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24-hour cargo shipment instead of 48 hours as year before

Interview with Łukasz Kołodziejczyk about Raben services in Ukraine and factors accelerating company’s operation. What is groupage cargo and fresh logistics, how did the pandemic affect trucking in Ukraine while expanding business opportunities, as well as what areas became successful in terms of increased transportation loads and speeding up delivery time? Łukasz Kołodziejczyk, Raben Ukraine Road Network Domestic and Fresh Logistics Director, told to Centre for Transport Strategies during an interview

Tell, please, about Raben's activities in Ukraine. What is the Company’s place in the Ukrainian logistics market? 

Raben Ukraine has been operating in the market since 2003. The Company offers a full range of services for contract logistics, international and national, as well as sea and air cargo transportation.

We have about 500 employees in Ukraine. The Company uses about 70,000 m² of warehouse space (including regions) and about 600 vehicles. We engage in both the so-called “dry cargo” and fresh logistics. Currently, Raben Ukraine ranks high in the Ukrainian logistics market, especially in groupage transportation.

What does groupage transportation mean?

This is the transportation of a small amount of cargo in pallets from sender to recipient. For example, if a company needs to send a small amount of goods (several pallets), it does not need to collect more cargo to fill up a truck or half of a truck. We pick up small consignments from customers, group at our traffic terminals and send in relevant directions with further transshipment at our cross-docking sites throughout Ukraine with a delivery to final recipients.

How many major players are in the Ukrainian market for groupage transportation?

Currently, there are up to ten major players, if we talk about companies with good positions in certain regions. Some are doing better in Kyiv, others – in Western Ukraine, or in the East of the country, etc. If we talk about firms that cover most of the country’s territory, then, there are 5-6 of them in Ukraine.

In addition, some postal companies, especially recently, are switching their approach to doing business, focusing on core business (courier delivery), transporting fewer pallets and more small parcels.

That is, the postal companies are also your competitors to some extent

I would not call us the competitors in a traditional meaning. We have different objectives. The postal companies focus on box format, while Raben – on the pallet format. The main difference is the companies’ infrastructure, the format of the transshipment sites, which affects significantly the speed of cargo handling.

What are your advantages over other logistics companies, small carriers and postal companies?

First, this is our coverage. We cover completely the territory of Ukraine (except for Joint Forces Operation zone and Crimea). We have representative offices in more than 25 cities. The offices locate mainly in regional centers, places convenient for running a logistics business. This facilitates shorter deadlines for fulfilling orders and transporting goods, that is, from 24 to 48 hours in-between the main cities, 72 hours – in-between the most remote points (for example, Uzhgorod-Slavyansk).

The next advantage (and this is one of our business basics) is the high quality of services and meeting deadlines. We deliver more than 98% of all shipments within the stated timescales. This is very important for the customers and all transportation stakeholders.

In addition, Raben has a forwarder liability insurance, which means liability for the delivery of goods in accordance with the current legislation of Ukraine. Moreover, as a large sustainable company, we minimize carbon dioxide emissions through vehicle fleet renovation, reduction in a number of cars used, incentive programs for our partners, etc. There is a number of other advantages associated with a large international company cooperation.

How coronavirus pandemic changed the logistics market in Ukraine?

We can divide the Ukrainian logistics market condition into “before” and “after”. Naturally, in March 2020, our lives and worldviews have changed completely. People started buying more online during the quarantine period, so the companies providing services in this segment have benefited. After lockdowns, including in 2021, there is an increase in shipments, market growth. To some extent, this is due to deferred demand.

However, the quarantine restrictions have affected the economy as a whole. Some companies have not been able to withstand the changes in the market. These are both manufacturers and importers, distributors, carriers. They simply ran out of working capital to cover current expenses – loans, leases, rent, employee maintenance, purchase of products, etc.

Now, the transportation load has increased by 30% compared to the same period in 2019.

At the same time, many companies remained on the market. New ones have appeared that have already filled this niche and are developing very actively, especially in the groupage cargo segment. We actually see an increase in demand, shipments and consumption by the general population. Now, the transportation load has increased by 30% compared to the same period in 2019.

Many manufacturing companies have changed their profile. For example, those who used to do “a little bit of everything” (import, manufacture, own delivery to the customers) become switching today to a narrower profiles, discarding less marginal and more labor-intensive parts of the business. The whole market benefits from this, as they invest more in their development, produce more, and carriers transport more.

What has changed specifically in Raben operation due to coronavirus?

Like most businesses, we have restructured our offices; many employees started working remotely. We implemented strict rules for wearing masks, using antiseptics, visiting, etc.

We found new points of growth in terms of business. We started developing logistics actively from the regions not previously involved in large transportation loads. These are, for example, Volyn, Rivne, Khmelnytsky, Ternopil, Transcarpathian regions. Previously, there were few shipments from there. However, following active construction and repair of roads there, we started making connections with local clients and discovered a significant potential. We invested in the development of our own infrastructure, vehicles, expanded our warehouses and local staff. During the year, we increased more than 2-fold the cargo traffic from these regions.

We also optimized significantly the timescales and cost of shipments within and between neighboring regions. For example, earlier, the delivery from Lutsk to Uzhgorod took 48 hours, now it takes one day.

Additionally, we focused on electronic document management. Now, more than 80% of our customers and suppliers (except for transport services) receive documents from us in electronic form. This minimizes physical contact, significantly speeds up the exchange process and has a positive effect on the environment. We plan to switch the service providers to electronic document management by the end of the year.

How the demand for groupage cargo has changed since quarantine?

The demand for groupage cargo has grown. There are several reasons for this. First, the number of senders has increased: customers buy goods from more sellers in smaller quantities. Secondly, the purchasing power has changed: both recipients and consignees do not want to buy a lot, “freezing” money in goods at the warehouses. Accordingly, the average number of pallets in a shipment also decreased, as did the number of orders from one manufacturer, but their frequency increased in general. That is, the number of groupage shipments has grown.

In each region, we started developing more strongly the segment of groupage transportation for medium and small businesses. It turned out that there is still a lot of unknown. We optimized the in-house processes and offered the customers to accelerate and reduce the cost of delivery. Thus, we help the same local small business, which did not always have the opportunity to go beyond their region. Some entrepreneurs had no idea how they could sell their goods, for example, from Novovolynsk to Dnipro. Now they are looking for their counterparties across the country. This also yields certain benefits in the form of a significant increase in cargo traffic.

Is your business currently developing more actively in the western regions of Ukraine?

We are developing in all the regions. In 2021 we placed greater emphasis on the Western Ukraine, as this region shows small and medium-sized business development, and we can support this by providing services in groupage transportation. In addition, Dnipro and Zaporizhya show rapid growth – over the past 2 years, the volume of shipments increased by 40%.

Are there certain goods, which are the basis of your cargo traffic between different regions?

There is nothing specific. The structure of cargo traffic in all the regions of Ukraine is the same. Each region sends mainly food and non-food products in a very broad sense, that is, all kinds of non-food products. Regardless of the type of shipped cargo, Raben Ukraine serves it in compliance with all the requirements for commodity neighborhood, different temperature modes of transportation and other features. All this is within the framework of standard transportation times.

What is fresh logistics?

This is the transportation of food products within the shortest possible time under a certain temperature mode. When you open the refrigerator, you can see the products there, delivered as part of fresh logistics.

We specialize in the transportation of fresh logistics products at a temperature of + 2 + 6 degrees; for this, we use our distribution network in Ukraine.

Raben Ukraine portfolio, in terms of domestic distribution, makes up 20% of transportation under a temperature mode of + 2 + 6.

How it works?

We set up nine sub-divisions to service fresh logistics that geographically cover the entire country and facilitate the shortest possible delivery time, with a due regard for “best before” date. The warehouses are equipped with special refrigeration equipment. The supply chain is arranged in a way that ensures the products are under continuous required temperature mode. We pick up goods from the customers in small refrigerated vehicles (with a carrying capacity of 1.5 to 10 tons), move these to our cross-docks, reload, transport to another city in mainline refrigerated vehicles, unload in a special refrigeration zone of the warehouse, reload again into small vehicles and deliver to the consignee. Thus, when a customer purchases a product in a store, he/she is guaranteed that this product won’t be heated or spoiled during transportation.

What are locations of goods processing hubs in fresh logistics segment?

Kyiv, Vinnitsya, Khmelnytsky, Rivne, Lviv, Dnipro, Odesa, Mykolaiv and Kharkiv. For example, Lviv Representative Office is responsible for distribution in Lviv, part of Ternopil and part of Transcarpathian regions.

As the fresh segment continues to develop, we are at the stage of launching new such sub-divisions. We plan to set up 4-5 more in the near future. This will speed up the delivery times to certain regions by one day.

Regarding fresh logistics, do you transport only within the country?

Generally, the groupage delivery is carried out within the country. Raben Group provides international transportation services, same as Raben Ukraine, but fresh logistics in this case is only full truck business – that is, loading a whole vehicle in Ukraine and unloading it abroad at consignee’s location (or vice versa). If we talk about other types of logistics, then groupage transportations between the countries are carried out in the same way as within Ukraine.

What are other Company’s services within national distribution?

We provide cross-docking for individual customers (that is, monopallets and prefabricated pallets option – we bring goods for them from several manufacturers, including from other countries, pickup/assemble and deliver across Ukraine). This way, the customer benefits from using our extensive network.

What are the Company’s plans for national transportation logistics development in the coming years?

We continue developing actively in the regions, expanding our business beyond the boundaries of cities with a population of over one million. Our goal is to enable the market to enjoy the benefits of fast and optimal delivery using our network and further increase less than truckload shipping.

What is your vision of national transportation logistics, taking into account the new realities?

As the European practice shows, the groupage format will continue to develop. Government support (cheapening loans, introducing special business lending programs) will contribute to the small and medium-sized businesses growth and promote an increase in less than truckload shipping volumes. After all, small and medium business constitute basis of robust national economy.

Those who managed to adapt and spot the opportunities will continue to advance. The companies will continue focusing on their core business, outsourcing all other activities, including logistics, to the contractors. Based on this, the logistics market will continue to grow. 

What is the role of road infrastructure in your business development?

If the road surface improves, the number of unscheduled car repairs will decrease over time. Roads with a renewed surface allow speeding up the delivery of any cargo. For example, a year ago, the delivery time for shipments from Dnepr to Odessa was 48 hours, as the vehicles were bound to a suboptimal route. However, following Dnepr – Krivoy Rog – Odessa road repair, the delivery time was reduced to 24 hours. This is a significant acceleration. Vehicles cover less mileage; the goods are delivered much faster. The customer’s benefit becomes obvious.