head of corporate compliance
and Southeast Asia,
Globe Express Services
India is a serious market for Globe Express Services, a fast-growing third-party logistics company based in Hong Kong. With the recent opening of the company's eighth Indian office in Delhi, Namaste chatted with Goh, whose territory includes India, about issues critical to success for 3PLs and their clients.
In a report on 3PL activity in India last summer, Goh toldNamaste's sister publication American Shipper that 3PL do exist in India in a limited fashion, but few players have the breadth to do the range of functions from customs clearance all the way to transportation (August
American Shipper, pages 22-25). More likely, a company will outsource some of the less strategic activities and keep in-house the processes it considers core to its business. She also said she had little hope that infrastructure issues would be overcome anytime soon given the democratic system in place.
Namaste: Given that your territory covers Southeast Asia as well as the Indian Subcontinent, how would you say India compares to countries in Southeast Asia from a logistics perspective? What are its advantages and drawbacks?
Goh: I must say that certain countries in Southeast Asia have rather sophisticated logistics network — for example Singapore, Malaysia and Thailand. I do see some similarities between Vietnam and India though. Both countries have enormous economic potential and strong foreign investor interest levels, but their logistics developments are hampered by infrastructure limitations.
Namaste: We’ve previously chatted about the lack of true 3PL service providers in India. Is that scenario changing at all, and if so, how is it manifesting itself?
Goh: International 3PL service providers are definitely putting their money into developing their logistics network in India. For example, Globe Express has recently opened an office in New Delhi, bringing the number of India offices we have to eight. For us, it’s the country with the second most offices after China (where Globe Express has nine).
Namaste: As far as exports are concerned, what are the key product sectors where Globe Express is seeing growth? Also, to which countries are these products headed, and why are these particular goods and destinations a good fit for India?
Goh: The commodity mix of our exports are varied, ranging from furniture and garments from north India to food products from the south. With our new corporate offices in Beijing, New Delhi and New York in 2008, we are definitely serious about expanding our air freight service offerings. From India, we are particularly looking at development of participation in the garment market.
Namaste: Outside the country, more is made of export potential and not much is made of India’s current domestic consumption, much less potential. Are you seeing foreign companies actively trying to tap into that consumption base, and how so?
Goh: We are definitely looking at that. The domestic consumption potential of India is huge. It’s true that the bulk of the population lives at or below the poverty line, but there is a rapidly growing group of middle- and high-income earners who have a growing appetite for quality local products and foreign imports. This elite group is still a minority group in India today but then again, India is a huge country, with its population exceeding 1 billion people.
Namaste: From a logistics standpoint, how are India’s major retailers and manufacturers (the Reliances and the Tatas, for example) driving supply chain sophistication? Many of these corporations have their own logistics units, but are they relying on foreign providers for anything?
Goh: These Indian companies that you have mentioned are international players. International companies have sophisticated supply chain needs of international standard. Many international companies have their own logistics departments, but they still reply on 3PL to complete their logistics needs. Normally, they reserve strategic logistics services in-house, like forecasting, and outsource non-strategic logistics services to 3PLs, like customs clearance, local and air and ocean transportation.
Namaste: What role will places like Singapore and Dubai play in Indian supply chains going forward? Will their better infrastructure and more streamlined trade policies give them a leg up in providing value-added services for imports to and exports from India? And what will those value-added services be?
Goh: India and Singapore have strong trading ties that go way back. India and Dubai have strong ties as well, not to mention that a fairly high proportion of logistics personnel in Dubai are originally from India, especially the south. India can definitely leverage on the logistics sophistication and policies from these friendly partners.
Namaste: Is there a specific example you can think of where Singapore does value-added logistics for either export or import cargo from India? I think there’s a sense that Singapore is merely a transshipment stop for Indian cargo, but I have the sense that Singapore is doing more than just taking boxes from one ship to another. Am I wrong on this?
Goh: Singapore is a free port so there’s cargo consolidation activity done in Singapore where cargo from India will be deconsolidated and reconsolidated in Keppel Distripark, which is located in the free trade zone, before shipments move on to various destinations from Singapore. We also do switch bill of lading activities for our customers. Switch bills of lading are often called 'the trader's second set' and intended to replace the first set of bills of lading issued. They are usually used where a seller/trader wishes to keep the name of his supplier — in other words, the shipper — secret from the ultimate buyer of goods.
Namaste: Has Globe Express had to tailor its service offerings in India to the Indian market, or do you try to provide a service that looks the same whether or not your customer is interested in moving goods through China, India or the United States?
Goh: We do not have a 'one service fits all' concept in our worldwide offices. We listen to our customers’ needs and our suppliers’ concerns, and we constantly benchmark ourselves in our pricing and service offering locally against our peers in order to stay competitive.
Namaste: I guess what I was getting at is this: a Globe Express customer expects a certain level of service if he or she is sourcing in China or India. How difficult is it for you to make sure that their expectations are met considering how different the two markets are? Or are you typically dealing with completely different sets of customers with completely different sets of expectations?
Goh: We try to facilitate our customers’ entry into any new market through improving the communication channel between our foreign customers and potential local suppliers. We hire local sales and customer service staff in our corporate offices in India, Vietnam, etc., so our staff serves as a communication bridge between the two. We will even attend sales meetings and facilitate planning and partnership. Globe Express Services is starting up a new sourcing office in Vietnam soon in view of the increased demand for sourcing assistance from our customers. We hope to do the same for the rest of our emerging markets’ offices.
Namaste: The air freight market in India seems ready to explode, provided there’s enough capacity created at airports. Give a specific example or two about how air freight might help India grow as a manufacturing powerhouse.
Goh: Asia on the whole is becoming a viable region for air freight activity. India has great plans for its aviation and air freight industry, with ambitious master plans for MIHAN (Multimodal International Hub Airport at Nagpur).
Namaste: I’m somewhat familiar with the Nagpur development, but surely that can’t be enough to satisfy the coming demand. Or are you suggesting that that is an example of what India should be doing at key spots around the country? And if so, what other key air freight spots should they focus on? Do you have faith that India will build enough capacity for the next 25 years?
Goh: All I can say is that there are a lot of planned projects in the pipeline for air freight development in India, with improved airport facilities in the key air hubs in India. That demonstrates India’s ambitions to be a key player in the global air freight arena.
Namaste: There’s a perception, right or wrong, that Indian transportation service providers fight for every penny on costs, ignoring the broader supply chain costs to the shipper. Is this something you’re finding?
Goh: For the local freight forwarding and logistics companies, it’s true that every penny matters. However, we see the trend of some India shippers being more sophisticated in their logistics and supply chain needs. Some of them are starting to see value in global networks of international 3PLs and their shipment track-and-trace tools.
Namaste: Continuing from the last question, how will that silo mentality in terms of cost affect supply chains in an environment of steeply rising fuel prices? Can cost be extracted from elsewhere in the supply chain to provide margin for 3PLs, shippers and transportation companies?
Goh: Steep fuel prices have increased logistics costs for companies. That being said, most fixed and variable costs have also increased. Hence, logistics costs as a percentage of the companies’ operating cost levels have not gone up for most companies. Shipping companies have applied a floating fuel surcharge (revised every one to three months), on their direct customers and 3PLs. For those who want to hedge their fuel costs for a year, they will have to pay a premium to have it fixed for one calendar year. We are transparent on fuel surcharges with our customers. Nevertheless, we are constantly exploring ways to help our customers streamline their logistics costs levels through other avenues such as alternative cargo routing.