What matters more than proven results?
What matters more than proven results?
What matters more than proven results?
What matters more than proven results?

New opportunities open to 3PLs in Iranian market

   Iranian foreign trade almost balanced in previous Iranian calendar(2013-14), marked a 0.5% growth within mid year(February to September 2015) but the exports figure of 49744 million dollars did not match that of imports of 52477 billion dollars. Exports shrank by 14.5% compared to corresponding period of the last year. Iran trade partners, were limited to a handful of five to six origin and destinations as a result of Iranian economy boycott. All independent observers unanimously are of opinion that flourishing of trade and exports shall take place hand in hand. The ever unique principle is the freedom of trade whereby our trading partners spectrum to multiply and diversify.

   Many economic experts believe that coincidence of sanctions lifting with crude oil slump shall be deemed by Iranian private sector as a golden opportunity. First of all the lifting of sanctions shall improve the transaction cost. The first deputy president said recently that omitting of middlemen and middle countries from the Iranian trade network shall lessen some 15% of Iranian foreign trade cost. Some other independent observers put this figure as high as 30%.

   Among the sectors where a manifest growth is expected are tourism, hotels, and transportation. Out of whole Transportation economy, some 95% is road domestic transport. The network of freeways, highways, and ordinary roads are relatively in a good state and up to date. In addition the road transport has almost no sizeable operator. It’s private as it was from long time ago, and consists of multitude of very small, most of the times single entrepreneur-owner model. Naturally this small scale model cannot produce least productivity and efficiency. 387000 trucks of which 96% single owner are trading among 4200 pseudo domestic transportation companies who have no control on these self-employed fleet, reduced to the sole function of issuing way bills and touching a commission. The average mileage is quite low and around 50,000 Km a year, as there is no hub and spoke system, nor any logistics centres or didtriparks, hence the mathematical model on which the productivity of truck is being laid upon is an old fashioned one resulting in a lose-lose-lose relation for all stakeholders( cargo-owner-truck-owner-economy and the state representing it). The government in fear of road transport strikes, protects the sector by granting a large energy subsidy out of its empty pockets as one liter of gasoil stands close to seven cents a dollar. Gas-oil is cheaper than drinking water!. The rail industry has been privatized since ten years comprising of twenty private or public-fund freight transport companies. These companies had a great challenge so far but those who survived the tough years, learned the fleet management and customer service lessons. On the demand side, the wider industry and trade is quite unsatisfied with the output of such widely dispersed and uncoordinated road transport industry. The country has yet to enter the logistics and supply chain management phase. Industry and big retailers alike are keeping large inventories before and after the production in own vast stores. The location of warehouses and the industries have not been intelligently calculated before establishment, taking account from logistics elements elasticity, leading to higher costs or in worst cases forced reduced production under full capacity. Recalling that during current fiscal year only oil and gas, food and beverage and pharmaceutical industries had not entered the recession phase, even these industries prove to have much trouble in keeping competitiveness in particular facing neighboring countries and in particular Turkey. Some analysts put the average wastage in logistics costs of the wide industry at some 15% and this figure proves the gap that could be filled out by 3PL industry. The private sector has slowly but gradually formed large institutions. For instance, one entrepreneur who started the business in detergents industry has then diversified into food and in retail industry. This entrepreneur spends some $ 430 million a year in logistics. Another private entrepreneur in food industry has a per annum logistics expenditure of $ 290 million.

   In brief, although all major macro-economic sphere needs more institutional, regulative and good governance reforms but the logistics and transportation, not only rarely intervened or manipulated by the state bureaucrats but over and above forcibly and widely protected by the state though low gas-oil prices, presents formidable opportunities and presents a quite interesting arena open to 3PLs who could by modest investment, mobilization and exploiting the vast road sector capacities use its know-how and capitalize on this great untapped opportunity.

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