Background

With the rapid expansion of infrastructure and highway construction across India, there is a significant demand for key construction materials such as Gabions, Geosynthetics, Road Markers, and Crash Guards. These materials are often sourced from suppliers in the U.S., China, Germany, and South Korea. Road contractors, who are awarded tenders for various highway projects, are required to use specific materials from prescribed sources. Given the nature of construction, which progresses in phases across different locations, contractors prefer Just-In-Time (JIT) supplies. However, overseas suppliers faced challenges in meeting these demands due to shipment delays, supply chain disruptions during the COVID-19 pandemic, and the ongoing war risks affecting transit routes. Additionally, the cost of Less than Container Load (LCL) shipments for piecemeal deliveries to multiple destinations was prohibitive, significantly eroding profit margins.

Challenge

Chinese suppliers, who were struggling with these logistical challenges and diminishing margins, approached MOMENTUM for a viable solution to streamline their supply chain and reduce costs.

Solution Provided by MOMENTUM

MOMENTUM developed a strategic solution by leveraging the advantages of a Free Trade Warehousing Zone (FTWZ). The key components of the solution included:

• Restructured Supply Model: MOMENTUM worked with the FTWZ to restructure the supply chain for the Chinese clients. Instead of shipping materials directly to various construction sites in India, the clients were advised to bring shippable volumes of materials into the FTWZ. These materials were stocked in the name of the supplier without any change in title.
• Centralized Stocking and Just-In-Time Dispatch: By centralizing inventory in the FTWZ, the Chinese suppliers could manage their stock more efficiently. As contractors in India indented materials with specific destination details, the suppliers could promptly dispatch the required materials from the FTWZ to the construction sites. This approach ensured timely deliveries, reduced logistical costs, and minimized the risk of transit losses.
• 3. FTWZ Advantages: MOMENTUM leveraged the unique features of the FTWZ to provide further benefits:

  No Transfer of Title: Suppliers could stock inventory in their own name without the need for a transfer of title, maintaining control over their goods.

  Multiple Dispatches from Single Bill of Lading: The suppliers were able to make multiple dispatches out of the same Bill of Lading, reducing paperwork and simplifying the shipping process.

  Export-Like Transactions: Each dispatch was treated as if it were an export from the supplier’s home country, allowing funds to be transacted directly into their own bank accounts without the complications of local regulations.