By Edward Attwood
IBS’s Deepak Garg on how to keep revenues in synch with your costs, even in times of a global crisis.
How can you keep your revenues in synch with your costs, even in times of global crisis? IBS’ Deepak Garg has the answer.
Logistics is an expensive business. In the current climate, the need to save money has become key, and any solutions that allow operators to cut hard-earned dollars from their bottom line via efficiencies will obviously be of great interest not only to industry giants but also to start-ups breaking their teeth in what is becoming a more and more competitive market.
The focus of India-based IT solutions outfit IBS Software Services is on streamlining operations, and the operator has spent a significant amount of time investing in building a portfolio of solutions for a specific number of markets.
Any product spends about 90% of its time in transit actually stationary - it is crucial to optimise the flow of information to lower this figure.
Specialising in differentiating ideas from other services, the firm provides its solutions to a sector on which one out of every 10 dollars is spent worldwide. But finding ways to promote efficiency in such a vast and diverse sector is naturally difficult; each company will understandably seek a tailor-made solution that will allow his operation to run smoothly.
The trick is to find a product that can offer companies diversity while at the same time continuously adding value and still providing an excellent service to the customer. In this sector, a small error of any kind, or a bad decision, can result in lost revenue, and client retention is thus of paramount importance.
With a workforce of about 2000, the company has now been in existence for about 10 years and sees the Middle East market as generating around 20-25% of its business. "Some of our highest growth rates have been witnessed in this region," says Deepak Garg, IBS' chief operating officer for the company's Middle East and Africa region. The company has three other major areas of operation: North America, Europe and Asia Pacific, IBS' largest, which covers the emerging markets of India and China, plus Japan and Australasia.
IBS offers logistics services primarily to the airline, airport and oil and gas industries. "From the logistics side, we place a focus on ocean and surface transportation, particularly for the oil and gas upstream sector," continues Garg.
"For example, we implement the logistics management solution for Shell worldwide - that's 32 operating countries in which we support upstream exploration and production. Our other customers include Chevron in a couple of locations, plus BP and ConocoPhillips in the US."
In terms of services, IBS offers a complete management of the marine, aviation and logistics needs for these giants, covering the movement of both men and material, a product that Garg rightly points out is a huge commitment.
"In the Gulf of Mexico, there are about 4500 rigs and platforms, about 200 of which are permanently manned, but whether the facility is manned or otherwise, there is always constant movement," he explains. "Some of these platforms are as far as 250 miles into the Gulf of Mexico and the entire network is served by a fleet of some 2100 helicopters and 900 ships."
However, when IBS was offered the chance to look at the logistics of inter-rig operations, it found there was absolutely no optimisation of resources. For example, a mechanic might need to be flown out to a rig by one company, while a cook would need to be transported back to the mainland by another.
Due to the lack of collaboration between companies, two helicopter trips would be made, thus adding substantially to cost, especially given the recent high price of fuel. With manned rigs costing on average about US$400,000 a day to run, such operations are a needless expense. "The more optimised the movement, the better it is for suppliers," observes Garg.
"We came in and created resource optimisation by creating a transportation portal through which companies could let each other know about these operations and resources could be shared. Logistics management in the Gulf of Mexico is worth about $2 billion a year, and if you make a 20% saving on that figure, you are cutting costs by around $400 million."
Not surprisingly, Garg feels that IBS' solutions have a lot to offer upstream activities in the Arabian Gulf.
The upstream solution, named iLogistics, was started five years previously in conjunction with a consortium entitled Gulf Share. As with products designed for other sectors, IBS used an innovative concept, which it has termed the ‘Core Group of Influence'.For the company's iCargo solution, IBS collaborated with six leading carriers to participate in a programme to influence the direction of the product being built. These six diverse major air cargo operators - Qantas, Gulf Air, Australian Air Express, Air New Zealand, South African Airways and NCA - all gave their input into the definition of the product.
"We really wanted the practitioners to contribute so we could understand their true business requirements," explains Garg. "For example, if we were to ask just one preferred airline about their business practice, we would have lost the crucial component of a general debate about best practice. This has really helped us to create a solution in which the air cargo industry was more than keen to invest."
This is a model that IBS' oil and gas solution has followed, with Shell, ConocoPhillips and BP in place of the air cargo ‘Core Group of Influence'. "Other IT providers want customers to commit to buying the solution before it has even been developed," outlines Garg.
The logistics and transport sector will gain more impetus simply as a result of the speed at which business transactions are now being taken.
"However, we asked the members of Gulf Share to participate in the creation of a next-generation solution, but did not insist that they committed to buy the product on completion. An additional plus for those companies participating was that they knew the final solution would benefit them, and that they would be offered a preferential rate."
From the airfreight perspective, IBS' generic solution, iCargo, helps an airline manage its cargo business completely by allowing the client to gauge capacities and schedules, book flights, produce airway bills, carry out shipment handling and undertake ULD management, plus looking after terminal operations and even going so far as to interface with the customer. All this is carried out with the aim of enhancing an airline's profitability.
Garg also believes that the transport and logistics sector has a bright future, not only in the Middle East but around the world, even given the recent economic troubles. "The sector will gain more impetus simply as a result of the speed at which business transactions are now undertaken," he says.
"Back in the 1990s, before the internet was fully developed, it would take about 15-20 days for a business decision to be taken, and most of that time would be as a result of a letter being in transit. Now, times have changed. You are expected to provide business decisions within a very short period of time, as a result of the advent of the internet, email and text messages."
Similar changes are afoot in the transport industry, especially as 90% of the time that a particular package spends in transit, it is likely to be stationary. "It is crucial to optimise the information flow so that this figure can be lowered to 80%, then 70%, and so on," explains Garg.
For IBS, consistency of best practice is key, in order for companies to get the best out of their operations.
"The service we provide begins with an assessment of the key business processes your company is looking to change," Garg continues.
"From there, we go through to training, running as a data centre, running as a hosted service, and making sure you achieve the benefits you wanted to realise when you first put the business case together. So we offer full implementation services and ongoing support and maintenance of the system we provide," he concludes.
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