Global Supply Chain September 2015 Issue

September 2015 Issue 18

ENHANCING THE BUSINESS OF LOGISTICS

THE AGE OF AUTOMATION Warehouse technology 2.0

The CIS economies In crisis?

Materials Handling Middle East A preview

Freight report

Air and sea freight slow down

Change is the only constant SIGNATURE MEDIA FZ LLE P. O. Box 49784, Dubai, UAE Tel: 04 3978847/3795678 Email: info@signaturemediame.com Exclusive Sales Agent Signature Media LLC P.O. Box 49784, Dubai, UAE Publisher: Jason Verhoven jason@signaturemediame.com Director: Deepak Chandiramani Deepak@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.

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What are we talking about? Falling oil prices, of course! With the local economy heavily dependant on oil revenue coupled with the slow growth of other diversified non-oil sectors, where do we stand? Are we heading into another recession?

Experts argue that OPEC and its members of oil producing countries such as the Kingdom of Saudi Arabia, the UAE, among others, should reduce production in order for the forces of demand and supply to push oil prices back up. But historically OPEC hasn’t favoured similar suggestions. That being said, these same nations are able to withstand falling oil prices better than other oil producing nations because of sizable financial reserves. Russia is already feeling the pinch of global oversupply however it also does not want to reduce production fearing a loss of existing market share. According to various news stories, one of the major reasons for the price drop is the ramped up production of oil and natural gas by the United States in the last few years. Other reasons are the overall reduction in demand of oil from many European nations due to sluggish economies as well as a switch to renewable energy fuelled transport. A major consumer China has also recently been hit by its falling currency adding further repercussions on a global scale.

How will prices go up? No one knows. Recent reports suggest that from April this year the United States has reduced the amount it produces. OPEC is also reportedly showing signs of concern about the developments as well as a willingness to speak to producers about it. This does not mean that prices will be on their way up any time soon. So even though, there may be a slightly higher disposable income in the short term, the longer term probability of not having your regular income is definitely not an option. Because even though regional governments may continue spending, the private sector may not be that willing to continue investing.

While global speculation on how the Middle East will fare continues, the region is not going to take a hit this time around. Learning from the mistakes of 2008-9, most nations have a back-up plan. A strong investment in infrastructure for diversified industries over the last few years will steadily increase non-oil sector revenues. Sectors such as real estate, construction, manufacturing (collectively represent 58 percent of Dubai’s GDP this year) and tourism - medical and otherwise (both UAE and Qatar are already attracting a large number of tourists in both categories) are promising potentials. So while a slight fluctuation is expected, the days of intense decline are certainly long past.

Munawar Shariff Managing Editor munawar@signaturemediame.com SEPTEMBER 2015 3

September 2015 Issue 18

ENHANCING THE BUSINESS OF LOGISTICS

42 The evolution of

third-party logistics

How do past challenges create tomorrow’s solutions? Inbound Logistics’ Joseph O’Reilly examines the growth and changes in third party logistics over the last couple of decades

20 06 News 12 Country report – CIS A worsening crisis?

The majority of economies of the Commonwealth of Independent States (CIS) have been hit hard by the worsening economic conditions in Russia

20 The age of automation As businesses realise the value of integrating technology into all levels, warehouse automation solutions are becoming the need of the hour.

GSC explores

28 Putting their best foot forward

A preview of Materials Handling Middle East 2015. We talk to some exhibitors about what to expect 4 SEPTEMBER 2015

32 Guest Column Embracing technology the right way Paul Virgo, VP for Logistics at Milaha Maritime and Logistics speaks about incorporating the right technological tools

34 Air and sea freight slows down

Tough times ahead? Expectations continue to deteriorate as a downturn is predicted

40 Is Iran the next global

automotive hotspot in the Middle East?

As the Iran Deal is poised to open up Iran’s economy, Frost & Sullivan finds that opportunities make it a very attractive market

52 The future of supply management: a conversation with millennials

Bringing millennials into the supply management profession is challenging because the usual recruitment tools don’t work

56 Creating a supply chain centre of excellence

A guide to creating you own supply chain centre of excellence. Tom Craig shares his insights in bettering your operational capabilities

58 KSA expands

Madinah airport

The expansion of KSA’s Madinah Airport is a positive move towards airport privatisation and economic diversification

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Talke accomplishes mechanical completion of Slovnaft project

Acting as general contractor, TALKE has successfully finished the complete construction of the Logistics unit that is part of SLOVNAFT´s massive investment into petrochemicals. Last quality assurance measures, such as performance tests under real-life conditions, are currently being held.

The silo farm, with 28 silos, is the heart of the logistics plant for the storage and handling of polyethylene granules. The new logistics complex is fed directly from

the production facility, and is designed to handle up to 220,000 metric tons polyethylene per year. The new facility on the premises of the petrochemical division of Bratislava-based SLOVNAFT Group includes warehousing and packaging capacities, offices, traffic routes and manoeuvring areas. In addition, TALKE’s design comprises two bagging lines, three loading stations for bulk cargo and the product transfer lines leading from the degasification silos to the storage silos.

Crown brings highly versatile SC 6000 Series electric counterbalance lift trucks to market Crown has extended its electric counterbalance lift truck offerings with the launch of the Crown SC 6000 Series.

The new three-wheel and fourwheel models, with capacities ranging from 1.3 to 2.0 tonnes

6 SEPTEMBER 2015

and lift heights of up to 7.5 metres, offer a combination of stability, advanced technology and task-focused ergonomics.

The new lift trucks are capable of performing a wide variety of material-handling tasks

in both indoor and outdoor conditions. Crown supplies an all-encompassing concept that streamlines workflows and ensures sustainable, productive and profitable warehouse operations.

Egypt’s Alexandria National Refining & Petrochemicals company to expand refinery with Honeywell UOP UOP LLC, a Honeywell company (NYSE: HON), has announced today that Egypt’s Alexandria National Refining & Petrochemicals Company (ANRPC) will use UOP technology and equipment as part of a US$ 300 million (AED 1101885000), multi-year project to expand an existing, state-of-the-art gasoline production facility to meet growing domestic demand for highoctane gasoline.

ANRPC will add a second UOP CCR Platforming™ process unit, including a modular CCR section, at the facility in Alexandria to produce high-quality reformate, which is used to produce high-octane, low-sulphur gasoline.

ANRPC installed the first UOP CCR unit at the site in 2001.

Egypt became a net importer of gasoline in 2008, as domestic supply has not kept up with demand, which has grown by an average of three per cent annually over the past 10 years. UOP modular equipment is often ideal for remote locations, short project timelines and regions with limited resources.

Tristar to invest AED 75 million in new chemical warehouse in Jafza

Mohamed Amin Senior Manager-investor Services, Asim Al Abbasi Chief Financial Officer EZW, Eugene Mayne, Tristar Group CEO, Reinhard Fischer, Skeberis Plastics Managing Director, Omar Bin Hendi VP – Customer Relations & Development, Hamad Al Sayegh Senior Manager – Customer Relations & Development

The upcoming Tristar chemical warehouse and bagging plant worth AED 75 million will be the first silo and bagging facility of its kind in the Jebel Ali Free Zone (Jafza). This was announced at the ground-breaking ceremony by Tristar Group CEO Eugene Mayne, with Skeberis Plastics Managing Director Reinhard Fischer and Jafza officials led by Group Chief Finance Officer Asim Al Abbasi and VP – Customer Relations & Development Omar Bin Hendi.

The 350,000 square feet chemical warehouse is a joint project between UAE-based Tristar and

Skeberis Plastics, who are headquartered in Greece and Belgium, with a regional headquarter in UAE. The facility is designed to handle a throughput of 250,000 tons bulk material of plastic granules per annum, with silos and a racking capacity of more than 15,000 pallet positions for packed chemical and plastic granules products. Green building technology and best in class safety features are built into the design to ensure safe handling and storage of all types of liquid and solid chemicals. Skeberis will provide technical support for the management and day to day operation of the bagging operations.

Aquatech completes 15 MIGD Desalination Project for FEWA in Ras Al Khaimah Aquatech has reported that it has successfully completed its 15 MIGD seawater reverse osmosis based desalination facility for the Federal Electricity & Water Authority (FEWA) in Ghalilah, Ras Al Khaimah, UAE. The plant, which produces 15 million Imperial gallons per day (MIGD), was commissioned in March 2015 and supplies drinking water for the Emirate of Ras Al Khaimah. The facility will help conserve ground water and bring the UAE closer to its goal of decreasing ground water dependence by 90 per cent in the next two years. Aquatech was awarded the engineeringprocurement-construction (EPC) contract to build the plant.

Experts identify shortfall in maritime industry Challenges in recruiting and retaining experienced seagoing and shore-based personnel will be highlighted at this year’s Seatrade Offshore Marine & Workboats Middle East 2015, which will take place at the Abu Dhabi National Exhibition Centre (ADNEC) from October 5th to 7th, 2015.

The region’s leading event for the workboat and offshore marine industries, the biennial three-day conference and exhibition will once again address the hot topics and issues facing the industry, with

people and performance a major consideration for any owner, operator or employer.

With more than 90 per cent of global trade dependent on shipping, the worldwide shortage of well-qualified seafarers and, specifically for the Gulf region, the ongoing challenge of deploying the right seagoing personnel for specific projects, is adding to the pressure being put on the industry to address the recruitment challenge. And this is being further exacerbated by the need for a proactive

Dr Martin Renilson, Dean, Maritime, Higher Colleges of Technology

recruitment drive targeted at a younger career-seeking audience, for whom the maritime industry

holds little or no appeal due to the long hours and relative isolation of a sea-going role.

The two-hour session will be moderated by Joe Brincat, Vice President Middle East, ABS, with a series of four technical presentations followed by an interactive audience Q&A opportunity. Other sessions this year include a Leaders’Forum; the Seatrade Technology Forum; a Finance Forum as well as two special regional‘power hours’about operational issues in the Caspian with another dedicated to Africa.

SEPTEMBER 2015 7

New ground handling services launched at key Afghan airports Breaking ground for the first integrated chemicals logistics facility in Dubai (fltr.): Tariq Bin Ghalaita VP Europe & UAE Region, Sales JAFZA, Abhishek Ajay Shah, Director at RSA & RSA-TALKE, Talal Al Hashimi, COO JAFZA, Alfred Talke, Group Managing Director TALKE, Ajay Indravaddan Shah, CEO RSA Logistics and Abdulla Bin Damithan, Director Commercial Department DP World

RSA-TALKE breaks ground for integrated chemicals facility in Dubai The chemical logistics joint venture, RSA-TALKE has broken ground for its new integrated chemicals facility. The multi-service site is designed for the handling of liquid chemicals, with ISO tank containers as the central element and will have a capacity of 1,800 TEU. It is located in Jebel Ali Free Zone, close to Dubai World Central, where the company already operates two specialised warehouses for hazardous and non-hazardous chemical and petrochemical products.

The full-service facility specialises in the storage and handling of liquid chemicals in ISO tank containers. It is designed for both non-hazardous products and dangerous goods

classes 3, 4, 5, 6, 8 and 9, and complies with the highest safety, environmental protection and quality standards.

In addition, RSA-TALKE offers the filling and re-filling of these products into IBCs or drums. The range of services also includes cleaning, inspection and approval of ISO tank containers. The facility also entails additional warehouses, bringing RSA-TALKE’s total capacity for the storage of packed non-hazardous and hazardous chemical products to around 39,000 pallet spaces. The construction of this ISO tank facility completes the company´s portfolio of chemicals logistics in the region.

Ariana-NAS, a joint venture between National Aviation Services (NAS) and Ariana Afghan Airlines, has launched ground handling services in Herat and Kandahar International Airports in Afghanistan, in a move that it is hoped will facilitate the integration of Afghanistan into the wider global economy.

Stephen Irwin, General Manager of NAS Afghanistan, stated,“At NAS, we fully understand the opportunities and challenges of operating in emerging markets. Our commercial and operational expertise gives us the edge as an ideal partner in airports services worldwide, allowing us to operate at optimal financial and operational levels. Being a privately owned company affords NAS the very important advantage of being independent to offer partners the best in airport services.”

Etihad Airways to drive procurement efficiency with SAP Ariba Etihad Airways’ Procurement and Supply Management (P&SM) department has embarked on a transformation journey to support the airline’s future expansion by implementing SAP’s innovative, cloud-based Ariba solutions.

8 JULY/AUGUST 2015

The Sourcing and Supplier Information Management solutions will deliver state-of-the-art technology, enabling the airline to automate and streamline its sourceto-contract processes, and efficiently integrate new suppliers. The new

processes and capabilities will give Etihad Airways clear visibility into its spend and contracts, and provide up-to-date information on all supplier activity.

Other significant workflow improvements include a virtual

tender board and contract approval procedures to speed up procurement decisions; automated purchase orders to reduce manual and paper-based activities; and access to global suppliers through the SAP Ariba portal.

Bahrain to host the fifth annual Arab Aviation and Media Summit

The 2015 Arab Aviation and Media Summit (AAMS) will be held in Bahrain.

The event, which is a joint industry initiative by world-leading organisations, will take place on December 7th and 8th, 2015 in the

Kingdom of Bahrain’s capital, Manama.

Running in its fifth edition this year, the Arab Aviation & Media Summit is an industry initiative committed to improving the state of Arab Aviation & Tourism.

The initiative is braced by many leading organisations such as Airbus Middle East, Air Arabia Group, CFM, CNBC TV and The Sultanate of Oman Ministry of Tourism, in addition to many supporting partners; and this year’s edition is held in partnership with the Kingdom of Bahrain’s Ministry of Transportation and Telecommunications and Bahrain Airport Company.

The 2015 edition will discuss the status of Arab aviation and tourism under the current political and economic climate, and will see industry pioneers from across the region come together to discuss the growing significance of the partnerships between tourism and aviation.

The summit concludes every year with a white paper draft submitted to regulators and decision makers from both public and private sector followed up by a course of action. The report provides the latest insights on the current trends and challenges faced by the aviation-tourism sector in the Arab world and its impact on social and economic growth.

Royal Jet approved to use the Enhanced Vision System (EVS) Royal Jet, the Middle East’s foremost private charter company, chaired by His Excellency Sheikh Hamdan Bin Mubarak Al Nahyan, has announced it is using enhanced

visual system technology in its two recently delivered Bombardier Global 5000 aircraft.

It is the first charter operator in the UAE to receive regulatory approval from the UAE General

Civil Aviation Authority (GCAA) to use the technology.

Royal Jet has also confirmed that His Excellency Sheikh Hamdan Bin Mubarak Al Nahyan and the Board of

Directors at Royal Jet have approved the technology to be in the two new Boeing Business Jet (BBJ) aircraft that are due to arrive green in 2015.

The EVS consists of a Heads-Up Guidance System and a forward-looking infrared camera. The infrared camera provides imaging of the outside environment, including terrain, runway, other aircraft and animals on the Heads-Up Display (HUD). The enhanced vision system increases safety during taxi, take-off and approach in low visibility conditions.

JULY/AUGUST 2015 9

Abu Dhabi Airports starts the de-propping process for the roof structure of the MTB A major milestone has been reached in the construction of Abu Dhabi Airports’ new Midfield Terminal Building, which will have the capacity to handle 30 million passengers a year. The process of de-propping the centrepiece of the building, the curved roof, has begun, which will give the impression that the state-of-the-art looking structure is floating on 18 steel arches.

In this first of nine deprops, a team of 45 specialists, with 60 hydraulic jacks, systematically removed 30 temporary supports used for constructing the roof element, in one of the most complex engineering feats of the multibillion dollar infrastructure project.

The supporting structure for the MTB central roof consists of 18 inclined arches of varying heights, and a roof grillage in total weighing around 20,000 metric tons. By completing the de-propping

process by February 2016, the roof will be a free-standing structure, floating above 18 mega arches, which will feature the world’s longest indoor arch spanning 180m, at a height of 52m, with a weight of around 1000 metric tons.

The MTB will not only look spectacular, it will also boost Abu Dhabi International Airport’s total capacity to over 45 million passengers a year.

Tasneef organizes awareness workshop for ship owners Emirates Classification Society ‘Tasneef’ held a workshop in liaison with Port of Fujairah on August 26th, 2015 at Al Diar Siji hotel, Fujairah, to raise awareness for safety regulations of nonconventional ships. The workshop epitomised Tasneef’s continuous efforts to raise awareness of Cabinet Resolution No 29 of 2013, regarding safety regulations for non-conventional ships that are

not covered by the international conventions in GCC countries (GCC Code). The workshop was attended by ship owners and several representatives from maritime and insurance companies.

These awareness workshops are considered a step forward in order to establish the significance of applying safety regulations on ships, which are not covered by international conventions in GCC countries.

LOT and Turkish Airlines launch strategic partnership towards future joint venture agreement LOT Polish Airlines and Turkish Airlines have agreed on a major expansion of commercial ties.

Both sides have signed a letter of understanding, which will initiate an enhanced cooperation between relevant Polish, Turkish and beyond

10 JULY/AUGUST 2015

markets, and also deepen commercial cooperation on the existing ones.

Recognising the great significance of deepening the cooperation and desiring to create the most appropriate conditions for their development, both Turkish and Polish carriers have

decided to implement a strategic partnership to make use of the possibilities to enhance benefits for their customers by offering them more connection alternatives and even better product. This will give passengers opportunity to travel with

convenient stopover and one ticket only to even more destinations across the world.

Final model of cooperation has not been decided yet, however both airlines agreed to proceed towards future joint venture cooperation.

logistics & Storage ad.pdf 1 23/08/2015 16:17:04

Etihad Airways announces three key UAE national executive appointments C

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Mohammed Al Bulooki

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Etihad Airways has announced the appointment of three UAE nationals to executive positions within the airline. Hareb Al Muhairy becomes Senior Vice President Corporate and International Affairs; Mohammed Al Bulooki joins Etihad Airways from Abu Dhabi Airports Company to become Vice President UAE Commercial; and Haitham Al Subaihi becomes Vice President UAE Sales.

James Hogan, Etihad Airways’ President and Chief Executive Officer, said: “We are delighted to announce these key executive appointments, which will have a significant impact on the development of the airline’s Corporate and International Affairs and Commercial departments.

Hareb has a wealth of experience and expertise in media relations and international and government affairs, and is ideally suited to lead Etihad Airways in this crucial area of the business.

Mohammed and Haitham have a deep knowledge of the aviation business, particularly in this region, and this knowledge, combined with the understanding of the UAE market, will be of great value to Etihad Airways as we continue to expand our business.”

JULY/AUGUST 2015 11

COUNTRY REPORT - CIS

A worsening

crisis?

The majority of economies of the Commonwealth of Independent States (CIS) have been hit hard by the worsening economic conditions in Russia, since all of the CIS countries have strong economic and trade links with it. Senior Economist, Ricardo Aceves, at FocusEconomics writes in the report titled CIS Country Report an excerpt of which appears below

12 SEPTEMBER 2015

COUNTRY REPORT - CIS

CIS economy contracts in Q1 and recession worsens in Q2 The beginning of the recession in Russia in Q1 of this year had a substantial impact on the region, since many of the economies that are members of the Commonwealth have strong links with Russia through trade, financial services and important flows of remittances. The economies of Azerbaijan and Kazakhstan are heavily dependent on oil for both exports and fiscal revenues, while the CIS currencies also felt the high volatility that many emerging market currencies experienced at the beginning of 2015. Lower oil prices and heightened uncertainty regarding Russia’s economic situation prompted monetary policy makers in Azerbaijan, Kazakhstan and Turkmenistan to devalue their respective currencies.

According to a growth estimate elaborated

by FocusEconomics, the Commonwealth’s GDP swung from a 0.9 per cent increase in Q4 2014 to a 1.2 per cent contraction in Q1 2015. However, growth dynamics in Q2 are more concerning. The region’s economy is expected to have contracted 2.9 per cent in Q2 as it was dragged down by a deeper recession in Russia and Belarus.

Main picture: View of the modern area Nemiga from the river Svisloch, Minsk, and Sculpture departing cranes is part of composition of fountain at Independence Square in Minsk, Belarus (left}

SEPTEMBER 2015 13

COUNTRY REPORT - CIS

August Circus building in Astana, Kazakhstan

Meanwhile, Ukraine’s GDP, which is not included in the regional average, took a disastrous plunge in the first quarter of 2015 and is projected to have contracted again Q2, although the contraction is expected to have been less sharp. Ukraine’s Ministry of Finance stated that, the government paid USD 120 million in interest on its Eurobond debt on 24 July this year as scheduled. The payment, considered to be a gesture of goodwill, maintained the chances for keeping the negotiations regarding Ukraine’s debt restructuring on the table. Although a 40 per cent cut in the debt’s face value - as demanded by the Ukrainian government - is not likely, a compromise resolution for some debt reduction is likely to occur before a USD 500 million bond payment is due on 23 September.

The debt talks have been protracted due to differences in opinion regarding the severity of Ukraine’s financial trouble. Private creditors have resisted a large cut in interest payments and a postponement of debt repayments, while the Ukrainian government, supported by the International Monetary Fund (IMF), has stated that it needs a reduction in interest rates and the principal in order to build reserves.

Should the negotiations between Ukraine and its private creditors stall, the country will

14 SEPTEMBER 2015

probably default and a debt restructuring could knock its macroeconomic stabilization plan off course. Moreover, the IMF has hinted that, although it prefers that the country and its creditors reach an agreement, the international body will continue supporting Ukraine under its loan program even without a creditors’ agreement.

Economic Growth CIS Countries

Outlook remains unchanged, growth prospects for the region are grim The economic outlook for the Commonwealth of Independent States remains grim. Economists participating in the FocusEconomics Consensus Forecast expect the region to contract 2.4 per cent in 2015.

This month’s projection is in line with last month’s forecast. If confirmed, this will represent the region’s first economic contraction since the global financial crisis hit the region in 2009. However, the gradual recovery in global oil prices and stronger global economic growth are expected to contribute to a recovery in the Commonwealth in 2016, when panelists see the region rebounding and growing 1.1 per cent.

This month’s stable forecast stems from the fact that that panelists did not revise the GDP growth projections for six economies, including that of Russia, which is by far the largest economy of the Commonwealth. The economic forecasts for Armenia and Belarus were revised downward, while growth prospects for Azerbaijan improved over the previous month.

Regarding the three countries that are not included in the regional estimate,

New Heights in

Young people in the city, Ukraine

2015 GDP growth forecasts for Georgia, and Turkmenistan were stable over the previous month, while projections for Ukraine were cut.

Belarus Economy is a casualty of the recession in Russia

Belarus’ economy continues to worsen.

Preliminary estimates show that GDP contracted by 3.3 per cent in the first half of GDP Growth 2015, annual variation in %

16 SEPTEMBER 2015

2015, hitting a multi-year low. Falling real incomes in the face of rising inflation and a devaluation in the Belarusian ruble have hurt domestic demand, while the external sector has suffered from the economic downturn in Russia - the country’s largest trading partner. Moreover, international reserves are at critically-low levels, below three months of imports, and talks with the International Monetary Fund to secure additional credit have stalled due to the country’s lack of GDP Growth in % Table

structural reforms. On 28 July, Russia gave Belarus a small lifeline, granting a USD 760 million loan. However, the loan will be used to service Belarus’ debts to Russia and the Eurasian Fund for Stabilization and Development.

Belarus’ outlook is grim. The economy is expected to record its worst result since 1998 this year on the back of weak domestic demand combined with Russia’s economic slump. FocusEconomics Consensus Forecast

COUNTRY REPORT - CIS

panelists see the economy contracting 2.8 per cent, which is down 0.1 percentage points from last month’s forecast. For 2016, the panel projects that the economy will rebound to a 0.7 per cent expansion. (see details on page 24)

Kazakhstan Nearly two decades of negotiations come to an end with WTO accession

Following tepid GDP growth in Q1 stemming from a deceleration in the Belarus Economic Outlook

agricultural and services sectors, recent data suggest that the economy began Q2 on a more positive note: In June, industrial production expanded for the second consecutive month and the unemployment rate improved moderately. On 27 July, the World Trade Organization (WTO) officially approved Kazakhstan’s bid to become the international body’s 162nd member, thus ending nearly two decades of membership negotiations. The WTO described the accession process as among the most challenging in its history and specified that the process was complicated due to Kazakhstan’s membership of the Eurasian Economic Union.

The government’s plan aimed at improving the country’s business and investment climate is expected to buttress economic growth in the long run. However, a deep recession in Russia and lower oil prices will cast a shadow on the country’s economic outlook. Our panel of economic analysts expects the economy to expand 1.4 per cent in 2015, which is unchanged from last month’s forecast. For 2016, our panel of experts sees economic growth picking up to 2.9 per cent.

Russia Growth performance deteriorates in Q2; implications of Iran’s deal are mixed for Russia

Following lackluster economic growth in 2014, the Russian economy entered into contraction mode in Q1 as a combination of international sanctions, low oil prices, Kazakhstan Economic Outlook

high inflation and the resulting deteriorating business and consumer confidence all impacted on economic growth. GDP contracted 2.2 per cent annually in Q1 and more recent data point to a sharper economic fall in Q2: In June, industrial production plummeted for a third consecutive month while exports registered the eighth month of contraction at a double-digit rate. The more recent consumer confidence indicator and manufacturing PMI suggest that the worst may not be over for the Russian economy. Meanwhile, the government welcomed the mid-July agreement between Iran and six global powers (P5+1), which lifted financial sanctions on the country in return for scaling back its nuclear program. Although the deal may have some negative implications for Russia’s oil exports and budget - Iranian oil output could cause prices to fall further – Moscow could benefit from increased trade and investment opportunities as well as arms sales.

Russia’s economic outlook stabilized this month. The majority of analysts are becoming less pessimistic regarding Russia’s growth prospects due to a gradual recovery in oil prices, better international relations and a successful import substitution program.

FocusEconomics Consensus Forecast panelists see GDP contracting 3.6 per cent this year, which is unchanged from last month’s forecast. In 2016, the panel sees the economy rebounding to a 0.5 per cent expansion. (see details on page 53) Russia Economic Outlook

SEPTEMBER 2015 17

COUNTRY REPORT - CIS

Myasnitskaya street, Moscow, Russia

Ukraine IMF grants lifeline to the country and emphasizes that a successful debt restructuring is key

On 31 July, the International Monetary Fund (IMF) granted Ukraine a small lifeline, approving the release of the next tranche of its USD 17.5 billion bailout program.

The country’s economy has been stuck in a downward spiral since the onset of the military crisis in the Eastern regions of Ukraine and the USD 1.7 billion payment is designed to help replenish the Central Bank’s depleted reserves. While the IMF stated that encouraging signs are emerging regarding Ukraine’s economy, it emphasized that a successful debt restructuring is key to the program’s objectives. The IMF has conditioned the continuation of its USD 17.5 billion bailout program on Ukraine receiving substantial debt relief, however it has also signaled that it will continue to support the country even if negotiations stall. On a positive note, talks showed signs of progressing in recent weeks with four bondholders offering Ukraine a small amount of debt reduction. Ukraine has a USD 500 million bond payment due on 23 September and it is critical that the country comes to an agreement with creditors before then.

Ukraine’s outlook continues to deteriorate rapidly. While the IMF’s reform plan should help correct the economy’s imbalances, it

18 SEPTEMBER 2015

will dampen private consumption in the near term. Moreover, the economy is unlikely to rebound until a lasting solution to the military conflict is found, however progress continues to be slow. FocusEconomics panelists downgraded their 2015 forecasts for the fourteenth consecutive month in August and now expect GDP to contract by 9.3 per cent, which is down 0.6 percentage points from last month’s forecast. The panel sees the country rebounding next year and projects that GDP will expand 1.7 per cent.

Inflation Inflation falls for third consecutive month in June

According to a FocusEconomics inflation gauge, inflation in the Commonwealth of Independent States fell from a revised 13.2 per cent in May (previously reported: 13.3 per cent) to 12.8 per cent in June, which represented the third consecutive drop.

The fall stemmed mainly from a decline in inflation in Belarus, Kazakhstan and Russia.

FocusEconomics is a leading provider of economic forecasts and analysis on the most important macroeconomic indicators for 127 key countries in the Middle East, Asia, Europe, SubSaharan Africa and the Americas.

Meanwhile, inflation in Ukraine eased for a second consecutive month in June, falling from 58.4 per cent in May to 57.5 per cent.

The FocusEconomics panel of analysts revised down their inflation projections for the CIS economies for the third month in a row in August. This month, panelists expect inflation at 10.7 per cent, which is down from the 11.3 per cent expected last month. The movement mainly reflected lower inflation expectations for Kazakhstan, Moldova, Russia and Tajikistan. The inflation forecast for Ukraine, which is not included in the regional estimate, was raised over the previous month, despite the current moderation observed.

The FocusEconomics Consensus Forecast panel left the CIS countries’ 2016 inflation forecast unchanged this month at the 7.2 per cent that was expected last month.

-An excerpt from CIS Country Report published by FocusEconomics. Written by Senior Economist Ricardo Aceves. The full report can be accessed on www.focuseconomics.com

Forward-thinking companies require such reliable and timely information to help them make the right business decisions.

FocusEconomics’ extensive global network of economists, coupled with its position as an

industry leader, are indications of the company’s solid reputation as a reliable source for business intelligence among the world’s major financial institutions, multinational companies and government agencies.

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n o i t a m o t u a f o e g a e Th

y into hnolog c e t g g the egratin ecomin e of int b lu a e r v a e s lution alise th tion so a sses re e m in o t s u u As b ouse a s , wareh ls explore e v C le S G all r. u f the ho need o

T

Cosmin Ilie

20 SEPTEMBER 2015

he last few years has seen an increase in land costs, growth in manufacturing, and more demanding customers, which has triggered the need for warehouse automation. Automation solutions can help companies achieve a competitive advantages, by enabling better productivity, increased output, and more flexibility.

Says Frédéric Zielinski, General Manager Swisslog Middle East LLC,“Some companies in the Gulf are already using the latest automated warehousing technologies.

For those who don’t, we can offer them support in the transition from manual to fully-automated warehousing processes.”

Cosmin Ilie, Regional Sales Manager, SSI Schaefer, agrees.“As result of the market demand, our industry of storage systems is always looking for the development of

COVER STORY

JULY/AUGUST 2015 21

COVER STORY

Frédéric Zielinski

new products. SSI Schaefer is thus able to provide turnkey solutions from its vast portfolio of products,” he says, adding,“The market shows high interest in Integrated Standard Systems - Manual Storage Systems in combination with Mobile Racking, Pallet Shuttle Systems, Logimat or Conveyor Systems - and as well for Automation like ASRS, Mini-load, SCS, Pallet Conveyor. SSI Schaefer can bring all this to the table from one reliable source.”

22 SEPTEMBER 2015

Talking about innovations, Zielinski says, “If you visit us at the Material Handlings Middle East exhibition, you will have the opportunity to experience a groundbreaking system, which integrates robotic picking with Swisslog’s unique, automated, small part storage and picking system, AutoStore. Since 2010, we have sold over 50 AutoStore projects globally.”

AutoStore efficiently picks and stores single items and small cases to make

better use of available space and increases efficiency at integrated goods-to-person workstations. Robots with transport and lifting functionality operate the system.

Equipped with a lift, they retrieve the required bins from the AutoStore grid, and present them at the integrated picking stations, led by a controls and location management system.

“We will demonstrate the AutoStore in combination with the Human-Robot

COVER STORY

Interaction (HRI) concept named ‘Automated Item Pick’. This will be the first time we will showcase this concept to an audience. The concept combines AutoStore with KUKA’s collaborative lightweight robot, LBR iiwa, to create the first-ever interactive human-robot picking station. It allows humans and machines to work together seamlessly, and without cumbersome protective barriers,” he says proudly.

systems and services from a single source – When it comes to technology, it is from consulting to design, implementation important to ensure the product is truly and lifetime customer service,” he says. ready for implementation, and the bugs Adds Ilie,“The demands of the regional have been worked out. At SSI Schaefer, market is different in each business sector. for one, their experienced and dedicated Main sectors like 3PL, FMCG, retail, F&B, research and development teams across and automotive, are looking mostly for the world are working very close with their Integrated Standard Systems, such as customers to understand their operational Manual Racking and Shelving integrated needs, and to find the right solution to with Dynamic Solutions such as Mobile increase efficiency, reduce human errors, Racking, Channel Storage or Logimat.” and add value to their business by reducing In the ever-changing world of technology the running cost.“In addition, SSI Schaefer though, how long do these solutions is operating a number of technology centres actually last? “Based on our experience, worldwide, where new products are tested and with the combination of well-trained long before a launch onto our global customer staff, plus regular assistance by markets,” informs Ilie. one of our local maintenance teams on “Based on our long-term experience annual inspection, the storage system is in and proven methods, we design reliable safe and operational condition for a long solutions tailored to customer needs. In period of time. The lifetime a customer project, we can easily stretch over a analyse everything in AutoStore period of 20 - 30 years. We detail and from different have a couple of examples in perspectives, in order efficiently picks the Middle East where SSI to compare alternative and stores single Schaefer supplied system solutions. In-depth that are now up and running computer animations and items and small since the mid 1980’s,” says simulations can show us Ilie. how possible processes cases to make “Swisslog provides 24x7 could look in a new better use of support in order to solve warehouse, and give us problems, and to help specific figures for certain available space our clients to return to process steps. If we develop and increases efficient operation rapidly a complete new technology and avoid high costs.

– for example our new efficiency at Additionally, effective root Automated Item Pick integrated causing and a detailed solution – we do testing analysis of the incident in our technology testing goods-to-person help to prevent repeat centres. At a later stage, we workstations. issues. More importantly, also carry out pilot projects Swisslog Engineers are on-site at the customer to able to implement effective make sure we develop the and cost efficient preventive maintenance. perfect solution,” explains Zielinski.

Swisslog is very strong in modernisation. A In terms of customer demands, Zielinski constant monitoring and safety inspections feels that companies are generally of the plant, and an effective spare parts increasingly bringing logistics and management system, helps to optimise the warehousing solutions in-house rather total investment over the lifetime of the than outsourcing. This is definitely a sign installation,” explains Zielinski. that logistics is becoming a core business Of course, like any other product, this for many companies.“It’s also a way for comes at a cost. Says Ilie,“As any type of Swisslog to step in earlier in the process, business, we face external challenges on and have access to the client data in order manufacturing due to fluctuation of raw to design a system that fulfils 100 per cent material prices or foreign exchange rates. of his expectations. We offer integrated

SEPTEMBER 2015 23

COVER STORY

Being a global manufacturer, with plants show you one example with our service in Europe, Asia and the US, allows us to solution - Condition Monitoring. This benefit from these challenges at times as technology monitors many parameters well. Our global teams manage to secure associated with the general condition of the best quality materials which keep us on warehousing equipment, but identifying top of the global suppliers list in materials the key parameters is crucial. We are handling for years. Our highest quality looking at the important things – heat, of products is the strongest part of our errors, throughput, that sort of thing. business.”

Essentially, we want to give customers Adds Zielinski,“But if your the complete picture on how operation requires a higher their equipment is running, throughput, or if you need when and where it may need This technology maintenance, even predicting to store a high number of pallets (for example, 20,000+ when it needs replacing.” monitors many pallet positions), solutions Innovation is a big thing parameters such as high bay warehouse now, and Ilie stresses that can offer a better return, associated with the SSI Schaefer R&D Team a lower initial investment keeps it as top priority.“This the general as well as lower running helps us to provide better costs compare to traditional solutions in our wide range condition of manual warehouses.” of products to our clients. warehousing A hot topic today is IOT, Globally, SSI Schaefer is and Zielinski shares his take frequently nominated and equipment, but on it, “It is all about more awarded for its innovative new data, more intelligence, and products in Automation and identifying the more insights. IOT covers conventional storage solutions. key parameters Sustainability plays a vital all aspects of warehousing and logistics, and I can role in this development. is crucial.

24 SEPTEMBER 2015

To give a few examples, the drives used within a conveyor system are rated in the highest available efficiency class; energy that is generated by the breaks of an ASRS crane are fed back into the system to reduce overall energy consumption; the majority of our plastic bin range is also available from recycled plastic materials, which significantly reduces the impact on available resources,” he says.

Agrees Zielinski,“At the end of day, it is also a cost factor when it comes to energy consumption. Swisslog’s energy label GreenLog, classifies our material handling equipment according to energy efficiency saving measures. Based on lightweight designs, energy efficient drives, recuperation and innovative control concepts, the energy requirements for Swisslog‘s technologies have been substantially lowered. As a result, the Vectura stacker cranes and the Tornado Miniload crane, re-use break-energy and saves significant power resources. In this industry, the two aspects – sustainability and innovation - are inseparable. Innovation is our driving force in order to stay a market leader and be competitive. And sustainability drives innovation even more.”

Order fulfillment solution to increase your efficiency Being one of the most efficient order fulfillment systems available, the Schaefer Carousel System provides 1,000 picks per hour and can increase storage density by 50%. Its modular system design makes the SCS an adaptable and intelligent system solution for dynamic order picking processes with a very high performance level and maximum economic efficiency. Contact us, we will show you how to become fast, flexible and efficient.

P: +971/4/8048 100 路 E: info@ssi-schaefer.ae 路 www.ssi-schaefer.ae

‫‪COVER STORY‬‬

‫لدى العمالء للتأكد من أننا نطور بالفعل احلل‬ ‫األمثل‪ ».‬كما يقول زيلينسكي‪.‬‬ ‫وأما من حيث متطلبات العمالء‪ ،‬يرى‬ ‫زيلينسكي أن الشركات جتلب وبشكل متزايد‬ ‫اخلدمات اللوجستية وحلول التخزين إليها بدال‬

‫من االستعانة مبوردين خارجيني‪ .‬هذا بالتأكيد‬ ‫عالمة على أن اخلدمات اللوجستية أصبحت‬ ‫من صلب األعمال األساسية للعديد من‬ ‫الشركات‪ ،‬كما انها وسيلة لشركة سويسلوغ‬ ‫لتدخل في وقت مبكر في سياق العمليات‪،‬‬

‫وللوصول إلى بيانات العمالء من أجل تصميم‬ ‫نظام قادر على حتقيق ‪ %100‬من توقعات‬ ‫العمالء‪ .‬نحن نقدم النظم واخلدمات املتكاملة‬ ‫من مصدر واحد ‪ -‬ومن االستشارة للتصميم‬ ‫للتنفيذ ولتقدمي خدمة عمالء طوال العمر‪.‬‬ ‫‪26 SEPTEMBER 2015‬‬

‫‪COVER STORY‬‬

‫زمن األمتتة‬

‫مع إدراك الشركات لقيمة دمج التكنولوجيا في جميع‬ ‫أقسامها‪ ،‬أصبحت حلول األمتتة للمستودعات واملخازن‬ ‫ضرورة حالية ماسة‪ ،‬كما اكتشفت مجلتكم‪.‬‬ ‫شهدت السنوات القليلة املاضية زيادة في‬ ‫تكاليف األراضي‪ ،‬ومعدالت منو إيجابية في‬ ‫التصنيع‪ ،‬وعمالء أكثر تطلبا‪ ،‬والتي زادت‬ ‫مجتمعة احلاجة ألمتتة املستودعات واملخازن‪.‬‬ ‫ميكن حللول األمتتة مساعدة الشركات في‬ ‫حتقيق املزيد من املزايا التنافسية‪ ،‬من خالل‬ ‫حتسني اإلنتاجية‪ ،‬وزيادة اإلنتاج‪ ،‬وتوفير املزيد‬ ‫من املرونة‪.‬‬ ‫وفقا لفريدريك زيلينسكي‪ ،‬مدير عام‬ ‫شركة سويسلوغ الشرق األوسط‪ ،‬والذي‬ ‫يقول‪ « :‬تستخدم بعض الشركات في اخلليج‬ ‫بالفعل أحدث تقنيات التخزين اآللي‪ ،‬وأما‬ ‫بالنسبة للبقية التي لم تفعل بعد‪ ،‬ميكننا أن‬ ‫نقدم لهم الدعم لالنتقال من عمليات التخزين‬ ‫اليدوية إلى تلك املؤمتتة بالكامل‪».‬‬ ‫كوزمني ايلي‪ ،‬مدير املبيعات اإلقليمي في‬ ‫شركة اس اس آي شايفر‪ ،‬يوافق على ذلك قائال‪:‬‬ ‫«نتيجة للطلب في السوق‪ ،‬تبحث صناعتنا عن‬ ‫تطوير منتجات جديدة ألنظمة التخزين‪ ،‬وهذا‬ ‫ما يجعل شركة شايفر قادرة على توفير حلول‬ ‫متكاملة ومتباينة من املنتجات‪».‬‬ ‫يستكمل زيلينسكي حديثه عن االبتكارات‬ ‫قائال‪« :‬حني تزورنا في معرض مواد عمليات‬ ‫املناولة ‪ -‬الشرق األوسط‪ ،‬ستتوفر لديك الفرصة‬ ‫لتجربة نظامنا الرائد ‪AutoStore‬؛ والذي يدمج‬ ‫االختيار الروبوتي الفريد من نوعه‪ ،‬مع نظامنا‬ ‫اآللي لتخزين وانتقاء األجزاء الصغيرة‪ .‬منذ عام‬ ‫‪ ،2010‬بعنا نظامنا ‪ AutoStore‬ألكثر من ‪50‬‬ ‫مشروعا حول العالم‪».‬‬ ‫‪AutoStore‬‬ ‫يختار نظام‬ ‫ويخزن بكفاءة‬ ‫العناصر الفردية والصناديق الصغيرة لالستفادة‬ ‫‪SEPTEMBER 2015 27‬‬

‫بشكل أفضل من املساحة املتوفرة في املخزن‬ ‫واملستودع‪ ،‬وليزيد من كفاءة محطات البضائع‪.‬‬ ‫الروبوتات القادرة على االنتقال والرفع تعمل‬ ‫على النظام املجهز مبصعد لتمكني الروبوتات‬ ‫من استرداد الصناديق املطلوبة من شبكة النظام‪،‬‬ ‫وعرضها في محطات االلتقاط املتكاملة‪ ،‬حتت‬ ‫إشراف نظام ملراقبة وإلدارة املوقع‪.‬‬ ‫عندما يتعلق األمر بالتكنولوجيا‪،‬‬ ‫فمن املهم التأكد من أن املنتج جاهز حقا‬ ‫لالستخدام والتطبيق‪ ،‬ومت اكتشاف وتصليح‬ ‫املشاكل التقنية فيه‪ .‬في شركة شايفر‪ ،‬تعمل‬ ‫فرق البحث والتطوير ذات اخلبرة الكبيرة‬ ‫والتفاني الشديد من جميع أنحاء العالم‬ ‫بشكل وثيق مع عمالئها لفهم احتياجاتها‬ ‫التشغيلية‪ ،‬وإليجاد احللول املناسبة لزيادة‬ ‫الكفاءة وتقليل األخطاء البشرية‪ ،‬وإلضافة‬ ‫القيمة إلى األعمال التجارية من خالل خفض‬ ‫تكلفة التشغيل‪ ،‬أو كما يقول إيلي‪ :‬تعمل‬ ‫شركة شايفر على تشغيل عدد من مراكز‬ ‫التكنولوجيا في جميع أنحاء العالم‪ ،‬حيث‬ ‫يتم اختبار املنتجات اجلديدة قبل فترة طويلة‬ ‫من إطالقها في األسواق العاملية‪».‬‬ ‫«استنادا على خبراتنا وأساليبنا ذات املدى‬ ‫الزمني الطويل‪ ،‬نعمل على تصميم حلول‬ ‫موثوقة مصممة لتلبية احتياجات العمالء‪ .‬في‬ ‫مشروع عميل ما‪ ،‬نعكف على حتليل كل شيء‬ ‫بالتفصيل ومن وجهات نظر مختلفة‪ ،‬من أجل‬ ‫مقارنة احللول البديلة ببعضها البعض‪ .‬توضح‬ ‫رسوم الكمبيوتر املتحركة وتطبيقات احملاكاة‬ ‫كيف سيبدو سير العمليات إذا نقلناها ملستودع‬ ‫جديد‪ ،‬وتعطينا أرقاما محددة لبعض اخلطوات‬

‫العملية‪ .‬إذا طورنا تكنولوجيا جديدة كاملة‬ ‫ على سبيل املثال نظامنا األتوماتيكي اجلديد‬‫اللتقاط املخزون – ساعتها جنري اختباراتنا‬ ‫التكنولوجية في مراكزنا‪ .‬في مرحلة الحقة‪،‬‬ ‫ننوي أيضا القيام مبشاريع رائدة في املوقع‬

EVENT PREVIEW - MATERIALS HANDLING MIDDLE EAST

g n i t t Pu

t o o f st

fo

d r a rw e b r thei

Multi-billion dollar investments in GCC-wide commercial and civil infrastructure projects is having a positive impact on the materials handling sector, as Materials Handling Middle East 2015, the region’s dedicated logistics and warehousing trade show, will prove. We talk to some exhibitors about what to expect 28 SEPTEMBER 2015

based powerhouses Kanoo Group, Al Futtaim Motors, General Navigation and Commerce Company (GENAVCO), SPAN Group, and Al-Futtaim Auto & Machinery Company (FAMCO). This is a great opportunity for them to expand business opportunities across the board.

“The sustained growth in the sector can be attributed not only to the continued infrastructural development across the region, but also to an increasing demand for a streamlined supply chain and logistical framework from a growing number of regional businesses,”said Ahmed Pauwels, CEO of Messe Frankfurt Middle East, organiser of Materials Handling Middle East 2015.“As the premier trade event in the region for the industry, Materials Handling Middle East provides exhibitors and trade buyers with a dedicated networking platform and unmatched business promotion and development facilities,”he adds.

Al Futtaim Motors’ Commercial Vehicles division will be at Materials Handling Middle

Twintec

A

ccording to industry reports, the Gulf region awarded US$86 billion (almost AED 316 billion) worth of infrastructure projects in 2014, 78 per cent over 2013. This increased investment is fuelling demand for providers of logistics, transportation, materials handling, and supply chain solutions.

The upbeat sentiment is underlined by the industry’s biggest names exhibiting at Materials Handling Middle East 2015, taking place from September 14 to 16, 2015, at the Dubai International Convention and Exhibition Centre. The exhibition has sold out of exhibition space, further reiterating this point.

Headline companies returning to the biennial, three-day event include UAE-

Twintec returns to the show after a break of six years due to the upturn in demand in the UAE for superflat floor slabs. This year, the company will be showcasing innovation in concrete floor design and construction that directly impacts on the operational capabilities of materials handling equipment.

This includes ‘jointless’ floor slab design, Co-sinus construction joints and superflat floor tolerance construction without grinding.

In previous years, this show has provided excellent opportunities to discuss floor slab demands with MHE and racking suppliers, and to meet clients who have requirements for superflat floor slabs. Twintec is now located permanently in the UAE, with a view to responding to client’s needs effectively and efficiently.

SEPTEMBER 2015 29

EVENT PREVIEW - MATERIALS HANDLING MIDDLE EAST

SIG Combibloc, Riyadh, Materials Handling System for cartons

East 2015 to showcase its Hino Trucks and Toyota Material Handling equipment, including Toyota and Raymond Forklifts, and BT Warehouse Equipment. Vladimir Knezevic, Managing Director of Al Futtaim Motors Commercial Vehicles, said,“Thanks to the wide range of products offered by Hino Motors and Toyota Material Handling, we are able to provide customer tailored solutions for each business segment, and hence our target customers varies from small and medium enterprises, to large distribution

UNITECHNIK UNITECHNIK is bringing distribution logistics, catering and cargo handling systems to the exhibition, based on the references they have received.

The exhibition has always been a good networking opportunity. The

30 SEPTEMBER 2015

companies, from FMCG and logistic companies to construction and governmental institutions. This event allows us to present a live product demonstration and promote rental and other services to potential business partners from relevant industries.”

GENAVCO, a leading supplier of hightech industrial and construction equipment, will also showcase some of the world’s leading brands in warehousing equipment, racking and shelving systems, including Crown, JLG, Weiro, and Flexi articulated

show helps to identify projects in the region, and close follow up has been the headline after each show. Since the visitors at the exhibition are not only potential customers, but also consultants, there is a broad basis to update and exchange information.

Clients are looking more seriously into the automation of their handling systems, which is actually the core competence of Unitechnik Systems. Continuous improvement and good service to the clients is our motto– You have to be there when they need you.

trucks.“Instead of providing just a product, we provide a solution to our customers,” says Asif Khan, General Manager of the GENAVCO Equipment Business Unit, adding,“Having a diversified product range improves a dealer’s ability to adapt.

If one is not doing so well, the others can compensate and fill in those gaps. It makes our overall business more robust in the face of market fluctuations.”

Now in its 8th edition, Materials Handling Middle East 2015 will feature more than 150 brands from 17 countries. While a long list of exhibitors are returning this year, notable international newcomers include Belgian company Alphaplan, Bulmor Industries from Austria, and German warehouse pallet manufacturer CABKA. Another exciting announcement comes from UAE-based Aikah Establishment, who is launching Italian brand OMG, offering a wide range of materials handling equipment, from warehouse applications

EVENT PREVIEW - MATERIALS HANDLING MIDDLE EAST

LOC 8

Emirates Flight Catering, Dubai, Material Handling System for Carts

to rough terrain applications. Says Riaz Ahmed, General Manager of Engineering Products Division at Aikah Establishment for General Trading,“We believe that this exhibition can help us attract new customers and enhance our brand’s presence across the region. Currently, we are focusing on the UAE, but are looking at expanding our footprint across the GCC.” Materials Handling Middle East is the wider region’s only dedicated trade and networking event for intralogistics, warehousing, supply chain management, freight and cargo. New features in 2015 include the inaugural Warehousing and Materials Handling Conference, a two-day summit analysing key growth drivers and restraints, emerging trends and their impact on the regional materials handling industry.

Another highlight is the 1st Materials Handling Middle East Awards, where the industry’s heavy weights will be recognised and celebrated among industry peers.

Loc8 Group is celebrating 10 years of business in the UAE, and will be showcasing their loading dock range of products, with an emphasis on safety, productivity and effectiveness. The latest and most innovative dock leveller on the market, which comes with superior safety features, will be on interactive display.

This exhibition is a great opportunity to showcase their extensive range of storage and handling solutions and helps in raising our brand awareness in the logistics community.

It is difficult to put a figure to the potential business value gained from the show, as often, enquiries come after the show, but participation does add to sales. So the networking aspects of the show are fundamentally valuable, as it provides a platform to meet both new and old clients.

The materials handling sector year on year becomes more and more sophisticated, and clients evaluate their warehouse layouts in greater detail. They are also more open to the benefits of automation, and have longer term views in terms of returns on investments. Which is why it is important to provide not just products, but solutions.

SEPTEMBER 2015 31

GUEST COLUMN

Embracing technology the right way Paul Virgo, VP for Logistics at Milaha Maritime and Logistics, a subsidiary of Milaha, a Qatar-based marine transport and logistics conglomerate advises logistics firms to incorporate the right technological tools to enhance their business and service to the clients

T

he history of technology intersects with the history of humanity itself as technological progress has been a complementary force behind the rise of civilisation. Today, business technology encompasses a wide range of hardware, software, and services that enhance every aspect of an organisation.

Over the last few decades, technologies for improving enterprise flexibility and performance have been developing exponentially while requiring lower total cost of ownership. Even smaller enterprises can now appear bigger and prosper in highly competitive markets through strategic business technologies.

Modern day logistics management relies heavily on technology to boost competitiveness and performance.

Technology optimises the effectiveness, efficiency, and reliability of the entire logistics system to open up strategic opportunities for competitive advantage.

Technology has become an invaluable component of the logistics practice, ensuring the fastest, safest, most accurate, and most transparent way of handling goods. Shying away from advanced technology is tantamount to sacrificing on competitiveness and quality in the logistics business. The choice of technology is influenced by operations, goals, budget and market, among other considerations.

Technology – a necessity Milaha Maritime and Logistics embraces the necessity of technology in the logistics business. Its various state-of-the-art tools help deliver a comprehensive range of services to some of the region’s biggest oil, gas, petrochemical, and trade companies.

Milaha’s operations are critically supported by key technologies, such as automated warehouse management,

32 SEPTEMBER 2015

accounting and human resource management systems, and proprietary and third-party online services that facilitate cross-border trade, visa processing, trade license renewal, and Certificate of Origin processing, among others.

In the GCC, the ongoing economic boom is putting increasing pressure on the logistics industry to optimise efficiencies as trade demand continues to outpace infrastructure capabilities. Technologies for enterprise resource planning and dynamic e-commerce and services for activities, such as data backup, are becoming musts rather than just options. Milaha recognises the need to constantly push the technology envelope further to maximise their operations, talents, practices, and products in step with the evolving regional and global logistics landscape.

The growing efficiency of the Gulf’s logistics activities has had a significant impact in propelling the region’s trade

GUEST COLUMN

volumes and supporting the dynamic expansion of shipping and economic diversification across member states.

Technology is underpinning this sweeping growth, with advances such as round-theclock electronic transactions and mobile applications enabling traders to receive realtime information and conduct business with the Gulf 365 days a year, from anywhere in the world. State-of-the-art omni-channel systems and warehouse and transportation management systems are steadily gaining traction among logistics stakeholders in this part of the world.

More than just easing commercial flows, new technologies are carving a more ambitious future for the region-wide supply chain. Innovative tools and processes are currently being synthesised with existing policies, manpower and practices, to create a healthier and highly competitive logistics ecosystem in the Gulf.

Milaha relies heavily on advanced

technologies to control revenues through automation and alerts, streamline work processes, optimise decision making, and enhance time management, among others.

They do not just embrace technology haphazardly, though; every type of tool is carefully assessed to ensure it fits both their operational standards and the commitments to their customers.

Think tech The technological arsenal of a logistics business significantly dictates operational performance, service quality, reliability, and competitiveness. Milaha M&L acknowledges that ‘thinking tech’ by incorporating a harmonious collection of state-of-the-art tools can maximise the viability and proficiency of the logistics framework. Embracing the right technology for the right service or sub-procedure can provide a big edge in today’s aggressive multimodal logistics market.

About the author

Paul Virgo is a logistics professional with more than 30 years of experience at various companies and institutions. In his career, he has held positions with the UK Armed Forces, Maersk Oil and more recently with Baker Hughes.

With Milaha since 2013 as VP Logistics, Virgo is responsible for international freight forwarding as well as all logistics outside the port including warehousing, distribution and contract logistics.

Virgo is a Chartered Fellow of the Chartered Institute of Logistics and Transport as well as a graduate of City & Guilds, London.

SEPTEMBER 2015 33

FREIGHT REPORT

Air and sea freight

34 SEPTEMBER 2015

FREIGHT REPORT

slows down Tough times ahead?

Expectations continue to deteriorate as a downturn is predicted.

As per the Stifel Forwarding Index for August, European airfreight volumes decelerated and the Stifel Logistics Confidence Index (LCI) experienced its second-largest onemonth decline ever, falling 4.2 per cent from July to a reading of 54.1 – its lowest level so far this year

A

irfreight markets were undoubtedly strong at the end of 2014, but while many forwarders commented on volatility in 1Q15 and 2Q15, our airfreight index remained relatively stable, bolstering otherwise weak ocean freight results. In July, we began to see signs of deceleration in air, but that trend was particularly evident in August. Both present and six-month expected airfreight volumes fell sharply, as did six-month expected ocean volumes. Only current ocean volumes saw a modest increase. Slow global growth, fierce competition, and an outlook for volatility leads us to maintain our Hold ratings on common shares of the Europe-based freight forwarders in our coverage, including DHL Global Forwarding and Freight (DPW.XE, EUR 24.56, Hold), Kuehne and Nagel (KNIN-SIX, CHF 127.30, Hold), and Panalpina (PWTN-SIX, CHF 117.80, Hold).

In July, the overall Logistics Confidence Index (LCI) decreased sequentially by 2.3 index points to a reading of 54.1, exiting the 55.0-60.0 index band that it has been trading between since November 2013.

This month’s reading registered 5.1 points below the September 2014 peak, and 6.8 points above the October 2012 trough. The conclusion is that Europe-centric global trade growth remains challenged and markets remain volatile. Moderation in the Expected Situation Index indicates that growth in the back-half of 2015 will likely also be slow. By mode, Airfreight tonnage growth continues to slow. According to IATA, a tepid global economy and declining trade activity saw volumes increase at a rate of just 1.2 per cent in June, a margin barely enough to repel claims of stagnation.

Mirroring these results, the Present Situation Index for airfreight fell 4.1 points to 51.3, which is barely above the 50.0 growth threshold. All lanes decelerated, with European export lanes seeing the largest sequential slowing. Some lanes, including Europe to Asia and the U.S. to Europe

SEPTEMBER 2015 35

FREIGHT REPORT

growth, yields should improve as carrier rates remain depressed. In our view, this type of environment is most advantageous for operators who are able to manage expenses well due to better technology, personnel efficiency, and scalable costs.

Within our coverage, Kuehne + Nagel fits this description best, but we maintain our Hold rating on its shares, as well as those of DHL and Panalpina given slow European and global growth and a volatile rate environment.

Air freight confidence index

36 SEPTEMBER 2015

Aug-15

Apr-15

Jun-15

Feb-15

Apr-14

Feb-14

Oct-13

Dec-13

Aug-13

Aug-15

Apr-15

Jun-15

Feb-15

Oct-14

Dec-14

Aug-14

Apr-14

Jun-14

45 Feb-14

45 Oct-13

40

Dec-13

50

Aug-13

50

Aug-15

45

Apr-15

55

Jun-15

55

Feb-15

50

Oct-14

60

Dec-14

60

Aug-14

55

Apr-14

65

Jun-14

65

Feb-14

60

Oct-13

T0TAL FREIGHT 70

Dec-13

SEA FREIGHT 70

Aug-13

AIR FREIGHT 65

Oct-14

The total airfreight logistics confidence index decreased 3.7 points to 54.3 in August 2015, falling to its lowest level since August 2014.

But compared with year-ago levels, the index is still 1.5 points higher. Compared to August 2013, the index is 4.0 points higher. In terms of the present situation, the air freight index

Dec-14

In August, respondents were asked what proportion of the customs clearance and consulting/trade management services markets they believe are controlled by freight forwarders. The results show that freight forwarders are perceived to control ~48 per cent of the customs clearance market and ~25 per cent of the consultancy/ trade management services market, with specialists, non-forwarding 3PLs, or nonoutsourced functions making up the rest.

Investment conclusions: Our research indicates that sea freight rates continue to hit new lows, partially as a result of capacity additions, and partially as a result of weak demand. Likewise, declines in airfreight volumes are likely to support lower buy rates. So, while most large, European forwarders are expected to experience soft, or perhaps even negative volume

Aug-14

Trending topic

Jun-14

even slid below the threshold 50 mark into contraction.

The six-month outlook for airfreight also fell in all measured lanes, indicating that the second half of 2015 is unlikely to see much improvement over current levels. On the ocean side, a 0.5 point rise in the Present Situation Index was the only positive indication this month, with acceleration in all lanes but Europe-U.S., which fell 5.4 points into contraction territory after 16 consecutive months of expansion.

On an absolute basis, the countervailing U.S.-Europe lane also remains at sub-50 contraction levels, as it has done since April of this year. Unfortunately, a slowing in six-month sea freight expectations offset the mild improvement in the present situation.

Fundamentally, underlying ocean carrier overcapacity continues to weigh on the market, outpacing lethargic demand growth.

FREIGHT REPORT

38 SEPTEMBER 2015

FREIGHT REPORT

registered at 51.3 - still positive, as the last time the index dipped into sub-50 contraction was June 2014. However, a sequential loss of 4.1 points was the greatest one-time contraction, month-to-month, in the history of the index, and highlighting what many public freight forwarders have called-out as a highly volatile airfreight environment. All lanes declined, with Europe-Asia experiencing the biggest fall - down 7.2 points to 48.4 and returning to sub-50 contraction after four months of growth. Economic uncertainty in China and a devalued Yuan were likely contributors. The Asia-Europe backhaul did not fare much better, down 1.3 points.

Europe-U.S. remains the strongest absolute lane, but still fell 5.6 points to 57.8. The U.S. to Europe lane lost 2.4 points to 48.3. For the six month outlook, the expected situation index for total air freight decreased 3.2 points to 57.3.

All lanes fell, with Asia-Europe and EuropeAsia falling 4.5 and 3.7 points to 58.2 and 55.8, respectively. Europe-U.S. fell 1.2 points to 60.1, and U.S.-Europe was down 3.1 points to 55.1.

Sea freight confidence index For sea freight, the logistics confidence index fell 1.1 points to 53.8, with a mild improvement in the near zero growth present situation offset by an abatement in the previously highly optimistic expected situation. The index is 4.7 points lower than it was in August 2014, and 0.4 points lower than in August 2013. For the present situation, the index rose 0.5 points to 51.2.

All lanes but one experienced improvements this month, with the exception being Europe-U.S., which fell 5.4 points to 48.5.

The reverse trade, U.S.-Europe noted a 3.0 point gain to 47.8, whilst Europe-Asia rose 0.9 points to 51.0, and Asia to Europe gained 3.4 points to 56.4. The expected situation index for sea freight decreased 2.7 points to 56.4, erasing any improvements in the overall sea freight picture afforded by the present situation, and then some. All lanes were negative with Europe-U.S. suffering the greatest decline - 3.4 points to reach 58.1. Asia-Europe lost 3.3 points to 58.1, U.S. -Europe was down 3.0 points to 51.1, and Europe to Asia fell 1.1 points to 57.8.

- August’s index produced between Transport Intelligence and Stifel. www. transportintelligence.com

SEPTEMBER 2015 39

DEVELOPMENT NEWS

Is Iran the next global automotive hotspot in the Middle East?

As Iran’s economy opens up with the recent agreement in lifting international oil and financial sanctions in exchange for a reduced nuclear ability, Frost & Sullivan finds that opportunities for OEMs, supply chain partnerships and automotive services make it a very attractive market

40 SEPTEMBER 2015

I

ran has traditionally been a highvolume automotive market, whose geographic advantage has endowed it the potential to serve as a production hub in the Middle East. The recent lifting of economic sanctions has burnished the country’s reputation as a business hotbed, with the automotive market expected to grow at a compound annual growth rate of 13.4 per cent from 2014 to 2022. Unsurprisingly, global original equipment manufacturers (OEMs), suppliers, and other market participants are exhibiting unprecedented eagerness to be a part of the Iranian growth story.

New analysis from Frost & Sullivan, Strategic Overview of the Passenger Vehicle Market in Iran finds that Iran holds huge potential in a market that is already in its growth phase. The country’s high levels of localisation support and its production capabilities have earned it the status of an export hub for the Middle East. This could potentially alter the way OEMs and suppliers do business in the region.

Despite being the largest automotive market in the Middle East in 2014, with sales of more than 860,000 cars, Iranian suppliers’ processes leave a lot to be desired in terms of efficiency and eventually, product reliability. A key reason for this was the technology void left in the passenger vehicles market due to the long American boycott of, and early European exit from, Iranian markets.

“Iranian OEMs lack the powertrain technology, build quality, and finesse of foreign companies, and would benefit immensely from partnering with them,” said Isaac Abraham, Senior Research Analyst, Automotive & Transportation, Frost & Sullivan. “Almost the entire automotive industry is open to partnering, as international technology, modern

DEVELOPMENT NEWS

production lines, and finance is the need of the hour.”

However, the Iranian passenger vehicle market is a complex space, with the Government having stakes among OEMs and suppliers. While the protectionist policies and high localisation mandates raise the entry barriers for foreign companies at the cost of quality, they also

boost local economy and employment.

Chinese OEMs are already offering up to 20 per cent discounts to entrench themselves before western companies can enter the market, but customers are likely to defer purchases until western vehicles are available to them.

“Overall, the Iranian passenger vehicle market’s potential to quickly launch new

models with existing levels of localization and the country’s high annual consumption will attract investors to the country,” noted Abraham. “Cooperation with foreign auto industries and the resulting modern technology as well as vast options in models and makes will give the push needed to make Iran an automotive hub in the Middle East.”

SEPTEMBER 2015 41

How do past challenges create tomorrow’s solutions? Inbound Logistics’ Joseph O’Reilly examines the growth and changes in third party logistics over the last couple of decades – the time period that change has come very rapidly

42 SEPTEMBER 2015

ANALYSIS

SEPTEMBER 2015 43

ANALYSIS

W

hen we look back at the history of logistics, not much changed over the eons. For hundreds of years, we moved boxes, put products on ships, and traveled all over the world. In the past 20 years, however, the management of transportation and logistics has undergone meteoric change. Today’s supply chain is awash with complexity. Whether it’s the rapid growth of e-commerce and omni-channel logistics, or emerging consumer markets around the world, shippers face a litany of challenges. As a matter of course, they often partner with third-party logistics (3PL) providers to seek counsel and reduce costs.

Yet it seems like only yesterday when 3PL was just a new acronym bandied about industry conferences and trade magazines to describe a different kind of transportation and warehousing company. In 1996, Inbound Logistics’ initial Top 3PL list, segmented providers by unique functions: truck-based, brokers, forwarders, warehouses, air express, ocean, and dedicated contract carriage. Today, integrators aren’t so easily typecast.

44 SEPTEMBER 2015

have long since disappeared. In 1996, it was Federal Express, not FedEx; Caterpillar Logistics had yet to morph into Neovia.

But a handful of service providers have stood the test of time. Inbound Logistics recently caught up with five 3PL providers that featured on our inaugural list in 1996, and have been on the list each year up to the present. We asked them to consider how outsourcing demand has changed over the past 20 years, and to shed some light on where the future of 3PLs is tracking.

As a point of reference, consider the world of 1996. Mad Cow disease spread throughout Britain and Europe; Japan unveiled the first DVD; AOL was the social medium of choice; Microsoft introduced the Windows NT 4.0 operating system and Internet Explorer 3 Web browser; Amazon.com let readers search for books by author, subject, or title; and theRegina Maersk debuted as the world’s largest Many names have containership with a capacity of 7,100 TEUs. changed. GATX, Today, Internet Explorer is Fritz Companies, being phased out with the introduction of Windows TLC, USCO, BAX 10 – 10 versions removed Global, and Caliber from NT 4.0 . Amazon is playing with drones, and have long since containerships tip the disappeared. scales at 20,000 TEUs. A lot has changed in 20 years.

In 1996, it was As global economies have Federal Express, turned and burned, the 3PL sector has evolved not FedEx; accordingly.

Many names have Caterpillar Logistics changed. GATX, Fritz had yet to morph Companies, TLC, USCO, BAX Global, and Caliber into Neovia.

Function junction When Ann Drake joined Des Plaines, Ill.-based Dry Storage Company as executive vice president in the early 1990s, it was an asset-based public warehousing company with a small trucking fleet and locations across several geographies.

“Our internal departments were siloed. Transportation and warehousing people didn’t talk to one another – which was typical in the industry as so little was integrated,” Drake recalls.

ANALYSIS

Most shippers were outsourcing little pieces of the business. The logistics market in the mid-1990s was a transportation and warehousing buffet. Early adopters recognized that outsourcing was an extension of the business. so it was treated as transactional.

“It was a test market,” says Bob Bianco, president of San Francisco-based Menlo Logistics.“Shippers liked the 3PL concept, but they were piloting projects to see if they

46 SEPTEMBER 2015

could achieve real value. These projects covered singular functions, or were regional in scope.”

Shippers dictated terms accordingly.“We were order-takers,” Drake says.“We saluted and did whatever customers told us to do.”

Things started to change, however, when savvy shippers began tasking 3PL partners with additional responsibilities.

For Des Moines, Iowa-based Ruan Transportation Management Systems,

it was a natural progression from its dedicated fleet pedigree.

“We started doing some logistics, brokerage, and warehousing as customers asked,” explains Marty Wadle, senior vice president of supply chain solutions for Ruan. “We grew up doing little pieces of 3PL work using our legacy systems— trying to jam logistics processes through trucking dispatch systems that weren’t built for that.”

ANALYSIS

Eventually, Ruan began investing in technology and recruiting the right people so it could proactively go after that market share rather than pick off new business through its dedicated fleet operation.

“Twenty years ago, shippers just wanted us to move their freight,” he adds.“Now they want to know what’s going on with their freight, and how we can move it more efficiently and economically the next time.”

Logistics competency—and outsourcing

activity—was largely embedded within manufacturing industries, so that’s where much of the 3PL growth originated, explains Steve Sensing, president of global supply chain solutions, for Ryder System, based in Miami, Fla. Automotive, in particular, was a core industry for Ryder. Fiat Chrysler Automobiles (FCA) North America started working with the 3PL in the early 1990s. At the time, its outsourcing strategy was simple.

“We worked with lead logistics providers (LLPs) at individual assembly plants to run operations,” says Bill Cook, director, logistics and customs, Fiat Chrysler Automobiles North America.

Ryder was among several 3PLs that served Chrysler in this capacity. The automotive company relied on its LLPs to gather data from suppliers and carriers, and dynamically manage routes—pick up times and deliveries—in and out of its plants.

SEPTEMBER 2015 47

ANALYSIS

But then Ryder started to change its go-to-market approach.“We focused more attention on our logistics and supply chain portfolio, as well as fleet management,” says Sensing.“We exited the one-way truck rental business. Because most people tied our brand to the iconic yellow truck, that move was a big step in our transition.”

By 2000, Ryder’s role with Chrysler grew into that of a 4PL—overseeing the automotive company’s North American plants by performing logistics engineering, modeling, and network design.

Eventually, Ruan For the better part of the past began investing decade, Ryder has provided strategic oversight. With a in technology and few recent exceptions, Ryder recruiting the right doesn’t run any physical part of Chrysler’s operation to prevent people so it could any conflicts of interest. proactively go As logistics outsourcing has matured, opportunities after that market to further optimize logistics share rather than operations surface. The 3PL has become an important node in pick off new this transformation—not just business through in terms of meeting functional needs, but also as a repository its dedicated fleet of industry best practices and knowledge sharing. operation.

When Drake became CEO of Dry Storage Company in 1994, she recognized the need to consolidate the 3PL’s business model in a literal sense.

Because the public warehouse comprised 22 smaller entities, she wanted to move toward a standard way of doing things—where the company could coalesce best practices across customers and geographies. That’s when it pulled everything together under the DSC Logistics banner.

Changing with the times Ryder and DSC Logistics’ stories are not uncommon among legacy 3PLs. In fact, many have similarly transformed over the past two decades. The 3PL’s value proposition has morphed from exclusively cost reduction to also include change management.

There has been no shortage of drivers: the peak of the dot.com bubble and rapid deployment of technology; the Sept. 11, 2001 terrorist attacks; the rise of China’s

48 SEPTEMBER 2015

manufacturing economy and widespread offshoring; the Great Recession in 2008; and cloud computing, among others.

These external pressures have forced companies to seek counsel beyond the enterprise. 3PLs, by virtue of their myriad customers and experiences, crowd-source invaluable information and insight.

Dovetailing functional capabilities with knowledge creates a powerful elixir for prospective outsourcers.

“Shippers today don’t want data; they want information,” says Wadle.

That’s why Ruan has developed customized dashboards for specific verticals to show shippers exactly what’s happening in the supply chain—whether it’s ontime performance by carrier and mode, high price-low price lanes, or multi-stop consolidation opportunities.

“Today, we sit at the strategy table with our customers,” adds Drake.“Consultants

used to tell companies what to do; that responsibility for thinking and doing has shifted to the 3PL.” She points to a current situation where DSC Logistics is working with three customers that are in the process of making acquisitions. In two of the cases, the 3PL is working with both buyer and seller.“We’ve been helping them figure out how the new network should look,” Drake adds.

Buffalo, N.Y.-based New Era Cap

Company is familiar with this type of 3PL counsel. In 2005, it operated a lone warehouse in Mobile, Ala. Business outpaced distribution capacity. The company had never worked with a 3PL before, but there was a burning platform to test outsourcing.

“We talked to several players at the time,” explains Jim Patterson, chief operating officer for New Era.“Menlo Logistics had space available, and was ready to jump in

and solve an immediate need for us. It was an opportunity to work quickly with a 3PL, and learn along the way.”

Menlo had space available in Kansas City, which was a good fit for where New Era needed to fulfill customer demand. It was an 80,000 seasonal unit program; a short-term solution powered by an offline spreadsheet the two companies shared.

New Era continued to operate the Mobile DC. After a successful two years with Menlo,

SEPTEMBER 2015 49

ANALYSIS

the company revisited its outsourcing and distribution strategies.

“In 2007, we looked at some analysis that Menlo provided regarding where our accounts were located and where we were shipping from,” says Patterson.“Menlo suggested we’d be better able to service our accounts by moving to Harrisburg, Pa.” So New Era relocated to a Menlo DC in Harrisburg, all the while maintaining the Mobile facility. But the company started shifting some accounts to the new warehouse. Two years later, it closed the Mobile operation entirely and moved everything to the Menlo-managed model.

Today, New Era runs 20 million units through the system—both seasonal and stock product. Its ERP system and Menlo’s warehouse management system are completely integrated.

“The partnership has been a journey,” Patterson says.“If you look back, it seems like we’ve operated on a 24-month cycle— every two years we make a big leap forward.

“Early on we had product that needed to move, and we were constrained by capacity,” he adds.“Now the partnership is much more strategic. That’s the direction we’re going.”

Expanding globally 3PLs have been leading manufacturers and retailers in new directions as well. As China’s economy exploded in the 2000s, and U.S. companies began looking offshore for cheaper labor, they needed help making inroads into new sourcing markets where they had no infrastructure or connections.

Today, that paradigm applies on the sell side as well. Global e-commerce is revolutionizing retail. Growing consumer economies, especially in Asia and Latin America, open new doors for manufacturers and retailers, while reinforcing variable cost, risk-averse outsourcing solutions.

“We became more of an integrated company by looking at our international operations,” says Sensing.“We focused on where our customers had needs in North America, Europe, Latin America, and Southeast Asia. That allowed us to grow where customers needed our help, and where we could provide solutions in terms of a global footprint.”

Few 3PLs have the global footprint that

50 SEPTEMBER 2015

UPS has developed over the past two decades.“In the early 1990s, UPS acquired a broad range of supply chain capabilities globally,” says Alan Amling, vice president of global logistics and distribution, UPS. Even in 1992, UPS was reaching more than 200 countries and territories with its parcel and package services. When it formed a logistics group one year later, it had a solid foundation to deliver global supply chain management solutions.

“Serving international markets introduces a higher level of complexity to the supply chain,” says Amling.“As companies expand to penetrate new markets or pursue improved manufacturing models, they need the logistics expertise, services, and solutions that 3PLs can provide.”

That’s one reason why New Era eventually followed Menlo Logistics to Europe.

In 2010, the company was looking to open a European DC to serve its growing market there. Menlo operated a facility in Eersel, Netherlands. So New Era opted to go with the 3PL.“We were able to move down the path quicker because of our experiences in the United States,” says Patterson.

New Era’s positive experience outsourcing distribution and logistics with Menlo also influenced its decision to rely on other local 3PLs to serve unique global markets such as Japan and Korea.

Given the rapidity of change over the past 20 years, it’s difficult to even conjure what the supply chain—let alone the 3PL sector—might look like in the near future.

Consider Menlo’s trajectory as an example.“When we first started the company, we were a transportation management 3PL,” recalls Bianco.“Our first

project in 1992 was helping Hewlett Packard with LTL distribution. Then we got into the warehousing business. Today, Menlo provides a full array of logistics services— anything from the supplier to the end user.

We even do some manufacturing.”

That’s not an uncommon narrative. 3PLs continue to diversify their services.“The 3PL sector will likely become more specialized,” predicts Amling.“3PLs will focus more on industry segments and sub-segments, for example focusing not just on the healthcare supply chain, but the medical device supply chain within healthcare.”

Such specialization raises the profile of 4PL-type models. Also, as global markets continue to open up, there will likely be more competition from service providers in other parts of the world.

An interesting dynamic is building. The industry continues to expand, then contract.

Technology and human talent have become competitive differentiators. Non-asset service providers and transportation brokers are flooding the market. But consolidation has been rampant over the past few years.

Given capacity constraints, asset-based providers have become more valuable. The cycle continues.

Drake predicts continuous integration is the likely scenario over the next few years.“We know that’s the megatrend in technology. We see people working in both directions and both sides of the aisle,” she says.“And that’s OK. Silos create costs. It’s fine for lines to blur.”

“Blur” is an apt word to describe the continuing evolution of 3PLs and 3PL partnerships.

-www.inboundlogistics.com

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52 SEPTEMBER 2015

FUTURE TRENDS

The future of supply management:

a conversation with millennials Bringing millennials into the supply management profession is challenging because the usual recruitment tools don’t work. As we educate millennials about the profession, we also need to educate ourselves about millennials.

L

“

M.L. Peck

ooking for ways to change the world and improve the quality of life for others? Enjoy getting out of the office for a break during the day?

Constantly seeking new challenges and learning opportunities? Aspire to make a difference to your organization? Live for social media?”

That may not sound like the job description most of us post for a position in the supply management profession. But, if the industry wants to attract millennials, that group of young people age 18 – 35 who are entering today’s job market, perhaps we should.

After all, engaging millennials in the supply management profession is challenging. In part, that is because the usual recruitment tools don’t work. Their motivators and desires are different, as are their work habits and style. Many of us from a different generation may be put off and want to change those attitudes. However,

if we as a profession learn to embrace and harness those differences, millennials can have a huge, positive effect on their companies, communities, and our industry.

As we educate millennials about the profession, we also need to educate ourselves about millennials. Here’s what two millennials recently told us.

Building awareness of supply management profession Tania Santiago, indirect procurement lead for the Latin American region at Millicom International Cellular SA in Coral Gables, FL, credits Professor Norm Aggon at Penn State for introducing her to the profession through an introductory business class on supply chain management. Grayson Mitchell, outbound logistics supervisor at Fiat Chrysler Automobiles in Auburn Hills, MI, had a similar experience at Howard University. He first learned about the discipline during an introductory business class in his sophomore year.

SEPTEMBER 2015 53

FUTURE TRENDS

Subsequently, both Santiago and Mitchell were able to participate in supply management internships at major corporations including IBM, Johnson & Johnson, Owens Corning, Eli Lilly, and Chrysler Group. Both received multiple honors and scholarships, including the prestigious R. Gene Richter Scholarship.

The exposure to the profession in college “really gave me the opportunity to learn about supply management and understand how many different departments it touches,” said Mitchell.“You are tackling a different challenge every day.”

Santiago and Mitchell agree supply management as a career choice is becoming more popular and appealing on college

54 SEPTEMBER 2015

campuses. Students are attracted to the number of different disciplines within the profession, the breadth of responsibility, and its impact on sustainability and the global footprint.

To build the enthusiasm of millennials who opted for a career in supply management and to provide broader visibility to their talents and achievements, ISM partnered in 2014 with ThomasNet to initiate the “30 Under 30 Rising Supply Chain Stars Programme.”The programme recognizes up and coming professionals who are making significant contributions within multiindustry procurement roles. In the first year, we received more than 200 nominations, and nominations are now open for 2015. Santiago

was one of our 30 Under 30 Rising Star in 2014.

It’s not enough, however, that we expose millennials to the profession and reward them for their hard work. If we’re going to recruit them, we need to understand what attracts them to certain companies.

What’s a millennial looking for anyway?

Millennials want to work for companies that are authentic and trustworthy. They’re looking for companies that make a positive difference in the world, protect the environment, and treat people as individuals, not tools to accomplish a task. Once they’re on board, millennials want to continually learn and have responsibility for projects

FUTURE TRENDS

to those who work on the production side and others from the commercial side.

“The innovation teams create the space to bounce ideas around a room of people that truly embody diversity of thought,”he said.

“Whether we’re discussing more eco-friendly supply chains or coordinating a feasible work-from-home schedule, many great ideas come from these teams.”

and decisions that have a direct impact on their company’s bottom line.“We want to prove our worth and give something back,” Santiago said.

Mitchell’s opportunity to intern at Chrysler after his junior year in college ultimately led to his accepting a job with them.“I wasn’t just a number or an intern; I was an employee – a valuable asset. We worked on projects that were meaningful and helped our company,” Mitchell said. Also important was the global environment Chrysler created after it survived bankruptcy and partnered with Fiat.

He appreciates Fiat Chrysler’s “innovation teams,”the focus groups made up of different employees who wouldn’t ordinarily work together, from new hires to 30-year veterans

“We take pride in new challenges, but if we find ourselves not being challenged, we tend to look elsewhere,”said Mitchell.“As we get five, 10, and 15 years into the future, millennials will represent a large portion of the workplace – and if companies have not been preparing for this, they certainly should start today.”

Some companies may find it difficult to make the changes necessary to attract and retain millennials. At ISM, we’ve learned How do you keep them? that if a company is making a good faith Millennials work much differently than the effort and continually trying to engage baby boomers before them. As a result, many them, millennials are eager to help. For baby boomers hold the misperception that example, some companies are hosting millennials don’t have the same work ethic. focus groups made up of Nothing could be further millennials to brainstorm from the truth. They’re very ideas and then giving effective at what they do, they Supply management that same group the just work differently.“We like “green light” to make the to maximize the efficiency of as a career choice changes. Millennials want our time. We’re not focused is becoming to help their company. on ‘face time’ – being at your Our newly developed desk for eight to 10 hours and more popular and ISM Mastery Model is then going home,”Mitchell said.“If we can get that same appealing on college another tool managers can use to have a work done in a shorter period campuses. Students conversation around of time or at home and be just as efficient, we’re all for it.” are attracted to the learning, one of the key motivators for millennials.

Santiago characterizes number of different The Mastery Model the workstyle of millennials includes a proprietary as dynamic.“We don’t disciplines within supply management necessarily take the linear the profession, competency framework, path to arrive at a conclusion. a comprehensive survey We may go in circles, we may the breadth of to determine where take a break to surf the web responsibility, knowledge levels may or get out of the office, but we be deficient, and a get the results,”she said. and its impact on subsequent roadmap Opportunities to learn are of specific training and very important to millennials. sustainability and coaching to prepare Whether it’s a lateral move into the global footprint millennials for the next a new department, rotations step in their career. from the headquarters office Many large, established companies will to a warehouse or a call center, or a transfer experience a loss of 50 per cent to 67 per to a different geographic location, millennials cent of their workforce due to retirements in are eager for the“opportunity to move around the next five years. It’s time to ramp up our under the same roof,”Mitchell said.“We need efforts to attract and retain millennials in our to be continually challenged because we do profession. get restless. We’re eager and extremely hard working and want to continue to learn,” Santiago added.

-M. L. Peck is the senior vice president Both Mitchell and Santiago said they of Program and Product Development know peers who have moved on from one for the Institute for Supply Management. company to another because they weren’t For more information, visit http://www. learning something new. instituteforsupplymanagement.org/

SEPTEMBER 2015 55

TRENDS

Creating a supply chain centre of excellence A guide to creating you own supply chain centre of excellence.

Tom Craig is a leading supply chain and logistics consultant with LTD Management.

He shares his insights in bettering your operational capabilities below 56 SEPTEMBER 2015

M

any of the companies with the best supply chains have a centre of excellence (CoE). If your firm is looking to create one, here is a guide. Depending on your supply chain effectiveness, then this can be a transformation effort or a continuation to having a top world supply chain programme.

The CoE concept is not fixed. A company can design, build, and operate as they believe would be most beneficial. To that extent, LTD Management offers the following: What is the mission and purpose of the group and of each project they undertake?

What are the goals? What value and benefits will it generate for the company and for the supply chain group? These are perhaps the first questions that should be addressed. The answers should be clear and understood by everyone. Will it focus on best practices as is sometimes done with a CoE? Or will it go further and work to take supply chain management to a higher level? We support both, with emphasis on taking SCM to a higher level.

Across the organisation, a CoE can blend the best of“corporate”and“local”thinking and operations, improve tactical alignment, share resources, advance integrated supply chain process and integrated supply chain technologies, break down functional and organisation barriers/silos,and increase agility.

Underlying the CoE is cross cultural collaboration. This is fundamental to both the supply chain and the company. It is important across the regions and divisions.

Issues range from team building with people in different locations, speaking different languages, creating trust, and developing leadership.

There is much complexity with the company-wide supply chain that creates significant opportunities. Examples are best practices, risk ,and sustainability.

There is also the potential of using the new supply chain management for the company’s multichannel activities. This could address opportunities such as B2B and B2C global e-commerce and multichannel sales in different countries. Supply chain duality,

TRENDS

advanced process and technology integration, inventory velocity, time compression, extending the supply chain upstream, inventory positioning, order throughput, and network alignment are examples of key projects that would go with these.

What is the structure? Will it be a corporate effort that presents its work to others? Or will it be a collective, collaborative effort? We believe it should be a blended endeavor of corporate and regional people. Depending on the project, there should be internal and external stakeholders and outsiders who can present objective comments to guide the effort. Blending is important for team involvement and for implementation-so that the work of the group is adopted throughout the company and is not viewed as a dictate by an authoritative body. Various online technologies and collaborative tools should enable this approach. Depending on the respective projects, the leader of the particular work should rotate through key parts of the supply chain organization, both corporate and regional. The size of a team

The CoE concept is not fixed. A company can design, build, and operate as they believe would be most beneficial. What is the mission and purpose of the group and of each project undertaken?

What are the goals?

What value and benefits will it generate for the company and for the supply chain group? should not be so large as to make it impotent for the work and decision-making required.

Where should it start? How does it identify and select projects? Various groups within the company likely have their own ideas of what projects the CoE should work on. Another approach is to do a holistic

analysis of the global supply chain. Core components to the assessment are: Process Technology Organization Product flows Information flows Best practices Key performance measures Capacity, utilization, and scalability of supply chain Financial flows Costs The results should be used to guide possible projects. Project results and performance are important to validating and increasing support for the centre of excellence. www.ltdmgmt.com Tom Craig is a leading supply chain and logistics consultant with LTD Management. He has real-world logistics and supply chain experience. Tom’s experience and capabilities are cuttingedge and bring authority to clients.

SEPTEMBER 2015 57

DEVELOPMENT NEWS

58 SEPTEMBER 2015

DEVELOPMENT NEWS

The expansion of KSA’s Madinah Airport is a positive move towards airport privatisation and economic diversification.

Leading regional consultancy Frost & Sullivan elaborates in this development report

expands Madinah airport

T

he Kingdom of Saudi Arabia’s aviation sector is a dynamic industry due to the country’s expanding population and increasing religious tourism. The Government is working to sophisticate and streamline the industry through infrastructure development, privatisation initiatives, and market liberalisation.

Keeping up with the growing need, the KSA has just opened the first phase of its airport expansion project. The USD 1.2 billion expansion plan consists of a threelevel terminal covering over 156,940 square metres with 16 aircraft stands and boarding bridges. For Haj and Umrah pilgrims who are looking to sanctify their travel with a visit to Madinah, the airport expansion plan comes as a boon without disguise.

However, the Madinah airport is also likely to be the harbinger of heightened economic activity and the precursor to other privatisation initiatives.

Frost & Sullivan estimates that the KSA has close to 11 million tourists annually of which 5.7 million are aviation passengers.

Aviation traffic is likely to grow at a Compound Annual Growth Rate (CAGR) of 27.2 per cent over the next decade or so. In view of this, the airport expansion project assumes special significance.

SEPTEMBER 2015 59

DEVELOPMENT NEWS

The new airport is expected to significantly boost Madinah’s economy.

Besides improving commercial trade to more than USD 107 million, almost 20,000 new job opportunities will be created and housing accommodation for an excess of 100,000 residents will require new constructions. This will also directly boost infrastructure and connectivity of the city.

60 SEPTEMBER 2015

The Madinah airport project was constructed and will now be operated as a private enterprise. The KSA has been steadily moving towards aviation privatisation and the sale of Saudia Airlines was the first of multiple such steps. The new airport is another such move in the same direction as the KSA looks to enhance competitiveness and efficiency in the aviation sector.

“Privatisation is seen as a welcome move as it provides a more competitive environment for airports to function.

Besides improving efficiency, privatisation ensures that the airport management will have a more focused business outlook that could contribute to the economy of the KSA,”says Vinod Cartic, Senior Consultant, Business and Financial Services, Frost & Sullivan.“Growth is also more likely in the privatisation set up with airports looking to non-aeronautical revenue sources as well.”

With the need to support an entire business environment, airports have a more varied source of revenue, leading to diversification.“Given that airport revenue is tied to economic cycles and uncertainties, diversified sources of revenue can help stabilise the airport’s cash flow. Studies indicate that as airports mature in terms of traffic, non-aeronautical revenue increases correspondingly,”Cartic adds.

Cartic also suggested that the Madinah airport could also pave the way for a Madinah Aerotropolis - an urban planning concept where all economic and business activity revolves around the airport.

Apart from the geographical size and the economic impact, an aerotropolis serves to boost significantly the airport’s non-aeronautical revenue. The nonaeronautical revenue associated with an aerotropolis like Madinah will also boost the economy of the city.

The KSA took giant strides in developing the aviation sector with the liberalisation policy initiated in 2007.

However, with the expansion of the airport, safety standards in a privatised airport will attract significant attention.

Prevention of monopoly and illegal tie ups between the airport, airlines, and aerotropolis management will be a big challenge. Simultaneously, with the expansion of the airport, the requirement of an increasing number of trained line staff is on the increase.

With the KSA economy given a boost by high oil prices, a burgeoning young population with higher disposable income, enhanced aviation infrastructure, and an open capital market attracting greater foreign investment, the overall outlook for the KSA’s aviation sector is very positive.

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