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Russia Logistics in Russia

Russia is the worlds largest country in terms of area. It covers 11 time zones that have completely different geographic, cultural and climatic features. Bureaucratic hurdles and a poor infrastructure complicate logistics processes in Russia just as a lack of competition, insufficient transparency and limited logistics know-how do. Nonetheless, Russia intends to become a hub between Asia and Europe.

Transport hubs in Russia

Geographic challenges of Russia

At 17.1 million km, Russia is the worlds largest country. It has 11 time zones and stretches from the Baltic to the Pacific. Three-quarters of the country is in Asia. As a result of the countrys enormous expanses, it has regions with completely different geographic, cultural and climatic conditions. Despite difficult conditions, Russia intends to become an important hub for Asian-European transport and in part for the north-south axis running from northern Europe to India. The biggest challenges are created by its faulty infrastructure and lack of modern logistics technologies. In addition, the transformation is being slowed by bureaucratic hurdles, including customs clearance. The logistics infrastructure is to be extended particularly in the hubs of Moscow and St. Petersburg [1].

Core countries for trade

Russias biggest export partners are the Netherlands, Italy, Germany, China, Ukraine and Turkey. The most imports come from Germany, China, Ukraine, Japan, Korea and the United States [2].

Russian infrastructure
Road density is very thin at 40 m of road per km. This is the result of the sparse population of many regions in the country, among other things. Nonetheless, most of freight transports between western Europe and Russia are done by road - through Poland and Belarus or over the northern route through Poland and the Baltic states. A growing amount of freight transports passes through European harbors like Hamburg and then through harbors in the Baltic states, Finland and northern Russia. Once in the country, freight is transported primarily by truck and, to a

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lesser extent, by rail. The Russian rail network is about 85,000 kilometers long, the worlds second largest. Within Russia, rail transport makes up the largest share of freight transport at 83 percent. The focus of rail transports is both shipments between Russia and Europe and through transports from Europe to Asia via Russia [3, 4]. The trans-Siberian railroad plays a particularly interesting role here. Thanks to this link, shipment times of goods between Pusan and Helsinki can be reduced from about 47 days by ship to around 16 days. The potential of the transSiberian railroad is about 300,000 TEU per year. But it cannot really put its strengths to use at the moment. The reasons for this include rates and handling procedures by the Russian railroad company, bureaucratic hurdles particularly customs agencies - and the introduction of a value-added tax on transport services. Russias infrastructure is especially deficient in terms of maintenance and modernization. The lack of multimodal goods transshipping hubs and the current transport systems generate few network effects for logistics service providers [5, 6].

Logistics requirements and service areas

Fueled by Russias economic growth, the demand for transport services has jumped considerably. In 2005, the market volume for logistics totaled about $120 billion. An average growth rate of 16 percent is forecast. In particular, transports between Europe and Russia will continue to increase in years ahead. A large share of these transports will be exports of Russias abundant natural resources, including crude oil and natural gas. The Russian logistics market is characterized by a lack of competition, little transparency and limited logistics know-how. Many companies have high storage and transport costs. At the same time, the share of outsourcing in logistics is constantly rising. Experts say this share amounted to about 45 percent in 2005. For this reason, demands for more and more sector-specific and innovative logistics concepts are growing [3]. Russian logistics service providers still focus primarily on the core services of transport and storage. The inclusion of value-added services like assembly processes and packing is in its infancy. Broad development potential is seen for contract logistics in Russia. Some logistics service providers are already offering services that extend beyond product transshipping. These new services include labeling, market-specific provision of manuals and the conversion of DVD players to Russian standards. International logistics service providers rely heavily on local partners particularly in the CEP area because a company must make large investments if it is to cover the entire country with its own means of transport [5, 6].

Logistics centers in Russia

The most important logistics centers in Russia are Moscow and St. Petersburg. But other economic centers, including Samara, Nizhny Novgorod, Kazan, Yekaterinburg, Novosibirsk and Rostov, are becoming increasingly important in the regions as logistics centers because of growth in retail and industry.

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The government views expansion of the transport and logistics sector as an opportunity to diversify the economy. For this reason, large investments will be made in the expansion of existing logistics centers and the construction of new ones. For instance, a Moscow consortium is investing hundreds of millions of euros to develop a series of logistics terminals [5].

Important logistics service providers

The important Russian logistics service providers are STS Logistics, National Logistic Company (NLK), Russian Logistic Service, the Interterminal Group and Eurosib. The most important international logistics service providers in Russia are DHL, Rewiko/Fiege Group, Militzer&Mnch, Hellmann Worldwide Logistics and Schenker [5].

Recommended reading
Fundamentals of Logistics Management | Grant / Lambert / Stock / Ellram 2005

References
[1] Handbuch Logistik Russland | Doborjginidze / Abelmann 2005 [2] The World Fact Book | Central Intelligence Agency 2007 [3] Handbuch Logistik Russland | Doborjginidze / Abelmann 2005 [4] European Conference of Ministers of Transport. Regulatory Reforms of Railways in Russia | OECD 2004 [5] Russland | Lichter 2006. In: Transport und Logistik | Bundesagentur fr Auenwirtschaft (Hrsg.) [6] DVZ Sonderbeilage - Russland | 2006. In: DVZ 60(2006)30

URL
http://www.dhl-discoverlogistics.com/cms/en/course/trends/europe/russia.jsp

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