Architects of the Supply Chain Industry– Freight Forwarding and its Role in Modern Day Supply Chains
Today on BusinessLoungeLK's journey to bring you the voices of business professionals in Sri Lanka, we are honored to have Mr. Channa Gunawardena on our Supply Chain Interchange segment. Mr. Channa is the Director/ CEO of Expelogix, which is one of Sri Lanka's leading freight forwarding companies.
1.) How did you commence your professional journey and how did you enter the world of logistics?
Back in 1995, just after commencing my further studies in marketing, I got to know about an opportunity which emerged in one of Hayleys shipping subsidiaries called Maritime Holdings. I didn’t know much about freight forwarding back then as the general term “shipping” was used to describe everything, but I decided to take up the offer and started working in Maritime Holdings.
Maritime Holdings was a subsidiary of Hayleys, but it also had its own subsidiaries under it, and I was working under one of those subsidiaries. Within a years’ time I got an internal transfer to a freight forwarding company within Maritime Holdings, and that is how I embarked on my professional journey into the industry, back in 1996.
2.) Some refer to freight forwarding as the “architect of transport”. What is freight forwarding and why is it a crucial aspect of sustaining modern day supply chains?
You can think of a freight forwarding company as a broker. If we look at brokers, they play a crucial intermediary role between buyers and sellers, and they apply a mark up for that service. So, freight forwarding companies are the brokers of the shipping and logistics industry. We as freight forwarders facilitate trade between traders (exporters or importers) and the carriers (shipping and airline companies).
So, what we do is facilitate this connection between the traders and the carriers. This doesn’t mean that importers and exporters can’t go to shipping and airline companies directly themselves, but where we add value is that we are able to offer a gamut of different services to our customers. So, we buy services from a variety of different logistics companies, and we offer it to our customers.
So, why is freight forwarding referred to as the “architect” of logistics and why does it play such a crucial role in our industry? If we look at the logistics industry, what we will very quickly understand is that it is a massive market with a vast number of different players with their own individual core competencies. There are shipping lines, airlines, trucking companies, warehousing companies, distribution companies, customhouse brokers etc., so when we look at these companies, we can see that they specialise in a specific service within the logistics umbrella. As the intermediatory party, we offer any of those services to our customers as a result of the partnerships we have with these companies. We are at the heart of logistics because we are the ones who can offer that all-inclusive logistics solution to importers and exporters.
This is why freight forwarding is so important in modern day supply chains. We can connect every bridge for our customers and offer them a one-stop solution to all their supply chain needs.
Impact of the Pandemic on the Industry and Consumer Behaviour
3.) The logistics sector is made up of a complex network of supply chains which was drastically affected when the pandemic first hit. How has the industry gotten through and moved forward from the initial impact of the pandemic both locally and internationally?
Due to the advancements in technology and the digital sphere, we are able to do our work using online systems. There is a physical element to our work as well, but a majority of it is done online on these operating systems.
So, when the work from home model was introduced to us as a counter measure to the pandemic, it wasn’t actually a cumbersome task to adapt to it by any means, as we already had prior experience working from home due to the nature of our industry. Even when the pandemic hit locally and internationally, the freight forwarding sector was ready to tackle the issue and we were able to completely adapt our workload to the work from home model.
The impact of the pandemic was more heavily skewed onto the physical side of the industry. The impact of the shortage of lorries and other transport vehicles was felt globally, and it left a massive crater on the whole industry. However, what really helped us get moving once again was the vaccine programs. We were proactive on the vaccine front and within the industry there was a huge drive to get into these vaccine programs as early as possible. This helped the industry restart much quicker when the restrictions slowly started to ease and helped us get on our feet much sooner than anticipated.
That being said however, we are not out of the woods yet as there are a lot of problems stemming from the pandemic that we are still dealing with.
4.) Even though we are past the peak of the pandemic, some major European shippers warned that freight rates may still remain high throughout the year. Why are international freight/shipping rates still so high and what has the impact been on consumer behaviour?
When the freight rates are high, the consumer is the one who will ultimately have to shoulder the burden of these price hikes. Even in Sri Lanka the freight costs have a direct bearing on the end price of goods from medicine all the way to basic FMCG (Fast Moving Consumer Goods) products, so freight costs play a huge role on the final price of any product.
There are a couple of reasons as to why the freight rates are still expensive relative to pre-covid prices. If we look at the ocean freight side, still to this date some containers are stuck. When it comes to the shipping of containers, there is a rigorous process that needs to be followed for shipments to be received on time and the containers need to be rotated quickly. So, the container has to travel to the relevant port, get discharged from the vessel, get clearance from the customs office and released from the port, travel to its destination and then come back to the port to be used again. Now however, there are bottlenecks in all of those processes. The ports are congested, there are labour issues, there are no truck drivers and there are a lack of trailers to carry the containers in. This creates a serious blockage within ports when trying to unload vessels and it has resulted in huge shipping vessels just laying idle outside ports.
So, this creates a toll on the inventory levels of companies and when there is a demand, they will be unable to supply it. Due to these high demands and low supplies, the products become scarce, and the prices skyrocket as a result.
This directly affects the air freight side as well. When there is a high demand for ocean freight, there will also be a high demand for air freight as well. When the ocean freight side gets congested people will move to the air freight option, resulting on the demand (and thus the price) for that service increasing as well.
It’s a vicious domino effect, and it is going to take some time to undo that damage and bring everything back to an equilibrium point.
5.) The Ukraine-Russia war:
Fighting has broken loose in Ukraine, and the EU, UK, US, Japan, and Australia have already announced firm economic sanctions against Russia. How will these latest developments affect supply chains further?
Any war will trigger fuel prices to increase drastically. When fuel prices go up, our operational cost will increase as the cost to keep delivery vehicles/vessels running will become more expensive. This will ultimately cause the freight rates to increase and furthermore, the weight of these costs will have to be shouldered by consumers once again. Even if the conflict stops in one or two-months’ time, again just like we are experiencing with the pandemic, it will take much longer to recover from that initial impact.
Secondly, when we look at the geographic area of the conflict, it is right in between Europe, Russia and China, so all of the logistics activities within the region gets affected as a result of the conflict. The entire airspace above Ukraine is closed off as a result of the ongoing war between Ukraine and Russia, meaning that no commercial flights are allowed over their airspace. This forces the airlines to find fresh routes which are longer and thus more costly. Again, we as consumers are the ones who will have to bear that final cost.
Moving the Industry Forward
6.) How important is technology in increasing both the reach and efficiency of the logistics industry and what are some of these key technologies?
When it comes to logistics, the core requirement in this industry is speed. So, we need to be mindful about the speed at which we are sending and delivering cargo, but speed doesn’t just apply to cargo, it applies to data and information as well. Before the internet and electronic data transmission was available, we had to use physical documents to go with the shipments and they had to get the shipments cleared at the destination by submitting these documents. Now however, the data flows through systems, and so the speed at which it is processed is extremely important, so in that sense technology plays a huge role in the process.
That’s just the start. IoT (Internet of Things) is another key technology that helps transfer data faster and helps you connect directly and share information in real time with a wider community (e.g., exporter, freight forwarder, airlines etc.). So that connection again plays an extremely crucial role in making sure all parties are up to date.
AI is also used heavily in the industry when trying to identify patterns in data analytics. It’s really important to have AI systems go through data and identify key insights as it ultimately helps make our decisions more accurate.
Robotics and automation are also important technologies which are being actively used and developed in the industry. When we look at the warehousing and distribution aspect of logistics, we can easily find robots working in it. Companies like DHL use robots to handle the more dangerous tasks rather than putting humans at risk in their warehouses. Automation of processes helps increase efficiency and speed with repetitive tasks.
Finally, blockchain is another crucial technology which is widely being used in the industry. There are a lot of different stakeholders involved in handling a particular shipment. For example, if a shipment is going out of Colombo port, we have the exporter, freight forwarder, shipping line, customs office, Sri Lankan port authorities etc., however with blockchain we are able to have a single ledger where we have all the parties communicating safely and in real time.
These are some of the key technologies that the industry is utilising today to maximise efficiency and speed.
7.) How did Expelogix begin and what does it mean to be celebrating your 10th year of operating successfully in Sri Lanka?
Expelogix commenced its operations back in 2012 and we are a fully-fledged freight forwarding company. So as I explained earlier, we provide services starting from basic freight, purchase order management, trucking, warehousing and distribution to our clients, so we are an all-inclusive stop for our customers to handle all of their logistics needs.
We are owned 100% by Hayleys and we represent a foreign principal called “Expeditors International” which is a Seattle based US freight forwarder and they are one of the top freight forwarding companies in both ocean freight, air freight and consultations in the world.
Predominantly we are handling apparel and retail businesses in Sri Lanka, but we also handle other industries such as pharmaceuticals in our import business side as well. So, we have been in operation for 10 years now and it has been an amazing journey so far.
8.) How has Expelogix evolved throughout the last 10 years and how did it become a leading freight forwarding company in Sri Lanka?
We predominantly handle the apparel sector and apparel exporters in Sri Lanka, and as the apparel industry grew in terms of volume and new buyers, we were able to expand our business with a majority of the buyers being international clients. 80% of the clients we are handling right now are global clients of Expeditors International, so we extend their services here. Whilst sustaining the pre-existing clients and simultaneously acquiring new clients we have been able to grow tremendously over a period of 10 years.
Through our local sales efforts we were able to acquire a new set of clients as well, such as tea exporters and tyre exporters. That is also contributing greatly to our growth in terms of volume and our reach.
9.) How has Expelogix specialised themselves to provide freight forwarding solutions to so many different industries such as healthcare, food, and manufacturing?
If we look at the Expeditors structure globally, we have product specialists globally as well as regionally. So, in strategic markets like the retail sector, we have a product specialist sitting in Hong Kong. These specialists are at a very high level in the network (such as directors and product directors) who have an in-depth knowledge of the industry and the requirements that the industry demands.
That’s just the international aspect, it also stems down to our efforts locally as well. We have a lot of training on how to tailor-make solutions to clients and that helps us specialise and give custom solutions to each client as per their industry requirements. So, we do this for clients in retail, aviation, pharma, food, manufacturing, fashion, and technology, which then helps us grow as a company and it helps us add new clients, because we can demonstrate that we have the focus and knowledge in the client’s industry.
10.) What advice would you give young professionals on how to enter this rapidly evolving and expanding industry?
It is a growing industry, and it is gaining a lot of prominence in the world. For example, if we consider the pandemic, one industry that really kept the world going despite all of the setbacks that it had to face was the logistics industry, because if logistics had failed then nothing would have been able to run.
So, for those in the younger generation interested in getting into the field you need to understand that the industry is vast and there are a lot of different positions which are in demand. There is a lot of different areas that you can concentrate and focus on.
Secondly, having the basic knowledge in the industry is vital. The good thing is that you can acquire this knowledge by even entering the industry at a trainee level and then working your way up in knowledge and experience. There are even professional exams that you can complete to get that recognition in the industry, like in the Institute of Charted Ship Brokers, or at Sri Lanka Freight Forwarding Association where we conduct FIATA exams which is a post graduate level qualification, and these are all things that you can do whilst working as well.
It's all about perseverance, but more importantly it’s about patience as well, because unlike most other industries, to really understand logistics it will take about two or three years on the job. These are the areas which I would advise our youngsters to be mindful of.
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