Majid Abdulrahman - A Fresh Perspective

MAJID ABDULRAHMAN

A Fresh Perspective PROJECT PARTNER

BUSINESS INTERVIEW

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MAJID ABDULRAHMAN is the former Supply Chain Director at Arabian Beverage Company (ABC) in Kuwait and the founder of The London Commission, a growth strategy consultancy which identifies growth opportunities for companies to help them deliver and execute the strategy through a ‘hands-on approach’. Here, he shares his perspective on the impact of the recent pandemic on the beverage industry’s global supply chains.

Written by Anna McMahon • Produced by Vince Kielty

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‘May you live in interesting times’ is an English expression that purports to be a translation of a traditional Chinese curse defined by a period of chaos and disorder.

Never have the events since the start of 2020 been closer to this truth, and global supply chains everywhere have been impacted by the Covid-19 pandemic. ccording to a Fortune report, 94 per cent of the Fortune 1000 companies have experienced supply chain disruptions in 2020; from the tension of the trade war between Washington and Beijing trickling down to other populist cities around the globe, to the rise in protectionism, coupled with concrete costs and new monetary barriers, igniting broader challenges and concerns for logistics networks operating internationally.

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Industry expert, Majid Abdulrahman, says, “Today’s globalised supply chain calls for the use of the most cost-efficient recipe and it’s garnished by the increasingly important quality control dressing. Quality standards and hygienic practices are quickly becoming the key selling point for most producers and sellers.

“In the Gulf Cooperation Council (GCC), the hidden costs of single-source dependencies and poor flexibility in adapting to real-time shocks have become clearer than ever.

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“Today, consumers are willing to accept higher prices for certain goods, if it means convenience.

Minimising physical contact with various sales channels does not come without additional cost.”

Over the next few years, we can expect to see a broad overhaul of our supply chain infrastructure and a new order focused on regionalisation, whereby logistics hubs will re-emerge at the regional level. This will eliminate single-source reliance, establishing a flexible and a resilient supply chain. In the case of beverage manufacturers in the GCC, this might mean shifting all production to the source of their raw materials, particularly to regions where the labour costs are substantially lower.

Majid adds, “China has prided itself for years on its competitive labour costs, but it has lost a big chunk of its labour cost differential. What still continues to hold water is the supply chain network of suppliers and sub-suppliers located in these Chinese hubs.

“Beverage manufacturers continue to depend predominantly on European production lines, with spare parts costing much more than their Chinese counterparts. The 6

real question going forward is can upstream and downstream equipment manufacturers in the EU reach a leaner level, resulting in sustainable operation with acceptable conversion costs?

This is a far cry from the rest of the world, which sources 40 per cent of its parts from China including sub-assembly.

“Supply chains from playing a organisational rol driver of the com

MAJID ABDU

“Given the incredibly high number of parts required, with different lead times, a return to regional supply chains poses a very complex challenge.”

In the post-Covid era, European manufacturers will need to ensure they can feed their supply chains from their own region. We can all agree that Covid-19 provides the natural environment for stress testing every sector in the economy.

s have moved a value-added le to being a prime mpany business�

ULRAHMAN

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Jadli Foods ( India) Pvt. Ltd, the Flagship of Food Division of Jadli Group, is a dynamic and exponentially growing company primarily engaged in the manufacturing and export of Processed Food Products and Agro Commodities business.

Established in the year 1999, Jadli Foods (India) Pvt. Ltd. is a Star Status Manufacturer Export House recognized by Govt of India since last two decades and are accredited with FSSC 22000 which is latest series in ISO certification which covers Food Safety Management System (FSMS), USFDA, SGF Certified and Halal certified from Halal India and Kosher Certificate also. Jadli Foods also produces organic fruit Puree & Concentrate, IQF Fruit Dice which are certified by Lacon Institute.

Jadli foods (India) Pvt. Ltd., is amongst front-runners in supplying Fruits-Pulp/ Puree & concentrates of Alphonso and Totapuri Mango, Pink & White Guava, Litchi, Papaya & Tamarind packed in Frozen, Aseptic Bag OTS cans to Fruit Juice, Dairy, Confectionary and other Food Industries in Far East, Sub continent, Middle east, Europe, North and West Africa, besides, North American Countries. The company has also emerged as one of the finest producers of IQF Frozen Fruits and Vegetables like IQF Green Peas, Sweet-corn, Mango and Papaya Dice alongwith canned fruits, vegetables, pickles, fruit jams, Tutti-Fruiti etc., packed in consumers, catering as well as industrial pack size.

Adding to the saga of success, Jadli Foods (India) Pvt. Ltd., the FMCG wing of Jadli Foods under our market leading brand MANSA has taken quantum leap, and forayed into supplying Condiments, pickles, jams, sauces, syrups, squashes, and canned foods to international and domestic market segment vis-à-vis Super market chain, retail shops, super markets chains,

Horeca Segment besides, other leading Institutions. Amongst other task, the wing is active in supplying diversified processed food products to Ministry of Defence, Govt. of India. Mansa Brand is active in both international and domestic market.

Operated from its Head Office in New Delhi, capital of India, Jadli Foods (India) Pvt. Ltd. is equipped with three factories. The unit is located in Krishnagiri, Tamil Nadu and Chittoor (Andhra Pradesh) in South are equipped in the state of art of machinery and latest technology of Processing of Fruit Pulp such as Mango, Guava, Banana with Aseptic and Canning process line. The unit located in Roorkee,Uttarakhand at the foothills of Himalyan region producesdifferent varieties of Fruit Jams, Pickles, Squashes, Amla & Apple Preserve (Murabba) of Export Quality meeting with International standards are manufactured.

The success of Jadli Group resides on Quality and Reliability.

For business enquiries contact: +91-11-27555459, 27555460, 27555461 • Email: info@jadlifood.net • export@jadlifoods.net

FSSC 22000-2005 certified company

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Going back to the economic crisis of 2008, governments and companies were forced to engage in stress tests to assure preparedness for an economic shock. Such was the case eight years before, which forced technology companies to institute penetration tests to their cyber-security mechanisms and prevent the Y2K millennium bug. Covid-19 is just another puzzle in this endless paradox that we must solve, and we cannot rule out the misfortune of another threat in the future.

Majid says, “In a post-Covid-19 era, supply chain stress tests will be embedded into every cooperation such as the need for business process reengineering.

The distributed global business

model is swiftly diminishing, calling for new priorities in optimisation.

“Supply chains have moved from playing a value-added organisational role to being a prime driver of the company business. They must be more flexible to allow for greater variations in volumes, force majeure, strikes, and potential social unrests. Many companies in China and the world reviewed and capitalised on force majeure in their contracts to cope with Covid-19 disruptions.”

The need for digitisation and the move away from a paper-based relationship between supplier and buyer has never been more essential, as well as dashboards

“Intelligent machines predicated on algorithms and predictive models will become more important than the human element, removing the emotional connection and focusing on bold hard numbers” MAJID ABDULRAHMAN

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“The current crisis is an opportunity to update a system that has relied on outdated processes and procedures. T world should look at this as a blessin disguise, in establishing/capitalising nimble supply chains as a key driver. then will global trade be in a position weather whatever storm may come�

MAJID ABDULRAHMAN

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n The ng in on Only n to

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to provide a real-time overview of the entire supply chain. Intelligent machines predicated on algorithms and predictive models will become more important than the human element, removing the emotional connection and focusing on bold hard numbers.

As unemployment rates rise across the world, Majid believes beverage companies will face labour shortages, with many workers migrating to other sectors.

Although there is a call for a human driver to be the link between these two worlds, Majid explains, “I believe AI will be quicker to react and anticipate market spikes. Only in situations where there is a new production line, or the modification of an existing one, is there a need for human capital.”

The GCC beverage market is still adapting to new ways of doing things and has been very traditional in its approach up to now. With most countries now focusing on protectionism tactics to secure domestic demand, the question is how to compensate sales losses in export sales whilst achieving 2020 financial targets?

Majid answers, “Most companies in the beverage industry don’t have sufficient expropriated provisions, and will resort to shifting CAPEX 12

“Lockdowns are adding to the struggle, as special permissions are needed to keep the flow of material and parts steady” MAJID ABDULRAHMAN

to working capital requirements to cope with variable change.

Ultimately, the differentiator will be the delivery mechanism and modular delivery process.

In other words, whenever a new development is made, it should be incorporated directly into the business for maximum benefit.

“We have inherited two unwanted effects in the aftermath of this pandemic. As many realise now, it is taking longer to settle an invoice, reversing a previous trend of faster payments. As a result, many beverage manufacturers will have orders on hand that will be delivered way past the intended ETA, impacting sales and, ultimately, profits. This cashflow gap is getting even more difficult for companies which don’t have sound financial ratios to receive the funding aid from 13

banks. The second unwanted effect is that they will be forced to use advance payments and reprioritise payments depending on their production plan and for the sake of business continuity.

The hard reality is that they will lose suppliers and credit insurance appetite to fund their operation.”

Lockdowns are adding to the struggle, as special permissions are needed to keep the flow of material and parts steady. To add insult to injury, the supply side dilemma has been replaced with a demand drop, as consumption in 14

the economy has moved; the essential needs and buyers are cascading down to the cheaper product alternatives or other categories.

According to PWC’s April CFO Pulse survey, cashflow is the primary concern, with 77 per cent of CFO’s implementing cost containment measures.

56 per cent of respondents thought they could get back to ‘business as usual’ in three months, down from 90 per cent when the survey ran in mid-March.

“Larger companies have already agreed to pay suppliers earlier to secure their inventory and benefit from early payment discounts” MAJID ABDULRAHMAN

Median and small businesses with sufficient cash reserves can remain solvent for one to two months. If cashflow dries up, it could have a devastating impact on supply chains, extending the recovery period and pushing them to the brink of critical mass.

Larger companies, on the other hand, with liquidity, have already agreed to pay suppliers earlier to secure their inventory and benefit from early payment discounts. We can anticipate many co-packing contracts taking place in countries where manufacturers’ regional hubs exist in the coming months.

In the GCC, there could also be an appetite for M&As from key players in KSA and UAE, but they will be limited.

Majid concludes, “The current crisis is an opportunity to update a system that has relied on outdated processes and procedures. The world should look at this as a blessing in disguise, in establishing/ capitalising on nimble supply chains as a key driver. Only then will global trade be in a position to weather whatever storm may come.”

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