AN ANALYSIS ON CONTAINERIZED CARGO SERVICES AT COIMBATORE CITY

Dr.M.Ashok Kummar, Professor, PG Department of Research & Commerce, Sree Narayana Guru College, K.G.Chavadi Coimbatore – 641 105

E.mail.: mashk21@yahoo.co.in, Mobile No.: +98421 68002

M.Saravanan, Assistant Professor, PG Department of International Business, Sree Narayana Guru College, K.G.Chavadi Coimbatore – 641 105 E.mail.: shravan.murugan@gmail.com, Mobile No.: + 99434 37749

INTRODUCTION

Logistics Management has been identified as the primary challenge for organizations desiring to

exploit logistics capabilities to gain and maintain customer loyalty. The concept, based on total

cost analysis and total quality control, ties together all logistics activities and views the results as

a system that strives to minimize total distribution cost, while achieving desired customers levels

through providing satisfaction to customers and retaining customer loyalty. The fusion of

information logistics and transportation technologies provides rapid crisis response to track and

shift assets, even while en route and to deliver tailored logistics packages and sustainment

directly at the strategic, operational and tactical levels of operations.

In 1991, the Council of Logistics Management modified its 1976 definition of physical

distribution management by first changing the term to logistics and then changing the definition

as follows:

“Logistics is the process of planning, implementing and controlling the efficient, effective flow

and storage of goods, services and related information from the point of origin to the point of

consumption for the purpose of conforming to customer requirements”.

OBJECTIVE OF LOGISTICS

The objective of logistics is to minimize total cost. Given the customer service objective, where

total costs equal transportation costs, warehousing costs, order processing costs and information

costs. Marketing and logistics efforts are highly complementary. Product based decisions and

unitization concepts have to be supportive of each other. Channels of distribution will greatly

depend on the transportation and warehousing policies of the firm. Sales measures must be in

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coordination with the level of logistical competency of the firms. Thus, if marketing and

logistics managers begin to think strategically, the coordination built in will create a competitive

edge for the firm, over other competitors.

OBJECTIVES OF THE STUDY

01. To study the containerized cargo movement in Coimbatore city and to trace out the

composition and direction of containerized cargo from and to Coimbatore city.

02. To study the share of containerized goods in global trade.

03. To find out the problems faced by the agents in handling containerized cargo and

suggestions for the same.

IMPORTANCE OF THE STUDY

Containerization, which today comprises 85% of the general cargo market in the world, made its

beginning using a modified World War II T -2 tanker. It provides today the most cost effective

and efficient service and has constantly adapted itself to the needs of the shipping world. In

international trade, containerization is a term which is inevitable. It is true that developing

countries like India use more number of containers in the present context than in the past. The

most outstanding contribution of containerization is the suitability and capability of containers

for door to door transportation internationally. Containerization helps to increase many fold

productivity in cargo handling by involving labour. Moreover, when unit load is bigger, manual

operation is not possible where mechanical methods are introduced which involve capital

investments too.

India’s expenditure on logistics activities, equivalent to 13 percent of its GDP, is higher than that

of the developed nations. The key reason for this is the relatively higher level of inefficiencies in

the system, with lower average trucking speeds, higher turnaround time at ports and high cost of

administrative delays, to cite a few of the examples.

METHODOLOGY

The study was empirical in nature and was carried out to find the role of containerized cargo in

Coimbatore city. A standardized questionnaire method was administered in collecting data for 2

the above study purpose. The sampling frame for this study was agents acting as CUSTOMS

HOUSE AGENTS. Convenience sampling technique was selected as a sample design. The study

was exclusively conducted in Coimbatore city to find out the problems faced by the agents in

handling containerized cargo. The study was conducted in Coimbatore City and the sample size

of the agents is limited to One Hundred and Fifty only.

HISTORY & GROWTH OF CONTAINERISATION

The system is a long established one and was carried out in primitive form in the North Atlantic

Coastal Track in the 1930s, when the vessels were called Van Ships. The concept gained

momentum in 1955, when an American named Malcolm McLean devised a new way to ship

goods. Lorry body was detached from the drivers cab and lifted on to the deck of the ship, thus

completely taking away the work of workers to handle the individual item inside the cargo

compartment. Malcolm McLean’s first ship, an oil tanker called the ‘Ideal – X,’ made its initial

voyage from New York to Houston in 1956 with lorry bodies on its deck. Computerization plays

an important role in the operation, controlling the delivery and pick up of containers from the

truckers as well as the movement and positioning of all containers in the terminal.

CONTAINER TERMINOLOGY

Container as the meaning implies, is an equipment used to store and carry goods. In shipping, the

term was used to refer to any type of box used to carry cargo. Presently container is also known

as ‘Box‘ or ‘Van’ in many countries, particularly in the U.S.A. Containers can be classified

according to (a) Raw Material (b) Size and (c) Usage.

CONTAINER MARKINGS

For identification, containers have markings showing Owner code, serial number, check digit,

country code, type code and maximum gross and tare weight. Each container has an

identification code or container number, a combination of the 4 letter characters that identify the

owner (the operator of container) and the 7 numeric characters that identify the container. The

container number can be found on the outer and inner side walls. The container number is

entered on the bill of lading to facilitate the identification and tracking of the container and the

cargo.

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LEASING OF CONTAINERS

Containers are taken on lease by carriers from container manufacturing companies or leasing

companies who own containers. There are four types of leasing arrangements. They are as

follows:

Trip lease ; Financial lease ; Master lease ; Long term lease

CONTAINER DIMENSIONS AND CAPACITY

Containers intended for intercontinental use have external nominal dimensions of:

Length – 9.8125 ft (2.991 m) as 10 ft; 19.875 ft (6.058 m) as 20 ft; 29.9375 ft (9.125 m) as 30 ft

and 40 ft (12.192 m); Width – 8 ft (2.438 m); Height – 8.5 ft (2.591 m) and 9.5 ft (2.896 m).

The 20 ft (20’) & 40 ft (40’) containers are very popular in ocean freight. The demand for the

high cube container is increasing. The popular high cube container has a normal height of 9.5 ft

(9.5’ or 9.6’).

RESULTS AND DISCUSSION

Table No.1.1

Frequency of the total container traffic handled in international market & Domestic market in the Southern Region (in TEUs)

Year 2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

International 127868 135095 170941 184518 219226 233947 264110 276283 213450 263518

Domestic 64312 70316 70884 64025 69835 69521 76549 69522 70907 71014

Total 192780 205411 241825 248543 289061 303468 340659 345805 284357 334532

Source: www.concorindia.com

The above table shows that the total container traffic (fig.1) handled in the international market

and domestic market. The entry on expanding scale in international transport of goods represents

a major change in the traditional transport process and hence it is clearly concluded that there is

rapid usage of containers in the international market. The container traffic handled in the

domestic market is increasing year by year. This is due to outsourcing logistics activities to

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experienced logistics service providers which enable companies to get very efficient and

customized logistical support while themselves focusing on the core of organizational activities.

Table No.1.2

Table showing the share of containerized cargo in global trade, 1980 – 2010

(in million tones)

Year 1980 1985 1990 1995 2000 2005 2010

Containerized Cargo 510 530 680 730 790 860 940

Other General Cargo 410 390 400 330 270 290 250

Source: Intermodal shipping

Containerized cargo has experienced a remarkable growth both in absolute and relative terms.

Freight forwarders realized that significant improvements in cost, time and reliability could be

realized with containerization. This growth was further accelerated with the development of

inland freight transport systems which is again substantiated in Table 1.2.

Table No.1.3

Table showing the type of services rendered

Description No of Agents %

Containerized goods 146 97.3

Conventional goods 1 0.6

Containerized & Conventional goods 1 0.6

Break Bulk 1 0.6

All types of service 1 0.6

Source: Primary data

Table 1.3 shows that 97.3% of the agents carry containerized goods because there is no

intermediate handling at terminal transshipment and less packing is needed for containerized

shipments while 0.6% of the agents opt for all types of services like Group Age, General

Haulage, Shared Transport / Distribution and hence could be concluded that most of the agents

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carry containerized goods. The reason behind the growth of containerized goods is that the usage

of containers in international trade has increased rapidly and more significantly, the impressive

export performance in developing countries like India, China, Bangladesh, etc.

Table No.1.4

Table showing the mode of containerized movements

Description LCL FCL Both Others (Break Bulk)

No of Agents 3 7 139 1

% 2 4.6 92.6 0.8

Source: Primary data

It is clearly evident from the above table that 139 agents prefer both FCL and LCL mode of

containerized movement due to consolidation due to which it becomes easy for shippers /

consignees of small parcels and the rates are likely to remain more competitive when compared

with conventional tonnage. This is because majority of the exporters ship the goods according to

their convenience and requirements of their shipment of cargo.

Table No.1.5

Table showing the type of Industry concentrated on by the agents

Description No of agents %

Engineering 9 6

Textiles 135 90

Electronics 3 2

Chemicals 1 0.7

Others 2 1.3

Source: Primary data

It is understood that 135 (90%) of the agents are concentrating on textile products followed by

engineering goods. It is due to the system that supports the transport activities regarding the

mobility of the goods transported in the containers and Coimbatore is considered as a hub for

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textile and textile related products. As rightly said Coimbatore is the Manchester of South India

and nearby Tirupur is rightly known as the Garment City / Textile City. This is followed by

engineering goods.

Table No.1.6

Table showing the export destination

Description No of Agents %

Europe 131 87.3

USA 5 3.3

Far East 5 3.3

Middle East 4 2.8

Others 5 3.3

Source: Primary data

It is clear from the above table that 87.3% of the agents are dealing with the European continent

followed by USA and Far East Countries. This is because, after the abolition of quota

restrictions, exports to Europe and USA has increased more specifically from Coimbatore as

many exporters are keen in concentrating on these markets.

Table No 1.7

Table showing the opinion of agents about cost, safety & time involved

Source: Primary data

Parameters / Attributes

Excellent (%)

Fair (%)

Good (%)

A Cost 90.6 8.0 1.4

B Safety 6.0 91.3 2.7

C Time Involved 8.0 88.0 4.0

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91.3% of the agents’ opinion was fair with regard to the safety while using the container. 6% of

the agents’ opinion was excellent with regard to the safety while using the container. It is also

inferred that 90.6% of the agents’ opinion is excellent about the cost while handling with the

containers. In order to remain cost-competitive, contract manufacturers will be required to

provide integrated logistics solutions that will bolster the cost savings potential of the

outsourcing initiative. The increasing trend of outsourcing will, in turn, drive strong demand for

logistics solutions in the country. Most of the agents’ opinion is fair (88%) while using the

container with regard to time involved. A web system has been developed for data acquisition,

data storing, data processing and data retrieval in order to optimize business processes and also

to save time.

Table No.1.8

Table showing the preference of stuffing of goods & the problems while stuffing the goods into the container

DescriptionPreference

No of Agents / (%)Description

Problems

No of Agents / (%)

Factory 6 (4%) Cargo damage 128 (85.3%)

Warehouse 4 (2.7%) Mishandling 4 (2.6%)

ICD 138 (92%) Packing breakage 4 (2.6%)

Port 2 (1.3%) Damage while loading and unloading

12 (8%)

Others 2 (1.5%)

Source: Primary data

The above table clearly shows the preference of agents for stuffing of goods and also the

problems faced by the agents while stuffing the goods into the container. It is evident from the

above table that 92% of the agents prefer to stuff the goods in ICDs because ICDs carry out

several functions such as stuffing, de stuffing, locking, sealing, providing trailers, chassis,

railway flats, repair handling equipment, storage facilities for reefer, customs examinations and 8

processing of customs documents, issuance of combined transport documents by carriers. 85.3%

of the agents faced the problem of damage of cargo while stuffing the goods into the container

because not all merchandise can be conveniently containerized and also due to the bad

maintenance of the containers while 8% of the agents faced the problem of damage while

loading and unloading the cargo.

Table No.1.9

Table showing the type of containers used by the agents

Description No of Agents %

General Purpose only 138 92

General Purpose & Flat Container 5 3.3

General Purpose & Thermal Container 6 4

Break Bulk 1 0.7

Source: Primary data

The above table clearly shows the type of containers used by the agents in Coimbatore city. It is

concluded that most of the agents (92%) use only general purpose container while 4% of the

agents use general purpose and thermal container (which requires insulated storage) in

Coimbatore city.

Table No.1.10

Table showing the size of the container preferred by the agents

Description No of Agents %

TEUs 50 33.3

FEUs 10 6.6

Both 45 30

Based on requirement 40 26.6

Break Bulk 5 3.5

Source: Primary data

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The above table clearly shows the size of container preferred by the agents. It is concluded that

33.3% of agents prefer TEUs, 30% of agents prefer both TEUs and FEUs and 26.6% of agents

prefer containers based on the requirement. This is because cost of obtaining TEUs (fig.2) is

much cheaper than FEUs and all attributes help in reaching the cargo in much quicker time to the

receiver, thus improving the bottom line of all the players in the supply chain.

FINDINGS

It is a known fact that Coimbatore stands as the Manchester of India and Tirupur being the Knit

wear City is also popularly known as Mini Japan which is rich in garment industry having a wide

range of both small and medium scale industries. (As on 2009, USD 2,92,29,01,070 worth of

exports of apparels were made by India to America) where not only the small scale industries

but with infrastructural products and engineering goods. It is observed from the study that 56%

of the agents are having a credit of servicing the clients for the past 5 years. Less cost of

operation, perils of sea, multimodal transportation, inappropriate handling of the cargo, natural

calamities and world wide maritime threats are the major reasons which have given a face lift to

this Logistics Industry (84%). It is understood that intermediate handling such as loading and

unloading of cargo (fig.3) is not possible and the study shows that the maximum number of

agents (92.6%) prefer both LCL and FCL mode of using containerized cargo. 90% of the agents

are specialized in handling textile products followed by engineering products which makes it

evident that still Coimbatore ranks first in exporting business.

87.3% of agents are concentrating on European markets followed by USA and Far East.

Liberalisation and the consequent opening up of the domestic economy necessitated a higher

order of economic management. 90.6% of the agents felt good with regard to cost of using the

container. In addition, the evolving business landscape and increasing competition across

industries, is creating the need for more efficient and reliable logistics services than what exist

today. After the terrorist attack on the World Trade Centre (Twin Tower) in America in 2001, the

US government posed severe restrictions to increase the security of its country. By this, the

usage of the containerized cargo has been increasing. 91.3% of the agents have given excellent

feed back with regard to safety measures while using the container. The facility is helpful to the

exporters as they can export the goods from the nearest point of their factory or premises which

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reduces the unnecessary transportation cost, labor and saves time. It is found that the EDI is at a

inceptional stage where poor human resource and semi skilled labour. This has been exposed in

the study where 96% of the agents were not comfortable with the functioning of the EDI and

hence, the Government of India and the Port Trust of India should take necessary efforts in this

regard. 92% agents prefer ICD for stuffing the goods. Easy accessibility to the complex, less

procedural formalities and easy handling of goods, availability of containers were the foremost

reasons where ICDs were preferred. 92% of the agents use only general purpose containers.

(fig.4). Players now have the opportunity to leverage economies of scale, complemented with

better infrastructure, to provide integrated logistics solutions which are cost effective and hence

33% of the agents prefer TEUs with regard to size of the container.

SUGGESTIONS

The infrastructural bottlenecks should be resolved and use of state of the art technology should

be facilitated. It is suggested that appropriate packing is necessary in order to ensure safety of the

goods.

The role of computers play an important role and the overall performance using computers need

to be developed. The freight rates must be made comparatively less in order to ensure more

movement of containers. Planning in advance will be the best way for easy accessibility of

containers. EDI operations in ICDs are still in the nascent stage and hence the authorities should

focus on implementing the EDI facility in ports, ICDs, CONCORs, CFS, etc., which will

drastically reduce the turnaround time.

The transportation trailers must be made available to ensure containerized cargo movement. For

easy tracking of container, elements like hardware, telecommunication network and

communication software and transfer software need to be improved for the EDI process.

Container market needs to be strengthened which will lead to development of the Indian Market

worldwide.

CONCLUSION

The study emphasizes the importance of distributing merchandize in a unitized form. Container

serves to prevent or reduce damages and risk and encourages trade development and provides

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quicker payment of export invoices. The most outstanding contribution of containerization is the

suitability and capability of containers for door to door transportation internationally. The

problems faced by the agents were analyzed and suggestions were made to overcome the same.

Finally containerization is a system and it will show benefits only when it is properly

administered.

FUTURE SCOPE OF THE STUDY

Currently, the annual logistics cost of the world is about USD 3.5 trillion. For any country, the

annual logistics cost varies between 9% and 20% of the GDP. The annual logistics cost in India

was 14% of the GDP in 2010, which translates into USD 140 billion, assuming the GDP of India

to be slightly over USD 1 trillion. Out of this USD 130 billion logistics cost, almost 99% is

accounted for by the unorganized sector (such as owners of less than 5 trucks, affiliated to a

broker or a transport company, small warehouse operators, customs brokers, freight forwarders

etc.,) and slightly more than 1% i.e., approximately USD 1.5 billion, is contributed by the

organized sector. Besides the core transportation and warehousing services, the business of

logistics is evolving to encompass services that either enhance the effectiveness of existing

transportation and warehousing services or cater to associated value chain elements. All such

services that do not directly involve transportation and warehousing have been classified as value

added and emerging services such as express services, track & trace facility, cold chain services

etc.,

So, one can see that the logistics industry in India is in a nascent stage. Hence, there is immense

potential for the growth of containerization in the world in general and so research can be carried

out on logistics outsourcing and third party logistics providers, as they may enable exporters and

importers to get efficient and customized logistical support.

GLOSSARY ICD – Inland Container Depot

TEUs – Twenty Feet Equivalent Units

FEUs – Forty feet Equivalent Units

LCL – Less than container load

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FCL – Full container load

EDI – Electronic Data Interchange

CONCOR – Container Corporation of India

CFS – Container Freight Station

BIBLIOGRAPHY

BOOKS

Dr. Krishnaveni Muthiah, Logistics Management & World Seaborne Trade, Mumbai: Himalaya Publishing House, 2006

Dr. C.R.Kothari, Research Methodology – Methods & Techniques (Second edition), New Delhi : Wishwa Prakashan, 2002

Donald J. Bowersox & David J. Closs, Logistics Management, Tata McGraw - Hill Publication; pp 3 to pp 20, 2007

Vinod V. Sople, Logistics Management, Pearson Publication; pp 2 to pp 13, 2007

Dr. K.V. Hariharan “Containerization and Multimodal transport”.

“Indian Logistics Industry” (2008) published by Cushman & Wakefield

S.K.Bhattacharya, Logistics Management – Definition, dimension and Functional Applications, New Delhi: S.Chand Publications, 2010

“Logistics Management in Global Marketing” (2010) published by Dr.G.Chandrasekaran

WEBSITES FOR REFERENCE

www.google.com

www.logisticsmanagement.com

www.concorindia.com

www.researchindia.com

www.questia.com

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fig.1

fig.2

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fig.3

Fig.4

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