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Enhanced focus

Country Focus

Choppy Waters

Adoption of WMS for effective handling

Iran strengthening its logistics sector

Shipping battle it out in 2017

Connecting trade professionals with industry intelligence

March 2017

The e-commerce market is gaining strength in the Middle East owing to the growing internet-savvy user base


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Start 8 | News 16 | Op-ed A focus on the emerging trends in the region’s logistics in 2017

Features 20 | Country Focus How is Iran’s logistics sector opening up to the global market 24 | Cover Story:

E-commerce Is the Middle East region ready for the current ecommerce boom?

34 | Warehouse Man-

agement System How do WMS aid effective functioning of operations?

38 | Shipping Is the global shipping sector ready to face the challenges in 2017?

24

42 | Interview

38

ALS Logistics’ MD talks about automation to boost warehouse management

46 | Viewpoint Why the growing logistics industry should be a concern for Dubai? 50 | Report How new technology is rendering the old supply chain rules obsolete

34 20

54 | Supplier News 56 | Diary

44 Logistics News ME | March 2017 | 3


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Editor’s Note

I

t was a difficult choice to make! Moving to a completely new world of logistics, a topic which is not talked about much, yet it forms the backbone of a successful economic model. Logistics is the part of supply chain management that plans, implements, and controls the efficient, effective, and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption to meet customer’s requirements. Well, it does sound intense! We will begin the new year by throwing some light on a hot and trending topic. Don’t we all love to shop online; seeing and buying products at one click gives us an immense sense of satisfaction. But have you ever wondered about the vast network of back-end processes that goes behind these numerous online platforms, just trying to efficiently deliver the product at a right place and at a right time? To understand the very same dynamics, our cover story for the March issue talks about the booming e-commerce market in the region and how the industry players are currently trying to be at the top of their game just to ensure effective customer satisfaction. Generally referred to as a slow growing market and the current economic challenges that the Middle East region faces due to the persistently falling oil prices, any big global players have been a bit sceptical about launching e-commerce ventures in the market. However, with a growing internet-savvy base and high

disposable income, retailers are slowly and steadily recognising the purchasing potential of the market. Majority of us believe the year 2016 didn’t live up to our expectations. Due to the unstable nature of the oil prices and the potential threat of an economic crisis looming over our heads, several industries, including the logistics and the supply chain, have struggled to ride the choppy waters. Many of us would want to believe that 2017 would bring in some good news. Do you believe the same? I am waiting to listen to your thoughts. Follow us on Twitter at @logisticsnewme or like us on Facebook to remain updated.

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All rights reserved © 2015. Opinions expressed are solely those of the contributors. Logistics News ME and all subsidiary publications in the MENA region are officially licensed exclusively to BNC Publishing in the MENA region by Logistics News ME. No part of this magazine may be reproduced or transmitted in any form or by any means without written permission of the publisher. Images used in Logistics News ME are credited when necessary. Attributed use of copyrighted images with permission. All images not credited courtesy Shutterstock. Printed by International Printing Press www.ippuae.com

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Re g i on a l N e w s

Regional News An update from around the region

For News, features and more, Visit www.CBNme.com/logistics-news Follow us on twitter for breaking news: @logisticsnewsme Follow us on Facebook for up-to-the-minute breaking news

Logistics

DP World posts 3.2% volume growth in 2016 Caption

D

P World handled 63.7 million TEU (twenty-foot equivalent units) across its global portfolio of container terminals in 2016, according to the company. Gross container volumes grew by 3.2% year-on-year on a reported basis, and 2.2% on a like-for-like basis, which compares favourably to the industry estimated growth of 1.3% for 2016. In the fourth quarter, gross reported volumes grew by 6% year-on-year driven by strong growth in Asia Pacific and Europe. UAE handled 3.7 million TEU in Q4 2016, marginally down by 0.7% yearon-year. The Americas and Australia region delivered a broadly stable volume performance during this period, the company said. At a consolidated level, the group’s terminals handled 29.2 million TEU 8 | Logistics News ME | March 2017

during 2016, a 0.4% improvement in performance on a reported basis and 1.6% year-on-year on a like-for-like basis. Group chairman and chief executive officer, Sultan Ahmed Bin Sulayem, said: “Despite the challenging market conditions, particularly at our flagship Jebel Ali Port, our portfolio continues to deliver ahead-of-market growth, which once again demonstrates the benefits of operating a globally diversified portfolio. “We are pleased to see volumes stabilising in the UAE and as we look ahead into 2017, we expect our new developments in Rotterdam (Netherlands), Nhava Sheva (India), London Gateway (United Kingdom), and Yarimca (Turkey) to drive growth in our portfolio.

“We will continue to maintain capital expenditure discipline by bringing on capacity in line with demand, while focusing on targeting higher margin cargo, improving efficiencies and managing costs to drive profitability. Given the resilient volume performance of our portfolio, we are well placed to meet full year market expectations,” said Bin Sulayem. DP World operates multiple yet related businesses, from marine and inland terminals, maritime services, logistics and ancillary services to technologydriven trade solutions. The group has a portfolio of 77 operating marine and inland terminals, supported by over 50 related businesses in 40 countries across six continents, with a significant presence in both high-growth and mature markets. www.cbnme.com


Oil & Gas

Oman’s PDO, Sumitomo sign $1.2bn Duqm pipe supply contract Petroleum Development Oman (PDO) signed a $1.2bn contract with Japanese supplier, Sumitomo, to supply piping for its drilling operations through Duqm. The five-year deal with Sumitomo includes a new supply yard in the Special Economic Zone (SEZ) at Duqm, which will be a logistics centre for materials being delivered to PDO’s drilling locations. The agreement will confirm PDO as an anchor tenant at Duqm from mid-2018, with up to two shipments a week (carrying 3,000 metric tonnes of pipe) being routed through the port for its oil and gas fields. The logistics hub will provide integrated supply chain management services, such as storage, planning and delivery, and 30 trucks a day will be needed to transfer the pipes from the new supply yard to PDO’s drilling locations. The move will significantly build capability at Duqm to become the primary logistics hub for the sultanate’s oil and gas sector and complements the Tanfeedh programme on economic diversification so far. PDO managing director, Raoul Restucci, said: “This contract will spur the growth of Duqm and attract even more business as the port demonstrates its ability to handle major operations. “Every year, we drill 600 wells across our concession area and all the piping for

that will be managed at Duqm. This agreement is further evidence that PDO’s in-country value (ICV) programme, to retain more of the oil and gas industry’s wealth in the sultanate by creating Omani jobs and developing local capability and infrastructure, is going from strength to strength. “At the same time, it underlines our commitment to turn the promise of Tanfeedh programme on economic diversification into concrete action.” The new agreement is a renewal of an existing contract to supply PDO oiltubular goods, casing and tubing pipes used for drilling, and consolidates the company’s long-standing business relationship with Sumitomo. Suichi Suzuki of Sumitomo Corporation, said: “We have enriched our contribution towards ICV in this renewed agreement, especially by

relocating our supply base to Duqm. This shows Sumitomo’s commitment in Oman to contribute towards this country’s continued good fortune and development. “This is an exciting challenge for us, and is a great honour for the whole Sumitomo Corporation Group to participate in the development of a new industrial oil and gas capital for Oman.” Under the terms of the deal, Sumitomo has committed to further support ICV initiatives on top of its large investment in Duqm. The deal builds on the government’s strategic aim to make Duqm the oil and gas port of Oman and will further attract other companies’ services to the hub. Its proximity to Oman’s major oil fields and its links to a congestion-free road network will enable PDO to reduce road safety exposure and achieve cost reductions.

Bitesize news

Global logistics conglomerate, Transworld Group, announced that they have chosen Ramco Systems’ HCM and Payroll, offering to automate its human resources hire-toretire functionality on a single unified platform.

Michael Pram Rasmussen, chairman of the board of directors of Danish shipping conglomerate, AP Møller Mærsk A/S, stepped down from his role, as the company reported its second annual loss since World War II.

FedEx Supply Chain, a subsidiary of FedEx Corp, launched FedEx Fulfillment, an e-commerce solution that will help SMEs fulfil orders from multiple channels, including websites and online marketplaces.

Real-time digital transactions will transform Middle East e-commerce by 2020, SOUQ. com, the region’s largest e-commerce platform, announced in a tie-up with enterprise application software, SAP. Logistics News ME | March 2017 | 9


Re g i o n a l N ew s

Supply chain

The latest DHL Global Connectedness Index places the UAE as one of the most connected countries in the world, as well as naming both Abu Dhabi and Dubai as globalisation hotspots in its newly introduced ranking. ” Geoff Walsh, DHL Express’ Country Manager for the UAE

Dubai South launches Aerospace Supply Chain Facility Phase 1

Dubai South has announced the completion of the Phase 1 of its Aerospace Supply Chain Facility at Aviation City. The new facility is in line with the focus of the Dubai Industrial Strategy, launched in June 2016, by Vice President, Prime Minister and Ruler of Dubai, HH Sheikh Mohammed bin Rashid Al Maktoum, which aims to make Dubai the aviation capital of the world and contributes to raising the industrial value of this growing sector, said a WAM report.

The announcement was made on the inaugural day of MRO Middle East, co-located with the Aircraft Interiors Middle East (AIME) exhibition and conference, at the Dubai World Trade Centre. The Phase 1 of the project features a multi-purpose landside facility, covering a total area of 9,000 sqm, and includes 12 units catering for small to medium enterprises in the global MRO (maintenance, repair and overhaul) sector. The facility comprises workshop facilities and offices.

Ahmed Al Ansari, acting CEO of Dubai South, said: “The project represents a significant ‘added value’ for all companies participating in the aviation supply chain and supporting the aerospace industry. The first of its kind in the Middle East, the facility is purpose-built to cater to the specific needs of the aerospace industry and leverages the integrated aviation ecosystem that Dubai South is creating. “The key advantage of the aerospace supply chain is its strategic location that offers unrivalled access to both the Al Maktoum International Airport and Jebel Ali Port, as well as benefits from Dubai South’s multi-modal logistics platform. The facility offers unique productivity and efficiency benefits that arise from the ‘cluster effect’, which is created by suppliers and stakeholders, all in close proximity within the Dubai South Aviation District.” When completed, the entire Aerospace Supply Chain, which includes nine phases, will span 157,000 sqm, the report said.

Oil & Gas

DME sets record of crude oil barrels delivered International energy futures and commodities exchange, Dubai Mercantile Exchange (DME), has achieved a new record with 36.8 million barrels of Oman crude oil to be delivered through the exchange in March 2017. The physical delivery record marks yet another milestone for DME which, only last week, reported a new open interest 10 | Logistics News ME | March 2017

record of 40,505 lots for its flagship Oman Crude Oil futures contract, following January 2017 trading activity. DME chairman, Ahmad Sharaf, said: “DME has enjoyed a record-breaking start to 2017, hitting new alltime highs in delivery and open interest, and raising the bar on performance excellence with every passing month.

“Our steady and consistent progress demonstrates strong confidence in our delivery mechanism and reinforces the DME Oman contract’s status as the most efficient and transparent price discovery and risk management tool for the regional crude oil market.” He also added: “We remain focused on the future and look

forward to building on our strong momentum to usher in the next phase of growth for the exchange.” DME Oman is the only regional regulated benchmark to price crude heading East of Suez and is backed by the support of oil production from Oman, which today stands at over one million barrels per day. www.cbnme.com


Re g i on a l N e w s

Legal

Agility files $380mn arbitration case against Iraq govt

Kuwait-based logistics company, Agility, said it was seeking to settle by arbitration a $380mn dispute with Iraq’s government over the company’s investment in the Iraqi telecommunications industry. The company has filed for arbitration at the International Centre for Settlement of Investment Disputes, which is part of the World Bank group, and handles disputes between international investors, Reuters reported citing an Agility statement. The company said Iraq had “indirectly confiscated” its investment, which was worth over $380mn, and violated a bilateral protocol between Kuwait and Iraq on encouraging the movement of capital and investment between the two countries. In March 2011, Agility and France Telecom, now called Orange, said they would acquire a 44% stake in Iraqi mobile telecoms operator, Korek Telecom. The two groups would form a joint venture, 54 percent owned by Agility, to control the stake, said Reuters. The firm was to contribute convertible debt and inject an additional $50mn for its 24% indirect stake, with France Telecom paying $245mn for its 20% indirect stake while extending a $185mn, four-year loan to the Iraqi firm. 12 | Logistics News ME | March 2017

Saudia Cargo renews human organ transportation agreement Saudia Cargo has renewed the agreement of human organ transportation with the Saudi Center for Organ Transplantation. Dr Faisal Shaheen, the Center’s director general and Nabil Khojah, Saudia Cargo chief executive officer, have signed the agreement. The renewal of the agreement complements the co-operation established by the two parties since January 2014. Khojah has ensured dedicating all logistics available for dealing with the human organ transportation according to the international terms to the services of the noble humanitarian objectives. Khojah said: “Saudia Cargo seeks to enhance the role of its social responsibility through different activities and the company prides itself on being a supporter to the activities of the Saudi Center for Organ Transplantation for free since 2014. “The working team has since then dealt with the shipments in a professional way and according to the required standards, as well as giving extreme priority to such shipments in terms of receipt and delivery in all cargo terminals in the Kingdom’s airports and that the 2017 agreement includes providing cargo services in the Arabian Gulf countries.” It is worth mentioning the number of shipments provided to the Saudi Center for Organ Transplantation has amounted to 217 shipments in 2016. On his part, Dr Faisal Shaheen, the Saudi Center for Organ Transplantation’s Director General has treasured the high coordination that contributed to the success of the agreement since its signature two years ago, indicating that the center shall seek to expand its scope in the coming period and get more human organs through the specialized centers and health bodies in the Arabian Gulf countries.

Freight

Qatar Airways Cargo launches Pharma Express flights to doha

Qatar Airways Cargo launched additional Pharma Express flights from the pharmaceutical hubs of Basel and Brussels to Doha, providing a dedicated air service to the growing pharmaceutical industry. Basel and Brussels are both home to the headquarters of major pharmaceutical companies, while the Swiss chemical exports are largely shipped out of Basel. Qatar Airways Cargo has added an additional weekly frequency, operating on Fridays, from Basel to Doha and will launch two additional Airbus A330 freighter services from Brussels to Doha on Wednesdays and Saturdays, commencing February 15. These newly added frequencies take the cargo carrier’s total Pharma Express flights to nine per week. Qatar Airways’ chief officer cargo, Ulrich Ogiermann, said: “Air cargo standards for

handling time and temperature sensitive commodities such as pharmaceuticals, are becoming more stringent, especially with the stricter guidelines followed for temperature control requirements. “At Qatar Airways Cargo, we understand the intricacies involved in safeguarding the integrity of temperaturesensitive commodities during shipment. Therefore, we are committed to offering our customers seamless cool chain air logistics as well as uncompromised service standards compliant with Good Distribution Practice (GDP) requirements. “Our Pharma Express flights are launched to cater to the rapidly expanding pharmaceutical industry. We are extremely proud to be the only international air cargo carrier to offer dedicated pharma express flights to the world’s major pharmaceutical and healthcare industry hubs.” www.cbnme.com


The big Picture

Vice President and Prime Minister of the UAE and Ruler of Dubai, HH Sheikh Mohammed Bin Rashid Al Maktoum, welcomed Frederick Smith, the president and CEO of FedEx. Oil & gas

Sharjah’s PI, SNOC sign MoU to study exploration and production The Petroleum Institute (PI) signed a Memorandum of Understanding (MoU) with the Sharjah National Oil Corporation (SNOC) to conduct research on its oil and gas exploration and production in Sharjah. The agreement aims to exchange knowledge between the PI’s research team and SNOC’s E&P experts and to provide Msc and PHD internship opportunities for the PI students for research purposes, among other areas of collaboration such as summer internship. Dr Ebrahim Al Hajri, director of collaborations and external affairs, said: “This MoU reflects the PI’s long-standing commitment to working with world-class organisations and identifying opportunities that strengthen the UAE’s human capital while helping those organisations improve their business results. We look forward to developing a rewarding and long-term partnership with SNOC, and continue to work with them to ensure the UAE’s oil and gas sector includes the best talent.” Hatem Al Mosa, CEO of SNOC, said:

“SNOC is proud to partner with the Petroleum Institute in oil and gas exploration and production research. This is aligned with SNOC’s core values of people, innovation and continuous improvement. This is also aligned with SNOC’s social agenda of supporting higher level education and research within the UAE.”

Bahri to receive $95mn carrier in Seoul

National Shipping Company of Saudi Arabia (Bahri) is supposed to receive a large crude carrier (VLCC) from Hyundai Samho Heavy Industries (HSHI). The first VLCC, named Amjad, will be the first among the 10 VLCCs, that will be delivered by the Korean company in the next two years. Bahri will receive the carrier on February 7 in Mokpo city, in the southern province of South Korea, according to Yonhap News Agency. The carrier is 333 metres long, 60 metres wide, 29.4 metres high, and worth between $85mn to 95mn. In May, Bahri signed contracts with HSHI to build five VLCCs, with an option for additional five more vessels.

Logistics News ME | March 2017 | 13


Re g i on a l N e w s

Development

UPS, AmCham sign agreement for Abu Dhabi initiative Global logistics leader, UPS, has signed a sponsorship agreement with the American Chamber of Commerce Abu Dhabi (AmCham Abu Dhabi) to support the Women in Business Committee to explore professional development platforms in the UAE. As an official sponsor, UPS will fund events, workshops, personal development opportunities, and deliver on the key ideals of AmCham Abu Dhabi’s Women Achieve initiative. Esther Ndichu, director of public affairs for UPS in the Indian Subcontinent, Middle East and Africa region, said: “We are honoured to work alongside AmCham Abu Dhabi to further our shared vision of women’s development in the region. UPS pledges to provide greater opportunities for women’s participation in training and career advancement, and have made this a key part of our diversity strategy. Sharief Fahmy, chairman, AmCham Abu Dhabi, said: “AmCham Abu Dhabi thanks UPS’ team and its leadership for the continued support of the Women in Business Committee. We are steadfast and will continue to support current and future women leaders, enabling them to advance in their professional careers. We look forward to working closely with UPS in shedding light on the importance of a diverse and inclusive workforce.” Through this partnership, UPS will empower women in the region to advance professionally and scale greater heights. The company is especially keen to see an increasing number of females in more senior positions, which will be done via a range of training sessions, coaching, and mentorship programs. 14 | Logistics News ME | March 2017

Abu Dhabi’s Kizad to get AED80mn logistics warehouse

Abu Dhabi Ports and Khalidia International Shipping are currently in talks to set up a third-party logistics (3PL) warehouse, with a total investment of AED80mn in Khalifa Industrial Zone’s (KIZAD) trade and logistics cluster. The agreement was signed by Mohamed Abdul Jaleel Al Blooki, chairman of Emirates Business Group (EBG), and Mana Mohammed Saeed Al Mulla, KIZAD chief executive. Located in Khalifa Port Free Trade Zone (KPFTD), the warehouse will be developed on a 47,000 sqm plot of land and is expected to be completed by mid-2018. Al Mulla commented: “KIZAD’s integrated clusters offer tenants a number of benefits and enhances the efficiency of supply chains within our free zone. The development of Khalidia International Shipping’s new 3PL warehouse in KPFTZ provides existing and future customers with facilities that save transportation costs and streamline storage and distribution processes.” The warehouse, which will handle international imports for Abu Dhabi and Dubai markets, boasts a large capacity with over 33,000 pallet positions. It will also contain a cold store, with temperatures as low as – 24°C, and a temperature controlled dry store at 24 to 26°C.

Logistics

Agility opens life sciences centre in Hyderabad

Global integrated logistics provider, Agility, has opened 557 sqm Life Sciences Excellence Centre (LSEC) at Rajiv Gandhi International Airport in the Indian city of Hyderabad. The centre is strategically placed to serve pharma manufacturers in Hyderabad, Goa, Pune, Vishakhapatnam, and Bangalore. The centre will provide conditioning, preparation and storage of pharmaceutical goods, and operate as a control tower for Agility life sciences customers in India. Detlev Janik, CEO of Agility South Asia, said: “Life sciences are one of the cornerstones of the Indian economy with exports expected to grow an astonishing 60% in 2017. This new centre will help fastgrowing Indian life sciences solution providing companies meet the rising global demand for their products.” The centre will operate as the primary warehouse for

solutions from va-Q-tec, a passive packaging company specialising in high-end, secured cold chain products. The LSEC will house va-Q-tec’s inventory, perform quality checks, conditioning and preparation of containers, and box packaging for va-Q-tec’s products before the final release of packaging for the customers. Joachim Kuhn, CEO, va-Qtec, said: “Our partnership with Agility is a further example of how va-Q-tec develops and provides transportation systems with accompanying services for life sciences logistics. The cooperation will further strengthen va-Q-tec’s footprint in India, one of the fastest growing pharma exporters in the country.” In India, Agility operates from 61 locations and controls 150,000 sqm of warehouse space covering all major ports, airports, and inland locations in the country. www.cbnme.com


O p -E d

Riding the wave

Shailesh Dash, entrepreneur and founder at Al Masah Capital, highlights the emerging trends in the logistics and transportation sector in the MENA region for 2017

T

he MENA region is strategically located in the middle of the Far East and Europe. It is at the centre of international trade and considered to be a lucrative connection point between East and West. The UAE, for example, is located within a four-hour flight from one-third of the world’s population and an eight-hour flight from two-third of the world’s population. Hence, the entire region is positioned as a hub for international trade for logistics and transportation companies. The global economy has grown manifold over the last 30 years, which led to an increase in the movement of raw materials and finished products. The rising exports and imports drove the supply chain and logistics market and the Middle East, led by the UAE, became one of the most important hubs in ensuing changing

16 | Logistics News ME | March 2017

global trading lanes. Furthermore, over the last 30 years, the region itself has grown from a rural landscape to a cityscape, benefiting from a large middle class population and an increase in spending on critical infrastructure, which led to the growth in the transport of goods into and around the region, thus driving the domestic logistics market. Global manufacturers started setting up their regional headquarters and distribution facilities around the region, attracted by the improving transportation links, modern facilities, and skilled workforce. All this led to the setup of companies specialising in logistics, transportation, freight handling, warehousing, packaging, and supply chain management in the region to meet the ongoing demands. Additionally, in the recent years, governments across the region

have set up free zones with in-built logistics infrastructure, providing incentives for using the air and seaports as stopovers for the transportation of goods globally, reducing the time to customers and making it more cost-effective. According to our research, the transportation and logistics (T&L) industry in MENA generated approximately $73bn in revenues in 2015 (representing 3.4% of the GDP), while the GCC T&L industry accounted for $47bn (representing 3.3% of the GDP). The share is very low when compared to other regions across the world. However, T&L is emerging as one of the key drivers of economic activity in the region, especially in GCC, whereby it now constitutes a major industry sector, rather than being just a support activity to other industries.

www.cbnme.com


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O p -E d

Oil and gas, infrastructure, trading, and retail industry segments are the leading contributors to the GCC logistics sector. Among the GCC nations, Saudi Arabia’s logistics market is the largest, accounting for approximately 40% of the total market size in the region. Booz & Company had estimated the size of the industry at around $18bn in 2008. MENA has trade relations with almost every country/region across the globe and engages in maximum merchandise trade with Asia (55% of all exports and imports), followed by Europe (31%), and North America (8%). Over 85% of MENA exports mainly comprise hydrocarbon and mining products. Merchandise trade in the MENA region has been growing rapidly. Over the last decade, merchandise trade as a percentage of GDP expanded from 77% in 2005 to 81% in 2014, increasing at a CAGR of 6% to $1.5tn in 2015 from $807bn in 2005. This ratio was higher for the GCC at 95%, up from 86% in the same period. In 2005, Saudi Arabia dominated trade with a 30% share followed by UAE (25%). The same got reversed in 2015, with UAE dominating 33% of the market, followed by Saudi Arabia at 25%. The T&L industry is highly fragmented and offers opportunity for consolidation and market dominance. Many small players offer point solutions, such as freight forwarding, warehousing, and transportation services. Few providers have nationwide capabilities, and even fewer have the people, assets, and IT sophistication to serve clients across the entire region. Thus, the third-party logistics (3PL) market in MENA is still in the early development phase, and it is gradually following the same evolutionary curve as the markets in Europe and North America, thus witnessing significant consolidation. This is giving rise to integrated service providers (ISPs) with the scale and resources to offer end-to-end logistics services across MENA. The domestic services segment (inland transportation and warehousing) is dominated by local players, while the international services segment (freight forwarding and international transportation by air/ocean) is dominated by multinational players. The transportation segment is the largest logistics segment in GCC, accounting for 60% of the industry’s revenue, followed by warehousing (25%), freight forwarding (10%), and others (5%). Most manufacturers and retailers in the region managed their warehousing and transportation operations in-house. However, now with increased competition and cost pressures, companies are focusing on their core activities and outsourcing logistics. Furthermore, the harsh

18 | Logistics News ME | March 2017

climate (dry desert), prevalent across the region, necessitates extra effort and equipment in handling logistics for several industries, including food, pharma, FMCG, and chemicals among others, thus necessitating outsourcing of logistics. Currently, outsourcing accounts for approximately 12% in the region, compared with 25-30% in Western Europe. Some of the major GCC logistics trends witnessed include the region’s emergence as a global trading hub, the fluctuation of oil prices forcing governments, to diversify away from oil dependency, and developing other industries which require logistics, the disruptive technology that has changed the speed and ease at which logistics companies operate, the strong T&L project pipelines supported by the local governments and the preparation for upcoming major events like UAE’s expo 2020 and Qatar’s hosting of the World Cup 2022. The Expo 2020 provides a huge opportunity for the region. Major contracts are lined up to be awarded, which will pump liquidity into the UAE, resulting in the start of infrastructure/ developmental projects and bringing in huge demand for the logistics sector. The renewed focus on a diversified economy with multiple commercial sectors is paving the way for investments in transport infrastructure spanning seaports, airports, and major rail initiatives across the region. One of the most remarkable emerging trends witnessed in the logistics sector arises from technology in general and e-commerce in specific. Technology is changing the landscape and various e-commerce and technology-based solutions are affecting how we interact, conduct business, and ship items. The MENA e-commerce segment is still in a nascent stage and forms a very small fraction of

the region’s GDP (compared to other countries with a similar GDP). However, the growth has been notable and industry experts expect a steep rise in the next few years. Internet spending in the Middle East is booming, and according to Frost & Sullivan, e-commerce in the MENA region is expected to double from $95bn in 2013 (2% of GDP) to $200bn in 2020 (5% of GDP). B2C e-commerce is expected to represent 30% of the total value, followed by government to business or customer (G2B/C) at 25% and B2B e-commerce at 20%. At the moment, more than 90% of the GCC e-commerce market operates only across four to five product categories. According to AT Kearney, despite strong fundamentals, the GCC is one of the world’s most challenging e-commerce playgrounds. With one of the world’s highest levels of GDP per capita, average mobile penetration stands at more than 170%, smartphone penetration is at more than 65%, and more than two-thirds of the population uses the Internet, with penetration in the UAE and Qatar exceeding 90% (including fixed and mobile). And yet, the ecommerce market is very small. With an estimated market size of $5.3bn in 2015, it contributes only about 0.4% to the region’s GDP, a miniscule amount compared with more mature markets that have similar levels of GDP per capita and internet penetration. However, despite all the challenges we are seeing, major drivers that are improving ecommerce activity at various fronts in the region include young and adaptable population, increased smartphone penetration, prominence of mobile commerce, enhancement of payment modes, increase in the volume of online purchases, government support, and low customs fees.

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C o u n try f o c us

The Iran Connect

Being the current focus of international trade, the existing economic policy makers inside Iran refer to the country’s logistics and supply chain as the golden point, say industry experts

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A

ccording to the World Bank, the lifting of the economic sanctions has proved beneficial for Iran, as its per capita welfare is expected to rise by 3.7%, mainly because of the removal of the oil embargo imposed by the European Union and the liberalisation of cross-border trade in financial and transport services. With a population of 77.4 million, and being the second largest economy in the Middle East and North Africa (MENA) region after

Saudi Arabia, Iran’s return to the market was by far one of the biggest news in 2016. Following the lifting of the United Nations (UN) and EU sanctions on Iran, many industry players considered it of a significant importance of connecting the country to the logistics and the supply chain industry. According to Kuwaiti logistics company, Agility’s latest annual report, jointly conducted by Transport Intelligence, Iran has climbed spots – eight positions to 18th than

any country - in the 2017 Agility Emerging Markets Logistics Index. The index offers a snapshot of logistics industry sentiment in a survey of supply chain executives and ranks the world’s leading emerging markets based on their size, business conditions, infrastructure, and other factors that make them attractive to logistics providers, freight forwarders, shipping lines, air cargo carriers, and distributors.

Logistics News ME | March 2017 | 21


C o u n try f o c us

The US government still has in force a myriad of unilateral sanctions, largely prohibiting US companies doing business with Iran.” David Buckby

Iran’s primary intention is to tighten its bilateral trade ties with the GCC member states.” Navid Sato 22 | Logistics News ME | March 2017

Iran is one of the five countries added to the index in 2017 besides Ghana, Myanmar, Angola, and Mozambique, which ranked 39, 48, 49, and 50 respectively. The report said that while the country is taking steps to find a place in the global and regional economic landscape, creating sustainable growth on the domestic front may prove to be the most important pillar. Achieving this will require a policy mix that emphasises and incentivises job creation in the non-oil sector. Iran will need to encourage entrepreneurial activity, an increase in investment, and higher productivity to create jobs, raising living standards, and spending power. Short-term gains can be made by opening up markets to new domestic and international players and removing barriers to competition and foreign investment, thereby furthering integration with the world economy. David Buckby, economist at Transport Intelligence, justifies the optimistic hype surrounding the country’s logistics and transportation sector in the index. He said: “Overall the hype is justified. Maersk resumed services to Iran in October 2016 after a five-year hiatus. In anticipation of sanctions lifting, MSC, CMA CGM, HMM, Evergreen, and Yang Ming resumed services in 2015. In a nutshell, container lines have returned en masse. “A similar story applies for air freight. Many major European airlines have resumed services to Iran. KLM commenced in October 2016, IAG Cargo in September, and Air France in April. In addition, Iran has ordered 80 jets from Boeing and 100 from Airbus, the country’s first planes acquired from Western manufacturers since 1979. Iran has also ordered 100 planes from Airbus. “The major announcements made, surrounding road freight, really relate to trade between Europe and Iran. DHL Freight, Delamode, and Gebruder Weiss have all announced new services to Iran in 2016.” International relations With the sanctions being lifted, Iran is trying to utilise its potential advantage in logistics, which is the transportation industry and take part in the global supply chain and play a role in international trade, mentioned Navid Sato from Dentons. “Of course, Iran’s primary intention is to tighten its trade ties with the GCC member states. Iran has always been a key trade partner for several GCC countries, perhaps UAE being the most important of them, and will continue to play the same role after the lifting of the sanctions,” said the firm’s Tehran-based partner. He continued: “Iran’s prime advantage regarding supply chain

industry is its geopolitical position and transportation infrastructure. In addition, Iran has a great capacity in offering inexpensive, qualified, and skilled labour, especially in engineering fields and IT, as well as an abundance of cheap lands and warehouses are also a part of the infrastructure in the country to support the supply chain managers.” The current Iranian administration has put a great extent of focus in improving its logistics sector and supply chain industry, and is very much willing to become bind with its neighbouring countries, including GCC, in terms of mutual trade. As Iran keenly seeks to attract foreign investment and take part in the global supply chain industry, GCC players would be welcomed in increasing their trade relationships with Iran and would face no hurdles from Iranian side, pointed out Sato. Challenging times Although the outlook might be rosy, yet Iran still has to face sanctions from the US government. Buckby explains that the trade situation is still tricky for the new trading hub. He said: “While many Asian and European companies are eagerly scrambling for new business, as the UN lifted all nuclear-related sanctions against Iran and the EU removed many bilateral sanctions on Iran’s banking and energy sectors in January 2016, the US government still has in force a myriad of unilateral sanctions, largely prohibiting US companies doing business with Iran. The trade situation does not look like it will improve any time soon either – President Donald Trump sounds like he will be taking a [hard line] with Iran. “Companies outside the US are also affected by its sanctions. Iranian banks and foreign banks processing Iran-related transactions are not allowed to deal in dollars. US sanctions are deterring some European and Asian companies from investing in Iran that otherwise would.” The upcoming presidential election in May this year in Iran will be the deciding factor, playing a major role in its future measures. Sato said: “Considering the economic aspects, Iran is trying to draw a line between its political tensions and trade relationships and is very much willing to engage in the GCC supply chain despite political issues with several member states.” He concluded: “There have been long living debates inside the country to make the best out of Iranian potential capacities in logistics and making Iran into a hub for supply chain industry. To aid this, the current government is willing to focus on the country’s capabilities in becoming a regional transportation corridor for international trade.”

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C ov e r Sto ry

The Middle East is yet to uncover the full-fledged potential of the e-commerce sector despite the booming retail and the upcoming infrastructure. Logistics News ME finds out

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itting in the comfort of a couch and ordering products from an online marketplace is a rising trend in the Middle East, as more and more shoppers are adopting it as a lifestyle. With a quick expanding internet audience and the continued creation of logistics infrastructure, the region is poised to become a larger player in the global e-commerce market as time progresses. According to the market research company, eMarketer, as of now, the Middle East e-commerce market is valued at $4.9bn and is expected to expand to $10bn by 2018. In the UAE alone, the share of business to commerce (B2C) e-commerce on total retail sales of goods is forecasted to triple between 2014 and 2019. Generally referred to as a slow growing market and the current economic challenges that the region faces due to the persistently falling oil prices, any big global players have been a bit sceptical about launching e-commerce ventures in the market. However, with a growing internet-savvy base and high disposable income, retailers are slowly and steadily recognising the purchasing potential of the market. Haritha Ramachandran, associate director for digital transformation practice at Frost &

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More people are shopping online now, and we witness how e-commerce is transforming our way of interacting with global brands.” Frédéric Zielinski, Swisslog Middle East

Sullivan, said: “The global retail market is expected to be at $23tn in 2025 and growing at a compound annual growth rate (CAGR) of 4%. Going on, the e-commerce market will account for 18% to 19% of the market in 2025. The e-commerce market in the region is very nascent; there are 10 times more opportunities to be captured in the next year or so as compared to the global markets.” Currently, the Middle East market is dominated by few local players like souq.com and wadi.com, and certain global players like eBay and Amazon. But due to increased internet penetration and improved logistics, the market is entering a new phase for regional ecommerce. Frédéric Zielinski, general manager, Swisslog Middle East, explained: “More people are shopping online now, and we witness how e-commerce is transforming our way of interacting with brands. Only in the UAE, we have 8.81 million active internet users with around 89% of the population using it daily, and most of the e-commerce purchases are actually done via smartphones.” Growing base A research done by Standard Chartered points to a 30% topline growth year-on-

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year in e-commerce across the Middle East, where Saudi Arabia, Egypt, and the UAE are expected to be one of the fastest growing e-commerce markets globally in the next few years. Zielinski continued: “More and more people appreciate the convenience of shopping from the comfort of their home; we already buy shoes, clothes, accessories, or electronics on the web, with smartphones and tablets being major drivers. Consumers can make purchases anytime of the day - no matter where they are and what they are currently doing.” Industry experts believe e-commerce has fundamentally changed the nature of the retail supply chain; fast and accurate delivery of e-commerce orders is critical to ensuring customer satisfaction and thus realising a profit. Each e-commerce vendor and multichannel retailer has its own business model, corporate history, and goals; however, a customised intralogistics design has the potential to level the playing field to give any company the opportunity to grow in the e-commerce market. One of the leading material handling systems supplier, SSI Schaefer ME, has been directly present in the region since 2001, with

The global retail market is expected to be at $23tn in 2025 and growing at a CAGR of 4%.” Haritha Ramachandran, Frost & Sullivan

offices in Dubai and Jeddah. According to Matthias Hoewer, general manager for Middle East and Africa, at SSI Schaefer ME, 2016 was a year of stable business performance with selected growth in specific markets and industries like the e-commerce. Hoewer said: “It is clear that independent e-commerce operators and retailers are pushing into the Middle East markets. Some of them are globally operating, others are new start-ups from the region. In the past, many of the e-commerce operations for retail brands have been provided as part of the commonly used third party logistics (3PL) operations that distribute products into the normal retail supply chain. This trend of specialisation will continue as we have seen in other global markets.” Hoewer mentioned that the company will continue to grow the presence in the region specifically outside its home market of the UAE. “We always focused on long term development together with our global clients and this will continue in the years to come.” In November 2016, Emaar chairman, Mohamed Alabbar, and Saudi Arabia’s Public Investment Fund (PIF) together launched a Middle Eastern e-commerce

Logistics News ME | March 2017 | 25


C ov e r Sto ry

platform, Noon.com. Investors will initially contribute $1bn to the project, which will be 50% owned by the Saudi sovereign wealth fund. The other 50% will be owned by Alabbar and other regional investors. Noon.com will launch operations in Saudi Arabia and the UAE, with launches planned for other Arab countries later. The rapid growth in the sector and the traction that local companies receive attracted huge investments in recent years. However, Madhav Kurup, CEO for MENA and South Asia region at Hellmann Worldwide Logistics, stressed on the fact that ecommerce is in a very nascent stage in the Middle East. “We have done a market research in the region and was surprised to see that the e-commerce channel is not penetrated in a big way in the industry. So, in terms of growth, it has been small although substantial. I think there is a huge potential for that going forward.” The company is currently working on creating an online marketplace for fashion brands, which are not so well-known in the region. Kurup said: “We will provide them with a platform to give them market entry. We still see that there are a lot of gaps in the market here, as there are not so many varieties available here. We will also open, for the brands, a showroom for the demonstration of their products in the Dubai Design District. It is outside the scope of logistics but we are using it as the market-entry model for some of these brands. “We have quite a few players coming in the market. Our solution is not necessarily providing an online platform; we will provide the entire back-end, including the banking, payment, audit processing, customer service, etc.” Future trends Despite the growing interest, industry experts are still of the opinion that logistics remain a challenge for the e-commerce sector. Haritha said: “Countries like Saudi Arabia and the UAE are working assiduously to transform the postal service and logistics sector by looking at setting up hubs and the like to ensure timely delivery. Also, the countries are putting additional emphasis on data security in mobile transactions, which can be handled with the right levels of regulation and ensuring that people have the right awareness to ensure that the adoption levels improve.” In today‘s competitive world, errors and delays in order fulfilment can have a lasting negative impact on a brand. Zielinski pointed out that the

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trend towards customisation requires additional resources, and competition pressure – these are just few factors that present new challenges for businesses these days. “In addition to scheduled store deliveries of pallets and cases, retailers must factor split-case picking, item-level touches, and multi-line item sortation into their fulfilment processes to accommodate for demand fluctuations.

“Finding ways to improve time-consuming tasks like picking and storing in a cost-efficient manner is a top priority for any growing business that relies on logistics. Warehouse automation is certainly widely deployed by large businesses that have recognised a need for more cost-effective and less labour-intensive solutions to managing large amounts of stock.”

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We have done a market research in the region and was surprised to see that the e-commerce channel is not penetrated in a big way.” Madhav Kurup, Hellmann

Outside the warehouse environment, the key challenge for e-commerce retailers is the last mile delivery into several relatively small markets in the GCC region. Hoewer concluded: “Within mature markets like Europe or North America, the last mile distribution moves from days to hours. In many GCC countries, we are

still happy if we can reduce the delivery times from weeks to days. For e-commerce, both inside and outside the warehouse, delivery times to the end customer are crucial. Availability, price, and delivery times are the main decision criteria that determine if the order ends up with supplier A or B.”

We always focused on long term development together with our global clients and this will continue in the years to come.” Hoewer Matthias, SSI Schaefer ME Logistics News ME | March 2017 | 27


E v e n t R ev i e w

Dubai Trade: 2017 winners revealed Dubai Trade, the single window for cross-border trade and a DP World company, commended the winners of the 9th E-Services Excellence Awards (ESEA), held in Dubai, on February 1. Held under the patronage of HH Sheikh Maktoum bin Mohammed bin Rashid Al Maktoum, Deputy Ruler of Dubai, the annual award event was organised by Dubai Trade to recognise customers, who use its smart services, and appreciating their contribution in promoting smart transformation in trade and logistics in Dubai. The award ceremony was attended by HE Abdulla Al Saleh, undersecretary of the Ministry of Economy for Foreign Trade & Industry; Ali Ibrahim Mohammad, deputy director general of Department of Economy in Dubai; Eng Mahmood Al Bastaki, CEO of Dubai Trade; Ahmed Mahboob Musabih, director of Dubai Customs; business leaders; government officials; and representatives from the financial sector, shipping, and logistics. Bin Abed General Land Transport won the Smart Services Award for M-Token Services, with Ocean World Shipping & Clearing as the runner-up. The National Fire Fighting Manufacturing Company (NAFFCO) Group won the Smart Services Award for Free Zone Services, with Del Monte Foods as the runner-up. Takhlees Cargo Services won the Smart Services Award for Clearance Services, with Mehta Trading Co. coming at the second place. Al Taawun Clearing & Forwarding won the Smart Services Award for Payment Services, with Mosaco Shipping & Forwarding as runnerup. DAMCO won the Best Innovative Award in the trade and logistics industry, and Mai Al Baz, a student from the Wollongong University in Dubai, won the Best Innovator award. Two awards in the exporters’ category were presented by Dubai Exports, the export promotion agency of the Department of Economic Development (DED), as part of its strategic partnership with Dubai Trade. Mai Dubai won the New Exporter of the Year award, with Delta Food Industries as runner up. NAFFCO won the Innovative Exporter of the Year award with Falcon Pack Industries as runner up. Highlighting the role of Dubai Trade and eservices in enabling trade in the UAE, Al Saleh said: “E-services have significantly en28 | Logistics News ME | March 2017

hanced the UAE’s trade activities. Its positive impact is reflected in the country’s strong trade performance last year even amidst a very challenging global economic climate. For the first half of 2016, the UAE’s total non-oil foreign trade alone stood at $215bn and is expected to grow by 7% this 2017. “Dubai Trade, as the premier single-window trade facility for various trade and logistics service providers, has played a huge role in encouraging organisations to use smart services for trade and logistics. Hence, this event is one of the key indicators of Dubai’s international competitiveness. “Our partnership with Dubai Trade also includes offering a range of services that support economic and commercial sectors in the UAE, and facilitate operations for individuals as well as organisations. The smart services provided by Dubai Trade for customers and traders are world class and offering them with state-of-the-art smart services and trade platforms, one of the strategic objectives of the Ministry of Economy.” Dubai Trade CEO, Eng Mahmood Al Bastaki, said: “When we launched the E-Services Excellence Award nine years ago, we wanted to encourage the use and adoption of electronic services. Today, the adoption rate of many services has reached 100%. The number of transactions by registered companies and customers using Dubai Trade also increases year after year and, in 2016 stands at 19 million.

“Today, with the widespread use of smart technologies, and our leadership’s vision to transform Dubai into the smartest city in the world, we honour the organisations that support our efforts. We will continue to develop our services and launch smart trade platforms that feature advanced technologies and are fully integrated with to provide services that traders need such as cargo insurance, a warehouse booking system, and land transportation management system. “Innovation has become our main priority in everything we do for our customers. Following the promise made by HH Sheikh Mohammed bin Rashid Al Maktoum, for those who choose Dubai to launch their businesses to be our partners in the future.” Al Bastaki also acknowledged ESEA sponsors for their role in the success of the event. These included Al Futtaim Logistics and TechnoPro Middle East as gold sponsors and Agility Logistics and Newage Software Solutions as silver sponsors. He commended the support of government and private organisations, especially the Ministry of Economy which supports ESEA annually. Other partners include DP World, Dubai Customs, Jebel Ali Free Zone Authority (Jafza), Dubai Exports, the International Chamber of Commerce-United Arab Emirates (ICC-UAE), Dubai Maritime City Authority, and the National Association of Freight & Logistics. www.cbnme.com


T e ch n o lo gy

Honeywell launches Supply Chain tech

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oneywell introduced its latest technology to address the rapid rise in e-commerce in the Middle East, and the continued development of the region’s manufacturing, retail, and logistics sectors. The new products and solutions are targeted at regional manufacturers, distribution centres, logistics providers, delivery firms and retailers, and aim to significantly streamline operations and ultimately achieve better bottom-line results by driving efficiency across supply chain operations. The new technology, announced during the ‘Honeywell LIVE: The Future of Supply Chain, Today’ online broadcast event, range from a revolutionary 3-D dimensioning system that automatically captures the volume of parcels to connected solutions that boost the productivity of workers in brick-and-mortar retail stores.

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John Waldron, president and CEO of Honeywell Safety and Productivity Solutions (SPS), said: “The e-commerce boom and growing consumer expectations have put a spotlight on operational inefficiencies and disconnects. To stay competitive, businesses need to deploy the Internet of Things, cloud solutions, and automation throughout their supply chains. The technology we launched demonstrates our commitment to innovation and bringing to market hardware and software solutions that can help organisations boost productivity and safety.” Edmond Mikhael, general manager for Honeywell SPS in the Middle East, Turkey, and Africa (META), said: “Having access to the latest technology allows those working in supply chain management to plan better, run multiple operations and drive collaborative decision-making,

therefore improving delivery and response times. “Our solutions increase effectiveness through automated and optimised processes that reach every touchpoint – from the warehouse to retail shops enabling a seamless end-user experience and allowing our customers to get closer to their goal of a more efficient next generation supply chain.” Honeywell is deploying connected solutions for a range of customer challenges. Automation, software, and hardware solutions are helping retailers meet growing customer expectations for faster and cheaper delivery. Cloud technology is helping logistics providers better track and route deliveries. And connected safety solutions from SPS make workplaces safer by enabling better monitoring of workers in high-risk situations, such as firefighters or utility line workers.

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R e p o rt

Going the distance GCC countries need to adopt a structured technology adoption framework to overcome current challenges facing their transportation systems, according to a recent study by Strategy&

32 | Logistics News ME | March 2017

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T

he GCC transportation system is currently facing three main challenges, whereby as oil prices continue to decline, GCC governments are cutting investments and can no longer justify spending freely on transportation infrastructure projects. Secondly, the region suffers from significantly higher rates of death from road accidents than international benchmark, leading to economic losses equivalent to 2.5% to 4.5% of the gross domestic product (GDP) among GCC states, including non-fatalities. Lastly, transportation carries steep environmental costs with emissions levels far higher than the world average of 1.03 tonnes of carbon dioxide per capita (5.59 in Qatar, 4.12 in KSA, 3.58 in Kuwait, 3.49 in the UAE, 3.16 in Oman, and 2.44 in Bahrain). Commenting on these challenges, Dr Ulrich Kögler, partner at Strategy& in Dubai, said: “Innovative new technologies, including autonomous vehicles, electric cars, drones, and traffic management systems, develop at unprecedented speed and are already allowing for the possibility of a smarter, safer, less expensive, and more accessible transportation system coveted by governments around the world. “As the GCC population grows and urbanisation continues, governments have little choice but to upgrade their transportation systems. The wealth of existing and emerging new technologies can significantly help facilitate this process. Dubai is already taking measures to adopt more technologies into its transportation infrastructure, having recently announced plans to convert 25% of the emirate’s total number of passenger trips to autonomous by 2030.” According to Strategy&, capitalising on these technologies requires a four-part framework: 1. Regulate: GCC governments need to build the correct regulatory foundation by reviewing their current operating model and setting clear policy objectives and priorities to promote and rapidly deploy these new technologies. 2. Pilot: Evaluate the potential benefits by conducting pilot programs to test new technologies, potentially in conjunction with private-sector partners. For example, Dubai’s Road and Transport Authority (RTA) recently partnered with Emaar to conduct trial runs of a 10-seat autonomous shuttle on a 700m track along Mohammed bin Rashid Boulevard. Another potential candidate for a pilot program is natural gas. The GCC is a major producer and, when compared with standard fuel oil,

Camil Tahan

Fadi Majdalani

Ulrich Koegler

LNG can reduce the greenhouse-gas emissions of ships by 20% and reduce other certain emissions by 85% to 100% 3. Build: Put the underlying infrastructure in place, including physical infrastructure (such as roads that can support autonomous vehicles, charging stations for electric cars, and facilities for greener maritime fuels) along with an IT backbone capable of handling the increased flow of information, and analytics tools to derive insights from the data. 4. Incentivise: Use incentives to encourage both customers and service providers to adopt these technologies. In the realm of commercial logistics, GCC countries are investing to become major logistics hubs. Yet to be globally competitive, they need to become more efficient and cost-effective for traders. Stressing the importance of embracing more technologies, Fadi Majdalani, partner at Strategy& in Beirut, said: “It is important that governments stay flexible when adopting such a framework as it is almost impossible for them to predict how well specific technologies will do. Governments should encourage experimentation by staying on top of developments in other markets, taking the best of what works elsewhere, and applying it to the unique needs of their markets. “For example, Qatar’s Ministry of Transport and Communications recently signed a memorandum of understanding (MoU) with Qatar Postal Services Company (QPost) to develop an innovative pilot project for autonomous drone delivery services.” Another key area that technology enabled transportation systems will support towards is substantially reducing the environmental costs and car emissions. In a bid to reduce car emissions, automobile manufacturers are making huge strides in electric powertrains; such cars could comprise 25% to 50% of the overall market by 2040, according to Bloomberg. GCC governments should prepare the ground for the wide adoption of electric cars, incentivise their use, and potentially even build a local industry around electric vehicles. Commenting on the importance of adopting such a framework, Camil Tahan, principal with Strategy&, said: “Technology offers GCC governments means to not only address some of the most pressing fiscal, safety, environmental, and accessibility challenges they face, but also build a state-of-the-art transportation and logistics sector, that can propel regional economies into the future and create significant employment opportunities.”

Logistics News ME | March 2017 | 33


Ware h o us e M a n agement

An anchor in the new era Industry experts talk to Logistics News ME about how efficient warehouse management systems can strengthen the effective movement of materials in the supply chain

I

ncreasing inventory and the growth in the amount of workload has necessitated the rise in the effective implementation of warehouse management system (WMS) for operations. WMS is a software application that is designed to support the management of warehouse, distribution centre, and staff. They are tactical tools deployed by the business owners to cater to the requirements of the distribution channel(s) and the customers. It uses a database that is configured to manage the warehouse operations and contains detailed description of various standard warehouse elements, including individual stock keeping units (SKUs), warehouse storage locations, dock doors, and expected labour productivity rates by activity or function. According to a new report published by Allied Market Re-

34 | Logistics News ME | March 2017

search (AMR), the WMS market size will reach $4.2bn by 2022, growing at a compound annual growth rate (CAGR) of 15.2%, from 2016 to 2022. The report, Global Warehouse Management System Market by Component Type, Industry Vertical, and Geography—Global Opportunity Analysis and Industry Forecasts, 2014–2022, found that among the various industry verticals, transportation and logistics is projected to dominate the market, however, pharmaceuticals industry is expected to have the fastest growth rate. Seapee Bajaj, lead analyst, construction and manufacturing at AMR, said in the report: “The European market is the most productive as compared to others with diverse industry verticals implementing WMS at a greater extent. Furthermore, it is projected to generate

the highest market revenue over the forecast period with pre-dominant deployments in the transportation and logistics industry.” The report explains that the WMS market is segmented based on components, industry vertical, and geography. Software and services are the component types of WMS. Automotive, electronics, food and beverage (F&B), transportation and logistics (T&L), pharmaceutical, and others are categorised under industry verticals. Geographically, the market is segmented into North America; Europe; Asia Pacific; and Latin America, Middle East, and Africa (LAMEA); followed by region-wise countrylevel analysis. Germany, Italy, and Saudi Arabia are some of the leading market for WMS market.

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Abhishek Ajay Shah, managing director at RSA Logistics

Frédéric Zielinski, general manager at Swisslog Middle East

Effective functioning For a WMS solution to function effectively, Frédéric Zielinski, general manager at Swisslog Middle East, stresses on improving productivity and staying competitive. He said: “Whether you’re a small or big company, improving productivity may be the [single] most important differentiator and source of true competitive advantage in our global economy. To stay competitive and profitable, businesses need to speed the adoption of automation technology and, ultimately, the speed of innovation. “Companies that will invest more in machinery, equipment, and software will be the winners in our hyper-competitive world. And, the companies that take the lead in effectively deploying technology across their operations, including warehousing and distribution, will be

the winners within their respective markets.” Headquartered in Switzerland and with a local office in Dubai, Swisslog is a subsidiary of the German robots manufacturer, KUKA, and is organised in two divisions — warehouse and distribution solutions (WDS) and Healthcare Solutions (HCS). Swisslog WDS designs, develops, and delivers intralogistics automation solutions for customers for a wide range of industries, including food, retail, e-commerce, pharmaceuticals, as well as third party warehouses and distribution centers. An efficient WMS guarantees easy integration and intelligent synchronisation, allowing the companies to manage peak demands; transform insight into intelligence giving quick visibility into the operations through standardised data aggregations and appropriate visuali-

Ignatius Scholtz, head of operations, Integrated National Logistics (INL)

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Ware h o us e M a n agement

sation; and helps to have a smart system in place to adapt fast to changes and capitalise on the opportunities that are emerging as the industry evolves. Third party logistics (3PL) provider, RSA Logistics, has been using Infor WM 4000 for the past several years as its WMS, which enables distribution management (packaging, inventory, warehousing, supply chain, and logistics) to control merchandise throughout the warehouse. Abhishek Ajay Shah, managing director at RSA Logistics, said: “The online WMS portal we offer our customers is a powerful tool, which begets visibility and transparency, allowing for quicker decision making. It offers customisable features, providing a pathway for sharing information while making the whole process coherent from stem to stern. “The extensive features of the portal allow users to check the status of their stocks and shipments, create new SKUs and requests, as well as the extensive search and sorting fea-

36 | Logistics News ME | March 2017

tures. Customers can also access personalised reports that are available in various formats as well as the option to schedule reports.” Challenges faced According to Shah, an efficient WMS should be able to tackle the main challenges posed by manual processing and tracking, involving a lot of man hours, and poor inventory visibility and stock accuracy. “A WMS designed and implemented to address the challenges incorporates those values in all its constituents, be it the technical components, processes, or most importantly, the user experience component. The solutions are not one-time but becomes part of day-to-day operations. “By a cycle of implementing and re-evaluating the positives and negatives of such a solution, it can not only be maintained, but enhanced over time. The benefits are an improved customer experience, overall efficiency, and cost-effectiveness.” As WMS offer significant return on investments (ROI) with

increased productivity, reduced staffing levels, and less dependency on temporary labour hire during peak periods, the market successfully remains immune to economic challenges, mentions Ignatius Scholtz, head of operations, Integrated National Logistics (INL). “Demand for WMS will continue to grow in the future, as latest developments and upgraded design offerings are always required and sought after. Our WMS integrates with the Automated Warehouse Control System (AWCS) for all multi-user operational activities and monitors, controls, and optimises our service offerings.” Initial investment in the field can be a deterrent in implementing WMS, but Shah explains that slowly and steadily the suppliers have started to demonstrate confidence in the products. He added: “Initial investments needed to implement these systems can be a preliminary hump, but suppliers are demonstrating their confidence in their products by releasing more niche versions that cater to

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specific industry verticals, like the cold chain within the larger logistics industry.” Future outlook According to experts from the industry, 2017 will witness the rise of two primary driving factors for WMS, including the booming ecommerce industry and the cloud-based WMS. As e-commerce is making its presence felt virtually in every sector in the market, from the moment the online order is placed to when it is picked, packed, and shipped, every step in the process must be handled efficiently, consistently, and cost-effectively. For an effective e-commerce business, the right automation facilitates the minimisation of manual labour, resulting in more accurate orders, lower costs and worker travel time, fewer returns, and space saved by operating in a smaller footprint. Shah explains: “The obvious benefit to e-commerce, which is serving the needs of an increasingly demand-

ing consumer base, is the reduction in delivery and therefore lead times, and errors while processing orders. “Greater efficiency in order fulfilment helps to build a strong relationship between supplier and customer. Since the market has been affected by the ongoing economic challenges, many businesses are turning to WMS solutions to delight their customers.”

No matter how simple or complex the application is, the goal of an efficient WMS remains the same, to provide management with the information it needs to efficiently control the movement of materials within a warehouse. Scholtz concluded: “Inventory accuracy is critical to any business and, through WMS an organisation can reduce inventory levels to the bare minimum and achieve higher levels of accuracy.”

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S h i p p in g

38 | Logistics News ME | March 2017

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Staying afloat Industry experts explain that the global shipping sector is in for a tough year in 2017 owing to the persistently falling oil prices and the oversupply of vessels

A

ccording to the recent report published by The Baltic and International Maritime Council (BIMCO), a Denmarkbased international shipping organisation, the shipping industry is set to face rough seas going forward in 2017 as the International Monetary Fund (IMF) is anticipating the lowest level of global gross domestic product (GDP) growth since 2009. “In 2016, the container shipping industry bit the bullet in terms of demolition and consolidation to help the market recover. The dry bulk sector needs to copy that approach,” BIMCO explained in its market outlook sector report. The report mentions that 2017 will see another year of die-hard competition, including the tanker industry. “For eight years, the world has struggled to cope with huge changes and challenges brought around by the crash of the financial market in 2008. The resulting issues have not always been dealt with in the best way, leaving many large economies still in the recovery mode.” Ian Chung, partner at Clyde & Co, agrees to the aforementioned report, and explained that the availability of finance remained a problem last year. He said: “2016 was a challenging year with continued pressure on rates for all types of vessels. The availability of finance at what is perceived to be a reasonable cost is also challenging the business models of many shipowners. Notwithstanding the challenge, the expectation is that new ships will continue to be built and delivered, so supply is challenging.” Challenges galore For GAC, one of the leading providers of shipping, cargo, and marine services worldwide, the company did feel the pinch of the economic slowdown. Fredrik Nystrom, group vice president for Middle East at GAC, pointed out: “Inevitably, GAC has felt the effects of the economic slowdown. However, we are responding to the difficulties it presents with greater innovation and agility. Disruptive forces are constantly

challenging and reshaping our markets, but in the process, new opportunities for growth arise.” Nystrom believed that there is a global market shift towards innovative technology that enables companies to increase efficiency and reduce costs. “We are constantly focusing strongly on further elevating our use of smart technologies to optimise efficiency for our staff and value for our customers. At a time, when owners and operators are under intense pressure to cut costs, GAC has developed an online fuel savings calculator that allows owners and operators to compare savings achieved through different hull-cleaning techniques.” The company has recently invested in capital assets such as vessels and warehouses in key locations around the world despite the difficult conditions. In 2016, its total investment commitments have reached more than $65mn, according to Nystrom. Here in Dubai, GAC just completed the ground breaking of its new contract logistics facility that is supposed to bring its total capacity in Dubai to more than 200,000 pallet positions, serving customers active in the local and regional markets. Construction of the three-chamber warehouse and executive office complex in the Logistics District of Dubai South is due to be completed in the fourth quarter of 2017, with operations expected to go live in January 2018. It will add to GAC’s existing contract logistics capacity and complements established facilities in the Jebel Ali and Dubai Airport Free Zones. On top of it, the shipping sector is also rife with a serious imbalance of supply and demand with too many ships coming into the water. William Bennett, senior analyst at VesselsValue explained: “The shipping crash stems from a serious imbalance of supply and demand with far too many ships coming onto the water over the past two to three years and in the future. Demand growth is slowing with China being the major factor in this equation. A weak lending environment has also negatively impacted growth.”

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S h i p p in g

Middle Eastern Bulker, Tanker and Container Fleet 2017 Ship Type

Number of Vessels

Total Value USDm

Size DWT

Tanker

707

57,993,623

11,655

Bulker

203

12,147,100

1,850

CBM

We are constantly focusing strongly on further elevating our use of smart technologies to optimise efficiency for our staff and value for our customers.” Fredrik Nystrom, GAC

LNG

72

14,077,116

10,981

LPG

33

1,321,781

896

TEU Container

159

Grand Total

1,174

881,840

4,116 29,499

Middle Eastern Bulker, Tanker and Container Fleet 2016 Ship Type

Number of Vessels

Total Value USDm

Size DWT

Tanker

655

55,694,000

13,890

Bulker

210

12,476,500

1,454

LNG

55

11,244,197

8,598

LPG

31

1,236,739

1,222

TEU

We are actively pursuing a two-fold investment strategy, which includes capacity expansion in our existing portfolio, and the acquisition of new ports.” Flemming Daalgard, Gulftainer 40 | Logistics News ME | March 2017

Container

148

Grand Total

1,099

813,868

UAE-based privately-owned ports and logistics company, Gulftainer, has continued to invest in infrastructure to meet the requirements of its customers serving new, larger ships and step up its capacity despite challenging times. Flemming Daalgard, chief executive officer (CEO), Gulftainer, explained that the shipping industry is largely predicated on the growth of international trade, which is ultimately affected by economic growth. He continued: “Given this close interlinkage, economic performance is bound to have some impact on the shipping market. The impact of the economic slowdown has been accelerating over the past few years, with the historical multiplier between economic activity and global containerised trade slowing down steadily. The cyclical nature of the industry, in addition to the long lead

4,906 30,070 time between ordering and deploying vessels, mean that the industry has been slow to react to this change, leading to a significant oversupply of vessels, which in turn, has led to worsening returns in the shipping industry.” Another factor to affect the shipping sector are the global oil prices, which have been persistently low for over a year and a half now, and the effects have been felt by all the sectors. Chung said: “The offshore marine market is currently challenging and there has been significant pressure on charter rates because of the falling global oil prices from its high a couple of years back. The recent price stability does provide some optimism in the medium term, though in the short term, general issues of oversupply of vessels and limited availability of contracts (due to delayed and cancelled projects) suggests that it will remain challenging for some time.”

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Data supplied by VesselsValue

CBM


Northern Container Terminal

The availability of finance at what is perceived to be a reasonable cost is also challenging the business models of many shipowners.” Ian Chung , Clyde & Co Future outlook As volatility and uncertainty continue to sweep through the global markets, industry analysts say that financiers will ultimately need to take a decision on the valuation of assets and the sustainability of the operator. Chung clarified: “We have started to see some of the offshore marine companies restructure and more will continue to do so. The question is what kind of restructuring takes place and how the industry addresses the issue of oversupply of vessels.” Daalgard stressed on the fact that the company’s strategy for 2017 will remain focused on continuing to engage customers and partners as well as governments for long-term impact. “We are actively pursuing a two-fold investment strategy, which includes capacity expansion in our existing portfolio, and the acquisi-

tion of new ports. Our core regions of interest are the Middle East, Africa, Southeast Asia, the US, and South America, with the primary focus on ports with around one million TEUs in capacity.” He also mentioned that the company plans to continue investing in technology in the ongoing year. He continued: “Two milestones we achieved last year include the implementation of SAP’s new-generation S/4HANA business suite as well as the industry-proven Marine and Container Handling (MACH) Terminal Operating System. Both platforms are set to advance our operational and customer service function by streamlining key business processes and increasing terminal productivity.” Industry experts suggest that the full restoration of shipping markets will need several

years of solid improvements to lift fleet utilisation rates, whereas sector overcapacity almost everywhere must be reduced. In addition to it, adequate government support for any industry - including shipping - which is feeling the heat of global competition, might also seem like a good thing. Nystrom concluded: “GAC’s strategy is to put our customers first, leverage our existing assets and values, continue to innovate, and take advantage of new technologies to find ways to prosper in these turbulent times. At GAC, we have a strong focus on the long term. It is important to be an anchor in the storm and not make sweeping changes just for short-term results. In fact, we believe that the market downturn is an opportune time for us to continue investing.”

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Int e rv iew

Five minutes with

Walid Khoury

The ALS Logistics Solutions managing director talks about automation to boost warehouse management and maximise the efficient functioning of the facility

Describe your market presence in the GCC. How much have you grown in ? We are glad to be one of the leading suppliers of logistics automation in the GCC region. Talking about significant logistics projects in the region, 2016 was not the best year as we saw many of them getting shelved, if not cancelled totally. However, we are building two fully automated cargo terminals in Muscat and Salalah, as well as the logistics hub for FedEx in Jeddah. We can definitely notice the activity in the Saudi market, where major logistics projects will be released in the nearest future. Also in 2016, we saw a great rise in the automated car park systems and we managed to secure a few of them.

2016

course car park systems, which has been on the rise lately in the GCC.

2017

How has automation helped you achieve efficient material handling in the past year? We are a great advocate for automation and believe that it is a great tool to boost warehouse efficiency and maximise the use of the facility with the help of an upgrade. Full automation might not be the right answer to all customers but surely it is not to be discounted. Did the economic slowdown affect the company’s growth? How did you manage to keep yourself afloat? According to me, 2016 was not the best we have seen in all ways, it started off on a bad note and ended worse. From the business and political perspectives, it was a year to remember for sure. There were lots of challenges in terms of business acquisition and we have seen a lot of contracts cancelled or put on hold, most of them indefinitely. Unexpectedly, we have seen major customers affected by the low oil prices and, in turn, the whole supply chain and logistics market was affected. Uncertainty will be carried on

42 | Logistics News ME | March 2017

in 2017 but I am hopeful that we will survive this cyclone and come out stronger. Explain the entire automation process that goes behind the operations of your company. We are always working on improving the automation systems that we offer our customers and are always different between them and terminals. If the customer requires a manual system, they usually do not contact unless they are the existing ones and require a small upgrade. The automation is and will always be the driving force behind ALS success and we offer it for cargo handling, logistics handling, and of

What are your plans for ? Any special strategies for that? Starting a new year is always exciting. Holding last year figures in one hand and ambitions, resolutions, and targets in another gives us a chance to think about ALS plans in 2017. In the age of progress and innovation, modern world is searching for solutions that maximise efficiency and boost the profit. In ALS, we do automation: we provide material handling solutions, air cargo equipment, and car park systems. When it comes to automation, millisecond does matter; when it comes to operations, improved results speak louder than any promised sales statements. Automation requires significant investments. It is essential to conduct research, evaluate the potential, and predict the results – consultancy will minimise and almost exclude the risks of mistakes. It is always a good idea to learn from case studies, ask advice, and apply the knowledge to your field with the help of reputed solution providers. Even though market conditions are challenging, technology development and focus on automation allow us to remain positive in 2017.

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Pick faster and smarter with LydiaÂŽ Voice Warehouse Solutions by EPS

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Mach i n ery

Genavco opens new facility To celebrate the last 50 years in the region and a growing customer base, Genavco opened a new facility in Abu Dhabi

44 | Logistics News ME | March 2017

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G

eneral Navigation and Commerce Company (Genavco), a member of UAE-based Juma Al Majid Group, recently opened its new facility in Musaffah in Abu Dhabi. The opening of the new flagship facility also marks the year-round celebration of serving the company’s customer base over the last 50 years. The facility, with a total built-up area of 2,822 sqm, comprises Isuzu and heavy equipment showroom, service facility, spare parts sales counter, and BP Quick Lube facility. The showroom will display the extensive range of Isuzu fleet, along with the selected heavy equipment products. The 1,045 sqm service facility, with 13 service bays and dedicated VIP waiting area, will offer futuristic customer service experience. The new facility is strategically located in M9, Musaffah Industrial Area, and adjacent to Bin Hamoudah – Chevrolet Body Shop. Speaking about the new facility, Eng Khaled Issa, chief operating officer of Juma Al Majid Group, said: “We anticipate that Abu Dhabi, being the capital of the UAE, will witness a lot of projects in the next few years. To complement that, we want to have a solid presence in the capital and, hence invested in this new facility. We have an old facility in the emirate, but this is a new one to serve our customers better. We also have

Eng Khaled Issa, COO Juma Al Majid Group

facilities in Dubai, Sharjah, and Ras Al Khaimah as well.” Issa also mentioned that the company is looking to open a new facility in the Al Quoz area of Dubai by the end of 2017. “2016 was a good year, and we anticipate 2017 to be similar. We hope that in the second half of 2017, things will start to improve again all the way up to 2020. “There are extreme important solutions being put in place to make sure that the economy of the GCC countries is independent of oil prices. When oil prices go down, consumer confidence gets affected and there is a decline in the number of projects. I think now

most of the governments have put in structured plans to help the countries have a sustainable growth.” Producer of mobile aerial work platforms, JLG Industries, has been a partner with Genavco for the past 30 years. Enrico Marighella, distribution manager ME, JLG Industries, said: “We have been with Genavco for 30 years now, I would say Genavco is the most reliable dealer in the GCC. They enjoy a solid foundation and the business with them has been good as they are growing year-on-year. “The business is tough now, but with their help, we are achieving very good results. Our 2017 strategies would be based on the new resources on board, the new launches from JLG, and the new schemes dedicated to the distribution network. We are expanding, present in all markets, and we are looking for emerging markets.” Focussing on a customer-centric strategy for 2017, Issa concluded: “We are more of a heavy equipment supplier, so the most important thing for us is to meet with our suppliers, and show them the investment that Genavco is making in the region. To solidify our position for a customer-centric strategy, we make sure that the right product and service is present. We are confident that with our partners in UAE, we will exceed our customer satisfaction.”

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V i e wp o i n t

Growing logistics: A concern?

Khizer Hayat, co-founder and CTO of Throughput Inc., shares his insight on the risks associated with the growing logistics and the supply chain industry and the ways to solve them

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ccording to a report by Frost & Sullivan, the UAE logistics sector was expected to grow by 4% in 2016, with a compound annual growth rate (CAGR) of 5.7% between 2015 and 2020. The transportation and logistics industry contributed close to $29bn to UAE’s gross domestic product

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(GDP) in 2015 and continues to grow. The growth is largely due to government investment plans and infrastructure development initiative. Ongoing economic diversification, growing domestic demand, and development of multimodal transportation will continue to aid the growth of the UAE’s logistics industry.

Frost & Sullivan further explains that the airport expansion and the GCC rail network will strengthen alternate mode for freight and cargo transportation. Furthermore, the lifting of economic sanctions on Iran will most likely increase trade activities in the region and add to the growth in logistics.

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Companies like Aramex are already preparing for the strong logistics growth with the construction of a new facility in the Umm Ramool area in Dubai. Based on the above information, exciting times lie ahead for the UAE economy. Strong growth in the logistics sector will provide employment opportunities in the region as well as increase the strength of the local currency. So why should organisations be concerned? Why is there a downside to this logistics growth, which can hurt the bottom line of organisations? The $26tn global supply chain industry touches every aspect of a business from HR to operations. Logistics is a major player in the supply chain sector. As per logistics viewpoint, the demand for logistics personnel in the United States is expected to grow by 26% between 2010 and 2020, but the supply is unable to meet the demand. According to Gulf News, the trade and logistics growth in hiring in the UAE was 55% year-on-year in 2015. However, as reported in The Leadership Network, 25% to 33% of the supply chain workforce is either at or already passed the retirement age and there is currently a 61% talent gap in middle management supply chain. For every supply chain manager entering the work force, two (or more) are retiring. In the United States, more than 60 million employees will retire by 2025, but only 40 million are expected to enter the supply chain and logistics sector. To further add to this, Supply Chain Insights reports that there is currently a 15% turnover in supply chain personnel, which shows that not only is talent hard to find but retaining it is not easy either. The report also indicates that the turnover rate is expected to increase in the future. According to a report published by Deloitte, only 14% of the companies believe that they are doing better than their peer groups in managing supply chain talent, 43% actually believe they are doing a worse job. Most CEOs are aware of this talent shortage and know they’re not doing enough to fix this problem. Growth in any industry often results in process problems, which results in the need to hire more personnel to fix these issues. Due to the talent shortage, most companies end up hiring personnel unfit for the supply chain role and believe that they can train them to lead supply chain/logistics in the future. According to our research, it costs organisations close to $350,000 on average to train a supply chain employee in order to make a significant impact on cost savings. To add to this, 15% of supply chain employees leave their organisations due to job dissatisfaction. Imagine spending close to

Companies like Aramex are already preparing for the strong logistics growth with the construction of a new facility in the Umm Ramool area in Dubai.” $350,000 only to lose that employee. The organisation has just lost a tremendous amount of knowledge and experience apart from their investment. Often the training is rushed so the employee takes a long time to make any significant cost saving impact on organisations. Hence, profits tend to drop instead of rise with growth. Currently, organisations try to preserve the knowledge base through training courses, design books, best practice books, mentoring sessions, and standard work instructions. While these are great for the preservation of knowledge, it requires a substantial amount

of time to go through these and understand the supply chain principles in detail. Let’s see how we might be able to solve this problem using technology. Modern technology, especially in the field of big data and artificial intelligence, allows us to make better use of this knowledge by integrating it into a single platform that gives insights to the end-user to highlight bottlenecks in supply chain processes. We live in an age where a ton of data is being generated every millisecond. Automating the data analysis process can not only accelerate decision making but also significantly reduce training costs while preserving knowledge. According to a study by McAfee and Brynjolfsson, those enterprises, which had embraced big data, analytics suggested they were on average 5% more productive and 6% more profitable than their competitors. The problem here is that only about 20% of the supply chain talent actually possess the analytical skillsets needed to embed big data into supply chain. According to a survey by XPlenty, on an average, a minimum of 70% of the total time for a supply chain strategy project is spent on data cleaning and analysis. In my opinion, such a solution would not only reduce the talent gap problem but make it easier for people in supply chain, especially logistics, to focus on implementing key strategies instead of wasting precious time on data analysis. Machine learning can help organisations to not only predict future outcomes of processes but guide the user to the optimal solution, so that the companies can effectively identify bottlenecks in their supply chain operations and come up with improvement strategies. Such solutions can identify process bottlenecks in real-time to give the end-user actionable insights, so they know which areas of their operations to focus on, without needing to manually churn all that data. E-commerce companies, like Amazon and EBay, have used machine learning to show users the content they are most likely to buy, resulting in significant revenue improvements. It’s about time the global supply chain sector embraces this technology to reap the benefits. Thus, all hope is not lost. Through proper utilisation of technology, logistics organisations can not only overcome problems because of the growth but also make higher profit margins compared to their competitors and become an industry leader in logistics. At RigBasket, we have automated the role of a supply chain analyst, which allows organisations to spend more time on implementing effective supply chain strategies and less time on data analysis.

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V i e wp o i n t

48 | Logistics News ME | March 2017

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Redefining supply chain Rajeev Daswani, managing director of Marami Metal Plating, discusses the importance of localising and digitalising the supply chain in order to improve the goods movement

T

oday, companies across industries globally are looking at ways to establish close-knit relationships with their supply chain, as closer integration results in improved supply chain management. Over the past few years, there has been an increase in the number of brands building long term strategic alliances with local suppliers. Players, that previously off-shored their facilities to emerging economies, are re-thinking if their efficient but long supply chains are still functional as international inbound supply chains create longer lead times, inventory cost burdens on manufacturing facilities, and also incur added custom duties. Those entering the market are now understanding the potential of building products for the sector from the very beginning. The benefits of this approach include controlled costs, no import costs, reduced delivery lead time, and inventory accumulation. A fundamental way in which a firm can manage its supply chain is by increasing its know-how on outsourced jobs and procured items within an organisation. At Marami, for example, the clearer clients are about their specifications for metal plating, better are their chances of receiving the desired quality. A supply chain is best effective when a client sets boundaries and is able to monitor and control it — precise communication and aligned expectations — are vital. Additionally, in this digital era, companies should re-organise and create new competences by utilising the latest integrated IT solutions to ensure being on par with practices followed internationally, thereby helping them overcome any challenges they may face. Changing trends and heavy competition have also called for companies to adopt a more openminded approach in allowing local vendors to become part of their processes, ensuring that both sides support the overall vision of growth. In recent times, we have found that clients understand that a selected vendor within the supply chain is best suited to process a particular job and relies on them to provide a suitable price, delivery time, and overall execution. Clients are also putting further emphasis on hiring qualified procurement teams that can balance the supplier-client relationship. Times when overconfident procurement teams used pressure tactics to have suppliers outdo each other

In this region, it is very important that the idea of importing spare parts or repairing them only on a need basis, changes.” to secure business is now on the downturn and we find that there is an open and tolerant attitude where everyone wins. Localising the supply chain In this region, it is very important that the idea of importing spare parts or repairing them only on a need basis, changes. International brands and the regional players, who buy these brands, need to make a conscious and a unified effort towards localising the supply chain so that both parties can benefit. Compared the last 20 years, things are definitely changing, more and more brands are setting up manufacturing facilities locally and there has been an increase in the number of brands building long-term strategic alliances with local suppliers. The overall trend to carry out plating locally on new manufactured components has increased because of greater awareness of the benefits associated with it. However, those players that have been slow to localise their operations, are seeing an obvious loss in market share.” Marami works very closely with some of the leading companies in the region, and has had to adopt a more open approach and relationship towards servicing its clients in the plating industry. By providing clients with an opportunity of localising their plating and spare part repairing needs, working as an extension of

their clients, keeping their centres small and cost effective, while at the same time investing heavily in R&D, Marami offers personalised solutions at affordable prices to its clients. Although long supply chains sometimes seem cost-effective to start with, the surplus inventory and the lead time deviations caused by them often nullify the benefits achieved from sourcing products from global supply regions. Localising the supply chain benefits both the brand as well as the suppliers in any economy. For suppliers, localisation helps to improve overall technical know-how due to increased interaction with international specs, innovate, and have a direct positive impact on the economy as parties involved are able to maximise spare capacity and keep busy. For international brands, localisation helps in exercising a direct control on the supply chain locally instead of depending on global vendors, reducing the overall cost and risks as companies do not need to store or import large quantities, and in customising and modifying designs based on regional needs as well as on geographical, cultural, and working condition differences. In order to maintain a competitive edge, supply chains need to become responsive and flexible to market forces. A long supply chain works against a company’s ability to quickly and efficiently respond to disruptions to the market. Localisation empowers organisations by helping them reduce costs, sense threats, and react quickly. It helps an organisation to realise tangible cost benefits in turbulent times and maintain competitive order fulfillment lead time. When we speak specifically about the manufacturing industry, a non-localised supply chain in most cases, leads to high waiting times for imported parts, increased shipment costs, and a longer response time to local market fluctuations, which eventually leads to organisations left with either unsold inventory or stock outs.” At Marami, our system features include complete hard chrome plating setup; a pioneering electroless nickel plating setup; complete stainless steel passivation; complete nickel sulfamate, tin plating and copper plating setups; complete manganese and zinc phosphate and black oxidising setups; portable brush plating and on-site applications; and machine-shop with lathes, grinders, welding, and polishing systems.

Logistics News ME | March 2017 | 49


R e p o rt

An Agenda for growth Carlos Cordon, professor of strategy and supply chain management at IMD, explains how companies such as Adidas and Amazon managed to increase their sales by re-writing the supply chain rules

I

n an amazing twist, technology is rendering the old fundamentals of supply chain management obsolete. In Russia, Adidas increased sales in Moscow by double digits in 24 hours, thanks to a supply chain initiative. At the same time, Amazon is now looking at using drones to deliver products, a very expensive move, but one the company says will increase sales. Experts would usually claim that supply chain management is about delivering the right quality at the lowest cost, with the agreed service level, right? Well, not anymore. As the two examples above show, it is also about increasing sales and profits; the supply chain is no longer just about efficiency, working capital reduction, and inventory management. So, what happened? Adidas is the leading sports’ shoe brand in Russia with more than 1,200 stores. As part of its strategy to please customers, Adidas is imple-

50 | Logistics News ME | March 2017

menting an omni-channel strategy, allowing people to buy in a number of ways (online or in the physical store), any product that is available anywhere in Russia (whether in an Adidas shop, distribution centre, or warehouse), and for it to be delivered in any way (at home, at the store, or at a pick-up point). This is possible, thanks to the use of RFID identification chips, “ship from store” tools, a digital “click and collect” solution, and “endless aisle” technology. Initially, Adidas implemented a trial of click and collect in Moscow, expecting that just a few consumers would choose this option – to buy online or to collect the product at a store. They expected around 10 to 20 orders per week, but consumers embraced the idea and orders reached 1,000 per week. Adidas was forced to stop the experiment and build the supply chain infrastructure needed to support such demand. Today, up to 70% of online sales are through click and collect.

Similarly, other supply chain initiatives like ship from store, where goods ordered online are delivered from a store, not a distribution centre, and endless aisle, in which customers can order products no longer in stock in their local store but is available in another store in another part of the country, have substantially increased sales and, logically, profits. For Adidas Russia, the supply chain is no longer about reducing costs: It is – more importantly – about increasing sales. All of this is possible, thanks to the technology being used in the supply chain. Most of these technologies belong to Industry 4.0, a high-tech strategy promoting the computerisation of manufacturing. Adidas applies these technologies to the supply chain rather than just to manufacturing. Therefore we call it Supply Chain 4.0, a term initially coined by supply chain professional Anne Wyss. Executives have always known that improving supply

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chains ultimately improves sales. However, because the impact was very difficult to evaluate, companies traditionally approved investments in supply chains based only on the expected reductions in costs and working capital. The digitalisation of supply chains, with the breadth of sales and ordering data available, now makes it possible to calculate by how much supply chain improvements are increasing sales and profits, and the numbers are often amazing. Another example is how much more Adidas is selling in Russia, thanks to the use of ship from store. In the largest country in the world, shipping from one part of the country to the other extreme can take up to 15 days using traditional delivery systems. By being able to deliver from a store, Adidas expected to reduce delivery times and to increase sales, but it also expected to increase delivery costs. To its surprise, delivery costs fell and sales increased substantially. It turns out that in certain product categories, consumers tend to return around 50% of the products they buy online, if delivery is made within 24 hours. However, if delivery takes three days, consumers may return up to 70%. Thus, increasing speed of delivery means fewer returns, which means higher sales – up to 40% – at full price. Also, by reducing the number of returns, logistics costs go down substantially. These successful examples lead to a redefinition of what a supply chain is and of the scope of the role of executives. In the case of Adidas Russia, one executive was both head of IT and supply chains – one executive with

Carlos Cordon

a holistic view of the business and with the goal of pleasing consumers and increasing sales. This combination made possible these developments. He justified investments by increased sales. Similarly, while many logistics executives see the idea of Amazon using drones for deliveries as an “extravaganza”, it makes a lot of sense. For decades, the world of logistics has been obsessed with lowering costs. As one logistics executive put it: “We look at savings in

terms of cents, not dollars or euros.” Delivering by drones looks crazy to them. However, if you are Amazon, and you lower the rate of return of products because you deliver in 15 minutes, fewer returns mean higher sales and, therefore, higher profit. The comparison is not about costs but about sales. Until recently, we were used to looking at supply chains as cost drivers, not sales drivers. We have a lot of tools to understand supply chain costs, like “total cost of ownership”, “spend analysis,” or “total landed cost”, but none about increasing sales. However, technology is bringing about a fundamental change and Supply Chain 4.0 requires a very different view – focusing on increasing sales through a better understanding of how customers behave. Finally, we should also start to use the term Value Chain 4.0, because we might need to re-combine and re-think how we work and organise companies. The key is how to generate and capture value in the whole chain. And it looks very different from the past. Adidas is combining functions like IT and supply chains. They are doing a lot of trial and error (rather than the typical big bang of huge enterprise resource planning (ERP) or systems deployment) and they are using technology usually associated with Industry 4.0 everywhere, not just in the factory. In short, the digital revolution is creating a whole new paradigm for what used to be the supply chain. It was once about delivering the right quality at the lowest cost, with the agreed service level; now it is about increasing sales, creating more value, and capturing it.

Logistics News ME | March 2017 | 51


Sup p lie r N e ws Al Shafar Steel eyes AED175mn expansion in DIP

S

tructural steel manufacturer, Al Shafar Steel Engineering (ASSENT), a subsidiary of the UAE-based Al Shafar Group of companies, has announced the expansion of its facilities located at Dubai Industrial Park (DIP). The expansion, which will result in one of the largest steel manufacturing companies in the region, is geared to grow the company’s operational footprint in the UAE and the wider GCC region. As per the expansion land lease area plan, ASSENT will add four new facilities, spread over additional 11ha of land, which will lead into reaching a total leasable area of 22ha. Construction is scheduled to begin in Q2 2017, and the new facility is estimated to start operations by 2018-end. ASSENT will invest AED100mn on the construction of facilities and AED75mn on installing new machinery. With 2,300 employees projected to work on site, the factory will manufacture and fabricate ready-to-use products for delivery to local clients, with integrated facilities for warehousing, storage, and offices. Once the new facilities are commissioned towards 2018-end, they will enable ASSENT to increase its annual production value by approximately AED300mn in the first two years, with an annual growth of 15% to 20% in subsequent years. This growth will add to ASSENT’s current annual production levels that stand between AED800bn to AED1bn. Speaking on the expansion, Amr Ali Ahmed, manager partner and CEO of ASSENT, said: “Strengthening our services to our customers and catering to the rising regional demand for steel are the key reasons for our decision to expand our facilities at DIP. With the UAE’s steel manufacturing sector expected to grow to a robust 20% by 2021, a bigger factory shall place us in a superior position to contribute towards this growth. It will also help us achieve

52 | Logistics News ME | March 2017

our long-term vision of expanding our footprint within the region.” He added: “Our decision to locate our facility in DIP was influenced by the partnership we enjoy with the industrial hub. This partnership is the backbone of our commitment to effectively serve our customers, and to contribute towards accelerating industrial growth in the UAE. By improving quality, service, and productivity, we aim to make the UAE the clear leader of industrial products in the region.” For his part, Saud Abu Al-Shawareb, COO of DIP, said: “We are pleased to witness the strategic expansion of ASSENT. The new facilities will promote industrial growth and sustainability for the benefit of the community. In recent years, the UAE has become a highly promising destination for local steel manufacturing, and the sector is an active contributor to the nation’s nonoil GDP. ASSENT’s expansion further testifies to DIP’s commitment to provide world-class infrastructure that fuels client growth and supports their strategic ambitions.”

Dubai-based INL eyes expansion in 2017 Dubai-based Integrated National Logistics (INL) revealed that it aims to develop and grow its business in the logistics industry during 2017. INL is a joint venture between Integrated Group Malaysia and National Trading and Development Establishment (NTDE). The company has seen a considerable rise in the demand with its wide-ranging products and services from warehousing, transportation to freight forwarding for clients in different sectors, said a company statement. INL offers several points of difference when it comes to the storage and handling of customers’ goods at a predominately temperature-controlled logistics facility with a total capacity of 40,000 fully automated frozen pallet positions, ranging from -18°C to -30°C with state-of-the-art crane and conveyor systems, it said. INL has 36,000+ pallet positions of standard racking controlled at +25°C for flexibility and 64 loading docks for efficient receiving and dispatch of multiple shipments, it added. In addition to warehouse storage, the company offers ready-to-move in offices for immediate occupancy, as well as core and shell that can be tailored for clients’ specifications. The 4,000 sqm is rentable to customers requiring both storage and office solutions, it stated. Ignatius Scholtz, head of operations, INL, said: “2017 is a unique opportunity for client building and re-establishing relationships to foster new partnerships. INL believes it will be a defining year for many industries, and logistics is going to play a significant role in the outcomes. “As demands in logistics solutions to customers are intense, we are confident the industry will sustain this growth in the coming years,” he added.

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Narrow Aisle appoints new Middle East general manager Intralogistics storage solutions company, Narrow Aisle Ltd, has appointed Damien Murray to head the company’s business development across Middle East and Africa (MEA). Murray will be located in Dubai and will be responsible for overseeing the development of Narrow Aisle’s Flexi range of articulated warehouse truck systems throughout the region. John Maguire, commercial director of Narrow Aisle, commented: “Over more than a decade, Narrow Aisle has built a strong distribution network in the MEA region. In order to further build on this business success, we have invested in a dedicated general manager in the region. “We are very pleased to welcome Murray to our growing international business. His knowledge of intralogistics and the local market across the MEA will be extremely valuable, as we seek to further grow Narrow Aisle’s Flexi Articulated market across the continent.” Having started his career with Jungheinrich followed by Aislemaster Combilift, Murray has broad experience of modern warehousing handling systems and delivering space-saving solutions and systems for the third-party logistics sector.

Swiss Watch opens new warehouse in Dubai South

UAE-based distributor, Swiss Watch Group, inaugurated a new logistics facility at Dubai South. The 10,000 sqm complex facilitates the company’s warehousing and logistics requirements. Khalifa Al Zaffin, executive chairman of Dubai Aviation City Corporation and Dubai South inaugurated the facility, located in the logistics district of Dubai South. Pishu Chainani, president of Swiss Watch Group, said: “The Swiss Watch Group is delighted to mark its presence at the world’s first purpose-built aerotropolis. This custom-built facility is the cornerstone of our logistics operations that will help the group work as an integrated hub, seamlessly taking care of imports, warehousing exports, and catering to the retail requirements of the GCC and wider Middle East and North Africa region.” Zaffin said: “Dubai South is integral to maintaining the emirate’s position among the world’s leading centers for trade, transportation, and investment, it also serves to boost Dubai’s status as the aviation capital of the world. With the airport and the neighbouring Jebel Ali Port, we have created new standards of seamless connectivity, offering sea to air cargo transfer in a mere four hours. “A multi-modal futuristic platform, the Logistics District offers companies, such as the Swiss Watch Group, whom we are happy to partner with, the perfect environment to grow their business, plug into the global value chain and leverage the time and cost efficiencies that Dubai South’s strategic location offers.”

Twintec to design jointless floor slab

Concrete flooring contractor, Twintec, is set to design and construct a DM1 floor slab, maintaining all the advantages of a large panel jointless SFRC floor slab. Twintec’s competence was recently demonstrated at a new logistics facility in Qatar, where the independent DM1 flatness survey reported an overall 99.4% compliance with the required specification, making it the flattest large panel jointless floor slab in the GCC. The project has 18m high racking and floor panel sizes up to 32.6m x 32.5m. Twintec designed and constructed the floor slab, utilising high-tensile strength steel fibres, with no saw-cut joints and no remedial grinding required. Twintec’s commercial director, Tom Menary, said “There are key critical success factors to constructing a DM1 large panel jointless floor slab. These include highly skilled and experienced workers on site, precision in-house developed machinery and robust quality control processes. The role of other parties on site is key also with a strictly controlled and prepared working environment for the floor slab construction and the correct concrete mix design, delivery and quality. Twintec takes total responsibility for the floor slab offering a clearly defined Design-Build-Guarantee service that removes any split responsibility”. Twintec has a long-standing track record of designing and constructing high tolerance floor slabs worldwide, including a recent DM1 project in Oman.

FedEx demonstrated industry leadership at MRO Middle East FedEx Express led a discussion on best practices in shipping oversized cargo at MRO Middle East on February 8, 2017. The US-based firm sponsored a panel entitled ‘Engines, Wings or Fuel Tanks… Best Practices in Moving Large, Oversized Shipments’. The panel was hosted by Chris Swearingen, manager of marketing for SenseAware of FedEx Services, and addressed the challenges of delivering oversized shipments. Taarek Hinedi, vice president of operations, FedEx Express Middle East and Africa, said: “FedEx has developed world-class procedures to ensure every shipment, regardless of its dimensions, is delivered with the utmost care. “The company has extensive experience in successfully handling oversized cargo. Our hub facility in Dubai has set new precedents for transporting difficult and sensitive items within the Middle East and beyond.” Sammy Bousaba, managing director of sales, and Saleh Mansour, managing director of operations for FedEx in the Middle East, shared best practices for efficiently managing large international and domestic movements to ensure timely delivery. MRO Middle East guests also visited the company’s booth (#536) to explore the full range of solutions available. On February 5, Vice President and Prime Minister of the UAE and Ruler of Dubai, HH Sheikh Mohammed bin Rashid Al Maktoum welcomed Frederick Smith, the President and CEO of FedEx, to further strengthen ties. Logistics News ME | March 2017 | 53


Save t he dat e

The Month Ahead

The key exhibitions, conferences, and seminars coming up this month

March

7-8

March

7-8

THE CARGO SHOW MENA 7 - 8 March Dubai, UAE The Cargo Show MENA is the event that brings together the entire cargo and transport logistics supply chain to improve efficiency in the movement of cargo across road, rail, sea, and air. It’s all about innovation, supply chain management strategy, IT, and infrastructure, that come together to support transparency and efficiency for the entire logistics supply chain. The show is the meeting point for an industry that is evolving and developing at an unprecedented rate.

MIDDLE EAST RAIL 7 - 8 March Dubai, UAE Multimodal transport infrastructure investment in the region is booming and the logistics industry needs the right transport channels in place to support it. With the growing need to offer a costeffective and reliable mode of transport to both mining and supply chain companies, great steps have already been made to connect the regional freight line networks with local ports. The show will focus on the cargo and the logistics industry, offering companies the opportunity to educate the market, network with buyers, and raise their brand.

54 | Logistics News ME | March 2017

April

26-27

May

9-11

GCC LOGISTICS CONFERENCE 26 – 27 April Manama, Bahrain Bahrain has recently liberalised the transportation and logistics market, so everyone can invest in almost all areas of this sector without restrictions. This has turned the Gulf state into a highly attractive location for the logistics service providers. The twoday conference reaches out to business professionals, politicians, media representatives, students, and to the public, making it a showcase of the service quality and the attractive jobs that the industry has to offer.

9TH GPCA SUPPLY CHAIN CONFERENCE 9-11 May Dubai, UAE Held under the theme ‘Agile and Efficient GCC Supply Chains - The Role of Technology’, the 9th GPCA Supply Chain Conference will offer delegates an exclusive opportunity to explore the benefits of supply chain digitisation in a complex and changing marketplace environment. Attendees will hear from global industry experts about how leading supply chain organisations have leveraged innovative technologies to improve the agility and efficiency of their supply chain operations. Experts will also shed light on the core capabilities required to embark upon a digital transformation journey. www.cbnme.com


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