Kühne + Nagel MG on Russian transportation logistics sector

Since its inception in 1992, the Moscow Air Show - held every two years - has become one of the world’s leading events for the global aeronautics industry. Now in its 11th year, the latest edition took place on August 16-21, 2011, attracting more than 800 companies from approximately 40 countries. Besides the presentation of highly anticipated products such as Sukhoi’s T-50 stealth fighter, the event set the stage for the signing of a wide array of business agreements, estimated at more than $10 billion in total. 

Kühne + Nagel, a leading global transportation logistics company with headquarters in Schindellegi, Switzerland, is a regular MAKS participant. Perry Neumann, Kühne + Nagel’s managing director for Russia and Belarus, was a keynote speaker at the 4th European Air Transport Congress organized during the air show. In an interview with Modern Russia, Neumann talks about MAKS, the company’s development prospects in Russia and the state of the country’s logistics and transportation sector in general.

As the largest country in the world, Russia covers nine time zones and climatic extremes, thus making logistical infrastructure a crucial and very serious challenge for the country’s economic development. How does Kühne + Nagel contribute to the development of the transportation logistics industry in Russia?

Kühne + Nagel is strategically expanding its logistics activities and manpower to meet the growing requirements of global and national customers in the dynamic Russian market. With over 100,000 square meters of warehouse space, our service portfolio is perfectly matched to deliver the best logistical solutions for the world’s largest country in areas like:

• Sea freight – We deliver regular FCL (full-container-load) and LCL (less-than-container-load) shipments to every Russian port;

• Air freight – With offices in all major Russian airports we can make domestic deliveries to even the most remote regions in the country;

• Road freight – We are currently developing domestic road transportation and improving our FTL (full-truck-load) and LTL (less-than-truck-load) services to and from Europe.

We are also active in some of the most remote parts of the country, such as Russia’s Far East, where we maintain an operation on Sakhalin Island.  

How do you think Russian authorities have addressed the natural challenges mentioned above, and how has this changed over time since you initially started operations there in 1992?

Compared with Europe, Russia’s huge geography is of course one of the key factors to take into consideration when dealing with transportation and logistics. Generally speaking, transportation infrastructure (roads, rail, airports and seaports) is rather underdeveloped in Russia, and contrary to many European countries, in Russia the logistics industry is still in the very early stages of development. Though the government has made massive investments in the country’s infrastructure since 2008, we have yet to see tangible results. 

However, there have been significant evolutions with regard to the legal and regulatory framework in which the transport and logistics sector operates in Russia since Kühne + Nagel started doing business in the country back in 1992. When you compare this legal environment to those in place in the more than 100 other countries in which Kühne + Nagel is present, you find that it is very similar or even the same as the rules that exist in Europe – which is a very positive development.

Which sectors of your industry – for example air freight, sea freight, rail – are strong growth areas in Russia?

Considering the overall market I would say that with the exception of air freight, all other transportation modes such as sea, road, and rail freight, as well as warehouse storage, show strong growth potential. However, that is not to say that growth is not possible in airfreight: In 2011, we plan on seeing double digit growth in air freight compared to last year.

In addition to Kühne + Nagel’s logistical services, as a diversified company we also provide tailor made transport solutions and project services, which was one of the reasons why the company was honored with the Golden Chariot Award in 2008. Our future objectives include the development of dedicated warehouse logistics, a domestic transport network and regional sales activities in Russia. In 2011, we plan on increasing our FCL volume by 42 percent and all in all, we intend to become one of Russia’s top integrated logistics providers by 2014 – a goal which we feel is possible to achieve seeing our strength in emerging and diverse markets.

You attended the Moscow Air Show this year. Why is aeronautics of particular interest at the moment? What are your objectives for this edition of the event?

Indeed, I was one of the speakers at the 4th European Air Transport Congress during the Moscow Air Show (MAKS) 2011. As one of the top three market leaders in air freight, Kühne + Nagel also plays a major role in global aviation logistics, and MAKS therefore provides a very good forum to meet industry experts and decision makers. The airplane is still the fastest way to transport passengers and cargo over long distances and seeing that in our business, more than anywhere else, “time is money.” I guess aeronautics will always remain a very relevant issue for a company like ours.

The 2014 Olympic Games in Sochi present a significant logistical challenge. Are you involved in improving the transportation logistics in and around Sochi? Judging from your previous work on similarly large-scale events, how can the whole region benefit from the Sochi Games, in the long run specifically?

Kühne + Nagel’s operation in the Adler district, in close proximity to Sochi International Airport and river/sea port, was established in early 2009 and is ideally positioned at the nexus of the region’s construction and logistics activities.

We have been in contact with the Russian Olympic Organizing Committee since early in 2008 and consequently became one of the first companies awarded official contracts. We have created an executive position dedicated to the Olympics to coordinate worldwide shipments for the project while also managing the time-critical site logistics. Following the conclusion of the games, Kühne + Nagel plans to maintain our Sochi facility, due to its location in the Krasnodar Krai on the Black Sea - an area which already constitutes the third largest regional consumer market in Russia and is considered to have particularly strong potential.

With approximately 60,000 employees at 900 locations in over 100 countries, the Kühne + Nagel Group is one of the world’s leading logistics companies. Its strong market position lies in the sea freight, air freight, overland and contract logistics businesses with a clear focus on providing IT-based supply chain management services. In Russia, Kühne + Nagel operates at 14 locations and employs more than 500 people.