Global Supply Chain October 2015 Issue

October 2015 Issue 19

ENHANCING THE BUSINESS OF LOGISTICS

OIL

A declining industry?

SAP’s Run Simple Truck Launching at GITEX

Innovation = economic growth

Innovation is the solution from emerging and established countries

DP World harnesses Solar power A sustainable difference to its community

Oil - losing its charm SIGNATURE MEDIA FZ LLE P. O. Box 49784, Dubai, UAE Tel: 04 3978847/3795678 Email: info@signaturemediame.com Exclusive Sales Agent Signature Media LLC P.O. Box 49784, Dubai, UAE Publisher: Jason Verhoven jason@signaturemediame.com Director: Deepak Chandiramani Deepak@signaturemediame.com Managing Editor: Munawar Shariff munawar@signaturemediame.com Art Director: B Raveendran ravi@signaturemediame.com Production Manager: Roy Varghese roy@signaturemediame.com

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

Our cover feature on the reducing allure of the oil industry speaks about the extreme volatility of the business. How fluctuating demand and constant supply are wreaking havoc on prices. And with no response to this tumble from the largest organisation of oil producing nations OPEC, the future of the business is, right now, not looking promising. On page 20.

We have a feature article on technology solutions provider SAP who are creating a SAP truck called the SAP Run Simple Tour right in time for GITEX later this month. This technology solutions on wheels will be at the exhibition and will then embark on a three country regional tour from here to KSA and Qatar. The Run Simple project aims to communicate to clients that using SAP solutions simplifies running businesses and that there’s always a simpler way of doing things. On page 30.

An interesting article on page 40 talks about the relationship between innovation and economic growth in countries all around the world. A few months ago, the UAE government declared 2015 as the ‘Year of Innovation’, and announced a new National Innovation Strategy, with the aim of becoming one among the most innovative nations in the word within a seven-year period. INSEAD, in collaboration with Cornell University and the World Intellectual Property Organisation (WIPO), recently issued the 2015 Global Innovation Index (GII) report. This year, the UAE ranked 47th globally in terms of overall performance in the GII. There are many more interesting features all through the magazine, let me know your feedback.

Munawar Shariff Managing Editor munawar@signaturemediame.com

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

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

OCTOBER 2015 3

October 2015 Issue 19

ENHANCING THE BUSINESS OF LOGISTICS

52 Providing fresh talent Dubai Trade recently held a graduation ceremony for more than 300 CTLP and CCB students

54 The Solar Impulse – a

20

Swiss innovation

06 News 36 Strategic partnership Sharjah and Canaveral Ports 12 Country report – China Authorities sign ground-breaking Reorganising China With China’s rate of growth decelerating, the government is talking about a ‘new normal’

20 Oil, gas and energy:

Down goes the boom

There really is nothing called the oil boom anymore. With reducing demand leading to lower returns, the high cost of investment is hardly attractive

30 SAP – Keeping it simple SAP will present its Run Simple truck at GITEX later this month to showcase its latest industry solutions

4 OCTOBER 2015

‘Sister Ports’ cooperation agreement

40 Innovation = economic growth

The contribution of innovation levels in a country are directly related to its economic growth

46 SCM strategies for insurance claims

Mark Nobilio and Clare Louis discuss current supply chain management issues and trends and imagine a brighter future for scm if insurers incorporate visibility, data, technology, and customer focus into their supply chain management strategy

Daniel Bangser, Director of US Investment Promotion for the Swiss government’s trade and investment agency Switzerland Global Enterprise talks about clean technology and renewable energy’s poster child – The Solar Impulse

56 Staying well-connected Qatar has reiterated that they are on track with the various transport projects currently underway in the country

58 Exploring alternate options

DP World announces plans to harness solar power in Dubai, aiming to make a sustainable difference to the community

60 Unwind Communication is key Vivek Seth, CEO, Halul Offshore Services Company, spoke to GSC about his management style

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Etihad Airways and Chapman Freeborn announce collaboration

Etihad Airways has unveiled a new partnership with leading global aircraft charter specialist Chapman Freeborn, to complement its exclusive The Residence and First Apartment cabins, both available on the airline’s Airbus A380 fleet.

The agreement with Chapman Freeborn is to promote and market the luxurious living spaces to its top-tier clientele, giving them the opportunity to receive the levels of luxury, discretion and technology they expect on private jet, which can now be enjoyed on Etihad Airways’ long haul network.

Guests travelling in The Residence and First Apartments will also be able to charter private jets through Chapman Freeborn for travel onwards from Etihad Airways’ A380 gateways, providing a point-to-point experience to their final destination.

Left to right: Shane O’Hare, Etihad Airways’ Senior Vice President Marketing, and Russi Batliwala, Chief Executive Officer of Chapman Freeborn, celebrate the signing of the partnership

RTA develops comprehensive guide The Roads and Transport Authority (RTA) has recently compiled a comprehensive guide entitled: Policies, Manuals of Maintenance Governance, which outlines the practices ought to be adopted by concerned asset management staffs. The guide has standardised maintenance procedures in all departments across the RTA in a bid to reduce costs, and sustain improvements in operations in accordance with the highest global practices.

“The RTA has a diverse and huge

6 OCTOBER 2015

portfolio of assets including the metro, tram, buses, taxis, marine transit means, roads, infrastructure, buildings, and technological systems among others. This situation requires concentration and the adoption of a professional approach in mapping out and implementing plans to sustain these assets so as to deliver better services to the community, and realise the government’s vision of bringing happiness to people,” said Udai Al Deesi, Director of Assets, Corporate Technical Support Sector, RTA.

Navtor accelerates growth in Asia

Less than a year after opening its first office in Asia, Norwegian e-navigation specialist Navtor is expanding in the region again - this time with a dedicated presence in Japan. Navtor Japan KK will help the firm secure an important foothold in this key

shipping arena.“The importance of Japan to shipping, and to suppliers that serve the industry, can’t be overstated,” says Tor Svanes, Navtor CEO. Since the launch of its ENC service in 2012, Navtor has hit the market with a

series of products – such as NavTracker fleet management and NavStation, the world’s first digital chart table. In its home nation, for example, its ENC service has enjoyed such success that it is now used by over 50 per cent of the entire Norwegian fleet.

Svanes’ ambitions for Asia are equally as bold. He comments,“As the IMO’s ECDIS Mandate continues its gradual roll out, the global demand for proven e-navigation solutions is booming. This is especially true in Asia, home to some of the world’s key shipping lanes. The industry here is very open to innovation, so the way our technology can drive efficiencies through the secure distribution of digital navigational data will be a very compelling proposition. We are sure we can make a real impact on the market here.”

Navtor Japan K.K. is led by Managing Director Hiroaki Kitano, an experienced figure within Japanese and Norwegian business environments, having previously worked regionally for SAS (Scandinavian Airlines).

Market demand drives Farnek sustainability investment UAE-based total facilities management company Farnek, has made significant investment in human capital, after recruiting a number of key executives to support its rapidly expanding sustainability business, buoyed by the soaring demand for expert consultancy in energy, water, carbon and waste management.

With his master’s degree in energy and his LEED AP, GSAS CGP and PQP credentials, Pakistan national, Muhammad Jaffar, has been appointed as Head of Consultancy – Energy Efficiency. In his new role, Jaffer will take direct responsibility for all activities related to energy efficiency services,

Sambath Kumar

Rijo Abraham

Muhammad Jaffar

including our benchmarking Hotel Optimiser for hotels, residential and commercial buildings, Energy audits, ISO 50001, Carbon assessment and ESCO projects.

Jaffer is joined by two new energy consultants at

Farnek – Indian nationals Rijo Abraham who has CEM, CMVP certifications and Sambath Kumar, who is a and CMVP and Certified Energy Auditor professional. Both these professionals are mechanical and electrical engineering

conversant with the latest energy management audit strategies and policies. They will be responsible for detailed energy and walk through audits, monitoring, evaluation and critical analysis of building energy flows.

OCTOBER 2015 7

Abu Dhabi Air Expo 2016 takes off on a bigger scale

Emirates increases Phuket service

Emirates has announced additional services between Dubai and Phuket, starting December 1, 2015. Responding to high customer demand, in particular during the peak winter travel season, the new flights will double current capacity and ensure better connections for travellers from cities in Europe, the Americas and the Middle East, via the airline’s Dubai hub.

Emirates will operate the new flights with a Boeing 777-300ER, offering eight seats in First Class, 42 seats in Business Class and 310 Economy Class seats.

Passengers also have the added bonus of a generous baggage allowance with 30 kilograms for those travelling in Economy

8 OCTOBER 2015

Class, 40 kilograms for Business Class, and 50 kilograms for First Class. EK396 will operate four times per week, while EK394 will operate three times per week.

In other news, Emirates celebrated the completion of over 859,000 flights of the US-built Boeing 777, while logging over 4,720,000 flight hours since its first delivery in 1996. Emirates’ 147-strong Boeing 777 fleet criss-crosses the globe, currently serving 98 destinations on six continents. These staggering operating milestones underscores Emirates’ long-term commitment to the Boeing 777 programme, and its contribution to aerospace manufacturing and related jobs in the US.

In cooperation with Abu Dhabi Tourism and Culture Authority, and as part of the Abu Dhabi Aviation and Aerospace Week launched under the patronage of His Highness Sheikh Mohamed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces, Abu Dhabi Airports has announced the dates and highlights of its three key events taking place in March 2016.

These will be: Abu Dhabi Air Expo 2016, Middle East Aviation Career Conference & Exhibition, and Abu Dhabi Heli Expo 2016.

The Abu Dhabi Aviation and Aerospace Week is a national initiative aimed at focusing attention on the country’s thriving aviation and aerospace sector, by hosting all major aviation related activities within Abu Dhabi during a single dedicated week.

Abu Dhabi Airports’ three events will take place from March 8th to March 10th, 2016, at Al Bateen Executive Airport, the region’s only dedicated business aviation airport.

This will be the fourth cycle of the Abu Dhabi Air Expo which has now become a biannual event. It brings together major players in general and business aviation, providing attendees with the chance to discover the industry’s latest developments and innovations.

Information Security Governance practices maturing Information security governance practices are maturing according to Gartner, Inc’s annual end-user survey for privacy, IT risk management, information security, business continuity or regulatory compliance. Gartner surveyed 964 respondents in large organisations in seven countries between February and April 2015.

“Increasing awareness of the impact of digital business risks, coupled with high levels of publicity regarding cybersecurity incidents, are making IT risk a board-level issue,” said Tom Scholtz, vice president and Gartner Fellow.“Seventy-one per cent of respondents indicated that IT risk management data influences decisions at a board level. This also reflects an increasing focus on dealing with IT risk as a part of corporate governance.”

The nature of the reporting lines of the information security team is one of the key attributes of effective governance. Thirtyeight percent of the survey respondents indicated explicitly that the most senior person responsible for information security reports outside of the IT organisation.

The seniority level from which security programmes are sponsored is also improving.

Sixty-three percent of the respondents indicated that they receive sponsorship and support for their information security programmes from leadership outside of the IT organisation.

On the effectiveness of security policies, although half of the respondents indicate the governance body is involved in assessing and approving the policies, only 30 per cent of respondents indicated that the business units (BUs) are actively involved in developing the policies that will affect their businesses.

Additional details on the security market will be discussed at the Gartner Security & Risk Management Summit, to be held on November 2 and 3 in Dubai, UAE.

NAS wins tender to provide meet-and-assist and lounge services at Sharm El-Sheikh International Airport National Logistics Services Egypt, a subsidiary of the NAS Group, has been awarded a tender by Egyptian Airports Company to provide premium meetand-assist and lounge services at Sharm El-Sheikh International Airport, one of the top 10 busiest airports in Africa.

NAS will offer Pearl Assist, a worldclass meet-and-assist service for the estimated seven million passengers travelling through Terminals 1 and 2 of Sharm El-Sheikh International Airport each year. Pearl Assist will help travellers to obtain expedited visa upon arrival and be guided through immigration clearance, baggage claim and finally, to their transportation pick-up point.

NAS has also started operating a

lounge at both terminals since June 2015.

The Pearl Lounge provides passengers with a wide range of services before they board a flight, including comfortable seats, charging stations, complimentary Wi-Fi, a play area for kids, and an assortment of snacks and beverages.

The Pearl Lounge is accessible to special cardholders such as Priority Pass and Airport Angel members, employees of premium banks, and business class passengers.

To make their services more accessible and improve passenger experience, NAS has introduced a booking portal at www.pearlassist.com, mobile phone applications and other airport technologies for all Pearl services.

OCTOBER 2015 9

Etihad Airways discusses best practices of sourcing talent at the Global Aviation Talent Summit 2015

TALKE in Moerdijk is now AEO F Certified Following a successful audit, the TALKE Group has received the full status of an Authorised Economic Operator (AEO) for its Dutch location in Moerdijk. Among other things, the certificate – which is issued exclusively by customs authorities – enables quicker customs clearance for export goods, which is a significant advantage in the international exchange of goods.

With the upgrade to AEO F, the company has now proved that the location also complies with the high security requirements of the customs.

These include controlling access to the company site, provisions to prevent manipulations to goods, and security checks for customers,

suppliers, employees, temporary workers and interns.

TALKE’s AEO F status also means customers can rely on even faster customs clearance.

As a result of the officiallyrecognised high security and legal compliance of the chemical logistic company’s services, the certificate paves the way for fewer checks of the goods and accompanying documents by the customs.

The AEO standard is part of the extensive modernisation of customs processing within the European Union, whose aim is to secure an end-toend international supply chain, which starts with manufacturers of a product and proceeds right through to the end consumer.

Etihad Airways joined airline HR and talent acquisition executives from around the world to discuss best practice in sourcing and attracting aviation professionals at the Global Aviation Talent Summit in Abu Dhabi. Hosted by cut-e, in partnership with Etihad Airways, the summit saw professionals discuss best practices in assessments for screening, talent selection and development methodologies, the latest online recruitment systems and assessment tools, benchmarking, and improvements in the quality of recruitment practices. Said Mona Walid, Etihad Airways’ Vice President of Talent Acquisition, “The aviation industry is unique as it requires a great variety of talent to operate – cabin crew, pilots, engineers, marketers, lawyers, caterers, load controllers, network planners, revenue managers, social media managers, and more. This diverse range of roles, coupled with the fact that Etihad Airways receives more than 250,000 applications each year, means that we need modern, transparent, time-efficient and simple recruitment solutions.”

Executives also attended sessions on risk management in hiring, succession planning, and talent pipelining. Airline representatives in attendance included those from British Airways, Virgin America, Scandinavian Airlines, Aer Lingus, Finnair, flydubai, Royal Jet, Turkish Airlines, Emirates and Etihad Airways’ equity partner Air Serbia.

In other news, Etihad Airways and its equity partner airlines have increased the funds raised from their unique platform financing transaction to US$ 700 million (AED 2570925000), following a surge in demand from international financial institutions. Etihad Airways, Etihad Airport Services, airberlin, Air Serbia, Air Seychelles, Aliltalia and Jet Airways announced that they had successfully raised US$ 500 million (AED 1836375000) through the transaction, which followed roadshows in Abu Dhabi, Dubai and London. The funds, which will be split across the seven businesses, will be used for a mixture of capital expenditure and investment in fleet, as well as for refinancing, depending on each airline’s individual needs.

flydubai selects Mindtree as a strategic technology partner Mindtree has announced a strategic partnership with Dubaibased flydubai to shape the full digital experience of the connected traveller.

Mindtree will focus on transforming flydubai’s information technology to support passenger sales and service

10 OCTOBER 2015

systems, including services such as electronic ticketing and real-time baggage tracking. The agreement will also extend to other strategic business areas such as revenue management, target monitoring, ancillary revenue and operational optimisation.

Said Ramesh Venkat, Chief Information Officer of flydubai, “We welcome this agreement with Mindtree who bring their creativity, IT architectural design capabilities and experience of working within the aviation industry.” Added Parthasarathy

N S, President and Chief Operating Officer of Mindtree, “We will work with flydubai to digitise their value chain, hone operations and create remarkable experiences for each traveller before, during and after their journey.”

Jafza organises three-day Community Wellness event road and burn accidents etc. The Health, Jebel Ali Free Zone (Jafza), Dubai’s Fitness and Weight Assessment Session flagship free zone entity, held a threefocused on the employee’s well-being day Community Wellness Event at the and fitness issues and assessments.

Free Zone, which included a Blood The Jafza Wellness Day included health Donation Drive, Health, Fitness and education on anti-smoking and tobacco Weight Assessment Session, and a hazards; back pain and problems related Jafza Wellness Day. The event was to desk-bound office job; osteoporosis part of Jafza’s CSR activities plan, and the importance of vitamin D; which focused on creating awareness healthy diet for healthy life style, dental about people’s social responsibility, as Fatma Hussain, check-up; eye test and blood pressure well as to increase consciousness of Senior Manager – CSR, Jafza Marketing and blood sugar check-up conducted by living a better and healthy life. & Communications a highly professional team of specialised The Blood Donation Drive, the doctors, dieticians and wellness experts and second that Jafza organised in the year, provided health counsellors. assistance to Thalassemia patients, victims of

Jafza employees and Customers at the wellness day event

Enec completes installation of Unit 2 Steam Generators at Barakah The Emirates Nuclear Energy Corporation (ENEC) has announced the completion of yet another milestone in the development of the country’s first nuclear energy plant, with the successful installation of its Unit 2 Steam Generators (SGs) at Barakah.

The two huge stainless steel SG units, which are similar in length to a tennis court, were manufactured in South Korea over a period of four years by Doosan Heavy Industries – part of ENEC’s Korean Prime Contractor consortium. Following manufacture, the generators were then shipped to Barakah, where they were set in place inside the Unit 2 Reactor Containment Building (RCB).

Over the next six months, further piping connection work will take place to connect the SGs to the Unit 2 Reactor Vessel, Turbine Generators and Condenser in order to allow water and steam to pass in and out as required for the electricity production process.

Launch of the world’s first technologyfocussed forwarder network, Centrolene With the launch of the Centrolene Network, freight forwarders now have access to the two things they need to win more businesses – strong partnerships and powerful technology. The Centrolene Network is the world’s first freight forwarder organisation built around a common technology platform – the Centrolene C-Suite. The Centrolene Network uses this technology to redefine the old forwarder networking model and bring it into the digital age.

Chief Executive Officer Alex Ruf said the Centrolene Network changes the way forwarders operate by giving them a complete ecosystem of technology that lets them outperform their competition.

“The C-Suite is the only fully integrated solution for the logistics and supply chain management industry and has been designed by industry professionals, for industry professionals. A key benefit of the C-Suite is the ease with which this new technology can be integrated into the forwarder’s business.

C-Suite eliminates the problem of getting software from different companies to work together, saving the forwarder both time and money.”

Centrolene’s C-Suite is a cloudbased system using the platform and infrastructure provided by Microsoft Azure. Microsoft Azure has industry-leading security measures and privacy policies, which have been independently verified.

OCTOBER 2015 11

COUNTRY REPORT CHINA

Reorganising

China With China’s rate of growth decelerating, the government is talking about a ‘new normal’. This new normal calls for better allocation of credit and an indigenous capacity for innovation.

This excerpt from The World Bank’s China Economic Update 2015 gives an overview of the country’s current economic situation

12 OCTOBER 2015

A

s structural adjustments and policy efforts to address financial vulnerabilities continue, growth in China is expected to decelerate to 7.1 per cent in 2015, and to 6.9 per cent by 2017. Progress in rebalancing the sources of growth in domestic demand will remain incremental.

Investment growth will continue to decelerate due to credit tightening and ongoing property adjustments. In 2017, gross capital formation is expected to contribute 44.4 percentage points of GDP, and aggregate consumption 52.7 percentage points. Economic growth will continue moving from an industrial to a services base. A transition from capital and resource-intensive industries to services will remain rapid, facilitated by policies to ease business regulations in the services sector and tighten excess capacity in industrial sectors. Growth in services is expected to outpace that in manufacturing, contributing more than half of GDP growth by 2017.

The external environment will be supportive, but real effective appreciation of the RMB is likely to put pressure on export growth. Global growth remains broadly on track to reach about 2.8 per cent in 2015, with a modest pickup to 3.2

COUNTRY REPORT CHINA

Hongkong Cityscape, China

OCTOBER 2015 13

COUNTRY REPORT CHINA

Hongkong, China

per cent in 2016-17. The recovery in some high-income countries has been gathering momentum more rapidly than previously anticipated, while a broad-based slowdown appears to be underway in developing countries. Over the next three years, global activity should be supported by continued low commodity prices and generally benign financial conditions, notwithstanding the expected modest tightening in US monetary policy.

Among major economies, the Euro area and Japan have picked up, and the United States continues to expand at above potential. High-income countries are expected to grow by two per cent in 2015, and 2.3 per cent in 2016-17. Although a gradual tightening in US monetary policy is likely from this year, overall financial conditions have been benign thus far, and while China’s reliance on external financing is low, rising interest rates could increase debt-service costs for some corporations.

China’s external debt represents less than six per cent of total debt, but in absolute dollar terms, it is steep, at about USD 1 trillion (AED 3.67 trillion) in mid-2014.

A tapering pace of economic growth in China will bring slower household income

14 OCTOBER 2015

growth and a decline in the rate of fall in rural poverty. Rural poverty rates, at the World Bank poverty line of USD 1.25 (AED 4.59) per day, are projected to be cut by more than half, from 6.4 per cent in 2014, to 2.8 per cent in 2017. Narrowing the gap between rural and urban average incomes will help reduce overall inequality.

There are some downsides to the growth outlook. Although unlikely, China’s gradual rebalancing of growth drivers could still turn into an investment rout. The reforms being cautiously implemented could, unintendedly, disrupt growth, in one of at least two main ways. First, a correction in asset prices, a contraction in public investment and construction, and a rapid unwinding of financial vulnerabilities could arise. Second, as sectors operating at low capacity utilisation wind down their activities—as part of the authorities’ reform plans—they could slip into financial distress, causing nonperforming loans (NPLs) for financial intermediaries and other investors. A weakening of lending institutions’ capital bases could lead to a more general tightening of credit. There is also a risk that if confidence in China’s growth prospects wanes as high-income country growth strengthens, private capital

outflows might accelerate, despite capital controls, prompting the authorities to tighten domestic financing conditions.

Global risks to growth remain tilted to the downside. Deflation risks still lurk for the Euro Area, but have largely receded as inflation expectations have recently picked up, and the beneficial effects of lower commodity prices on economic activity may yet turn out stronger than expected. However, new risks have arisen.

The likelihood of disruptive exchange rate adjustments in developing countries may have increased, as the first post-crisis policy rate increase nears in the United States. In addition, growth in the United States may be more fragile than anticipated, and may be slowed more than foreseen by the broadbased dollar appreciation.

While China has enough of a buffer to address these risks and avoid recognising losses and recapitalising, financial intermediaries may be inclined to roll over NPLs to ailing firms. The upshot could be constrained lending to productive firms – capital misallocation – and a prolonged period of stagnation. In such a scenario, economic resource misallocations, particularly in the financial sector, would continue to reduce the

Singapore City, China

productivity of firms, the strength of financial institutions, and the confidence of consumers.

In these circumstances, monetary policy loses its effectiveness as even lower interest rates would not be able to trigger highly indebted companies to invest more. At some point, high level of corporate debt could trigger a balance sheet slowdown – a slowdown of economic growth caused by corporate sector’s collective focus on paying down debt rather than on investing and spending, as in Japan in the mid-1990s. Mitigation of these risks will require- in the short run -a careful balancing act between reform and demand management measures, and – in the long run – adopting a systematic approach to strengthening financial sector discipline.

Balancing reforms and short-term demand management remains a priority in 2015. Engineering a gradual shift to a more sustainable growth path poses challenges for policy makers, given real-sector weaknesses and financial-system vulnerabilities. Efforts to cut excess capacity in heavy industry, reduce supply mismatches in residential property, dampen unproductive risk taking in shadow banking, and harden budget constraints on local governments will help make investment more efficient and realign growth over the

16 OCTOBER 2015

medium term. In the short term, however, such reforms will depress activity. Official targets for 2015 signal a downward trajectory, with GDP targeted at about seven per cent, half a percentage point lower than in 2014.

Conversely, stimulus measures aimed at supporting short-term growth may conflict with efforts to increase the sustainability of medium-term growth. A narrowly targeted stimulus may mitigate the trade-off, but will also be harder to implement as using just administrative measures to reallocate credit to priority sectors are not as effective as market based mechanisms. The projected gradual growth deceleration assumes a firm commitment to pushing through structural reforms and to reducing vulnerabilities; at the same time, targeted stimulus is expected to attenuate the impact on short-term growth, should this show signs of slowing too much below the government’s indicative target of about seven per cent.

Weak growth in the first quarter indicates that reaching this target for 2015 would require an accommodative policy stance. It is expected that the authorities will intensify use of demand management to shore up growth (beyond recent measures). Further, the late-April Politburo meeting suggests

that growth stabilisation is increasingly becoming a priority, and recent policy measures imply that the central government will take a softer line on implementing its reforms for the new local government debt framework: it will likely provide sufficient transitional arrangements to finance ongoing infrastructure projects and refinance maturing debts. Recent policy statements, too, indicate that policy banks will become more active as financing tools for local governments, while a recent reduction of resource tax on iron ore suggests a more gradual approach to reducing excess capacity.

The new budget for 2015, approved in March, has fiscal policy becoming more accommodative, with the fiscal deficit widening to 2.3 per cent of GDP. The widening of deficit by 0.2 percentage points arises from new tax rates, including replacing business tax by VAT for all industries and reducing fees to strengthen support for the real economy.

Efforts will be made to decrease administrative charges for small and micro businesses to limit the administrative and regulatory burden.

Policy support will be needed to address the local government financing gap. While the debt swap mentioned earlier addresses key immediate challenges, the proportion of

COUNTRY REPORT CHINA

The Forbidden city in Beijing, China

debt and contingent liabilities not covered by it will be heavy for many provinces. It is expected that the PBOC will take a more indirect role in purchasing these bonds via its Pledged Supplementary Loan operations window using a proxy, such as the China Development Bank. This window was used in the past to design a financing vehicle for the social housing initiative.

Public investment will be used as a growth stabiliser. Recent policy documents suggest that public investment will be increasingly targeted to major national and transregional investment projects that have strong positive externalities. Similarly, efforts to rebuild rundown urban areas will carry on.

Monetary policy is set to remain accommodative, in tandem with efforts to contain shadow-banking credit growth.

Aggregate credit growth is poised to remain above nominal GDP growth. However, despite recent efforts to lower the required reserve ratio and benchmark interest rates, liquidity conditions are still tight due to capital outflows, moderating deposit growth, and sharply decelerating non-bank credit.

The authorities have also signalled that measures will be taken to increase the trading band of the RMB, but when is unknown.

The reversal of capital flows has tightened domestic liquidity and required active, ad hoc liquidity management by the central bank to avoid a liquidity crunch. However, the PBOC is also concerned that monetary easing using rate cuts, or a reduction in the required reserve ratio, would exacerbate the leverage issue and contribute to existing credit imbalances in the financial sector.

China is progressing with structural reforms.

At the Third Plenum of the Central Committee of the 18th Party Congress of the Communist Party of China (CPC) in November 2013, the government set out an ambitious programme of 15 key reform areas, covering 60 economic and social reforms, with the overarching objective of giving ‘the market a decisive role in resource allocation’, and of improving government efficiency. The authorities are pressing ahead with implementing these reforms, but with reforms to improve allocation of capital going faster than those to address frictions in labour and land markets.

A decline in the CPI provides an opportunity to address price distortions in product and factor markets. As part of its price reforms, the government is expected to continue adjusting prices for transport, energy, and utilities, and taxes on resources, energy,

and the environment. Not only should these moves reduce, or even eliminate, government price controls, they should also help lessen price distortions and improve resource allocation in the economy, offsetting (to an extent) mounting deflationary pressures.

The transition to the ‘new normal’ requires a better allocation of credit and indigenous capacity for innovation.

China’s key medium-term policy challenge is to engineer an orderly transition toward higher-productivity, equitable, and sustainable growth—as seen. An increase in productivity is critical to rebalance growth on the supply side from capital- and resourceintensive industries to services, while an increase in the labour share of GDP is critical to rebalance growth on the demand side from investment to consumption.

While annual data suggest that household income and wage shares in GDP have started to rise (in part due to a demographic transition), reversing a two-decade trend, a transition to more equitable growth will be gradual. Hence, aggregate consumption to GDP will continue to increase, supported by a declining savings rates and higher household income share in GDP. Continued efforts to undertake structural reforms will facilitate these transitions, but a gradual moderation of medium-term potential growth trajectory will continue.

In May 2014, President Xi Jinping used the term ‘new normal’ to describe an evolving economy of slower growth and new risks that will require a more efficient and effective bureaucracy, the rule of law, and other reforms. His premise is that upgraded economic structures and innovation will be the core of a strategy for sustainable, albeit moderated, growth over the next two decades. China’s top leadership has articulated the needs for markets to play an expanded role in this growth.

The leadership’s policies to adjust to the ‘new normal’ include structural fiscal and financial reforms, governance modernisation, a more streamlined bureaucracy, the rule of law, upgraded economic structures, and greater innovation. He acknowledged the risks and challenges flowing from the new paradigm, and reiterated the collective will to ‘comprehensively deepen reform’ to benefit from this new normal.

OCTOBER 2015 17

COUNTRY REPORT CHINA

China’s medium-term potential growth trajectory Will China be able to sustain medium to high growth over the next two decades? Much depends on how the global environment evolves and on the structural forces that are already at work within China. But this much is likely to happen: within the next decade, China’s economy will shift from rapid to moderate growth, with average annual growth of around five per cent.

First, because of a weaker external demand, China’s export growth will slow. Second, continuing capital accumulation will contribute less to growth as the capital-labour ratio rises.

And changes in the demographic profile will lead to a decline in the labour market participation rate. China’s working-age population is expected to decline, and labour’s contribution to growth will turn negative. In addition, the spatial transformation in labour markets will contribute less to growth. And finally, total factor productivity (TFP) growth—a measure of improvements in economic efficiency and technological progress— has also declined, in part because the economy has exhausted gains from first-generation policy reforms and the absorption of imported technologies.

While there is broad consensus that China’s growth is likely to slow, there are different views how fast this adjustment will happen. The baseline scenario assumes that this moderation of growth will be orderly and gradual. China has avoided economic setbacks: not only did economic growth average nearly 10 per cent over more than three decades, it fell measurably below seven per cent only once. At the same time, global and domestic trends are also likely to give rise to many risks that could slow economic growth and disrupt China’s progress to become a high-income, harmonious, and creative society.

Managing the transition from a middleincome to a high-income society will itself prove challenging, and a global environment that will likely remain uncertain and volatile for the foreseeable future makes the task doubly daunting. Any sudden slowdown could unmask inefficiencies and contingent liabilities in banks, enterprises, and different levels of government – heretofore hidden under the veil of rapid growth – and could precipitate a fiscal and financial crisis. The risk

18 OCTOBER 2015

of sharply lower growth rates is exacerbated by China’s relatively high income and asset inequality, low consumption, and unequal access to quality public services.

Implementation of much needed structural reforms will not reverse a moderation of economic growth over the next decades. It is also clear that many second-generation reforms are likely to have a significantly smaller impact on growth than the first-generation reforms that led to rapid technological absorption in the manufacturing sectors. However, without reforms, the growth slowdown would be more severe.

Analysing the effect of such a reform package will require quantifying both the supply and demand side factors of economic growth and their links. To project the effect of reforms on growth, Urban China study adopted the computable general equilibrium model of China’s Development Research Centre. Different from the simple macro model of aggregate production function, it can better simulate the effect of structural changes. China still has potential to use reforms to unlock growth dividends from increased labour force participation, reallocation of excess labour from agriculture, and total factor productivity growth.

The following three sets of policies will contribute to higher growth rates under a reform scenario: Land and labour market reforms that stimulate the reallocation of excess labour from agriculture to other sectors can increase annual growth by about 0.2 percentage points.

Public finance reforms that strengthen the

accumulation of human capital by ensuring equal access to public services.

Reforms that enhance the efficiency of urbanisation by strengthening agglomeration, connectivity, and specialisation will promote agglomeration economies.

First, the transition to the ‘new normal’ will require a better allocation of credit to deleverage the economy while maintaining growth. An increase in corporate and local government leverage after the global financial crisis has been very rapid, and has resulted in declining debtservice capacity. Globally, rapid rises in the creditto-GDP ratio, as in China, are usually followed by slower economic growth. This is true for economies as varied as Chile, Ireland, Malaysia, and the United States.

Cross-country evidence shows that credit booms can stimulate economic activity, but a rapid build-up of leverage has a long-lasting impact on corporate and household behaviour, leading to subsequent below-trend economic growth, which, on average, slows by 2.2 percentage points after a credit boom. Only a minority of booms have ended in financial sector crashes, but some of these crashes have been spectacular. Countries with high savings rates appear to decelerate less sharply.

China has tempered the pace of total credit growth, but unless it adopts a systematic approach to strengthening financial sector discipline, the measures are inadequate to ease the misallocation of credit and the build-up of risk.

China’s financial system was developed to serve the old investment-driven growth model, effective during earlier phases, but less so now. So, in the absence of policy interventions, the financial system will be unable to support any major reallocation of credit to those sectors that can maintain reasonable growth.

Yet, China does not have the luxury of waiting decades to fully develop these skills. To reap the benefits of extensive R&D spending, the entire ecosystem (including institutions) has to be directed to developing innovations and productively applying them. China has a vast number of institutions supporting this ecosystem, but their overall dovetailing is a work in progress.

New Heights in

Reprinted with permission from Inbound Logistics magazine February 2015.

COVER STORY www.inboundlogistics.com/subscribe Copyright Inbound Logistics 2015

boom : y g r e n e il, gas and

e h t s e o Down g

O

There really is nothing called the oil boom anymore. With reducing demand leading to lower returns, the high cost of investment is hardly attractive. Since everything rests on growth, what happens when that slows down. Joseph O’Reilly has more

20 OCTOBER 2015

T

he North American oil and gas industry has always wavered between boom and bust. Volatility comes with the business. Supply and demand ebbs and flows as geopolitical flare-ups dictate.

Wellheads dry up. New ones emerge. Producers are constantly on the move looking to locate the next big rig, whether it’s offshore or on land, drilling for conventional liquid oil or unconventional shale gas.

The last decade has been an out-and-out land grab in the North American energy sector, demonstrated by explosive growth in Northern Alberta’s tar sands, North Dakota’s Bakken shale formation, Appalachia’s Marcellus Basin, and the Eagle Ford and Permian plays in Texas. This impact is now being felt throughout the broader supply chain as cheaper energy lures industrial bases closer to demand.

For all the upstream potential, there are also inevitable headwinds. The oil and gas

COVER STORY

industry is hyper-sensitive to macroeconomic pressures, especially consumption in China and conflict in the Middle East. This past year was no different. As global demand for oil waned in 2014 and OPEC, the world’s largest oil cartel, resisted cutting back production to inflate prices, supply flooded the market. Now falling oil prices are eroding margins. Simply, it costs more to produce.

Other pressures come to bear as well.

Regulatory inertia with regards to hydraulic fracturing and crude by rail remains a latent concern. The rapid growth of liquefied natural

Volatility comes with the business.

Supply and demand ebbs and flows as geopolitical flare-ups dictate. Wellheads dry up. New ones emerge. Producers are constantly on the move looking to locate the next big rig

gas (LNG) has kicked open a new export market for North American producers. It’s also kickstarting a transportation revolution as carriers across all modes explore LNG for locomotion.

On the legislative side, the Keystone XL pipeline impasse directly impacts midstream activities.

External factors notwithstanding, energy companies need only look under the hood to identify where they’re leaking oil – and money.

Industry has long been laggard in managing costs. Growth has focused on increasing yields and generating revenue. Consequently,

OCTOBER 2015 21

COVER STORY

producers have been slow to manage and optimize their supply chains. Now these systemic failures are lowering the boom as industry confronts an inevitable bust.

Capital punishment The amount of investment that has seeped into the oil and gas space over the past decade is unprecedented. Speaking at the second annual SCM Leaders On Demand oil & gas symposium in Houston, Texas, in November 2014, Dennis Cassidy, managing director for consulting firm AlixPartners, documented this outlay.

“There has been a renaissance in capital flooding into the oil and gas industry,” he said.“More than $1 trillion was invested

22 OCTOBER 2015

worldwide in 2014; 75 percent of that was spent in upstream activities at the wellhead.

There has also been a midstream bonanza in the United States, as industry looks for ways to build infrastructure to get oil to market.”

But there’s a problem. Given market volatility and deteriorating oil prices, energy companies and their backers aren’t seeing the same kind of returns as in the past. Easy capital is drying up. Companies can’t just knock on Wall Street doors looking for free handouts anymore. Investors simply won’t support an industry that is underperforming.

So an uneasy pressure is building within the oil and gas business that threatens to burst.

“The industry is on an unsustainable path,” Cassidy said.“Something has to give.”

AlixPartners has been tracking these changing dynamics, recently partnering with UK-based Oxford Economics to survey C-level oil and gas executives at more than 250 global companies across all industry streams. The results are eye opening.

For one, 70 percent of executives report they are not actively managing costs.

Why? Invariably, everything the business is evaluated on – such as incentives, agreements, and leaseholds – pivots on growth. It comes down to two primary levers, according to Cassidy: First, absolute throughput at the wellhead, then portfolio management – or how companies are structuring deals and aligning with global partners.

COVER STORY

Consequently, AlixPartners discovered that project management and cost management are far down the priority list.

“Consider that these companies are custodians of $1 trillion,”Cassidy noted.“But only 20 percent of the time do they expect a project to come in at or under budget; and only 47 percent of the time do they expect a project’s rate of return to land within their original planned horizon.”

AlixPartners’ research points to several reasons why oil and gas companies are delivering projects below expectations: Lack of technology for execution.

Synergies in planning processes are incomplete, inconsistent, and often too siloed.

“Some of the biggest oil and gas Culture is not focused on project companies don’t know what their supply management. chain spend is,”Love notes.

Competition for resources.

Talent acquisition is another area that Lack of centralized processes. would seemingly be top of mind among Inaccurate data.

C-level observers. Cassidy’s clients often Poor talent acquisition. point to human resources as one concern The failure to properly apply and integrate they grapple with. logistics technology contributes to many Yet it ranks low in importance. visibility problems that oil and gas companies “It’s startling that the majority of items encounter. As sophisticated as industry is affecting the success of oil and gas projects on the production side, back-end support is are execution related,”Cassidy said. years behind.

“Management affects these items.”

Considering the complexity of managing While there is a burning platform for well site logistics in a just-in-time (JIT) better project and cost management, environment, costs can quickly spiral out of industry is still largely externally focused. control.

“One of the industry’s unique challenges is Surveyed executives report they are trying to do a better job of forecasting and tracking moving equipment and materials to latitudemacroeconomics – in other longitude coordinates,” words, predicting the price explains Alaster Love, vice As global demand of oil. But that’s a moving president, oil and gas for target and ultimately a Frisco, Texas-based thirdfor oil waned in losing proposition. party logistics provider 2014 and OPEC, Realistically, many of Transplace.“For example, these challenges, and the deliveries can sometimes be the world’s levers producers need to pull, six miles into a ranch in a largest oil cartel, are within management’s remote area.” control. But change, as often As onshore development resisted cutting is the case in siloed supply in North America expands, back production chains, does not come easily. the amount of materials Case in point: when oil and (frac sand) needed to inflate prices, gas executives were asked to facilitate drilling is supply flooded whether they are ready to growing accordingly. assume these new challenges, Consolidating resources the market. Now 80 percent said“no.” and managing longer lead times in a decentralized, falling oil prices are That sentiment is likely to change in an $80/barrel JIT environment is fraught eroding margins. environment. with risk.

“Professionalising” Simply, it costs logistics Oil pressure more to produce Given these stiff “Oil and gas companies headwinds, it’s inevitable also operate 24/7/365, so it’s that energy companies will turn to logistics sometimes necessary to receive equipment service providers for guidance. The growing first-flight-out because of operational costs,” complexity of on-site logistics demands a Love adds.“If an oil well goes down, even different management structure to ensure if it’s onshore, it’s a tremendous loss. Other operations run as seamlessly and efficiently as industries don’t have this type of pressure.” possible—especially when you consider the In these types of remote environments, where amount of outsourcing activity at well sites. companies often rely on many small momAlberta, Canada’s Athabasca tar sands and-pop carriers and local contractors to deliver have been the epicenter of North America’s requisite materials and services, transportation natural gas renaissance over the past decade. management becomes a critical success factor.

Most of this growth is in“unconventional” But industry has been slow to adopt and use development, where horizontal drilling and solutions to manage this complexity.

OCTOBER 2015 23

COVER STORY

which only breeds inefficiency. The growing fracturing are necessary to tap harder-tovolume of transport activity in remote areas reach gas reservoirs. also increases risk exposure.

“The key difference between conventional About six years ago, Shell Canada began and unconventional is hydraulic looking more closely at how it manages fracturing,”says Asuyuo Edem, manager logistics in the field. The company saw a of unconventional logistics, Shell Oil need to enhance data quality, Company.“A huge volume of reduce manual processes, transportation is required to and improve its social license deliver frac sand and water Given market to operate – in other words, necessary to facilitate this the level of acceptance or volatility and process.” approval by local communities The volume of inbound deteriorating oil and stakeholders of mining material movements companies and their challenges well sites because prices, energy operations. Shell recognized historically there has been a companies and that professionalizing logistics low level of coordination at and increasing safety go hand the field level.“It’s common their backers in hand. knowledge that logistics aren’t seeing “The first time I went into a is an afterthought in the wellhead to manage logistics, unconventional space,” Edem the same kind of the site manager said he didn’t adds.“Everybody is a logistics returns as in the need my help to manage manager and coordinator.”

That’s the core problem. past. Easy capital dispatch. That man is now one of our strongest advocates,” It’s a fragmented and is drying up Edem says. decentralized environment,

24 OCTOBER 2015

“We’ve moved from ground zero to setting up logistics cells in almost all the areas we manage.”

Shell put in place field logistics coordinators tasked with receiving requirements from various businesses, then planning and sourcing assets to meet demand. As easy as it sounds, the approach presented a sea-change shift in how sites operate.

An unconventional wellhead is a hub of activity. Drilling groups, frac crews, production facilities, and construction/ maintenance are all dependent on transportation. A high volume of service calls and multiple on-site representatives (OSRs) need materials“yesterday.”Transportation tends to be highly uncoordinated. In a decentralized environment, consolidation is challenging. Backhaul opportunities go wanting.

By 2013, Shell decided that it needed to push its logistics delivery model to another level by adopting a 4PL-type model. The strategy was not without precedent. The

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But times are changing. As natural gas becomes more difficult to reach, especially in unconventional shale formations, producers are drilling holes in their supply chains to mine new efficiencies and economies that offset increasing exploration and production costs. Logistics is an area ripe for improvement.

When Menlo came on board, it prioritized a few key facets within its existing solutions set. First, the 3PL wanted to invest in the Migrating to a 4PL model business overall. In some industries, such as Today, Shell uses 4PLs throughout its North retail, it’s easy to leverage other resources. But American operational footprint. For example, oil and gas has unique requirements – from Ryder manages unconventional freight in the transportation equipment to labor. The 3PL United States, while Schneider handles bulk specifically trained its team on oil and gas and water moves. In Canada, Shell works process and terminology. It placed special with Menlo Worldwide. emphasis on building a safety culture.

Shell defines the 4PL role as an entity Menlo also wanted to create a scalable without assets. In other words, the“lead” solution that could match the volatility logistics provider is charged with sourcing of upstream logistics. Producers are on the resources and expertise necessary to the move all the time, migrating between manage 3PL activities and create value. But given the relative novelty of using 4PLs in the sites. It’s a dynamic that differs from other industries where, seasonality aside, oil and gas space, Shell and its outsourced operations are more constant. logistics partners have been challenged with Importantly, Lean principles underpin adapting solutions that have traditionally these mandates. For example, Menlo worked been optimized for retail and manufacturing. with Shell to create a strategic vision, then a five-year roadmap that underscored goals they 3PL on the scene wanted to achieve during the project’s lifetime.

Menlo entered the picture in 2013. The San “On a more tactical level, we break that Cupertino, Calif.-based 3PL started up its roadmap down into what oil and gas operations about we call an impact matrix, three years prior, with an which allows us to focus account in Anchorage, Alaska.

For one, 70 per on initiatives that deliver Andy Graff, a 15-year veteran cent of executives the lowest level of effort with the company, who also and highest returns—quick spent five years working on report they are wins,”explains Graff.“That a drilling rig in Prudhoe Bay, not actively generates initial savings and currently serves as senior program manager for oil and managing costs. creates a baseline for success moving forward.” gas accounts.

Why? Invariably, Most upstream producers are at the“firefighting stage” Deploying solutions everything in terms of their operational Given the oil and gas the business maturation, says Graff.“There industry’s logistics immaturity, are a lot of 3 a.m. phone it has ample opportunities is evaluated calls, hotshot trucks, team to adapt best practices from on – such as drivers, air freight, and other other disciplines. Automotive, considerations that ultimately for example, presents similar incentives, increase overall costs,” he says.

JIT dynamics that dictate “Five to 10 years ago, those agreements, and inventory management were accepted practices. In the tactics; CPG companies know leaseholds – words of one CFO, ‘logistics the cost of selling and moving was a rounding error.’” pivots on growth product down to the cent. multinational has used DHL as a 4PL provider in its Oman oil field operations.

Applying that experience to North America was an attractive option.

“Pre-2009, we were highly decentralized,” recalls Edem.“From 2009 to 2011, we put in centralized logistics at the field level. Then we made a push to professionalize this further with the 4PL concept.”

26 OCTOBER 2015

“Oil and gas companies generally hold too much inventory,”says Love.“They can’t recognize demand, and don’t have confidence in shipment tracking or arrival times. If companies had a more efficient logistics program – and therefore visibility – they wouldn’t have to stockpile additional inventory. They could buy as they need.”

Poor visibility and inefficient inventory management inevitably bleed into transportation. That became a burning platform for Menlo as it progressed with Shell’s project.

“Carrier management is a big focus for us,” says Graff.“It comes down to visibility and data reporting. Before we got involved, much of the communication was hearsay. Decisionmaking was based on perceptions among local operators. Bringing data in to track incidents, service failures, late deliveries – in effect, putting data behind those comments – drives a lot of value for our carriers and customers.”

Menlo also saw opportunity to help Shell’s OSRs become more proactive in identifying and communicating their requirements. Better planning on the front end reduces costs and creates efficiencies for carriers and operators.

Menlo identified several tactical

COVER STORY

helped Shell reel in those costs.

OSRs now have access to a low-level Web tool – a simple interface for use in the field – that lets them access information, and track resources and utilization in real time.

This pushes the envelope further as operators begin using KPIs to measure performance and align benchmarks with organizational goals.

When Shell began taking a more proactive approach to logistics management in the field, it had some clear targets in mind.

First and foremost, the company wanted to improve its safety culture.

“We have been able to dramatically reduce our transportation risk exposure. It’s one of the strongest drivers,”says Edem.“Although cost and efficiency are important, safety in light of the social license to operate is a big deal.”

Logistics pays off

deployments to address these concerns.

Adapting a transportation management solution to the needs of the well site was a cardinal consideration. Logistics technology has largely been developed and optimized for mature retail and manufacturing supply chains. Well site logistics requires more nuanced tweaks.

“We were challenged to bring in a system that created value for end users and field coordinators,”Graff adds.“OSRs are making or receiving 100 phone calls every day. So how can you make that communication more efficient from their initial order request to carrier dispatch?”

Menlo deployed its traditional overthe-road transportation solution. Further, it developed a front-end order entry interface that is customized for use in the field. Importantly, the 3PL is also helping Shell incorporate freight audit payment functionality to better understand and assess transportation performance.

A quick win Traditionally, oil and gas companies haven’t had resources at the local level to audit carrier

invoices. As Menlo has worked with Shell and other energy companies this has become a quick win from day one. In fact, Graff points to one project in Alaska where the 3PL paid for itself on two months of freight audit payment savings alone.

Love agrees. Producers can find cost savings by calculating freight accessorials.“These benchmarks are used by shippers to change carrier behavior; or by carriers to make sure they’re properly compensated for all the extra service they provide to the shipper,”he says.

“Common examples include detention and stop-off charges, both of which contribute to and affect a shipper’s costs,”Love adds.

“Benchmarking against the market can put companies in a better position to control accessorial costs. Executing the right action plan can help uncover savings.”

Beyond freight spend, Menlo has also helped Shell’s on-site workers capture more accurate data and gain better visibility into all aspects of the operation. For example, given the capricious nature of drilling, producers often lease, rather than buy, equipment. But local operators make their own decisions, often without economy in mind. Menlo

Consequently, Shell has reduced serious incident rates by more than 50 percent. As is often the case, prioritizing logistics pays dividends in countless ways.

“Between 2011 and June 2014, we totaled 80 million truck miles, and 850,000 moves,” Edem says.“In that space, we’ve reduced about eight million truck miles through optimization, consolidation, and backhauls.

We’ve taken about 80,000 trucks off the road. Consider the impact that has on risk exposure and safety. That’s a huge win.”

Bringing Menlo into the fold has similarly accelerated the maturation.“We often see a six-month return on investment with our oil and gas engagements – in other words, after six months we’ve saved more money than we’ve invoiced. It’s not a 24-month ROI,” says Graff.

While these quick impacts are positive, they also speak to the execution gap that still exists for many oil and gas companies. Declining oil prices will only widen that divide.

Shell and other leading edge energy companies, in concert with 3PL partners, are working toward establishing industry standards that raise the bar for everyone that plays in the oil and gas space. This entails sharing best practices, standardizing regulations, and developing the social license to operate.

“We have a lot of companies with different models and preferences,”Graff says.“But there are areas where we can find collaboration.”

OCTOBER 2015 27

‫‪COVER STORY‬‬

‫تريليون دوالر في جميع أنحاء العالم في عام‬ ‫‪ ،2014‬ذهب ‪ %75‬منها على آبار البترول‬ ‫ذاتها‪ .‬كذلك كانت هناك طفرة في الواليات‬ ‫املتحدة حيث بحثت الصناعة عن سبل لبناء‬ ‫بنية حتتية تتيح نقل النفط إلى السوق‪».‬‬ ‫لكن بقيت هناك مشكلة‪ :‬تقلبات السوق‬ ‫وتدهور أسعار النفط‪ ،‬وتراجع عوائد شركات‬ ‫الطاقة عن السابق‪ .‬منابع رأس املال السهل‬ ‫بدأت جتف‪ .‬الشركات ال ميكن لها أن تدق‬ ‫على أبواب بورصة وول ستريت بحثا عن‬

‫الصدقات املجانية بعد اآلن‪ .‬املستثمرون‬ ‫ببساطة لن يدعموا هذه الصناعة بسبب‬ ‫أداؤها احلالي‪.‬‬ ‫«الصناعة تسير على مسار غير مستدام ولذا‬ ‫يجب أن ندفع الثمن‪– ».‬دينيس كاسيدي‬ ‫تتابع شركة أليكس بارتنرز هذه التغيرات‬ ‫الديناميكية‪ ،‬حيث دخلت في شراكة‬ ‫مؤخرا مع أكسفورد اكونوميكس االجنليزية‬ ‫الستطالع آراء املديرين التنفيذيني العاملني‬ ‫في صناعات النفط والغاز في أكثر من ‪250‬‬

‫شركة عاملية والنتائج تكشف عن الكثير‪.‬‬ ‫بداية‪ %70 ،‬من املديرين التنفيذيني‬ ‫أقروا أنهم ال يديرون التكاليف بشكل فعال‪.‬‬ ‫ملاذا؟ دائما ما يتم تقييم احلوافز واالتفاقات‬ ‫وحقوق االستغالل‪ ،‬بناء على النمو‪ .‬وفقا‬ ‫لكاسيدي‪ ،‬يعتمد األمر على انخفاض اثنني‬ ‫من املؤشرات األساسية‪ :‬أوال‪ ،‬اإلنتاجية املطلقة‬ ‫للبئر‪ ،‬ثم إدارة احملافظ االستثمارية أو كيف‬ ‫ميكن للشركات هيكلة الصفقات للمواءمة مع‬ ‫الشركاء العامليني‪.‬‬ ‫‪28 OCTOBER 2015‬‬

‫‪COVER STORY‬‬

‫النفط والغاز والطاقة‪:‬‬

‫قل وداعا لالزدهار‬

‫لم يعد هناك شيء اسمه مرحلة االزدهار النفطي بعد اآلن‪.‬‬ ‫انخفاض الطلب أدى إلى انخفاض العوائد‪ ،‬التكلفة املرتفعة‬ ‫لالستثمار في النفط تكاد تكون ذات جدوى‪ .‬ألن كل شيء‬ ‫يتوقف على النمو‪ ،‬فماذا يحدث عندما يبطئ؟ جوزيف‬ ‫أورايلي لديه الكثير ليخبرنا عنه‪...‬‬ ‫تتردد صناعة النفط والغاز في أمريكا‬ ‫الشمالية دائما ما بني االزدهار والكساد‪.‬‬ ‫هذا التقلب يجلب بدوره التجارة واألعمال‪.‬‬ ‫العرض والطلب ينحسر ويتدفق كما متلي‬ ‫األحوال السياسية العاملية‪ .‬فوهات اآلبار جتف‬ ‫لتظهر أخرى جديدة‪ .‬املنتجون يتنقلون‬ ‫باستمرار لتحديد موقع بئر أكبر مقبل‪،‬‬ ‫سواء كان ذلك حتت املاء أو سطح األرض‪،‬‬ ‫مع التنقيب عن النفط السائل التقليدي أو‬ ‫الصخري غير التقليدي‪.‬‬ ‫شهد العقد املاضي توسعات كبيرة في‬ ‫قطاع الطاقة في أمريكا الشمالية‪ ،‬ويظهر‬ ‫ذلك التوسع جليا من خالل النمو السريع‬ ‫الذي تشهده مناطق رمال القطران في ألبرتا‬ ‫الشمالية‪ ،‬ومساحات الصخر الزيتي في والية‬ ‫داكوتا الشمالية‪ ،‬وحوض مارسيلو أباالتشيا‬ ‫الرسوبي‪ ،‬وسهول ايغل فورد وبرميان في والية‬ ‫تكساس‪ .‬هذا التأثير يبدو واضحا في جميع‬ ‫مراحل سلسلة التوريد حيث جتذب الطاقة‬ ‫الرخيصة القواعد الصناعية لتكون أقرب إلى‬ ‫مناطق الطلب‪.‬‬ ‫مع كل هذه اإلمكانات املواتية‪ ،‬هناك أيضا‬ ‫رياح معاكسة التي ال مهرب منها‪ .‬صناعة‬ ‫النفط والغاز حساسة جدا لضغوط االقتصاد‬ ‫الكلي‪ ،‬خاصة مشاكل االستهالك في الصني‬ ‫والصراعات في بالد الشرق األوسط‪ .‬العام‬ ‫‪OCTOBER 2015 29‬‬

‫املاضي لم يختلف كثيرا عن احلالي‪ .‬مع تراجع‬ ‫الطلب العاملي على النفط في عام ‪،2014‬‬ ‫ومقاومة منظمة أوبك؛ أكبر كارتل ملصدري‬ ‫النفط في العالم‪ ،‬خلفض اإلنتاج‪ ،‬مما أدى إلى‬ ‫تضخم األسعار وتشبع السوق بالعرض النفطي‪.‬‬ ‫هبوط أسعار النفط يؤدي إلى تآكل هوامش‬ ‫الربح‪ .‬األمر ببساطة هو أن إنتاج النفط يكلف‬ ‫أكثر من ذي قبل‪.‬‬ ‫الضغوط األخرى تلعب دورا إضافيا‪.‬‬ ‫اجلمود التنظيمي فيما يتعلق بالتكسير‬ ‫الهيدروليكي ونقل النفط اخلام عبر السكك‬ ‫احلديدية ال يزال مصدر قلق كامن‪ .‬كما وبدأ‬ ‫النمو السريع للغاز الطبيعي املسال (‪ )LNG‬في‬ ‫فتح سوق تصدير جديد للمنتجني في أمريكا‬ ‫الشمالية‪ ،‬وكان سببا في حدوث ثورة في‬ ‫مجاالت الشحن والنقل إذ بدأت الشركات‬ ‫تستكشف إمكانية استخدام الغاز الطبيعي‬ ‫املسال في كل وسائل النقل‪.‬‬ ‫العوامل اخلارجية ليست غائبة عن املشهد‪،‬‬ ‫فشركات الطاقة تنظر فقط حتت قدميها بحثا‬ ‫عما إذا كان هناك مشاكل ما تواجهها‪ ،‬كما‬ ‫تقاعست صناعة النفط منذ فترة طويلة عن‬ ‫حتسني إدارة التكاليف‪ .‬تركز النمو وحسب‬ ‫على زيادة العوائد وتوليد اإليرادات‪ .‬نتيجة‬ ‫لذلك‪ ،‬تباطئ املنتجون عن حتسني إدارة سالسل‬ ‫التوريد اخلاصة بهم‪.‬‬

‫عقاب رأس املال‬

‫حجم االستثمارات في مجاالت النفط‬ ‫والغاز خالل العقد املاضي لم يسبق لها مثيل‪،‬‬ ‫وع ّبر عن ذلك دينيس كاسيدي‪ ،‬العضو‬ ‫املنتدب لشركة االستشارات أليكس بارتنرز‪،‬‬ ‫حني حتدث في مؤمتر ‪ SCM‬السنوي الثاني في‬ ‫ندوة عن الطلب على النفط والغاز في هيوسنت‪،‬‬ ‫تكساس‪ ،‬في نوفمبر ‪.2014‬‬ ‫«لقد شهدنا نهضة في االستثمارات املوجهة‬ ‫لصناعة النفط والغاز‪ .‬مت استثمار أكثر من‬

SAP

Keeping it simple

The truck that will be launched at GITEX is modelled on a similar truck which successfully toured Europe. This is the interior of the European truck

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SAP, known for creating software to simplify complicated tasks, will present its Run Simple truck at GITEX later this month to showcase its latest industry solutions.

GSC has more details Tayfun Topkoc, Managing Director, SAP UAE

30 OCTOBER 2015

he 200 biggest companies in the world are losing over 10 per cent of their annual profit because of complex processes – over US$ 237 billion (AED 870 billion). Furthermore, 40 per cent of management time today is wasted on unproductive activities that will never drive a nickel of value to the bottom line.

‘Running simple’ will have far-reaching implications for every industry. And the rewards are real and quantifiable. In the US, UK and Germany alone, companies that offer

TECH ROAD SHOW

more simplicity will capture a share of the US$ 50 billion (AED 183.6 billion) in incremental revenues that come with it.

While technology is clearly contributing to the problem, it also holds the key of the problem – a different kind of solution, built on the idea that sophisticated technology doesn’t necessarily mean complicated technology. ‘Running simple’ will have far-reaching implications for every industry. And the rewards are real and quantifiable.

“Across the Middle East, organisations still

The increasing volume of IT systems, applications and data you manage represent the highest level of technical complexity ever.

face massive hurdles in business complexity, which is the most intractable issue of our time.

With GITEX Technology Week and the region as innovation hubs, our Run Simple Truck will demonstrate how Middle East organisations of all verticals can adopt the latest Big Data solutions to simplify their operations, and deliver on the Internet of Things opportunity,”said Tayfun Topkoc, Managing Director, SAP UAE. The SAP Run Simple Tour is currently travelling through all of Europe, and makes its debut tour across the GCC this year, in the UAE,

OCTOBER 2015 31

SAP’s stand at previous GITEX exhibitions

KSA, and Qatar, from October 2015 – January 2016.

The SAP Run Simple Truck features a space in which ideas are shared. SAP experts will present innovative business showcases and specific client solutions inside the truck. The truck features a state-of-the-art exclusive interior, with

32 OCTOBER 2015

enough space to create a pleasant meeting atmosphere.

Discussions focus on how clients can innovate their businesses, attract new clients and / or increase their profit. The SAP – Intel Run Simple truck is a mobile showroom and will be able to show customers their demos either on-site or near their premises. Visitors

to the truck can learn how their businesses can be more innovative, attract new clients, and increase profits.

Several demos from all across industries and lines of business will be shown on the screens and mobile devices in the truck, including: The SAP Simple Finance solution, which

TECH ROAD SHOW

provides clear information to the CFO, and is a single source of truth on all financial information inside an organisation.

The Smart Vending Machine reveals how organisations can anticipate customer wishes and become even more profitable.

With the Predictive maintenance solution with SAP Predictive Analytics, companies

Running simple’ will have far-reaching implications for every industry.

And the rewards are real and quantifiable.

can analyse large volumes of operational data and apply predictive insights in real time to harness the power of the Internet of Things to prevent asset failures before they happen. The demo session will showcase the predictive maintenance scenario with SAP. SAP Digital Farming makes use of sensor data and predictive analytics to enable

OCTOBER 2015 33

TECH ROAD SHOW

Solutions for the logistics and transport industry SAP provides solutions for a number of industries in the logistics and transport sector - airlines, freight forwarding 3PL, liner shipping, passenger transport – ground and sea and rail cargo. More details on each of the above can be found on http://go.sap.com/solution/ industry/transportation-logistics.html

SAP’s stand at previous GITEX exhibitions

farmers to make more informed decisions, simply and in real-time.

The Data Centre Intelligence (DCI) project – run by SAP and Intel – enables IT to monitor datacentres in real-time. The DCI system analyses data collected from Intel servers and predicts fail-out times.

In addition to the vast array of demos, customers will also find key showcases focusing on reducing complexity in organisations.

The Internet of Things demo will show how connecting facilities with the new generation of internet-enabled devices in the cloud can

34 OCTOBER 2015

transform and optimise processes for an enhanced reliability of equipment.

With the help of innovative scenarios, Big Data demonstrates how analysis of massive data volumes can be made possible in a matter of seconds to support healthcare as well as create the future of transportation.

Managing on-premise, as well as in the cloud, the demo on SAP S/4HANA immediately gives the right answers in real time to the most unexpected questions, by processing every task of the Business Suite applications, in-memory.

SAP’s Business Network solutions demonstrates how easy it is for customers to connect to their suppliers, partners and clients to enlarge the panel of their possibilities optimally – no matter what their business field is.

The Cloud displays how business processes can, in different ways, perfectly meet organisational requirements in real time without having any infrastructure concerns.

And finally with Intel, they will showcase their collaborative product optimisation, embodied in SAP HANA and the Intel® Xeon® processor E7 family, which delivers extraordinary performance for data warehousing implementations.

The SAP Run Simple Truck is being unveiled to the public at the Dubai World Trade Centre on October 18, during the 35th GITEX Technology Week. Over the course of five days, attendees at GITEX and key clients can check out the real thing, get acquainted with the demos, and test the content. After that, the truck will officially start a 60-day tour through MENA. Complexity is the toughest challenge for today’s business leaders. Management becomes more complex products or services are added, companies are acquired or operations expand.

Complex, outdated processes no longer meet the needs of modern consumers. The increasing volume of IT systems, applications and data being managed represents the highest level of technical complexity ever.

Managing this complexity consumes resources, prevents innovation, and puts a business at risk. Organisations can now discover how SAP can help to simplify management, processes and technology, and watch as it transforms the business.

The truck is scheduled to hit three markets during Q4-2015 - UAE, Qatar and KSA.

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Authorised Partner

Strategic partnership The UAE is USA’s largest Middle East trading partner for the last six years. So this agreement between Sharjah and Canaveral Ports Authorities definitely will take things further. The ports have signed a ground-breaking ‘Sister Ports’ cooperation agreement 36 OCTOBER 2015

PORT REPORT

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he USA and the UAE enjoy a strong trade and investment relationship, with the UAE being the USA’s largest trading partner in the Middle East, a distinction it has held for six straight years. Since 2009, bilateral trade has grown more than 80 per cent, exceeding more than US$ 24 billion (AED 88 billion) in 2014. This represents one of the fastest growing USA economic partnerships, both globally and especially in the Gulf region.

This robust trade relationship has received a further boost as a ‘Sister Ports’ agreement has been signed between the Department of Seaports and Customs, Government of Sharjah, represented by His Excellency Sheikh Khaled Bin Abdullah Al Qasimi of the Department of Seaports and Customs, Government of Sharjah, and the Canaveral Port Authority of Florida, represented by Jerry Allender, Chairman, Canaveral Port Authority Board of Commissioners.

The signing ceremony was hosted by Gulftainer, which recently expanded into the USA with a new concession at Port Canaveral. The ceremony was held at the Sharjah Chamber of Commerce in the presence of Shaikh Fahim Bin Sultan Bin Khalid Al Qasimi, Head of the Department of Government Relations in the Emirate of Sharjah, Badr Jafar, Vice Chairman of Gulftainer and Managing Director of Crescent Group, Wayne Justice, Commissioner of Port Canaveral; Frank Kruppenbacher, Chairman of the Greater Orlando Aviation Authority; Mohammed Meer Al Sarrah, Director of Department of Seaports & Customs, Government of Sharjah; Jersh Mohammed Bin Jersh, Director of Sharjah Creek Customs; and Yaqoub Hassan Abdulla, Director of Marketing & Head of Administration of the Department of Seaports & Customs, Government of Sharjah.

The agreement confirms the two ports’ status as ‘sister ports’ in order to extend their mutual understanding for the development of economic resources, international trade and logistics. The two entities also entered into a ‘Joint Declaration of Collaboration and Cooperation’, through which they will explore new opportunities to develop further cooperation between the ports,

OCTOBER 2015 37

and enable private companies within the catchment area of the respective ports to collaborate on trade and investment prospects. The port authorities also committed to exchange information and knowledge between them and develop commercial, technological and cultural ties for their mutual advancement.

38 OCTOBER 2015

Said Sheikh Khaled Bin Abdullah Al Qasimi, Department of Seaports & Customs, Government of Sharjah,“We are delighted to be part of such an important moment in the history of the UAE-USA trade relationship.

The ‘Sister Ports’ agreement strengthens our ties with an already strong partner of the UAE, and reflects our commitment

to establishing strong international relationships to boost the country’s economic development.”

“We thank the Sharjah Port Authority for extending a hand of friendship to us, and Gulftainer for graciously hosting us. We look forward to a long prosperous relationship,” added Allender.

PORT REPORT

Canaveral is ideally located on the East Coast of Central Florida, with direct access to the Atlantic, providing an ideal gateway for the transportation needs of not only its home county of Brevard, but the larger Central Florida Metropolitan Area.

As an inland urban centre, the Orlando Metropolitan Area is the only major Florida

city without direct port access. Domestic have welcomed this agreement with great trucking through its current port gateways excitement. This will positively impact our accounts for a mileage of 280 miles from operations, and we will continue to strive to the nearest port of Jacksonville to 727 miles strengthen the bond that exists with a view through Charleston, compared the mere 100 to contribute even further to the economy of miles from Canaveral. both port areas.”

On the international cargo front, the port Gulftainer, established in the Emirate of will initially provide a barge/truck solution to Sharjah, UAE, in 1976, is a rapidly expanding, connect to main rail services dynamic ports and logistics for inland cargo movements company now operating in to the countries distribution various parts of the world. In The two entities centres, and is working on the UAE, Gulftainer operates also entered into a three main ports on behalf getting a more permanent rail head at the port to further ‘Joint Declaration of the Sharjah Port Authority increase its competitiveness.

– Sharjah Container of Collaboration Marine charges at Canaveral Terminal (SCT), Khorfakkan are also more competitive Terminal (KCT) and Cooperation’, Container with possible savings of over and Hamriyah.

50 per cent over other main As the company’s through which ports for the main liners. flagship terminal, they will explore Gulftainer’s international Khorfakkan was experience will also bring new opportunities recognised by the Journal in the required professional of Commerce as the fastest to develop further terminal in the MENA approach and efficiency that will enhance the economic region and third in the cooperation value of the port, and world. In April of 2015, between the ports. Khorfakkan container encourage international carriers to make POC as their Terminal was named preferred port on the Florida East Coast.

Shipping Port of the Year at the ITP SCATA Gulftainer’s experience in generating higher Logistics ME awards. levels of productivity will ensure that vessels Outside of the UAE, the Gulftainer Group are berthed on arrival, have a reliable port stay also operates and manages ports and logistics and are turned around fast. businesses in several countries, including Gulftainer has a reputation for working the Iraq Container Terminal, the Iraq Project with local communities to develop their Terminal and Umm Qasr Logistics Centre transport solutions, and they expect to develop in Iraq, Karachi in Pakistan, Recife in Brazil, cost effective and attractive supply chain Tripoli in Lebanon, Istanbul in Turkey, and in opportunities for the local market. This will the Northern Container Terminal in Jeddah, further enhance local development of related the Jubail Islamic Port and the Jubail Container services, which will generate even more Terminal in Saudi Arabia, where Gulftainer economic activity within the port environs. acquired 51 per cent stake in Gulf Stevedoring As the main container terminal operator Contracting Company (GSCCO) in June 2013. at both authorities’ facilities, Gulftainer, The Company’s most recent facility, which first started its operations in Sharjah in Canaveral Cargo Terminal opened in Florida 1976 with the first container terminal in the in the USA in June 2015, following the Arabian Gulf, will play a key role in enhancing signing of a 35-year agreement, making communications between both organisations Gulftainer the first Middle Eastern port and the various clients and private companies management company to operate in the currently calling at their ports.

United States.

Peter Richards, Managing Director of The UAE has trade relations with every Gulftainer, said,“As the operator of the state in the USA, as well as the District container terminal at Port Canaveral, as of Columbia, Puerto Rico, and the Virgin well as three main ports in Sharjah on Islands, with Florida, in particular, being one behalf of the Sharjah Port Authority, we of the top five exporting states.

OCTOBER 2015 39

ANALYSIS

Innovation = eco 40 OCTOBER 2015

ANALYSIS

The contribution of innovation levels in a country are directly related to its economic growth. Bruno Lanvin, Executive Director, Global Indices, INSEAD speaks with GSC on the launch of their 2015 Global Innovation Index report

A

few months ago, the UAE government declared 2015 as the ‘Year of Innovation’, and announced a new National Innovation Strategy, with the aim of becoming one among the most innovative nations in the word within a seven-year period.

INSEAD, in collaboration with Cornell University and the World Intellectual Property Organisation (WIPO), recently issued the 2015 Global Innovation Index (GII) report. This year, the UAE ranked 47th globally in terms of overall performance in the GII. Says Bruno Lanvin, Executive Director, Global Indices, INSEAD,“The GII aims at providing a holistic vision of innovation, ie, not limited to its traditional indicators, such as numbers of patents and licenses.

It encompasses a large array of what allows innovation to be successful, such as institutions, human capital and research, infrastructure, credit, investment, linkages, the creation, absorption, diffusion of knowledge, and creative outputs.”

nomic growth OCTOBER 2015 41

The challenge here is to find metrics that capture innovation as it happens in the world today. The GII places great emphasis on measuring the climate and infrastructure for innovation, and on assessing related outcomes. Direct official measures that quantify innovation outputs remain extremely scarce. Most measures also struggle to appropriately capture the innovation outputs of a wider spectrum of innovation actors, such as the services sector, the government, etc.

The GII thus aims to better conceptualise and measure innovation. Its model is continually updated to reflect the improved availability of statistics and

42 OCTOBER 2015

our understanding of the meaning and implications of innovation.“The rich metrics of GII (79 variables are being combined to produce the index) can be used by individual countries to monitor performance and to benchmark developments,”explains Lanvin.

The GII methodology aims at being applicable globally: each and every one of the 141 countries included in this year’s GII rankings should be able to consider it as a valuable tool for action to improve its innovation performance.“Although there is a heterogeneity among countries, there are also a series of elements that can be pointed out as essential for innovation in economies

at all levels of development. Examples of these are the need for reliable infrastructure, efficient product, capital and labour markets (and the legal and business frameworks that allow these to thrive), and solid education systems, among others,”says Lanvin.

Yet, to reflect undeniable differences in various countries’ respective levels of development, the GII report also provides ranking per income group and per region.

Such comparisons have proved very useful when GII has been used to define or refine innovation strategies at the national level.

“Since its creation, eight years ago, the GII has carried good news about the pace at which

ANALYSIS

innovation performance is being improved in all parts of the world, and at all levels of development.Yet, a certain level of ‘innovation divide’ remains among the ‘GII leaders’ and other countries, as the quasi-stability of the ‘top 10’ and ‘top 25’ suggests,”muses Lanvin.

A few lessons that have emerged over the last eight years include: 1. Framework conditions for innovation are more challenging in developing countries: beyond macroeconomic challenges, this often manifests itself in poorer infrastructure; weaker product, capital, and labour markets; and weaker education

systems. Ineffective regulatory set-ups that do not provide the proper incentives to innovation are often a problem.

2. In low-income countries, the capacity to finance, coordinate, and evaluate a large package of innovation policies is constrained when urgent priorities vie for the attention of policy makers (fighting poverty and inequalities, developing infrastructure for health and education, etc).

3. Even in middle-income countries, innovation is not always geared to maximising the spill-over effects that will make it a true driver of local development: innovators are often too isolated, and local universities and enterprises (especially if they are small) remain out of the sphere of innovation.

Based on the above, there are two policy strands that can assist in improving innovation at a local level: A need to improve the framework conditions for innovation - these include the business environment, access to finance, competition, and trade openness; Nations also need dedicated innovation policies targeting both innovation actors and the linkages among them - these include collaborative research projects, public-private partnerships, and clusters. This also entails creating a strong human capital and research

base that includes research infrastructures, sophisticated firms and markets, innovation linkages, and knowledge absorption.

“This year’s GII reports has identified ‘market sophistication’ as a major differentiator among emerging economies. This is an area where significant progress has started to appear, which is very encouraging,”says Lanvin.

The theme of this year’s report is ‘Effective Innovation Policies for Development’. Many of the chapters it includes describe and analyse specific country experiences about how innovation policies have made a difference.

Governments play an essential role in the development of public policy to promote innovation.“From providing the proper infrastructure, to developing the adequate regulatory and business frameworks that help promote and sustain innovation and entrepreneurship locally. Through policy, governments can also aim towards the development of an ‘innovation culture’ that is based on local interest and ways to do things.

These innovation policies and institutions, however, need to be context specific, reflecting the extensive heterogeneity and varying trajectories of countries,”says Lanvin.

Fiscal incentives, clusters development, but also enhancement in the education system and the regulatory environment in which entrepreneurs and innovations have

OCTOBER 2015 43

ANALYSIS

to operate are critically important. They all rely on governments’ abilities to formulate and share an ambitious innovation vision for their country.

Innovation has been identified as highly correlated with the overall production levels of nations, and thus is considered as an essential element in the quest to achieve higher levels of economic development.

There are several avenues that can be followed to ensure that the results of innovation become more evident to all actors.

“An essential step is to foster an innovation system approach, in which innovation becomes the result of complex interactions among all innovation actors, policies, and institutions. This allows for all actors to become aware of the outcome of collective efforts. It is also often necessary to go beyond incentivising research; complementary measures are also essential to bring product, process, marketing, and organisational innovation to fruition,” explains Lanvin.

Diversity and openness are also key ingredients for successful innovations, and a necessary condition to translate innovation into higher levels of productivity and global competitiveness.“This may be seen as one of the reasons why so many ‘small economies’ (Switzerland, Sweden, Singapore, etc) can be found at the top of GII rankings: being small, they had no choice and had to be open economy, and rely on a diversity of talents,” he adds.

“There really is no single formula to foster innovation that works equally for all nations. Very often, innovation feels closer to alchemy than to chemistry,”he smiles.

There are, however, some essential elements that appear to be vital for innovation to thrive regionally and at the country level.

For example, the set of rules defined by institutions is particularly important for developing economies because the rules stipulate norms of interaction among actors in recurrent situations.

Eventually, these rules set the normal and informal guidelines followed by national, international, private, and public realms as they interact to produce and develop new ideas and innovations in particular regions.

44 OCTOBER 2015

Another example comes from low-income countries. Those that have made efforts on business sophistication are able to do well, sometimes overtaking some middle-income countries.“And, of course, as mentioned before, openness, diversity, respect for failure and opportunities for young entrepreneurs remain valid recipes at all levels of development,” he adds.

With regards to the UAE, most areas in which the country can significantly enhance its GII performance are located within the outputs-side of the Index, principally in the Knowledge and technology outputs pillar.

They include knowledge creation (mainly in the number of domestic patent applications or scientific and technical articles), knowledge impact (in areas like computer and software spending), and knowledge diffusion (in areas such as High-tech exports). There is also potential in the area of creative goods exports.

number of these stand among the GII top five economies globally, displaying an excellent performance in most areas. Others stand at less homogeneous performance segments of the rankings, allowing for other factors, including the performance of their closest neighbours in ranking, to influence their outcome,”explains Lanvin.

Yet, it is somewhat misleading to compare the countries’ GII performance on a single year.

‘Sliding averages’ (typically on three or five years) make more sense from an analytical and economic point of view. Using this methodology, the UAE remains the regional GII leader.

Innovation has become a high priority in an increasing number of countries around the world.

This is not surprising, since innovation is not only the way by which emerging countries will gain a greater share of global growth and prosperity, it is also the instrument through which established economic powers (typically OECD countries) can hope to revitalise their own structures and economic activities.

“Innovation is also a powerful message sent by countries who project themselves into the future and think of making the world a better place for younger generations. In that sense, those countries that benefit today from the ‘demographic dynamism’ that we see in the Arab world, will be in the best position to make the most of innovation in the years and decades to come. Innovation is a mindset, and young minds are a key ingredient for its success,”concludes Lanvin.

Bruno Lanvin is the Executive Director of INSEAD’s European Competitiveness Initiative (IECI). From 2007 to 2012, he has been the Executive Director of INSEAD’s eLab, managing INSEAD’s teams in Paris, Singapore and Abu Dhabi. From 2000 to 2007, Lanvin worked for the World Bank, where he was inter alia Senior Advisor for E-strategies, and Regional Coordinator (Europe and Central Asia) for ICT and e-government issues. He also headed the Capacity Building Practice of the World Bank’s Global ICT Department, and Chairman of the Bank’s e Thematic Group.

In terms of the region, the top performing countries are: “The reasons why these economies rank at the top of their regions vary greatly. A

25-28 October 2015

Abu Dhabi National Exhibition Centre (ADNEC) Abu Dhabi, UAE

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SCM strategies for insurance claims 46 OCTOBER 2015

Mark Nobilio and Clare Louis discuss current supply chain management issues and trends and imagine a brighter future for supply chain management if insurers incorporate visibility, data, technology, and customer focus into their supply chain management strategy

SCM TRANSFORMATION

I

nsurers employ a score of supply chain vendors across the claims process.

Examples include claim investigators, third-party administrators, auto body repair shops, defense counsel, engineers, offshore claims service providers, materials suppliers, case managers, and pharmaceutical benefits managers. As insurers consider more flexible and expanded business models in the Digital Age, the opportunity to bring business partners into the claims process

costs now by adopting leading supply chain and operating model will become more management practices. prevalent. Additionally, as claims become more complex – requiring more specialized expertise – and claims handling becomes Present State of Supply Change increasingly regulated and subject to broader Management in Insurance Claims reporting rules under Sarbanes-Oxley, ICDIn our experience, insurers’ use of modern 10, MMSEA (Medicare, Medicaid, and SCIP supply change management techniques Extension Act of 2007), and similar laws and to manage and improve their supply chain regulations, the number and diversity of these process is generally at a relatively low maturity vendors will only continue to grow along with level in all but global insurance organizations. insurers’ costs and risks. It is We also have observed that not unusual for supply chain even such large, capable vendor costs to contribute Because of the organizations often lack key 25 points or more to insurer components of a world-class significance combined ratios, although supply chain management insurer experience in this area system: (1) standardized supply of supply can vary. chain management processes chain costs to across the entire supply chain; Insurers have been slower (2) clearly defined metrics an insurer’s than their counterparts for measuring supply chain in other industries to performance; (3) the right bottom line, rationalize their supply supply chain performance data; it is critical chain management and (4) a continuous feedback strategies. Hurdles to loop to drive supply chain for insurers insurers’ adoption of performance improvement. to focus on more robust supply chain We have observed that some management programmes reducing these insurers centralize some of their are similar to those in other supply chain management costs now industries: activities in a supply chain management office responsible Talent – Analytics Finding by adopting for vendor selection, contracting, talent with the right analytical leading and, to a lesser degree, skills to provide insight into performance measurement. A your supply chain supply chain single supply chain management Internal Optimization management function enables standardized Pressures Top-down pressure supply chain management to continually reduce costs practices practices across the entire supply and optimize working capital chain process and promotes in the supply chain optimal supply chain outcomes. However, Supply Chain Responsiveness Designing to the extent that an insurer’s supply chain a supply chain that can respond to volatile management function is not fully visible, i.e., customer demand in“real time” does not encompass supply chain activities Compliance: Business adoption of supply from end-to-end because of manual processes, chain management program the insurer is at risk of inconsistent, sub-optimal Talent – Functional Knowledge Finding outcomes from its supply chain activities. talent with the functional knowledge of effective supply chain processes Visibility and Coordination End-to-end Important Supply Chain visibility and coordination across the supply Management Trends for Insurers chain (See: Capgemini Supply Chain We discuss below three key supply Impact Survey) chain management trends that provide Because of the significance of supply opportunities for insurers to reduce their chain costs to an insurer’s bottom line, it is supply chain costs and risks and improve critical for insurers to focus on reducing these supply chain performance.

OCTOBER 2015 47

Data Analytics (Predictive and Prescriptive) In the past several years, one of the most important areas of supply chain management to undergo significant change is supply chain data analytics. Supply chain analytics, which impact every aspect of the business, enable alignment of the supply chain program with the enterprise vision and goals. These analytics provide executives

48 OCTOBER 2015

with a window into supply chain financials, including expense analysis, forecasting, and contract compliance.

Supply chain data analytics can empower the business to optimize demand and supply planning, thereby reducing supply chain risk.

Supply chain analytics can allow insurers to benchmark and improve supply chain vendor performance and identify instances of contractual non-compliance.

Supply chain data analytics provide a basis for measuring customer satisfaction and regulatory compliance related to the supply chain interaction, creating opportunities to improve the customer experience and retention and reduce regulatory fines and penalties. Finally, insurers can harness supply chain data analytics in an iterative way to continuously improve the supply chain process.

SCM TRANSFORMATION

it to leverage Big Data. Big Data can increase supply chain visibility by giving organizations the ability to identify external factors such as weather events and civil unrest that may impact supply chain demand and supply.

The accessing of Big Data through the supply chain tower can be a boon for insurers, allowing them to more quickly dispatch the right level of adjusters and other claim resources to locations affected by a loss event and more accurately forecast loss exposures arising from the event.

Supply Chain Control Tower and Big Data The supply chain tower is a central hub with required technology, organization, and processes to capture and use Big Data to provide enhanced visibility into supply chain decision-making. While the supply chain control tower is not a new concept in supply chain management, what is new is that organizations are now increasingly turning to

interactions with the insurer’s supply chain vendors, can expect higher levels of customer satisfaction and retention, potentially leading to greater insurer profitability.

The Future of Supply Chain Management in Insurance Claims

Here is a glimpse into what we believe the future for supply chain management in insurance claims may look like: As insurers’ supply chain data analytics capabilities improve, the model for insurer supply chain management Social Media One of the most organizations will evolve Social media such as important areas from a largely procurement Facebook, Twitter, and function to one that is more LinkedIn provide means of supply chain performance-focused and for insurers to more management to better aligned with business closely communicate The supply chain and immediately share undergo significant objectives. organization will be less information with their supply siloed and better integrated chain vendors on such issues change is supply into business operations. as best practices, performance chain data outcomes, and training.

Better supply chain Social media can be used as a performance data analytics analytics. Supply forum for insurers to discuss means that insurers will chain analytics, performance issues with be able to better forecast their vendors and quickly and proactively plan for which impact determine a solution. The supply chain activity, more every aspect of immediacy of the information efficiently allocating the shared through social media right supply chain vendor the business, can help insurers to avoid resources to achieve enable alignment supply chain performance improved claim outcomes. issues or nip them in the of the supply chain The wider availability bud, thus reducing supply of supply chain vendor program with the chain costs and ensuring that performance data will supply chain results remain enable the closer partnering enterprise vision on track. of insurers and their supply Given the importance chain vendors based and goals of social media as a on a common view of communications channel in vendor performance and the personal sphere and business domain, performance goals. This shared vision should particularly for Millennial and Generation X pave the way for continuous performance customers, insurers should encourage the use improvement and supply chain cost of social media by their supply chain vendors reduction. such as body shops and contract adjusters to A wider array of commercial supply chain communicate with the insured and claimant technology solutions, allowing for end-toduring the claim process. Today’s consumers end visibility of the supply chain process and expect to be able to communicate with its improved integration into claims process insurers on a 24 X 7 basis by any channel workflow and decision-making, should of the consumer’s choosing. Insurers that become increasingly available. promote a seamless All-Channel Experience, Insurers will have access to better supply including social media, for their customers chain risk management tools, including across the Claims Value Chain, including dashboards and scorecards, to identify,

OCTOBER 2015 49

SCM TRANSFORMATION

manage, and remediate supply chain-related instances of contractual, legal, and regulatory non-compliance.

In “Supply Chain Trends Impacting the Consumer Products Industry: Five Forces to Understand” Capgemini notes that the quickened pace of change in the marketplace demands a “more proactive and aggressive approach” to supply chain management. As in the Consumer Products industry, changes in insurers’ rationalization of their supply chain management strategies have been “gradual and incremental” at least until now. And as with Consumer Products companies, remaining competitive will require insurers to continuously hone their supply chain management strategies for insurance claims, positioning themselves

50 OCTOBER 2015

on the leading edge of future supply chain management trends.

In light of the above, we believe that insurers should seriously consider including supply chain management in their claims operational reviews, recognizing that supply chain management presents not only an opportunity for significant gains in efficiency, process improvement, and cost-reduction, but also an area of material risk, financial and otherwise. Finally, insurer investment in supply chain management should be balanced against potential financial, regulatory, reputational, and other returns. Given the relative immaturity of current insurer practices for managing their supply chain vendors, we believe these returns could be substantial.

-Mark Nobilio is VP and Insurance Industry Leader for Capgemini Consulting, working with insurance industry clients on Digital and Business Transformation programs to enhance their business performance and digital presence by improving overall customer experience, implementing flexible business models, and increasing operational efficiency.

-Claire Louis is a Managing Consultant and Insurance Claims Leader for Capgemini Consulting, working with clients to manage their operational, financial, regulatory, and marketplace risk in connection with claims transformation programs, claims performance optimization, regulatory readiness assessments, reserve studies, insurance program diagnostics/ oversight, and re/insurance dispute resolution support. www.capgemini-consulting.com

UNWIND

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October 2015 Issue 19

ENHANCING THE BUSINESS OF LOGISTICS

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Innovation = economic growth

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Providing fresh talent

Dubai Trade recently held a graduation ceremony for more than 300 CTLP and CCB students, creating new professionals for the industry.

52 OCTOBER 2015

D

ubai Trade, the online gateway for trade and logistics services in Dubai, recently celebrated the graduation of more than 300 Certified Trade and Logistics Professionals (CTLP) and Certified Customs Brokers (CCB) in a glittering ceremony. In attendance were the CEO of Dubai Trade, Eng Mahmood Al Bastaki, Jan Steenberg, Chair of Chartered Institute of Logistics and Transport International (CILT) Education Standards committee, Jon Harris, International Professional Development Coordinator at CILT, and Steve Cross, Board Member of CILT UAE, along with senior officials from DP World, media, and graduates’ families.

The ceremony began with Al Bastaki welcoming the graduates as trade and logistics professionals, and congratulating them for adding this prestigious and internationally accredited qualification to their resumes.

He also signed an MOU with CILT – International, represented by Steenberg, based on which the Certified Trade & Logistics

Professional (CTLP) programme has been internationally accredited. This partnership will support the CTLP graduates who intend to continue their studies with CITL International by exempting them from one whole unit.

For his part, Steenberg praised Dubai Trade’s efforts in supporting the trade and logistics community with the important and needful knowledge that will, in return, facilitate their day-to-day activities and face challenges.

Dubai Trade has launched the CTLP in 2011 as the only comprehensive and progressive vocational training programme that covers the end-to-end process of import and export in the UAE and region. They have, till date, created more than 1200 professionals who are knowledgeable and skilled in trade policies and regulations locally and internationally.

Other than being accredited by Knowledge and Human Development Authority (KHDA) in Dubai, Dubai Trade’s Training Centre was honoured as the ‘Training & Education Provider of the Year’ during the Supply Chain and Transport Awards 2015 (SCATA) for the third

EVENT

consecutive year. For the Certified Customs Broker (CCB) programme, Dubai Trade started offering it last April to address the key elements and procedures of customs processes in the region. The courses are generating interest from outside the UAE as well, and are attended by trainees from the US, China, Japan, Colombia, Saudi Arabia, Brazil, Oman, Iraq.

Said Poornima Raveendran, one of the

graduates,“On this occasion, and on behalf of all the graduates, I would like to thank Dubai Trade for giving us the opportunity to enrol in their programmes and acquire the tools required by everyone who wants to work in the field of trade and logistics. I was really pleased because after passing the programme, I was able to find a job immediately, so thank you Dubai Trade.�

The programmes are run every month at Dubai Trade training halls, with the capacity of 30 trainees per class. They offer 40 classroom hours as an intensive format over one week, as well as in two-weeks of evening sessions.

Courses are available in both Arabic and English depending on demand.

The test is based online.

This year, they have launched a new platform where candidates can get access to course resources, extra reading materials, and engage in discussions. This platform can be accessed through desktops and using Smartphones by downloading a special application.

Candidates can easily enrol in the courses by visiting the websites where they can book the convenient schedule and pay online.

OCTOBER 2015 53

The Solar Impulse a Swiss innovation Daniel Bangser, Director of US Investment Promotion for the Swiss government’s trade and investment agency Switzerland Global Enterprise talks about clean technology and renewable energy’s poster child – The Solar Impulse

54 OCTOBER 2015

B

y now, most have heard about the groundbreaking work being done

by Solar Impulse to show what clean technologies and renewable energies can achieve: the team has already recorded the longest solo flight ever without fuel – 117 hours and 52 minutes, more than five days over the open ocean using only solar energy. The journey began in March in Abu Dhabi, and made stops

CLEAN ENERGY

including India and China on the way to its current location, Hawaii.

After an epic journey across the Pacific, the flight is on hold until April 2016 when the weather breaks and maintenance is done, after which they expect to fly on to Arizona, New York, and then across the Atlantic and onward to complete their journey around the world. The voyage will mark a new chapter in aviation history while

inspiring entrepreneurial ingenuity and bringing much needed attention to clean technologies.

The story of Solar Impulse has gone global and their fame has reached across country borders, but how did they get started? The story behind this huge news phenomenon has a lot to do with their country of origin.

The founders of Solar Impulse are Swiss,

the company is located in Switzerland, the four engines of the plane are Swiss, and the entrepreneurial spirit is definitely 100 percent Swiss.

And it makes sense that a company like Solar Impulse would originate in Switzerland, because the country itself is ranked as the most innovative country in the world, having secured the top spot for the past four years running in the Innovation Union Scoreboard and the Global Innovation Index, and for the past six years in the WEF Global Competitiveness Report.

As an example of how Solar Impulse leverages the strength of its country, the project has been successful in receiving strong support from the Swiss Confederation with various resources, taking a leading role in promoting clean technology for a better environment. Many leading Swiss companies have also signed on to fund the project, and have lent their expertise and technical innovations to help make this project happen.

The Swiss view their support not only as helping an individual company, but as helping the world by taking a leadership role in clean technology in line with its broad policy of sustainable use of the limited natural resources available, such as water protection, wide-spread waste recycling and innovative sustainable architectural concepts.

Not all companies can make grand achievements like Solar Impulse. But as your company looks to make its mark in business and the world, it is important to consider how the right country can take an active role in helping you achieve more, grow faster, and make your dreams come true.

-Daniel Bangser is the Director of U.S. Investment Promotion for the Swiss government’s trade and investment agency Switzerland Global Enterprise. www.tech.co.

OCTOBER 2015 55

Staying well-connected Qatar has reiterated that they are on track with the various transport projects currently underway in the country. GSC reports

56 OCTOBER 2015

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he recently held annual Qatar Transport Forum, organised by MEED and in its fourth year now, saw Qatar confirming that they are moving ahead with more than US$ 40 billion (almost AED 147 billion) worth of planned transport projects.

These include the expansion of Hamad International Airport (HIA) and Hamad Port, the Doha Metro and long-distance passenger and freight network, and the expressway programme.

One of the highlights of the Qatar Transport Forum, which was held under the patronage of HE Sheikh Abdullah bin Nasser Al Thani,

QATAR INFRASTRUCTURE UPDATE

Minister of Transport H.E. Jassim Bin Saif Al Sulaiti Minister of Transport speaking with the media at the MEED Qatar Transport Forum in Doha.

Prime Minister and Minister of Interior, was the public unveiling of plans for the estimated US$ 8 billion (AED 29.3 billion) expansion of Hamad International Airport (HIA). New Doha International Airport (NDIA) Steering Committee Project Director Peter Daley outlined the procurement timeline, along with descriptions of the project scope, which includes an expansion of the main terminal building and concourse D and E. Also revealed for the first time were plans for two additional container terminals at Hamad Port that would increase the QR 27 billion (US$ 7.3 billion/AED 26.8 billion) project’s handling capacity to six million TEUs

by 2020. The first phase of the megaproject, which involved installing more pre-cast blocks than the pyramids, is due to open at the end of 2016, confirmed Aecom’s Programme Director Tim Verdon.

Qatar Rail’s Chief of Service Delivery Andrew Tailor updated the Forum on Qatar’s US$ 20 billion-plus (AED 73.4 billion) integrated transport plan. A world record 21 tunnel boring machines are being used on the Doha Metro project, which so far has completed almost 50 kilometres of tunnels.

A total of 26,000 workers are working on the project, equating to more than 78 million man hours worked as of end of August.

Work on the Lusail tram scheme is even more advanced, with four of the five at grade stations completed, while the tender for the first phase design and build of the longdistance freight and rail network will be issued to contractors early next year.

On the roads side, Eng Nasser al-Kuwari, Manager of Highway Projects department at Ashghal, presented an overview of the QR 40 billion (US$ 10.8 billion/AED 39.6 billion) expressway programme. The massive project, which involves 1,000 kms of new or upgraded roads, 240 major interchanges and 360 bridges, has already seen 43 major contracts awarded. A total of 15 contracts are either in the market or are being prepared, while a further 23 are in the planning stage.

Summarising the considerable number of opportunities in the Qatar transport sector, Ed James, Director of Content and Analysis at MEED Projects, revealed that the overall pipeline of planned projects in the state exceeded US$ 200 billion (AED 734.5 billion).

Transport, along with construction, were the two largest individual sectors in the pipeline.

The Forum opened with a speech from His Excellency Jassim bin Saif al-Sulaiti, Minister of Transport, in front of a highly-distinguished audience that included HE Sheikh Abdullah bin Nasser Al Thani, Prime Minister and Minister of Interior, HE Sheikh Ahmed Bin Jassim Al Thani, Minister of Economics and Trade, HE Ali Sherif Al Emadi, Minister of Finance, HE Dr Hessa Al Jaber, Minister of Telecommunication and Information Technology, and HE Abdullah Bin Saleh Al Khulaifi, Minister of Labour and Social Affairs.

The Forum’s stakeholders included Qatar Rail, who was the Platinum Sponsor, the Strategic Event Partners were UrbaCon Trading & Contracting, Al Khayyat Contracting & Trading, Qatar National Bank and Mowasalat. The Forum’s Gold Sponsors were the Supreme Committee for Delivery and Legacy and Joannou & Paraskevaides. Qatar Development Bank was the Development Sponsor, Qatar Airways was the Official Airline Sponsor, and ooredoo was the Official Telecom Sponsor. Manateq was the Economic Zones Partner, and Atkins, Lean Park and Milaha were the Forum’s Silver Sponsors.

Huawei, ALYSJ Joint Venture, GBM and Q Shield were the Forum’s Exhibitors and Sky News Arabia was the Official News Partner.

OCTOBER 2015 57

Exploring alternate options DP World announces plans to harness solar power in Dubai, aiming to make a sustainable difference to the community, finds GSC

58 OCTOBER 2015

M

arking the start of the global ‘Go Green’ campaign, a maritime industry initiative involving five of the world’s largest port operators - DP World, Hutchison Port Holdings Limited (HPH), APM Terminals and PSA International and the Shanghai International Port Group (SIPG), global marine terminal operator DP World has announced plans to launch a major renewable energy project.

The project is based on the installation of photovoltaic solar panels to generate electricity, allowing it to reduce its carbon footprint while exporting surplus energy to the national grid.

Under this campaign, the five port operators have come together to raise

environmental awareness to make a sustainable difference in the communities in which they operate. The project, launched in cooperation with Economic Zones World, a DP World subsidiary, involves rooftop solar panel mountings on its Jebel Ali free zone buildings and parking sheds, and several of its cruise terminal buildings in Port Rashid.

The launch of this major project, the largest distributed solar rooftop grid connected project in the region, follows the announcement by Dubai Electricity and Water Authority (DEWA) of Shams Dubai, a smart initiative to regulate the generation of solar energy in buildings, and their connection to the grid, and complements Dubai’s effort to diversify energy resources in line with Dubai

INNOVATION

vision 2021 and the Dubai Integrated Energy Strategy 2030, which aims to reduce energy demand by 30 per cent by 2030 and diversify the energy mix.

Said DP World Chairman HE Sultan Ahmed Bin Sulayem, ”This project supports the Smart Dubai initiative, and the vision of His Highness Sheikh Mohammed bin Rashid Al Maktoum, UAE Vice President and Prime Minister and Ruler of Dubai, to transform Dubai into one of the world’s smartest cities through sustainable development. It is a major milestone in promoting the rational use of natural resources and creating innovative solutions that replace traditional energy sources. We

are delighted to contribute to the efforts that support the Emirate’s economic growth and the drive to build a green economy.”

“To secure a healthy sustainable society for future generations, it is necessary to take stock of our energy consumption today.

Diversifying our energy mix with renewable resources such as solar power makes a lot of sense in our region where we can harness it all year round,” he added.

A tender has already been issued for the project, and vendor bids are to be accepted until October 1st, 2015, with a final

contract expected to be signed by the end of October 2015.

The project will be implemented in phases, the first will cover 19 buildings’ rooftops in Jafza and their surrounding parking areas, six LIUs (Light Industrial Units) rooftops in Jafza and their surrounding parking areas, one warehouse, and two cruise terminals rooftops in Mina Rashid and their surrounding parking areas, in addition to ground-mounted panels for the main spine road in Jafza North. This will contribute to a total generation of 30-40 MWP (Mega Watt Peak).

DP World also hopes to roll out the initiative across its global portfolio in the future.

OCTOBER 2015 59

UNWIND

Communication is key Vivek Seth, CEO, Halul Offshore Services Company, is a believer of excellence regardless of the project.

He feels communication is a key aspect of motivating a team and enabling them to achieve targeted results.

He spoke to GSC about his management style

Which school and university did you go to?

I attended the Don Bosco School in Kolkata, India for my secondary education (high school). For my university studies, I attained my Marine Engineering degree from the Marine Engineering and Research Institute (MERI), formerly known as the Directorate of Marine Engineering Training (DMET) also in India. Later, I attended the Manchester Business School, UK, for my MBA. What was your first job?

My first job was quite memorable as it gave me my first experience of how to work on a shipping vessel. I first served as a 5th (junior) engineer on a crude oil tanker.

What do they not teach you in business school?

Business school is a place where you are taught about theories and concepts and working later in the real world gives you the opportunity to apply whatever it is that you learned. What you are not taught is more in practice – valuable lessons like improving people and communication skills and understanding that success comes from a team that delivers and implements your strategies.

Who is your role model and why?

I have always looked up to Mohandas Karamchand Gandhi, the father of the Indian nation.

He was truly a great leader sacrificing a great career to achieve what he believed in. He is a great example of a man of clarity and how he focused on achieving his goals despite going against a strong adversary.

What is your leadership style?

I have always focused on empowering my team members and giving them the proper

60 OCTOBER 2015

motivation to achieve set goals and objectives. Which becomes easier when everyone is aligned towards a common purpose.

What do you think is the most important factor in being an effective manager?

Over the years, I think the secret formula here is to be an excellent communicator - having the ability to maintain strong communication which is not only being a good speaker but also being a good listener.

How well do you handle stress?

What is your fool-proof method of de-stressing yourself?

I have learned that the best way to handle stress is to effectively communicate the challenges you face with the team you work with. Doing so can show you that the problem is not so bad after all and that it can be solved. There is no foolproof method for de-stressing. Stress, to an extent, is good as it challenges you and pushes you to find a better way. One important thing to remember is not to take your work stress home. It is important to keep them separate, although it is easier said than done but a conscious effort needs to be made towards it.

What do you find encouraging?

Achieving level of excellence in whatever you do, the ability to exceed expectations and recognition for a job well done.

How do you spend your free time?

I love doing fun activities with my family as it not only means being able to spend time with them but it also translates to bonding as family. I also find extreme joy and pleasure in being able to sit down and enjoy a good book.

What is at the top of your agenda right now?

My top priority nowadays is to create and develop a high performing team that drives change and exceeds expectations.