Challenging the competition

Making your presence felt in a cutthroat industry

Manya Pamnani is the Director of Advisory & Consulting of Horwath Mak, Auditors & Business Consultants

Globalisation and recent developments in technology coupled with growth in ecommerce has brought about unprecedented
expansions in logistics, giving companies a pivotal role to play in providing the link in the customer supply chain as volumes of online purchases increase.

According to the Fred Smith, CEO, Federal Express Corporation, logistics data “allows you to operate the business more and more precisely against demand”.

A recent industry report has valued the GCC logistics market at more than AED40.4 billion (US$11 billion). Currently Dubai alone channels more than AED62.4 billion (US$17 billion) of imports annually, and this too is set to increase enormously. Michael Profitt, CEO, Dubai Logistics City (DLC), says, “Currently, Middle East air cargo growth is the highest amongst all regions in the world.”

But with vendors and customers spread across locations, there are several issues which are critical to logistics. They are movement of product and information, timeliness of service, cost and integration (within the company, between the company and its customers and between the company and its vendors).

These issues have given rise to the concept of third and fourth party logistics. The term third party logistics (3PL) describes the handover of logistical operations, which includes integrated warehousing and transportation services, supply chain services and value added logistics such as subassembly, postponed manufacturing, labelling and kitting. Operators functioning within the 3PL sphere are usually highly integrated logistics providers, with large diverse networks with the ability to customise and manage the customer’s entire supply chain.

The most recent progression in the provision of logistics services has been the emergence of fourth party logistics (4PL), which describes a company involved in the redesigning of a client’s supply chain; implementing the solution and then managing the logistics companies used as part of the overall solution. The industry is mainly dominated by players running their own fleet of vehicles and owning/leasing ships, aircraft and warehouses, while only utilising the services of other providers where their own capabilities suffer from deficiencies.

Logistics companies must make available to their clients the kind of product they expect in this competitive world. Broadly, it is a solution rather than a product. And that solution should be provided efficiently while remaining both flexible and innovative to remain globally competitive. Technology plays a pivotal role in achieving this.

There are certain areas which always pose challenging for logistics operators. They are efficient warehouse record keeping, synchronisation of material movement resulting in high inventory levels, overstaffing in the absence of integrated information systems resulting in work redundancy, integrated information systems for seamless planning and execution of work, efficient and effective information systems for customer services.

Such teething problems hinder companies in a big way. This is the challenge both for the industry and for businesses operating within it. Growth potential, demand and other unique problems are reasons a plethora of logistics companies have been researching methods for improving performance and getting expert advice.

Manya Pamnani is the Director of Advisory & Consulting of Horwath Mak, Auditors & Business Consultants