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Transport & logistics www.bus-ex.com ISSUE 1

The

hub ofthe matter

Strategy and development in a diverse, but crucial, industrial sector


Editor’s letter

The EDITORIAL

Managing Editor Becky Done bdone@bus-ex.com Editor In Chief Martin Ashcroft mashcroft@bus-ex.com

DESIGN

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www.bus-ex.com

hub ofthe

matter As trade becomes ever more international, transport and logistics become increasingly crucial links in the supply chain. This special issue of Business Excellence offers insider knowledge into the strategy and development of the major international players in this diverse sector. The simplest definition would describe this as the sector that enables the movement of goods, services and people via surface, sea or air transport—but, of course, when you get down to the detail, there’s much more to it than that. Traditional surface transport has been transformed in recent years with the emergence of 3PL (third party logistics), a term coined to describe an extended service which now includes warehousing, inventory management, packaging, freight forwarding, or any other non-core service a customer may wish to outsource to an expert, rather than handle in-house. The South African haulage company Bakers Transport has made this transition, and chief executive Abdool Tayob tells us how it was done. Also in this issue are first-hand accounts from senior executives of expansion plans at shipping ports all over the world, as well as air freight services, airport management, rail infrastructure development, bus and coach services, and a brand new multi-modal transport service in Singapore. What more could you ask for?

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Contents

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Dampier Port Authority Satisfying export needs

Australia’s second largest bulk export port is on the threshold of a major expansion programme.

Gladstone Ports Corporation Australia’s Pacific gateway

One of the fastest-growing industrial hubs in Australia, housing the world’s fourth largest coal export terminal.

Port of Durban

In deep in Durban

The Durban Harbour Entrance Widening & Deepening project is opening up the port for the era of bigger ships.

Kenya Ports Authority

From spices to containers

The port of Mombasa is now a highly efficient and growing operation, overcoming a series of obstacles.

Luba Freeport

Guinea: the new Gulf

As discovery succeeds discovery, the Gulf of Guinea is shooting up the ranks of global oil and gas producing regions.

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Gibraltar Port Authority Maritime motorways

One of the most famous nautical names in the world offers its customers a surprising mix of services.

Maher Terminals Terminal value

A trusted partner to the world’s major ocean carriers, with its sights set on long-term expansion of capacity.

Al-Rashed International Shipping Delivering in style

A Kuwaiti shipping services company offering a wide range of services, and looking to expand into new markets.

Imperial Logistics Refrigerated Services A strong springboard for growth

An industry consolidation intended to bring about a paradigm shift in refrigerated logistics services in South Africa.

Bakers Transport

One-stop solution

Originally a haulage company, but now transformed into a one-stop logistics provider, to keep pace with customer demand.

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Rennies Distribution Services Assured direction

This company is overcoming the challenges of operating warehousing and distribution services in South Africa.  

McColl’s Transport

Being systematically better

This Australian transport company achieved a significant turnaround by locking operations into standardised systems.

MIDEX AIRLINES Eastern star

Experienced staff, an outstanding delivery record and commitment to customer service add up to an excellent business model.

Grupo Aeroportuario del Sureste (ASUR) Anyone for coffee?

Transforming the performance of Mexico’s airports with a professional approach after privatisation ten years ago.

Evergreen International Airlines Losing the label

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A US-based full-spectrum aviation company, offering ground handling, maintenance, a helicopter company and a 3PL support service.

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Summit Air Rare air

A charter air service operating out of two locations in Canada, taking its clients to the remotest places.

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Let them fly

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Transnet: Capital Projects

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GOAL (German Operating Aircraft Leasing) Owning more aircraft than most passengers realize, this is a strong and apparently future-proof business.

The waking giant

Transnet Capital Projects is investing billions of rand in transforming South Africa’s transport infrastructure.

SMRT

Just the ticket for growth

After years of planning, design and construction, Singapore’s new driverless Circle Line metro system is ramping up to full operation.

Alaska Railroad Corp. Riding the rails

Striving to be safer, greener, more customer-friendly and an even bigger engine for economic growth in the largest US state.

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Contents

The higher road

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Intercape

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Kenya Bus Service Management Kenya’s transport service poses challenges to bus operators; but one company is making a real difference in Nairobi.

The caped cruise-aiders

This South African luxury coach company has been undergoing a transformation, introducing new services and practices.

Great North Transport Driving the bus industry

This South African bus operator has driven home a competitive advantage based on its reputation for safety and reliability.

Prime Invest Transport Take one truck...

...and build a business. That’s the story behind this successful trucking firm extending across South Africa.

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Satisfying ex

ne

Dampier Port Authority is on the t Gay Sutton finds out from port de how Australia’s second largest bu needs of the rapidly growing oil & 14

Transport & logistics


Dampier Port Authority

eeds

xport

threshold of a major expansion programme. evelopment manager Dr Rochelle Macdonald lk export port is preparing to satisfy the export & gas and mining sectors

Transport & logistics 15


I

f you think of the most exciting oil and gas development projects of recent years, names such as Gorgon, Wheatstone and Pluto are bound to spring to mind. And then you are thinking of Australia, a massive continent that already boasts some of the world’s most productive mineral resources. The eastern seaboard, the south-east and far south-west may be its most fertile regions, but it is Western Australia that is home to these three projects. The state generates almost 40 per cent of the country’s exports, and its output is growing. There are currently over $170 billion of major new resource projects either committed or under consideration in the state. Now, look a little closer and it is the Pilbara region in Western Australia that will receive the majority of this investment. The region is already the state’s most productive, a fact that conceals a curious paradox. Pilbara is sparsely populated, boasting less than 0.2 per cent of the nation’s population, and yet it is considered to be the engine room of the Australian economy, responsible for approximately 20 per cent of the nation’s exports including various forms of gas from the massive oil and gas reserves off the north-west coast and iron ore from the mines.

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Dampier Port Authority

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Dampier Port Authority Small wonder, then, that this volume of traffic requires the services of the nation’s second largest and the world’s third largest bulk export port, the Port of Dampier. Located on the north-west coast some 1,260 kilometres due north of the state capital Perth, the port has enjoyed phenomenal growth since its launch in 1963 when it was first constructed by Hamersley Iron (now Rio Tinto) to provide the export infrastructure to support its iron ore deposits some 320 kilometres inland at Mount Tom Price. The importance of Dampier to the development of the Pilbara region is indisputable, and this was recognised in 1989 when the Dampier Port Authority (DPA) was formed to oversee maritime activities at the port, when the North West Shelf Venture LNG exports commenced. Today, the port is a vital gateway for exports and imports into the Pilbara region. During the last financial year, Dampier handled $21.7 billion of goods

Shell Australia Redevelopment for fuel supply at King Bay Supply Base: Shell Australia has announced a commercial agreement with Woodside for the redevelopment of the fuel supply facilities at King Bay Supply Base, near Dampier. Works will commence in early 2011 and will include the reinstatement of the King Bay Supply Base import pipeline, a road gantry for truck loading and additional tankage. Shell marketing general manager Craig James said the facility was important to support shipping and local export industries in this booming region. Craig said Western Australia was a key growth market for Shell’s business and this enhanced facility would improve supply to customers in the Dampier area. “This investment is part of a larger capital program to support Shell’s aggressive plans to grow its fuels business,” he said.

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Dampier Port Authority and materials which included some $10.5 billion of iron ore for export, $7.4 billion of liquid natural gas (LNG), $1.3 billion of natural gas condensate and $1.4 billion of liquid petroleum gas (LPG). Other major products handled by the port included $515 million of anhydrous ammonia and $100 million of salt harvested from the salt plains close to the port, as well as $221.5 million of general cargo. Over the last five years, trade through the port has grown at an average rate of 10 per cent per annum, and the projections show that growth is likely to continue as oil and gas production from the new offshore fields ramps up to full scale production, and iron ore production continues to

Greatship Subsea Solutions Greatship Subsea Solutions specialise in life of field subsea services to the offshore oil and gas industry. With offices in Perth, Singapore and Mumbai, GSS provide services focused in the areas of construction & decommissioning support; inspection, maintenance & repair; geotechnical & geophysical services; and well construction. Our ability to deploy several multi-role vessels from our fleet of differing size and capability allows us to provide the most cost effective solution to your project’s technical and schedule requirements. GSS are focused on providing the right solutions to our clients’ requirements.

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Dampier Port Authority

expand. The Gorgon and Pluto projects are under development at the moment while Rio Tinto, still one of the region’s major operators, plans to increase output of iron ore from 220 million tonnes to a forecast 283 million tonnes by 2013. The facilities at Dampier have grown over the years and currently include the seven-berth Dampier Cargo Wharf and the Dampier Bulk Liquids Berth operated by DPA, as well as a wide range of private facilities constructed and run by many of the port’s major clients such as Rio Tinto, Dampier Salt, Mermaid Marine Australia and Woodside. The role of shaping the regional development strategy is something that DPA has been heavily

Evans & Peck In WA, Evans & Peck recently provided advice to port authorities and mining companies in Dampier, Port Headland, Fremantle, Esperance, Bunbury and Cape Lambert. Evans & Peck first worked with Dampier Port Authority in 2004 as project managers on the Bulk Liquids Berth project. Since then it has continued providing project management support to the Port. As Dampier Port Authority’s project manager for the DMSF, Evans & Peck provided options studies, design management and capital cost estimates. It also developed the business case, prepared tender documentation and managed the tender process.

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Dampier Port Authority involved with since its inception, in close partnership with industry, local communities and government. As part of its remit, it has formulated a long-term plan that analyses the optimal use of available land and infrastructure in and around the port through to 2060, looking particularly at the high value land in close proximity to the water, and then providing a strategy for the development of those assets. From this longsighted perspective, DPA has produced the Port of Dampier Development Plan 2010-2020, launched late last year. The port is now gearing up for an ambitious programme of expansion. “The Dampier Cargo Wharf, for example, has been at near capacity since 2007,� explains port development manager, Dr Rochelle Macdonald. “We are currently in the process of securing final funding approval for the new Dampier

POAGS POAGS is the pre-eminent supplier of stevedoring logistics and port management services in the Australian region. POAGS has had a presence in Australia since 1852, through its heritage as a shipping company, vessel agent and stevedore. POAGS until 2006 operated as P&O Ports Limited, and now offers over 150 years of Australian stevedoring expertise, which extends to port development, management and cargo handling services. POAGS is committed to servicing its existing clients, expanding and developing new business opportunities by extending services at existing facilities, creating new facilities by investing in infrastructure domestically and working in partnerships to build new business opportunities.

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Dampier Port Authority Marine Services Facility (DMSF), which has been designed to meet the rapidly expanding needs of the offshore oil and gas industry as well as the mining, processing and infrastructure industries.” The DMSF will more than double berthing capacity by providing an additional eight berths with facilities for vessels up to 65,000 DWT; an adjacent laydown area equipped with general cargo handling facilities and storage sheds; a roll-on roll-off wharf; and upgraded heavy load-out and rock load-out facilities. Designed to accommodate a diverse range of users and uses, it will relieve the current berthing congestion at the port, improve operational efficiency and provide built-in redundancy, enabling activities to continue even in the event of failure or shutdown at the existing cargo wharf. In addition to the construction of the DMSF, shortterm plans include the development of an alternative water supply option for port users, upgrades to the road network to the Burrup peninsula and a truck marshalling area at the port. Meanwhile, oil and gas client Woodside is due to complete the construction and commissioning of a new LNG facility at Burrup LNG Park later this year, and will begin processing gas from its prestigious Pluto project and exporting it from its newly constructed LNG jetty. Looking further into the future, assessment shows that the existing Dampier Bulk Liquids Berth will continue to have sufficient capacity for demand. Meanwhile the construction of the DMSF will certainly ease pressure and congestion in the short term, but with the Dampier Cargo Wharf due to be decommissioned in 2021 and forecasts for demand ranging from 10 to 17 berths, the pressure is likely to continue. The lack of new land available and ready for industrial use within the port boundaries is something of a challenge, but DPA has identified a number of options. “We do have areas which could be rationalised to yield more space, and there are developed sites that could be used more efficiently,” Macdonald says. “For example, the road network within the port has the potential to

Westlink Shipping Westlink Shipping, a locally owned and operated company, has successfully been operating a fleet of modern self-geared vessels from SE Asia into Dampier for the past eighteen years. Our vessels are equipped with high speed cranes designed to lift heavy project cargo of virtually all kinds such as structural steel, pipe piles, subsea equipment and other project cargoes required by the mining, construction and oil & gas communities. Westlink Shipping takes great pride in offering flexible solutions accompanied with superior attentive service which has left numerous multinational organisations satisfied and continuing to trust us to be their carrier of choice through Australasia.

Jeyco Jeyco (1992) Pty Ltd is the market leader in providing turnkey solutions for mooring systems, specialised rope products and chandlery in Australia. Jeyco has a key focus as a solution provider providing the right product for your project the first time.

be rationalised to improve both access and transport circulation, and to provide physical separation between the various activities and precincts. We also have rugged and precipitous areas that represent possible opportunities for levelling and conversion to developable sites, but noting that there are significant heritage sites in the area to also be taken into account.” There is also the option for further land reclamation, to extend the foreshore into the open waters of Mermaid Sound. “We are also looking to expand the boundaries of our responsibility,” Macdonald says. DPA has become involved in two exciting port developments elsewhere in the West Pilbara region: firstly, at Ashburton North, some 11 kilometres south-west of

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Dampier Port Authority Onslow, plans are currently being drawn up for a new 8,000 hectare strategic industrial area large enough to accommodate major LNG developments. “Chevron is investigating the site to commercialise its Wheatstone gas discovery, while BHP Billiton Petroleum and ExxonMobil are considering using the site to develop their Scarborough discovery,” she continues. “The site will include a port precinct with multi-user facilities on the coastal strip and a multi-use infrastructure corridor.” The second development is the new industrial precinct and port proposed for Anketell, 30 kilometres east of Karratha. The aim is to provide deepwater iron ore port facilities to complement those of Dampier and Hedland. And having played a key role in the planning

process, DPA will ultimately manage the new port and infrastructure corridors. Finally, the port is keen to play a more active role in promoting collaboration in port activities across the state. “We have recently expanded our Perth office and our vision for this is to foster a regional port centre for Western Australia, to build camaraderie between fellow Western Australian ports and to provide an invaluable opportunity to share knowledge and skills, particularly in planning and development. The dedicated team of men and women of DPA have the capacity to deliver outstanding results over the next five years (and beyond) as we think big, think smart, and think future in our decision making, our customer service and our new initiatives.” www.dpa.wa.gov.au/ BE

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Austral Pacific

Australia’s fourth largest port achieved a record financial year in 2009, handling more than 83,000,000 tonnes of coal, grain and other goods. The company managing this impressive growth is Gladstone Ports Corporation Limited 30

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Gladstone Ports Corporation Ltd

lia’s

gateway Transport & logistics 31


G

l adstone Ports Corporation (GPC) is a government-owned corporation that manages and operates three port precincts: the Port of Gladstone, Port Alma Shipping Terminal and the Port of Bundaberg. Gladstone is Queensland’s largest multi-commodity port, housing the world’s fourth largest coal export terminal. Port Alma Shipping Terminal facilitates the import and export of niche market products including ammonium nitrate, explosives, general cargo, salt, frozen beef, tallow and scrap metal. Gladstone, and Port Alma in the Fitzroy River delta near Rockhampton, are both sheltered from the heave of the Pacific behind opposite ends of Curtis Island, while Bundaberg lies some 100 kilometres to the south.

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Gladstone Ports Corporation Ltd

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Gladstone Ports Corporation Ltd

The Port of Gladstone traces its history back to 1914, while the other two are even older, having been founded in 1896. However, the government-owned corporation (GOC) that now unites them didn’t come into existence until 2008. Between them the three sites employ 684 people carrying out operations that include ship loading and unloading, harbour works, quarry operations, reclamation works, general maintenance and administration. The Port of Gladstone’s major cargo today is coal. To give some idea of how the scale of operations has developed, coal was first handled in 1925 at Auckland Point at a ship loading rate of 100 tonnes per hour (tph). Today at GPC’s RG Tanna Coal Terminal (RGTCT), coal is loaded at an amazing 6,000 tph, with Barney Point Coal Terminal (BPCT) loading

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Gladstone Ports Corporation Ltd

at 3,000 tph. But this did not happen at random. During the early 1950s the port transformed from a declining primary industry export base (handling cattle, etc) to the multimillion-tonne export centre it is today. GPC assumed a unique role in 1954 when it pioneered bulk coal handling in Queensland— not only did it develop the facilities, but it opted to operate them, a role it continues today on a vastly expanded scale. The three ports handle the export of resources from Central Queensland and of finished products from local industries, notwithstanding the global trade downturn, which knocked 4.3 per cent off expected coal export volumes for example. Coal exports in

Corporate Protection Australia Corporate

Protection

Australia

(CPA)

is

a

specialist, dynamic and highly professional security

organisation

whose

credentials

in

the provision of practical, effective security solutions ensure our standing at the forefront of industry. CPA supplies professional security services exclusively to the maritime, mining and critical infrastructure industries. Corporate Protection Australia is pleased to be affiliated with the Gladstone Ports Corporation (GPC) for the past three years and currently is GPC’s site security provider.

Gladstone is Queensland’s largest multi-commodity port, housing the world’s fourth largest coal export terminal 2009/10 were up 7.5 per cent on the previous year’s figures, reaching a record 60.4 million tonnes. As the effects of the downturn start to diminish, business is expected to become even brisker in the current financial year, when the Port of Gladstone is forecast to handle a total of 89.8 million tonnes of cargo, an impressive 7.8 per cent increase on last year. Trade growth in 2010/11 is expected to come primarily from the coal industry, with coal exports forecast to reach 67.0 million tonnes. The ever-increasing demand for coal from India and China should see sustained growth in this important part of GPC’s trade. A multibillion-dollar liquefied natural gas (LNG) project on Curtis Island has won approval from the Queensland State Government. This has diverted GPC from coal as its central focus, and given it another completely new industry to consider. While the corporation does not intend to miss any opportunity to fulfil the needs of its

powerful coal mining customers, keeping a close eye on the mining companies’ proposal for a new coal terminal at Wiggins Island, it is now working closely with the LNG sector. LNG, highly compressed methane which can be piped in from coal mines, landfill and other sources, is seen by many as the automotive fuel of the future, encouraged by many cities as a pollution-free way of keeping traffic on the roads. As the host port for this new industry, it is now developing protocols for the safe movement of LNG ships in Gladstone harbour. The Wiggins Island Coal Terminal (WICT) and the imminent major LNG export hub on Curtis Island stimulated GPC to prepare to develop the Western Basin in the Port of Gladstone into the most significant industrial port precinct in Australia. Under the GPC

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Gladstone Ports Corporation Ltd

50-year Strategic Plan, the Western Basin is highlighted as the major future growth area for port infrastructure. Proposals for the LNG export hub on Curtis Island have triggered an environmental impact study (EIS) process for the Western Basin Dredging and Disposal Project—perhaps the largest dredging approval ever sought in the nation. This EIS submission is being processed through both Queensland government and Australian government regulatory agencies for approval. During the year, work commenced on the logistics facilities that will service the movement of people and materials between the mainland and Curtis Island during the

construction of LNG compression and storage infrastructure there. Work also commenced on constructing storage areas for pipes which will be used in the construction of the coal seam gas (CSG) pipeline between the gas fields and Curtis Island. The WICT Project design process was completed during 2009/10. The terminal, with an ultimate capacity of approximately 80 million tonnes a year, has been designed for construction in three stages. Construction is expected to take three years and will create approximately 800 jobs. Safety is always one of the most important concerns in the hazardous environment of a

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Gladstone Ports Corporation Ltd

port, where every ship movement or loading operation is a hazard. As GPC’s CEO Leo Zussino says: “A robust management system provides the cornerstone of a strong safety culture.” The workforce has doubled since 1995, and Zussino expects it to increase to over 1,000 by 2015, so the port’s Site Safety Committee has worked closely with management on a daily basis to remind workers to act safely for their interest and that of fellow employees. “In the coming year, we plan to transition to the internationally accredited AS4801 Safety Management System and this, along with enhanced data capture and analysis capabilities, will provide the prerequisites for improved performance,” says Zussino. Far from being a minor provincial harbour,

remote from any large population centres, Gladstone looks like becoming in its own right one of the fastest-growing industrial hubs in Australia. Since consolidating under the GPC ‘brand’, it has adopted world class environmental, safety and materials handling practices, a Continuous Improvement Programme (CIP) and excellent corporate social responsibility policies. One of the community engagement highlights during the year was the release of the first edition of a five-part port history. The publication documented the role of the indigenous community in the pre-European settlement of Gladstone and the early history of the port’s development up until 1934, and this has been presented to schoolchildren throughout the region. www.gpcl.com.au BE

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dee

In

The Port of Durban, catering for all cargo sectors bulk liquids, continues with its infrastructure inve needs of shippers and the South African industrie for Transnet National Ports Authority (TNPA), told Entrance Widening & Deepening (DHEW) project 42

Transport & logistics


Port of Durban

ep

in Durban

s and especially containers, automotive and estment programme in order to meet the es they serve. Dave Ward, project manager d John O’Hanlon how the Durban Harbour is taking the port into the era of the big ships Transport & logistics 43


D

urban has one of those magnificent natural harbours that must have seemed a godsend to early navigators. The haven is guarded by a bluff that reaches up like a finger and the southern breakwater is actually further north than its opposing northern counterpart. Shipping approaches the harbour from the north, and the primary reason for widening and deepening the entrance channel was to improve the safety of navigation of vessels into and out of the port in line with international standards. From the port users’ point of view the channel is now more accessible in all states of weather. When it was narrower and shallower the Port experienced occasional downtime due to weather conditions. With it now widened and deepened, the Port has now reduced disruption of that sort. There were restrictions on the larger vessels, and those restrictions have now been removed. However, there’s a more important strategic reason behind the R3.9 billion investment. The largest ships that could be handled prior to 2007 were 4,000 TEU (20 foot equivalent unit—the standard measure for container ships). The original design increased that to 6,600 TEU, but Korea’s Samsung, a shipyard that has led the development of large container ships, had started to build 9,200 TEU vessels. As that was clearly the way the market was going, the design was changed to accommodate these ‘post-Panamax’ behemoths. The revised design specification

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Port of Durban

Transport & logistics 45


will give Durban a distinct competitive edge over other ports and enable it to accommodate the larger container vessels— which deliver lower freight costs to shippers and industrial end-users alike but so far do not call at African ports. The project was an opportunity to clear out a number of hazards from the harbour, including four concrete caissons deliberately positioned to prevent U-boats from slipping in during World War II. These had to be removed ahead of the dredging operation, and the original plan was to lift them intact and dump them out to sea, says project manager Dave Ward. “Achieving this was quite challenging because the structural integrity of these caissons had deteriorated with the result that we could only do that in sections. We did manage to float one caisson out, but the rest we had to cut up into much smaller pieces using advanced technologies such as underwater diamond saws.” Another surprise that turned up well into the contract was the discovery of an unknown wreck in the channel for which historical records were unavailable. “The approach to the identification of the wreck and rendering it harmless to shipping while meeting the objectives of the project was in itself a significant achievement,” says Ward, who emphasises that the speed and efficiency with which this project was brought to completion in February 2010, a month ahead of schedule, can be attributed mainly to good communication between the Port authorities, the shipping lines and the contractors and subcontractors. “We were able to execute some of the dredging work ahead of time, even in the navigable channels, without disruption to shipping and the working Port. It was business as usual.” With around 8,000 ships utilising the harbour every year that was quite an achievement, he

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Transport & logistics

adds. “Throughout the project we were able to keep the traffic going in the Port by doing all the work on the north side first, then diverting all the traffic into the channel on the north while we then turned our attention to the south channel. That proved to be very successful.” In February 2003, coastal engineering consultants Prestedge Retief Dresner Wijnberg were appointed jointly with the CSIR Stellenbosch to undertake the preliminary design work. The main contract for the works was awarded in May 2007 to a consortium comprising Dredging International of Belgium and Group Five of South Africa, while project management was carried out by Transnet Capital Projects and its joint venture EPCM (engineering, procurement and construction management) contractor HMG (Hatch, Mott MacDonald, Goba). The type of contract used was the New Engineering Contract (NEC), and Ward believes this was a key factor in managing risk and controlling the project, thereby overcoming potential problems. “The NEC form of contract is based on mutual trust and cooperation between contractor and client. This assisted all stakeholders to focus on project objectives and find solutions.” Safety is always a good indicator of how well a project is being approached, and the project achieved one million hours without an LTA (lost time accident). “Health and safety were constantly enforced,” Ward says. However, the outstanding safety record also depended on the quality of collaboration between the contractors and project management teams, and their experience. “We were pleased that even the newer but more innovative subcontractors found in the project an excellent opportunity to stretch their capability in partnership with a global player like Dredging International. This assists in demonstrating the expertise available in South Africa and is good for the construction industry. An example of this is the Durban-based commercial diving and marine construction company Subtech, for whom this was a significant contract where they were responsible for the numerous underwater tasks prior to and during


Port of Durban

Maritime Craft Services Maritime Craft Services (Clyde) Ltd is a well established tug and workboat company that primarily supply vessels to the dredging and marine construction industries. Operating worldwide, all vessels are modern, fully in class, and equipped with the latest technology. They are also operated by experienced, highly skilled and trained crew. We pride ourselves on being approachable, adaptable and professional in the services we provide.

the contract, including such work related to the removal of an old service tunnel under the harbour.� No two marine projects are the same and what makes Durban unique, says Ward, is the geographical position of the Bluff headland and its extension to

the South Break Water. This is a great asset to the Port in creating natural protection to the harbour and was thus not suitable for widening the channel to the south side. “In the event we decided to do all our widening and deepening on the north side. Apart from strengthening and raising the southern breakwater by two metres, we left other structural aspects of the South Break Water unchanged.� The successful delivery of the DHEW highlights the need for deeper berths to realise full value in the Port. Various developments are underway to deepen berths in the Port to ensure that vessels meeting the design capacity of the entrance channel may be serviced. Several feasibility studies in this regard are underway while the reconstruction of some berths has commenced. www.transnetnationalportsauthority.net BE

Transport & logistics 47


From

spice

Despite a number of obstacles, the highly efficient operation that is gr

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Kenya Ports Authority

escontainers to

e port of Mombasa has developed into a rowing daily, as Alan Swaby learns

Transport & logistics 49


W

e ’re used to hearing about high GDP growth in China and India but until a political squabble turned previously stable Kenya into a riot state for a month, it too had been doing very nicely. “Prior to 2007, growth had been running at seven per cent or better,” says Bernard Osero, public relations manager for the Kenya Ports Authority (KPA), “but then violence and destruction of infrastructure put the country back again.” Even while the rest of the world was experiencing a 12 per cent downturn in container volumes after the 2008 banking disaster, total tonnage through Mombasa increased by 16.1 per cent while container volumes went up by 0.5 per cent. As a result, Mombasa is the second most important port after Durban in eastern and southern Africa. Not only does it handle its own imports and exports but it handles freight to and from all surrounding countries—Uganda, Democratic Republic of Congo, Southern Sudan, Burundi and Rwanda—and it’s also more convenient for the northern part of Tanzania to use Mombasa instead of Dar es Salaam.

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“Dar es Salaam is around half the size of Mombasa,” says Osero. “Theoretically we are in competition but it is more of a collaborative relationship now that there are closer economic ties between our two countries. And the available distribution network will always be a major factor in deciding which port to use.” If there are any weaknesses in the Mombasa story, they revolve around distribution. Only 10 per cent of freight is transhipped by rail, thanks to an inadequate network and a less than reliable service. Rectifying the problems is on the government’s agenda but at best it will be a long-term solution. In the meantime, Kenya’s roads—albeit good ones—are clogged with trucks. There’s been shipping in and out of Mombasa for centuries, ever since spice-carrying dhows called there. Over 100 years ago the first of two lighterage wharves was built and the modern Port of Mombasa

started taking shape in 1926 when two deepwater berths were created. In the 1960s and 1970s, during the era of the East African Community (EAC), Mombasa was controlled along with Dar es Salaam and the oil port of Tanga by a joint authority of the member countries. But when ideological differences caused the EAC to collapse, Kenya’s ports were taken over by the national government in 1978 and run by the KPA. Although Mombasa is by far the largest, the KPA has other smaller ports dotted along the coast and in the future it will have an additional giant, when the deepwater port of Lamu is completed. Contracts have been signed with a Japanese contractor to undertake a feasibility study into a new 22 berth port, which will

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relieve some of the pressure from Mombasa. And a relief of pressure is definitely needed. Using one method of measuring capacity, it is already handling 600,000 teu (20-foot equivalent units) per annum compared with a design capacity of 250,000 teu. In sheer tonnage, this means that 19 million tonnes are passing through the port compared with an absolute capacity of 22 million. Two years ago, congestion peaked as an issue and the KPA came up with a novel solution of contracting private cargo freight stations (CFSs)—offsite storage areas complete with the necessary customs clearing and freight forwarding facilities. To relieve pressure completely and to provide badly needed extra capacity, a contract has been signed with the Japanese to build a second terminal at Mombasa. The first phase of this should be ready by 2015 and eventually it will provide an additional 1.2 million teu—in other words, it will triple the capacity of the existing Mombasa facilities. In the meantime, the KPA has been working hard behind the scenes streamlining the way the port operates, taking out duplication and bureaucracy. Today, there is an automated document clearance

system; the movement of ships and cranes is planned using sophisticated ERP software; and gate management and truck movements are controlled from a central point. In part, the results have been impressive. Ship turnaround times that once averaged five days are now down to just two, comparing favourably with an international average of one to two days. Where there is still work to be done is on the cargo dwell time, or the time between the moment the cargo is landed to the point when it is despatched. “The best ports have got dwell times down to a matter of hours,” admits Osero. “Ours too have come down but are still unacceptably long, at around five days. Unfortunately there is only so much we can do because much of the problem relates to road and rail links that are largely out of our hands.” Still, the KPA is investing in different solutions. Two more gantry cranes have been ordered that will provide operational flexibility of having two cranes offloading one ship. Similarly, extra

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Bolloré Africa Logistics African transport and logistics are important to the Bolloré Group. It guarantees a tailormade solution for the logistical transport chains of its customers and Africa’s economic players, regardless of the activities, countries or environments involved. An expert in African logistics, Bolloré Africa Logistics is a partner of excellence for local and international institutional and economic players, and offers a quality service throughout the continent.

mobile cranes are on order to ensure quicker attention to smaller ships. And there is always the option of increasing the number of CFSs as demand dictates. There is no doubt that Mombasa has a lot going for it. It is strategically well placed and has established links with 25 shipping lines and direct connections to

over 80 ports. It is a natural deepwater harbour that only needs some additional dredging once every five years, and it’s sheltered from the wind and strong tides. The 7,000 strong, 100 per cent Kenyan work force is also well trained and comprises all the support needed, from nautical engineers to experienced pilots. But despite all the good points, Osero is concerned by the effect Somali piracy is having on sea freight in general. Already, ships are being forced to take ever longer routes to avoid hot spots impacting on rates and insurance. The trouble is that without intervention, the pirates are becoming ever bolder and reports already exist of attacks 1,000 miles from land. No doubt all at the KPA are hoping that action is taken, so that the country and its economy are free to forge ahead once more. www.kpa.co.ke BE

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Guine the

ne

As discovery succe up the ranks of glo servicing its deman

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ea:

ewGulf

eeds discovery, the Gulf of Guinea is shooting obal oil and gas producing regions—and nds is Luba Freeport, the new Jebel Ali

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t was in 1999 that the government of Equatorial Guinea realised that the port of Malabo would never be able to cope with the demands of an oil industry. But the island of Bioko is perfectly placed, not 50 miles from the coast of Cameroon and nestling between the Bight of Biafra and the Gulf of Guinea. Malabo is the capital of Equatorial Guinea and it has a decent and well established harbour; but the port is surrounded by urban development and there’s no room to site any development around it. Accordingly, the government decided that the only solution was to develop a different site on Bioko that was free from these constraints. Together with the investment and development group Lonrho, it decided it would develop Luba to the south-west of the island as a purpose-built logistics centre for the region, attracting the oil producers away from the competing mainland ports in West Africa by tax concessions. Thus Luba Freeport was established, and Howard McDowall, a port management consultant with 30 years of international experience in port management and oilfield logistics, was appointed as its director and general manager. McDowall has overseen the project from its development and now, more than a decade later, is seeing it gain real traction as the industry grows and Luba is getting recognised as its only really fit-for-purpose logistics hub. Its first advantage is God-given, he says. “All the ports of

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West Africa have draught problems in one form or another. Big vessels can only get into the nearest alternative Douala once a day because they have to wait for the tide to get them over the sandbar. Takoradi in Ghana has a quayside that will give you 12 or 13 metres at high tide but that drops to about seven at low tide.” In Malabo, where draught is restricted to 10 metres, vessels queue for up to 10 days to get into the port, he says, and four or five days’ delay can be expected anywhere on the coast from Ghana to Cameroon. The other disadvantage they all share with Malabo is that these ports are landlocked, having developed as the port area of a city. They have no hinterland and very restricted space around the quayside for exploration drilling companies to establish storage and supply facilities. “We established Luba Freeport as a logistics base dedicated to the oil industry. We are in a well sheltered bay, with deep water access. Luba has a natural draught of 10 metres at the current quayside, and in the next stage of our development that will increase to at least 16 metres.” The tide differential is the lowest in West Africa, he adds, at just one metre. At the time of Luba Freeport’s inception, ExxonMobil was just about the main oil producer. Now that it has been joined by Marathon and Amerada Hess, at around 400,000 barrels a day, Equatorial Guinea has become the third largest producing nation in West Africa after Nigeria and Angola, just 15 years after its first crude was pumped. All of these companies have established facilities at Luba, says McDowall. And now they have been joined by Noble Energy, which is sitting on a major oil and gas discovery in the region. He paints a picture of the activity Noble Energy’s involvement will trigger before it starts to pump oil in 2012: “They have completed all their major exploration wells and the development phase, and are ready for entering the production phase later this year or early in 2012. Single Buoy Moorings (SBM), with its operating offices

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in Monaco, is starting to bring in various equipment they require like suction piles, chains, anchors etc, ready for the arrival of the floating production storage and offloading unit [FPSO] which is due later this year. Following SBM’s work, the French company Technip will bring in the umbilicals ready for transferring the crude to the FPSO.” At the same time the port continues to serve the existing producers. Currently Luba Freeport sees around 100 ship movements a month, but it should be noted that these are ships entering and leaving the port with the day-to-day production and maintenance chemicals and materials needed to keep the existing rigs in production. Once they are moored, the experience is very different from what happens in other West African ports. There is no shuffling from berth to berth, because Luba Freeport was designed as a one-stop-shop. “We had a clean slate. Having been involved in oil logistics for so many years I knew where the pitfalls were going to be.” It is common at the older ports to find flexible hoses snaking across the quayside, vulnerable to traffic, machinery and human error. Splitting and leaks are common, he says. “To pump efficiently across a quay you need to be no more than 30 metres away from it. Companies like M-ISwaco and Schlumberger that supply drilling fluids and chemicals are set up at a section of quay specifically for chemicals suppliers—all their feed lines go through a trench across the quay, completely protected and covered—and they come out onto a manifold.” It makes life much easier and safer. A supply ship can turn round really quickly, load its chemicals, engineering materials, fresh water for drilling, fuel and victuals simultaneously. Time is money in the oil business, with vessels chartering extremely expensive. Bioko is hours away from any part of the West African oilfields, so sailing times are never an issue; however the biggest attraction for clients is undoubtedly its tax-free status. A number of other ports claim to be ‘free’ but Luba Freeport is modelled on Dubai’s Jebel Ali, McDowall explains. “We were given some very lucrative tax concessions. Clients establishing a base at Luba get a full range of tax concessions: they are exonerated

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Luba Freeport from corporate income tax, tax on dividends, VAT, withholding tax and so on. One further advantage we have at Luba Freeport is that transit tax, which applies across the whole coast of West Africa and can range from one to three per cent of the CIF (cost, insurance and freight) value of the cargo is exonerated at Luba.� Last year a 150 metre quay extension was completed by the Danish contractor Pihl. A tender is due to go out for a further 220 metre deep water phase that will be completed in 2012. With interest from China National Offshore Oil Corporation (CNOOC) and companies like Roc Oil, Repsol and the Australian Ophir Energy all active in the area, the additional capacity will undoubtedly be needed. www.lubafreeport.com BE

TLC SA TLC SA is headquartered in Chavannes-de-Bogis, Switzerland. It was created in 2001 and today has more than 150 employees in seven countries. TLC specializes in transportation & logistics activities, focusing on servicing oil companies and their contractors. Its expertise entails all logistics activities from processing of orders to delivery at job site including freight forwarding, expediting and customs clearing. It provides its clients within Luba Freeport its own storage bonded area and is the only permanently established agent inside LFL with 12 staff members. TLC also provides port agency services to vessels and offshore working units as well as husbandry services such as crew changes, visas etc. TLC Equatorial Guinea opened its first office in Malabo in 2003 followed by Luba in 2004 and Bata in 2010.

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Maritim

moto

It’s one of the most famous nautical nam offers a surprising mix of services, as Al

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rways

mes in the world but lan Swaby discovers

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h ere can’t be many ports which have an ancestry going back 2,000 years or which, at least these days, handles so little actual freight as Gibraltar. In many ways, it is unique—not just in terms of its location at the crossroads of the north-south and east-west shipping routes, but also in terms of its business mix. “Ports exist,” admits Captain Peter Hall, CEO of the Gibraltar Port Authority (GPA), “as the conduit for imports or exports. Gibraltar is more like a motorway service station—our role is to keep the ships of the world in motion.” The port is managed by Hall and a core staff of less than 50 who create the conditions in which other service operators can work, providing employment for upwards of 3,000 skilled and semi-skilled workers. Without exaggeration, Gibraltar is a bustling spot on the map. In a typical year there are some 110,000 vessels transiting the Strait of Gibraltar— in other words, around 250 per day—and 10 per cent of them call to use the facilities at Gibraltar. In typical motorway fashion, the port can feed, water and refuel whoever calls; untypically, it can also repair ships and entertain visitors. “Gibraltar has a special tax-free status,” says Hall, “and this is particularly attractive to cruise ships on their way back north. We are often the last port of call, allowing passengers a final opportunity to take advantage of purchasing tax-free goods before returning home. It’s a nice bonus for them and 300,000 plus visitors a year represent an important multiplier to Gibraltar’s economy.”

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Gibraltar Port Authority

The airport terminal here is no more than a 10 minute walk to the port, making it extremely convenient for shipping lines who want to change ships’ crews

At the less glamorous end, ship repairs take place in facilities originally built by the British Royal Navy as part of the empire’s primary defences in the days of Lord Nelson— his flagship, ‘Victory’, was one of the first warships to be repaired at Gibraltar. Now, they represent some of the largest dry dock facilities in the Mediterranean which continued to be operated by the British government until 1985, when they became a private concern. In fact the status of the entire port changed just five years ago when it ceased to be administered by the local government and became a private authority with an executive board made up of local professionals and business people with marine connections. “This move has been invaluable,” he says. “It allows many advantages such as making a profit, which in turn leads to development. Being responsible for your own future means that profits can be re-invested in new facilities and infrastructure. It also gives us the opportunity of making decisions faster so that we are better able to respond to customer needs.” Considering its location, Gibraltar is not short of competitive ports. Just across the bay is Algeciras, gateway to Andalucía and the rest of southern Spain. No more than 60 kilometres away across the Strait, there is the North African port of Tangiers, offering lower operating costs than its European partners and less environmental restrictions. Fortunately, Gibraltar

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can leave its two neighbours to fight it out for freight supremacy because both of those are geared towards containerisation, which isn’t the case for Gibraltar. Instead, this outlying British territory has made an international reputation for itself as service provider to shipping lines. The most notable aspect of its service portfolio is that of a bunkering station—the largest refuelling operation in the western Mediterranean. “In 2001,” says Hall, “the port provided 2.9 million tons of fuel oil—a figure which had grown to 4.7 million by 2009. Gibraltar’s bunkering companies can supply all grades of marine fuel, from 30 cSt to 380 cSt. We police these operations, conducting constant quality audits on each company to ensure that the service standards as set out in the Bunkering Code of Practice are met. The port has a very long-standing reputation for quality and that must be protected.” Ships wanting fuel can be processed either tied up at berth in the harbour or, more commonly, while at anchor in the bay. This way, fuel is taken out on bunker barges—or mini tankers holding upwards of 8,000 tons of fuel. Considering that a super-tanker might need to take on 10,000 tons of fuel to get it around Africa and into Gulf waters, it often takes a couple of visits to fill a ship’s tanks. It’s also possible that a ship might need a mix of different fuels. To travel in the English Channel, for example, ships must run on low-sulphur fuel to minimise environmental impact. At times, they might need to be bunkered with as many as four different grades of fuel to meet all their needs. Instead of being rivals, the port and local airport

are collaborators, working closely together to provide an attractive package of services. “The airport terminal here is no more than a 10 minute walk to the port,” says Hall, “making it extremely convenient for shipping lines who want to change ships’ crews. But a far more exciting prospect is using Gibraltar as the staging point for what are known as turnaround cruises. Instead of ploughing through winter Atlantic seas, northern holiday makers could fly to Gibraltar and instantly feel the sun on their backs.” The single drawback to Gibraltar’s operations is its finite geographical limitations. Already business is missed by ships reluctant to wait for a berth, so extra capacity would be extremely welcome. An environmental impact assessment (EIA) is currently being conducted to see how waters to the east of the rock could be used as extra anchorage and more importantly increasing bunkering capacity. It’s an attractive plan as it needs little or no investment on the part of the GPA—just an assurance to the community as a whole that it doesn’t present any new problems. If the study is favourable, it is hoped that this plan could begin in the early summer. Already there is a little slack in the bunkering provisions which could be used; but successfully attracting new customers would soon encourage local operators to expand. www.gibraltarport.com BE

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va

Terminal

Already a trusted partner to the world’s major sights set on growth, using the economic slowd prepare for a longer-term phased expansion of 76

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alue

ocean carriers, Maher Terminals has kept its down to further improve its operations and f capacity as necessary, Keith Regan learns Transport & logistics 77


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he port terminal operations that Maher Terminals LLC run at the Port of New York and New Jersey may well be more than 2,000 miles from the Panama Canal, but the fortunes of the cargo handling business and many others in ports up and down both US seacoasts will undoubtedly be impacted by the construction work now taking place to expand the century-old canal across Central America. Just how closely linked those two locations are became apparent recently when Panama’s president, Ricardo Martinelli Berrocal, visited the Maher Terminal facilities. “It was very significant for us, of course, as it underscored Panama’s commitment to completing the expansion of the Canal by 2014,” says Frans van Riemsdyk, executive vice president of corporate development and strategy for Maher Terminals. “The president made it clear that completing the Canal expansion by 2014 on what will be the 100th anniversary of its original opening in 1914 is an important milestone for Panama.” Additionally, New Jersey governor Chris Christie has committed to “fix” a height clearance problem with the Bayonne Bridge to

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ensure that the much larger vessels transiting the Panama Canal upon completion of its expansion will not be restricted in accessing marine terminals in the Port of NYNJ. The completion of that project is likely to be good news for Maher, which currently also operates a terminal at the Port of Prince Rupert in British Columbia, Canada, and is expanding into Nova Scotia through a commitment it made to a project known as the Maher Melford Terminal. Maher is well positioned to enjoy the benefits of increasingly larger vessels moving its cargoes from Asia to the Port of NYNJ via an expanded Panama Canal. “It’s all about capacity, and we have the capacity to handle that growth now, having recently completed a major expansion and modernization of our NYNJ terminal,” says van Riemsdyk, who has been with Maher for 30 years. “The major ocean carriers have committed to an enormous expansion of their container ship fleets by building increasingly larger vessels. When the global economy went into its dramatic downturn, the world’s container vessel fleet suffered through significant idling of capacity, with harbors such as Hong Kong and Singapore littered with vessels at anchor. The ocean carriers are eager to re-deploy their larger vessels in order to benefit from their improved economies of scale. Many of these vessels currently exceed the capacity of the Canal. Completion of the Panama Canal expansion will allow these much larger vessels to transit via ‘all water’ routes to the Port of NYNJ, which represents a significant growth opportunity.” That opportunity may extend to Maher in particular. “In the Port of NYNJ we have what is arguably North America’s largest marine container terminal,” he adds. “Just before the economic downturn, we had completed an extensive modernization and expansion of our facilities there, so we’re ready to accommodate significant volume increases immediately and can quickly implement plans for further capacity expansion when necessary.”

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Maher’s terminal in the Port of Prince Rupert can handle 750,000 TEUs (each TEU represents the equivalent of a 20-foot cargo container), a capacity that Maher has grown by 50 percent since it acquired the operations. Prince Rupert is the deepest harbor in North America and is strategically located on the Great Circle Route, which provides the quickest ocean transit times between the Far East and the West Coast of North America. With direct rail access, Maher’s customers are shipping goods from Asia to major North American cities, helping to reduce the time it takes to reach those markets. Although the Prince Rupert terminal currently has ample capacity for future growth, Maher is already working on plans to further increase capacity at Prince Rupert as conditions may require. Maher services ocean carriers who in turn are providing service to the likes of major retailers such as Walmart and Target. Maher is responsible for the loading and discharging of container vessels and handling such container shipments between vessel and either truck or railcar for ultimate distribution to the beneficial cargo owners. Meanwhile, coming out of the economic slowdown Maher is ready to capitalize on work it has done to reorganize and refocus its operations on providing absolute satisfaction to the clients it serves, van Riemsdyk points out. “When you go through these difficult economic periods, there’s good news and bad news. The bad news is obvious, but the plus side is that it gives you an opportunity to re-evaluate the way you’re handling your business, and it puts you in a position to redesign and prepare yourself for recovery. We are very well positioned to handle

substantial container volume increases.” Maher’s New Jersey operations recently received another major boost with the State of New Jersey and the Port Authority of NYNJ announcing a commitment of $1billion to fix the air draft (the distance between the waterline and the highest point of a ship) restrictions on the Bayonne Bridge by 2014, which will allow the much larger vessels to enter the Port without restriction and significantly enhance the Port’s competitive position. The Maher Melford (Nova Scotia) facility will be well positioned to handle cargo heading to and from Southeast Asia, India and the Indian subcontinent. Container shipments moving via the Suez Canal and the Maher Melford terminal will benefit from the quickest transit times between Southeast Asia and the East Coast of North America. “Melford is in some respects a North American East Coast ‘sister port’ to Prince Rupert, as it is also strategically located on the Great Circle Route with the potential to provide industrybest transit times to and from key inland markets,” van Riemsdyk says. Maher Melford is being developed on a 14,000-acre industrial reserve in the Strait of Canso, a port that features water depths of more than 90 feet and no air restrictions, and it remains ice-free year-round. Like Prince Rupert on the West Coast, the port is designed to be an intermodal facility, with direct, on-dock access to the CN Rail network. Initially, the operation will have a capacity of more than 1.5 million TEUs. That new facility, scheduled to begin operations in 2014, in turn helps make the company’s overall portfolio of terminal operations all the more powerful.

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Completion of the Panama Canal expansion will allow much larger vessels to transit via ‘all water’ routes to the Port of New York and New Jersey, which represents a significant growth opportunity “It’s quite strategic,” van Riemsdyk says. “Vessels from Asia can come across the Pacific to the West Coast and call on our facility in Prince Rupert. If they decide to come through the Panama Canal, they can come to our terminal in the Port of NYNJ. Vessels that go through the Suez Canal can be handled very competitively via both NYNJ and Melford. We think we’re positioning the business well regardless of which shipping routes our customers choose.” www.maherterminals.com BE

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Delivering in

Al-Rashed Internationa leader in shipping serv Varrier explains to Gay 86

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al Shipping has established its position as a vices in the Persian Gulf. General manager Ravi y Sutton why the human touch is so important Transport & logistics 87


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o dern-day Kuwait has come a long way from the small pearl fishing community of the early 1900s. Sophisticated and cosmopolitan, it is the world’s eleventh richest nation, boasting a free and thriving economy, a well funded education system and the second highest literacy rate in the Middle East after Israel. Its population is also very diverse, 32 per cent being Kuwaitis and the rest expatriates drawn from around the world. The echoes of the old pearl fishing tradition, however, continue to resonate strongly today. With its roots firmly based in a seagoing tradition, Kuwait has developed one of the largest shipping industries in the Persian Gulf, not only handling exports but also importing the vast array of materials required for industrial and commercial development, along with goods and food for its multifaceted population. One of the leaders of the Kuwaiti marine industry is Al-Rashed International Shipping, a division of The Al-Rashed Group—a long established trading company founded in 1911 by the highly respected Al-Rashed family. Launched in 1952, the International Shipping division initially traded as a shipping agent for the materials and goods required during the earlier years of modernisation and transformation. It wasn’t until 1991 when Kuwait faced the challenge of rebuilding its devastated infrastructure following the depredations of the Iraqi invasion that the company saw the opportunity to diversify and build a much stronger and larger company.

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If a customer, shipper or consignee is having any problems our top management will get involved and help find a solution. It is just part of our day-to-day business

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“We saw significant opportunities to work with some of the world’s largest and most respected companies on the reconstruction of Kuwait,” explains general manager Ravi Varrier, who has been with the company for 33 years. “But at the same time, we also had to rebuild our business from scratch when we returned to Kuwait after the war.” The two reconstructions went hand-in-hand. Building on the reputation it had gained over the previous 40 years for efficiency and service, the company established its credentials and expanded into all areas of international shipping. Today, Al-Rashed International Shipping offers a wide range of services from shipping agency and charter work to warehouse & logistics, contract work and freight forwarding. Not only capable of handling all types of marine operations including chemical, military,

oil, bulk and break bulk, the company also has considerable expertise and experience in air and land transportation. Operating to the highest international standards, it is renowned for the care and attention it gives to its customers. Varrier attributes a significant element of this success to the people-oriented company ethos of the Al-Rashed Group, and to the indepth knowledge and experience of his own staff. “The key thing for us is the human touch. We employ 146 staff in our Kuwait office, and simply don’t have the staff turnover that many of our competitors do. Many of our staff have 10 to 12 years’ experience with the company and are prepared to work very promptly and very hard for our customers,” he says. “Moreover, if a customer, shipper or consignee is having any problems our top management will get involved and help find a solution. It is just part of our day-to-day business.” In the weeks following the end of the second Gulf War in 2003, when urgent supplies were needed throughout Iraq, the company stepped in quickly to fill that vacuum. Managing the supply of items such as power generation and water purifying equipment as well as supplies to the international troops, it became the first company to establish a proven freight delivery system into Iraq. And this established a firm foundation for the company’s second phase of expansion. “Operating in Iraq was challenging in those early days because much of the local manpower had been lost, and there was a considerable amount of looting,” Varrier admits. However, the company worked hard to establish an office in Iraq and to build a stable and secure business. What began as a requirement to import and move construction materials and equipment for the international contractors tasked with rebuilding the country’s infrastructure soon developed into a full range of shipping, air and road services, and eventually included fulfilling

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Al-Rashed International Shipping complex projects for major multinational players in the oil and energy sectors. Today, Al-Rashed International Shipping employs some 68 Iraqi nationals to run the Iraq office. Again, Varrier believes that it’s the human touch that has enabled the company to build a strong and loyal workforce in what is essentially a deeply troubled region. All the usual concessions are provided for the local staff, including attractive salaries and a healthcare scheme. But true loyalty requires stronger foundations than that. “The Iraqis are essentially building their nation,” Varrier says. “Therefore we put a considerable amount of money into their families, for example by supporting the education of their children. This builds loyalty to the company and confidence in our system.” Suppliers and contractors play a significant part in supporting the company’s reputation and influencing its efficiency, and they are therefore subject to the same principles of loyalty and honesty. “We don’t allow anything under the table,” Varrier says. Neither does he believe in beating his suppliers down to the lowest price—it’s loyalty and quality of service that matters the most. “We always demand the best service,” he continues. “But we ask for a reasonable price and we pay very promptly, and that’s a great advantage in our negotiations.” The company continues to invest for the future, and has recently spent approximately US$150,000 on the implementation of a new ERP system. Meanwhile, the operations in Iraq were expanded in 2009 when a purpose-built 3,000 square metre warehouse was opened at a site just 10 kilometres from the Iraqi port of Umm Qasr. “Our strategy is to invest in the growing market,” Varrier says. Apart from Iraq, though, the Persian Gulf is very much a saturated market and the company is therefore considering its options for expansion further afield. “We have initiated market reports for areas such as China and India, but such things are very much for the future,” he concludes. www.al-rashedgroup.com BE

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A strong spri

g

for

Formed just eight m Services is preparin services in South A to Gay Sutton his v 94

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growth

months ago, Imperial Logistics Refrigerated ng a paradigm shift in refrigerated logistics Africa. Managing director Gavin Wilson explains vision for the future Transport & logistics 95


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t is a long held wisdom that any company that remains static is in fact in decline. And during times of global economic uncertainty, it’s even more important to be flexible, alive to opportunity—and above all, creative. “We believe that our marketplace is right for a step change,” explains Gavin Wilson, managing director of Imperial Logistics Refrigerated Services. “And not only a change in mindset: the global economic situation is forcing a lot of organisations to rethink their company focus and to reassess exactly what constitutes their core business.” Imperial Logistics Refrigerated Services (ILRS), part of the Imperial Logistics division of one of South Africa’s largest companies the Imperial Group, was formed in July 2010 through the merger of four companies within the group. Fast ‘n Fresh—originally headed up by Wilson—and Liebentrans were leaders in their field in the transport of refrigerated produce, one transporting perishable food predominantly for the retailer Woolworths, the other transporting fresh meat between abattoir, wholesaler and retailer. The third company in the mix was a smaller family owned fruit transport business located in the north of the country, in which Imperial is now a majority shareholder. The three were obviously complementary to each other: “Our aim in coming together is to achieve economies of scale and to provide a better offering across the marketplace,” Wilson says.

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The fourth element of the merger, however, heralds something of a change in strategy for the other three companies. “As companies, we have grown organically and by acquisition, and historically we have always acquired assets: trucks, trailers and bulk infrastructure,” Wilson explains. “The final element in the merger is a fourth party logistics provider, known as our 4PL division. It’s what we call asset-light, and consists of an office that simply matches companies looking for transport with those that have transport and are looking for commodities to move,” he continues. “This will help us to improve our return on investment ratios, particularly for the perishable foods business. It will help us ensure our vehicles are filled for their return journeys and also, by building relationships with reliable smaller operators, it will enable us to use their services without the necessity of investing in assets.” It is, however, by developing a new strategy for growth that ILRS hopes to revolutionise South Africa’s refrigerated logistics marketplace. Wilson believes that with many global organisations operating in South Africa and benchmarking their performance against global best practice, the next big growth area in the logistics market will be complete outsourced logistics services. This model already operates extremely well in many parts of the world, and delivers significant efficiency

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and cost savings. And given the current economic conditions, companies are increasingly focusing on their core business, and outsourcing the rest. “Each element of our company has a very good record of executing a transport service for customers, delivering from A to B. That’s where our strength lies,” Wilson says. “The plan is to build on that with end-to-end logistics services.” The model that ILRS is developing will include providing an in-depth analysis of the existing customer’s logistics requirements, based on detailed information provided by the customer along with ILRS’s experience of their current operational processes. The company will also draw on the expertise of other divisions within the Imperial Group such as the Integration Services division, which has particular expertise in supply chain optimisation, and will amalgamate all the findings to devise a detailed total logistics offering. “The challenge for us will be in changing old mindsets,” Wilson says. “Many organisations are happy in principle to outsource, but then tend to tell us how we should do it rather than to provide us, as the logistics experts, with the information and allow us to have the freedom to suggest and recommend how best we can provide those services.” An example of how this could pan out in the future is a plan being developed for Fast ‘n Fresh customer Woolworths. Until now, Woolworths has been paying a huge number of different suppliers to produce and deliver chilled goods to its distribution centres. “We have put together a proposal suggesting that if they purchase from the factory gate, we can optimise our transport fleet which has been doing outbound deliveries for them, and collect direct from the factory as well, delivering significant cost savings.” As one of the first such proposals, it has been a huge undertaking, and the company has drawn on the theory and practice developed by world leading organisations such as Walmart, as well as the skills and knowledge of the Imperial Group. Going forward, the plan is to begin with well established customers where a relationship of trust has developed over a long period of time, and then ultimately to take the concept out into the wider marketplace. As a new company, ILRS not only has an ambitious vision for the future, but it has also spent the first six months aligning the four original companies into a single entity, managed from a new head office in Cape Town. “Much of this work has

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involved the softer issues of bringing together the different cultures and approaches.” A considerable number of roadshows have been undertaken for staff and customers. “Initially, there was individual tension and fear amongst the staff that this was purely a cost cutting exercise. But that was never the intention. Everybody who was with the four companies is still part of the new entity, and those fears have now subsided.” Alongside this the company has tackled some of the basic structural integration issues by analysing the IT systems and operational requirements of the four original companies and drawing up a plan that will allow them to completely harmonise their processes and cultures while continuing to

provide a top quality service. Beginning in January this year identical ERP, accounting and payroll systems are being implemented across each company. “At Fast ‘n Fresh we developed our own in-house Transport Management System which proved very successful, and we’re also in the process of rolling that out across the new companies.” The main benefit of this system is that it provides real time visibility of processes, of all of the different disciplines, across the business. Work on the IT infrastructure and systems is scheduled to be completed by the end of this financial year, not only creating a single organisation with one way of doing things, but also a great springboard from which to market the new service offering. www.imperial.co.za BE

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so

One-stop

Logistics companies have had to rethink their b as customer trends have moved away from the solution. Abdool Tayob, chief executive of Bake the changes have benefited this family-run succ 104 Transport & logistics


Bakers Transport

olution

business models over the last few years, e traditional long haul service to a one-stop ers Transport, talks to Andrew Pelis about how cess story

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O

v er the past few years, there has been a major shift in the manner in which companies approach their logistics requirements. The days when long haul was the preferred practice are long gone. Today, logistics companies have become one-stop-shops providing 3PL and 4PL solutions. For family-run businesses like Bakers Transport, the change has injected fresh impetus. This South African business made its name as a long haul company, transporting fast moving consumer goods, packaging products and white goods across the sub-Sahara region. However, over the past few years, the company has diversified, firstly into distribution and then into warehousing. This change in strategy has yielded an impressive annual growth rate, as chief executive Abdool Tayob explains: “At the moment, Bakers Transport has transformed itself into a fully fledged logistics company. We began investing in distribution about eight years ago—more for our clients’ needs—and later on we offered our own warehouse management. Today, we operate with over 65,000 square metres of warehousing space.” The main reason for the changes, explains Tayob, was that the company realised its South African clients had joined the global trend of expecting a complete one-stop logistics function, and it recognised the need to move into these other service functions. “Without doubt, the growth we have enjoyed in recent years has come from meeting our customers’ demands (and therefore maintaining our long-term relationships), by diversifying into a fully-fledged logistics service provider, as well as revisiting our corporate culture,” he explains.

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The cultural change was brought about by a buy-out of other family shareholders almost two years ago that saw two existing directors, Abdool Kader Tayob and Shabir Ahmed Tayob, take control of the company. Their father Aboobaker Suleman Tayob, who founded the business, is no longer operational, but is rather a strategic advisor for the group. “We have kept the business within the family,” Tayob affirms, “but my father is no longer involved in the day-to-day running of the company. Over the last two years we have made efforts to introduce a stronger management structure and corporate feel to operations,” he continues. “We have a forward thinking senior management team and executive board in place, to handle strategic and executive decisions. This is all a far cry from the company’s beginnings in Pietermaritzburg, back in 1973. “We started from very humble beginnings when my father operated with one truck. For the first 15 years we had slow growth, and it has really been over the last 10 years that we have grown into a medium-sized operation. To give you an indication of our expansion, 15 years ago we had a relatively small fleet and workforce. Today we boast the largest independent fleet in South Africa and run 10 sites (including truck stops) across the country.” Bakers pays tribute to its dedicated employees and loyal clients for their hard work and support, and acknowledgement of success is to God Almighty. By 1988 the company had grown sufficiently to relocate to its current larger premises in M’kondeni, as Bakers’ ever-growing fleet of Mercedes-Benz vehicles underwent further expansion. The relationship with

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Bakers Transport the German supplier remains a focal point of the business. “Our ties with Mercedes-Benz have been in place since we purchased our first brand new truck back in 1980,” Tayob explains. “We have an ongoing vehicle replacement programme in place and over the last 36 months we have spent approximately R60 million on upgrading our fleet. “This has been a big plus for us as we chose the right product from the outset,” he continues. “In my opinion, we have the world’s best product and package available, thanks to the reliability of the vehicles, their flexibility for different applications—depending on terrain and the type of load—and for the aftersales support we receive. Crucially we also make savings over the longer period and vehicle costs have proven quite static.” Cost savings are at a premium for a business that has to pass on rising fuel prices to customers. To counter this problem, Tayob says that Bakers has invested heavily in intensive driver training and high-tech software aimed at keeping fuel consumption to a bare minimum. “We spent around R4 million to create our Driver Training Academy five years ago,” he states. “Our centre is accredited by Mercedes-Benz Germany. We took the courage to sign off the project and it has proved hugely successful in improving customer services and keeping costs down. We currently employ three full-time and two assistant trainers who provide ongoing training around the country.” Bakers now realises the return on investment of the decision. “We have also benefited from keeping abreast of IT trends with regards to our IT system. We run two systems: Opsi Plato provides us with routine scheduling that enables us to identify the shortest route for our drivers, reducing time and fuel costs. For fleet management and driver performance we also use Mix Telematics which

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provides live information on driver behaviour and route patterns. We run a monthly incentive programme for our drivers and we are able to use this software to identify winners.” Bakers is currently implementing an integrated WMS system which is close to completion. South African logistics companies are now facing a raft of legislative changes that impact on the issues of environment, quality and health and safety. Tayob welcomes the changes currently being implemented and feels these will help to clean up the industry. “It [legislation] is moving more towards international standards and is having a positive impact on our industry,” he asserts. “Prior to the mid 80s there was a lot of red tape and we operated under a permit system; but that has all changed, and anyone with cash has been able to buy a truck and start a business. This has resulted in a drop in industry standards and a “cowboy market” with poor road safety. Fortunately, this is all starting to change and the legislation will create a level playing field. Quality is very important to us—we are now working towards attaining ISO: 9001 accreditation in August 2011.” Bakers Transport’s ISO: 9001 aspirations further underline its clear corporate structure, something Tayob feels will help win more big contracts without compromising family values. “We have to keep pace with human capital and recruit the right people and skills, but we must also keep the same flavour as we grow,” he says. “Infrastructure will present a challenge as volumes get bigger and we will need greater automation. These are the big challenges for the next couple of years which include quality of professional drivers and a diminishing workforce; we must make sure that we don’t let it run away from us. “In the meantime, 2011 will be a year to review our strategy and consolidate our ‘Breather Strategy’. God willing we are confident and excited about the success that lies ahead. Our plan for 2011 is securing the foundation and setting the stage, as we move towards becoming a ‘World Class Company’ and ensuring the solid manifestation of ‘Performance Driven Logistics’ in every aspect and activity within the Bakers organisation”. www.bakerstransport.com

BE

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Assure

dire

Warehousing and distribution from high maintenance costs Managing director David Leise Rennies Distribution Services 112 Transport & logistics


Rennies Distribution Services

ed

ection

in South Africa faces many challenges, through to the lack of a skilled workforce. egang discusses with Andrew Pelis how has continued to hold its own

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R

ennies Distribution Services is a member of the Bidvest Group of Companies that was created out of a company restructure in 2004. Rennies is a national supply chain and logistics specialist in warehousing, transport and distribution. “We were created from a restructure of Bidfreight’s transport, distribution and in-land warehousing divisions. Our business is divided into two distinct areas covering multi-customer third party warehousing and transport and single customer warehousing, transport and distribution,” affirms managing director David Leisegang. Leisegang says that the company has built its reputation on specialist services. As a result it enjoys long-standing relationships with several global blue chip companies. “A large portion of what we do in terms of transport and warehousing involves dangerous and hazardous products and we are capable of handling these products nationally. We only have two or three significant competitors in that area. “Most of our work is contractual and, amongst others, we provide logistics services for large clothing and homeware retailers,” he continues. “We also provide services to the automotive, chemical and forest products industries; handle general cargo; and deal in transportation and distribution. Our strategy is to specialise in niche markets in these areas.”

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Rennies Distribution Services

As the global economic downturn started to bite, Leisegang says that the effects were somewhat delayed in South Africa and that by diversifying, Rennies did not feel the impact so much. “There were some areas that were affected and certainly the packaged chemical sector was adversely affected; however, our experience was that the retail sector was impacted to a lesser extent.” Leisegang himself arrived at Rennies just before the credit crunch, some three and a half years ago. A nine-year veteran of the parent company Bidvest Group, his aim was to invigorate customer relations and oversee improvements in operational processes. “There have been a lot of changes since I’ve been here,” he admits. “The objective was to establish a well rounded and competent senior management team, settle down a number of insecure contracts and to review operational processes. Part of the process has been a significant management restructure that has

Additionally we can measure efficiency now as the system looks at the allocation of tasks to employees on the floor. We have also improved our visibility with our customers’ stock as a result of this new system and the feedback we have received from clients has been very positive.” An integral part of the success in improving operations has been training Rennies’ 530 staff. Indeed, Leisegang suggests that without training, the company would have trouble functioning at all. “There is a shortage of the necessary skills here in South Africa,” he comments. “We spend quite a lot of time on training and have an in-house training department as well as an operations support department that helps to write our procedures and to set up operational training. We have found it easier to bring people up through the ranks into management and

We spend a lot of effort trying to up-skill guys from school into forklift operators and then management enabled us to refocus on our key areas of competency. We also implemented a number of operational systems that support the work we do, including a safety, health and environmental system based on ISO14001 and OHSAS 18001. More recently we have started to roll out a new warehouse management system—we found a simple and efficient system which is supplied by the Canadian company Accellos.” The company has spent in the region of R5 million on the new system, initially installing it at two sites before rolling it out to another three sites. “We have another three to four sites to go yet and we’ve seen advantages already,” he continues. “Daily planning has become a lot easier and it gives us a better snapshot on the business so we can ascertain our scheduling requirements much quicker.

we spend a lot of effort trying to up-skill guys from school into forklift operators and then management.” With the Black Economic Empowerment (BEE) agenda in mind, the company’s expenditure on training is well placed. Leisegang indicates that Rennies’ objective is to raise its current BEE level 3 rating to level 2 in the next financial year. “Two important aspects of that will be to achieve our employment equity targets and maintain our preferential procurement spend— using companies with appropriate BEE ratings,” he explains. Vendors are an important part of the Rennies Distribution Services success story. South Africa’s internal road system has certainly come in for its fair share of criticism

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over the years. For the occasional motorist, poor road surfaces may prove a temporary inconvenience; however, for the logistics companies that drive the country’s commerce from A to B, the issue is far more serious. However, a spin-off of hosting the 2010 Football World Cup has been significant infrastructural improvements in many of South Africa’s major centres, including improvements to roads. The company operates a fleet of 50 trucks and approximately 95 trailers, customised to accommodate the specialist nature of their cargo. All very impressive; but then one factors in the demands of those South African roads and the reality of costly maintenance added to fuel costs, and the penny drops. “Much of our preventative maintenance is outsourced and we have established long-term relationships with those vendors. Most of the work they carry out is done remotely but they will work on-site when necessary, as it is vitally important that our vehicles are never off the road.” The second element of fleet is expenditure on new vehicles. Leisegang says that, on average, the fleet is no more than three years old, with new replacement vehicles brought in each year. Further investment in the latest satellite navigation technology enables management to track the progress of each delivery and to chart the best route for the driver. So it seems that Rennies Distribution Services is well positioned for the next phase of its growth; and Leisegang has very definite ideas on the direction that will take too. “One of the areas we are looking at for the future is the Durban to Johannesburg market. In particular we have seen that it is far more cost-effective to unpack containerised products at the port and to then load them onto bigger vehicles and transport them to Johannesburg. “At the moment the transport and distribution business accounts for no more than 30 per cent of our revenues, with the majority covered by warehousing; we anticipate seeing more growth from transport and distribution and that is where our focus is going to be,” he concludes. www.rds-sa.co.za BE

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Being

be

systematically

Company turnarounds require tough decisions Transport, the secret has been to lock operati as CEO Simon Thornton explains to Gay Sutto 120 Transport & logistics


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etter

s and strong leadership. But for McColl’s ional activities into standardised systems, on

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I

n just 18 months the new management team at McColl’s Transport has achieved a significant business turnaround, returning what had once been a well respected family-run Australian transport company to profitability, and re-establishing its reputation for delivering quality services reliably and consistently. Brought in by the company’s new owner, 333 Management found staff morale at rock bottom with remedial action needed quickly. “The transportation industry tends to be very price competitive, and for many it’s a race to the bottom, with competitors vying to offer the lowest prices,” CEO Simon Thornton explains. And since 2005, when bought out by a private equity firm, McColl’s had lost its way and become one of those tumbling towards the bottom with decreasing service levels and increasing debts. The challenge was to reverse that decline. “We recognised that there were blue-chip brand name companies that could not afford their logistics to operate like that, and would be prepared to pay a modest premium for a company prepared to invest in systems to deliver a consistent and high quality service. Our strategy, therefore, was to divest areas of the business that made no sense for us and invest in those areas of the business where we could do well. We then began to lock-down everything we did into systems so that we could achieve repeatable and consistent results for our customers.” Of an original customer base of around 300, the cull was impressive. “We were really brutal. We got rid of all those who didn’t fit with our way of operating, and today we have just 15 customers that really matter to us.” The choices must have been difficult. But they were based on a thorough analysis of the company’s capabilities and resources, and by defining the way the company wished to operate. With a large fleet of 500 specialised tankers equipped to provide a high quality service for farm milk collection, the company already had a dominant position in the milk marketplace, and the facilities to deliver a value added service. At the other end of the spectrum, its large fleet of tautliners—large dry freight lorries—operated in a highly competitive and low value arena. “It was a $50 million division of our business but we made the decision to close it. And it has worked very well. We reinvested the money in technology and training to provide better services for our core customers.”

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Today, McColl’s operates in three principal markets: the farm milk collection service, transporting milk between factories, and transporting chemicals—and it has seen business increase significantly in each area. Alongside this rationalisation, the company has implemented a business improvement programme based on locking all operational activities and events into defined business systems—a concept it calls being ‘systematically better’. At the heart of the newly tuned internal administration lies a specialist transportation ERP system that had been in the company for 12 years but only used for its invoicing capability. This has been cleansed and populated with accurate data and is now being configured to manage the business administration faultlessly from end-to-end, from initial order entry, through truck scheduling and materials ordering to customer invoicing. Beyond this, great improvements have been achieved at the driver level. A $1.6 million investment in a GPS truck management system named McColl’s Co-Pilot is significantly improving operational efficiency as well as driver safety. Installed in every truck, the system monitors and measures all aspects of the equipment’s activity in real time. The control centre therefore records and monitors where the vehicles are, how they’re being driven, whether speeding or driving in a fuel efficient way and so on. “We can then reward drivers who are driving efficiently, and improve the driving skills of those who are not,” Thornton says. With a fleet of 200 prime movers and 500 tankers and trailers travelling around Australia and an annual fuel bill of between $14 million and $20 million, even a small percentage improvement in fuel efficiency significantly impacts the bottom line. “One of the big issues in Australia is managing driver fatigue and we have strict fatigue laws that govern this,” Thornton continues. “However they’re difficult to manage unless you put in some systematic way of doing it.” Most companies operate a paper management system using driver diaries that are filled out and checked retrospectively, but McColl’s is going to be the first in Australia to manage this also in real-time electronically. When the driver gets in the truck he punches in his pin number and it keeps track of him, reminding him when he should take a break, and

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alerting the control room if he fails to do so, making it easier for drivers to manage their safe driving hours. “We have found this is a great differentiator with our clients. We have legislation called the Chain of Responsibility, which extends the liability for road transport offences to our clients and their respective clients. We are therefore managing the Chain of Responsibility for everyone and ensuring the rules cannot be broken.” The Co-Pilot is currently being integrated into the ERP system, and once completed, each driver will receive their job instructions in the cab, including sat-nav directions to the pick-up and drop-off points, instructions about the plant layout and the loading and unloading operations. “Everything is documented, even down to which hose to use, so there is a systematically reduced likelihood of a mistake.”

The second major investment is in a driving simulator costing around $1/4 million, which is due to be delivered shortly. The aim is to improve safety by simulating normal driving conditions and then presenting the drivers with almost everything that could go wrong, whether that’s losing the steering and brakes or a pedestrian stepping out in front of the vehicle. Simulator training can then be provided to improve any skills deficiencies. Early on in the change process, the company brought in a safety specialist to analyse the accident rate prior to the takeover; and one of the key findings was that many drivers continued for excessively long hours, and this rang some warning bells. Although a drugs and alcohol testing regime had been in place it had not been effective, so the team implemented a strict regime, testing 20 per cent of its 600+ drivers every month. “Early

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on we lost a lot of drivers because they knew the game was up,” Thornton comments, “and we fired everyone who tested positive. Then after a few months there were no more problems.” Putting all these programmes in place has resulted in significantly increased consistency of service, which is appreciated by customers who are prepared to avoid the ‘discount transport trap’ in return for the safety and reliability. 333 Management took over halfway through 2009; and the figures speak for themselves. “Our net debt has been reduced from $71.8 million to $36.6 million over the past 18 months,” Thornton says. “And we see plenty of opportunities to expand. As we’ve differentiated ourselves in our three business areas, more and more business has been coming towards us.” But the company is remaining true to its principles: it will not accept every contract on offer. “We will not be all things to all people,” Thornton concludes. “We are very specific about what we offer, and we’re very disciplined in how we deliver it.” www.mccolls.com.au BE

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Eastern

MIDEX AIRLINES has grown rapidly to becom East and Europe. Dr Issam Khairallah tells Ru

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nstar

me the largest charter airline in the Middle uari McCallion how it was done

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T

he year 2007 may have begun by looking like a good time to start an airline; but the emergence of the banking crisis and the global downturn in trade may have caused some air entrepreneurs to think that it could have been a better idea to have sat on their hands. But not Dr. Issam Khairallah, president of MIDEX AIRLINES. “We decided to establish a cargo operation in Dubai due to the fact that there is a huge amount of products being brought from the Far East to Dubai by sea, to be forwarded by air to Europe and to the USA,” he says. “There was a definite shortage of aircraft. We established ourselves in the United Arab Emirates [UAE] as a competitor to many Russian airlines, with the intention of flying to other parts of the Middle East, Europe and the Far East.”

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MIDEX AIRLINES

The company was created in January 2007 under a licence for Passengers & Cargo issued by the government of Dubai; but getting such a licence is not easy. “The UAE has very strict rules applied to airline operators. If you think of the Federal Aviation Administration [FAA]’s standards in combination with those of the European regulatory agency [the EASA], you’ll get to UAE requirements,” Khairallah says. Those demands are a hurdle but also opened up opportunities for MIDEX, as the Ilyushin aircraft of its principal competitor outlived its usefulness and ability to comply with contemporary standards. In 2008, MIDEX began scheduled flights from Al Ain International Airport, which is just about in the middle of the base of the peninsula occupied by Dubai, Abu Dhabi, Sharjah and other Emirates; but the company’s plans had to be adjusted in the light of the downturn in demand.

Scheduled flights were suspended in April 2009 and the company switched to offering charter services. “We now specialise in charter flights from the UAE to Afghanistan and Iraq, and we lease planes to the contractors of many US Departments for the transport of supplies to American troops,” he explains. “Our planes carry produce and equipment for their daily needs—mostly food, but also housing and living requirements. Everything the Americans need has to be shipped in—they have nothing on-

First Class Air Support First Class Air Support, based in Louisville, Kentucky, is a rising star in the distribution of aftermarket materials and components to the aviation industry. Our business model has been geared toward the supply of quality aircraft parts to meet our customers’ requirements in a timely manner and on budget. We recognize that as a primary supplier to the aviation industry, our customers rely heavily on our ability to exceed their expectations. As a niche player in support of cargo operating systems throughout the world for numerous freighter airlines, First Class has established a strong business relationship with Midex Airlines. In today’s tumultuous economy, we value our opportunity to grow in unison with an emerging all freighter airline.

site.” Items such as food are time-critical, of course; flight, rather than surface shipping, is usually the only option. MIDEX offers ACMI (aircraft, crew, maintenance and insurance) charters; in short, a complete package. It now has a fleet of 10 aircraft: three nose-loaders Boeing 747-228Fs and seven Airbus A300B4-203F aeroplanes. Its reputation— and therefore its competitiveness—is founded on delivering on time, every time, in full.

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We were awarded the prize for the Best Air Cargo Operator 2009 at the Middle East Logistics Awards

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“We were awarded the prize for the Best Air Cargo Operator 2009 at the Middle East Logistics Awards, which was based on a study of our operations, on-time take-offs and landings, and on our services. We’ve been in business for just a short period of time and were able to compete with leading carriers such as Air France, KLM and so on. We were surprised and greatly honoured to receive the award,” says Khairallah. “We always seek to take off and land on time and in full. Our flights to Afghanistan, for example, are going into military airports, which have heavy traffic. We have to hit our 10-minute arrival slot or turn back. We have to offload and load within 40 to 50 minutes. We have a slogan, which is a promise to our customers: ‘It’s On Time Or It’s On Us’.” It reflects the company’s commitment to service—and it is a rare day when it has to carry responsibility for coming up short. That commitment is now being manifested in another way—MIDEX is moving its centre of operations from Al Ain to Sharjah airport. “Sharjah airport is right next to the seaport and only 10 to 15 minutes away from Dubai—Al Ain is about 90 minutes away,” Khairallah says. “The European airlines prefer to land there. We simply followed our customers to their preferred destination—it’s better for everyone.”

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MIDEX is sufficiently confident in its business model that it is expanding. It has already invested around $600 million and is expanding its fleet during 2011; it intends to buy two more B747F planes before June and another three in the second half of the year. It does not lease or finance its purchases; the company is a wholly-owned subsidiary of MIDEX INTERNATIONAL Group, the Lebanon-based courier company with its main hub at Orly in France. The company is thus able to acquire assets without incurring debt, which helps control its overheads. “We are one of probably just five companies that own their own fleet,” he explains. “Those airlines that lease or finance their planes are faced with big costs at the end of each month, whether they are flying or not. Our ROI is in the region of 15 to 20 per cent, which means it takes five years to get a complete return—but we are saving a lot of money on bank charges and interest.” As well as serving growing demand, MIDEX in its existing areas of operation has definite plans for expansion; it began weekly flights to Lagos, Nigeria, a while ago and now operates 10 each week. It is also looking further afield, to the emerging markets in South America. Such ambitions need staff, and the company has been investing there as well. “We prefer to hire experienced staff,” Khairallah says. “We require pilots with a couple of thousand flying hours with 747s and A300s. Some came when we bought the aeroplanes; we

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have sent others for training and type rating. Those we send for type rating agree to work with us for a period—otherwise, pilots are on a two to three year contract.” But aeroplanes aren’t just about flying— they have to be maintained and serviced as well. “Again, we prefer to hire trained and experienced technical staff. Each aircraft needs four or five ground engineers and 10 to 12 crew; most of our pilots are from the USA and engineers are from South Asia and the Middle East.” Experienced and highly qualified directors, managers and staff, an outstanding delivery record and commitment to customer service add up to an excellent business model for MIDEX. http://midex.glnetwork.org/ BE

Abu Dhabi Aircraft Tech Abu Dhabi Aircraft Technologies (ADAT) is the Middle

East’s

technical

leading

solutions

independent

provider,

and

aviation has

a

comprehensive set of airframe, engine and component maintenance, repair and overhaul (MRO) capabilities. Under the ownership and direction of Mubadala Development

Company

(Mubadala),

the

strategic investment arm of the Government of Abu Dhabi, ADAT is spearheading Abu Dhabi’s regional aviation MRO ambitions and is pivotal in the development of Mubadala’s worldwide MRO network. A competitive cost base, the highest quality standards and world-class turnaround times have made ADAT the preferred MRO partner of choice in the region.

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Anyone

coff for

Privatization is often seen as a money-raising exerc assets, but the experience in Mexico with airports r (ASUR) shows that performance can be enhanced, 140 Transport & logistics


Grupo Aeroportuario del Sureste (ASUR)

fee?

cise by governments selling off national run by Grupo Aeroportuario del Sureste as Alan Swaby learns

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H

aving just returned from a vacation in Italy, the timing to write about airport management couldn’t have been better. Once past security checks, the airport coffee and sandwich were very enjoyable. It’s just that the coffee had to be collected from different halves of the same concessionary—two lines plus a third line to pay, which, by the way, you do before ordering. No, it doesn’t make sense, but it’s what happens. Then the only two flights leaving at that precise time of the day were arranged to embark from adjacent gates that shared the same access stairway. No, that doesn’t make sense either, but it’s what happened. The chaos getting through the various checkpoints or the 20-minute wait on the tarmac wisely won’t even be mentioned. And all this from a newly built terminal. One thing is certain: the airport in question won’t be winning any accolades from Airports Council International (ACI), the Switzerlandbased organization whose role it is to measure passenger satisfaction at 130 airports worldwide. The Mexican airport at Cancún, on the other hand, has just got a nice pat on the back: best airport in Latin America and third-best in the entire world. Not bad for a vacation airport with a geographical monopoly.

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Grupo Aeroportuario del Sureste (ASUR)

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“We want our passengers to be happy,” says Adolfo Castro Rivas, CFO and strategic planning officer for Grupo Aeroportuario del Sureste (ASUR), the management company behind Cancún and eight other regional airports in the far south of Mexico. “When customers are happy, they spend money with the airport concession holders, and this makes more profit for us. It’s a win-win-win situation.” If you had traveled to Cancún in the 1990s, you might have thought you were in Italy. At the time all Mexican airports were government controlled, and once having fulfilled their obligation of putting the buildings and runways in place, the bureaucrats running them quite frankly switched off. “There was no incentive to provide good service,” says Castro. “It didn’t make any difference whether the airports made money or not. Airport budgets were a function of the overall country’s economy.” Ironically, change came about when the country ran out of cash. With more votes to be had by building hospitals rather than maintaining airports, matters just got worse until the point—10 years ago—when they went private. The country’s 35 airports were divided into four parcels and invitations to bid sent out to professional airport managers around the world. Copenhagen Airport, with three other international partners, formed the investment consortium ITA and won the bid for the smallest parcel of nine airports. ITA held 15 percent of the equity in ASUR, and the other 85 percent was sold on the stock exchange in two tranches. With a business that had been starved of

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investments of any kind and manned by a workforce that couldn’t even be sure that manana was possible, ASUR had a job on its hands instilling the concept of service to those on the payroll. “Not only have we turned direct airport employees around,” says Castro, “but these days we also undertake to train— at our expense—anyone who works at any of the airport concession holders. But as the ACI survey demonstrates, it has more than paid off.” ASUR’s contract with shops and food outlets operating within the terminal building is that they pay a nominal ground rent plus a percentage of their turnover or a fixed amount per passenger, whichever is greatest. As such, Castro knows down to the penny how much passengers are spending as they wait to fly home. He inherited a situation where the average spend was just $0.70 and has grown that to an average of $4.50. At the same time the number of passengers in Cancún Airport has increased from 7.1 million to 12.7 million. All this is reflected in the share price, which was $15 when first floated and is now $47. ASUR has also put order into the way the airports are to develop. Previously they had grown wild, without plan, structure or direction. Each airport now has a master plan that maintains order and optimum traffic flow, now and into the rest of the 50-year franchise it holds. More than $500 million has been invested so far in bringing the airports into the 21st century. The jewel in the group’s crown is Cancún, which handles around 450 flights a day compared with a total of 300 flights through the other eight airports. Of the 15 million passengers a year that ASUR handles, 13 million go to Cancún. Of these, 75 percent are international travelers, 75 percent of whom come from the United States—travelers not known for their quiet acceptance of shoddy service.


Grupo Aeroportuario del Sureste (ASUR)

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As we approach ASUR’s 10th anniversary, all its initial targets have long been met. A complete overhaul of all procedures has seen a transformation of how the business is run. Outside, safety-critical considerations were the first to be attended to. Runways, lighting, access and parking have all been given the treatment. To save airline operators money, time and distance spent taxiing have been reduced while schedules have been organized to minimize waiting time for planes. In no-frills fashion, ASUR’s airports can turn airplanes around in 20 minutes. When passenger volumes look as though more than eight minutes will be spent in line, more staff are brought in and more lines opened. “And yet we have a total workforce of just 800,” says Castro, “including head-office personnel. It is done by good planning of multifunctional teams.” It’s a good bet that the coffee in Cancún will never match that of the Italian airport, but in all other respects ASUR is showing many much longer established operations how things should be done. www.asur.com.mx BE

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Grupo Aeroportuario del Sureste (ASUR)

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Losingt

Well-established cargo carrier Evergreen Internat corporate introspection to improve efficien 148 Transport & logistics


Evergreen International Airlines

label

the

tional Airlines isn’t resting on its laurels—it’s using ncies for the future, David Hendricks learns

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E

v ergreen International Airlines, located in McMinnville, Oregon, just outside Portland, was founded in the 1920s as Johnson Flying Service, and today it holds the oldest air operations certificate in the US and has a fleet of ten Boeing 747 cargo freighters. Evergreen’s largest client is the Department of Defense, comprising about 40 percent of the company’s revenue, “carrying everything from beans and bullets to military vehicles and equipment, whatever the Air Mobility Command requires,” says Jim Dineen, Evergreen’s vice president of special operations. “We’ve been with the Civil Reserve Air Fleet program since its inception in 1952, which for us is an on-call commitment, and we’re proud of our participation there.” The remainder of the company’s business is civilian or commercial freight forwarding, mainly for consolidators, and mainly carrying between Asian markets and the US. It also receives calls from individuals wanting to move anything from racehorses to expensive cars or yachts. Technically, Dineen points out, Evergreen is a Part 121 supplemental air carrier, which is a specific category of charter, and carries all cargo. “We’re not doing any passenger service as we have in the past. But we’re the only full-spectrum aviation company—we have a ground handling company, a heavy maintenance modification center, airline maintenance, a helicopter company and a 3PL support company, so we’re agile. If you need something done with an aircraft, from developing it to employing it and supporting it, we can do that. We have some licenses that other aviation companies don’t have. We’ve had some interesting programs, with Boeing, for example, on the large cargo freighter, as well as our own, internal 747 Supertanker fire fighter that we built and certified.”

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Evergreen International Airlines

d something done with an aircraft, from g it to employing it and supporting it, o that. We have some licenses that tion companies don’t have Transport & logistics 151


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Evergreen International Airlines

Most of Evergreen’s commercial business is moving freight out of Asian markets to the US, and recently there has been a decent increase in the “back-haul” business out of the US to Asia. Evergreen is increasing its presence in Chicago and New York with freight going to Shanghai and Hong Kong, and also maintains a presence with Nagoya, Japan. Currently Evergreen is expanding its fleet to about 15 aircraft by retiring its older freighters and adding new, more efficient planes. “The problem with an airline meeting its requirements is that a 747 and its related peripherals is an enormous investment, so you have to know which way the market is going,” Dineen explains. “Just adding an additional crew requires a four-month lead time. So to add six full crews, which means 12 to 18 pilots, you need to get them through the pipeline. You have to level out the peaks and balance the opportunities that you may be leaving on the table with the fact that the peaks will go away and you’ll be left with some very expensive capital assets and payroll to meet.” Another major challenge is planning for the future. “A company that has been around as long as we have tends to become not exactly complacent, but we think we’re doing well where we are. What I’m pushing for right now is a lot more corporate introspection: what we’re doing and how we work together. Many of us have been here for upward of 30 years, so we bleed green. We’re dedicated, crossfunctional people, kind of a lean, family-like company.” Dineen notes that they always meet whatever challenges they face, but he wonders whether they’re getting the best out of their talent and motivation—are they using it as efficiently as they can? “Business environment analysis has to be continuous,” Dineen says, “and we need to look at a two-to-five-year range when we look at capital assets, as to which way the market’s going, where we want to penetrate and what kind of contracts we can pursue. We need to look at our strategic planning, then take it back in an introspective way to look at our near term, what I call tactical planning and structure. I should be able to go to anybody in the company and ask what that person thinks this airline will look like in two years, in five years. If I can’t get an answer, then I’m not doing my job as a leader. Everybody in the

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company needs to be able to say where we’re going, what we’ll look like, what size we’ll be and what kind of work we’ll be doing. “For example, I’m currently doing airline planning,” he continues. “We’re an ad hoc charter carrier, classified by the Federal Aviation Administration as a specific type of carrier, not a flag carrier or a scheduled carrier. People tend to look at that and say that’s what we are, it’s the business we’re in. Basically, it’s accepting a business model or label that’s then applied to us externally. But it’s not necessarily so. How much of what we do is actually known? Surprisingly, in a somewhat volatile market with downhill trending in our Department of Defense work and uphill in our Asian business, it turns out that more than 80 percent of what we do is known a good 90 days ahead—actual days of flights and the cargo. “So despite what label we may have,” adds Dineen, “if the actual environment is 90 days out, then are we using the tools and procedures and the structure to operate the way we actually are, not the way we’re labeled? To that end we’re evaluating some longer-range planning software, and we’ve joined with JetBlue; they’re helping us with benchmarking and how to use the tools. It’s different for us, and it’s working well.” Dineen summarizes, “In this business we tend to look at profit and loss, payroll and revenue, and it’s easy to get stuck in data points. My job is linking more of our goals and the trends back to the data. My advice to anyone in a volatile business is: make sure you’re capable of expressing the more theoretical, long-term strategic views of what you want to do and where you want to be, and bring that back through the data while keeping your eyes on the trends. Make sure everybody’s involved in knowing how they’ll support it. And keep everyone enthusiastic.” www.evergreenaviation.com

BE

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a

Rare

While mankind continues to search the c resources, there will always be a need f Dave Mathieson, president and chief pilo innovative approach that has underpinn

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Summit Air

air

e

corners of the earth for adventure or for safe, cost effective transportation. ot of Summit Air, tells Rob Harris about the ed the company’s growth Transport & logistics 157


E

p loration is part of human nature. For some it is the pursuit of wealth, while for others it is the quest for knowledge and enlightenment, and for a few it is the journey itself that brings excitement and fulfillment. While the unknown corners of the Earth become smaller every day, these dwindling wilderness areas are the new frontier of the modern era. One such area is Canada’s Northwest Territories (NWT), where the abundant natural resources and beauty are a magnet for explorers. In these inaccessible locations, transportation can be especially challenging due to weather, lack of roads, and distance. Summit Air, a charter air service operating out of two locations in Canada, exists to take its clients to these remote places. The company’s main operation is headquartered in Yellowknife, NWT, and it has a second operational base in the city of Iqaluit on the southern coast of Baffin Island in Nunavut. The company started out with small float planes in British Columbia and then later moved to its current location in Yellowknife.

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The key to our succe is our people. I think a lot of businesses miss that; they see their payroll as an expense rather than investment. To me th is the most valuable investment you can make in any compa


Summit Air

ess

n an hat

any

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After moving, the company upgraded its aircraft to the Dornier 228 and the Shorts Skyvan. Chief pilot and president of Summit Air Dave Mathieson describes when he started with the company. “I was the ninth employee when I started in 2005. I could see the business potential was there, and they had two perfect aircraft types that filled a niche that’s unmatched.”

The Dornier 228 cruises at 200 knots, which is 50 knots faster than any comparable aircraft in its class. With fuel burned at the rate of 600 lbs/hour, the increased speed of the Dornier reduces the client’s fuel bill by nearly 25 percent and clients get to their destination faster, safer, and in greater comfort. “Our low turnover rate reduces training costs and keeps experience levels high which then allows us to operate the aircraft at a lower cost per mile. So for the client it’s really a no-brainer,” Mathieson continues. “They’re getting an aircraft that carries more, goes faster, and costs a lot less on a price per pound basis. The aircraft really sells itself.” The other aircraft in Summit Air’s fleet is the

Shorts Skyvan, which can carry nine passengers and up to 4500 pounds of cargo. The plane is equipped with a massive rear door that opens up wide enough to allow it to accommodate a mid-sized truck. Today the company has five Dornier 228s, with two more to be delivered this winter, and three Skyvans. It has also grown from nine employees to its current level of fifty. So what lies behind this remarkable growth? “The reason is our people,” says Mathieson. “We hand pick them, we treat them with respect, and we pay them above the industry standard, so we have a real positive team feeling at this company. It’s a real family feel.” The company services the entire northern part of Canada from coast to coast, as Mathieson explains. “Our larger clients are the Department of National Defence, and the mining industry. We go as far north as Alert and Eureka, which is the very top of Canada.” In the future, he says, “we plan to continue to grow the company, adding more experts to our team, more aircraft, new types of aircraft and continuing to open new bases across Canada.” Any successful business is always developing new goods and services, and Summit Air is no exception. Mathieson explains two new services that the company is offering. “We do Polar re-supply parachute drops now, for people that are hiking to the North Pole. We fly over and parachute gear in for them. This is something we started last year, and it has worked out to be amazing because with the aircraft’s range, we can service five different groups at a time all over the North Pole and still make it back safely. By using the Dornier we can do this more cost effectively than any other aircraft. “We also do what is called ACMI leases, where we provide an aircraft anywhere the client needs it,” he continues. “It comes with a crew, engineer, and a full spares package and that’s a total mobile unit. So you could send an aircraft anywhere in the world. We’ve

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For the client it’s really a no-brainer. They’re aircraft that carries more, goes faster, and cos on a price per pound basis. The aircraft really

just started a survey contract in South America for a large research company; we’re surveying the jungles of South America. They are quite happy with this aircraft because of reliability, range and the length of time the aircraft can remain in the air without the need to re-fuel.” Another unique concept that Summit Air has brought to the charter air business is the way the company compensates its pilots. Traditionally in the charter air market, pilots are paid a base salary with the majority of their pay depending on how many miles they fly. The negative aspect of this model is that you can have pilots making critical decisions based on personal financial concerns. The difference in Summit Air’s policy is that it pays all of its pilots a salary. This new system was ridiculed by the competition when it was first started, but the change has led to great results. Summit Air’s pilots make decisions based on safety first at all times, and give the company 100 percent effort all the time. Mathieson explains why this works. “The key to our success is our people. I think a lot of businesses miss that; they see their payroll as an expense rather than an investment. To me that is the most valuable investment you can make in any company.” The mystery of the unknown and the lure of riches has always compelled explorers to reach for the uncharted regions of the world. Mathieson describes what it’s like to operate in the NWT. “It’s one of the most extreme places you could be flying on the planet. You might as well be flying on the moon when you’re operating up here. You are unsupported, you’re thousands of miles away from anyone or any help, and you’ve got to depend on your training and your ability to keep the passengers and crew safe.” www.summitair.net BE

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Summit Air

getting an sts a lot less sells itself

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Let

GOAL (German Operating Aircraft Leasing GmbH & aircraft than most passengers realize. John O’Hanlo Michael Radunz about this strong and apparently fu 164 Transport & logistics


GOAL (German Operating Aircraft Leasing GmbH & Co. KG)

t

fly

them

Co. KG) owns more of Europe’s on talks to managing director uture-proof business

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H

ow many people realize how commonly airlines actually own just a few aircraft, holding 80 percent or more of their liveried fleet under a five- or tenyear operating lease? GOAL is a joint venture company owned by KGAL GmbH & Co. (KGAL) and the German national airline, Deutsche Lufthansa AG (Lufthansa). These are a couple of the most experienced players in the airline industry; the Lufthansa group’s fleet of aircraft is the third-largest in the world, and KGAL has financed well over 300 aircraft in its time. “GOAL can offer clients a unique combination of resources,” says managing director Michael Radunz, “KGAL’s 40 years of in-depth involvement in the structured asset finance sector and Lufthansa’s five decades of operational experience in the aircraft industry.” From KGAL’s perspective, it suited it well to partner with a professional asset manager that knew the market and how to maximize the value of an asset over the term of the funding, whether through public offer or private equity. When GOAL was founded in 1998, Radunz says, aircraft leasing was already an important activity for Lufthansa. The airline had a business unit, Lufthansa Leasing GmbH, that was provided financial leases to the Lufthansa group

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and to a number of other airlines, and that business was doing very well. In addition, Lufthansa was active in the operating lease market since 1993. However, Lufthansa wished to put some distance between its brand and these leasing activities. “The task then was to find a partner willing to work with an operating lessor, and because KGAL had already done business with the group’s leasing arm, it was a natural choice.” The business today is led by joint managing directors—Radunz with ten years’ experience at Lufthansa and Christian Schloemann on the financial side. The business case for its establishment was to optimize the use of Lufthansa’s leased assets and to take advantage of market cycles. “The best example I can think of would be five Airbus A310-300s that Lufthansa wanted to sell in 2003. There was a downturn in the market at that time and nobody wanted to pay a sensible price, so those planes were transferred to us. We were able to place the planes out on five-year leases to Air Transat, Canada, and then sell them a couple in 2008–09 when the market had picked up. One of the main objectives of GOAL is to take advantage of cycles in the market and decide precisely the best moment to sell the aircraft.”


GOAL (German Operating Aircraft Leasing GmbH & Co. KG)

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The sale-and-leaseback model appeals to airlines for different reasons, but typically it is a way for companies to reduce their capital assets while gaining some of the advantages of outsourcing. There’s a lot of administration, document management and recording associated with owning an aircraft, and GOAL has developed its own system for dealing with that, says Radunz. “Every aircraft used to be accompanied by around 30 boxes of documents, tracing the provenance of every replacement part that has gone into it as well as recording its maintenance history in detail. Sometimes when we acquire older aircraft the documentation is not in electronic format—they just hand us the boxes. We had to have an intelligent way to manage all this information. We used our own IT system for a while, but as our portfolio grew above 15 aircraft, that wasn’t really up to the job, so we scanned the market.” Several systems existed. However, it happened that the parent company’s technical arm, Lufthansa Technik AG, was developing a system in collaboration with the Swiss IT developer Open Connect that suited GOAL’s needs much better. “We bought a license and adapted the software to the particular needs of a lessor. One of our key selling points when we go to the market is that we keep track of the assets very closely with this system,” Radunz adds. “The software system is very transparent; our clients can import their monthly flight hours and cycles into the system in a very convenient way.” If you look at the list of services offered by GOAL, it’s clear that its objective is to

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GOAL (German Operating Aircraft Leasing GmbH & Co. KG)

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GOAL (German Operating Aircraft Leasing GmbH & Co. KG)

be a one-stop shop for its clients. However, each has very different needs according to its size and how long ago it was established. Apart from information management, which safety and international standards demand, insurance is a frequently used service. Some others, like training and catering support, are less often demanded. When they are, though, GOAL can simply make the necessary introductions to the relevant Lufthansa group subsidiaries. The company’s terms of reference require it to have a viable return on investment. Acquisitions must have a lease agreement in place or some other exit for investors such as a “part-out” opportunity, by which an older aircraft is bought, valuable systems like the engines or landing gear removed and resold, and the airframe finally scrapped. The risk has to be a manageable one, he says, and that is also why almost all of GOAL’s client airlines are in Europe—basically, the German investors are reluctant to put their money into a package with an airline they don’t know well. The first deal handed over to GOAL involved two Lufthansa Boeing 737-300 aircraft that Lufthansa had sold and leased back in 1998. This was followed in 2000 by two A310-300s owned by Lufthansa and already leased out to Kenya Airways and Air Afrique. Two 737-400s were provided to the Italian carrier Air One under a long-term agreement, then the company moved into new territory with the sale, leaseback and financing of eight Bombardier CRJ 200 regional jets for Eurowings, a Lufthansa subsidiary. The strategy going forward is to find new aircraft transactions— not so easy in the present climate, he says. “We’re looking at narrow-body transactions involving planes like the Boeing 737 NGs or Airbus A320 family.” Meanwhile, it seems there will be no lack of new opportunities for GOAL in the wake of a contract it is currently executing for the German air force via Lufthansa Technik. In December 2007 it was asked to manage the acquisition, fitting out and commissioning of four Bombardier Global 5000 jets. “We’re very proud to have been selected by Lufthansa Technik to purchase aircraft on behalf of the German government,” says Radunz. “This is a big step for a small company like ours.” The first plane has already been certified “in green,” ready for fitting out, and the rest will follow later this year in time for delivery in the second half of 2011. The contract could well lead to further projects for government and corporate entities looking to acquire executive jets, he believes. www.goal-leasing.de BE

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The

g

waking

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Transnet: Capital Projects

giant Transnet Capital Projects is investing billions of rand in transforming South Africa’s transport infrastructure, as Moira Moses told Ruari McCallion

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ransport infrastructure can define a country—just think of India’s railways, the high-speed trains of Europe and Japan and the USA’s highways. China is investing heavily in creating the world’s most advanced rail infrastructure; and South Africa is committed to making its rail and port network fit for the 21st century. South Africa has an established rail network; but it could not be regarded as a world leader. However, that is in the process of change. The organisation that is tasked to implement the growth and regeneration strategy is Transnet Capital Projects, which is part of the South African government-owned Transnet Ltd. “Transnet is made up of five operating divisions,” says Moira Moses, group executive of Transnet Capital Projects (TCP). “They are: Transnet Freight Rail; Transnet National Port Authority, which owns eight of the country’s major ports; Transnet Port Terminals; Transnet Rail Engineering, which manufactures and maintains rolling stock; and Transnet Pipelines.” TCP is one of two special divisions of the organisation, the other being Transnet Properties. TCP has three functions, as Moses explains: “First, we undertake all long-range planning for the company. We take a 30-year view on infrastructure requirements and formulate, from that, a five-year plan,” she says. “Second, we have the responsibility for the development and execution of large and mega-sized projects: effectively, everything over R50 million. Last, we are charged with the maintenance of the physical infrastructure, including track and signalling but not the rolling stock.” TCP is investing hugely—around R20 billion a year. Even with the decline in value of the rand compared with other major currencies, that is a great deal of money— equivalent to nearly $3 billion or a little over €2 billion. The investment is a key element in Transnet’s turnaround and growth strategy, which was launched in 2004. “At that time, Transnet was a large conglomerate. It owned South African Airways, passenger transport operations and some IT companies,” Moses continues. “The decision was taken at that time to focus on our business—there was a pressing need to invest, with a lot of backlog that required attention.”

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Transnet: Capital Projects

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Transnet: Capital Projects Three ‘corridors’ were identified as the main priorities: Gauteng-Maputo, up to the Mozambique border; Northern Cape-West Coast and Cape; and Gauteng-Cape Town. But that didn’t mean other areas were ignored, or put on the back burner—it was purely a question of setting priorities for action and implanting the strategy.

In order to do this, TCP also developed a stronger understanding of its key assets, so as to ensure it provides capacity ahead of demand—thus the 30-year view on infrastructure. The implementation of this structured approach has enabled the company to improve capacity and performance.

“In terms of rail freight, we have identified our core business in key corridors, which we will continue to own and operate,” Moses continues. “Other lines— secondary or branch lines—are either open or being opened to the private sector. One of the main pillars of the turnaround is capital optimisation—when we embarked on the strategy, we recognised that there had been underinvestment in our assets. So what we did, in setting our priorities, was set out to understand who our key customers are and how we were going to support them and the South African economy.”

“In the West Coast-Cape area, the core commodity is iron ore from the Northern Cape. We carry that ore 800 kilometres or so, to Soldanha Bay,” Moses says. “Our first investment programme resulted in a rise in tonnage capacity from 47 million to 60 million tonnes. We created more passing loops and updated the signalling systems.” Then TCP invested in updating the ports, in order that they could handle the increased traffic. “We updated our existing stacker/reclaimers and

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Transnet: Capital Projects ship loaders, and bought new units as well.” The Gauteng-Cape Town corridor has also benefited. “This is a large export area but there is a lot of business local to Cape Town as well,” Moses continues. “We upgraded the carrying capacity of the container terminal, with a reconfigured layout, new ship-to-shore cranes and rail-mounted gantry cranes—so a pretty comprehensive programme of modernisation.” Port Elizabeth now has a new port facility; and a few miles up the coast, Ngquara now has a deepwater port that can cater for the new generation of large vessels. “We are keen to support trade between ourselves and the growing markets, the BRIC countries especially, as well as catering for trade that comes around Africa. Our hub terminal facilities allow for trans-shipping and short-route shipping to the east and west coasts of the continent.” Durban, the busiest port in Africa, has seen a number of projects to improve and extend its capacity and capabilities. Vehicles produced by BMW, Mercedes-Benz and Ford are transported by rail through the city to the port for export. Durban has a new container terminal and a new multipurpose pipeline running 560 kilometres to Gauteng that will handle much of South Africa’s fuel supplies for the next 50 years. TCP has invested R75 billion over the past five years. Although it is state-owned, its finances don’t come from the taxpayer. “We raise money off our own balance sheet,” Moses says. “We don’t rely on government guarantees. Some of our services are monopolistic, in the key corridors, to mining companies and in bulk services. Our biggest competition is road haulage at this stage, and we have seen a migration to truck carriage. We’re working to regain market share; to build a strong nationwide infrastructure; and we have implemented a rigorous management system.” With the help of Stellenbosch University, TCP has also improved its freight forecasting model, meaning it can ensure land is available for the next 30 years—massively important when engaging with its customers and with government departments. “We have also improved our safety record and shortened the time taken to deliver our projects,” Moses concludes. It all adds up to a sound foundation for South Africa’s future transport infrastructure. www.transnet.net BE

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Just the

ticket forg

After years of planning, design and construction, Sing metro system is ramping up to full operation. Khoo H modal transport company SMRT, explains to Gay Sut operating and maintaining the majority of Singapore’ 180 Transport & logistics


SMRT

growth

gapore’s sophisticated new driverless Circle Line Hean Siang, executive vice president at multitton how the knowledge and experience gained from ’s rail systems is benefiting rail projects across Asia

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roviding transport services to the discerning public of Singapore, Asia’s most sophisticated and cosmopolitan nation, is a challenging but rewarding task, and one that SMRT has been performing since 1987. A truly multi-modal transport company, SMRT’s operations encompass three rail networks and a light rapid transit, an extensive bus service and taxi services, as well as engineering, project management and consultancy services. All of this is managed through three executive vice presidents: one to oversee the operation and maintenance of railways as well as engineering, consultancy and product services; a second to oversee the commercial operations, taxi and bus services; and the third to manage the company’s finances. The company’s origins can be traced back to 1987 when the government formed Singapore MRT within MRTC (predecessor of the railway arm of the Land Transport Authority, or LTA) to run its newly built 52-station subway system. A group of senior MRTC officers were transferred to SMRT to form the core team for this purpose. Both SMRT and MRTC were then under the same executive director; and it wasn’t until 1995—when MRTC was hived off to become part of LTA—that SMRT came into its own as an independent corporate entity. Until then, SMRT was essentially a train business; but after merging with Trans-Inland Bus Services, or TIBS—basically a bus and taxi business—in 1999, it grew into the rail, taxi and bus business we know today. In 2000, SMRT became publicly listed on the Singapore Stock Exchange.

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“There were changes in our top management in 1995,” explains Khoo Hean Siang, executive vice president, trains. “Having begun as a statutory body, we moved to a more dynamic and commercially minded leadership.” Diversification into bus and taxi services quickly followed after the merger with TIBS in 1999, and by 2003 under a new CEO, the company had begun to exploit the previously under-utilised commercial spaces at its MRT stations and terminals, renting them out as retail outlets. Perhaps one of the most impressive of these is the Raffles Xchange, an underground shopping mall refurbished in 2005 at the Raffles Place MRT Station, one of the busiest stations in the central business district within the national network and laying adjacent to the legendary Raffles Hotel. There has also been more creative use of the advertising space. This has resulted in the company’s earnings increasing three-fold. However, along with privatising SMRT, the government also decided to take a new approach to the rail transport system and introduce competition. Previously, all new rail systems would have been handed over to SMRT to operate and maintain; but in 1998, when the new 16-station North-East Line was still under construction, the government invited a selection of other companies to bid for the licence but asked SMRT to refrain from bidding. The winner, SBST, has since become another rail operator. In 2000, however, when the government did not exclude SMRT during the tender for the operation and maintenance of the prestigious new Circle Line, SMRT won the franchise to operate and maintain the system for an initial period of 10 years, to be renewed for another

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30 years subject to good performance. The 34 kilometre Circle Line system, including the extension, is a driverless, completely underground system using state-of-the-art technology, with 31 stations linking Singapore’s thriving commercial and business centre to all the radial transport routes, tourist, leisure and the old residential areas, before finally terminating at the Harbour Front Station. When the fourth and fifth stages of the Circle Line become operational in October this year, it will be the world’s longest fully automated underground metro system, and is expected to carry half a million passengers a day on its three-car trains. The opening of the Circle Line Extension is expected in 2012. The line also delivers another interesting record. “We now have one of the deepest underground depots in the world, Kim Chuan Depot, which has the capacity to accommodate up to 70 three-car trains,” says Khoo. The depot performs multiple functions—not only is it the maintenance centre for the rolling stock and network, but it also houses the system’s vital operations control centre, and is the main storage facilities for materials and parts as well as for stabling some of the trains for the Downtown Line. “For operational efficiency and cost effectiveness, we have exploited the driverless technology and stabled some trains outside Kim Chuan Depot,” he continues. “The rationale behind this is that it will enable us to conserve energy. It takes power to return the trains to the depot when the operations close down at night; therefore, we will park them at strategic locations on the network and send our staff out to clean them. Before sending the trains out for service every morning, the health status of the train is first checked remotely at the operations control centre and only after they are confirmed fit for service will they be sent out by activation of a button. Thereafter the trains will operate according to the timetable to meet the needs of the commuters.” Safety, service quality and efficiency are top priorities for SMRT. Having had the opportunity of being involved in the design review of the Circle Line and participating actively throughout the project implementation stage since winning the contract in 2000, SMRT has used its past operating experience to benefit the Circle Line system, incorporating more user friendly features. This has been made possible through the success of the working relationship established with LTA and the contractors. In addition, after the line was handed over by LTA to SMRT, SMRT also put the system through a programme of extensive preparation, and testing began. “We simulated and practised all the possible incidents that could occur, and developed processes so that we will be able to recover from them

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in the shortest possible time,” Khoo explains. The system is now being opened section by section. “We continuously improve service quality of sections opened at a later stage using lessons learnt from the previous stages.” The new Circle Line has also been a catalyst for change on SMRT’s other rail operations— the original North-South and East-West MRT lines and the small automated Bukit Panjang LRT line. “A large part of our work involves maintaining and upgrading our trains and technology, and our engineers are in the process of replacing the fixed block signalling technology on the older lines to the new moving block signalling system that has been installed on the Circle Line. Although it requires substantial capital investment, we consider it a necessity because it will deliver significant improvements to our customer service and reliability, and cost savings in terms of maintenance,” Khoo says. “At the moment we are also operating the signalling from two control centres, but we will be merging these and housing them together at the underground depot. This will improve our coordination between the lines, resulting in overall operational efficiency and better customer service.” All this work requires a significant engineering team, and of the 6,200 staff employed across all divisions of the SMRT Corporation, 450 are highly trained graduate engineers attached to the train division. Some 200 undertake the daily maintenance work and the remaining 250 work on projects, system upgrades and the development of new technology. “Our strategy is to ensure we have a robust succession plan in place for our engineering capability. Therefore younger engineers begin in the maintenance department, learn the ropes and then progress to the project group, where a lot of technical experience and knowledge is required.” One of the significant achievements of the project group, and one which offers considerable opportunity for future revenue growth, has been the development of a sophisticated automatic fare

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collection system boasting robust detection and high durability, as well as environmental friendliness and cost effectiveness. “We will be installing these gates throughout the MRT network to replace the existing obsolete gates,” Khoo reveals. The company’s focus now is on taking the technology to the wider world. “We first took the product to market some six years ago but we were not very successful. However we have since learned how to be more market orientated and competitive, and we will be taking the product back out into the Asian market.” Over the years, SMRT has acquired considerable knowledge and experience of designing, operating and maintaining both driven and driverless MRT systems, and has

a growing consultancy arm that offers advice on all aspects of MRT, from initial design and specification through to operations and maintenance. Among the many international projects it has worked on to date are the Palm Jumeirah monorail in Dubai which it also operated for three years, and MRT systems in Korea, Mumbai, Chennai and Ho Chi Minh City. With significant rail development planned for countries such as Vietnam, Malaysia, the Philippines and Thailand, Khoo sees tremendous opportunities for growth. “Looking forward, our focus will be on operations, consultancy and product development, and we should be able to make significant headway in the world arena,” he concludes. www.smrt.com.sg BE

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Riding

the

Alaska Railroad Corporation is an independent state the US that still operates both passenger and freigh locomotive engineer now overseeing transportation greener, more customer-friendly and an even bigge 190 Transport & logistics


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e corporation and one of the last railroads in ht services. Keith Regan learns from a former n for the corporation how it is striving to be safer, er engine for economic growth in our largest state Transport & logistics 191


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he Alaska Railroad Corporation (ARRC) traces its roots to 1903, when the Alaska Central Railway built the then-territory’s first railroad, a 50-mile stretch of track that was so costly to build that it propelled its owners into bankruptcy within a few short years. Today, the organization is an autonomous, self-sustaining state-owned corporation that is one of the last railroads in the United States to operate both freight and passenger operations. The Alaska Railroad now owns and operates 651 miles of main line, siding and branch track, running seasonal passenger and year-round freight operations in some of the harshest weather conditions and most remote parts of the country. The railroad had 2009 revenues of $169.4 million and a profit of just under $14 million. In 2009 the railroad handled some 470,786 passengers—many of them cruiseship passengers who take the railroad’s scenic trips along the Alaska coast or inland through Denali National Park—as well as more than 6.1 million tons of freight such as coal and aggregate, according to Patrick Shake, vice president of transportation and mechanical operations. Shake has been with the railroad for 36 years, starting as a locomotive engineer and holding a number of positions along the way. More recently he has had a hand in an effort to modernize the railroad’s locomotive fleet, a move that has reduced fuel costs and helped move the railroad toward compliance with new emissions standards.

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We cross-train our employees to work in several aspects of our operations, and that’s how we operate a full-service railroad in a profitable and sustainable way

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Alaska Railroad Corp. The Alaska Railroad’s motive power fleet consists of 28 SD70MACs and 23 GP-series locomotives. A number of these locomotives are DP (distributed power) and HEP (head end power) equipped. One benefit that Alaska Railroad has is that it doesn’t interchange or share locomotives with other railroads, Shake explains. “This ensures that our locomotive fleet stays in excellent operating conditions at all times.” The Alaska Railroad’s passenger service is highly seasonal, running largely from mid-May through midSeptember. The long-haul Denali Star train offers a daily connection between Anchorage and Fairbanks with a stop at Denali, home of North America’s tallest peak, Mount McKinley. The Coastal Classic train operates daily, traveling 114 miles between Anchorage and Seward. “It’s just the most beautiful trip you can imagine,” Shake says. “The scenery is spectacular.” Along with ARRC railcars, the Coastal Classic and Denali Star often pull cars privately owned by cruise lines such as Royal Caribbean and Holland America. Among other passenger services is one of the last remaining flag-stop services in the country, allowing anglers, hikers and cabin owners to depart the train in the back country and stop the train for a return trip simply by waving a white cloth. Passenger services are reduced to mainly weekend services in the off-season. On the freight side of the business, the railroad runs daily over the 356 miles between Anchorage and Fairbanks. Petroleum trains carry fuel from the North Pole Refinery in Fairbanks, where crude oil from the Trans-Alaska Pipeline is refined and hauled back to Anchorage by rail. Intermodal and mixed freight is also moved between Anchorage and Fairbanks several days a week, carrying cargo that comes by way of steamships and barges into Alaska. The railroad also handles as much as 800,000 metric tons of export coal each year, product that is bound from Alaska for overseas locations such as Chile and South

Korea. Another 2.5 million tons of aggregate material is hauled for use in construction during the state’s short summer building season. In addition to passenger and freight train businesses, the railroad generates revenue by leasing land that it owns all along the rail belt. Real estate leases not only encourage economic development with prime land adjacent to rail access, but this revenue stream helps to keep the self-sustaining corporation’s books in balance. To support that effort, the railroad created a dedicated facilities department that is actively updating and modernizing many of the older facilities in its portfolio. One such project is the renovation of a historic freight shed that was built in 1941 in the Anchorage terminal area. This facility is now the first historic building in the state certified under the US Green Building Council’s LEED program. The refurbished building will house commercial office space for lease to private companies. Other capital improvements in recent years have included installation of 60 miles of centralized traffic control (CTC), along with a major track upgrade program including concrete ties and welded rail installation. “We’re fortunate to have a highly qualified and dedicated workforce,” Shake says. “We’re a small enough railroad that we have very good interaction with each department and all our employees. “The things that set us apart are that we’re a full-service railroad that touches every aspect of railroad operations and that we’re here in Alaska,” Shake goes on to say. “We deal with very heavy snowfall and sub-zero temperatures, and then days in the summer when the temperature might reach 80 degrees. We cross-train our employees to work in several aspects of our operations, and that’s how we operate a full-service railroad in a profitable and sustainable way.” www.akrr.com BE

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The

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Kenya’s transport service poses many cha managing director of Kenya Bus Service M company is making a real difference in N 196 Transport & logistics


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allenges to bus operators. Edwins Mukabanah, Management Ltd tells Andrew Pelis how his Nairobi

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he challenge of running a successful bus service in Kenya is one fraught with difficulties and danger. But against the backdrop of failed enterprises, corruption and gangsters, one company has adopted a new approach—and is now making great headway in Nairobi. The story of Kenya Bus Service Management Ltd has its origins in bus operations in Kenya’s capital city, stretching back over 25 years. That was around the time that the company’s managing director Edwins Mukabanah first became involved with the business’s forerunner, Kenya Bus Services Ltd. “The old company was established here back in 1934 and had a branch in Mombasa,” Mukabanah explains. “It was originally owned by United Transport of London but shares were later sold to Stagecoach, before they sold the business in 1998 to a group of local investors. They operated the company until 2005 when it collapsed and at that point, I decided to create a company based on the principles of National Express [the UK-based coach operator], where a brand is used to run fleets for other people.” Mukabanah had seen first-hand how UK bus companies worked, having spent three years there studying transport planning and management at the University of Westminster and later working for Stagecoach. His knowledge and experience gained while working for Stagecoach under Transport for London was invaluable to the Kenyan company as it sought to develop a new model. It is rare in Kenya to meet one like Mukabanah who combines many years experience of hands-on public transport operation and professionalism.

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Kenya Bus Service Management Ltd However, the reasons for the old company’s collapse were far from easy to remedy, as Mukabanah explains. “In Kenya, the market is filled with paratransit operations which provide an informal, unscheduled, profit-driven service which is unreliable. These kinds of operations do not pay the true cost of labour. This mode of transport does not offer fixed routes or fares, and the old company was competing against these operations that encourage unfair and wasteful competition. “Furthermore, the industry is unregulated and there has been a succession of failed bus companies in the country as the paratransit model tends to move towards smaller capacity—typically minibuses.” Aside from the competitive nature of the sector, Mukabanah says there are other factors that act to the detriment of legitimate transport providers. “Issues like congestion, accidents and pollution all regularly occur, while the road surfaces are in many places very poor and riddled with potholes; but there are also problems with cartels who control certain areas, making some routes inaccessible. There are also gangsters who extort money from bus companies.” Given the extent of the problems facing bus companies in Nairobi, it is heartening to learn that Kenya Bus Service Management is making good inroads into changing the model of transport in the capital. Today, the company transports around 2.9 million passengers a month. One of the first things Mukabanah did in mid 2006 was to approach local bus companies to join his enterprise as franchises. “I saw that to operate in this situation, one needed an individual operator to apply some degree of micro management with standards that were acknowledged within a brand. I had a small fleet of vehicles and invited small companies to become a part of our enterprise. Although there was initially a lot of rejection, this changed when businesses learned that I had obtained a license to operate in the Central Business District of Nairobi and could travel along certain routes. “Today we have grown to run 152 franchises which own up to seven buses each and in total we have 292 buses that operate under our brand,” he continues. The company has encountered many challenges

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concerning the lack of regulations when it comes to enforcing the brand. “The laws in Kenya on infringement are very weak,” says Mukabanah. “Even so, although many of the vehicles are small, we have a very visible household brand and look forward to the government legislation on an Integrated Transport Policy, which will encourage grouping and franchising.” Aside from the operating model, another big difference between Kenya Bus Service Management and other transport providers is the age of its fleet. Mukabanah says that his company owns fleet assets totalling in the region of 800 million Kenyan shillings (US$10 million) and the average age of a bus within his company’s business is three years (although these are owned by the individual franchisees, including some who only offer services at weekends). Other operators, meanwhile, purchase much older vehicles from countries like Japan and then adapt them to Kenyan needs. Currently Kenya Bus Service Management receives around 40 to 50 buses each year. The next phase of the company’s plan is to create value through associations with other businesses like fuel suppliers. This is especially important, says Mukabanah, as fuel constitutes 40 to 50 per cent of operation costs and has increased by up to 20 per cent over the last couple of months. Other partnerships could include bus suppliers and insurance providers. Maintenance remains an issue, with the vehicles needing durable chassis to drive over the terrain; although Mukabanah feels that the Kenyan government has done a lot to improve the condition of roads in Nairobi over the last two years. The standard of drivers, he says, is more of a problem, so another exciting initiative that the company has introduced has been the only Passenger Carrying Vehicle training school in Kenya for

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Kenya Bus Service Management Ltd drivers and conductors. “Over the last four years we have rented premises, and we spend over one million shillings each month. The site has a garage, which is important as there are no local authority depots in Kenya, and a training school. We charge a fee for each inductee as the people we train will often acquire a Kenya Bus Service Management certificate and find work elsewhere more easily. We have put over 950 drivers through our training and some 1,081 conductors.” Mukabanah says that his company’s approach is redefining the future of public transport operations in Nairobi, and that is likely to magnify with greater use of technology. “The original firm was the only computerised bus company back in the 1980s, and when it went down we decided to create in-house programmes that aide our accounts, maintenance schedules and rotas. We also use ticket machines from the UK and we are now looking at the option of introducing a pilot cashless ticket system which will help to end corruption, cartels and theft on buses in Nairobi. Information technology is the key to changing this industry in a developing country.” Kenya Bus Service Management being the only member of the International Association of Public Transport in Kenya (where they gain from sharing international best practice), Mukabanah sees a future where his company can help the government to shape definitive guidelines and legislation that may lead to Kenya Bus Service Management moving into leasing and management. Already the business has received enquiries as far afield as Kampala in Uganda, Juba in Southern Sudan and Dar Es Salaam in Tanzania. “We will see if we can operate in Mombasa eventually, but only after we have good legislation and the necessary transport management institutions in place,” he concludes. www.kenyabus.net BE

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caped

The

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Family run South African coach company Inte Gay Sutton discovers from Arend de Waal, W how the company has been introducing innov 204 Transport & logistics


Intercape

e-aiders

ercape has been undergoing a transformation. Wynand Van Nieuwenhuizen and Corne De Waal vative new services and practices

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h e distances across southern Africa are vast, the scenery stunning and the mountain roads challenging, yet previously gruelling long distance journeys can now be achieved in luxurious comfort. Today’s traveller can board a luxury double-decker coach in Namibia, for example, and travel overnight in a spacious reclining seat, surrounded by all the comforts usually associated with business class air travel. There are none of the tedious hours of waiting at airline terminals, baggage doesn’t go mysteriously missing, pick-up and drop-off points are in city centres and you arrive refreshed. The company behind this new and appropriately named Sleepliner service is Intercape. Based in Cape Town, South Africa, family owned Intercape has been operating in the long distance coach service sector for more than 30 years. One of the secrets of its success is the ability to identify new opportunities and implement improvements that are aimed at pleasing the customer. Over the last decade, the company has been undergoing an evolution. “We have made significant changes to the company since 2000,” says financial director Arend de Waal. The changes include launching the Sleepliner service, developing a new ticket management system and improving company branding. Over the past four years alone, R140 million has been invested in new coaches. “We also began to formalise our corporate governance, putting a fleet replacement programme in place and focusing the business on safety, reliability and customer service.”

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The Sleepliner service, launched in 2005, is a new concept in business class comfort and is based on a fleet of purpose-built coaches designed in conjunction with the Brazilian bus maker Marco Polo specifically for Intercape’s South African network. “Some of our routes are in excess of 1,500 kilometres, which is a 21 hour journey,” says technical and operations manager Wynand Van Niewenhuizen. “The coaches are designed purely for comfort and safety on long distance journeys, and since 2005, Sleepliner has developed into an exclusive market.” The seats on these double-decker coaches come with extra leg room and foot rests, and recline to a restful 150 degrees. There is a full suite of on-board entertainment, air conditioning, toilet facilities and a kitchenette. All of this is managed by a hostess who is responsible for passenger comfort, and two drivers who operate on four hour shifts, one resting while the other is driving. To date, the Sleepliner has been introduced between major centres throughout South Africa, and between Cape Town and Windhoek in Namibia. If the Sleepliner is Intercape’s business class service, the Mainliner is its standard luxury class. Operating over a wider range of routes that extend into Botswana, Mozambique, Zambia and Zimbabwe, Mainliner comprises comfortable double-decker coaches and standard reclining seats. The final piece in Intercape’s jigsaw is a tour and charter coach service, which is currently gearing up for the 2010 World Cup and beyond, with a new fleet of top-of-the-range Irizar PB coaches. Safety is a top priority for Intercape, and the company has been introducing a range of protocols to formalise safe practice. In 2007, drive cams were introduced on all the coaches—so not only are the vehicles monitored by satellite tracking but the journeys are continuously recorded to improve performance, safety and efficiency. The cams have two views: they record the journey from the driver’s perspective; and they also monitor the driver’s actions and reactions, providing an invaluable insight into conditions on the road, as well as changes that could improve safety and efficiency. Speed is acknowledged to be one of the greatest contributory factors in road accidents, and Intercape has

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Intercape

taken steps to address this. “The speed limit in South Africa is 100 kilometres per hour, but we have introduced a 95 kilometre per hour limit on all our services, and we’ve reduced the speed limit on the mountain passes to just 45 kilometres per hour,” Niewenhuizen says. This is not an empty regulation either—there are two checks to enforce it. Firstly, a warning buzzer automatically sounds on the coach if the driver exceeds the speed limit. Secondly, the coaches are monitored throughout their journey by a 24 hour operation room which provides emergency back-up and coordinates

speedy repair services. Its operators will contact the drivers by phone if they exceed the speed limit. The coach fleet is the company’s primary asset, and a formal fleet replacement programme has been introduced whereby the coaches are operated for four years and then refurbished to extend their lives for another two to three years. They are kept in top condition by an extensive preventive maintenance programme which includes a full safety check at each depot stop and a full vehicle service every 20,000 kilometres. The depots, located at all major stopover points, are equipped with full workshop facilities to carry out anything from a basic service to a full engine replacement, while major depots in Pretoria and Cape Town put the coaches through regular full roadworthiness tests. The preventive maintenance policy is paying off. “The

first batch of new vehicles going through the two million kilometre check are doing so without requiring any major component replacements. So we’ve essentially doubled the life expectancy of our vehicles,” Niewenhuizen explains. “Another contributory factor to this extended vehicle lifespan is driver behaviour,” de Waal says. “Our drivers are incentivised to drive as efficiently as possible on each trip. Bringing down the maximum speed to 95 kilometres per hour has also helped.” People are certainly at the heart of Intercape’s business, and the company has been operating an in-house training school since 1999, delivering fully accredited training to those who deal directly with the public. The standard customer care, safety and best practice topics are all covered. “But the biggest thing we’re focusing on now is the softer skills,” explains marketing manager Corne De Waal. “For example, we offer a range of fares for each departure, so it’s important for our sales staff to have the skills to make the sale and close the deal. Our market is also very visual, meaning that word of mouth marketing is very important. So we’re focusing on sharpening the skills of our drivers and hostesses, and letting them know their importance in the whole value chain.” Looking to the future, Arend de Waal sees significant opportunities for growth. “Statistics show that over a 12 month period, three quarters of the people visiting South Africa came from Africa itself, which means there is a huge opportunity for us.” Services are likely to be expanded further into Namibia, Botswana, Zambia, Zimbabwe and Mozambique. De Waal acknowledges that the African road networks do need to be improved. “However, the roads are already much better than they were, and when they are ready in a few years’ time, we will be ready to provide the service.” BE

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Driving the

bu

The importance of a reliable and safe bus s Africa. Mphumudzeni Muneri talks to Andrew driven home a competitive advantage based 212 Transport & logistics


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ervice cannot be underestimated in South w Pelis about how Great North Transport has d on reputation Transport & logistics 213


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u blic transport in South Africa has long been a topic of much debate. Today, competition remains as rife as ever, despite the recent downturn in the economy. One company that has ridden out the tough times better than many has been Great North Transport (GNT). With headquarters in the Polokwane region of South Africa, the company operates a further 11 bus depots which serve as home to a vast fleet of modernised coaches. “The company had its roots in two separate companies that formed more than 30 years ago,” states Mphumudzeni Muneri, CEO at GNT. “The two companies (called Gazankulu Transport and Lebowa Transport), which were previously homeland-based, were transferred after the dawn of democracy in 1994, following the release of Nelson Mandela. There was a new dispensation and the two businesses were amalgamated in 1996, to form Great North Transport.” Today, GNT operates within Limpopo province and part of Mpumalanga province; its operational model is based upon negotiated and interim contracts, both governmental and private. “Our customers are more local for now and we operate in rural areas, providing commuter services,” Muneri explains. At the time that GNT came to fruition, the company inherited a fleet of old buses— which was a situation that the shareholders, board of directors and management team felt needed to change, as Muneri describes: “Around the turn of the century we formed

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a strategic plan to turn around the business and we started to introduce modern buses. The process continued for several years and we began to see the benefits of the upgraded fleet by 2005.” At the moment, GNT operates 540 buses with the oldest bus 10 years old and the newest one a mere 18 months old. In total, Muneri estimates that the company has invested in the region of R200 million on its new fleet. With South African road conditions not always conducive to regular travel, it is not surprising to learn that GNT has a big focus on maintenance. “Road conditions are not great,” Muneri admits. “Most roads have an impact on tyres in particular and the bus lifespan can be affected by the movement of the bus on bad roads. However, the kind of equipment we use includes an excellent chassis on each vehicle and this can withstand most of the bumps in the road. “As a company, our core function is commuter services and our responsibility is to sell seats on buses—we leave the maintenance to the experts (Scania) who also manufacture our vehicles. They take full responsibility for maintenance and have staff based at all of our depots.” Aside from maintenance concerns, the fluctuating cost of fuel is something Muneri says is hard to predict, which creates its own challenges when planning a budget. Effective revenue collection remains another priority for the business. “When dealing with cash


Great North Transport

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Great North Transport you have to be on your toes all the time.” Security is another issue, he says, as when the buses are running the safety of the bus is essential. “The various parts of that equation include how safe the bus is, our premises and also people and investments. We have outsourced those elements of physical security.” Part of the challenge to ensure that the operations run smoothly is also to get the ‘people factor’ right. “Perhaps our biggest challenge is skills, people and capacity,” says Muneri. “We have 1,250 employees and training plays a significant role within the company. Without the necessary skills, no company can grow, so we view our people as the most valuable asset we have. “Our staff development programmes focus on training people up for requisite skills and includes on-the-job training for drivers. We encourage all of our workers to enrol and this includes formal education with external institutions—our drivers have to learn not only how to drive a bus, but also the value of customer service skills. Those in managerial positions are trained not only on how to manage but also on how to approach conflict resolution.” Following the investment in its new fleet, GNT saw customer numbers progressively rise to a peak of 40 million; but the onset of the economic downturn resulted in falling numbers of passengers as jobs were lost, meaning fewer commuters. Muneri feels that despite the economic problems the country faced, competition remains strong. “You have not only the bus companies to contend with, but also the taxis and informal bus and taxi operators that operate without proper or adequate permits,” he explains. “During the boom period the market really opened out and continues to be competitive; our advantage is based around the safe, reliable service that we provide. Our drivers are well trained and our buses are well maintained. We also have a good operating system and a schedule that we stick to that ensures the bus will be at its destination on time. Those are the most important aspects to a customer.” Part of the secret to that success has been

investment in technology. Muneri is quick to extol the virtues of the GNT’s tracking systems: “We have systems in place that are used to monitor the buses and driver behaviour. Our auto-data system is pretty up to date and monitors the bus itself in terms of how it is driven and fuel consumption. We also run

Marcopolo The relationship between Marcopolo and Great North Transport goes back a decade already. We can proudly say that GNT was the main reason why Marcopolo decided to invest in a manufacturing plant in South Africa. From there until today Marcopolo has grown to be the biggest bus body builder in South Africa. A decade later we can also proudly say that GNT is running over 500 buses all with Marcopolo bodies. To have a partner like this is really important for our company. We thank GNT for the loyal support during these years and wish to continue growing this successful partnership together.

an electronic ticketing system which works superbly and helps to improve efficiency.” The recent FIFA World Cup opened up a number of temporary opportunities which Muneri says GNT were happy to accept, including the shuttling of more than 70 buses from the park & rides to the football stadium. However, other than making a good impression, he does not feel there was a lasting legacy. That said, Muneri remains optimistic for GNT’s long-term goals. “The future looks bright and we will continue to explore opportunities, which we feel are unlimited. We will explore markets and will take advantage of opportunities when the market dictates— which could include acquisitions. “We will also aim to maintain a young fleet of vehicles all the time, so that as the market grows, we can also grow in terms of fleet size,” he concludes. www.gntpassenger.co.za BE

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Take one

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...and build a business. That is the story beh successful trucking business that extends 218 Transport & logistics


Prime Invest Transport

uck...

hind Prime Invest Transport, which has now built a s across South Africa, as Ruari McCallion discovers

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r ime Invest Transport started in Cape Town in 1994 with just one truck—and that was rented. It now has seven distribution centres, 170 vehicles and around 450 employees. Laurence Edwards was the co-founder, along with Andy Van Wyk, and they are now joint managing directors. The business is characterised by attention to detail, technology, a close focus on costs and above all, a commitment to serving its customers by delivering on time, in full, every time. “We purely provide transport services,” Edwards says. “Our market is South Africa, with some cross-border shipping into Lesotho.” The company’s biggest market segment is clothing and related goods but it also carries tyres, cosmetics, books, furniture, crockery, cutlery and other kitchen equipment. It’s pretty much all high-value. “Moving high-value goods is challenging, there’s no doubt,” Edwards explains. “When we are making deliveries at our customers’ distribution centres, we have to make appointments. Our trucks may be driving 1000 miles and have to be there at a specific time. It is challenging but we built our business knowing those were the requirements. We grew by being flexible. We revolve around what the customer wants.” It could be expected that scheduling to tight delivery windows would require long lead times, with lots of planning ahead, but that isn’t the Prime Invest way. “We usually work no more than two days ahead.”

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When Edwards and Van Wyk set the company up, they identified an opportunity in clothing and related products. As everyone knows, fashion is a fickle business and rapid response is essential for retailers and design houses. “The manufacturers actually act as design houses,” says Edwards. “They ship the production work out to CMT (cut, make and trim) operations, who deliver back to the design houses. From the start, we focused on that transport space.” Prime Invest was in very much the right place at the right time, with a strategy that harmonised with the clothing sector’s development. “Edcon, the retailer, decided to outsource their distribution centre and delivery work in the Western Cape in 1998; we tendered for the contract and got it.” That win effectively doubled the company’s size. At the time it had six trucks, it acquired six more from Edcon with the contract and proceeded from there, region by region and state by state. “They outsourced the Free State at the time we were looking to expand, and we got that contract, too. Then we got northern KwaZulu Natal; then the

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Prime Invest Transport

We grew by being flexible. We revolve around what the customer wants

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north and south coast of KwaZulu Natal.” When Boardman Stores was purchased by the Edcon Group and the tender for distribution became available, based on its previous performance Prime Invest was able to secure it, starting with Johannesburg and followed by other areas around the country. Piece by piece, step by step, Prime Invest Transport was expanding. Its distribution centres are now in the key locations of Cape Town, Port Elizabeth, East London, Durban, Ladysmith, Johannesburg and Bloemfontein. As its customer base grew, so did Prime Invest—by delivering to the standards required. Also essential to Prime Invest’s growth strategy is building its people. Everyone in management knows transport inside out. “Two of our directors began as drivers, and we’re all actively involved in the business,” Edwards explains. “We’re very hands-on and watch all aspects of our operations. We have great regional managers.” Prime Invest complies with South Africa’s economic empowerment laws pretty naturally. It is 26 per cent black owned; and previously disadvantaged groups are represented at all levels, from loaders to supervisors and managers. It invests heavily in training, teaching new recruits to become truck drivers, constantly upgrading their licences, from which they will perhaps go on to become managers. “We have people training to become accountants: we put them through their exams. Our HR people go through courses learning to handle people, how to conduct hearings and so on,” says Edwards. “We are helping our staff to improve, which helps us as a business and almost incidentally helps us to score well on the Broad Based Black Economic Empowerment scorecard.” In fact, the company is rated as a level 3 contributor on the scorecard. All of which is excellent but it’s the performance of the company in practice, in serving its

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customers, that is the key to growth and success. Prime Invest runs a tight ship and has invested in technology to ensure its costs are under control. They have to be— transport is a competitive business and cost can be the difference between winning, keeping and losing a contract. All its vehicles have tracking devices fitted— Edwards is able to look on his computer as we are talking and see where every single truck is and whether the engine is running or not. The company’s Global Telematics Orchid system enables complete trip records to be printed out, covering where the truck went, its speed, driver breaks and so on. “We can set exclusion zones on the software. If a truck goes into an exclusion area, alarms go off. Whether it’s a hijacking, piracy or an unauthorised detour, we know about it immediately,” says Edwards. “We use it as a tool for driver debriefing, which enables us to help them to be better, to drive more economically and to identify route improvements.” Planning itself is a busy process. “We get our daily requirements for carriage and set our schedules accordingly,” Edwards explains. “Tomorrow we need 13 trucks in Durban. Where are we going to get them? We source and arrange them appropriately. We’re always planning and making sure our trucks are working as effectively as they can, which means carrying economical loads both ways.” Prime Invest Transport’s customers appreciate that it is working to deliver the best service possible. “We take responsibility for their transport issues; they can leave the headaches to us.” Naturally, the company’s success relies heavily on its fleet. “We run a fleet that is predominantly Isuzu vehicles; without the support of Isuzu Truck Centre in Cape Town, the rest of the Isuzu dealerships around the country and General Motors South Africa, we would not be the success that we are,” says Edwards. “Isuzu helps us by servicing after-hours or on Saturdays.” Edwards has clearly been able to recognise that a strong relationship with not only customers but suppliers is invaluable. “Standard Bank, WesBank, Vebody and Caltex have all made our success possible as well,” he concludes. BE


Prime Invest Transport

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Transport & logisitics