Strategic Logistics Management

Logistics and Pakistan

Strategic Logistics Management

Pakistans logistics is an important economic sector with significant growth and investment potential. It is also a key driver for private sector development, economic growth and overall development. There is a clear relationship between a countrys logistics performance, lead times and its export performance.

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In Pakistan, there it is a critical inefficiencies in our logistics chain, resulting in a 45 percent excess in export times compared to one of the European country (Spain) and higher logistics costs (35-40 percent of retail price compared to 22 percent in that country), leaving much room for improvements in the sector.

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In Pakistan, there it should be a coordination between government and the private sector to improve logistics efficiencies. These include:
Establishing freight villages to serve as logistics hubs Investing in reefer storage facilities to increase the shelf life of perishable goods Developing trading platforms for smaller and medium size producers to sell their goods.

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A good way to measure a countrys logistics expertise is the Logistic Performance Index (LPI), an indicator compiled by the World Bank. According to this index, Pakistan lags slightly above the regional average and is clearly behind the EU average. Pakistans biggest weaknesses according to the LPI are in the Infrastructure (2.37) and Customs (2.41).

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Country Overall LPI Country Overall LPI

UAE

3.73

Pakistan

2.62

EU Israel Oman Jordan Tunisia

3.67 3.21 2.92 2.89 2.76

MENA Morocco Egypt Lebanon Syria Algeria

2.42 2.38 2.37 2.37 2.09 2.06

Saudi Arabia 3.02

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Pakistans Logistic Sector Size

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Composition and Characteristics of Pakistans Transport Market

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Maritime transport accounts for 91 percent of Pakistans international trade. Road accounts for most of Pakistans domestic traffic, accounting for roughly 93 percent. Most OECD countries also heavily rely on road transportation, rail services are used in a higher percentage in OECD countries than in Pakistan (16.0 percent in OECD vs. 2.4 percent in Pakistan)

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Logistical chain or ORANGES exporting to Europe from PAKISTAN V/S SPAIN

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Due to inefficiencies at several points in the logistics chain, citrus export times in Pakistan is Approx 27 days longer than in Spain. Although 55 percent of this time (15 days) is due to Pakistans longer distance to the European destination markets, 45 percent (12 days) is due to Pakistans lower efficiency in the logistics chains. In sum, inefficiencies in Pakistans logistics value chain are responsible for a 45 percent excess time.

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These delays and inefficiencies also have an impact on logistics costs. In Pakistan, logistics costs represent an average 35-40 percent of the total retail price, whereas logistics costs account for only 22 percent in Spain.

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There are opportunities to improve reliability, lead times, and costs in the Pakistani citrus export chain. These opportunities are at the most critical points of the logistics chain, in areas such as trucking, warehousing, customs, and maritime services.

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Transportation Industry Of Pakistan

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Road Transport
Pakistans freight transport is dominated by road transportation. This is similar to most OECD countries; however rail services play a bigger role in these countries than in Pakistan The biggest challenges faced by this industry is Infrastructure and trucking regulations. The dependence of Pakistani logistics chain on road services makes it even more vital for these problems to be corrected to decrease export time and, thereby opening up new markets for Pakistani exports.

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Road Infrastructure Assessment
In Pakistan, there are approximately 260,000 km of roads, of which about 60 percent are paved. The main artery in the country is the National Trade Corridor (NTC), a 1,760 km long. Its length is less than 1 percent of the total road network of Pakistan, but it serves over 80 percent of the urban population. It is managed by the National Highway Authority (NHA).

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Transit times of Pakistani road transportation is 3 times greater than Europe and East Asia. A trip from Lahore to Karachi (1,260 km) takes about 2 days, while from Peshawar to Karachi (1,700 km) takes 3 days. The presence of non-motorized traffic and even pedestrians reduces traffic capacity. Operating conditions are further intensified by extensive commercial activities located along the roads, poor physical condition of the roads, and lack of traffic management in towns.

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Another feature of Pakistans road network is its low density, which leaves several areas underserved. This shows when comparing Pakistans road density with that of neighboring countries such as Bangladesh, Sri Lanka, India or Afghanistan. In this comparison Pakistan only is in a better position than Afghanistan.

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Road network size (in km) in terms of a countrys area (in sq-km)

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Road Services Assessment
Weak road transportation services is one of the main logistical challenges in Pakistan. Bottlenecks like a large informal trucking sector and a lack of refrigerated vehicles, Pakistani perishable goods face a higher logistics costs and lower shelf life, making it more difficult to compete internationally.

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Not only is trucking the main way for moving goods domestically, but it is also an essential link in the Pakistani export chain for goods shipped by sea and, to a lesser extent, by air. Truck loads account for 206,404 million tons-km of goods per year, about 93 percent of the countrys total. For agricultural goods, there is no alternative transport mean for transporting fruits and vegetables out of rural harvesting areas.

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Despite its importance, the Pakistani road transport is immature as a service sector. Absence of qualified service providers is one of the main issue in providing good logistics services. Most providers have a small fleet, even with 2 trucks per owner, means that most trucks are not owned by a formal company, but by individual drivers. Moreover, many trucks are in poor condition, with high average age, and there is very few specialized vehicles with reefer devices or refrigerated trucks available to transport perishable goods.

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One direct consequence of the unreliable road service available in the country is high working capital requirements, as higher safety inventories are needed. Producers of certain goods are also forced to invest their resources in non-core activities such as their own truck fleet, which increases shipping-related costs.

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In summary, the trucking sector in Pakistan is poorly regulated with about 70 percent of trucks part of the informal sector. This environment provides little appeal to large sophisticated operators and service providers willing to enter the market due to low prices, low margins and generally unfair competition.

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These problems are mainly caused due to a lack of enforcement of rules on vehicle inspection, driving license concession, overloading, and hazardous cargo handling.

Motor Vehicle Ordinance 1965, incorporating federal and provincial amendments, is an old and outdated regulation if compared with best practices from OECD countries Obtaining a driving license in Pakistan is relatively easy. There are no proper training schools, instructors, equipped vehicles, or testing and licensing facilities.

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The National Highway Authority (NHA), which was created in 1991, focuses its activity in the planning, development, operation, repair and maintenance of the national highways and other strategic roads. However, the total length of the roads under NHA management only stands at 8,780 km, which accounts for about 3 percent of the entire road network in the country.

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Road Transport Recommendations Regulate trucking industry Increase the capacity of transportation used in transferring perishable goods Provide incentives to renew trucking fleets (Mexico and USA have worked on it ) Reshape the current insurance structure Improve the Operation of the National Trade Corridor (NTC)

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Road Transport Recommendations Expand the role of NHA Benchmark with other transport regulatory authorities like:
Spanish General Directorate for Traffic (DGT) The Finnish National Road Administration (Finnra) The Dutch Road Authority.

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Sea Transport

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Maritime transport accounts for 91 percent of Pakistans international trade. The main ports in Pakistan are Karachi, Qasim and Gwadar. In 2006, 55.85 million tons of cargo was transported through them.

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The port of Karachi is Pakistan's largest and busiest seaport, handling about 60 percent of the nation's cargo. Port Qasim is Pakistan's second busiest port, handling about 40 percent of the nation's cargo. It is located in 35 km east of Karachi. One of its major advantages is its proximity to different national transport facilities. It is 15 km away from a national highway and 22 km away from the airport.

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The port of Gwadar is in Baluchistan,about 460 km away from Karachi. It became operational in 2008. It is a deep-sea water port, being constructed with heavy investment from China. The government of Pakistan has projected this port as the first link to China and Central Asian republics, by providing them with short access route to the markets in the Middle East and Europe.

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Port infrastructure in Pakistan is overall in good shape. Of course, there are aspects that could be improved, such as the connection of the Karachi Port with other transport means or the custom and storage facilities

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Some of the KPIs that can be set by KPT are as follow:
Port operational performance: Dwell time, transit times, loading and unloading rates, and availability of daytime or 24/7 port services. Availability of services to the ship: Bunkers, waste treatment, power, towage, and mooring. Availability of services to the goods: Reefer container service, bounded warehouse, consolidation/de-consolidation, containers depot, and agriculture and sanitary area. Degree of intermodal and logistic integration: Access to land transport including rail and road. IT expertise: Tracking and tracing processes and IT.

Strategic Logistics Management Rail Transport

Strategic Logistics Management

Rail Transport
Rail has become a key transport mode for freight in developed countries and could be used to transport a higher share of heavy non-perishable goods. Weak rail services in Pakistan fail to offer an alternative to road transportation, as it has a poor infrastructure and management issues. Developing rail infrastructure has cost advantages, and is more environmentally friendly than road transportation, and will take some of the stress away from the overburdened and underdeveloped trucking industry.

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Rail Infrastructure and Services Assessment
Pakistans rail network is operated by the stateowned Pakistan Railways (PR) under the supervision of the Ministry of Railways. It comprises 8,163 km, of which broad gauge tracks account for 7,718 km and narrow gauge tracks for the remaining 445 km. It only has international active links with India. However, plans exist to also establish a further connection with China and other neighboring countries

Strategic Logistics Management

Pakistan-Germany rail network size comparison
Concept
Network size (km)

Pakistan
8,163

Germany
41,315

Country area (sq-km)

881,640

357,021

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Pakistan Railways has lost a considerable share of its private freight traffic because many importers and exporters are not satisfied with the railway services, and so urgent consignments are usually transported by truck.

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Pakistan-Germany rail network usage comparison

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