Logistics News ME - June 2016

Technology

Interview

Sector focus

Drones and the last mile revolution

Agility on the global CSR report

Flooring under the spotlight

Connecting trade professionals with industry intelligence

Preparing for the next generation

June 2016

Start 8 | News

Features 18 | Technology:

Contents

Drones The revolution of last mile delivery

22 | Interview

Agility Global CSR director Frank Clary talks

26 | Sector Focus The latest trends in flooring 32 | Cover Story

The next generation of materials handling

Continued 38 | Face to Face Brian Cartwright meets John Wylie, MD Middle East, Barloworld

34

44 | Viewpoint Commentary from across the industry

18

50 | Supplier News

16 24

36 Logistics News ME | June 2016 | 3

Editor’s Note INFLUENCING THE MARKET

A

s with previous years, the start of 2016 brought a raft of predictions for the year ahead, from robotic supply chains to autonomous fleets and a marked rise in the popularity and intelligence of apps, not to mention wider IoT applications.

This month marks the official half way point for 2016 and how the rest of the year will play out is anybody’s guess. Instead of the creation of a futuristic wonderland the year begun with a string of scenarios that have all been greatly impacted by political decisions the world over. We have seen the cancellation of parts of the GCC rail network, introduction of PPP contracts for infrastructure works, and a steep rise in the pace of mergers and acquisitions; in fact in the last two years there has been a number of large and strategic acquisitions resulting in a significant consolidation among the top 50 global 3PL providers.

In addition, there are a number of focuses from within the industry that are shaping the operations of many companies but aren’t part of the central dialogue – for example, sustainability and CSR. While there is speculation that oil will reach $60/ barrel before the end of the year and with eyes firmly fixed on Iran, certain developments look set to remain in the headlines.

But what looks even more interesting is developments in ecommerce, specifically since the January announcement that

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Amazon received a license from the Federal Maritime Commission to operate as a non-vessel operating common carrier (NVOCC) of cargo from China to the United States.

Flexport CEO Ryan Petersen wrote in a blog at the time: “With ocean freight itself so low, a considerable portion of logistics costs come through labour costs—particularly compliance and coordination of cargo handoffs between different players in the chain. It’s here that automation, something no traditional freight forwarding company can do even one percent as well as Amazon can, becomes the key competitive advantage over legacy freight forwarders.”

It isn’t the first time Amazon has taken the lead on changing how supply chain logistics works – after all it was the first to test out the capability of drones in last mile delivery only a few short years ago.

The stage has been set for some time now for an e-commerce retailer to seize such an opportunity and with Amazon clearly intending to remain at the plate the future could become very interesting indeed.

Melanie Mingas Group Editor

CONTRIBUTORS Helen Gaskell Riad Mannan

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news

In the NEWS Gulftainer Surpasses 20 Million TEU Milestone at Northern Container Terminal KSA Operations Gulftainer operates two main ports on behalf of the Sharjah Port Authority - Sharjah Container Terminal (SCT) and Khorfakkan Container Terminal (KCT).

Other countries include the Iraq Container Terminal, the Iraq Project Terminal and Umm Qasr Logistics Centre in Iraq, Karachi in Pakistan, Recife in Brazil, Tripoli in Lebanon, and in the Northern Container Terminal in Jeddah, the Jubail Islamic Port and the Jubail Container Terminal in Saudi Arabia.

There Gulftainer acquired 51% stake in Gulf Stevedoring Contracting Company (GSCCO) in June 2013.

The company’s most recent facility, Canaveral Cargo Terminal opened in Florida in the USA in June 2015, following the signing of a 35-year agreement, making Gulftainer the first Middle Eastern port management company to operate in the United States.

G

ulf Stevedoring (GSCCO), a member of the Gulftainer Group of Companies, celebrated the handling of a record 20 million TEUs at the Northern Container Terminal (NCT) in the port of Jeddah, Saudi Arabia. Gulftainer is the world’s largest privately-owned, independent port operator based in the UAE. With a market share of almost 50%, Gulf Stevedoring’s Northern Container Terminal is the busiest container terminal in the port of Jeddah and with its operation in Jubail Commercial port, Gulf Stevedoring is also 8 | Logistics News ME | June 2016

the largest terminal operator within the Kingdom of Saudi Arabia Thursday’s event was attended by His Excellency Dr Nabeel Al Amoudi, President of the Seaports Authority, Captain Abdullah Bin Awad Al Zami, Director General of Jeddah Islamic Port, along with several government representatives and representatives from shipping lines, agencies and trade organisations.

Gulf Stevedoring’s presence in Saudi Arabia, spanning over 30 years, has

included cargo operations in Dammam, operations of the South Terminal before its concession and more recently, the opening and operation of the Jubail Container Terminal (JCT), making Gulf Stevedoring the only company to operate container terminals on both coasts of the Kingdom of Saudi Arabia.

In 2013, Gulftainer became the managing shareholder after entering into a partnership with GSCCO that saw the two companies combine their expertise to enhance port operations in Saudi Arabia.

news

Milaha, DSV Sign Exclusive Agency Agreement for Logistics Services

Milaha offshore rig

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ilaha, a Qatar-based marine transport and logistics conglomerate, and DSV, a Denmark-based provider of global transport and logistics, have signed an agreement by virtue of which Milaha will become the exclusive agent for DSV in Qatar. The agreement will significantly expand Milaha’s presence on the global logistics scene and will provide access to more than 1,000 offices, terminals and warehouse facilities in more than 80 countries.

Commenting on the agreement, Milaha’s President and CEO Mr. Abdulrahman Essa Al-Mannai said: “We are pleased to have the opportunity to partner with DSV, one of the largest 3PLs globally. Milaha will greatly benefit from the wider network access that this agreement gives us and which will allow us to enhance our service offerings to our clients in Qatar and elsewhere. At the same time, DSV will find in Milaha a reliable partner with a significant presence in Qatar and a solid track in quality customer service.”

Mr. Michael Carstensen, DSV Middle East regional director and UAE MD, said: “As a customer-focused organisation, the cooperation with Milaha will enable us to reach our customers in one of the fastest developing economies in the Middle East. We are looking forward to the synergies that will result from this agreement.”

Milaha has been providing project logistics services, freight forwarding, customs clearance and land transport in Qatar for more than 30 years using a fleet of trucks, trailers, mobile cranes and other equipment. It serves many of the largest industrial companies in Qatar. The company also owns and operates a multi-purpose warehouse in Jebel Ali, UAE, offering its clients customized door-to-door, logistics solutions.

Global Pharma’s automation push

Global pharmaceutical intralogistics is the latest sector to experience disruption from emerging technology, according to automation experts, Swisslog.

The Swiss market-leader is embarking on a major push within intralogistics to highlight new examples of best practice and innovation.

Challenges specific to the sector include smaller batch sizes, increased product ranges, increased product sensitivity and shorter shelf life. The result leaves many pharma giants embracing new technology to help change their distribution models, relive cost pressures and maximise the growth potential of online pharmacies, says the firm.

Pharmaceutical sector specialists are set to address leading pharma events in Chongqing (China), Montreux (Switzerland), and Dubai (United Arab Emirates).

One such specialist, Michiel Veenman, spent five years optimising automated warehouse operations and IT systems for a pharmaceutical wholesaler.

Veenman said: “The pharma world is fairly traditional, and it can take time to innovate procedures in sharp contrast to the R&D that goes into product development.

The other side of the coin is experience is greatly valued.

The way technology is being used now amounts to an evolution of the whole warehousing and logistics process.

Swisslog helps customers to find an optimal, proven solution that is also tailored to their needs.”

Logistics News ME | June 2016 | 9

news

FedEx acquires TNT Express

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edEx has acquired TNT Express in a deal worth €4.4 billion. The companies have stated that services to customers and 400,000 team members will run without interruption, with the “process” beginning immediately.

A statement read: “FedEx Corporation (FedEx) (NYSE:FDX), FedEx Acquisition B.V. (the Offeror) and TNT Express N.V. (TNT Express) jointly announce that FedEx has acquired TNT Express. The €4.4 billion acquisition combines the strengths of the companies – the world’s largest air express network and an unparalleled European road network, which will expand the existing FedEx portfolio and reshape the global transportation and logistics industry.”

“This acquisition is a significant accomplishment and marks the beginning of a new era, filled with promise for our people, customers and shareowners,” said Frederick W. Smith, chair and CEO of FedEx. “The timing of this historic event is important, particularly in the current market environment where global e-commerce is growing at double-digit rates,” Smith added. “Adding TNT’s capabilities to our existing world-class suite of services, including GENCO and the recently relaunched FedEx CrossBorder, will further expand the ability of FedEx to support business connections around the world.

10 | Logistics News ME | June 2016

Comparative data “critical” for free zones The need for free zone operators to have access to comparative data is “critical” according to Hernando José Gómez, Former Colombian Ambassador to WTO (Colombia) who was made the comment during the concluding day of the World Free Zone Organization’s 2nd annual international conference and exhibition in Dubai.

The session highlighted the impact of Global Value Chains (GVC) on the free zones of the future, as well as the opportunities they presented for economic development. Moderated by Gary Gereffi, professor of Sociology and Founding Director of the Center of Globalization, Governance and Competitiveness, Duke University, the session drew the participation of four panelists – Gokhan Akinci, Global Product Leader at World Bank Group; Martin Ibarra, VC, World FZO (Colombia); and Przemyslaw Kowalski, Senior Trade Economist, Organization for Economic Co-operation and Development (OECD), France.

Speaking on the topic, Hernando José Gómez said: “Global value chains are very demanding in terms of regulations – such as taxation procedure or pre-requisites to operate in - and in terms of infrastructure requirements. Free zones can address these issues through promotion of research and development (R&D). They can also incentivize and attract human capital, including academic experts and dedicate resources for skill development and superior ICT technologies. Policy-makers must use tools to measure advancement and growth within free zones, so that any gaps in the operations or demand may be identified and addressed proactively.”

Free zones of the past functioned as isolated economic clusters with little to no interaction with the local economy. In the highly digitized and innovative future, however, free zones will need to be more integrated and collaborative in their approach and open their doors to global talent, investments and technologies, experts at the event concluded.

The session highlighted the impact of Global Value Chains (GVC) on the free zones of the future, as well as the opportunities they presented for economic development. Moderated by Gary Gereffi, professor of Sociology and Founding Director of the Center of Globalization, Governance and Competitiveness, Duke University, the session drew the participation of four panelists – Gokhan Akinci, Global Product Leader at World Bank Group; Martin Ibarra, VC, World FZO (Colombia); and Przemyslaw Kowalski, Senior Trade Economist, Organization for Economic Co-operation and Development (OECD), France.

Speaking on the topic, Hernando José Gómez said: “Global value chains are very demanding in terms of regulations – such as taxation procedure or pre-requisites to operate in - and in terms of infrastructure requirements. Free zones can address these issues through promotion of research and development (R&D). They can also incentivize and attract human capital, including academic experts and dedicate resources for skill development and superior ICT technologies. Policy-makers must use tools to measure advancement and growth within free zones, so that any gaps in the operations or demand may be identified and addressed proactively.”

DP World opens first Turkish port Dubai ports operator DP World has expanded its reach to Turkey, officially opening its first terminal in the country.

DP World Yarimca is now one of Turkey’s largest ports, covering 460,000 square metres and with a capacity to move 1.3 million containers a year. It is based in one of the country’s largest industrial areas, Izmit Bay, located about 50 kilometres south-east of Istanbul. The port has two main berths, and six ship-to-shore gantry cranes.

“Our investment is not just in machinery and equipment – it’s about our people, our most important asset,” said DP World chairman Sultan Ahmed bin Sulayem, in a press statement.

“DP World Yarimca currently employs 300 people and we aim to reach 650 jobs when at full capacity. There are over 800 jobs identified indirectly in the local economy and many more local and regional supplier opportunities. This illustrates the ripple effect of projects of this magnitude – that boost economies and prosperity for the long term.”

news

GEFCO Group generates €4.2 turnover, 2015

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EFCO group, a global player in industrial logistics and the European leader in automotive logistics, generated a turnover of €4.2 billion in 2015, up 3% compared to 2014.

Luc Nadal, Chairman of the Management Board of GEFCO Group, says: “GEFCO achieved good results in 2015 in an unsteady global economic context and succeeded in further enhancing its position of global logistics solutions provider. The Group expanded its international footprint by opening new countries and acquiring the Dutch company IJS Global, whilst broadening its offering in freight forwarding and customer portfolio. I see the Group’s performance as a tangible proof of our customers trust in GEFCO’s expertise: they know how much GEFCO’s teams are committed to adding value at every stage of their logistics chain.”

The background In 2015, the GEFCO group achieved a turnover of € 4.2 billion, up 3% compared to 2014. The Group produced a free cash flow of € 173 million over three years, with very little debt, which demonstrates its sound financial situation. The performance plan initiated mid-2014 to increase its cost flexibility, alongside with the Group’s “asset-light” business model, contributed to an efficient cost management by the company. In the meantime, the Group kept on expanding its customer portfolio and achieved an increase by 9.5% of its revenue with international industrial customers.

The EBITDA is lower than in the previous year (-18%). A decline in oil prices, the economic crisis hitting hard countries such as Russia and Brazil, and difficulties experienced by car makers in Latin America and Russia are the key reasons of this setback.

Growth presents challenges. But with the right automation, there’s no limit to where your intralogistics operation can take you. Only companies who actively shape the transition from manual to automated intralogistics will remain competitive in the long run. Swisslog offers the widest spectrum of automation solutions, from conveyor systems to the latest ASRS goods-to-person technologies, from AGVs to advanced robotics.

No matter how you grow, grow smart with Swisslog. swisslog.com/GrowSmart-MiddleEast

Logistics News ME | June 2016 | 11

news

Alstom records €41bn combined orders, sales up 12%

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etween 1 April 2015 and 31 March 2016, Alstom achieved a record commercial performance with orders received and backlog at respectively €10.6 billion and €30.4 billion. Over the same period, sales were up 12% (7% organically), amounting to €6.9 billion. The adjusted EBIT increased to €366 million, 23% above last year, leading to an adjusted EBIT margin of 5.3%.

The results are in line with the confirmed objectives for 2020, which were stated as: By 2020 sales should grow organically by 5% per year; Adjusted EBIT margin should reach around 7% by 2020 driven by volume, portfolio mix and results of operational excellence actions; By 2020, Alstom expects c. 100% conversion from net income into free cash flow.

Net income (Group share) reached €3.0 billion, benefitting from the sales of Energy activities to General Electric and after impact of exceptional impairments mainly in France.

Alstom benefits today from a very strong balance sheet. The net debt significantly decreased to €0.2 billion on 31 March 2016 compared to €3.1 billion on 31 March 2015. Equity amounted to €3.3 billion at 31 March 2016.

Following the cash return to shareholders of €3.2 billion through the public share buy-back offer, the Board of Directors will propose no dividend distribution at the next Annual General Meeting.

Alstom invested €154 million in capital expenditures in fiscal year 2015/16 and the continuous need to reinforce its network as well as local competences should trigger an exceptional €300 million capex over the next three years.

The Group had a gross cash in hand of €2.0 billion at the end of March 2016 and a fully undrawn credit line of €0.4 billion.

As committed, the Group has been fully deleveraged. The remaining net debt of €203 million at 31 March 2016 resulted from small acquisitions and the cost of bond buy-back. Equity reached €3,328 million at 31 March 2016.

12 | Logistics News ME | June 2016

Global brands call for heavy goods efficiency standards A union of 19 major global brands and logistics companies have written to Jean-Claude Juncker to urge him to reduce the CO2 emissions of heavy-goods vehicles.

The brands include IKEA, Nestlé and Philips and they stated that fuel efficiency standards for new trucks and trailers would save billions for businesses, lead to cheaper goods, protect the environment and boost energy independence.

The letter reads: “We are convinced fuel efficiency standards would save consumers and businesses money at the pump, lessen the economic and security threats presented by oil dependence and price volatility, and help European manufacturers and suppliers develop new technologies that spur investment in research, development, and production of the ultra-efficient vehicles Europe needs to make the transition to a low carbon economy”.

The coalition highlights that the EU’s 2030 climate targets and more ambitious targets of the Paris climate deal can only be met if fuel economy standards are issued for heavy-goods vehicles, which account for 25% of road transport’s fuel use and carbon emissions. Realising a 35% cost-effective for truck fuel efficiency improvements could save businesses up to €10,000 per year, per truck, while avoiding 37m tonnes in annual carbon emissions by 2030, according to an EC Impact Assessment.

Tech advancements must be “far more savvy” The logistics industry needs to get “far more savvy” with technology to meet and capitalise on the needs of the international e-commerce industry, according to Glyn Hughes, Global Head of Cargo for the International Air Transport Association (IATA).

“Our industry needs to work more collaboratively and come up with collective solutions. If not, other players will come in with disruptive technology and disruptive solutions.”

Richard White, CEO of WiseTech Global, developer of cloud-based software solutions for the international and domestic logistics industry, said many freight forwarders are still using ‘coloured folder’ based processes, and 75 per cent of the top 100 global freight forwarders are operating core systems relying on decades old legacy technology.

“More has to be done with the technology you drive your companies with,” said Mr White. “We need to assist freight forwarders to access the best most integrated core platforms that enable the execution, virtualisation and visualisation of all stages of logistics – and we need common platforms and understanding.”

White and Hughes were speaking at the Customs Brokers and Freight Forwarders Federation (CBAFF) 20th annual conference.

news

TNT Express scoops Everywoman award TNT Express head of operations Caroline Rose has scooped the top prize at the 2016 FTA Everywoman in Transport & Logistics awards – launched nine years ago to raise awareness of the careers on offer to women in transport and logistics – in London last month, Judges said she is a visionary team leader, with a proven track record for leading teams and projects. Many of her ideas have been adopted by the wider TNT Group at a global level.

Other category winners included: Brighton & Hove Bus and Coach Company’s Rachel Beckett (rising star of the year); Kirsty Sando of Heathrow Express (driver of the year); and Transport for London’s Jo Field (industry champion of the year).

14 | Logistics News ME | June 2016

RTA awards $190mn contracts for Dubai Water Canal Dubai Roads and Transport Authority (RTA) has awarded contracts worth AED 703mn ($191.3mn) for the fourth and fifth phases of the Dubai Water Canal Project.

Phase 4 costs about AED 307mn and is part of infrastructural works required to serve property development areas on both sides of the Canal, including roads & utility lines.

Phase 5 costs about AED 396mn and would link the Business Bay Canal with the Dubai Water Canal terminating at the Arabian Gulf. Both phases are set for completion by the end of September this year.

The canal stretches for 3.2 km from Business Bay Canal to the Arabian Gulf via Sheikh Zayed Road (SZR), Al Wasl Road and Jumeirah Road.

Projects to be constructed on the water front will be served by modern water transport means, and result in improved quality of water in the Dubai Creek.

RFID APAC demand to soar According to the latest research study released by Technavio, the global radio frequency identification (RFID) market is expected to record a CAGR of 11% until 2020.

“The RFID market in APAC will grow at a CAGR of 14.93% during the forecast period. Developing countries in APAC are driving a significant demand for RFID solutions. Over the last decade, China and India have emerged as key revenue contributors to the market. The region is home to a large number of untapped countries that are still following traditional means of product tracking, and it is expected to further boost the prospects for vendors over the next four years,” said Sunil Kumar Singh, one of Technavio’s lead research analysts for embedded systems.

I n d u st r y i n si g h t

Greek Shipping – Posidonia 2016

BUYERS

GREECE MAINTAINS ITS NUMBER ONE SPOT IN THE SHIPPING INDUSTRY

s ie tr ss un ine co s p bu To ng i do

Despite the economic woes that have beset the country, Greece maintains its central role in the day-to-day running of the

USD 769m

USA

USD 554m

Norway

USD 428m

Belgium

USD 380m

Qatar

SELLERS

shipping industry.

Japan

USD 1,518m USD 959m USD 645m

China

USD 596m

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ip sh e et bl fle ua k al ee t v Gr os he t in

M

very two years, Greece celebrates its pre-eminence in the shipping industry with a huge trade exhibition called Posidonia. The 2016 edition, to be held 5 – 10 June – of the trade exhibition will last five days, and contains hundreds of exhibitors displaying everything required for a ship, from paint to full-size ships engines.

In side rooms, shipping experts conduct seminars, but the main events take place after dark, when Greek shipowners host fabulous parties on their superyachts and in their seaside villas. Greek shipowners have assembled a huge portfolio of ships despite having very little Greek-sourced cargo to move or even a large-scale native shipbuilding industry. Greek shipowners are widely regarded as the savviest traders of second-hand shipping tonnage.

According to mapping, ship search and valuation provider, VesselsValue, the Greek fleet is the most valuable in the world, with a current value of $90bn.

The largest single sector in the Greek fleet is composed of 1,500 tankers, with a value of nearly $40bn. The second largest fleet by size and value is the dry bulk carrier fleet at around 2,100 ships with a value of $22bn.

There are only 71 LNG carriers in the Greek fleet, but these are complex and sophisticated vessels, and far more expensive to build than simple tankers and bulkers. Indeed, the most valuable ship in the Greek fleet is the “Maran Gas Agamemnon”, which is valued by VesselsValue at just under $200m.

Greek shipowners purchase most of the second-hand tonnage from Japanese owners. There is something of a tradition of Japanese industrial giants ordering a new ship from a Japanese ship yard which is sold on at 15-years’of age to a Greek owner.

Meanwhile, the Japanese corporation has a new vessel waiting to be delivered. This close relationship has led to Greece purchasing $1.5bn of tonnage from Japanese shipowners in the first five months of 2016. In the same period, the

H

E

Craig Jallal from Vessle Value explains the numbers

The Greek-owned fleet is currently the most valuable in the world at USD 90bn (approximately 15% of the world fleet).

Greek owners are significant buyers of second-hand tonnage and have purchased three times the number of

Maran Gas

Agamemnon

Company Maran Gas Maritime Ship type Large LNG Carrier Capacity 174000 cbm Year of Build 2016 Shipyard Hyundai Samho Heavy Ind

major buyers of ships from Greek owners has been US owners, mainly companies associated with hedge funds. Qatar is also a

vessels as the next buyer, according to VesselsValue.

significant buyer of Greek-owned tonnage, having bought $380m worth of ships in the last five months.

Logistics News ME | June 2016 | 15

n e w s A n a l y sis

Buying power Imad Damrah, managing director, Colliers International in Saudi Arabia speaks to Logistics News ME about the power of retail in the Kingdom

16 | Logistics News ME | June 2016

n e w s A n a l y sis

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hile Saudi Arabia’s retail sector shows much promise due to a perfect storm in population trends and demographics, a number of key challenges exit within the sector and a recent report from Colliers International stated an opportunity “exists to develop retail formats (specifically malls) in the Kingdom that will be in line with regional counterpart such as The Avenues (Kuwait City), Bahrain City Centre (Manama), Mall of Dubai (Dubai) and Mall of Emirates (Dubai). Colliers’ research indicates that the one of the biggest challenge developers and owners face is the uncertainty in dealing with major retailers an aspect that is also arguably unique to Saudi Arabia.”

Logistics News ME met with managing director of Colliers International in Saudi Arabia, Imad Damrah about the driving force in the retail world and the impact on logistics.

To begin, how wide an analysis of the retail sector is this report and which are the key retail developments driving current expansion and growth in Saudi Arabia?

The report focuses on the commercial retail sectors in the primary metropolitan areas of Riyadh, Jeddah and Khobar. The analyses include stock segmentation, power of retailers along with their presence in the market.

Key retail developments driving current expansion works include Serafi Mega Mall expansion, Mall of Saudi, Mall of Arabia and The Avenues Riyadh.

Additionally, there are multiple projects in the planning phasing for the three cities. In terms of Riyadh, majority of the upcoming developments are supper regional malls while in Jeddah the concentration is on smaller themed centres.

What does the growth mean for the Saudi Arabia logistics industry in terms of: a) key challenges in scaling up to meet demand? And b) key opportunities to expand operations/ move into new areas?

The key challenges in scaling up to meet demand, are: • Relatively lower quality of warehousing developments available

logistics and warehouses is changing.

End-users (tenants) are becoming more selective in their specifications and requirements. We noticed a wider range for size requirements ranging from small warehouses (for SMEs) to large distribution centres (for distributors and large retailers).

Furthermore, contribution of e-commerce sales have been slowly growing; according to PixHeart, Saudi online retail reached SAR56.25bn in 2015, contributing 5.5% of total retail spending (as per EIU) in the Kingdom. However, E-commerce is still below its potential, largely because of the low rate of credit card usage (cash sales represent 75%), as well as the popularity of shopping as a leisure activity.

in the market for lease compared to other regional cities has an effect on business operations in terms of efficiency and type of services offered.

• Developing infrastructure and limited availability of affordable industrial land along major logistics corridors, are driving operators and occupiers to expand their operations away from the city.

As the market continues to evolve and both logistics and space needs become more sophisticated, the key challenges include service differentiation and deepening segmentation. More sizeable operators will be there to compete on service quality. Yet, there are early signs that developers and investors are responding to this change.

The logistics market in Saudi Arabia is primarily driven by the manufacturing, transport (import/ export) and wholesale/ retail industries. In light of the retail and whole sale industries, competition among major retailers have been growing steadily as a number of companies control distribution rights for a large portfolio of brands. Nevertheless, the market is gradually getting fragmented were smaller retailers are gaining more market share with their expansion plans and attracting new brands. With an increasing number of players in the retail market and higher presence of SMEs, demand dynamics for

Where should investors focus their attention?

Fragmentation of the retail market into a higher number of players has changed demand dynamics in the logistics and warehousing market in Saudi Arabia.

This has resulted into varying specific needs in terms of tenants’ logistics operations which all usually aim to shorten lead time in their supply chain cycle. The change in the retail and wholesale market is a natural evolution of market lifecycle moving to a maturity stage as witnessed in other developed markets. The future outlook in the logistics and warehouses sector is expected to focus on varying products to meet various types of end-users/ occupiers such as 1) supersized distribution centers to serve regional distributors and chains, 2) mid-sized cross dock facilities as required by third party logistics companies (3PLs), couriers and e-commerce companies and 3) urban warehouses located in more central locations to serve SMEs. With regards to new logistics companies entering the market, Does KSA see a rise in logistics SMEs and start-ups which also contribute to the retail sector?

We see demand picking up gradually for urban warehouses operated by specialised logistics companies that are able to shorten delivery routes and provide a full range of services such as packaging and handling at competitive prices relative to large 3PLs. Logistics News ME | June 2016 | 17

Technology

Revolutionising the last mile Riad Mannan writes on how UAVs are re-writing the rules

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he use of Unmanned Aerial Vehicles (UAVs), more commonly known as drones, in the logistics sector has been touted for some time.

They have been developed over many years, and like many innovations, they started out as a military / government initiative. In the recent past drones have indeed be used for military strikes or intelligence purposes and perhaps with these negative connotations, along with privacy and safety concerns, it is no surprise that the general public are wary of the use of drones in civil and commercial environments, and regulatory changes remain slow.

18 | Logistics News ME | June 2016

Nevertheless, with the maturing and miniaturization of applicable technologies, drones have now been developed for much more than the military use of its origin. As the technology becomes more advanced and costs fall, more civilian uses of drones have started to emerge. Now there is growing acceptance by governments, commercial organisations and indeed the public that the use of this emerging technology in the shape of drones can be a game changer and bring extensive benefits for all.

In recent years, drones have been

used in a wide range of activities from inspection of offshore oil and gas platforms, search and rescue efforts, news broadcasts, aerial photography, land surveys and collecting atmospheric data.

Internationally, the logistics industry and its clients have also taken tentative steps in researching, testing and developing drones for its own use.

Global companies like Amazon (Prime Air), Google (Project Wing) and Walmart have proposed the use of drones for home delivery, roadside pickup and checking warehouse inventories. However, commercial use

Technology of drones are getting slowed down or in some cases stopped by regulations and concerns about safety, security and privacy.

In the US for example, the Federal Aviation Administration (FAA) currently only authorizes the use of drones for commercial or business purposes on a case-by-case basis and it is in discussions with several industry associations to promote safe and responsible use of unmanned aircrafts.

In Europe, due to disparate and fragmented national regulatory frameworks, the European Aviation Safety Agency (EASA) has suggested that further common regulations on commercial drones across the EU is required to safeguard safety, privacy and data protection.

Similar concerns are present in the Middle East with countries like Saudi Arabia and Qatar banning commercial drones and even private ones, particularly when cameras are attached. In this respect, the UAE is slightly different and perhaps ahead of the game. This in part has been due to the UAE Drones for Good Award, launched by His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, in February 2015.

In an effort to demonstrate practical capabilities which can be used for the good of people and business, the award has opened up the space for new technical solutions and industry applications – including medical, emergencies, search and rescue, and most relevantly for here, logistics.

According to Marsh, the global insurance broking and risk management firm, the drone market for commercial use is estimated to reach over $1.2bn by 2020 and according to the UAE Drones for Good Award, the drone industry will have an economic impact of about $8 billion by 2025. So the potential usage is there for the logistics sector, yet concerns remain about legislation, privacy, security and

integration into existing networks.

Drone Developments There are a variety of drone models which are being developed. All of them have to consider and balance the need for appropriate payloads, engine type, size, weight, power source, take-off

logistics industry. Will it be more costeffective to use drones instead of traditional transport modes like road and rail? How flexible can drones really be? Can regulations keep up with technological advances? How much can be transported at any one time? What long-term value can drones provide logistics companies in terms of being a differentiator? Will drone applications complement existing business processes?

Will they allow companies to create new businesses and operating models?

All these questions provide a lot of food for thought for companies across the value chain from logistics operators or freight forwarders.

Last Mile Delivery Experiments Whilst research shows that there are identified and tangible demands for the use of drones in logistics, the day-to-day application of them is some years away. Given the complex mix of advancing technologies, regulations and application development, the transportation of goods over long distances with significant tonnage internationally is a long-term prospect.

However, in the short-term, perhaps the logistics industry can best use drones in the everimportant last mile. Companies like DHL and Swiss Post have been researching and experimenting with the use of drones for several years in an effort not just to test technical capabilities, but the commercial and operational benefits too.

The drones used by Swiss Post are very light and are capable of transporting loads of up to 1 kilogram over more than 10 kilometres with a single battery charge.

They fly autonomously, following a clearly defined and secure flight path.

Since 2013, DHL has been researching the use of drones to delivering different loads, over diverse terrains and weather conditions – and their evolution is noteworthy. Their first foray included Parcelcopter 1.0 which was manually controlled, a payload of 1.2 kg, speed of 43km/hr and

“DHL is convinced that copter deliveries can create substantial added value for society.”

Dunja Kuhlmann, Spokesperson for DHL modes, speed, reach, noise levels, altitude, resistance to harsh weather conditions and of course costs.

From fixed wing drones which can cover longer ranges but have to take off horizontally to multicopters, which are inexpensive but have limited payloads, the range of drones currently being developed is multifaceted – and the potential applications for the logistics industry, though in its infancy, can be widespread.

Several considerations have to be taken into account when determining the use and value of drones to the

Logistics News ME | June 2016 | 19

Technology flew a distance of 1 km. Their latest drone (Parcelcopter 3.0) tested between January and March this year is autonomous, has a payload of 2 kg, speeds of 70km/hr and can fly up to 8.3 km. While drone trials in urban areas are some time away the testing of Parcelcopter 3.0 over difficult terrains in adverse weather conditions in Bavaria bode well.

Integrating Drones to Existing Supply Chains Significantly, DHL showed that the last mile delivery via drones can be integrated into an existing supply chain. The trials showed for the first time that a parcel delivery provider can directly integrate a logistics drone into its delivery chain. Private customers were invited to test out the specially developed Packstations, dubbed the Parcelcopter Skyport. During the three month trial period, they would simply insert their shipments into the Skyport to initiate automated shipment and delivery per Parcelcopter.

Speaking to Logistics News Middle East, Dunja Kuhlmann, Spokesperson for DHL said: “DHL is convinced that copter deliveries can create substantial added value for society. The DHL parcelcopter is not tied to a highway network, it can deliver parcels even when faced with natural barriers like water and mountains and as a result, it can be a great help in situations where a normal delivery is not possible.”

Whilst these trials demonstrate that last mile deliveries made by drones can be integrated into the logistic value chain and therefore bring significant benefits and costs and time savings, there is a step-by-step process in place.

“At the moment, we have no specific plans for using DHL Parcelcopters in normal delivery operations. This is a research project designed to test and evaluate the possibilities of such a type of delivery. We will now analyse the data we have collected during the recent tests in Bavaria and evaluate our findings. Only then will we decide on further steps and future activities.” she added.

Privacy, Safety and Regulations Some of the main obstacles slowing down the application of drones in the last mile urban environment are the interlocking issues of privacy, 20 | Logistics News ME | June 2016

safety and regulations.

In terms of GCC regulations, there is very little common ground as they vary from country to country. Airspace restrictions apply over most major cities and an increasingly congested skies mean that regulations have to be developed to allow commercial drones to safely fly with airplanes and helicopters.

Privacy and security concerns by the public and government is another area to overcome before logistics companies can fully utlise drones – particularly ones with cameras. The UAE recently announced that all drones have to be registered with the General Civil Aviation Authority after recreational drones strayed on to flight paths at Dubai airport and grounded passenger planes. Additionally drones with fitted

cameras are illegal (as they are in Saudi Arabia) over privacy and security concerns. Whether these restrictions will also apply to commercial drones used in the logistics sector for example is still unclear.

Moving Forward Despite these challenges, the future of using drones for logistics almost seems inevitable. Like any new disruptive technology, the envisioned application of drones will be far ahead of public acceptance, business readiness and regulatory change. However as logistic operators in the last mile continue to test and refine the possibilities, there will be a time when the obstacles will dissipate and logistic drones over the skies will become the norm – it is only a matter of time.

THINKING AHEAD – MOVING FORWARD ...in Dubai.

Hellmann Worldwide Logistics is a family run business with offices in more than 150 countries around the world. Our proximity to our customers is what allows us to build long-lasting partnerships and tailor made solutions for all your logistic needs.To learn more go to: www.hellmann.net

Interview

Deepening Impact – the story behind Agility’s CSR Report Global CSR director Frank Clary talks to Logistics News Middle East about Agility’s third CSR Report and its 24 CSR awards

D

eepening Impact is a detailed report that showcases its commitment to ethical business conduct, employee rights, workplace safety, community investment and the environment in more than 100 countries where Agility operates.

The report is Agility’s third comprehensive look at its Corporate Social Responsibility (CSR) efforts. It was put together using the Sustainability Reporting Guidelines developed by the Global Reporting Initiative, an independent international organization that is the gold standard for reporting on corporate efforts to address climate change, human rights, anticorruption initiatives and other issues.

In 2015, EcoVadis, an independent group that analyzes CSR programs based on their environmental and social practices, put Agility in the top 16% of logistics and transportation providers.

CSR in Business

Why is it important for CSR to be incorporated into a business’s activities?

Being involved in CSR activities is good for our customers, our team members, our communities and our company. It’s an integral part of our corporate identity, and it helps our team members to understand the organisation in which they are working. We believe in in building trust with employees, customers, communities, suppliers and shareholders by doing what is right, and giving back to our communities and to the planet through our actions.

22 | Logistics News ME | June 2016

Interview

22 000

How do you motivate , employees to engage in CSR activities?

We motivate our team members by communicating CSR issues, and by empowering them to take ownership of CSR projects that are important to local communities and relevant to global issues.

We have invested in more than 1,370 community projects in over 80 countries since 2006, reaching more than a million people in need. Our Community Volunteer Program enables employees to apply for a company grant to initiate and lead humanitarian projects. This allows us to have a greater social impact, since the people on the ground will always have a better understanding of the most pressing social issues in a particular community.

Sustainability

Agility CSR in the Middle East Fair Labour – Focuses on tackling issues such as passport retention and recruitment fees, issues that are of high priority in this part of the world due to the large numbers of migrant workers in the region.

Forced labour – Including bonded labour, and recruitment agency bribes, a common problem in the Middle East. We are working through a six-pronged approach to tackle these and other issues.

Environment program – Estimating our CO2 emissions, controlling our resource consumption, operating in ISO 14001 certified facilities and running cleanups, plantings, conservation and employee awareness projects.

UAE specific – Several activities ranging from business-focused, to environmental and social initiatives.

Over 6,000 people have been positively impacted by actions of almost 3,000 volunteers in over 50 projects since 2006.

The transport industry, across all modes, is notoriously unsustainable.

What kind of reductions in carbon emissions did you find in this report?

Our estimated CO2 emissions have remained fairly consistent over the last four years, with variations ranging from 5-10%, and we have found an overall reduction of about 10% in CO2 emissions from our own operations over the last three years.

Agility is a large company with over 20,000 employees, and while emissions from business travel is a comparatively small part of our overall carbon footprint, it’s still an area where it’s important for us to reduce emissions. We have set clear goals, and are encouraging managers to rely on digital solutions such as video conferencing to minimize travel for internal meetings. These, and other, measures have reduced our business travel related emissions by 55% over the last six years.

How were operations greened?

We focus on workplace awareness and behaviour, and try to make sure Agility employees are aware that the environment is an important issue for us. We focus our behaviours on reducing resource consumption, reusing what we can, and recycling what we can’t.

We are also tracking our carbon footprint in our 22 largest operations worldwide; these together account for almost 75% of our headcount and more than 80% of revenue for the core commercial Global Integrated Logistics (GIL) business.

What are the targets for the next report and how do you intend to meet these?

We want to increase the number of branches reporting on resource consumption, and improve the reporting process. We hope to achieve both by improving the reporting process.

Humanitarian Aid

With regards to the logistics of humanitarian aid what services did you provide to the areas/ disaster zones listed?

Agility’s Humanitarian and Emergency Logistics Program (HELP) has provided everything from deploying persons to

support humanitarian logistics operations, to donating trucking, warehouse space, customs clearance administration support, and even things like pallets. We’ve supported more than 40 humanitarian operations in the last eight years, and each one is different

There is often criticism that aid takes too long to reach affected areas, or it’s held up at checkpoints. What challenges do you face in providing aid to emergency areas?

As you point out, time is a challenge. Aid never flows as fast as we like it to flow, and each scenario presents its own challenges.

From Agility’s side, factors such as the type and scale of the emergency, the security situation, the needs of our humanitarian partners on the ground, and our own bench strength in any given country must all be taken into consideration.

We respond to disaster scenarios when invited to participate by our humanitarian partners or local government emergency relief bodies, and take our operational cues from the humanitarian organisations that specialise in this work and lead our efforts.

Before we commit resources, we consider the health and welfare of our local office staff, as well as available capacity to support a disaster response operation, to ensure that we would actually be helping in a situation.

Looking at the role of governments, how can humanitarian logistics efforts be improved for future emergencies? What is the role of the private sector in this?

The role of the private sector is very important, especially engagement with humanitarians, and more engagement from privately owned companies as an intermediary between governments and humanitarians is vital. Agility strongly advocates for ratification of the WTO Trade Facilitation Agreement between nations, to reduce disaster risk and improve disaster response and resilience through trade-enabled economic development. Trade can be preventative and curative where risks for humanitarian crises are high.

Fair labour in the supply chain

Many companies struggle to clamp down on labour abuses in the supply chain because they are disguised by subcontractors to maximize profit margins. How can firms audit their chains and recruit trustworthy partners?

It’s important that companies learn and communicate the issues internally, in order to be able to address them from a well-informed perspective. This process involves asking the right questions, empowering teams to act, and managing the issues as you would any other business program – with an importance placed on execution and results. Something that can’t be overlooked is the importance of the organisation knowing the partners with whom the company works, and working with trusted suppliers who comply with labor laws and regulations in their operations.

Strong foundations Logistics News rounds up the experts for the low-down on flooring What are the main trends in flooring currently?

David: The main trends are firstly in terms of sustainability and secondly in design.

The last decade has seen considerable emphasis on increasing product safety with European and North American manufacturers eliminating the use of potentially-harmful chemicals such as phthalates. Following on from this we are now seeing increased demand for flooring, like linoleum, which is manufactured from sustainable raw materials, rather than vinyl, which is not. Architects and designers, particularly in UAE, are looking not only at the technical performance of the product but also its “green” credentials.

Joachim: Joint-less for high tolerance Super-flat floors that requires high skill on all staff involved, from design to the installation.

Magdi: As is the case in the wider construction industry, developing 24 | Logistics News ME | June 2016

sustainable, environmentally friendly solutions is becoming ever more crucial. It is common for cost to be the overwhelming factor when choosing a floor, with cheaper alternatives frequently being picked for this reason alone – however we know that the lowest price rarely means the highest quality and that when it comes to floors this mentality will only lead to higher costs in the future to repair failing surfaces unfit for the environments in which they were installed or, in some cases, requiring a complete floor refurbishment so that a more appropriate system can be applied.

Ruth: Trends in flooring are being driven by trends in the logistics industry with higher demands being put on the floor slab and as such technology such as large bay ‘jointless’ floor slabs are being specified by warehouse operators and consultants to improve business efficiencies and the reduce the life cost of the building.

Minimising the effect of our activities on the wider environment should be a

consideration by all and end users are questioning how tested and innovative technologies can be incorporated into new warehouse designs at an early stage. Value engineered designs that reduce slab depth means less concrete and therefore less cement being consumed within the construction of the building. Surface enhancer treatments offer high aesthetic finishes as well as reducing energy consumption due to high reflectivity of the surface.

How is the lifecycle of flooring solutions being extended?

David: The main improvement in resilient flooring (linoleum and vinyl) is coming from the development of improved surface treatments.

The surface treatment is a transparent layer (microns thick) which is typically bonded to the product during the last stage of manufacture using ultra-violet (UV) light. It increases durability and provides extended protection

Sector Focus – flooring

against stains and scratches.

Joachim: Design durability is one of the main factors that we are taking into consideration to extend the life cycle of the floor.

Magdi: Facility owners are being made aware that there are flooring solutions available which can be tailored to meet their demands. Choosing the right floor means carefully considering all the challenges that will be thrown at the floor, including high levels of traffic, attack from corrosive chemicals, heavy loads, thermal shock and more. By knowing what the floor will face, a system can be specified that has been formulated to withstand all the on-site demands.

Ruth: A well designed and constructed concrete floor slab will generally outlast the service life of the building – the use of cheaper and therefore inferior materials and unskilled workers to reduce costs can be attractive at construction stage, but will shorten the life expectancy of the floor slab in addition to disruptions to business performance. Employ a specialist flooring contractor to design and construct your floor slab.

What are the key points that make a good floor?

David: The most important thing is to identify where the flooring is to be used and what type of traffic (people and equipment) it will have to withstand. One size definitely does not fit all.

Once a suitable type of product has been identified it’s not easy to tell the difference between “good” and “not good”.

Unfortunately this is an industry where you can be offered an inferior, cheaper product that looks very similar – it’s easy to reduce the manufacturing cost by substituting raw materials but this also significantly reduces durability. Some of the products we see in the Middle East don’t even have any surface treatment.

Joachim: The right design including the fatigue of floor during the operations. Layout to be flexible so the end user can change the operations on the floor if the racking configuration should change; that is very important for third party logistic companies.

Magdi: A good floor needs to fulfil multiple criteria, including: protecting the sensitive substrate from water ingress or exposure to oils, contaminants and chemical; providing a level surface for warehousing units, especially important

in large warehouses with high, Very Narrow Aisle racking systems and where lift trucks will be moving quickly around the site, as it is crucial to minimise any vibrations the truck could experience.

Flooring should be seamless and impervious, as this will make it easy to clean. Unprotected concrete floors or materials that require lots of joints are more difficult to wash, as dirt, grime and contaminants could get stuck in hard to clean spaces.

Colour is important to not only create a pleasant environment, but also to implement effective zoning, as different areas of the facility can be quickly and easily differentiated with brightly coloured floor finishes.

Ruth: A true understanding of the requirements of the end user at the earliest stages design, coupled with quality materials and skilled workers.

What are the key factors that affect the performance of a floor?

David: The key factor with resilient flooring is the composition of the product.

Vinyl and linoleum flooring is durable but other performance factors can be incorporated. It is important to define those performance criteria, for example durability, ease of maintenance, stain resistance, scratch resistance, acoustic performance, slip resistance and others. A homogeneous product is composed of a single layer and provides high durability.

Heterogeneous flooring usually provides better acoustic performance but is less durable. A trade-off between multiple requirements may sometimes be necessary.

Joachim: Design, tolerance and locations of armoured floor joints.

Magdi: When applying a resin floor it is important to ensure that the substrate has been properly prepped, usually by being shot blasted. If the underlying surface is not up to standard when the resin coating is applied then it could fail to properly bond with the concrete, which can lead to a variety of failures. Any cracks in the substrate need to be repaired during the prepping process as otherwise these can be a prime cause of problems.

During the installation, movement and control joints need to be installed to avoid cracks occurring in the finish. The moisture level of the substrate should also be checked, as rising moisture can cause blistering in the finish. An adequate damp

The panel

David Malloch regional sales director, MEA, DLW Flooring

Joachim Nyberg managing director, FAM Flooring

Magdi El Hammamy business development manager, Flowcrete

Ruth Waugh managing director, Twintec

Logistics News ME | June 2016 | 25

Sector Focus – flooring

proof membrane should be installed in areas where this is a concern to avoid moisture related damage.

Ruth: Joints and flatness: “The ideal floor would be perfectly flat and contain no joints,” says the UK Concrete Society.

Eliminate saw-cut joints by specifying a ‘jointless’ slab and where construction joints are necessary use armoured construction joints. Consider the use of the latest joint technology in high trafficked area, for example Co-Sinus or Signature Joints.

If a floor is not constructed to the flatness tolerances dictated by the operational requirements of the facility – business operations could be seriously affected – employ a specialist flooring contractor – don’t leave it to chance.

What is your latest flooring technology breakthrough and how was it applied to your products?

David: We have just announced two enhancements to our vinyl product range.

The first is a new thicker and harder surface treatment called PUR+. We have made changes to the UV process and developed a coating which enables greater inter-connection of the PUR varnish and thereby achieves reduced emissions (improving air quality), greater scratch resistance (especially against castors), and greater stain and chemical resistance (particularly against liquids).

The second is a sanitized version of our products. We have incorporated silver ions into the product which create an antimicrobacterial effect inhibiting bacteria and microbes. This is of particular value for the healthcare industry.

Joachim: With the latest Somero S-22E Laser screed purchased in May 2016 added to the earlier fleet of SXP-D, S-15 and S11, we can better serve our clients in the region.

Magdi: Flowcrete Middle East’s polyurethane range Flowfresh has been HACCP International certified due to its ability to retain an ultra-hygienic finish and be an active part of a contamination prevention programme within intensive yet contamination sensitive industrial facilities.

Flowfresh is also now able to be installed at lower temperatures than before, making it ideal for cold stores where it is undesirable to raise the 26 | Logistics News ME | June 2016

Products from Flowcrete

Products from DLW Flooring

ambient temperature up to the level required for many alternative flooring materials to properly cure.

Ruth: Twintec is renowned for its commitment to research and development leading to innovative designs and is now offering both the Twintec Ultimate floor slab – a jointfree design solution and the Eco Freeplan floor slab that incorporates re-valued wire from end of life truck tyres to offer a technically superior as well as environmentally sustainable solution.

How can a floor impact the productivity of a business?

David: There are three ways in which flooring may affect employee and business productivity.

• Safety: is the flooring in each area of the building safe for employees and visitors?

• Performance: does the flooring meet the needs of the people who will be working on it?

• Design: does the flooring complement the interior design?

We take all three into consideration in the

Logistics News ME | June 2016 | 27

Sector Focus – flooring

development and manufacture of our products.

Joachim: A bad floor can impact productivity through excessive joints, badly positioned joints and uneven floors will slow down materials handling equipment movement and cause unnecessary wear to forklift tyres, wheel and bearings and cause instability with loads. This will slow production of the facility and will add costs for the operations.

Magdi: The floor is an important factor for the productivity of a business in a number of ways, for example it can make it easier for vehicles and equipment to

move around the site and the floor can affect on-site safety levels, reducing the cost and lost man-hours of accidents. A well-designed floor design can also help people navigate a site and even make for a more pleasant and impressive working environment.

An inadequate floor can negatively affect the business by leading to unprofitable, unproductive and unwanted downtime while the floor is being repaired or refurbished. Downtime often means that manufacturers lose up to 20% of their productive capacity and many industrial facilities are underestimating their downtime by

approximately 200-300%.

These statistics emphasise the importance of installing a floor that can withstand a site’s challenges in order to avoid downtime.

Fast curing resin systems, such as Flowcrete Middle East’s Flowfast range, are available that will minimise the length of downtime required to refurbish an industrial facility.

Ruth: The floor slab is singularly the most important element of the building on productivity. A poorly designed and constructed floor slab will not allow the MHE equipment to operate correctly and safely.

ABOUT DLW Flooring is a German company which was established near Bremen in 1882, becoming part of Armstrong World Industries in 1998. Since 2015 the firm has been an independent company, with its head office is in the south of Germany near Stuttgart. Middle East operations are managed from our office in Dafza. Strong customer acceptance of product quality has helped DLW to grow our revenue by 250% in the last two years.

Products from Twintec

Fars Al Mazrooei Contracting LLC was founded in 1986. Therefore we have been in the industry for 30 Years this year. FAM has a significant share in the market for Super-flat floors in the region.

Flowcrete Middle East is a leading supplier of specialist resin flooring solutions to large-scale industrial and commercial developments around the Gulf region. Flowcrete Middle East has the products and expertise required to supply floors for any site, regardless of scale, scope, sector or on-site challenges. Flowcrete Middle East was established in 2000 and is based in Dubai’s Jebel Ali.

Products from FAM Flooring

28 | Logistics News ME | June 2016

Twintec Group was founded in 1998 and has been designing and construction SFRC ‘jointless’ floor slabs throughout the GCC for 10 years. The regional office for the GCC is based in Dubai.

SUPERFLAT & JOINTLESS FLOORING A FOUNDATION OF LOGISTIC AND WAREHOUSING OPERATIONS Tel : Fax : Email : Web :

+971 4 885 5316 +971 4 885 5317 info@fam.ae www.fam.ae

FAM Industrialwww.fam.ae Flooring - the region’s leader in industrial flooring since 1986

Cover Story

30 | Logistics News ME | June 2016

Cover Story

Riad Mannan explores the recent growth in the materials handling sector and the future role of robotics

T

he movement of cargo is a key enabler to national and international trade and is in itself is a barometer of economic activity. Cargo movement and by inference supply chain management and logistics capabilities are predicated on the efficient and cost-effective handling of the materials being moved, whether in the manufacturing, warehousing, distribution or consumption cycle.

Within production plants for example, efficient material handling can optimise space usage and reduce costs. Good material handling within warehouses can improve palletization and reduce accidents. It effects sectors from retail, manufacturing, heavy industry, food and beverages, e-commerce, construction to raw materials industries.

Whether it is the transportation, storage, control, or protection of bulk and non-bulk materials, the material handling sector has seen a growth in its own significance over the years. Given the continued evolution of the Middle East as a regional and global logistic hub, the need for accurate, reliable and prompt material handling will only continue to grow.

The sector has responded by developing new automation processes, technologies and innovations to cater for the increased demands and

requirements. In a series of interviews with Logistics News Middle East, leading players in the materials handling sector outlined some of the key drivers and challenges as well as some leading solutions being offered.

As a range of major projects move forward, including the GCC Rail Project and Oman’s Port of Duqm expansion, and air cargo increases into Bahrain and Doha and Jebel Ali Port is expanded in Dubai, there will inevitably be a focus on the material handling sector as part of the overall economics of supply chain management.

Walid Khoury managing partner at ALS Logistics Solutions explains: “With open borders and global economic developments, businesses are always changing and looking for innovative solutions to stay up-to-date and competitive in the market. In particular, warehouse automation, with its sophisticated technologies such as automated storage and retrieval systems, variety of conveyor systems, transfer vehicles and modern ITsolutions, is one of the attributes of the successfully operating distribution and production centres.�

With the reduction in revenues from oil prices, government and companies from all sectors operating in the GCC are looking at their own costs and investment strategies and looking for

Logistics News ME | June 2016 | 31

Cover Story

costs savings where possible.

Indeed there are many ways that the cost of handling materials can be reduced whether in the manufacturing plant, warehouse or cargo port.

Ultimately, a drive to control and reduce material handling costs can create efficiencies.

Reducing manufacturing time for example can be done by optimising material flow (making it as short as possible), reducing the time labourers handle the materials, deploying the right equipment in the right places and reducing the need for increased equipment capital costs.

As David Dronfield, regional GM, Storage and Handling Solutions Division at AlFuttaim Auto and Machinery says: “Companies are looking at reducing capital expenditure and are placing a higher focus on using the existing equipment in the most effective manner. All budgeted replacements are being scrutinised, if it is not critical, it will not be approved.

Additional focus is being placed on the realignment of fleets or extension of the correct fleet mix which is critical to efficient operations and ultimately ensuring the lowest cost/unit moved.”

Hans Christian Ettengruber, MD of Unitechnik concurred, says: “Currently people are more reluctant to invest. There is uncertainty about the development of the oil price.

However when companies are looking for cost reduction, they would be well off to consider an investment in automated material handling and computer based warehouse management systems.”

Technology Trends This leads us to the use of technologies.

Increased customer demand, shorter delivery lead times, reduced inventories and maximum stock turns are transforming the material handling sector. The emergence of e-commerce has also led to the need for a faster turnaround of goods with less storage 32 | Logistics News ME | June 2016

space which involves larger numbers of smaller capacity unit handling machines as opposed to larger storage focused units. These in turn are creating real cost-saving and efficiency opportunities based solidly on the use of new technologies.

As Frédéric Zielinski, GM Swisslog Middle East highlights: “Finding a flexible and scalable solution for warehouse and material flow processes from receiving to picking, and shipping to returns, is a challenge for start-ups, established e-commerce companies and multi-channel specialists alike - and the growth in online sales will force companies to consider their flexibility.”

In an effort to drive costs down and

increase the speed and predictability of material handling and movement companies as seeing an increasing use of technologies – whether embracing the internet of things, big data, smart phones, wearable devices, robotics or automation. With the reduced costs of sensors coupled with the increased use of wireless connectivity and greater data storage capacity, material handling equipment like forklifts within warehouses for example can capture real-time data which provide operators and managers key information to make better informed decisions.

As Khoury notes: “The Internet of Things, where there is a direct machineto-machine communication allows us to

Cover Story

build and set up effective and progressive solutions for intralogistics, for example, coordination between conveyors and automated storage and retrieval systems.”

Automation The Internet of Things (IoT) feeds into the increased use of technologies in materials handling, whether it is automated guided vehicles, autonomous vehicles, automatic storage and retrieval systems or advanced robotics. Whilst it may take time for some of these technologies to be fully adopted, there are issues that need to be tackled before materials handling is fully and comprehensively automated.

Dronfield points out: “For every process under review for automation, there are limitless solutions dependant on specific operational and client criteria. By its very nature, automated equipment is quite specific and dedicated to the task at hand.

Given that change will happen, especially to the business environment, care needs to be placed to consider the degree of flexibility required in the end solution.

By incorporating standard materials handling equipment adapted to automation, i.e. automated guided vehicles, a degree of flexibility for the future can be maintained.”

The growing advantages of automation is also highlighted by Khoury who says: “Automation in logistic centres bring many benefits to the operational processes including space savings, lower building costs, improved productivity, more efficient material flow, less manpower, safer operations, reductions in inventory, increased reliability, reduced running costs, better ROI and lower lifecycle cost.”

As technologies gain a greater foothold in the wider economy, the materials handling sector will see a higher involvement of autonomous vehicles and advanced robotics, but this may be a few years away. However, automation will always help to make processes more reliable and support a reduction in cost and an increase in efficiencies, as Ettengruber highlights: “Automated, paperless systems for picking material like pickby-voice and pick-by-light have already been successfully introduced into the market ensuring error rates are reduced to a minimum.”

With regard to the role automation and technology can play in enhancing the handling of materials, Zielinski says: “The expectation is that high throughputs, and a large range of products to pick from, increases the running costs of a manual operation significantly and helps to justify a higher level of automation. For example, whilst

The experts

Walid Khoury ALS

David Dronfield Al Futtaim

Frederic Zielinski Swisslog Middle East

Hans Christian Ettengruber Unitechnik

Logistics News ME | June 2016 | 33

Cover Story

the demand for pallet moving equipment is set to remain for receiving goods, their use within the storage, order picking and goods-out areas are far from certain. Existing technology is now being used to design flexible systems that are able to handle the transition from warehouse delivery to home delivery and of course all the steps between the two. No matter if you are operating manually or with automation, this transition needs to be managed by capable IT systems, utilizing different key technologies, such as conveyor systems, ASRS, AGVs, Shuttle Systems, monorails, and software to help businesses maximize their intralogistics potential.”

The company hopes to develop the market yet further, with its range of modular solution portfolios that provide order fulfilment, split case picking, returns management and other common warehouse processes.

Future Innovation Whether it is automated storage and retrieval systems, large assembly operations or new conveyor technologies, the materials handling sector can boast some real innovations in the recent past – but it seems only the beginning. Intelligent use of computercontrolled devices from robots to energy-saving, smart machinery to advances in mobile capabilities all bode well for the future. As Khoury notes: “Every day we can see new innovations within the industry; always working on new ideas to offer a cutting edge, stateof-the-art solutions - the ideas are numerous with some of them already implemented and others are still under study.”

New innovations will add greater efficiency, speed, visibility, functionality, flexibility and control to material handling processes. They can also eliminate delays, reduce human error, lower the number of accidents and of course reduce costs. One area where there has been significant development is robotics – or more specifically human – robotic interaction.

Material handling robots can automate production activities from part selection, packing, palletizing, loading and unloading, creating 34 | Logistics News ME | June 2016

“Finding a flexible and scalable solution for warehouse and material flow processes - from receiving to picking, and shipping to returns, is a challenge for start-ups, established e-commerce companies and multi-channel specialists alike - and the growth in online sales will force companies to consider their flexibility.”

Frederic Zielinski Swisslog Middle East efficiencies and cost savings in the long run.

Zielinski says: “Even just a few years ago, the notion of humans and robots working closely side-by-side to achieve better results, was nothing but a futuristic idea. Safety was a key concern, and public acceptance could not be taken for granted. Today there is a groundswell of opinion that the development of Human-RobotIntegration technology will help

mankind, not overtake it, and the newly developed Automated Item Pick workstation, developed in conjunction with new parent company, KUKA, has made the vision a reality. It’s designed for robots to work alongside operators, rather than replace them, and is perfectly suited for industrial applications, as it combines automated storage and picking systems with a collaborative lightweight robot.”

The first-ever interactive humanrobot picking station can safely take on heavier loads more than a manual operator can handle alone, whilst sensors covering the robotic arm allows it to safely react to any kind of human contact.

Additionally, the adaption of standard materials handling equipment to perform automated processes will also continue to develop and flexibility will remain a key feature. As Dronfield explains: “Ease of reprogramming must be considered to enable end users a limited capacity to manage system change. Point to point load transfers via simplified unit handling will enable users to integrate automation into specific sections of their supply chain and manage costs and productivity gains accordingly.”

Adding value to supply chain management and logistics As a key component of the supply chain process, the handling of materials can provide an area where efficiencies can be created and value added. The handling methods, equipment, controls and software can be standardised to achieve higher performance in throughput whist remaining as flexible as possible. In an effort to increase capacity, reduce unit cost of production, and increase productivity, material handling experts are keen to add value to the process.

Whilst material movement is considered a non-value adding activity and there is a constant objective to reduce or eliminate material handling altogether, there are areas where value can be added. Getting the right product, at the right place, at the right time, at the right cost can only be achieved if the materials handling equipment is best suited for the related applications.

However as Dronfield notes: “One size

Cover Story

does not suit all. At any stage of the supply chain, equipment that is not designed or used for purpose will affect one or more aspects of the delivery criteria, i.e. equipment operating below design speed requires longer periods to fulfil an order, engages the operator for a longer period and thus raises the cost per item moved.” Streamlining this process could add value to the overall system from correctly specifying equipment and better staff training.

Zielinski adds: “Effective warehouses are centred on flexibility, accuracy, speed and scalability. Operations differ in how they cope with orders, quantities, deliveries and returns, but the warehouse designed as a ‘parts centre of individual, personalised items’ is here to stay.

Ettengruber comments: “Knowing exactly what you have in stock and more importantly (particularly in food logistics) what the expiration dates are, will truly help to reduce costs. Stock and demand are balanced and no material/ supply has to be dumped. Advanced warehouse and materials management systems are the best tools for this.”

Zielinski concludes: “You could say

that just as our roads are starting to fill with advance cruise control, radar guided braking, automatic parking, and in all probability, fully autonomous electric vehicles, so too it would seem that the tipping point for automated logistics has arrived in materials

handling. From robot pickers moving up and down aisles, to radar guided powered pallet trucks and automated item picking solutions, it would appear that the sector is more than ready to embrace intelligent machines and Industry 4.0 concepts.”

Logistics News ME | June 2016 | 35

Fa c e t o f a c e

The global Perspective Brian Cartwright meets John Wylie, MD Middle East, Barloworld Logistics

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his month’s interview is with John Wylie Managing Director Middle East for Barloworld Logistics.

John has had an interesting and varied career encompassing over 27 years of commercial and general management experience in third party logistics across a wide variety of markets and cultures. His early career began in the UK and his progression into senior executive roles saw him leading businesses in Western Europe before moving to Saudi Arabia for around 3 years.

36 | Logistics News ME | June 2016

He then moved to Central Europe after which he relocated back to the Middle East and he has been living and working in the UAE since late 2008.

John has now been at the helm of Barloworld Middle East for almost three years and has overall responsibility for the business across the entire GCC and parts of Africa. During this time he has grown the business by over 40%, an impressive achievement when you consider the tough trading conditions we have all faced globally over the past few years.

Fa c e t o f a c e How and when did Barloworld Logistics enter the Middle East market?

Barloworld Logistics acquired Swift Freight in 2008 to gain entry to the Middle East market and given the Swift profile at that time the company’s focus was primarily freight forwarding and warehousing. Since then the company has evolved in to a supply chain solution provider that offers contract logistics services and complementary freight forwarding. This major change has aligned us with the core proposition of the South African organisation but it also reflects the opportunities we are seeing in the market.

How would you briefly sum up the core proposition that you mention when you talk about the South African business?

Well, for over 20 years since the business started in Africa, Barloworld Logistics has been supporting and advising its clients with modelling global and regional supply chains, as well as helping them with optimising inventory and demand management processes and facilitating rapid response to changes in global supply and demand. Over the years the business has been able to set itself apart with a suite of world class software products and proven methodologies which has helped us construct and interpret results successfully for clients across many business sectors around the world.

These systems and methodologies have translated extremely well to the Middle East market and the resulting interest has ensured a steady level of growth for our business in this region.

Have the changes to your business model from the earlier Swift Freight approach positively or negatively affected the business?

Our freight forwarding business has contracted in the last 12 months but this is partly a result of the challenging business environment, and also the result of a conscious decision for us to move away from forwarding other than for our existing contract logistics clients and high yield opportunities.

We have also changed our customer mix from where it was three years ago. When I arrived in Barloworld our warehouse clients were mostly transactional and did not require any real value-add services. This has changed particularly since this time last year as our client portfolio has evolved and the services they require have become more complex. But this has been a positive for us as our revenue quality has improved.

Our new business model has also forced us

Brian Cartwright

Brian Cartwright is the Managing Director, Middle East and Africa for Logistics Executive Group, he has partnered exclusively with Logistics News to run a series of interviews with senior executives to uncover the facts and provide real time insight on what’s happening in the SC & Logistics sector across the region.

As a respected thought leader with extensive networks and knowledge of the Supply Chain & Logistics sector, he’s the ideal person to get the inside word on behalf of Logistics News.

to embrace a fully Integrated Management System. Our customer commitment to continuous improvement has driven us to achieve four ISO accreditations and HACCP certification in the last two years. This has not only improved how we do things but also given us tremendous credibility with customers particularly when we are talking about improving operational excellence in their supply chains.

Do you think the requirement for more in-depth, value added Supply Chain Solutions will continue to grow in this region?

As companies now look to improve working capital and reduce costs, we are seeing a marked increase in demand for us to look at optimising supply chains. I think this trend will continue and so I am investing in resources this year to ensure we have the right people to build appropriate solutions.

But it is important to state that we are not consultants who simply tell companies what their issues are and how they might solve them. We rather work with clients to identify the right solution for their business and implement it.

Are you planning any further expansions for the business in the region?

Within the GCC countries, our focus is the

UAE and Saudi Arabia but currently we are also working on projects in Kuwait and Oman. Projects in Saudi Arabia have contracted recently due to the reduced oil price but we still see the Saudi market providing a number of opportunities given our business model. There are a number of large companies in the Kingdom that have their own warehouses and transport assets but lack the appropriate management, systems and planning tools. Using our supply chain experts and specialized software we can build the right complementary framework to make best use of the assets, resources and systems.

Barloworld Logistics is also active in African countries such as Kenya, Uganda and Zambia due to contractual commitments for clients based in Dubai.

There are a number of opportunities in these African markets and at present we are working with our colleagues in South Africa on a number of 3PL and 4PL solutions.

What do you think about Iran, is that also one of your targets?

Iran is an exciting prospect, we are currently looking at how best to access the market but, given the country’s need to develop its infrastructure in the coming years, there will certainly be opportunities in logistics and supply chain management.

I am looking forward to visiting Tehran shortly and getting a sense of the country, the environment and where Barloworld Logistics might play a role in the future.

Given the current global economic environment and all that we have discussed today, how is your business performing in general?

The current market situation is challenging and is impacting volumes and margins.

However, as I mentioned earlier, as companies look to drive down costs and optimize their supply chains, we are seeing more opportunities in the 4PL space. So this is having a positive impact for us. The issue with this type of business is that it is “lumpy”; it has long lead times, is hard to forecast accurately and the people needed to build and deliver the solutions are expensive which increases fixed costs. We counter this in the Middle East by having a relatively small team here in Dubai that works with specialist colleagues in South Africa.

Overall, the business is doing well given the current environment. 2016 is a year for Barloworld Logistics in the Middle East to identify opportunities and build the right framework to provide the right solutions for clients. So I see this as a year to keep things tight and build for the future.

Logistics News ME | June 2016 | 37

VIEWPOINT

MFC CONTAINER CONCEPT REVOLUTIONISES CONSTRUCTION ARCHITECTURE IN THE GCC

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ith the average living space prices on a constant rise over the past few years, many people are choosing alternative space solutions. The deteriorating economy, rising levels of pollution and rapid increase in population has forced people to consider more eco-friendlier ways. So, what is the newest solution for living spaces?

Shipping containers… It’s cheap, compact and eco-friendly.

Dubai-based MFC Cargo Container Concepts has been actively innovating and promoting a host of these green and sustainable living options using upcycled shipping containers since its inception in 1990s.

Besides having manufactured the GCC region’s first permanent containerized mall, MFC provides cutting edge construction alternatives including residential and office units, pop-up venues for events, transportable units for the mining, construction, power and oil and gas industries.

Driving down Al Wasl Road, you will come across a rather unexpected structured mall made of containers.

The ’BOXPARK‘, having a footprint of 1200 meters, is a pedestrian shopping mall stylishly merged with open spaces and amenities. Fabricated by MFC Cargo Container Concept, for Meraas Holdings, the development comprises of 220 renovated and brightly colored shipping containers converted into cafés, multi-purpose facilities, rental spaces and restaurants.

MFC has managed to win over many converts over the years. One such recent convert was for Hyundai Construction, a control room made of three high cube 38 | Logistics News ME | June 2016

“The humble shipping container is a credible alternative to conventional construction methods plus it makes for some exciting buildings.”

Nick Trott, GM, MFC containers having acid resistant floors, well insulated walls, explosion proof lights and air conditioners.

Addressing the dire need for economical and portable spaces, MFC is also involved in a project for Abu Dhabi Ports, which includes building a modular double storey building, fabricated using 20’ and 45’containers, modified internally and painted externally, which will accommodate the marine service technicians. The Ground level of the building is constructed using two 45’ containers with the first floor constructed using two 20’ containers with a traditional ‘karmeed’ pergola on

top. The utilities rooms are installed with all required amenities, and the building has external steps and staircases.

One of the beauties of container buildings is that they’re quick to construct and MFC Cargo Container Concept has the expertise to manufacture units for any bespoke requirements in a short span of time.

When Land Rover, the multinational car manufacturer wanted a creative and sustainable solution for the Dubai Motor Show - 2016, MFC’s repurposed container was the answer. A structure consisting of a 40’ Flatbed container was redone into a vibrant exhibition stand with side-opening doors.

The humble shipping container is a credible alternative to conventional construction methods plus it makes for some exciting buildings.

Marine containers are made of ‘weathering’ steel, featuring specialised alloys that make them corrosion resistant. When needed, these make strong and flexible structural framework for buildings, regardless of whether they are used for residential, office or commercial purposes.

MFC Container Concepts, has produced a number of other projects for businesses and governments which include Racing Pavilions (Volvo Ocean Race), Hospitals, Medical centers, Accommodation units and office complexes, through the aesthetics of shipping containers – materials that have proven themselves to be sustainable and affordable. There will be more to come you can be sure.

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Managing Change in The Supply Chain

By Robert Sutton, managing partner, Innova Supply Chain

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ne of the constants in Business is “change”. This is particularly relevant in the Supply Chain … not because the logisticians have nothing better to do, but simply because the Up, Middle and Downstream elements are in a constant state of flux.

To illustrate this let’s take a look at a specific sector “Retail”… Retail is an extremely dynamic sector and often impacted by multiple internal and external factors, the diagram below illustrates some of the more common ones: The Retailer’s Dilemma As consumers or buyers we all contribute to the challenges faced in this sector. The growth in online retail vs. traditional retail remains a key challenge and opportunity in many markets. Retailers know that access, speed and availability are key triggers for the consumer and in today’s e-driven market it’s taken for granted that the range, price and delivery options will flex to meet the buyer’s needs.

Traditional retail will never 40 | Logistics News ME | June 2016

completely disappear and in many markets will continue to be the mainstay of the retail brand – however, as markets mature the transition between traditional and digital channels will create a significant number of challenges (as shown in the diagram opposite) for the retailer and the entire supply chain as it attempts to serve the often conflicting demands of multiple sales channels.

In a Franchise or Representative market this transition needs to be considered and understood as it has the potential to impact their overall portfolio and the balance of investment/return – particularly where inventory is maintained at the franchisee’s expense.

Creating Value for a Retailer For today’s Retailer the ability to identify and work with partners that not only understand this complex and often conflicting business, but are also able to deliver a value, service and price commitment, is invaluable – as the majority of Retailers would rather

focus on marketing, sales and product/ range. Even historically core activities like sourcing are now considered as candidates for outsourcing and as the sourcing map continue to transition from China and core Asian markets to a mix of near shore and formative African markets then we can expect there to be increased demand for supply chain solutions in support of new sourcing strategies.

For service providers they must be able to demonstrate a clear focus on the core business requirements whilst also ensuring that their organization and service menu can flex ahead of and/or with the changes in the market. The traditional menu of services (warehousing, transport, order fulfilment, etc.) is unlikely to attract new retail partners and will need to expand to include Omni-Channel distribution and fulfilment strategies, Digital Retail solutions, Value Deferment solutions, i-tagging and comprehensive risk management solutions amongst many others.

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• CONGESTION • POE/POD CLOSURES • SUPPLY/DEMAND CONFLICTS • NATURAL DISASTER IMPACTS • CAPACITY CONSTRAINTS

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• SUPPLIER COMPLIANCE • PRODUCT & DESIGN INFRINGEMENT • BUYER BEHAVIOURS* • MARKET STABILITY • CPU FLUCTUATIONS

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In In summary The Retail environment has been and continues to be amongst the most dynamic of Supply Chains, sourcing maps change based on cost, speed, political, environmental and socioeconomic factors. Sourcing is no longer based around a China/Asia footprint but continues to fragment/

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• Data & Systems • Network (IT & Physical) • Talent Management • Channel Management

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Factors

• Social, Political & economic unrest/instability • Environmental issues • Climate, weather, acts of nature • Security considerations and constraints • Regulatory compliance

expand into South America, Africa and Eastern Europe. Demand planning no longer relies upon store ordering but has to increasingly consider the much more fickle digital demand. Inventory agility is a key competitive advantage.

Given these changes/trends you should expect that resilience of supply is high on the agenda and will

increasingly play a major role in partner selection.

The demands on Supply Chain partners are high but those that are able to rise to the challenges can be assured of an attractive long term revenue stream underpinned by increasing demand for both service and continuous innovation.

Logistics News ME | June 2016 | 41

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Gulf Shipping Insurance Trends: 2016

Akram Rashid and Michael Kortbawi, BSA

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he first half of 2016 has justified what many analysts have forecasted in regards to the shipping insurance sector in the Gulf Region – that it will maintain the trends witnessed in 2015, with one salient exception – Iran. Regional developments have not necessarily spiraled, but economic conditions have not improved significantly either. Thus, the primary trajectory of the shipping insurance market is an interplay of two counter-poised factors: The implications of Iran’s unimpeded entry into the regional market supplemented with the likely boosting effects sanctions lifting will have on shipping insurance, as well as the offsetting effect that the plummeting (but now gradually stabilizing) prices of oil will augur for this projected boost.

Background

Oil Prices Oil-price decline and slower growth in key commodity importing nations, has already impacted development, engineering and infrastructural projects, eventually reducing insurance premiums for those insurance classes. Some insurance players have already undercut pricing, affecting their operational bottom-line, while not reaping any comfort from increased administrative costs and inflationary dynamics not reflected in insurance rates.

This might seem tailor made to encourage profit-margin erosion.

Yet, other trends have contested that evaluation, especially supply-side. Insurers in Gulf oil-producing economies have demonstrated a resilient capacity to grow premiums proportionately with GDP. Net oil importers, “will see premiums grow in excess of GDP growth”, due to domestic development plans and the ancillary consumption benefits of low commodity prices.

42 | Logistics News ME | June 2016

regional jurisdictions have labored for more in-depth sophistication of available insurance mechanisms in response to demands for greater returns from invested stakeholders - insurers, re-insurers, affinity partners, advisors, brokers, etc. Overall, observers and experts have noted a regulatory “paradigm shift” in the regulatory regimes for both shipping and non-shipping insurance in the region, especially in the UAE, Qatar and Saudi Arabia.

Shipping Insurance:

Non-Shipping Insurance Given the current business and intermediary-actor saturation of the insurance market in some Gulf States, their upward trends tend to be mitigated by relatively low levels of penetration, neglect of risk assessment pricing facets, and a lack of mechanisms to reverse low yields (Kuwait and Bahrain). Diversion of limited and already restructured capital reserves to buttress ailing revenues is an added drag.

Environments which boast low barriers to entry against foreign insurers and reinsurers, such as Turkey, tend to display a more fragmented and more competitive market that must jostle for dwindling clientele.

On a more positive appraisal, markets like the UAE’s have adopted supervisory regulatory schemes providing for mandatory monitoring of auditable financial statements designed to preserve fiscal viability and shareholder equity, as well as actuary oversight to “review and assess technical provisions” to abide by best international practices and standards.

Consumer confidence has proven to be vital to price correction. Regulators in

Challenges: Over all, Marine cargo is a profitable insurance sector because of a relatively limited pool of providers with registered low-loss ratios in the Gulf. These premiums are not entirely unscathed, since they are at least peripherally reliant on public spending and internal growth within their respective jurisdictions. Administrative costs for shippers, which include insurance premiums, and the inflation levels that inevitably affect them are dependent on GDP Growth, and the economic downturn in many Gulf jurisdictions has made 2016 a challenging year.

Shipping companies in the Gulf continue to hunt for competitive terms and rates, both from carriers and insurers, the condition of whose underlying financials and performance metrics might vary. Many Gulf multipurpose/heavy-lift vessels are financial institution or nationally owned.

While they adjust pricing “to make interest payments”, they subsequently reduce expenditure on maintenance. Insurers will need to account for heightened awareness of “environmental, security, health and safety regulations” in their premiums, as well as more attractive insurance policies to encourage demand.

One cannot ignore the growing trend toward overcapacity and continued

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consolidation. Typically, the fewer the players in the project market, the less the competition. Shipping line consolidations typically results in less choice for clients.

However, if those few players themselves are comprised of numerous formerly separate entities organically merged or non-organically acquired, the project market must absorb a supply-side surfeit of shipping capacity. This will negatively affect shipping rates, and insurers will concomitantly have to adjust their premiums more modestly in order to stay viable and competitive.

Excess spare capacity encumbers Gulf ocean carriers’ attempts at rate increases, even if project activity is at a rise. Gulf shippers are affected by global trends displaying reticence rather than dynamism, cautiously evading commercialisation of demand-side project shipping. For that reason, new vessel funding has reduced in response, and insurers have become more cautious given

increasing counterparty risks and the occasional bankruptcies. Both ocean freight and pressure-hit air cargo are on a plateau from an insurer’s perspective.

Oil devaluation occasioned by global over-supply, might be reversed in the short-term by Middle East tensions, but shipping insurance still suffers from low premiums. The lifting of sanctions on Iran have after all, palliated these tensions; The Hormuz Straits are in no immediate danger and Somali piracy is neutralised.

The threat to Bab Al Mandab has been provisionally relieved because of the Gulf Coalition’s Yemeni intervention.

Potential While oil/gas price decline has affected the volume of shipments, shippers in the Gulf have actually registered a modest increase in private shipping charters, given the spare income that household budgets can allocate. While this has not dramatically ameliorated nor stimulated shipping

demand per se, it has had a derivative and auxiliary effect on non-shipping insurers, because clients are less risk-averse when they are more securely solvent.

Some Gulf shippers have responded to the above challenges by reducing costs to encourage activity. This nonetheless potentially incurs operational risk characterized by “vessel seizures, aging assets, declining reliability, and maintenance on ‘need’ basis”. Insurers and shippers have derived some benefit from this, but it is decidedly short-term.

Iran Sanctions

Potential The tip of the sanctions-lifting repercussions iceberg has already registered with many insurance players in the Gulf. The mere announcement of sanctions lifting fostered a rise in the Iranian stock index, although it hampered global markets, especially in regional competitors Qatar and Saudi Arabia. U.S. Logistics News ME | June 2016 | 43

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companies still endure trading limits with Iran. The U.S. government on the other hand will ease insurance, shipping, and banking restrictions, while releasing more than $100 billion in frozen assets. If so, then the projected GDP growth of 6-8% for 2016-17, the expected $50 billion FDI in a near-$500 billion economy bodes well for shipping insurance. Anyhow, the takaful insurance industry in Iran is pervaded by influential national standard-bearing entities boasting a notable record of market leadership and savoir faire, which has produced a highly-saturated market structure, as opposed to those characterized by less protectionist regulatory environments.

Intensification of developmental projects for Iran’s refining capacity, even if to the detriment of regional OPEC competitors, will increase shipping volume, and nourish a market of well-capitalised and expertise-driven insurers. Iran has eagerly commercialised its petrochemical sector, and augmented revenue encourages internal investment in a variety of Iranian indigenous markets like power and industry. With greater volume for domestic commercial activity, the realignment and reactivation of previously frozen proposed oil and gas projects, coupled with offshore gas-production monetisation and an expected medium-term rise in global demand, the more likely the impetus for takaful operators in Iran to assume risk in export-shipping through more secure trade relations with formerly recalcitrant countries becomes.

Shipping to Iran should become significantly easier. Previously, all Iranbound cargo had to be transshipped through other Gulf States. Direct shipments spell reduced costs and timely delivery for shippers. This might reduce their risk and suppress premiums, however, the added revenue will encourage them to take out more qualitatively comprehensive insurance policies – a trend encouraged by the fact that more than 11 international shipping companies are established in Iran’s Shahid Rajaee port alone.

Should Iran abide by the JCPOA (Joint Comprehensive Plan of Action), the full range of sanctions will shrink significantly.

Many have echoed the need for swift familiarity with Iran’s internal policies, customs regulation, and import/export 44 | Logistics News ME | June 2016

of the JCPOA, or “snap-back” provisions, which could affect pre-existing shipping charters, contracts, subcontracts, and their insurance schemes with Iran, along with consequently unforeseen delays and disputes. Iran maintains its own snap-back provisions, although only major violations are expected to trigger them from both ends. Trade restrictions will endure postsanctions, as they apply to full “US persons” “unless an OFAC license is in place potentially making the delivery process difficult for multinational firms”.

Conclusion logistical data in order to adequately assess insurance policies’ compliance awareness, audits, contract terms, and verification for project, breakbulk and carrier cargo both imported from and exported to Iran.

Enforcement and remedy mechanisms have proven exigent for Iran-bound exports and transit-docking where insurers reasonably assess risks that factor into their policies, eventually determining the extent to which Iranian insurers are “protectionist” in light of their crude hitting the regional and global markets.

Challenges The partial dissolution of sanctions on Iran means the infusion of 800,000 barrels daily spare capacity, given Iran’s growing reserves (at an annual rate of 3%), in spite of hitherto limited export destinations.

Other projections posit that production will increase from 1 million to 2.5 million daily barrels. While shipping insurers will see this as a veritable bonanza in terms of exponential growth in coverage-demand, the potential further depression of oil prices and subsequently lower commodity demand in the current supply glut might diminish enthusiasm. These surpluses dampen appetite for refined products imports, while infrastructure development and FDI in logistics for the natural gas sector is likely to taper off “both in pipelines and in LNG terminals”.

Furthermore, previous initial policy exclusions corresponding to banned goods, (non-blacklisted) entities/individuals “of interest” will become “legal tender”.

Insurers hence conduct due diligence for the potential ramifications of paragraph 36

Recommendations Given the rather complex picture concerning shipping trends in the region, numerous observations and recommendations for models that maximize efficiency and improve returns and profitability abound. To effect a positive transition, regional shipping insurers should: • Update customer-responsive technology and marshal this innovation to adapt to their customers; Shippers will now demand more justifiable premiums that respond to the changing dynamics in the region, including intricate policies oriented toward the nature, destination and capacity of their cargo, advice quality, and client-education; • Invest in improving operational processes and increasing efficiencies to accomplish more with less disposable resources; • Maintain strict regulatory compliance by infusing the market with expertiseprizing entities and trade associations; • Revaluate established and emerging risks in light of new geo-political and environmental realities; • Distribute risks cross-jurisdictionally, and maintain systems to successfully “transfer risk offshore”; and • Control and ease consolidation of the shipping industry in order to preserve efficiency and capital liquidity without sacrificing adequate variety, competition, and ultimately, demand.

SUPPLIER NEWS Bristol Fire Engineering Honored with 2016 Dubai QAA

Cisco launches Girls Power Tech Initiative In a global effort to raise awareness around the necessity for girls to consider a career in ICT, Cisco is once again supporting Girls in ICT Day through its Girls Power Tech initiative. The UAE edition of the event was held on 12 May, 2016 at the Cisco’s Dubai offices in Knowledge Village, where 60 female students from various schools had the opportunity to experience the latest technology first-hand, engage with industry professionals and learn about the education and career experiences of Cisco’s women executives.

“Globally, women comprise a mere 27% of the computer science, engineering and physics fields and remain a largely untapped resource.

A diverse workforce has never been more important to stay competitive in today’s digital world and, more importantly, in the future,” said Mike Weston, VP, Cisco Middle East.

“Students attending the event will have an opportunity to meet women role models and men who are advocates for women in technology, 46 | Logistics News ME | June 2016

learning about their career paths and the excitement of working in the fast-evolving field of technology.

The initiative’s focus is on mentoring girls and young women about career opportunities in ICT and encouraging them to pursue careers in science, technology, engineering, and math (STEM) to become the next generation of innovators who will use technology to change the world,” added Frida Kleimert, head of channel and commercial sales - Cisco UAE. Through its networking academies, Cisco has helped over 220,000 students in the Middle East graduate from the program since its inception.

With nearly 480 active academies in the Middle East across 14 countries, Cisco has over 44,000 active students and over 1000 instructors with the average female student participation standing at 37%. The number of female students is in the Middle East is high, where women account for 55% of students in the UAE, 40% in Jordan, and 63% in Oman.

Bristol Fire Engineering has been recognized at the Business Excellence Awards by being honoured with the Dubai Quality Appreciation Award from the Department of Economic Development (DED) in Dubai.

Held under the patronage of His Highness Shaikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, the awards include the Dubai Quality Award (DQA), the Dubai Human Development Award (DHDA) and the Dubai Business Excellence Scheme (DSES).

Shaikh Maktoum bin Mohammed bin Rashid Al Maktoum, Deputy Ruler of Dubai, and Shaikh Mansoor bin Mohammed bin Rashid Al Maktoum, Chairman of Dubai International Marine Club, attended the ceremony and honoured Bristol Fire Engineering for their outstanding pursuit of excellence during 2015.

Bristol, the leading manufacturer of world-class firefighting and fire protection equipment in the Middle East, won the award for achieving exceptional business values and exuding excellence in its all-round business practices in the field of manufacturing.

For decades, the company has been proudly supplying the UAE’s police and Civil Defence and several other government entities with equipment and services. It also supplies sectors such as the oil and gas, commercial, and industrial industries within the UAE and across the globe.

Supplier news

FILA Surface Care Solutions exhibited at Middle East Stone Show

Cybercrime to cost “$2.1tr globally 2019” Cisco Annual Security Report 2016 estimates cybercrime to cost businesses $2.1 trillion globally by 2019, four times more than the estimated cost in 2015. According to another Cisco global study, enterprises face tough cybersecurity challenges.

Speaking at the Kuwait Info Security Conference & Exhibition, Samer AlLahham, General Manager, Cisco Kuwait said: “In Kuwait, the Central Agency for Information Technology through the Kuwait Information Network helps both public agencies and the non-governmental sector share information more securely and cost efficiently for government operations. Moving forward, the need of the hour is for businesses to make the most of digital technologies without compromising on the security of sensitive data. Cisco is focused on delivering ‘Security Everywhere’ which cuts across the security architecture, the data center, Internet of Things and the enterprise network which includes wireless. It defends the IT

infrastructure before, during and after an attack, and allows organizations to focus on growing their business, and we will be showcasing all of this at the exhibition.”

From the Report • The 32% indicated the inability of their cyber security policies to keep pace with business change • 27% lack the right metrics to determine cybersecurity effectiveness

Lufthansa Technik has concluded a cooperation agreement with DC Aviation Group, a leading operator of business jets in Europe.

As part of the agreement signed at the European Business Aviation Convention and Exhibition (EBACE 2016), the two companies plan to offer their VIP customers a first-class package of services at Al Maktoum International Airport.

The services will consist of regular checks as well as maintenance services, including unplanned repairs e.g. in the case of an AOG (Aircraft on Ground). The portfolio also features services for aircraft cabins, including small modifications. Moreover, plans call for a mobile aircraft and cabin service to serve the region.

The offer is rounded off by extensive FBO (fixed-base operator) services for ground operations at the airport, such as fueling, catering for passengers and pilots and transport services. A luxuriously equipped terminal with 1,300 square meters of space is available for this purpose.

Around-the-clock facilities for entry procedures and customs clearance will ensure seamless support. A hangar extending over 5,700 square meters of floor space will accommodate business jets up to the size of an Airbus A320 or Boeing 737. Last but not least, aircraft management and business jet charters are among the services offered by DCAF.

• 26% have insufficient investments in cybersecurity • 24% are ineffectively enforcing their cybersecurity policies • 21% do not know their own major cyber security vulnerabilities

Logistics News ME | June 2016 | 47

Supplier news

FILA Surface Care GES deploys WiseTech Solutions exhibited at Global’s CargoWise Middle East Stone Show One software across 56 offices FILA Surface Care Solutions’ technical seminar at the Middle East Stone Show on May 24 witnessed strong interest, due to the insightful advice provided by the leaders in stone protection.

The technical seminar, conducted

by Milena Dimitrova, technical manager of FILA Middle East and Fabrizio Nicoli, commercial manager of FILA Middle East, highlighted the different technologies that can be used to enhance the life of natural stones through tips and advice for proper stone care.

FILA Surface Care Solutions, a leading international manufacturer of eco-friendly and cost-effective products, believes that only a perfect knowledge of the material you are protecting can achieve effective results. Developed in-house in close collaboration with the stone industry, its award-winning products are designed to provide high performance, while protecting natural surface characteristics.

Fila also offers consultancy services and full support during the construction phase. Spanning from dirt-repellent protectors, solvent-free stain protectors, grout haze removers, epoxy removers and stain removers and detergents, FILA’s products are designed for the treatment of marble, granite, natural stone, porcelain, ceramics, terracotta and wood.

Globe Express Services (GES) announces it will enhance its business processes and capabilities globally by implementing CargoWise One software across 56 GES offices located across 20 countries.

CargoWise One is one of the most integrated and comprehensive endto-end logistics solutions that forms an integral link in the global logistics industry. It is an operating system that streamlines processes, integrates business with customers and partners, and improves communication with the supply chain. The deployment of the next-generation CargoWise One technology will help GES in improving its visibility, efficiency, quality of service, and profitability.

“As logistics becomes increasingly global and complex, the competition gets stiffer and business-changing acquisitions take place more frequently. In such a dynamic environment, companies that are capable of meeting or exceeding the standard specifications definitely have an edge over competitors and therefore, it is important for businesses to innovate and streamline their supply chain to optimize productivity. We,” said Mustapha Kawam, President & CEO, Globe Express Services.

BSI unveils Kitemark scheme for Fire Alarm Installations BSI, the world-leading business standards company and respected international certification body, has held an informative launch event for a new Kitemark scheme, developed to offer organisations involved with the design, installation, commissioning and maintenance of fire detection, fire alarm, and/or fixed gaseous suppression systems, the opportunity to become third party certified.

The event, which took place last week, was led by Andy Packam, BSI Certification Manager, who has over 30 years’ electrical and fire safety experience. His presentation gave an overview of the scheme, its specific modular requirements and the certification process. The scheme covers the design, installation, commissioning/ initial verification and maintenance/ servicing of fire detection, fire alarm, and/ or fixed gaseous suppression systems.

Companies are able to select all the modules or only the modules covered in their scope of work. The scheme can take from 1 to 2 months for organizations to achieve certification, this will depend upon the client’s project availability and their preparedness.

In the second session Bob Wells, Global Head of Personal Safety for BSI, delivered an insightful session on product certification opportunities under the BSI banner. Over 70 fire and safety professionals signed up to attend the event.

RSA-TALKE opens integrated chemicals hub in Dubai Dubai, United Arab Emirates, 22. May 2016: RSATALKE has marked the completion of the first phase of its integrated chemicals hub in Dubai’s Jebel Ali Free Zone with an official ceremony.

The centrepiece of the inaugurated first phase of the chemicals hub is storage and transhipment capacity for up to 1,800 TEU – designed for empty or laden ISO tank containers with class 3, 6, 8 and 9 hazardous substances or non-hazardous chemicals. In addition to the purpose built ware48 | Logistics News ME | June 2016

houses in Dubai South, which were constructed in accordance with international safety and environmental standards, RSA-TALKE also offers cleaning, maintenance, inspection and certification services for ISO tank containers.

Sultan Ahmed Bin Sulayem, DP World Group Chairman and CEO, Chairman of the Ports, Customs and Free Zone Corporation said, “We are delighted to be a part of RSA-TALKE’s remarkable growth in the region. The new facility

will enable them to serve customers more efficiently and achieve even greater successes in the future. Jafza continually supports its valued business community of over 7,000 companies that have transformed it into a global centre for commerce and trade and an ideal business location for international and regional markets. I extend my best wishes to all the employees of RSA-TALKE and we remain fully supportive of the company’s development.”

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Dia r y

The month ahead

Logistics News ME picks the latest and most sought-after exhibitions, conferences and seminars coming up in the industry

SIL International Logistics Exhibition

9 – 11 June Fira De Barcelona Montjuic

After 11 editions SIL has become the Great Logistics and Transport event in Spain and is at second place in Europe’s exhibitions reference.

SIL 2016 saw an important growth and spectacular development in the exhibition, consolidating itself in the international exhibition calendar as the logistics exhibitions of Southern Europe.

Organized by “Consorci de la Zona Franca”, whose main activity has been centred in promoting and driving leading projects within the real estate and logistics sectors, developing an exhibition know-how.

India Warehousing Show

08 – 10 June, 2016 Pragati Maidan, New Delhi, India

India Warehousing Show is India’s biggest trade show for warehousing, materials handling, logistic and supply chain industries. The trade fair allows professionals to explore a variety of innovative products and technologies, discover global trends by meeting industry experts and improve their processes by acquiring the latest technologies

Supply Chain and Logistics Summit

20 – 22 June 2016 Hotel Rey Juan Carlos I, Barcelona

The European Supply Chain and Logistics Summit offers the unmissable opportunity to meet, network and exchange ideas at Europe’s largest event of this kind. The essential summit for all involved in supply chain, logistics and related disciplines, securing your place will guarantee that you gain a true understanding of up-to-date industry developments and best practice

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LogMat

24 – 26 June, 2016 Chennai Trade Centre, India

The only exhibition of its kind in the South-India that has been organised consistently over the past three years and the only platform where the entire industry meets once in a year to share and discuss the latest upcoming projects within the region. LogMat reaches beyond Chennai as the show attracts buyers from other regions of India.

Cargo Week Americas

28 – 30 June, 2016 Centre Banamex, Mexico City, New Mexico

Cargo Week Americas - Expo Carga is the platform where experts from foreign trade and the freight transport sector meet the world to do business.

Intralogistics Latin America

28 – 30 June, 2016 Centre Banamex, Mexico City, New Mexico

Intralogistics Latin America is a leader event in Latin America which adds the main specialists into the logistic industry in Mexico approaching products, services, innovations and trends of the supply chain and material handling.

During 3 days the most important material handling providers of the sector are meeting up with potential clients on a platform that includes diverse interactive activities.