Sector Focus
Technology
Transport
Cold chain storage for healthcare
The entrepreneurs re-writing the rules
Fleet management innovations
Connecting trade professionals with industry intelligence
The year ahead, according to the experts
January 2016
Start 8 | News 14 | News Analysis
Contents
Stuart Matthews looks at the GCC rail developments
18 | The Entrepreneur Effect How new age tech companies are redefining logistics
Features 22 | Re-writing the
Rules of E-commerce Regional players and international standards
26 | Sector Focus: Healthcare The challenges to be met in cold chain transportation 30 | Cover story: 2016 Trends The expert view on the year ahead from across the industry 36 | Viewpoint Contributions from Winston and Straw, Logistics Executive and Prakash Menon
40 36
58
50 | Fleet Management in the Modern Age The latest technology and new age innovations 54 | Interview
Face to face with Bion and Panache International
58 | Case Study
The numbers driving the new Emirates Sky Cargo facility
60 | Retail Focus
Stationery supplier Pencil talks about the logistics of expanding operations
62 | Snapshot What’s on and what to read during the month ahead
50 Logistics News ME | January 2016 | 3
Editor’s Note The year ahead
W
ith the New Year comes new promises: to be more successful, more disciplined or, in business terms, bigger and better than ever before. But after a year of unprecedented developments, how can one prepare for success in the face of uncertainty? 2015 saw achievements like no other; the new Suez Canal opened; the UAE’s non-oil trade hit record levels, bucking the global trend; the sharing economy extended its reach into logistics; and the UAE logistics industry was tipped to reach values of $25bn according to Dubai Chamber, in predictions made as early as October. But there were negative developments too – none more so than complications in international political relations, a decimated oil price and continued issues with international trade sanctions. Such developments only went to show that if anything governments need to work together in greater cohesion in order to ensure that trade remains free and open and private sector entities must continue to springboard off each other’s innovations in order to avoid stagnating. As 2016 dawns the only thing certain is that the year is likely to bring just as many surprises as 2015; both positive and negative. Like almost every industry today, the logistics industry is facing a need to evolve; to embrace the sharing economy that has re-drawn the lines of how people connect and access age old services; to em-
Managing Director Walid Zok Walid@bncpublishing.net
Group Sales Manager Joe Taphouse Joe@bncpublishing.net
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Sales Manager Vishvanath Shetty vish@bncpublishing.net
Director Wissam Younane Wissam@bncpublishing.net
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Group Editor Melanie Mingas Melanie@bncpublishing.net
brace technological innovations such as the Internet of Things, which are no longer the things of fiction; to embrace and innovate E-commerce to a more unified standard. Business is changing too. M&A activity has remained high, following a flurry of activity in 2014 and is predicted to continue on this trajectory. How this will re-shape the face of commerce is yet to be seen. This issue of Logistics News ME is dedicated to providing the information senior managers and business owners need to navigate these uncertain times. We have spoken to trade bodies, private sector business leaders, consultants and even exhibition organisers to compile a comprehensive road map for business in 2016. While each has their own specific concerns, the uniting theme is one of hope and positivity in the face of potentially very challenging times. The year ahead won’t be without its challenges and we have already seen divisions in how different GCC members conduct business and a strain in regional relations, but with the dawn of new transport infrastructure, rapid economic growth and huge commercial investments, the foundations for growth have been laid.
Melanie Mingas Group Editor
contributors Malcolm Dias, Stuart Matthews, Sindhu Hariharan
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We deliver on Logisics The Rais Hassan Saadi (RHS) Group have been at the very front of the emergence of Dubai as a Shipping and Logistics hub since they started operations in 1910. Now over 100 years later, the company has evolved into the regional powerhouse it is today with diverse interests across the region. RHS Logistics, the 3PL and supply chain systems integrator, operates from the Middle East, but with a truly global vision. Utilising the latest of technologies, and with a wealth of experience on diversified product handling, in high quality, sophisticated environments, it has cemented its status as an innovative market leader within the Logistics industry. With cutting edge facilities in Dubai World Central, Jebel Ali Free Zone, Dubai Airport free Zone adjacent to the Sea and Air ports, housing a total of 100,000 pallet locations, RHS have and will continue to invest in first class infrastructure, ensuring they remain leaders in their field.
How can RHS Logistics help your Logistics business? Call us on (971-4) 8810007, (971-4) 8082300 or visit rhslogistics.com
RHS Logistics represents the 3PL division of the RHS Group of companies operating out of Dubai, U.A.E.
RHS Logistics Established 1910
Logistics News ME | January 2016 | 7
news
In The NEWS Dubai-China bilateral trade crosses AED527bn since 2011
F
igures released by Dubai Customs show that from 2011 to 2014 overall trade with China reached values of AED527bn. Phones, PCs, satellite receivers, automobiles and aluminium topped the list of most traded commodities between Dubai and China. China was Dubai’s top trading partner in 2014, with bilateral trade volume valued at AED174.84bn, reflecting a 29% growth rate over the previous year. Imports accounted for AED167.64bn, exports for AED1.51bn and re-exports for AED5.69bn. Ahmed Mahboob Musabih, director of Dubai Customs, pictured, said: “Dubai Customs’ efforts to reinforce economic and trade ties with China have resulted in remarkable growth figures in bilateral trade. We work towards achieving more commercial growth by strengthening cooperation and direct communication with Chinese officials, diplomatic corps and business communities based in Dubai. Integrated privileges and benefits are also in place to help Chinese traders and investors who are seeking added value from trading through Dubai and who desire to expand their market potential here. Our customs development plans are focused towards further building their capacities to make best use of Dubai’s current stature as a fast-growing global trade hub.”
Ahmed Mahboob Musabih-Director of Dubai Customs
UAE E-commerce industry to reach $10bn Currently valued at $2.5bn, the UAE’s e-commerce industry is set to reach $10bn by the year 2018, according to a recent survey by MasterCard. According to the survey, the UAE is home to a growing population of online shoppers with over 50% of respondents saying they use the internet to shop for goods and services. With the majority of sites limited to offering traditional buy and sell transactions, few as yet appear to have embraced the social selling bandwagon – a trend that has been seen growing in popularity in many other countries around the world. 8 | Logistics News ME | January 2016
“With the value of the e-commerce industry set to increase three-fold, online platforms need to evolve and develop their interfaces and usability,” says Adham Saleh, Managing Director of EZHeights.com. “Users are looking for easy, convenient websites from which to buy and sell, and when we compare local and global e-commerce sites there is a real gap. Many sites here adhere to the same layouts and elements they’ve used from the start; it’s time the UAE caught up and integrated social selling as a major part of local e-commerce,” he adds.
news
KPCT ready for expansion
Gulftainer wins Lloyd’s List ME award Gulftainer, a privately owned, independent terminal operating and logistics company, has won the ‘Port Operator Award,’ sponsored by Fichte & Co., at the Lloyd’s List Middle East & Indian Subcontinent Awards 2015. Flemming Dalgaard, CEO international operations at Gulftainer, received the award from Paul Holloway, event director at TOC Middle East, at the award ceremony held in Dubai. Gulftainer was among six other finalists from the region and was chosen for the laurel that recognises a company or port authority that has maintained the highest standards of operational efficiency and customer service throughout the year. Factors considered by the expert panel of judges were quality, tangible examples of innovation, improved efficiency, profitability and successful investment in port operations. Highly regarded in the shipping industry, the award also took into consideration evidence of sustained commitment to customer service, cost and operational efficiency, and an outstanding safety and environmental record.
Martijn Van de Linde
Khalifa Port Container Terminal is ready for the next phase of expansion and new equipment will be added in 2016 and 2017 to keep up with demand for services, according to an announcement from Abu Dhabi Terminals (ADT). The port is currently on 78% of its handling capacity and the next two years will see Abu Dhabi Terminals enhancing its operational readiness through infrastructural development to meet the expected growth of the local and regional industry. Three additional Ship-toShore (STS) gantry cranes and 10 Automated Rail Mounted Gantry (ARMG) cranes will be added to increase the terminal’s annual capacity and satisfy the future demand and volume growth potential. At the end of 2015 it was forecast a total of 1.5 million twenty-foot equivalent units (TEUs) containers have been
handled at Khalifa Port Container Terminal in 2015, up from 1.14 million in 2014. Annual throughput at Abu Dhabi’s container port will grow to 2.5 million TEUs at the completion of this phase of expansion. In three years of operation, traffic through Khalifa Port Container Terminal has grown at the fastest pace of any container terminal in the Middle East Martijn van de Linde, ADT CEO commented: “KPCT is now firmly on the world map as a key logistics hub which has been achieved through becoming an industry partner for our customers, as well as demonstrating that Khalifa Port offers a cost-effective, fast and reliable alternative to regional ports. We have also significantly developed our network, going from an initial five to a current 50 international destinations.”
Globe Express Services President and CEO, Mustapha Kawam
Transworld Group, Suzue Corp Japan sign MoU Dubai headquartered global conglomerate Transworld Group and Yokohama based Suzue Corporation of Japan signed a Memorandum of Understanding for the formation of a Joint Venture Company for exploring business opportunities in the logistics space within Indian Sub-continent, Middle East and Japan. Under the agreement Transworld Group and Suzue Corporation will develop a Joint Venture unit which will capitalise on the possibilities in international freight forwarding, customs clearance service, warehousing services, land transport services and other related logistic services with additional focus on land bank development for commercial purposes in Indian Sub-continent, Middle East and Japan.
Logistics News ME | January 2016 | 9
news
36% Sustainability rising on business agenda
An increasing number of organisations in the Lower Gulf are making sustainability a key part of their business agenda, according to the findings of the 2015 KPMG Lower Gulf Sustainability Report. 36% of the UAE’s top 100 companies reported on CR in 2015, a significant increase from 22% in 2013. Meanwhile, 37% of top 100 Omani companies also reported on sustainability, included in the survey for the first time. Rajeev Batra, partner and head of risk consulting, KPMG comments on the report: “Sustainability is reshaping the Middle East. Leading companies are increasingly moving away from focusing only on community and QHSE, towards a formalised reporting process, with stakeholder engagements and materiality assessments. Those who lack a formal process tend to have limited quantitative sustainability data, and qualitative data shared alone can be perceived as PR or green-washing, hence they are hesitant to report; while others simply need guidance on how to report. Our report highlights insights and leading practice from leading companies across the UAE that have a clear vision for their businesses.”
10 | Logistics News ME | January 2016
of the UAE’s top 100 companies reported on CR in 2015
National Air Cargo awarded for health and safety
National Air Cargo, Middle East won recognition from Dubai Airports in its fifth Safety and Security Excellence Awards Ceremony held on 8 December, 2015. National won the Best HSE Project Award in the Organisations award category among 76 various organisations in the Middle East. Alan White, ground operations VP shared that: “National being the only nongovernment entity among the final
nominees, encountered three progressive levels of selection interviews. The interview jury consisted of Senior Executives from Government Departments including Dubai Municipality and Ministry of Health.” At every advancing stage of interviews, National were challenged by the jury with queries from multiple Health, Safety and Environment scenarios to which they provided evidence that superseded all expectations. ”
SOHAR pens environmental deal with be’ah SOHAR is to become home to one of the region’s most advanced waste treatment facilities, following a signing with deal to secure development of a 240 hectare facility to handle a range of industrial waste from SOHAR. Slated as “one of the Middle East’s most advanced, integrated waste management facilities” work will soon start on the site close to the recently leased-out first phase of SOHAR Freezone. The new integrated facility will be equipped to deal with the large quantities of waste generated annually by the country’s burgeoning industrial sector, much of it from SOHAR, now one of the
region’s primary industrial hubs. Jamal Aziz, SOHAR Freezone CEO, said: “Excellent road connectivity in SOHAR, as well as future rail links with other industrial hubs in the region, were some of the main factors for locating the treatment plant here.” The integrated industrial waste treatment facility will serve as the cornerstone of industrial waste management infrastructure being developed for SOHAR and will include a dedicated waste solidification facility; units for thermal, physical and chemical treatment designed to process different types of industrial waste; as well as landfills.
news
QR261bn
Total value of major projects in development in Qatar
Norway trials new News in age of e-navigation brief with NAVTOR The Norwegian Coastal Administration (NCA) has initiated the first full-scale trial of e-navigation in Norwegian waters in conjunction with NAVTOR, a global provider of e-navigation technology and services. The test sees the ferry MS Stavangerfjord digitally sharing its routing information with NCA via NAVTOR’s NavStation, the world’s first ‘digital chart table’. The project focuses on the way NCA receives vessel data. Until now, ships had to contact the authority via maritime VHF radio to verbally communicate routing information before both departure and arrival. NCA could then update vessel navigators on traffic and advise of any necessary changes in speed or routing.
60% of business leaders in KSA plan to increase investment in talent development, the highest rate in the region. The total value of major projects in development in Qatar is QR261 billion, not including projects for the oil and gas and private sectors “I would like to see additional investor-friendly initiatives like tax incentives and guaranteeing that repatriation of funds is given priority by the Central Bank of Egypt,” Khalaf Ahmad Al Habtoor told Egyptian President Abdel Fattah Al-Sisi. Maersk has joined WTO’s Global Alliance for Trade Facilitation, along with DHL and Wal-Mart, and the International Chamber of Commerce and the World Economic Forum. The objective of the Global Alliance for Trade is to accelerate trade facilitation reforms by supporting swift and wide implementation of the WTO Trade Facilitation Agreement. Alstom has been awarded a €160 million contract to supply 30 Coradia Continental electrical trains to the Hessische Landesbahn GmbH (HLB) in Hesse, Germany. The trains are scheduled to enter commercial service in December 2018 on the Südhessen-Untermain network, connecting the cities of Wiesbaden, Mainz, Darmstadt, Frankfurt and Aschaffenburg, in the west-central part of Germany. SOHAR has commissioned a new series of thought leadership reports, including the ‘2016 Middle East Iron and Steel Industry Report’ with MEED Insight launched to over 700 delegates at the Middle East Iron and Steel Conference in Dubai Umm Al Quwain Free Trade Zone (UAQ FTZ) registered and licensed 850 companies in 2015
12 | Logistics News ME | January 2016
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Track Changes The GCC is currently engaged in rail projects worth $115bn, set to link major port and road infrastructure as well as urban centres. While there is significant doubt cargo tracks will complete by the 2018 deadline, progress on commuter lines has been rapid. Stuart Matthews writes
T
he GCC countries have witnessed some of the fastest population growth rates in the world over the last decade. Crucially more than 70% of the Gulf populations live in urban areas, with both Kuwait and Qatar experiencing nearly 100% urbanisation, according to UN Habitat. Between 2005 and 2010 Dubai saw annual population growth rates in excess of 4%, while Riyadh was not far behind knocking around 3%. These surges in growth, spurred by economic development and accompanying opportunities put enormous pressure on transport infrastructure in Gulf cities and some still struggle with their daily commute. Regional municipalities have long recognised the need to shift people on to public transport if their cities are not to end up in a semi-permanent gridlock. Understanding this has seen bus and taxi fleets boosted; nurtured the growth of private driver enterprises such as Uber and Careem; and led to the emergence of significant light rail projects in the densest of urban centres around the Gulf. Dubai Dubai led the way, in part because it had to. Rapid expansion of the city and its population meant the Dubai Metro was a much welcomed addition to the city’s transport options when it first opened back in 2009. Two lines - Red and Green - are operational and accounted for some 531 million passenger trips in 2014; a year which also saw public transport’s share of the city’s passenger traffic rise to 14%, from just 6% in 2006. While other lines have been on the drawing board since the project was first announced the one likely to see action soonest is the extension of the Red Line designed to accommodate additional traffic to the site of Expo 2020. Known as Route 2020, the extension will add 15km to the line starting at Nakheel Harbour and Tower 14 | Logistics News ME | January 2016
Tramway maintenance centre depot in Reims, France Image provided by Alstom
station and including 4km of underground line. The plan got the seal of approval from Sheikh Mohammed Bin Rashid, Vice President and Ruler of Dubai, in April and construction will also include seven new stations, two of which will be underground. “The construction of the Route 2020 project conforms to the strategic vision of the Dubai Government for achieving sustainable development, and developing a
world-class infrastructure and services,” said Mattar Al Tayer, chairperson and executive director of the Roads and Transport Authority (RTA) at the time of the announcement. “The RTA has mapped out an integrated plan for roads and transport projects to serve Expo highlighted by the Route 2020 project.” The extension will boost Dubai’s total metro lines to 90km and encompass a
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Rail engineer Julian Hill, Atkin’s managing director for rail in the Middle East highlights the complexities of the region’s multi-package rail developments How do you manage the scope and scale of the ongoing projects? We mobilise a team to be in the office with contractors so we can respond quickly. They feed information back to design centres here in Dubai, or it could be in Hong Kong, India or the UK. It’s the same with all of our projects. We have a strong team on Doha’s Gold Line for example, where we have 100 people in the contractor’s office. There are regular meetings with the client and contractors to coordinate and agree design. Clients set requirements for a project and they would be the same across all packages, but they get interpreted very differently so there can be inconsistencies, which is a challenge and that’s why the clients out here then have to have very strong project management consultants to support them. Their job is to make sure design procurement is all in accordance with each other, delivered to the same standards. It’s extremely complex and requires a lot of skilled engineers and labour to bring together. What’s different about these kind of projects in a Middle East context? When you look around the Middle East they do procure these major metro jobs a bit differently. They will often look for a civil contractor and systems provider to team up and submit a combined offering for the project. That has some advantages and disadvantages. Obviously the client doesn’t get the preferred contractor with preferred systems provider, but it does mitigate them dealing with the interface between civils and the systems. If you procure them separately, like they are doing on the Makkah Metro, you have to have a strong project team in place to manage the interface. Where do the challenges lie, given the number of metro projects currently under development in the region? Challenges for the consultants include getting good quality engineers into the region and working on these projects. We want to be able to deliver projects at a quality the contractor expects from Atkins. With the metro projects happening on a global level, getting good engineers here and mobilising staff is a challenge for all consultants.
number of densely populated residential areas. The demand timeframe for the extension to be up and running, with its deadline fixed to meet the surge in passenger numbers generated by Expo 2020 Dubai, means interested parties are anticipating an award to be announced this month. Names familiar from the construction of the first two lines are likely to be prominent among the bidders.
Qatar Another city with a fixed deadline to measure its progress by is Doha. The Qatari capital will play host to the FIFA World Cup in 2022 and is a city much in need of the relief a functional light rail system will bring to traffic. This need has seen the country allocate a large portion of its 2014-2015 national budget, more than $20bn, for infrastructure-related projects, according
to Alpen Capital’s GCC Construction Industry report, released in June. The report notes that nearly $74.6bn worth of transport projects in Qatar are currently in planning or under construction and key among these is the $40m Qatar integrated rail project. Overseen by Qatar Rail, three major projects make up the integrated network: the Doha Metro, the Lusail Light Rail Logistics News ME | January 2016 | 15
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Transit (LRT) network, and the Long Distance Passenger and Freight network, which will be connected to the wider GCC rail network. Doha Metro is a significant portion of this work and is currently one of the world’s largest active metro projects. In phase one three lines - Red, Green and Gold - are being developed, with an ultimate completion date of 2026 for phase two elements. Doha Metro’s first phase is underway and has an expected completion date of 2019, putting it in place well before the city plays host to world football. This first phase will see the construction of some 35 stations and more than 100km of track will be laid, mostly underground. The second phase will see around a further 50 stations developed and making the network 150km long. This second phase will be notable for the increase in amount of track either at ground level or elevated, as the project moves out of the city’s densely packed central areas. Riyadh Despite the size of the Doha Metro project, observers may be more inclined to look to Saudi Arabia to see the future potential of light rail projects in the region. The Riyadh Metro stole headlines when contracts were announced in 2013, but it is not the only city with rail plans in the pipeline. Saudi municipalities have also pencilled in metro maps for the cities of Dammam, Jeddah, Makkah and Madinah. With five major metro projects under way or on the drawing boards the country is set to draw on global rail expertise for up to the next decade; especially when these projects have the major high-speed links and elements of the GCC rail network added to them. With a project cost estimated at $23bn Riyadh Metro is certainly the most valuable of the planned projects and may also be one of the earliest to finish. In July the first tunnel excavation for the project got under way when the consortium led by Bechtel began tunnelling for Line 1 of the network. The Bechtel-led consortium, includes Saudi company, Almabani General Contractors, Middle East-based Consolidated Contractors Company, and Germany’s Siemens AG, and is responsible for the $10bn contract for Lines 1 and 2 of the project. 16 | Logistics News ME | January 2016
Panama Metropolis. Image provided by Alstom
“Sending our team’s first tunnel boring machine on its underground voyage is a significant step for all,” said Amjad Bangash, Bechtel’s director on the project in a statement. As the TBM makes progress it will reach speeds of up to 100 metres per week as it cuts a hole beneath the city, with an anticipated completion date sometime in mid-2016. In total, seven
tunnel boring machines will be deployed by the Bechtel-led team to dig and construct more than 35km of tunnels for its portion of the project. July 2015 also saw movement on the metro destined for Makkah, where the annual surge in population fuelled by the pilgrimage seasons places huge strain on existing transport networks. Spain’s Isolux Corsan is part of a consortium appointed as
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Urban mobility Vincent Prou, GCC managing director for Alstom Transport explains some of the key challenges the rail provider faces in getting the Middle East on the move What challenges does Alstom tackle to design and deliver a metro system? Alstom’s goal is to provide the mobility solution that addresses its customers’ needs. In order to do this, during the project definition phases Alstom sets out to fully comprehend customer requirements. Through this direct interaction, Alstom is able to offer the right solution or come up with innovative ones when the solution is not available off the shelf. This is, for example, how Alstom came up with Axonis, a metro system that is driverless, quick to build and that can operate elevated, on the ground and underground, limiting city footprint and disturbances during construction. Without that direct interaction with customers, designing and managing a project could be more challenging. What makes metros in the Middle East different? Most cities build metro networks in stages, or build one or two lines at a time. In the Middle East region, there are ambitious transport projects as a result of substantial economic growth, population increases, congestion, pollution and industrialisation. The authorities tend to build several lines simultaneously and require their projects to be built within a set deadline, which may be a challenge for the contractors building the system. Alstom is able to deliver performancebased projects, on time and sometimes before the contractual date, as was the case for the Dubai tram. What are the main characteristics of the metro systems in the Middle East? The Middle East and Africa is the region with the highest level of integrated rail urban transport, accounting for 80% of its total rail projects. Undeniably, when led as an integrated system, projects require only one tender procedure, a single contract to manage the project and a single entity to commit to the full performance requests. This greatly simplifies the organisation on the customer’s side. Project financing is also easier to secure. Another trend, is that metros tend to be automatic and driverless. Alstom’s Urbalis gives operators precise control in the movement of their trains, allowing them to run on the line at higher frequencies and speeds in total safety. Urbalis can largely improve capacity, efficiency, reliability and safety of metro lines, while reducing operating costs for operators.
preferred bidder to build lines B and C of the Makkah Metro, with an overall budget of more than $2.5bn. While only the two lines awarded to the Isolux Corsan JV - which also includes Turkish company Kolin Insaat Turizm Sanayi ve Ticaret and the Arab Haif company - are to be built during the first phase, Makkah Metro will eventually include four lines and integrate with the
existing Al Mashaaer Al Mugaddassah line, originally built in 2010 to carry pilgrims between the city’s holy sites. Earlier this year the metro’s developer signed a $390m deal with the Saudi Electric Company to connect and supply electricity to the project, which is scheduled to start next year with a tentative completion date of 2019. With regional projects of this scale likely
to be on going for nearly a decade the Gulf has the potential to become a centre for rail expertise. This status can only improve if plans on the region’s drawing boards start to come to fruition and more passenger miles are clocked up on existing networks. Gulf inhabitants have yet to universally embrace public transport, but nothing is more likely to make them do it than modern metro systems and heavy traffic. Logistics News ME | January 2016 | 17
Technology
The entrepreneur effect A new generation of tech-enabled startups is innovating the logistics landscape. From GPS enabled e-commerce deliveries to 5-star food on demand, Sindhu Hariharan investigates.
Anis Harb - General Manager, Deliveroo UAE
D
isruption is the buzzword across businesses today. Globally, the new normal is a scenario where long-standing companies need to operate as ‘smart’ businesses or run the risk of lagging behind their peers. While technological disruption is making its presence felt across businesses, logistics, by nature, has been a difficult one for start-ups to enter and thrive in. Based on ships, rail, trucks and aviation, the industry is an asset-heavy one and regulationdriven. The presence of risk-averse stakehold-
18 | Logistics News ME | January 2016
ers who are restrained when it comes to embracing tech innovations adds to the hurdles. The sustained economic growth in MENA region, mainly across automotive, retail (ecommerce) and health sectors, has increased the need for a smart and robust logistics framework. Despite various structural challenges being thrown at tech start-ups, MENA’s logistics industry is witnessing promising entrepreneurial action. Few upstarts, realising the potential of digitising this industry, are leveraging technology to solve
operational issues. While one of the start-up uses technology to strengthen last-mile delivery critical to support e-commerce, there are others that have applied principles of the “sharing economy” pioneered by Uber, to the freight industry. These ventures all have one thing in common: they have all used the UAE market as their launch pad before venturing further into the MENA market. We feature three such new-age logistics startups placing their bets on the mobile and digital revolution sweeping over the MENA region and aiming to disrupt the logistics industry.
Technology
Fetchr Fetchr aims to eliminate use of conventional addresses and instead deliver packages using the GPS coordinates of consumers. The Fetchr mobile application and its delivery team ensure efficient last-mile delivery – without the hassle of coordinating verbally for directions. The app helps shippers to deliver packages to the exact location of the recipient using the GPS location feature on their smartphone, which is an integral part of life for the majority of people today. “E-commerce is defined by strong logistics and we at Fetchr aim to move along with the customer to make deliveries,” says co-founder Joy Ajlouny. Fetchr considers its service useful to e-commerce companies looking to scale their operations. It also helps enrich the shipping experience for the customer. Large e-commerce providers, retailers and tech-oriented individuals are major customer groups of Fetchr. In an infant venture capital market like MENA, Fetchr has raised $11 million in Series A funds from investors led by New Enterprise Associates (NEA), a large US based venture fund. Fetchr currently operates in the UAE, Saudi Arabia and Bahrain and has aggressive expansion plans for the GCC region in the short-term. The company is also evaluating partnerships for international deliveries. Fetchr’s biggest challenge is to do away with physical addresses and use technology to redefine the very premise of the ‘shipping address’. “Even with the massive smartphone penetration in the region, we had to work to create awareness about how our technology can define locations, for both customers and staff who were not used to this,” comments Idriss Al Rifai, founder and CEO, Fetchr. LoadME LoadME holds the distinction of being the first and only marketplace connecting transporters and load owners in the Middle East using the power of Internet and GPS tracking. As a Middle East logistics professional, Sebastian Stefan, Co-Founder and CEO, LoadME observed more than 50% of trucks returning empty after shipping trips. “Besides affecting profitability of the transporter, this creates traffic congestion and adds to the emissions footprint,” says Stefan. This gave shape to LoadME, a web platform connecting freight/loads to trucks with spare carrying capacity on an on-demand basis. Features like transporter reviews, driver profiles and load details enable real-time
The Fetchr team
Sebastian Stefan - co-founder and CEO, LoadME
Deliveroo Screenshot
Fetchr Screenshot
Joy Ajlouny - co-founder, Fetchr
Logistics News ME | January 2016 | 19
Technology
LoadME
evaluation of options through the portal. Stefan pegs the savings to transporters at almost $100 per day by such a utilisation of capacity. This includes savings on fixed costs of empty trucks parked in their compounds and the fuel efficiency achieved. The idea is a transformation of sorts for the region’s unorganised trucking business, which largely relies on third-party brokers to play matchmaker. However, LoadME stresses that the business aims to empower the broker with their tool and not push them out of business. Currently, LoadME has over 2,300 registered users including transporters, load owners and brokers and it aims to expand in GCC states and Jordan. The company is testing its mobile application and looking at evolving into a community portal for logistics professionals. “Though it’s nice to not have direct competitors, the industry is largely unaware of the
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model and we need to educate them on the benefits of the technology,” observes Stefan. Deliveroo Deliveroo is an on-demand food delivery service bringing to consumers, food from premium restaurant chains that typically do not run their own delivery services. Founded in 2013, the UK-based venture made its first foray outside Europe last month with its launch in Dubai. Anis Harb, UAE GM for Deliveroo considers the venture as a tech company creating a win-win situation for restaurants and consumers alike. Harb explains that the plug and play nature of the proprietary software brings incremental revenue for restaurants without incurring any additional fixed costs and also relieves them of fleet management. For consumers, Deliveroo is an ‘Uber’ for food. A customer can order from the network’s restaurants and track the status
of deliveries through the Deliveroo app. The company targets to achieve an average of 32 minutes delivery time on its orders. Its drivers complete orders seamlessly using the navigation features on the app. Deliveroo has established tie-ups with over 100 Dubai restaurants in neighbourhoods like Dubai Marina, J.L.T., Downtown and Business Bay among others. Starting with the GCC region, where demand for food take-away and orders is high, the start-up aims to expand its network of premium restaurants. Globally, Deliveroo has raised $200m to date from major investors including Accel, DST Global and Greenoaks Capital among others. “The biggest task for us in ensuring efficient and reliable deliveries is the driver (delivery team’s) onboarding process,” said Harb. Deliveroo tackles this challenge by running extensive training programs to educate the drivers on the proprietary technology and navigation systems.
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Technology
RE-writing the rules of E-commerce
In many countries, this is the time of year when E-commerce transforms the retail experience. But with Cyber Monday deliveries on average 20% slower in 2015 compared to 2014, it looks like E-commerce may be too popular for its own good. Sindhu Hariharan discovers how the sector can innovate
T
here used to be a time, not so long ago, when online shoppers felt highly impressed and excited about buying a wide range of products with a single click of the mouse and finding the merchandise delivered in a week or two. Little did people know then that it was just the herald of a phenomenon called E-commerce that is sweeping over the retail industry today. Digital markets research firm eMarketer estimates the global E-commerce market to
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grow at a CAGR of 17% from $1.5 trillion in 2015 to $2.5 trillion by the end of 2018. The logistics network catering to this large market is a very important cog in the wheel of E-commerce’s growth. E-retail giants like an Amazon and eBay are spearheading most of the innovation in E-commerce logistics. While large industry leaders like Amazon can afford investments in logistics platforms and solutions of their own, there are countless other retailers with growing E-commerce presence and aspira-
tions, for whom, working with 3PLs or 4PLs makes more sense. MENA’s E-commerce story The proportion of population shopping online in MENA may be small but is increasing. Industry observers say that the region is positioned at an exciting stage – one where perhaps Western markets were 10 to 15 years ago. “There are about 4.4 million online buyers in this region, and this figure is set to rapidly
Technology
increase with an expanding population surpassing world average growth rates. There is also a predominantly young population, especially in the Gulf countries, who are more tech-savvy and prone to explore the world of on-line purchases,” says Nour Suliman, CEO, DHL Express - MENA. In a research report, market research firm Research and Markets opines that the UAE leads the growth of B2C E-commerce in the Middle East, owing to having the highest Internet and smartphone use and payment cards penetration. Saudi Arabia, Qatar, Kuwait and Bahrain are other markets closely behind UAE in the adoption of E-retail. In the absence of organised data, estimating market potential of E-commerce vertical for the logistics industry is difficult. However, Cathy Robertson, experienced logistics professional and founder and head analyst, Logistics Trends and Insights states that as of 2014, MENA’s E-commerce logistics market stood at $3bn – depicting 10% rise from 2013. Delivery fulfilment under E-commerce The MENA region has unique traits when it comes to E-retail, which transporters must factor. Cash on Delivery (COD) - a concept alien to the US or Europe - is still the norm here in MENA, and the rate of return of merchandise is higher than global average. Lastly, the all-important “last-mile” delivery leaves a lot to be desired with customers still having to direct drivers street by street on call. “In a short period of time, we have seen consumers becoming more demanding and competition becoming fierce across E-commerce logistic players. Logistics companies should not fall into the trap of setting up infrastructure, processes and systems to meet a current demand for ‘two to three day delivery’ when this could quickly turn into ‘same day delivery’ market,” say Julian Thomas, Middle East supply chain leader, PwC and Ashley Koussa, Middle East supply chain senior manager, PwC. Logistics companies, on their part, need to unlearn traditional fulfilment procedures to handle e-commerce needs. Picking, packing and shipping multi-line item orders, split case picking and more realtime inventory management are some aspects to be mastered.
For instance, Swisslog (provider of supply chain automation solutions) offers a picking system called ‘CarryPick’ specifically for Ecommerce. CarryPick combines transportable racks, robots and Warehouse Management software with multi-functional workstations, providing retailers with a flexible solution that can adjust quickly to changing requirements. “The automated storage and goods-to-person order fulfilment system is specifically designed for the intralogistics requirements of E-commerce businesses, where product variability, delivery times and cost efficiency are daily challenges,” states Swisslog. Due to the digital nature of E-commerce, integration of front-end and back-end processes of the supply chain is also needed. The transporters must be able to track each parcel being shipped. “Personalised track-and-trace systems, competitive pricing structures, efficient lastmile delivery and smarter warehousing and inventory management are just some of the ‘must-dos’ for logistics players,” lists out Suliman. Innovations around last-mile delivery like parcel lockers, GPS-oriented deliveries and round-the-clock parcel centres also need to grow further. Global integrated logistics provider Aramex recently announced its plans to launch private, automated parcel lockers for e-commerce and express shipments across Dubai, providing a convenient delivery option for its customers.
Returned merchandise is another contemporary aspect of the supply chain process that logistics providers need to get used to. ‘Reverse Logistics’, as it is called, requires tech platforms used by logistics companies to match returns with corresponding dispatch, inspect the integrity of the returned item and sorting accordingly. All this needs a well-defined returns policy and procedures and also a well-integrated tech logistics platform/ ERP. Robots of the Amazon Robotisation of warehouses is emerging as a key contributor to efficient E-commerce warehouse operations in the mature markets. This form of automation ensures accurate orders, lower labour costs and storage space saving among other benefits. Last year, industry leader Amazon unveiled a cutting-edge technology to handle the deluge of online orders - its warehouse robots. The world’s largest online retailer is now reported to have almost 25,000 robots working across over 10 its US warehouses/ fulfilment centres. While globally advanced tech is used, MENA’s logistics companies are seeing only basic form of automation for E-commerce needs. Industry trackers tell us that technology usage is restricted to solutions like Pickto-light, Pick-to-voice, dynamic slotting and racking tools and zone-wise picking, to name a few. Very few large logistics companies in MENA have gone this way yet.
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Technology
Aramex, which has its roots in MENA, offers E-commerce specific solutions as part of its portfolio. Aramex’s ‘Shop and Ship’ is a product that allows members to shop from online merchants spread across 15 countries in MENA, USA, Europe, South East Asia and Africa, which it then delivers to their doorstep at competitive rates. Identifying differentiations that is needed for E-commerce fulfilments, Suliman of DHL says: “Geo coding, GPS positioning and location mapping are just some of the new mechanisms being introduced in our industry to ensure a more customer-centric approach. DHL is also on the verge of deploying a system called On-Demand Delivery (ODD) where customers can choose the location and time of delivery, pushing for more flexibility.” Feature-rich and flexible Warehouse and Transportation Management Systems (WMS/TMS) also play a major role to seamlessly connect the shopping cart with the logistics processes. The analytic capabilities of these systems can help logistics players analyse customers’ shopping and delivery preferences too. Bridging the gap Analysing the region-specific hurdles, Suliman explains that disruptions in road connectivity that affect timely deliveries - especially in the case of intra-regional transactions – is the biggest challenge. “There is also a limited number of E-commerce players based in the region which is limiting the industry’s potential,” he adds. “The challenge is to always arrive at a cost-effective model to complete efficient Ecommerce deliveries by way of using technology and optimisation methods and we are working towards that,” states Iyad Kamal, COO, Aramex. Robertson of Logistics Insights agrees. “Much of the E-commerce growth is via overseas/cross border businesses, with Amazon, eBay and so on. These are delivered by large express providers such as DHL, UPS and FedEx and then delivered last mile by local providers. The challenge is to encourage more domestic E-commerce growth,” she stresses. “With regards to infrastructure, there is a disparity of road quality across the countries in the MENA region, and in many countries, especially the Middle East, rail is not yet a major player in the transportation of goods,” observes Thomas and Koussa of PwC. Additionally, innovations in E-commerce logistics need to keep pace with massive volume increase being seen by E-retailers and
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sometimes specific seasonal demands. As per recent news reports, management consulting firm Kurt Salmon, which annually releases a study of shipping times during the holiday season, has said that orders placed on this year’s Cyber Monday (a day of tech products sale in the West) were delivered in an average of 6.9 days – 20% slower compared to 2014. Analysts view this as an early sign that most shippers are operating at full capacity and tend to get bogged down by holiday rush, which is only swelling up with each passing year. Perfecting the last mile Conveying the company’s outlook on E-commerce logistics as a vertical, Kamal of Aramex says: “We see more opportunities emerge as opposed to challenges in this Ecommerce wave. At Aramex, we have been investing heavily for the past few years in our
last mile delivery infrastructure, customer service, warehouse designs and automation solutions to accommodate E-commerce packages. We also plan to launch a B2C mobile application soon that will support last mile deliveries in E-commerce to enhance customer experience.” “We (logistics companies) have to tackle E-commerce as a separate sector altogether, it is much more than just delivering a product to the client, it’s about customer satisfaction at every step of the process and living up to a promise. We are bound to see the rise of a more demanding, price-conscious segment that seeks more control over their delivery process,” emphasises Suliman of DHL. As logistics businesses get pulled from all directions thanks to advent of E-commerce, it is the responsibility of the region’s logistics companies to adapt themselves to the changing supply chain requirements to separate themselves from the pack.
Sector Focus
The Health sector and its mixed fortunes By 2016, over 50% of the top 50 best–selling drugs will require cold chain transportation. But is the regional industry ready for the extra demands this will place on its ability to adapt to and meet demand? Sindhu Hariharan investigates
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Sector Focus
I
f one had to come up with an appropriate phrase to describe the state of global healthcare and life sciences industry, it would be: ‘in flux’. While macro-economic factors are influencing outcomes at the regulation-heavy industry, the sector is also experiencing mixed fortunes leading to a conflicting impact on the bottom line. On one side, growth opportunities in APAC’s emerging markets, and increased healthcare consumption, brings cheer; unrelenting cost pressures and tiresome compliance procedures are pulling down margins. Additionally, innovation - the need of the hour - has led to burgeoning R&D costs in niche areas like bio-tech and clinical trials. This, when coupled with stringent regulations around temperature control and authentication, means profits are shrinking further. This has forced healthcare providers to undertake a keen scrutiny of their supply chain set-ups and streamline them to keep a tight lid on costs. Looking outwards Pharmaceutical shipments require specialised transport and handling procedures that cannot be compromised on. As a result, healthcare providers are increasingly looking to entrust distribution to logistics providers with investments in special infrastructure, R&D and expertise needed to get life-saving medicines and equipment across to the user. “As the global economy recovers from recession, healthcare spending is expected to accelerate. In such a scenario, the majority of healthcare providers consider it wiser to outsource logistics to specialist 3PLs and focus on their core competencies,” opines Eric ten Kate, director of healthcare Middle East, for Hellmann Calipar Healthcare Logistics. Tim Wilson, Middle East health industries leader for PwC, and Mathew Jones, Middle East health director, PwC observe reflections of this trend in mature markets. “We have seen key players in Europe transform their network, using a limited number of “multimarket” warehouses, and leveraging fourth party logistics (4PL) business models to dynamically manage transportation,” the consultants said. MENA’s share of the pie Leading research firm IMARC Group estimates the total size of the healthcare cold chain logistics services market to expand
from its current size of $8.5 billion to nearly $13.4 billion by 2020 – a whopping 60% rise. As per an industry report titled Global Cold Chain Market for Pharmaceuticals 2015-2019 brought out by market research firm Research and Markets, APAC is an emerging market for this solution with the UAE, Saudi Arabia, Algeria, Egypt, and Lebanon being key contributors to MENA’s cold chain logistics market. For MENA, the market potential is enviable and is only expanding. Cathy Robertson, experienced logistics professional and founder and head analyst, Logistics Trends and Insights pegs MENA’s pharma logistics market at $2.3 billion - 3.1% of the global pharma logistics market. “Emerging markets such as those in Africa will see growing demand as its middle class grows,” explains Robertson. Andrew Mitchell, VP of life sciences and healthcare EMEA, DHL Customer Solutions and Innovation is an industry leader excited about MENA’s prospects in this specialised vertical. “We have, in the last two years, opened 10 new life sciences warehouses throughout the EMEA region. Dubai remains the centre of life sciences for the Gulf countries and most of our customers maintain a presence there,” said Mitchell. He feels that, with the recent establishment of a free trade zone in Lagos, it could emerge as the next West Africa hub for life sciences.
How can logistics players equip themselves? To take advantage of such a lucrative share of the pie, the regional logistics sector must endow itself with key differentiations of this vertical. A crucial expectation of any pharma company from their logistics partner is real-time visibility of products to ensure its integrity. Explaining Hellmann Logistics’ infrastructure to cater to this demanding vertical, Eric ten Kate says: “We provide customers with a state-of-the-art dedicated healthcare facility that assures temperature controlled storage meeting the Ministry of Health requirements for GSP (Good Storage Practices) certification, combined with humidity control. “Our latest warehouse is equipped with a floor cooling system. The building is under continuous monitoring and back-up plans are in place to mitigate risks of temperature excursions of any kind.” In Dubai, Hellmann operates as a separate joint venture catering to healthcare known as Hellmann Calipar Healthcare Logistics. Healthcare logistics enablers must put in place documented Standard Operating Procedures (SOPs) and follow them to ensure structured operations. Another regulation-driven necessity is to meet international quality assurance standards like Good Manufacture Practice (GMP), Good Storage Practices
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Sector Focus
(GSP) and Good Distribution Practices (GDP) among others. “Warehouse design and planning is becoming a prerequisite to put away, store, pick and maintain products in temperature controlled areas. The loading bay area must also be temperature controlled along with docking stations both for goods inward and outbound,” explains Muthanna Muckatira, business director Middle East, Ehrhardt + Partner Solutions, a logistics tech solutions provider. Ehrhardt + Partner offers Pick-by-Voice and Pick-by-light solutions that are already popular in the western markets. Industry participants say that the making staff understand the significance of reporting quality excursions must be top-driven from the senior management. There should also be a quality manager designate reporting directly to top management. Trend spotting “By 2016, over 50% of the top 50 best–selling drugs will require cold chain transportation. So logistics providers in the sector will have to adapt accordingly,” observed Kevin Hill, regional sales and marketing director, Agility. With its 104,500sqm warehouse catering to operations across MENA, Agility counts more than 350 pharmacies, 40 clinics and 21 hospitals in Kuwait in its distribution network. Hellmann’s Eric notices the industry move from a ‘one size fits all’ approach to segmentation and personalisation. “With more high value products now being dealt with, security requirements and measures are expected to gain significance. Global developments such as serialisation and 2D printing are also reaching our vertical in the Middle East as the world keeps getting smaller,” he added. DHL’s Mitchell speaks of interesting developments around packaging solutions, and notes: “Hybrid thermal packaging is evolving; localisation of reefers is getting more accurate; and data analytics based on ambient temperature data is also picking up.” DHL Thermonet, a product from DHL Global Forwarding provides temperature visibility along the supply chain enabling 24/7 proactive monitoring and intervention. Right place and right time Despite healthcare logistics being extremely niche, it presents plenty of opportunities for MENA’s logistics industry. “The geographic location of the Middle East is an advantage for this region as it is a major transhipment hub connecting Asia to Europe and Africa. Free trade zones established also encourage growth of healthcare sec-
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tor,” stressed Robertson of Logistics Insights. “The region has the opportunity to leverage the latest digital technologies, enabling companies to leap frog what is found in the more established health systems in the West,” add PwC’s Wilson and Jones. The Achilles Heel However, before jumping on the bandwagon, logistics providers must take stock of impediments. The environmental conditions in the Middle East are a primary challenge, requiring wellplanned and controlled transport systems. As per Hellmann Logistics, the challenges they face mainly relate to climatic extremes and the need for a regional standard. There is no regional equivalent of the US and EU standards and regulations at the moment, they said. DHL points to differences in the quality of infrastructure between mature and emerging markets that add to the cost of delivering healthcare solutions in the region. ‘Reverse Logistics’ can also not be ignored. Recalled and expired shipments need to be disposed in the best possible manner, and in entirety. Experts say that logistics companies should use globally recognised coding systems for pharma products as an identifier for better traceability and disposal of medical waste. Even with all the SOPs in ship shape, logistics companies still require personnel who share the same values as the organisation when it comes to quality. The staff should also be trained on latest guidelines and developments in this line.
Work-in-Progress Hellmann Logistics is working on its warehouse extension project which will see current warehouse capacity of the company being doubled by adding over 12,500 temperaturecontrolled pallet positions. The company expects this additional space to be operational by mid-2016. DHL is also bullish about this vertical. Following their successful introduction of ‘Thermonet’ - temperature controlled air-freight solution - the company said it is working on enhancing this offering to make it an option for ocean freight customers as well. DHL also expects significant opportunities in Iran. Capitalising on its core strength as a logistics provider for the pharma industry, Agility is highly optimistic about pharma solutions. For one of its global pharma clients, Agility has enabled an ‘Integrated Control Tower Solution’ a one-source setup that enables total supplier management and transport flow management. Saudi Arabia’s King Abdullah Economic City (KAEC) is keen to position itself as a strategic hub for pharmaceutical companies. As per a recent official release, pharma company Pharmaline has partnered with KAEC to build and operate its first Saudi Arabian pharmaceutical plant in KAEC’s Industrial Valley. The projects in progress and the demand pipeline just go on as MENA has both opportunities and capabilities going in its favour. The time is ideal to leverage smart technologies to grow this niche vertical and capabilities of 3PLs and 4PLs in the region also support re-imagination of supply chain models to ones that are leaner and more transparent.
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After a year dominated by oil prices, sanctions, global security issues and natural disasters, 2016 is tipped to be a year of change and positivity. Logistics News ME hears the outlook for the year ahead, from the industry’s key sectors and top personalities
Cover Story
The Trade Perspective Eng Mahmood Al Bastaki, board member and CEO, Dubai Trade Federal Customs Authority and the wider GCC customs bodies for standardisation of customs laws and to promote automation for border clearance activities. EZ World has already provisioned all of its administrative services on Smart Devices and will be releasing their next generation app in 2016. Dubai Trade will continue its journey to deliver value to the trading community by investing in its core technology and Contact Centre platforms. We are conceptualising a few pioneering solutions for our stakeholders that will change the way cargo logistics is being managed currently.
What was the single most significant event to impact on trade in 2015? From our perspective UAE non-oil trade has been resilient reaching AED 534.1 billion in the first half of 2015 compared to AED 521.8 billion in H1 2014, achieving a growth of 2%. Despite this heartening scenario for UAE, global trade is possibly poised to record its slowest growth rate since 2009 due to multiple macro scenarios that have come together but possibly dominated by the continued slowdown in Chinese exports and regionally by the fall of the crude oil prices. Is this impact likely to continue in 2016? With regard to the UAE non-oil trade outlook, we have reasons to be optimistic about 2016. The continued government support for megaprojects such as Dubai South, Dubai Design District and Expo2020 will add impetus to the local economy. Across the border, the expected opening of Iran’s economy to mainstream trade will provide a huge boost to various industry sectors in the UAE. The UAE leadership is also committed to cement a firm footprint in the “new Silk road” and the current visit of H.H. Sheikh Mohammed Bin Zayed Al Nahyan to China comes at a time when China has become UAE’s largest trading partner. These factors will ensure that UAE continues its growth trajectory for non-oil foreign trade in 2016 also.
2015 was a huge year for Dubai and Dubai Trade – with exports and FDI increasing, a huge leap in MICE business and record visitors to DWTC – what have been the primary factors driving this? According to Mr. Helal Al Marri, director general of Dubai’s Department of Tourism and Commerce Marketing: “Business tourism generates leisure tourism.” The rise of exports from Dubai and UAE reflects the increase in tourist numbers to Dubai. The UAE offers political stability for foreign investors and coupled with the excellent business and tourism infrastructure has established itself as a global hub for MICE business. Automation and trade are said to be key to driving the future of Dubai’s non-oil trade: how will these be further developed in 2016? All related stakeholders to the non-oil trade sector are committed to the Innovation agenda of the Dubai Smart City initiative. Under this strategy, entities such as DP World, Dubai Customs, EZ World and Dubai Trade along with the Government departments will continue to deliver innovative services to complement the hard infrastructure development. In Q4 of this year DP World’s Terminal 3 has started operations, and in 2016 this new terminal will reach its full operational capacity. Dubai Customs has plans for greater cooperation with the
Dubai was named as the world’s fifth fastest growing city economy in 2015. What is Dubai Trade’s role in this achievement and how will this be sustained and enhanced in 2016? Dubai Trade is a part of the Dubai Smart City vision by enabling the Smart Economy and Smart Mobility pillars through our various initiatives. Our role is to facilitate seamless trade across the borders and into the commercial capital of the country, Dubai. In order to achieve this vision, we work in close coordination with the Dubai government entities to complement the investment in the hard infrastructure by developing tight integration with all stakeholders, both private and public, to ensure free movement of goods, associated information and also the flow of money. What is next for Dubai’s logistics infrastructure development? Dubai Trade continues to set the benchmark for trade facilitation in the region. We will be launching a crowd-sourcing innovation program with our industry partners to better align our investment programs with the need of the industry. Do you have a message for logistics industry companies for next year? We welcome the logistics companies to foster closer ties with Dubai Trade and collaborate on improving the standard of services to the trading community both locally and regionally. We want them to use Dubai Trade as their launch innovative solutions that will strengthen Dubai’s position as the leading trade and logistics hub of the world.
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The Service Provider Perspective Bachi Spiga, VP of operations, DHL Express MENA How did your business perform in 2015? Overall very well considering a number of disruptions and challenges in the region. We invested significantly in the past couple of years and we have seen this impact our business very positively. New flights into Lebanon, Egypt, Tangiers, Jordan, Abu Dhabi in addition to upgrading our ground facilities in Saudi, UAE, Cairo, Algeria have provided impetus for continued growth. Also Imports and re-exports have continued to grow so overall it has been positive What was the most impactful event of 2015 on your business? We have had a number of countries that
have suffered disruption and unrest in MENA which meant we had to adapt to these challenges providing continuity in service safely and securely. Also the oil price has impacted some aspects of the region and the short term outlook on some sectors, which meant we had to react to find alternative growth What new plans do you have in place for 2016? We plan to launch a few new flights in the region, new flight for Algeria, increased frequency to Lebanon as well as reviewing our movements and schedules to Jeddah in mid2016. We are also looking at improving our
connectivity from Asia. We plan to strengthen our footprint with some agreements in a variety of airports around the region, Tangiers, Doha, DWC, AUH, MCT which will see us prepare for our future plans and commitment to growth. What are your top three predictions for 2016? • Continued demand and growth for Imports and redistribution despite price of oil • Middle East will continue to see growth and development in its infrastructure • There will be less volatility and civil unrest in 2016 and more stability in the region especially North Africa.
The Shipping Perspective: ME and GCC Trends Abdulrahman Essa Al-Mannai, president and CEO, Milaha Macro-Economic Uncertainty: Uncertainty in macro-economic conditions is primarily due to the large correlation factor between regional economics and the hydrocarbon sector, which has suffered a huge drop in prices. This, in turn, has impacted the market spending which is imperative for economic diversification. Investments: Major investment projects, especially in infrastructure, will continue as planned. For instance, infrastructure development, including rail and road network, sea port and airport expansion, and construction of water and power projects in the UAE, Saudi Arabia and Qatar are proceeding. Vertical Integration: Additionally, investments will continue to be directed towards vertical integration in the hydrocarbon sector where there is a push for production of refined rather than base products for exports. Besides fetching a premium for the GCC economy, this will more effectively enable them to compete with their US and European counterparts because of their lower ton-miles in trade lanes to Asia. Food Security: Middle Eastern countries have made significant investments in food security supported by robust strategic planning. This has led to the conceptualisation and de-
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velopment of strategic food reserves backed by robust food supply chains to withstand disruptions and endemic conditions in case they fall upon the region. Retail Landscape: A growing young population, strong GDP growth, and rising purchasing power have all boosted investor and consumer confidence, luring more retail players into the region. The growing number of malls and hypermarkets has transformed the shopping pattern of the consumers. In addition, it has altered the distribution pattern of products from warehouse to shelf, providing challenges and opportunities compared to distribution in the single-location stores. At the same time, standalone large and mega stores are proliferating with high levels of urbanisation. Digitisation of Commerce: The influx of ecommerce and established brands moving to web stores has enabled consumption of goods and services online. This has created the demand for enhanced value added solutions from logistics partners in terms of scheduling, inventory, quality control, and returns logistics. Many startups have gone a few steps ahead in supporting such businesses through channel analytics which enables cost control measures, targeted marketing, and even IT support.
Cover Story
The Consultant’s Perspective
Marcus Meissner, managing partner, MEA, Camelot
What was the single most significant event to impact on trade in 2015? The world and especially the logistics industry are exposed to high volatility and dynamics on the market every year. Many events as the sudden and deep drop of the oil price, the regional conflicts and the potential opening up of Iran can be mentioned for 2015. However, there is one event in particular which has in my opinion the most significant impact on trade: the expansion of the Suez Canal. The construction was initially scheduled to take five years, reduced then to three and took at the end only one year to be finalised. This is remarkable! Is this impact likely to continue in 2016? No, the shipping lines are slashing sailings on their routes and bundle shipping volumes, which means that the Suez Canal extension can only create more business if the world economy is growing significantly. In other words: the extension came at the wrong time. We believe that on land the GCC rail will be the major game changer for the next years. In particular the rail logistics hubs -
which are being established at Yanbu and Dammam in Saudi Arabia - will play a major role in the near future. 2015 was a huge year for Dubai and Dubai Trade – with exports and FDI increasing, a huge leap in MICE business and record visitors to DWTC – what have been the primary factors driving this? Dubai and the overall UAE are profiting from the fact that Saudi Arabia did not develop in the same speed as UAE. Dubai is clearly the main logistics hub for passengers and freight. It will continue its strong position as the potential opening up of Iran will have a very positive impact on trade. However, due to the upcoming rail infrastructure the linkage will increase with Oman and especially Saudi Arabia. Furthermore, if Saudi Arabia will develop Free Zones, or at least Special Economic Zones, than a major shift is possible within the next 10 years Automation and trade are said to be key to driving the future of Dubai’s
non-oil trade: how will these be further developed in 2016? Automation is only one topic, more important is the trading and cross border supply chain. As we still do not have the GCC union in place in the day-to-day business, the automation alone will not help to shorten the end-to-end supply chain. However, as automation in Dubai trade points (sea ports, air ports) is continuously improving, it will further secure Dubai’s position as one of the top hubs in the world with regards to trading and logistics infrastructure and processes What is next for Dubai’s logistics infrastructure development? Dubai South with its integration to other airports and ports is the key development which we see to be very successful in the future, including rail connectivity. Do you have a message for logistics industry companies for next year? Get prepared for the main game changer, rail, as well as Iran and Saudi Arabia becoming major players in logistics.
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Cover Story
The Trade Show Perspective Jasmeet Bakshi Singh, show director, Materials Handling Middle East
Materials Handling Middle East 2015. Inset: Jasmeet Bakshi Singh
How did the 2015 show perform compared to previous years? Materials Handling Middle East (MHME) 2015 was a great success and attracted 4,386 trade visitors from 55 countries, a 30% increase over the previous edition of the show in 2013. What do you believe were the factors driving this? Thanks to relatively rapid economic growth coupled with huge investments in commercial and logistics infrastructure, the region is currently seeing a surge in demand for quality materials handling and logistics services. This has created considerable interest among global materials handling brands in doing business with the rapidly-expanding regional markets. The other factor has been the ability of the exhibition to accurately reflect global trends onto the regional market and represent regional aspirations and requirements on a global scale. We continue to work closely with our exhibiting partners in order to
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ascertain and anticipate regional needs, while at the same time ensuring that every edition of the exhibition is more representative in terms of scope and coverage. The show also showcases an unmatched range of products, services and comprehensive materials handling solutions that are tailored to the needs of the region. Were there any particular themes or trends in the 2015 exhibition which were new? Why were these included? The 2015 edition was far more representative and wider in scope than ever before in its 14year history. The show witnessed the debut of 30 UAE-based companies and more than 30 exhibitors who were making their initial showing in the region. Brand new at the exhibition was the Forklift Operator of the Year competition, which featured 77 contestants from across the UAE pitting their skills against each other for the title of the country’s most skilled, safest, and efficient forklift operator. The competi-
tion was designed to promote operational safety across all theatres, given that the region is witnessing a huge boom in the warehousing and logistics industries. What do you believe will be the key factors driving development of the maritime sector in 2017? Even as the region continues to gain importance as a major shipping hub as the oil and gas exports continues to supply major economies around the world, the countries of the GCC are also becoming key import and transshipment centres, thanks to flourishing commercial cities such as Dubai, Abu Dhabi and Doha as well as ports in Saudi Arabia. Continued large-scale investment in ports, commercial, logistical and transport facilities will ensure that demand for materials handling services and machinery remains high, making the exhibition a must-attend event for leading suppliers and service providers worldwide.
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Know your eco-system If you are a retailer, or belong to any part of the retail buisness, regardless of the country you are operating in, whether in your own country or a new country you need to go to, there are some basics you need to get your head around in order to be able to find out what impact it’s going to have with the sort of business you want to run there. Prakash Menon details the five metrics of business
The Economy First and foremost, you need to understand what the economy is like: is it growing or is it stable? If there’s growth happening, what’s driving that growth? What’s the GDP per capita; is it a wealthy country or is it a poor country? You need to understand the spread of wealth. Is that wealth in that country held by a dozen families or is it spread relatively evenly across the population? How big is the population? How many people are you going to have as your potential customers in that market and where do they spread? Is it a large country with a relatively low population, like Australia,
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or is it a small country with a large population, like a lot of the European countries? Factor in the transient population, as well. If you look at a country like Singapore, if they would rely just on their own population, they would have a totally different market than the one they actually have. You need to understand the retail markets there: how are they growing, what is the structure in those retail markets? Plus, you certainly need to understand the regulatory requirements - what you are allowed to do by law and what you are not allowed to do. It’s very easy to come up with a plan and then find out that:
“Oh, that’s actually illegal in the country we want to operate in.” The Retail Market The first step was to understand the country in which you are operating in, but you also need to understand the retail market. You need to understand how big it is, what’s the total retail turnover in that area, how is it growing? Is it really growing? Where is it in terms of life cycles? Is it a mature market, is it a growing market or is it a declining market? You need to understand what’s driving that change. What sort of factors, like health and
Viewpoint
education, are having an impact on the retail market that you’re looking at? What are the conditions within that market? What are the regulations within that market? What kind of social and cultural mores will you deal with? Are there social mores that you need to be aware of and that could trip you up if you weren’t aware of them? Are there regional differences? In a large country like Australia, you’ve got massive regional differences simply in terms of climate, from the north of Australia to the south of Australia. But you also have cultural differences from the east coast to the west coast. In a lot of other countries you have those significant regional differences. In a country like China, there are regional differences involving language and culture, as well as climate. You need to look at things like consumption by household. Understand the nature of the retail market: are there shopping malls, are there convenience stores, are there wet markets and traditional formats like that? Are people open to franchise arrangements? What’s the status, what are the trends that occur within the structure of that retail market? Last, but not the least – culture - that’s the one thing we usually take for granted. I cannot emphasize enough the importance of understanding the language and the culture along with the regional differences; and how much of an impact can they make for a retailer. The Consumer A finer and finer level of detail is to understand the consumers within the retail market. You need to understand their lifestyle and the consumer profile: what sort of products do they like to buy, what are their trends? What are their aspirations, what are their needs and expectations from the retailer? How satisfied are they with the level of retail market at this moment? What are their current shopping habits? Where do they shop, how do they shop? What’s the GDP per capita threshold? How much potentially they’ve got to spend? How intensively concentrated are your targeted customers? Are they all located in a particular area? What are their purchase habits? What’s their loyalty to the current retailers like? Where do they get their information from? Are they attracted to specific store types? Are they attracted to specific brands? You need to have an avatar, you should be able to know exactly who your customer is. The simplest way to do it is by going around and asking questions. There are 4 distinct customer profiles that we are going to aim for in the business we’re developing. The Competition Once you have identified who your custom-
ers are, the next step is to identify who you’re competing with to reach those customers. It’s important that you are aware of the fact that the people you are going after, particularly if you’re going into a new market, they already shop somewhere. They already have a degree of loyalty that they’ve developed to an existing retailer. You need to find out as much as possible about those retailers, if you’re going to take the customers from them. You need to understand the market and how big your competitors are in this market. You need to have a clear understanding of their customer offer, including the reason why customers shop from them. You need to understand how strong their brand is. Understand what their operational strengths and weaknesses are. Understand what the economic strengths and weaknesses are, and how that might be able to leverage for your advantage. Additionally, you need to have a look at how many of them are part of a globalized retailer structure - are there overseas retailers that are already competing in the market you’re looking at? What’s the expansion status? How quickly are they spreading? Do they have a manufacturing base, either in the country in which you are operating or elsewhere? How many stores do they have? What’s their turnover? What’s the value proposition? Understand how well-organized they are and who owns them. What’s the ownership of the retail market like in the country in which you’re looking at expanding? It’s important to recognize how fragmented the market is before you start analyzing the strength of various competitors. India is a very fragmented country, China is very similar - again, lots of mom-and-pop operators - and so, a retailer with a 3% market share in China is going to be a very dominant player, whereas in a more concentrated market, like Australia or US or Britain, a player with 3% market share would be seen as relatively insignificant.
The Social Milieu The retailers have to take into account the fact that the society in which they are operating is shifting dramatically and very quickly. Things like the size of families, the age at which people get married, the level of education those people have had, the amount of travel those people experienced, all of these things have significantly shifted within the last generation. If retailers don’t recognize this change within the society, then they’ll be aiming products to customers who just aren’t here in the volume that they used to be in the past. For the western world, in particular, one of the major areas where this is happening is in the aging population. Customers that are getting older have different needs than younger customers. Something as simple as vitamin supplements is an area where the aging population is doing a lot of purchase. It’s not the usual Executive B Stress Formula vitamins anymore - what you’ve got it’s a whole lot of variety of joint pain vitamins and more. Apple products are one of the best illustrations for a shifting society - how Steve Jobs predicted the new product that the consumers were looking for, because this product never existed before. But he came up with the product as a solution to the desires of the consumers. Therefore, based on what was mentioned before, based on the society becoming more savvy and being able to articulate, in a lot of ways, what they want, it is the job of retailers to come up with those innovative ideas and thus come up with a solution for them. But don’t come up with a fad. Remember how the scooter came in as a fad once upon a time? That wasn’t a need; it was more of a fad. It didn’t solve the problem the society had, it created a degree of entertainment and a degree of mobility for young people, for whom it was easier than riding a bike, but that’s probably about it. Hence, the recommendation for retailers is to actually take some time out and map the above five metrics, so that the business can run seamlessly.
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In focus
Gulf Pinnacle Logistics CEO of Gulf Pinnacle Logistics, Rodney Viegas, talks mergers and acquisitions
Why was Gulf Pinnacle Logistics (GPL) established? GPL has the vision to become a MENASEAfocused fully integrated logistics and transportation holding company. We aim to become a logistics and transportation ‘integrator’ of the highly fragmented mid sector market, encompassing four unique business models: freight-forwarding, warehousing, road transportation, courier and e-commerce services. Our mission is to aid in making international trade more seamless for the mass market that cannot afford the large scale players. Today, with the world trade growing faster than the world GDP, this region is set to boom owing to its strategic location, top-ranked trans-
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portation infrastructure (spanning sea ports, airports and road), low fuel costs and existence of longstanding successful logistics firms. What are your criteria and conditions for acquiring new companies? Our philosophy is to invest in companies that typically have strong management teams, a scalable business model and the potential to become a regional leader in their respective fields. The companies should be profitable, should have existed for at least two to three years and may become strong candidates for future industry consolidation. The envisioned value creation levers are proprietary deal sourcing, business expansion, re-
gional synergies and industry consolidation, and a typical holding period will be four to five years. How significant is the logistics sector for investors? Our strategy is geared towards the sectors where growth opportunities exists and good returns and value proposition are there. Same goes for logistics. Our strategy is to become an integrated logistics player in the medium-scale segment in the MENASEA region. This strategy was formulated based on a keen analysis of an interesting phenomenon we observed in this sector. We saw a huge disparity in the models of the large-scale and medium-scale companies in this industry. While integration is the prem-
In Focus
ise of a large-scale player, fragmentation and non-substantive sizes have majorly governed the medium-scale segment. Perhaps such a disparity emerged because trade was the mainstay of MENASEA economy for generations, and thus attracted many players over the years. With our strategy, we see the time ripe to integrate in the high growth medium segment. Upon acquisition, does GPL play a role in the management and operations of the concerned companies? Beyond buy approach is the start of value creation process for our portfolio companies and the way we build this further is through implementing a number of key strategic and operational initiatives ranging from: • Business planning and development • Carrying out business intelligence • Reviewing and analyseng the data, trends which helps us form the right strategy • HR function, to ensure we retain and recruit best talent to support the next level of growth • Procurement, which we consider is essential to manage costs • Integrate the finance function across the platform • Technology: to ensure we have most efficient systems, upgrade them if required The above factors drive operational efficiency to the business. In addition, we look at operational streamlining, standardisation of processes, integration of middle and back office across the entire platform. To implement these strategies and operational initiatives, we set up full operational team with significant experience in the respective sectors who work together to achieve common objectives. Our focus so far has been is to acquire SME/mid market businesses with inefficiencies but with tremendous growth potential requiring capital and expertise to unlock the value. As a takeaway, from buy and build strategy is to buy SME/mid market businesses at low single digit multiple and aim to create value to these businesses by building efficiencies, through scaling, integrating and consolidating the operations with rest of the businesses which drives the recurring net income growth across the platform. What is your vision for GPL for the short and long-term futures? World trade has never before been as sizable, highly-valued and complex as right now. The
predisposition rests no more towards trade between developed countries or between the developed world and the outsourcing giant China. Past few years have seen the developing world emerge as a significant consumer market, marking the new phenomenon of SouthSouth trade. Medieval period trade routes such as the “Silk Road” have gained prominence in the modern world for the first time within the developing world. Governments around the world and more so in the trading hubs, are making exceptional investments in upping the transport infrastructure across seaports, airports, road corridors and railways. Amidst all of this, we see a vital logistics opportunity in the trading hubs of MiddleEast, North Africa and South East Asia (MENASEA). Logistics industry has not yet
grown at the pace of world trade in terms of its development, and this is where the opportunity lies to become a part of the sure growth in this industry. What is the GPL message for 2016? As part of the vision, we anticipate the evolution of the MENA markets from frontier status to emerging status and eventually to developed status. The successful evolution of this cycle means a significant repricing in assets and a significant jump in valuations. Smart fund managers who have expertly placed themselves within this cycle in the most opportunistic assets will benefit the most. We aim to tap on these opportunities and offer compelling reasons to build a dynamic multi-asset portfolio generating handsome returns for our investors.
Logistics News ME | January 2016 | 39
Viewpoint
The challenge of powering Africa
With 25 of the 54 African countries experiencing an energy crisis, and disparities between development and economic growth, James Simpson, partner, Katharine Sonneborn, of counsel, and Giulia De Michelis, associate, at the international law firm Winston and Strawn, examine how Africa can benefit from experience gathered in the Middle East on infrastructure and power projects
Cape Town, South Africa
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Viewpoint
Africa: The Infrastructure Gap Over the last decade, Africa has, for the most part, demonstrated resilient economic performance. But, by most measures and in most regions, sustainable and affordable energy development has not kept pace with economic growth. With the rising demand for power, Africa could witness a continued infrastructure gap which presents a genuine risk to its growth. According to the World Bank, 25 of the 54 African countries are in an energy crisis. In Sub-Saharan Africa, only seven countries have electricity access rates greater than 50%, meaning more than 600 million people (approximately two-thirds of the continent’s population) lack access to electricity. African Governments have responded with conventional and renewable energy investment growth initiatives. Such initiatives include an opening of markets to private investors, the adoption of regulations to enhance transparency and legal certainty, and feed-in-tariff schemes to promote the deployment of renewables. While many government initiatives have been met with great success, such as South Africa’s Renewable Energy Independent Power Producer Procurement Programme, others have not been as well received. The experience and lessons of successful Independent Power Projects (IPPs) and Independent Power and Water Projects (IWPPs) in Arabian Gulf countries and the wider Middle East over the last two decades, can serve as guidance for Africa. The parallels are important – many parts of Africa have the same opportunities as Middle East countries had when developing their IPP/IWPP programmes, including significant economic growth, increasing consumer demand and an abundance of natural resources against a backdrop of strong interest from the international investor community. However, Africa faces a number of the challenges the Middle East has faced – and overcome – such as scepticism related to political risk and perceptions of inefficiency. Clearly one model will not fit all and the variety and complexity of economic and political considerations across the African continent cannot be underestimated. Drawing on the Middle Eastern experience can make a vital contribution to the successful development of power projects in Africa. Project participants should feel confident that, with the establishment of a process which follows generally acceptable procurement standards, Africa will continue to represent a significant and exciting opportunity for the power project market.
In this article we examine and consider six key lessons from our Middle Eastern experience and how they may contribute to the effective development of power projects in Africa.
Giulia De Michelis, associate
James Simpson, partner
The Middle East: A (very) brief history of IPPs and IWPPs The Middle East took on the challenge of the infrastructure gap in part by developing IPPs and IWPPs. Both have played a major role in the electricity and water sector in the Middle East providing for significant additional generation and water production capacity in the region. Abu Dhabi alone has procured one IPP and nine IWPPs, the most recent being the Mirfa IWPP, which closed in October 2014, resulting in an aggregate of approximately $14 billion of finance raised and over 14,500MW of contracted capacity. The Abu Dhabi model has also been successfully adopted, with certain variations, by other countries across the region, including Qatar, Bahrain, Saudi Arabia and, more recently, Kuwait What lessons can be applied in Africa based on the Middle East experience? A clear, fair and consistent independent regulatory regime The Middle East experience demonstrates the benefit of having a clear and consistent independent regulatory regime which is built to respect political realities but at the same time facilitates private investment and ensures fair regulatory oversight from both the public and private sectors. For example, in 1998, Abu Dhabi issued comprehensive legislative framework, governing its power and water sectors, including a coherent regulatory regime, the provision of guidelines for the development of IPPs and IWPPs and, critically, the establishment of an independent regulator. A transparent procurement process A thorough, transparent procurement process is essential and project procurement should be by reference to specific non-discriminatory criteria and open to appropriate public scrutiny. For example, the opening of financial bids should take place on the bid submission date and in public.
Katharine Sonneborn, of counsel
A well-structured and consistent contractual template It is also important for projects to be well structured and follow a contractual template that
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Viewpoint
25 of 54 African countries are experiencing an energy crisis
delivers bankable projects while not requiring extensive reworking for each new development. In the Middle East, the legal contractual matrix, with the power purchase agreement (PPA) at its heart, has rigidly followed precedent through the IPPs and IWPPs across the region, regardless of changes in commercial terms or market conditions. Bankability: Stability and strength of supply and off-take arrangements In particular, the key to success is ensuring there is a bankable contractual structure. The PPA should ensure a source of revenue over a tenor which is sufficient to ensure the repayment of the project finance loan and provide a return to investors. In this respect, the careful selection of creditworthy counterparties is one of a number of critical factors which will determine the bankability of the project. Similarly, the adequacy of the fuel supply arrangements, preferably by way of a fixed price long-term supply agreement, is a
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key factor in determining bankability. In Abu Dhabi, the Abu Dhabi Water and Electricity Company (ADWEC) is responsible for the fuel supply as well as being the single off-taker of electricity produced by all the Emirate’s IPPs. No government guarantee is issued in respect of ADWEC’s payment obligations; however, the Abu Dhabi Government guarantees termination payments under the PPA. Where the creditworthiness of an off-taker presents a concern, a higher level of government support is typically required. Bankability: Tariffs and revenue generation The tariff that the power producer can charge for the power it generates is fundamental to the bankability and ultimate success of a project. When setting a tariff, consideration should be given to realistic and comprehensive calculations of the costs of generating power and to the price which endusers are paying for the power.
In Abu Dhabi, payments by ADWEC to power producers have followed a take-or-pay structure comprising a capacity payment and an output payment. ADWEC also takes the fuel supply risk by paying fuel suppliers directly for the fuel consumed by the power producers. Making use of the multitude of financing sources Projects in the Middle East have been able to mobilise and leverage a wide range of financing resources. These have included export credit agencies, multilateral financing institutions, development finance institutions (DFIs) and political risk insurance providers. All these sources, and in particular DFIs, who can supply due diligence, influence with host governments, and/or partial risk guarantees (which are likely to be essential in strengthening sovereign guarantees in countries with low credit ratings) are likely to be vital for the development of projects in Africa as well.
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Viewpoint
Supply vs. demand: Iranian hospitality Sophia Soltani, editor of Hotel News ME looks at the supply chain needs of Iran’s new generation of hotel operators
W
hen news broke that sanctions in Iran were slowly being lifted in July 2015 after a historic deal between the U.S and Iran agreeing to halt the Islamic Republic’s nuclear programme, it was no surprise that foreign investors, hoteliers and trade companies were eager to secure their slice of the pie. International hotel operators including Accor, and Rotana were two of the first to set the pace in this modern-day gold rush to open hotels in the country. But after 36 years of essentially being closed for business, how will the country deal with the supply chain
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needs of all of these new hotel operators? Trade with Iran has faced a number of peaks and dips over the years. Major US exports to Iran have recently included wheat, rice, soybeans, corn, dairy, pulpwood, plastics, medical equipment and pharmaceuticals. Iran is the region’s secondlargest grain importer after Saudi Arabia. American products exported to Iran in 2014 totaled a staggering $182.1 million with figures reported from the BBC including butter at $35,535,582 export revenue, seeds, fruits, and spores at $19,992,618, toiletries and cosmetics worth $802,000 and lamps,
lighting fittings, and parts worth $34,673. Iran’s consumer culture has long been heavily influenced by western trends, with western-style grocery stores and shopping malls gaining recognition over the past decade. American and European luxury brands are popular with the elite in major cities, especially Tehran, because of their reputation for quality. Iconic beverage brands such as CocaCola and Pepsi have prospered in Iran for years at the expense of local rival Zamzam Cola and the presence of bootleg versions of American F&B outlets, plus coffee shops, from ‘Mash Donald’s’ to ‘Pizza Hat’ suggests opportunities for US franchises to expand and thrive, leaving no doubt in my mind the same for the hospitality sector there. So with those figures on the table, the hospitality sector in any country is dependent on two main factors: Supply and demand; the demand of the hospitality sector leads to the supply of things required for provisions of services including labour, food and beverages, materials and equipment. But, the lifting of sanctions in Iran will boost trade and commerce for the entire region. Having such a large population, significant natural resources and an educated population, the country offers attractive high yield investment opportunities for hoteliers and investors alike across the entire Middle East and the western world. Additionally, Iran’s fast growing consumer market will bring around incredible supply chain opportunities for the logistics sector once the country homes in on a new era of normalisation and reintegrates itself within the international trading world. As a whole, open borders and new levels of transparency between the US and Iran will improve commercial ties considering a consumer base of almost 80 million who have an interest in seeking out foreign goods and services such as hotel experiences will most definitely fuel business activities within the region.
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The executive view
Brian Cartwright and his team of experts at the Logistics Executive Group’s MEA Regional office give their views of the market in 2015 and share their predictions of what to expect in 2016 from the logistics and supply chain sector
Y
ou are about to read the trends and predictions provided by our team of experts in the Middle East with each providing individual insight based on their area of specialism. Our combined knowledge and experience is all focused around the supply chain and logistics sector, which should present you with a well-rounded and balanced view of the overall sector for 2015 and the year ahead. I will start by saying the past year has been a real rollercoaster ride for the majority of our clients and contacts as well as our own business as volatility and instability has become the new norm. 2015 was a really difficult year to get a handle on when it came to doing business across the end-to-end supply chain. Feedback from my clients and contacts in the sector, who comprise senior executives from both the LSP’s and principals, has been a fairly even mix of positives and negative’s making it harder to form a balanced opinion. The UAE and Saudi Arabia have remained our busiest markets throughout the year although the majority of the organisations we deal with in both those markets have had a very tough year, particularly the 3PLs. That said I am sure we have interesting times ahead as we move into to 2016 and beyond especially with the growth of the E-commerce sector snowballing globally and notably in Asia in particular… but I am confident the MEA region is going to catch up fast! E-commerce will continue to rapidly expand as more and more people join the connected world due in part to ever improving Internet connectivity as well as technology becoming more affordable in the emerging markets and therefore more easily accessible to an ever increasing number of people. An interesting point which was shared at the 2015 Asian Logistics and Maritime conference in Hong Kong by Frank Lavin, the CEO of Export Now, is that in China alone the annual new market growth (just growth!) in E-commerce is greater than the total USA market size, so in other words it grows by one USA market each year! Opportunity knocks With all of the above in mind one of the key trends to watch out for across MEA will be the expansion of E-commerce leading to growth in E-commerce logistics and the associated value
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added services and related technology. If the growth of E-commerce happens as I expect it will then it stands to reason that this sector will also be a key contributor to job creation in the region. Keep in mind the global supply chain is evolving at a faster rate than ever before; we are all part of the evolution and it’s a positive thing. In his new book “Global Supply Chain Ecosystems” Mark Millar writes: “Despite the volatility of recent decades – political upheaval, spikes in energy costs, wars and terrorism, environmental issues – the volume of goods moved internationally has grown far beyond what most would have forecast “Measured at current US dollar prices the World Trade Organisation figures for gross im-
ports and exports show that in 1973 the figure was $1.175 billion and by 2013 this figure had already risen 32 times to $37.658billion”. I think Mark’s first comment really hits the spot and the figures speak for themselves. So my final thought as we wave goodbye to 2015 is that it’s time for us all to reflect on the tough and ever changing market conditions we have all worked so hard to endure over the previous 12 months. Reflect on the year gone by… smile about the positives… learn from the negatives and be ready to face this year confident in the knowledge that everything the market has thrown at you in 2015 has simply made you more resilient, more innovative and more experienced than ever before.
Viewpoint
Alex Allen VP, supply chain consulting
Niharika Davar HR consultant and executive coach
On reflection, 2015 was a year that saw the air and sea freight operators reach a turning point in having to deal with critical issues of over sized capacity with dwindling space demand. Global economies have also felt the brunt of low trade activities with volatile commodity prices and trade deficits dealing with a nervous global market in 2015 compared to 2014/13. The oil price today sits below $40 a barrel which is unprecedented and has influenced a range of reform in manufacturing and logistics industry practices in 2015, positive or negative for some in the end to end fulfillment. Many leading manufacturers, retail, finance, oil and gas and luxury goods verticals are operating under suppressed market conditions in 2015 causing revenues and profit forecasts to be adjusted to accommodate the shifting sands. The notion of financial security is at an all time high.
2015 saw a growing realisation that conventional people practices which HR leaders have used for years may not work in the volatile, uncertain, complex and ambiguous world of work today. The truism that an organisation is only as good as it people has never been more apt. We have seen the need for dramatic change in approaches to leadership, talent management and almost every area of people management. Thanks to communication technology the line between work and life is fading with people being “always on”. Cognitive technologies are displacing workers and dramatically changing job design. Millenials expect greater responsibility and rapid growth to Leadership roles with purpose and flexibility. Deloitte’s Global Human Capital Trends 2015 report, lists culture and engagement, leadership and learning and development as the top three human capital challenges in 2015 globally. The Middle East ranking is slightly different with learning and development, reinventing HR, culture and leadership as the top priorities. What were earlier considered “softer areas” have now become critical to enable organisations prepare for the future. Companies across the globe have started taking a long hard look at the way they manage people. “Agile” and “disruptive” have entered the lexicon of management speak. With high profile companies like Accenture, GE, Microsoft and Adobe ditching formal annual reviews the HR community is left wondering what will replace one of the mainstays of their function. Enter agile performance management. While easy to describe in theory, the challenge going forward will be how to make it work.
Trends to watch out for in 2016 We will see more technological disruptions in the online transactions and E-commerce space with the merging of the physical and virtual worlds benefitting consumer economies. The top integrators have been put on notice that no one is safe on past legacy systems anymore as new startups are finding new ways to effectively disrupt the B2B and B2C verticals offering smarter solutions, increased dependency through aided commerce, efficient mobile smart app technology offerings befitting scale, faster time to market and reduced cost economies through network consolidations. Convenience and lifestyle are the brands of choice for 2016. Data integrity, security and mobility are high on the list of online transactions offering consumers access to anything anywhere anytime, up to last mile delivery to the most remote corners, making the world a smaller place. A further shift in global economic power from the West to the East will see increases in dynamic expansion of the emerging markets, which will continue to take shape for the next few years. China and India will be at the forefront in creating polarisation of demand on a global scale.
Trends to watch out for in 2016 2016 will be a year for huge change in people management practices. A broader definition of talent, Hiring for potential and learning agility vs experience, agile performance management, job redesign and effective application of HR analytics will be some of the key trends. HR leaders and their teams will need to re-invent themselves to meet the challenge of a whole new world.
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Katharina Albert, practice leader EMEA, corporate advisory and supply chain consulting In the beginning of 2015 we saw a lot of optimism, especially in the booming food and beverage sector. Many small to mid-size companies had ambitious growth plans looking to relocate to new facilities. This sector is still relying on manual tasks and insufficient production planning methodology. The older and established factories are facing a lot of cost pressure from the new and more efficient competitors who have invested in integrated production lines and well-planned factory layouts. Hence, just moving to a larger facility and bringing along the in-efficient work practices while adding new products that they had no experience with, seemed to be a rather risky strategy. When the forecasted sales numbers did not materialise in mid 2015, many of these projects were put on hold due to budget constraints. Only the larger companies followed through and embarked on automation projects for their national distribution centers. Furthermore the spending cuts in the oil and gas sector due to the low oil price affected many other smaller suppliers. Everyone suddenly felt the need to improve efficiency and to adapt more quickly to changing market conditions. Only the airlines don’t seem to be affected by it all, they continue to grow fast and keep buzzing, trying to add system capacity as fast as the market demands. The construction business continued strong, so the order books of their suppliers e.g. for facades and interior fit-outs are more than full for the coming year. Trends to watch out for in 2016 2016 will see those who take continuous improvement seriously and had dedicated resources for lean initiatives to be ahead of the game. Others fell back into habits before the last crisis, just adding new machines and people to boost production output without a clear market strategy, they will face over-capacities and losses. Smart managers who took the opportunity to enhance productivity by investing in integrated IT and revising business processes will see a good return of investment. We will see again a wave of market consolidation with the risk of smaller businesses exiting or being taken over by larger corporations. The oil and gas sector will continue to undergo major costsaving initiatives to enhance productivity in order to sustain in the long-term global price battle. This will also be pushed onto many of their suppliers who will find themselves in a fierce price struggle as procurement managers will review every agreement for cost saving potential. 2016 will be a good year for professionals with a solid track record of change management who can help companies who haven’t yet transitioned into the modern economy. The cycles of economic boom and contraction are getting shorter in the Middle East, which will clean the market furthermore of inefficient practices.
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Mareike Walter Paschkowski Regional Consultant MEA My core focus is the coaching side of the business and throughout 2015 it’s been encouraging to see a growing interest in, and demand for, coaching and mentoring services across the MEA region, especially from the smaller and mid-size organisations. I think this has been largely due to a higher awareness around the benefits of coaching leading to an increasing number of individuals and business leaders turning to external coaches for support. To date the majority of organisations using performance and leadership coaches are mainly concentrated in the higher-income regions of North America, Western Europe and Oceania. Nonetheless, the coaching profession appears to be showing more rapid growth in the emerging markets especially Latin America, the Caribbean as well as Asia and MEA. Trends to watch out for in 2016 A recent publication from the International Coaching Federation shows that they increased the number of active memberships by 4% from 2014 to 2015 and they currently have more than 25,050 members in 136 countries around the globe. Only 940 of these members are from the MEA region so I certainly expect to see these numbers rising across MEA from 2016 onwards as coaching becomes more prevalent in this region. I think a contributing factor to this will be the growth and development of the Internet of Things (IoT) and the growing e-commerce market as the need for people to be constantly innovating and developing new skills and thought processes is becoming more important than ever. It’s my view that organisations will increasingly look for different ways to develop and motivate their people and I am pretty sure coaching and mentoring will play an important part in this.
Brian Cartwright is MD of Logistics Executive Middle East, a Supply Chain focused management consulting firm delivering whole-of-lifecycle business services. They are a single source for market intelligence, trade facilitation, supply chain consulting, mergers & acquisitions & merger integration strategy, training & leadership development, talent acquisition & talent management. For more information please contact BrianC@LogisticsExecutive.com www.LogisticsExecutive.com
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Transport
Fleet management in the modern age With some experts estimating the industry is around six years behind the global adoption of telematics, Sindhu Hariharan explores the benefits of adopting the technology and detrimental effects of ignoring it
Transport
I
f you are a company with commercial fleet operations, it is likely that mandates like reduction of fleet costs, fuel price volatility, fleet safety and ‘smart’ fleet management figure on top of your priority list. If one were to say that a single technological tool exists now encompassing all these targets, they would not be exaggerating. The exciting era of ‘Internet of Everything (IoE)’ that we have entered, offers answers for various operational questions of logistics players. IT giant CISCO estimates that, by 2020, there will be more than 50 billion devices communicating with one another and offering useful insights harnessing the power of Internet. Technology and the Logistics industry Globally, the logistics industry has been an early adopter of digitization techniques like RFID scanners and load monitoring sensors. However, experts say that even the mature European and US markets have not yet fully realised the potential of IoE in logistics. To use the technological cliché, ‘big data’ has enabled better understanding of huge data generated from various systems in the value chain. Behind this over-used term lie its genuine benefits. Complex operational data can be collected, analysed and stored centrally, providing management with much-needed metrics for policymaking. Telematics is one such tool that remains to be exploited to its complete potential by the emerging MENA market. In the simplest form, telematics involves sending, receiving and storing information relating to remote objects using telecommunication devices. In addition to performing basic functions of tracking and tracing locations of vehicles and other assets, a telematics system can also give you insights on its idling status and usage among other things. MENA Telematics: Changing landscape Global marketing intelligence firm ABI Research estimates the current size of the global commercial telematics market at around $15 billion growing at 18% annually with roughly 30 million subscriptions making up this revenue. According to ABI’s research data, commercial telematics subscriptions in the Middle East and Africa (MEA) region are estimated grow from 1.82 million in 2015 to 4 million in 2020, at a CAGR of 17%. As per research firm MarketsandMarkets,
geographically, Europe is expected to be the largest market in terms of size for commercial telematics while MEA and Asia-Pacific (APAC) are estimated to experience increased market traction, during the period 2015 to 2020. “The adoption of telematics by the industry has been slow in this region. I would think that right now we are around six years behind the developed markets,” John Taylor, COO of SITECH Gulf states. SITECH Gulf distributes end-to-end machine control solutions for heavy machinery and service vehicles in UAE, Oman, Qatar, Bahrain and Kuwait. While agreeing that telematics is at an early stage of development in MENA, stakeholders admit to winds of change when it comes to logistics players embracing telematics. Customer requirements, increased competition and margin pressures have urged fleet operators to look beyond standard ‘track and trace’ solutions, say industry players. Location Solutions, a Dubai-based telematics provider with offices in Saudi Arabia, Qatar, Egypt, Europe and the US backs this trend. “Customers are demanding more metrics including elaborate reports on location of their vehicles, on driver performance and vehicle utilisation among others,” states Zaim Azrak, CEO, Location Solutions. “Until five years ago, telematics systems were not well-known in the MENA region. Currently these systems have become almost an indispensable technology investment for private companies and public institutions,” Özer Hıncal, CEO, Arvento Mobile Systems, a mobile-tracking systems company based in Turkey, comments. Tangible results Interestingly, it is not taking long for end users to reap benefits of these systems. A significant benefit of using telematics is
Alerts • • • • • • •
Alerts from telematics can include Vehicle idling Fuel consumption Report on operations outside designated routes or hours Suspicious stops Under-utilisation of machinery Alerts on nature of maintenance
Logistics News ME | January 2016 | 51
Transport
proactive management. The organisation’s culture transforms from reactive measures to preventive safety programs. Beneficial alerts obtained from telematics that help in informed decision making are: vehicle idling, fuel consumption, report on operations outside designated routes or hours, suspicious stops, under-utilisation of machinery, alerts on nature of maintenance and so on. In short, telematics can function as the voice of the truck or machinery and communicate about its working. In addition, the two-way communication features and in-vehicle video devices, can be used by the management to coach drivers on driving behaviour and in fact the drivers can even themselves evaluate their skills. Brodie von Berg, sales and marketing director, Mix Telematics - Middle East and Asia (a global fleet management solutions provider) lists out customer testimonials of value derived out of telematics. “One of our key customers in the region achieved a 72% sustained improvement in driver behaviour only six weeks after installing our solution. The same customer also achieved a 15% reduction in fuel costs within 12 months,” says Berg. Mix Telematics said that general contractors Abdullah A.M. Al Khodari Sons Company (KSC), another one of their customers have even been able to control illegal practices like ‘junk yard trade’ by drivers, by monitoring suspicious stops along pre-decided routes. The utilities extend to specialised fleets and machinery as well. Arvento’s clients engaged in transporting cold-storage items are able to remotely monitor and control in-vehicle temperature, hence guaranteeing product integrity. FAMCO’s Linde Forklift Data Management system (a fleet management system) that it offers to its customers with their Linde forklift machinery provides detailed reports regarding maintenance issues, downtime, accidents and underperformance of machinery. “This eliminates the need for assumptionbased decision-making and enables rapid effective remedial action,” remarked David Dronfield, regional general manager, storage and handling, FAMCO. Asset or cost? Telematics suppliers pitching their solutions to companies in MENA face a constant question from the operators, especially from small and medium sized ones: the question of cost. Most telematics providers say that hardware costs associated with the technology have dropped in the past five years and the price of connectivity/network varies depending on mobile operator and country. “In today’s climate, telematics vendors offer bundled options that involve monthly fee
52 | Logistics News ME | January 2016
At a Glance
$15bn telematics industry value
18%
average annual growth recorded
17%
CAGR expected in MEA telematics subscriptions 2015 – 2020 By 2020, there will be more than
50bn connected devices
covering hardware, installation, maintenance and services with no additional costs. This means there is no capital purchase involved,” Berg points out. Location Solutions urges end users to look at telematics as an investment rather than a cost. “The ROI is usually achieved within three to six months over the entire fleet and the running cost of operations is highly reduced. Fleet owners are achieving up to 30% reduction in total running cost after adopting telematics,” stresses Azrak. However, for end-to-end control of supply chain, telematics needs to go beyond fleet management and must be able to interact with other tech platforms like a company’s ERPs for instance. Majority telematics suppliers offer integrated solutions supporting two-way data sharing using APIs (application program interfaces). APIs allow efficient movement of data between disparate systems. “We have engineers who can work with the client’s IT department on the best method to integrate the telematics data with their existing ERP,” says Azrak. The alarm bells Despite all the positives, the path to sweeping adoption of telematics in MENA is not
without hurdles. Right from the terminology to the utility, it is a concept alien to traditional transporters. “The initial challenge we faced when we first stepped into MENA was the lack of recognition and utilisation of fleet telematics. We had to relentlessly carry out a multitude of demos and projects to build the popularity of our fleet telematics practices among fleet owners,” explains Hıncal of Arvento. There is also the network issue to be addressed, known as ‘blind spots’. “When vehicles or ships pass through certain locations, communication is hampered due to inconsistent network coverage, thus affecting overall efficiency of the system for a certain period. Furthermore, a standardised telematics platform would speed up the development of the commercial telematics market,” Chinmay Shirsat, analyst, MarketsandMarkets (a global market research and consulting firm) explains. As with any system dealing with large data, security is another important consideration. Companies need to ensure that data is encrypted and the reports are available only to authorised personnel and only on approved devices. Perhaps the biggest hurdle in growth of this technology is the change management program that an organisation requires. Companies need staff that can understand the system and extract value from it. “With the right people on board and the right training, the market potential in the region is huge,” Taylor of SITECH Gulf remarks. Commenting on the expanding presence of telematics in this part of the world, Dominique Bonte, VP and GM, B2B, ABI Research says: “The overall focus on technology by policy makers in this part of the world, and economic growth, are the few major opportunities for telematics players to enter MEA. “Traditionally South Africa has seen huge interest in stolen vehicle tracking while oil and gas segment in the Middle East has been a key driver.” ABI’s data shows that Western players like Telogis, Microlise, Transics (Wabco), TomTom Telematics and Geotab are all keen to enter the MENA market. With fleet management suppliers turning their attention away from BRICS countries due to economic and regulatory hurdles, analysts say that MENA’s telematics market is poised for and interesting growth trajectory. GCC’s strong network and road infrastructure and key future events like FIFA World Cup in Qatar and Expo 2020 in UAE has already made it a front-runner in this race to be smart transporters. Though slow and steady, growth of telematics in MENA is very real and evident.
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Interview
Packing a punch
Vishaal Shah, CEO, Panache International, explains how the company achieved a 48% YoY growth to 2015
54 | Logistics News ME | January 2016
Interview
Generally speaking, how is the Packaging industry currently faring in the Middle East and what is your take on its future potential? The packaging industry is growing at a rapid rate. The market is maturing as more and more food outlets open and everyone wants to be different, thus a high pressure on manufacturers to keep on innovating and bring news offerings for the consumers. How would you characteriSE the growth of Panache since its inception and how did the business perform in 2015? How did that compare with your performance for the corresponding period in 2014? We also have been on extreme high growth and have drastically increased our offerings in terms of product range. Our volumes have increased in revenue by more then four times in the last five years and we still keep on seeing that curve going higher. 2015 we had grown by 48% compared to 2014 and 2016 is even looking more interesting and lots to achieve. What are the expansion plans for the Middle East region? We are strongly working internally on how to better our service levels, market reach, product quality and product innovation. Currently as far as infrastructure is concerned, we shall carry on focusing expansion with more capacity in Dubai itself. What is your short and / or long-term vision for Panache? Our long term vision is to be doing a global revenue of $900million by 2050 and covering every populated part of the globe with our own representatives. Short term vision for Panache is to be doing $70million revenue by 2020. Do you plan to boost current capacity at your manufacturing or open a new manufacturing complex? We certainly have the plans in place and should be up and running very shortly with new additional production capacity, which will double our output from what we have currently. A new manufacturing complex is not yet on the cards. How is Panache faring on the export front? We are proud to have our product presence in more then 27 countries across the world with the latest one being added late in 2015; the Seychelles. We export all the way to Canada, UK and down to Madagascar.
Briefly, what are Panache’s USP? An extremely highly passionate team whose focus remains “customers for life”. We are not focusing on selling what we have but we are focusing on offering what our clients want, what our clients can save money with and what will make our clients distinctive. Please describe your customer profile and what are your fastest-selling product categories? Our vision is “to advance convenience, hygiene and luxury at best value for all’’. With this vision in mind, we have products to fit all pockets and thus customers vary from airlines to food producers, retail outlets, restaurants and hotels. Our fastest moving products are the plastic cups, containers and plates due to the time we have been in the industry and strong brand loyalty towards them from our clients. What did you showcase at the recent Gulfood Manufacturing 2015 and what is your assessment of the exhibition? Gulf Food 2015 helped us showcase an entire new range of products under the Raha and Anaasa brand as well as the Mozaik range which is more of the luxury stainless steel / glass looking products but believe it or not they are plastic. We felt the exhibition for us was a huge success and we already have had good conversions. Whilw we are looking forward to the 206 event, as always, the hard work doesn’t begin until after the event. Panache has launched its upscale ‘Mozaik’ range in Carrefour and Geant supermarkets. What has been the response to date? The response for these products have actually been better then expected. We have done decent volumes with them and this has also opened doors for us in international retail outlets, for which the shipments are just on the way.
In October 2015, Panache was awarded ISO 9001: 2008. What are the implications? We have always been a company which values quality, strong processes and belief in continual improvement. The certification completes the authenticity of the same and also allows us to work with customers who need that extra confidence. With all this in mind we also ensured that we get the certification from the best bodies which also shall help us improve further with their critics. How logistically well-resourced are you for Panache’s marketing and distribution functions? We are working very closely with a world class logistics company which helps us scale up our distribution function and let us focus on our core which is production and marketing. We have an in-house team of graphics, photographer, product development and marketing personnel which help us execute effortlessly. Given strong environmental concerns, how can the packaging business be made more eco-friendly and sustainable? This is always in our mind and thus we continuously look at improving our products with additives or substitutes which allow us to also offer eco-friendly and sustainable products. What are the opportunities and challenges facing the packaging industry today? The faster everyone’s life becomes, the less they have time to cook at home and thus more and more demand for ready to eat meals, more demand for fast food and fine dining, as well as takeaway. This gives us a large opportunity of sustainable growth. Challenges shall always exist in different forms and these challenges only help us to improve and become better, thus I would rather convert these into opportunities and move forward.
Logistics News ME | January 2016 | 55
The road ahead Noas Al Rawi, CEO, Bion Industrial, talks new plants, African expansion and 2016 plans
56 | Logistics News ME | January 2016
Interview
objective of keeping the customer business in focus and meeting their requirements in their areas of operation.
Talk to us about your new manufacturing facility in Dubai Industrial City We’re planning to launch our new state-ofthe-art plant in 2016 to expand our production capacity to 125 tipper trailers per month. The new manufacturing facility will employ a workforce of approximately 1,000 and expand the production line to include flat and lowbed trailers, skip-loaders and a wide range of municipal transport equipment. Bion Industrial is showcased an expanded range of tipper trailers and cement bulker semi-trailers at PMV Live 2015. How has this new fleet been received and what is the market reaction? Our range of tipper trailers have been very well-received and performed above expectation; this is testament to the added value we provide to our clients through operational efficiency and high performance at lower operational costs. The new models come as a result of continuous development in line with our
Tell us about your expansion plans for the African continent. We’re constantly looking for opportunities to grow the business and penetrate new markets; Africa specifically represents a major growth potential for us and we believe that our worldclass products will make a strong statement in these markets. We have started exploring opportunities in African countries like Nigeria and Kenya. How is the Hardox-in-my-body (HIMB) programme ++ performing since its launch in June 2015? We joined the prestigious Hardox® In My Body Program(HIMB), to give customers the ultimate quality stamp, by guaranteeing that all key wear parts of our tipper trailers are manufactured using the original HARDOX steel from SSAB – SWEDEN. The Hardox steel contributes into extending the service life of our tipper trailers and further maintaining a lighter structure with optimal payload. This ensures the ultimate quality guarantee for our customers. How did Bion Industrial fare in 2015 and what opportunities do you foresee going forward? 2015 was a very successful year for us. Our range of heavy transport equipment has been
very well-received and we are pleased with the response rate received from our target markets and client base especially on Bion Tipper Trailers. Going forward, we will strive for continuous product development to suit customer expectations and requirements and deliver optimum operational efficiency through our range of heavy transport equipment. What do you attribute the rapid rise of Bion Industrial to? I think that Bion industrial has managed to build a good reputation in the market through our product portfolio that boasts outstanding payload, second-to-none efficiency, advanced safety features and materials made to last. What are the primary challenges that confront you particularly in relation to competition? Our heavy transport equipment is manufactured using the highest quality materials and the latest technologies. These revolutionary changes to the market standard give us a competitive edge and set Bion Industrial apart from major players in this industry. We are working closely with customers to demonstrate the added-benefits that our products deliver through higher levels of safety, operational efficiency and longevity. The use of high-end materials in particular is immediately appreciated when realised by our clients, we aim to show that our products offer a higher return on investment for them.
Logistics News ME | January 2016 | 57
Case Study
Creating World Class Official opened at Dubai Airshow 2015, Emirates SkyCentral is the new freighter terminal for Emirates SkyCargo. Logistics News ME goes behind the scenes
I
t has been hailed by group executives as consolidating Dubai’s excellence, setting world class standards and enhancing Dubai’s position as a leading global air cargo and logistics hub. It is also the latest in a string of major announcements to come out of Dubai South. Inaugurated by His Highness Sheikh Ahmed Bin Saeed Al Maktoum, chairperson and chief executive of Emirates Airline and Group, Emirates SkyCargo’s advanced cargo terminal, at Dubai South’s Logistics District, was designed to enhance Dubai’s position as a global air cargo and logistics hub.
58 | Logistics News ME | January 2016
Named Emirates SkyCentral, the cargo facility is the home of Emirates SkyCargo’s fleet of 15 freighter aircraft and was officially opened on the sidelines of the Dubai Air Show. The event was attended by a number of dignitaries, including members of Dubai’s Executive Council, representatives from various local authorities, members of Emirates’ senior management, and special invitees. “The opening of Emirates SkyCentral is an important milestone for us, as it represents our vision for future growth and firmly establishes Emirates SkyCargo as the world’s leading air cargo carrier across all its opera-
tional areas. The space it currently occupies on the land allocated to us at Dubai South is part of a much bigger area, which we can develop over time to increase our cargo handling capacity to achieve our vision of 12 million tonnes annually by 2050, from the current 2.3 million tonnes,” said Nabil Sultan, divisional senior vice president, Emirates SkyCargo. Mohsen Ahmed, vice president, logistics at Dubai South, commented that the launch of the Emirates SkyCargo facility in Dubai South further consolidates Dubai’s excellence as a logistics hub. Dubai South offers
Case Study
Doubled up With Emirates SkyCargo’s dual operation of belly hold cargo being managed at its Cargo Mega Terminal at Dubai International and freighter cargo at DWC, cargo is moved 24/7 by truck between the two airports via a bonded virtual corridor. Since Emirates SkyCentral first became operational in May 2014, the movement of cargo between the two airports has become a seamless process and is now firmly integrated into its operations, with a transit time of just five hours between the arrival of goods to their departure from freighter to belly hold and vice versa.
Skycentral •
Home to 15 freighter aircraft
•
240 commercial aircraft make up the rest of the Emirates fleet, which link 145 destinations
•
12 aircraft can be docked in front of the terminal
•
50 destinations linked to Dubai via SkyCentral
•
Capacity to handle 12m tonnes of cargo annually by 2050 Currently handling 2.3m tonnes
•
the ideal connection point for sea and air cargo, which calls for rapid movement to the markets of the Middle East, Asia and Africa. Emirates SkyCentral is in close proximity to a dedicated corridor to the Jebel Ali Port and Free Zone and 77km from Dubai International Airport. Emirates SkyCargo has 47 trucks that ply the virtual corridor between the two airports, with each being equipped with satellite tracking to ensure the safety and security of cargo and staff. The facility features a sophisticated centralised screening and integrated police facility, a dedicated 15,000sqm cool chain area and specific storage areas for goods requiring varying temperature ranges. The amenity is fully automated with material handling and Quick Dolly Transfer Systems (QDTS) that enables quick transfer of six Unit Load Devices (ULDs) simultaneously. Emirates SkyCentral is a dedicated freight-
er facility and has a capacity for 12 aircraft to be docked directly in front of the terminal. One of its key advantages is the close proximity of aircraft to the receiving docks, which enables quick movement of goods. The freighters that operate from Emirates SkyCentral fly to more than 50 destinations around the world. In the 2014-15 financial year, Emirates SkyCargo reported a revenue of $3.4 billion, a 9% increase over the previous year. Contributing 15% of the airline’s total transport revenue Emirates SkyCargo continues to play an integral role in the company’s expanding operations. Emirates SkyCargo currently uses cargo hold capacity in Emirates’ fleet of more than 240 aircraft, including 15 freighters – 13 Boeing 777-Fs and two B747-400ERFs – and provides air cargo services to more than 145 destinations around the world.
•
15,000sqm cool chain area and specific storage areas
•
Fully automated with material handling and Quick Dolly Transfer Systems (QDTS) that enables quick transfer of six Unit Load Devices (ULDs) simultaneously.
•
77km from Dubai Airport Covered by 47 trucks between the two facilities
•
In the 2014-15 financial year, Emirates SkyCargo reported a revenue of $3.4 billion
•
Revenues 2014-5, up 9%
•
15% of the airline’s total transport revenue is from Emirates SkyCargo
Logistics News ME | January 2016 | 59
Retail Focus
The writing on the wall Starting in 2010 with a seed capital of $13,600 from a partitioned office in Abu Dhabi, Pencil Office Supplies has grown to become a leading purveyor and supplier of leading stationery brands. Logistics News Middle East meets Noble Ninan Mani, the company’s founder and MD
I
n 2010, at the height of the global recession, a young, steely-nerved entrepreneur, set out to venture into the stationery business, much against the wishes of his parents and well-meaning friends. With an investment of $13,600 and with a tough resolve, Noble Ninan Mani went on to establish Pencil Office Supplies (Pencil). Over five years on, there is no turning back and the company has since expanded and now has offices and warehouses in Mina Zayed, Abu Dhabi and Dubai Investment Park, in total spanning over 20,000 sqft. and an employee headcount that has now reached 35 and growing.
60 | Logistics News ME | January 2016
According to Noble, the company’s first order came in even before the licensing of the company was complete. Since then there is no looking back and Pencil has since built a strong customer base. Presently, the company represents various international brands and has also launched OPM (Original Product Manufacturer) brand ‘Enpitsu’. As Noble says: “The market response has always been phenomenal and we are just getting started.” Initially as a startup, the company always dealt with suppliers on cash. Ironically, this was when other stationery companies and stores were pushing for credit from their suppliers especially due
to the tough market situations. The good side to this was Pencil Office Supplies was able to attract suppliers to work with them and this enabled it to build trust and goodwill for the company. “This continued for over a year and by then we had to get creative and limit business to the amount of orders we could execute by procuring goods on cash,” reminisces Noble. “The demand for capital was high and we had to frequently raise capital to keep going; however in the coming years it all started paying off. Our suppliers started approaching us offering credit. Our reputation as a good paymaster had spread and today maintaining it is among our top priorities going forward,” he adds. Noble’s focus now is to be able to build a company that is innovative and can adapt to the changing market conditions. “In any industry, creating a sustainable business in a fast paced environment is always a challenge. The challenges are even higher when you try to scale the business fast. Although we are a brick and mortar business, Pencil is run similar to a technology start-up company. We try to identify challenges and anticipate problems before it happens find a solution and continue with our plans,” he notes. Pencil Office Supplies nurtures ambitious growth plans and its aim is to become the one-stop-shop for all stationery and office supply needs. In 2014, the company entered into the wholesale market. For growth, Noble has a well-chalked out strategy: “The market now has various verticals and being present in each of these, especially in the UAE, is of high importance to the company. Being based in the UAE has various geographical advantages, which we hope to benefit from,” he observes. In the near future Pencil Office Supplies is looking to venture into other GCC markets and also ensure its products reach the CIS and
Retail Focus
TIMELINE and HIGHLIGHTS 2010
Pencil begins in a partitioned space in Khalidiya, Abu Dhabi.
2011
Moved to a retail outlet in Salam Street, Abu Dhabi.
2014
Rented the first warehouse and office in Dubai Investment Park.
2015 African markets. In tandem, it is also looking to venture into international markets. “Currently Pencil Office Supplies has over 350 SKUs (stock-keeping units) and we are continually in the process of adding new products. We are also in discussions with various international brands to represent them in the local market. “Stationery companies in other countries cover everything that is needed for an office including basic supplies like tea, coffee, milk, tissue boxes to furniture and equipment. It is always more convenient for an organisation to deal with a single supplier who can cater to all their needs. This saves time, increases efficiency and value for money as well,” remarks Noble. Diversification The company has been launching a new product every alternate month under the Enpitsu brand, which is Japanese for pencil, and the brand which took Pencil into the wholesale market. “Quality has always been our main focus and launching Enpitsu has helped us ensure the high quality of the products delivered to our customer. It also helped us to ensure stock availability. Being direct importers helped us pass the benefit of price to our customers,” he affirms. “The stationery market is highly unregulated and unorganised. There is hardly any standardisation in term of quality or pricing,” he rues. Noble confirms that the company will foray in the ecommerce arena and will soon be launching its online shopping portal through which consumers can be sure they are getting quality genuine products and value for money they spend. Presently, the two largest stationery companies in the GCC and the region are not UAE-based and with Pencil Office Supplies, Noble hopes to change this. “With hundreds of small stationery companies and suppliers in the market trying to survive
the fast-changing market conditions, competition is fiercer than ever. This has lowered the margins and with increased cost of operations, many companies will be forced to exit,” he complains. At Pencil, Noble points out that he has taken the appropriate steps to minimise any negative fallout as a result of volatile market conditions. The stationery entrepreneur Business has been a personal passion for Noble, who always wanted to turn entrepreneur, from the very beginning. “Getting it right is a learning process. Every type of sector is unique and is always interesting for someone like me. Stationery has been my stepping-stone; but I am constantly on the look out to see what else might interest me,” he confesses. Logistics is an area which most companies never give its deserved importance. “At Pencil, we aim to grow our logistics infrastructure beyond what we can sell. With this there was always pressure on sales to do more. We keep adding people and vehicles to our logistics department every quarter. This also avoids a bottleneck situation, which normally happens with increases in orders, and also ensures better service for our clients with timely delivery of goods. To improve the logistics we follow a highly documented process which we keep improvising based on our client requirements and overall growth plans,” he explains. “We had chosen one of the biggest warehouses we had seen. The warehouse looked too big initially and I still remember echoes as we spoke. Today we are running short of space and are considering new warehousing to support our growth plans,” he adds. Typically large stationery companies deals with tens of thousands of products. Stock management has been one of the biggest challenges, which have restricted many other companies
Rented a warehouse and office in Abu Dhabi.
2014-2015
On track to achieve 300% growth in each of the years compared to the previous year with plans to maintain this growth momentum.
when scaling growth. Noble says that a major portion of the time in most cases for Pencil was spent to develop procedures both manual and system-based for best-in-industry stock management practices. “If stock management systems are not perfected, it would always be a hindrance in growth. These procedures are to be constantly reviewed and improvised,” he cautions. In Noble’s estimation, the traditional stationery market has reached saturation point in the region. “Stationery was an easy business to start and owing to this we have hundreds of stationery companies, stores and depots today. In the beginning it was easier to classify stationery companies as a wholesaler, retailer or an office supplier. At present due to increase in the number of stationers everyone is trying to get a share whatever sector they can,” he laments. Noble notes that going forward, as evident in every other, the retailer or office supplier segment would be taken over by the wholesale companies. This is already happening. He predicts that the number of stationery outlets will drastically reduce with larger companies directly getting their products to the end users. As a result, Noble is also considering the possibility of manufacturing products locally and does not rule out the possibility of establishing a joint venture or partnership to establish a manufacturing facility. “You never know! We are looking at our portfolio and it could be a reality sometime in the future,” he predicts.
Logistics News ME | January 2016 | 61
The
month Ahead
Snapshot
EVENT: Temperature Controlled Logistics Europe LOCATION: Messe Frankfurt Venue, Germany DATE: 25 – 28 January, 2016 ABOUT: IQPC’s CLE, focuses on cost effectively achieving next level quality in extensive global supply networks. EMAIL: enquire@iqpc.co.uk EVENT: 7th Intermodal Asia LOCATION: Intercontinental Melbourne The Rialto, Australia DATE: 25 – 28 January, 2016 ABOUT: A two day Conference featuring 30 world-class conference speakers addressing topical issues and challenges facing Australasian transportation and logistics attended by a gathering of 300 senior executive from across the industry. EMAIL: enquiries@transportevents.com EVENT: 10th Indian Ocean Ports and Logistics 2016 LOCATION: SEM Nordev, Reunion Island DATE: 28 – 29 January 2016 ABOUT: A two days Conference Programme featuring 30 speakers addressing topical issues and challenges on global transportation and logistics attended by a gathering of 500 senior executives from across the industry. EMAIL: enquiries@transportevents.com EVENT: Jump Start 2016 LOCATION: Atlanta, Georgia, USA DATE: 18 – 20 January 2016 ABOUT: Ignite your supply chain strategy at Jump Start 2016. New for 2016, the Logistics Technology Summit will provide attendees with trending, relevant information and discussion on emerging trends in the transportation technology field. EVENT: Food & Beverage Distribution 2016 LOCATION: San Diego, California, USA DATE: 20 – 21 January, 2016 ABOUT: Food & Beverage Distribution 2016 will explore potential solutions to the distribution challenges facing the industry.
62 | Logistics News ME | January 2016
The
last word
A
s the UAE has declared 2016 “the year of reading”, Logistics News ME brings you Amazon’s list of logistics must reads
• Ninety Percent of Everything: Inside Shipping, the Invisible Industry That Puts Clothes on Your Back, Gas in Your Car, and Food on Your Plate by Rose George • The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger by Marc Levinson • The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention by William Rosen • Longitude: The True Story of a Lone Genius Who Solved the Greatest Scientific Problem of His Time by Dava Sobel
Fast Facts Amazon’s LSC literature collection Amazon stocks
56,751
supply chain and logistics books. All those books would weigh
49,000kg half the cargo mass of a Boeing 747-200F...
• Changing How the World Does Business: Fedex’s Incredible Journey to Success – The Inside Story by Roger Frock • The Toyota Way: 14 Management Principles from the World’s Greatest Manufacturer by Jeffrey Liker • The Wal-Mart Way: The Inside Story of the Success of the World’s Largest Company by Don Soderquist • The End of Cheap China: Economic and Cultural Trends That Will Disrupt the World by Shaun Rein • The Lexus and the Olive Tree by Thomas Friedman • The Innovators: How a group of Hackers, Geniuses and Geeks Created the Digital Revolution by Walter Isaacson
Stacked, those books would be as tall as 10.7 Empire State Buildings