Alexander Pirogov, Kusto Logistics CEO, speaks at the 3rd Annual Conference “Transport Logistics and Warehouse in Agribusiness”

The conference was organized by ProAgro Group and held on May 17. Speaking at the conference, Alexander Pirogov, Kusto Logistics CEO, covered the main issues, which agribusinesses face while arranging cargo transportation, and presented his approach to solving them.

1. The railway car fleet turnover leading to grain car artificial scarcity

Ukrainian Railways lack locomotives to carry out maneuvering operations in a timely manner. Small grain storage facilities have nothing to do but to find and, though expensive, buy their own grain car on the market. In their turn, freight forwarders have to include the daily car value, calculated based on its actual turnover, into the transportation rates. The railway declares the car fleet transfers at the rate of 200 kilometers per day, but in fact, the car moves twice as slowly. The car fleet scarcity will decrease as soon as the car turnover is improved.

2. Rail transportation plans approval

Currently, Ukrainian Railways have every right to unilaterally and unannounced approve or disapprove the transportation plan. As a result, all participants operate using additional plans. This way, some shipping carrier receives approval for all their plans announced, blocking the shipping stations capacity at the same time, while other companies receive unreasoned refusals. This issue can be resolved by including loading grain storage companies in the plans approval list, as well as by vesting responsibility in grain storage facilities for failing to fulfill the plans on condition that the necessary rolling stock is fully provided.

3. Approval restrictions applied for electronic transportation applications

Ukrainian Railways claim it is impossible to properly distribute the existing rolling stock due to the lack of proper planning, which shipping carriers have to conduct. At the same time, the state railway transportation limits the time for electronic application submission to 7 days. So, the question arises: why are any limitations applied if it is necessary to plan beforehand? This issue can be simply solved by lifting the limitations, and that will allow shipping carriers and Ukrainian railways to draw longer-term plans.

4. Electronic applications approval done by the addressees skipping grain storage facilities’ participation

For example, a grain storage facility intends to load corn, but wheat railway cars are supplied instead. As a result, the cars are not loaded, and the car detention time is increased. To solve this problem, it is necessary to provide the grain storage or house track owner with the possibility to confirm agreements in the MESPLAN system. The grain storage facility has to adjust electronic applications according to its shipping capabilities and be liable to the railway and freight forwarder for the rolling stock detention.

5. Railway car distribution without grain storage approval

To minimize their risks and ensure timely performance of the contract, cargo owners quite often hire several freight forwarding companies for the same cargo volume. All hired freight forwarders draw plans, place electronic orders, and order railway cars to attend this volume. At best, the railway provides one car to each forwarder and we all load one contractor with the same cargo, creating inconveniences and incurring additional costs as freight forwarders. The one who earns in this case is the railway – it provides three cars but counts one car provision and withdrawal per each forwarder. This issue can be resolved when grain storage facilities, being shippers, are prioritized in railway rolling stock provision. In this case, grain storage facilities will incur expenses for car detention and other additional fees.

6. Ukrainian Railways provide their cars first

Ukrainian Railways go on lobbying their own interests, giving orders to provide their cars in the first place. At the same time, the grain storage companies’ own parks are forcedly idle, standing on the railway tracks – the railway cars owners incur expenses and lose transportation income while paying the railways for their own cars standing idle on the tracks. If car provision is approved together with grain storage facilities, this problem will cease to exist.

7. No freight forwarder-elevator interaction

Grain storage companies conduct shipment approvals, agreeing them with cargo owners. Next, cargo owners submit a transportation application to a freight forwarder. If there is no communication between grain storage facilities and freight forwarders, queues at storage facilities build up and freight forwarders incur expenditures caused by car detentions. There is one solution to this problem – grain storage facilities have to be financially liable for failure to fulfill their obligations.

8. Unilateral plan withdrawals

To improve their plan performance, Ukrainian Railways just unilaterally withdraw their plans. So, when the cars, sent by the Transportation Logistics Center, arrive to be loaded, it turns out there is no shipment plan. The cars are detained, and freight forwarding agents incur additional expenditures. In its turn, the railway is not liable in any way. Consequently, it is necessary to stop artificially improving the performance, withdrawing plans.

9. Grain theft

Both freight forwarding companies and cargo owners incur significant losses related to grain theft. While car underloading (under the guise of natural loss norms) can still be dealt with, establishing long-term partnerships with honest contractors, Ukrainian railways have far more complicated issues. Though the representatives of the Ukrainian Chamber of Commerce revealed and recorded signs of bottom discharge door intrusions, facts of pressed grain, and instances of visible whirls occurring when the cargo is discharged, the railways continue to write objections to these incidents. The only thing to be done in this case is to go on contacting the railway authorities again and again and ask them to take responsibility as a shipping carrier for cargo safety.

10. Purchasing lock and seal devices during a shipment season

As of this day, an issue of sealing the railway cars after loading procedures still persists. Since only one plant in Ukraine manufactures seals, freight forwarders have to wait for lock and seal devices for 2 to 3 months or buy them practically at 50% percent higher price from intermediaries, to whom the plant promptly supplies its products.

The issues, raised by Alexander Pirogov in his speech, caused a lively discussion among the audience because he revealed the problems which any enterprise can face while arranging logistics.