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3 (11) September-November 2007

3 (11) September-November 2007
To WTO with new services: OAO RZD is deeply involved into services improvement and launching the system of international standards. This strategy became more crucial in the view of forthcoming joining the WTO and necessity to develop the transit potential of the country, believes OAO RZD Vice-President, CEO of First Cargo Company Salman Babayev.

Outsourcing in retailing sector: The experience of developed states proves that retailing is very interested in partnership with external providers of transport and logistic services. According to the money turnover, Russian retailing will reach the international level in two or three years: its volume will be comparable with the one of German and French networks. Still, cooperation between Russian retailers and logisticians falls behind the world tendencies. Retailers are not satisfied with the quality of logistic providers’ services, although they consider them their future strategic allies.

1520 Gauge Goes to Europe: ОАО RZD initiated the project of 1520 gauge railway construction in Europe. This line will cross several European states and join Russia and Austria. In the opinion of its developers, this project will allow to increase the railway transportation volume between Europe and Russia having turned the route into an attractive opportunity for cargo owners.
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РЖД-Партнер

Quality of Logistics Services in Russia Will Increase

Frank Mueller«International logistic companies will succeed on the Russian market if they can combine experience and European standards of work with a clear vision of how to offer, promote and provide services for deliveries to Russia», believes Frank Mueller,
Chief Executive Officer of AsstrA group of companies. He told The RZD-Partner International about the specific features of the Russian logistic services market.
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 biography

Frank Mueller, Chief Executive Officer, AsstrA Associated Traffic AG:
– Having joined AsstrA group of companies in 1993, when the headquarters of AsstrA Associated Traffic AG was established in Zurich, Switzerland, he is currently the Head of the group of companies, which has representative offices in 10 countries of Europe, Asia, the CIS and the Baltic states with the total personnel of 600 people. He played a role in AsstrA’s development from a transport and forwarding company into a 3PL provider. At the end of 2006, he founded and headed the Contract Logistics Department in the group of companies. It develops logistic solutions to provide project deliveries. Mr. Mueller graduated from Eidgenoessische Technische Hochschule in Zurich.
He holds an Executive MBA degree in Supply Chain Management.    

 

– Mr. Mueller, could you, please, comment on the AsstrA group of companies’ last year performance?
– The group’s turnover amounted to EUR 128 mln in 2006, which is 26% up year-on-year. The number of clients increased by 22%, and the company’s staff grew by one third. Now we have representative offices in 10 countries of Europe, Asia, the CIS and the Baltic states. At the end of 2006, a new subsidiary was registered and started functioning in Almaty (Kazakhstan). Last year the company was awarded the «Winner of Russian Ratings of Companies and Solutions in the Logistic Sector Diploma» from the Best Practice Agency, and the Diploma as «The Best Transport and Forwarding Company in Russia in 2006» according to the results of the «Logistic Operator of Russia 2006» rating.
As you can see, the company develops dynamically. The year of 2006 was announced in the company the year of «Client Values». Our primary concern was the understanding of the client’s needs, adoption of his values, and step-by-step creation of a complex logistic product for every consumer. 2007 is the Logistic Solutions year. Consequently, AsstrA continues its main activities to provide logistic services to clients.
We provide door-to-door transportation, consolidation, storing and distribution of cargoes, customs formalities and insurance. We develop project logistic solutions. AsstrA specializes in transportation of all cargoes in Eastern Europe, Russia, Ukraine, Byelorussia, Kazakhstan and the Baltic states. We provide transportation by all transport modes, and offer a full pack of services. We use our own infrastructure (transport, warehouses, customs agencies) as well as external, dealing with contractors on the basis of long-term contracts.
– Could you characterize the Russian market of logistic services?
– Nowadays, it is characterized by a very strong competition. Big logistic and transport and forwarding companies compete to get large Russian clients.
At the same time, smaller players also have their advantages on the market. It is their mobility. Although they have big opportunities, large companies can be not mobile enough. Thus, using their advantage, small and medium enterprises keep their position on the market, although their client portfolio changes somehow because of different conditions and the growth of large market players.
Moreover, in Russia and Eastern Europe, personal relations play one of the key roles in business. Choosing a logistic services provider, clients prefer either a well-known partner or a company recommended by him.
International logistic companies are experienced; they have a well-defined structure and a large client base. Russian logisticians have another advantage – they know the Russian mentality pretty well. Besides, because of the impossibility to understand the psychology of Russian clients, large international companies willing work in Russia can make mistakes. And their mistakes cost as much as the investments into the business development.
As for the prospects, I believe that the market will develop up to specialization of separate companies in certain sectors of services.
– Which business segments in Russia do you consider as priorities for your company to invest in?
– Nowadays, it is very important for us to provide a proper level of professionals working in the offices of AsstrA in Russia and the CIS. It envisages not only their education, but also the formation of working skills and corporate culture meeting European standards.
People coming to our company start to understand that the success of the company they work for is their success. Recently in Russia there was no such specialty as a logistician, and while working for our company, the employees obtained the specialty.
On the whole, the situation on the territory of the former USSR is as follows: the majority of experienced employees come from large state enterprises. Whereas the ideology of modern logistic companies is aimed at the client’s needs, which is why such specialists and the commercial companies operating on the market now are not always able to come to an understanding.
It is very difficult to attract a professional to a company. Sometimes the expenses on salary can exceed the real income from his activities. Another characteristic feature is that the demand for the services on the CIS market is large, while there is a significant shortage of specialists in warehouses management and distribution. And during the last six months, there has appeared another trend – the lack of lorry drivers.
– How are the priorities for the company’s investment development defined?
– Payback from investments into the transport sector is not as fast as the one from investments into, for example, real estate. That is why usually we invest into definite projects. So, for example, if a client with a large order applies to us and we need to develop a certain direction to carry out the order, we will be ready to develop it.
– Who is the investor in such cases?
– Swiss banks as well as AsstrA group owners themselves.
– Russian market is considered young and in the process of formation. What problems do large international companies operating on it face?
– Being one of the most rapidly developing sectors of Russian economy, logistics depends on many factors. In particular, there are lots of difficulties because of the specifics of the Russian taxation system. Although, the juridical base has already been developed in Russia, and there are no problems with documentation, still, taxes cause lots of questions.
As for financial issues, there always appears something new in the tax legislation. There are often such situations when taxation bodies have no unified opinion on some issues. It cannot but prevent the forwarding market from development, because every company has its own clients, and each of them has his own viewpoint on taxation. So, the company has to ask the client’s interpretation of one or the other article of the tax code. There are similar problems with consignors and consignees. These contradictions are to be solved anyway. To export goods is much easier, but when you deal with import, you have to «reinvent the wheel».
The problem of truck queues on the border is also very important for the work on the international market. Nowadays, almost any border gathers huge queues of cargo trucks. Russia is a very large importer and exporter. Border crossings often fail to service properly the whole freight flow carried into and from the country.
For example, it takes customs officers a lot of time to inspect lorries on the border check point. Naturally, queues occur. If advanced systems are used for control and inspection, the role of the human factor may be reduced and the work of the customs may be optimized.
Infrastructure modernization and modern loading and unloading equipment may make for the reduction of time spent on cargo handling in ports, thus increasing their handling capacities.
– What cargoes does your company transport?
– AsstrA delivers over 100 thousand tons of cargo by all transport means monthly. We transport everything but weapons and legally prohibited products. About 25% of the total volume of transported to/from Russia cargo is household cleaning products, hygiene products, cosmetics and perfume. Equipment, including expensive and oversized one, makes 15%. Usually we carry for export such cargoes as timber and construction materials. Food stuffs make about 13% in the company’s freight flow. The remaining volume includes different cargoes – medicines, paper, cars, small lots of valuable cargoes etc.
– What companies are the main clients of AsstrA?
– Nowadays, our clients are 3,650 companies all over the world. These are large, medium and small enterprises, famous as well as new market players, producers and suppliers of goods, trading companies, international holding companies, corporations etc.
– What is your evaluation of the prospects of AsstrA group of companies development in the Russian transport and logistic business?
– We are very optimistic about the future and consider our prospects very promising. Besides Russia, our target markets are Byelorussia and Ukraine. There as well we develop complex logistic services, i.e. delivering cargo from door to door, from the place where it is produced to the consignee.
Nowadays we have warehouses in the Moscow region (Russia), Kiev and Gostomel (Ukraine), in Byelorussia, Italy and Germany. The group of companies has its own network of customs agencies in Europe and the CIS. We continue to invest into our own transport stock and warehousing capacities.
Still, what is most important in logistics is to provide high quality services to customers on the whole logistic network. The Russian market is very specific nowadays, and I think that it will become more and more civilized and developed. And then the quality of services will only increase.

By  Ekaterina  Glazunova 

[~DETAIL_TEXT] =>

 biography

Frank Mueller, Chief Executive Officer, AsstrA Associated Traffic AG:
– Having joined AsstrA group of companies in 1993, when the headquarters of AsstrA Associated Traffic AG was established in Zurich, Switzerland, he is currently the Head of the group of companies, which has representative offices in 10 countries of Europe, Asia, the CIS and the Baltic states with the total personnel of 600 people. He played a role in AsstrA’s development from a transport and forwarding company into a 3PL provider. At the end of 2006, he founded and headed the Contract Logistics Department in the group of companies. It develops logistic solutions to provide project deliveries. Mr. Mueller graduated from Eidgenoessische Technische Hochschule in Zurich.
He holds an Executive MBA degree in Supply Chain Management.    

 

– Mr. Mueller, could you, please, comment on the AsstrA group of companies’ last year performance?
– The group’s turnover amounted to EUR 128 mln in 2006, which is 26% up year-on-year. The number of clients increased by 22%, and the company’s staff grew by one third. Now we have representative offices in 10 countries of Europe, Asia, the CIS and the Baltic states. At the end of 2006, a new subsidiary was registered and started functioning in Almaty (Kazakhstan). Last year the company was awarded the «Winner of Russian Ratings of Companies and Solutions in the Logistic Sector Diploma» from the Best Practice Agency, and the Diploma as «The Best Transport and Forwarding Company in Russia in 2006» according to the results of the «Logistic Operator of Russia 2006» rating.
As you can see, the company develops dynamically. The year of 2006 was announced in the company the year of «Client Values». Our primary concern was the understanding of the client’s needs, adoption of his values, and step-by-step creation of a complex logistic product for every consumer. 2007 is the Logistic Solutions year. Consequently, AsstrA continues its main activities to provide logistic services to clients.
We provide door-to-door transportation, consolidation, storing and distribution of cargoes, customs formalities and insurance. We develop project logistic solutions. AsstrA specializes in transportation of all cargoes in Eastern Europe, Russia, Ukraine, Byelorussia, Kazakhstan and the Baltic states. We provide transportation by all transport modes, and offer a full pack of services. We use our own infrastructure (transport, warehouses, customs agencies) as well as external, dealing with contractors on the basis of long-term contracts.
– Could you characterize the Russian market of logistic services?
– Nowadays, it is characterized by a very strong competition. Big logistic and transport and forwarding companies compete to get large Russian clients.
At the same time, smaller players also have their advantages on the market. It is their mobility. Although they have big opportunities, large companies can be not mobile enough. Thus, using their advantage, small and medium enterprises keep their position on the market, although their client portfolio changes somehow because of different conditions and the growth of large market players.
Moreover, in Russia and Eastern Europe, personal relations play one of the key roles in business. Choosing a logistic services provider, clients prefer either a well-known partner or a company recommended by him.
International logistic companies are experienced; they have a well-defined structure and a large client base. Russian logisticians have another advantage – they know the Russian mentality pretty well. Besides, because of the impossibility to understand the psychology of Russian clients, large international companies willing work in Russia can make mistakes. And their mistakes cost as much as the investments into the business development.
As for the prospects, I believe that the market will develop up to specialization of separate companies in certain sectors of services.
– Which business segments in Russia do you consider as priorities for your company to invest in?
– Nowadays, it is very important for us to provide a proper level of professionals working in the offices of AsstrA in Russia and the CIS. It envisages not only their education, but also the formation of working skills and corporate culture meeting European standards.
People coming to our company start to understand that the success of the company they work for is their success. Recently in Russia there was no such specialty as a logistician, and while working for our company, the employees obtained the specialty.
On the whole, the situation on the territory of the former USSR is as follows: the majority of experienced employees come from large state enterprises. Whereas the ideology of modern logistic companies is aimed at the client’s needs, which is why such specialists and the commercial companies operating on the market now are not always able to come to an understanding.
It is very difficult to attract a professional to a company. Sometimes the expenses on salary can exceed the real income from his activities. Another characteristic feature is that the demand for the services on the CIS market is large, while there is a significant shortage of specialists in warehouses management and distribution. And during the last six months, there has appeared another trend – the lack of lorry drivers.
– How are the priorities for the company’s investment development defined?
– Payback from investments into the transport sector is not as fast as the one from investments into, for example, real estate. That is why usually we invest into definite projects. So, for example, if a client with a large order applies to us and we need to develop a certain direction to carry out the order, we will be ready to develop it.
– Who is the investor in such cases?
– Swiss banks as well as AsstrA group owners themselves.
– Russian market is considered young and in the process of formation. What problems do large international companies operating on it face?
– Being one of the most rapidly developing sectors of Russian economy, logistics depends on many factors. In particular, there are lots of difficulties because of the specifics of the Russian taxation system. Although, the juridical base has already been developed in Russia, and there are no problems with documentation, still, taxes cause lots of questions.
As for financial issues, there always appears something new in the tax legislation. There are often such situations when taxation bodies have no unified opinion on some issues. It cannot but prevent the forwarding market from development, because every company has its own clients, and each of them has his own viewpoint on taxation. So, the company has to ask the client’s interpretation of one or the other article of the tax code. There are similar problems with consignors and consignees. These contradictions are to be solved anyway. To export goods is much easier, but when you deal with import, you have to «reinvent the wheel».
The problem of truck queues on the border is also very important for the work on the international market. Nowadays, almost any border gathers huge queues of cargo trucks. Russia is a very large importer and exporter. Border crossings often fail to service properly the whole freight flow carried into and from the country.
For example, it takes customs officers a lot of time to inspect lorries on the border check point. Naturally, queues occur. If advanced systems are used for control and inspection, the role of the human factor may be reduced and the work of the customs may be optimized.
Infrastructure modernization and modern loading and unloading equipment may make for the reduction of time spent on cargo handling in ports, thus increasing their handling capacities.
– What cargoes does your company transport?
– AsstrA delivers over 100 thousand tons of cargo by all transport means monthly. We transport everything but weapons and legally prohibited products. About 25% of the total volume of transported to/from Russia cargo is household cleaning products, hygiene products, cosmetics and perfume. Equipment, including expensive and oversized one, makes 15%. Usually we carry for export such cargoes as timber and construction materials. Food stuffs make about 13% in the company’s freight flow. The remaining volume includes different cargoes – medicines, paper, cars, small lots of valuable cargoes etc.
– What companies are the main clients of AsstrA?
– Nowadays, our clients are 3,650 companies all over the world. These are large, medium and small enterprises, famous as well as new market players, producers and suppliers of goods, trading companies, international holding companies, corporations etc.
– What is your evaluation of the prospects of AsstrA group of companies development in the Russian transport and logistic business?
– We are very optimistic about the future and consider our prospects very promising. Besides Russia, our target markets are Byelorussia and Ukraine. There as well we develop complex logistic services, i.e. delivering cargo from door to door, from the place where it is produced to the consignee.
Nowadays we have warehouses in the Moscow region (Russia), Kiev and Gostomel (Ukraine), in Byelorussia, Italy and Germany. The group of companies has its own network of customs agencies in Europe and the CIS. We continue to invest into our own transport stock and warehousing capacities.
Still, what is most important in logistics is to provide high quality services to customers on the whole logistic network. The Russian market is very specific nowadays, and I think that it will become more and more civilized and developed. And then the quality of services will only increase.

By  Ekaterina  Glazunova 

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src="/ufiles/image/rus/partner/2007/3/007.png" border="1" alt="Frank Mueller" title="Frank Mueller" hspace="5" width="110" height="140" align="left" />«International logistic companies will succeed on the Russian market if they can combine experience and European standards of work with a clear vision of how to offer, promote and provide services for deliveries to Russia», believes Frank Mueller, <br />Chief Executive Officer of AsstrA group of companies. He told The RZD-Partner International about the specific features of the Russian logistic services market. [ELEMENT_META_TITLE] => Quality of Logistics Services in Russia Will Increase [ELEMENT_META_KEYWORDS] => quality of logistics services in russia will increase [ELEMENT_META_DESCRIPTION] => <img src="/ufiles/image/rus/partner/2007/3/007.png" border="1" alt="Frank Mueller" title="Frank Mueller" hspace="5" width="110" height="140" align="left" />«International logistic companies will succeed on the Russian market if they can combine experience and European standards of work with a clear vision of how to offer, promote and provide services for deliveries to Russia», believes Frank Mueller, <br />Chief Executive Officer of AsstrA group of companies. He told The RZD-Partner International about the specific features of the Russian logistic services market. 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 biography

Frank Mueller, Chief Executive Officer, AsstrA Associated Traffic AG:
– Having joined AsstrA group of companies in 1993, when the headquarters of AsstrA Associated Traffic AG was established in Zurich, Switzerland, he is currently the Head of the group of companies, which has representative offices in 10 countries of Europe, Asia, the CIS and the Baltic states with the total personnel of 600 people. He played a role in AsstrA’s development from a transport and forwarding company into a 3PL provider. At the end of 2006, he founded and headed the Contract Logistics Department in the group of companies. It develops logistic solutions to provide project deliveries. Mr. Mueller graduated from Eidgenoessische Technische Hochschule in Zurich.
He holds an Executive MBA degree in Supply Chain Management.    

 

– Mr. Mueller, could you, please, comment on the AsstrA group of companies’ last year performance?
– The group’s turnover amounted to EUR 128 mln in 2006, which is 26% up year-on-year. The number of clients increased by 22%, and the company’s staff grew by one third. Now we have representative offices in 10 countries of Europe, Asia, the CIS and the Baltic states. At the end of 2006, a new subsidiary was registered and started functioning in Almaty (Kazakhstan). Last year the company was awarded the «Winner of Russian Ratings of Companies and Solutions in the Logistic Sector Diploma» from the Best Practice Agency, and the Diploma as «The Best Transport and Forwarding Company in Russia in 2006» according to the results of the «Logistic Operator of Russia 2006» rating.
As you can see, the company develops dynamically. The year of 2006 was announced in the company the year of «Client Values». Our primary concern was the understanding of the client’s needs, adoption of his values, and step-by-step creation of a complex logistic product for every consumer. 2007 is the Logistic Solutions year. Consequently, AsstrA continues its main activities to provide logistic services to clients.
We provide door-to-door transportation, consolidation, storing and distribution of cargoes, customs formalities and insurance. We develop project logistic solutions. AsstrA specializes in transportation of all cargoes in Eastern Europe, Russia, Ukraine, Byelorussia, Kazakhstan and the Baltic states. We provide transportation by all transport modes, and offer a full pack of services. We use our own infrastructure (transport, warehouses, customs agencies) as well as external, dealing with contractors on the basis of long-term contracts.
– Could you characterize the Russian market of logistic services?
– Nowadays, it is characterized by a very strong competition. Big logistic and transport and forwarding companies compete to get large Russian clients.
At the same time, smaller players also have their advantages on the market. It is their mobility. Although they have big opportunities, large companies can be not mobile enough. Thus, using their advantage, small and medium enterprises keep their position on the market, although their client portfolio changes somehow because of different conditions and the growth of large market players.
Moreover, in Russia and Eastern Europe, personal relations play one of the key roles in business. Choosing a logistic services provider, clients prefer either a well-known partner or a company recommended by him.
International logistic companies are experienced; they have a well-defined structure and a large client base. Russian logisticians have another advantage – they know the Russian mentality pretty well. Besides, because of the impossibility to understand the psychology of Russian clients, large international companies willing work in Russia can make mistakes. And their mistakes cost as much as the investments into the business development.
As for the prospects, I believe that the market will develop up to specialization of separate companies in certain sectors of services.
– Which business segments in Russia do you consider as priorities for your company to invest in?
– Nowadays, it is very important for us to provide a proper level of professionals working in the offices of AsstrA in Russia and the CIS. It envisages not only their education, but also the formation of working skills and corporate culture meeting European standards.
People coming to our company start to understand that the success of the company they work for is their success. Recently in Russia there was no such specialty as a logistician, and while working for our company, the employees obtained the specialty.
On the whole, the situation on the territory of the former USSR is as follows: the majority of experienced employees come from large state enterprises. Whereas the ideology of modern logistic companies is aimed at the client’s needs, which is why such specialists and the commercial companies operating on the market now are not always able to come to an understanding.
It is very difficult to attract a professional to a company. Sometimes the expenses on salary can exceed the real income from his activities. Another characteristic feature is that the demand for the services on the CIS market is large, while there is a significant shortage of specialists in warehouses management and distribution. And during the last six months, there has appeared another trend – the lack of lorry drivers.
– How are the priorities for the company’s investment development defined?
– Payback from investments into the transport sector is not as fast as the one from investments into, for example, real estate. That is why usually we invest into definite projects. So, for example, if a client with a large order applies to us and we need to develop a certain direction to carry out the order, we will be ready to develop it.
– Who is the investor in such cases?
– Swiss banks as well as AsstrA group owners themselves.
– Russian market is considered young and in the process of formation. What problems do large international companies operating on it face?
– Being one of the most rapidly developing sectors of Russian economy, logistics depends on many factors. In particular, there are lots of difficulties because of the specifics of the Russian taxation system. Although, the juridical base has already been developed in Russia, and there are no problems with documentation, still, taxes cause lots of questions.
As for financial issues, there always appears something new in the tax legislation. There are often such situations when taxation bodies have no unified opinion on some issues. It cannot but prevent the forwarding market from development, because every company has its own clients, and each of them has his own viewpoint on taxation. So, the company has to ask the client’s interpretation of one or the other article of the tax code. There are similar problems with consignors and consignees. These contradictions are to be solved anyway. To export goods is much easier, but when you deal with import, you have to «reinvent the wheel».
The problem of truck queues on the border is also very important for the work on the international market. Nowadays, almost any border gathers huge queues of cargo trucks. Russia is a very large importer and exporter. Border crossings often fail to service properly the whole freight flow carried into and from the country.
For example, it takes customs officers a lot of time to inspect lorries on the border check point. Naturally, queues occur. If advanced systems are used for control and inspection, the role of the human factor may be reduced and the work of the customs may be optimized.
Infrastructure modernization and modern loading and unloading equipment may make for the reduction of time spent on cargo handling in ports, thus increasing their handling capacities.
– What cargoes does your company transport?
– AsstrA delivers over 100 thousand tons of cargo by all transport means monthly. We transport everything but weapons and legally prohibited products. About 25% of the total volume of transported to/from Russia cargo is household cleaning products, hygiene products, cosmetics and perfume. Equipment, including expensive and oversized one, makes 15%. Usually we carry for export such cargoes as timber and construction materials. Food stuffs make about 13% in the company’s freight flow. The remaining volume includes different cargoes – medicines, paper, cars, small lots of valuable cargoes etc.
– What companies are the main clients of AsstrA?
– Nowadays, our clients are 3,650 companies all over the world. These are large, medium and small enterprises, famous as well as new market players, producers and suppliers of goods, trading companies, international holding companies, corporations etc.
– What is your evaluation of the prospects of AsstrA group of companies development in the Russian transport and logistic business?
– We are very optimistic about the future and consider our prospects very promising. Besides Russia, our target markets are Byelorussia and Ukraine. There as well we develop complex logistic services, i.e. delivering cargo from door to door, from the place where it is produced to the consignee.
Nowadays we have warehouses in the Moscow region (Russia), Kiev and Gostomel (Ukraine), in Byelorussia, Italy and Germany. The group of companies has its own network of customs agencies in Europe and the CIS. We continue to invest into our own transport stock and warehousing capacities.
Still, what is most important in logistics is to provide high quality services to customers on the whole logistic network. The Russian market is very specific nowadays, and I think that it will become more and more civilized and developed. And then the quality of services will only increase.

By  Ekaterina  Glazunova 

[~DETAIL_TEXT] =>

 biography

Frank Mueller, Chief Executive Officer, AsstrA Associated Traffic AG:
– Having joined AsstrA group of companies in 1993, when the headquarters of AsstrA Associated Traffic AG was established in Zurich, Switzerland, he is currently the Head of the group of companies, which has representative offices in 10 countries of Europe, Asia, the CIS and the Baltic states with the total personnel of 600 people. He played a role in AsstrA’s development from a transport and forwarding company into a 3PL provider. At the end of 2006, he founded and headed the Contract Logistics Department in the group of companies. It develops logistic solutions to provide project deliveries. Mr. Mueller graduated from Eidgenoessische Technische Hochschule in Zurich.
He holds an Executive MBA degree in Supply Chain Management.    

 

– Mr. Mueller, could you, please, comment on the AsstrA group of companies’ last year performance?
– The group’s turnover amounted to EUR 128 mln in 2006, which is 26% up year-on-year. The number of clients increased by 22%, and the company’s staff grew by one third. Now we have representative offices in 10 countries of Europe, Asia, the CIS and the Baltic states. At the end of 2006, a new subsidiary was registered and started functioning in Almaty (Kazakhstan). Last year the company was awarded the «Winner of Russian Ratings of Companies and Solutions in the Logistic Sector Diploma» from the Best Practice Agency, and the Diploma as «The Best Transport and Forwarding Company in Russia in 2006» according to the results of the «Logistic Operator of Russia 2006» rating.
As you can see, the company develops dynamically. The year of 2006 was announced in the company the year of «Client Values». Our primary concern was the understanding of the client’s needs, adoption of his values, and step-by-step creation of a complex logistic product for every consumer. 2007 is the Logistic Solutions year. Consequently, AsstrA continues its main activities to provide logistic services to clients.
We provide door-to-door transportation, consolidation, storing and distribution of cargoes, customs formalities and insurance. We develop project logistic solutions. AsstrA specializes in transportation of all cargoes in Eastern Europe, Russia, Ukraine, Byelorussia, Kazakhstan and the Baltic states. We provide transportation by all transport modes, and offer a full pack of services. We use our own infrastructure (transport, warehouses, customs agencies) as well as external, dealing with contractors on the basis of long-term contracts.
– Could you characterize the Russian market of logistic services?
– Nowadays, it is characterized by a very strong competition. Big logistic and transport and forwarding companies compete to get large Russian clients.
At the same time, smaller players also have their advantages on the market. It is their mobility. Although they have big opportunities, large companies can be not mobile enough. Thus, using their advantage, small and medium enterprises keep their position on the market, although their client portfolio changes somehow because of different conditions and the growth of large market players.
Moreover, in Russia and Eastern Europe, personal relations play one of the key roles in business. Choosing a logistic services provider, clients prefer either a well-known partner or a company recommended by him.
International logistic companies are experienced; they have a well-defined structure and a large client base. Russian logisticians have another advantage – they know the Russian mentality pretty well. Besides, because of the impossibility to understand the psychology of Russian clients, large international companies willing work in Russia can make mistakes. And their mistakes cost as much as the investments into the business development.
As for the prospects, I believe that the market will develop up to specialization of separate companies in certain sectors of services.
– Which business segments in Russia do you consider as priorities for your company to invest in?
– Nowadays, it is very important for us to provide a proper level of professionals working in the offices of AsstrA in Russia and the CIS. It envisages not only their education, but also the formation of working skills and corporate culture meeting European standards.
People coming to our company start to understand that the success of the company they work for is their success. Recently in Russia there was no such specialty as a logistician, and while working for our company, the employees obtained the specialty.
On the whole, the situation on the territory of the former USSR is as follows: the majority of experienced employees come from large state enterprises. Whereas the ideology of modern logistic companies is aimed at the client’s needs, which is why such specialists and the commercial companies operating on the market now are not always able to come to an understanding.
It is very difficult to attract a professional to a company. Sometimes the expenses on salary can exceed the real income from his activities. Another characteristic feature is that the demand for the services on the CIS market is large, while there is a significant shortage of specialists in warehouses management and distribution. And during the last six months, there has appeared another trend – the lack of lorry drivers.
– How are the priorities for the company’s investment development defined?
– Payback from investments into the transport sector is not as fast as the one from investments into, for example, real estate. That is why usually we invest into definite projects. So, for example, if a client with a large order applies to us and we need to develop a certain direction to carry out the order, we will be ready to develop it.
– Who is the investor in such cases?
– Swiss banks as well as AsstrA group owners themselves.
– Russian market is considered young and in the process of formation. What problems do large international companies operating on it face?
– Being one of the most rapidly developing sectors of Russian economy, logistics depends on many factors. In particular, there are lots of difficulties because of the specifics of the Russian taxation system. Although, the juridical base has already been developed in Russia, and there are no problems with documentation, still, taxes cause lots of questions.
As for financial issues, there always appears something new in the tax legislation. There are often such situations when taxation bodies have no unified opinion on some issues. It cannot but prevent the forwarding market from development, because every company has its own clients, and each of them has his own viewpoint on taxation. So, the company has to ask the client’s interpretation of one or the other article of the tax code. There are similar problems with consignors and consignees. These contradictions are to be solved anyway. To export goods is much easier, but when you deal with import, you have to «reinvent the wheel».
The problem of truck queues on the border is also very important for the work on the international market. Nowadays, almost any border gathers huge queues of cargo trucks. Russia is a very large importer and exporter. Border crossings often fail to service properly the whole freight flow carried into and from the country.
For example, it takes customs officers a lot of time to inspect lorries on the border check point. Naturally, queues occur. If advanced systems are used for control and inspection, the role of the human factor may be reduced and the work of the customs may be optimized.
Infrastructure modernization and modern loading and unloading equipment may make for the reduction of time spent on cargo handling in ports, thus increasing their handling capacities.
– What cargoes does your company transport?
– AsstrA delivers over 100 thousand tons of cargo by all transport means monthly. We transport everything but weapons and legally prohibited products. About 25% of the total volume of transported to/from Russia cargo is household cleaning products, hygiene products, cosmetics and perfume. Equipment, including expensive and oversized one, makes 15%. Usually we carry for export such cargoes as timber and construction materials. Food stuffs make about 13% in the company’s freight flow. The remaining volume includes different cargoes – medicines, paper, cars, small lots of valuable cargoes etc.
– What companies are the main clients of AsstrA?
– Nowadays, our clients are 3,650 companies all over the world. These are large, medium and small enterprises, famous as well as new market players, producers and suppliers of goods, trading companies, international holding companies, corporations etc.
– What is your evaluation of the prospects of AsstrA group of companies development in the Russian transport and logistic business?
– We are very optimistic about the future and consider our prospects very promising. Besides Russia, our target markets are Byelorussia and Ukraine. There as well we develop complex logistic services, i.e. delivering cargo from door to door, from the place where it is produced to the consignee.
Nowadays we have warehouses in the Moscow region (Russia), Kiev and Gostomel (Ukraine), in Byelorussia, Italy and Germany. The group of companies has its own network of customs agencies in Europe and the CIS. We continue to invest into our own transport stock and warehousing capacities.
Still, what is most important in logistics is to provide high quality services to customers on the whole logistic network. The Russian market is very specific nowadays, and I think that it will become more and more civilized and developed. And then the quality of services will only increase.

By  Ekaterina  Glazunova 

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Chief Executive Officer of AsstrA group of companies. He told The RZD-Partner International about the specific features of the Russian logistic services market. [~PREVIEW_TEXT] => Frank Mueller«International logistic companies will succeed on the Russian market if they can combine experience and European standards of work with a clear vision of how to offer, promote and provide services for deliveries to Russia», believes Frank Mueller,
Chief Executive Officer of AsstrA group of companies. He told The RZD-Partner International about the specific features of the Russian logistic services market. 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src="/ufiles/image/rus/partner/2007/3/007.png" border="1" alt="Frank Mueller" title="Frank Mueller" hspace="5" width="110" height="140" align="left" />«International logistic companies will succeed on the Russian market if they can combine experience and European standards of work with a clear vision of how to offer, promote and provide services for deliveries to Russia», believes Frank Mueller, <br />Chief Executive Officer of AsstrA group of companies. 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РЖД-Партнер

Warehousing Logistics in Railway Manner

ОАО RZD plans to launch a net of logistic centers by 2010. This way the company intends to develop multimodal schemes of transportation in Russia on the basis of railway infrastructure potential.
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Logistic Center for Every City

OAO RZD long-term concept of terminal-warehousing development was approved in late 2006. It is believed that the launch of a terminal network spread all over Russia will turn transit transportation into an attractive segment at last.
At the first stage, according to the concept, terminal-logistic capacities are to be taken out of the cities to the outskirts of populated areas. For example, currently a cargo station is to be relocated from the center of Saint-Petersburg to a suburb. Similar processes are taking place in Moscow, Yekaterinburg and other Russian cities. Container sites and warehouses are to be constructed to organize transportation of general cargo and count goods. Thus, the first stage of the concept implementation will allow to simplify the servicing of transit cargo flows that currently go via the territories of big cities, which causes transit time loss.
The second stage of the concept is to be implemented by 2010 and aimed at construction of a logistic centers network all over the country, to start with big industrial cities, regions serviced by large trade operators and transport junctions with intensive cargo flows. While construction is unfolding, the Russian railways plan to build 8 - 10 terminals for count goods and containers. However, in the opinion of forwarders, a regional network should be created right now and large industrial cities can not perform as the principal focus. «Otherwise, – Yuri Yuryev, Head of Corporate Development Department of ОАО TransContainer, believes – these terminals will accumulate around the cities and no efficient activities are to be expected. We have analyzed how foreign companies function and have come to the conclusion that big hubs are to be launched for a great number of participants and with the help of local administrations».
Nowadays lack of handling logistic capacities in the regions is one of the crucial problems for the Russian carriers. According to Alexander Gorodetsky, Managing Director of Eurosib-Terminal, in such Russian regions as Siberia and Ural in the radius of 300–400 kilometers typically there is only one terminal servicing large-tonnage containers. As a result, the cargo following to, for example, mid-Russia is directed to logistic terminals of Moscow or Saint-Petersburg to undergo respective procedures and only after that heads for the consumer. Currently, in the words of Nikolai Tityukhin, president of EuroAsian Logistic Association, the Central region of Russia receives 44% of cargo flows, North-West - 35%, and the remaining regions, such as TransVolga, South etc. - 3-7%.
The third stage of the concept is to unfold in 2010 – 2015 with the target to construct terminals in the regions (the so-called logistic centers antenna network). State and private stock is believed to participate: officials will initiate and coordinate the projects and both cargo owners and OAO RZD forwarders will perform as investors.

 

Warehouse Means Efficiency

Thus, TransLes JSC, OAO RZD affiliate, implements the project on the territory of 13 hectares in Irkutsk. The terminal will function as a dry port, i.e. the warehouse will receive cargo from cargo owners, handle it, store and deliver, also performing customs and phytosanitary procedures when required.
The launched terminal will give the customers a chance to accumulate and store significant volumes of timber, saving money on keeping their own or rented small deadlocks which create serious difficulties for the stations when providing and clearing the rail cars. Twenty-four-hour working schedule will reduce cars idling, increase their turnover and cut transport costs. Wholesale dealers will have the opportunity to launch dealing centers on the basis of logistic centers and in the future handle the cargo. The technology of giving saw-timber in gondola cars, platforms and containers is to be arranged at the terminal. This way the company plans to reduce the share of logistic component on the ultimate production cost and acquire a competitive advantage on the market.
Russian and Finnish companies have completed the launch of the terminal net on the Oktaybrskaya railway. The terminals concentrate production aimed at further transportation to Finland and perform as buffer warehouses where timber is delivered both by railway and trucks. Then the delivered production is sorted out in accordance with the requirements of the buyers and loaded on the rolling stock destined at consuming factories. In 2005 terminals handled 150 thousand tons of timber, in 2006 – almost 180 thousand. Thus, transportation prime-cost was reduced, as well as expenses caused by shunting and car idling on the small load stations.

Do not Stop Private Capital!

Simultaneously with logistic business development another tendency can be observed. Private enterprises construct terminals with railway accesses, having lost hopes for long and medium term railway programmes. However, terminal constructers face certain difficulties when dealing with railwaymen, since it is not possible to lay a permanent way for accesses without them.
In words of Igor Bulgakov, Deputy CEO of Vostoktrans JSC company - owner of logistic terminal located in Moscow region, OAO RZD policy in the terminal net development won’t influence private terminals and their prospects. «After several Moscow stations stopped functioning for Riga direction, our warehouse terminal of А class remains the only available facility», – he says. At the same time, in Igor Bulgakov’s words, no problems in dealing with the railway arise.
According to А. Gorodetsky from Eurosib-Terminal, to launch an efficient terminal, a private company has to construct a railway station worth USD 5—15 mln. At the same time the company has to solve problems with acquiring permission for bringing railway to the terminal. In accordance with the Russian legislation, new warehouse owners do not have the right to apply to the Federal Railway Transport Agency (Roszheldor) to get permission of this sort, since Roszheldor only considers applications forwarded by the infrastructure owner, i.e. ОАО RZD. However, according to Victor Yevpakov, Head of Railway Transport Department of Transport Control and Communication Administration of the RF Antimonopoly Service, it happens that OAO RZD does not apply to Roszheldor with a claim to join companies to the railways of common use. Russian companies (on Krasnoyarsk and Zabaikalsk railways) had to obtain this permission themselves.
«I presume ОАО RZD is not interested in private terminals development», – V.Yevpakov concludes. The enterprises have to apply to the RF Federal Antimonopoly Service to settle the disputes legislatively. In А. Gorodetsky’s words, Eurosib company has applied to the RF Transport Ministry to regulate this problem, but so far without success …

OAO RZD Logistic Daughter?

In 2006 within ОАО RZD structure two Directorates were formed: the first one for a terminal-warehousing complex of warehouses depots control and the second one for mechanized distance of load/unload procedures. Their basic functions are efficient management of container sites, warehouses and other property of the cargo complex. In particular, load/unload procedures, handling, weighing, giving cargo, maintenance and repair of the equipment and quarters on the territory of the complex.
According to Anatly Krasnoschek, Deputy Head of October railway, there is a probability that in a year or two, when the Directorate proves that it functions efficiently, the structure can acquire the status of the corporation department. Further on, if the set tasks are fulfilled, it can be separated into an affiliate which will provide services on load/unload, storage etc. In this respect the railway will have to perform the control-revision function and inspection of subsequent technical terms for cargo load and transportation.
«Speaking of building-up the efficient logistic chain, we are to learn how to get profit in the unified norm for the expenses unit. That is why the launch of a through transit transportation is a very important task for our company to fulfill», – Boris Lapidus, Senior Vice-President of ОАО RZD, stated recently.

Summing Up

According to OAO RZD, this concept will allow to attract transit cargo flows to the Russian railways. In this respect the question arises why should one create obstacles to private business then? Is it worth launching a big company or maybe it is enough to sort out the legal problems with infrastructure for the terminals and launch a regional net on the basis of the state-and-private partnership?
In experts’ data, now OAO RZD warehouses make 20% of all the Russian offer of warehousing services or 5% of the aggregate capacities of warehousing complex of the country. Typically OAO RZD warehouses are classified as C class facilities. However, according to experts, the potential capacities of OAO RZD warehousing complex, its links with the terminal container handling complex, and railway and truck accesses allow one to increase its share on the warehousing market to 70%. Won’t this new company turn to another monopolist on the Russian transport market? Or there is still a chance to launch a terminal net involving all interested persons?

By  Anna  Nezhinskaya 

[~DETAIL_TEXT] =>

Logistic Center for Every City

OAO RZD long-term concept of terminal-warehousing development was approved in late 2006. It is believed that the launch of a terminal network spread all over Russia will turn transit transportation into an attractive segment at last.
At the first stage, according to the concept, terminal-logistic capacities are to be taken out of the cities to the outskirts of populated areas. For example, currently a cargo station is to be relocated from the center of Saint-Petersburg to a suburb. Similar processes are taking place in Moscow, Yekaterinburg and other Russian cities. Container sites and warehouses are to be constructed to organize transportation of general cargo and count goods. Thus, the first stage of the concept implementation will allow to simplify the servicing of transit cargo flows that currently go via the territories of big cities, which causes transit time loss.
The second stage of the concept is to be implemented by 2010 and aimed at construction of a logistic centers network all over the country, to start with big industrial cities, regions serviced by large trade operators and transport junctions with intensive cargo flows. While construction is unfolding, the Russian railways plan to build 8 - 10 terminals for count goods and containers. However, in the opinion of forwarders, a regional network should be created right now and large industrial cities can not perform as the principal focus. «Otherwise, – Yuri Yuryev, Head of Corporate Development Department of ОАО TransContainer, believes – these terminals will accumulate around the cities and no efficient activities are to be expected. We have analyzed how foreign companies function and have come to the conclusion that big hubs are to be launched for a great number of participants and with the help of local administrations».
Nowadays lack of handling logistic capacities in the regions is one of the crucial problems for the Russian carriers. According to Alexander Gorodetsky, Managing Director of Eurosib-Terminal, in such Russian regions as Siberia and Ural in the radius of 300–400 kilometers typically there is only one terminal servicing large-tonnage containers. As a result, the cargo following to, for example, mid-Russia is directed to logistic terminals of Moscow or Saint-Petersburg to undergo respective procedures and only after that heads for the consumer. Currently, in the words of Nikolai Tityukhin, president of EuroAsian Logistic Association, the Central region of Russia receives 44% of cargo flows, North-West - 35%, and the remaining regions, such as TransVolga, South etc. - 3-7%.
The third stage of the concept is to unfold in 2010 – 2015 with the target to construct terminals in the regions (the so-called logistic centers antenna network). State and private stock is believed to participate: officials will initiate and coordinate the projects and both cargo owners and OAO RZD forwarders will perform as investors.

 

Warehouse Means Efficiency

Thus, TransLes JSC, OAO RZD affiliate, implements the project on the territory of 13 hectares in Irkutsk. The terminal will function as a dry port, i.e. the warehouse will receive cargo from cargo owners, handle it, store and deliver, also performing customs and phytosanitary procedures when required.
The launched terminal will give the customers a chance to accumulate and store significant volumes of timber, saving money on keeping their own or rented small deadlocks which create serious difficulties for the stations when providing and clearing the rail cars. Twenty-four-hour working schedule will reduce cars idling, increase their turnover and cut transport costs. Wholesale dealers will have the opportunity to launch dealing centers on the basis of logistic centers and in the future handle the cargo. The technology of giving saw-timber in gondola cars, platforms and containers is to be arranged at the terminal. This way the company plans to reduce the share of logistic component on the ultimate production cost and acquire a competitive advantage on the market.
Russian and Finnish companies have completed the launch of the terminal net on the Oktaybrskaya railway. The terminals concentrate production aimed at further transportation to Finland and perform as buffer warehouses where timber is delivered both by railway and trucks. Then the delivered production is sorted out in accordance with the requirements of the buyers and loaded on the rolling stock destined at consuming factories. In 2005 terminals handled 150 thousand tons of timber, in 2006 – almost 180 thousand. Thus, transportation prime-cost was reduced, as well as expenses caused by shunting and car idling on the small load stations.

Do not Stop Private Capital!

Simultaneously with logistic business development another tendency can be observed. Private enterprises construct terminals with railway accesses, having lost hopes for long and medium term railway programmes. However, terminal constructers face certain difficulties when dealing with railwaymen, since it is not possible to lay a permanent way for accesses without them.
In words of Igor Bulgakov, Deputy CEO of Vostoktrans JSC company - owner of logistic terminal located in Moscow region, OAO RZD policy in the terminal net development won’t influence private terminals and their prospects. «After several Moscow stations stopped functioning for Riga direction, our warehouse terminal of А class remains the only available facility», – he says. At the same time, in Igor Bulgakov’s words, no problems in dealing with the railway arise.
According to А. Gorodetsky from Eurosib-Terminal, to launch an efficient terminal, a private company has to construct a railway station worth USD 5—15 mln. At the same time the company has to solve problems with acquiring permission for bringing railway to the terminal. In accordance with the Russian legislation, new warehouse owners do not have the right to apply to the Federal Railway Transport Agency (Roszheldor) to get permission of this sort, since Roszheldor only considers applications forwarded by the infrastructure owner, i.e. ОАО RZD. However, according to Victor Yevpakov, Head of Railway Transport Department of Transport Control and Communication Administration of the RF Antimonopoly Service, it happens that OAO RZD does not apply to Roszheldor with a claim to join companies to the railways of common use. Russian companies (on Krasnoyarsk and Zabaikalsk railways) had to obtain this permission themselves.
«I presume ОАО RZD is not interested in private terminals development», – V.Yevpakov concludes. The enterprises have to apply to the RF Federal Antimonopoly Service to settle the disputes legislatively. In А. Gorodetsky’s words, Eurosib company has applied to the RF Transport Ministry to regulate this problem, but so far without success …

OAO RZD Logistic Daughter?

In 2006 within ОАО RZD structure two Directorates were formed: the first one for a terminal-warehousing complex of warehouses depots control and the second one for mechanized distance of load/unload procedures. Their basic functions are efficient management of container sites, warehouses and other property of the cargo complex. In particular, load/unload procedures, handling, weighing, giving cargo, maintenance and repair of the equipment and quarters on the territory of the complex.
According to Anatly Krasnoschek, Deputy Head of October railway, there is a probability that in a year or two, when the Directorate proves that it functions efficiently, the structure can acquire the status of the corporation department. Further on, if the set tasks are fulfilled, it can be separated into an affiliate which will provide services on load/unload, storage etc. In this respect the railway will have to perform the control-revision function and inspection of subsequent technical terms for cargo load and transportation.
«Speaking of building-up the efficient logistic chain, we are to learn how to get profit in the unified norm for the expenses unit. That is why the launch of a through transit transportation is a very important task for our company to fulfill», – Boris Lapidus, Senior Vice-President of ОАО RZD, stated recently.

Summing Up

According to OAO RZD, this concept will allow to attract transit cargo flows to the Russian railways. In this respect the question arises why should one create obstacles to private business then? Is it worth launching a big company or maybe it is enough to sort out the legal problems with infrastructure for the terminals and launch a regional net on the basis of the state-and-private partnership?
In experts’ data, now OAO RZD warehouses make 20% of all the Russian offer of warehousing services or 5% of the aggregate capacities of warehousing complex of the country. Typically OAO RZD warehouses are classified as C class facilities. However, according to experts, the potential capacities of OAO RZD warehousing complex, its links with the terminal container handling complex, and railway and truck accesses allow one to increase its share on the warehousing market to 70%. Won’t this new company turn to another monopolist on the Russian transport market? Or there is still a chance to launch a terminal net involving all interested persons?

By  Anna  Nezhinskaya 

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Logistic Center for Every City

OAO RZD long-term concept of terminal-warehousing development was approved in late 2006. It is believed that the launch of a terminal network spread all over Russia will turn transit transportation into an attractive segment at last.
At the first stage, according to the concept, terminal-logistic capacities are to be taken out of the cities to the outskirts of populated areas. For example, currently a cargo station is to be relocated from the center of Saint-Petersburg to a suburb. Similar processes are taking place in Moscow, Yekaterinburg and other Russian cities. Container sites and warehouses are to be constructed to organize transportation of general cargo and count goods. Thus, the first stage of the concept implementation will allow to simplify the servicing of transit cargo flows that currently go via the territories of big cities, which causes transit time loss.
The second stage of the concept is to be implemented by 2010 and aimed at construction of a logistic centers network all over the country, to start with big industrial cities, regions serviced by large trade operators and transport junctions with intensive cargo flows. While construction is unfolding, the Russian railways plan to build 8 - 10 terminals for count goods and containers. However, in the opinion of forwarders, a regional network should be created right now and large industrial cities can not perform as the principal focus. «Otherwise, – Yuri Yuryev, Head of Corporate Development Department of ОАО TransContainer, believes – these terminals will accumulate around the cities and no efficient activities are to be expected. We have analyzed how foreign companies function and have come to the conclusion that big hubs are to be launched for a great number of participants and with the help of local administrations».
Nowadays lack of handling logistic capacities in the regions is one of the crucial problems for the Russian carriers. According to Alexander Gorodetsky, Managing Director of Eurosib-Terminal, in such Russian regions as Siberia and Ural in the radius of 300–400 kilometers typically there is only one terminal servicing large-tonnage containers. As a result, the cargo following to, for example, mid-Russia is directed to logistic terminals of Moscow or Saint-Petersburg to undergo respective procedures and only after that heads for the consumer. Currently, in the words of Nikolai Tityukhin, president of EuroAsian Logistic Association, the Central region of Russia receives 44% of cargo flows, North-West - 35%, and the remaining regions, such as TransVolga, South etc. - 3-7%.
The third stage of the concept is to unfold in 2010 – 2015 with the target to construct terminals in the regions (the so-called logistic centers antenna network). State and private stock is believed to participate: officials will initiate and coordinate the projects and both cargo owners and OAO RZD forwarders will perform as investors.

 

Warehouse Means Efficiency

Thus, TransLes JSC, OAO RZD affiliate, implements the project on the territory of 13 hectares in Irkutsk. The terminal will function as a dry port, i.e. the warehouse will receive cargo from cargo owners, handle it, store and deliver, also performing customs and phytosanitary procedures when required.
The launched terminal will give the customers a chance to accumulate and store significant volumes of timber, saving money on keeping their own or rented small deadlocks which create serious difficulties for the stations when providing and clearing the rail cars. Twenty-four-hour working schedule will reduce cars idling, increase their turnover and cut transport costs. Wholesale dealers will have the opportunity to launch dealing centers on the basis of logistic centers and in the future handle the cargo. The technology of giving saw-timber in gondola cars, platforms and containers is to be arranged at the terminal. This way the company plans to reduce the share of logistic component on the ultimate production cost and acquire a competitive advantage on the market.
Russian and Finnish companies have completed the launch of the terminal net on the Oktaybrskaya railway. The terminals concentrate production aimed at further transportation to Finland and perform as buffer warehouses where timber is delivered both by railway and trucks. Then the delivered production is sorted out in accordance with the requirements of the buyers and loaded on the rolling stock destined at consuming factories. In 2005 terminals handled 150 thousand tons of timber, in 2006 – almost 180 thousand. Thus, transportation prime-cost was reduced, as well as expenses caused by shunting and car idling on the small load stations.

Do not Stop Private Capital!

Simultaneously with logistic business development another tendency can be observed. Private enterprises construct terminals with railway accesses, having lost hopes for long and medium term railway programmes. However, terminal constructers face certain difficulties when dealing with railwaymen, since it is not possible to lay a permanent way for accesses without them.
In words of Igor Bulgakov, Deputy CEO of Vostoktrans JSC company - owner of logistic terminal located in Moscow region, OAO RZD policy in the terminal net development won’t influence private terminals and their prospects. «After several Moscow stations stopped functioning for Riga direction, our warehouse terminal of А class remains the only available facility», – he says. At the same time, in Igor Bulgakov’s words, no problems in dealing with the railway arise.
According to А. Gorodetsky from Eurosib-Terminal, to launch an efficient terminal, a private company has to construct a railway station worth USD 5—15 mln. At the same time the company has to solve problems with acquiring permission for bringing railway to the terminal. In accordance with the Russian legislation, new warehouse owners do not have the right to apply to the Federal Railway Transport Agency (Roszheldor) to get permission of this sort, since Roszheldor only considers applications forwarded by the infrastructure owner, i.e. ОАО RZD. However, according to Victor Yevpakov, Head of Railway Transport Department of Transport Control and Communication Administration of the RF Antimonopoly Service, it happens that OAO RZD does not apply to Roszheldor with a claim to join companies to the railways of common use. Russian companies (on Krasnoyarsk and Zabaikalsk railways) had to obtain this permission themselves.
«I presume ОАО RZD is not interested in private terminals development», – V.Yevpakov concludes. The enterprises have to apply to the RF Federal Antimonopoly Service to settle the disputes legislatively. In А. Gorodetsky’s words, Eurosib company has applied to the RF Transport Ministry to regulate this problem, but so far without success …

OAO RZD Logistic Daughter?

In 2006 within ОАО RZD structure two Directorates were formed: the first one for a terminal-warehousing complex of warehouses depots control and the second one for mechanized distance of load/unload procedures. Their basic functions are efficient management of container sites, warehouses and other property of the cargo complex. In particular, load/unload procedures, handling, weighing, giving cargo, maintenance and repair of the equipment and quarters on the territory of the complex.
According to Anatly Krasnoschek, Deputy Head of October railway, there is a probability that in a year or two, when the Directorate proves that it functions efficiently, the structure can acquire the status of the corporation department. Further on, if the set tasks are fulfilled, it can be separated into an affiliate which will provide services on load/unload, storage etc. In this respect the railway will have to perform the control-revision function and inspection of subsequent technical terms for cargo load and transportation.
«Speaking of building-up the efficient logistic chain, we are to learn how to get profit in the unified norm for the expenses unit. That is why the launch of a through transit transportation is a very important task for our company to fulfill», – Boris Lapidus, Senior Vice-President of ОАО RZD, stated recently.

Summing Up

According to OAO RZD, this concept will allow to attract transit cargo flows to the Russian railways. In this respect the question arises why should one create obstacles to private business then? Is it worth launching a big company or maybe it is enough to sort out the legal problems with infrastructure for the terminals and launch a regional net on the basis of the state-and-private partnership?
In experts’ data, now OAO RZD warehouses make 20% of all the Russian offer of warehousing services or 5% of the aggregate capacities of warehousing complex of the country. Typically OAO RZD warehouses are classified as C class facilities. However, according to experts, the potential capacities of OAO RZD warehousing complex, its links with the terminal container handling complex, and railway and truck accesses allow one to increase its share on the warehousing market to 70%. Won’t this new company turn to another monopolist on the Russian transport market? Or there is still a chance to launch a terminal net involving all interested persons?

By  Anna  Nezhinskaya 

[~DETAIL_TEXT] =>

Logistic Center for Every City

OAO RZD long-term concept of terminal-warehousing development was approved in late 2006. It is believed that the launch of a terminal network spread all over Russia will turn transit transportation into an attractive segment at last.
At the first stage, according to the concept, terminal-logistic capacities are to be taken out of the cities to the outskirts of populated areas. For example, currently a cargo station is to be relocated from the center of Saint-Petersburg to a suburb. Similar processes are taking place in Moscow, Yekaterinburg and other Russian cities. Container sites and warehouses are to be constructed to organize transportation of general cargo and count goods. Thus, the first stage of the concept implementation will allow to simplify the servicing of transit cargo flows that currently go via the territories of big cities, which causes transit time loss.
The second stage of the concept is to be implemented by 2010 and aimed at construction of a logistic centers network all over the country, to start with big industrial cities, regions serviced by large trade operators and transport junctions with intensive cargo flows. While construction is unfolding, the Russian railways plan to build 8 - 10 terminals for count goods and containers. However, in the opinion of forwarders, a regional network should be created right now and large industrial cities can not perform as the principal focus. «Otherwise, – Yuri Yuryev, Head of Corporate Development Department of ОАО TransContainer, believes – these terminals will accumulate around the cities and no efficient activities are to be expected. We have analyzed how foreign companies function and have come to the conclusion that big hubs are to be launched for a great number of participants and with the help of local administrations».
Nowadays lack of handling logistic capacities in the regions is one of the crucial problems for the Russian carriers. According to Alexander Gorodetsky, Managing Director of Eurosib-Terminal, in such Russian regions as Siberia and Ural in the radius of 300–400 kilometers typically there is only one terminal servicing large-tonnage containers. As a result, the cargo following to, for example, mid-Russia is directed to logistic terminals of Moscow or Saint-Petersburg to undergo respective procedures and only after that heads for the consumer. Currently, in the words of Nikolai Tityukhin, president of EuroAsian Logistic Association, the Central region of Russia receives 44% of cargo flows, North-West - 35%, and the remaining regions, such as TransVolga, South etc. - 3-7%.
The third stage of the concept is to unfold in 2010 – 2015 with the target to construct terminals in the regions (the so-called logistic centers antenna network). State and private stock is believed to participate: officials will initiate and coordinate the projects and both cargo owners and OAO RZD forwarders will perform as investors.

 

Warehouse Means Efficiency

Thus, TransLes JSC, OAO RZD affiliate, implements the project on the territory of 13 hectares in Irkutsk. The terminal will function as a dry port, i.e. the warehouse will receive cargo from cargo owners, handle it, store and deliver, also performing customs and phytosanitary procedures when required.
The launched terminal will give the customers a chance to accumulate and store significant volumes of timber, saving money on keeping their own or rented small deadlocks which create serious difficulties for the stations when providing and clearing the rail cars. Twenty-four-hour working schedule will reduce cars idling, increase their turnover and cut transport costs. Wholesale dealers will have the opportunity to launch dealing centers on the basis of logistic centers and in the future handle the cargo. The technology of giving saw-timber in gondola cars, platforms and containers is to be arranged at the terminal. This way the company plans to reduce the share of logistic component on the ultimate production cost and acquire a competitive advantage on the market.
Russian and Finnish companies have completed the launch of the terminal net on the Oktaybrskaya railway. The terminals concentrate production aimed at further transportation to Finland and perform as buffer warehouses where timber is delivered both by railway and trucks. Then the delivered production is sorted out in accordance with the requirements of the buyers and loaded on the rolling stock destined at consuming factories. In 2005 terminals handled 150 thousand tons of timber, in 2006 – almost 180 thousand. Thus, transportation prime-cost was reduced, as well as expenses caused by shunting and car idling on the small load stations.

Do not Stop Private Capital!

Simultaneously with logistic business development another tendency can be observed. Private enterprises construct terminals with railway accesses, having lost hopes for long and medium term railway programmes. However, terminal constructers face certain difficulties when dealing with railwaymen, since it is not possible to lay a permanent way for accesses without them.
In words of Igor Bulgakov, Deputy CEO of Vostoktrans JSC company - owner of logistic terminal located in Moscow region, OAO RZD policy in the terminal net development won’t influence private terminals and their prospects. «After several Moscow stations stopped functioning for Riga direction, our warehouse terminal of А class remains the only available facility», – he says. At the same time, in Igor Bulgakov’s words, no problems in dealing with the railway arise.
According to А. Gorodetsky from Eurosib-Terminal, to launch an efficient terminal, a private company has to construct a railway station worth USD 5—15 mln. At the same time the company has to solve problems with acquiring permission for bringing railway to the terminal. In accordance with the Russian legislation, new warehouse owners do not have the right to apply to the Federal Railway Transport Agency (Roszheldor) to get permission of this sort, since Roszheldor only considers applications forwarded by the infrastructure owner, i.e. ОАО RZD. However, according to Victor Yevpakov, Head of Railway Transport Department of Transport Control and Communication Administration of the RF Antimonopoly Service, it happens that OAO RZD does not apply to Roszheldor with a claim to join companies to the railways of common use. Russian companies (on Krasnoyarsk and Zabaikalsk railways) had to obtain this permission themselves.
«I presume ОАО RZD is not interested in private terminals development», – V.Yevpakov concludes. The enterprises have to apply to the RF Federal Antimonopoly Service to settle the disputes legislatively. In А. Gorodetsky’s words, Eurosib company has applied to the RF Transport Ministry to regulate this problem, but so far without success …

OAO RZD Logistic Daughter?

In 2006 within ОАО RZD structure two Directorates were formed: the first one for a terminal-warehousing complex of warehouses depots control and the second one for mechanized distance of load/unload procedures. Their basic functions are efficient management of container sites, warehouses and other property of the cargo complex. In particular, load/unload procedures, handling, weighing, giving cargo, maintenance and repair of the equipment and quarters on the territory of the complex.
According to Anatly Krasnoschek, Deputy Head of October railway, there is a probability that in a year or two, when the Directorate proves that it functions efficiently, the structure can acquire the status of the corporation department. Further on, if the set tasks are fulfilled, it can be separated into an affiliate which will provide services on load/unload, storage etc. In this respect the railway will have to perform the control-revision function and inspection of subsequent technical terms for cargo load and transportation.
«Speaking of building-up the efficient logistic chain, we are to learn how to get profit in the unified norm for the expenses unit. That is why the launch of a through transit transportation is a very important task for our company to fulfill», – Boris Lapidus, Senior Vice-President of ОАО RZD, stated recently.

Summing Up

According to OAO RZD, this concept will allow to attract transit cargo flows to the Russian railways. In this respect the question arises why should one create obstacles to private business then? Is it worth launching a big company or maybe it is enough to sort out the legal problems with infrastructure for the terminals and launch a regional net on the basis of the state-and-private partnership?
In experts’ data, now OAO RZD warehouses make 20% of all the Russian offer of warehousing services or 5% of the aggregate capacities of warehousing complex of the country. Typically OAO RZD warehouses are classified as C class facilities. However, according to experts, the potential capacities of OAO RZD warehousing complex, its links with the terminal container handling complex, and railway and truck accesses allow one to increase its share on the warehousing market to 70%. Won’t this new company turn to another monopolist on the Russian transport market? Or there is still a chance to launch a terminal net involving all interested persons?

By  Anna  Nezhinskaya 

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РЖД-Партнер

Outsourcing in retailing sector

The experience of developed states proves that retailing is very interested in partnership with external providers of transport and logistic services. According to the money turnover, Russian retailing will reach the international level in two or three years: its volume will be comparable with the one of German and French networks. Still, cooperation between Russian retailers and logisticians falls behind the world tendencies. Retailers are not satisfied with the quality of logistic providers’ services, although they consider them their future strategic allies.
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Doomed to cooperate

The specifics of retailing inevitably make it a consumer of high-quality logistic services. The nature of retailing envisages management of a network of shops with one and the same range of goods, prices and trade technologies. Goods supplies are regular, while the ones to industrial enterprises are sporadic. Food retailing envisages twenty-four-hour supplies. Supplies to other retail sectors are not so frequent but regular, and as a rule the «on time» principle is observed. So, the requirements to goods suppliers and transport and logistic services provider are high.
Besides, one of the main tasks of a retailer is proper management of products in the shop and storage facilities to compensate for the lack of one or the other type of goods on the shelves. Moreover, services are to be as cheap as possible, because of the peculiarities of the latest international and Russian tendencies of the retailing sector. There is a tendency for development of shops offering cheap goods, the so-called «discounters».
How can one manage such a complicated logistic system successfully? The decision is obvious – to hire a qualified professional. Due to its features mentioned above, retailing became the most important factor for logistic outsourcing development. «We believe the work with network retailing to be prospective. The retail sector grows stably. Customers prefer to purchase not at the markets, but in retail shops, where there is a certain level of comfort, and goods are often cheaper. The retail sector is very promising for logistic companies», tells Anna Klinskova, Head of Business Development Department of Armadillo group of companies. «The turnover of retailing in Russia grew by USD 169 bln in the last decade and it continues to increase fast. For example, in 2006 the growth was 12.5%. Already in 2008 the volume of retailing market in Russia is to amount to USD 415 bln, and to USD 581 bln by 2011. That is why, retailing is a «titbit» for logistic operators», highlights Maxim Tsibulkin, a representative of A DAN DZO consulting company. «I am sure that retailing should be considered a separate sector of the logistic market», thinks Konstantin Tomenko, Director General of Dobrynya retail network.

Trusted but Not to the Full

Most retailers prefer to control logistics by themselves and use the services of external companies only in case of emergency, or use a combined approach, i.e. give only a part of operations for outsourcing. The network of consumer electronics shops Media Markt, which has recently come to Russia, uses external suppliers in the storing services sector, as well as for domestic and import transportation. «Our company entered the market over six months ago, and the growth is significant enough. Consequently, during such a period, the outsourcing of some logistic functions is a good way out, because in this case they are given to a more experienced company. And we will not face the problems we could come across, if we fulfilled the functions ourselves», say specialists of Media Markt.
Director of logistic of Lenta (leading hypermarket operator in Russia and the largest retail chain in the RF Northwest region) Roman Kozak tells that «nowadays our own logistic service provides regular and reliable supplies and saves expenditures. The service is responsible for management of orders, stores and internal movement of goods, as well as the company’s distribution centre for Non-food and Dry-food goods in Saint-Petersburg». At the same time, Lenta uses the services of external specialists, including keeping and warehousing goods of the category «fresh vegetables and fruits» in Saint Petersburg, and goods in the distribution centres in Novosibirsk. External suppliers - carriers and forwarders - also provide city and regional transportation services for the company.
Mir (Russian consumer electronics shops network) has outsourced its transport and part of warehousing services, while the network has its own storage facilities. «We are also discussing a possible construction of company’s own terminal, but now it seems unprofitable to us», tells Alexey Kurushin, Director of Logistics Department of Mir. «Our company prefers to work directly with the shops in the cities or regions, where the volumes of supplies are large. So, we control the quality of supplies and provide better services to our clients. We always keep our eye on the ball and fulfill clients’ demands and wishes as fast as possible. In case supplies volumes are not large, it is more profitable to use services of external companies», notices Director General of Atria Russia Juha Ruohola. Metro group of companies cooperates with the services suppliers responsible for operation issues, in particular for transport and storage facilities, says Yern Arnhold, Director General of Metro group Logistics.

 

Outsourcing Dialectics in Russia: Profitable but Insecure

The cautious interest of retailers to the opportunities of logisticians can be explained by the dilemma the retailer faces when he considers the advantages and drawbacks of outsourcing. Specialists of Media Markt believe that the main advantages of cooperation with logisticians are saving on costs, because organization of company’s own service of such scale would demand for significant investments, and flexibility, which enables to cope with the growing volume of work without increasing the number of the company’s staff. Other advantages are the reduction of documents turnover and concentration on the main business, decrease of financial risks and the opportunity to get the full pack of services from one provider. According to the experts of Media Markt, the drawbacks are the possible failures of the computer systems integrating the client and the services provider, and such a period can last several months. Roman Kozak from Lenta says that the logistic expenses economy (and such economy exists due to the company’s own logistic service) is one of the constituents of low prices for goods in the network’s hypermarkets.
A.Kurushin. a representative of Mir, believes that the main advantage of cooperation with outsourcers is the possibility to concentrate on the main business as opposed to collateral processes. Besides, the company does not have to recruit and train its staff: one person is quite enough to control the work of the contractors. «However, the drawbacks are also significant. If there is outsourcing, some procedures slow down. It takes an external company more time to adapt and implement any changes. Moreover, all the new services, which were not mentioned in the contract, are to be paid for additionally», stresses A.Kurushin.
Juha Ruohola from Atria Russia, which uses outsourcers’ services for not very large volumes of supplies, notes a significant disadvantage of such practice, «We cannot fully control the quality of the service, and have fewer opportunities to hear comments from our clients». Specialists of the Logistics Department of the largest grocery network X5 Retail Group state that «independence is cheaper», and «controllability is better». That is to say outsourcing, used by X5 in case there is no other way out, is not very efficient. The only good thing about it is the «speed of access to storage facilities in case of emergency».
Retailers’ requirements to logisticians are the same. «Flexibility, efficiency, ability to reduce our expenses, and provision of high-quality services» – these are Media Markt’s requirements to outsourcers. However, the company’s specialists add that «providers should not follow the scheme «we did what they said». They should act as partners instead, and treat their client’s business as their own. In theory, these are the principles of work envisaged by logistic companies, although in practice, the tactics may disagree with the declared strategy. Consequently, it is necessary to train personnel, so that employees understand the principles of work».
«First of all, we are to be sure they are able to meet all our requirements, i.e. to provide timeliness and safety of the delivered cargo, to be able to cope with the growing volumes, which is especially important in Russia. Besides, the reliability and long-term of contracts mean a lot to us. We prefer to cooperate with logistic companies which have an efficient logistic structure, which is shown in their prices, and a stable financial position. This is very important in conditions of constant growth of demand. Proper and clear-cut cooperation between retailers and logistic companies is especially important for development of a joint business», - this is the opinion of Y.Arnhold from Metro Logistics Group, who adds that he is «quite satisfied with the quality of provided services».
«Cutting down on logistic expenses, simultaneously keeping a proper level of quality of services and goods, is possible only if our business-processes, as well as the ones of our partners, are quite technological. That is why we pay a lot of attention to this item when we choose a partner», says R.Kozak from Lenta.
The companies with which Lenta used to cooperate have proved the declared reliability, timeliness and quality of provided services. There are no losses during transportation, goods are serviced properly and in time in the storage facilities; and, thanks to the external distributing centre, the retailer successfully supplies its hypermarkets in distant regions. «However, we also had some negative experience. Once we had to refuse from the services of one warehouse and operator. Unfortunately, the company overestimated its abilities to organize the work of the warehouse. Due to the low machine ability of warehouse servicing, the expenses exceeded the prime cost of the services», tells R. Kozak about his company’s experience.
M.Tsybulkin names the following reasons preventing development of cooperation between logisticians and retailers. It is worth mentioning that they coincide with the practice of doing business in Russia. The list of reasons includes the retailers’ fear to disclose corporate information and thus to lose their know-how and other knowledge; lack of IT standards, which makes integration of IT systems risky; financial risks from the possible stoppage of cooperation with the partner. Finally, to give all logistics to outsourcing, a company has to change the strategy of development and revise its approach to management.

3PL Is a Distant Prospect

Analyzing the work of large retailers, it is quite clear that in case they outsource anything, the volumes are small. In the first turn, they outsource such operations that are connected with the necessity to own and manage some assets, i.e. transportation and warehousing. But there is no pure logistics, i.e. management of supplies chains to find the optimal routes if delivery and storing, thus optimizing time and financial losses. 3PL, in which all the operations are provided by the third party – a logistic provider, responsible for all the operations, is not used at all.
«Unfortunately, nowadays, Russian logistic companies are regional rather than federal. Some of them are strong partners in some regions, but one can hardly speak of large logistic agents of the federal level. A specific feature of Russian companies is that they mainly provide either warehousing or transport services. Whereas we are interested in a full pack of services. We are waiting for the day when external logistic companies will develop their activities in Russia. We are ready to attract the third and even the fourth parties, if they provide high-quality services at reasonable prices», complains J.Ruohola from Atria. K.Tomenko from Dobrynya is of the same opinion. He also refers to the low level of development of logistic operators. «Our experience shows that logistic operators do not fully understand the demands of retail, while their own inefficient management system leads to high operating costs, which prevents these companies from making competitive offers», highlights the expert. However, he adds that time is required to overcome this objective contradiction. In Russia market develops actively and stimulates not only retail trade, but logistics as well. There are companies which could offer a full pack of services, but their scale does not enable them to operate on the territory of the whole country. Moreover, there is no mass demand for these services yet, although it is being actively formed now.
M.Tsybulkin names another reason that will disappear in several years. «The share of the ten largest retailers in Russia is only 6% of the total retail turnover, while in developed countries this figure exceeds 50-60%. The retail sector in this country is very fragmented, market consolidation is only in prospect».
The opinion of transport and logistic services providers is different. «I think, our logistic companies are ready to fulfill the demand and expand their resources to the necessary level. Naturally, there are factors which restrain the development, such as an underdeveloped transport infrastructure, for example. But these factors negatively influence the quality of logistic operations regardless of who provides them – an external provider or the company itself. An external provider is even more competent to overcome these factors», believes Anna Klinskova from Armadillo.

Resume

It is interesting that several companies asked by a correspondent of The RZD-Partner International failed to answer if they are satisfied with the cooperation with logistic operators. The reason for it is simple: their cooperation has started recently, so it is too early to speak about results. However, it looks like a tendency, which is developing quite logically. Thus, K.Tomenko from Dobrynya believes that the period of extensive development of retail, when retailers strove to get the best places in the most solvent regions, is over. Now it is the period of intensive development, the increase of business-processes’ efficiency. And outsourcing will come in useful. Practically nobody doubts that. Still, the question is if the quantity will turn into quality.

Ivan stupachenko
maria shevchenko

viewpoint

Anna KlinskovaAnna Klinskova, Head of Business Development Department of Armadillo group of companies, PhD in Economics:
– Fruitful cooperation is a result of efforts by both sides – the customer and the provider of a logistic service. Improperly set tasks, different expectations, lack of cooperation based on the principles of partnership prevent retailers and logisticians from efficient cooperation. In this respect, the role of transport and logistic services providers is not only to offer logistic solutions to clients, but also to do everything possible to make their sense and value understandable for all the relative participants of the logistic chain.

 

 

 

viewpoint

Roman KozakRoman Kozak, Logistics Director of Lenta company:
– Lately, the market of modern high-tech warehouses for dry cargoes develops fast. As for the warehouses for low-temperature and cooled goods, all the potential customers suffer from the shortage of areas. As a result, producers and distributors have to build their own warehouses, and network companies are not an exception. 
The second unsolved problem is efficiency of warehousing services. Nowadays it is not enough to use a warehouse to store goods only. The current commodity flows are characterized by high speed and turnover; consequently, the demand for picking and warehouse servicing of goods grows, and there are high requirements to the warehouse capacity.
In the transport sector there is a strong competition in the segment of regional transportation. Unfortunately, the segment of freight transportation in cities is underdeveloped nowadays.

 

Alexey KurushinAlexey Kurushin, Director of Logistics Department of Mir company:
– The main problem is that not all logistic companies in Russia can work with our goods. The operators working on the market nowadays can service large clients with a small range of items, and their terms of storing are practically the same. However, when it is necessary to service different goods, when the pre-sale preparation is complicated, Russian logisticians give up. In other words, they can store tires or beer, but it is more difficult for them to service us.

 

 

 

 

Maxim TsybulkinMaxim Tsybulkin, A DAN DZO company:
– Development of logistic services market falls behind the development of retail trade. Nowadays, there is no 3PL-provider, who is able to offer services at least in all the regions in the European part of Russia. Mainly, 3PL-providers work in the Moscow region, in Saint- Petersburg and in some other cities. As for large retailers, they are interested in getting the full pack of services in all the regions where they act. Retailers are not satisfied with the price policy of logistic operators – the prices are too high now. Secondly, retailers are afraid of outsourcing logistics. Nowadays large companies let their subsidiaries manage logistics and construct their own logistic centers in different regions. One can assume that in the near future large retailers will switch to their main business only, having launched their own 3PL-providers, which will be able to provide services to external companies as wel

 

Alexander Sharyafetdinov, Deputy Director General of Logistics, OOO Kuzbass Furniture Company:
– I believe that 3PL operators have occupied only the best and most available part of the sector. Few of them have started to study and implement advanced technologies into the processes of order delivery from a distributing centre (owned by an operator or trade network) to a shop, and to optimize losses in the link of delivery chain. In fact, practically everywhere there is an automated order, selection of order, almost all the retailers have understood that it is better to replace 100-200 suppliers by one supplier and a distributing centre, but only several of them have developed special transport containers, put non-forwarding delivery methods into operation, and standardized business-processes. It will be good if logistic operators develop in this direction, and it will be even better if they cooperate with retail networks starting from the moment the shop’s been conceived.
 

[~DETAIL_TEXT] =>

Doomed to cooperate

The specifics of retailing inevitably make it a consumer of high-quality logistic services. The nature of retailing envisages management of a network of shops with one and the same range of goods, prices and trade technologies. Goods supplies are regular, while the ones to industrial enterprises are sporadic. Food retailing envisages twenty-four-hour supplies. Supplies to other retail sectors are not so frequent but regular, and as a rule the «on time» principle is observed. So, the requirements to goods suppliers and transport and logistic services provider are high.
Besides, one of the main tasks of a retailer is proper management of products in the shop and storage facilities to compensate for the lack of one or the other type of goods on the shelves. Moreover, services are to be as cheap as possible, because of the peculiarities of the latest international and Russian tendencies of the retailing sector. There is a tendency for development of shops offering cheap goods, the so-called «discounters».
How can one manage such a complicated logistic system successfully? The decision is obvious – to hire a qualified professional. Due to its features mentioned above, retailing became the most important factor for logistic outsourcing development. «We believe the work with network retailing to be prospective. The retail sector grows stably. Customers prefer to purchase not at the markets, but in retail shops, where there is a certain level of comfort, and goods are often cheaper. The retail sector is very promising for logistic companies», tells Anna Klinskova, Head of Business Development Department of Armadillo group of companies. «The turnover of retailing in Russia grew by USD 169 bln in the last decade and it continues to increase fast. For example, in 2006 the growth was 12.5%. Already in 2008 the volume of retailing market in Russia is to amount to USD 415 bln, and to USD 581 bln by 2011. That is why, retailing is a «titbit» for logistic operators», highlights Maxim Tsibulkin, a representative of A DAN DZO consulting company. «I am sure that retailing should be considered a separate sector of the logistic market», thinks Konstantin Tomenko, Director General of Dobrynya retail network.

Trusted but Not to the Full

Most retailers prefer to control logistics by themselves and use the services of external companies only in case of emergency, or use a combined approach, i.e. give only a part of operations for outsourcing. The network of consumer electronics shops Media Markt, which has recently come to Russia, uses external suppliers in the storing services sector, as well as for domestic and import transportation. «Our company entered the market over six months ago, and the growth is significant enough. Consequently, during such a period, the outsourcing of some logistic functions is a good way out, because in this case they are given to a more experienced company. And we will not face the problems we could come across, if we fulfilled the functions ourselves», say specialists of Media Markt.
Director of logistic of Lenta (leading hypermarket operator in Russia and the largest retail chain in the RF Northwest region) Roman Kozak tells that «nowadays our own logistic service provides regular and reliable supplies and saves expenditures. The service is responsible for management of orders, stores and internal movement of goods, as well as the company’s distribution centre for Non-food and Dry-food goods in Saint-Petersburg». At the same time, Lenta uses the services of external specialists, including keeping and warehousing goods of the category «fresh vegetables and fruits» in Saint Petersburg, and goods in the distribution centres in Novosibirsk. External suppliers - carriers and forwarders - also provide city and regional transportation services for the company.
Mir (Russian consumer electronics shops network) has outsourced its transport and part of warehousing services, while the network has its own storage facilities. «We are also discussing a possible construction of company’s own terminal, but now it seems unprofitable to us», tells Alexey Kurushin, Director of Logistics Department of Mir. «Our company prefers to work directly with the shops in the cities or regions, where the volumes of supplies are large. So, we control the quality of supplies and provide better services to our clients. We always keep our eye on the ball and fulfill clients’ demands and wishes as fast as possible. In case supplies volumes are not large, it is more profitable to use services of external companies», notices Director General of Atria Russia Juha Ruohola. Metro group of companies cooperates with the services suppliers responsible for operation issues, in particular for transport and storage facilities, says Yern Arnhold, Director General of Metro group Logistics.

 

Outsourcing Dialectics in Russia: Profitable but Insecure

The cautious interest of retailers to the opportunities of logisticians can be explained by the dilemma the retailer faces when he considers the advantages and drawbacks of outsourcing. Specialists of Media Markt believe that the main advantages of cooperation with logisticians are saving on costs, because organization of company’s own service of such scale would demand for significant investments, and flexibility, which enables to cope with the growing volume of work without increasing the number of the company’s staff. Other advantages are the reduction of documents turnover and concentration on the main business, decrease of financial risks and the opportunity to get the full pack of services from one provider. According to the experts of Media Markt, the drawbacks are the possible failures of the computer systems integrating the client and the services provider, and such a period can last several months. Roman Kozak from Lenta says that the logistic expenses economy (and such economy exists due to the company’s own logistic service) is one of the constituents of low prices for goods in the network’s hypermarkets.
A.Kurushin. a representative of Mir, believes that the main advantage of cooperation with outsourcers is the possibility to concentrate on the main business as opposed to collateral processes. Besides, the company does not have to recruit and train its staff: one person is quite enough to control the work of the contractors. «However, the drawbacks are also significant. If there is outsourcing, some procedures slow down. It takes an external company more time to adapt and implement any changes. Moreover, all the new services, which were not mentioned in the contract, are to be paid for additionally», stresses A.Kurushin.
Juha Ruohola from Atria Russia, which uses outsourcers’ services for not very large volumes of supplies, notes a significant disadvantage of such practice, «We cannot fully control the quality of the service, and have fewer opportunities to hear comments from our clients». Specialists of the Logistics Department of the largest grocery network X5 Retail Group state that «independence is cheaper», and «controllability is better». That is to say outsourcing, used by X5 in case there is no other way out, is not very efficient. The only good thing about it is the «speed of access to storage facilities in case of emergency».
Retailers’ requirements to logisticians are the same. «Flexibility, efficiency, ability to reduce our expenses, and provision of high-quality services» – these are Media Markt’s requirements to outsourcers. However, the company’s specialists add that «providers should not follow the scheme «we did what they said». They should act as partners instead, and treat their client’s business as their own. In theory, these are the principles of work envisaged by logistic companies, although in practice, the tactics may disagree with the declared strategy. Consequently, it is necessary to train personnel, so that employees understand the principles of work».
«First of all, we are to be sure they are able to meet all our requirements, i.e. to provide timeliness and safety of the delivered cargo, to be able to cope with the growing volumes, which is especially important in Russia. Besides, the reliability and long-term of contracts mean a lot to us. We prefer to cooperate with logistic companies which have an efficient logistic structure, which is shown in their prices, and a stable financial position. This is very important in conditions of constant growth of demand. Proper and clear-cut cooperation between retailers and logistic companies is especially important for development of a joint business», - this is the opinion of Y.Arnhold from Metro Logistics Group, who adds that he is «quite satisfied with the quality of provided services».
«Cutting down on logistic expenses, simultaneously keeping a proper level of quality of services and goods, is possible only if our business-processes, as well as the ones of our partners, are quite technological. That is why we pay a lot of attention to this item when we choose a partner», says R.Kozak from Lenta.
The companies with which Lenta used to cooperate have proved the declared reliability, timeliness and quality of provided services. There are no losses during transportation, goods are serviced properly and in time in the storage facilities; and, thanks to the external distributing centre, the retailer successfully supplies its hypermarkets in distant regions. «However, we also had some negative experience. Once we had to refuse from the services of one warehouse and operator. Unfortunately, the company overestimated its abilities to organize the work of the warehouse. Due to the low machine ability of warehouse servicing, the expenses exceeded the prime cost of the services», tells R. Kozak about his company’s experience.
M.Tsybulkin names the following reasons preventing development of cooperation between logisticians and retailers. It is worth mentioning that they coincide with the practice of doing business in Russia. The list of reasons includes the retailers’ fear to disclose corporate information and thus to lose their know-how and other knowledge; lack of IT standards, which makes integration of IT systems risky; financial risks from the possible stoppage of cooperation with the partner. Finally, to give all logistics to outsourcing, a company has to change the strategy of development and revise its approach to management.

3PL Is a Distant Prospect

Analyzing the work of large retailers, it is quite clear that in case they outsource anything, the volumes are small. In the first turn, they outsource such operations that are connected with the necessity to own and manage some assets, i.e. transportation and warehousing. But there is no pure logistics, i.e. management of supplies chains to find the optimal routes if delivery and storing, thus optimizing time and financial losses. 3PL, in which all the operations are provided by the third party – a logistic provider, responsible for all the operations, is not used at all.
«Unfortunately, nowadays, Russian logistic companies are regional rather than federal. Some of them are strong partners in some regions, but one can hardly speak of large logistic agents of the federal level. A specific feature of Russian companies is that they mainly provide either warehousing or transport services. Whereas we are interested in a full pack of services. We are waiting for the day when external logistic companies will develop their activities in Russia. We are ready to attract the third and even the fourth parties, if they provide high-quality services at reasonable prices», complains J.Ruohola from Atria. K.Tomenko from Dobrynya is of the same opinion. He also refers to the low level of development of logistic operators. «Our experience shows that logistic operators do not fully understand the demands of retail, while their own inefficient management system leads to high operating costs, which prevents these companies from making competitive offers», highlights the expert. However, he adds that time is required to overcome this objective contradiction. In Russia market develops actively and stimulates not only retail trade, but logistics as well. There are companies which could offer a full pack of services, but their scale does not enable them to operate on the territory of the whole country. Moreover, there is no mass demand for these services yet, although it is being actively formed now.
M.Tsybulkin names another reason that will disappear in several years. «The share of the ten largest retailers in Russia is only 6% of the total retail turnover, while in developed countries this figure exceeds 50-60%. The retail sector in this country is very fragmented, market consolidation is only in prospect».
The opinion of transport and logistic services providers is different. «I think, our logistic companies are ready to fulfill the demand and expand their resources to the necessary level. Naturally, there are factors which restrain the development, such as an underdeveloped transport infrastructure, for example. But these factors negatively influence the quality of logistic operations regardless of who provides them – an external provider or the company itself. An external provider is even more competent to overcome these factors», believes Anna Klinskova from Armadillo.

Resume

It is interesting that several companies asked by a correspondent of The RZD-Partner International failed to answer if they are satisfied with the cooperation with logistic operators. The reason for it is simple: their cooperation has started recently, so it is too early to speak about results. However, it looks like a tendency, which is developing quite logically. Thus, K.Tomenko from Dobrynya believes that the period of extensive development of retail, when retailers strove to get the best places in the most solvent regions, is over. Now it is the period of intensive development, the increase of business-processes’ efficiency. And outsourcing will come in useful. Practically nobody doubts that. Still, the question is if the quantity will turn into quality.

Ivan stupachenko
maria shevchenko

viewpoint

Anna KlinskovaAnna Klinskova, Head of Business Development Department of Armadillo group of companies, PhD in Economics:
– Fruitful cooperation is a result of efforts by both sides – the customer and the provider of a logistic service. Improperly set tasks, different expectations, lack of cooperation based on the principles of partnership prevent retailers and logisticians from efficient cooperation. In this respect, the role of transport and logistic services providers is not only to offer logistic solutions to clients, but also to do everything possible to make their sense and value understandable for all the relative participants of the logistic chain.

 

 

 

viewpoint

Roman KozakRoman Kozak, Logistics Director of Lenta company:
– Lately, the market of modern high-tech warehouses for dry cargoes develops fast. As for the warehouses for low-temperature and cooled goods, all the potential customers suffer from the shortage of areas. As a result, producers and distributors have to build their own warehouses, and network companies are not an exception. 
The second unsolved problem is efficiency of warehousing services. Nowadays it is not enough to use a warehouse to store goods only. The current commodity flows are characterized by high speed and turnover; consequently, the demand for picking and warehouse servicing of goods grows, and there are high requirements to the warehouse capacity.
In the transport sector there is a strong competition in the segment of regional transportation. Unfortunately, the segment of freight transportation in cities is underdeveloped nowadays.

 

Alexey KurushinAlexey Kurushin, Director of Logistics Department of Mir company:
– The main problem is that not all logistic companies in Russia can work with our goods. The operators working on the market nowadays can service large clients with a small range of items, and their terms of storing are practically the same. However, when it is necessary to service different goods, when the pre-sale preparation is complicated, Russian logisticians give up. In other words, they can store tires or beer, but it is more difficult for them to service us.

 

 

 

 

Maxim TsybulkinMaxim Tsybulkin, A DAN DZO company:
– Development of logistic services market falls behind the development of retail trade. Nowadays, there is no 3PL-provider, who is able to offer services at least in all the regions in the European part of Russia. Mainly, 3PL-providers work in the Moscow region, in Saint- Petersburg and in some other cities. As for large retailers, they are interested in getting the full pack of services in all the regions where they act. Retailers are not satisfied with the price policy of logistic operators – the prices are too high now. Secondly, retailers are afraid of outsourcing logistics. Nowadays large companies let their subsidiaries manage logistics and construct their own logistic centers in different regions. One can assume that in the near future large retailers will switch to their main business only, having launched their own 3PL-providers, which will be able to provide services to external companies as wel

 

Alexander Sharyafetdinov, Deputy Director General of Logistics, OOO Kuzbass Furniture Company:
– I believe that 3PL operators have occupied only the best and most available part of the sector. Few of them have started to study and implement advanced technologies into the processes of order delivery from a distributing centre (owned by an operator or trade network) to a shop, and to optimize losses in the link of delivery chain. In fact, practically everywhere there is an automated order, selection of order, almost all the retailers have understood that it is better to replace 100-200 suppliers by one supplier and a distributing centre, but only several of them have developed special transport containers, put non-forwarding delivery methods into operation, and standardized business-processes. It will be good if logistic operators develop in this direction, and it will be even better if they cooperate with retail networks starting from the moment the shop’s been conceived.
 

[DETAIL_TEXT_TYPE] => html [~DETAIL_TEXT_TYPE] => html [PREVIEW_TEXT] => The experience of developed states proves that retailing is very interested in partnership with external providers of transport and logistic services. According to the money turnover, Russian retailing will reach the international level in two or three years: its volume will be comparable with the one of German and French networks. Still, cooperation between Russian retailers and logisticians falls behind the world tendencies. Retailers are not satisfied with the quality of logistic providers’ services, although they consider them their future strategic allies. [~PREVIEW_TEXT] => The experience of developed states proves that retailing is very interested in partnership with external providers of transport and logistic services. According to the money turnover, Russian retailing will reach the international level in two or three years: its volume will be comparable with the one of German and French networks. Still, cooperation between Russian retailers and logisticians falls behind the world tendencies. Retailers are not satisfied with the quality of logistic providers’ services, although they consider them their future strategic allies. 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Doomed to cooperate

The specifics of retailing inevitably make it a consumer of high-quality logistic services. The nature of retailing envisages management of a network of shops with one and the same range of goods, prices and trade technologies. Goods supplies are regular, while the ones to industrial enterprises are sporadic. Food retailing envisages twenty-four-hour supplies. Supplies to other retail sectors are not so frequent but regular, and as a rule the «on time» principle is observed. So, the requirements to goods suppliers and transport and logistic services provider are high.
Besides, one of the main tasks of a retailer is proper management of products in the shop and storage facilities to compensate for the lack of one or the other type of goods on the shelves. Moreover, services are to be as cheap as possible, because of the peculiarities of the latest international and Russian tendencies of the retailing sector. There is a tendency for development of shops offering cheap goods, the so-called «discounters».
How can one manage such a complicated logistic system successfully? The decision is obvious – to hire a qualified professional. Due to its features mentioned above, retailing became the most important factor for logistic outsourcing development. «We believe the work with network retailing to be prospective. The retail sector grows stably. Customers prefer to purchase not at the markets, but in retail shops, where there is a certain level of comfort, and goods are often cheaper. The retail sector is very promising for logistic companies», tells Anna Klinskova, Head of Business Development Department of Armadillo group of companies. «The turnover of retailing in Russia grew by USD 169 bln in the last decade and it continues to increase fast. For example, in 2006 the growth was 12.5%. Already in 2008 the volume of retailing market in Russia is to amount to USD 415 bln, and to USD 581 bln by 2011. That is why, retailing is a «titbit» for logistic operators», highlights Maxim Tsibulkin, a representative of A DAN DZO consulting company. «I am sure that retailing should be considered a separate sector of the logistic market», thinks Konstantin Tomenko, Director General of Dobrynya retail network.

Trusted but Not to the Full

Most retailers prefer to control logistics by themselves and use the services of external companies only in case of emergency, or use a combined approach, i.e. give only a part of operations for outsourcing. The network of consumer electronics shops Media Markt, which has recently come to Russia, uses external suppliers in the storing services sector, as well as for domestic and import transportation. «Our company entered the market over six months ago, and the growth is significant enough. Consequently, during such a period, the outsourcing of some logistic functions is a good way out, because in this case they are given to a more experienced company. And we will not face the problems we could come across, if we fulfilled the functions ourselves», say specialists of Media Markt.
Director of logistic of Lenta (leading hypermarket operator in Russia and the largest retail chain in the RF Northwest region) Roman Kozak tells that «nowadays our own logistic service provides regular and reliable supplies and saves expenditures. The service is responsible for management of orders, stores and internal movement of goods, as well as the company’s distribution centre for Non-food and Dry-food goods in Saint-Petersburg». At the same time, Lenta uses the services of external specialists, including keeping and warehousing goods of the category «fresh vegetables and fruits» in Saint Petersburg, and goods in the distribution centres in Novosibirsk. External suppliers - carriers and forwarders - also provide city and regional transportation services for the company.
Mir (Russian consumer electronics shops network) has outsourced its transport and part of warehousing services, while the network has its own storage facilities. «We are also discussing a possible construction of company’s own terminal, but now it seems unprofitable to us», tells Alexey Kurushin, Director of Logistics Department of Mir. «Our company prefers to work directly with the shops in the cities or regions, where the volumes of supplies are large. So, we control the quality of supplies and provide better services to our clients. We always keep our eye on the ball and fulfill clients’ demands and wishes as fast as possible. In case supplies volumes are not large, it is more profitable to use services of external companies», notices Director General of Atria Russia Juha Ruohola. Metro group of companies cooperates with the services suppliers responsible for operation issues, in particular for transport and storage facilities, says Yern Arnhold, Director General of Metro group Logistics.

 

Outsourcing Dialectics in Russia: Profitable but Insecure

The cautious interest of retailers to the opportunities of logisticians can be explained by the dilemma the retailer faces when he considers the advantages and drawbacks of outsourcing. Specialists of Media Markt believe that the main advantages of cooperation with logisticians are saving on costs, because organization of company’s own service of such scale would demand for significant investments, and flexibility, which enables to cope with the growing volume of work without increasing the number of the company’s staff. Other advantages are the reduction of documents turnover and concentration on the main business, decrease of financial risks and the opportunity to get the full pack of services from one provider. According to the experts of Media Markt, the drawbacks are the possible failures of the computer systems integrating the client and the services provider, and such a period can last several months. Roman Kozak from Lenta says that the logistic expenses economy (and such economy exists due to the company’s own logistic service) is one of the constituents of low prices for goods in the network’s hypermarkets.
A.Kurushin. a representative of Mir, believes that the main advantage of cooperation with outsourcers is the possibility to concentrate on the main business as opposed to collateral processes. Besides, the company does not have to recruit and train its staff: one person is quite enough to control the work of the contractors. «However, the drawbacks are also significant. If there is outsourcing, some procedures slow down. It takes an external company more time to adapt and implement any changes. Moreover, all the new services, which were not mentioned in the contract, are to be paid for additionally», stresses A.Kurushin.
Juha Ruohola from Atria Russia, which uses outsourcers’ services for not very large volumes of supplies, notes a significant disadvantage of such practice, «We cannot fully control the quality of the service, and have fewer opportunities to hear comments from our clients». Specialists of the Logistics Department of the largest grocery network X5 Retail Group state that «independence is cheaper», and «controllability is better». That is to say outsourcing, used by X5 in case there is no other way out, is not very efficient. The only good thing about it is the «speed of access to storage facilities in case of emergency».
Retailers’ requirements to logisticians are the same. «Flexibility, efficiency, ability to reduce our expenses, and provision of high-quality services» – these are Media Markt’s requirements to outsourcers. However, the company’s specialists add that «providers should not follow the scheme «we did what they said». They should act as partners instead, and treat their client’s business as their own. In theory, these are the principles of work envisaged by logistic companies, although in practice, the tactics may disagree with the declared strategy. Consequently, it is necessary to train personnel, so that employees understand the principles of work».
«First of all, we are to be sure they are able to meet all our requirements, i.e. to provide timeliness and safety of the delivered cargo, to be able to cope with the growing volumes, which is especially important in Russia. Besides, the reliability and long-term of contracts mean a lot to us. We prefer to cooperate with logistic companies which have an efficient logistic structure, which is shown in their prices, and a stable financial position. This is very important in conditions of constant growth of demand. Proper and clear-cut cooperation between retailers and logistic companies is especially important for development of a joint business», - this is the opinion of Y.Arnhold from Metro Logistics Group, who adds that he is «quite satisfied with the quality of provided services».
«Cutting down on logistic expenses, simultaneously keeping a proper level of quality of services and goods, is possible only if our business-processes, as well as the ones of our partners, are quite technological. That is why we pay a lot of attention to this item when we choose a partner», says R.Kozak from Lenta.
The companies with which Lenta used to cooperate have proved the declared reliability, timeliness and quality of provided services. There are no losses during transportation, goods are serviced properly and in time in the storage facilities; and, thanks to the external distributing centre, the retailer successfully supplies its hypermarkets in distant regions. «However, we also had some negative experience. Once we had to refuse from the services of one warehouse and operator. Unfortunately, the company overestimated its abilities to organize the work of the warehouse. Due to the low machine ability of warehouse servicing, the expenses exceeded the prime cost of the services», tells R. Kozak about his company’s experience.
M.Tsybulkin names the following reasons preventing development of cooperation between logisticians and retailers. It is worth mentioning that they coincide with the practice of doing business in Russia. The list of reasons includes the retailers’ fear to disclose corporate information and thus to lose their know-how and other knowledge; lack of IT standards, which makes integration of IT systems risky; financial risks from the possible stoppage of cooperation with the partner. Finally, to give all logistics to outsourcing, a company has to change the strategy of development and revise its approach to management.

3PL Is a Distant Prospect

Analyzing the work of large retailers, it is quite clear that in case they outsource anything, the volumes are small. In the first turn, they outsource such operations that are connected with the necessity to own and manage some assets, i.e. transportation and warehousing. But there is no pure logistics, i.e. management of supplies chains to find the optimal routes if delivery and storing, thus optimizing time and financial losses. 3PL, in which all the operations are provided by the third party – a logistic provider, responsible for all the operations, is not used at all.
«Unfortunately, nowadays, Russian logistic companies are regional rather than federal. Some of them are strong partners in some regions, but one can hardly speak of large logistic agents of the federal level. A specific feature of Russian companies is that they mainly provide either warehousing or transport services. Whereas we are interested in a full pack of services. We are waiting for the day when external logistic companies will develop their activities in Russia. We are ready to attract the third and even the fourth parties, if they provide high-quality services at reasonable prices», complains J.Ruohola from Atria. K.Tomenko from Dobrynya is of the same opinion. He also refers to the low level of development of logistic operators. «Our experience shows that logistic operators do not fully understand the demands of retail, while their own inefficient management system leads to high operating costs, which prevents these companies from making competitive offers», highlights the expert. However, he adds that time is required to overcome this objective contradiction. In Russia market develops actively and stimulates not only retail trade, but logistics as well. There are companies which could offer a full pack of services, but their scale does not enable them to operate on the territory of the whole country. Moreover, there is no mass demand for these services yet, although it is being actively formed now.
M.Tsybulkin names another reason that will disappear in several years. «The share of the ten largest retailers in Russia is only 6% of the total retail turnover, while in developed countries this figure exceeds 50-60%. The retail sector in this country is very fragmented, market consolidation is only in prospect».
The opinion of transport and logistic services providers is different. «I think, our logistic companies are ready to fulfill the demand and expand their resources to the necessary level. Naturally, there are factors which restrain the development, such as an underdeveloped transport infrastructure, for example. But these factors negatively influence the quality of logistic operations regardless of who provides them – an external provider or the company itself. An external provider is even more competent to overcome these factors», believes Anna Klinskova from Armadillo.

Resume

It is interesting that several companies asked by a correspondent of The RZD-Partner International failed to answer if they are satisfied with the cooperation with logistic operators. The reason for it is simple: their cooperation has started recently, so it is too early to speak about results. However, it looks like a tendency, which is developing quite logically. Thus, K.Tomenko from Dobrynya believes that the period of extensive development of retail, when retailers strove to get the best places in the most solvent regions, is over. Now it is the period of intensive development, the increase of business-processes’ efficiency. And outsourcing will come in useful. Practically nobody doubts that. Still, the question is if the quantity will turn into quality.

Ivan stupachenko
maria shevchenko

viewpoint

Anna KlinskovaAnna Klinskova, Head of Business Development Department of Armadillo group of companies, PhD in Economics:
– Fruitful cooperation is a result of efforts by both sides – the customer and the provider of a logistic service. Improperly set tasks, different expectations, lack of cooperation based on the principles of partnership prevent retailers and logisticians from efficient cooperation. In this respect, the role of transport and logistic services providers is not only to offer logistic solutions to clients, but also to do everything possible to make their sense and value understandable for all the relative participants of the logistic chain.

 

 

 

viewpoint

Roman KozakRoman Kozak, Logistics Director of Lenta company:
– Lately, the market of modern high-tech warehouses for dry cargoes develops fast. As for the warehouses for low-temperature and cooled goods, all the potential customers suffer from the shortage of areas. As a result, producers and distributors have to build their own warehouses, and network companies are not an exception. 
The second unsolved problem is efficiency of warehousing services. Nowadays it is not enough to use a warehouse to store goods only. The current commodity flows are characterized by high speed and turnover; consequently, the demand for picking and warehouse servicing of goods grows, and there are high requirements to the warehouse capacity.
In the transport sector there is a strong competition in the segment of regional transportation. Unfortunately, the segment of freight transportation in cities is underdeveloped nowadays.

 

Alexey KurushinAlexey Kurushin, Director of Logistics Department of Mir company:
– The main problem is that not all logistic companies in Russia can work with our goods. The operators working on the market nowadays can service large clients with a small range of items, and their terms of storing are practically the same. However, when it is necessary to service different goods, when the pre-sale preparation is complicated, Russian logisticians give up. In other words, they can store tires or beer, but it is more difficult for them to service us.

 

 

 

 

Maxim TsybulkinMaxim Tsybulkin, A DAN DZO company:
– Development of logistic services market falls behind the development of retail trade. Nowadays, there is no 3PL-provider, who is able to offer services at least in all the regions in the European part of Russia. Mainly, 3PL-providers work in the Moscow region, in Saint- Petersburg and in some other cities. As for large retailers, they are interested in getting the full pack of services in all the regions where they act. Retailers are not satisfied with the price policy of logistic operators – the prices are too high now. Secondly, retailers are afraid of outsourcing logistics. Nowadays large companies let their subsidiaries manage logistics and construct their own logistic centers in different regions. One can assume that in the near future large retailers will switch to their main business only, having launched their own 3PL-providers, which will be able to provide services to external companies as wel

 

Alexander Sharyafetdinov, Deputy Director General of Logistics, OOO Kuzbass Furniture Company:
– I believe that 3PL operators have occupied only the best and most available part of the sector. Few of them have started to study and implement advanced technologies into the processes of order delivery from a distributing centre (owned by an operator or trade network) to a shop, and to optimize losses in the link of delivery chain. In fact, practically everywhere there is an automated order, selection of order, almost all the retailers have understood that it is better to replace 100-200 suppliers by one supplier and a distributing centre, but only several of them have developed special transport containers, put non-forwarding delivery methods into operation, and standardized business-processes. It will be good if logistic operators develop in this direction, and it will be even better if they cooperate with retail networks starting from the moment the shop’s been conceived.
 

[~DETAIL_TEXT] =>

Doomed to cooperate

The specifics of retailing inevitably make it a consumer of high-quality logistic services. The nature of retailing envisages management of a network of shops with one and the same range of goods, prices and trade technologies. Goods supplies are regular, while the ones to industrial enterprises are sporadic. Food retailing envisages twenty-four-hour supplies. Supplies to other retail sectors are not so frequent but regular, and as a rule the «on time» principle is observed. So, the requirements to goods suppliers and transport and logistic services provider are high.
Besides, one of the main tasks of a retailer is proper management of products in the shop and storage facilities to compensate for the lack of one or the other type of goods on the shelves. Moreover, services are to be as cheap as possible, because of the peculiarities of the latest international and Russian tendencies of the retailing sector. There is a tendency for development of shops offering cheap goods, the so-called «discounters».
How can one manage such a complicated logistic system successfully? The decision is obvious – to hire a qualified professional. Due to its features mentioned above, retailing became the most important factor for logistic outsourcing development. «We believe the work with network retailing to be prospective. The retail sector grows stably. Customers prefer to purchase not at the markets, but in retail shops, where there is a certain level of comfort, and goods are often cheaper. The retail sector is very promising for logistic companies», tells Anna Klinskova, Head of Business Development Department of Armadillo group of companies. «The turnover of retailing in Russia grew by USD 169 bln in the last decade and it continues to increase fast. For example, in 2006 the growth was 12.5%. Already in 2008 the volume of retailing market in Russia is to amount to USD 415 bln, and to USD 581 bln by 2011. That is why, retailing is a «titbit» for logistic operators», highlights Maxim Tsibulkin, a representative of A DAN DZO consulting company. «I am sure that retailing should be considered a separate sector of the logistic market», thinks Konstantin Tomenko, Director General of Dobrynya retail network.

Trusted but Not to the Full

Most retailers prefer to control logistics by themselves and use the services of external companies only in case of emergency, or use a combined approach, i.e. give only a part of operations for outsourcing. The network of consumer electronics shops Media Markt, which has recently come to Russia, uses external suppliers in the storing services sector, as well as for domestic and import transportation. «Our company entered the market over six months ago, and the growth is significant enough. Consequently, during such a period, the outsourcing of some logistic functions is a good way out, because in this case they are given to a more experienced company. And we will not face the problems we could come across, if we fulfilled the functions ourselves», say specialists of Media Markt.
Director of logistic of Lenta (leading hypermarket operator in Russia and the largest retail chain in the RF Northwest region) Roman Kozak tells that «nowadays our own logistic service provides regular and reliable supplies and saves expenditures. The service is responsible for management of orders, stores and internal movement of goods, as well as the company’s distribution centre for Non-food and Dry-food goods in Saint-Petersburg». At the same time, Lenta uses the services of external specialists, including keeping and warehousing goods of the category «fresh vegetables and fruits» in Saint Petersburg, and goods in the distribution centres in Novosibirsk. External suppliers - carriers and forwarders - also provide city and regional transportation services for the company.
Mir (Russian consumer electronics shops network) has outsourced its transport and part of warehousing services, while the network has its own storage facilities. «We are also discussing a possible construction of company’s own terminal, but now it seems unprofitable to us», tells Alexey Kurushin, Director of Logistics Department of Mir. «Our company prefers to work directly with the shops in the cities or regions, where the volumes of supplies are large. So, we control the quality of supplies and provide better services to our clients. We always keep our eye on the ball and fulfill clients’ demands and wishes as fast as possible. In case supplies volumes are not large, it is more profitable to use services of external companies», notices Director General of Atria Russia Juha Ruohola. Metro group of companies cooperates with the services suppliers responsible for operation issues, in particular for transport and storage facilities, says Yern Arnhold, Director General of Metro group Logistics.

 

Outsourcing Dialectics in Russia: Profitable but Insecure

The cautious interest of retailers to the opportunities of logisticians can be explained by the dilemma the retailer faces when he considers the advantages and drawbacks of outsourcing. Specialists of Media Markt believe that the main advantages of cooperation with logisticians are saving on costs, because organization of company’s own service of such scale would demand for significant investments, and flexibility, which enables to cope with the growing volume of work without increasing the number of the company’s staff. Other advantages are the reduction of documents turnover and concentration on the main business, decrease of financial risks and the opportunity to get the full pack of services from one provider. According to the experts of Media Markt, the drawbacks are the possible failures of the computer systems integrating the client and the services provider, and such a period can last several months. Roman Kozak from Lenta says that the logistic expenses economy (and such economy exists due to the company’s own logistic service) is one of the constituents of low prices for goods in the network’s hypermarkets.
A.Kurushin. a representative of Mir, believes that the main advantage of cooperation with outsourcers is the possibility to concentrate on the main business as opposed to collateral processes. Besides, the company does not have to recruit and train its staff: one person is quite enough to control the work of the contractors. «However, the drawbacks are also significant. If there is outsourcing, some procedures slow down. It takes an external company more time to adapt and implement any changes. Moreover, all the new services, which were not mentioned in the contract, are to be paid for additionally», stresses A.Kurushin.
Juha Ruohola from Atria Russia, which uses outsourcers’ services for not very large volumes of supplies, notes a significant disadvantage of such practice, «We cannot fully control the quality of the service, and have fewer opportunities to hear comments from our clients». Specialists of the Logistics Department of the largest grocery network X5 Retail Group state that «independence is cheaper», and «controllability is better». That is to say outsourcing, used by X5 in case there is no other way out, is not very efficient. The only good thing about it is the «speed of access to storage facilities in case of emergency».
Retailers’ requirements to logisticians are the same. «Flexibility, efficiency, ability to reduce our expenses, and provision of high-quality services» – these are Media Markt’s requirements to outsourcers. However, the company’s specialists add that «providers should not follow the scheme «we did what they said». They should act as partners instead, and treat their client’s business as their own. In theory, these are the principles of work envisaged by logistic companies, although in practice, the tactics may disagree with the declared strategy. Consequently, it is necessary to train personnel, so that employees understand the principles of work».
«First of all, we are to be sure they are able to meet all our requirements, i.e. to provide timeliness and safety of the delivered cargo, to be able to cope with the growing volumes, which is especially important in Russia. Besides, the reliability and long-term of contracts mean a lot to us. We prefer to cooperate with logistic companies which have an efficient logistic structure, which is shown in their prices, and a stable financial position. This is very important in conditions of constant growth of demand. Proper and clear-cut cooperation between retailers and logistic companies is especially important for development of a joint business», - this is the opinion of Y.Arnhold from Metro Logistics Group, who adds that he is «quite satisfied with the quality of provided services».
«Cutting down on logistic expenses, simultaneously keeping a proper level of quality of services and goods, is possible only if our business-processes, as well as the ones of our partners, are quite technological. That is why we pay a lot of attention to this item when we choose a partner», says R.Kozak from Lenta.
The companies with which Lenta used to cooperate have proved the declared reliability, timeliness and quality of provided services. There are no losses during transportation, goods are serviced properly and in time in the storage facilities; and, thanks to the external distributing centre, the retailer successfully supplies its hypermarkets in distant regions. «However, we also had some negative experience. Once we had to refuse from the services of one warehouse and operator. Unfortunately, the company overestimated its abilities to organize the work of the warehouse. Due to the low machine ability of warehouse servicing, the expenses exceeded the prime cost of the services», tells R. Kozak about his company’s experience.
M.Tsybulkin names the following reasons preventing development of cooperation between logisticians and retailers. It is worth mentioning that they coincide with the practice of doing business in Russia. The list of reasons includes the retailers’ fear to disclose corporate information and thus to lose their know-how and other knowledge; lack of IT standards, which makes integration of IT systems risky; financial risks from the possible stoppage of cooperation with the partner. Finally, to give all logistics to outsourcing, a company has to change the strategy of development and revise its approach to management.

3PL Is a Distant Prospect

Analyzing the work of large retailers, it is quite clear that in case they outsource anything, the volumes are small. In the first turn, they outsource such operations that are connected with the necessity to own and manage some assets, i.e. transportation and warehousing. But there is no pure logistics, i.e. management of supplies chains to find the optimal routes if delivery and storing, thus optimizing time and financial losses. 3PL, in which all the operations are provided by the third party – a logistic provider, responsible for all the operations, is not used at all.
«Unfortunately, nowadays, Russian logistic companies are regional rather than federal. Some of them are strong partners in some regions, but one can hardly speak of large logistic agents of the federal level. A specific feature of Russian companies is that they mainly provide either warehousing or transport services. Whereas we are interested in a full pack of services. We are waiting for the day when external logistic companies will develop their activities in Russia. We are ready to attract the third and even the fourth parties, if they provide high-quality services at reasonable prices», complains J.Ruohola from Atria. K.Tomenko from Dobrynya is of the same opinion. He also refers to the low level of development of logistic operators. «Our experience shows that logistic operators do not fully understand the demands of retail, while their own inefficient management system leads to high operating costs, which prevents these companies from making competitive offers», highlights the expert. However, he adds that time is required to overcome this objective contradiction. In Russia market develops actively and stimulates not only retail trade, but logistics as well. There are companies which could offer a full pack of services, but their scale does not enable them to operate on the territory of the whole country. Moreover, there is no mass demand for these services yet, although it is being actively formed now.
M.Tsybulkin names another reason that will disappear in several years. «The share of the ten largest retailers in Russia is only 6% of the total retail turnover, while in developed countries this figure exceeds 50-60%. The retail sector in this country is very fragmented, market consolidation is only in prospect».
The opinion of transport and logistic services providers is different. «I think, our logistic companies are ready to fulfill the demand and expand their resources to the necessary level. Naturally, there are factors which restrain the development, such as an underdeveloped transport infrastructure, for example. But these factors negatively influence the quality of logistic operations regardless of who provides them – an external provider or the company itself. An external provider is even more competent to overcome these factors», believes Anna Klinskova from Armadillo.

Resume

It is interesting that several companies asked by a correspondent of The RZD-Partner International failed to answer if they are satisfied with the cooperation with logistic operators. The reason for it is simple: their cooperation has started recently, so it is too early to speak about results. However, it looks like a tendency, which is developing quite logically. Thus, K.Tomenko from Dobrynya believes that the period of extensive development of retail, when retailers strove to get the best places in the most solvent regions, is over. Now it is the period of intensive development, the increase of business-processes’ efficiency. And outsourcing will come in useful. Practically nobody doubts that. Still, the question is if the quantity will turn into quality.

Ivan stupachenko
maria shevchenko

viewpoint

Anna KlinskovaAnna Klinskova, Head of Business Development Department of Armadillo group of companies, PhD in Economics:
– Fruitful cooperation is a result of efforts by both sides – the customer and the provider of a logistic service. Improperly set tasks, different expectations, lack of cooperation based on the principles of partnership prevent retailers and logisticians from efficient cooperation. In this respect, the role of transport and logistic services providers is not only to offer logistic solutions to clients, but also to do everything possible to make their sense and value understandable for all the relative participants of the logistic chain.

 

 

 

viewpoint

Roman KozakRoman Kozak, Logistics Director of Lenta company:
– Lately, the market of modern high-tech warehouses for dry cargoes develops fast. As for the warehouses for low-temperature and cooled goods, all the potential customers suffer from the shortage of areas. As a result, producers and distributors have to build their own warehouses, and network companies are not an exception. 
The second unsolved problem is efficiency of warehousing services. Nowadays it is not enough to use a warehouse to store goods only. The current commodity flows are characterized by high speed and turnover; consequently, the demand for picking and warehouse servicing of goods grows, and there are high requirements to the warehouse capacity.
In the transport sector there is a strong competition in the segment of regional transportation. Unfortunately, the segment of freight transportation in cities is underdeveloped nowadays.

 

Alexey KurushinAlexey Kurushin, Director of Logistics Department of Mir company:
– The main problem is that not all logistic companies in Russia can work with our goods. The operators working on the market nowadays can service large clients with a small range of items, and their terms of storing are practically the same. However, when it is necessary to service different goods, when the pre-sale preparation is complicated, Russian logisticians give up. In other words, they can store tires or beer, but it is more difficult for them to service us.

 

 

 

 

Maxim TsybulkinMaxim Tsybulkin, A DAN DZO company:
– Development of logistic services market falls behind the development of retail trade. Nowadays, there is no 3PL-provider, who is able to offer services at least in all the regions in the European part of Russia. Mainly, 3PL-providers work in the Moscow region, in Saint- Petersburg and in some other cities. As for large retailers, they are interested in getting the full pack of services in all the regions where they act. Retailers are not satisfied with the price policy of logistic operators – the prices are too high now. Secondly, retailers are afraid of outsourcing logistics. Nowadays large companies let their subsidiaries manage logistics and construct their own logistic centers in different regions. One can assume that in the near future large retailers will switch to their main business only, having launched their own 3PL-providers, which will be able to provide services to external companies as wel

 

Alexander Sharyafetdinov, Deputy Director General of Logistics, OOO Kuzbass Furniture Company:
– I believe that 3PL operators have occupied only the best and most available part of the sector. Few of them have started to study and implement advanced technologies into the processes of order delivery from a distributing centre (owned by an operator or trade network) to a shop, and to optimize losses in the link of delivery chain. In fact, practically everywhere there is an automated order, selection of order, almost all the retailers have understood that it is better to replace 100-200 suppliers by one supplier and a distributing centre, but only several of them have developed special transport containers, put non-forwarding delivery methods into operation, and standardized business-processes. It will be good if logistic operators develop in this direction, and it will be even better if they cooperate with retail networks starting from the moment the shop’s been conceived.
 

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