Food chain supply and logistics is a well-established and significant component of global trade. The food sector plays a significant role in the economies of many countries, particularly in developing nations. In fact, one of the most discussed and debated topics in all modes of transportation currently is the cool chain network that ships perishable food items and pharmaceuticals globally. This network is advanced and much research, discussion, and articles have been written already regarding the transportation of the fruits of a farmer’s labor. However, less emphasis has been placed on the machinery that allows farmers to produce the food needed to sustain an ever-expanding world population.
In this issue of LM, we sat down with Mr. Bernd Oevermann, Senior Vice President Hellmann Automotive/Agriculture Logistics from Hellmann Worldwide Logistics; and Mr. Masahiko Taki, “K” Line’s Asia Regional General Manager Car Carrier Department, to get their views and experience on an often understated part of agriculture logistics; the transportation of agriculture equipment and parts, and the differences between the needs of farmers in different parts of the world.
The Automotive and Agricultural Connection
For years, the dominant driver of transportation based shipments by ro-ro vessel has been, and most likely will always be the automotive industry, specifically passenger vehicles. The need to transport heavy, bulky, and larger agriculture equipment has been a need that’s been steadily rising over the years, but is still far eclipsed by the amount and frequency of automotive shipments. It’s logical that those in the industry would thusly focus on this automotive segment.
Mr. Taki explained this further when we spoke with him at an event celebrating the calling of their newest 7,500 unit ro-ro vessel, the Hamburg Highway, at the Laem Chabang Port.
“The Hamburg Highway is the second of ten ro-ro vessels of this size we have on order, and the first to call in Thailand,” said Mr. Taki. “The standard ro-ro vessel size around the world is 6,000 units, but because of the recent expansion of the Panama Canal along with other research, we felt it was a good time to expand into larger ro-ro vessels. It allows us the ability to take on additional non-uniform passenger car units. Our large passenger car customers in Japan are on contract and their manufacturing is linked for the consistent usage of 6,000 units per vessel.”
“Competition is getting fierce for car carriers so getting new business and expanding our portfolio is needed, so we are diversifying.”
“This leaves us with additional space on our newer larger ro-ro vessels to take additional cargo like train cars, farm machinery, mining, and construction equipment. Competition is getting fierce for car carriers so getting new business and expanding our portfolio is needed, so we are diversifying. We’re happy to try new cargo and customers, specifically in the agriculture industry,” Mr. Taki said.
Just like the ro-ro vessels increasing in size that Mr. Taki mentioned, the size of farm machinery continues to grow larger and larger. Which in turn, makes it more difficult to handle and transport the humongous and oddly shaped loads. Mr. Oevermann spoke about the situation from a freight forwarders perspective and how Hellmann Logistics adapted to the needs of their customers.
“What we did then was take the systems from the automotive segment and approached agricultural equipment like an automotive customers.”
“Our automotive logistics branch began in 1998 and from the contacts we received in the auto industry in a few short years’ time we were able to branch out and serve the largest agricultural manufacturers,” said Mr. Oevermann. “We learned that from a transportation and supply chain management perspective, there’s a lot in common with automotive logistics. What we did then was take the systems from the automotive segment and approached agricultural equipment like an automotive customers.”
“On the other end, to make it clear that we are focusing on the agricultural side we gave it a different brand under Hellman Agricultural Logistics, to make a clear distinguish between the two, and it’s worked quite well. Obviously there’s some big differentiators between the two though, the largest being off course is the size of the machines differ a lot, and the seasonality you have is very different than automotive. You don’t always see the automotive sector dominating every part of the market either. Some of our biggest customer are in agriculture driven countries like Russia, Ukraine, and Kazakhstan. The sheer size of the land requires increasingly larger sizes of machinery,” Mr. Oevermann explained.
As Mr. Oevermann mentioned, as the world moves from manual labor to more automated labor, the sizes of farms and equipment are changing. However, there’s a big difference in the size of operations between countries. A distinctive size difference can be seen in countries like Russia and Brazil when compared to say India. In Europe, the piece of land that needs to be harvested is more of a medium size, while in Asian countries there are normally very small plots of farm land that are almost impossible to work with bigger machines. For these countries, there’s a different need of machinery needed that’s more flexible, less heavy, and not too expensive or sophisticated. So one type of tractor may not be successful in Russia, but thrive in countries like Thailand with smaller area farms. However, the general trend of farm size is still increasing as we continue to see larger corporations getting more and more involved with farming practices.
An interesting point taken from discussing this topic with both of our interviewees, was the fact that agricultural products are needed on a seasonal basis. While an automotive operation can usually run like clockwork on what the need, agricultural product needs can vary wildly. The need for transporting a harvester would be almost non-existent during planting season and vise-versa. This leads to inconstancies that most companies do not like. Having the flexibility to work with agricultural producers needs is key to the success of the operation.
“Time is of the essence very often for spare parts, as the disruption to farm operations can cause big damage and losses.”
Besides the actual full-sized equipment needed in various points around the world, the spare parts needed to keep the machines functional needs to be considered as well. Especially during peak times, such as planting and harvesting, having a breakdown can cripple an operation. Without a functioning harvester, the farming operation completely grinds to a halt, and the harvesting of the valuable produce is left to rot in the field. Mr. Oevermann explained how the supply and support operations with the invaluable spare parts they need.
“There’s a great need for spare parts, especially during the course of the season. For this, we provide inline distribution of spare parts. In fact, we just signed an agreement with John Deere to provide their distribution of spare parts in Germany. Often, spare parts and special delivery parts get delivered over night, at least for Germany, so we are able to get the parts in the hands of farmers within a day, if not sooner. For very urgent parts we can even make arrangements to deliver them directly to the field even.”
Preparing for the Future
With the world’s population expected to reach over nine billion by 2050, the need to feed a population of that sized is a tough proposition. The production of the food we need to survive poses one of the biggest dangers for the planet in the coming years. The spread of prosperity and wealth across the world is also driving the demand for more meat, eggs, and dairy, adding pressure to grow more corn and soybeans to feed more cattle, pigs, and chickens. The environmental challenges posed by agriculture are huge, and they’ll only become more important and pressing as we try to meet the needs of food production worldwide. Beyond the politics involved, this need has increased the size of farming operations and looks to continue on this trajectory. For example, in parts of South America there are farm operations in the hundreds of thousands acres category, something unheard of before the turn of the century. To take advantage of this underserved industry, both experts we talked with believed that the need for a separate business unit focused on the transportation of agriculture equipment would eventually be needed. Both Hellmann and “K” Line see the value and need for these types of agricultural services now and are already looking towards the future to take advantage of the ever increasing need for agriculture logistics.