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Strategic Logistics Management

Logistics and Pakistan

Strategic Logistics Management


Pakistans logistics is an important economic
sector with significant growth and investment
potential.
It is also a key driver for private sector
development, economic growth and overall
development.
There is a clear relationship between a
countrys logistics performance, lead times and
its export performance.

Strategic Logistics Management


In Pakistan, there it is a critical inefficiencies in
our logistics chain, resulting in a 45 percent
excess in export times compared to one of the
European country (Spain) and higher logistics
costs (35-40 percent of retail price compared to
22 percent in that country), leaving much room
for improvements in the sector.

Strategic Logistics Management


In Pakistan, there it should be a coordination
between government and the private sector to
improve logistics efficiencies. These include:
Establishing freight villages to serve as logistics hubs
Investing in reefer storage facilities to increase the
shelf life of perishable goods
Developing trading platforms for smaller and medium
size producers to sell their goods.

Strategic Logistics Management


A good way to measure a countrys logistics
expertise is the Logistic Performance Index (LPI),
an indicator compiled by the World Bank.
According to this index, Pakistan lags slightly
above the regional average and is clearly behind
the EU average. Pakistans biggest weaknesses
according to the LPI are in the Infrastructure
(2.37) and Customs (2.41).

Strategic Logistics Management


Country

Overall LPI

Country

Overall LPI

UAE

3.73

Pakistan

2.62

EU

3.67

MENA

2.42

Israel

3.21

Morocco

2.38

Saudi Arabia 3.02

Egypt

2.37

Oman

2.92

Lebanon

2.37

Jordan

2.89

Syria

2.09

Tunisia

2.76

Algeria

2.06

Strategic Logistics Management


Pakistans Logistic Sector Size

Strategic Logistics Management


Composition and Characteristics of
Pakistans Transport Market

Strategic Logistics Management


Maritime transport accounts for 91 percent of
Pakistans international trade.
Road accounts for most of Pakistans domestic
traffic, accounting for roughly 93 percent.
Most OECD countries also heavily rely on
road transportation, rail services are used in a
higher percentage in OECD countries than in
Pakistan (16.0 percent in OECD vs. 2.4
percent in Pakistan)

Strategic Logistics Management


Logistical chain or ORANGES exporting to Europe
from PAKISTAN V/S SPAIN

Strategic Logistics Management


Due to inefficiencies at several points in the logistics
chain, citrus export times in Pakistan is Approx 27 days
longer than in Spain.
Although 55 percent of this time (15 days) is due to
Pakistans longer distance to the European destination
markets, 45 percent (12 days) is due to Pakistans lower
efficiency in the logistics chains.
In sum, inefficiencies in Pakistans logistics value chain
are responsible for a 45 percent excess time.

Strategic Logistics Management

Strategic Logistics Management


There are opportunities to improve reliability,
lead times, and costs in the Pakistani citrus
export chain. These opportunities are at the
most critical points of the logistics chain, in
areas such as trucking, warehousing, customs,
and maritime services.

Strategic Logistics Management

Transportation Industry
Of Pakistan

Strategic Logistics Management


Road Transport
Pakistans freight transport is dominated by road
transportation. This is similar to most OECD countries;
however rail services play a bigger role in these countries
than in Pakistan
The biggest challenges faced by this industry is
Infrastructure and trucking regulations.
The dependence of Pakistani logistics chain on road
services makes it even more vital for these problems to be
corrected to decrease export time and, thereby opening up
new markets for Pakistani exports.

Strategic Logistics Management


Road Infrastructure Assessment
In Pakistan, there are approximately 260,000 km of
roads, of which about 60 percent are paved.
The main artery in the country is the National Trade
Corridor (NTC), a 1,760 km long. Its length is less
than 1 percent of the total road network of Pakistan,
but it serves over 80 percent of the urban population.
It is managed by the National Highway Authority
(NHA).

Strategic Logistics Management

Strategic Logistics Management


Transit times of Pakistani road transportation is 3
times greater than Europe and East Asia.
A trip from Lahore to Karachi (1,260 km) takes about
2 days, while from Peshawar to Karachi (1,700 km)
takes 3 days. The presence of non-motorized traffic
and even pedestrians reduces traffic capacity.
Operating conditions are further intensified by
extensive commercial activities located along the
roads, poor physical condition of the roads, and lack
of traffic management in towns.

Strategic Logistics Management


Another feature of Pakistans road network is
its low density, which leaves several areas
underserved. This shows when comparing
Pakistans road density with that of
neighboring countries such as Bangladesh, Sri
Lanka, India or Afghanistan. In this
comparison Pakistan only is in a better
position than Afghanistan.

Strategic Logistics Management


Road network size (in km) in terms of a
countrys area (in sq-km)

Strategic Logistics Management


Road Services Assessment
Weak road transportation services is one of the main
logistical challenges in Pakistan. Bottlenecks like a
large informal trucking sector and a lack of
refrigerated vehicles, Pakistani perishable goods face
a higher logistics costs and lower shelf life, making it
more difficult to compete internationally.

Strategic Logistics Management


Not only is trucking the main way for moving
goods domestically, but it is also an essential link
in the Pakistani export chain for goods shipped by
sea and, to a lesser extent, by air. Truck loads
account for 206,404 million tons-km of goods per
year, about 93 percent of the countrys total.
For agricultural goods, there is no alternative
transport mean for transporting fruits and
vegetables out of rural harvesting areas.

Strategic Logistics Management


Despite its importance, the Pakistani road transport is
immature as a service sector. Absence of qualified
service providers is one of the main issue in providing
good logistics services.
Most providers have a small fleet, even with 2 trucks per
owner, means that most trucks are not owned by a formal
company, but by individual drivers. Moreover, many
trucks are in poor condition, with high average age, and
there is very few specialized vehicles with reefer devices
or refrigerated trucks available to transport perishable
goods.

Strategic Logistics Management


One direct consequence of the unreliable road
service available in the country is high
working capital requirements, as higher safety
inventories are needed. Producers of certain
goods are also forced to invest their resources
in non-core activities such as their own truck
fleet, which increases shipping-related costs.

Strategic Logistics Management


In summary, the trucking sector in Pakistan is
poorly regulated with about 70 percent of
trucks part of the informal sector. This
environment provides little appeal to large
sophisticated operators and service providers
willing to enter the market due to low prices,
low margins and generally unfair competition.

Strategic Logistics Management


These problems are mainly caused due to a lack of
enforcement of rules on vehicle inspection, driving
license concession, overloading, and hazardous cargo
handling.

Motor Vehicle Ordinance 1965, incorporating federal and


provincial amendments, is an old and outdated regulation
if compared with best practices from OECD countries
Obtaining a driving license in Pakistan is relatively easy.
There are no proper training schools, instructors,
equipped vehicles, or testing and licensing facilities.

Strategic Logistics Management


The National Highway Authority (NHA),
which was created in 1991, focuses its activity
in the planning, development, operation, repair
and maintenance of the national highways and
other strategic roads.
However, the total length of the roads under
NHA management only stands at 8,780 km,
which accounts for about 3 percent of the
entire road network in the country.

Strategic Logistics Management

Road Transport Recommendations


Regulate trucking industry
Increase the capacity of transportation used in
transferring perishable goods
Provide incentives to renew trucking fleets
(Mexico and USA have worked on it )
Reshape the current insurance structure
Improve the Operation of the National Trade
Corridor (NTC)

Strategic Logistics Management


Road Transport Recommendations
Expand the role of NHA
Benchmark with other transport regulatory
authorities like:
Spanish General Directorate for Traffic (DGT)
The Finnish National Road Administration
(Finnra)
The Dutch Road Authority.

Strategic Logistics Management

Sea Transport

Strategic Logistics Management


Maritime transport accounts for 91 percent of
Pakistans international trade.
The main ports in Pakistan are Karachi, Qasim
and Gwadar. In 2006, 55.85 million tons of
cargo was transported through them.

Strategic Logistics Management


The port of Karachi is Pakistan's largest and
busiest seaport, handling about 60 percent of the
nation's cargo.
Port Qasim is Pakistan's second busiest port,
handling about 40 percent of the nation's cargo. It
is located in 35 km east of Karachi. One of its
major advantages is its proximity to different
national transport facilities. It is 15 km away from
a national highway and 22 km away from the
airport.

Strategic Logistics Management


The port of Gwadar is in Baluchistan,about
460 km away from Karachi. It became
operational in 2008. It is a deep-sea water port,
being constructed with heavy investment from
China. The government of Pakistan has
projected this port as the first link to China and
Central Asian republics, by providing them
with short access route to the markets in the
Middle East and Europe.

Strategic Logistics Management


Port infrastructure in Pakistan is overall in
good shape. Of course, there are aspects that
could be improved, such as the connection of
the Karachi Port with other transport means or
the custom and storage facilities

Strategic Logistics Management


Some of the KPIs that can be set by KPT are as
follow:
Port operational performance: Dwell time, transit times, loading
and unloading rates, and availability of daytime or 24/7 port
services.
Availability of services to the ship: Bunkers, waste treatment,
power, towage, and mooring.
Availability of services to the goods: Reefer container service,
bounded warehouse, consolidation/de-consolidation, containers
depot, and agriculture and sanitary area.
Degree of intermodal and logistic integration: Access to land
transport including rail and road.
IT expertise: Tracking and tracing processes and IT.

Strategic Logistics Management


Rail Transport

Strategic Logistics Management


Rail Transport
Rail has become a key transport mode for freight
in developed countries and could be used to
transport a higher share of heavy non-perishable
goods.
Weak rail services in Pakistan fail to offer an
alternative to road transportation, as it has a poor
infrastructure and management issues.
Developing rail infrastructure has cost
advantages, and is more environmentally friendly
than road transportation.

Strategic Logistics Management


Rail Infrastructure and Services Assessment
Pakistans rail network is operated by the stateowned Pakistan Railways (PR) under the
supervision of the Ministry of Railways. It
comprises 8,163 km, of which broad gauge tracks
account for 7,718 km and narrow gauge tracks for
the remaining 445 km.
It only has international active links with India.
However, plans exist to also establish a further
connection with China and other neighboring
countries

Strategic Logistics Management


The financial and operational performance of Pakistan
Railway is declining since last many years. Passenger
traffic since 2007-08, has declined from 230 trains to 92
trains per day, while freight trains has went down from
96 to just one per day.
Over aged infrastructure and rolling stock, sharp
increase in fuel prices (high speed diesel), depreciation
of rupee against dollar and substantially subsidized
railway fare have led to an increase in the cost of
operations.

Strategic Logistics Management

Earnings of Pakistan Railway


(2000-20008)

Strategic Logistics Management

Earnings of Pakistan Railway


(2007-2013)

Strategic Logistics Management


Pakistan-Germany rail network size
comparison
Concept
Network size (km)

Country area (sq-km)

Pakistan

Germany

8,163

41,315

881,640

357,021

Strategic Logistics Management


Pakistan Railways has lost a considerable
share of its private freight traffic because many
importers and exporters are not satisfied with
the railway services, and so urgent
consignments are usually transported by truck.

Strategic Logistics Management


Pakistan Railway is only used for a few
specific goods such as wheat, coal, fertilizer,
cement and sugar; it is hardly used for the
transport of perishable goods.

Strategic Logistics Management


Pakistan-Germany Rail network usage
Comparison

Strategic Logistics Management


The underlying reason for the current situation
is the total lack of competition within the
sector. In a context in which there are no
alternative providers in the market and there is
no modern management techniques used in
Pakistan Railways

Strategic Logistics Management


Rail Transport Recommendations
Despite its poor track record, rail has commercial
potential and could play a valuable transport role in the
country. The main benefit of investing in rail transport
is to reduce road traffic.
Government of Pakistan should promote public-private
partnerships and should increase the number of double
railway tracks, its freight capacity and should close the
freight routes where PR is making no profits.

Strategic Logistics Management


Other Logistical Infrastructure
The main hindrances to the sector that need
coordinated efforts by the government and private
sector is to:
Establish freight villages to serve as logistics hubs
Invest in reefer storage facilities to increase the shelf life of
perishable goods
Develop public trading platforms for smaller and medium
size producers to sell their goods

Strategic Logistics Management


Freight Villages
Freight villages are logistics concentration points,
developed at strategic locations, which provide
various logistics-related activities like
warehousing, packing, re-packing, break-bulk etc,
Freight villages can vary in size, from few
hectares to thousands of hectares, depending on
their functions. and truck parking.

Strategic Logistics Management


No such facilities exist in Pakistan. In fact, not even a
downgraded version of such facilities exists. As a result, the
surroundings of the larger cities are congested with a rise in
disorganized parking and waiting areas.
In parallel, unlicensed workshops, service facilities and
spare parts outlets have emerged in such areas. This
combines with a widespread lack of metropolitan
regulations on specific timings for trucks to load, unload
and circulate inside metropolitan areas, contributing to
traffic jams and pollution.

Strategic Logistics Management

Reefer Storage
There is a lack of reefer storage facilities in Pakistan.
These facilities require strategic location such as
freight villages. The lack of reefer storage facilities at
key locations for exports is particularly critical for
companies dealing with agricultural perishable goods.
Well-stored perishables have a longer shelf life, are
better preserved, and are of higher quality and as a
result, they sell at higher prices.

Strategic Logistics Management


Fruits conservation temperature requirements and
maximum life

Source: University of California.

Strategic Logistics Management


Trading Spaces
Logistics chains of perishables in Pakistan is full with
intermediaries that add little value to the supply chain.
Because there are few public trading spaces to small farmers
to sell their goods so most of them are unable to sell to
wholesalers without going through an intermediary.
If farmers were able to capture a larger portion of the profit,
they would have more money to invest in new equipment and
be able to adapt to international harvesting quality standards
thus opening new markets for Pakistani goods, benefiting not
only the individual farmers, but the economy as a whole as
well.

Strategic Logistics Management


Development of Wholesale Central Markets
In order to eliminate intermediaries that add little value, it is
recommended to establish regional wholesale central markets.
The Spanish MERCAs model has proved very successful and is
regarded as a good practice. It is recommended to benchmark this
model. Such a move is expected to generate the following positive
effects:
Price structure: Prices will be set more clearly, as the market will be more
transparent.
Product quality: Will be improved through better storage in shared common
facilities.
Inspection: It will make quality procedures and checks easier to be enforced.
Accessibility: It will make easier for small producers to access large
retailers.

Strategic Logistics Management

End of Topic