Russian Transport and Logistics Markets - With Special Focus on Vladivostok
======= TABLE OF CONTENTS =======
1 TRANSPORT & LOGISTICS MARKET OF VLADIVOSTOK, ITS FEATURES AND PROBLEMS OF THE LAST YEARS 4
1.1 OVERVIEW 4
2 DETAILED INFORMATION ON MAIN ENTRY PORTS 10
2.1 SEA 10
2.2 AIR 11
2.3 RAIL 14
2.4 ROAD 15
2.5 PUBLIC TRANSPORT 16
3 TOP 30 SUBCONTRACTORS (OWNERS OF FLEET OF ANY KIND OF TRANSPORT, WAREHOUSES, CUSTOMS TERMINALS ETC.) PER EVERY BUSINESS FIELDS 17
3.1 AIR TRANSPORTATION 17
3.2 MARITIME TRANSPORT 17
3.3 AUTOMOBILE TRANSPORT 18
3.4 WAREHOUSES 18
3.5 CUSTOMS SERVICES 20
4 MAJOR PLAYERS OF TRANSPORT & LOGISTICS MARKET PER BUSINESS FIELD: 22
4.1 MULTIMODAL OPERATORS 22
4.2 MARITIME TRANSPORT 31
4.3 AUTOMOBILE TRANSPORT 33
4.4 RAILROAD TRANSPORT 34
4.5 WAREHOUSES 35
4.6 CUSTOMS SERVICES 38
5 INDUSTRY MARKET SEGMENTATION (WHICH MARKET-CONSUMING SEGMENTS ARE PRESENTED AND IN WHICH PROPORTION): 40
5.1 INDUSTRY MARKET SEGMENTATION 40
5.2 FMCG 42
5.3 RETAIL 42
5.4 OIL & GAS 46
5.5 OTHERS (IF ANY) 46
6 THE LIST OF COMPANIES WHICH ARE PRESENTED AT THE VLADIVOSTOK MARKET WITH CONTACT DETAILS INFORMATION: 48
======= RESEARCH TARGETS =======
- Vladivostok (including surrounding areas if applicable)
- Transport and Logistic services, including main business fields:
- Air transportation
- Maritime transport
- Automobile transport
- Railroad transport
- Customs services
- Major players of transport & logistics market
- Subcontractors (that are owners of movable and immovable assets in field of transport and logistics)
Demand market – Main consuming segments:
- Oil & Gas
- Others (if any – will be identified during research)
======= RUSSIAN LOGISTICS MARKET OVERVIEW ======
In the future the logistics industry in Russia may benefit more from its geographic location connecting East Asia and Europe. Introduction of port special economic zones will stimulate internal and external trade flows between Asia, Europe and North America.
Russia also plans to use special economic zones as a lever to achieve its objective to create new transportation corridors. Russia has established around 20 special economic zones; major objectives are to create optimal conditions for foreign and domestic investments and to develop modern industrial complexes able to produce high-quality products. The resulting production is intended to stimulate the economy and the Russian export base. Four special economic zones have been created at transport hubs with the intention of attracting both domestic and foreign investment as well as to develop regional transportation and logistics infrastructure. The zones are located at the airports of Krasnoyarsk in East Siberia and Ulyanovsk in the Volga area, at the Sovetskaya Gavan port in the Khabarovsk Territory, in the Far East and at the Port of Murmansk in the North.
The Russian government sees the T&L (Transport & Logistics) industry as one of the key priorities for the economy. The government is willing to actively use public private partnership (PPP) tools to develop infrastructure projects. In order to help facilitate PPP activity, the government has introduced a law on concessions and has established a special investment fund to finance infrastructure projects.
The logistics market in Russia is not yet saturated. The overall number of players in the market is fairly small, particularly in comparison with Europe or even China. The market is currently dominated by Russian companies, although some foreign players are very active in Russia and are constantly increasing their presence on the market. Many experts are optimistic about the prospects of multinational logistics service providers in Russia, because leading international logistics service providers are more competitive than Russian domestic players due to bigger financial resources and leading experience, especially in the 3PL and 4PL sectors.
Efficient, reliable and flexible supply chain is rather an exception than a rule in Russia with many technical standards routinely accepted in the West being at the early stage of introduction in the region.
In Russia supply chain actors have to overcome problems of substandard quality of goods, inadequate infrastructure, lacking efficient production and distribution capacities and general unreliability of logistical operations. The existing transportation/logistics networks are inclined towards handling raw materials at the expense of higher value-added goods. That could be added to vast geographical scope of the internal markets and quite dynamic consumer demand for various goods and services. The situation is aggravated by the growing lack of highly qualified logistics and SCM personnel, which consequently causes insufficient customer and service dedication of the logistics operations.
The share of transportation and forwarding sector comprises 55% of the CIS logistics services market with that of warehousing services standing at 13% and integration/SCM (supply chain management) services - at 32%.
A factor negatively influencing developments in supply chains is a lack of understanding of logistics issues by many policy makers. An efficient global supply chain depends on the ability of a company to deliver a product through established transport logistics. Transport congestion is one of the major factors hindering trade between Russia and other countries and appearance of global supply chains. For example, the lack of reliable and economically viable logistics corridors is one of the reasons behind the falling share of fruits and vegetables from Central Asia at the Russian market.
The Russian policy makers are constantly discussing ways of improving the work of transport corridors both within the region and also a transit link Asia-Europe through Russia. The suggested solution is usually new investments into physical infrastructure. Very little attention is currently devoted to raising the efficiency of regulatory controls (which is one of the major complaints from business) through introducing risk management techniques, schemes of “authorized economic operator”, better transboundary cooperation on transit, establishing green lines for transit trucks, etc. Better understanding of realities and how global supply chains work by policy-makers and by control state agencies will help to promote and to bring the holistic vision and integrated complex solutions to logistics challenges at Russia.
The major technologies of integrated interaction between supply chain actors which already now are actively applied in the Russian business environment, are CPRF (Collaborative Planning, Replenishment and Forecasting), VMI (Vendor-Managed Inventory), SCPM (Supply Chain Planning and Monitoring), EVCM (Extended Value Chain Management), SCEM (Supply Chain Event Management), ECR (Efficient Consumer Response).
Warehouse management systems (WMS) are being implemented widely and successfully enough in Russia as demand for them is steadily growing. Network enlargement is accompanied by complication of logistic processes, emergence of one or several distribution centers involving the introduction of WMS systems. Other blocks of SCM systems: planning, demand forecasting, etc. in the local conditions are implemented more seldom. The local companies in most cases apply single blocks of ERP systems separately. But now many companies are coming to a conclusion that modules of existing ERP systems do not possess the characteristics required for efficient management of supply chains, and for effective performance of such tasks as planning and a demand forecasting, the organization of reverse logistics, service enhancement specialized SCM systems compatible and connected with a universal ERP system are needed.
It should be noted that experience of supply chain management in Russia is still insignificant. Immense introduction of SCM practices in Russia could be expected in 2015 – 2020.
Currently the most potent demand for complex SCM services in the CIS countries comes from the retail trade in consumer goods, especially from the vibrant FMCG (fast moving consumer goods) sectors.
In the domestic market of Russia the process was actively implemented through concentration of the capital in the retail network trade accompanied by strengthening of the market power (oligopolistic situation) of large national operators and of foreign retail networks which actively moved ahead to regions in the last decade forcing out local operators. Small regional networks find it more and more difficult to compete with federal players, and many prefer investing in joint projects to avoid bankruptcy or takeover. Experts believe that the network retail market in non-metropolitan regions still remains unsaturated and there is a considerable space for growth of distribution networks. In 2015 – 2016 expansion to regions both of retail operators and of distributors will proceed. In the foreseeable future the competition between federal and regional players is expected to grow.
There is no doubt that sooner or later 3PL- and 4PL (see Appendix for terminology) foreign service providers will develop in Russia. It will happen when the share of network trade in the total retail turnover in the region will exceed 50%. It is going to take at least 4 - 5 years.
Representation of retail networks in Vladivostok (2013):
- 9% of international retail chains represented in the city to the total number of international retail chains represented in Russia;
- 33% of federal retail chains represented in the city to the total number of federal retail chains represented in Russia.
It is worth noting that the very logic of development of retail networks as a dominating form of distribution channels in Russia in the last decade fits perfectly well into organizational features of building supply chains. The need for SCM solutions is the more acute, the wider is the geographical spread of a network, the more number of outlets and their formats it has and the higher the competition by price and assortment is in the market.
Expansion from the large cities to the smaller ones as well as from metropolitan regions to peripheral areas is becoming the main avenue for retail trade development in the CIS countries for the near future. Retail networks are not present at many regions at all due to logistics problems, to lack of suitable commercial space and low consumer power of the population.
The regional growth of retail networks inevitably requires solving of problems related to supply chain operation. Obviously, this question is more actual for grocery networks due to limited of the goods, taking into account the trend of growing sales of products with shorter shelf lives. Therefore many companies are increasingly relying on the development of their own logistics, including investment into regional distribution centers.
Basic problems and barriers
- Lack of investments (including foreign ones) into logistic infrastructure of the companies and in international transport corridors (ITCs).
- Long payback periods of investment projects into building logistic infrastructure, high credit charges, insufficient development of transport (incl. motorways) and warehouse infrastructure.
- Low rates of commissioning of new warehouse and transport capacities. Poor development of warehouse and transport infrastructure especially in the regions (port infrastructure, warehouse class A, poor highway network, etc.)
- Congestion at the basic commodity distribution routes.
- Absence of the mature market of services of 3PL-providers.
- Inability of the majority of the local logistic operators to provide modern level of complex servicing to clients (especially in peripheral regions).
- Deficiencies and disparities in legislative and regulatory base in the field of logistics, the customs and land ownership laws.
- Bureaucratic barriers.
- High level of logistics costs.
- Lack of transparency of Transport & logistics market.
Serious obstacle to the development of 3PL segment in Russia is the high level of necessary expenses for intangible assets: innovation, information technology, training and maintenance staff of qualified personnel. This factor, combined with the initially high logistics costs in the country, creates a significant barrier for 3PL segment development.
Other obstacle is the structure of production and cargo traffic in Russia. It is dominated the transportation of raw materials and semi-finished products, which are transported mainly by rail, i.e. by 2PL companies.
Key trends on the market:
- Market growth through consolidation of Russian 3PL-operator;
- Mergers and acquisitions, when international 3PL-company merged with the largest transport companies of the Russian Federation;
- Partnership and cooperation that is suitable for small and medium businesses.
For more information, see report page samples.
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