Performance Review

How did the industry do in 2008?

David Christmas is Regional MD, Middle East, DHL Exel Supply Chain

This has been an exciting, invigorating, successful, albeit sometimes challenging year for most players in the Middle East logistics industry.

Growth has continued at a pace, and most companies have witnessed a double digit increase in volumes; whether through organic growth with present customers or new growth as more and more companies requiring logistics services enter the region.

This growth has meant that the ‘war for talent’ has increased, and the movement of managers has been at times quite fluid, particularly between the larger players; as they try to attract and retain the very best in the business. A welcome (though still too small), growing interest in the industry has been evidenced from local communities – helped by an increased number of educational courses, graduate schemes and inhouse training programmes.

The infrastructure in the region continues to creak at certain ‘touch points’, with road and port congestions increasingly becoming a thorn in day to day operations, as too is the availability of vehicles. However, it is clear to see that most countries are working very hard to address this and many initiatives are well underway to alleviate the issues.

The oil price fluctuations have clearly played a role in the movement of prices (both up and down) and have added some complexity into the decision making process, on how and when to move materials and goods. I believe the majority of companies have tried to minimise the impact of these price movements on their customers, but clearly there have been some associated effects.

The green agenda, has definitely been on the rise; globally, regionally and I am pleased to say broadly within the industry – which by its very nature is a large contributor to the regional carbon footprint. Discussion and moves towards carbon neutral warehouses and reduced emissions from vehicles (on road, sea and in the air), can only be viewed as positive.

Interestingly, the link to cost reduction is adding its own commercial impetus for change.

Pleasingly, the profile of health and safety has also increased, with a number of companies working hard to improve standards and awareness. A number of the more enlightened customers I know have already tied health and safety performance to financial return and penalise or reward their logistics supply accordingly – the oil and gas industry certainly seems to be leading the way on this.

One very clear trend is with the larger multi-national customers. They now expect the same standards, processes, behaviours and performance throughout the globe. If they have proven a successful warehouse management system (WMS) in say Dallas, Texas, they expect the same system and the same smooth implementation in Dubai. If they have global positioning systems (GPS) on the vehicles that are operated for them in Rotterdam, via a control tower platform, they expect the same for their fleets in Riyadh. They also expect to see the same high calibre of people, health and safety standards, processes and employment policies.

Technology continues to play an increasingly critical factor offering complete visibility for customers and affording accuracy, flexibility and a speed of goods movement that helps support significant cost efficiencies. And although not all the players investing in large new builds have gone the ‘automation’ route, consideration is certainly being given more seriously, particularly with the increases in labour rates and supervisory salaries.

Partnership is perhaps also being taken more seriously between customer and supplier. For years there has been ‘lip service’ to a move from transactional relations to partnership and strategic sourcing. However, more and more case studies from across the region and from within the industry are proving that the value created here can far outstrip that of the more traditional approach.

There is no doubt that more and more customers are asking logistics companies to deliver ‘value’ rather than just minimum cost. This, I believe, is in part due to increased maturity and understanding of what an improved supply chain can really deliver for a business – end to end, and also in part due to the drive to maximise market share as the regional economies continue to grow.

Competition has increased as well as the demand for both excellence and value. Whether it’s for a retailer, manufacturer, oil field supplies company, or public sector works project, the pressure has always been on doing it better, faster and more efficiently. This has been good for the industry; and it means we have to remain focused on delivering the very best service for our customers and adding tangible benefit to their top and bottom lines.

Within many of the global industry companies, the Middle East has been held up as one of the ‘shining lights of opportunity’, where ‘anything is possible’, and their associated interest and commitment has continued to grow – many investing considerably in increased footprints.

As the success of these more established industry players is witnessed by others, it has encouraged a number of new entrants into the regional market. Time will tell how successful they will be, but certainly they are doing their part to raise the profile of the industry, and to increase the competitive element in the region.

The tremendous investments in infrastructure, particularly with the advent of Dubai World Central including Al Maktoum Airport, Dubai Logistics City, Dubai Industrial City and the opportunity afforded by Jafza, (the only free zone in the world to be situated between an airport and seaport), offers infinite further possibilities for suppliers and customers alike.

It’s true that the fallout from the global credit crunch has yet to become clear, in terms of its full impact on the region. What is certain, is that 2009 will be a harder year for consumers and businesses. This is likely to have a knock-on effect for the logistics industry, but the upside is that it will further increase focus and innovation.

The year has been a successful one for the industry as a whole, and the rate of innovation and developing maturity is truly impressive. However, there are still many areas for internal improvement, external value creation and indeed further growth.

With the prevalence of a struggling world economy, 2009 should perhaps be greeted cautiously by some, but for those willing to lead the logistics agenda and focus on their customer needs (both short and long term); another exciting and rewarding year lies ahead.

The Hub

With the opening of Danzas’s massive logistics facility in Dubai, companies can use the centralised location to reach out to clients all over the world, reports Casey McFann

With the global freight market set to reach US$1.4 trillion by 2020, and the Gulf imports and exports reaching US$320 billion at the end of 2007, Danzas’s new facility will be an essential addition to the expanding GCC market.

The 80,000 sq metre facility, at the equivalent of 11 football pitches, the largest of its kind in the Middle East, is said to offer the perfect platform for companies to profitably leverage their supply chains using the new hub as a global gateway.

The facility, with a built up area of 54,000 sq metres, is fully air-conditioned and includes 6,700 sq metres of office space and an 8,000 sq metre temperature- controlled life sciences distribution centre. The building was constructed using 3,000 metric tonnes of steel and 12,050 cubic metres of concrete and is equipped with world-class security infrastructure that will be certified under the Technology Asset Protection Association (TAPA) guidelines.

The company says using advanced, scalable technology platforms and strategic warehouse management solutions, combined with an environmentally friendly green data centre, will ensure customers accuracy, flexibility and a speed of goods movement that should support significant cost efficiencies.

“The Gulf is ideally positioned, with access not just to Europe, Africa and Asia, but also to the fast developing Indian subcontinent and its huge manufacturing output. Our global experience of aligning logistics services with trade lanes will be further enhanced by the future benefits of operating from the only free zone in the world to be located between an airport and a seaport,” explained Hermann Ude, CEO, DHL Global Forwarding, Freight.