Kuehne+Nagel: Global uncertainties pushing manufacturing towards India: Kuehne+Nagel’s Coen Van Der Maarel



Global supply disruptions may be easing, but the threat of a recession in Europe and the US has again led to uncertainties for businesses. In a conversation with ET Digital, Kuehne+Nagel, Managing Director-India, Sri Lanka & Maldives, Coen Van Der Maarel, talks about the trends in the global supply chain, falling consumer demand and the company’s plans for India. Edited excerpts:
Economic Times (ET): How does the global supply chain situation look like at the moment? Do disruptions persist?Coen Van Der Maarel (CVDM): We had two very challenging years, both in our sea logistics operations and air logistics operations. In the sea logistics operations, the challenges centered on the lack of equipment because of some big disruptions in the Suez Canal, along with congestion in the US ports. So, equipment and capacity in sea logistics was low.
In airfreight, because of the lockdowns, there was a capacity shortage. But that is now easing. In fact, congestion is far less than what it used to be in sea logistics also, and capacity in air logistics is coming back.

What does it mean for us? It has been extremely important to stay close to our customers and suppliers. The reason we did well in the past two years was that we were close to the customers, understood their pain points and, given all the constraints, we could help them in securing supply chains. We concentrated in the past year mainly on our existing customers, to support them in surviving and securing the supply chains.
ET: Even if supply chains are easing a bit, there is now talk of demand slowing down and the prospects of the world seeing a recession. How will this impact the economic environment?CVDM: Yes, we see that happening as we speak. Capacity has increased, but demand in the US and Europe is slowing down. This is because high inflation has led to weakened consumer demand, while inventories of our customers in the US and Europe are pretty high. While we continue to stay in touch with our existing customers and stay close to them, we are also looking for new volumes to compensate for that lower demand. We are in a totally different market now compared with six or seven months ago, but our job as a freight forwarder is to react to those different circumstances and we have been very strong in that.
ET: Are business cycles getting crunched when you are talking about things changing every two-three months? If yes, what does it do to your demand forecasting?CVDM: I think the change we now see will not be a change that happens every month or every quarter, and we already see some differences. In the last year or so, our customers have been asking us for monthly trends because of the volatility in the market. Right now, we see that going back to three to six months’ forecast. I think predictability will come back and, hopefully, there is no other disruption. So, we expect that forecasting will again become easier in the next few months, but at a different level.
ET: When it comes to geographies, which regions are doing well across the globe. Also, which sectors are doing well?CVDM: For us, Europe, the US and intra-Asia are extremely important. We expect, in the years to come, high growth in intra-Asia, and so we are preparing for that. Sector-wise, what we see is that pharma, healthcare remains very strong.
In India, we also see high tech growing rapidly as we see manufacturing coming to India. What we also see is that aerospace is back; it was down in the past two years. From a consumer point of view, e-commerce is extremely strong. Even in the area of grocery, fulfillment and distribution, it is at a very high level. Automotive is also very important for us.
ET: Within India, what does the business environment look like at the moment? What are the things that Kuehne+Nagel is doing?CVDM: India is on a growth trajectory and within Kuehne+Nagel, we are the third largest organisation within the Asia-Pacific. Asia-Pacific is the largest region in Kuehne+Nagel this year for the first time. That also means that growth expectations are high from the company.
We are thrilled with the National Logistics Policy that the government has announced last month. We have a strong intention to be part of the growth in India and we already see expansion in demand coming from second-tier and third-tier cities. And we will position ourselves to be present not only in the metro cities but also in the smaller cities where we can support SMEs and Indian startups.
ET: How do you plan to do that? Will you have more people on the ground? Is it warehousing? Is it land transport? What is it you are looking at?CVDM: I would say we are looking at three areas. First, we want to have our sales and customer facing operation people close to the customers in those cities so we expand our presence there.
Secondly, warehousing with high standards is very important for the government in its National Logistics Policy. It is one pillar. At the moment, we have around 65 warehouses in India today and we plan to double that in the next four to five years, and our transportation network will grow accordingly. So those are the three main pillars where we will be working — both for our international customers who want to work with us here and also for local Indian large and small and medium companies.
We are celebrating 25 years of Kuehne+Nagel in India this year and we are very happy with our presence here.
ET: You spoke about NLP. When it comes to infrastructure and associated services around logistics and supply chain, what are some improvements that you think India can do at the moment?CVDM: I would say for us, three pillars are very important in the NLP. First, we need a greater automation and digitalisation where we have far more connection between the stakeholders in the supply chain — from transportation companies, warehousing companies, the government, road authorities, etc.
Second, it is very important for us to develop a logistics HR policy in India. Supply chain in the past two and a half years, during the pandemic, has gained much more importance and has become a part of the boardrooms of many companies. We think that our industry is a very good job option for students from universities and we need to make sure that we have the human capital to operate the supply chains. And then, last but not the least, we need the logistics parks that the government plans, to make sure that we have a good connection for our goods.
ET: In terms of the role of technology. how do you see that evolving from now on and especially after 2020, how has that changed?CVDM: I think that technology is there to stay. For us as an industry, I think there are many elements of technology. For example, we will have more automation in the warehouses to improve the quality, to reduce the dependency on labour and also to make sure our productivity is right. We are also reducing the manual touch points in our supply chain activities for our air and sea logistics, but the human touch will remain extremely important.
ET: You have a war in Europe and the prospects of a recession. What do you think will be the role of such events in shaping the global economy, especially around supply chains?CVDM: Consumer demand will most likely be at a low next year given what we see right now across the world. For India, there are positives because the uncertainty around the world and in Asia will move manufacturing to India, which is already happening. I think for India it is an opportunity. And for our organisation in India, it is an opportunity as well. We see our customers also asking for our support in preparing for that move and we will need to stay close to the customers and suppliers to make sure we can handle those requirements.