Strategic partnerships
between chemical producers & logistics providers key to sustainable &
safe operations
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The dangers posed by poor
management of chemical logistics were brought sharply into focus last week
with the leakage of ammonia from a tanker that tried to squeeze under a
railway over-bridge in Punjab. This was not an isolated instance; several
accidents occur on Indian roads, and many do not even get reported. As a
consequence, with little or no learning, the industry is prone to repeat the
mistakes. This is costing the chemical industry dear in loss of reputation –
amongst the government and the regulators, and just as importantly amongst
the lay public. Not to mention the economic loss, the immeasurable toll on
human lives and drastic impacts on the environment.
Structural issues
The problems in chemical logistics
in India partly stem from structural issues both in the chemical industry and
in the logistics business. For a start, the chemical industry is highly
fragmented and dominated by hundreds of small units, with little technical or
financial strengths. Many eke out an existence, buying raw materials and
processing them to products sold at unsustainable prices. They cannot be
bothered about global best practices – be it in manufacturing or logistics –
and will continue to cut corners at every possibility, including compliance
to safety, health and environment.
Many mid-sized and large units
have invested in technology and training to improve operations within their battery
limits. And they have results to show for the effort: safer, cleaner and more
efficient operations; better compliance to laws or the requirements of
discerning clients; enhanced reputations; and, at times, even healthier
financials.
But they are still to extend these
efforts down their supply chain – to their transporters and eventually their
clients.
Transactional
relationship
The relationship between the
logistics service provider and the supply chain departments at chemical
companies remains largely a transactional – and one to be re-evaluated every
year or so. The performance of managers in the latter is often determined by
the savings accrued on transportation costs – with scant regard to how these
have been achieved. Logistics providers lament this approach and point that
this limits their ability to invest – despite having the resources to do so –
on modern vehicles, IT-based platforms, sound management practices etc.
Instead, they sacrifice vehicle maintenance & monitoring, driver training
etc., and remain focused on shaving a buck on the price of their offerings.
Few options to road
transportation
Unlike in much of the developed
world, a large portion of chemicals manufactured in the country is
transported by road. Transportation by pipeline or by rail and waterways is
under-developed for many reasons. For one, a cluster-based approach for
chemicals manufacture is still lacking. With a few exceptions, most chemical
hubs including in Maharashtra and Gujarat have not been by design. As a
consequence, raw materials and finished products often travel long distances
to find markets. The ammonia tanker that leaked in Punjab was on a long
journey from Gujarat.
Very few companies use the Indian
rail network to transport chemicals. While the network is widespread for
passengers, cargo networks are still undeveloped. Ditto for coastal shipping
or on inland rivers by barges, as seen, for example, along the Rhine river in
Europe.
The challenges of moving
by road
So for the near-term at least,
there is no getting away from moving chemicals by road. The challenges of
this are obvious. Poor quality of roads – especially in the industrial clusters
– are often a cause of accidents. Add to this the poor quality of truck
fleets, indiscriminate overloading, disparate bundling of cargo with little
attention being paid to compatibility, and poor training of drivers &
cleaners and it is a wonder chemical accidents are not more frequent.
Welcome initiatives
The good news is that at least a
few companies are now paying far more attention to how chemicals are procured
from suppliers and delivered to customers. Those companies that have adapted
the tenets of Responsible Care – and there are about 38 of them in the
Indian Chemical Council (ICC), the premier industry association – are going
beyond regulatory compliance. The sole remaining code on Security is also
being adopted by ICC over the next three years or so and this also lays
emphasis on security of the supply chain.
These companies are now
implementing strict guidelines on vendor selection, training of their staff,
drivers & cleaners, advanced IT systems to monitor consignments 24x7, and
also creating emergency response systems that can quickly respond should an
accident occur. A select band of companies – numbering about 10 chemical
producers, besides some logistics providers – have now undertaken a
commendable NicerGlobe initiative, under the aegis of ICC, that has at
its core a GPS-enabled tracking system for all hazardous cargo shipped by
participating companies. The technology has several other benefits. It can,
for example, identify deviations from chosen travel routes, almost on a real
time basis, greatly reducing the risk of pilferage of cargo. Emergency
response providers, such as police, fire departments, hospitals etc., can be
quickly identified and contacted to respond to a crisis.
Likewise, the chlor-alkali
industry has done a commendable job in creating a national emergency response
network – with a nationwide toll-free number – to respond to an emergency
involving chlorine in particular. Large quantities of this hazardous chemical
are being transported long distances on terrible roads. Ethylene oxide
consumers are also considering forming a focussed group that will work in
partnership with the sole merchant producer to spread industry best practices
in the handling of this highly hazardous chemical.
Rail transportation – an
emerging option
Some companies are also examining
alternative transportation options. Especially for international cargo –
exports and imports – rail transportation is increasingly seen as a viable
option. It has several advantages: it is cheaper, safer (with few worries of
theft or pilferage), more robust (which implies less chance of accidents or
spillages) and even time efficient. Lanxess, the German speciality chemicals
company that operates two sites in Nagda (Madhya Pradesh) and Jhagadia
(Gujarat) is now using rail services offered by the Container Corporation of
India (Concor) for moving cargo to Nhava Sheva port via Inland Container
Depots (ICDs) in Ratlam and Ankleshwar respectively. From moving chemicals
500-700 km by road, with all the attendant ills, the company is now moving
just 50-75 km to the nearest ICD and then on rail for direct entry into the
port. There is none of the indeterminate waiting to get into the port and
none of the delays of Customs clearance (as it can be done at the ICD). As a
consequence, the share of cargo moved by rail has consistently increased for
the last few years, and Lanxess plans to take it to nearly all export
consignments.
Strategic partnership
needed
There is a slow evolution from the
supply side as well and one is seeing the emergence of a select band of
professionally run logistics service providers capable of offering
high-quality services with safety as a paramount concern. These companies
need the support of the industry to grow and thrive in a mutually beneficial
relationship. Chemical companies have long recognised the need to cultivate
vendors for their raw materials and partner them through a strategic
approach. They must extend this relationship to their logistics service
providers as well.
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- Ravi Raghavan Chwkly 23jun15
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