The Last Mile

One of the biggest challenges in any emerging or fast growing economy is infrastructure. The Chinese have been superb at this. For example, the Pearl River Delta story starts with building up the clusters that delivered the roads, the railways and port connectivity. Manufacturing and textiles followed as market access (in/out) was sorted out. Exports exploded. Imports of vital resources were speeded up. The rest is history. The idea was to build capacity, supply would follow and demand would be triggered. Sustainable growth was the prize. Elsewhere, it is as if they build the house starting with the smoke coming out of the chimney.

This video illustrates just why logistics has to be enabled for any economy to be transformed at the grassroots and not just at the macro level. It takes place in Chennai, India. Let’s be clear – it could be elsewhere. It is a wake up call.

India will spend between $350 to $550 billion on infrastruture in the coming years. How much on the last mile? And how quickly? 95% of Indian exportsand nearly 70% in value terms are carried by sea and pass through the ports. The export-import (exim) trade has grown at an impressive compounded annual growth rate of 13.4% during the last ten years. Containerised traffic stands at 25% of exim trade and this will grow to 18m TEUs by 2013-14 in major ports. This is up from an estimated 8 m TEUS for 2008. And trucks move most of this through areas such as the ones highlighted on this video. Food for thought. 

These infrastructure and port capacities will be challenged by India‘s explosive growth. The back story starts with how India has reformed its economy and opened up to the outside world in the past decade, its trade performance has risen dramatically. Two-way merchandise trade in the fiscal year to March 31, 2008 reached $414 billion, up more than 30 percent from the previous year. Trade in services added another $125 billion.

While imports occupy the biggest part of the trade picture, India’s export push is gathering serious momentum, tripling in value over the past five years, from $53 billion in 2002-03FY to $163 billion of merchandise in 2007-08FY.

But India is still working off a very low base, accounting for just 1.5 percent of global trade. For an economy that is now one of the largest in the world, it shows just how dominant India’s domestic focus has been, apart from a few high-profile export-oriented sectors such as information technology, IT-enabled services, pharmaceuticals, textiles and automotive components.

India’s goal is to lift its share of world trade to around 5 percent by 2020. To do that, it will need, for example, to dramatically improve its agricultural logistics and food processing capabilities to make the most of its potential as the world’s food basket. And when we consider the agricultural challenge we enter the area of the informal / formal market interface. Here we will focus the Ports. In other entries, we will turn to other aspects.

This is the point – Transformational Logistics could be developed to ensure that both the informal and formal elements of the economy are dealt with in a holistic manner. It is not enough to build connectivity and marginalise the people from these areas – who may well be the workforce you need and, whose homes may be the place where goods are actually made. This is where Transformational Logistics can become the toolbox to deal with the informal and formal agenda as one.

The informal economy is not an abstract concept. This video takes us on a journey along the roads that move through it, the lives that are led in it and the chaos that, if not resolved, can choke even the greatest of growth strategies in the formal economy. Policy needs to deal with reality – now; think far enough ahead to address likely scale – next; and deal with the constraints that get in the way of real needs – fast. Get it wrong and exports will be trapped; foreign investors will go elsewhere and career opportunities for the majority and not just for a few will fade.

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7 Responses to The Last Mile

  1. Byron Song says:

    Stunning facts.

    It is shown in the video that Chennai’s potential has been largely strengthened by the construction of the port. However, it is also seriously hampered by the last mile of roads linking to the ports. What a shame!

    What I am interested is: what defines a region’s “Logistics capability”? Infrastructure is definitely an important factor but certainly not the only one. How about “Government efficiencies” in processing documents and clearing customs? How about the “competencies of local logistics service industries” such as warehousing and transportation? How about on the communication side, the teledensity of the region that allows efficient information flow?

    It is only after putting together a toolbox of measuring the logistics capabilities of a region can we start assessing the relationship between logistics and economic development.

  2. Tom says:

    Absolutely stunning facts!

    Can one define the Key Factors for what makes the local infrastructure efficient and also what Key Factros hampers the supply chain?

    If one then link these factors to the “Toolbox” – then one may be in a position to execute direct actions in order to improve the local supply chain flow. This can be everything from making information available, training people to specific infrastructure investments.

    Main objective: where to put the investments to maximize the Retrun On Investments in form of a more efficient supply chain flow?

  3. Byron Song says:

    That’s right to the point, Tom. For my Doctoral research, I am trying to firstly define “Regional Logistics Capabilities” – a set of metrics that measure the logistics performance in a particular region and then assess the relationship between Logistics and regional economic development and industrial cluster’s growth.

    Look forward to have a chat with you if you are interested.

  4. Tom says:

    Very interesting Byron, I do think you have targeted one of the key subjects in order to find and define successful growth strategies. It’s a subject or economic approach that I also guess will be different, based upon location, degree of market informality, government regulations and subsidises. I look forward to discuss this as you work on your Doctoral research.

  5. Phil Brophy says:

    As Ireland increased in prosperity, the traffic did too, but like Chennai, the infrastructure didn’t keep pace. The trucks going to & from Dublin port clogged the already busy streets & caused major traffic jams. The solution decided on was to build a tunnel from about 10k north of the city to the port. This was opened about 2 years ago & trucks with more than 4 axles are banned from using the city. The tunnel is free to trucks, but private vehicles using it must pay a toll which varies from €3 to €12, depending on the time of day.
    All trucks must use this tunnel & go northwards, then use the ring road, which is tolled & perhaps adding 30kms to their journey. The Road Hauliers Association has objected to this imposition, but they have been overruled.
    The increase in traffic on the ring road means that there is too much traffic on the rong road & this is now being increased from 4 to 6 lanes, with all junctions being upgraded. It has caused a lot of grief for all users of the ring road (M50), but as parts are upgraded & the toll booths replaced by electronic tolling, the traffic jams on the road are decreasing.
    The M50 was started in the 1980’s & as work was completed, business parks have sprung up around the junctions & thus removing the need for long journeys from factory to the port.
    As Dublin port has reached it’s capacity as a port in a city, there are plans afoot to create a new port 30k north of Dublin at a place called Bremore. The current financial crisis may cause this to be put on hold for a time, but as an open economy, the country needs it.
    There is mention of the Pearl River Delta region – I remember travelling from Guangchou to Macau by bus in 1983 & this entailed taking the bus on 4 ferries, as there were no bridges. We had to get off the bus as the bus went on the ferry & when we asked why, we were told that a ferry had overturned & all on board the bus were drowned. This didn’t stop them putting us on the bus as soon as it had driven on to the ferry.They had started to build them & I’m sure, if I went back there now, I wouldn’t recognise the place.
    Keep up the good work

  6. divya rajendran says:

    well..,
    it is the road congestion which is mainly talked about in this port.well road congestion can be handled in a efficient way.even with the sustainable infrastructure we can modernise the road by government’s support.where as now the tamil nadu government has taken a keen notice on roads,which are been into four truck roads..and the projects is implemented and processes is going on.
    the priority for this port is more where the government and people are prospering..moreover it is one of the busiest port in the state and they are taking care of it in all the ways that they wanted the turn over to improve and not demolish….

  7. harish says:

    We can only develop the logistics network only after addressing the bureaucratic and procedural difficulties being faced which are worsening every year. Already we’re know globally for our “not so encouraging policies”. As you’ve rightly pointed out, neighboring countries have started causing a ripple effect on India and should the govt. still sleep we’re in for a surprise very soon!!!!!!!!!!!!. On one side we want urbanization and rapid expansion and on the other we don’t empty our coffers nor do we allow players with expertise to do the job,…. What a shame 🙁

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