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— Lars Sorensen, Chief Executive Officer - South Asia, Damco India Pvt. Ltd

Damco International A/S, headquartered in Copenhagen, Denmark, is one of the world's leading providers of freight forwarding and supply chain management services and is an independent business activity within the A.P. Moller-Maersk Group. Sandeep Menezes interviews Lars Sorensen on a range of issues in the "growing" logistics market in India.

Logistics infrastructure spend has tripled from $10 billion in 2003 to an estimated $30 billion this year. How do you see this sector in near future?
I think we have witnessed a positive development over the last few years; there is much more awareness from government institutions and private investors that transportation infrastructure needs to improve if manufacturing costs are to be reduced.

We need to ensure that logistics providers and other stakeholders push for infrastructure development such as ports, roads, airports, railways and other transportation modes. I am confident that the government authorities and private investors will continue their focus on infrastructure improvement in India.

India spends around 13 per cent of its GDP on logistics, which is higher than in USA (10 per cent), Europe (11 per cent) and Japan (10 per cent). Inefficient practices have inflated the size of this industry. How can we improve supply chain efficiency?
India's logistics costs are higher when compared to China, Asia- Pacific, Europe and USA. It is essential to improve the logistics infrastructure so that we can compete and lower our logistics cost.

We have seen developed and developing markets spending billions of dollars to ensure better roads, rail and other transportation infrastructure. This has helped them to establish strong industries that flourish on the developed logistics infrastructure.

Logistics costs go up when there is a lack of visibility and reliability in the supply chain. Infrastructure improvements will greatly help to improve reliability and thereby reduce overall costs. Investment in technology will improve visibility of the supply chain and this will also reduce overall logistics costs.

With good transportation infrastructure and systematic planning, we can improve the efficiency and reliability of the Indian logistics supply chain and decrease our overall logistics spend.

India's logistics market, including transportation and warehousing, is expected to go up from $75.19 billion in 2009 to $120 billion in 2014. What will be the main drivers leading to this growth?
India is a large country and with growth in consumption there will be demand to move significant volume of merchandise between different locations and import goods from overseas locations. India is also emerging as a key manufacturing location for several industries and these trends will mean that India will have higher share of global trade in the future, and this will increase the demand for logistics activities in India.

The export containers will specifically witness significant increase over the next five to 10 years; this will also lead to overall logistics industry growth.

Also, India is witnessing the rapid development of logistics intensive industries like automotive and retail which are increasing demand for logistics services. India's rapid industrialisation and infrastructure development is boosting the demand for project cargo.

There is also an increase in the outsourcing of logistics activities by Indian companies to capable 3PL partners.

All these factors are playing an important role in driving the growth of the logistics industry in India.

What are the main challenges facing the Indian logistics sector in next 10 years?
Apart from logistics infrastructure, one of the main challenges is the different state taxes while moving cargo across various states in India.

The logistics industry and providers are very fragmented across India. For example, it is very tough to go out and find one trucking company that can serve entire India; it is also tough to find one warehousing company serving entire India. In such a fragmented industry one has to involve a number of different players to work efficiently.

 In future, we will see consolidation in the industry and more players capable of offering services across the country.

What is the current size of the global project logistics industry? What is the estimated growth rate of the industry?
The key is that it is a growing market. In India, we are witnessing a lot of industrialisation and infrastructure development. The government and private sector is investing in energy, irrigation projects, roads, ports and these investments are resulting in increased demand for project logistics.

Many Indian companies are also winning turnkey contracts in overseas locations like Africa and Middle East, so there is demand for project export logistics too.

How does the Indian logistics market compare with the global market?
If one divides the global logistics market between developing and developed nations then India is definitely growing faster than the mature markets. Our estimate is that India, China and some of the African nations are growing fastest right now. India is a very interesting place to be in terms of logistics.

Damco has been in India for nearly 18 years. What are your company's main achievements and future plans?
As a foreign player it is always difficult to convince local customers to use you. It is a natural challenge since one has to build trust in the market. In the beginning, we mainly serviced overseas customers, but looking at our customer portfolio now it is predominantly driven by local customers.

We have managed to use our global experience and tie that into local knowledge developed over the years. We do not try and impose global solutions to Indian challenges. For us, India is a different market and needs to be dealt with differently. But we do believe in sharing our global experience here in India while focusing on local requirements.

Our aim is to grow our current size by two to three times in India over the next four to five years.

Bilateral trade between India and Africa is expected to touch $70 billion in next five years. Tell us about Damco's recently created India-Africa trade lane.
Historically, there have been close trade relations between many African nations and India and this will continue and expand further.

Damco has a strong network in Africa which allows us to offer reliable and competitive services in the hinterland through an integrated, one-stop solution.

We have set up a team of Africa specialists to offer our customers unique and value adding solutions on the India-Africa trade lane. This initiative will help us to bridge the knowledge gap about Africa and will enable our customers to create a competitive and reliable African supply chain with an improved speed.

Why did Damco merge its supply chain management services (Maersk Logistics) and freight forwarding activities (Damco)?
The main aim of merging the brands was that we wanted to be easier to do business with from the customer's point of view. Secondly, we wanted to move away from the Maersk brand as many customers saw us as closely connected to Maersk Line even though over half of our overall volumes were shipped on non-Maersk carriers. We are a very neutral forwarder and we work with all major carriers. The new Damco brand helped us to establish this neutral image in the market.

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