There are no logistics companies in Iran.
An interview with Engineer Mohammad Siavoshi, a member of the Transport and Logistics Commission of the Iran Chamber of Commerce.
From freight companies to logistics companies.
The transportation of steel and its delivery to consumer markets is one of the major challenges in the global steel industry. Along with the growth of the steel industry, the methods of transporting it have also evolved and become more complex, so much so that the process of getting steel from production to consumption involves a wide range of operations. Transportation experts use the term logistics to refer to this entire process.
The Metafo 1403 exhibition was an excellent opportunity to meet with experts and professionals involved in the steel industry. The steel industry is connected to various fields, and one of the most important of these is transportation and freight facilities, or more specifically, logistics. In this regard, we had the opportunity to have a conversation with Engineer Mohammad Siavoshi, a member of the Transport and Logistics Commission of the Iran Chamber of Commerce and a seasoned expert in the country’s transportation sector. In this brief interview, Mr. Siavoshi explains some of the important issues in this sector of the country’s economy for the Steel World Review publication.
At the beginning, we should have some brief information about logistics, its concept, added value, and its applications. Worldwide, large companies use logistics services from logistics companies. Unfortunately, in our country, there are no logistics companies, and freight companies and railway lines are mistakenly referred to as logistics. The concept of logistics is essentially not well understood. Water, electricity, and gas are well-defined concepts, but logistics is not a well-known concept. Therefore, the first step is to define logistics.
A chain called logistics.
Logistics refers to a chain in which goods are extracted from mines, processed into products in factories, then packaged and stored. After this, the goods are entrusted to the transportation sector. From this point onward, transportation facilities such as trucks and rail systems play a role, and these are also part of the logistics chain. However, logistics does not end here; it also encompasses the following stages.
If the goods are for export, they are transported via road or rail towards the port or land exit points. There, facilities must be available to ensure that the goods are sent to export markets smoothly and without damage.
If the goods are for domestic sales, distribution is spread out, and a hub is created at a specific point. Products are stored there and then distributed in a network-like manner. All of this requires having data.
After collecting the data, it is used to achieve their larger objectives. Today, logistics costs have become extremely burdensome, and there is only a certain level at which you can cover these expenses. Beyond that, because you are operating in a competitive market, if you cannot balance costs and revenues, you will be out of the cycle.
Therefore, cost control must be carried out carefully. First, you should calculate your logistics and transportation costs and then assess what costs have been imposed on you. Since all the entities in the country operate traditionally, it is essential to identify costs accurately and plan to reduce them. The next question is whether to use rail, create a hub, or buy our own trucks. Alternatively, should we obtain financing and pay the rental fees through this financing?
The role of rail transportation in the steel industry.
In the steel industry, due to the large volume of shipments, there is currently no better sector than rail transportation. This is because you avoid the hassles of road transportation, cash payments, and depreciation, and transportation is done in bulk. If you move towards purchasing wagons, it can be said that you have strengthened your transportation chain. However, if you haven’t purchased wagons, there are contractors who are providing services to you today, but they may provide services to someone else tomorrow.
In any case, if you focus on the logistics sector and integrate logistics into your supply chain, you must understand where logistics fits in, what its role is, and what its impacts and benefits are.
Today, companies that call themselves transportation or freight companies are far from the science of logistics, and this flaw applies to all of them. The largest steel entity, which is Mobarakeh Steel, has around five to six thousand wagons and faces the same challenges. In summary, anyone who has a transportation system is facing the same difficulties.
I believe that even for securing funding and spending in the logistics sector, the relevant experts must be identified. Logistics experts are individuals who have worked in the field and have hands-on operational experience.
Neglecting the scope of logistics and having a narrow view focused only on freight and transportation can lead to significant losses. It’s like building a super-specialized hospital with the best materials and spending billions to purchase the latest medical equipment, only to realize at the last moment that there are no surgeons or professionals skilled in surgery. This is where the investment goes to waste, and the role of the super-specialized hospital becomes similar to that of a clinic, which is only useful for outpatient treatments. Even at the beginning, when determining the budget and planning, a budget and program expert must be consulted first. Similarly, for electricity, an electrical expert must be brought in to determine which generators to use and to define the architecture of the work. Logistics works the same way. But where is this expert? They don’t come from universities. The individuals needed are those with practical, hands-on experience. – They must have hands-on experience. For example, I have worked in rail transportation, I was the Director General of the Engineering Office, and I was named the top logistics manager in 1399. Currently, I am the CEO of a holding company with five subsidiaries. We own five thousand trucks and light trucks under our umbrella and have made significant investments. We are already benefiting from this, as we have established our own dedicated logistics system.
Logistics, when specialized, includes various fields such as petro-logistics, oil logistics, metal logistics, and similar areas. When we talk about specialized logistics, we are referring to logistics within that specific field, not logistics in its general and broad sense.
In general, the rail sector is very beneficial for the transportation of energy carriers. The cost of rail transportation in this regard is one-seventh of the cost of road transportation. Additionally, rail transport fundamentally means safe, clean, and economical transportation.
The cost of rail transportation is at least 20 to 30 percent lower than road transportation costs. Therefore, investing in rail transportation can reduce logistics costs by up to 70%, 60%, and at least 50%.
But the bottom line is that we must understand that as long as we don’t recognize the importance of logistics and focus on it specifically, the issue will not be solved. In this context, no one is essentially at fault. Our universities do not train logistics experts (Logisticman and Logisticwoman), and for this reason, the transportation structure in the country has not advanced toward logistics. In Iran, we do not have capable logistics companies from which we can obtain services.
Iran’s position in global logistics rankings.
Mr. Siavoshi says about Iran’s position in global logistics: “If we want to know about the status of our logistics on a global scale, we must understand that the situation is catastrophic. The World Bank has a logistics index called the Logistics Performance Index (LPI), which determines our logistics status globally. Currently, in the field of logistics, our position in the world is 123rd, while the United Arab Emirates, which is neighboring us, ranks 7th. Unfortunately, our country has performed very poorly in the logistics sector, and today, in this ranking, we are on par with countries like Burkina Faso and Syria. Our rank is even lower than crisis-stricken Afghanistan and Iraq.”
In logistics, having a rail structure is of great importance. We need to develop our rail infrastructure from a logistics perspective. Our factories can use these references to improve their rail structures and create rail infrastructure for themselves and others. If they invest and spend in the right places, these costs will definitely be compensated in the short term, but in the long term, a permanent and robust structure will remain for the organization. This is essential for survival and sustainability in the highly competitive and risky environments of both the country and the world.
In terms of costs, on average, 120 billion Tomans are required for one kilometer of railway track, 1,200 billion Tomans for 10 kilometers, and 12 trillion Tomans for 100 kilometers. Of course, the terrain’s elevation and mountainous nature can alter the situation. Studies and investigations regarding how to create and develop railways were conducted before the revolution, and now it is simply a matter of funding to implement the plans.
Given the importance of logistics, a percentage of the profit in each organization should be allocated to infrastructure. This means that during planning, a certain percentage should be dedicated to infrastructure. We must think about our own future. An important point is that to have efficient logistics, we need to have experts who are well-versed in logistics.
Our urgent conversation with Engineer Siavoshi ended without the opportunity to hear his views on Iran’s railways and strategies for utilizing the existing rail lines. We will provide and reflect his opinions on this matter at another time.
Steel World Review
