Global Supply Chain October Issue 2017

October 2017 Issue 41

ENHANCING THE BUSINESS OF LOGISTICS

DIGITAL SUPPLY CHAIN

RISK

Disrupting and improving

FREE ZONE AND PORTS SPECIAL

Freezone special Regional uodate

Hajj 2017

Logistics at its best

DP World

Jafza

RAK FTZ

Sohar Port

The perfect supply chain Myth or reality?

Sao Paolo •

• Prague

Paris •

• Kano

Riga •

Antananarivo •

• Johannesburg

(Madagascar)

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Understanding digital 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 Manager: Brian Cordeiro brian@signaturemediame.com Managing Editor: Munawar Shariff munawar@signaturemediame.com Art Director: B Raveendran ravi@signaturemediame.com Production Manager: Roy Varghese roy@signaturemediame.com

Printed by United Printing Press (UPP) – Abu Dhabi Distributed by Tawseel Distribution & Logistics – Dubai

Contributor’s opinions do not necessarily reflect those of the publisher or editor and while every precaution has been taken to ensure that the information contained in this handbook is accurate and timely, no liability is accepted by them for errors or omissions, however caused.

Articles and information contained in this publication are the copyright of Signature Media FZ LLE & SIGNATURE MEDIA LLC and cannot be reproduced in any form without written permission.

The change driven by technology or disruption specifically technology that transforms and/or displaces solutions, processes etc., across a supply chain or parts of it. Put another way, while disruptive technologies enable innovative, disruptive solutions (built on these innovations), they also give rise to new business and process models that drive significant economic and service benefits. Page 22.

This issue we have compiled a comprehensive report on the region’s ports and free zones. RAK Free Trade Zone (RAK FTZ) welcomed a significant increase in its client portfolio, adding 600-plus companies to the 8,000 from 2015. The economic trade zone was honoured by different prestigious award-giving bodies such as: the inaugural Burj CEO Awards, which named RAK FTZ as the Global Best Free Trade Zone; the Emirates and Europe Economic Forum, which recognised RAK FTZ as the Most Innovative Free Zone; and the Sheikh Saqr Program for Government Excellence (SSPGE) Awards, which honoured the free zone as the Best Government Authority in Ras Al Khaimah.

Oman, as well, is making huge investments in the construction of modern infrastructure to maximise benefits stemming from its unique geographical location. SOHAR Port and Freezone sits at the centre of those plans. Incentives have also been provided to develop the domestic market, facilitate business, promote the uptake of modern technologies, and develop human capital. To achieve all these aims, the government is joining hands with public and private organisations to amend soft infrastructure, simplify legal procedures to eliminate red tape, update export and import procedures, and promote the adoption of best international practices.

These and reports on Jafza and DP World complete our compilations on the regional free zone outlook.

Munawar Shariff Managing Editor munawar@signaturemediame.com

OCTOBER 2017 3

October 2017 Issue 41

ENHANCING THE BUSINESS OF LOGISTICS

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22 06 News 16 Country report China China - wobbling towards growth The speed at which the Chinese economy was growing is now projected to reduce

22 Cover Digital supply chain risk management in 2025 Three radical scenarios built on today’s disruptive technology models. Jason Busch and Pierre Mitchell of www.spendmatters.com elaborate

30 Materials handling market on growth trajectory A look back at the Materials Handling Middle East 2017

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34 Guest column Getting with the programme Monzer Tohme, Regional Vice President, Middle East & Africa, Epicor Software issues guidelines for the manufacturing industry as they get ready to transform digitally

36 How to create the perfect supply chain Manufacturers and retailers need to create a new supply chain model to cater directly to the end user

38 The logistics of Hajj A look at this year’s Hajj in numbers

44 Motivated by excellence DP World’s Mohammed Al Muallem, SVP and MD – DP World, UAE Region and CEO – JAFZA, speaks about the current business climate

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46 The pursuit of glory We take a look at how Jafza continues to be one of the world’s most innovative freezones

50 Scaling Up Rami Jallad, Group CEO RAKEZ, RAK FTZ and RAKIA, speaks about the trailblazing economic free zone and how it plans to keep the momentum going

57 The young and the restless Mark Geilenkirchen, the CEO of SOHAR Port and Freezone, talks about the port’s ascent to the top

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FM industry to integrate technologies within their services

As part of the Facilities Management Congress within the FM Expo, in the panel ‘Digital Future – Where we are and where we go – Is technology a game changer?”experts discussed how technology systems can help

support the advancement of the FM industry and create valuable solutions in the future.

FM organisations are looking to grow and develop their services that integrate these IT systems to optimise the value for their suppliers.

Globe Express Services joins hands with Emirates Wildlife Society-WWF to protect the UAE’s natural heritage Globe Express Services (GES), one of the globe’s leading providers of supply chain solutions, announced its partnership with Emirates Wildlife Society in association with WWF (EWS-WWF), a leading local environmental NGO which is committed to protecting the UAE’s natural heritage - our climate, seas, land and the biodiversity that lives within it.

As a Corporate Member, GES will support EWS-WWF’s long-term conservation initiatives.

Safeguarding the UAE’s natural environment, both on land and offshore, is fast becoming one of the top priorities for the UAE’s leadership. Today, environmental organizations throughout the Emirates work alongside several government bodies to ensure the UAE’s natural heritage is preserved to set the foundation for a strong economy and thriving society.

GES’ partnership with EWS-WWF will reinforce the company’s Corporate Social Responsibility (CSR) agenda by providing funds to support a number of projects focused

6 OCTOBER 2017

on marine & terrestrial conservation, climate change and education. EWS-WWF provides the resources required to give its partners the freedom they need to achieve their sustainability goals, in adherence to their CSR framework and core company values.

Commenting on the partnership, Mustapha Kawam, President and CEO of GES said:“Our collaboration with EWSWWF reflects our commitment to reinforcing our responsibility towards protecting biodiversity in the UAE and preserving natural resources for the future generations.

It highlights the uncompromising values and dedication of both companies to enlighten the local community on the importance of environmental conservation. This will enrich understanding of climate change, and ensure a brighter sustainable future for the environment in both: UAE and abroad.”

The association between GES and EWSWWF also supports the efforts of the UAE Government to work alongside the private sector to conserve the country’s biodiversity in alignment with its future development goals.

This in return will help gather data that can be analysed in real time, address the insights before it creates a problem and maximises the potential of the technology.

Manish Bhasin, Product Head – Enterprise IOT, HARMAN Connected Services Inc, said,“In terms of IOT and system integration, businesses need to get all their devices connected. The real power lies in the analytic tools and technologies we have running in the back through these devices which can help simulate the data and convert that into meaningful information and decisions.”

Facilities management services can gain prominence through the advancement of technology solutions within their business processes, and effectively contribute to the UAE Vision 2021 National Agenda which focuses on highlighting the importance of infrastructure and aims for the country to excel in the quality of airports, ports, road infrastructure, electricity, and other building facilities.

However, experts believe understanding the technology before its implementation is vital to adding strategic value to services.

“Don’t think about technology for the sake of it. Think about why you are using the technology and align your business processes accordingly by understanding how it will be beneficial to your business and your suppliers. Just buying the technology and throwing data in it will not add any value,”said Adrian Jarvis, General Manager, FSI.

Otis Elevators selected for Riyadh Metro Otis Saudi Arabia has been selected for the prestigious Riyadh Metro – lines 4, 5 and 6 –

by FAST Consortium of companies, which is led by Spanish construction group FCC and includes partners Samsung C&T, Alstom, Strukton, Freyssinet Saudi Arabia; and is contracted by the High Commission for the Development of Arriyadh.

Otis will supply 256 escalators, 6 moving walkways, and 183 machine room-less elevators with travel speeds up to one metre per second, including fully glazed panoramic elevators. The heavy-duty escalators are specifically designed for public transportation.

The scope awarded to Otis comprises of all elevators and escalators within the three lines of the metro for all stations across Riyadh, two train depots, and three car parking facilities over a total area of 72 kms.

Otis, which operates in Saudi Arabia as Otis Elevator Company Saudi Arabia Limited is part of a joint venture between Otis Elevator Company (New Jersey) and E.A. Juffali & Brothers in the Kingdom of Saudi Arabia.

The Riyadh Metro Project constitutes the backbone of the future public transit system in Riyadh. With 6 lines totaling 176 km and 85 metro stations, the Metro network will serve most of the densely populated areas, public facilities, as well as educational, commercial and medical institutions. It will

be connected to King Khalid International Airport and King Abdullah Financial District, in addition to main universities and the downtown area.

“We are honored that our equipment has been selected for this prestigious project,” said Fernando Condinho, Managing Director, Otis Saudi Arabia.“The Riyadh Metro is a significant project for Saudi Arabia and its local community, and we are proud to be part of it.”

GCC fertilizer production capacity surges to highest growth rate in six years Fertilizer production capacity in the Arabian Gulf region has reached 42.3 million tons per annum in 2017, rising by 12 per cent over the previous year, a new report by the Gulf Petrochemicals and Chemicals Association (GPCA), the go-to source for industry data, has found.

According to the report, the industry expanded at the highest growth rate yearon-year since 2011, and further outpaced the overall annual growth of 8 per cent per annum over the past decade. Capacity additions in 2017 are mainly driven by Saudi Arabia, the largest fertilizer producer in the region, with projects like Waad Al Shamal, a US$ 7 billion joint venture between Ma’aden, SABIC and Mosaic, coming onstream.

By 2025, regional capacity is expected to reach 49.8 million tons, growing at a steady rate of 2 per cent per annum. Of the additional 7.4 million tons of fertilizer capacity to be added between now and 2025,

95 per cent will come from Saudi Arabia, growing the country’s share in regional fertilizer production to 58 per cent, up from 51 per cent currently.

GCC fertilizer exports have also been growing at 7.3 per cent per annum over the last decade. These exports account for about a third of the chemicals export volume, with 90 per cent sold in international markets. Growth in fertilizer exports has a significant multiplier effect throughout the local economy generating an estimated USD 6.7 billion in supporting indirect economic activity in the region, including supporting services, packaging, warehousing and distribution.

The GCC fertilizer industry has also contributed to growth in non-oil exports, expanding sales in international markets.

Economic growth in emerging economies has been one important driver of this expansion. In 2016, GCC retained its position

as the world’s largest urea exporter with a global market share of 32 per cent and the second largest exporter of diammonium phosphate (DAP) with a share of 14 per cent.

Dr Abdulwahab Al-Sadoun, Secretary General, GPCA, said,“Much like any other fertilizer producing region globally, the GCC fertilizer industry’s sales revenue has been affected by an overall decline in commodity markets, dropping by an estimated 21 per cent from the year before. Nonetheless, the industry has remained resilient despite volatility in global markets, continuing to expand with a commitment to long-term projects, growing export volumes and significant investment in niche, high-value and environmentally friendly fertilizer products. Furthermore, the contribution of the fertilizer industry to regional progress goes much beyond financial growth, playing an important role in supporting food security and job creation.”

OCTOBER 2017 7

Al Naboodah Group Enterprises creates a sustainable future for UNESCO World Heritage Site, Al Ain Oasis Date Plantations For years, Al Naboodah Group Enterprises (ANGE), one of the UAE’s oldest and most respected family conglomerates with a diverse portfolio of businesses, has been entrusted with maintaining the prestigious Al Ain Oasis date plantations – part of the first listed UNESCO World Heritage Site in the UAE, and operated by the Al Ain City Municipality. Covering 3,000 acres, and more than 184,000 date palms, ANGE has long since committed to embedding sustainable practices at the Al Ain Oasis, preserving a treasured piece of UAE heritage while embodying the UAE’s 2021 Vision.

Managed by the Group’s agriculture business, ANGE’s sustainability efforts at the oases ensure that almost 75 per cent of natural resources are saved. The Group has reduced pesticide use from 140,000 litres per day to just 18,000 litres, and minimised wastage by re-using portions of trimmed leaves for livestock feed. Almost every part of fallen or trimmed date plants is re-used: trunks used for furniture and planters for flowers, and leaves being re-purposed into

8 OCTOBER 2017

ropes, or used to create barasti fencing and roofing for traditional buildings. Additionally, leaves are also up-cycled to create ornaments, baskets and furniture, preserving traditional Emirati handicraft techniques.

Buti Al Naboodah, ANGE’s Deputy Chief Executive Officer: Commercial said,“Our passion to preserve Emirati culture is demonstrated throughout Al

Naboodah Group Enterprises’ operations, and we are proud to protect the culturally significant Al Ain Oasis date plantations.

We cultivate the land to pay homage to our heritage while ensuring this legacy for many future generations to come. Through these initiatives, we seek to enhance the community we live in and work towards establishing a sustainable future for us all”.

Turkish Airlines announces a commitment to order 40 787-9 Dreamliners During Turkish President Recep Tayyip Erdoğan’s visit to New York to join the United Nations General Assembly, Boeing and Turkish Airlines announced a commitment to order 40 787-9 Dreamliners.

“Our agreement to purchase 787 Dreamliners is a significant step forward in enhancing our passengers’ flight experience as these aircraft are the latest and one of the most advanced in the world,”said M. İlker Aycı, Chairman of the Board and the

Executive Committee, Turkish Airlines.“This order is set to play a key role in our growing business in the years to come, and we look forward to further continue our relationship with Boeing. During the talks to finalize the order, we are strictly evaluating the US$ 1 billion worth business volume for the local Turkish supplier industry.”

In addition to this order commitment, Boeing and the Turkish government also announced the Boeing Turkey National Aerospace Initiative, which is designed to support the growth of the Turkish aerospace industry, in conjunction with the targets set by Turkey’s Vision 2023, and strengthen Boeing’s presence in the market.

Turkish Airlines reached record high load factor in August with 84.3 per cent LF Turkish Airlines’ load factor reached a record high in the month of August, at 84.3 per cent, up 5.7 points compared to the same period in 2016.

International load factor also recorded a jump, up 6.3 points to 84.1 per cent compared to the August 2016.

Double-digit growth in demand (revenue per kilometre) that commenced in July kept on, with 10.1 per cent growth in demand.

While capacity (Available Seat Kilometre) increased by 2.6 per cent compared to August 2016, the total number of passengers carried went up by 14 per cent, reaching 7.4 million passengers.

Excluding international-to-international transfer passengers (transit passengers), the number of international passengers went up by 40 per cent.

In August, cargo/mail volume increased by 18 per cent compared to the same period last year.

OCTOBER 2017 9

DHL Express announces 2018 rate adjustments in the UAE DHL Express, the world’s leading international express services provider, announced its annual general average price increase throughout the Middle East and North Africa region, effective January 1, 2018. In the U.A.E. the average price increase for Time Definite International shipments weighing up to 300 kg will be 4.9 per cent. An additional rate increase will be applied for heavier and bulkier Time Definite International shipments weighing over 300 kg based on overall weight and size of shipment.

“The DHL Express customer promise is that we will provide the very highest levels of service quality for their international time-definite shipments and their business,” said Geoff Walsh, Country Manager, DHL Express, U.A.E.“Over

10 OCTOBER 2017

the last year, we have added new hubs with automated sorting capabilities to our international network and further strengthened our security measures globally. We have announced further investments in modernizing our aviation fleet, introducing more green vehicles for inner-city delivery and enhancing our ground infrastructure around the world.

We have also deployed new solutions such as On Demand Delivery – to make the delivery process even more convenient for retailers and their customers in the dynamically growing e-commerce segment. Our annual price increase ensures that we can make the investments needed to meet our customers’ expectations and to continue to make them successful over the long-term.”

Intertek integrated solutions drives the future of Asset Integrity Management Intertek, a leading Total Quality Assurance provider to industries worldwide, announces its participation at the Society of Petroleum Engineers’ (SPE) workshop in Abu Dhabi on September 26–27. Intertek will be providing insight on how oil and gas companies can secure the safety and uninterrupted operation of their assets by utilizing the company’s integrated Asset Integrity Management (AIM) solutions.

The SPE is the largest individual-member organisation within the upstream segment of the oil and gas industry, serving managers, engineers, scientists and other professionals worldwide.

Intertek’s experts will be presenting AIM best practices that help asset owners and operators ensure sustainable, efficient and profitable operations.

In addition, the team will participate in a panel discussion on“Increasing performance with Asset Integrity”, and will highlight how asset integrity plays a vital role in driving performance.

Managing the integrity of personnel, processes and equipment, helps clients apply the proper inspection and testing techniques in order to minimise risk and maintain safety.

Ahmed Al Goburi, General Manager of Asset Integrity Management and Shahzad Ali, RBI Engineer, Asset Integrity Management Services at Intertek said,“We are pleased to be part of this workshop, which will provide a platform to exchange ideas and share our in-depth knowledge, innovations, methodologies and tools to help meet our global customers’ need for total quality assurance, asset reliability, efficiency, safety and profitability.”

EFS Facilities Services secures project wins worth AED 1 billion across MEASA in 2017 EFS Facilities Services, a regional leader in delivering integrated facilities management services across the Middle East, Africa, South Asia, announced that the company has sustained its growth momentum by securing contracts worth US$ 272 million across its operating regions.

The company was awarded key contracts in its biggest markets i.e. UAE, Saudi Arabia, Qatar, Jordan, and Egypt, for both public and private sector clients operating in various industries such as education, master communities, residential, and commercial entities. Buoyed by the project wins, EFS is set to achieve a commendable revenue growth of 26 per cent, despite the challenging macro and socio-economic scenarios in its major markets.

Tariq Chauhan, Group CEO, stated: “We are pleased with the progress that EFS has achieved in 2017, despite the significant pressures experienced by the global FM industry due to the vagaries of the global economy. EFS has adopted an innovative strategy and proactive approach to business development which has helped us deliver key project wins in the region. We are constantly engaging with existing and prospective clients to raise awareness about the benefits of professional FM services which have started to pay off, as evidenced by the strong growth in our project awards amounting to AED 1 Billion, as well as projected 26 per cent revenue growth.”

Imdaad to launch first “Work Series” at FM Expo 2017 Imdaad, the Dubai-based award-winning integrated facilities management company, will be launching the first“Imdaad Work Series”at FM Expo, Middle East’s largest dedicated FM show. From September 25-27 at the Dubai World Trade Centre, the Imdaad Work Series will provide unique insights on facilities management and the disruptors

behind the rapid transformation of this booming industry.

As FM Expo’s Strategic Content Partner, Imdaad will host open debates with industry thought-leaders on the FM world’s most compelling topics, including the digitalisation of the assets’ life cycle, and how Artificial Intelligence

(AI) and Big Data are changing the way buildings operate.

Jamal Abdulla Lootah, Group CEO of Imdaad, said,“Our strategic partnership with FM Expo for the organization of the Imdaad Work Series is a crucial step in advancing the FM industry towards an innovation-led future.”According to Alexis Wheatley, Event Director of FM Expo,“The Imdaad Work Series offer the oneof-a-kind opportunity for FM clients and end users to engage with leading industry experts in a professional environment designed to stimulate open debates and knowledge sharing.”

The Imdaad Work Series will take place alongside the FM Expo exhibition, where local and international companies will showcase the latest facilities management products across dedicated features areas, including Clean, Waste, Elevators, the Legionella Hub, and the IoT Village. On September 25 and 26, the event will host the free to attend “Facilities Management Congress Middle East”conference, gathering industry thought leaders responsible for the region’s landmark projects, while technical workshops on the latest products, innovations, technologies, and regulations in the FM industry will be on offer on the last day of the event.

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GCAA organizes Aviation Safety Campaign Events in emerging markets Earlier this year, the UAE’s General Civil Aviation Authority (GCAA), supported and organized the 4th Safety Campaign in Kenya.

The conference has become a successful annual event and has now been well embraced by operators and Aviation Authorities around the region. This year’s Safety Campaign Event was held at the magnificent Ole Sereni Hotel overlooking the Nairobi National Park in Kenya.

Following the success of the event, the GCAA is planning to hold another Safety Campaign event in December, between 6 – 8, in Dakar.

The Safety Campaign is part of the GCAA’s wider strategic objectives to increase aviation safety and

safety awareness not only in the UAE but around the world, particularly emerging countries. The Campaign is also one of the GCAA initiatives to support the ‘Year of Giving’ by helping to improve aviation in emerging economies.

Saif Mohammed Al Suwaidi, Director General of the General Civil Aviation Authority said, “Given the complexity, volume and interconnected nature of air travel today, aviation safety is a global issue that affects everyone, so ensuring that civil aviation operations and regulations conform to global norms is critical in every region of the world, nowhere more so than in emerging markets where critical infrastructure and training can often be lacking.”

Saif Al Suwaidi

Laila AL Muhairi

Etihad Aviation Group announces new executive appointment Etihad Aviation Group (EAG) announced the appointment of Mana Mohamed Saeed Al Mulla as Chief Group Support Services Officer, responsible for a range of support functions, including IT Services, Procurement and Supply Management, and Property and Facilities Management. He will report directly to the Group Chief Executive Officer.

Al Mulla joins Etihad Aviation Group from Khalifa Industrial Zone (KIZAD) where he served as Chief Executive Officer from 2015. Prior to that, he was Vice President – Corporate Support of Abu Dhabi Ports, and Managing Director of Dubai Refreshments Company PJSC. He is a wellknown business leader in the Middle East and has an extensive network of relationships with

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major firms and business communities across the UAE. Ray Gammell, Interim Group Chief Executive Officer of Etihad Aviation Group, said: “We are delighted to welcome Mana to the leadership team.

His appointment brings a wealth of relevant operational and business experience and he strengthens our group leadership.”

Etihad Airways becomes first airline in region to offer automated credit card payment plans Etihad Airways has become the first airline in the region to offer fully automated credit card Installment payment plans after partnering with PayFort, the leading online payment service provider in the Arab world.

The initiative allows Etihad Airways to offer consumers who book directly via Etihad. com that range from three to 60 months. 17 of the region’s leading banks are taking part in the programme.

This is the latest enhancement in Etihad’s ongoing digital transformation, after establishing its Digital Transformation and Innovation team at the start of 2017.

Etihad Airways Vice President Digital Strategy and Innovation Justin Warby, said,“Etihad is committed to continually enhancing the travel experience by providing greater choice and flexibility to our guests while ensuring we make it as easy and secure as possible to transact through our direct channels, including Etihad.com.”

With over 20 payment methods available on its website, Etihad Airways offers diverse payment solutions to meet both global and local needs.

Warby said this initiative was designed to assist low to medium income travellers and families by empowering them with the ability to book travel without the burden of having to pay for it up front.

RERA leads the switch to fire-resistant building facades Dubai Land Department (DLD), through its regulatory arm the Real Estate Regulatory Agency (RERA), has begun the process of replacing non-fire-resistant building facades across Dubai. The project demonstrates RERA’s dedication to taking proactive and preventative measures that will reduce the incidence of fire accidents in the Emirate.

Mohammed Khalifa bin Hammad, Senior Director of the Real Estate Regulatory Department at RERA, said, “By replacing building facades that do not comply with our fire resistance safety requirements, we are supporting DLD’s vision of making Dubai the world’s safest and securest residential and investment destination. As DLD prioritises safety, investor confidence and

customer happiness, it is implementing proactive solutions through its specialised departments to provide protection for both investors and residents.”

He added that this project has been specifically launched to ensure the safety of residents and save lives, while also preserving the Emirate’s reputation as a leading destination for business, investment, travel and accommodation.

RERA has launched the project based on the security, safety and environmental requirements imposed by the Dubai Municipality and the Civil Defense Department, and in line with the vision of the Emirate of Dubai. RERA is now strongly encouraging all owners to replace non-fireresistant building facades in collaboration with the city’s real estate developers.

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First major cotton yarn plant in region comes to SOHAR Freezone HE Sultan Bin Salim Bin Said Al Habsi, Chairman of SOHAR Port and Freezone, led a high-level delegation from Oman to Jaipur, India where they met with Shri Vallabh Pittie Group (SVP), one of the largest manufacturers of cotton yarn in India and a global leader in the sector.

A land lease agreement was signed to establish a new US$ 300 million plant in SOHAR Freezone to manufacture a wide range of cotton yarn, to be operated

as SV Pittie Sohar Textiles FZC-LLC, a wholly owned subsidiary of Bombay listed SVP Global Ventures Ltd. The facility will eventually provide over 1,500 jobs and is expected to start commercial operations in late 2019.

Abdullah Humaid Al Mamary, Chairman of Bank Sohar, together with Acting-CEO Sasi Kumar and other senior officials from the bank, were also part of the delegation. Bank Sohar has been awarded

the syndication mandate to fund the entire project in two phases. An agreement to this effect was entered into with SVP Group.

Commenting on the agreement, Sasi Kumar said: “We are honoured to be the finance partner for a project of this magnitude that is expected to have a significant impact on the development of the region. It demonstrates our commitment to collaborate as a one-stop financial services provider catering to the diverse needs of individuals and large corporate customers.”

The plant will import 100,000 metric tons of cotton fibre annually through SOHAR Port, with around 50 per cent coming from the United States and the remainder split between Australia and India. The plant will produce around 75,000 tons of finished yarn each year, which will be exported back through the Port to China and other global markets including Bangladesh, Pakistan, Vietnam, Portugal and Turkey.

Hitachi introduces Hitachi Vantara: A new digital company committed to solving the world’s toughest business and societal challenges Hitachi has launched Hitachi Vantara, a new business entity to leverage the broad portfolio of innovation, development and experience from across Hitachi Group companies to deliver data-driven solutions for commercial and industrial enterprises.

The new company will unify the operations of Hitachi Data Systems, Hitachi Insight Group, and Pentaho into a single integrated business as Hitachi Vantara to capitalize on Hitachi’s social innovation capability in both operational technologies (OT) and information technologies (IT).

Hitachi has been a leader in OT for industries such as finance, government, manufacturing, power/energy and transportation for over 100 years, providing solutions that have positively impacted cities, industrial operations and businesses at large.

The company has also been a leader in IT for over 50 years – bringing IT applications, analytics, content, cloud, and infrastructure solutions to market that have transformed the way enterprises do business. Combining Hitachi’s broad expertise in OT with its

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Ryuichi Otsuki CEO Hitachi Vantara

Toshiaki Higashihara President and CEO Hitachi

proven IT product innovations and solutions, Hitachi Vantara gives customers a powerful, collaborative partner in data.

“Hitachi Vantara marks a monumental change for Hitachi as we continue to advance our unified corporate vision of Social Innovation,”said Hitachi, Ltd. President and CEO Toshiaki Higashihara.“Now as the world is being transformed by digital tools

and processes, we are unifying our strongest digital solutions companies together as a new Hitachi company that delivers exponential business impact for our customers and the betterment of society. The formation of Hitachi Vantara underscores Hitachi’s commitment to collaborative creation with customers and partners, and being a true innovation partner for the era of IoT.”

Igy Marinas And P&O Marinas launch superyacht complex in Mediterranean

International marina operator and developer IGY Marinas and P&O Marinas, a subsidiary of DP World, today announced a new-build superyacht marina project in Sète, France with construction to start at the end of the year.

Once open, it will offer 12 dedicated superyacht berths for the world’s largest vessels of up to 328 feet (100 metres) with a maximum draft of 23 feet (7 metres).

Other features include electrical facilities; fuel service arrangements; in-slip grey and black water pump-out; high-level security; and Wi-Fi. Marina guests will also have access to the world’s leading and largest vessel support network – the IGY Anchor Club Strategic Partners, which offers a range of services from provisioning, crew training and full range insurance to emergency health services, maritime travel and satellite communications.

The site of the marina will be in the heart of Sète, which is known as the “Little Venice” of France and is conveniently located near Montpellier,

the Côte d’Azur, and the Balearic Islands.

It is an official Port of Entry, fully ISPS compliant and has easy access to quality restaurants and shops. Guests will also be able to enjoy watersports and recreational activities such as paddle boarding, kayaking, mountain walking and biking.

Tom Mukamal, CEO of IGY Marinas, said: “We have been actively pursuing numerous marina opportunities in the Mediterranean as part of our strategic plan to enhance our global network of berthing options for the superyacht market and expand our Anchor Club strategic platform. As the world’s largest superyacht market, Europe already hosts many of our customers and we are looking forward to being able to offer IGY’s unique platform on a truly global basis. We are excited to begin our first phase of this expansion in the south of France.”

The agreement will see IGY providing a global network of commercial and tourist services with P&O Marinas providing technical and crew support.

DP World to acquire Dubai Maritime City and Drydocks World for total cash consideration of US$ 405 million DP World Limited announces that it has entered into agreements to acquire Maritime World LLC, the 100 per cent owner of Dubai Maritime City (DMC), for a purchase consideration of US$ 180 million and to buy 100 per cent of Drydocks World LLC (Drydocks) by means of a capital injection of US$ 225 million, taking the total cash required for the acquisitions of DMC and Drydocks to US$ 405 million.

DMC is a world-class maritime service facility and industrial business zone in a prime location of central Dubai and adjacent to DP World’s Port Rashid. It is a maritime-focused commercial and industrial park, which extends to 2.3 million sq metres on a man-made peninsula and provides Economic Zones World FZE additional land as an alternative to the highly-occupied Jebel Ali Free Zone.

Drydocks World is a market leader in the ship repair business with the largest ship repair yard in the Middle East. The business delivers stable ship and rig repair revenues and has specialist capabilities in niche ship new builds and conversions. Drydocks’ acquisition will integrate well into P&O Maritime (POM), which is DP World’s 100 per cent owned maritime services subsidiary. On a proforma basis, the US$ 225 million capital injection into Drydocks World represents a 2016A EBITDA multiple of 8.0x.

The acquisitions are expected to be earnings accretive from the first full year of consolidation. On a proforma basis, DP World’s net leverage as of 1H2017 would be 2.9x Net Debt to EBITDA with these acquisitions compared to the reported 2.6x.

Sultan Ahmed Bin Sulayem, DP World Group Chairman and CEO, said: “We are delighted to make these acquisitions which further strengthen the Group’s maritime services and port-related businesses. As a global trade enabler, we have been targeting a broader strategy to grow complementary sectors in the global supply chain such as industrial parks, free zones and logistics adding further value for all our stakeholders. Overall, these transactions will enhance our position as a leading maritime services provider, and we look forward to leveraging on our proven track record to accelerate growth and deliver stakeholder value.”

OCTOBER 2017 15

The great wall of China

16 OCTOBER 2017

COUNTRY REPORT - CHINA

CHINA

wobbling towards growth

The speed at which the Chinese economy was growing is now projected to reduce. However, there is no cause for alarm.

As the country is experiencing growth on all sectors currently.

However, changes need to be made to strategies to get back on the growth train. FocusEconomics analysts elaborate

R

ecent data points to easing momentum in China’s economy, following buoyant growth in the first half of the year. In August, retail sales growth moderated, industrial production lost steam and the pace of investment cooled. To add to that growing list of problems, the external sector’s performance deteriorated as exports slumped, while import growth picked up speed. Recently, exporters have come under strain due to the strengthening of the yuan. While incoming data suggests that growth has peaked and entered a downward trajectory in H2, the downturn is likely to be modest overall as government spending should prevent a sharp slowdown. Meanwhile, all eyes are on the government’s 19th National Congress of the Communist Party on October 18. Five of the seven members of the

OCTOBER 2017 17

COUNTRY REPORT - CHINA

Wangfujing snack street, Beijing, China

standing committee are due to retire, and their replacements will help shape the future of China’s policy. President Xi Jinping will also lay out the party’s priorities for the next five years.

FocusEconomics panellists forecast that the economy will grow a robust 6.7 per cent in 2017, thanks to a strong start to the year and fiscal stimulus. Next year, growth is expected to slow moderately as the economy continues to transition. GDP has been projected to expand by 6.3 per cent, which is unchanged from last month’s forecast. Inflation rose from 1.4 per cent in July to 1.8 per cent in August.

Our panel forecasts that inflation will average 1.7 per cent in 2017. Next year, inflation is expected to pick up modestly and average 2.1 per cent, which is down 0.1 percentage points from last month’s forecast.

Manufacturing PMI ticks up in August The manufacturing purchasing managers’ index (PMI) rose slightly from 51.4 per cent in July to 51.7 per cent in August, according to the National Bureau of Statistics (NBS) and the China Federation of Logistics and

18 OCTOBER 2017

Purchasing (CFLP) that publish the index.

The result was higher than the 51.3 per cent reading market analysts had expected, resting more comfortably than in July above the 50 per cent threshold that separates expansion from contraction in the manufacturing sector.

August’s reading reflected improvements in the two most significant subcomponents of the manufacturing PMI - new orders and production - pushing them both further above the 50 per cent threshold compared to July. By contrast, inventories of main manufacturing raw materials and employment levels both dipped further below the 50 per cent threshold in August, and delivery times of main manufacturing raw materials swung below the 50 per cent threshold. As commodities prices recovered in recent weeks, input prices – a reliable leading indicator for overall inflation – rose to an eight-month high in August.

Chinese authorities set an annual GDP growth goal of 6.5 per cent for this year, while the 13th Five-year Plan established a growth target of 6.5 per cent for the 2016–2020 period. Panellists expect GDP to expand 6.7 per cent in 2017, which is unchanged from

last month’s estimate. In 2018, the panel foresees lower economic growth of 6.3 per cent, which is also unchanged from last month’s forecast.

Industrial production slows to eight-month low in August In August, industrial production expanded six per cent over the same month last year, below the 6.4 per cent expansion in July and the weakest reading since December 2016. August’s result, which undershot the 6.6 per cent rise that market analysts had expected, reflected worse dynamics in two of the three subcomponents of industrial production - mining and electricity, gas and water supply - the latter of which remained in contractionary territory for the third consecutive month. By contrast, growth in manufacturing accelerated in August.

On a monthly basis, industrial production expanded 0.46 per cent in seasonally adjusted terms in August, up from July’s 0.41 per cent increase. The trend was stable in August, with the annual average growth in industrial production staying at 6.5 per cent for the third month in a row.

Car Assembly Plant in Chengdu, China

For 2017, FocusEconomics Consensus Forecast panellists expect industrial production to grow 6.6 per cent, which is unchanged from last month’s projection. In 2018, the panel sees industrial production growth falling to 5.9 per cent, which is up 0.1 percentage points from last month’s estimate.

Investment growth slows slightly in August In the first eight months of the year, urban fixed-asset investment excluding rural households expanded 7.8 per cent annually, below the 8.3 per cent rise in the January– July period. The print undershot the 8.2 per cent increase expected by market analysts. It reflected an across-the-board slowdown in the growth of the primary, secondary and tertiary sectors of the economy. Investment growth in the closely watched real estate development sector remained unchanged in August.

Analysing January–August’s data from the ownership side, investment growth among state-owned and state-holding units, although strong, decelerated to the lowest level since May 2015. Activity among private companies also slowed in the same period.

A month-on-month comparison showed that investment in urban fixed assets rose a seasonally-adjusted 0.57 per cent in August, slightly below the 0.60 per cent increase in July.

The government set a growth target of 9.0 per cent for urban fixed-asset investment for this year. FocusEconomics Consensus Forecast participants expect fixed-asset investment to grow 8.6 per cent in 2017, which is unchanged from last month’s Consensus. In 2018, the panel sees fixed-asset investment growth at 7.9 per cent, which is also unchanged from last month’s estimate.

Retail sales growth cools in August In August, nominal retail sales grew 10.1 per cent year-on-year, below the 10.4 per cent rise in July and the 10.5 per cent expansion that market analysts had expected. August’s slower print compared to July reflected weaker retail sales growth in food and beverages, oil and household appliances.

Lower retail sales growth in cars also contributed to the slowdown. Clothing and textile sales, however, improved in August compared to July.

Retail sales expanded a seasonallyadjusted 0.76 per cent in August compared to the previous month, up from July’s 0.71 per cent increase. Annual average growth in retail sales was 10.4 per cent in August, slightly down from July’s print of 10.5 per cent.

The government set a retail sales growth target of 10 per cent for this year.

FocusEconomics Consensus Forecast participants expect retail sales to increase 10.4 per cent in 2017, which is unchanged from last month’s estimate. In 2018, the panel foresees retail sales expanding 10.1 per cent, which is also unchanged from last month’s forecast.

Growth in house prices slows to seven-month low in August House prices in 70 large- and medium-sized cities rose 0.2 per cent in August from the previous month, according to a weighted average index calculated by Thomson Reuters from data issued by the National Bureau of Statistics (NBS). The print undershot the 0.4 per cent rise in July and was the lowest rate since January. According to the NBS, the sale price of newly-constructed residential

OCTOBER 2017 19

COUNTRY REPORT - CHINA

buildings increased in 46 cities (56 in July), declined in 18 cities and was unchanged in six.

House prices rose 8.3 per cent annually in August, which was below July’s 9.7 per cent increase and marked a 13-month low.

Annual average growth in house prices inched down from 11.2 per cent in July to 11.1 per cent in August.

M2 growth hits new low in August Chinese banks extended CNY 1.09 trillion (US$ 167 billion) in new yuan loans in August, below July’s CNY 826 billion (US$ 124 billion).

The print significantly overshot the CNY 900 billion (US$ 135 billion) markets had expected.

In the 12 months up to August, new yuan loans totalled CNY 13.6 trillion (US$ 2 trillion).

Total social financing (TSF) – a broader measure of credit and liquidity in the economy that includes loans, bonds and other non-traditional instruments - rose from July’s CNY 1.22 trillion to CNY 1.48 trillion (US$ 180 billion) in August.

Meanwhile, annual growth in M2 - the broadest measure of money supply in China - declined from 9.2 per cent in July to 8.9 per cent in August. The reading undershot the 9.2 per cent that market analysts had expected and was the lowest rate since the current series began in 1996.

The government set an M2 growth target of 12 per cent for this year. FocusEconomics Consensus Forecast participants expect M2 to expand 9.6 per cent in 2017, which is down 0.2 percentage points from the previous month’s forecast. In 2018, the panel sees M2 growth of 9.5 per cent, which is down 0.1 percentage points from the previous month’s estimate.

Inflation increases in August In August, consumer prices rose 0.4 per cent from the previous month, up from July’s 0.1 per cent increase. The reading mainly reflected higher prices for food, tobacco and liquor. Prices of fresh vegetables, part of that sub-component, notably rose by 8.5 per cent compared to July. On the other hand, prices for clothing, and education, culture and recreation fell in August from July.

Inflation rose from July’s 1.4 per cent to 1.8 per cent in August, overshooting the 1.6 per cent market analysts had expected. As with the month-on-month increase in consumer prices, the rise in the price of fresh vegetables

20 OCTOBER 2017

drove the inflation reading for August. Annual average inflation, meanwhile, rose from July’s 1.6 per cent to 1.7 per cent in August.

Producer inflation came in at 6.3 per cent in August (July: 5.5 per cent), overshooting market analysts’ expectations of 5.6 per cent. Annual average producer inflation rose from July’s 4.5 per cent to 5.1 per cent in August, marking the highest reading since January 2012.

The government set an inflation target of 3.0 per cent for 2017. FocusEconomics Consensus Forecast participants expect that consumer inflation will average 1.7 per cent in 2017, which is down 0.1 percentage points from last month’s estimate. In 2018, the panel sees consumer inflation at 2.1 per cent, which is also down 0.1 percentage points from last month’s projection. Meanwhile, the panel expects producer inflation to be 5.2 per cent in 2017, which is up 0.2 percentage points from last month’s projection. In 2018, panellists see producer inflation at 0.8 per cent, which is unchanged from last month’s forecast.

Yuan strengthens to over one-year high The Chinese yuan (CNY) rallied to its strongest value since May 2016 in September, continuing a trend that started in June amid stronger-than expected growth and a weakening of the U.S. dollar. On September 8, the yuan closed the day at 6.48 CNY per US$, which represented a 3.4 per cent appreciation over the same day of the previous month. It gained 6.7 per cent year-to-date and was 2.7 per cent higher compared to the same day last year. In the following days, the yuan lost some of the ground due to a strengthening US$.

Positive market sentiment has strengthened the Chinese currency. Economic growth surprised market analysis to the upside in H1 and, although recent indicators point to a deceleration in Q3, economic dynamics remain fairly strong overall. Moreover, the yuan benefited from diminishing fears of an open trade war with the U.S., tight capital controls and a weakening of the U.S. dollar. While the strengthening of the yuan highlights China’s healthy growth momentum, if sustained it could hurt the country’s all-important external sector.

FocusEconomics Consensus Forecast panellists expect the Chinese yuan to trade

at 6.73 per US$ at the end of 2017. For 2018, the panel projects that the CNY will trade at 6.81 per US$.

Trade data shows slowing exports and quickening imports in August Exports rose 5.5 per cent annually in August, coming in below July’s 7.2 per cent increase but above market analysts’ expectations of a 5.0 per cent expansion.

Meanwhile, imports rose 13.3 per cent annually in August, which came in above both July’s 11 per cent expansion and the 10 per cent increase that market analysts had expected. This could point to resilient domestic demand in H2 for the Chinese economy.

The trade surplus narrowed from US$ 46.7 billion in July to US$ 42.0 billion in August (August 2016: US$ 50.2 billion). The 12-month moving sum of the trade surplus decreased slightly from July’s US$ 456 billion to US$ 447 billion in August, which marked the lowest value since January 2015.

FocusEconomics Consensus Forecast panellists project that growth in merchandise exports will reach 6.3 per cent in 2017, while imports will increase 11.2 per cent, driving the trade balance to a surplus of US$ 465 billion. For 2018, the panel expects exports to expand 4.7 per cent and imports to increase 3.5 per cent, while the trade surplus is expected to be US$ 508 billion. rovider of leading p a is s ic nom sis on the FocusEco and analy ts s a ators c re fo omic indic economic acroecon m t ast, n E a rt le o d the Mid most imp the untries in d o c n a y e a k ic 7 for 12 haran Afr a -S b s u S ie , n pe compa Asia, Euro -thinking rd ation a rm rw o fo F . timely in d Americas n a le b a ess ch reli right busin require su make the sive m n e te th x e lp to he nomics’ o c E s d u c o .F ts, couple decisions economis f are o r, rk e o d a tw ustry le global ne as an ind tation u n p io re it s d o li p o s with its pany’s m o c ence e ig th ll f so ess inte indication e for busin rc u o s l le b ncia as a relia major fina d e world’s panies an m o c l a among th n o ti a in lt u s, m institution s. nt agencie e m rn e gov

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22 OCTOBER 2017

COVER

Digital supply chain risk management in

2025 Here we take a look at three radical scenarios built on today’s disruptive technology models.

Jason Busch and Pierre Mitchell of www.spendmatters.com identify this digital supply chain risk management market into separate segments to define and understand them better

T

he market for supply risk management is complex, overlapping and confusing – even for the experts!

In this recently published report, Spend Matters Landscape Definition and Overview: Supply Risk Management and Compliance, the authors segment this market into seven different areas: • Stand-alone supplier and supply chain risk management, monitoring, and optimization solutions • Supplier management solutions • Spend analytics solutions (inclusive of risk / financial data enrichment)

OCTOBER 2017 23

• Risk information / content originators (e.g., supply market intelligence providers) • Governance, risk and compliance (GRC) vendor • Commodity management solutions • Supply chain planning, (re-)design and optimization While no single provider addresses all of these areas, there is one unique item linking many of them – as well as procurement, supply chain and finance organizations looking to expand their investments in the area. This commonality is an interest to incorporate new, disruptive technologies to better improve risk mitigation, management and forecasting capabilities. Some of these technologies are in broader deployment than others. Artificial intelligence (AI), for example, is used by riskmethods, a supply risk intelligence provider, to decide whether an incident in the supply chain warrants issuing a formal alert to users.

As we have noted in past research: Riskmethods embeds approximately a dozen third-party data feeds into its core supply risk management solution (users have the option to license additional feeds). It combines these intelligence sources to provide an aggregated view of a company’s own supplier and supply chain data and leverages AI-based machine learning capabilities and human intelligence to provide monitoring and alerting based on the combination of these inputs and a company’s suppliers and supply chain.

Beyond AI, cloud solutions (at least firstgeneration ones, as we would define them) have become a nearly ubiquitous technology delivery mechanism for the broad range of risk management tools outlined above as well. See our“glossary” of definitions and examples in the next section.

This paper provides an introduction to these disruptive technology components and then provides a glimpse of three scenarios in the year 2025 that highlight how many of these different building blocks may come together to not only transform supplier and supply chain risk management, but entire industries and markets.

Examples of disruptive technologies and solutions Clayton Christensen originally formulated the business term “disruption”and its

24 OCTOBER 2017

definition, which have since been used liberally, with varying definitions, in a range of contexts. For our purposes here, Spend Matters views disruption as change driven by technology – specifically, technology that transforms and/or displaces solutions, processes etc., across a supply chain or parts of it. Put another way, while disruptive technologies enable innovative, disruptive solutions (built on these innovations), they also give rise to new business and process models that drive significant economic and service benefits.

Here we identify and explain some key disruptive technology categories:

Technology category - Cloud A range of technologies that are by definition consumed – efficiently and flexibly – as an online“service”(versus as a purchased or licensed asset). The cloud paradigm shifts

the emphasis of computing from transaction processing to connectivity and interaction.

Conceptually, cloud is unified in a reference model or stack, typically broken down into basic layers: Infrastructure as a Service (IaaS), Platform as a Service (PaaS), Software as a Service (SaaS). Cloud-based software or solutions (developed on PaaS) usually leverage Service Oriented Architectures (SOA) for intra- and inter-system integration.

Application Programming Interfaces are inherent in cloud solutions (another stack layer for integration/connectivity [iPaaS] is now emerging as well), and service-oriented architecture is being superseded by the more flexible and powerful“micro-services” architecture.

Technology category - Data A range of technologies that enable the management and use of more data in

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can analyze, learn, make judgments/ prescriptions, and initiate actions without “humans in the loop.”

Technology category - Robotics These technologies encompass a range of physical agents (robots) that can – on a“directed”/ programmed basis or autonomously – take actions and accomplish tasks/objectives in a physical environment.

These agents can range from household or business robots to driverless/ autonomous vehicles to flying drones. Virtualized robotics technology can replace or complement human capital.

Technology category - Blockchain A technology, or value-exchange protocol, enabling a secure way of conducting online transactions, blockchain is a“decentralized digital ledger”that records transactions across large numbers of globally distributed computers. Registered transactions (e.g., the assignment of rights to digital assets) cannot be altered retrospectively and processes can be programmed to occur when certain conditions are met (without recourse) through a capability known as “Smart Contracts.”The first blockchain application was Bitcoin, which was built on a blockchain architecture.

important new ways: processing larger volumes of data, new types of data, and generally processing data faster. NoSQL goes beyond relational databases to enable processing of Big Data (for example, it is designed to scale horizontally across many servers). NoSQL databases and other more specialized databases enable the organization and processing of unstructured data (such as text, images and other objects). In-memory databases, like SAP Hana, go beyond diskbased technologies and enable real-time data management and utilization.

Technology category - User Experience (UX) A range of technologies that effectively adds other dimensions to the decades-old, two-dimensional man-machine interface.

Looking ahead, Augmented Reality (AR) is a view of a real physical environment, digitally augmented with sensory inputs such as sound, video, graphics or GPS data.

Virtual Reality replaces the real physical environment with a simulated one in which a user can be active.

Technology category - Mobile

Technology category Analytic/ Algorithmic

A range of technologies, which most visibly includes mobile wireless networks, smart “phones,” tablets and other wireless devices, as well as GPS,“apps” (that can be used for data/image capture, etc.), and connectivity with other networks and cloud services.

An extensive, complex group of technologies which include (as well as underlie) AI, machine learning, natural language processing, image recognition, predictive analytics, et al. (what IBM calls“Cognitive Computing”). Collectively, these technologies

Technology category - Internet of Things (IoT) A composite technology that internetworks physical objects (vehicles, appliances, medical devices, buildings, etc.) that are embedded with electronics, software, sensors, actuators, and network connectivity. These objects are able to collect and exchange data, be sensed and/or controlled remotely, etc. IoT vastly expands the collection, processing and actionability of data from and in the physical environment.

Technology category - Open Source Not so much a technology, Open Source is really a low- or no-restriction“right to use”model that applies to technologies.

In software, it allows developers to access, modify, use, share, and co-develop source code and applications. In effect, Open Source equates to non-proprietary versions of a technology – including software

OCTOBER 2017 25

languages (Apache), databases (MongoDB), cloud platforms (OpenStack), blockchain (Ethereum), and many others.

Key characteristics that are common among some of these technologies: • Virtual (as-a-Service) • Open Architecture (SOA/APIs) • Network/Ecosystem (among devices and other platforms) • Distributed Apps/Mobile • Big, Fast, Multiform Data • Analytics/Algorithms • Open Source • Easy/Cost-Effective Consumption • Peer-to-Peer It is important to consider disruptive technologies, and the solutions the technologies enable, within a process framework. New, potentially disruptive technologies are continuously arising and the pool of technologies grows over time.

New or existing solution providers exploit technologies to unlock value through entirely new solutions or through new features/ functions and provide their solution users new or better ways to meet their objectives.

But technologies and solutions do not just suddenly materialize – they incubate for a longer period of time, over which early indications can be missed. Occasionally, a disruptive technology is showcased (initially) by a specific business solution.

In short, disruptive technologies give rise to innovative and sometimes disruptive solutions. For example: Uber. As a platform, it provides a much better solution than taxis for people in need of rides, and is based on a range of enabling disruptive technology models and components. And for strategic procurement technologies, it is less the technologies that may be pertinent, but more the types of solutions they can enable.

Putting it all together The following three scenarios highlight how the various technology components above might work together to provide new types of supply risk management solutions in the decade to come.

Scenario 1: Risk-Sensing Supply Chains in Aerospace & Defense Imagine for a moment that it’s 2025 and a group of new and old aerospace manufacturers have banded together with technology and intelligence providers to

26 OCTOBER 2017

drive resiliency deep into the supply chain.

The rise of self-flying personal aircraft and remotely controlled transportation pods has taken the entire world by surprise, with demand skyrocketing globally, especially in countries without national highways and high-speed rail systems.

Maintaining supply chain integrity and quality as demand spikes amidst rising weather-based supply chain disruptions is considered a priority in both the private and public sectors – with tight collaboration among participants to share aggregate supplier quality, demand planning, repair, maintenance and other information. In addition, as mounting concerns over more advanced terrorism plots and government espionage continue to persist, especially from lower-tier meddling (e.g. Chinese component suppliers) affecting electronics within the supply chain, extended supply chain visibility and control is more important than ever.

Fortunately, supply risk solutions have managed to stay one step ahead of mounting

risk factors as this new market has exploded in growth. The breakthrough element in proactive risk management has centered on the creation of“risk-sensing”supply chains that take their cue from earlier applications of AI models which were used in more targeted manners in the past.

As ever more sources of data crop up and connectivity within the supply chain has become available – from applications that track worker locations and patterns in lower-tier supplier facilities to the triangulation of delivery confirmations from specific suppliers and facilities – intelligent systems are able to crunch through massive datasets to predict many potential risk elements before they occur.

As noted, information validation and triangulation is central to the identification of outlier inputs that could flag risk elements.

For example, to confirm delivery from specific supplier facilities and insure the integrity of supply networks, not only are documents matched and archived via blockchain-based

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electronic data interchange (EDI) networks, but pallets and items are tracked via sensors in transit (and in warehouses) using GPS and cellular devices, and satellites provide a third layer of monitoring and oversight of goods in transit to the container level.

The combination of these inputs, which is further fed (in the aggregate) by cooperating government data sources, technology and mobile companies, provides a massive foundation to identify potential outliers that could lead to incidents – either those which are detectable in short order, or those which could become a potential menace down the line. This in turn creates flags for supply chain risk analysts to launch pre-emptive investigations while, in the highest risk cases, creating pre-emptive mitigation programs as well even before the confirmation of predictive risk alerts.

Enabling technologies include: AI, Blockchain, Big Data, Analytics/Algorithmic, Internet of Things (IoT), Cloud, Data and Mobile.

Scenario 2: Peer-to-Peer Supplier Monitoring and Extreme Transparency in Food, Retail and CPG After a series of global scandals, the“fight” for safe, natural resources in the food, retail and CPG supply chain in 2025 has given way to collaboration amongst participants at all levels of the supply chain to create extended risk visibility and sustainability efforts, built on collaboration and peer-topeer monitoring. The result is unprecedented visibility and greatly reduced risk – and new levels of trust among all customers – businesses and consumers – built on transparency.

One example:“farm to table”is now not only a restaurant slogan, it is an expectation that every meal served and whatever appliances, processes or other products are used in the home, store or restaurant used to prepare an item will contribute to a traceable provenance that consumers can use to make decisions – whether items are coming from same county or from around the world (or both). These virtualized bills of materials for meals, food, products, appliances and other items are built on a multi-tier network data foundation.

Not only can end-consumers understand all aspects of traceability down to the lot level through scanning the 2025 equivalent of QC

codes on a majority of branded products on store or grocery shelves, but participants – even competitors – explicitly share data on suppliers (and suppliers on customers) to insure traceability and compliance. These many-to-many supplier and supply chain networks are noteworthy not only for the sea of data they collect but for their peer-to-peer aspect – all participants have full visibility into harvesting, production, testing, tracing and other inputs.

While these networks do not address commodity price risk of“soft”commodities, they confront, head on, many other supplier and supply chain risk elements.

For example, lower-tier suppliers are less likely to cut corners (e.g., substituting lesser products, using counterfeit ingredients or undocumented labor) based on the higher risk of having this information shared directly with customers and end-consumers. In addition, the blockchain-based archiving of information has stood up to legal review and challenges, having successfully been used in litigation to support corporate and class action lawsuits in the case of dangerous or substandard ingredients.

Financial supply risk (e.g., supplier insolvencies) have been reduced as well based on the ability of larger buyers to hunt for network data that might suggest financial risk and/or the potential for suppliers to cut corners to stay in business. In certain cases, these interventions have even led to new types of offtake agreements and peer-to-peer (non-exchange-based) futures and option agreements between trading partners to shore up at-risk suppliers before incidents occur – and/or other types of pre- or earlypayment financing schemes.

Enabling technologies include: AI, Peerto-Peer, Blockchain, Big Data, Analytics/ Algorithmic, Internet of Things (IoT), Cloud, Data and Mobile.

Scenario 3: Democratized, Aggregated, Social and Personalized Supplier Risk Ratings Consider a world where credit bureaus and Dun & Bradstreet-type ratings models have been disrupted by a new approach to risk scores and predictive analysis built on a foundation of democratized, aggregated and social inputs – with a push-driven AI framework doing the heavy lifting on top of all the combined data sets.

Think about how this can happen in practice. A buyer gets a notification from the supply risk “AI bot”about a small but strategic lower-tier supplier. It lets the procurement user know that: • LinkedIn has been noticing that supplier employees are starting to defect • Social chatter has indicated increasing negative sentiment – albeit only slightly • Glassdoor.com reviews have also been trending down • Some insider trading volumes are also up • Community rankings of the supplier from the Ariba network have surfaced some rumors After clicking into her risk dashboard, our category manager learns that what’s odd about this particular situation is that on-time delivery has actually improved. Other AP dashboard information incorporated into the risk framework suggests that finance is still paying on good terms.

But strangely enough, the dynamic discounting offer for 3% discount net 0 has suddenly been accepted. And most curiously, Rapid Ratings has reported that the supplier has declined participating in its FHR scoring for the last two periods.

Something to look into? You bet.

Especially because the personalized risk score for the supplier – after considering these factors together – suggests a high incident (insolvency, disruption, quality issue, etc.) potential.

But it’s just another day at the supply risk management virtual workbench in 2025.

Enabling technologies include: AI, Social, Big Data, Analytics/Algorithmic, Cloud, Data and Mobile.

Conclusion It’s difficult to overstate the intricate nature of digital supply risk management these days, with so many interlocking – and, at times, overlapping – elements of disruptive technological advancement.

And that’s just where we stand today.

As for the future, whether it’s employing risksensing supply chains in the A&D sector or receiving social-media-input driven supplier risk ratings from an AI bot on your iPhone, one thing is certain: digital technology is not only at the center of managing supply risk, but is the primary driver of it.

-www.spendmatters.com

OCTOBER 2017 27

Materials handling market on growth trajectory A look back at the Materials Handling Middle East 2017 that has not only grown over the years but also established itself as a premier networking event for people within the industry 30 OCTOBER 2017

T

he Middle East’s dedicated trade fair for intralogistics, supply chain management, freight and cargo concluded on September 13, bringing a successful end to three days of networking and discussions of the latest trends and innovations in the market today.

Materials Handling Middle East 2017 featured 126 exhibitors from 21 countries and welcomed 3,300 visitors from 50 countries at the Dubai International Convention and Exhibition Centre. The ninth edition of the biennial three-day event saw the participation of seven of the world’s top 20 materials handling systems suppliers, including the global top three of Daifuku from Japan, German company SSI Schaefer, and the American-headquartered Dematic.

It also featured major local suppliers and service providers such as Kanoo Machinery, Al Futtaim Motors, General Navigation and Commerce Company (GENAVCO), SPAN, and ACME, while a two-day Supply Chain and Logistics Forum and a Forklift driving competition ensured visitors and exhibitors alike were informed and entertained.

Much of the discussion on the show-floor centred around the readiness of warehouse automation in the GCC, with exhibitors showcasing a full range of wares from manual wracking and semi-automated order picking solutions, to fully automated high-bay warehouses incorporating Artificial Intelligence and the Internet of Things, otherwise known as Industry 4.0.

According to research firm Markets and Markets, the GCC’s automated material handling equipment market will grow 8.6 per cent annually through to 2023, when it will reach USD500 million from USD278 million in 2016. That helps explain why Dematic, one of the world’s leading specialists in automated intralogistics solutions, was a debut exhibitor at Materials Handling Middle East 2017, along with the fact that in January 2016, it secured the contract for what will be the Gulf region’s largest automated distribution centre upon completion toward the end of 2018.

Michael Kreeft, Sales Manager from Dematic’s European office which handles the EMEA region, was on-hand at Dematic’s Materials Handling Middle East 2017 booth.

EVENT

He said while he couldn’t go into specifics, the Dubai-based project was the largest Dematic had secured in the company’s 100plus year history.

“We signed the project in January 2016 and it’s going live next summer hopefully,” said Kreeft, adding that it was in the general merchandise industry.“There’ll be people working in pick stations, but it’s highly automated. We have project managers working on it, and 50 resident engineers based here along with a customer service office. It’ll take two and a half years to build along with testing and then it’ll go live.

“We specialise in highly automated solutions but we know in this region labour is cheaper so the ROI is always more difficult with automation. However, the addition of VAT in 2018 will eventually lead to higher salaries comparable to Europe, making automation more attractive,”added Kreeft.

UAE-based ACME is a regular exhibitor at Materials Handling Middle East, and a full spectrum industrial and warehouse automation solution provider with more than 40 years’ experience in the Middle East. This

According to research firm Markets and Markets, the GCC’s automated material handling equipment market will grow 8.6 per cent annually through to 2023, when it will reach USD500 million from USD278 million in 2016

year the company was launching Cavalry, a semi-automated man to goods order picking solution. Holger Humburg, Vice President of Projects at ACME, said the ACME-designed solution is a mobile version of the Sort to Light system, using a guided manned miniload crane, and capable of travelling along aisles 100m long and up to 25m high.

“When we tell anybody that we have a fully automated system, some people get scared because they need trained people for operation, and they need maintenance from experienced staff,”said Humburg.“People can operate Cavalry without specialist skills or qualifications, and that’s why we’re going to the market with a more or less semiautomated system. This type of system will be particularly popular in this region because the first step of automation is semiautomation and we would use it for different goods with small and midsize throughout. If you have standard operations to deliver, for spare parts or pharmaceuticals with delivery once a day, you can manage with Cavalry.”

Humburg said it was important for the ACME to continue exhibiting at Materials

OCTOBER 2017 31

EVENT

Handling Middle East to keep its existing and prospective customers up-to-date with its latest solutions.

“We’ve been in the market for more than 40 years, mostly as a supplier for static wracking and shelving systems,”he added.“Two years ago, we started with semi-automated and automated systems, and we’ve now secured a huge automated project for Saudi Arabia’s second largest dairy operation where we’re installing their main distribution centre with 25,000 pallet locations. It’s a huge step for us.”

Other top 20 worldwide suppliers at Materials Handling Middle East 2017 were Mecalux from Spain, Beumer Group from Germany, and Swiss companies Swisslog, and Kardex Remstar. UAE Company Kanoo Machinery was also on-hand as the regional agent for its material handling equipment brands Hyster, Utilev, Aisle-Master, and Combilift. Mohamed Elabd, Brand Manager for Kanoo Machinery, said the rental division of its material handling equipment department was becoming increasingly important as a revenue-generating stream.

“Our rental division has grown by 25-30 per cent over the past two years, and there’s more and more enquiries now,”said Elabd.

“Most of the third-party logistics providers are asking for rental equipment for long-term leases of three to five years. We were one of the first companies to offer rental of material handling equipment and in the past three-

32 OCTOBER 2017

four years, it’s really grown. “It’s popular firstly because customers don’t have to have service team. If there’s a problem with the machinery we will fix it. It’s hassle free and the most important part is there is very little initial investment and risk.”

Materials Handling Middle East 2017 also featured the second Forklift Operator of the Year – a unique competition where more than 80 of the UAE’s most skilled Forklift jockeys were judged on their ability to safely and efficiently manoeuver three-tonnes of electric forklift machinery in tight and narrow spaces, replicating a warehouse environment. The competition was sponsored by SPAN, which provided its Jungheinrich forklifts to be guided by the finest operators from more than 30 companies, including IKEA, Aramex, Global Food Industries, Airlink International, Unilever, RSA Logistics, and Agility Global Logistics.

After several preliminary rounds, the contest was eventually narrowed down to several finalists, with Deepak Kataria from CWT-SML Logistics crowned the Forklift Champion of Materials Handling Middle East 2017. Kataria, who had learnt his trade at CWT-SML Logistics, and for whom he had worked for seven years, said,“It’s a great thrill to win this year, the competition was tough with many highly-trained forklift operators, but I was confident in my ability to impress the judges enough. I’d like to show my appreciation to my company who nominated me and my colleagues for this competition

and I look forward to coming back in two years to defend my title.”

Representing more than 200 brands, Materials Handling Middle East 2017 also introduced a new Transport and Logistics section to the show floor, putting the spotlight on commercial vehicles and adding more focus on a sector that is poised to experience significant growth in the region.

Ahmed Pauwels, CEO Messe Frankfurt Middle East, the organiser of Materials Handling Middle East, said,“Significant investment is being made throughout the Middle East to develop the materials handling industry and support its growth, and key industries such as e-commerce, retail, and FMCG will fuel further growth.

“At Materials Handling Middle East, the entire intralogistics and supply chain needs are covered, and we’ll continue delivering an interactive platform benefitting all stakeholders. The show has not only attracted participation from leading industry brands, but has also garnered an encouraging response from regional trade buyers, local governments and industry professionals. This underscores the important role the show plays in creating valuable networking and interface opportunities among key stakeholders and this rapidly expanding market.”

The 10th edition of Materials Handling Middle East will take place in 2019.

More information is available at: www. materialshandlingme.com

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GUEST COLUMN

Getting O with the program Monzer Tohme, Regional Vice President, Middle East & Africa, Epicor Software issues guidelines for the manufacturing industry as they get ready to transform digitally

34 OCTOBER 2017

ne of the key findings of a recent PWC report found that the buzz around Industry 4.0 has moved on from what some saw as marketing hype in 2013 to investment and real results today. But preparing for a digital future is no easy task. It means developing digital capabilities in which a company’s processes, people, culture, and structure are all aligned toward a set of organisational goals. And for most companies the ultimate aim is growth.

In manufacturing, the challenges for companies are multifarious because digital transformation impacts every aspect of operations and the supply chain, from equipment and product design, through to production processes, logistics and service.

Industry 4.0 trends now require new, more sophisticated levels of collaboration across geographies on everything from product roadmaps and engineering specifications to production line management and information about parts.

A little less conversation a little more action The PWC study found that companies expect to significantly increase their portfolios of digital products by 2020. In addition, our own research has highlighted the importance businesses are placing on digital transformation today, with two-infive industry professionals agreeing that digital transformation will offer them strong opportunities for growth in the future.

Whatever manufacturing model they are working to, such as engineering-to-order (ETO), make-to-order (MTO) or make-tostock (MTS), manufacturers are increasingly working with an ever-broadening range of software systems. The challenge is to ensure that software integrates properly and data is shared effectively across all systems.

Another challenge is that migrating to new solutions can incur heavy costs. Many manufacturers have existing legacy systems and technologies that do not provide the functionality, integration and upgrade capabilities required to become a truly digital organisation. These organisations

should be prioritising what technology is needed at different points in their digital transformation journey.

The reality is that digital transformation is an ongoing process for most companies – they are required to continuously assess when and how fast to migrate their technology. For some, this means struggling with digital debt that can restrict the potential of the business for growth.

Digital debt embodies itself in IT cost burdens, due to decisions taken on legacy technology years ago, but also in terms of unsupported old releases, or isolated systems that may hold a business back from its potential–in fact, in a recent report, Forrester defines digital debt as: ‘the opportunity cost resulting from retaining technologies, systems, and processes that constrain a firm’s ability to become a digital business.’

To avoid being constricted under the strains of digital debt, manufacturing businesses must adopt technology that’s customer-led and insight driven. Forrester recommends three steps for manufacturers to migrate from legacy systems in support of a customer-centric operating model.

Identify migration priorities The first step is to understand the role of digital transformation and how it can help your manufacturing business grow. The best way to do this is to analyse the current state of all systems, from R&D, procurement, production, warehousing, logistics, and marketing to sales and service. Assess these systems for their ability to put the customer at the centre of business operations—for example, do they allow for customer engagement? Do they help a customer achieve what they want to achieve?

Businesses should also assess systems for their ability to provide and act on insights, and work in real-time, whilst connecting with other areas of the business.

Crucially, however, make sure you assess the capability of technology against your business goals. Once this assessment has been done, manufacturers can identify migration priorities in their journey towards digital transformation.

Estimate costs one pain-point at a time It’s important that organisations don’t try to radically overhaul all of their systems at once. A report by Accenture suggests that for organisations to shed systems and behaviours that are relics of the past, they need to establish spending priorities based on what will yield the best returns, and help them keep pace with growth objectives.

Invest in technologies that add strategic business value and develop organizational capabilities that are aligned with your business goals. For example, investing in a cloud can expand collaboration along the value chain.

For some systems, a complete and immediate replacement might be the best option. But for others, such as for applications that work well but simply look a bit out-dated, a full replacement might not be necessary straight away. Here, an update might be a more costeffective and immediate solution.

Map the remediation journey

Remaining competitive means being able to put customers first, and putting customers first requires manufacturers to grow and work in the digital landscape

As Forrester recommends, manufacturers need to ‘build your migration roadmap consistent with your migration urgency – your digital debt.’Those that attempt to retain complex, disconnected, networks of legacy applications and systems will limit their ability to put customers first, constrain their digital transformation and restrict business growth.

That’s why it is so important for organisations to set out clear goals for legacy migration and constantly re-evaluate their progress.

Turn insight into action and empower your business with the right people, processes and culture to foster change. Digital transformation has already had a profound impact on the manufacturing industry and it shows no sign of slowing down. Remaining competitive means being able to put customers first, and putting customers first requires manufacturers to grow and work in the digital landscape.

The digital model fuels key competitive differentiators, including the ability to extend transactions into experiences, to connect with customers and suppliers anytime and anywhere, and to translate data into strategic insights. Manufacturers that embrace digital transformation now are set to pave the way for business growth tomorrow.

OCTOBER 2017 35

INNOVATION

How to create the perfect

supply chain

Manufacturers and retailers need to create a new supply chain model to cater directly to the end user.

Tom Craig, President, LTD Management, talks about the factors to consider to achieve this

36 OCTOBER 2017

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any retailers and manufacturers struggle with how to service e-commerce customers. This is a significant change from shipping to stores and to retailers - both are types of intermediaries. They must now deliver to end-use customers.

There are assumptions that must be established like: First, the company is launching an e-commerce programme for selling and understands being able to compete on meeting the dynamic requirements with customer expectations. And second, it is considering more than the fulfillment segment. It is looking to the total supply chain.

The assumptions are important to the ‘what you want’ and ‘how to do it’ issues. They help to define

INNOVATION

1) Process Everything starts with the process, which is viewed as the what is done. a) Defined/Scope: The supply chain process starts with and runs from the end customer back through the factory. Recognizing the total scope/process is needed to reduce operating issues, now or down the road. b) Pull: The placement and movement of products in the supply chain is based on customers ordering. Those orders trigger the pull replenishment inventories through the supply chain – which extends to the factories. This is different from standard ways of responding to orders from retailers. Now, the manufacturer has responsibility for the total supply chain.

2) Technology a) Visibility: You need visibility across the supply chain – to know where all inventory is; both at various nodes and in-transit.

Add to it the movement of orders and other needs. What do you have now? What do you need? This is important for replenishing fulfillment centers b) Integration: Bring the different areas and technologies together at factories, suppliers, warehouses, and logistics providers – warehouse and transportation. It is important to identify and correct gaps.

3) Velocity a) Inventory: It must move quickly to keep up with customer expectations but not drown the company in excess inventory.

Forecasting is even more challenging with e-commerce. Inventory velocity can counter this. The design must recognize this need.

E-commerce is more demanding that the usual make and ship to retailer distribution centers and to stores. Underlying this is process integration among the various nodes in the supply chain – suppliers, manufacturing, and storage. b) Customer expectations: This is delivering orders timely.

4) Network a) Fulfillment centers (many and where): To meet the two-day delivery expectation, how many fulfillment centers are needed?

And where should they be approximately located for startup? This also presents the manufacturer or retailer with an understanding of whether one outsource provider can meet all location needs or if multiple providers are needed.

5) Metrics the structure for the operations and are meant to meet customer expectations. These also provide needs and requirements with any possible logistics outsourcing providers. Shown below is the supply chain structure – which are interrelated and linked to each other – that are important for start and ongoing.

They are the essentials. An important point is that the design is not what others do, but rather what the firm needs to compete and succeed.

Performance metrics are needed to measure and monitor how well the program is working. The need is for a few, critical measures.

The use of metrics means that corrective actions, if needed, can be made sooner.

Completed actions for these points may not be implemented for launch. For example, total supply chain visibility may not be operational, but working to advance it is the key. Others may involve making changes to improve inventory velocity or adding more fulfillment centers as the program grows. -www.ltdmgmt.com.

Tom Craig can be contacted on tomc@ltdmgmt.com

OCTOBER 2017 37

TRENDING

The logistics of

Hajj Most logistics challenges are doable. Hajj, on the other hand, has all the makings of a logistical headache. Yet, year after year, for several hundred years now, it seems to have worked out a system that allows the annual pilgrimage to be successful. We take a look at this year’s numbers

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ore than 2.35 million pilgrims have completed Hajj this year, fulfilling their religious duty in peace and unity at the holiest city in Islam, Makkah. Saudi Arabia welcomed the world to the five-day pilgrimage, one of the five pillars of Islam, with pilgrims from dozens of countries coming together in what many consider the highlight of their spiritual lives.

In all, 2,352,122 pilgrims travelled to Makkah for this year’s Hajj, 1.75 million of whom were from outside the Kingdom. Just over a million came from Asia, and nearly 400,000 travelled from non-GCC countries. Close to 200,000 arrived from African countries. Nearly 100,000 pilgrims travelled from European countries, while the United States and Australia together accounted for around 25,000 pilgrims. Almost 33,000 came from GCC countries. “Welcoming pilgrims from all around the globe is the honour and duty of Saudi Arabia, under the auspices and direct guidance of the Custodian of the

38 OCTOBER 2017

TRENDING

Hajj: by the numbers

Muslim wearing ihram clothes and ready for Hajj

Other examples of the resources that the Saudi Authorities deployed to ensure a safe and smooth Hajj season include: 51,700 - staff members representing more than 20 governmental entities working around the clock 14,000 - staff members from the Makkah Region Development Authority to facilitate pedestrian movement at the holy sites and operate and maintain the ‘Hajj metro’ 6,300 - staff members from the General Presidency for the Affairs of the Grand Mosque and the Prophet’s Mosque providing cold Zamzam water for pilgrims at prayer sites 4,480 - staff members providing municipal services for pilgrims, citizens and residents in Makkah and the Holy sites 4,470 - staff members from the General Department of Passports to prepare and equip the entry ports to receive pilgrims 3,706 - scouts providing a wide range of services such as directions to lost pilgrims 2,935 - volunteers under the Ministry of Hajj from different nationalities and backgrounds 2,280 - Civil Defence staff members for firefighting and emergency rescues, overseeing safety measures and contributing to medical evacuation 1,650 - media professionals providing media services and live coverage to more than 104 TV channels and 19 radio stations 1,500 - technicians 1,307 - staff members and technicians from the National Water Company 279 - staff members from the Saudi Food & Drug Authority to ensure food safety 240 - inspectors from the Ministry of Labour and Social Development to inspect establishments 130 - help desks manned by the Ministry of Islamic Affairs, Dawah and Guidance to answer pilgrims’ questions in all languages 67 - Civil Defence centres in Makkah, Madina and the Holy sites OCTOBER 2017 39

TRENDING

Two Holy Mosques, King Salman bin Abdulaziz and Crown Prince Mohammad bin Salman.

We make every effort and spare no expense in ensuring that pilgrims have a peaceful and fulfilling Hajj,”said Dr Awwad Alawwad, the Minister of Culture and Information.“Whether it is providing lodging at Mina or staffing health facilities or giving pilgrims helpful information bracelets, we do everything we can to take care of those traveling to Makkah. Our efforts to improve this experience are constant and ongoing,”Dr Alawwad added.

As always, the creation of a temporary city to accommodate more than two million people meant that Saudi Arabia again had to go to extraordinary lengths to protect the health, safety and well-being of pilgrims.

There were 15 medical centres at Makkah and nearby Holy sites, staffed by more than 30,000 trained medical professionals. During the course of Hajj, doctors performed more than 2,600 free surgical procedures, and nearly 60,000 pilgrims received some form of medical treatment.

Of the foreigners who travelled to Saudi Arabia for Hajj, more than 1.6 million arrived by air, most traveling through Jeddah and Madinah, where airports have special terminals dedicated exclusively to handling Hajj pilgrims. These facilities, paid for and constructed by Saudi Arabia, are just one example of the fruits of the tens of billions of dollars Saudi Arabia has invested since

40 OCTOBER 2017

Muslims at Mount Arafat in Saudi Arabia

the 1950s to improve and enhance access to Makkah, the upkeep of the Grand Mosque, and the Hajj experience itself.

As always, a focal point of Hajj was the vast tent city at Mina, where pilgrims stayed in airconditioned tents constructed of fire-retardant materials. In the tent city, the pilgrims were grouped by nationality. Of course, a massive undertaking like Hajj can sometimes be daunting and confusing for pilgrims, which is why 2017 marked the second consecutive year that pilgrims were issued individual electronic identification bracelets.

Each bracelet contained a pilgrim’s personal information and any special medical needs they might have. The devices, which are water-resistant and contain GPS data, also were used to provide pilgrims with up-to-date information on prayer schedules and other details related to Hajj. The bracelets could also be used to connect with a multi-lingual help desk in which other, more detailed questions could be asked and answered.

The utility of the wrist bracelet was augmented by regular Hajj updates texted by the Saudi organisers to the pilgrims’mobile devices. All information was also updated to two websites dedicated to Hajj 2017: SaudiWelcomesTheWorld.org and Hajj2017.org.

The spirit of Hajj Hajj, of course, is about more than raw numbers. Each pilgrim has his own deeply

personal experience. And pilgrims bring their own unique perspective to this fulfilment of a religious duty. One of the oldest pilgrims was 104-year-old Ibu Mariah Marghani Muhammad, from Indonesia, who arrived in Jeddah on August 26 and later in the week said in Makkah that her pilgrimage journey was an “experience that I will never forget”.

Another young Indonesian pilgrim, Mochammad Kahmim Setiawan, travelled 9,000 km by foot on a yearlong“spiritual adventure”before he arrived for this year’s Hajj. These are just several of thousands upon thousands of personal stories that illustrate the importance of

Hajj to Muslims the world over The spirit of Hajj was perhaps best captured by senior Saudi cleric Sheikh Saad Al Shathri in a sermon delivered August 31 at Mount Arafat, who said that one of the primary intentions of Hajj is “to cultivate benevolence in people’s hearts.

This is no place for partisan slogans or sectarian movements.”

As pilgrims begin to return to their home countries, Saudi Arabia is already beginning to plan for next year’s Hajj. The work of organizing and hosting the world’s largest annual gathering never stops.

Source: Ministry of Culture and Information, Kingdom of Saudi Arabia

PORT AND FREE ZONES SPECIAL

Ports and free zones special

Free zones are of utmost importance to global supply chains. As we move into a technology led present and future and logistics operations from start to finish change; it is the free zone that grows and adapts to the changing business scene, facilitating trade, growing the economy, enhancing employment opportunities and improving a country’s competitive position.

We have compiled in-depth information and first hand opinions from the CEOs of the regions free zones and ports in order to get this never before seen information and strategies.

In this special feature this issue, we take a closer look at the many flourishing free zones in the country and region bringing in-depth news, analysis and interviews about how these multiple free zones are going to be at the forefront of their respective country’s progress and success.

OCTOBER 2017 43

Motivated by

excellence

DP World’s Mohammed Al Muallem, SVP and MD – DP World, UAE Region and CEO – JAFZA, speaks to Munawar Shariff about the current business climate and their positive work ethic of excellence in order to achieve future growth

How is business till date in 2017?

2017 has been a good year for us so far, and we have been able to deliver ahead-ofmarket volume growth. The UAE handled 7.7 million TEU in the first half of the year, growing 4.3 per cent year-on-year. Market conditions have stabilised as well, which added to our success and we are looking well placed to meet our yearly expectations.

There’s reason to be optimistic about the future. A BMI Research report published by Fitch Group forecasts a steady rise in trade of 4.35 per cent year on year in 2017 for the UAE, driven by a five per cent growth in imports and exports of 3.7 per cent. The report sees positive economic growth for the UAE over the next five years due to government plans to diversify the economy through the development of trade, the service sector and tourism.

These trends will further encourage prospects for the logistics, warehousing and materials handling sector, increasing demand and attracting more businesses to the country who will need logistics support.

44 OCTOBER 2017

Our strategy has been to stay focussed on our business ethos of anticipating and providing our customers with services they will require, investing in our people and delivering increased value to our shareholders. By thinking ahead, foreseeing change and innovating we aim to create the most productive, efficient and safe trade solutions globally.

How is the company assisting the government’s vision in terms of diversification of the economy?

DP World supports economic diversification in line with the directives of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, to provide services and incentives to traders / investors that meet their aspirations and provide value added benefits to compete in local, regional and global markets.

Our flagship Jebel Ali Port and Free Zone is a classic case study on how to get the right

connectivity, multi-modal transport and smart digital technology to work together to improve the environment for business.

The importance of the logistics sector in Jafza, and Dubai as a pillar of the economy with global trade partners, is highlighted by the fact that there are 328 logistics companies from 29 countries operating within Jafza.

The Jebel Ali Free Zone (Jafza) is a key part of our diversification strategy, allowing us to attract investors and industries keen to capitalise on the trading advantages and investment opportunities that Dubai provides. Despite conditions facing the global economy, Jafza, has been able to progress through flexible policies and innovation.

The strength of this is borne out by Jafza’s trade reaching US$80.2 billion in 2016, with non-oil foreign trade growing by 17 per cent from 23.9 million tonnes to 27.9 million tonnes year-on-year. Jafza attracted 267 new companies from nearly 50 countries worldwide in the first half of 2017, marking a six per cent growth from the corresponding

FREEZONE SPECIAL

the first half of 2017, with gross container volumes growing by 8.2 per cent year-onyear, ahead of the market. We benefitted from the improved trading environment in 2017 and market share gains from the new shipping alliances, driving volumes in the second quarter. The robust performance demonstrates that we have the right strategy and the relevant capacity in the key markets.

DP World, UAE Region volumes have improved and we continue to expect our portfolio’s volume growth to outperform the market.

What will it take to be the number one port?

How achievable is this target?

We do not compete for rankings. Instead, we focus on building productivity across our services and operations, ensuring continued efficiency that makes us the premiere trade hub in the region. The successful model we have created in Jebel Ali of a world class port and a thriving business free zone is replicated across the world. Our London Gateway development is modelled on Jebel Ali, which is built entirely on the port centric integrated logistics model – a model DP World replicating wherever possible throughout its portfolio of more than 78 operating marine and inland terminals. period last year, with local and regional companies accounting for almost 60 per cent of the new entries.

The value and volume of trade through Jafza underlines the strength of the national economy and its ability to adapt to global trading conditions, create investment opportunities and open up new markets to exports from the UAE. Our ongoing investments and expansions at Jebel Ali Port and Free Zone aim to maintain our competitiveness globally, strengthening the country’s position as a global and regional business hub and a centre for trade. This will open up new markets for companies operating in Jafza and Dubai.

Tell us more about the various business units that are a part of the DP World umbrella?

Container handling is the DP World’s core business and generates more than three quarters of its revenue. DP World UAE portfolio includes Jebel Ali Port, Mina Rashid

Cruise Terminal and Coastal Berth, and Al Hamriya in Dubai city.

In addition to its marine terminals business, DP World Group also operates P&O Maritime, World Crane Services, DP World Cargo Services, and DP World Intermodal.

Our recent acquisitions of Dubai Maritime City and Drydocks World will strengthen our ability to help diversify Dubai’s economy.

DMC will provide us space to develop more economic zones, which on top of its proximity to Port Rashid, will further incentivise industries to bring in more business. Drydocks World will help boost Dubai’s shipbuilding capabilities, augmenting the success we’ve met through Jebel Ali Port by adding shipbuilding and rig repair services.

How is DP World tackling the economic slowdown, and specially how has Jebel Ali Port performed under these circumstances?

DP World handled 34.0 million TEU (twenty-foot equivalent units) across its global portfolio of container terminals in

When it comes to technology, what in your opinion is the biggest trend that needs to be incorporated to enhance the daily operations?

Automation and cyber-security – those are the key technologies that need to be focused on under current market conditions, and are equally important as they go hand in hand. Automation is vital to improving efficiency and productivity, reducing costs, and improving overall safety in the maritime sector. Trade volumes will just keep on increasing over the coming years, and automation is the key to being able to meet those increased volumes in a timely manner.

And with increased automation, cybersecurity naturally becomes increasingly important. The more we see automation adoption, the more systems and networks will need extra security. Increasing dependence on automation means that any disruption will have increased consequences as well, as we saw with the recent NotPetya attack on the world’s maritime sector.

OCTOBER 2017 45

Sultan Ahmed Bin Sulayem, Group Chairman and CEO, DP World

The pursuit of glory We take a look at how Jafza continues to be one of the world’s most innovative freezones 46 OCTOBER 2017

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ast year, Jebel Ali Free Zone, a subsidiary of global trade enabler DP World, managed to attract 470 new companies and boasted a growth rate of seven per cent over the previous five years. These aren’t simply statistics we’re pulling out of a hat, the

PORT AND FREE ZONES SPECIAL

news was confirmed by DP World Group Chairman and CEO Sultan Ahmed Bin Sulayem at The Multaqa Jafza 2017.

For the uninitiated, the Multaqa Jafza is a gathering of consultants, agents and legal firms working to promote Jafza products and services worldwide under the banner

“Building a Better Business Together”. This year’s edition was attended by industry bigwigs like Mohammed Al Muallem, Senior Vice President and Managing Director of DP World UAE Region and other senior representatives from foreign embassies legal consultants and strategic partners.

“Jafza works with its partners to attract businesses looking to set up their regional base of operations in the UAE,” Bin Sulayem said.“By providing everything that a business needs in line with international standards, the Free Zone attracted 470 new companies last year. Despite the challenges facing the global economy, this translates to a combined annual growth rate of seven per cent over the five years leading up to 2016.”

Of the 470 companies established in Jafza last year, 58 per cent came from the Middle East, 21 per cent from Asia-Pacific, 16 per cent from Europe, 3 per cent from the Americas and 2 per cent from Africa.

“As part of its business strategy, Jafza has continued to attract foreign investment in key economic sectors that add value to the local economy and other related sectors, helping to drive the UAE’s s economic development forward,” Bin Sulayem added.

The fittingly proud CEO also noted that Jafza’s long-term strategy is to become the world’s leading provider of sustainable industrial and logistics infrastructure solutions by upgrading its infrastructure, products and services. The approach is key in establishing Jafza’s reputation as the world’s most innovative free zone.

Jafza has been doing a number of things right on its trailblazing path to establishing new companies. The first of those right moves is supporting SMEs. Jafza provides significant support to small and medium enterprises through more than 10 business incubators, as well as workstations and business centres with ready-to-use offices.

These services promote entrepreneurship by creating an attractive environment to help entrepreneurs launch into the market with minimum lead time.

Second is enhancing customer experience. Jafza is currently working on an integrated project to re-engineer all its operational processes and services to improve the customer experience. This is being done through modernising electronic and smart services, reducing the time it takes to complete transactions and enabling companies to access a 24/7 service from anywhere around the world. There is no business without a customer.

And last but not least, developing new facilities. During the event, Jafza

OCTOBER 2017 47

PORT AND FREE ZONES SPECIAL

highlighted the launch of 110 new leasable warehouses in Jafza South. The development is aimed at meeting the integrated needs of the supply chain and logistics sector, enabling companies to improve their distribution platforms to regional markets. Elsewhere, Jafza has also launched a new residential complex within the Free Zone with 582 rooms to ensure that its workers enjoy the highest levels of

48 OCTOBER 2017

comfort by providing a safe and healthy living environment.

That’s not all, a multi-story car storage project is also under development at the National Industries Complex to support the burgeoning automobile trade in the Dubai Auto Zone (DAZ). Close to Jebel Ali Port, the project will allow companies to import and re-export vehicles easily. The five-storey car storage facility covers an area of 82,000

metres and will have the capacity to hold 12,000 cars at a time. It includes all the services needed by the automotive industry under one roof, most notably 4,000 sq metre for office space, in addition to workshops with an area of 1,300 sq metres to repair and modify cars, As part of the forum, a panel discussion entitled “Building Better Business Together” was held. The aforementioned panel

PORT AND FREE ZONES SPECIAL

discussion was moderated by Steven Henderson, partner Baker & McKenzie Habib Al Mulla, and included participants like Samer Qudah, Partner and Head of Corporate Structuring at Al Tamimi & Company, and Tahir Mahmood, Head of Business Development, Nasdaq Dubai.

“Nasdaq Dubai is the ideal platform for Jafza-based businesses to raise capital for growth through an IPO,” Mahmood said.

“We are in contact with a growing number of companies there that are interested in the global visibility and access to regional and international investors that are provided by listing on our market.”

“In my view, Jafza has not only successfully managed to retain its leading position as the most mature and credible free zone in the Middle East region, but also continued to reinvent itself to cater for a consistently changing business environment and reflect its commitment to support its companies in such a challenging economy,” added a similarly buoyant Qudah.

And why wouldn’t they be buoyant? Last year, Jafza consolidated its position as a major trading and logistics hub by growing its non-oil foreign trade by 17 per cent from 23.9 million to 27.9 million tonnes in 2016, worth US$ 80.2 billion.““The value and volume of trade through Jafza underlines the strength of the national economy and its ability to adapt to global trading conditions, create investment opportunities and open up new markets to exports from the UAE,” Bin Sulayem said.

In line with the directives of HH Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, Jafza also supports economic diversification to provide services and incentives to investors that meet their aspirations and provide additional benefits to compete in local, regional and global markets. Bin Sulayem noted that despite conditions facing the global economy, Jafza, has been able to progress through flexible policies and innovation.

“Jebel Ali Port plays a pivotal role in enabling international trade so companies operating in Jafza can import and re-export their goods and products to the various countries of the region.” Bin Sulayem said.

“Dubai Logistics Corridor, which connects Jebel Ali Port and Al Maktoum International Airport in one customs zone, reduces the time taken for the movement of goods between sea and air transport modes, making the area the main transit gateway in the Middle East.”

With Jebel Ali Port’s ability to handle heavy equipment; machinery, electronics and electrical goods accounted for 49 per cent of Jafza’s total trade and played a

key role in its rise. Petrochemicals, oil and gas sector had 16 per cent of total trade, followed by food and FMCG (eight per cent), textiles and garments (seven per cent), automotive and spare parts (six per cent).

That spike in trade is also a result of a number of right moves on the part of Jafza. Take for example its loyalty to China.

Meanwhile, China maintained its position as Jafza’s largest trading partner with US$ 11.3 billion worth of trade during the year with many Chinese companies in Dubai using logistics capability to re-export goods and products. Saudi Arabia is the second largest Jafza trading partner with US$ 7 billion, while Vietnam was third with US$ 4.3 billion through the import of electronics and electrical appliances, followed by the United States with a trade volume of US$ 3.7 billion.

There’s also a case to be made for the ongoing trade with the Asia Pacific region that came to US$ 32.4 billion, followed by the Middle East at US$ 27.2 billion, the European continent (US$ 9.9 billion), the Americas (US$ 5.5 billion) and Africa (US$ 5 billion).

The good times have carried on into 2017 too. During the first half of 2017, Jafza attracted 267 new companies from 48 countries around the world, marking a growth of 6 percent compared to the same period last year.

During the period, Jafza leased more than 340,000 sq metres of space for facilities for a variety of sectors and industries.

Plots of land were most in demand with 318,000 sq metres, with 11,500 sq metres of warehousing space, over 2,000 sq metres of office space and 3,700 sq metres in showrooms.

“These results reflect the vision and leadership of HH Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, and the wide range of initiatives to attract foreign investment in accordance with the Dubai 2021 and UAE 2021 plans.,” Bin Sulayem said.“New investment opportunities for businessmen and investors created have contributed significantly to the diversification of the economy and the growth of Jafza, helping us achieve the objectives of the national agenda.”

OCTOBER 2017 49

PORT AND FREE ZONES SPECIAL

Scaling up Munawar Shariff speaks to Rami Jallad, Group CEO RAKEZ, RAK FTZ and RAKIA, about the trailblazing economic free zone and how it plans to keep the momentum going

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ast year, RAK Free Trade Zone (RAK FTZ) welcomed a significant increase in its client portfolio, adding 600-plus companies to the 8,000 from 2015. It was also a great year for RAK FTZ in terms of accolades. The economic trade zone was honoured by different prestigious awardgiving bodies such as: the inaugural Burj CEO Awards, which named RAK FTZ as the Global Best Free Trade Zone; the Emirates and Europe Economic Forum, which recognised RAK FTZ as the

50 OCTOBER 2017

PORT AND FREE ZONES SPECIAL

OCTOBER 2017 51

Most Innovative Free Zone; and the Sheikh Saqr Program for Government Excellence (SSPGE) Awards, which honoured the free zone as the Best Government Authority in Ras Al Khaimah.

“The past year has been a very memorable year for us, and it peaked when we announced our collaboration with RAK Investment Authority (RAKIA),”said Rami Jallad, CEO of RAKEZ, RAK FTZ and RAKIA. “In May this year, RAK FTZ and RAKIA came together under the umbrella of Ras Al Khaimah Economic Zone (RAKEZ).”

RAKEZ was established to consolidate, oversee and regulate RAK FTZ and RAKIA as well as cater to their 13,000-plus companies. By combining the best of RAK FTZ and RAKIA, from facilities and services to specialised zones, the government of Ras Al Khaimah has created a powerhouse economic zone that broadens the opportunities and incentives offered by the emirate and the UAE to the global business community.

“As for our strategy for 2017,”said a particularly proud Jallad,“we are focusing on raising the awareness on the formation RAKEZ and all that it has to offer to investors from around the globe – from entrepreneurs and startups to large enterprises and industrialists. Thankfully, RAK FTZ and RAKIA have a loyal and satisfied clientele who help spread the word about the establishment of RAKEZ. This makes it easier for us to introduce the new entity

52 OCTOBER 2017

to the world. We are also concentrating on improving our processes by simplifying them to ensure quick turnaround time for approvals as well as equipping our frontliners with the best practices and tools in order to raise the bar of our clients’ satisfaction.”

In the meantime, Jallad and his team are also actively tapping their leading prospect markets such as India and China. Most recently, they attended the 3rd Annual Free Trade and Special Economic Zone Summit in Shanghai China where they presented the wide-ranging advantages of setting up a business and expanding to RAKEZ.“Our trip was very productive and we were able to meet potential Chinese investors,”Jallad said.

“In November, our Business Development team will be bound to India to conduct a seminar for the Indian businessmen.

Something big is also going to happen in Pakistan but we are yet to announce it.

Overall, our strategy is to keep building our presence in various countries and help global investors learn the advantages and opportunities that RAKEZ has to offer.”

Along with being a masterstroke, the birth of RAKEZ is a step towards the emirate’s further diversification. The government of Ras Al Khaimah brought together the two of the fastest growing free zones in the UAE to create a single empire and attract thousands of more investors to the emirate.

“By regulating and consolidating RAK FTZ and RAKIA, we have combined the best of

the best and made them available for foreign investors to enjoy,”concurred Jallad.“This gives birth to, a wider range of facilities, more specialised zones to operate from, more first-class services in a one-stop shop, as well as freedom for investors to choose between a free zone and non-free zone company formation.”Currently, RAKEZ caters to over 50 industries and thousands of business activities, which present diverse investment opportunities to businessmen in different industries, such as manufacturing, trading and logistics, services, education, tourism, and real estate development.

That’s not to say the two zones weren’t doing enough before. Even in the past when RAK FTZ and RAKIA were operating individually, their contributions to the diversification of the economy have been very evident. In fact, in 2015, Ras Al Khaimah saw an eight per cent increase in business registrations compared to the previous year, and both RAK FTZ and RAKIA have been significant drivers to this milestone. Last year, on the other hand, Fitch Ratings released a report that affirmed Ras Al Khaimah’s longterm foreign and local currency issuer default ratings (IDRs) at ‘A’, with“stable”outlook.

“What’s great is that 2017 has not even ended yet but we have already managed to attract hundreds of new companies to set up shop in Ras Al Khaimah,”Jallad said.

“If you want to know the secrets of how we are successfully supporting the emirate’s

PORT AND FREE ZONES SPECIAL

diversification, I’ll tell you that there are great about RAKEZ is that we welcome every actually just two things: first is our costinvestor,”said Jallad.“We have entrepreneurs effectiveness and second is our customisation. and startup businesses that operate from Ras Al Khaimah offers 25 per cent to 50 per our low-cost Flexi facilities, which are shared cent lower costs of living and operating a workstations and also have small to mediumbusiness compared to other major business sized enterprises or SMEs that have chosen cities in the region, allowing us to provide to build a permanent presence in the region cost-effective packages to investors.” via our offices that come in various sizes.

In addition to all that, RAKEZ offers a These businesses are spread across our variety of payment plans to Business Zone, Media Zone help businesses reduce their and Academic Zone.” initial investment costs as well That’s in addition to Ras Al Khaimah as have the option to sign RAKEZ’s Al Hamra, Al offers 25 per up for three-year packages Ghail, and Al Hulaila instead of the usual one-year Industrial Zones, where cent to 50 per package, saving about 15 per you can find the large, cent on their yearly expenses. multinational enterprises cent lower Also, being a client-centred operating from its statecosts of living organisation, RAKEZ always of-the-art warehouses makes sure that it answers to or industrial land plots and operating their clients’ exact needs with where they have built their a business the guidance of its business own facilities.“We have development professionals. compared to other industrialists dealing in They can even tailor-make various manufacturing major business packages to fit business activities, such as food requirements by selecting from stuff and beverage, cities in the a wide range of customisable automotive and parts, region, allowing facilities and services. base metals, packing and On the client front, RAKEZ packaging, paper and us to provide houses over 13,000 clients from paper products, glass and cost-effective all types of businesses, offering ceramics products, and so a highly diversified portfolio of much more,”said Jallad. packages to companies operating in more “Our over 13,000 clients than 50 industries.“What’s came from different parts investors

of the globe but our largest population based on nationality is the Indian with more than 3,100 companies. It is followed by the British with 1,000 plus companies then the UAE with 750 companies. Other countries that are well represented in RAKEZ are Pakistan, France, Egypt, Germany, Jordan, Canada, USA, among others.”

Jallad believes RAKEZ is very blessed that these businesses have chosen to partner with them on their business journey.“This is why we always do our best to contribute to their growth,”said Jallad.“We have an overwhelming number of success stories at RAKEZ and these are businesses of all sizes.

To name a few, we have Ashok Leyland, Streit Group, SaverGlass, Permagard, Knauf, Eurocap, Regus, Knight Rider Technologies and Ahmad Tea.” As you can probably tell, for RAKEZ, this year was all about developing the infrastructure of its industrial zones. Some of its plans have already been implemented while others will roll out in the coming years.

Among the many things they have already done this year were: levelling the Phase 2 of the formerly known Technology Park, now called Al Hamra Industrial Zone, which was previously hilly and undeveloped; upgrading its non-free zone warehouses’ power capacity from 28.4 kVA to 62.5 kVA to provide its clients enhanced operations within the zones; improving the electrical infrastructure at Al Hulaila Industrial Zone to ensure that it

OCTOBER 2017 53

PORT AND FREE ZONES SPECIAL

meets the requirements of both existing and potential clients.

“All of this has been done to efficiently support our existing and potential investors in their industrial operations.,”said Jallad.“We also recently announced the opening of our Media Zone. Right now, we are enhancing the Media Zone building so that creative companies get access to the right space and amenities to help them effectively bring their ideas to life. As for the upcoming development plans in the pipeline, we are currently master planning a new specialised zone.”

Since it is still in the early stages, Jallad will be able elaborate on the specialised zone in the coming months. Nevertheless, the objective of launching a new zone is to provide more locations for businesses to work, play and grow. This will surely contribute to the boost of businessmen coming to set up in Ras Al Khaimah.“In our ongoing efJallad to bring ease to our customers and investors, we are developing our offices in Dubai and Abu Dhabi to become full-service centres,”said Jallad.“We are also looking into building additional labour accommodations in our Industrial Zones. As I have mentioned, we’re currently a family of over 13,000 companies coming from over 100 countries. Every year, our

54 OCTOBER 2017

With RAKEZ, our free zone companies are entitled to 100 per cent business ownership, 100 per cent repatriation of capital and profits, 100 per cent exemption from import and export duties, and these are all in addition to the variety of premier facilities and services that we provide them

target is to surpass the number we brought in the previous year and I believe that it is achievable, given all the efJallads that we are putting into positioning Ras Al Khaimah as an ideal investment destination.”

Free trade zones offer a favourable environment for investors who want to set up a business away from their homeland.

Here, businesses from various continents are welcomed with more liberal and attractive operating conditions as far as rules and regulations are concerned. The company formation process is easier and what’s even more important is the range of benefits that they offer.“With RAKEZ, our free zone companies are entitled to 100 per cent business ownership, 100 per cent repatriation of capital and profits, 100 per cent exemption from import and export duties, and these are all in addition to the variety of premier facilities and services that we provide them,” said Jallad.

Not to mention, the recruitment process of labour and staff within free trade zone are faster and less costly. Free trade zones are designed to enhance the ‘ease of business’ of global investors – this is how these authorities become integral to country’s economy. By offering an ecosystem where businesses from different countries can

PORT AND FREE ZONES SPECIAL

grow and collaborate, free trade zones pull in thousands of investments, which of course means, more job opportunities, enhanced imports and exports because of zero customs duty and also, there will be more transfer of knowledge. Foreign investors that come to a specific country carry substantial knowledge they learned from their home country in terms of the best practices and latest technological trends in conducting business. In the UAE, free trade zones as well as economic zones like RAKEZ, have helped diversify the economy and limited the dependence of the country on the energy sector.

“We have significantly enhanced the services, commercial, trading, industrial, education and tourism sector,”said Jallad.“In terms of how free zones adapt to the changing business landscape, at RAKEZ, we remain proactive rather than reactive. We take time to understand the upcoming trends. As you know, nothing’s going to surprise you if you remain vigilant on what’s going to happen next. This is how you adapt, you need to have the knowledge and you have to be open to non-stop innovation. I guess our best ongoing tactic is that we allow our clients to customise their solutions. This does not only help our clients in their business, it also helps us follow

the trends of the dynamic requirements of today’s investors.”

As for how local and regional free zones compare to international ones when it comes to attracting businesses, Jallad claims that RAKEZ’s edge is that since the Middle East is still a developing economy, the demands for services and products are very high.“Also, the Middle East has a young population – more than 28 per cent are below 29 years old,” said Jallad.“These young adults are ready to join companies and share their talents and skills. Hence, the businesses we bring into our region get access to countless doors of opportunities not only for business but also for attracting highly-qualified manpower.

Furthermore, because we have a large number of youths in the region, we have gradually learned their preferences.”

Jallad is of the opinion that the automation of processes is one of the most important technology trends that businesses have to implement if they want to raise the bar of their customers’ satisfaction. Sure, doing things manually have advantages but we live in a fast-paced world and everybody is now looking to get things done immediately.

This is exactly what automation brings to businesses – it enhances the efficiency and turnaround time for processes.

“At RAKEZ, we strongly believe in delivering accelerated and enhanced services to our clients,” said Jallad.“That is why, earlier this year, we have decided to implement changes to our systems and through these, we have been able to successfully simplify our processes and procedures. Our aim was to reduce general administrative tasks and speed-up daily operations, and we achieved exactly those.

Furthermore, just last June, we launched a revamped E-services website where our clients can apply for visas, pre-approvals, Chamber of Commerce membership, and many other services.”

The website even comes with an application tracking system – like Uber has for tracking its many cabs – so clients can know the status of their application.

“Right now, our team of web professionals is working on developing another platform where our clients can initiate their company’s formation process,”said Jallad.“They will be able to submit documents, receive approvals and obtain a license wherever they are in the world. Once this project is completed, our clients can enjoy a more hassle-free business experience. It will eliminate the need for investors to travel back and Jallad just to fulfil bureaucratic requirements.”

OCTOBER 2017 55

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PORT AND FREE ZONES SPECIAL

The young and the restless Mark Geilenkirchen, the CEO of SOHAR Port and Freezone, talks about the port’s ascent to the top of not only Middle East but even South Asia and gives us his blueprint on how he plans to go higher

D

espite its many efforts, much of the Middle East region is very dependent on oil. As such, the sustained lull in global oil prices has had a telling effect across the entire region. Necessity is the mother of all inventions and with that lull, the GCC has set itself up as a launching pad for the many initiatives aimed at continued economic diversification. The Sultanate of Oman with its prime location at the crossroads of east and west that connects the main markets of Asia with those of Europe, is no different.

“The vision is to position the Sultanate as one of the world’s top-10 logistics centric economies by 2040,”said Mark Geilenkirchen, the CEO of SOHAR Port and Freezone.“The government’s National Logistics Strategy 2040 is a 25-year blueprint to boost the logistics sector’s share of GDP to US$ 36 billion, along with the creation of 300,000 new jobs.”

Oman is making huge investments in the construction of modern infrastructure to maximise benefits stemming from its unique geographical location. SOHAR Port and Freezone sits at the centre of those plans. Incentives have also been provided to develop the domestic market, facilitate business, promote the uptake of modern technologies, and develop human capital. To achieve all these aims, the government is joining hands with

OCTOBER 2017 57

public and private organisations to amend soft infrastructure, simplify legal procedures to eliminate red tape, update export and import procedures, and promote the adoption of best international practices.

Like the Port of Rotterdam, SOHAR Port operates on a landlord-tenant basis. That means, the Port Authority as the landlord provides the infrastructure, like breakwaters, quay walls, roads and utilities, and tenants operate their businesses on long land-leases and create the superstructure on top.

“This operating model allowed us to bring in best-in-class terminal operators from the very early days of our operations,”said Geilenkirchen.“Oil tanking for liquid bulk; Vale for dry bulk; C. Steinweg for break-bulk, general and project cargo; and Hutchison, who operate our state-of-the-art, remote-

58 OCTOBER 2017

controlled container terminal. The Port was originally built around three industrial clusters for the metals, petrochemicals and logistics industries. In addition, we have utilities in the Port, providing gas, electrical power, potable and cooling water.”

Work is progressing fast on the construction of SOHAR III, a green-field, gas turbine power plant located in the Port. The project is valued at over US$ 1 billion and is on track to commence operations by January 2019. With more than enough capacity to power new developments, the plant will have an output of over 1,700 Megawatts, making it Oman’s second largest power station.

“Our role is to ensure that world-class infrastructure is in place before our incoming tenants require it, so they do not experience delays when commencing production,”

explains Geilenkirchen.“In 2010, we added phase-one of our planned 4,500-hectare Freezone adjacent to the Port. The Freezone is connected to the Port by bonded corridors, allowing seamless access and easing the movement of incoming feedstock and outgoing finished goods.”

SOHAR Port and Freezone is managed as a single entity, unlike many of its regional competitors, and Geilenkirchen and his team believe this has a significant upside for their existing tenants and for potential investors.

“We are now busy planning phase-two of the Freezone because phase-one is practically leased out,”he said.“Most recently, we added a fourth industrial cluster in the Port, our new Food Zone. It includes the region’s first dedicated agro-bulk terminal, as well as a 500tons a day flourmill, now under construction,

PORT AND FREE ZONES SPECIAL

a sugar refinery, and facilities for cold storage, food manufacturing, packaging and food logistics.”

Believe it or not, the GCC food market is worth well over US$ 100 billion a year and, because of the harsh climate, over threequarters of its food is imported.

It’s a market that will continue to grow in the coming years, boosted by one of the world’s youngest and fastest growing populations and the phenomenal growth in regional tourism, expected to top 80 million visitors a year in less than 10 years’ time.

With investments to-date topping US$ 26 billion, you can already see SOHAR emerging as a significant

Our role is to ensure that world-class infrastructure is in place before our incoming tenants require it, so they do not experience delays when commencing production

regional manufacturing and distribution hub for commodities and consumer products, outside the congested Strait of Hormuz.

“We are really establishing ourselves as the new Gateway for the Gulf region, as well as becoming a springboard to enter the Indian and Iranian markets,” said Geilenkirchen.“Over the past 10 years we’ve been growing at an average rate of over 35 per cent per year.

The opening of new logistical connections, such as our new cargo airport and the new direct highway to Saudi Arabia, will help us maintain and grow that position.”

In the petrochemicals sector, Oman is on course to deliver against its vision to create the maximum possible value from every drop of oil extracted. The Liwa Plastics Project, located in SOHAR Port, is a US$ 6 billion investment in a new plant that will create 1.4 million tonnes of polymers annually.“Plastics have the biggest potential for us,”said Geilenkirchen.“In the near future, we predict excellent opportunities for polyethylenerelated downstream product industries, especially in the Freezone.”

When it comes to food, the availability of abundant feedstock like flour, sugar and vegetable oils in the new SOHAR Food Zone will create many new opportunities for downstream food processing, packaging and logistics industries. Just last week, the food zone signed two significant projects: A

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PORT AND FREE ZONES SPECIAL

global leader in the cotton On the international front, When we yarn business, SVP Global Geilenkirchen says SOHAR is established Ventures, is investing US$ an international port with many 300 million in a 27-hectare direct liner connections to the SOHAR, we yarn plant, the first in this main ports of Asia. It helps that elected to have most of their tenants in the Port region, which will generate up to 1,500 new jobs in and Freezone are connected world-class the Freezone. Perhaps to international companies. companies more importantly, it can “When we established SOHAR, become the core for an we elected to have worldoperate our entirely new textile hub in class companies operate our terminals and SOHAR. And Trescorp, the terminals and this ensures that Singapore-based oil storage this ensures that we are always playing at the top and bunker specialists, of our game,”he said proudly. we are always are planning a US$ 600 “Those terminal operators million oil terminal on a will always be better at their playing at the 45-hectare site at SOHAR specialised business than we Port South in anticipation top of our game ever could be. It is this kind of the significant growth in of best-in-class international petroleum trading in the benchmarking that is a core region as well as growing demand for bunker element of our success in SOHAR.” services. It will eventually house 1.8 million But is the coveted spot of number one metre cubes of oil storage and blending port achievable? Apparently, yes.“We already capabilities. The new facility will feature six are the number one port in the Middle deep-water berths, with 25-metre drafts, East and South Asia when it comes to bulk one of them capable of receiving VLCC throughput,”Geilenkirchen said.“In the oil tankers of up to 320,000dwt –so-called maritime sector, with over 3,000 ships a year supertankers. In its first phase, the terminal now berthing in SOHAR and an average of will be equipped to receive, store and blend over one million tonnes of sea cargo each crude oil, fuel oil and diesel. Expansion plans week, we are fast becoming a significant for phase two include gasoline blending, jet regional player and our prime strategic fuel, asphalt and a lube oil blending plant. location helps us to keep growing. The scale With regards to synergies with that we have already achieved means we can neighbouring ports, Asyad, an umbrella sink costs along the supply chain and remain organisation that will oversee the highly competitive – and that, in turn, fuels Sultanate’s transformation into a hub, continued growth.” has been recently established to manage Another aspect that fuels growth is Oman’s infrastructure assets in airports, technology. With the advent of industry railways and seaports like SOHAR.“Asyad 4.0 and digital taking over, Geilenkirchen has a mandate to execute Oman’s logistics stresses on the need to continually strategy 2040, which will see the Sultanate innovate – something that SOHAR Port and emerge as a top-10 global logistics economy, Freezone has embedded in its DNA.“We’ve leveraging the country’s prime strategic been pushing the boundaries of maritime location at the crossroads of east and west logistics since we were established and have and within easy reach of 2.5 billion people,” always found new and better ways of doing said Geilenkirchen.“With the repositioning business, making our tenants’ operations of Sultan Qaboos Port in Muscat as a leisure more efficient and convenient along the destination, the other two large ports in way,”Geilenkirchen said.“Today, SOHAR Oman are in Salalah and Duqm. Salalah is is one of the world’s fastest growing port focused on the transhipment of containers and free zone developments and we are and is a significant hub for lines like Maersk, really establishing ourselves as the region’s for example. Duqm has only recently challenger brand. All over the world, people started, but their focus at this stage is on in our industry are sitting up and taking their dry docks business.” notice of what we’re doing here. We’re able

60 OCTOBER 2017

to use this position to enhance innovation in Oman and the wider region.”

The race to not be so incredibly dependant on oil has got the whole Middle East is moving from an economic base powered by oil and gas exports to one that is fuelled by knowledge, and this diversification is driving investment with an upside for businesses in SOHAR. From the outside looking in, ports don’t look very smart. However, over the last ten years there has been a revolution in the way that they work. The focus of port operators is changing across the globe and behind the scenes there has been huge investment and innovation.“Instead of being really good at doing just one particular thing, today it’s more important that we become really good at learning how to do new things - and doing that faster and better than ever before,” Geilenkirchen says.“Right now, that’s our focus at SOHAR, and ensuring that we have the management structures in place to deliver against that. SOHAR Innovation Zone is central to this effort. We want to operate the Innovation Zone as an ideas factory. Working in close cooperation with Port of Rotterdam, we will try to find innovative ways to solve tomorrow’s logistical problems.”

Together with private sector companies, international research institutes and some of the world’s top universities, Geilenkirchen and his team are seeking solutions across a broad range of issues that affect their shipping, logistics and industrial hub at SOHAR. From innovative ways to track containers and their loads moving between the Port and Freezone; through the use of 3D metal printing to create high quality industrial parts onsite; to the world’s first self-sustaining Freezone logistics cluster, the team at SOHAR firmly believe everything is possible.

“The Innovation Zone will focus on sustainability, and will operate as the world’s first self-sustaining Freezone cluster,” Geilenkirchen said.“It will not be connected to the national power grid, instead getting all its electricity needs from renewable sources, while all waste will be recycled.

The Innovation Zone is not a hypothetical, futuristic concept, however, it will use proven and trustworthy techniques brought together in one integrated system for the first time, to demonstrate the full potential of Oman’s technology sector.”

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