Round the World

What
LOG.Middle East’s second round table
Who
Gillian Lewis, Logistics and Inventory Manager, ACE Hardware, Al Futtaim Group Wade Thompson, Regional Sales Director, Middle East, CEVA, Dr. Albert Tan, University of Wollongong Dubai, Kathryn Semcow, Editor, LOG.Middle East
Why
To answer the question, “How tight are our supply chains?: Where does our region stand?”
Where
Radisson Media City, .net Room
When
Wednesday, September 17, 2008

KS: How do you all perceive the way supply chains run here in Dubai versus the rest of the world, versus the region?

WT: When I first came to the region over 10 years ago Dubai was very much “let’s put a pallet on a shelf”, although Dubai, on the back of Emirates airline was able to position itself by somewhat of an accident as a global crossway. They were talking about “supply chain management”, but what I saw certainly wasn’t supply chain management. Even now I would have to say 60 to 70 per cent of our industry is only big warehouses with pallets on shelf.

If you had a look at the 3PL companies, maybe only 10 per cent of warehouses would have VNA (very narrow aisle) racking today. So, the most simplistic of all efficiencies isn’t even here today.

GL: From my experience in the UK, I arrived here and I was really shocked. I walked into a warehouse in Jebel Ali and it was all dusty, and there was stuff everywhere. The processes in place were very simplistic and basic. What we’ve been doing at ACE for the past three and a half years is working on two things: one is working on the processes and trying to make them more efficient, two is developing an IT solution to help us with that.

I came from Woolworths where everything is delivered in full pallets and the vendor has to deliver within a certain 10 minute time slot at the distribution centre. But here it is just like, “Oh, whatever. It’ll turn up.”

KS: Is this region frustrating to work in?

GL: I get frustrated because I’m a person who wants things done yesterday, and things just don’t get done yesterday here. They take a long time to get done, and you have to have a lot of patience. You just have to keep pushing people to get things done to the standards you want.

KS: How do you define “supply chain excellence”?

WT: A supply chain solution needs to be a real solution which delivers time, cost efficiencies, whether that is through faster turnaround times in your pickand- pack, faster storage capabilities to allow itemised handling, whether that is an automated supply chain outbound, or whatever it is. You need to have tangible results, not a marketing ploy.

AT: There are three areas of supply chain excellence. One is the area of processes, because if you do not have proper processes meeting customer expectations, whatever you do, you just cannot get it done.

Another area is technology, which can help you get an information flow. In supply chain, there are three flows that are important to manage: fund flow, material flow and information flow. Most of the time we are looking at fund flow and material flow, but information flow is the key to competition. The more visibility you have, the more you can plan for the future.

The other important area is the skill set of the people working with you. You can have the best technology and the best processes, but your people may be not sure what to do with this technology, and are still following traditional ways. These three areas are all important.

WT: Talking about IT and just knowing what to order, on the logistics side we are driven by sales, but one of the biggest downfalls in the region is that the buyers are so inexperienced and the merchandisers and brand managers today are so inexperienced. We get stock forecasts with way-oversupply or way-undersupply, because all they are doing is going by an Excel spreadsheet. They have no analytical data of the stock movement.

GL: We’ve done a lot of training with our buying team on how to understand how automatic replenishment works and how the whole process fits together. They tend to look at their landed margin and don’t think about the cost of storing stuff in the distribution centre if it stays there for a year. It doesn’t enter their heads.

From Left: Gillian Lewis, Logistics and Inventory Manager, ACE Hardware, Al Futtaim Group, Wade Thompson, Regional Sales Director, Middle East, CEVA and Dr. Albert Tan, University of Wollongong Dubai

KS: Are things changing?

WT: I believe now through all the global giants being here, supply chains are being re-engineered through new properties, rather than existing infrastructure, because that existing infrastructure is so old and tired. We’ve done extension after extension after extension.

These new properties coming up are certainly going to be in accordance with what we’ve come from in other regions. The planning for tomorrow is in accordance with global standards.

AT: Now in Dubai, many companies are rationalising the use of 3PLs. In Singapore, from my research with HP, they were starting to see too many problems from outsourcing the whole supply chain. For example, when shipping a computer from Singapore to Hong Kong, the failure rate was around 30 per cent. They were outsourcing to five parties along the way and no one would take responsibility. From there, they decided to consolidate the outsourcing to at most two parties.

WT: Even in Saudi Arabia, I’ll go to visit people and you talk to them about logistics and they’re like, “What do you mean you’ll take over my warehouse?” They’ve never heard of 3PLs.

To go to some of these companies in the region and make an Arab family board of directors outsource is difficult. The Arabs just refuse to let go of their stronghold. Outside of Dubai, they see the efficiency of outsourcing, but the bottom line remains that they can’t touch their goods anymore. It makes a difference when a company is family-controlled. Everybody owns their own warehouses, everybody owns their own vehicles. Trying to explain to someone that they should never own their own vehicle, that vehicles should always be outsourced and leased, is difficult.

AT: Have you come across any companies or 3PLs here that go to a company with a solution and say, “Now you have an inventory cost of two million. I will come in and implement best practices. If I can reduce your cost to one million, then that one million of savings, you can give me 50 per cent”? That’s what they do in Singapore. So upfront, you pay me an initial fee to do the analysis, and then you don’t pay me a thing until implementation.

WT: In Saudi Arabia, we are selling that now. We are selling “Just pay us what you are paying for logistics now. We won’t charge you anything extra.” We do a due diligence on their supply chain, so they see that we are the exact same cost. That’s the way we are trying to get Saudi Arabia.

AT: They have nothing to lose then.

KS: Dr. Tan was talking about skill sets and I was wondering, are people in this industry not getting paid enough? Is that a problem?

GL: I think so.

WT: To be honest, in higher level positions, companies are actually paying way too much. I hear of people’s salaries and they’re too much for their experience. I think the higher positions are earning a fortune.

KS: So we need to be a bit more balanced. Pay the lower guys a little more and the higher guys a little less.

AT: That’s why in Singapore, when there’s a pay cut, they start from the top down, not from the bottom up.

KS: So where do we go from here?

WT: I think that Dubai is almost over the hill, and I think that inside our industry, our customers are a lot cleverer, they’re a lot more analytical. The industry is being driven by multinational standards and requirements, the likes of HP, Ericsson, Siemens, Nokia. They’re really coming through and saying, “I don’t care if you’re in Yemen. This is what we do, this is what we expect and this is your KPI.”