period, and further the situation should become clear.
“Forecast of the industry recovery depends on the recovery of purchasing power, including at the account of state regulation measures in the sphere of consumer goods, agro-industry and mechanical engineering,” – says Alexander Lisin, the Executive director of the Russian intermodal logistics association (RILA).
“Unstable rouble exchange rate against other currencies is the reason of low traffic. We have no choice but either to concentrate on export or to continue to adapt to the environment,” thinks Andrey Dubovik.
According to the experts, the government should care about the industry, agriculture, engineering; and the logistics industry will catch up.
“Logistics is an integral part of the economy. In case the industry falls by 30%, the economy will have at least 20% decline. In other words the decrease of import is followed by the domestic transportations, as mostly it is import transportation rather than domestic production,” thinks Miroslav Zolotarev, the Head of the first Russian logistics alliance ACEX.
In difficult economic conditions that is state structures which have authority and funds to subsidize any sector of economic activity. It is obvious that transport logistics is a service sector, therefore, global state support is not subject to discussion at this stage of economy development. Nevertheless development of industry, agriculture and engineering can give an impetus to all sectors of economy on the way out of the crisis. Under a policy of the state directed to the development of the import substitution, the placement of state orders for the leading enterprises can be considered as the assistance of the state.
“Our partners “Beriev Aircraft company” and JSC “Rostselmash” informed of placement of state orders,” shares the news Maria Moskvicheva (a member of ACEX, Rostov-on-Don).
“Crisis serves for the purpose to leave afloat only the strongest ones,” thinks Andery Dubovik, “The state has done much already, I think, the idea of territories of priority development will give work for those who is left in trend.”
WHAT ARE THE STEPS FOR INDUSTRY IMPROVEMENT IN LONG-TERM PROSPECTS?
The heads of the Russian logistics companies agree that a number of measures can influence upon the situation. Among such measures are expansion of power of regional authorities with the purpose of funds allocation for construction of transport and logistics complexes, renewal of rolling stock, development of the institute of state and private partnership, development of related sectors of economy, increase of share of state orders for small and middle business, increase of production, as well as decrease of forwarders under natural selection in the conditions of effective competition.
At present efficiency of supply chain is a basic condition for ensuring the enterprise competitiveness. Construction of big logistics centers is the future for the logistics market in Russia and the main factor for decrease of rates for rent of warehouses and cost for logistics services. Logistics parks, uniting companies from different industries and transport communications in one platform, establish qualitatively new standards in the concept of development, design and logistics management.
“In the Russian logistics industry there is no cooperation between companies providing different services; everybody wants to do everything on their own, everyone wants to be a 3 and 4 PL provider. But it is necessary to establish supply chains between logistics companies, create economical schemes of deliveries at the account of different resources,” thinks Miroslav Zolotarev.
In the recent years there is a tendency for development of regional logistics in Yekaterinburg, Novosibirsk, Vladovostok and other regional centers. Russia is a transit country with the shortest transport routes between Europe and Asia. It takes 30 days to deliver cargo by sea from Asia to Europe, whereas by Trans-Siberian railway it will take 10-12 days. There are projects for development of regional multimodal hubs, in particular in Novosibirsk. This will possibly enable to change cargo traffic and attract more transit cargo to Russia.
By analogy with RZD, which is in real earnest engaged in transit and has increased number of direct container carriages from China to Europe from two dozens to two hundreds per year on the basis of transit cargo. The airfreight has the same opportunities and is waiting for its integrator.
Miroslav Zolotarev, the Head of the Russian logistics alliance ACEX, resumes: “It is obvious and clear that the expenses for logistics in Russia are equal to 20% of the products cost, what is too much. The goal is to decrease costs, what will contribute to further development of the industry and economy on the whole. The ways of the costs decrease are: infrastructure, strengthening of terminals, roads, etc. Import substitution is a good idea, it is necessary to produce products at the domestic level and consume them to the maximum and not to depend on the import. Besides import substitution it is necessary to develop export, search for sales markets for the Russian products, develop small and middle business. Russian economy is monopolized and most of cargo flows are produced by large companies. And the logistics companies have to divide them. But it is the “dead-end road”, one cake will not be enough for everybody. Other “bakeries” also need help. Almost nobody consider Europe as export market for the Russian products. There is an opinion that the Russian standards are lower than the European ones. And there is nothing to gain there. However nobody prevents us from working on the product quality and bringing it in correspondence with the European “GOSTs” and not to work according to the Soviet standards. Then the logistics will catch up and manage these processes.”
Development prospects and attractiveness of the Eurasian market of transport and logistics services were discussed at the joint conference ACEX-TFS (Eurasia Cargo Meet) in April 2016.
About opportunities of modern logistics industry and measures required for strengthening of the Russian economy read in the full article №31 (2015) of the magazine “Transport strategy XXI century”.