A major name in Bangladesh logistics sector, Head of KDS Logistics, Nilantha Wakwella speaks exclusively with Team Apparel Resources (AR) to share his thoughts and views on how to make the country’s logistic sector more efficient that can support Bangladesh’s increasing global trade, not to mention the ambitious US $ 100 billion export target of the RMG sector. Here are the excerpts.
AR: Bangladesh garment industry is on a never-before-seen growth journey even if it has set a target of achieving US $ 100 billion in exports by 2030. How do you think the logistics sector of the country is shaping up to cater to the industry’s needs?
Nilantha: It is best to indicate with good reason that ‘logistics’ and ‘supply chain management’ are often used interchangeably. Logistics refers to the careful origination of a complicated activity and a piece of a supply chain can be a complicated activity.
As a sector, logistics is only a part of the supply chain management that plans, implements and controls the effective forward and reverse flow of goods and services between the point of origin and point of consumption.
Apart from the usual containerisation and transport, the art and science of obtaining, producing, distributing materials and products in proper place and in proper quantities are all considered to be a part of logistical challenges. With the objective to achieve the target of US $ 100 billion in apparel exports by the year 2030, the logistics sector needs integration with all other sectors which include production, processing, warehousing and material handling, simplifying documentary formalities etc., to name a few.
Therefore, the entire supply chain needs to be integrated into a network of facilities.
Logistics covers a broad array of industries be it domestic transport providers, freight forwarders, off docks, shipping lines, customs agents, ports, a huge collaboration amongst which is needed to network effectively.
About two decades ago, emphasis to set up off docks was focused upon to meet the needs of exports of the country – mainly RMG being the bloodline – and EXIM industries. The efficiency of the logistical functions in these off-docks facilitated and encouraged the RMG sector to set up US $ 100 million target and propel the country to higher tiers.
Logistics industry demands humongous investments and as buyers are always looking for a competitive price with best services, Bangladesh’s logistics industry is shaping itself up to meet the demand and hence I feel off docks will be geared to meet the challenge.
AR: KDS is a major player in the logistics sector even if it’s as strong in apparel manufacturing and backward linkage industry and knows the industry’s pulse. Anything in particular from KDS to cater to the industry (in terms of shipments, logistics) more effectively?
Nilantha: KDS Group was established near to four decades ago and is being recognised as a significant participant in the apparel and backward linkage industry, which has identified the need to facilitate exports and thereby decided to invest on an ICD cum CFS way back in the year 2008. The setting up of KDS Logistics off-dock underscores the group’s respect to support the country’s trade, fellow industry players and the overseas buyers.
Going forward, KDS Group is always on the lookout for development. Even though there is a scarcity of suitable land meeting the parameters of the regulatory bodies, our idea and thought process hasn’t diminished. Regardless, KDSLL updates equipment handling machines and transport fleet frequently to meet and improve the demand of the trade.
Considering the discomfort to the public and trade owing to traffic, propelled due to voluminous RMG shipments that happened during last Eid along with a catastrophic incident of a fellow colleague depot that happened in June 2022, we increased truck parking facilities by developing a sophisticated parking yard to accommodate more trucks so as to meet the growth of the export demand of the apparel sector.
Further, two of our new load-handling equipment are due by February/March. In addition, we have booked more empty handling equipment, prime movers and chassis too and are waiting for the country’s foreign reserves to reach a comfortable level to open letters of credit.
As I mentioned earlier, each act of logistics is interfaced with many other sectors, and one alone would not be able to progress individually without the assistance of another.
AR: What according to you are the major obstacles towards the growth of the logistics sector in Bangladesh and how to address those?
Nilantha: The concepts and implementations are very technical, so to make a true difference, the importance of the SCM needs to be understood. For instance strategic ‘trade-offs’, understanding inter-dependencies, whether to focus on requirements versus targets, etc., need to be considered, which ultimately could translate into efficiencies on SCM and logistics sector.
Port being our principal gateway, it is natural that port efficiency will be a measurable and a major factor in terms of our connectivity to the world and, that efficiency is not limited to berthing or ship waiting times only; but are also connected with prompt custom’s examination, smooth transportation of traffic and largely the free availability of space for logistical needs in the port’s premise.
Over 95 per cent of the exports are shipped through off-docks today; hence the requirements of the off-docks need to be understood and recognised, both in terms of services and objectives. Bounding the off-docks activities can be a hindrance to its performance which eventually will become a setback to the progress in trade.
In terms of operation, I would sight the inability to offer ‘sufficient’ space in port yards to drop laden exports is the largest setback we face. Then there are incalculable and endless vehicles entering the port through limited gates to drop empty containers (that are removed by consignees to their factories to unload) and to take delivery of consignee’s import cargo delivery. These are major obstacles for off-docks to reach levels of efficiency cum productivity.
Financial setback is another obstacle. To keep the export shipments competitive, the off-docks compromised many factors in their tariff structures. The members of the BICDA opined that RMG and shipping sector expanding into new markets is quite unthinkable without world-class logistics centres operating with reasonably determined tariffs.
Even though, the off-docks have handled all import containers during Covid-19 pandemic as well as congestion at the port, still the authorities are reluctant to allocate more import FCL deliveries through off-docks.
Therefore, when a downturn on exports is encountered, the ability to have a secondary or a fallback revenue stream is unattainable for us. Worsening the scenario, the authorities consented to introduce and continue a dual delivery on the off-dock’s allotted import commodities! That resulted in further woes, with consignees opting to take delivery of their goods from port of the commodities which the NBR initially allotted to us.
The authorities need to create and evaluate the relevant scenario on off-docks investments and their sustainability. Securing the future of off-docks needs to be considered during their decision making as trade will be extremely handicapped without the support of off-docks.
We all witnessed the hardships encountered to trade during an unfortunate incident that one of our fellow depots encountered last year.
AR: KDS has one of the largest off-dock facilities in Bangladesh. Lately, there has been a lot of criticism related to private ICDs even as apparel exporters complained of increased cost and time in availing the services of the private ICDs. Your views.
Nilantha: If logistics is a commodity, service is defined by price as to what are providers selling and what are shippers really buying.
So, if you do not add any value to the logistics services, then your services will be seen by the client as a commodity only but logistics is much more than just transport and warehouse.
As stated earlier, providing truly distinctive service or expanding into new markets is unthinkable without world-class logistic centres to support the chosen strategies. And private ICDs are centres for all and highlight them to all. If properly scrutinised, it can be seen that there is more to gain from ICD which includes only labour.
It is not sensible to lump all logistics services into a single category. The variation of ability, quality, flexibility and services vary.
On the other hand, the cost of doing business for the last ten years increased drastically while the offering prices remained lower and/or not aligned with the rising costs. I did mention of the strategy related to our tariff structure, which we keep low to encourage competitiveness of the export sector. The growing concerns on compliance too need to be factored in. Compliance need to be introduced, maintained and upgraded constantly for the sellers to ensure that their buyer’s brand names are serviced through recognised and compliant facilities, amidst the reality of their impact on profitability considering we are subjected to many statutory payments and taxes.
It is pleasant if all the stakeholders adopt a stance to coexist and think about each other so that in future, the rates don’t affect each other and everybody can improve their services based on the needed requirements to achieve the ultimate goal.
AR: What according to you puts KDS ahead of other players in logistics?
Nilantha: There are a few reasons. Our biggest strength is that we have multifunctional teams with experienced people having the willingness and attitude to go far and beyond to achieve new heights. We are not the largest facility and we do not have engagements in other business areas, for example forwarding, shipping lines or customs clearance. Our logistics act focuses on our core business that is ICD and CFS services.
Therefore we emphasise profoundly on our core activity. We continuously focus to invent methods on matters relating to balance logistics cost against the appropriate level of customer service. Service at low cost is a key factor to our value proposition.
Our touchstone is to offer our customers peace of mind in the sense that they have a reliable logistics company which would deliver within agreed parameters, with an affordable price; which naturally comes to them secondarily. By understanding what the client really wants, we offer a tailor-made service and avoid competing only in terms of price.
Our commitment has built our service brand – be it in operational or in all other services besides our team’s commitment and the belongingness the team displays, thanks to the frequent encouragement, confidence and the great guidance given by our Chairman Alhajj Khallilur Rahman and his son Salim Rahman, which is owing to their immense experience gathered through their entrepreneurship which enlightens us to raise our bar constantly.
However difficult it may seem, there is always something we want to do and succeed in that. Our team’s positive action combined with positive thinking makes us different and has kept us ahead for 75-plus months and counting.
AR: Many new shipping lines have either connected or plan to connect Chittagong directly with Europe. How do you think this has helped the apparel exporters?
Nilantha: It is a great initiative; the direct routes are a major game changer for the industry. It cuts down time and cost, ensures equipment supply consistency, reduces the risk of misrouting and reduces handling through different ports.
Moreover, the direct lines encourage the buyers to be inclined to procure their products from Bangladesh, which inter alia links to growth. We witnessed that resulting in the emergence of direct lines, specific buyers increasing their order volumes from Bangladesh or transferring their sourcing services to Bangladesh. So, it is important in terms of national interest as well.
AR: Even if Chittagong is the main port in Bangladesh and is responsible for handling bulk of apparel exports, a lot of questions have been asked as to its infrastructure, container handling abilities and many other aspects. Your view and how to improve the current scenario?
Nilantha: I have partially touched upon the issue of possible solution to the challenge of congestion at Chittagong Port. We must understand that Bangladesh is developing tremendously and going through economic growth, which has resulted in trade increase. Though it is slightly low now, it is recorded that the export volumes drastically increased in yesteryears due to customer preference. The Chittagong Port Authority (CPA) recorded over 2 million TEUs throughputs and it is handling 100 per cent of the LCL exports along with 100 per cent LCL and around 75 per cent of the FCL Import items.
I prefer the port to perform its core activity; to be precise, connected with navigational and ship handling terminal services. Deviating from that core act and engaging on de-stuffing and delivery of FCL imports and accepting empty containers from local consignees will certainly require providing substantial space, equipment, manpower and other inter-related needs. Even the security needs to be strengthened.
The congestion is mainly due to delivery facility being inside the port. As off-docks are considered as ‘extension’ of port and are licensed custom bonded facilities with Customs Office appointed by NBR, it is wiser that the authorities transfer the import FCL to be delivered to off-docks and free port’s space, which will stop unnecessary traffic from coming to the port.
All the procedures on un-stuffing are followed in the depots even if NBR allowed only 38 FCL items to be delivered from the off-docks. But, during the years 2020 and 2021, there was global congestion due to Covid-19 and all types of items were allowed to be cleared from Private off-docks where Private ICDs successfully handled and delivered the items. To reduce the congestion, there is no other way out but to allow private ICDs to handle majority of the FCL imports and focus on ensuring unloading containers from vessels and loading containers to the vessel in the fastest possible way.
I am of the strongest belief that by doing so, all logistics and SCM functions will improve and port’s ship handling efficiency will increase and its ranking could improve further to bring better reputation to the country.
To make a true difference, we need to understand the importance of SCM as its success is based on its efficiency.
AR: How is the absence of deep sea port hampering logistics?
Nilantha: Deep sea ports are vital for international shipping. The Chittagong Port’s navigation depends based on the depth of the river and tide. In recent years, the Government took initiatives to clean the waterway, to allow ships with deeper drafts to come inside Chittagong Port. Very recently a new ship having 10 metres of draft berthed at Chittagong Port.
However, the new investment on Matarbari Deep sea port will be a game changer in the economy of Bangladesh and will also allow the South Asian countries to capitalise from it. The new port will reduce the dependency of transhipment points curtailing the risk associated with multiple handling of containers. The operating cost of ships and unit cost of containers could reduce not only due to handling rates but also considering the economies of scale.
The Government has understood the need for a deep sea port and has embarked on it and the country and its future generations will be hugely benefited through this.
We are keenly looking forward to the deep sea port.
AR: Even if some multinational logistics companies are operating directly in Bangladesh, but their numbers are not yet that high; what could be the reasons as per you?
Nilantha: All the major players in the logistics industry are in Bangladesh either directly or through agents. The regulatory body has a big role to play in this scenario. There are some regulations which force the foreign investors to make certain changes to their plans. Some, with time, get accustomed but others may feel discouraged. The recent flux of multinationals being interested is heavily due to the growth in the RMG industry and exports.
Multinationals have the potential to attract more international recognitions. Generally speaking, the multinationals and their companies, if engaged in to share their skills, can improve and influence other skills of a productive workforce. The business as a whole can be benefited. Not only the service and goods providers but also the users set their sights on which their vendors are. Their expertise may visualise the operational system and working business processes through a different angle. This will help to recognise the weak points, main reasons for quality gaps, quantify the uncountable issues and find room for improvement, etc.
If the regulatory bodies think they can relax or consider few things to attract the multinationals, this may open a new dimension for the growth of Bangladesh. On the other hand, if we keep the floodgates open, the origin or the core economic culture of the country will be hampered over time. Therefore, it is wiser to analyse and balance things carefully.
AR: Dhaka and surrounding areas are amongst the established garmenting hubs but transporting goods to Chittagong through road or railways have posed various challenges. Could inland waterways be a feasible option?
Nilantha: Relocation of the garments industry may sound uncomfortable but it could be a way forward. The industries strengthened surrounding Dhaka resulting in it being the capital and required facilities located within. However, the present major port is located in Chittagong, hence time has now come to give a second thought on this.
The Government is setting up economic zones and there are huge chunks of lands on offer. The ICDs are situated in Chittagong, where the major port is located and also the deep sea port has to be accessed through Chittagong. With encouragement by the Government, the RMG sector will and can relocate, so that development of the country will become wider and help reduce the distance, cost and risks during transportation.
If not, there would be a steady increase in highway traffic outstripping increase in infrastructure capacity, resulting in delays, safety problems and congestion, costing the nation largely in its importation on fuel not to mention the greater social tension.
Water transport, through rivers, has no congestion problem. The river ways are obviously the cheapest way of transport and there are 2 or 3 river terminals in Bangladesh. But the operation of shipments through river ways needs to come to Chittagong and there will be extra handling of containers.
As for rail transportation, the Government has floated a tender for development of a railway depot. It could start to function in due course.
What’s encouraging is the Government’s identification of the need on development of logistics and SCM functions that are working towards its improvement.
AR: How did the opening of the Padma Bridge give a boost to connectivity and conversely the logistics sector?
Nilantha: There is no doubt the Padma Bridge has opened doors for new opportunities.
It is now seen that raw material of cement industry, LPG, coal, fertilizer, wheat and material of Government’s different mega projects are unloaded at Mongla Port, since the ships’ arrivals enhanced after inauguration of the Padma Bridge. Apart from the imports, export of fish, export of shrimps, crabs, jute goods, fruits and vegetable products boosted through Mongla port due to this mega infrastructure investment.
Yet as the RMG industry is heavily dependent on the Chittagong Port, and accounts for larger share of the trade, logistics companies have not rushed in to set up businesses in those areas to access Mongla Port yet.
AR: Anything else you would like to share with our readers that you feel is of significance?
Nilantha: I just want to reiterate logistics is much more than transport and warehouse. It is knowledge and smart solutions and any opportunity to improve efficiency and accuracy in logistics is the highest moral, imperative and professional obligation of our generation.
More efficient operation expands untapped markets and improves the quality of lives of millions of consumers. We must thus commit selflessly to evolve and serve our profession to the fullest and feel visionary logistics will open opportunities.
It is also encouraging when regulatory bodies understand the global demand-supply gap and put priority in supporting its functions. I do recall that quite recently the President of our Association, BICDA, viewed huge domestics and foreign investments are required so that Port could match the growth capacity of the country’s export/import activities.
What’s more soon, with the recent pilot project on the 10-metre draft vessel berthing, more vessels with longer lengths will be able to berth in Chittagong and these vessels will carry more containers and thus the port terminal will naturally have to offer more space to accommodate the additional volumes. The constraint of space will have a snowballing effect on the sailing times and prevent faster turnaround of vessels.
Private ICDs are there to support the port and to minimise the congestion inside the port. It is better that the majority of import items are allowed to be delivered through the ICDs, which will create ample space inside the port for stacking and handling of export-laden containers that are congesting private ICDs.
Further there is considerable space occupied inside port and off-docks as a result of old undelivered containers and it would be good if port and customs officials focus to expedite methods/strategies to clear up the space by disposing the stagnant containers and goods.
Also, as I mentioned in the beginning, logistics and supply chain are often used inter-changeably and being so a major leap towards future would be introducing education and training facilities focusing on the industry, which will help spread knowledge and produce more focused human resources for this industry and will add many values to the logistics services. Those working in the supply chain also need to be trained to understand true commercial requirements to build customer intimacy. In fact, it often feels as if sales and supply chain live in two different worlds and once when there is a better understanding of customer’s requirement, a trained supply chain team member can align the supply chain strategy and capabilities taking the industry to new heights.
Lastly, I would love to live to see the day when a one-stop logistical platform can be introduced by the Government that is aimed at connecting all the stakeholders of the logistics community. The objective should be to improve efficiency and transparency by reducing costs and time delays to achieve an easier, faster and more competitive service offering. It should be introduced with the aim to promote the growth of the logistics sector and thereby improve trade. The platform should allow coexistence of multiple service providers to provide EXIM-related services independently or by combining different options and ideally it should focus on reducing regulatory complexities and enhancing the ease of doing business by moving towards a user-friendly trade while the next step could involve introduction of digital transactions for payments for clearance processes such as port charges, CFS charges, shipping line charges, transportation charges, etc. The portal- if and when developed- should be able to integrate other stand-alone applications, developed by multiple vendors, users and other stakeholders so that there will not be undue duplication of efforts.
