Global Supply Chain March 2017 Issue

March 2017 Issue 35

ENHANCING THE BUSINESS OF LOGISTICS

SUPPLY CHAIN

RISK EXPECT THE BEST AND PLAN FOR THE WORST

Emirates SkyCargo A clear focus

Al Majdouie, Kuwait Adapting to the environment

Dubai Trade

Awarding excellence

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Supply chain risk SIGNATURE MEDIA FZ LLE P. O. Box 49784, Dubai, UAE Tel: 04 3978847/3795678 Email: info@signaturemediame.com Exclusive Sales Agent Signature Media LLC P.O. Box 49784, Dubai, UAE Publisher: Jason Verhoven jason@signaturemediame.com Director: Peter Dass peter@signaturemediame.com Managing Editor: Munawar Shariff munawar@signaturemediame.com Art Director: B Raveendran ravi@signaturemediame.com Production Manager: Roy Varghese roy@signaturemediame.com

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Whether it’s a fire, a lawsuit or an electrical/technological outage all of the three scenarios mean loss for the business. And all businesses go through big and small tumbles during their operations. It’s a matter of being rightly prepared to handle any unforeseen scenario that makes it possible to keep losses to a minimum. Page 26.

Hiran Perera, Senior Vice President, Cargo Planning & Freighters, Emirates, has a clear focus when it comes to strategy for the course of the year. Over the last threefour years, the air cargo industry has not really done very well. Minimal growth in tonnage volumes combined with overcapacity wasn’t good news either. But tonnage volumes improved towards the end of 2016, hoisting it as a year that was much better for tonnage volumes than 2015. Page 42. global economy growth prospects remain muted, due to the multitude of geopolitical challenges in both advanced and emerging markets.“This leads to tighter financial conditions linked to market volatility, slowing production activity and low commodity prices,”he states.

Oussama Abba, GCC General Manager, Almajdouie, feels due to globalisation e-commerce is rapidly expanding in a multitude of commodities. This is leading companies to rethink their supply chain models and consider global sourcing opportunities, enabled by e-commerce. Traditional B2C and B2B distribution models and sales processes/channels are now witnessing a merge.

The share of B2B companies that have opted to use the ‘direct-to-customer’ mode has virtually equalled the ‘shipto-distribution centre’ traditional mode. There is now talk of the B2B2C. This model change is leading towards an ongoing shift from bulk replenishment to smaller consignments (parcels), generating more demand for air express and air cargo services, and last mile delivery to end customers. Page 36.

These were the three main highlights of this issue, there’s a lot more inside of industry interest. Let us know your thoughts and see you next month.

Munawar Shariff Managing Editor munawar@signaturemediame.com

MARCH 2017 3

March 2017 Issue 35

ENHANCING THE BUSINESS OF LOGISTICS

26 06 News 16 Country report - Kuwait Expansion of Kuwait’s transport and logistics sector An indepth look at the country’s transport and logistics sector

26 Cover Supply chain risk - expect the best, plan for the worst, and prepare to be surprised It’s not IF your supply chain will be disrupted, it’s WHEN

36 Adapting to the environment Oussama Abba, GCC General Manager, Almajdouie, talks about their Kuwaiti operations

4 MARCH 2017

42

42 A clear focus Hiran Perera, Senior Vice President, Cargo Planning & Freighters, Emirates, speaks about their 2017 agenda

48 Guest Column Collaboration = success in the cool chain Marc Levin, Senior Vice President of Business Development, Americold Logistics, talks about how the cold chain’s future depends on collaboration

52 Harnessing solar and wind energy New solar and wind capacity will move Kuwait closer to its 2030 renewable energy generation goals

56

56 Celebrating progress Genavco marks 50th anniversary with new Mussafah, Abu Dhabi, facility

58 Dubai Trade’s excellence awards Dubai Trade awards winners at the 9th E-Services Excellence Awards

Dutco finalises acquisition of Balfour Beatty LLC minority shares Dutco has finalised the acquisition of the minority shares held by Balfour Beatty PLC within its joint companies Dutco Balfour Beatty LLC, Dutco Construction Company LLC, and BK Gulf LLC. Dutco Group Chief Executive Tariq Baker said,“A review of the strategic objectives of the two shareholders has indicated the time was right for a new chapter to be written for the joint businesses. This allows Balfour Beatty to focus on their target areas of operation, which no longer includes the Middle East. There will be no fundamental change to our existing operations, other than our continuous drive to become more efficient and productive in the execution of our projects. Our companies will continue to focus fully on serving our existing customers, and we will also look to develop new relationships across our wide construction offering.”

SITA invests in dynamic mapping start-up LocusLabs SITA has completed a strategic investment in dynamic mapping company LocusLabs, helping drive innovation for the benefit of the entire industry, while supporting SITA’s own investment in innovation. The investment also supports SITA’s continued focus on developing and delivering common-use geo-location technology, which allows passengers to identify services using location. This solution, which merges mapping with a wide range of location data, allows airports and airlines to use the same dynamic maps and data, but tailor them to their own requirements.

This additional funding will help LocusLabs further enhance its mapping capabilities, which is already in use at several

major international airports as well as by airlines. LocusLabs provides the world’s most accurate and up-to-date indoor maps for airports, and is used by SITA to power its mapping functionality for its Day of Travel airport app, already in use by international airports globally, including Miami International Airport and Nice Côte d’Azur Airport. These graphically enhanced, vector-based maps, have built-in navigation functionality to guide travellers to their boarding gate or other airport locations.

Rich content, including images, attributes, keywords, and other metadata enable easy discovery of points of interest, retail stores and other amenities at the airport.

Hamburg and Rotterdam volumes grow slowly, and Dubai plays catch up Numbers released over the past month revealed that both Rotterdam and Hamburg’s container terminals experienced volume growth in the low single digits, with the German port seeing container volume measured in TEUs rise by one per cent to 8.9 million TEUs. Growth here was powered by the huge trade with China, which edged up by 1.6 per cent and the rest of Asia by 1.3 per cent. Slightly surprisingly, Russian trade also grew at 4.5 per cent, whilst business with the US and UK expanded in double digits.

Some aspects of Hamburg’s Baltic trade suffered from competition, but generally the demand picture appeared reasonable.

In contrast things in the UAE were a little slower. DP World’s global business did reasonably well with top-line volumes up 3.2 per cent even if like-for-like operations saw a fall of 2.2 per cent. Asia Pacific and the Americas both grew by over four per cent, however DP World’s Europe, Middle East, and Africa ports saw an expansion of just 1.4 per cent, and even then, this was in great part due to the success of ports such as London Gateway. The key UAE complex saw throughput on a likefor-like basis fall by 5.3 per cent to 14.7 million TEUs. This performance however does represent an improvement to the situation in the first half of the year and to a degree reflects a reduction in transhipment cargoes.

Source: Transport Intelligence Author: Thomas Cullen

6 MARCH 2017

Siemens to supply rotating equipment for major petrochemical project in Oman Siemens and its Dresser-Rand business will supply two gas turbine-driven compressor trains and two gas turbine generator packages sets for the Liwa Plastics Industrial Complex, a major petrochemical project in Oman. The natural gas extraction plant in Fahud, situated approximately 300 kilometres southwest of the capital of Muscat, is part of the industrial complex. It extracts valuable liquefied natural gases. The order was placed by GS Engineering and Construction Corp, a Korean construction firm, for the state-run oil refineries and petrochemical provider, Orpic, who will operate the plant and the industrial complex.

The natural gas liquids (NGL) extraction plant is expected to go into operation in 2019.

The scope of supply includes four Siemens SGT-700 industrial gas turbines. The same type of gas turbines will be used in the plant for both generating electricity and lean gas compression. The SGT-700 gas turbine is particularly suitable for use in such plants, thanks to its fuel flexibility, compact dimensions and high efficiency.

Siemens has been a key contributor to Oman’s infrastructure since 1972. The company’s technology has enabled Oman to conserve its valuable natural resources, thanks to energy-efficient gas turbines used in power generation.

Siemens to equip Saudi Arabia’s Fadhili gas plant project with locally produced gas turbines

Siemens will supply five F-class gas turbines to the Fadhili Combined Heat and Power (CHP) plant in Saudi Arabia. With a generating capacity of 1,200 megawatts, the plant will supply electricity and process steam to a new natural gas extraction plant in Fadhili, which is located around 120

kilometres northwest of Dammam. The turbines will be produced at the Siemens Dammam Energy Hub (SDEH), the Middle East’s largest gas turbine manufacturing facility. In May 2016, the SDEH launched its first gas turbine that was built by young Saudi nationals.

The project is led by Doosan Heavy Industries and Construction, the Engineering, Procurement and Construction (EPC) partner, with whom Siemens inked the supply agreement. Furthermore, Siemens and Kahrabel FZE, an affiliate of the ENGIE Group, signed the 16-year long-term service contract for the gas turbines. The Fadhili CHP plant is jointly owned by Saudi Electricity Company (30 per cent), Saudi Aramco Power Holding Company (30 per cent) and the developer (40 per cent), which is an ENGIE affiliate.

In addition to the turbines, Siemens’ scope of supply includes five generators and a control system, all of which will be commissioned on site. The Fadhili CHP project is scheduled for completion by the end of 2019, and will play a key role in expanding gas production to meet the rapidly growing domestic energy demand.

MARCH 2017 7

DP World extends global framework agreement with Bravosolution / Tejari Following a highly successful partnership, DP World has signed a five-year extended agreement with leading strategic procurement company BravoSolution / Tejari. The deal was made following the existing five-year relationship, where Tejari supported DP World’s supplier relationship, tendering and contract management processes into a seamless, integrated online platform that can be accessed both locally and globally.

As a leading global trade enabler DP World recognised that innovative procurement technologies such as strategic

procurement would allow it to stay at the forefront of the industry.

It required a more streamlined and connected solution that reduces procurement time and costs across continents whilst offering transparency across the entire procurement process.

The new agreement outlines the expansion and adoption of the BravoAdvantage solution beyond the initial use across DP World globally. Additionally, the solution will be leveraged for strategic decision making and management information allowing visibility, control and governance worldwide.

DP World chairman and Elon Musk discuss Tesla Technology DP World Group Chairman and CEO Sultan Ahmed Bin Sulayem and Tesla and SpaceX CEO Elon Musk have discussed potential uses of Tesla technology for DP World’s global operations in a meeting at the World Government Summit in Dubai. Topics revolved around the use of Tesla battery solutions for renewable energy storage in the global trade enabler’s ports and terminals in the fast-growing markets of Africa, India, and Latin America.

Bin Sulayem is now exploring possible implementations

of Tesla’s state-of-the-art technology to further enhance DP World’s impact on global trade. DP World’s Rotterdam World Gateway is already employing driverless cars at its terminal, while several other DP World operations are in the process of implementing the new technology. Tesla’s decision to set up its regional headquarters in Dubai complements DP World’s vision to adopt innovative and sustainable transport solutions across its portfolio.

DP World Chairman and CEO Sultan Ahmed Bin Sulayem and Tesla and SpaceX CEO Elon Musk during their meeting on the sidelines of the World Government Summit in Dubai.

8 MARCH 2017

DP World Group Chairman and CEO Sultan Ahmed Bin Sulayem with Senegalese President Macky Sall on a panel discussion at the World Government Summit in Dubai.

DP World chairman highlights value of trade at World Government Summit How long-term partnerships between governments and the private sector can help Senegal and other African nations develop their economies was the focus of a discussion between the global trade enabler’s Group Chairman and CEO Sultan Ahmed Bin Sulayem and Senegalese President Macky Sall, on the opening day of the World Government Summit.

DP World published a trade impact report with EY on the role

of its Dakar Container Terminal at the event, noting that 31,000 Senegalese nationals have been supported by the company’s activities, with a 63 per cent increase in Dakar’s imports and exports between 2010 and 2015 as a result of infrastructure investments. DP World’s report explores the benefits of DP World Dakar for the national economy, while backing the Emerging Senegal programme of the government.

DP World reports 3.2 per cent volume growth in 2016, and six per cent volume growth in fourth quarter 2016 DP World Limited handled 63.7 million TEU (twenty-foot equivalent units) across its global portfolio of container terminals in the full year of 2016, with gross container volumes growing by 3.2 per cent year-on-year on a reported basis, and 2.2 per cent on a like-for-like basis, which compares favourably to the industry estimated growth of 1.3 per cent for 2016.

In the fourth quarter, gross reported volumes grew by six per cent year-on-year, driven by strong growth in

Asia Pacific and Europe. The UAE handled 3.7 million TEU in 4Q2016 down marginally by 0.7 per cent year-on-year. The Americas and Australia region delivered a broadly stable volume performance during this period.

At a consolidated level, the terminals handled 29.2 million TEU during 2016, a 0.4 per cent improvement in performance on a reported basis, and down 1.6 per cent year-on-year on a like-forlike basis.

China Yuchai supplies bus engines to Saudi Arabia China Yuchai International Limited, through its main operating subsidiary, Guangxi Yuchai Machinery Company Limited (GYMCL), announced that 321 units of Xiamen Kinglong buses have been purchased by the Saudi Arabia Public Transport Company (SAPTCO) for use in Mecca. These municipal buses are all powered by GYMCL’s YC6MK380 and YC6L280 heavy-duty engines.

Prior to this order, in 2013 and 2015, a total of approximately 1,800 engines supplied by GYMCL were assembled in Xiamen Kinglong’s buses, which were exported to Saudi Arabia.

GYMCL’s engines are used in over 90 per cent of buses in Saudi Arabia. Mecca, as the world’s holiest site in Islam, receives millions of people on pilgrimage every year creating a daunting challenge for the city’s transportation system.

Safe and reliable mass transit is hence a high priority for the city authorities. The model YC6MK380 is a turbocharged, six-cylinder diesel engine with a 10.34-litre displacement. The model YC6L280 is a compact, lightweight turbocharged, sixcylinder diesel engine with an 8.42-litre displacement.

Kuwait Air Force to enhance fleet maintenance management capabilities Tapestry Solutions, Inc, a Boeing Company, and prime contractor Kay and Associates of Buffalo Grove, Ill, will modernise maintenance processes for the Kuwait Air Force (KAF), under a contract modification from the Naval Air Systems Command (NAVAIR). The efforts include automating and standardising the KAF’s maintenance management infrastructure with GOLDesp Maintenance, Repair and Overhaul (MRO) software. GOLDesp was successfully implemented for the KAF F/A-18 fighter attack aircraft under the original contract awarded from NAVAIR in June 2011.

GOLDesp provides automated workflow tools to manage MRO for military and commercial customers. It enables maintenance crews to accurately track and manage inventory through the supply chain, improving total asset visibility of movements and repairs. With GOLDesp, users can quickly schedule and record maintenance actions; evaluate maintainability and reliability; and control and update configurations – right down to a component’s part and serial number. It manages each step of the repair process to reduce repair cycle times and costs.

Growth opportunities in the gulf triggered by innovations and disruptions in building energy efficiency The Gulf Cooperation Council (GCC) is at an interesting juncture as the economic and social initiatives driving the transition towards energy efficiency have never been stronger. High economic growth and diversification from oil and gas have significantly increased demand for electricity and energy. Furthermore, the region’s policies on fuel and electricity subsidies have led to wastefulness, and to inefficient buildings and industrial infrastructure, making these countries some of the most energy-intensive globally. The current economic growth path is unsustainable; hence, there is a push to develop both renewable energy and energy efficient policies to meet the increasing energy demand, to diversify the electricity mix and to reduce dependence on fossil fuels.

In a recent White Paper titled ‘Innovations and Disruptions in Building Energy Efficiency in the GCC’, Frost & Sullivan highlights a number of technologies and services that will become more relevant as a result of greater adoption of

renewable energies and energy efficient policies in the GCC as compared to other regions.

Potential products that are likely to gain traction in the GCC energy efficiency industry are LED Lighting, Building Management Systems, District Cooling, Building Insulation, Variable Frequency Drives, Energy Recovery Devices, Trigeneration Plant Systems, Solar Thermal Air Conditioning, Non-Electric Chillers, Low-Emissivity Glass, and Building Integrated Photovoltaics. Besides the aforementioned products, the services market such as Energy Performance Contracting is also expected to gain significant opportunities in the GCC. If adopted, the energy efficiency policies will provide a financial boost to governments as there is an opportunity cost associated with reducing wasteful consumption of oil/electricity.

The large potential of this market can be gauged by the burgeoning real estate development activity, and the need to cut energy consumption across commercial, residential, and government infrastructural segments.

MARCH 2017 9

flynas celebrates the 10-year anniversary of its first flight with a single price of 100 Riyal for all domestic flights flynas, Saudi Arabia’s national airline, has announced the 10-year anniversary of its first flight in Saudi Arabia, with celebrations staged at the King Khaled International Airport, Riyadh.

Passengers at the event took part in folk dances, and received free travel vouchers, distributed amongst passengers’ bags, who were pleasantly surprised upon finding them.

During the celebrations, which marked 10 years since the start of operations, several promotional offers were announced - the first of which being the blanket sale of all domestic flights at 100 Riyal for a limited 48-hour period via all flynas retail outlets, either via their website or call centre on 920001234, for all travel dates between March 1st and May 31st, 2017.

Bahri and Bunge to form ocean freight joint venture Bahri Dry Bulk Company (BDB), a subsidiary of the Bahri Group, the national shipping arm of the Kingdom of Saudi Arabia, and Koninklijke Bunge BV (Bunge), a wholly-owned subsidiary of Bunge Limited, a global agribusiness and food company, announced that they have signed definitive agreements forming a joint venture to establish a leading ocean freight supplier for dry bulk import and export flows in and out of the Middle East region.

The JV, which will operate under the name Bunge Bahri Dry Bulk Ltd, will provide exclusive freight transportation services to regional and other international customers. The company plans to ship over five million metric tons in year one, ramping up volume over time to double-digit figures. BDB and Bunge will own 60/40 per cent of the JV respectively, and it will be registered and based in Dubai. Financial terms of the agreements were not disclosed.

10 MARCH 2017

BAHRI ADDS 37TH VLCC ‘AMJAD’ TO ITS MULTIPURPOSE FLEET OF 84 VESSELS Staying on course towards becoming the world’s largest owner and operator of VLCCs Bahri, announced that ‘AMJAD’, a 300,000 DWT Very Large Crude Carrier (VLCC) built by Hyundai Heavy Industries (HHI) in South Korea, has become the latest addition to its growing fleet of 84 vessels of various types.

Bahri took delivery of the VLCC, its 37th, built to the latest environmental and fuel-efficient technical specifications, in a ceremony held at HHI’s Mokpo shipyard in South Jeolla Province, South Korea. Bahri CEO, Ibrahim Al-Omar, Hyundai Heavy Industries’ President and CEO, M. K.Yoon and President and COO, Sam H. Ka, Saudi Arabia’s Ambassador to South Korea, H.E. Riyad Almubaraky, Bahri Oil President, Naser Al-Abdulkareem, and other senior officials from both organisations attended the special two-day celebrations.

Flytxt showcases its workbench for carrier-scale analytics at Mobile World Congress Flytxt showcased key product capabilities like ready-to-deploy packaged machine learning models and Enterprise Analytics Workbench for data scientists to prototype and deploy analytical models with live data at Mobile World Congress last month.

Flytxt’s products support smarter and faster decision making through the use of machine learning models, smart visualisations, and interactive data analysis.

Intuitive UI-driven business workflows and features like plug-andplay data ingestion and secured APIs allow seamless integration into the enterprise infrastructure and processes with ease.

Gulf Air signs technology agreement with Sabre Sabre Corporation has signed a new agreement with the Kingdom of Bahrain’s national carrier, Gulf Air, to provide an expanded portfolio of core passenger services technology covering reservations, departure controls and all other aspects that touch passengers directly.

For the past two decades, Gulf Air has been using SabreSonic core reservations and departure control systems to conduct the most critical services ranging from sales of tickets to checking in passengers on flights.

Under this new agreement, Sabre will continue providing the latest developments and trends through its technology solutions to Gulf Air, giving the airline access to an expanded portfolio of progressive technologies including passenger reaccommodation, mobile concierge services, ancillary inventory, and real time revenue integrity software.

CEFC China takes shares from the biggest oil gas field in UAE China Energy Company Limited (CEFC China), which ranks 34th among the Fortune Global 500’s energy industry list, announced that it has gained 40 years of equities in the biggest land oil gas field in Abu Dhabi, UEA. On February 20th, 2017, CEFC signed an agreement with Abu Dhabi government and Abu Dhabi National Oil Company (ADNOC) to obtain four per cent of equities of Abu Dhabi’s land leasing contract area. The contract term is 40 years, and this is the first time for a Chinese company to gain equities in Abu Dhabi’s land oil gas area.

According to the contract, CEFC China will

obtain four per cent of the equities, which will yield an annual oil share of 3.2 million tonnes, based on current output, and will be expected to reach over four million tonnes for peak period. In addition, CEFC China has reached an agreement with ADNOC for long term supply of 10 million tonnes of crude oil each year, thus to ensure China a stable supply of over 13.2 million tonnes of high quality crude oil each year.

The contracted oil field is currently the biggest developed field in Abu Dhabi, accounting for half of the country’s oil and gas reserve and production.

A year of sustained growth for Etihad Airways in 2016 Etihad Airways delivered another year of sustained growth in 2016, helped by new aircraft, additional frequencies and the introduction of further world-class products. The airline carried 18.5 million guests during the year, up six per cent on 2015.

The airline was also part of the evolution of Etihad Aviation Group, a wider aviation and tourism business that now also includes Etihad Airways Engineering, Airline Equity Partners, Etihad Airport Services, and Hala Group.

The formation of Etihad Aviation Group was announced in May 2016.

During the year, Etihad Airways operated more than 109,000 scheduled passenger and cargo

flights spanning around 446 million kilometres and 112 destinations. Capacity, measured in available seat kilometres (ASK), grew by nine per cent and passenger traffic, measured by revenue passenger kilometres (RPK), rose by eight per cent. The average load factor held steady at 79 per cent.

2016 was a year of impressive accolades for Etihad Airways – the pinnacle being the Skytrax Certified five-Star Airline Rating – the most sought-after quality status in the airline industry.

Etihad was also named the ‘World’s Leading Airline’ at the World Travel Awards for the eighth consecutive year, and collected the coveted Crystal Cabin Award for the Boeing 787 First Class cabin design.

FEBRUARY 2017 11

Cisco accelerates digital network transformation According to a newly released IDC study, organisations around the world are expected to triple the adoption of modern, automated networks over the next two years. To accelerate the journey to these digital-ready networks, Cisco is introducing new technologies that allow customers to virtualise and secure their networks.

Network virtualization and integrated security are foundational elements of Cisco DNA. Cisco is introducing a new hardware platform and virtual network services to extend virtualisation to branch locations, as well as a new solution that allows customers to virtualise their network perimeter and extend it to colocation centres.

Cisco is also the first in the industry to deliver softwaredefined segmentation across the entire network—from the network to the endpoint to the cloud – with complete application visibility.

12 MARCH 2017

Swisslog WDS reports record results for 2016 and major Q4 orders

Major orders from around the world, a significant award, and forward-looking innovations: Swisslog Warehouse & Distribution Solutions (WDS) maintained its successful course in the fourth quarter. Contract awards from Mai Dubai, Stemilt, and one major Asian customer alone generated new orders in excess of Euro 76 million in the last three months of the year.

Whether in the automobile or pharmaceutical industry, the food and beverage sector, e-commerce or retail: Wherever customer requirements and specialised expertise in process design are critical, Swisslog made a lasting impact in 2016 with its competence in logistics automation solutions. Swisslog posted several noteworthy orders, particularly in the fourth quarter.

GPCA adds North America, Australia and Sri Lanka to global ‘Waste Free Environment’ Campaign The Gulf Petrochemicals and Chemicals Association’s (GPCA) Waste Free Environment (WFE) campaign has expanded into three new territories, adding the US, Australia, and Sri Lanka to its global reach. Growing participation in the WFE initiative – now in its fifth year – encompasses 17 companies and thousands of volunteers across 14 nations. The campaign’s expansion has been made possible through partnerships with Dow Chemical and Muntajat in North America and Australia respectively, while GPCA’s founding members Sabic and Borouge will be hosting events in China, The Netherlands and Singapore for the third year running.

In the UAE, to mark the anniversary and growth of the initiative, the GPCA will host a carnival in Dubai, supported by the Ministry of Environment and Climate Change and the Dubai Municipality for the fourth consecutive year. The carnival event will include an educational playground of circuit-style stations offering volunteers an action-packed morning filled with competitions, games, quizzes and a magic show, in addition to cleanup activities.

Emirates SkyCargo honoured again at Air Cargo Africa Emirates SkyCargo was named the ‘Highly Acclaimed Global Cargo Airline of the Year’ at the Air Cargo Africa awards held in Johannesburg last month. With this honour, Emirates SkyCargo continues its decade of domination having won awards at Air Cargo Africa four times in a row since 2011.

The award was accepted by Khalid Al Hinai, Emirates Vice President, Cargo Commercial Africa at the ceremony held at The Barnyard Theatre, and attended by senior cargo executives from all over the continent.

Air Cargo Africa is an international biennial

Khalid Al Hinai, Emirates Vice President, Cargo Commercial Africa (second from right) receiving the Highly Acclaimed Global Cargo Airline of the Year Award at Air Cargo Africa 2017.

air cargo event organised by STAT Times, a leading international multimodal transport publication, and serves as an industry platform to showcase one of the key sectors of the economy in the African region. The awards in each category were decided after a two stage online voting process by readers of The STAT Times. The award recognises Emirates SkyCargo’s constant efforts to create new benchmarks in the air freight industry by offering customers excellence in service delivery through modern infrastructure and innovative products.

Additional fees for employers non-compliant with Bahranisation Effective 1st May 2017, employers who do not comply with Bahranization rates will be subject to additional fees when renewing work permits for foreign nationals, according to the Labour Market Regulatory Authority’s (LMRA) announcement. Previously, the additional fees were applicable to new work permit applications only, as announced in the Fragomen Middle East News Flash 21/2016.

Employers can determine the number of Bahraini workers required to be employed to avoid additional fees for new or renewed work permits, by accessing the LMRA’s Expat Management System. Additional governmental fees will depend on the validity of the work permit, and will be imposed in addition to standard processing and insurance fees.

Employers who do not comply with the relevant Bahranisation rate will now be subject to additional governmental fees for issuance of new and renewed work permits.

OMAN

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MARCH 2017 13

EMEA service providers urged to bolster defences against evolving IoT threats Application security experts F5 Networks encouraged EMEA service providers to step up their defences against large-scale Internet of Things (IoT) hijacks. The call to arms comes in the wake of the recent Mirai botnet, which infected hundreds of thousands of IoT devices, including security cameras, to launch an unprecedented 620+ Gbps DDoS attack.

Fuelled in part by the IoT devices’ magnetism for cyber-criminals, F5’s global Security Operations Centres (SOC) – which provide

24/7 DDoS, anti-fraud and Web Application Firewall (WAF) research and mitigation services – experienced a 100 per cent increase in DDoS customers compared to the same period last year. The SOC handled and mitigated a total of 8,536 DDoS instances in 2016.

The importance of IoT-ready security solutions is set to take centre stage at this year’s MWC as the proliferation, power and influence of connected devices continues grow exponentially.

RSA Logistics awarded Gulf Customer Experience Award RSA Logistics received the Gulf Customer Experience Award for delivering outstanding customer experience through innovation and business impact at the Gulf Customer, Digital and Employee Experience Awards.

His Excellency Ali Ibrahim, Deputy Director General at the Department of Economic Development in Dubai, presented the award to RSA Logistics in January.

RSA Logistics received the award for creating a high-value product through its On-site logistic services. Through this service the 3PL specialists deliver inventory visibility

14 MARCH 2017

and accuracy at the sites of manufacturing and trading customers who own their own facilities. The objective is to optimise the customers’ supply chains to achieve higher productivity and growth. This supports the UAE government’s vision for the manufacturing sector to raise its overall GDP contribution from 11 per cent to 25 per cent by 2025 – a move to balance out the market volatility caused by the oil and gas sector. RSA’s winning strategy for delivering effective on-site services is applying their expertise in people, process and technology across the sites.

Milaha reports net profit of QAR 711 Million for 2016 Qatar Navigation (Milaha) QPSC announced its financial results for 2016, a net profit of QAR 711 million for 2016 on revenues of QAR 2.55 billion.

The Board of Directors decided to recommend to the General Assembly to distribute a 35 per cent cash dividend, equivalent to QAR 3.5 (AED 3.53 / US$ 0.96) HE Sheikh Ali bin per share. The Jassim Al Thani increase in Milaha Maritime & Logistics’ net profit was mainly as a result of lower revenue from their Port Services unit, which was affected by a drop in storage and general/bulk cargo revenue, and rate pressure in their Container Shipping unit, which still managed to grow its market share and volumes.

“2016 was a profitable year for Milaha despite the challenging business environment. Our strong balance sheet and formidable asset portfolio will allow us to continue executing our long-term growth strategy and expanding our presence in Qatar and beyond,” said HE Sheikh Ali bin Jassim Al Thani, Chairman of Milaha’s Board of Directors.

Food and Beverage sector in Jafza grows by more than 22 per cent Jebel Ali Free Zone (Jafza) has posted a 22.5 per cent growth in foreign companies from the Food and Beverage Sector (F&B) - rising from 480 companies in 2015 to 588 last year. Jafza participated at the Gulfood Exhibition this year, and met some of the leading companies from the F&B sector, who are planning to locate to the region.

Sultan Ahmed bin Sulayem, Group Sultan Bin Sulayem Chairman and CEO of DP World and Chairman of Ports, Customs and Free Zone Corporation underlined the increasing role of the food and beverage industry in the UAE in driving economic growth and in addressing the food requirements of regional markets. A recent Business Monitor International (BMI) research report expects food sales in the Middle East and North Africa to increase by 6.3 per cent on an annual basis between 2015 and 2020. The food and beverage industry will see a 7.1 per cent growth on an annual basis until 2020, due to several factors, such as the strong investment in the retail sector in the next few years, and the rise in the number of tourists and expatriate population - up to 10.4 million people by 2025.

Jafza Head office

Dubai Customs showcases its innovations at Cargo and Personnel Screening Conference The Cargo and Personnel Screening Conference concluded in Dubai with recommendations from participants to give more focus on better cooperation between customs administrations, and more technology to be involved in the screening process. The event ran for two days at the Dusit Thani hotel in Dubai, and was organised by International Quality and Productivity Centre (IQPC), in strategic partnership with Dubai Customs. The conference highlighted the latest innovations in screening and detection technology for the prevention of cross-border crimes in the GCC and beyond.

Experts from law enforcement organisations and the private sector took part in the event highlighted the

importance of electronic linkage between the GCC customs administrations, being members of a federal customs union. They also advised other customs administrations to benefit from Dubai Customs’ rich experience, especially in the effective use of the risk engine which helps in analysing data and identifying risks. Participants called for using the latest technologies in screening and inspection, plus the development of 3D and x-ray imaging to help enhance safety and protect societies from illegitimate and hazardous shipments.

A brainstorming session in the conference saw Dubai Customs come up with a number of innovative ways in preparation for the future. Transparent containers, satellite inspection, robots, smart runways, drones and 3D imaging are some of the ideas presented by Dubai Customs.

Qatar Airways Cargo voted the Global Cargo Airline of the Year Qatar Airways Cargo received the Global Cargo Airline of the Year award at a grand gala held at The Barnyard Theatre, Johannesburg, as part of Africa’s biennial air freight industry trade exhibition and conference, Air Cargo Africa, which took place last month.

The award is a significant recognition of Qatar Airways Cargo’s success in the air freight industry.

The cargo carrier was nominated and voted the Global Cargo Airline of the Year award by STAT Times readers via online voting prior to the awards announcement. Qatar Airways Cargo made the cut with the highest reader votes among the top five nominees in this award category.

Nicholas Danton, Regional Cargo Manager Africa (left) received the award and certificate from Glyn Hughes, Global Head of Cargo, IATA.

MARCH 2017 15

COUNTRY REPORT - BAHRAIN

Bahrain Fort in Kingdom of Bahrain, Manama city

16 FEBUARY 2017

COUNTRY REPORT - KUWAIT

Expansion of

Kuwait’ s transport and logistics sector

Located at the northern section of the Gulf, Kuwait lies on the historical trade routes that have for millennia linked Mesopotamia, Arabia and Persia to the Gulf and Indian Ocean trade networks. The country already boasts a quite sophisticated infrastructure, but as part of diversification plans set out in Kuwait Vision 2035, stakeholders have laid out plans to transform the country into a regional hub and global player in transport and logistics. This Oxford Business Group report takes an indepth look at the country’ transport and logistics sector Sheikh Jaber Al Ahmad Cultural Centre, Kuwait.

MARCH 2017 17

COUNTRY REPORT - KUWAIT

D

espite a reduction in oil export revenues, the government has been vocal about its commitment to move ahead with capital expenditures, including an airport terminal, a port facility, a series of roads and highways upgrades, an urban metro system and Kuwait’s segment of the region-wide GCC railway.

Aviation Kuwait’s aviation sector is in an earlier stage of development than those of its GCC neighbours. Carriers like Emirates, Qatar Airways and Etihad have transformed international air travel, using their location at the intersection of Africa, Asia and Europe to capture a larger slice of growing global aviation demand supported by a rapid growth in their infrastructure. In 2015 Middle Eastern carriers saw passenger numbers grow by 10.5 per cent, the fastest rate of any region in the world, according to the Geneva-based International Air Transport Association.

While other Gulf airways built themselves into global players, Kuwait Airways has taken some time to recover from the disruptions caused by the 1990-91 Gulf War. To speed up the airline’s development, privatisation plans were put in place in 2008 but were stalled due to opposition in the parliament.

Recent changes, such as the appointment of a new CEO, a fleet renewal plan and its new status as an independent state-owned entity, however, seem to already be bearing fruit.

Private players Owned by the Kuwait-based Boodai Group, Jazeera Airways entered the aviation market in 2004 as the country’s first private carrier. It found its niche in low-cost flights to popular regional destinations, including Dubai, Beirut and Bahrain. In 2008 the airline went public, listing shares on the Kuwait Stock Exchange.

In recent years, thanks to its “no fuel hedging” policy, Jazeera has been able to reap the benefits of cheaper jet fuel, cutting its variable costs – oil prices have fallen from KD0.84 (US$2.80) to KD0.29 (US$0.96) per gallon between February 2014 and February 2016, according to the US Energy Information Administration.

Jazeera has also revamped its development strategy. In the fourth quarter of 2014 it sold

18 MARCH 2017

COUNTRY REPORT - KUWAIT Souq Sharq Marina, Kuwait City

The airport is currently operating at 4m passengers over capacity with 10 per cent y-o-y growth expected. The proposed new airport complex could accommodate 25m passengers with options to upgrade

MARCH 2017 19

COUNTRY REPORT - KUWAIT

airport complex could accommodate 25m its aircraft leasing business, Sahaab, and passengers with options to upgrade,”Fawaz in early 2015 announced it would exit the Al Farah, president of DGCA, told OBG. In leasing business altogether to focus on its November 2014 the government announced core operations, commercial airline services. that a consortium made up of Turkey-based Funds generated from selling its fleet of Limak İnşaat and Kuwait-based Kharafi 15 Airbus 320s helped the company wipe National Group had offered the lowest KD116m (US$383.7m) in debt from its books. bid, KD1.4bn (US$4.6bn), to build the new The company’s total liabilities and ownership terminal. In February 2015, however, the equity fell from KD227.5m (US$752.5m) ministry’s technical committee recommended to KD49.5m (US$163.7m), according to its that the government reject all bids, Abdulaziz annual report for 2015. Net profits for the Al Ibrahim, then-minister for electricity, year, meanwhile, rose to KD15.4m (US$51m), water and public works, told local media. compared to a book loss of KD2.8m (US$9.3m) in 2014. Operating profits also rose two per cent year-on-year (y-o-y) to KD13.6m Progress (US$45m), indicating that the firm’s core The government has since re-started the operations have remained in the black. tendering process. By August 2015 Limak The state of Kuwait has announced that Kuwait’s encouraged local airlines to central Tenders Committee be established and there were had approved a second Kuwait’s several start-up attempts that Limak-Kharafi proposal to maritime were not successful in the first build the new terminal for attempt. One passenger carrier KD1.3bn (US$4.3bn), slightly transport – Wataniya Airways – and a less than its 2014 bid (see services have freight operator (Loadair) had analysis). At the end of May begun to roll out operations, also seen steady 2016 the agreement was but faced significant challenges finalised, nearly nine months and substantial are were still attempting to after the agreement was fully launch as of mid-2016.

The new terminal growth in recent reported. will expand capacity to 25m passengers per year, and is Growing demand years. The expected to take six years to Both Jazeera and Kuwait country has six complete.

Airways operate in a steadily Plans by Kuwait’s low-cost growing market. Over the past ports, three for airline, Jazeera Airways, to decade, Kuwait International oil and three build a new terminal were Airport (KIA) has seen large put on hold in 2014, with increases in total scheduled for commercial limited development on aircraft movements, which traffic. Oil is by the project reported until more than doubled from 37,166 to 83,443 between 2004 and far the country’s mid-2016. In July 2016 the carrier was granted approval 2014, according to the latest largest export by the Kuwait Council of data available from Kuwait’s Ministers for the land needed Directorate General of Civil to build the terminal as well as parking lots Aviation (DGCA). Likewise, total scheduled at KIA. The investment is valued at KD14m passengers grew from 4.8m to 10.1m during (US$46m) with an expected construction the same period. The DGCA reports that phase of 15 months.

223,764 total aircraft and 10.7m passengers moved through the airport between June 2014 and June 2015. Given KIA’s capacity of Ports development 7m passengers per year, recent growth has Kuwait’s maritime transport services have necessitated the construction of a new terminal also seen steady and substantial growth in to handle rising passenger numbers. recent years. The country has six ports, three “The airport is currently operating at 4m for oil and three for commercial traffic. Oil passengers over capacity with 10 per cent is by far the country’s largest export, making y-o-y growth expected. The proposed new up 87.3 per cent of total exports by value in

20 MARCH 2017

the fourth quarter of 2015, according to the latest data available from the Kuwait Central Statistical Bureau (KCSB). In 2014 Mina Al Ahmadi cleared the most oil tankers with 994, followed by Mina Al Abdullah with 203 and Mina Al Shuaiba with 188, according to figures from the Ministry of Oil. These numbers have remained largely stable between 2012 and 2014.

As for commercial vessels, Doha Port, Shuaiba Port and Shuwaikh Port have all seen a rise in vessel numbers for the same period. Doha Port, with a depth of 4.3 metres, handles smaller boats like berth dhows, barges and coastal vessels that operate within the Gulf. The number of commercial vessels that arrived there nearly doubled from 4577 to 8924 between 2012 and 2014. Shuaiba Port, the next-largest by vessels served, is located 45 km south of Kuwait City. The port, which has facilities for barge, craft and container vessels, saw its vessels handled rise from 1367 to 1749 during the same period. It contains 20 commercial and container berths at depths ranging between four and 14 metres.

Located to the southwest of central Kuwait City, Shuwaikh Port is the country’s main commercial maritime gateway. It has 21 berths with depths of between 6.7 and 10 metres.

Vessels enter the port via an eight-km access channel dredged to a depth of 8.5 metres at minimum tide. The number of commercial vessels arriving to the port rose about 16 per cent to 2358 between 2012 and 2014, according to the Kuwait Ports Authority (KPA).

In September 2015 local media reported that the port faced congestion after two of its gantry cranes broke down, new Customs procedures took effect and a severe dust storm struck the area, causing the KPA temporarily to halt operations there. The ensuing congestion prompted some carriers, including France-based CMA CGM and Hong Kongbased Orient Overseas Container Line, to levy congestion charges from the end of August through to the beginning of September 2015.

New capacity While some of those circumstances were temporary, the authorities, aware of growing trade volumes, have long had plans to significantly expand the country’s overall port capacity. To that end, work on the US$16bn Mubarak Al Kabeer (MAK) Port is set to be instrumental. The development of MAK began

COUNTRY REPORT - KUWAIT

Aware of growing trade volumes, have long had plans to significantly expand the country’s overall port capacity. To that end, work on the US$16bn Mubarak Al Kabeer (MAK) Port is set to be instrumental in 2010, when the state awarded a tender to South Korea-based Hyundai Engineering and Construction for the port’s first phase. Plans called for four container berths, a small boat harbour, and road and rail connections to the mainland. Completion of this phase would provide an estimated annual capacity 1.8m 20-foot equivalent units.

In April 2011 the foundation stone for the project was laid, and construction began. The port’s location on Kuwait’s Boubyan Island, however, raised concerns in neighbouring Iraq that MAK’s construction might hinder access to the site of Iraq’s own planned port project. Still, after some delay, Kuwait has

22 MARCH 2017

forged ahead with the MAK project. Bids for two project management consultancy packages were collected for a June 2015 deadline, one for the construction of the container yard, back of port, and free trade zone, and another for handling equipment.

The estimated completion date is the third quarter of 2020, and the ministry plans to float tenders for engineering, procurement and construction contracts by late 2016.

Roads and highways upgrades As planned port upgrades roll out, so too are planned road upgrades. Kuwait has grown quickly since the 1990s, but with that

growth has come increasing road congestion.

The length of paved roads in the country grew by 29 per cent from 5749 km to 7416 km between 2004 and 2014. The number of private vehicles, meanwhile, has grown more than twice that rate, increasing 63 per cent from 900,000 to 1.5m during the same period, according to data from the Ministry of Interior. To keep up, the government has been investing in the country’s roads and highways.

The Jahra Road Development is specifically aimed at this issue, with plans to upgrade a broad swathe of the capital’s roads to elevated throughways. Started in 2010, the

COUNTRY REPORT - KUWAIT

Kuwait Cityscape

project includes 2.4 km of elevated link roads, 8 km of ramps, and 19.5 km of grade-level roads, in addition to a number of pedestrian bridges and signalled intersections. Upon completion the work is set to increase the number of lanes from two to 12 in each direction, along with creating separate sections above for throughway traffic and below for local traffic, which is set to improve traffic flows.

In February 2016 a four-km section of the project opened to drivers, accessible by ramps in both directions.“This opening marks a major milestone for the project, and in Kuwait’s strategic plans to reduce traffic

congestion in vital areas. In addition to easing the flow of traffic, the partial opening will result in road users having a greater ease in movement,”Ahmad Al Hassan, assistant secretary for road engineering affairs, told local daily Kuwait Times. The new section has created a way to bypass the busy UN Roundabout while work continues on the project’s remaining sections. In July 2015, meanwhile, the Ministry of Public Works appointed Canada-based consultancy WSP Global’s engineering subsidiary Parsons Brinckerhoff to lead the KabdSulaibiya highway upgrade. The agreement calls for a concept and designs to better

connect the southern suburb of Kabd to Sulaibiya at the western end of Kuwait City’s outskirts.

The Ministry of Public Works’s Jamal Abdul Nasser Street Development Project, meanwhile, is set to substantially improve connections to the western suburbs.

Construction plans are aiming to transform Jamal Abdul Nasser Street into a multi-level expressway that would connect the western region of Kuwait to the capital’s Jahra Gate area. US-based Louis Berger and Kuwaitbased Pace have taken the lead of the design, construction and supervision of the KD240m (US$793.8m) project.

MARCH 2017 23

Mass transit

to enter the sector. Between 2009 and 2013, private bus ridership increased from 37,960 to The increase in automobiles has had the 54,013, according to data published by KCSB. effect of increasing traffic accidents in The two private players are Citybus and KGL Kuwait. The number of annual collisions in Passenger Transport Services. Citybus is owned the country rose 15 per cent from 85,557 to

by City Group, a public transport operator 98,344, or about 270 per day between 2012 listed on the Kuwait Stock Exchange (KSE). and 2014, according to Ministry of Interior The parent company reported that its net data. Mass transit systems can alleviate both profits increased 20.7 per cent from KD5.9m of these issues. The 2013 introduction of (US$19.5m) to KD7.2m (US$23.8m) between bus rapid transit along commuter routes in 2014 and 2015 in its financial disclosures Mexico City, for instance, reduced trafficprovided to KSE in February 2016. The related injuries and fatalities by 40 per cent, company’s transport segment, which operates saved 12m commuter hours annually, and 300 public transit buses, contributes about twoeliminated more than 113,000 tonnes of thirds of its overall net profit, according to its carbon dioxide emissions per year, according 2014 annual report, the latest data available at to the US-based World Resources Institute. time of publication. KGL, meanwhile, is owned Mass transit is especially effective in densely

by Kuwait-based KGL Logistics Company, a populated cities. In Kuwait, 98 per cent of supply chain management company that has the population live in urban areas, tying it for operations in Kuwait and other Middle Eastern third by urbanisation, according to the World markets. The firm operates bus transit systems Bank. This high proportion of city-dwellers not only in Kuwait but also in Abu Dhabi and offers both major incentives and significant Sharjah in the neighbouring UAE. potential for transit developments.

Indeed, the authorities in Kuwait continue to underscore the importance of transit Metro and rail investments. Najib Al Munifi, advisor to the While buses provide a more flexible and transportation minister, told attendees of the quickly deployed transit solution, railway Kuwait Investment Forum in March 2016 that and metro services could also alleviate plans to construct a railway and urban metro congestion significantly. The country is system were vital to national development currently exploring the details of constructing goals. He highlighted potential investment an US$18.5bn urban metro system and opportunities in construction, maintenance, US$6.6bn railway section, as part of the and railway components. Kuwait’s tradition proposed GCC regional railway system, Talal of public transport is nearly as Al Shemmari, an official old as the country itself. on the Supreme Planning A year after gaining its Council, said at a November The country independence, the country’s 2015 conference in Kuwait. government formed the Kuwait Plans for a metro were first is currently Public Transport Company announced in 2006, and by exploring (KPTC). The organisation started 2008 the government had operations three years later in executed a feasibility study. the details of 1965, with 100 buses serving 10 In 2012 expressions of constructing an lines. Although KPTC expanded interest to form publicservices through its first decades, US$18.5bn urban private partnerships for it has faced decreasing ridership rolling stock supplies and metro system in recent years. Between 2010 railway construction was and 2014, annual ridership on announced by the erstwhile and US$6.6bn KPTC buses fell from 58,632 to Partnerships Technical railway section, Bureau. Contracts would 33,765, according to the KPTC. have begun a 69-station, as part of the 160-km metro network, but Multiple players the project continued to face Decreases are not necessarily proposed GCC a series of delays. In late the result of decreased demand, regional railway 2015, however, the newly however. In 2002 the government created Kuwait Authority decided to allow private players system 24 MARCH 2017

Water towers in Kuwait

for Partnership Projects (KAPP) announced that the project was back on track.“We are planning to start the procurement in the first quarter of 2016,”Fatima Al Kandari, a project manager at KAPP, told a Dubai conference in October 2015.

Significant progress has also been made on Kuwait’s portion of the GCC railway project.

In January 2015 the Municipal Council of Kuwait City endorsed plans for the Kuwaiti section, which will connect Al Abdali on the border with Iraq along a corridor to neighbouring Saudi Arabia, where it will then link up to the rest of the regional network.

As each country faces new fiscal realities arising from lower oil prices, all six have begun to rethink the US$15.4bn project’s timeline, which was originally slated for a 2018 completion.“We know that 2018 is not realistic,”Abdullah Belhaif Al Nuaimi, UAE public works minister and chairman of the country’s Federal Transport Authority said at

COUNTRY REPORT - KUWAIT

January 2016. The landmark deal represented the company’s first foray into the corporate debt markets in 12 years, Andrew McMichael, group treasurer at Agility, said during a roundtable talk in Dubai in February 2016.

While Agility expands its global presence, a relatively new local player, Posta Plus, has been stepping in to serve Kuwait’s domestic market, along with its operations in the UAE, Bahrain, China, the UK and the US. Founded in 2005, the firm is part of Post Services Company, owned by Kuwait-based Gazal Logistics. Posta Plus started off by offering services to meet locally based firms’ delivery needs. By 2011, it had partnered with key clients like the National Bank of Kuwait, Zain, Wataniya and VIVA. In the same year, Posta Plus opened its first US shipping location.“E-commerce is the mega-trend for business, and is expected to be valued at approximately US$20bn around the region.

This has a major impact on the logistics sector, which is driving our business model to change and adapt to market demand,” Hisham Albahar, country manager at Posta Plus, told OBG.

Outlook

a Dubai news conference in February 2016.

“The ministerial counterparts of all the Gulf countries met in Doha in late 2015 to rethink the timetable. We have asked all of them to come up with a realistic programme.”Rather, countries have focused on developing urban systems, such as the those in Doha and Riyadh, as well as national systems, like the ones seen in the UAE and Oman.

Logistics As the authorities gear up to invest in a new airport terminal, ports upgrades, roads, and railways, Kuwait’s well-developed logistics sector is set to benefit. Players in the country include well-known global firms like UPS, FedEx and DHL, as well as important Gulf firms that have been expanding in recent years. Agility, the Gulf’s largest logistics company, started as Kuwait’s state-owned Public Warehousing Company, which was formed in 1979.

The company was privatised in 1997, rebranded in 2004, and has expanded its operations since. As of February 2016, it had US$1bn in project commitments, mostly in emerging markets. The company reported a net profit of just under KD51m (US$168.7m) at year-end 2014, up from KD34m (US$112.5m) in 2012. As for 2015, Agility reported a net profit of KD39m (US$129m) for the first three quarters of the year, up from KD37.1m (US$122.7m) in the first three quarters of 2014, according to the latest financial data from the KSE. In recent years the company has been raising capital as a means to continue fuelling growth.

At the end of 2015 Agility concluded a financing agreement for a three-year credit facility worth US$235m with five banks – National Bank of Abu Dhabi, Banco Santander, Natixis London Branch, Standard Chartered and HSBC Middle East – according to a communication sent to its investors in

The national authorities have taken a number of important steps toward developing the country’s transport and logistics sectors.

Reforms of Kuwait Airways and the finalisation of the deal on the new airport terminal could significantly boost the aviation sector, while ports, roads, and rail investments could help improve connectivity within the country and to markets around the world. Although depressed energy prices have reduced state revenues, they have also helped to underscore infrastructure investment’s importance in the country’s broader economic diversification plans.

“The oil and gas situation had a hidden benefit. It has been an eye-opener,”Moustafa Osman, DHL’s Kuwait commercial director and MENA sales development manager, told OBG.“It is also sending a clear message to all logistics players: you need to diversify your portfolios.”With a number of largescale infrastructure investments rolling out across the country and demand for imports expected to remain strong, the sector seems well-positioned to meet its plans for significant expansion in the coming years.

-www.oxfordbusinessgroup.com

MARCH 2017 25

COVER

expect the best, plan for the worst, and prepare to be surprised It’s not IF your supply chain will be disrupted, it’s WHEN. Risk assessment and advanced planning will help minimise the impact on business, says Sandra Beckwith of www.inboundlogistics.com 26 MARCH 2017

COVER

I

n late August 2016, Gap Inc experienced the type of supply chain disruption that’s hard to predict or prevent - a massive fire in its 990,000-square-foot Fishkill, NY, distribution centre. The facility represents about 10 per cent of the retailer’s US warehouse capacity. In its September sales report, Gap noted that the suspected arson“negatively impacted Gap Inc’s September 2016 comparable sales by approximately three percentage points”.

One year earlier, Costco was sued by a California woman for selling shrimp raised with feed - fish - collected by slave labour in Thailand’s waters. She cited California’s

MARCH 2017 27

COVER

Transparency in Supply Chains Act of 2010, which is designed to fight slavery and human trafficking. It bars companies from making false claims about illegal conduct in their supply chains.

Costco had been alerted to the potential for slave labour one year earlier, and was investigating the situation, so the potential impact on its shrimp supply chain had already been triggered. But the negative impact on its reputational supply chain after the slave labour suit made national news? It has to be significant.

While fire is nearly always a risk at any storage facility, the possibility of slave labour involvement in a supply chain might seem remote to companies without global supply chains. Still, both show up in the supply chain disruption risk list in the Supply Chain Resiliency Report 2016, recently released by The Business Continuity Institute (BCI). They rank 14th and 21st, respectively.

The BCI list, compiled from surveys of 526 people in 64 countries and 15 industries, includes the following top 10 supply chain disruption risks: 1. Unplanned IT or telecommunications outage 2. Loss of talent/skills 3. Cyber-attack and data breach 4. Transport network disruption 5. Outsourcer failure 6. Adverse weather 7. Currency exchange rate volatility 8. New laws or regulations 9. Act of terrorism 10. Insolvency in the supply chain The report also details the economic impact of the disruptions. Of those surveyed, 70 per cent experienced at least one supply chain disruption, while one-third reported cumulative losses of at least US$ 1.2 million (AED 4.4 million) as a result. A single incident generated that loss level for nine per cent of respondents.

Getting leadership buy-in How prepared are companies for that level of disruption? Not as prepared as you’d think, considering what’s at stake. While nearly three-quarters report having business continuity arrangements in place for their supply chains, only about one-quarter say top management is committed to supply

28 MARCH 2017

chain resilience. That’s down from one-third in 2015.

That lack of leadership buy-in is a problem, says Nick Wildgoose, global supply chain product leader at Zurich Insurance Group, which provided financial support for the study.“If you haven’t got your C-suite on board with what you’re doing, then it’s very difficult for bottom-up initiatives to improve supply chain risk management,” he says, adding,“To make progress, you need resources. The only way to open up a sensible amount is to get senior management approval, and that’s one of the biggest challenges.”

Chicago consulting firm Crowe Horwath LLP is exploring the impact leadership risk has on supply chain issues. The firm takes clients through an exercise that explore risks by acknowledging that events in the supply chain are interrelated.“If you mitigate leadership risk, does that significantly impact lead time risk? Maybe the company needs to allocate resources to leadership risk,”says Mike Varney, a partner in the risk consulting practice.

Wildgoose recommends identifying what’s important in the supply chain - “critical nodes” - and studying the impact that node has on the most profitable product or service. What happens if there’s a failure with that node?“Calculate to the nearest US$ 10 million (AED 36726000), because the exposure is at that magnitude,”he says, adding,“The reaction we get from senior management when we do this is, ‘What do we have to do to fix this?’”

He also recommends presenting case studies from the company’s industry. There’s a third option, too.“The most painful

While fire is nearly always a risk at any storage facility, the possibility of slave labour involvement in a supply chain might seem remote to companies without global supply chains.

Supply chain disruption is common

Source: BCI Supply Chain Resilience Report

way to get support is to have a crisis that forces management to say, ‘We have to do something about this,’”Wildgoose advises.

The BCI report also reveals that two-thirds of companies don’t have full supply chain visibility, defined as firm-wide reporting of disruptions.“There’s clearly a gap in terms of awareness in managing their supply chain risks,”says Patrick Alcantara, a senior research associate at BCI and the study’s author.“When you know that 70 per cent of the companies will experience supply chain disruption in the next 12 months, one of the best ways to be prepared is to have full supply chain visibility. Yet, a similar percentage of organisations don’t. It’s like they’re flying blind,”he says.

Risk at all levels According to the report, most disruptions 41 per cent - occur with Tier one suppliers, but a growing proportion of incidents are occurring with Tier two and Tier three suppliers as well. Those disruptions increased by two points to 31 per cent in 2016. This reinforces the need to not only identify key suppliers, but to understand what’s happening with them at all levels.

“Companies are asking how they can become more integrated from end to end in the supply chain so that their logistics are more visible and collaborative,”says Yatish Desai, managing director and US lead on distribution and logistics at KPMG LLP. He notes that they’re sharing more information with third-party service providers and carriers, integrating them into business processes.“This is where the innovation is taking place,”he says.

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As wise as that approach is, it isn’t without risk, considering that hackers often break into a system through weaknesses in a supplier’s connected network. Just one example from many in the headlines: The Target attack in 2013 that affected 70 million customers happened because hackers could take advantage of - “exploit” - a weakness in an HVAC vendor’s network. Cyber-attacks and data breaches rank third on BCI’s list of risks, down from second the year before.

Protection from exploit attacks and other cyber risks is a priority at Yaskawa Motoman, an industrial robotics company, for exactly that reason.“When you work with the government and

30 MARCH 2017

auto manufacturers, security becomes a real focus,”says Jeff Magnuson, IT architect at the Dayton, Ohio-based manufacturer.

Motoman uses Morphisec’s Advanced Threat Protection solution to protect the company’s IT systems from cyber risk and exploit software. Its protection is“the tiniest piece of software ever written in cyber security,”says Omri Dotan, Morphisec’s chief business officer, based in Israel.

Once installed, it continuously changes

the system’s memory in real time, creating new memories. Exploit software can’t react quickly enough, so when it attacks an ‘old’ system memory, it’s trapped.

Confusing the hackers “We change the predictability function so we’re unpredictable, which confuses hackers,” says Dotan, explaining,“When we move the target around, we leave behind a little decoy that looks like the original thing to make sure the attacker gets lured in. As soon as he opens that ‘door,’ we know he’s a hacker because he shouldn’t be there.”

“We recently caught a few big ones,”says Magnuson.

COVER

“These exploits can pull information off the machine, and we’re held liable for that confidential information. If anything’s stolen from a customer or vendor, and people in the field find out about it, you may not be able to get the parts or supplies you need for your business anymore.”

Cyber risks and concerns

Respondents who say they worry a great deal or some about each cyber risk concerning their company, according to the 2016 Travelers Risk Index.

Weather watch Just as cyber threats make global headlines, so do natural disasters that include hurricanes, tornadoes, and earthquakes. In fact, half (51 per cent) of businesses surveyed for the 2016 Travelers Business Risk Index believe that severe, damaging weather events have become more frequent in the United States.

One of the more recent was Hurricane Matthew in fall 2016. The impact was felt beyond businesses in the storm’s path. The anticipated disruption in the Caribbean and South-Eastern United States also affected businesses elsewhere that depended on companies in the region for supplies and transportation.

Forklift manufacturer Hyster Company, when the company was able to not only itself affected at its Greenville, NC, identify suppliers in the hurricane’s path, but headquarters, knew that 32 of its Tier one also contact them plus customers. And they suppliers were at risk, too. How? The did this while working remotely, because company learned from its experience with much of the Headquarters’ region was the 2011 tsunami in Japan that it needed to flooded. be able to assess the risk to its supply chain “Planners and procurement took their more quickly. laptops home on Friday. When we couldn’t The result is a software-based risk impact get to work on Monday, we were on a tool it created that lets the company identify conference call by 8:15 am, Tier one suppliers by going through the list of location, what products are suppliers that were probably connected to each supplier, When you know affected,”Champagne says, and which customers buy that 70 per cent adding,“Without this tool, products manufactured with parts from each of of the companies we would have spent all of Monday and Tuesday just those suppliers.“We build will experience going through supplier to order, so every truck that databases and tracking down comes off the line has a supply chain addresses.” unique customer purchase disruption in the On the other side of order attached to it,” says the country, Portland, Ore, Mark Champagne, director next 12 months, operations and supply chain of supply chain for the one of the best consultant Rick Pay has had Americas.“If the supply of to plan for supply chain a part is disrupted, I need ways to be disruptions caused by bad to know which customer is prepared is to weather of a different kind affected.”

- snow. When Pay, principal Taking action on Hyster’s have full supply of The R Pay Company, tsunami lessons paid off LLC, was vice president of during Hurricane Matthew, chain visibility

operations at a technology manufacturer, the company bought a large quantity of parts from Los Angeles suppliers. Trucks carrying the parts were often delayed as much as one week when the highways were impassable because of mountain pass avalanches.

“We learned to bolster our parts inventory during the four months of avalanche season, because one week can make a big difference in just-in-time systems,”Pay says.

Risk assessment is key These kinds of risks – whether they’re related to cyber security, extreme weather, or dock strikes – can be identified and planned for in advance with a risk assessment that starts at the corporate level with business continuity planning, and drills down to the supply chain specifically.

“Many companies tend to think of risk in terms of insurance, but there are many other mitigations for supply chain risk, so the perspective needs to be more holistic,” Pay says.

Wildgoose at Zurich, which looks at 23 risk areas with clients, agrees.“Many do financial due diligence on their logistics providers, especially after the Hanjin bankruptcy, and think that’s risk management,”he adds,

MARCH 2017 31

COVER

“What about production, key ports, and suppliers’ intellectual property situations?”

Ken Katz, property risk control director at Connecticut insurer, The Travelers Companies Inc, helps companies reduce exposure to loss.

That starts, he says, with a four-step planning process: 1. Risk assessment 2. Business impact analysis 3. Prevention mitigation and recovery 4. Implementing, testing, and improving the plan 5. “The goal is to identify what can be done better before it’s necessary,”Katz says.

“One of the best ways to plan for supply chain risk is through scenarios,”adds Varney at Crowe Horwath, continuing,“It’s the ‘what if’ approach. If you’ve got stronger supplier transparency as part of scenario planning, your preparedness is even stronger.”

Incorporating suppliers in scenario planning also helps organisations anticipate and address supplier weaknesses they might not otherwise uncover, according to Brad Steger, senior vice president for supply chain management and vertical solutions at Atlanta software company Aptean.

“If you know you’re going to ask a supplier for another 20 per cent of inventory in a certain situation, and the vendor reassures you that it keeps 40 per cent extra in inventory, what happens if another company needs an additional 20 per cent, too?”he asks.

Risk in the transportation sector In terms of general risks, medical cost inflation, rising employee benefit costs, and legal liability (including the risk of the business being sued) are the top concerns for the transportation industry (71 per cent, 62 per cent, and 60 per cent respectively), according to respondents to the 2016 Biggest general risks in the transportation industry

Respondents to the 2016 Travelers Risk Index worry a great deal or some about these threats to their business.

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MARCH 2017 33

Travelers Risk Index. Other concerns specific to the transportation industry are: Rising worker’s compensation claim costs (52 per cent) Company computers being damaged or going down (52 per cent) Distracted driving as a cause of accidents (under employee safety risk) (52 per cent) Ability to retain skilled/experienced employees in a competitive labour market (45 per cent) When asked about emerging trends, respondents list a changing workforce (52 per cent) and the uncertain dynamics of the energy industry (51 per cent) as main causes for concern.

Addressing common risks Risk assessment is only part of the planning, though. Companies need solutions for the supply chain disruption risks they identify. In addition to those already discussed, here are other ways organisations address common risks: Diversify suppliers geographically so one region doesn’t dominate the supply chain.

When asked to choose supply chain risks with the greatest disruptive potential, the top choice - 32 per cent - for businesses of all sizes responding to the Travelers risk survey was the ability to get materials from suppliers. Most of Pennsylvania-based Apprise Software Inc’s customers import from China, where there are political risks to trade, so CEO Jeff Broadhurst encourages clients to diversify their supply sources as much as possible.“If they can get some of their supplies from South America, they can mitigate multiple risks,” he says, referring to natural or political disasters as well as dock strikes.“The only thing that has shut down our business in the past decade is dock strikes in Los Angeles,” Broadhurst adds.

Keep your supply chain short. The less transportation that’s involved, the less risky it is, advises Pay. Ideally, he says, suppliers, designers, and production teams will be in neighbouring time zones, too.“When people can talk to each other because it’s not morning for one and evening for the other, you shorten the communications supply chain as well,” Pay says.

Use dual sourcing. Pay also encourages what he calls“dual-sourcing the technology

34 MARCH 2017

and single-sourcing the part.”In other words, find more than one supplier for several related parts, and buy a single part from all of them, even though one might be able to provide all the parts needed. When one has a problem that interrupts the supply chain, order the part that’s affected from another vendor the company is buying something else from already. Hyster does this, dualsourcing any large components it buys overseas.

Advocate for supply chain transparency.

This is at the core of the Costco shrimp slavery issue.“Transparency can be a big problem, and given the current environment, organisations are working to drive that intimacy across the supply chain,”says Varney, adding,“It’s important to identify how you work with and engage with suppliers, as well as knowing what you can do to understand where potential issues can arise.”

Start by prioritizing suppliers, Wildgoose advises.“You might have 10,000 suppliers, but you probably need to understand only the top 100,”he says.

Look to the cloud. Cloud computing adds a level of risk mitigation to information and operations, says Broadhurst. He recommends working with a cloud specialist.“If you’re hosted on Amazon or Microsoft, you’re working with a company that invests significantly to make sure your data is secure and that the infrastructure is constantly upgraded,” he says. Connecting with the cloud also makes it possible for businesses to continue when they are literally underwater, as Hyster was during Hurricane Matthew.

Cloud computing allowed headquarters employees to work from home when the region was flooded.

Eliminate functional silos. Make sure that purchasing and logistics groups understand

COVER

Causes of supply chain disruption

In its report, BCI consistently tracks the impact of various disruptions to an organisation’s supply chains. Unplanned IT and telecommunications outages remain the top cause of supply chain disruption for the fifth consecutive year. The loss of talent and skills jumps three places from fifth in 2015 to second in 2016. Cyber-attacks and data breach, meanwhile, drop one place from second in 2015 to third this year. Nonetheless, the percentage of respondents who say that cyber-attacks and data breach had a “high impact” on their supply chains increased from 14 per cent to 17 per cent.

risk management and work with the risk management team to prevent problems and identify solutions before they’re needed. Wildgoose cites an example at one organisation where the new chief financial officer extended supplier payments to 60 days. Less than two weeks later, a key supplier went out of business because the new policy created cash flow problems.“They weren’t thinking through the whole supply chain and talking to different teams,”he says.

No matter what type of risk is keeping managers awake at night, vigilance is important.“You need to constantly evaluate and refresh your current knowledge of your supply chain,” says Steger.“Your ability to react to these major events as they occur makes a big difference. If you can’t serve a customer, somebody else can, and they will take that business and loyalty away from you quickly in today’s world.”

Note: Responses to this question were voluntary, which explains the variance in the results.

Source: BCI Supply Chain Resilience Report www.inboundlogistics.com

MARCH 2017 35

COMPANY IN FOCUS - AL MAJDOUIE KUWAIT

Adapting to the

environment GSC’s Munawar Shariff talks to Oussama Abba, GCC General Manager, Almajdouie, about their Kuwaiti operations, their growth plans in the region, and where the industry is expected to go

36 MARCH 2017

COMPANY IN FOCUS - AL MAJDOUIE KUWAIT

A

t Almajdouie, the approach to logistics’ implementation differs from one market to another. After careful and detailed study, the company understands each markets’ entry barriers, regulatory requirements, and addressable market size by product, and by segment, and then decides a mode of implementation.

“In Kuwait, for example, we have chosen a partnership in the form of a JV - MK Logistics (with one of the most prominent local business families – Al Kazemi), and this is the same approach used for Qatar and Oman, while we have opted for a direct implementation in Bahrain, where we plan to operate directly under Almajdouie Logistics Company (MLC) name,” explains

Oussama Abba, GCC General Manager, Almajdouie.

Due to its strategic importance, and specific requirements in the country, the UAE market will see a combination of both implementation modes, using their current JV set-up with their partner, Sinotrans - Maxx Logistics, based in Jebel Ali Free Zone, which focuses on warehousing, freight forwarding, and customs clearance activities, and their own company based in Abu Dhabi, which will focus on heavy lift and transportation activities.

“In Kuwait, we have successfully increased our contract value related to the KNPC project by 20 per cent, thanks to the dedication and consistent followup of the Heavy Lift team managing this project, and supported by our

MARCH 2017 37

COMPANY IN FOCUS - AL MAJDOUIE KUWAIT

38 MARCH 2017

COMPANY IN FOCUS - AL MAJDOUIE KUWAIT

newly appointed Country Manager for MK Logistics, Kaleemulla Sharif. He is an MLC veteran, who is bringing a considerable amount of experience necessary to develop our Kuwaiti market,” smiles Abba.

In the UAE, Maxx Logistics has been operating for nearly a decade, and has always focused on delivering quality service, mainly to Chinese customers.“By Q4 last year, we have started the support of our JV with commercially-focused activities to generate additional volume for the UAEKSA trade lane - Raihan Hussein, our Sales Manager for the UAE at MLC, leads this.

As per MLC direction, we have enjoyed great progress with the acquisition of new contracts,” he adds.

MLC has a number of USPs that set it apart from competitors. These include its fully-integrated logistics solutions offering, ranging from customs clearance to heavy lift services, its market leadership position in KSA (the largest market in GCC by both volume and value), capabilities based upon its asset-based strategy, a global network providing customers with access from 28 countries in five continents, and, most importantly, 4,000 skilled and well-trained employees supporting customers.

However, admits Abba, global economy growth prospects remain muted, due to the multitude of geopolitical challenges in both

advanced and emerging markets.“This leads to tighter financial conditions linked to market volatility, slowing production activity and low commodity prices,” he states.

Globalisation is also causing the world to ‘shrink’, and e-commerce is rapidly expanding in a multitude of commodities.

This is leading companies to rethink their supply chain models and consider global sourcing opportunities, enabled by e-commerce. Traditional B2C and B2B distribution models and sales processes/ channels are now witnessing a merge.

The share of B2B companies that have opted to use the ‘direct-to-customer’ mode has virtually equalled the ‘ship-todistribution centre’ traditional mode, as per a recent study conducted by the Aberdeen Group.“So now we are talking about the emergence of B2B2C. This model change is leading towards an ongoing shift from bulk replenishment to smaller consignments (parcels), generating more demand for Air Express and Air Cargo services, and last mile delivery to end customers,” he informs.

So what does all this mean for Almajdouie? “I believe these elements are crucial for our operations in the GCC, since it is one of the most dynamic and fastest growing markets, especially in the UAE, which has always been ‘an early adapter’ market, and sensitive to any change in

MARCH 2017 39

COMPANY IN FOCUS - AL MAJDOUIE KUWAIT

global economic conditions, due to its pivotal role as a logistics hub in the region.

Changes have already impacted the country, as we have started to witness a shift in supply chain models. We are currently reacting to this change, and finalising our response to the market, to adapt our service offering to customer needs and consolidate our integrated logistics solutions approach,” Abba explains.

Over the past half century, MLC has accumulated immense experience and know-how to to provide tailored services to verticals like Energy, Power and Utilities, Engineering and Manufacturing, Infrastructure, and FMCG. They aim to fulfil their customers’ needs and expectations through their understanding of their individual supply chain models, both locally

40 MARCH 2017

and internationally, and they intend to capitalise on the same success factors in future markets.

With the full organisational restructure of MLC, Abba says, they have developed an internal shared services platform, the key mandate of which is to ensure a solid standardisation approach across all business units.“This aims at generating synergies between internal functions, hence improving our operations efficiency and effectiveness, and ultimately, maximising our company profitability, without compromising on quality delivered to our customers. This same platform is used for our implementation outside of KSA, and includes a centralised Enterprise/Corporate sales team, Marketing Communication, Contracting and Pricing, Asset management,

Fleet Management, Customer Service, SHEQ, Market and Business Intelligence,” he says.

When it comes to growth, the sky is the limit for Abba.“Since our company’s inception, our founder has made visionary decisions that has led MLC to its current leadership position, and this culture will always drive our strategic approach.

Tomorrow is already here, and the future belongs to those who prepare it today, as Malcolm X said, and we shall act on this basis, and continue to be ahead of the game in our markets. As set in our ‘Accelerate 2020’ Programme, expanding our footprint within the MENA region will be, with the help of Allah, key to our company’s development and sustainability in an extremely competitive environment,”he states.

Solutions for a healthy world Tranzone operates a state-of-the-art 3PL warehouse in Jebel Ali Free Zone.

We have partnerships with the leading pharmaceutical, medical device and animal health companies around the world

Healthcare Logistic Services: Air Freight Sea Freight Land Transportation Value Added Services Warehousing & Distribution Return logistics Documentation Tranzone FZCO (Member of Banaja Holdings) Jebel Ali Free Zone (South) Plot No: S20129 P.O Box : 262955, Dubai, United Arab Emirates Tel : +971 4 811 0000 Web: www.tranzone.ae

EMIRATES SKY CARGO

A clear focus Hiran Perera, Senior Vice President, Cargo Planning & Freighters, Emirates, spoke to Munawar Shariff about what 2017 will bring for the air freight industry, and how they intend to tackle it

Hiran Perera

What is on the agenda for 2017?

We ended 2016 with the start of Emirates SkyCargo services to Fort Lauderdale, our 13th destination in the United States, and we will soon be offering daily cargo capacity from our 14th destination in the United States - Newark Liberty International Airport. We currently operate to over 150 destinations across 83 countries in

42 MARCH 2017

six continents, providing our customers across the world with an unparalleled reach to markets. As a global facilitator of trade, we will continue to study market trends and trade ows in 2017, to understand where best to deploy capacity and expand our network.

Right through 2016, we also saw that there is an increased demand for specialised transportation solutions for specific

EMIRATES SKY CARGO

business verticals. In September 2016, we launched Emirates SkyPharma - our specialised solution for transport of temperaturesensitive pharma products, which we developed in close consultation with our customers. We will continue to work with our customers to build other customised solutions for specific industry verticals through 2017.

MARCH 2017 43

EMIRATES SKY CARGO

What is your strategy for staying on top of your achievements till date, and outperforming on the goals that have been achieved so far?

The airfreight industry is very competitive, and it is only by staying focused on our customers that we are able to stay ahead in the industry. The only way to enjoy sustainable growth is to work closely with our customers, understand their business and their requirements, and then to be exible in tailoring a solution that adds value to their business. We put the

44 MARCH 2017

customer at the centre of all that we do.

The quality of our product and service offerings is reected in the high levels of customer demand for our services.

What is the outlook in the air cargo industry now?

Over the last three-four years, the air cargo industry has not witnessed a strong performance. The industry has seen minimal growth in tonnage volumes, and this has been combined with overcapacity, which has been prevalent in the market.

It is not, however, all doom and gloom.

Tonnage volumes improved towards the end of 2016, and we saw better than expected figures, helping position 2016 as a year that was much better for tonnage volumes than 2015.

That being said, demand spurts, such as the one we witnessed towards the end of last year, are difficult to manage, as there are several weaker months during which managing capacity becomes problematic.

Over the long term, this trend might be unsustainable. Unless yields improve with

EMIRATES SKY CARGO

commensurate returns, investment in the industry may be impacted.

What has been the impact of fuel prices till date, and moving ahead, say two-three years from now?

Over the last two years, air freight rates reduced in line with falling fuel prices.

Currently, yields are under pressure from two fronts – first, from the capacity available in the market, and second, because of the rise of fuel prices. Fuel prices are an important concern to us, given that it is a large

In September 2016, we launched Emirates SkyPharma - our specialised solution for transport of temperature-sensitive pharma products,

component of operational costs. Emirates has invested in a young and modern, widebodied, fuel-efficient aircraft fleet, and this mitigates the impact of rising fuel prices to a certain extent. However, over the long term, the industry will have to find a way of balancing yields with the increasing fuel costs to ensure that operations – especially that of freighters – remain sustainable.

It is a difficult task to predict how fuel prices will move in two-three years, given the various geopolitical events that are taking place around the world.

which we developed in close consultation with our customers.

MARCH 2017 45

EMIRATES SKY CARGO

Did the recent collapse of a major shipping company have a favourable impact on air freight, or it wasn’t noticeable?

We have not felt any significant impact on tonnage volumes following through from this incident. The shipping industry also has considerable capacity, which probably absorbed the additional volumes. We also don’t believe that the year-end spike in air freight tonnages in 2016 was caused by this.

What has been the impact of the industrywide increase in freight capacity?

The increasing capacity in air freight has led to intense competition and pressure on yields in the market. However, we have recently seen capacity being withdrawn, and early retirement of freighter aircraft because yields were unsustainable. We feel that this is a balancing mechanism

46 MARCH 2017

between supply and demand over the months and years to come.

And what about the impact of weaker conditions on the most profitable routes – Asia and Europe – and from the region to North America?

We have observed a marked reduction in freighter capacity between Asia and Europe. Weaker conditions in any route leads to rationalisation of cargo capacity, as operators seek to best deploy capacity where there is demand.

How has the opening of the purposebuilt pharmaceutical facility at Dubai International (DXB) impacted business?

Why was there a need for it?

In September 2016, we launched Emirates SkyPharma - a specialised offering for transporting temperature-sensitive

pharmaceutical shipments. We launched a purpose-built facility at Dubai International airport (DXB), dedicated to the timely and secure transport of pharma products. This was in addition to the dedicated facilities we also have at our freighter cargo hub at Dubai World Central (DWC) airport for pharmaceutical shipments.

We also went a step further to get EU Good Distribution Practices (GDP) certification for our facilities and operations for pharma transport at our hub in Dubai from Bureau Veritas, Germany. Emirates SkyCargo now operates the largest GDP certified multi airport hub in the world, offering over 8,600 square metres of dedicated space for pharmaceuticals at Dubai.

As a quality carrier, we worked closely with our customers, and we developed the Emirates SkyPharma facility and capabilities to address the requirements of our customers.

GUEST COLUMN

Collaboration = success in the

cool chain Marc Levin, Senior Vice President of Business Development, Americold Logistics, talks about how the cold chain’s future depends on collaboration

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GUEST COLUMN

A

lthough collaboration has been discussed for years, few companies do it well - or, they don’t even do it at all. But, with the growing concern over cold-chain capacity constraints in major markets, and the additional strain on the US infrastructure with consumer demands for faster, fresher deliveries of ready meals and customisable meal plans, the time has come when we can no longer wait to do so.

The tightening of an integrated relationship is the difference between long-term success and short-term gains. We can achieve this success within the cold chain, and today’s larger supply chain, by embracing true collaboration, putting aside the drive for individual gain, and developing the relationships within each partnership so that we can collectively seek out the ‘ win-win’.

Companies willing to embrace true collaboration will find that it looks very different than traditional collaborative models of the past. Robert (Bob) Mudge, executive vice president of strategic initiatives at Verizon, said that,“Collaboration is no longer just a strategy: it is the key to long-term business success and competitiveness. Businesses that realise this sooner rather than later will be the ones who win the game and succeed in the new global economy.”

We all know the definition of collaboration people working together on non-routine cognitive work - but, according to research from Gartner, the activity is also about behaviour, work habits,

MARCH 2017 49

GUEST COLUMN

culture, management, and business goals and value: “To devise a collaboration strategy that will advance your business goals, [you must] consider a wide range of interlocking issues.” Collaboration must mean more than an exchange of ideas and information among partners that agree to work together.

Otherwise, they may share best practices, but will miss addressing concerns and generating solutions, and will just continue to benchmark like they’ve always done.

In recent years, there’s been an influx of companies outside of the supply-chain sector, partnering and inventing in areas that may have been seen as stagnant or monopolised. Take Airbnb, for example. The global peer-to-peer (P2P) network disrupted the hotel industry in 2008 by offering tourists cheap housing accommodations, hosted by local residents. Airbnb then took its platform one step further by partnering with Vayable, an international tourism platform in which local residents offer customised tours based on their personal expertise or experience.

Together, Airbnb and Vayable have created a unified business model based on selling sensations and unique experiences that go far beyond traditional tourist services.

50 MARCH 2017

This type of collaboration is hard work, and requires all participants to be fully committed.

Even with the old adage, ‘We’re better together’, improving productivity requires an extreme amount of collaborative efforts while supporting a business environment that shares both risk and reward to all parties deployed.

One would think that with the end-to-end supply-chain visibility enhancements we’ve had over the last 15 years within cold chain, that collaboration would be at an all-time high, but therein lies the problem — it isn’t.

Supply-chain entities have started to share data in order to create that end-to-end visibility capability, but, in most cases, that’s where the sharing stops.

One main issue is not getting the right people aligned on supply-chain projects from the start. Successful collaboration begins and ends with people: the knowledge they bring, the skills they have, and their intuition and ability to interact with others.

For example, if a transportation company instigates a collaborative supply-chain project for a customer, and includes other supplychain partners, but only outlines goals to personnel from within its own four walls,

how can this possibly succeed? Bringing in capable, responsible supply-chain partner representatives, and discussing mutual goals, strategies to achieve them, assigning tasks appropriately, and outlining the intended solution and expected deliverables along the way, is the only potential path for a mutually successful, collaborative project.

Many times, collaborations break down for other reasons, too, such as when one party feels they’ve entered into a win-lose scenario. This is especially true when it comes to the idea of partnering with your competition. Harvard and Massachusetts Institute of Technology (MIT) - as top American universities, it may seem an unlikely pair, but in 2012, they launched edX, a non-profit organisation that offers university-level courses to a global student body, including some courses at no charge.

Currently available in five languages, the partnership has continued to seek out unique collaborative opportunities, including with Stanford, Microsoft, and Arizona State University, and within its first 12 months, the group signed up more than one million students.

Pursing a common goal is the main ingredient behind this type of success. Once you get past the thought that you shouldn’t share aspects of your supply-chain strategy with a competitor, thinking it’s your only competitive weapon in the marketplace, it becomes clear that we all want the same successes in the end: reduced inventories and associated costs, increased speed-to-market, enhanced service levels, and enriched customer service while also growing brand equity.

By setting aside our competitive mindset and joining forces to forecast the priority needs of the future, we’ll be able to combat our common pains. We can shape the future of all aspects of the industry, from the farm and food production, to grocery stores, restaurants and food service, and on to the fork at our families’ dinner tables. This will diminish the uncertainties currently associated with cold chain. This is the key to our collaborative, prosperous future. We can no longer go down the road alone. The time has come when we must clear the fog and see it’s true that we’re all better together.

Source: Americold Logistics and www.supplychainbrain.com

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ALTERNATIVE FUEL SOURCES

52 MARCH 2017

ALTERNATIVE FUEL SOURCES

energy Harnessing solar and wind

New solar and wind capacity will move Kuwait closer to its 2030 renewable energy generation goals.

This comprehensive report by Oxford Business Group provides more insights

T

he vast deserts of the GCC were often seen as obstacles to development in the past, preventing widespread cultivation, holding down population growth, and hindering overland travel. The oil sitting beneath those deserts changed that view.

Like its GCC neighbours, Kuwait relied on oil resources to fuel its rapid economic development in the 20th century. Looking ahead, officials are now interested in technologies that draw power from the deserts themselves. Kuwait’s deserts contain abundant solar and wind resources. Its solar potential, as measured in global horizontal irradiance, is 1900 KWh per square metre per year, while wind potential amounted to 1605 full hours per year, according to International Renewable Energy Agency data.

Greater share This potential is not lost on the authorities, who are moving ahead with a series of solar and wind projects. Although Kuwait has long had an interest in renewables, the sector will benefit from the added momentum, thanks to recent developments, including anticipated changes to utilities subsidies. Renewable energy is set to meet up to 15 per cent of Kuwait’s electricity consumption needs by 2030, Bader Hamad Al Essa, the education minister, said at the MENA Renewable Energy Conference in April 2016.“Kuwait is working on facilitating the transfer of renewable energy techniques, as well as providing applications and policies to tackle current challenges, mainly pollution and global warming,”he said.

MARCH 2017 53

To make renewables a reality, officials have plans to invest up to US$ 100 billion in renewable energy projects over the next two decades, Samira Ahmad Omar, directorgeneral of Kuwait Institute for Scientific Research (KISR), said in April 2016. The electricity and water authorities aim to install 4500 MW of solar and wind capacity by 2030, by which point, demand is expected to rise to 30,000 MW from the current peak of around 12,500 MW. With the potential to preserve oil for revenue-generating export, cut costs on utilities production, and reduce the country’s emissions, renewable projects have caught the eye of state planners and are gaining momentum.

Clean cost-savers Increasing renewable capacity could provide a clean and cost-saving substitute for the country’s current power sources.

In theory, Kuwait could rely solely on its own hydrocarbons resources for power generation. Among the 14 members of the

54 MARCH 2017

Organisation of the Petroleum Exporting Countries, in 2014 it had the fifth-largest oil reserves, at 101.5 billion barrels, and fourth-largest daily production, at 2.87 million barrels per day, according to OPEC. Perhaps more importantly, for electricity generation, Kuwait also has significant associated and non-associated gas deposits in the deep Jurassic reservoirs at Rahiya, Mutriba, and Umm Niga. Still, the country’s gas reserves are not enough to meet its power demand, meaning that it increasingly relies either on imported liquefied natural gas (LNG), or on its own heavy fuel oil for power generation.

In 2009, Kuwait became a net importer of natural gas, and in 2013, it imported 210m cu ft per day, about 12 per cent of its needs, according to the US-based Energy Information Agency.

Paying for imports is not ideal, as the government covers the lion’s share of generation costs through its utilities subsidies programmes. As utilities consumption grows,

however, it takes up an increasingly large share of state finances.

Between 2012 and 2014, subsidies cost the government between KD3.5 billion and KD four billion (US$ 13.2 billion), or seven to eight per cent of GDP, according to the Ministry of Finance. Using domesticallyproduced oil for power generation is not ideal either. Burning oil for domestic electricity is not only expensive and inefficient, but also burns away export revenues vital to the country’s economy.

In addition, fuel oil does not burn as cleanly as natural gas, emitting far more carbon, particulate matter, sulphur dioxide, and nitrogen oxides, according to US-based consultancy M J Bradley and Associates.

Without a major change to power generation and consumption patterns, however, oil remains central to the electricity mix, generating more than 70 per cent of total power in 2011. Natural gas made up around 28 per cent, according to US-based consultancy IHS.

ALTERNATIVE FUEL SOURCES

Solar and wind

a 100 square kilometre plot in western Kuwait, allocated More renewable capacity, A GCC joint specifically for renewable therefore, could reduce demand project to energy generation. The for imported LNG, save oil area’s capacity is set to reach resources for export, and reduce build up and 2000 MW by 2025, Salem harmful emissions. The idea of connect grid Al Hajraf, head of energy renewable generation in Kuwait is not new. Researchers there infrastructure research at KISR, told Kuwait Times in September 2015. made the country one of the across the Planned projects include Gulf’s first to tap renewable photovoltaic, concentrated energy sources. In 1978, a team six-country solar and wind power from KISR, with German backing, designed and created a pilot solar bloc bodes well generation facilities. Spainbased TSK won a US$ 403 energy station. In the intervening for the future million contract to install 60 decades, renewable technologies MW of solar energy capacity, and the economics of power of renewable split between a 50-MW generation have both changed thermal solar plant, and a 10substantially. generation.

MW photovoltaic plant, the KISR, along with the Ministry company said in September of Electricity and Water, continues 2015. Under the agreement, TSK is set to to take the lead on introducing renewable provide engineering, supply, construction, generation. The Al Shagaya complex plays and start-up for the power plant. a central role in both of their renewable Another Spain-based firm, Elecnor, won energy expansion plans. Al Shagaya is set on a US$ 26 million engineering, procurement and construction (EPC) contract to build Kuwait’s first wind farm in the Al Shagaya complex. Developed as joint project, Elecnor is set to split the contract 60:40 with Kuwaitbased EPC contractor Alghanim. The plans call for five two-MW G97 wind turbines from Spain-based manufacturer Gamesa, for a total installed capacity of 10 MW.

Nuclear Plans for nuclear power generation in Kuwait have been at a standstill since 2011.

The authorities had announced intentions to install nuclear energy in 2009, signing agreements with the US, France, and Russia to draw up plans. The rationale behind atomic energy largely resembled that behind current investments in renewables. Like those favouring solar and wind, some in the government favoured nuclear power generation because it could reduce gas imports, save fuel oil for export and cut the country’s overall emissions.

Initial plans called for four reactors, each with a generating capacity of 1000 MW, according to Ahmad Bishara, the general secretary of the country’s National Nuclear Energy Committee. Four months after the March 2011 meltdown at the Fukushima 1

plant in Japan, however, the emir, Sheikh Sabah Al Ahmed Al Jaber Al Sabah, ordered the nuclear committee to be dissolved.

On the grid While nuclear plans are shelved for the moment, upgrades are moving ahead on electricity infrastructure. A GCC joint project to build up and connect grid infrastructure across the six-country bloc bodes well for the future of renewable generation. In 1999, all six members agreed to construct a unified power grid. In 2001, they established the GCC Interconnection Authority (GCCIA), and by 2011, all six members were connected.

GCC governments provided the funds to cover the first phase’s US$ 1.2 billion budget, and, in return, took shareholdings that corresponded to each country’s anticipated savings from the project.“The interconnector alone will save countries up to US$ three billion in capital investment by avoiding the need to build more than five GW of generation capacity over 20 years,”Ahmed Ali Al Ebrahim, the GCCIA’s chief operating officer, said, following the completion of the project, adding,“Operational and fuel efficiency savings across the system will amount to at least US$ 300 million, based on feasibility estimates to 2028.”

In addition to providing added efficiency and emergency back-up capabilities, the new network could also offer incentives to install more renewable and other low-carbon generation capacity, as the network would provide an export outlet for excess power.

“Solar and wind energy come as resources are there and not as the load requires,”Al Ebrahim told Dubai-based daily The National in December 2014.“That’s why whenever you have excess renewable energy that you don’t need, you can export it through the interconnector member states.”

Although the grid has a maximum transfer capacity of 1200 MW, intra-bloc energy trading activity has still not taken off. The advent of more low-carbon energy installations and their excess electricity production, therefore, could encourage more cross-border trading. With members across the regional club aiming for 15-30 per cent renewable and other low-carbon energy generation by 2030, each country could benefit from this. www.oxfordbusinessgroup.com

MARCH 2017 55

NEW FACILITY

Celebrating progress

Genavco celebrated the opening for its new facility in Mussafah, Abu Dhabi, to mark their 50th anniversary, GSC reports

G

eneral Navigation and Commerce Company (Genavco), a member of Juma Al Majid Group, has dual reasons for celebration. It opened its new facility in Mussafah, Abu Dhabi, which also marked the all-year celebration of serving their customers for 50 years.

Speaking about the new facility, Eng Khaled Issa, Chief Operating Officer of Juma Al Majid Group, stated that the opening of the new facility highlights Genavco’s commitment towards offering easy accessibility to their large customer base.

In the coming years, Genavco expects robust demand for commercial vehicles, industrial and construction equipment. The projected infrastructure expansion plans, ahead of Expo 2020 and other strategic projects, is expected to fuel the market growth.

Genavco’s expansion strategy is based on offering comprehensive, yet diverse product portfolio, competent human capital, exceptional service delivery, and state-of-art facilities.

The facility, with a total built up area of 30,376 sq feet, comprises of the state-of-art Isuzu and Heavy Equipment Showroom, Service Facility, Spare Parts Sales Counter, and BP-Quick Lube Facility.

The showroom will display the extensive range of the Isuzu fleet, along with the selected heavy equipment products. The 11,250 sq feet service facility, with 13 Service Bays and dedicated VIP waiting area, will offer a futuristic customer service experience. Genavco offered attractive discounts and special promotions during February to celebrate the grand opening of the new facility, and the 50th anniversary of Genavco.

The new facility is strategically located in M9, Mussafah Industrial Area, between 6th and 8th street, and adjacent to Bin Hamoudah – Chevrolet Body Shop.

56 MARCH 2017

NEW FACILITY

MARCH 2017 57

Dubai Trade’s excellence awards Dubai Trade awards winners at the 9th E-Services Excellence Awards. GSC reports

58 MARCH 2017

U

nder the patronage of H H Sheikh Maktoum bin Mohammed bin Rashid Al Maktoum, Deputy Ruler of Dubai, Dubai Trade commended the winners of the ninth E-Services Excellence Awards (ESEA), held in Dubai recently. The annual award event is organised by Dubai Trade to recognise customers who use its smart services, appreciating their contribution in promoting smart transformation in trade and logistics in Dubai.

SMART SERVICES AWARDS

The award ceremony was held at Atlantis Dubai, and attended by HE Abdulla Al Saleh, Undersecretary of the Ministry of Economy for Foreign Trade and Industry, Ali Ibrahim Mohammad, Deputy Director General of Department of Economy in Dubai, Eng Mahmood Al Bastaki, CEO of Dubai Trade, business leaders, government officials, representatives from the financial sector, shipping and logistics, and the media, who consider it one of the main indicators of Dubai’s transformation to a smart economy.

HE Al Saleh and Al Bastaki honoured the winners of the ninth ESEA in recognition of their excellences. Bin Abed General Land Transport won the Smart Services Award for M-Token Services, with Ocean World Shipping and Clearing as runner-up.

NAFFCO Group won the Smart Services Award for Free Zone Services, with Del Monte Foods as runner-up. Takhlees Cargo Services won the Smart Services Award for Clearance Services, with Mehta Trading Co coming second. Al Taawun Clearing and

Forwarding won the Smart Services Award for Payment Services, with Mosaco Shipping and Forwarding as runner-up. DAMCO won the Best Innovative Award in the trade and logistics industry, and Mai Al Baz, a student from the Wollongong University in Dubai, won the Best Innovator award.

Two awards in the exporters’ category were presented by Dubai Exports, the export promotion agency of the Department of Economic Development (DED), as part of its strategic partnership with Dubai Trade.

MARCH 2017 59

SMART SERVICES AWARDS

Mai Dubai won the New Exporter of the Year award, with Delta Food Industries as runner up. The National Fire Fighting Manufacturing Company (NAFFCO) won the Innovative Exporter of the Year award, with Falcon Pack Industries as runner up.

HE Al Saleh highlighted the role of Dubai Trade and e-services in enabling trade in the UAE. He said: “E-services have significantly enhanced the UAE’s trade activities. Its positive impact is reflected in the country’s strong trade performance last year, even amidst a very challenging global economic climate. For the first half of 2016, the UAE’s total non-oil foreign trade alone stood at US$ 215 billion, and is expected to grow by seven per cent this 2017. Dubai Trade, as the premier single-window trade facility for various trade and logistics service providers, has played a huge role in encouraging organisations to use smart services for trade and logistics. Hence, this event is one of the key indicators of Dubai’s international competitiveness. Our partnership with Dubai Trade also includes offering a range of services that support economic and commercial sectors in the UAE, and facilitate

60 MARCH 2017

operations for individuals as well as organisations. The smart services provided

by Dubai Trade for customers and traders are world class, and offering them with state-of-the-art smart services and trade platforms is one of the strategic objectives of the Ministry of Economy.”

Al Bastaki, added,“When we launched the E-Services Excellence Award nine years ago, we wanted to encourage the use and adoption of electronic services. Today, the adoption rate of many services has reached 100 per cent. The number of transactions by registered companies and customers using Dubai Trade also increases year after year, and as of 2016, it stands at 19 million.

Today, with the widespread use of smart technologies, and our leadership’s vision to transform Dubai into the smartest city in the world, we honour the organisations that support our efforts. We will continue to develop our services and launch smart trade platforms that feature advanced technologies and are fully integrated with to provide services that traders need such as cargo insurance, a warehouse booking system, and land transportation

management system. Innovation has become our main priority in everything we do for our customers. Following the promise made by His Highness Sheikh Mohammed bin Rashid Al Maktoum, for those who choose Dubai to launch their businesses, to be our partners in the future.”

Al Bastaki also acknowledged ESEA sponsors for their role in the success of the event. These included Al Futtaim Logistics and TechnoPro Middle East as gold sponsors, and Agility Logistics and Newage Software Solutions as silver sponsors. He commended the support of government and private organisations, especially the Ministry of Economy, which supports ESEA annually.

Other partners include DP World, Dubai Customs, Jebel Ali Free Zone Authority (Jafza), Dubai Exports, the International Chamber of Commerce-United Arab Emirates (ICC-UAE), Dubai Maritime City Authority, and the National Association of Freight & Logistics. Dubai Media Incorporated (DMI) and Abu Dhabi Media were recognised as the media partners and honoured for their role in promoting ESEA and Dubai Trade’s smart transformation.

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