LOGISTICS:?

Sri Lanka’s geographic location on the major East-West trade route, makes Transport, Logistics and Supply Chain Management a major potential area for its growth. However, growth has been stymied by the ongoing crisis.

Dr Nimali Sirisoma, of the Kotelawela Defence University (KDU) says that there is no increase in traffic, the problem being decreasing volumes of imports and exports, starting with the Covid 19 pandemic and continuing due to the recession, the fuel crisis, the scarcity of containers and the increase of trade costs. 

Dr Sirisoma, who has a PhD in transportation engineering, is a senior lecturer in the Department of Finance and Management of the KDU, and Chairs, the Chartered Institute of Logistics and Transport (CILT). This, the local arm of the century-old UK-based professional body for transport and logistics, discusses what is happening in the industry and gets involved in policymaking, with feedback from representatives from maritime, aviation, supply chain, land transport, road safety, and academic sectors. “It is a world-wide problem,” she says, “faced by other countries. With the recession, some countries have reduced their exports. European countries face the fuel crisis and with the winter coming, they are trying to get fuel. We have to look at this as a world crisis and see how we can escape from it.”  President Ranil Wickremasinghe has said that logistics must be the key area in economic development. Even when the Covid-19 epidemic affected all industries badly, the logistics sector continued, the port operated and the airport stayed open, despite a drastic drop in passenger demand. 

“Freight transport continued,” says Sirisoma. “We didn’t have large-scale aircargo operations, because air cargo is expensive when you transport in bulk, which is why maritime is more popular. But with Covid-19, they identified that they had to do more air freight. Some passenger transport aircraft were converted to freight transport. It may change because, in aviation, they mostly target passenger transport. Because of the cost factor there will be no drastic increase in cargo.”

Crisis or challenge? 

“You have to be ready for a crisis,” thinks Irfan Ahmed, Chief Digital Officer at Expo Freight Ltd (EFL). “Gone are the days when you run business as usual. From the economic theory point of view business is very cyclical and the cycles are between demand and supply. But what we find is that those cycles are getting shorter, and there are a lot more disruptive forces that are aimed at your side.”Founded by Hanif Yusuf from humble beginnings in Sri Lanka, today, forty years later, EFL is a top 20 global logistics and supply chain company in terms of both ocean freight and air freight. It is among Sri Lanka’s most valuable companies and the largest local multinational, with 70+ offices in 39 countries. A nominated service provider for top global brands, across industry sectors such as apparel , machinery, electronics and pharma. 

“We have grown in expertise,” says Ahmed, “we have grown in our coverage and capability. For us the future looks challenging but good as well. We see adversity as an opportunity. A lot of people cited Expo as an overnight success, particularly during the run on the stock market last year, but I would like to say that we are a success ten years in the making. He describes how, a decade ago, EFL started laying the foundations for a company that sits at a vantage point for global trade, that understands the economics around world trade and organises accordingly. Their founder envisioned understanding global trade in order to navigate through it for their customers, and thereby growing naturally. EFL made a calculated decision to expand to the USA and Europe.

I have worked in larger conglomerates, and I find that the agility and the speed of decision making at EFL very refreshing, a lot to do with the organisational culture. Despite being forty years in the business, we still have a founder’s mentality at every level of the business: if there is an opportunity, chase it; if there is a risk, de-risk it; and control is important, but not to the point of being bureaucratic. What we have here is a broader sense of responsibility and accountability, being responsible for our actions.” He explains that taking the crisis as a challenge which it anticipated, for which the company was in a constant state of readiness for, and around which it drove its agility, have been a few things that have worked for EFL.

Hambantota e-commerce hub? 

Most people see Hambantota Port and Mattala Airport as failures of planning, white elephants. Dr Sirisoma was runway engineer at Mattala Airport, and says it has the advantage of very high strength, being built on solid rock, and the disadvantage of high temperature, which could melt the tarmac. Using a bitumen binder, for the first time in Sri Lanka, solved the problem. “Now the quality is assured, but there are so many other factors to look after, like hotels, hostels, parking, and business plans, which had been overlooked from the very beginning. That is why we do not have the demand. But if we give it to China they will develop it.” Dr Sirisoma points out that the Hambantota area has a severe shortage of human resources, necessitating either highly automated factories or providing transport to bring people there. An early proposal, to extend the KV line and introduce a Ratnapura-Hambantota railway link, to bring the people from high-density Ratnapura to Hambantota to work; and a similar one for a Batticaloa link, were abandoned. 

“We have the port and Mattala airport, so we have to use them. When Katunayake was started it was not a developed area. Gradually it was developed and now it is a high-density area. The land is there, but you need services, roads and factories. Will the government look after this part, or must the investor do it? The government must provide at least the electricity, water and other services. We talk about PPP (publicprivate partnership) models, but they should be workable. The government must have a plan for that, which they must show to the investor. We should give a sustainability guarantee to the investor. If the situation is very uncertain, they will not come. We have to show them that we will look after them and give them facilities.” She thinks that it should be developed as a multi-modal hub, to bring in the raw materials, add value addition and re-export. Ahmed agrees that, from a global point of view. Hambantota has huge potential. The proximity of the airport to the port provides a lot of opportunity for multi-modal — essentially being able to switch from ocean to air and even to ground. 

“Roughly 70% of global e-commerce orders originate in China. China currently uses about 100 e-commerce dedicated ports, which they are thinking of increasing rapidly. Why doesn’t Hambantota become a multi-modal hub for e-commerce out of China? We have all that space in the airport and port, we can set up warehouses for sorting, distributing, packing, all kinds of value-added services and then start running an order management hub for e-commerce out of China. The devil is in the details, but from a broad macro-perspective I see that as an opportunity for Hambantota. Last mile and cross-border e-commerce are a growing, technology-based sector. E-commerce within a geographic location is important but so is crossborder between geographic locations. As far as international logistics are concerned, we have an advantage in cross-border, as well as local, which is last-mile.”

Final frontier?

“Five years ago,” Ahmed reveals, “we started investing in technology. We are completely technology enabled, so much so that when the pandemic hit us, we were already on the cloud, our systems were already in place and it was almost seamless for us to get almost 3000 people to work from home, and still run the operation and grow the business to what it is today. We made a lot of mistakes along the way as well! The key to any crisis is to accept that there always will be crises. If there is a challenge, we walk towards the challenge instead of trying to circumvent it.” Moving everything from raw material to finished products, logistics is a core industry without which other industries would find it difficult to exist. It is increasingly adopting new technologies, to drive visibility around shipments, to process data better, and to use information to control movements of goods and services. Five years ago, manual systems dominated most of the logistics industry, with legacy systems predominantly working on Excel, which logistics personnel adored and found it difficult to abandon. Now, the largest number of start-ups getting funding globally are in logistics and supply chain management.

“Logistics is one of the final frontiers,” thinks Ahmed, “in the sense of how it will evolve, and therefore its adoption of technology. Being a technology person myself, it is a fascinating industry to work in. It has got problems which are largely unsolved, and everyone is finding a different problem to solve using technology. The core use of technology to ensure that the flow of information matches the flow of goods Technology has either to generate information, capture information, share, distribute and validate the information. Make sure everything you do is information-driven.” 

The opportunity for technology adoption, he believes, is in leapfrogging; seeing which way the industry will go tomorrow, not where it is today. Many logistics organisations try to work out which way they should go, whether to use IOT (internet of things – a system of interrelated devices capable of transferring data without human intervention) or Blockchain (a distributed database maintaining a continuously expanding list of ordered records, or “blocks” linked using cryptography), which remain still largely experimentative.

Challenges

“It is important,” he says, “not to be carried away with gimmicks and buzzwords. Last-mile in particular has the most start-ups, creating visibility, inventory management, order management, warehousing, lorries, bikes, all kinds of things. But if I order a red spoon, I am 50% sure I will get a yellow spoon! So there are still a lot of gaps. I think people are still investing in technology, but they are not really investing in the process, the people or the strategy that is required to solve the problem. The fundamental is, how do you provide a better, informationdriven service using technology. That is the starting point and some Sri Lankan companies have made good progress. I can confidently say that we have done more than our share. As a global organisation, we have done a global benchmarking and we definitely consider ourselves on par for the best IT-driven capabilities.” Dr Sirisoma sees new technologies challenging human resources all over the world in the next decade, particularly artificial intelligence (AI) applications, drones (used for last mile applications) and robots such as driverless autonomous heavy goods vehicles and automated systems. 

“For a country like ours,” sheavers, “it is not easy to implement such changes in one stage, because we have to look at many other things. Drone applications may have security issues, because they are low- altitude, and we have to get approval for operations. Even so, new systems are being introduced, for example by the Customs. It is happening, but it may take time. We need all these technological applications because we need to move away from so many documents going from one desk to another, to a paperless system. Actually, maritime and aviation are much better compared to the other areas. In road transport, the IT applications are minimal. We don’t have proper traffic management systems, it is all manual, stand-alone signal lights.”

System requirements should be examined carefully, and a policy should be established on how to develop these requirements. IT applications may be harmful, so automation could be risky. Cyber security requirements need to be addressed, a huge requirement needing a proper policy and a proper team to discuss and address it with an action plan for the next five years.

 We have to start training, identifying the software and upgrading these systems. That is a big challenge. Even if we develop something locally, how are we to upgrade it? There must be a team. That part is expensive. Management Degrees were started recently,” says Dr Sirisoma, “at Moratuwa in 2006, KDU in 2010. Now we have CINEC, NSBM, Ocean University, so we are getting graduates with basic qualifications. All the senior people are from different backgrounds but well-trained. In other countries, they combine logistics with IT, so their degrees are directly IT-based.”

Developing capacity 

EFL does much training, ensuring certification of all employees with its ERP enterprise resource planning system platform. “We set up online training repositories,” explains Ahmed, “with clear tutorials and videos: if they are unsure about a particular area there will be a tutorial or a video in that area. Again, there is a certification they have to take once and for all. We have a strong focus on knowledge management, but only around our organisation. If you asked me how I would improve it, it would be in a broader sense of new skills and knowledge needed to embrace new technologies, new systems, new processes. Sri Lanka needs a logistics and supply chain academy. The clear way forward is capacity development in infrastructure and also human capacity development. We have all heard this fairy tale about it being a perfect geographic location, to be a global logistics hub, but nothing is being done about it. We are sitting on an opportunity unless we do something about it. Dr Sirisoma agrees that something must be done, and soon. She points out that the country has no transport and logistics policy, although the government wanted to prepare one two years ago. 

“They started it but even the ministry is not there anymore, so they stopped it. India recently published their logistics policy. They did it after so many discussions and that was a very good achievement for India. We still don’t have it. We have the aviation policy, and the maritime policy was under preparation. I don’t know the status. The land transport document is in the ministry, it has not been forwarded to the Cabinet for approval. There are two documents. Actually: first prepared in 2019, then review documents submitted in 2020.” She emphasises that by preparing a proper policy, Sri Lanka should develop a proper five-year plan of what can be done in the short-term. It will need an infrastructure development plan, on which the government must be willing to spend money. “That is why we need a proper institute to look after policy preparation, strategic planning and implementation. Now we are working individually. The port is doing one thing, the airport is looked after by a different minister, so they are not connected. All these people need roads which are under some other ministry. They don’t know what other people need. If we can have one umbrella organisation in which we can address the requirements of all the people, then we can prepare some strategic plans to ensure where we shall be in 2030 or 2050.”

By Vinod Moonesinghe

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