Global logistics services provider gears to capitalise on opportunities Sri Lanka presents

BY Shabiya Ali Ahlam

Sri Lanka has captured the interest by one of the world’s top three supply chain and logistics service providers, Damco.

Impressed by the development and the string intent in making the nation a logistics hub, Damco is gearing up to deeply embed its roots in the country.

Mirror Business recently sat down with Damco CEO for India-Middle East and Africa Region, Charles Van der Steene during his first visit to Sri Lanka to gain insights on what the global company would bring to the table. 

What brings you to Sri Lanka?

It is my first visit to the country ever. What brings me to Sri Lanka is not my desire from a touristic point of view but more from a business perspective. From a Damco perspective Sri Lanka is a crucial hub location which has gone through a lot of roller coaster development over the last few years and is now building up to become quite an important hub for the primary organisation and the global organisation. To underscore that it is an important component it was important for me to be here. To mingle with the staff and spill over the message that we are not just interested in Sri Lanka but we are here to invest as part of the global Damco organisation.

How is the region faring in the logistics arena?

Pretty good. I am lucky in a sense that I have been given the responsibility of a region that is growing. And growing at a dramatic pace depending on which country you look. From a logistics perspective we have seen a steep repositioning of sourcing away from China and some traditional South Asian origin, such as Cambodia and Vietnam. A lot of the sourcing has been moved to Bangladesh, India, Sri Lanka and a few African countries are being looked upon to replace some of those sourcing. This means from a global supply chain point of view that this region is gaining importance quite dramatically.

What would that mean in terms of capitalizing on opportunities by the countries you mention? What can these countries do to reap the most benefits from this shift?

Certainly a few areas they can look upon. For one it is capitalizing on the fact that all of a sudden these countries become part of a global podium, which they haven’t been on before. Sourcing for the US, Europe, and China, has resulted for them to be a cog in a global network which brings employment, the primary need for development, and infrastructural development, which in the long run will be beneficial to the country.

Coming to the country specifics, what are your observations on Sri Lanka’s logistics industry?

A:Based on the discussion we had over the past few months about Sri Lanka, first impression is that it clearly is a country where deliberate investments are being made in infrastructure, which is important. So we are seeing a deliberate intent in developments taking place using foreign investment and local initiatives to build the country into a location to be reckoned with.

If I take it a bit boarder, from a global scale, we know these investments are being made and knowing that has connected a few companies together looking at Sri Lanka as a hub, beyond just India, but as a global hub for the Silk Belt. Sri Lanka has the ability of a great local pool of knowledge, high literacy. This for us is crucial being in a global supply chain. This asset is not what many other countries would be able to boast. If you look at the different components we need to be a serious contender in the global supply chain, Sri Lanka ticks many of these boxes, which for us is a natural stepping stone to say this is where we are going to invest. Together with the Maersk Line and APMT, our sister companies, all of a sudden we have a magical combination to truly put our money where our mouth is, building on what Sri Lanka can offer into our joint benefits.

 Sri Lanka is looking to be a logistics hub by making the most of its strategic location, so what do you opine is its scope in this regard? What should it get right?

A: A few thing are crucial that we would need in the mid to long term. We would need investment in infrastructure to continue, not just the ports but the road network feeding into the ports. We would need investments into the digital highway, this speaks the availability of high speed internet, communication possibilities, and more that would be crucial. Already today penetration of internet mobile connectivity is extremely high, that is a must for us to continue to develop at a faster pace in the surrounding countries.
We would say also development in the public transport system. Reason being, while the physical infrastructure of ports and airports are taking place, the availability of staff in our business is crucial. The constraint today is to get enough staff attracted to our industry and locations which are more in the remote areas. This is not dissimilar in other countries, but will be a bigger constraint as we continue to grow. As much as we talk about assets, it is going to be very much a service industry where our success is driven by the people we are able to employ and failing our ability to employ the right people, closes the Sri Lankan market, not just for Damco but for other companies as well. That might reduce the competitive positioning.

Sri Lanka is doing a great job already but we would need to continue, specifically the last component. The staffing ability is my biggest concern; this needs a more deliberate policy making. If for the logistics industry the last pillar is key for economic growth, this final pillar needs greater emphasis. This is the biggest we have faced across the globe the moment economies start to grow.

You mentioned Damco is looking to invest in Sri Lanka. Would you be able to share what are you looking at and where?

Firstly there has been a deliberate investment for us to go into a new Consolidation Freight Center (CFS) which we recently opened. It is an increase of the footprint we have before. That investment is to ensure our ability to consolidate more in a modern environment of local produce for us up-function. We will continue to evaluate this as we go forward. That is the initial physical investment in terms of money. The second investment is in people. It may sound strange but the investment is to move also into a country structure, again for Sri Lanka which was a commercial office in the regional set up. But the decision was made last year that we will never grow the way we wanted to grow unless we have a country focus and a country management team.

The third investment is more from a group perspective. Maersk, APMT, and Damco, where the hub function of Sri Lanka will be supported more by physical warehouses, which could be depots or further consolidation centers. 

What are the areas you are looking at in Sri Lanka?

The proximity to the Free Trade Zone is important and also connectivity to the airport and sea port. So the CFS we have opening is in Ja-Ela that is close proximity to the Katunayake zone. Wherever customers are located we will consider rather than looking at an isolated area. So connectivity is a key criteria for decision making here.

Any plans in the North and East province?

It is an open plate as of now. When there is a specific supply chain need for a customer then we will take that decision. Currently it is more Western province centric. The more strategic outlook we have for Sri Lanka is on two main pillars, one is the firm belief that we get from a sourcing perspective and the other is that Sri Lanka will continue to grow and do so dramatically. Now that we have an open podium to go for Europe, we expect to see significant growth. 

The other pillar is the hub related component. We like many of the other believers of the belt philosophy do see this as a natural up-location. The strategic outlook will be more fluid.

Coming to a more recent hit, could you shed some light on how Damco was impacted by the global cyber-attack?

We were impacted quite heavily by a cyber-attack that was not entirely focused on our group. By an unfortunate coincidence it impacted us heavily. For about four weeks,  all systems were completely down. We had to go manual but system after system was brought back online to now a situation where our core systems are up and running. Our regular customer processes are back to normal. But from a backlog perspective to a recovery perspective, we still have a few weeks to go before we are fully done. I am sure both ourselves are customers have realized how fragile are and can be. Cyber-attacks will become more a norm than an exception. We were obviously impacted but as Maersk line owning a very high percentage of global trade, meant that global trade was impacted immensely. For our customers, many large retailers in the US and Europe, store sales were impacted. Ports congestion was impacted. The intertwine nature of global supply chain that we talk about in the more theoretical level is how shown to be very real and practical and is mended on business continuity planning.
The learning for us was that we better make those plans together rather than in silos. I can have a great plan but unless you have one which is connected it will not make sense. Testimony to the resilience of the group is that we have been able to manually run a 70,000 people large company for a few days without things coming to a grinding halt. A very positive learning but a painful one.

Have the group been able to quantify the losses?

Not as yet. But our costs in terms of equipment, such as devices, and communication to operate manually, went up.Many of our customers redirected some of their activities away from us temporarily to our peers simply because for a few days we were unable to take new orders. Difficult to quantify the loss but the impact sits on those two pillars.

What actions have been taken to prevent such incidence from repeating?

The actions we have taken are the actions that we are currently still undertaking. We have vowed ourselves to become the strongest and secure IT platform that exist within our industry, that is ongoing as we speak. We have taken a number of fierce IT security actions.