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Issue 48 | June-JULY 2012
YOUR LOGISTICS AND SUPPLY CHAIN MAGAZINE
FINDING THE RIGHT TALENT Strategies to hire and retain qualified personnel | Page 06
TECHNOLOGY | 24
ANALYSIS | 32
FEATURE | 36
Port of Sohar
Booz & Company
Value Proposition
Oman’s ambitious project
Adapting to rapid changes
Serving the customer right
PUBLISHER’S NOTE
UAE’s logistics sector set to grow further The summer months in this region are known to be long and hot. A large portion of the population grabs the chance to travel home or other countries for their annual vacation. With traffic becoming less in the UAE, business seems to slow down. However, it never stops. As my colleagues in the office spend their holiday outside the country one after another, I find more time to relax and browse recent literature including white papers and case studies on the current status of the industry. It is also the perfect time to refresh our minds and learn more. That is why this edition’s main story focuses on the state of education in the supply chain and logistics industries. Just like other sectors, the logistics industry in the Middle East faces a severe shortage of skilled personnel. There is obviously growth and this expansion requires people with new sets of qualifications. Can the industry cope with the challenges ahead? An article by a leading logistics provider has caught my attention. Announcing the expansion of their operations in the UAE, the company also quoted the findings of recent industrial research. According to estimates, the UAE’s logistics sector is set to register a growth rate of 9 per cent annually from 2010 to 2020 and hit US$16 billion by the end of the decade. Such analysis by respected institutes reveals a lot on where the industry is heading and helps to guide international companies that plan to set foot in this region or invest further.
Taking a deeper look at the growth in logistics in the Middle East, the comprehensive study by Booz & Company sheds light on the dynamics of the sector and claims that it is still not too late to find opportunities. The profit margins in the transport sector are much higher here compared to the mature markets in Europe but there is no silver bullet formula to resolve all issues, claims the article. The International Air Transport Association (IATA) publishes quarterly studies on air cargo. The E-Chartbook assesses the growth patterns or decline in world markets. The report said, “Downward pressure on cargo profitability eased slightly in the second quarter of the year. Air freight demand has improved and a small rise in yields together with a decline in oil prices has been registered.” I urge all our readers to go through this article carefully and download the full report on IATA’s website. And finally, the Port of Sohar, one of Oman’s most ambitious projects with an investment of US$14 billion is featured extensively. According to the officials, “The revised master plan will provide a new roadmap for the development of Sohar Industrial Port Company’s concession area over the next 20 years through to 2030.” As usual, our magazine is full of useful features on the industry. With more sunny days ahead, I hope you enjoy reading the articles and find time to send your comments.
Reinhard Wind Managing Director, Gutenberg Publishing FZ-LLC
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IN THIS ISSUE
JUNE - JULY 2012
32 ANALYSIS
Booz & Company
06 COVER STORY
HR, Training & Education The logistics sector is facing a severe shortage of skilled personnel. Supply chains have become more complex and demand for professionals who possess a new set of skills. The article takes a deep look at the changing requirements in Supply Chain education.
To grasp new opportunities, the Middle East logistics industry needs to adapt rapidly. Logistics players must implement approaches that will allow them to dominate their chosen market segment. Booz & Company evaluates the current status of the logistics sector.
36 feature
PROFILE
Service Segmentation
Port of Sohar The Port of Sohar is one of the largest port development projects in the world with investments exceeding US$14 billion. This industrial and deep sea port has grown tremendously in size and importance since its inception in 2003.
The value proposition must be focused on the customer, not on the 3PL. A solid VP turns the discussion away from price and towards the customer. Tom Craig of LTD Management explains more about the Value Proposition.
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REVIEW
TECHNOLOGY
IATA’s Cargo E-Chartbook
help AG
Air Cargo is the heart of a value chain that supports 32 million jobs and US$3.5 trillion of economic activity. IATA assesses the industry as a whole in its quarterly E-Chartbook.
LOG. Window 12
The problem enterprises face today is how to give their employees both flexibility and mobility, while securing the enterprise. Stephan Berner, MD at help AG tells about the benefits of BYOD – Bring Your Own Device.
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Product Update 44
LOG. Classifieds 46
LOG. cafe 48
Events Calendar 50
COVER STORY
Creating a change culture With exponential growth expected in supply chain and logistics industries in the region, companies face the challenge of recruiting skilled and highly qualified personnel. 6
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COVER STORY
A
s market pressures ramp up, executives continue to focus on attraction and retention of staff but the focus needs to be more about what sits between these two according to the findings of Logistics Executives, Global Employment Report, with a special focus on the Middle East. The year 2012 brings with it the continuation of supply chain challenges that we have come to accept as the new norm. This includes the continuation of globalisation, business volatility and an increasingly competitive marketplace. Logistics Executive, a Human Resources and Recruitment Consultancy, regionally based in Dubai, came up with some interesting findings in their 20112012 Global Employment Market Report. The annual survey, which is sent to over 70,000 Supply Chain & Logistics executives in 82 countries (with a 15 per cent response rate) is now in its sixth year. According to the report, the Middle East continues to grow despite these global and economic challenges with 66 per cent of Middle East respondents in the Logistics Executive Global Market Survey indicating that their company has experienced financial growth compared to the last financial year, while 75 per cent were planning further growth in the New Year. Whilst this is excellent news on the business front, it means that there will be more pressure than ever to get the Human Resources aspect right, as the enduring message from Executives is that success is only possible with the backing of a talented team. It is therefore no wonder that in the Logistics Executive’s 2011-2012 Global Employment Market Report, 56 per cent of senior executives said that talent and retention would be their main priorities for 2012. From a Human Resources strategy perspective this is excellent news. Human Resources teams are at their most effective when they partner closely with business leaders and ensuring that companies retain the best talent has to be the number one priority for any business leader for 2012. Areas for improvement According to the Market Report, there are major areas for improvement in the area of staff retention. In particular, the report highlighted two main points of concern June-July 2012 I
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COVER STORY
amongst Middle East respondents – salary and employee development opportunities. It is no surprise that salary is a key issue. A large number of respondents (78 per cent) indicated that they were seeking a salary increase of up to 12 per cent with 10 per cent of respondents indicating that they were seeking an increase of 15-20 per cent. Remuneration is a necessary ingredient not only to keep up with market conditions but also to acknowledge market parity and the increased responsibilities being placed on Supply Chain professionals. It is however only part of the solution in retaining valuable employees. According to the Logistics Executive’s Employment Market Report the top five drivers of employee retention are: • Career Development • Competitive Pay and Rewards • Employer Values & Work-life Balance • Effective Leadership • Job Security Note that there is more to career satisfaction than salary with career development being top of the list here. It was found that 17 per cent of the report’s Middle East respondents indicated 8
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Remuneration is a necessary ingredient not only to keep up with market conditions but also to acknowledge market parity and the increased responsibilities being placed on Supply Chain professionals In the next financial year do you forecast that the staff levels of your company will
The future of mobility
“What if it was possible to retain a large pool of staff simply by offering them exposure to new on the job skills? It could be argued that if companies developed their own people, they would end up with more talent than they could handle. ” that career development is a key reason for them to change employment. This is only topped by salary as a main motivator at 18 per cent. Focus on training In terms of development opportunities, the Logistics Executive 2011-2012 Global Employment Market Report found that 59 per cent of business leaders in the Middle East perceived that they offered a satisfactory focus level on training. However on the employee side there was an increase in workplace movement to other organisations within the GCC Region stating their main reason was lack of development opportunity. Perhaps there is a need for the Human Resources function to shift their focus from traditional means of engagement towards a broader approach? According to Kim Winter, Logistics Executive’s Global CEO, the answer lies in the middle ground. With executives and Human Resources focusing on retention and attraction they are missing the middle piece here – managing
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COVER STORY
and developing existing talent. “It could be argued that if companies developed their own people, they would end up with more talent than they could handle,” adds Mr Winter. Employee experience Here we are referring to structuring the whole employee experience. This would start with the first impression of the company through employment branding followed with the first impression as part of the attraction strategy and the on boarding and overlaid throughout with a social element, which would enforce a healthy approach to change. A flexible training program and conditions of employment would be carefully interwoven in this model. Mr Winter goes on to explain that talent development could encompass a range of options, including “a real Talent Retention strategy to include structured career development, meaningful assessment processes, relevant KPI’s linked to bonus schemes, career choice options, job re-structuring, improved participation and an enjoyable but challenging work environment”. 10
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The report revealed that whilst most employees are not looking for another job, the large majority would be open to offers from other companies. What can organisations do to retain their top talent? Which statement best applies to your business and hiring experiences over the past 12 months?
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COVER STORY
By training we aren’t just talking here about the traditional definition of the word, which refers to formal courses to increase directly related work skills but to work related on the job learning. This could be offered not just to an earmarked group of “high performers” but to all company employees. In other words it is about treating everyone in the business collectively as “the talent”. The process also involves exposing them to new areas, which would then allow personal growth on the job but not necessarily directly related to their current roles. In this way it would be possible to retain a large pool of staff simply by offering them exposure to new on the job skills. This approach would require executives to include talent development as a major focus. Employees in turn would take on some responsibility for their own development. This would lead to a culture that is more capable of dealing with the high amount of change as employees are constantly encouraged to find better ways of doing things. Change as an opportunity The approach of treating change as an opportunity and not a threat at the micro level is critical as the capacity to keep up with changing markets is increasingly paramount for a company’s survival and competitive edge. It is not simply enough to have the support structure in place such as systems and process but also imperative that there is a workforce mentality that isn’t afraid of change – but actually sees this as an opportunity and part of the norm. A way of fostering this culture is to give people in the workplace opportunities to seek out new personal challenges that will provide them with opportunities to test themselves and drive themselves to new levels of performance and ways to connect with others in the workplace to achieve outcomes. This will attract other likeminded individuals to your organisation and enhance employer brand. Mr Winter adds, “As organisations get flatter then offering career development can be a challenge but this can be tackled in many ways such as offering interoffice transfers, job rotation and greater delegation of decision making down the 12
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As an employer, what are the major factors contributing to people leaving your organisation? Tick up to 3 reasons.
It will be interesting to see if the year ahead sees the Human Resources function take up the challenge to redefine culture as a way of improving the total employee experience. In partnering with their Human Resources teams, executives will recognise the broader role they may play in achieving commercial success. The annual survey identified key trends including a greater willingness of candidates to move nationally and internationally to attain desired executive positions in at times challenging employment conditions line. Allowing employees to be involved in “continuous improvement teams” offers both job satisfaction and better results – a win-win”. It will be interesting to see if the year ahead sees the Human Resources function take up the challenge to redefine
culture as a way of improving the total employee experience. In partnering with their Human Resources teams, executives will recognise the broader role they may play in achieving commercial success. Through these measures the focus is all about changing the mindset so that employees aren’t just ready for change but will embrace it on all levels. A change-ready company will not only have the competitive edge but will create a self-perpetuating cycle of achievement. CREDITS: Thanks to Darryl Judd, COO, Logistics Executive. With more than 20 years of executive experience in Aviation, Supply Chain and Logistics Transport Industry, Darryl has held executive positions within the airline & aircraft leasing/charter industry and major logistics organisations. To contact him: darrylj@logisticsexecutive.com SOURCE OF GRAPHS: Logistics Executives, Global Employment Report
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DP World completes first phase of port development
DP World, UAE Region announced the completion of the first phase of the Al Hamriya port development plans aimed at modernising and upgrading the port to meet customers and fishermen’s growing needs. The first phase includes the upgrading of one million sq ft of yard, which has been paved, metal fenced, and gated. These open yards are now available for lease for traders and logistics companies. Details of the next phase of the project were unveiled by Mohammed Al Muallem, Sr. VP & MD, DP World, UAE Region, Ghanem Al Abbar, Deputy Director, Al Hamriya Port. The second phase includes a modern facility for the exclusive use of the fishing industry at the
port. Construction work has already begun on the facility and is due to be completed this year. The development will create a new 1,650 m long wharf with a capacity to accommodate 190 fishing boats. The changes are expected to strengthen Al Hamriya Port’s traditional capability and leverage the strategic location of the port in the centre of Dubai. Al Muallem said, “After 35 successful years as a vital regional hub for re-export and fishing, we are equipping Al Hamriya Port to deliver significant services of value to both the shipping industry and the fishing community. Our expansion plans are in direct response to the needs of our customers and the fishing community.”
UAE companies unite for humanitarian missions Ten groundbreaking humanitarian relief missions to Nepal have been implemented by Care by Air, the UAE non-profit organisation charged with delivering transportation and logistics support for humanitarian causes. The four founding Care by Air partners, – Etihad Airways, Maximus Air, Aramex and the Abu Dhabi Airports Company (ADAC) – teamed up to provide services at cost, transporting almost 30 tonnes of donations from the UAE Ministry of Health to Kathmandu. The World Health Organization also 14
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supported the initiative. The cargo consisted of four million single-use syringes, invaluable in preventing the spread of communicable diseases. Nepal was chosen because of the country’s urgent need for injection needle safety, and Nepal’s Ministry of Health warmly welcomed the delivery. The missions underscored the success of the Care by Air ‘at cost’ business model, and the desire of all parties to play a role in saving people’s lives, especially in some of the world’s most difficult trouble spots.
Construction underway on DWC’s Aviation District
Dubai World Central (DWC) has announced that construction is underway at DWC’s Aviation District, a purposebuilt area designed to meet the needs of aviation businesses, and leasing negotiations have commenced with FBOs (Fixed Base Operators) and other aviation businesses. DWC further revealed that Majestic Wings Private Airplane Charter LLC is planning to move within 12 months, making it among the first high-profile aviation companies to set up operations. The company will occupy a 7,360-sq m plot. Majestic Wings, which is co-owned by H.E. Sheikh Hamad Bin Tahnoon Al Nahyan and H.E. Sheikh Khalifa Bin Hamad Al Nahyan, will develop a class ‘A’ hangar facility. Majestic Wings joins a list of companies that have been authorised to establish FBOs and provide highend aviation services in DWC’s Aviation District. The landside and airside facilities of DWC’s Aviation District complement the requirements of aviation businesses such as Majestic Wings. Majestic Wings will have direct access to both Jebel Ali Port and the components of DWC including Logistics District and Al Maktoum International Airport. It will also have a dedicated apron measuring 4,738 sq m in front of the hangar facility, providing space for several aircraft and ensuring easy access for clients. Dubai World Central and Majestic Wings had earlier signed a deal to set up the project’s second FBO facility with an investment value of AED 200 million.
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DAFZ awarded for Strategic Planning His Highness Sheikh Ahmed Bin Saeed Al Maktoum, Chairman of Dubai Airport Freezone, welcomed Dr. Mohammed Al Zarooni, Director General of Dubai Airport Freezone, and the strategic management team at the Free Zone. During the meeting, Dr Zarooni and the team handed over the Richard Goodman Strategic Planning Award to HH Sheikh Ahmed. The award, given by the American Strategic Planning Association, recognises distinction in strategic planning by Dubai Airport Freezone and honours its competence, innovation and excellence. Dr. Zarooni said: “Dubai Airport Freezone had chalked out a clear strategic plan when it was established over 15 years ago. The plan clearly underlined our core objectives of attracting quality foreign investments, considered vital to added value, and to contribute to the GDP growth
HH Sheikh Ahmed Bin Saeed Al Maktoum, Chairman of Dubai Airport Freezone, receives the award from the strategic team in the presence of Dr. Mohammed Al Zarooni, Director General of Dubai Airport Freezone
of the UAE economy.” “One of our priorities is to attract more investors and international companies from various fields and to help expand their business in the Middle East through the
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Calogi and flydubai, a ‘Powerful’ Combination Murray, Head of Calogi Worldwide Cargo Distribution Network. “Joining forces with flydubai will enable us to leverage each other’s strengths.” “Capitalising on Dubai’s position as a trading hub combined with c-Power’s solution allows us to be well positioned to grow our cargo business” said Ghaith Al Ghaith, CEO of flydubai. “flydubai Cargo is focused on enabling businesses, including small enterprises, to transport their shipments quickly and efficiently across our network at affordable rates.” Calogi offers an array of services to support airlines and ground service agents with their online sales operations including export sales, rating, booking, global online access and visibility. flydubai Cargo’s customers can utilise the Calogi portal to book cargo out of Dubai.
Calogi, the online air cargo portal, has signed flydubai to its airline sales solution, ‘c-Power’. The c-Power solution will enable flydubai to conduct online courier and airfreight transactions with more than 450 forwarding companies. Calogi, which is effectively a Global Distribution System (GDS) for the air cargo industry, allows its 90-plus airline customers to distribute their products to customers via the internet. The Calogi portal enables air cargo supply chain stakeholders, such as airlines, third party logistics providers and ground handlers, to sell their products through a complementary channel without competing with their own existing distribution mediums such as proprietary websites and sales teams. “flydubai, like Calogi, is a young, dynamic and fast-growing organisation,” said Patrick
Lufthansa Cargo Charter to support Moto GP With the launch of a daily passenger service on 4th June, Emirates SkyCargo will use the 240-tonne weekly belly-hold capacity of the aircraft to stimulate trade between Ho Chi Minh City, its Dubai hub and more than 120 other destinations. Ho Chi Minh City will become the 14th Emirates SkyCargo point in the Far East, strengthening its commitment to the region, with major exporters such as Hong Kong, China, Japan and Korea – already operating on bustling Emirates SkyCargo trade lanes to points throughout Europe, the Middle East, Africa and North America. Vietnam, with one of the fastest growing economies in Asia, will be able to further develop its import/export industry using the 17-tonne cargo hold of the wide-body Airbus 330-200 operating on the route. From 28th October, trade will receive another boost when a Boeing 777-300ER takes over, providing an additional 80 tonnes of weekly cargo capacity. “Vietnam is enjoying a period of growth and by facilitating international trade with businesses in the 73 countries we operate to, Emirates SkyCargo looks forward to 16
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helping it build on this momentum and become even stronger,” said Ram Menen, Emirates’ Divisional Sr. VP Cargo. According to the UAE Embassy in Vietnam, the UAE is one of its major trading partners in the Middle East, with bilateral trade between the two countries exceeding US$1.2 billion in 2011. Goods -
including smartphones, tablets, printers, garments, sportswear and shoes, as well as perishables - such as seafood, coffee, rice and vegetables - are expected to be transported out of Vietnam. Commodities going in the other direction will include electronics, machinery, steel and petroleum products.
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RAK Airport traffic up by 59pc in first quarter Ras Al Khaimah International Airport has continued to show significant growth in the first quarter of the year. Passenger numbers have grown by 58.5 per cent compared with the same period last year and all other indicators, such as aircraft movements, duty-free sales and cargo tonnage, have also increased. “We are delighted that growth is exceeding our own high expectations of 50 per cent,” said RAK International Airport Director Andrew Gower. “There are many factors behind this growth, such as our attractive pricing structure, the introduction of our new ground handing operator, the development of new routes and of course the improvements tour service and interminal facilities. “At the heart of our business strategy is the customer, operational excellence and product development. We continue to explore new opportunities and markets, using a ‘lean’ approach. These are the essential ingredients for our success, and we will continue to listen to our markets and adapt to the changes of the ever-evolving aviation industry.” “RAK International Airport is strategically placed on the map of the UAE with favourable
RAK International Airport Director Andrew Gower
demographics. We are only 20-45 minutes from Ajman, Umm Al-Quwain and Fujairah. With the combined population of approximately 900,000, RAKIA is a very attractive proposition for the airlines. Gower said a recent visit by RAK International Airport team to the Routes conference in China had stimulated the market and the airport is in discussions with a number of large scheduled operators from the commercial and cargo sectors. Recently a new business lounge has been opened at the airport, RAK Airways has launched its Premium Class product, Duty-Free offerings have been increased and a new café has been opened.
Gulf Air sets up Disaster Recovery Centre In further strengthening its IT infrastructure and keeping it risk-free, national carrier Gulf Air has set up a Disaster Recovery Centre. The new centre, commissioned recently, is located 15 kms away from its Muharraq headquarters, where the main Data Centre is housed currently. The centre has been designed and set up with the purpose to ensure the continuity of the airline’s daily functions and provide a convenient temporary workspace for Gulf Air staff should the main Gulf Air facility be unavailable in emergency situations. The facility is physically secured 24 hours a day and
7 days a week with security guards and monitored by CCTV cameras. Gulf Air Chief Executive Officer Samer Majali said, “It is no doubt that businesses today are increasingly dependent on IT systems to help manage and run their business operations effectively and efficiently.”
Safi Airways obtains IATA certification
Hamid Safi, Chief Executive Officer of Safi Airways
Safi Airways, the international airline of Afghanistan has passed the IATA Operational Safety Audit (IOSA), which is recognised worldwide and accepted as the main evaluation system designed to assess the operational management and control systems of an airline. The audit itself determines the level of conformity that an airline has with IOSA standards, and permits an airline that meets all standards to become registered with IATA as an IOSA Operator. The IOSA is the benchmark for safety management in all airlines globally, and being compliant with the audit is a prerequisite of IATA membership. The audit was conducted in February 2012 and the airline will remain on the IOSA registry until February 2014, when a further audit will be required to retain membership of IATA. Hamid Safi, Chief Executive Officer of Safi Airways commented: This is a significant achievement for the airline, which has been in operation since 2006. We are extremely pleased and terribly proud that our efforts to be fully compliant with these international safety standards have been recognised. Safi Airways is the only full-service IATA scheduled carrier operating from Afghanistan. Safi Airways distributes through all major GDS’s and offers myriad destinations through its partner airlines such as Emirates, Etihad and Lufthansa. The airline’s main focus is reconnecting Afghanistan to the world whilst maintaining global aviation standards. June-July 2012 I
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Three Bahrain logistics centres ranked in top twenty Bahrain is home to three of the world’s top twenty special economic zones and locations for inward investment, economic development and business expansion globally, according to the 2012/13 Global Free Zones Rankings, released by Foreign Direct Investment (FDI) Magazine. The report, which considered 150 free zones and special economic zones worldwide, saw Bahrain International Investment Park (15th worldwide), Khalifa Bin Salman Port (16th worldwide) and Bahrain International Airport (19th worldwide) all placed within the leading twenty locations, with Bahrain Logistics Zone also included in the report, ranking 30th. Kamal bin Ahmed, Minister of Transportation and Acting Chief Executive of the Bahrain Economic Development Board (EDB), said: “We are delighted that Bahrain’s logistics capability has been recognised in this report. All three of these leading centres play a key role in making Bahrain the best location from which to access the GCC markets in Saudi Arabia, Qatar and Kuwait,
whether by air, sea or land.” Commenting on the report, Hassan Ali Al Majed, Director General of the General Organisation of Sea Ports, said: “At GOP, our aim is to firmly establish as a leading global maritime centre and transhipment hub for the Northern Gulf. We are therefore pleased with Khalifa Bin Salman Port’s ranking which recognises the state-of-the art infrastructure, high business potential and services offered by the port.” The EDB played an instrumental role in attracting over US$300 million of investment from international businesses across a wide range of sectors in 2011.
Saudi Logistics celebrates latest ISO certification Saudi Logistics, a subsidiary of Banaja Holdings and an exclusive logistic company for the Healthcare industry in the Kingdom of Saudi Arabia has successfully upgraded its ISO certificate from ISO 9001:2000 to ISO 9001:2008. The certificate is compliant with the International Organisation for Standardisation in the provision of logistics management encompassing supply/demand, warehousing, and transportation and distribution specialised in healthcare and related lines, confirming that SL consistently meets and exceeds client satisfaction and regulatory requirements throughout the entire organisation. SL was carefully evaluated throughout the enterprise from sales forecast, demand planning and customs clearance to warehousing and distribution. The analysis also included a thorough audit of policies and 18
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Ghazi Melibari, GM, Saudi Logistics
practices governing operations, confirming that these processes are applied with a firm commitment to ongoing improvement. ISO certification complements SL’s stringent internal performance standards. SL regularly conducts extensive internal evaluations to ensure that all employees and processes are in compliance with the ISO quality control measures throughout every department.
Almajdouie moves huge reactors in Saudi Arabia
Almajdouie Heavylift and MPSC (a Joint Venture between Almajdouie and Fagioli) have made another move in the western region of Saudi Arabia. Almajdouie transported four massive reactor units from Yanbu Industrial Port to YERP project site for its client Daelim. These Hydrocracking Reactors, two weighing 1,660 tonnes and the other two weighing 790 tonnes were hauled 17 km safely to the site. The heavy reactors had to pass over seven culverts along the main access roads within the Royal Commission premises. Almajdouie’s inhouse team fixed sufficient scaffolding supports underneath the culvert, as per the engineering specifications, to ensure the safe traverse of the cargo over the culverts. In a highly regulated area, permissions had to be obtained from the Royal Commission’s Engineering & Road Department, the Royal Commission Police Security, the Industrial & Port Security and Yanbu Royal Commission in order to receive the Reactors in the Port and transport to the YERP site. Almajdouie and its Partners and Joint Ventures, like MPSC, have become expert in the engineering and transportation of unusual, heavy and over-dimensional cargo, which have to take into account many varying factors like route suitability, permits, stability, weight distribution and dimensional analysis in order to perform the many thousands of cargo deliveries performed over the years.
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Geodis Wilson inks contract with BIC Geodis Wilson has been selected by BIC as a logistics partner in Dubai, UAE. Geodis Wilson will perform a variety of warehousing and logistics functions for the multi-national company. The contract, between BIC Middle East & Africa (BIC MEA) and Geodis Wilson, is for a two-year duration. Commenting on Geodis Wilson’s successful business acquisition, the Company’s Supply Chain Manager for the UAE Ram Padmanabhan said, “We are, of course delighted to partner with such a global brand as BIC and have already begun to exhibit the high level of customer service, reliability and efficient integration of logistics functions, for which Geodis Wilson is well-known.” BIC is a world leader in the supply of pens, stationery, lighters, shavers and promotional products. For sixty years now it has been committed to providing highquality, affordable products to consumers throughout the world. BIC’s net sales in 2011 topped Euros 1,824 million and its
merchandise is sold in 160 countries. As part of its contract with BIC, Geodis Wilson will provide services that include; product unloading, reception and inspection; inventory administration and storage; stock-keeping, order preparation and documentation; dispatch packaging, loading and distribution. The countries served will include BIC markets throughout the Middleeast and the sub-continent.
CHAMP accelerates eCargo through portfolio integration CHAMP Cargosystems has broadened its product portfolio, target market, and appeal following the take-over of TRAXON Europe in November 2011. A visible sign of the integration was the renaming of Global Logistics System Europe Company for Cargo Information Services GmbH, known as TRAXON Europe, at the beginning of the year. The company is now called CHAMP Cargosystems GmbH. In addition to the Cargo Management Systems branded Cargospot, CHAMP Cargosystems now offers the largest cargo Community Integration Platform, named Traxon. This provides interconnectivity between some 3,000 forwarders with over 9,000 offices and over 200 airlines and GSAs worldwide. Furthermore the company markets a comprehensive eCargo Suite, also branded Traxon, with solutions for Customs and Security, Quality, Paper-Free, 20
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James Fernandez, VP Global Commercial Operations, CHAMP Cargosystems
Portals and Mobility. The facilitation of seamless electronic data exchange along the transport chain and compliance with regulatory requirements serve as a powerful foundation for clients to raise productivity and performance and reduce complexities.
“Green makes sense” says WMS president
Dag Schjerven, president and CEO Wilhelmsen Maritime Services
Dag Schjerven, president and CEO Wilhelmsen Maritime Services (WMS), addressed the need for the international maritime industry to adopt a green shipping ethos at EXPO 2012 in Korea. Mr. Schjerven discussed how the combination of engineering and global network capabilities has made it possible to develop environmental solutions for Wilhelmsen Ships Service (WSS) customers worldwide. “Some have criticised the IMO for acting too slowly and it has been suggested local regulation might be more effective. Whilst we agree that regional initiatives have made an important contribution to the cause, exclusivelylocal regulation would make it very difficult for international ship owners to operate effectively. And a global industry like shipping needs global rules and standards,” he said. “By offering the best available technologies in the market we can help our customers stay compliant and reduce their vessel operating costs. The less energy a ship consumes the less fuel it will burn, resulting in reduced pollution and cost savings. “The majority of vessels uses large amounts of chemicals for cleaning, maintenance, water and fuel treatment. Our companies, such as Wilhelmsen Ships Service, are leading the way in bringing environmentally acceptable marine chemicals into the market.”
LOG. WINDOW
IATA proposes new partnership agenda with governments The International Air Transport Association (IATA) called on governments to be stronger partners in maximising aviation’s economic and social benefits. Aviation is a key driver of economic growth, jobs, and prosperity: • In 2011, aviation safely transported some 2.8 billion passengers and 48 million tonnes of cargo. The value of goods transported by air is estimated at US$5.3 trillion, which equals 35 per cent of the value of all goods traded internationally. A recent study by Oxford Economics confirmed that aviation’s contribution to the global economy supports 57 million jobs and some US$2.2 trillion in economic activity. • Oxford Economics projected that aviation will grow about 5 per cent annually to 2030. That would see passenger numbers rise to 5.9 billion and cargo shipments could triple to nearly 150 million tonnes. This
Tony Tyler, IATA’s Director General and CEO
connectivity would support 82 million jobs and US$6.9 trillion of global GDP. “Our industry’s license to grow is earned through working with governments to constantly make flying even safer, more
secure, and more sustainable. Now we need an agenda to achieve tax regimes that do not kill growth, regulation that facilitates growth, and infrastructure that can efficiently accommodate growth,” said Tony Tyler, IATA’s Director General and CEO. The remarks came in Tyler’s State of the Industry address at the opening of the 68th IATA Annual General Meeting and World Air Transport Summit in China. “Hong Kong, Singapore, and the United Arab Emirates are among governments building their economies around air connectivity. The result is a virtuous circle. They are great markets for airlines. Businesses prosper from connectivity. And governments reap the benefits of increased employment and a stronger tax base. Aviation is a powerful workhorse. Using it wisely will deliver benefits throughout the economy,” added Tyler.
Changing face of container trade to be examined TOC Container Supply Chain Middle East returns to Dubai from 1-3 October 2012 to explore the impact of changing trade dynamics on container logistics, shipping and port strategies across the Middle East and Africa. The event brings together cargo owners, logistics providers, ocean carriers, port and terminal operators and other container supply chain members to assess the regional outlook. GCC countries are experiencing significant shifts in the direction and nature of trade with the rest of the world, as trade with OECD countries is rapidly supplanted by that of emerging markets. The emergence of India and China has presented the GCC with substantial opportunities, driving the region’s ports to expand capacity both for their own trade needs and also to develop as regional supply chain hubs. However, this overall picture of growth masks very different standards in supply chain infrastructure and practice across the GCC and the wider Middle East. Many
ports are undoubtedly world-scale and world-class, yet others now urgently need to improve their ability to serve today’s commercial demands. Modern ways of doing business are called for, especially in the areas of customs, immigration, and other business processes, if the Middle East is to capitalise on its unique strategic position as the crossroads
between Asia, Europe and Africa. In particular for 2012, the event will focus on the changing port strategies of Saudi Arabia, challenges and opportunities presented by Africa’s reinsertion into the global trade arena, and how continued containerisation of commodities will impact Middle East container trade flows – not least in the vital petrochemicals sector. June-July 2012 I
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LOG. WINDOW
Counter-piracy conference to be held in Dubai piracy in Somalia and other places. The conference website – www. counterpiracy.ae – has been updated and opened to provide all necessary information for invitees and other participants to register online for the conference. The website will also carry bespoke research articles and working papers that have been commissioned from seasoned academics, invited speakers and experts in the field of counter-piracy, in order to stimulate discussion and generate policy ideas on combating piracy, in preparation of the high-level event in Dubai. According to the International Maritime Bureau (IMB), as many as 43 pirate attacks were carried out by Somali pirates alone in the first quarter of 2012, and over 140 seafarers continue to be held in captivity, many in appalling conditions.
The UAE’s second anti-piracy conference to be held in Dubai, UAE on 27 -28 June has generated overwhelming interest globally and regionally with scores of high-ranking government ministers, industry leaders, security experts, the United Nations , the International Maritime Organisation, and other stakeholders from around the world expected to attend the event. The International Conference, to be held under the title A Regional Response to Maritime Piracy: Enhancing Public-Private Partnerships and Strengthening Global Engagement, will build on current global efforts to address the challenges of pirate attacks on ships, including its devastating human cost in terms of seamen taken hostage, and ways to enhance efforts to mitigate the root causes that have led to
Ports summit highlights Abu Dhabi’s strategic importance The second World Ports & Trade Summit in Abu Dhabi highlighted the need to tackle accelerated growth requirements of the industry keeping in mind mounting concerns relating to sustainability. The participants were in consensus about achieving a strategic vision for the long-term development of the industry being clearly aware of the effects of climate change and energy requirements. “While the Summit was a celebration of potential for growth, it is important to look at where such growth would take us,” said Jonathon Porrit, Founder of Forum for the Future and initiator of the Sustainable Shipping Initiative (SSI). Porrit pointed out that by 2050, if the emission level standards agreed upon by world leaders are to be achieved, the industry faces the challenge of reducing CO2 produced to 6 gm for each dollar value created in global economy from the current of 768 gm, which is rather unrealistic if prevailing levels of compliance are taken into account. Considering such critical sustainability challenges ahead, the summit explored 22
I June-July 2012
A conference session on Energy Outlook and Transportation in progress at the World Ports & Trade Summit in Abu Dhabi, UAE
Sustainable Shipping Initiative strategies to secure the industry’s future. The SSI brings together leading companies from across the industry and around the world to plan how shipping can contribute to – and thrive in – a sustainable future. Recognising the significant changes lying ahead, SSI members have developed a shared Vision for 2040. “There are currently 17 partners from a wide range of sectors such as ship owners,
charterers and operators, bankers, insurers and NGOs supporting the SSI. In view of the critical role of SSI Vision in global economy, a leadership commitment – with each chief executives signing individually – has been made to ensure its success,” said Porrit. The Summit held much significance for Abu Dhabi this year considering that the first phase of its futuristic Khalifa Port is getting ready in the last quarter.
Beyond Expectations Logistics from a different angle Pressure to be more efficient, cut costs and eliminate waste increases every day. This is why we build continuous improvements into everything we do. At CEVA, we are supply chain experts who we continually review and streamline our processes, eliminating defects, raising productivity and reducing energy usage. And everything we learn is replicated across our global operations. Our Operations Excellence approach is one of the ways we exceed our customers’ expectations, each and every day. Isn’t it time to see your supply chain from a different angle? We think so.
Find out more about our Operations Excellence program at
www.cevalogistics.com/expectations
CEVA Logistics in Middle East, Northern Africa and Central Asia P.O. Box 20336 Jebel Ali South Zone Jebel Ali Free Zone, Dubai, UAE Tel.: +971 4 8131555 E-mail: salesme@cevalogistics.com
PROFILE
Port of Sohar One of Oman’s finest economic successes, ambitious work is still in progress
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Sohar Industrial Port Company SAOC (SIPC) has been undertaking all necessary steps to sustain and enhance Sohar’s appeal to international investment and maritime traffic. Hundreds of millions of dollars have been earmarked by the joint venture partners, the Government of Oman and the Port of Rotterdam, for investment in a host of new initiatives designed to reinforce Port of Sohar’s position as the Gulf’s preeminent gateway. The Port of Sohar is one of the largest port development projects in the world with investments exceeding US$14 billion.
PROFILE
Located 220 km northwest of the capital Muscat, this industrial and deep sea port has grown tremendously in size and importance in only eight years since its inception in 2003. Port of Sohar is fully operational with state of the art facilities and the three terminals are handled by world renowned companies. The general cargo terminal is operated by C. Steinweg Oman (Holland), the bulk liquids terminal is operated by Oiltanking/Odfjell (German and Norwegian JV) and the container terminal is operated by Oman International Container Terminal (Hutchinson Whampoa, Hong Kong).
A series of new terminals and jetties are envisioned, along with projects that support rail and road connectivity. A new entrance, conceived as an imposing gateway into the port, is on the drawing board as well. So too are a number of longrange planning projects that will open the way for significant landside and waterside development in the future. Overseeing these initiatives are several specialist teams within SIPC dedicated to, among other areas, Spatial Planning Development, Geographical Information Services, New Infrastructure Development, Interface Management,
and Maintenance and Repairs. Where necessary, they closely interact with the relevant departments and agencies of the government, notably the Ministry of Transport and Communications, and the Supreme Committee for Town Planning. Deepwater bulk jetty The most significant by far is an initiative involving the construction of two largescale projects which promise to transform the wider Batinah region into a regional powerhouse for industrial-scale mining, quarrying and mineral processing. The first of these projects centres on the June-July 2012 I
25
PROFILE
development of major deep-water bulk jetty to support the bulk shipping needs of Brazilian mining conglomerate Vale, which is building a huge iron ore pelletising and distribution centre at the Port of Sohar. Construction work on the deep water bulk jetty, estimated at US$250 million, is well underway. A joint venture, of Italybased international engineering contractor Saipem and leading Indian infrastructure firm AFCONS, is undertaking the design and execution of the jetty structure. The 1,380m-long structure, which extends finger-like into the Sea of Oman, is itself a major feat of maritime engineering. Around 500 piles have been placed on the trestle and the jetty platforms will be constructed. Berthing pockets with a draft of 25 m will allow for the docking of a new generation of ultra-large ore carriers which are being owned and operated by Oman Shipping Company. Van Oord of The Netherlands, one of the world’s leading dredging companies, has dredged the approach channel and berthing pockets, having deployed one of the world’s largest dredgers at the site. Significantly, the jetty project will take Sohar into the ranks of only a select handful of ports in the world with such deep water capability. Bulk commodities terminal Also under development is a new Bulk Terminal for Aggregates and Minerals. This project has been conceived in line with SIPC’s vision to further industrialscale investment in mining, quarrying and mineral processing activities across the Batinah region, using Sohar as a gateway and international hub for trades in bulk commodities. The bulk terminal, featuring a water depth of 16 m, is being built as a separate extension of the deep water jetty project. A 220m-long adjacent to the jetty trestle is being earmarked for the development of the bulk terminal catering to bulk imports and exports of aggregates, as well as other possible commodities like limestone, coal, cement, copper concentrates, and chromate, among other mineral ores. The bulk terminal, serving both import and export cargoes, will have a capacity to handle 6-10 million tonnes of aggregates and dry bulk commodities per year. While SIPC will develop the jetty infrastructure, an internationally renowned operator 26
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“The Port of Sohar is one of the largest port development projects in the world with investments exceeding $US14 billion. Located 220 km northwest of the capital Muscat, this industrial and deep sea port has grown tremendously in size and importance in only eight years since inception in 2003.” will be invited to invest in the terminal superstructure, such as loaders and utilities. SIPC has earmarked a 250m length of an existing quay wall, for the temporary handling of aggregates and bulk commodities. Once terminal infrastructure for bulk imports and exports is in place, investments in upstream and downstream elements of the business chain are expected to flow into Sohar and the wider Batinah region, particularly the Freezone Sohar initiative being developed alongside the industrial port. Additionally, the project has huge implications for employment generation. Vision 2030 master plan The revised master plan will provide a new roadmap for the development of SIPC’s concession area over the next 20 years through to 2030. It will be integrated with the broader master plan for the development of the wider Batinah region. In drawing up a strategy for the port’s future development, SIPC specialists are carrying out a detailed spatial planning exercise of the concession area, together with simulations of cargo growth forecasts,
investment trends and other indicators. This roadmap will help throw light on the port’s future requirement for new infrastructure, such as jetties, terminals and corridors. Opportunities for future investment in new industries and services can be ascertained as well. Importantly, the new Vision 2030 master plan will also explore opportunities and synergies that will emerge as a number of major infrastructure schemes are implemented in Sohar and elsewhere along the Batinah coast. In various stages of design and development are prestigious ventures, such as the Sohar Airport, Batinah coastal road, Batinah Expressway, Freezone Sohar, and the Oman National Rail Project - all of which have important beneficial implications for the industrial port. Freezone Sohar The Government of Oman and the Port of Rotterdam signed an addendum to the concession agreement in 2007 that extended SIPC’s concession term to the year 2043 and expanded the concession area to include an additional 4,500 ha area to be used for the development of
PROFILE
development of educational, research institutions, housing and leisure facilities in the area. The authorities have also embarked on a sizeable program to enhance Sohar’s transportation links. In addition to Port of Sohar a new civil and commercial airport is under development in Sohar. Sohar Airport will have dedicated freight import and export zones. Two major new roads are planned to improve the transportation between Muscat and Dubai (UAE) and to connect to the rest of Oman and the UAE. The Government also has further plans to construct a new railway which will link Muscat to Sohar and eventually connect with the GCC railway system. The railway is likely to be a cargo line in the first phase and it will directly service both Port of Sohar and Freezone Sohar.
a special economic zone. In 2009, Sohar International Development Company (SIDC); a sister company to SIPC and SKIL Infrastructure Ltd. of India signed a shareholders’ agreement to establish Sohar Free Zone Company LLC to develop and manage Freezone Sohar. The Freezone Sohar is strategically located in the vicinity of the Port of Sohar with a deep draft of 18 m. The port together with the free zone also shares the excellent road connectivity with the new upcoming Expressways to Muscat (Oman), Abu Dhabi and Dubai (UAE). The development of this area includes Sohar Airport to commence operations in 2012 and the new rail link to be completed by 2015. The combination of wide market access, sound global logistics and attractive business incentives ensure that companies enjoy the ultimate freedom to do business. The availability of raw material, energy and local manpower further enhance the value proposition of Sohar as a destination of choice to investors. In December 2010 the Royal Decree was granted for Freezone Sohar. This means that it is ruled under a special free zone law.
Issuing the Royal Decree with the special incentives, shows that the Government realises the importance of Freezone Sohar as a tool to attract foreign investment and thereby increasing the trade exchange volume, enhancing comprehensive economic development and activating investment in various trades, industrial and service sectors. Freezone Sohar in Batinah region is proposed to be developed in three phases. The first phase (500ha) has already attracted investors from different countries. Freezone Sohar has completed essential infrastructure in its industrial area. Roads have been asphalted and lampposts installed. The concept The development strategy is based on the principle that many Freezone Sohar companies will be entities operating in downstream sectors from the petrochemical and metals industries active in Sohar and/ or be part of the logistics and supply chains feeding off (and into) such industries. Freezone Sohar will procure supplies of utilities to tenants as well as oversee the
Incentives at Freezone Sohar • Up to 100 per cent foreign ownership • No minimum capital requirements • “One stop shop” system to assist with the obtaining of all permits • No restrictions on the repatriation of profits and investments • No foreign currency restrictions • Exemption from Oman’s Commercial Agencies Law • 10-year tax holiday which may be extended up to 25 years • No duty on imports and exports • No price control on products or services Latest updates Ferro chrome smelter: Last May, the Port of Sohar signed a contract with the Gulf Mining Materials Co (GMM), the largest chrome ore mining and exporting company in Oman. GMM predominantly mines, extracts and processes Chrome, Marble and Laterite along with other materials. GMM has set up the first-ever chrome beneficiation (upgrading) plant in the Wilayat of Samail, Oman with a monthly processing capacity of 15,000 MT. The contract sets the start to construct of a Ferro Chrome smelter with a capacity of 50,000 metric tonnes per annum of Ferro chrome with the help of two furnaces of 16,500 kva each. The project is expected to be completed within 12-14 months from the date of construction. Oman will become the first country to produce Ferro chrome in the entire GCC. June-July 2012 I
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ANALYSIS
Simplifying the business of air cargo Air Cargo is a circa US$60 billion business that transports 35pc of the value of goods traded internationally worth some US$5 trillion. Air Cargo is a critical part of the airline business which, as a whole, is the heart of a value chain that supports 32 million jobs and US$3.5 trillion of economic activity. The International Air Transport Association (IATA) is known as the air transport’s global trade organisation. Over 60 years, IATA has developed the commercial standards that built a global industry. Today, IATA’s mission is to represent, lead and serve the airline industry. Its members comprise some 240 airlines - the world’s leading passenger and cargo airlines among them - representing 84 per cent of total air traffic. IATA seeks to improve understanding of the industry among decision makers and increase awareness of the benefits that aviation brings to national and global 28
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economies. The aim is to help airlines help themselves by simplifying processes and increasing passenger convenience while reducing costs and improving efficiency. The groundbreaking ‘Simplifying the Business’ initiative is crucial in this area. IATA serves as an intermediary between airlines and passenger as well as cargo agents via neutrally applied agency service standards and centralised financial systems. The organisation ensures that people and goods can move around the global airline network as easily as if they were on a single airline in a single country. In addition, it provides essential professional
support to all industry stakeholders with a wide range of products and expert services, such as publications, training and consulting. Cargo E-Chartbook Being a global organisation, IATA publishes the E-Chartbook on a quarterly basis. The most recent Cargo Economic Watch - Q2 2012 was out on 7 June, which provided a comprehensive evaluation of air cargo trends around the world. According to the report, downward pressure on cargo profitability eased slightly in the second quarter of the year following an improvement in air freight
the tightness of bank lending standards has decreased compared to the end of 2011, with the sector receiving support from the European Central Bank and various governments. In the US, banks are now loosening credit standards, improving conditions for private investment activity (3).
-3
United States Economic
Euro Japan Area outlook
China
India
Russia
ANALYSIS
4. Freight Traffic Growth Source: IATA, ACI
38
% change over year
Graph 1
32
Domestic Freight Volumes (ACI)
26
International Freight Volumes (ACI)
20
International FTKs (IATA)
14 8 2 -4 -10 -16 -22 -28
World
5. International Freight growth by major routes Source: IATA ODS
60%
Tightening
50%
Within Far East
North and Mid Pacific
% change over year
40%
Graph 2
Loosening
demand, a small rise in yields, and a 1. Forecasts for GDP growth decline in oil prices. Freight load Source: EIUfactors 7 bottomed out at the end of 2011, along with 2011 6 a hesitant and2012 narrowly based upturn in 5 demand - worldwide FTKs expanded by 2 4 per cent in April compared to the lows of 3 the fourth quarter of 2011. 2 Improvements in business confidence 1 and growth in world trade have supported 0 this expansion, as has the absence of an -1 overhang in business inventories. However, -2 the improvement inEuro airArea freight is not US Japan ASPAC excl Middle East Latin North Africa America widespread, with weakness Japan in European and Chinese consumer confidence keeping demand for air-freighted commodities 2. Goverment Cyclically Adjusted Fiscal Balance down in those regions.Source: IMF 3 Furthermore, expected increases in 2 belly-hold capacity are likely to continue to make asset utilisation a challenge. Looking 1 forward, cargo heads surveyed in April 0 2012 expect downward pressure to ease -1 cargo yields over the next 12 months; on but associated 2011 with 2012 the Eurozone -2 risks2010 remain a threat to this improved outlook.
Difference in % GDP over previous year
% change over year
Air freight volumes bottomed out at the end of last year. By April, the worldwide air freight market had expanded by 2% compared to the lows of Q4 2011 (4&5). Freight-only carriers have benefited more from the improvement in demand (6).
30% 20% 10% 0% -10%
North Atlantic
-20% -30%
Brazil
Europe - Far East
-40%
FTK Billion
FTK Billion
% banks
% banks
Worldwide economic growth is expected to be just over 2 per cent this year, slightly lower than 2011, but with 3. Bank credit conditions 6. Air Freight Carried by freighter or Belly Hold significant variation between Source: ECB, Federalregions. Reserve (seasonally adjusted) 10.5 7.0 Source: IATA 80 80The US is expected to improve on 2011 widespread. Although US consumer 10.0 European Banks Tighter Credit 6.5 consumers confidence has improved, 60 60performance, while the Euro area is likely Standards 9.5 US Banksoverall. Emerging economies in China and particularly in Europe are to contract 9.0 6.0 40 40 pessimistic. And this sentiment continues continue to grow at a much faster pace 8.5 20 20than Western economies, with Asia Pacific, 5.5 to depress Belly demand for air-freighted Hold 8.0 (right scale) commodities, as indicated by the decline MENA and Latin America anticipating solid 0 0 7.5 5.0 Freighters Looser Credit in semi-conductor shipments (See growth in 2012. (left scale) -20 -20 7.0 Standards 4.5 Graphs 3 & 4). Furthermore, despite no Western economies continue to be 6.5 -40 -40 sign of an inventory overhang, inventory limited by tightening fiscal policy, while 6.0 4.0 to sales ratios remain flat - businesses the governments of Brazil, Russia, India have no immediate demand for moving and China maintain a relatively looser quickly. fiscal position. However, despite Europe’s (Chart 6): Airline sample scaled up accordingcargo to 2006 Freighter/Belly-hold split in Airbus Global Market Forecast 2007 - 2026 On the positive side, capital investment financial instability, the tightness of has shown some increase for US and bank lending standards has decreased Tony Tyler, IATA’s Director General and CEO Japanese companies, – a positive sign compared to the end of 2011, with IATA Economics: www.iata.org/economics 2 as high value/ light weight capital goods Demand environment the sector receiving support from the typically rely on air transport. The demand environment for air cargo European Central Bank and various is showing signs of improvement. The governments. In the US, banks are now Capacity & Competition Purchasing Manager’s Index started to loosening credit standards, improving Freight load factors have turned up, turn upward at the end of 2011, and has conditions for private investment activity. after bottoming out at the end of 2011. now been signalling modest expansion in Air freight volumes bottomed out Improvements in air freight demand have business confidence for five consecutive at the end of last year. By April 2012, helped support load factors, as have months. World trade has continued to rise, the worldwide air freight market had limited increases in the freighter fleet. albeit at a slightly slower pace in Q1, and expanded by 2 per cent compared to However, capacity has still been added there is no sign of an inventory overhang. the lows of Q4 2011 (See Graphs 1 & 2). to the market via increases in widebody However, demand drivers indicate Freight-only carriers have benefited more aircraft, particularly in Q2. that the signs of recovery are not from the improvement in demand. June-July 2012 I
29
confidence has improved, consumers in China and particularly in Europe are pessimistic (11). And this sentiment continues to depress demand for air-freighted commodities, as indicated by the decline in semiconductor shipments (10). Furthermore, despite no sign of an inventory overhang, inventory to sales ratios ANALYSIS remain flat – businesses have no immediate demand for moving cargo quickly (9). Cargo eChartbook – Q2 2012
Capacity On the positive side, capital investment has shown some increase for US and Japanese companies (12), a & Competition positive sign as high value/ light weight capital goods typically rely on air transport. Freight load factors have turned up, after bottoming out at the end of 2011 (14). Improvements in air freight demand have support load factors, as have limited increases in the freighter fleet. However, capacity This trend willhelped continue, as deliveries of 10. Semi-Conductor Shipments and Air Freight World trade in goods and air FTKs has twin-isle still7.been added to the market via increases in widebody aircraft, particularly Q2SIA(13). new aircraft with belly hold capacity Source: Netherlands CPB and IATA Source:in IATA, 14
is set to increase by almost 60 per cent in
170
38 34
54
as new aircraft enter the market.World goods trade
% growth - International FTKs
11
% Growth, Semi-Conductor Shipments
Graph 3
index of world trade, 2000=100
Billion FTKs
FTKs This trend will International continue, as deliveries of new twin-isle aircraft with belly hold capacity is set to increase30by 46 2012 compared to 2011, (left scale)and by a further 13 26 International FTKs 13 160 38 22 almost 60% in 2012 compared to 2011, and by a further 13% in 2013 (15). Asset utilization has been per cent in 2013. Asset utilisation has been Semi-Conductor Shipments 30 18 150 14 decliningininthe the freight industry it will continue to be a challenge as new aircraft enter 22 12declining airair freight industry, and (14), and maintaining 10 14 6 the market.it will continue to be a challenge maintaining 140 2 -2
6
-2 volumes 130performance Sea freight markets are starting to show mixed across regions, suggesting the upward trend-6 in (right scale) -10 Sea freight markets are starting to -10 10 -14 120 world trade is fragile in some regions. Growth in containerized sea transport has increased in North America, -18 show mixed performance across regions, -18 -26 -22 but has softened in Northern Europe and the Middle East (18). Transport of goods from the EU to Asia by sea suggesting the upward trend in world 9 110 -26 -34 trade is fragile in some regions. Growth in along the same route remains weak (16). continues to increase, while air cargo
containerised sea transport has increased
in Sea freight rates still down, North America, but are has softened in but to a lesser degree than at the end of 2011. Air freight rates have remained soft, as the challenging business environment keeps competitive pressures high (17). Europe and the Middle East. 8. Northern Purchasing Managers confidence survey and Air Freight 11. Consumer confidence
-10
China
-15
EU to Asia by sea Asia to EU by air
-20
EU to Asia by air
-25
Europe (right scale)
US
-30 -35
-30% -40%
Net balance intending to increase investment % change over year
Graph % available freight tonne5capacity
FTKs (billion)
70 50 100%
12. Capital spending intentions Source: Haver Analytics
17. Ocean container and air freight rate growth Source: Drewry, CASS
5
Ocean container
10 60%
0
40% -10 20% -30 0% -50 -20%
10
Japan business (right scale)
30 80%
15
Air freight -5
UK business (left scale)
-10
-70 -40%
-15
-60%
18. Container Shipping Volume Growth by Region Source: Drewry
3
14 % Growth, Year-on-Year
Sep-11
Graph 6
150
Asia to EU by sea
-20% 0
2700
Average daily hours flown
Inventories to sales ratio
10%40
-5
% change from pre-crisis peak June 2008 Seasonally adjusted monthly data in tonne (Source: International Transport Forum)
Balance expecteting improvement, net %
2800
Revenues, costs and profits 2600 Air 2500 freight yields improved at the start of Q2, having drifted lower throughout the previous airoffreight yields End of year totalsyear. The rise in End month totals is a sign that there was some improvement 9. Total Business inventories to sales ratio and FTKs in market conditions, given Source: USalthough Census Bureau and IATA 1.6 18 Freight load factor and freighter the 14. degree of excess capacity, that aircraft 17 Inventories to sales ratio utilization 11.0 50% improvement was(Seasonally only minor. adjusted) 16 1.4 1548% 10.5 Jet fuel prices have eased back down Freight Load Factor 14 to10.0 2011 year-end levels and nominal 1.2 1346% wage rate increases in the US and 9.5 12 44% Europe have slowed, helping alleviate 9.0 11 FTKs 1downward pressure on net profits. With 1042% 8.5 slightly stronger volumes and the modest 9 Freight aircraft utilization 40% 8.0 8 0.8improvement in yields, revenues have 7.5 38% shown some improvement, but overall there has been very little growth. The outlook for cargo is also more positive, according to heads of cargo surveyed in April 2012, and this is consistent with improved 15. Twin Aisle Aircraft Deliveries by Airline Region indicators of business confidence and Source: Ascend 350 world tradeOther over recent months. Downward IATA 300 Economics: Middlewww.iata.org/economics East pressure is North nowAmerica expected to ease on cargo yields over Europe the next 12 months, after significant 250 Asia Pacific weakness at the start of 2012. 200 Number of Aircraft
30% 60 20%
0% 20 -10%
-40
30
Balance expecting improvement, index
Graph 4
% Growth YoY Number of aircraft
40%80
0
16. EU Trade with Asia
100 50%
-30
Glossary •100ACI: Airports Council International •50AFTK: Available Freight Tonne Kilometres • CASS: Cargo Accounts Settlement System 0 • FTK: 2007 Freight Tonne Kilometres 2008 2009 2010 2011 • ODS: Origin-Destination Statistics • SIA: Semiconductors Industry Association
Source: Haver Analytics
120
Net balance intending to increase investment
Transport of goods fromDemand the EU to Asia by Source: IATA, JP Morgan sea continues to13. increase, whilecomposition air cargo Cargo fleet 40 Source: IATA, Ascend Morgan Manufactuerers (+2 months) alongJPthe same routePMI remains weak. Sea 30 International FTKs freight rates are down, but toWidebody a lesser Freighter fleetstill in service pax fleet in service 3500 20 3400 degree than at the end of 2011. Air freight 10 3300 rates have remained soft, as the challenging 0 3200 -10 3100 business environment keeps competitive 3000 -20 pressures high (See Graphs 5 & 6). 2900 50
9
Feb-12 Mar-12
4
-1
2012
2013
-6
North America
North Europe
Far East
Middle East
Latin America
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IATA Economics: www.iata.org/economics
4
ASSOCIATED COMPANIES
SUPPORTERS
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11-13 November 2012
Dhahran International Exhibition Center, Dammam, Kingdom of Saudi Arabia Officially Supported by the Ministry of Transport of the Kingdom of Saudi Arabia
The 3rd International
TRANSPORTATION, MATERIALS HANDLING, WAREHOUSING & LOGISTICS Exhibition & Conference Organised by
www.sauditranstec.com
Working Towards the Integration & Implementation of Effective Logistics & Transportation Systems
ANALYSIS
Not too late – Finding opportunity in Middle East logistics The recovery of the global logistics industry has been remarkable. The Middle East has been notably resilient and the region now looks specifically attractive given problems in European markets and the slowing of China’s economic growth.
AUTHORS: Dr. Ulrich Koegler (L), Partner; Ivan Jakovljevic (R), Principal; Simon Kuge, Principal; and Dr. Timm Pietsch, Associate with Booz & Company
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In the GCC, the robustness of the logistics market is driven by high oil prices, along with increased government investment following the “Arab Spring.” Moreover, Middle Eastern governments want to establish a thriving logistics service industry and ensure that regional companies benefit from these opportunities. As a result, the region’s transport and logistics players are doing considerably well. DP World recorded a growth in revenue of 14 per cent on a comparable basis in 2011 and Aramex grew revenue by 16.5 per cent with a healthy net margin of 8.2 per cent.
In order to grab these new opportunities, the Middle East logistics industry needs to adapt rapidly. Logistics players must implement approaches that will allow them to dominate their chosen market segment. Ultimately, dominant strategic plays will be required due to the lack of sustainable transport and logistics niche markets in the Middle East. Regional opportunity Despite the political issues in some countries, the overall transport and logistics market in Gulf Cooperation Council (GCC) countries has rebounded
ANALYSIS
exceptionally well and witnessed doubledigit growth in recent years. We expect this to continue and anticipate that the market will grow to a value of US$31.5 billion by 2016 from US$21.9 billion in 2011. Logistics represents roughly 2 per cent of the GDP of the GCC countries, or about 4 per cent of GDP excluding the oil and gas sector. This is significantly lower than the sector’s average 6-per cent contribution to GDP in European Union countries. However, Booz & Company forecasts that the market’s compound annual growth rate (CAGR) will be approximately 7.6 per cent in the next five years. The sector has two components, transport and logistics services. We expect transport - which includes ground transport, air, and sea freight - to expand at around 6 per cent CAGR, a touch faster than GDP growth. Our forecast is that logistics services - which consist of warehousing, contract logistics, freight forwarding, and supply chain management - will have substantially higher annual growth rates of 9.8 per cent (see Exhibit 1). In common with other emerging markets, the transport and logistics sector in the Middle East has attractive operating margins. Basic road transport services have operating margins of approximately 6 to 10 per cent - significantly more than the 2 to 4 per cent in mature markets such as the European Union. Profit margins are even higher when the complexity and level of sophistication of the logistics service rises. Freight forwarding, which requires more sophisticated capabilities, typically yields margins well in excess of 10 to 12 per cent in the Middle East and North Africa (MENA) region. The rewards are even better for warehousing and contract logistics services. These offer margins of around 10 per cent, or even 15 per cent for comprehensive supply chain management. Bright prospects The sector’s encouraging prospects stem from four factors. First, all industrial activity needs transportation and logistics. In the Middle East that demand is increasing, thanks to solid growth and substantial investments in the production base. Second, the region will increase its outsourcing levels over time. As worldwide
“Despite the political issues in some countries, the overall transport and logistics market in the GCC countries has rebounded exceptionally well and witnessed double-digit growth in recent years. Booz & Company expects this to continue and anticipates that the market will grow to a value of US$31.5 billion by 2016 from US$21.9 billion in 2011.” and strong regional logistics service providers grow their capabilities and their regional footprints, the level of outsourcing is expected to increase. Third, regional distribution and logistics headquarters will be established in the Middle East. This is facilitated by improved accessibility by road, sea, and air; thriving and efficiently managed free zones; and access to markets in Transcaucasia and Central Africa. Fourth, there has been an evolution of global logistics hubs in key locations, such as Dubai. Sitting astride the Europe-Asia trade route, Dubai is showing aboveaverage growth rates. Competitive landscape The Middle East logistics and transport
market is highly fragmented. In fact, there are only a few players able to provide sophisticated services required by a burgeoning transport and logistics hub. Just three emerging global companies, Agility, Aramex and GAC, as well as a few midsized players, offer a full range of services and have global partners to extend their reach. The rest of the competition is hundreds of small players competing in freight forwarding, warehousing, and particularly transportation. Some operate quite profitable businesses within their local, modal, or customer relation-based niche. However, most of the smaller firms lack a clear strategic perspective and still perform as traditional operators with limited skills, capabilities, and positional assets. June-July 2012 I
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ANALYSIS
Defining a dominant strategy Recent trends indicate that the sole path to success is to have a dominant strategy. A company with a dominant strategy serves a well-defined customer segment with a mixture of comprehensive offerings and geographic reach. That means providing a services portfolio that encompasses all of the client’s transport and logistics needs in all of its relevant geographic markets. These services cover everything that the customer will want on a sustainable basis into the future. As a result, the transport and logistics company provides one-stop-shop services, thereby making it difficult for competitors to respond with a broader set of services. That focus on core capabilities that are hard for competitors to replicate is what Booz & Company calls a “capabilities driven strategy.” Based on our market research and understanding of customer demands, we see three dominant strategic plays that will provide a sustainable platform for their customers. DOMINANT STRATEGY #1: EXPRESS/ ROAD NETWORK OPERATOR Road transport will dominate for the foreseeable future. Logistics activity will therefore rely on efficient road transport services. From a customer-demand perspective, the market has four distinctive segments: low-cost transport for basic commodities or containers; high-quality transport for high-value goods; express services; and specialised transport. Low-Cost Transport: A dominant strategy in this segment requires a focus on cost-effectiveness paired with superior technological skills. That mixture of flexibility and low-cost services are the primary determinants of success because of segment fragmentation. The most important players typically serve the large basic commodity conglomerates. There is also a host of small service providers that own a few trucks and that provide “on-call” services. Yet, it should be noted that this segment will be exposed to significant competition by the emerging railway industry in the GCC. High-Quality Transport: This is a promising segment because of a shortage 34
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of providers and the likelihood that customer demand will grow faster than the market average. For the moment, the region’s production base in sophisticated goods remains small. Current demand for high-quality transport comes mostly from importers, which are looking for providers with portfolios of services that extend beyond road transport. Express Services: This segment contains two very different activities: Express services and the less-than-truckload (LTL) category. Express services include timedefinite deliveries, such as documents and parcels. The time-definite sub-segment is highly consolidated. A small number of brand name players serve this market, with the result that customers pay significant price premiums. Existing players have high-quality networks and significant scale advantages, capabilities that upstarts will struggle to replicate. Hence, express services have high barriers to entry. The LTL sub-segment offers more opportunities to become a dominant player. LTL services require a high-quality network and the main express players are well positioned to take a large slice of the pie. However, only a few companies
provide this service in the Middle East and latent customer demand is significant. That means a chance for others to exploit demand that the existing players may not be able to capture. Specialised Transports: This has emerged as an interesting segment in recent years. It includes a broad portfolio of services, such as liquid transports or heavy load transport for industrial or residential construction. Specifically with the ongoing high level of investment in infrastructure and production plants, it offers some very attractive and highly profitable niches. As a result, some large-scale players grow this segment as an attractive addition to their broader portfolios. DOMINANT STRATEGY #2: CONTRACT LOGISTICS PROVIDER The best opportunity in contract logistics is sophisticated supply chain management services. Most of the regional contract logistics providers lack a focus on supply chain management. However, as the region develops, and adopts global standards, customers will demand this service. Customers in the region are increasingly challenging the low standards of services they have received for decades.
ANALYSIS
The Middle East logistics industry needs to adapt rapidly. Logistics players must implement approaches that will allow them to dominate their chosen market segment. Ultimately, dominant strategic plays will be required due to the lack of sustainable transport and logistics niche markets in the Middle East. They are acquiring a taste for efficient supply chain processes and want their providers to have these capabilities. Until recently, most customers accepted significant inventory levels and carry costs, low-quality inventory management, and rudimentary supply chain visibility. However, global standards are creeping in. On the supply side, global logistics players are aggressively offering their supply chain management capabilities. On the demand side, global industrial players are now focusing on secondary markets such as the Middle East. These companies had previously restructured supply chains in their core markets in the last decade and are now increasingly expecting the same level of performance in the Middle East. DOMINANT STRATEGY #3: INTEGRATED LOGISTICS SERVICE PROVIDER Integrated logistics service providers must have strong asset capabilities, such as a road network and a comprehensive warehousing infrastructure, and the strong service capabilities of a contract logistics provider. There are two different structures to consider: Global Integrated Service Provider: Leading global service providers will
have to invest significantly in their Middle East presence. They have until now focused on their core markets in the largest economies, providing customers in these markets with a comprehensive integrated service portfolio. That could mean quite limited regional and local footprints. However, global service providers will need to expand their Middle East footprint because of three factors. These are the ongoing consolidation of the global transportation and logistics markets; increasing “regionalisation� of the distribution networks of the global industry players; and the emergence of global transshipment hubs in the Middle East. Regional Integrated Service Provider: Regional service providers offer a strong footprint in the Middle East with less emphasis on major global markets. Their regional strength means that they can offer themselves to global customers as their regional logistics partners. From strategy to implementation A long-term strategic play needs a well thought through implementation plan, starting with a sound baseline diagnostic assessment of a company’s position. The
baseline consists of three elements. First, the company must review the transport and logistics capabilities that make it different to its competitors. These might be superior fleet management and warehouse operating skills, competitive freight forwarding, or supply chain management capabilities. Second, the company should determine its crucial strategic assets. These include relationships, for instance, with key industrial customers or government entities, as well as tangible assets. Third, the company should establish its current and potential geographic reach. This encompasses existing reach and opportunities in easily penetrated neighboring markets. The baseline diagnostic will reveal any gaps that the company must address and the additional assets and capabilities needed for a dominant strategic play. It can also reveal opportunities in less farreaching strategic plays. Build or acquire? Finally, companies must formulate a rigorous growth plan. They will need to determine whether to build or acquire their desired business position. Unfortunately, both approaches are quite cumbersome in the Middle East. Business building should be restricted to situations in which companies offer a completely new value proposition for two reasons. First, this is an inherently costly approach as companies have to provide resources and networks in anticipation of revenues and profit streams. Second, there is a lack of experienced professionals in this field in the Middle East. The acquisition path is similarly challenging because of the lack of opportunities. The highly fragmented markets provide only a few potential attractive targets with strong logistics skills and significant revenue streams - which makes acquiring these regional players expensive. There is no silver bullet to resolve this dilemma. That said, a well-chosen mix of developing a regional platform either by acquisition or business building - blended with acquisitions of strong midsized players in other markets may eventually provide the most effective way to rapidly achieve the sought-after dominant market positioning. June-July 2012 I
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FEATURE
Logistics Services Segmentation Developing a strong value proposition for strategic purposes
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3PLs and other logistics service providers (LSPs) have a continuous sales cycle to pursue new business. The cycle is driven because of underlying, systemic issues, namely - Commodity service business where price is the key delineator; High customer turnover; and Eroding profit margins. Eighty per cent of customer business will be like this. The effort is to find that twenty per cent that can make a difference. There is little or no differentiation versus competition. The need is to create a brand identity that separates your company from the other firms offering similar services. This analysis will identify and capture the key segments that have high customer retention and solid profitability. Too many logistics providers stay with the business model they have developed as to service offerings and customer / market targets. There may be adjustments made;
but it is still the same intrinsic model and sales approach, including an anything and everything for everyone/ one stop shop and chasing volume for the sake of volume. Traditional sales approaches and marketing analyses handcuff a logistics service provider’s ability to identify significant market sector opportunities. All this perpetuates the commodity service dilemma. Value proposition There should be recognition of something underlying, subtle and somewhat evasive with many customer endeavors that lays the basis for problems. There is the lack of a value proposition (VP) by the 3PL or LSP. The VP is not about the freight. It is not about the pallets of product or just a marketing spin. It is outward facing - toward the customer, not inward facing about the 3PL. Value Proposition is not about the service provider, the service provided or the
FEATURE
assumed benefits of the service. It is not about market share or imitating competitors or indiscriminately pursuing customers or flogging asset utilisation. The value proposition must be focused on the customer, not on the 3PL. A solid VP turns the discussion away from price and toward the customer and his need. It creates a value in using the 3PL that no other LSP has and which the customer will pay for. An LSP can use the value proposition to differentiate itself from the competition and to break away from the zero-sum game of customer and market share pursuit. It should increase the quantity and especially the quality of sales leads. The VP is not a slogan or tagline. It requires 3PLs and LSPs to understand their services and what these are worth to customers and what customers really want and need. The value proposition separates the 3PL from commodity-service competitors and breaks the 3PL from a self-defeating price competition game that pressures profit margins. Value proposition is strategic positioning and should have its roots in the company strategy. The VP is customer centric and requires understanding the customers’ businesses. It targets real customer needs and does not apply to every customer or provide a universal sales methodology. It should be unique or distinctive. It may seem to have a niche approach. The VP should be measurable for the customer to see its impact and benefit. A clear, deliverable value proposition provides de facto branding. Developing the value proposition is actually challenging. Determining what
Traditional sales approaches and marketing analyses handcuff a logistics service provider’s ability to identify significant market sector opportunities. All this perpetuates the commodity service dilemma.
Tom Craig, LTD Management, Logistics / Supply Chain Consulting
develop new capabilities to gain these customers’ business. This is much more than a granularity evaluation and is different than multi-channel marketing. The segmentation takes a different, fresh look at customers to find those whose needs are not being met - and to then create innovative supply chain services - and the value proposition - for them. These are unique customers that respond differently to the traditional sales mixes and that may justify separate service offerings. Segmentation analysis should not just a marketing exercise. Follow through is required to be successful with strategic implications and importance. The purpose is to gain strategic insight and to identify customer sectors that have been under recognised and under served.
“Too many logistics providers stay with the business model they have developed as to service offerings and customer / market targets. There may be adjustments made; but it is still the same intrinsic model and sales approach, including an anything and everything for everyone/ one stop shop and chasing volume for the sake of volume.” customers want and need takes effort. Again, it is not about 3PL-perceived benefits and is not for all customers. It should be measurable and answer the question on why a customer should use a particular service provider. A strong value proposition can overcome real or perceived similarities as compared to competitors. Segmentation One way to create a value proposition is to look at the market and customers in a different way. Segmentation is important to finding the opportunities that lead to viable value propositions. It creates a focused view of specific customer sectors and logistics capabilities. This means that the overall design and operation will support growth, retention and profitability targets. The broad customer market is divided into subsets of companies with a common characteristic that will identify their need or demand for certain services. With this segmentation, services can be tailored and matched to the applicable sector. The LSP can then align its services or
This is different than the traditional way of finding customers that match what an LSP does. It is not the usual type of segmentation. It is not about traditional market classifications or industry verticals. The sectoring identifies key opportunities to pursue and that can create both a value proposition and sustainable brand identity and part of a strategic execution. It is about the customer and his needs. It is not about the LSP and what he can do. Different segmentations can be done and these would indicate market sectors that have strong potential as high retention, profitable customers. It also identifies the capabilities and services needed. The 3PL that wants to find, develop and participate in that key segment must objectively assess what it is doing. Benefits of the segmentation and the ensuing value proposition are: • Improved customer relationships • Increased customer retention • Higher margins, sustainability • Brand identity • Distinct competitive advantage June-July 2012 I
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FEATURE
Conclusion Logistics service providers definitely have a choice. They can pursue market segmentation as presented above with its benefits. Or they can do nothing and maintain the status quo is a recipe for continuing problems. Or as Shakespeare said: “Nothing will come of nothing” (King Lear Act 1, Scene 1).
Article courtesy of Tom Craig, LTD Management, Logistics / Supply Chain Consulting (www.ltdmgmt.com) 38
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Market Size
Segmentation Analysis #1
Possible
Very Interested TARGET
Likely No Interest
Possible
Product Value Segmentation Analysis #2
Market Size
An analysis would include demographics, such as customer size, operating variables, such as customer capabilities and supply chain/purchasing approaches, such as structure. Results would be shown in matrices, such as these two segmentations: • Segmentation Analysis #1 Product value, for example, brings implicit differences to the customers’ target, to what is expected and the integrated services required that go beyond the functional transport, warehousing and forwarding. The above analysis, as shown in the matrix, would identify markets of interest and of nominal interest. Large market size sectors - and their customers -with high product value would be very strong candidates as customers for the logistics centre. Large size with less value and large value with less size could yield customers also. Small size and small value would not likely be viable for the logistics centre. • Segmentation Analysis #2 Complex supply chains are not the traditional arena for 3PLs. This sector is defined by time, number of trading partners and locations, a plethora of SKUs, and multiple distribution channels. Market segments with high supply chain complexity would be very strong candidates for a value proposition. Large size with less complexity and large complexity with less size could yield customers also. Small size and small complexity would not likely be viable for a value proposition. The results of these analyses would facilitate a “reverse” value proposition approach and design by building backwards from markets/ customers - as compared to a forward which is based on the LSP’s capabilities. It would identify needed capabilities that otherwise may not be recognised, yet that are vital for the VP. The consequence of such segmentation would be multiple value propositions to position the company. This adds to the success of the program.
Possible
Very Interested TARGET
Likely No Interest
Possible
Supply Chain Complexity
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TECHNOLOGY
The Age of Enterprise Mobility and BYOD – Is Your Organisation Secure? Enterprise mobility presents a unique blend of benefits and challenges and organisations eager to capitalise on this trend need to proceed in a secure manner, writes Stephan Berner, Managing Director of help AG 40
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Businesses in the Middle East have seen a rapid proliferation of employee-owned mobile devices such as smartphones, tablets, and of course, laptops. According to estimates, smartphone penetration in the region is already at 47 per cent and is set to further rise to 70 per cent by the end of 2016 . Industry experts in their predictions on the top IT trends for the year have hailed 2012 to be the year of BYOD (Bring-Your-OwnDevice) and enterprises are encouraging employees to embrace this trend. Stephan Berner, managing director at help AG, a strategic information security consulting specialist in the Middle East, says that BYOD offers a number of benefits. For starters, BYOD programs typically shift operational expenses to the employee. This means that the IT department is no longer taxed with the
job of selection and purchase of devices. Employees bear operational expenses such as the cost of hardware, voice and data services and other related expenses. And unlike other scenarios wherein employees would complain about this transfer of expenses, surveys have shown that employees are more than happy to do so. Mobile endpoints are highly convenient and the ease of access means that employees are available for round the clock connectivity. This high availability translates to quicker turn around times on issues and results in better co-ordination between staff. For employees, this can be a game changer, as the information they need is right at their fingertips – whether they are at a client location, on route to a meeting, at home, or on vacation. Work is no longer just an ‘in-office’ activity.
TECHNOLOGY
A tech-savvy workforce, familiar with its own favourite tools, can dive right into technology that leverages consumer elements in the corporate environment. Training costs go down, and employees can be productive with their new tools right out of the gate. It used to be that IT departments drove technology, but that has changed dramatically in recent years. The consumerisation of IT revolution - sparked by the iPhone - has shifted the IT culture so that the users are the ones getting the latest, cutting edge technologies first, and they want to bring those devices to work. Also, given that the devices are not subject to slow upgrade cycles and infrastructure upgrade policies, they tend to be more cutting-edge allowing the enterprise to avail of the latest features and capabilities. The problem enterprises face today is how to give their employees both flexibility and mobility, while securing the enterprise. Consumerisation requires a strategic approach that reduces security risks, financial exposure, and management chaos. This strategy needs to be supported by a solutions infrastructure that helps the organisation regain visibility and control
While malware targeting mobile devices is undoubtedly on the rise, mobile malware should not be a top priority concern for most large businesses. Companies instead should lay emphasis on mobile device security and need to be concerned with the physical security of mobile devices and about what mobile devices are downloading from their networks.
“Mobile endpoints are highly convenient and the ease of access means that employees are available for round the clock connectivity. This high availability translates to quicker turn around times on issues and results in better co-ordination between staff” Stephan Berner, Managing Director of help AG
by managing and protecting company and bring your own device (BYOD) liabilities. These solutions should allow employees to share corporate data confidently through secure access, backup and file sharing while protecting data wherever it goes with context-aware security. Be malware aware One unwritten rule of malware is that when an operating system has reached 10 per cent market penetration, virus and malware will be written for it. Smartphones and mobile devices are no different. Worldwide, the two big players in the market- Google’s Android and Apple’s iOS- are in a constant battle against threats. The Android system is by far the most heavily targeted.
A report by Juniper Networks showed a 472 per cent increase in Android malware samples since July 2011. This is largely due to the open nature of the Android marketplace which allows app developers to post apps to the marketplace without stringent application control. Thanks to tight regulation, the Apple App Store has been far more secure but there is always a possibility of malware being installed on a jailbroken Apple device since jailbreaking of the device bypasses Apple’s software control. BlackBerry devices which remain popular in the Middle East are almost untouched due to RIM’s tight control around the APIs to the BlackBerry June-July 2012 I
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TECHNOLOGY
The problem enterprises face today is how to give their employees both flexibility and mobility, while securing the enterprise. Consumerisation requires a strategic approach that reduces security risks, financial exposure, and management chaos. operating system. This control does however affect the openness of the platform negatively which is why the number of applications available for BlackBerry platform is rather limited as compared to iOS and Android. While malware targeting mobile devices is undoubtedly on the rise, mobile malware should not be a top priority concern for most large businesses. Companies instead should lay emphasis on mobile device security. As workers now use more powerful mobile devices, companies need to be concerned with the physical security of mobile devices and about what mobile devices are downloading from their networks. Addressing employee factor The employee still remains at the heart of discussion. Unmonitored access to information even in the form of a synched email account should be perceived as a security liability. What the IT department needs to address is a consistent way to manage personal devices. This includes formulating accepted guidelines for the use of BYOD in the workplace as well as educating employees on how to protect their devices from potential threats. When addressing the issue of securing ‘prosumer’ devices, those which assume both a professional and consumer role, enterprises need to answer the following questions - is there need for device 42
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“With the future of mobile computing advancing at a rapid pace, the increased use of high-tech personal devices at the workplace is only but inevitable. Organisations should recognise that BYOD is very much here to stay and should have policies in place to ensure that they are prepared” encryption; who will implement endpoint security measures such as antiviruses; and will the organisation have remote control over the device such as removing/ installing applications, monitoring running applications, or even terminating an application in real-time? With BYOD, information takes precedence - it is the organisation’s information that is the liability and not the underlying hardware. Loss or the uncontrolled leakage of data can have a huge business impact. IT departments can employ safeguards such as placing a thin client with suitable authentication on a smartphone. This can be configured to allow employees to connect to the corporate network while preventing the removal of data. Another effective method of controlling data leakage and access to sensitive data on the device is sandboxing. This is possible through an application which when installed creates
an encrypted area for data storage. This data can be shredded/ deleted if necessary and no other application can access this data area unless the corporate policy allows it. It is also essential that IT department retains the ability to secure, control and remotely erase corporate data on employee-owned devices in the event of a security breach, if the employee leaves or the device is lost or stolen. With the future of mobile computing advancing at a rapid pace, the increased use of high-tech personal devices at the workplace is only but inevitable. Organisations should recognise that Bring-Your-Own-Device (BYOD) is very much here to stay and should have policies in place to ensure that they are prepared. Most of all, the push for the adoption of enterprise mobility should not be driven by “what is possible” but instead by “what is possible in a SECURE way”.
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June-July 2012 I
43
PRODUCT UPDATE
Gulf Air introduces lightweight trolleys onboard
TETRA for a new era of safety The Middle East is emerging as the fastest-growing market for Terrestrial Trunked Radio (TETRA), a technology evolving as the heartbeat of mission-critical communication across all major sectors in the region. According to sources, the Middle East and Africa (MEA) region experienced 70 per cent growth in deployment of digital communications networks in 2011. The region now accounts for 1/5 of a global market worth an estimated US$1 billion. Based on IMS Research figures, the global market is forecast to experience a 5 per cent Compound Annual Growth Rate (CAGR)
until 2016. MEA public safety services such as police, fire and ambulance services will be particular beneficiaries of this new surge to embrace the latest TETRA technologies. Motorola’s cutting-edge technology includes the Ultimate Police Patrol Vehicle. Other new technology includes the Motorola LEX 700, the world’s first handheld Public Safety LTE device; the new MTP3000 TETRA handheld radio series, which redefines mission-critical user safety with superior audio quality and an 14 per cent larger range; and an updated version of TRACES, a unique network monitoring system.
Opens doors to new customers with Briton The Briton Compact Door Operator for sliding doors has been launched by Ingersoll Rand Security Technologies to satisfy growing demand for a slimline automatic door solution. The operator is a selfcontained electro-mechanical drive unit ideal for surface applied applications of both new and existing sliding doors; it combines simple functionality with subtle elegance and robust construction. Manufactured in high-grade extruded aluminum, the low-profile design is suitable for use with most commercial architectural systems, and with an overall height of only 10.5 cm and projection of just 13 cm, the operator adds a contemporary look to any doorway. The unit is supplied with a secure digital keypad which provides a user-friendly, straightforward and effective means to 44
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program the door’s operating modes and parameters. In addition to normal operating functions, it includes one-way traffic and a ‘summer-winter’ setting. A number of built-in safety features provide appropriate operation in the event of abnormal situations, such as an obstruction in the doorway or power failure.
Gulf Air has recently introduced a new set of lightweight trolleys onboard. Used for carrying, storing and serving food and beverages onboard, the new trolleys are manufactured according to the latest technology by using composite materials that are sturdy, lightweight and have longer durability. The trolleys are lighter by an average of 6 to 10 kgs each than the current ones being used on board, resulting in estimated savings of BD350, 000 per year in fuel consumption, once the entire fleet is equipped and an estimated CO2 emission reduction of 3,000 tons per year. The trolleys come with more userfriendly and practical features such as ergonomic design for easy movement through the cabin, barcodes for easy track-and-control of the inventory all over the world and, side panels for display of art or advertising to complement the aircraft interiors. The new trolleys are currently used on selected routes and will be gradually extended across the entire Gulf Air fleet and network.
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LOG. CLASSIFIEDS
Supply Chain Manager, Kuwait A regional leader in the trading and distribution of retail and consumer goods is looking for a Supply Chain Manager (Home Division) to join their expanding global team in Kuwait. Reporting to the General Manager, the candidate should both strategic and operational responsibilities for the full supply chain process with focus on driving customer satisfaction. Responsibilities ■ Effectively control the total supply chain from suppliers to store premises ■ Handle all Supply Chain Management issues ■ In charge of relationship management with suppliers (Far East and Europe) ■ Monitor supplier performance ■ Continually evaluate processes (including warehouse practices) Requirements ■ Experience of developing a world class and responsive supply chain ■ Ideally with a Supply Chain related qualification ■ Sound commercial abilities and customer focused mentality ■ Excellent communication skills in English.
Issue 46 | APRIL 2012
YOUR LOGISTICS AND SUPPLY CHAIN MAGAZINE
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Issue 47 | MAY 2012
SALALAH FREE ZONE
Logistics
Issue 48 | June-JuLY 2012
YOUR LOGISTICS AND SUPPLY CHAIN MAGAZINE
YOUR LOGISTICS AND SUPPLY CHAIN MAGAZINE
OIL & GAS
www.logmiddleeast.com
FINDING THE RIGHT TALENT
Reaping the benefits of being on a major trade route | Page 06
Strategies to hire and retain qualified personnel | Page 06
As a vital sector for the GCC economies, safe & secure logistics of oil plays a major role | Page 06
Eng. Awadh bin Salim Al Shanfari, Chief Executive SFZ
PREVIEW | 30
TECHNOLOGY | 38
BusinEss siMuLAtiOn
INNOVATION | 22
LOG. LEO AwArds
CHAMP CArGO systEMs
Enhancing profits with technology
Ceremony takes place this month
Reduce costs, maximise yields
TECHNOLOGY | 24
REVIEW | 32
PROFILE | 40
TErAdATA COrpOrATiOn
LOG. LEO AwArds
CEVA LOGisTiCs
Analytic data solutions
Industry’s best recognised
Making business flow
TECHNOLOGY | 24 SALALAH FREE ZONE - ADMINISTRATIVE HQ
AERIAL VIEW SHOWING APPROACH TO MAIN ENTRANCE
ANALYSIS | 32
FEATURE | 36
port of sohar
Booz & Company
Value proposition
Oman’s ambitious project
Adapting to rapid changes
Serving the customer right
Advertise your job in LOG. Classifieds: Call: +971 (4) 4334 360 E-mail: info@gutenberg-dubai.com
GM – Beverage Supply Chain Sector, INDIA As the Subject Matter Expert, the candidate shall be managing and leading strategy operational and account development activities in this diverse Beverage Supply Chain sector. The role is about extracting closer engagement at a HQ and Regional level with key beverage accounts and leveraging best practice supply chain opportunities to enhance their business performance and grow the range of services offer to them. Responsibilities ■ 10-15 years experience ■ Knowledge of Contract Warehousing Operations ■ Experience in managing complex supply chain operations ■ Proven Commercial skills ■ Understanding in designing project proposals and costing ■ Ability to implement and manage a safety first work culture
Sr. Warehouse Supervisor, Middle East A major maritime services organis requires a Senior Warehouse Supervisor based in the Middle East. Principal responsibility of this role is to control the receipt, safe handling & storage of all materials ordered for ship repair & yard maintenance. Responsibilities ■ Manage storage, receipt, issue & safe handling of all items ■ Control the operations of gas store, weigh bridge and grit store ■ Manage all materials control and warehousing functions ■ Coordination and control of all warehouse staff, plant & equipment ■ Coordination and supervision on preservation activities Requirements ■ Minimum 6 years supervisory experience in Materials Management ■ Familiarity with materials relating to a marine environment ■ Experience in dealing with high volume and varied stock ■ Must be hands-on and results-oriented
Project Planners, UAE
Business Development Manager, CHINA
A challenging opportunity now exists with a major shipyard operator. They are currently seeking to hire experienced Project Planners (Shipyards) based in Dubai, UAE.
Rapidly expanding its global operations, a global Contract Logistics & Transport organisation seeks to employ success driven individuals for the role of Business Development Manager - Contract Logistics. The role is based in Shanghai, China. The candidate will be responsible for organic sales growth in within the scope of Warehousing and Distribution within China through active and aggressive new business development and for targeting and opening up new market segments.
Responsibilities ■ Ensure compliance with OH&S and QMS systems ■ Create work breakdown structures ■ Produce project resource plan ■ Analyse planning data and modifications, as required ■ Detail planning data of all stages of the project Requirements ■ Degree in a Marine / Engineering field ■ Min 5 years experience as Project Planner ■ Proficient in Primevera Project Planner ■ Experienced in planning activities ■ Good English communication skills
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Responsibilities ■ Generate new business within warehousing and distribution ■ Compile a list of all tender release dates for key client prospects ■ Establishment of performance metrics ■ Share knowledge and reinforce internal communication ■ Participate in service presentations Requirements ■ 2 years min sales and BD experience in China ■ Solid understanding of SCM and Solutions ■ China distribution knowledge & experience ■ Ability to close deals ■ Excellent skills in negotiation and sales presentation ■ Fluency in English and Mandarin
LOG. CLASSIFIEDS Advertise your job in LOG. Classifieds: Call: +971 (4) 4334 360 E-mail: info@gutenberg-dubai.com
Supply Manager, AUSTRALIA Operating within the mining and resources industry providing unique products and services to a variety of high profile customers, the company has recently restructured and as a result are now seeks an experienced Supply Manager to join their team. The position will be located in Perth. The Supply Manager is responsible for a managing and leading the supply division. Responsibilities ■ Manage transport, warehousing, supply and procurement ■ Analyse and develop new policies ■ Develop supply chain strategies ■ Manage budgets and KPI’s ■ Ensure best practice and supplier performance Requirements ■ Min 10 years experience in a senior level role ■ Relevant tertiary qualifications ■ Experience in leading and motivating large teams ■ Sound understanding of ERP systems ■ Proven track record in successful negotiations
Marketing & Sales Head, QATAR Responsibilities ■ Determine Marketing & Sales structure, roles and goals ■ Develop and manage M&S functions ■ Participate in definition of the M&S strategy ■ Increase revenue growth of controlled business ■ Ensure all Sales KPIs are met ■ Training of sales team and set challenging targets Requirements ■ Min 2 years experience in Marketing & Sales management ■ Knowledge of freight forwarding business ■ Experience within Qatar / Middle East ■ Arabic language an advantage ■ Degree level education
Strategic Procurement Manager, UAE A challenging opportunity now exists with this major shipyard operator as they are seeking to appoint a Strategic Procurement Manager based in Dubai, UAE. The role carries responsibility for the group’s procurement and supply chain for their various shipyards. The candidate will have full responsibility for planning and directing the activities of procurement of strategic materials and equipments.
Responsibilities ■ Analyse market and delivery systems ■ Prepare reports on market conditions & costs ■ Resolve vendor or contractor grievances ■ Identify and qualify potential new vendors ■ Negotiate contracts and commercial terms Requirements ■ Min 5 to 7 years in a similar business ■ Experience of a range of procurement categories ■ Degree Qualified - CIPS preferred ■ Knowledge of international trade & shipping terms ■ Written & spoken English and Arabic ■ Experience within Middle East an advantage
BD Manager Supply Chain Management Responsibilities ■ Identify and develop business opportunities ■ Retain current client base and implement deep selling ■ Support project implementation ■ Setting targets and meeting the overall business targets ■ Prepare annual Business Development Plan ■ Establish 3rd party logistics contracts Requirements ■ 6-10 years experience ■ MBA/B.E from reputed B School/University ■ Full knowledge of the sales process ■ Fair knowledge on SCM products
These brief postings are courtesy of Logistics Executive, an International Specialist Executive Recruitment and Business Consulting Company. To apply or to search for more positions in Supply Chain, Logistics and Transportation sectors, please visit www.logisticsexecutive.com
LOG CAFE
Bringing in wealth of experience Frank Courtney, Chief Executive – Barloworld Logistics (EMEA) Born and brought up in Durban, South Africa, Mr. Courtney has been part of the supply chain industry for the last 27 years. He has steered the wheel in almost all departments ranging from transport, inventory optimisation, dedicated transport management, demand planning, SOP planning, warehousing and distribution and currently freight forwarding. The talented executive has worked in different locations such as Spain, the Middle East, and the Far East apart from working in multiple regions within South Africa. Following the acquisition of a freight forwarder here, his company needed a broader view of the supply chain to implement a strategy to be able to offer a ‘smart supply chain solution’ to leading clients. Because of Mr. Courtney’s knowledge and experience in multiple areas of Supply Chain Solutions, he was invited to the Middle East. “I have been with Barloworld Logistics for the last 16 years and my first day is a distant memory. We are a fast-growing company and I have had 12 different positions in those 16 years and all of them have been filled with 48
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challenges and fun. This precisely made me stay with Barloworld Logistics for so long. It has been a great opportunity to work and learn and I look forward to the next exciting 16 years,” remarks the Chief Executive. They acquired a company in the Middle East because of the double-digit compound average growth forecast in the next five years. There is a strong belief that the market is ready for extracting strategic advantage by aligning supply chain. “We find the best ways for companies to optimise their supply chain either by investing ourselves or the solutions that already exist in the market to suit their needs accordingly. The number of enquires received so far to optimise supply chain, keeps us interested about the future. We look at this market as an opportunity to train and educate companies treat supply chain as a key enabler to their success,” explains Mr. Courtney. Has anything frustrated the Chief Executive of Barloworld Logistics? He explains it is only his lack of understanding of laws and customs but he admits that when anyone moves into a new market, they need to accept things differently: “Not necessarily because they are better or worse; they are
just different.” And he adds, “The frustration comes from your own lack of knowledge and not from the systems themselves. Business can be challenging or rewarding in many ways, just like many parts of the world, I do not find the Middle East any different.” The chief executive also enjoys the environment. “I like the winter and autumn seasons here. The cosmopolitan nature of Dubai is fantastic. One is blessed to work with many different people from many different cultures. It’s amazing to know how different people do things differently. Besides, in this country particularly, there is no shortage of sunshine, which is great.” Though we are half way through the year, we still asked his opinion on the near future. Mr. Courtney says, “A lot of people predicted 2011 as a better year compared to 2012. We are doing much better in 2012 with lots of exciting opportunities and it seems to be getting bigger. Certainly, there are always questions as to what happens in Europe and how that affects the global economy. One needs to find a balance between those two. The journey so far has been fantastic with lots of challenges and coupled with opportunities.”
www.logmiddleeast.com
Issue 48 | June-JuLY 2012
YOUR LOGISTICS AND SUPPLY CHAIN MAGAZINE
FINDING THE RIGHT TALENT Strategies to hire and retain qualified personnel | Page 06
TECHNOLOGY | 24
ANALYSIS | 32
FEATURE | 36
port of sohar
Booz & Company
Value proposition
Oman’s ambitious project
Adapting to rapid changes
Serving the customer right
FAX TO: +971 4 451 7945
EVENTS
JUNE
UPCOMING
International Logistics & Material Handling Exhibition
Supply Chain and Logistics Event
Barcelona, Spain; 5 - 7 June
www.scl-event.com
The LOG. Middle East Magazine is a publication of Gutenberg Publishing FZ-LLC. Licensed by TECOM, Dubai, UAE. Trade Licence No: 20704
www.logmiddleeast.com www.gutenberg-dubai.com
UK; 5-6 July
www.silbcn.com
Military Logistics Air Cargo China
Kielce, Poland; 3-4 September
Shanghai; 5-7 June
www.logistyka.targikielce.pl
www.aircargochina.com
Military Logistics India
Gutenberg Publishing FZ-LLC Al Thuraya Tower II, Office 1402
Transport Logistics
New Delhi, India; 19-20 September
Dubai Media City
Shanghai, China; 5-7 June
www.shephardmedia.com
P.O.Box 502547, Dubai, UAE Tel: +9714.433 4360
www.transportlogistic-china.com
Fax: +9714.451 7945
INTERLOG
TOC Container Supply Chain ME
Dallas, USA; 11-13 June
Dubai, UAE; 1-3 October
www.interlog-usa.com
www.tocevents-me.com
reinhard@gutenberg-dubai.com EDITORIAL
TOC Container Supply Chain Europe
Iraq Mega Projects
Antwerp, Belgium; 12-14 June
Dubai, UAE; 1-3 October
www.tocevents-europe.com
www.cwcimp.com
transfairlog
LOGIMED
Hamburg, Germany; 12 - 14 June 2012
Brussels, Belgium; 9-11 October
www.transfairlog.com
www.logimedeurope.com
Logistik Austria Vienna; 13-14 June
China Int’l Logistics and Transportation Fair
www.easyfairs.com
Shenzen, China; 15 - 17 October
Managing Director: Reinhard Wind
Editorial Director: Rustu Soydan rustu@gutenberg-dubai.com Sub Editor: Michelle Kasper michelle@gutenberg-dubai.com SALES & MARKETING
www.scmfair.com
TransCaspian
Sales Manager: Andy MacGregor andy@gutenberg-dubai.com LAYOUT & DESIGN Timonera Grafik info@gutenberg-dubai.com
Baku, Azerbaijan; 13-15 June
Logistics Madrid
www.transcaspian.az/2012
Spain; 17-18 October
ADMINISTRATION
www.easyfairs.com
Office Administrator: Sherlyn Millet
Saudi Supply Chain Conference & EXPO
sherlyn@gutenberg-dubai.com
16-18 June
Logistics West Africa
www.iscea.net/scc
Lagos, Nigeria; 5-7 November www.cwc-logistics.com
European Supply Chain & Logistics Summit
LOGIPHARMA ASIA
Berlin, Germany; 19-21 June
Singapore; 20-21 November
www.sclsummit.com
www.logipharmaasia.com
Reverse Logistics Conference
Intermodal Europe
Amsterdam, Holland; 19-21 June
Amsterdam, Holland; 27-29 November
http://rltshows.com/amsterdam.php
www.intermodal-events.com
LogiChem Asia
Saudi Infrastructure
Singapore; 26-28 June
Jeddah, Saudi Arabia; 15-17 December
www.wbresearch.com
www.saudi-infrastructure.com
Disclaimer: The details provided in the calendar may be subject to change. Please contact the organisers directly before making any arrangements.
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PRODUCTION Production Manager: Roy Varghese roy@gutenberg-dubai.com
Contributors’ opinions do not necessarily reflect those of the publisher or editor and while every precaution has been taken to ensure that the information contained in this journal is accurate and timely, no liability is accepted by them for any errors or omissions, however caused. Articles and information contained in this publication are the copyright of Gutenberg Publishing FZ-LLC (unless otherwise stated) and cannot be reproduced in any form without the written permission of the publisher.