Kuehne + Nagel’s Perry Newman: "International companies need a partner able to offer a complete supply chain"
Managing Director of Kuehne + Nagel Perry Newman has told in a recent interview with PortNews about the company’s plans of the company, the main difficulties of working in Russia and trends in global logistics.
- Mr. Newman, please tell us about the development plans of Kuehne + Nagel, both globally and in Russia?
Globally Kuehne + Nagel wants to focus on the expansion of regional operations, in particular in China, India, Brazil and Columbia, and the tailor made solutions for selected industries. A combination of organic growth and strategic acquisitions will result in further progress in roadfreight transportation. Eastern Europe is among the key growth regions of the Kuehne + Nagel Group comprising now 21 countries with 75 locations, more than 670,000 sqm of warehouse space and a staff of more than 5000. Since then our aim was to grow and to place ourselves in each and every country as the leader in Sea, Air, Overland and Contract Logistics.
The corporate strategy has set a focus to Eastern Europe development and we can expect further expansion in the future.
- Mr. Newman, please tell us about the development plans of Kuehne + Nagel, both globally and in Russia?
Globally Kuehne + Nagel wants to focus on the expansion of regional operations, in particular in China, India, Brazil and Columbia, and the tailor made solutions for selected industries. A combination of organic growth and strategic acquisitions will result in further progress in roadfreight transportation. Eastern Europe is among the key growth regions of the Kuehne + Nagel Group comprising now 21 countries with 75 locations, more than 670,000 sqm of warehouse space and a staff of more than 5000. Since then our aim was to grow and to place ourselves in each and every country as the leader in Sea, Air, Overland and Contract Logistics.
The corporate strategy has set a focus to Eastern Europe development and we can expect further expansion in the future.
In February 2010 the Kuehne + Nagel Group has founded a wholly-owned subsidiary in Belarus, based in the capital of Minsk. The new entity is a decisive step to further integrate this market into the company’s global logistics network and comprehensive service offering. With its geographical position between Europe, Russia, Kazakhstan and China, Belarus is a strategically important country in which we see an interesting potential.
Kuehne + Nagel has ambitious plans to develop the company in Russia.
Last year we also opened a new representation in Murmansk in order to be prepared for the Shtokman gas condensate field project.
Some time ago our new representation in Nogliki on the Sakhalin island was established. Nogliki is a crucial hub in the transport network for the Oil & Gas industries on Sakhalin. Our new representation will enable Kuehne + Nagel to further develop the range of products that we can offer to our clients.
- What are the main difficulties of working in Russia?
Firstly, these are the problems and issues with documentation in regulatory and legal basis of forwarding business
Unlike many European countries, for Russia the logistics area is quite new business field. Comparing peculiarities of regulatory & legal basis of logistics in other European countries huge difference come up on the surface. Logistics legislation in whole Europe is really similar or even the same in the majority of countries. But in Russia for the territory of 1/6th of the dray land, the specific legislation is applicable which is a bit different to European and others.
Last year we also opened a new representation in Murmansk in order to be prepared for the Shtokman gas condensate field project.
Some time ago our new representation in Nogliki on the Sakhalin island was established. Nogliki is a crucial hub in the transport network for the Oil & Gas industries on Sakhalin. Our new representation will enable Kuehne + Nagel to further develop the range of products that we can offer to our clients.
- What are the main difficulties of working in Russia?
Firstly, these are the problems and issues with documentation in regulatory and legal basis of forwarding business
Unlike many European countries, for Russia the logistics area is quite new business field. Comparing peculiarities of regulatory & legal basis of logistics in other European countries huge difference come up on the surface. Logistics legislation in whole Europe is really similar or even the same in the majority of countries. But in Russia for the territory of 1/6th of the dray land, the specific legislation is applicable which is a bit different to European and others.
Current standards give only general definitions and understanding which is not enough to work in logistics and forwarding area today in Russia. There is still no clear picture and understanding should forwarding biz be treated as a type of agency (agency relations) or as absolutely independent liability type. Contract liability caps are depending on this as well as list of documents and tax obligations of contract partners. Such factors prevent development of logistics biz in Russia.
Second, transportation from A to B being more popular compared to full supply chain logistics
Nowadays there still exists a wide variety of logistic providers in Russia incl. small and medium sized local companies. Most of the local providers are focusing only on particular fields instead of offering wide portfolio of services however their competitive advantage is in the fact that they often own assets such as trucks, rolling stock and terminals. At the same time international production companies need full supply chain services and are looking for a logistics partner who can offer solutions and manged the seamless integration of different transportation modes.
Second, transportation from A to B being more popular compared to full supply chain logistics
Nowadays there still exists a wide variety of logistic providers in Russia incl. small and medium sized local companies. Most of the local providers are focusing only on particular fields instead of offering wide portfolio of services however their competitive advantage is in the fact that they often own assets such as trucks, rolling stock and terminals. At the same time international production companies need full supply chain services and are looking for a logistics partner who can offer solutions and manged the seamless integration of different transportation modes.
Our main target is to understand the needs and challenges of our customers and to enable them e.g. lowering binded capital, changing production cycles, improving lead times, etc. by selling integrated solutions to them. Of course, "bread and butter business" is also the standard transport from A to B but we do not see the future of logistics in that.
Third, poor road infrastructure
The quality of Russian road infrastructure is still very poor. Major part of existing roads lack maintenance and require modernization. Taking into account the size of the country it is obvious that huge budget is required to build highways and to come closer to the road network in Europe. Specialized road engineering teams that would make sufficient design schemes and ensure usage of proper quality material aligned with world durability standards.
Another problem is Customs related issues
Russian shipping procedures and customs regulations are complex and can change suddenly with short or without notice. Bureaucracy, untransparent and complex administration are significant factors to be familiar with when doing forwarding business in Russia.
Third, poor road infrastructure
The quality of Russian road infrastructure is still very poor. Major part of existing roads lack maintenance and require modernization. Taking into account the size of the country it is obvious that huge budget is required to build highways and to come closer to the road network in Europe. Specialized road engineering teams that would make sufficient design schemes and ensure usage of proper quality material aligned with world durability standards.
Another problem is Customs related issues
Russian shipping procedures and customs regulations are complex and can change suddenly with short or without notice. Bureaucracy, untransparent and complex administration are significant factors to be familiar with when doing forwarding business in Russia.
Customs check points located at the border have limited capacity and poor infrastructure.
There’s a lack of qualified customs specialists at the border customs check points.
Electronic declaration at the very beginning stage with a lot of hick-ups (lost of declarations while sending to the customs server, big declarations are not coming through etc). One of the major differences between European and Russian systems is that customs in Russia is a governmental authority while customs bonded warehouses are in ownership of private sector (commercial) while in Europe everything is under one governmental shelter.
- What are the major trends in international logistics in your opinion? Can we expect in the future a shift of the cargo from sea to land transport because of tougher environmental requirements for greenhouse gas emissions from ships?
- Actually, we do not expect this kind of trend, at least not related to any environmental requirements. Maritime transport, regardless if deep-sea or short sea, will remain the most environmentally friendly mode of transport compared to air or land transports. What we see is a different mixture of transportation modes. Whereas companies tend to have road transportation from the harbor to their final destinations, rail transportation becomes more and more interesting. Rail transportation has the advantage of fixed schedules and almost no accidents therefore a very reliable possibility to get shipments to the respective areas. A good alternative to road transportation if a rail set up is in place. Concerning seafreight we can see a much higher than before the demand for LCL cargo shipments. Either the companies do not want to wait until they can fill a full container or they simply balance their payments better. Since we have established i.e. in Russia LCL services to and from Asia Pacific region even smaller companies have the chance now to source from abroad or expand their business on foreign markets.
- What are the major trends in international logistics in your opinion? Can we expect in the future a shift of the cargo from sea to land transport because of tougher environmental requirements for greenhouse gas emissions from ships?
- Actually, we do not expect this kind of trend, at least not related to any environmental requirements. Maritime transport, regardless if deep-sea or short sea, will remain the most environmentally friendly mode of transport compared to air or land transports. What we see is a different mixture of transportation modes. Whereas companies tend to have road transportation from the harbor to their final destinations, rail transportation becomes more and more interesting. Rail transportation has the advantage of fixed schedules and almost no accidents therefore a very reliable possibility to get shipments to the respective areas. A good alternative to road transportation if a rail set up is in place. Concerning seafreight we can see a much higher than before the demand for LCL cargo shipments. Either the companies do not want to wait until they can fill a full container or they simply balance their payments better. Since we have established i.e. in Russia LCL services to and from Asia Pacific region even smaller companies have the chance now to source from abroad or expand their business on foreign markets.