There are transformative changes taking place in Supply Chain Management (SCM), driven by latest technologies in chemical hazards management, in instrumentation, sensing and in logistics. The suite of emerging Industry 4.0 technologies, leading to digitalisation has created the potential for leap frogging over conventional techniques.To understand the current scenario and the rapid changes taking place in SCM, Chemical Industry Digest interacted with V Raju of All Cargo Group, whose views are presented here.
Chemical Industry Digest (CID): What are the specific services you offer in end-to-end logistics/supply chain management? What is the infrastructure you have in terms of warehouses, etc.?
V. Raju (VR): The different services that All Cargo Supply Chain Solutions offer in terms of end-to-end logistics / supply chain management are:
• Warehousing services for chemical companies – storage of both hazardous and non-hazardous cargo
• Freight forwarding services to global destinations – a) Air Freight b) Ocean Freight
• LCL consolidation services – LCL freight forwarding to global destinations.
• Multimodal transportation of cargo across locations.
• Project cargo movement globally.
• CFS services at all major ports Pan India.
• Express transportation country wide.
In terms of warehousing, and connected infrastructure, while we specialize in providing storage solutions and warehousing services for chemical companies, e-commerce and retail companies, automotive and engineering companies, consumer durables and IT products, etc., chemical cargo storage remains our niche numero uno area, being the market leaders for chemical storage in the country.
The chemical warehouses that we have are of the highest technical Grade-1 class and capabilities, in addition, needless to mention, that they excel in terms of safety and security implemented for storage of hazardous and non-hazardous chemicals. Contamination water pits, storage water tanks, emergency exits, sprinklers, alarms, detectors etc abound, in every chemical warehouse, while every person must wear the personal protective equipment, while at work inside the warehouse. Safety Managers and their teams ensure the highest safety techniques in the warehouses. Continuous safety and operational training are an important part of the process that is employed inside warehouses. All warehouses comply with statutory certifications and other stipulated safety measures required to manage storage of hazardous and non-hazardous chemicals.
Professional Handling
Each of our warehouses are manned by professionals trained in safe handling of the most hazardous chemicals and lubricants, continuous training by safety experts ensure that safety practices always are accorded topmost priority in all our warehouses. Knowledge and training to handle spillage, leakages, emissions, fumes etc are constantly provided by our on-site safety and emergency handling teams, there are extremely strict measures on the Dos and Dont’s during working and handling of cargo within our warehouses. Mock drills, fire drills, and other safety exercises are carried out regularly, in addition to handling safety drills in these warehouses. Last but not the least, safety audits by our internal auditors, customer auditors, global audit teams etc ensures a safe working environment of the highest global standard for chemical cargo storage.
CID: What are the Important Aspects of Chemical Logistics?
VR: Chemical Logistics pertains to the supply chain operation of Chemical products from the procurement of raw material to the end distribution channels till the consumers. Logistics on the basis of what part of the supply chain operations and how much of the operations are outsourced. Companies providing logistical services for chemicals provide many services in the field such as procurement services, material flow services, transportation and distribution services both national and internationally, warehouse management and storage services, contractual services to manage the whole supply chain operations, customs and security services, consulting services to optimize the supply chain and related operations and various other value-added services.
Chemical storage and transportation must be carefully planned and controlled at every stage, from the production facility to the end user. Companies need to consider the type of containers used for transporting the chemicals and ensure the right modal mix – whether it should be transported by truck, train, or sea; the organizations that will have access to the materials during shipment; and how they can get real-time information about the location and status of the materials, in order to minimize risk. Logistics management for chemicals industry demands continuous improvement in operational safety and security. Supply chain security and risk management will be the key differentiator.
Designing and Flexibility
Chemical warehouses also need to be specially designed for safety. If you have flammable chemicals, you need to have a designated room that contains a sprinkler system and wide aisles. Chemical warehouses also need to be designed to ensure waste streams are contained in case of an accident. Compliance involves not only complying with governmental rules, but also following voluntary “good practice” guidelines like ‘Responsible Care’. To achieve certification, companies need to have a detailed and documented process for responsibly managing the logistics associated with chemicals.
Being a high-risk business, chemical logistics requires flexibility and adaptability. The chemical supply chain is long, volatile, and highly complex and thus there are numerous inputs, and many touches to the end consumer. While chemical companies are adept at designing their products and manufacturing safely, the logistics companies offer the expertise required to safely navigate transport and store these potentially dangerous products safely adhering to the norms and safety regulations, at all times.
Logistics models have evolved over time to address the changing needs of the market and vary based on scope of service offering and degree of collaboration across the supply chain. However, the pace of automation in the chemical industry has been much slower compared to other industries. Rapid advances in supply chain technology enables increased functionality across multiple sites and countries and have a great potential to improve performance of supply chains. The industry needs to start using integrated planning systems to improve logistics asset productivity and network reliability. Efficient, competitive and sustainable logistics are therefore of great importance for its future development.
CID: As you know many chemicals are toxic, hazardous, and flammable. So, from transportation, handling to storage i.e. the entire length from end to end, what are the safety precautions required?
VR: Safe transportation of hazardous chemicals across the country is one of the biggest challenges. A boom in the chemical industry has also led to an increase in the safety concerns of chemical logistics as freight traffic has increased sharply. An increase in the number of untrained staff to handle packaging and transportation of hazardous chemicals and lack of awareness about the new and emerging trends and technologies are some of the issues that challenge the transportation of hazardous chemicals in India.
The warehouse design should aim at desired utility of space, orderly layout, safe product storage according to hazard, safe warehouse operations, emergency handling, and security of warehouse. The most important part of the design is the concept of inherently safe design, such as creating a stable building constructed for built in protection. This should cover design of walls, floor, roof, ventilation, retention water catchment basins, fire walls, fire doors, etc. The layout should take care of product storage, loading/ unloading, parking, utility, safety equipment, welfare facilities. The chemical warehouse should ideally be situated away from residential areas, heavily populated places, area should have good connectivity of roads and emergency centres like hospitals, police controls, ambulances, fire services etc should be around the location.
Understand all Hazards
Hazardous chemicals improperly stored and improperly handled in a warehouse can cause fire or explosion, resulting in injury of personnel at the site, as well as the neighbouring areas, and loss of property in and around the warehouse area. An understanding of hazards and associated risks will help in selecting better control measures. The potential safety, health and environmental impacts can be minimized by implementing control measures in the early design stage. The Globally Harmonized System (GHS) guides hazardous product storage, and labeling & hazard communication, which helps in identifying hazards and handling measures.
When putting in place the cargo segregation scheme it is important to identify all the hazard properties of a chemical. Many chemicals have multiple hazards and a decision must be made as to which storage location within the warehouse or drum store is the most appropriate for each individual chemical. Normally the storage area will be determined by the more hazardous property of the chemical and having assessed the consequences in the event of an accident in the storage area. There will always be some chemicals that will not fit neatly in one category or another, but with a proper identification of the chemical hazards and assessment of consequences of an accident release using the information available in the MSDS, most chemicals should be assigned to appropriate storage areas. In addition to the Material Safety Data Sheet (MSDS) there are many industry documents and guidance available on chemical hazard classes, reaction hazards and segregation policies, please see list of references.
Wearing Personal Protective Equipment (PPE) like face shields, gloves and head covers should be made mandatory for personnel within the warehousing premises. They should also be made aware of the best safety practices and security standards in warehouses.
Dangerous Wrong Practices
The following is a non-exhaustive list of examples of inadequate storage systems and practices commonly found in warehouses and drum stores:
- Chemicals stored on passageways including forklift truck routes, other vehicle routes such as truck access routes to loading bays, pedestrian walkways etc.
- Absence of a suitable vehicle and pedestrian traffic management plan including defined forklift truck routes with appropriate speed limits, etc.
- Emergency exits obstructed by chemical containers.
- Chemicals stored on damaged, or inadequately secured racking or on damaged pallets.
- Warehouse racking not suitably designed or constructed to withstand the anticipated loading of chemical containers placed on it. Absence of secondary containment and spill kits.
- Inadequate/no training provided for forklift truck drivers.
- Where applicable, the absence of a suitable area for the transfers of chemicals from a large to smaller packaging, e.g. for production or laboratory use, batch kitting, etc.
- Cylinders not properly secured against falls.
- Inadequate / no emergency response plan for dealing with chemical incidents such as liquid spills, toxic gas releases or fires.
- Chemicals stored by poorly chosen categories, such as all acids (inorganic and organic, strong oxidizers) together; all organics stored together.
CID: Considering the current environment, how is the logistics of road, rail, sea, and air progressing in relation with the chemical industry?
VR: The transportation sector, with 60-65% share, dominates India’s logistics spends given the vast landscape and reliance on expensive road transportation. Of the balance total inventory and carrying cost spends, carrying cost makes up 80-90% with the rest related to warehousing and storage. Compared to globally, share of transportation is higher in India because of the dominance of expensive road transport. Road and rail mix in the transportation sector, road dominates. Road’s share in the total transportation modal mix at 75% (volume based) is much higher than in other countries (US-37%, China-22%). Rail transport is primarily used for transport of bulk commodities (coal contributes 40% of total freight earnings).
India’s roads haven’t been able to keep up with the transportation demands of rapid urbanization. Poor quality of roads existing in India are a major cause for concern. Process flow of logistic industry increased accidents and also led to a loss in productivity due to delays. Crossing check points: If a vehicle goes through numerous stoppages e.g. toll booths, greater the chance of it meeting with an accident as the contact with the human ecosystem increases.
Pilferage is a major concern. Costly chemicals are replaced by some other low value substance with truck drivers being the major culprits. As a consequence, raw material quality is compromised.
In rail, Concor should benefit from DFC commissioning, which should boost volumes, but more importantly efficient and profitability. We estimate India’s freight transportation at around USD150bn plus. Driven by the underlying economic growth, high infrastructure investments (especially in road transport) and favourable government initiatives, we expect the transportation sector to grow at 9- 10% annually over FY18-25.
The container rail business is capital-intensive and requires a long gestation period to build volumes. However, once a company achieves a level to attain economies of scale in terms of rail sidings, rakes as also volumes, returns are typically quite high. Rail share declined from 89% in 1950 to less than 35% in 2018.
CID: What are the challenges the logistics industry faces?
VR: There is a lack of continuous engagement at the strategic and tactical level between the chemical industry and logistics service providers. However, with the government providing a few sops in the areas of storage facility, equipment, etc., the logistics sector seems to be moving on the right track. Hazardous materials storage and distribution risk management involves establishing, organising, planning, executing and monitoring a set of operations that aims to decrease the probability of accidents and reduce the relevant potential consequences. This risk management process pertains to preventive and repressive safety measures. Continuous improvement of safety and security standards will remain a high priority for chemical companies. This will require close co-operation with logistics service providers and joint improvement programs. Stringent selection and continuous monitoring of the performance of logistics service providers will remain necessary. The encouraging growth of chemical industry in India has naturally brought issues concerning hazardous chemical storage and distribution into sharp focus. The bottlenecks pertaining to infrastructure, suitable storage facility, equipment and technology are posing serious challenges for the growth of the sector. There is a need for continuous engagement at the strategic and tactical level between the chemical industry and logistics service providers. Governments and regulatory bodies around the world are overhauling chemical regulations.
As a result, be it logistics, planning, procurement, or distribution, companies are likely to outsource some or all of these functions to organizations that are industry leaders in these areas. In addition, to avoid any disruption or uncertainty in the supply of material and availability of vendors, companies are setting up multiple sources. In addition, regionalization in place of globalization is the new mantra as regards procurement policies in chemicals are concerned.
Customer Experience
The last link in the supply chain, the customer experience, offers tremendous opportunities for improvement. In the past, R&D and the effective use of production assets—rather than market and customer orientation—have been the most prominent engines of success in the chemical industry. Today, however, positive customer experiences in more customer-centric sectors such as industrial services and online retail have raised expectations regarding customer service. As a result, all aspects of customer interaction—from making products and product information more readily available to providing updates on order status—are promising grounds for increasing differentiation and customer retention. Perhaps most important, the introduction of innovative business models and services enabled by digitization (many of which, such as shipment tracking, are already standard in other industries) can dramatically change the customer experience.
Transporting chemicals while complying with safety and environmental regulations is a challenge for the chemical logistics service providers. Moreover, the complex chemical value chain made the job tougher for the third-party logistic players. So, the chemical logistics players require adequate infrastructure support to ensure smooth transportation.
CID: What are the emerging futuristic trends?
VR: Here are ten megatrends which influence the logistics industry:
• globalization,
• demographic change,
• new lifestyles of customers,
• the trend towards service integration (servitization),
• sustainability,
• rising risks along global supply chains,
• digitalization or technology deployment,
• new challengers in the industry,
• professionalization of logistics processes and
• the development of logistics as a core competence.
One key trend that is noticeable in the market is the digitalization of various segments of the businesses and the opportunities that technological advancements are bringing for the customer. Companies are providing their own propriety trademarked TMS to their customers for better supply chain visibility, management and in-depth analytics data so that Supply chain operation can be optimized.
We need to go into the direction of an integrated steering of global supply chains in times when supply chains are becoming even more complex each day. We need to deploy smart business solutions and digitalization to gain business. We need to focus on customers and process orientation according to business needs (resilience and responsiveness).
Digitalization in production industry 4.0 must go together with logistics 4.0. Regarding data, shippers must think outside the box — that is ‘think beyond the factory gate’ to realize the true potential. The sooner we receive relevant information, the faster we can react. In our experience customers for logistics services are most successful when they analyze processes together with their logistics partners and, in consequence, can take the right strategic decisions. We try to receive information about planned shipments as early as possible; this allows us to align our expertise with the customers’ information in the best way possible.
With the rise of digital, new supply chain resilience risk management applications and services are available to help companies monitor, analyze and respond to critical disruptions in real time. For example, a chemical supplier could subscribe to a cloudbased supply chain risk management service, which models the critical entities and material flows of a company’s supply network, and assesses exposure and vulnerability in different risk categories. With this information, the company could develop mitigation actions and back-up plans for critical facilities.
Although not a new concept, establishing an effective supply chain control tower has become more feasible with digital technology. It improves the linkage between planning and order fulfillment, which in turn leads to better customer service and optimized inventory levels in line with supply chain segment requirements. When organized as a shared service platform, the digitalized supply chain control tower integrates three essential sub-capabilities: (1) visibility to understand “what is happening” in real time and across all entities of the supply chain; (2) analytics to tell “why is this happening” and “how could we improve” by analyzing root causes and simulating solution options with their impact on supply chain performance and operational cost; and (3) execution to orchestrate the implementation of the action plan collaboratively with the relevant functions.
Leveraging the digitalization of supply chain planning, chemical companies can address several industry specific challenges and make an important leap to becoming competitive digital businesses. To realize this game-changing opportunity, chemical companies must evaluate the six digitalized supply chain planning capabilities and develop them according to their unique position in the market, using an agile and scalable model. The organizations that master the right mix of digital supply chain capabilities will be best positioned to innovate, compete and succeed in a fully developed economy.
