Albert Pang, CEO Oman International Container Terminal
We’re anchoring our position as the gateway to the Gulf.
With a newly expanded container terminal, investments of $25 billion and seamless sea-road-air access to the region’s largest markets, it’s no wonder so many companies choose to start their journey in SOHAR, one of the world’s fastest growing Port and Freezone developments.
September 2016 Issue 29
ENHANCING THE BUSINESS OF LOGISTICS
Focus on retail
GES answers to the regionâ€™s demand for materials handling
A new silk road
India invests in new Iran port
TALENT TRENDS In materials handling
Alshaya Trading Storage Systems & Supermarket Solutions has dedicated itâ€™s knowledge and experience to promote & expand the storage solutions industry, with over 35 years & 10,000 installations. We are always able to find the optimal Engineered Storage Solutions at the lowest possible cost. Our in-house design and project teams providing concept to completion service from initial site survey through to design and installation.
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Materials handling is easily the oil that runs the entire logistics and supply chain process. If you’ve got this sorted then your establishment is on the right track. We’ve compiled a number of informative articles in this issue to highlight the top trends affecting this aspect of the supply chain market whether it is talent acquisition or retaining (cover story page 22) or other trends at large (page 36). We worked with CNN to bring you an exclusive on Nigeria. Two years ago, it was touted to being the country with the most economic potential out of the entire continent of Africa. And today it is hitting a recession. Why? The economy of Nigeria is dependant on oil for 90 per cent of its revenues and oil prices haven’t helped. Being an emerging economy a recession was bound to happen. Today, doing business in this country is extremely difficult and lots of South African companies have already pulled out their investments. The country’s entrepreneurs however aren’t losing hope. While work is underway to create a massive, 650,000 barrel-per-day refinery to convert the country’s crude oil to gasoline. Once complete in 2018, this refinery provides hope to quench the country’s thirst for the fuel and even have spare to export. So while the government struggles in the short term because of this lack of business due to oil prices, several consumer-driven businesses are sprouting on the ground promising a better tomorrow in the long term for this nation. Iran (page 38). There isn’t enough that can be said about it. Since the news of the lifting of its sanctions and the opening up of its economy, all countries and businesses want a share of the pie. Recent news about India investing US$500 million to develop a deepwater port in the southeastern Iranian city of Chabahar is a potential game changer for business logistics and supply chains throughout Central and South Asia. A potential new route for businesses in the near future? Let’s wait and watch. Munawar Shariff Managing Editor firstname.lastname@example.org
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September 2016 Issue 29
ENHANCING THE BUSINESS OF LOGISTICS
38 Another new Silk Road?
22 06 News 16 Country report – Russia and CIS Oil induced regional weakness Worsening economic conditions in Russia and lower oil prices hit the economies of the Commonwealth of Independent States (CIS) in 2015
22 Cover Talent trends in Material Handling Eight top trends in the materials handling recruitment world for the year
26 Focus on retail Mustapha Kawam, President and CEO, Globe Express Services, talks about keeping up with the changes in the industry and preparing for the expected future growth 4 SEPTEMBER 2016
32 Kuwait gives green light for airport terminal construction Officials in Kuwait have made significant progress on long-awaited upgrades to Kuwait’s International Airport (KIA)
35 DHL delivers to Daimler’s smart cars Last mile delivery just got smarter
36 Top 5 materials handling and supply chain trends for the year The industry is taking on a new shape with innovative technologies and revolutionary ideas
India’s recently announced investment in a new Iranian port is a significant economic and geopolitical play with the potential to shake up Asian supply chains
42 Nigeria: On the brink Plunging oil prices, capital controls and chronic fuel shortages have thrown Africa’s largest economy into disarray
48 Design excellence Panalpina World Transport and Genavco give their perspectives on their new project
51 Shipping lines, ports and shippers A dramatic disruption is on the horizon for container lines and, in turn, for ports and shippers
60 Easy entry Dubai Trade and PCFC Security launch new 24-Hour online gate pass service
Integrated supply chain solutions that move your business forward. When it comes to integrated logistics solutions across the supply chain, you can trust Al-Futtaim Logistics to get your business moving ahead. Freight Forwarding and Local Services | Warehousing and Contract Logistics | Automotive Logistics Road Transport and Distribution | Corporate Transportation | Relocations and International Moving Automotive: Vehicles, Spare Parts, Machinery | Retail: Fashion, Footwear, Food, Electronics, High Tech, Furniture Engineering | Industrial | Project Cargo: Heavy Lift and Break Bulk | Humanitarian
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RTA selects Bill McDermott as keynote speaker of Dubai International Project Management Forum 2016
Logo of DIP
Mattar Al Tayer
Mohamed Al Abbar
The Roads & Transport Authority (RTA) announced that Bill McDermott, CEO of SAP SE, would be the keynote speaker at the Dubai International Project Management Forum (DIPMF), taking place from October 22-25, 2016, under the theme: Shaping the Future. The Forum is held under the patronage of HH Sheikh Hamdan bin Mohammed bin
Rashid Al Maktoum, Dubai Crown Prince and Chairman of the Executive Council, and is organised by RTA, in collaboration with DEWA, Emaar Properties, and the PMI. Bill has more than three decades of experience in business technology under his belt, and has steadily risen to his current role as chief executive officer. Before joining SAP, he served in senior executive roles with Siebel Systems
and Gartner, Inc. He launched his business career at Xerox Corporation. The DIPMF hosts a plethora of prominent speakers, including ministers, top executives of international businesses and organisations. The DIPMF is set to attract more than 2,000 persons and 35 speakers. The event will have four discussion panels, six parallel sessions, and five specialised training courses.
UAE students receive CIPS qualification in procurement and supply
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As part of its efforts to ensure UAE procurement and supply professionals work within global industry standards, the Chartered Institute of Procurement & Supply (CIPS) has awarded 20 students from the Zabeel International Institute of Management and Technology with Diplomas and Advanced Certificates in
Procurement and Supply this August. The students come from a variety of seniority levels, and from industries including aviation, oil and gas, and engineering. CIPS currently has 14 approved study centres across MENA and holds annual international exam accreditations in May, June and
November. There are currently over 1,500 CIPS members taking the qualifications route to achieve MCIPS status which is obtainable by completing the Diploma, Advanced Diploma and Professional Diploma levels, in conjunction with three yearsâ€™ experience in a role of responsibility in procurement and supply.
Etihad Airways celebrates Emirati Women’s Day
Jet Airways records fifth consecutive profitable quarter Jet Airways Group has announced its fifth successive profitable quarter for the period ending June 30, 2016, based on continuing improvement in aircraft utilisation, increased efficiency, and reduction in cost, including non-fuel expenses. Consistent financial performance has enabled Jet Airways to further reduce its debt by USD 53 million (AED 195 million) during Q1 of FY17. Cost per available seat kilometre (CASK) excluding fuel dropped by 1.2 per cent in Q1 FY17, clearly indicating Jet Airways’ focused approach in achieving operational efficiencies throughout its business. Jet Airways is launching Fare Choices, a new flexible fare structure allowing guests more choice and freedom when booking flights.
From left to right - Etihad Airways’ Aircraft Engineer, Muna Mohamed Abdul Kabeer Baqees Al Hadharem; First Officer Aisha Al Mansoori; First Officer Shareefa Mohamed Al Bloushi, and Aircraft Engineer Alia Rashid Alshamsi enjoying special moments with Zulaikha AL Sayed AL Hashemi, first member of the UAE General Women’s Union (GWU) at a gathering at the airline’s Training Academy to mark Emirati Women’s Day.
Zulaikha AL Sayed AL Hashemi, first member of the UAE General Women’s Union, enjoying a flight simulator experience with Etihad Airways’ first Emirati female A380 Pilot Aisha Al Mansoori.
Mona Walid, Vice President, Human Resources for Etihad Airways and Etihad Airways Engineering (centre top row) and a group of Etihad Airways’ female pilots, aircraft engineers and business leaders - pictured with members of the UAE General Women’s Union, including Lulwa Alhameedi (centre first row) Director of GWU Handicrafts and Heritage Centre; Ahlam Allemki (fourth right top row), Director of GWU Research and Development, and longstanding members Zulaikha AL Sayed AL Hashemi; Atija Ali AL Mehairbi; Atija Abdulla AL Mansouri; Mariam Mohamed AL Kaabi; Kaltham Khaled AL Mansouri and Noura Al Shamsi
Etihad Airways’ Senior Manager, GBSS Service Delivery, Saada Al Taei (centre left top row); Vice President, Financial Reporting, Shelly Lee Cole (centre right top row) and Emirati female staff were joined by five longstanding members of the UAE General Women’s Union for a cake cutting ceremony at Etihad Airways’ Global Business Service Solutions in Al Ain to mark Emirati Women’s Day
Etihad Airways marked Emirati Women’s Day by announcing that more than half the UAE nationals employed by the airline are women, including nearly 50 pilots. Aisha Al Mansoori recalls being mesmerised by the aerial activity at Al Ain Air Show in 2007. Nowadays, she is one of those pilots, flying the largest passenger jet in the world. A total of 11 Emirati women are fully
operational as pilots with the airline, while 38 others are navigating their way through cadet pilot training. Etihad has been holding a series of events to mark the second year of Emirati Women’s day, a government-led initiative now held annually on August 28, to recognise the role of Emirati women in the development of the UAE. This year’s theme is Emirati Women and Innovation.
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WSS Suez Canal transit team to cut customer costs, workloads and confusion Wilhelmsen Ships Service (WSS) has established a dedicated local transit team to help its customers negotiate not just the Suez Canal, but also the complex rebate system designed to boost traffic through the recently expanded waterway. The new office, based in Alexandria, is staffed 24/7 by local agents who intimately understand both customer requirements and the workings of the Suez Canal Authority (SCA). The canal expansion opened in August last year, cutting vessel waiting time from
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11 hours to three hours, and potentially doubling the number of daily transits. In an effort to incentivise shippers to choose its route over alternatives, SCA has created a rebate system capable of greatly reducing vessel toll fees - if all application criteria are satisfied. Applications must be received by SCA 48 hours prior to a vessel’s departure from its most recent port of origin before entering the canal, while a range of original documents are required post-transit.
10th World Future Energy Summit demonstrates the business case for sustainability With the cost of solar energy plummeting, the World Future Energy Summit 2017 (WFES) will showcase an unprecedented range of financially profitable clean energy solutions, opening up opportunities for green tech companies as the MENA region moves to achieve ambitious sustainability targets. Figures from the International Renewable Energy Agency (IRENA) show the installed cost of utility-scale photovoltaic (PV) solar generation in the UAE fell around 75 per cent between 2008 – the year of WFES’ first edition – and mid-2014. By June 2016, a Masdar-led consortium won the bidding for phase three of the Mohammed bin Rashid Al Maktoum Solar Park with a levelised cost of electricity of just US 2.99 cents per KWh. Part of Abu Dhabi Sustainability Week (ADSW) from 16 to 19 January and hosted by Masdar, WFES 2017 will bring together ADSW’s theme of ‘Practical Steps Towards a Sustainable Future’, with the WFES goal, ‘Sustaining the Clean Energy Consensus, Empowering New Players’. WFES was created to drive the business of clean energy, offering a marketplace where suppliers of new technology can connect with buyers. Since 2008, the economics of that marketplace have changed dramatically, and WFES 2017 brings together solutions that are not only sustainable, but are increasingly the more cost-effective option. That’s especially true when the WFES drives the business of clean long-term returns required for energy across the new-build infrastructure are Middle East, South factored in. Asia and Africa
Al-Futtaim Engineering wins access scaffolding contract for Al Taweelah Alumina Refinery project Al-Futtaim Engineering (AFE) has won a multi-million dollar contract from Petron Emirates to provide access scaffolding solutions for Emirates Global Aluminum’s (EGA) Al Taweelah Alumina Refinery project. The Scaffolding and Access Solutions division of the Al-Futtaim company will provide access solutions to the main
contractor – Bechtel Petrofac Joint Venture, to install permanent steel structures that rise up to 30 metres from ground level. In addition, AFE will also provide access to install a conveyor belt through suspended scaffolds from the steel structure. The AFE project team will follow the European EN12811 standards that specify
Dawood Bin Ozair, Senior Managing Director, Engineering & Technologies
performance requirements and methods of structural and general design for access and working scaffolds, as also adhering to EGA’s safety standards and regulations.
Saudi Industrial Development Fund and SAP partner to enhance IT solutions The Saudi Industrial Development Fund (SIDF) and global enterprise software company SAP announced today with a new partnership. Driving the manufacturing sector’s innovation-led growth, the government organisation, SIDF, will use advanced SAP enterprise resource planning, business planning and consolidation, and business intelligence to enhance the SIDF’s ability to
issue loans for manufacturers. SIDF, with medium- and long-term soft loans, and technical, administrative, financial, and marketing consultancy, helps industrial firms to overcome challenges and succeed in the Digital Economy. SIDF ranked earlier this year in a high position in the e-government programme ‘Yesser’, and achieved the ISO/IEC 20000 certification in IT services.
SIDF and SAP partner on using advanced technology to drive Saudi manufacturing innovation
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Qatar Airways, named Official International Airline Partner for the Sydney Swans, takes pride of place in front of the iconic Ladies Stand at the Sydney Cricket Ground
July passenger traffic rises at AUH by 7.9 per cent Abu Dhabi Airports has released July 2016 passenger figures, which marked an increase by 7.9 per cent at Abu Dhabi International Airport (AUH) compared to the same month last year. The month of July recorded 2,267,572 passengers travelling through the airport, exceeding last July’s figure of 2,100,929. Total arrivals at the airport were up by 10.4 per cent, at a figure of 1,074,022 in July, with departure numbers also increasing by 6.1 per cent, at a total figure of 1,180,504. As for the local arrivals specifically - arrivals to Abu Dhabi excluding transfer and transit - July witnessed numbers rise by 15.9 per cent whilst local departures grew by 1.8 per cent. The top city destinations from Abu Dhabi were London, Bangkok, Doha, Bombay and Manila respectively, representing 16 per cent of the total traffic registered at the airport in July. New hand luggage screening system introduced Abu Dhabi Airports has also installed a new Automated Tray Return System (ATRS) to speed up the process of hand luggage screening at Terminal 3 in Abu Dhabi International Airport (AUH). The new system allows for the processing of more than four times the number of baggage that conventional screening lanes do, reducing screening wait times and congestion, and providing a smoother travel experience for passengers. The ATRS also has two buffer stations, seven redress stations for cleared trays, four reject stations for suspicious trays, and two search stations. The system operates with a Hi-Scan 7555 aTix machine, and is equipped with two operator workstations allocated remotely in an imaging room, through which the live images can be analyzed separately. Any trays containing suspect belongings can be diverted to the search area for further investigation, away from the cleared lane. JULY TRAFFIC SUMMARY Traffic
Year to date
Total Aircraft Movements
Cargo (metric tons)
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Qatar Airways Cargo implements automated weight and balance system Qatar Airways Cargo recently launched a state-of-the-art Freight Load Control Centre at its hub in Doha. The new system will be an integral part of effective pallet loading procedures for all of the airline’s freighters. For customers, the implementation of Freighter Load Control Centre contributes to a better utilisation of cargo volume and weight capacity on the aircraft. The cargo carrier is able to provide specialised support on oversized and special product shipments, thus providing its customers with more cargo space, greater efficiency and quality. In April this year, Qatar Airways Cargo launched its first mobile app QR Cargo to provide ease and convenience to its global customers, enabling instant access to important information at their fingertips. The mobile app is linked to Qatar Airways Cargo in-house Cargo Reservations, Operations, Accounting and Management Information System (CROAMIS), which provides real-time data and updates for each logistic milestone achieved, direct to its customers. The airline has also marked its first foray into the Australian Football League (AFL) with a three-year sponsorship of the Sydney Swans, signing with the team until the end of the 2019 season. As part of the sponsorship deal, Qatar Airways will receive prominent branding at the Sydney Swans’ home games and training ground, and will engage the players in exclusive marketing and promotional activities. Supporters can also look forward to an enhanced match day experience at the Sydney Cricket Ground in the seasons to come.
NAVTOR reveals 80/20 split, in favour of pay as you sail ENCs
NAVTOR believes that hydrographic authorities yet to allow the use of ‘pay as you sail’ (PAYS) ENCs in their national waters are lagging behind clear industry demand. The firm, which launched the first ever type approved PAYS ENC service to the market in 2012, says that over 80 per cent of its subscribers now use PAYS - a delivery method that supplies clear efficiency benefits to an industry that is now, more than ever, defined by cost control and the effective use of resources. Unlike traditional ENC subscription models, which are based on set areas and time scales, NAVTOR’s PAYS only levies charges for the charts navigators actually use during voyages, while allowing them to instantly access any chart for planning. This distribution method is now widely accepted by the industry, and most authorities, but has yet to be approved by key bodies controlling some of the world’s busiest shipping lanes.
Robotics to boost business productivity and workplace safety by 2020 The six-fold growth in mobile robotics by 2020 will dramatically enhance Middle East and global business productivity, workplace safety, and daily lives, according to an exclusive new report by Frost & Sullivan, prepared in collaboration with GITEX Technology Week. Shipments of mobile robotics will grow from four million in 2012, to 25.4 million in 2020. The fastest growing sector in this expansion is predicted to be logistics, with unit shipments of logistics-related robotics increasing from 1,400 in 2012 to 95,000 in 2020. The largest absolute growth will be in personal and household robotics, growing from four million in 2012 to 25 million in 2020. Paul Clarke, CTO at the United Kingdombased Ocado, the world’s largest online-only grocery retailer, will headline GITEX’s Retail Wednesday, an all-day conference on how innovations are transforming e-commerce, brand engagement, and the retail supply chain. He will present on“Harnessing the Power of Technology Tsunamis to Disrupt the Future of
Online Grocery Retail and Beyond,”on how Ocado has scaled and sustained e-commerce by harnessing the power of innovative technologies. With more workplace automation, companies will be able to replace up to 10 workers with one robot, driving down costs by as much as 60 per cent, according to Frost & Sullivan. The European Federation of Robotics, a non-profit organisation that aims to promote, strengthen, and protect the robotics industry worldwide, predicts the Middle East will see strong take-up of robotics across businesses, especially in industrial and manufacturing. Robotics, along with drones and 3D printing, are three inter-related technologies that are rapidly decreasing in cost, advancing in sophistication, and driving innovation. The new GITEX Start-up Movement will support global start-ups experimenting in robotics, drones, and 3D printing in securing funding and reaching new markets and audiences.
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Emirati students participate in ENEC internship programme in South Korea Ten Emirati students have returned to the UAE from South Korea, where they gained invaluable hands-on experience, nuclear industry insight, and an introduction to Korean culture through the Emirates Nuclear Energy Corporation (ENEC) summer internship programme, organised in partnership with KEPCO International Nuclear Graduate School (KINGS). The students from Khalifa University of Science, Technology and Research (KUSTAR)
and Korea Advanced Institute of Science and Technology (KAIST) have been studying on the KINGS campus in Ulsan this summer. The internship programme sought to nurture students’ academic knowledge, while simultaneously providing them with experience in the form of on-the-job training. The programme aligns with the Abu Dhabi Plan and Economic Vision 2030, which aims to develop Emiratis in STEM subjects through direct educational and training programs, and scholarships.
The Sustainable City welcomes Ministry of Infrastructure Development delegation
A delegation from ‘Ministry of Infrastructure Development’ visited ‘The Sustainable City’ (TSC), the region’s first fully integrated and operational sustainable community, in Dubai. Engineer Faris Saeed, the CEO and Co-Founder of Diamond Developers, received the delegations during
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their visit to The Sustainable City, and took them through the innovative project, while reviewing its unique components and stateof-the-art facilities. The visit focused primarily on strengthening partnership ties between the ‘Ministry of Infrastructure Development’ and ‘The Sustainable City’.
DP World rating upgraded by Fitch Fitch Ratings recently upgraded DP World Limited’s Long-Term Issuer Default Rating (IDR) to BBB from BBB- and its ShortTerm IDR to F2 from F3. The rating outlook is stable. The upgrade follows on the Fitch announcement in November 2015 that DP World’s outlook had been revised to Positive from Stable. It reflects the global trade enabler’s strong performance and stable cash flow generation supported by its geographical diversification, high utilisation rate of terminals, and the long-term maturity of its main flagship operation in Jebel Ali, Dubai, UAE. MOU with Hyperloop DP World has also signed a Memorandum of Understanding (MoU) with US-based Hyperloop One to explore the role of innovation in the future of world trade. The collaboration is for feasibility studies that analyse the value of using Hyperloop systems in the UAE, with an initial focus in Phase 1 on moving containers from ships docked at DP World’s flagship Jebel Ali Port via the Hyperloop tube to a new inland container depot in Dubai. The initial study will focus on efficient handling of containers, costs, benefits, demand and volume patterns of moving cargo using the new technology.
Dubai Customs deploys self-service device for issuing customs card
Customers no longer have to stand in line for regular customs card for means of transport and machinery issuance procedure. The process has become a lot easier now, as Dubai Customs deployed an automated, self-service device to issue the card in Port Rashid Customs Centre. Dubai Customs issued a total of 769,000 customs cards for means of transport and machinery in 2015; equivalent to 3,200 cards per day. The new device helps customers complete their transactions with Customs conveniently and in no time. In addition to making customers happy by reducing the time they spend in Customs, the new device is helping Port Rashid Customs Center officials re-direct their human resources towards other duties.
Honeywell process controls improving operator efficiency and productivity at Russian refinery Honeywell Process Solutions (HPS) today announced that its Experion®HS process automation system has been implemented at Kuban Oil and Gas Company’s Ilsky Refinery, one of the largest refineries in Russia’s Krasnodar Territory. The new automation system will help the refinery improve process performance and minimise costs, while maintaining a high level of safety. Experion HS extends this powerful technology to meet the demands of specific industry segments. It comprises a subset of Experion PKS components specifically packaged to provide a targeted and robust system for small
to medium automation projects. The technology impacts the unit operations by streamlining work processes, and providing greater access to key process parameters and data of the refinery. Hence a higher level of operator performance helps meet the increasing demand of refinery’s products in the region. Honeywell supplied the Ilsky Refinery with a complete set of services for building an integrated production control system based on its hybrid HC900 controllers. The automation solution focuses on the refinery’s AT-5 crude distillation unit, which has a capacity of 1.5 million tons a year.
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UPS Worldwide express freight ExPANDS Globally
UPS announced the latest expansion of its popular UPS Worldwide Express Freight service to nine new countries: Bahrain, Bangladesh, Kuwait, Malta, Morocco, Pakistan, Qatar, Sri Lanka, and Tunisia. Together with the eight additional countries added within the past year, the service is now offered in 66 origin and 64 destination countries and territories. UPS also expanded UPS Worldwide Express Freight service to over 2,110 zip codes in Mexico in June. This specialised guaranteed service is designed for urgent, time-sensitive, and high-value international heavyweight shipments over 70 kilogrammes, making
it ideal for product launches, inventory shortages, and equipment failure replacement parts. Since its launch in 2013, the number of businesses using UPS Worldwide Express Freight has increased more than 250 per cent. Leveraging UPS’s global air network and expertise in customs clearance, UPS Worldwide Express Freight offers faster guaranteed palletised shipments between 60 per cent of the key city combinations when compared to FedEx’s guaranteed palletised freight service. Delivery is doorto-door and day-definite, with customs brokerage service included.
Peruvian gold exports to UAE grew by 155 per cent in H1 2016 Peruvian gold exports to the UAE reached USD 233 million (AED 855843950) in the first half of 2016, a 155 per cent increase compared to the same period in 2015. Total gold shipments jumped from 42 kilograms in 2015 to reach more than seven metric tons in 2016, making the UAE the fourth largest destination for Peru’s gold exports, after Switzerland, Canada and USA. Peru ranks as the world’s sixth biggest producer of gold and is the largest producer of the commodity in Latin America. Gold is the second most exported product for Peru after copper ore. The significant increase has been attributed to recent commercial activities undertaken by Peru’s Trade and Investment Office. Such activities include supporting international trade delegations attending the upcoming EXPOMINA PERU 2016. Delegates from the UAE interested in attending the trade show can contact the Trade and Investment Office of Peru in the UAE for potential support.
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New standard developed to calculate carbon footprints of supply chains A universal method for calculating the carbon footprint of logistics supply chains has been introduced, promising to standardise reporting data, and make it easier to compare businessâ€™s environmental performance around the world. A new standard for calculating the carbon footprint of logistics supply chains has been released by the Global Logistics Emissions Council (GLEC), as reported by Madeline Cuff in Business Green. The measurement will combine existing methodologies into one framework, thus allowing for emissions to be consistently calculated across a range of transport methods, including road, rail and shipping. The goal is the widespread adoption of the new standard in green freight programmes, carbon footprint calculation tools, and other related standards.
MercedesBenz presents the first fullyelectric truck for heavy distribution operations
Daimler Trucks presented the Mercedes-Benz Urban eTruck in Stuttgart, as the first fully electric truck with an admissible total weight of up to 26 tonnes. This means that in the future, heavy trucks will take part in urban distribution operations with zero local emissions and hardly a whisper. The market launch of this technology is conceivable for Daimler Trucks at the beginning of the next decade. In the light distribution sector, Daimler Trucks has already been impressively demonstrating the day-to-day suitability of the fully electric truck in customer trials with the Fuso Canter E-Cell since 2014. The development of electric trucks and series production maturity are fixed parts of the strategy of Daimler Trucks to build on their technological leadership. For this purpose a considerable part of the future investments by the truck division in the fields of research and development flow in the further development of the full electric drive.
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induced regional weakness Worsening economic conditions in Russia and lower oil prices hit the economies of the Commonwealth of Independent States (CIS) in 2015 and more complete data have confirmed that weakness across the region continued at the outset of this year. Ricardo Aceves, Senior Economist, Focus Economics, has this update on the region’s economy
n aggregate GDP growth estimate elaborated by FocusEconomics shows that, following the 3.0 per cent year-on-year contraction in Q4 2015, the CIS economy decreased 1.1 per cent in Q1. However, the Commonwealth’s economic downturn in Q1 was not as pronounced as expected as Russia - the region’s largest economy was more resilient to heightened volatility in global financial markets and the renewed fall in oil prices, which touched lows of under
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Illuminated skyscrapers buildings of Moscow City, Russia
COUNTRY REPORT - RUSSIA AND CIS
SEPTEMBER 2016 17
COUNTRY REPORT - QATAR
Ministry of foreign affairs of Ukraine in Kiev
US$ 30 per barrel in January. Inflation in the principally reflected a slow rebalancing process in the crude Russia’s GDP contracted 1.2 Commonwealth oil markets. This rebalancing per cent year-on-year in Q1, which came in above the 3.8 has fallen from has been further supported by a large number of unplanned per cent decrease observed in a peak of 13.8 production outages across the Q4 and was better than the globe. Meanwhile, on 2 June, 1.4 per cent contraction that per cent in OPEC celebrated its 169th Russia’s Ministry of Economic October 2015 to meeting and, as expected, Development had expected. between Nevertheless, the contraction 7.9 per cent in disagreements member countries regarding in the region’s largest economy undeniably affected other CIS March and has a strategy on oil production reappeared. Despite the countries’ economic activity: remained stable disappointing meeting and the economies such as Azerbaijan, lack of consensus on a clear Belarus, Kazakhstan and at that level strategy, oil prices continued Kyrgyzstan contracted at the since then to rise. beginning of the year. The financial turbulence of early 2016 eased toward the beginning Economic impact from Brexit of the second quarter and oil prices, along likely to be limited with prices for other raw materials, entered On 23 June, the United Kingdom voted to into a phase of gradual, yet steady recovery. leave the European Union and the result is A rally in oil prices in the second quarter expected to generate a period of prolonged
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global uncertainty with implications for economic growth, monetary policy and commodities markets worldwide. Shortly after the official result of the referendum was announced, the pound sterling tumbled over 11 per cent and stocks fell across the globe, losing a total of USD 2 trillion. The price of crude oil was not the exception; both Brent and WTI crude oil prices fell by almost five per cent and the decline continued on 27 June, with prices falling further and the British pound plunging to a 30-year low as news of a potential UK recession spread. Heightened volatility in global financial markets and commodities prices had caused enormous economic stress in the Commonwealth of Independent States in 2015 and the beginning of 2016. However, the referendum result is likely to have only a limited impact on the region. The principal transmission mechanism to the Commonwealth’s economy will be through lower commodities prices and
COUNTRY REPORT - RUSSIA AND CIS
Cityscape of Minsk, Belarus
Central part of the capital of Kazakhstan
an economic slowdown in the European Union. Furthermore, the exposure of most CIS economies, in particular the Russian economy, to the UK is modest. Russia’s exports to Britain totaled US$ 7.5 billion in 2015, which account for just 2.2 per cent of Russia’s total exports. Moreover, against a backdrop of Brexit jitters, uncertainty among global investors could prompt capital outflows from the CIS region and other emerging-market regions, which, in turn, could lead to a renewed weakening of CIS currencies against the U.S. dollar. However, since investors have already sharply reduced both portfolio and direct investment in the region last year - mainly in Russia due to Western sanctions - the impact of capital flights on the CIS currencies and investment dynamics is likely to be limited. Heading into the second half of 2016, the outlook for the Commonwealth of Independent States improved for a second consecutive month as data suggest that the
Russian economy remains in recovery mode. This is good news for the region’s prospects this year, but slower growth in China, the potential for renewed volatility in global financial markets in the wake of the Brexit, as well as geopolitical risks cast a shadow on the outlook. Analysts surveyed this month by FocusEconomics expect the Commonwealth’s economy to contract 0.5 per cent this year, which is revised up 0.2 percentage points from last month’s forecast. Next year, analysts predict the economy will bounce back strongly and expand 1.6 per cent.
Belarus - Weakness carries over into Q2 Reduced remittances inflows and the spillover effects from Russia’s economic downturn caused the Belarusian economy to contract for the first time in nearly 20 years in 2015. Ongoing weakness in neighboring Russia and still-low oil prices have kept economic activity depressed, resulting in the fifth consecutive
contraction in Q1. Although Q1’s softer contraction should come as good news, latest data from Q2 confirm that economic activity remains weak. In May, industrial production expanded for the second consecutive month while the pace of contraction in retail sales sped up. Meanwhile, the IMF stated in June that negotiations for a US$ 3.0 billion loan would continue into the second half of the year. Although the Fund noted that Belarus has made significant improvements in fiscal matters, reforms in state-owned enterprises and utility pricing - a necessary prerequisite for the loan disbursement – were thus far insufficient. The economy’s outlook is grim. Weak external and domestic dynamics coupled with debt repayments in foreign currencies are constraining growth prospects. Furthermore, a feeble economic recovery in Russia will keep remittances inflows and export growth depressed. FocusEconomics Consensus Forecast panelists see GDP falling
SEPTEMBER 2016 19
COUNTRY REPORT - RUSSIA AND CIS
1.8 per cent in 2016, which is down 0.3 percentage points from last month’s forecast. For 2017, the panel projects that the economy will rebound to a 1.4 per cent expansion
Kazakhstan - Deterioration persists in Q2 following a GDP contraction in Q1 An acute fall in oil and gas prices at the start of the year along with a protracted recession in Russia took a heavy toll on the Kazakh economy, which contracted in Q1 for the first time since 2009. Moreover, the deterioration in industrial production worsened in May on the heels of a sharp drop in mining output. This is an indication that the contraction in GDP deepened further in Q2. A land code amended on 21 May, which came into force on 1 July, has led to several protests across the country. Demonstrations like this are rare in Kazakhstan and the government took a cautious approach and has not attempted to crack down on the protests. However, in late May, the General Prosecutor’s Office alleged that the protests were staged in an attempt to seize power and hundreds have been arrested. President Nursultan Nazarbayev reshuffled a number of senior government figures in late June with the aim of improving his administration’s image. The President also imposed a moratorium on the more relevant structural reforms until the end of the year. However, that has failed to pacify many opponents. Kazakhstan’s recession is expected to have bottomed out in H1 and GDP is seen rebounding in H2. However, downside risks to the outlook persist in the form of heightened volatility in financial markets, a slow recovery in commodities prices and a protracted recession in Russia. Economists surveyed this month expect the economy to expand 0.3 per cent in 2016, which is unchanged from last month’s forecast. Next year, GDP is seen accelerating to a 2.2 per cent expansion.
Russia - Key factors behind recovery: rebound in oil prices and less FX volatility The Russian economy was more resilient to the second oil shock in January: in Q1, GDP decreased 1.2 per cent annually, which was a softer fall than expected. A detailed breakdown of data by economic sectors showed that agriculture continued to expand in Q1 and growth in mining activity picked up over the
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previous quarter, while the manufacturing sector contracted, although the pace did slow. Even though domestic demand is expected to be sluggish in the coming quarters, green shoots in credit growth and industrial production suggest that the economy remains in recovery mode. The key factors behind the gradual recovery are the rebound in oil prices and the economy’s slow, yet painful adjustment to a weak ruble. On the political front, on 27 June, Turkish President Recep Tayyip Erdogan expressed his regret for the downing of a Russian warplane in November 2015, which had led to a deterioration in relations between Moscow and Ankara and the subsequent imposition of sanctions by Russia. The tone of the official Russian response suggests that the apology has been accepted and an improvement in bilateral ties appears likely. The UK’s departure from the UE will send shockwaves across the global economy and is likely to have repercussions for the Russian economy, too, yet the impact is likely to be limited. The principal transmission mechanism is through lower commodities prices and reduced EU growth, as Russia’s direct exposure to the UK economy is modest. Analysts expect GDP to contract 0.9 per cent in 2016, which was revised up by 0.2 percentage points over last month. For 2017, analysts see the economy rebounding and expanding 1.3 per cent.
Ukraine - Economy remains in modest recovery mode After over two-years of contraction, Ukraine’s economy returned to growth in Q1, although the pace of expansion was meagre and driven mainly by base effects. Fewer military clashes and more stable price pressures have helped lead to a stabilization in economic data. The modest recovery path seems to have continued in Q2, with industrial production recording the fourth consecutive expansion in May. In the political arena, the Parliament approved a key judicial reform bill, the first major reform since the new government took office in April. The vote unlocked the third USD 1.0 billion loan from the United States and paves the way for a disbursement of IMF funds in July. Following the approval of the bill, S&P Global Ratings affirmed Ukraine’s B- rating and stable outlook as it is confident that the country will continue implementing structural reforms. A more stable political environment and progress on the IMF program should help
economic growth to pick up pace throughout the year. However, the economy will remain in a fragile state and the recovery is expected to be modest compared to last year’s pace of decline. The FocusEconomics panel sees the economy growing 1.2 per cent this year, which is up 0.1 percentage points from last month’s forecast. For 2017, the panel sees GDP growth accelerating to 2.5 per cent.
Inflation is stable again in May Inflation in the Commonwealth has fallen from a peak of 13.8 per cent in October 2015 to 7.9 per cent in March and has remained stable at that level since then. According to a regional estimate, inflation was 7.9 per cent in May and mainly reflected a stabilization in the evolution of Russia’s consumer prices. Furthermore, inflation fell in Armenia, Belarus, Moldova and Tajikistan, whereas the economies of Azerbaijan, Kazakhstan and Kyrgyzstan registered higher inflation in May. Most of the regional currencies stabilised in the second quarter following a period of instability. This has caused inflation to fall and is projected to fall further in the coming months. Economists surveyed this month by FocusEconomics expect inflation in CIS to end this year at 7.6 per cent. This month’s forecast was cut by 0.4 percentage points over the previous month’s Consensus. Looking forward, analysts predict that inflation in the region will fall further to 6.1 per cent in 2017.
About FocusEconomics 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, Sub-Saharan Africa and the Americas. 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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Dan Charney, President and CEO of Direct Recruiters Inc. (DRI), talks about the eight top trends in the materials handling recruitment world for the year
trends in Material Handling 22 SEPTEMBER 2016
What will be the top talent trends in the material handling and logistics industry for 2016?
As the president of Direct Recruiters, Inc. (DRI) and devoting much of my time to material handling executive searches, I see a number of talent trends already taking shape and continuing over the next year and beyond, including new technology, another generation entering the workforce, the need for new skill sets, the demand for hybrid talent, and high industry growth. Here are the top eight trends to follow in the coming year: 1. Internet of Things (IOT): IOT is emerging as the next technology mega-trend across the entire business spectrum, including the material handling industry. The IoT is the network of physical objects or“things”embedded with electronics, software, sensors and network connectivity, which enables these objects to collect and exchange data. While IoT has been in the industry for several years, we’ll witness more things being connected to the Internet every day
Rehiring a former employee makes sense since they are familiar with the company culture, may not require much training, and may bring new perspectives
and in turn, experience improved efficiencies, productivity and job growth. The IoT revolution means workers need to develop new skills to keep up, especially if you’re an IT professional. The IoT means a job boom for developers, coders and hardware professionals who have Big Data knowledge, excellent communication skills and security knowledge. 2. The boomerang employee:
An employee who leaves your organisation and then returns to work for you later in time is referred to as a boomerang employee. Reasons why they left may have been to further their career, to try something new, or because they had a life-changing event that forced them to resign. But no matter what the reason, a recent WorkplaceTrends.com survey found that 76 per cent of employers say they are more accepting of hiring them. This trend is happening because professionals are switching
jobs more often and honing their skill sets to keep up with industry demands. Rehiring a former employee makes sense since they are familiar with the company culture, may not require much training, and may bring new perspectives. 3. Gen Z entering workforce in
significant numbers. Generation Z, aka Gen Z - those born between 1994 and 2004 (although there’s been no general agreement on exact years) - will be entering the workforce in greater numbers. They are the most digitally connected generation yet. They have no concept about life before the Internet, mobile devices, digital games, or iTunes. Therefore, they are very tech-savvy and even more entrepreneurial than Millennials. However, Gen Z employees tend to be more loyal and flexible in their approach to careers. They will choose career opportunities
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that provide quick advancement and work/ life balance over salary, and want mentors to help them achieve their goals. 4. Hybrid talent in-demand. Hybrid jobs
are the future of jobs. That’s why the hybrid employee is on the rise. Whether it’s in IT, manufacturing, engineering, finance, sales, marketing, or human resources, hybrid jobs are growing each year. A hybrid employee is considered both a generalist and a specialist. A generalist tends to be someone who knows quite a few technologies but only at an average level. A specialist knows only one or two but at an expert level. A hybrid knows about a great many things at an advanced level and can adapt to any type of project. With a hybrid employee, employers are basically getting two people for the price of one.
workers to be flexible when it comes to their skills development and training. Since the demand for routine manual skills will continue to decrease, workers should be focusing on new skills or finding occupations with new complementarities. 6. Longer hiring process continues.
According to The Wall Street Journal, in the U.S. the time it takes to fill a job is lengthening. In April 2015, the average job was vacant for 27.3 days before being filled. This nearly doubles the 15.3 days it took prior to 2009. The long hiring process can be attributed 5. Industry growth creating need for flexible to having fewer qualified candidates skills development. According to Global for job openings as well as Industry Analysts, the global the increased number of market for material handling background screening and drug equipment is projected to Many tests ordered. reach US$134.8 billion by organisations WSJ also notes that the many 2020, driven by the growing portals and databases used emphasis on production are focusing to source and find candidates automation. on redesigning have become more entailed and Automation of therefore, take more time. While manufacturing processes, their office better hires are coming out of along with a growing environment as the process, it’s moving slowly. pressure to optimise raw materials, resources and a key aspect of energy consumption, are key 7. Office design is being used attracting and factors in fueling adoption of to attract talent. Studies have material handling equipment shown that by transforming the retaining the in mass production. High look of the workplace, companies growth is causing a need for can create a more effective best talent 24 SEPTEMBER 2016
and productive space for their workers. In addition, it demonstrates a commitment to innovation and shows that they highly value and appreciate their employees. For that reason, many organisations are focusing on redesigning their office environment as a key aspect of attracting and retaining the best talent. In fact, at our own company, we recently commissioned design specialists to optimise our physical environment and change it to reflect the new ways that we like to work. 8. More workforce flexibility. With the rise
of telecommuting, globalisation and new technology, workers are demanding more flexibility. However, with this demand comes high expectations. Hiring managers expect their employees to be reachable outside the office and on their personal time. That means longer work weeks. But where should employers and employees draw the line? It’s not yet been determined and for that reason, we expect that out of necessity, nearly every company will have a policy about workforce flexibility in the next few years. -Dan Charney is President & CEO of Direct Recruiters Inc. (DRI), based near Cleveland, Ohio. As a seasoned search professional with 15 years of experience, his specialty areas include material handling and logistics, packaging, capital equipment, and automation systems
Focus on Mustapha Kawam, President and CEO, Globe Express Services, talks to Munawar Shariff \about keeping up with the changes in the industry and preparing for the expected future growth
What, in your opinion, is the status of the logistics market in the country and the region? How have global indicators such as oil prices affected business till date, and how do you see things taking shape in the near future?
Oman, which will continue to account for the majority of GCC logistics at around 85 per cent. The Emirates is especially positioned for exceptional growth as Dubai prepares to host the 2020 World Expo.
The logistics market globally is feeling the effects of the protracted oil price slump, and has been making strategic adjustments accordingly at the operational and organisational levels in response. The region still has strong commercial potential, so we expect growth to continue, especially in Saudi Arabia, the UAE and
What is the status of the business, and GESâ€™s service offering market penetration, in different sectors like shipping, consumer goods, automotive, etc? What is the size of each sector, and do you expect any change in the lead up to 2020 and beyond?
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Market indicators and published studies by Frost & Sullivan tell us that demand for
high quality materials handling products and services across the Middle East are fuelled by sustained growth across key economic sectors, such as FMCG, retail, pharmaceuticals, oil and gas, and automotive. We have seen most of the growth reflected in the retail sector. According to a report by Alpen Capital, retail space across the GCC stood at 10 million square metres in 2013, while regional retail sales are set to grow 7.3 per cent annually to reach US$ 284.5 billion (AED 1,045 billion) by 2020. Retailing in the UAE alone is expected to reach AED 200 billion (USD 54.4 billion) by 2017, growing
COMPANY IN FOCUS - GLOBE EXPRESS SERVICES
by five per cent on average each year, according to an analysis by the Dubai Chamber of Commerce and Industry. GES has a strong retail traction in the UAE, through operating warehouses dedicated to the sector, in addition to a focus on having a presence in countries trading in retailâ€™s raw material and finished goods.
Modern center of Dubai, United Arab Emirates
SEPTEMBER 2016 27
COMPANY IN FOCUS - GLOBE EXPRESS SERVICES
plans for constructing new We have established a strong Furthermore, commercial complexes, that foothold in Asia, where raw there are pave the way to a thriving material is manufactured, as well and promising opportunity as in France, Italy, Netherlands projects for growth in retail logistics. and Spain, which are prominent underway to hubs of apparel in Europe. Similarly, growth can be expand existing Tell us about the observed in the automotive challenges that the malls, and plans company is currently market in the Middle East, where the number of cars on and what solutions for constructing facing, the region’s roads will reach do you have for them. 33.9 million, driving demand new commercial Global economic uncertainty for auto parts, and creating has certainly been a challenge complexes, that for our company. But, like big opportunities for materials handling providers. According the rest of the region, we pave the way to the International Trade have also been capitalising to a thriving Center (ITC), cars accounted on this as an opportunity to for 36.8 per cent of UAE’s reassess our operations and and promising automotive exports to the performance, and make the opportunity for world, followed by parts and necessary adjustments. We still accessories with 36 per cent. growth in retail have the advantage of serving UAE’s efficient transport one of the most dynamic logistics infrastructure (road, train, logistics corridors in the world, maritime, air) and strong so we are sticking to our triedlogistics network are accommodating factors and-tested business fundamentals in general. for any investment decision in automotive One issue we are currently focusing on manufacturing. As GES, we’re striving in a is cargo security, especially as the UAE is competitive automotive market by growing angling itself as an international, multiour efforts in Asia and the Middle East, modal logistics platform. We recognise the where we see active trade activity between need to abide by security requirements, given the regions in the automotive industry. today’s risky transportation landscape, but we also need to strike a balance in terms of our ability to facilitate free-flowing trade Of all the sectors mentioned above, which and logistics. We are exploring a number of sector is most promising, and why? solutions that will enable us to maintain the In addition to the sectors we are focused on, retail evidently shows promise, given the year- gains we have made out of the emergence of Dubai and the UAE as an international on- year growth we are witnessing, especially in the region. Retail and wholesale trade in the hub, while not compromising the safety and UAE accounts for more than 11 per cent of the security elements of our business. country’s Gross Domestic Product (GDP), and close to 30 per cent of Dubai’s GDP. Being a large company in the country’s This year, Dubai hosted the 10th edition of logistics market, what, in your opinion, is the World Retail Congress - the first time the the still unexploited potential in the supply event is being held outside of Europe. This is chain and logistics industry in the UAE and one of the highest indications that the retail the region? market in the UAE is on a growth path, as As the region’s recognised commercial and Dubai cements its position in the region as a logistics hub, the UAE, and Dubai in particular, retail hub. still offers huge growth opportunities for our This is an especially positive sign for the industry. Dubai Expo 2020 alone guarantees forwarding and logistics sector, as retail us sustainable business far beyond the historic space has increased by seven per cent event. Add to this the fact that the government during 2014 to reach 1.6 million square intends to further intensify its economic metres. Furthermore, there are projects diversification efforts, hence spurring more underway to expand existing malls, and demand for our services and specialisations.
28 SEPTEMBER 2016
With a geographic proximity to more than two billion potential consumers, Dubai will remain a preferred logistics partner and base, moving forward. At the regional level, analysts predict that the GCC will be one of the world’s busiest trade lanes by 2030. So we have definitely not yet exhausted all opportunities at the micro and macro levels. We are particularly excited over the business prospects that will arise from the completion of key multimodal projects, such as Etihad rail, and the broader GCC-wide rail network. Our industry needs to work together and prepare for dramatic growth once these initiatives become operational. With many neighbouring countries now getting on to bettering their ports and related facilities, what would your suggestions be to the UAE government to keep its many patrons, and what ways could you suggest to the country to enhance business and overall upcoming revenues?
As it is, the UAE is already considered an ideal location for supporting global trade and logistics, given its advanced transport, warehousing, and free zone infrastructures. We would suggest the government to continue with its focus on ‘smart transformation’, which is really becoming a differentiating factor for the country. I would also recommend a closer inspection of its competitive strategy and compare this against those of other Gulf states, and from there, tailor an effective approach that is more suited to today’s regional and global business environments. What is the plan for GES’s short and long term growth and expansion in the country and internationally? What areas of the business are going to be invested in?
Right now, we are sharpening our focus on taking our business performance to the next level. Just recently, our C-Level executives from across the globe gathered to come up with a market-driven business plan that can best meet the needs of regional and international customers, in line with the global standards. The result has been the integration of the broad strategies of individual business units with critical support functions, such as planning and budgeting. The meeting also provided useful insights on how to further unlock and harness
COMPANY IN FOCUS - GLOBE EXPRESS SERVICES Aerial view of downtown, Riyadh, Saudi Arabia
SEPTEMBER 2016 29
COMPANY IN FOCUS - GLOBE EXPRESS SERVICES
workforce potentials through transformational employee engagement, and collaboration with senior-ranking employees on discovering innovative and forward-thinking schemes to take GES to greater heights. We are in the process of applying the great ideas on Talent, Engagement, Leadership, Executive Intelligence, and Global Strategy that came out of the assembly. With regards to our expansion plans, GES enjoys a strong presence in key European markets, such as France, Italy and Switzerland, and is now seeking to extend its reach to Belgium to better support the French and Swiss markets. GES is also eyeing
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promising transportation and warehousing investments in US states the company currently does not have a presence in. GES is already active in Houston, Dallas, New York, LA, Boston and Charlotte. We are also identifying potential acquisition targets for 2018. Among the markets being targeted for entry and acquisitions are West Africa, Argentina and Mexico. Technology is a very big aspect of the supply chain industry. How is it affecting the way business is done on a daily basis, and what can be done to make it future proof?
Advanced technology has enabled the supply
chain industry to enjoy the highest levels of visibility, accountability, competitiveness, and management. Conveniences such as electronic invoicing, computerised shipping and tracking, and automated notifications are now commonplace, thanks to the advent of new technologies. The day-to-day monitoring and management of logistics performance has never been this easy, nor as efficient and precise. In line with this, Globe Express Services announced earlier this year its move to enhance its business processes and capabilities by implementing the CargoWise One software across 56 GES offices located in
COMPANY IN FOCUS - GLOBE EXPRESS SERVICES
Muscat, Capital of Oman
and implement sustainable solutions to possible gaps within the supply chain, and foresee more opportunities moving forward, as innovation and technology take on more prominent roles in the logistics world. What is your opinion on the Cloud, and how has that been integrated into the GES framework and network architecture?
20 countries. The software is one of the most integrated and comprehensive end-to-end logistics solution, that forms an integral link in the global logistics industry. It streamlines processes, integrates business with customers and partners, and improves communication with the supply chain. The deployment of the next-generation technology will help GES further improve its visibility, efficiency, quality of service, and profitability. The bottom line is that it has become a must for our industry to leverage the market segments that have been opened up by Information Technology. GES will be working closely with its industry partners to identify
The Cloud is integral to our industryâ€™s move towards innovative technologies that can streamline supply chains to optimise productivity. Cloud-based solutions enable us to get the most value out of our operations through real-time pricing and inventorying, and enhanced metric analysis and process synchronisation, among others. It is helping redefine supply chain management as a profession and as a discipline. As mentioned earlier, we have adopted CargoWise One, which is backed by a cloudbased system that stores critical data offsite and online, to provide us with remote global access 24/7. This cloud implementation empowers us to deliver unmatched
functionality to address the heavy demands of global logistics. Its single-platform technology will ensure increased productivity, better integration, and enhanced profitability. It is a broad and deep solution that offers unique advantages to a variety of customers, depending on their specific workflows. With GESâ€™s broad product offering, we will have a comprehensive module for every touch point along the supply chain we manage. Additionally, with this single-file platform solution, Globe Express expects to boost productivity gains across all the countries we operate in. Itâ€™s a truly global solution for a global operation.
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Kuwait gives green light for airport terminal construction
Officials in Kuwait have made significant progress on longawaited upgrades to Kuwait’s International Airport (KIA) by signing a $4.4bn contract to kick-start construction on a new terminal. This Oxford Business report has more details 32 SEPTEMBER 2016
ndustry stakeholders are optimistic over the Kuwait International Airport (KIA) expansion, with the recently signed contract indicating the government’s intention to deliver new aviation facilities to meet rising demand, as part of the broader goals outlined in the Kuwait Development Plan (KDP) 2015-20.
New terminal moves ahead In late May, Ali Al Omair, minister of public works, announced the government had signed a contract for KIA’s new terminal with Limak Construction, part of Turkey’s Limak Group. The announcement brought an end to the political gridlock that had postponed progress on the new terminal, which had also seen a re-tender process in 2015 after initially being awarded in 2014.
The terminal is expected to increase passenger capacity from the current 7m per year to 25m by 2022. Kuwait’s Directorate General of Civil Aviation (DGCA) estimates that future development could eventually bring total passenger capacity at KIA to 50m. Slated for completion in 2022, the new terminal will accommodate all types of aircraft at 51 gates, an increase from the airport’s current 21 gates, and will also be able to serve 21 Airbus A380 jumbo jets at the same time, according to Al Omair. The new terminal will have five levels – one below ground and four above ground – with 120 check-in counters and a baggage system capable of handling 2,930 pieces of luggage per hour. The expansion is expected to offer significant benefits for the industrial sector,
with more than 1m cu metres of concrete and over 100,000 tonnes of steel required for the terminal’s construction. To facilitate access to the new terminal, a new road will be constructed connecting to the King Faisal Motorway 51 and the 7th Ring Road. Additional plans are under way for a new metro line connecting Kuwait City Centre with the airport, which is located 15 km outside of town. Kuwait’s low-cost airline Jazeera Airways’ plans to build a terminal were put on hold in 2014, with limited development on the project reported until recently. However, in mid-July the carrier was granted approval by the Kuwait Council of Ministers for the land needed to build the dedicated terminal as well as parking lots at KIA. The investment is valued at KD14m (US$46m) with an expected
construction phase of 15 months, according to press reports.
Rising volumes To accommodate increasing passenger and air traffic, Kuwait’s DGCA has signed a raft of aviation deals recently, including air transport agreements with the UAE and Turkey. New routes are also servicing the country. In 2014, Philippine air carrier Cebu Pacific Air launched a Manila-Kuwait route, and in 2013 Kuwait resumed flight services with Iraq for the first time since 1990. The number of scheduled aircraft movements at KIA rose from 37,166 in 2004 to 83,443 in 2014, while passenger volumes increased from 4.8m in 2004 to 10.1m in 2014, according to the Kuwait Central Statistical Bureau (KCSB).
Since 2013 high air traffic volume has made it necessary for some passenger flights to divert to the Sheikh Saad Al Abdallah General Aviation Terminal near KIA, which is generally reserved for private aircraft, as well as flydubai flights, the only commercial airline to exclusively use the terminal.
A broader programme The KIA expansion project falls under the KDP framework, which aims to direct major investments into transport and logistics infrastructure with the goal of establishing Kuwait as a regional trade and financial centre. Enhancing air and sea links to improve connectivity with the region and further afield is a major priority of the state as a mechanism to drive non-oil economic growth. -www.oxfordbusinessgroup.com
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DHL delivers to Daimler’s smart cars Last mile delivery just got smarter. Daimler announced that its “smart ready to drop” programme will be rolled out across Germany. The objective behind the programme is to make online shopping easier. The parcels are delivered by DHL Paket
ere’s how it works. ‘smart ready to drop’ is smartphone based: both the smart car driver and the delivery driver use the special apps. After placing the order, the smart customer generates a transaction number (TAN) in the app and enters it in the ‘c/o’ field of the delivery address. The app reminds the customer to park their car near their home address for delivery. The app notifies the DHL driver of the desired delivery address. The driver uses the TAN to open the car within a specific time window. Similar to the car2go system, a Connectivity Box is installed inside the car at the bottom of the windscreen. (New car buyers can order their smart car from September with a pre-installed Connectivity Box .The box can also be retrofitted at the dealership.) The DHL driver deposits the parcel in the boot and locks the car digitally; their access
authorization expires immediately. The app automatically notifies the smart car driver of the successful delivery. The delivery driver will also pick up return parcels The company says its ‘successful car2go car-sharing offer with over 1.9 million customers worldwide’ had provided it with experience in digital access systems. The programme will be beta tested in the autumn in Stuttgart, followed by Cologne, Bonn and Berlin a few months later. Other cities will follow. With several hundred participants per city, smart’s goal is to gather experience in realistic conditions. A first field test with some 30 smart drivers that lasted several months was successfully completed back in 2015. “After successfully completing the in-car delivery pilot project last year in Germany, we are now using the know-how we gained with smart to develop yet another attractive service for a young, internet-minded target group,”’ says Jürgen Gerdes, CEO Post eCommerce - Parcel at Deutsche Post DHL Group The idea came from Dailer’s smart lab which was established to accelerate the development and implementation of such creative urban mobility projects. The smart lab is the brand’s think tank.“The easy-going and unconventional start-up mentality of the lab’s creative employees is what enables this innovative platform to drive new mobility ideas,”Daimler explained. “‘Smart ready to drop’ is the beginning of our next drive to further enhance the quality of urban life,”says smart boss Dr. Annette Winkler. “This is our way of staying true to our pioneering role in urban mobility. A lot of other services that make city life easier are also in the works.’ For example, private car sharing.” -www.mhlnews.com
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materials handling and supply chain trends for the year The industry is taking on a new shape with innovative technologies and revolutionary ideas. Hereâ€™s a look at the top five trends by Tom Reddon who is a forklift specialist and blog manager for National Forklift Exchange
36 SEPTEMBER 2016
he material handling and supply chain industry is dynamic. Each day and each year, the industry has taken on a new shape and form with innovative technologies and revolutionary ideas emerging at the forefront. There are many trends evolving within the industry, including automation, artificial intelligence, ecommerce, that continue to transform and revamp operations on both an individual and organisational, as well as a global level. Here are the top five trends currently influencing and impacting the trade: Automation. Supply chain management has become streamlined. In fact, software such as SAP has achieved near full automation to allow companies to focus more on service delivery as opposed to traditional supply chain management. Lean manufacturing
or Six Sigma methodologies have also been integrated into the industry, further calling for process improvement and full automation. These terms have become household names and administrators are being trained in these concepts more and more each day. Artificial intelligence. Robots have been pushed to the forefront in many warehouse and production floors. Although itâ€™s something dreamed up from science fiction, we have seen robotics emerge particularly in some commercial giants, including Amazon. Artificial intelligence costs less than a manual labor force and can achieve the functions and duties of supply chain operations seamlessly without breaks for hours upon end. Of course, with any new emergence, there sounds artificial intelligence a certain level of controversy for the exact reason just mentioned: it costs less than manual labor. Ecommerce. Dropshipping is a new form of retail that best embodies emerging trends in supply chain management. Ecommerce used to be the simple ordering of a product or good from an online catalogue. Now, logistics, transportation and inventory is handled by digital plugins that tap into multiple sources and coordinate the full lifecycle of the transaction. We have seen this in both FBA and eBay, where small businesses, entrepreneurs and large conglomerates have utilized these technologies to bolster sales while reducing on operating overhead and marketing materials. Service chains. The industry has been driven to focus on service chains. With this, fancy terms such
as CSAT or customer satisfaction, FCR or first call resolution, and average handle time come into the equation. With supply chains being revamped by technological solutions, human personnel can focus on mastering the interpersonal element of business: customer service. The customer service representative position has become a hot position in recent times. CSRs embody prolific business
acumen complemented by a slew of public relations talents. Performance analytics. The emergence of key performance indicators have led the development of statistical algorithms to gauge productivity, efficiency, and quality. Predictive analytics, which are even more of a breakthrough, can be utilized for data mining as a way to predict the future, along with other proven techniques. While not
fully abandoning the concept of forecasting, predictive analytics will draw correlations between past events and help to predict future events. -Tom Reddon is a forklift specialist and blog manager for National Forklift Exchange. He also sits on the Material Handling Equipment Distributors Association (MHEDA) Executive Dialogue team. Connect with him via Twitter at @TomReddon.
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S w e N r
? d a o R ilk
t can y fi i n sig suppl a s n ti por p Asia ng n a u i i Iran shake Manag w a ne tial to BPC ights n i n G t en ote r and ore ins p m t e s m th ve tne d in y with n, Par provide e c o n la nou itical p Peters sultant n a l tly R. on po cen d geo â€™s Erik ern, C e r ov an aâ€™s ey Indi nomic Kearn a McG eco ins. AT d Elen cha ctor an Dire
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38 SEPTEMBER 2016
he recent announcement that India will invest US$500 million to develop a deepwater port in the southeastern Iranian city of Chabahar is a potential game changer for business logistics and supply chains throughout Central and South Asia. It will improve India’s market access to the Middle East and open up Central Asia, which has been largely off-limits to Indian goods. This deal is also emblematic of a post-sanctions reality for Iran, which stands to benefit from substantial foreign direct investment (FDI) in key areas of its economy, including infrastructure. The logic of Indian investment in a port at Chabahar is not new. New Delhi and Tehran first discussed plans for the project in 2003, but bureaucratic delays and the tightening of international sanctions prevented its progress until now. It was therefore with large fanfare that on May 23, Indian Prime Minister Narendra Modi announced in Tehran a commitment of US$200 million to construct two terminals and five berths at the Chabahar port and another US$300 million for other portrelated infrastructure. New Delhi is also financially supporting the project in other ways, including a credit line
Side view of Azadi Monument, Tehran
of up to US$150 million from the ExportImport Bank of India to modernise cargo facilities. Other countries are also looking to capitalise on this opportunity, with suggestions that some form of an investment deal will be announced during a visit to Tehran by Japanese Prime Minister Shinzo Abe planned for later in 2016. But the likely real prize for the private sector is the free trade zone that will surround the port of Chabahar. Indeed, India’s state-run Oil and Natural Gas Corporation (ONGC) stated in April that it was open to a US$20 billion investment in petrochemicals and fertilizer plants, an LNG plant, and a natural gas cracker in the Chabahar free trade zone. These investments would facilitate the flow of Iranian and potentially Central Asian natural gas to support India’s growing energy demand. The same logic likely applies for Japanese and other energy security-minded investors. For their part, the Japanese have already expressed interest in investing in the port. The port would also be a huge boon to Iran. Approximately 85 percent of all Iranian maritime trade currently flows through the port of Bandar Abbas on the Strait of Hormuz (see figure 1). But Bandar Abbas is overcrowded and is not a deepwater port, so Iran heavily relies on the port of Jebel Ali in Dubai for transshipment. With its own deepwater port at Chabahar, seaborne imports and exports would flow much more efficiently into and out of Iran. Chabahar will also provide a much needed entrée into landlocked Central Asian markets for Indian and Middle Eastern goods, as well as an opportunity to eventually pipe Central Asian gas south for export, including to India. India is keen to
SEPTEMBER 2016 39
The Chabahar port willfacilitate North-South trade
Sources: A.T. Kearney analysis
India lags far behind Kazakhstan’s top import partners
Tehran at night, Iran
Note: Graph displays Kazakhstan’s top five import partners, plus India Sources: World Bank; A.T. Kearney analysis
increase trade with Central Asian countries for both economic and geopolitical reasons. Indeed, India has pursued a“Connect Central Asia”policy since 2012, driven in large part by the region’s substantial natural resources, including hydrocarbons and uranium. Modi, upon wrapping up his July 2015 visit to Kazakhstan, Uzbekistan, Kyrgyzstan,
40 SEPTEMBER 2016
Turkmenistan, and Tajikistan, said,“I return to India convinced that India and Central Asia must reconnect… We will reach you through Iran…”This is part of India’s general push to increase its exports and expand its broader foreign policy interests into what it terms its “extended neighborhood.”The development of Chabahar thus seems like a win-win-win
proposition, if the project and its associated overland infrastructure receive the necessary investments and political backing. The opportunity certainly exists to increase Indian exports to Central Asia. For example, according to the World Bank, Indian goods accounted for less than 1 percent of total imports into Kazakhstan in 2014, while Russia and China dominate (see figure 2). India has had to rely on Pakistan – its greatest geopolitical rival – for trade access over land to these markets. As a result, Indian shippers have resorted to circuitous and less efficient options, including the Chinese port of Lianyungang, which has a rail link to Almaty, Kazakhstan along what the Chinese call the “New Eurasia Land Bridge.”This is part of China’s broader“Silk Road Economic Belt” and “One Belt, One Road”policies to create seamless transportation connections from China throughout Eurasia and into Europe. The vision for the Chabahar port is, in
Chabahar port contract signed Iranian President Hassan Rouhan during Prime Minister Narendra’s Iran visit
fact, part of a wider effort by India, Iran, and Russia, as well as Afghanistan and several states in Central Asia, to establish an alternative trade route to China’s “Silk Road Economic Belt” through Central Asia. The agreement is known as the International North-South Transport Corridor (INSTC) and was first signed in 2002 to establish more efficient overland routes among the region’s cities. The success of Chabahar depends on the implementation of the INSTC, as businesses will need the overland infrastructure to actually move their goods throughout the region. For example, in 2009 India invested $1 billion and used the Indian Army Corps of Engineers to construct Route 606, a 217-kilometer highway linking the cities of Zaranj on the Iran-Afghan border – which connects via a southbound highway to Chabahar – and Delaram in Afghanistan – which connects to a circular highway linking several major cities including
Kabul, Kandahar, Herat, Mazar-e-Sharif, and Kunduz, with ongoing connections into Turkmenistan and Tajikistan. But the same geopolitical tensions that prevent India from moving goods through Pakistan efficiently also affect the Chabahar port development. Pakistan and China see the project as in direct competition to their joint development of Gwadar port and free trade zone in Pakistan, which is just 76 nautical miles to the east of Chabahar. Gwadar port is part of a broader $46 billion Chinese investment into the China-Pakistan Economic Corridor (CPEC). There are other downside risks to the Chabahar port project as well, including bureaucratic and political delays in both India and Iran, as well as potential US objection because of enduring Iran sanctions. In addition, relying on Afghanistan for the overland route to Central Asia requires some degree of lasting security there. And finally, Gwadar is only one of a
set of recent port modernization, expansion, and greenfield projects in the Persian Gulf and Indian Ocean littoral, including in Sri Lanka, Oman, Bangladesh, and UAE (often with Chinese investment), underscoring the need for Chabahar to be competitive as a transshipment hub beyond India’s direct interests. With all of these factors at play, the Chabahar port is far from a done deal. But its development is worth monitoring closely for the important implications it will have for economic growth and development in South and Central Asia, particularly the two giant markets of India and Iran. The future of the Chabahar port – as well as the plethora of competing and complementary port, road, and rail projects – will also dramatically affect the business operating environment in South and Central Asia by potentially redrawing supply chain routes throughout the region and beyond. -www.atkearney.com
SEPTEMBER 2016 41
EXCLUSIVE - NIGERIA REPORT
es, oil pric hronic g in g Plun nd c trols a e thrown n o c l capita rtages hav nomy o fuel sh largest eco these Africa’s ray. Despite asn’t ar lh into dis ria’s potentia e to e siv ills, Nig In this exclu article, . faded pply Chain ney Mo l Su Globa iokos, CNN ent Eleni G Correspond ation Africa on the situ ates elabor ground on the
On the brink 42 SEPTEMBER 2016
EXCLUSIVE - NIGERIA REPORT
t’s tough to think that one of the most promising African economies, touted to be the next big thing on the continent just two years ago, is now buckling under the low oil price. Very few analysts priced in this ‘worst case’ scenario when looking at five-year investment plans. Now Nigeria is in tight spot and it’s going to take a lot more than just a jump in oil prices for the country to truly recover. The country has drawn down its foreign exchange reserves and is now running out of cash. This has prompted the Central Bank to implement strict capital controls which makes doing business in Nigeria tougher than ever. In an economy that relies on imports, the controls have made life difficult for companies and a number of South African businesses have already pulled out. Due to the unavailability of dollars, the Central Bank closely oversees all transactions. Dollar payment requests go through a process of approval and priority items get preference leaving smaller businesses waiting for longer periods to access funds. The dollar shortage comes down to one commodity: oil.
SEPTEMBER 2016 43
EXCLUSIVE - NIGERIA REPORT
Nigeria relies on oil for 90 per cent of export revenue and makes up 70 per cent of government revenue. That leaves very little room to adjust the country’s budget. For an emerging market, that can only mean one thing - a recession. The West African nation is expected to contract by 1.8 per cent in 2016, the lowest rate in 29 years, according to the IMF. It’s facing a shortfall of US$11 billion in its 2016 budget. Discussions between Nigeria and the World Bank are continuing on a possible loan or credit facility that would be tied to policy reforms. Index compiler MSCI is considering removing Nigeria from its frontier market index because the restrictions have made it harder for investors to repatriate money. To make matters worse, the country is facing a fuel crisis. Despite being Africa’s largest oil producer, it has never had enough refining capacity, and the scarcity of dollars is making it harder for importers to bring gas into the country. The war against Al-Qaeda linked terror group Boko Haram, which the government has vowed to eradicate, is placing further strain on the country’s finances. As this African giant faces major economic problems, people on the ground are gearing up for a change in fortunes. How a massive refinery can solve Nigeria’s energy problems On the outskirts of Lagos, Africa’s richest man is building what he says is a solution to the country’s fuel crisis: A massive, 650,000 barrel-per-day refinery that is designed to turn the country’s crude oil into gasoline for hungry consumers. Aliko Dangote, a concrete magnate who is worth an estimated $15 billion, said the refinery and petrochemical plant
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has the potential to satisfy Nigeria’s daily requirement of 445,000 to 550,000 barrels of fuel, with spare capacity to export. “This one we are building will satisfy 100 per cent of the [fuel] need of Nigeria,” according to Dangote. There are reasons to believe Dangote will
meet his goal of bringing the factory online by late 2018: He has already completed several major projects in Africa, including the world’s largest sugar refinery and cement factory. If his refinery project is successful, Nigeria could even become an exporter of gasoline and other petroleum products to the region.
EXCLUSIVE - NIGERIA REPORT
Nigeria’s Space Programme taking off Leading the nascent Nigerian space program is one really tough gig. There is no billion dollar budget. The labs and equipment are far from cutting edge. The agency’s museum sits empty. New challenges lurk around every corner. Yet S. O. Mohammed, director general
Phones ring up millions for Nigerians of the Nigerian National Space Research Dial a random phone number in Nigeria and Development Agency (NASRDA), is and you’re more likely to hear music than a determined to wring scientific achievements standard repetitive ring. out of his shoestring budget. That’s because the latest trend to sweep “We have always said ... the Nigerian space program is not going to be an ego trip,” the nation of 170 million is something called a ring-back tone. Mohammed told CNNMoney. For the uninitiated, a ring-back “We are not part tone is a musical selection, of the race for the picked by the owner of a mobile moon, we’re not part Due to the phone, that plays when their the race for Mars,”he number is dialed. When the call continued.“What we unavailability is answered, the music stops need to look at is using of dollars, the and the talking starts. the space program to The tones were popular in look at how we can Central Bank the U.S. years ago, and they create typical Nigerian closely oversees all have since caught on in solutions to most of our problems.” transactions. Dollar markets around the world including China. Mohammed’s goals payment requests Now, ring-back tones are include the ability to the hottest consumer trend in locally design and go through a Nigeria, where they sell for just build a satellite by process of approval $0.25 per month. 2018. By 2030, he “It’s a phenomenon,”said hopes to launch a and priority items Audu Maikori, founder of music satellite from Nigerian get preference production house Chocolate territory. After that? He City. To demonstrate their wants to put a man to leaving smaller popularity, Maikori flipped the moon. NASRDA has been businesses waiting through his contact list and dialed a few friends: sure granted $20 million for longer periods enough, there was music on this financial year the line. to keep operations to access funds Telecoms are also feeling the going, but it needs $65 love. MTN, the largest telecom firm in Africa, million more to get its next satellite project now sells up to $80 million a year in ringoff the ground. back tones. Mohammed says the money will be put to good use -- after all, Nigeria is building on Fuel exec turned farmer: Nigeria was the efforts of others. drunk on oil “We’re not reinventing the wheel,”he said. For years, John-Paul Iwuoha enjoyed the “The Nigerian model is a good model for the fruits of Nigeria’s oil boom: The executive developing world. We’re not starting all over had a cushy job in Lagos, making plenty of like the U.S. or Russia.”
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EXCLUSIVE - NIGERIA REPORT
The former oil The country’s agricultural what he describes as“easy products were once its pride. money.” executive is right: In the 1960s, Nigeria was But even as the riches Shortages of rice the global leader in palm oil flowed, the former production, and second in consultant commenced and wheat force cocoa. Export crops were its work on an unlikely main foreign exchange earner. escape plan: a small farm Nigeria to import But the industry faded on the outskirts of town. food worth $12 into the background as oil Iwuoha describes the became the new commodity farm, started four years billion each year, of choice. ago, as an“experiment.” or one-third of “I call it oil drunkenness,” But when oil prices said Iwuoha.“I am happy crashed in 2015, he the continent’s with the current situation, quickly traded in his total food import where things are going bad, business suit for a chance because it’s causing us to to help remake Nigeria’s bill, according reflect, look inwards.” agricultural sector. to the African Plunging crude prices “When I saw this crisis have now pushed Africa’s coming, I knew this was Development Bank largest economy to the brink my exit,” says Iwuoha. of recession. “We have a vibrant agricultural sector that has been abandoned,” Nigeria’s Entrepreneurial Hustle he continued.“[Nigeria has] a population of How are entrepreneurs supposed to cope when a hundred and seventy million plus people loans aren’t available? When interest rates are ... they can’t feed on oil, somebody has to 20 per cent, unemployment has surged and produce the food.” most everyone lives below the poverty line? The former oil executive is right: Shortages They hustle. of rice and wheat force Nigeria to import And in Lagos, that means making noise. food worth $12 billion each year, or oneNigeria’s commercial capital is home third of the continent’s total food import bill, to dozens of thriving markets, each with according to the African Development Bank. vendors that boast a unique calling card: their Nigeria – where agriculture is 20 per cent of own sound. gross domestic product – simply isn’t growing Mobile tailors walk proudly on the enough crops. The sector employs tens of millions of people, but malnutrition, low yields streets, loudly clinking their scissors to woo customers who might need an emergency fix. and volatile pricing remain rampant. 46 SEPTEMBER 2016
This kind of work is done on a sidewalk, on the street or anywhere that can accommodate a sewing machine. Entire outfits are made in a single day and adjusting the hem on a dress costs just $2. The tailors use vintage Singer sewing machines – the type usually found in antique stores. With buttons and hems secured, visitors might want to enjoy another market pleasure: a manicure and pedicure. Here too, entrepreneurship comes with a tune: Nail artisans, who keep their tools wrapped in a piece of cloth, rattle them together to help attract customers. This sidewalk salon session will set you back $4. If the next item on the itinerary is an adult beverage, listen for the homemade gin vendors who are also fighting for your ears’ attention. The sound of metal on a glass bottle means that a drink is nearby. This unique audio shopping code echoes through the markets in Lagos, a city of 12 million people where entrepreneurship is king and the informal economy dominates. There are signs, however, that the hustle is about to get even harder: Nigeria’s economy shrank by 0.4 per cent in the first quarter, and a recession looms. Price pressures have pushed inflation to 14 per cent. This isn’t good news for the country’s informal sector, which is estimated to make up almost 50 per cent of the economy, according to Muda Yusuf, director general of the Lagos Chamber of Commerce and Industry. “If you go around Lagos, you go around the market, you can see how active this informal sector is,”Yusuf said.“Traders do huge turnover, billions of naira on daily basis.” Nigeria is an economy divided –it’s heavily reliant on oil to keep government on its feet but on the ground, sub-economies are taking off, showing the true strength of the consumer market. Now in a bid to prop up the economy, the government plans to spend its way out of the recession by issuing debt in order to increase capital expenditure. It plans to stimulate the economy with an extra $5.6 billion in 2016, four times more than the year before. All this in the hope that Nigeria will bounce back and finally diversify away from the commodity that has been both a blessing and a curse.
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Design excellence Clinton Campbell, Logistics Engineer, Panalpina World Transport and Varun Viswanath, Storage and Material Handling Solutions, Genavco, give their perspectives on their new project - Panalpina’s requirement for design and construction of 17,000 new pallet positions for its facility in Dubai South
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analpina World Transport has invested heavily in its growth plans for the Middle East, Africa and CIS Region (MEAC). These growth plans include a 40,000 sq metre built-to-suit, stateof-the-art new facility in the Dubai South Free Zone. Genavco/Stow was approached to design and construct in excess of 17,000 new pallet positions for the facility. “We had a racking tender for the project, which we opened up to five providers, including Genavco. Face-to-face meetings were held with all five providers, before we decided to award it to Genavco,”explains Clinton Campbell, Logistics Engineer, Panalpina World Transport.
“Stow International was established in 1977 in Wevelgem –Belgium, Europe. During our first meetings with Panalpina, we have highlighted our expertise in mega warehouse racking projects in the UAE, with references of IKEA, RHS, IFFCO, and many other prestigious projects. Genavco’s brief was to supply and install Stow Selective Pallet Racking System for storage of about 17,000+ pallet locations in their newly-constructed, 40,000 square metre facility in Dubai South,” explains Varun Viswanath, Storage and Material Handling Solutions, Genavco. When it comes to the selection, evaluation, and assessment or suppliers, there are many elements that Panalpina considers.“The
decision to work with a provider is not made purely on price alone. Panalpina wanted to build a relationship with a partner for the future. These 17,000 pallet positions are only the start, and covers less than 30 per cent of the floor area. We wanted a strong partner who could understand and meet our growing needs,”states Campbell. So when Genavco/Stow were confirmed for the contract, the decision was based on their professionalism and commitment. “Over the course of three months, our design team worked very hard to present various options to meet client expectations. I believe, at the end, it was our professional approach, efficiency in providing the right solution
at right time, and our market references, that were the key factors in winning this prestigious deal,”muses Viswanath. “The final proposal received from Genavco far outdid the rest of the competition. We bought into the concept of not ‘WHAT’ Genavco do, but rather ‘WHY’ they do it,” adds Campbell. For Panalpina, the service received from Genavco to date has been better than expected. This confirms that they made the right decision in choosing Genavco as a committed partner for the project. “The response time and support by the Genavco Sales team has been without delay. Communication is key in any business, and we cannot fault Genavco in this regard,” asserts Campbell. Genavco and Stow work well together as a team, which has helped them make a strong foothold in the UAE Market.“We have completed many major projects, including the IKEA Distribution Centre in DWC, one of the largest warehouses in the region, with a storage capacity of about 150,000 Pallets; the RHS Warehouse in DWC; and IFFCOIntergulf Warehouse. Currently, our team is engaged in the process of making a Shuttle Racking system for freezer application for
a reputed food distribution group,”says Viswanath. The biggest challenge that STOW has faced was to execute racking in a warehouse under construction.“But our project team has managed it very well, thanks to the Amana Contracting team - the Civil contractor, who helped us with the necessary clearances to complete the project on agreed timelines,” informs Viswanath. Genavco has been working closely with Panalpina through all stages of this project. Viswanath strongly believes that Genavco’s efficiency and quality of service will make them a preferred partner for Panalpina for the future as well.
SEPTEMBER 2016 49
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Shipping lines, ports and shippers
dramatic disruption is on the horizon for container lines and, in turn, for ports and shippers. Since ports are the vital link between liner carriers and their customers. Ports face a big decision with regards to the megaships coming on line and whether to invest in upgrading their facilities to handle these much larger container-transporting assets. Shippers are, for this discussion, the direct buyers of ocean transport. They use service contracts, spot market rates, relationships with carriers, and other methods to get rates for their shipments. Tom Craig, President Ltd Management and Gary Ferrulli, President Unicon Logistics and NVOCC discuss the predicament
SEPTEMBER 2016 51
Ocean carriers A dramatic disruption is on the horizon for container lines and, in turn, for ports and shippers. The reasons for much of what is happening rest with the lines. Long-term carrier viability – with low rates of return, losses over an extended period of time, and escalating costs – summarises the reality. Global container volumes, not rates, have driven revenues. Now these volumes have fallen. Reducing costs is essentially focused with ultra-large vessels and their lower operating and slot costs. But not all carriers have these ships – or have small activity with them. This is against a background where supply (ships/containers) exceeds demand. At the same time, with the losses and demand/supply, carriers continue to invest in mega-ships. And this sets up the tsunami. Some will point at Maersk, CMA CGM, and OOCL. They made money in
52 SEPTEMBER 2016
2014; so what’s the problem? One of these three made over US$2 billion; the other two made into the hundreds of millions. In terms of the industry, carriers made less than US$4 billion – less than a 2.5 per cent rate of return. Those returns are not sustainable for many carriers. Imagine what shipping may be like if there are 10 container lines with plus-90 per cent of capacity – and plus-90 per cent of the volumes. Let us step back and examine the most profitable carrier – Maersk Line. How are they making the kind of money they do when others cannot? They have a 14 per cent rate of return in Q1 2015. The next carrier is CMA CGM at 11 per cent. Then the numbers fall lower to nominal numbers and even losses. Since not all carriers are public, getting good financial data is difficult. • For starters, they have a 10-year head start on cost-cutting. Cost-cutting is mandatory
given continuing falling rates and soft demand. They did this with people and, especially with the mega-vessels in the Asia-Europe trade. This is important. They understand how to operate these ships. This has additional significance against the background of greater supply than volumes and the global slowdown. They also do something that almost no one else does – revenue management. That has meant, in some instances, walking away from business that did not meet a certain revenue level for the activity. The revenue management is combined with developing round-trips that generate better margins. An interesting point here is how – after refusing volumes at rates they felt were unattractive other lines jumped to get it. Maersk seems to be unique with what it’s doing. Some carriers have tried on the cost-side, but without the depth and results. Many lines pursue almost
any and all freight – not walk away from it – even if they lose money at it. Some of this –“any freight is good freight” – comes from carriers having invested in ultra-large ships to achieve lower operating costs. This is not a new action. For decades, the lines have been buying larger and larger ships – all with the premise of lower operating costs. Now with all the ship capacity and carriers wanting targeted vessel utilisation, they seek more loaded containers on each vessel. Doing this also complements the market share game that carriers do;
The way to get that volume is to reduce rates to attract more containers. The only problem is the price reduction moves the breakeven point out further, continuing the cycle and struggle
cutting rates is the primary method for increasing market share. Increasing volumes per vessel improves utilisation and capacity management. The difficulty in doing these in creases with soft demand. Lines engage in a classic breakeven game with high capital cost assets. The goal is to get more containers on each ship. This can achieve vessel breakeven – and more. The way to get that volume is to reduce rates to attract more containers. The only problem is the price reduction moves the breakeven point out further, continuing the cycle and struggle. Filling ships for the sake of a theoretical capacity utilization that creates magical financial
results is a short-term approach that has been repeatedly used. Carriers do-ing this are using decades-old practices and seem intent on proving Einstein’s definition of insanity. Container lines have also aligned into various operating alliances. These are supposed to improve operating costs. But alliances have added to service issues with customers. Blank sailings and poor on-time performance have caused complaints about schedule integrity and performance reliability. The alliances tie into the service problem. Carriers with“good” performance are in alliances with others that do not have good on-time execution. This situation creates problems with customers who have contracts with and/or utilize certain carriers are forced to use those that they do not want to use. Such customers need dependable service to manage supply chains. All this raises questions as to what customers are buying – and compounding problems
SEPTEMBER 2016 53
with trying to increase rates. The ultra-large ships bring the problem of what to do with the ships they are replacing. Carriers tend to cascade their ships into other trades to make way for the newer, bigger ones in the east-west trades. The net of the cascading has been adding more capacity than is being removed or scrapped. Inferring from information of public firms, our conjecture is three-fold: One, which carriers will go out of business? Two, assuming carriers with no or nominal ultra-large fleets as likely to go under, would these firms file bankruptcy? What is the incentive to acquire their assets? Three, will such bankruptcies remove enough capacity to achieve any viable industry revenue benefit? How fast will all this take place? Who will survive?
The ultra-large ships bring the problem of what to do with the ships they are replacing. Carriers tend to cascade their ships into other trades to make way for the newer, bigger ones in the eastwest trades
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Ports Since ports are the vital link between liner carriers and their customers, ports face a big decision with regards to the mega-ships coming on line and whether to invest in upgrading their facilities to handle these much larger container-transporting assets. Where is the greater financial risk? To invest in the larger ships, or not to invest: that is the question. In addition, ports in the United States face their own issues. Will there be long-term effects from the West Coast ports slowdown from the International Longshore and Warehouse Union contract negotiation? What about the impact of East Coast ports preparing to handle bigger containerships with the upcoming opening of the expanded Panama Canal?
Ferrulli and Craig offer different views on the upcoming financial tsunami bearing down on the world’s ports. Ferrulli,“To gain a perspective of the financial impacts facing the ports, take a look at the recent report by the Journal of Commerce on port productivity and see which ones are among the top 10. There are six Chinese ports which handle the large and ultra-large containerships, in addition to Khor Fakkan, Jebel Ali, Yokohama and Rotterdam. How did they do it? Know about it? Plan for it? Make it happen? They saw, they talked and they acted. Most European ports did not and virtually none in the United States did. What Norfolk/APM Terminals did was in their plans already; someone told them that big ships were coming.“The issues that ports have are not
big ships, but rather the increasingly larger volumes. Those volumes were actually going to be even bigger, but the financial slippage in 2007-2010 cut volumes by roughly 30 per cent. Now they have caught up, and few terminals have invested to handle the escalation in container volumes. It’s worse in the United States, because we have so many ports, and no national plan on how to prioritise and spend money smartly. That’s in addition to not spending what is collected in Harbour Maintenance Taxes (about half is spent on port maintenance, while the rest is funneled into a general fund for Congress to use as it pleases). And many city-affiliated ports are taking in billions, with little of it used for their actual ports, since they also use this money to booster their general funds.
“To recap: 1) Volumes have grown since 2000 and the ports haven’t spent the dollars required to handle that growth efficiently. 2) In the United States, there is no national port plan, so whenever anyone decides they want a container port, they build one and then try to get federal dollars. With no national plan and priorities, it gets spread too far and thin. In addition, the monies collected are diverted to non-related matters that only politicians and lobbyists can dream of. 3) There are enough examples (try the top 10 productive ports) where ports have acted responsibly with their investments in future growth. What stops the rest of the world? 4) The labour issue on the U.S. West Coast. Those are the port issues, not big ships.” Craig,“The ports’ decision on investing
is not a simple one. They need additional space to handle the loaded and unloaded containers from each large ship, more space for storing chassis and containers, and more roads to handle the volume.“Also, there is uncertainty with container lines themselves. Are the mega-ships the low-cost saviors they are reported to be? What if they are not, what happens if they invest? How long can the lines continue to lose money as they have been? What happens then if the line that goes bankrupt is your customer? How do the alliances play into all this with the different ports being used?“Ports need financial incentive to invest. For ports that are owned by various government agencies, should they risk taxpayers’ money with the expansion? What and where is the return on investment?
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Where will they get additional volume besides what is on each ship? Will the lines focus on using fewer ports to give them greater volumes?“Adding to the story is the release by the Organisation for Economic Cooperation and Development’s report, The Impact of Mega-Ships. OECD expresses doubt on the savings from these ships.“Container lines had these mega-ships built to benefit their businesses. So, it is not unreasonable to suggest that container lines should step up and invest in the port expansions. The point of this recommendation is that global trade and maritime transportation needs to change. Statesmanship is necessary. All stakeholders should step up and collaborate on the future. That cooperation should include risk-sharing.”
Shippers Shippers are the direct buyers of ocean transport. They use service contracts, spot market rates, relationships with carriers, and other methods to get rates for their shipments. There are two buyer subsets BCOs and OTIs. They are different and have different agendas. BCOs are beneficial cargo owners, while OTIs are the ocean transport intermediaries which include freight forwarders, third party logistics providers, and other similar service providers. BCOs are supposed to buy services that align with their supply chains. They should segment their supply chains and utilise the carriers whose services best match each segment. Service, however, does not seem to be a primary goal for many BCOs: Based on Drewry’s research, carrier on-time service and reliability in the major trade lanes are not good. That opens up the question as to what shippers are buying. Supply chain executives are under pressure not to take price increases. As a result, they utilize poor service carriers, which, in turn, increases the amount of inventory each company must carry to buffer for the poor reliability. Interestingly, many supply chain executives are faced with contradictory directives to not take price increases and avoid increasing inventories. With carrier alliances, a firm can contract with a good service carrier, but then be forced to use those carriers with lackluster service that are also apart of the alliance. Smaller intermediaries are rate shoppers. Service is often a secondary issue to them, but having
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Long-term carrier viability – with low rates of return, losses over an extended period of time, and escalating costs – summarises the reality. Global container volumes, not rates, have driven revenues
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space from multiple service providers has proven to be a valuable option for their customers. There are large OTIs who play both sides, lower rates and guaranteed space, but it’s a fragmented industry with many participants. What will these two buyer groups do when the tsunami hits and as many as five container lines go out of business? When there’s less reason for carriers to keep rates low due to excess capacity? With alliances broken due to lines disappearing and not all ports capable of handling mega-ships, there could be different ports for exports and imports, which impacts supply chain costs and performance? Shippers have essentially stood by while this tsunami has formed. They enjoyed the low rates that were part of the tsunami’s formation. They played no statesman’s role to bring resolution and mitigate what’s happening. They took the short-term benefits vs. the potential long-term negative impact. So what do BCOs and OTIs do when a major carrier (or carriers) closes down operations, or even just exits a trade? On the assumption that the carrier going out of business was chosen because of the lowest rates, then the shipper goes to the next lowest rate-providing carrier or shops for rates. If other reasons, then look for another carrier in the same alliance using virtually the same service. But what if over time, a group of carriers leave? Gone are the days when someone can cheaply charter enough ships to give them a service, lease containers, get agents, and be in business. So now shippers will wind up with fewer carriers, with potentially less capacity. The capacity situation isn’t likely to be a problem for long, as the remaining carriers will adjust fleet sizes to the markets. There will simply be fewer carriers. Will there be fewer alliances with fewer carriers? Possibly. But carriers currently see the benefits of alliances. What happens to rates? Rates in ocean transportation are very much a reflection of the markets and there is no reason to assume that this will change. Supply/demand ratios will win the day. In tight trades, rates will move higher; in oversupplied trades they
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will fall. All this will have an impact on both shipper groups. BCOs will have fewer choices, and maybe not as fast or reliable transit options, which creates supply chain operations problems and increases buffer inventories to compensate for the service uncertainties. OTIs and BCOs that are rate shoppers face a new market reality with higher rates. The happy days of cheap rates are over, and this will create a squeeze effect on their businesses - and put some in jeopardy. That will include BCOs who used low rates to mask their supply chain inefficiencies. The other question will be how many OTIs survive? One last thought on this; in 1980 the Staggers Rail Act was enacted and, at the time, there were more than 15 Class I railroads in the United States. Competition was abundant. Over time, however, rail consolidation occurred and today there are just handful of viable Class I railroads; negotiations between shippers and these railroads have become more difficult; and shippers have had to find new ways to service certain locations because of abandonment and curtailing of service. Many large shippers who once supported deregulation are now calling for more regulation to be put upon the rail industry when it comes to rates and services. Then superimpose today’s rail situation to having, let’s say, 10 container carriers which control 90 per cent of the global fleet and carry 90 per cent of the global trade. Might the shippers’ world be different? Might their view of competition be different? You bet. The pending maritime financial tsunami will start with the container lines and domino across the ports and shippers. There will be chaos. The greater the number of carriers that go under or are merged, the greater the upheaval. And, the end result will be a new paradigm of how shippers and ocean transport providers deal with each other. -Tom Craig is President of consulting firm LTD Management and can be reached by email at tomc@ltdmgmt. com, and Gary Ferrulli is President of Unicon Logistics, an NVOCC, and can be contacted by email at mrgtf4811@ mindspring.com
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Eng Mahmood Al Bastaki, CEO of Dubai Trade
Dubai Trade and PCFC Security launch new 24Hour online gate pass service, easing the entry process for JAFZA
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Mahmood Amin, CEO of PCFC Security
isiting clients and partners in Jebel Ai Free Zone just got a whole lot easier. Dubai Trade, in collaboration with Ports, Customs & Free Zone Corporation (PCFC) Security, has launched Tasreeh, an advanced automated gate pass service that will ease the entry process for Jebel Ali Free Zone. The 24-hour online service allows hosting companies and port visitors to issue passes, and to pay for and receive approvals online. Payment will be completed through Dubai Trade’s online payment gateway, Rosoom, and users can access the service by logging on to the Dubai Trade Portal, or by visiting www.tasreeh.ae.
The aim of Tasreeh is to reduce manual intervention, enabling uninterrupted and seamless gate pass management, and to provide a scalable system that can accommodate future growth of Jebel Ali Port and Jebel Ali Free Zone, as well as the city’s readiness to host the global mega-event, Expo 2020. Said Mahmood Amin, CEO of PCFC Security,“We are committed to applying the latest technology and smart applications, as well as stimulating creativity and innovation to boost our development and to support the UAE’s transition towards a knowledge economy in line with the UAE Vision 2021 and Dubai Plan 2021.” Eng Mahmood Al Bastaki, CEO of Dubai Trade, added,“Over the last 12 years, we have converted users to our online services, and reached a 100 per cent adoption rate for most of them. We have focused our efforts on creating convenient, 24-hour customer support services, and our partnership with PCFC will enable us to extend this to visitors as well.” “Our partnership with Dubai Trade for this project is a natural fit, given their experience in providing digital procedures for their services. They recognise that Tasreeh adds to their offering, and we are confident that it will provide visitors a smoother experience when passing through the gates into Jafza,” Amin explained. Users of Tasreeh will be able to issue six different types of passes for different activities and duration. These include Visitor Passes for those attending interviews, meetings or training at Free Zone companies; One Day Passes; Temporary Gate Passes valid for one week to six months; Permanent Gate Passes valid for one year; Tools and Equipment Passes valid for one day to three months, and daily Photography or Videography Passes for onsite shoots.
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Published on Sep 11, 2016
Supply Chain, Supply chain management , logistics and supply chain segmentation, warehousing, RFID, healthcare logistics, 3PL, 4PL, six sigm...