Trade logistics and supply chain impediments in Pakistan

November 20, 2006 at 12:00 am | Posted in Arsalan's Dawn Article | Leave a comment

 

 

As the world manufacturing business is thriving, the role of supply chain is ever growing immensely. Nowadays supply chain management is proving to be one of the biggest competitive factors after technology integration.

Logistics is one of the dynamic aspects of the supply chain. It accounts for the effective utilization of transportation facilities to aid supply chain management of the country’s trade. Various entities are used for transportation inPakistan’s logistic arena. This includes carts, loaders, trucks, trains, boats, ships.

The logistic operation is considered as non-value added entity in the whole value chain of a product. This is an unavoidable liability to the product value chain. Efforts are made to decrease the usage of this resource and make it as cost efficient as possible. This is done by standardizing the logistic codes, maximizing the utilization of the vehicle capacities, using new and state of art vehicles, building better road infrastructure, building warehouses at strategic locations and applying efficient operation research methodologies to boost performance. 

Standardizing the logistic codes implies developing country-wide standards to vehicles, containers, pellets, handling systems, monitoring systems, informational exchange and physical pathways. This has substantial impact on cost savings. The supply chain responsiveness is also enhanced.  By standardizing the logistic codes, there will be positive effect on vehicles capacity utilization. The trucks and loaders can better manage their loads. This will substantially decrease the transportation cost on the products.

All road vehicles are manufactured by leading automotive manufacturers around the world. The key elements to the manufacturing correspond to the design, flexibility, and adaptability to local conditions, efficient fuel consumption and workability. Leading global manufacturers of complete logistics vehicles include Volvo, Scania, MAN, Mercedees-Benz, General Motors, Ford, Isuzu. There are lots of companies which manufacture trailers and add-ons to Vehicles. They make use of the basic engine and structure made by automotive companies and then fit their custom made body over it. In
Pakistan there are number of companies engaged in this section of manufacturing.

The cost of operations and logistics is at the minimum possible level for the truck when it is in its first 3 years of operation depending upon various factors. After that, the cost of operation rises on account of wear and tear and damages. So in short the cost of operation for old trucks is the highest. Plethoras of resources are drained in fuel, spares and maintenance. This makes the logistic operation incomparably expensive. This is the reason that European countries, through law, abide to use and import inefficient and old trucks.

Unfortunately in
Pakistan, the truck transport sector is not organized. There is no fully functional and organized logistic company in private sector. The biggest is NLC, owned by army which is fully functional and fully subsidized by tax payers.

Majority of Trucks used are quite old and dilapidated. There is neither any formal channel of repairs and maintenance for trucks under a company nor any efficacious government authority monitoring the condition of goods vehicles and trucks on regular basis. As a result of which, poorly managed vehicles are used to transport goods. This not only deteriorates and damages the quality of the goods to be transported but also increases the cost of goods transportation. Cost of operation, cost associated with the quality loss of deliverables due to bad vehicle condition, bad maneuvering and accidents are exorbitantly high. Not mentioning to the environmental damage as a result of exhausts, the fuel consumption is excessive and wasteful.

Human resource problem is a grave issue in this case. Usually in a logistic firm and government organization in developed countries, they employ operation research and supply chain management professionals to manage, design, re-engineer and build logistics infrastructure. They employ state of the art tool and techniques for designing and routing of vehicles. Also they manage and monitor the performance of logistics and supply chain operations both in technical and financial aspect.

In
Pakistan, usually this job is done by an illiterate person in private companies. When talking of government sector, this task is carried out by regular civil engineers mainly at operational level. With limited logistic knowledge, they are satisfied of their planning as long as goods are moved properly from different locations. No emphasis is paid on strategic level relating to issues like cost, time and quality.

Collectively if observed in a holistic scenario, the net loss that this sector imparts to the Pakistani national and international trade is quite high. National resources lost in importation of spares and fuels and export product quality loss accounts to billions of rupees for this sector.

Pakistan should consider devising logistic standards for the country. There should also be a governmental body to control the goods transportation vehicles.  Brand new vehicles and trucks should be imported rather than old and refurbished. Companies should be given incentives to utilize new goods transport vehicles. Further banks and financial institutions should give easy financings to boost logistic business.  Proper qualified operation research or supply chain management personnel should be inducted in logistic companies and governmental bodies at tactical and strategic level. Institutions should be strengthened to initiate practical research in this specific area of logistics and supply chain management.