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Shashi Kiran Shetty, Allcargo Logistics, on Opportunities in LCL

Shashi Kiran Shetty, Allcargo Logistics, on Opportunities in LCL
Vip Klangchanee

ECU Line is one of the world’s leading providers of LCL (less than container load) services. With more than 25 years of experience and over 200 offices in more than 90 countries worldwide, ECU Line has the global reach to provide not only comprehensive LCL services but also key value-added services, outsourcing solutions and consultancy. In 2006, ECU Line received a significant boost to its services, network and resources, as the company was purchased by Allcargo Logistics, an India-based global logistics provider offering a wide range of multimodal transport operations and logistics services. Under the support and direction of its parent company, ECU Line has seen remarkable growth.

Allcargo Logistics’ core business in India is consolidation, but another major business is operating container freight stations; they have the capacity to handle around half a million containers. They also have their own fleet of ships, and the company also provides project logistics, equipment hiring, contract logistics, and even some freight forwarding and air freight services.

With its roots in India, Allcargo Logistics has expanded into other markets through acquisition and integration. They acquired ECU Line in 2006, turned the company around, then expanded the business by opening many new offices around the world. Later, Allcargo acquired two companies in China, and in 2013 they purchased companies in the US, Germany and the Netherlands. Mr. Shashi Kiran Shetty, Executive Chairman, Allcargo Logistics Ltd., explains, “We have now learned a lot through acquisitions and integrations. Fortunately, all of our acquisitions have created value for the company. They’ve been very successful.”

In this issue of LM, Mr. Shetty shared his insights into the global development of the LCL business and his vision for Allcargo Logistics’ and ECU Line’s future.

Maintaining a Global Perspective

From Mr. Shetty’s position overseeing the Group’s global operations, it is important for him to stay updated on what is going on around the world. By staying abreast of the latest economic developments, he can help his companies react to changes and stay ahead of the curve. “The global economy has gone through lots of ups and downs since 2009, but it appears that we have been heading toward a recovery since 2014. Currently, we are keeping our eyes on the US; its economy is showing a significant recovery and indicating 3.5 percent growth in GDP, which is a very good sign. This means there will be more cargo brought into the country. However, a slight drawback is that the US currency is appreciating in value, and this should impact their exports to some extent. However, as we all know, American products are of high quality, so it should not really make a significant difference. Also, the currently low oil prices can help stimulate manufacturing to shift back to the US, which means more jobs will be created there.”

As far as Asia is concerned, Mr. Shetty has a positive outlook on China and India, “China’s GDP growth is expected to slow down from its past rates. However, looking at domestic consumption, we can see that that figure is growing and adding balance to the economy, and it will be less export driven than it used to be. Their imports have increased and growth of 7.5 percent is considered very good progress, compared to the size of its economy.
“India is another country that will definitely grow, as it is undergoing several policies on development and manufacturing including many structural reforms in taxes, labor and manufacturing. This is another market to keep an eye on which will grow more in the future. It is currently growing at a five percent rate and should eventually increase to 7.5 to 9 percent.”

Growing Opportunities in LCL

Logistics, particularly consolidation, is undoubtedly a good indicator for the global economy, as the industry is consumption driven. If the economy is in good shape, consumption will increase followed by increased demand for transportation, which will boost the industry, and vice versa. “Before 2009, the shipping industry grew an average of 10 percent, due to the economic boom. However, after 2009, the growth came down to just three percent,” comments Mr. Shetty.

“In terms of ECU Line, we are known for LCL, and the business has grown faster than FCL (full container load) because it is a very efficient supply chain mechanism to procure. With LCL you can have the option to load with multiple carriers. Generally a shipping line offers a weekly service for each servicing route; for an LCL operator, it means we can ship every day. Inventory holding cost for a customer shipping low volumes via LCL provides an advantage compared to waiting for cargo to fill a full container load. As long as the supply chain flows smoothly, shippers with low volumes can keep going with partial container loads and still be financially healthy. Especially in the present day, when the just-in-time concept has been widely used across manufacturing for many different types of products, no one wants to hold excess inventory unnecessarily.”

The massive growth of e-commerce is another huge opportunity for LCL. We have witnessed the success of e-marketplaces such as e-Bay, Amazon and Alibaba, which have seen dramatic success recently. “Many items traded through online market places like Alibaba are mostly shipped as LCL, which has created a lot of opportunities for shippers as it is a much faster means of transportation than having to wait and ship a full container. An LCL operator enables them to have their products shipped every day. And for e-commerce specifically, we have also invested in IT systems to provide information and analysis, which helps our customers plan their inventory in a better way,” says Mr. Shetty.

A Bright Future for Allcargo Logistics and ECU Line

Today, Allcargo Logistics and its subsidiaries are known as some of the world’s leading providers of LCL services, serving both freight forwarders and shippers directly, but Mr. Shetty is always open to taking on new opportunities. In order to stay ahead of the competition, “We like to plan our business 3-5 years in advance. Our protocol of moving forward is mostly aimed at last mile logistics and trucking. In some markets we can offer ourselves to provide additional service and partner with local operators. In other markets, we might have to provide the service on our own; in some cases we even have to establish trucking services by ourselves.”

In this fiercely competitive environment, there is a range of operators with widely different approaches to doing business. Some focus on cost as a selling point, while others consider service to be the key selling point. As for his business model, Mr. Shetty believes that it’s important to keep three factors in mind, “We have to consider a hybrid model. I think service is paramount – if you don’t offer quality service, you cannot last long in the business. So service comes first. But unfortunately, convincing people that a premium service is worth a premium price is becoming increasingly challenging these days. So, because it is a price-driven commodity, we always have to keep cost in mind. The third factor to consider is investment for the future. We have to have good quality systems and processes, because these are necessary to ensure cost efficiency, risk mitigation and the ability to benchmark service quality. Thus, processes are also important.”

Backed by clear goals and a strong understanding of the market and global economy, ECU Line and Allcargo Logistics will keep expanding their business with LCL service at the forefront, while continuing to develop a wider variety of services to support their core business in the future. Mr. Shetty concludes, “We distinguish ourselves from our competitors by taking charge of our business in each market. We hire very experienced, knowledgeable people who understand customer service, and we’ve developed a strong working culture that values efficiency and integrity in everything we do. As an organization, we want to do business with high quality service, reasonable margins and sustainable growth. We are not simply looking to expand our volume while ignoring our bottom line. Our model is sustainability – we will be here for the long term.

“It’s always good to do the business that you are good at, and I believe very strongly that no matter what business you are in, you should either be a market leader, or you should not be in that business. Our strategy is very clear that we want to be among the top operators in the world from day one, from the first day that we acquire the company. In India, we are number one. But if we have to do more to get there, of course we will do it. We want to be the best for a long time to come.”

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Vip Klangchanee
@angkoon

Vip has been managing content about shipping and logistics for over ten years. He has a large database of logistics photos and videos just in case you guys are interested.

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