Tobacco Logistics and Warehousing: Smoothing the Way

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Forwarding and warehousing are two of the most important aspects to ensure a smooth production flow in the tobacco industry. Tobacco Asia picks the brains of some providers.

By Thomas Schmid

When the sourcing of raw material supplies stalls or if a lack of stored raw materials creates sudden bottlenecks, production slows or may even have to be halted temporarily. Ensuring that new supplies are flowing and enough tobacco is always available are therefore indispensable aspects in keeping factory floors humming. Likewise, tobacco shipments may have to be shifted in a timely manner between different manufacturing locations that sometimes can be countries, regions or even continents apart. This is where dedicated logistics providers come in, supporting their tobacco industry customers through expertise, professionalism and well-oiled forwarding and warehousing systems.

Andromeda: focusing on tobacco since 2006

Dutch company Andromeda Participations BV runs three operational centers, in Rotterdam (its home base), Antwerp, and Dubai. While the Rotterdam location only provides forwarding services, Dubai and Antwerp are fully operating warehousing and forwarding logistics centers. Although the company’s core business traditionally has been in the area of frozen foods-forwarding, it some time ago began specializing in handling all types of tobacco. “In order to survive in the forwarding business, one must focus on a particular industry and its commodities. Therefore, we have been focusing on tobacco since 2006,” reasons director Erik van Nueten.

Although Andromeda today controls about 35,000 sq.m. of storage space, the company does not actually own any of its warehouses but instead has taken out long-term leases with third-party warehouse owners. “These warehouses,” van Nueten assures, “are fully equipped and fitted especially for tobacco storage, which means they impart infestation control, humidity control, monitoring and fumigation facilities.” They also are properly cleaned on a daily basis and any damage is repaired without delay.

In Antwerp, the company has “zero tolerance for pest infestation,” according to van Nueten, who says that this means that “all tobaccos coming in for storage are inspected prior to unloading”. During the particularly busy months from April to October, daily monitoring ensures that no infestation can take hold. “In Dubai, however, this is impossible due to the environment. But even there we monitor every day to keep potential infestation under control. Whenever we see any sign of infestation, an immediate fumigation is carried out,” he elaborates.

As far as providing the available warehousing space is concerned, Andromeda is pursuing very flexible policies, or as van Nueten puts it, “We always will allocate space to our [tobacco industry] customers regardless of what their requirements may be.” This would encompass both short-term and long-term storage arrangements for importing or exporting customers, as well as those who have forwarding agreements with Andromeda. In cases of exportation or importation of product, “we also arrange all necessary customs declarations and other documentations needed,” assures van Nueten. While the Dubai facility accepts storage for finished products also (e.g. cigarettes), Antwerp exclusively stores unmanufactured tobaccos.

In terms of the forwarding business, Andromeda is collaborating with partners that can provide transport logistics such as air freight, train freight, trucks and container ships. As import or export regulations can vary tremendously between source and destination countries, Andromeda assists customers “by always keeping them informed and up to date on any changes in customs and tax procedures.” In that regard, Andromeda is not restricting itself to any source and/or destination countries. “We do not serve specific regions only, but provide our services worldwide,” insists van Nueten.

Filling a void: Krishnapatnam Port

India, and especially the region between Guntur and Vijayawada in the southern state of Andra Pradesh with its fertile farmlands, is a major global tobacco producer and exporter. The leaf tobacco industry of Guntur alone accounts for approximately 12,000-15,000 40-foot freight containers of export volume annually. What had been missing in the vicinity was a good port that could facilitate that trade, though. That changed in 2013 when the purpose-built Krishnapatnam Port Container Terminal (KPCT) became operational. ”Krishnapatnam is located about 250 kilometers from the Guntur-to-Vijayawada trade belt and was therefore ideally suited to meet this need,” recounts Vinita Venkatesh, the port facility’s director. How dire that need really becomes rather clear when looking at the ever-increasing annual tobacco pass-through figures processed by the port (see table 1), 100% of which is exported to markets around the globe.

Krishnapatnam handles a wide range of cargo types including tobacco, providing three general-purpose warehouses plus two container freight stations facilities (CSF). Tobacco can be stored at any of these, meaning that the port is presently not actively promoting a concept of “tobacco-only” warehousing, but the facility does accommodate tobacco for both short-term and long-term storage in shared warehouses. Nevertheless, Venkatesh “would consider” hiring out exclusive tobacco-only warehousing space and even contemplate allowing tobacco companies to install processing machinery on site if she were approached. So far this apparently hasn’t happened.

“When a [tobacco] shipment is to be expected, an appropriate number of empty 40-foot containers are dispatched by road from KPCT to the exporter’s factory, where they are loaded before returning to the port,” explains Venkatesh. The port provides fumigation of tobacco containers, too, if needed. “Containers are taken to [our] specialized fumigation area for treatment and subsequent customs processing and – once declared pest-free – will then be moved to the export yard,” Venkatesh elaborates. Tobacco crops, she adds, often also arrive from India’s other major growing region, Karnataka, “which are processed in Guntur and then moved to KPCT, pending export procedures.”

All customs documentation is handled by port-based customs house agents (CHAs). “Each tobacco exporter appoints a CHA for their shipment through KPCT,” Venkatesh says, adding that “the customs office’s on-site location ensure easy and convenient processing.”

KPCT has been well planned, including being connected to an excellent road-and-rail network to facilitate the transportation of goods, a fact that makes the container port interesting for imports also. For instance, KPCT had a 25 kilometer-long four-lane road constructed connecting the port premises directly to the national highway. “That access road was of course built with foresight for the future to ensure the smooth in- and out-flow of cargo from and to KPCT without road traffic congestion,” says Venkatesh. There are also regular container train services commuting between KPCT and Bangalore, Nagpur, and Hyderabad.

“We are a congestion-free port and container shipping lines arrive and sail as per their berth window agreements, being able to maintain their respective schedules,” asserts Venkatesh. “KPCT functions around the clock, seven days a week, 365 days a year, without any holidays.” And with its enormous land area both inside and the immediate vicinity surrounding the port facility proper, KPCT even “welcomes any industry that may have plans to set up facilities of their own, and we can offer them land on lease or for outright purchase.”

Dedem Mekatronik: the one-stop provider

Moving on to Turkey, we next take a look at Dedem Mekatronik. Headquartered in Izmir, the company was founded in 1995 and today also has representative offices in Dallas and Barcelona. Dedem Mekatronik is not leasing out tobacco warehousing space per se. Instead, the firm supports tobacco producers by designing, building, and implementing for them automated warehousing systems in factories or at remote storage locations. “We use state-of-the-art technologies like ASRS systems and automated guided vehicles [AGVs] to create fully-automated, self-contained raw material logistics operations,” elaborates general manager Rasit Imrenci.

“When C-48 and C-96 boxes of tobacco come in or are filled, we take them, scan, and sort them,” he says. “And if needed, we feed them into production or into an automated storage and retrieval system. It all depends on what the customer would like to accomplish.” The company claims to have successfully completed projects in over 26 countries worldwide, primarily for blue-chip customers such PMI, JTI, and BAT, with the Middle East, Europe, and the US being the main locations.

“Tobacco,” asserts Imrenci, “can be warehoused in an [almost] infinite number of ways and we at Dedem Mekatronik are experts in the logistics of boxed tobacco located near where cigarette production exists.” For example, in Izmir the company some time ago had a customer who needed to transport boxed tobacco from the warehouse to the remote production site. “We worked with our partner EK Automation on that, who provided an AGV that automatically loaded and unloaded the boxes, then sorted them for unboxing at the production location,” Imrenci recalls.

Cigarette production in particular, he says, is so often a continuous task that it is crucially critical that raw materials are in the right place at the right time. “In our experience, automation is the most efficient and consistent way to realize this.” Imrenci asserts that it is important for Dedem Mekatronik to ensure for its customers like the aforementioned PMI, JTI, and BAT that all raw materials are orchestrated perfectly to flow in and out of production at just the right time. “We want to avoid bottlenecks and make sure that production always can run at top speed.”

But it is storage or warehousing of finished tobacco products like cigarettes and cigars “where things can get very interesting,” according to Imrenci. “We have developed a concept in which we store master cases by brand on a multi-layer, roller conveyor-based shelving system and then robotically build up pallets to order based on the exact needs of each distribution center.” Implementing automated end-of-line systems like this apparently can save the customer “an incredible amount of labor and [storage] space.”

In a rapidly changing manufacturing environment, keeping track of best practices and technological advancements in order to produce faster and more efficient, as well as cheaper and safer, is a massive challenge. “At Dedem Mekatronik,” says Imrenci, “we focus on deeply understanding the project environment and objectives because we believe this is the critical first step to achieve production automation success.” When manufacturers work with a single, one-stop provider like Dedem Mekatronik, they can take delivery of a truly turn-key project, including all engineering, implementation, and commissioning.

“With our more than 25 years of experience we are adept in all areas of production automation, from [raw] material handling all the way to assembly lines, intralogistics, packaging-palletizing, and sorter systems,” Imrenci says. “We are even able to bring dreams to reality before anything moves on the factory floor by creating 3D simulations in-house,” which are then presented to the client.