“This investment is based on our significant growth in the Asian marketplace which has grown by approximately 50 per cent in just the last year alone,” Alan White, Regional Director, Pacific Rim, National Air Cargo said.  “We are confident that this allocation of corporate resources will provide us with a significant return on our investment in this emerging global marketplace.”

The new sales team will be directed by White, who heads all National Air Cargo’s operations in Asia.  Hari Subramaniam has been reassigned from Dubai to India to lead the sales efforts there.  Haryati Nordin has been hired to assist sales efforts in the commercial and charter markets and will be based in Kuala Lumpur.  Also joining the new sales team is Walter Edwards as Business Development Manager and Keiko Takatsu who will serve in the capacity of account executive; both will be based in Japan.   Martha Chung has been hired as a Sales Support Executive and will be based in Seoul, Korea, where she will manage the local National Air Cargo office and provide all servicing for the country’s shipping clients.

National Air Cargo also launched a toll-free number programme which it says will provide an added level of convenience for customers who need to schedule a transport or a pick-up delivery.  Calls to the new number will be directed to the call centre in Kuala Lumpur.  The call centre will be staffed with trained associates that will be able to manage calls in various languages. The toll-free numbers will provide convenience for customers to contact National Air Cargo from anywhere in Asia and schedule shipping, track deliveries, or utilise any of the company’s many freight forwarding services.

“Dubai Customs has a large service centre at the freezone to serve the multinational companies operating at the freezone,” says Ibrahim Ahli, Director of Marketing of the Dubai Airport Freezone. “We have been partner for the last decade with the customs department rendering excellent services to our international clients, we shall continue to support them and facilitate their tasks to enable us to give the best of services Dubai is known for.”

Ahmed Butti Ahmed, the Director General of Dubai Customs, said that the department is keen to create direct links with its various customers in several ways, including the Advisory Board that compromises leading traders and heads of business groups. The council holds its meetings four times a year with the aim of developing the customs services.

Opening the annual meeting of the customers, organised by the department at Atlantis Hotel, Ahmed Butti Ahmed said Dubai Customs considers customers strategic business partners. The department is very successful locally, regionally and internationally, and is facilitating trade and accelerating procedures. This could not have been achieved without this strategic partnership, and customer’s support for the initiatives launched for them.

Ahmed revealed the results of customers’ satisfaction of Dubai Customs in 2009, with 80.9 per cent increase compared to 77.2 per cent in 2008, according to the clients’ recent survey. “We aspire to higher rates of satisfaction by improving our services continuously,” he said.

During the meeting, Dubai Customs honoured a group of customers based on criteria of the size of transactions, excellence and compliance with laws and regulations. It also honoured a group of suggestions and complaints that have been used to improve and develop business procedures.

When Microsoft’s Hotmail was first launched in 1996 the concept of logging into an email account stored on a remote server felt awkward to most of us. “Where are my messages stored?” many of us asked ourselves. “Can someone else read my mail? How can this possibly be free?” Yet the lure of a mailbox accessible anywhere with an Internet connection at no cost was too good to resist. Hotmail quickly took over the world.

Today, a similar idea, known as software as a service (SaaS) is posed to take over in much the same way. Companies such as SAP are now providing popular programmes on-line to clients on a subscription basis, an alternative to selling users licenses to install the software themselves. “You can          Kamel El-Ghossaini
pay a monthly subscription and run the application through the web,” explains Kamel El-Ghossaini, Senior Manager, Supply Chain Solutions for Span Group. “This minimises your hardware costs and minimises your initial investment. But, at the same time, your data will be stored on a third party server.”

Span Group recently began selling integration software Boomi Atomsphere
in SaaS format. Clients can use the programme to connect different software services together. “Integration serves two purposes,” says El-Ghossaini. “The first is application integration, which means connecting your internal systems, for example your warehouse management system with your financial application. The second is business-to-business integration, where you have to integrate with your trading partners.”

“The new version of Boomi is 100 per cent SaaS-enabled,” he says. “This means that instead of customers buying
the integration platform, installing it locally, developing it and then executing
it; all development and set-up will happen over the web. Only the deployment part, the execution, will happen locally.”

SaaS is an ideal solution for cash-strapped times, according to El-Ghossaini.
“With this economic situation, companies would like to minimise their investment and reduce their cash flow,” he explains. “Instead of having to buy the software and pay the cost one time, today they are able to pay a monthly subscription for as little as US$15 a month and still receive the whole benefit of the solution.”

Only 15 dollars per month? I’m suddenly a bit sceptical. “It could cost US$15, it could cost US$100, it could cost US$200,” he says. “There are multiple factors which determine the price. One is the number of interfaces a client has, or what we call ‘trading partners’. Another factor is the different adaptors that you use. If you are moving data from file to database or database to file, this will be very cheap. But if you are going to read EDI messages or XML, for example, you might need to add some components.”

Either way, a company will spend a great deal more to purchase the software
license. “Purchasing the software upfront will cost not less than US$15,000 and you still need the proper hardware in place,” he says.

SaaS is also ideal for a company in need of a software programme only temporarily. “Tomorrow, if one customer decides that he no longer wants to continue with the system, he can still run the application but he cannot change or modify anything he has done.”

El-Ghossaini says one of the major obstacles to widespread SaaS implementation
is a client’s fear of storing data on a remote server – an attitude that can be changed. “It’s like using an ATM machine,” he explains. “A lot of people withdraw money but very few people deposit money. It’s a cultural thing.”

This, however, is not such a concern with integration software. “With an integration platform like Boomi, the risk is very minimal, because you are not sharing any data. Your data is still sitting on your end.”

He can see, however, why clients would avoid going the SaaS way for more sensitive programmes such as an ERP. “They would worry because all their financial data is being stored abroad,” he says.

While Span has over 100 customers for the traditional version of Boomi, at the time of our interview not one had officially signed up for the SaaS version.
El-Ghossaini, however, seemed confident the concept would pick up. “I am very positive that SaaS will be more widely adapted. I want to stress that today’s economy will help this technology penetrate the market, both regionally and abroad.”

As Operations and Commercial Manager for Aptec, one of the region’s largest IT distributionhouses, Mario Veljovic understands that the tangible products his company offers are nothing unique. “The bare IBM laptop is exactly the same as the one you can pick up from our competitors,” he says frankly. “The difference we make is the service we offer, the credit we offer, the price we offer and the overall support we can give them.”

With estimated annual revenues between US$300 million and US$400 million, Aptec distributes thousands of products from leading IT manufacturers to over 3,000 customers in 40 countries. Well-known retailers such as Sharaf DG, Plug-ins Electronics and Jackys Electronics, as well as corporate resellers          Mario Veljovic 
such as Emirates Computers and Alpha Data rely on its services.
“We never sell direct,” says Veljovic. “We only go through indirect channels.”

While the company’s 500 staff members work in offices and distribution centres in the UAE, Kuwait, Lebanon, Pakistan, Saudi Arabia, Turkey, Egypt and the UK, Aptec serves most of these subsidiaries through its 15,000 sq foot central warehouse in the Jebel Ali Free Zone. The facility contains a full racking system with bin locations, and can handle up to 3,500 pallet positions. On average, 2,000 SKUs of stock worth between US$10 million and US$15 million sit in the warehouse at any given time. The facility processes 30,000 orders and 360,000 order lines per year.

Aptec recently converted the formerly paper-based warehouse into an electronic one, installing the Exactus Aware warehouse management system from Dubai-based, Business Systems Group. “We are fully wireless and PDA-enabled,” says Veljovic, proudly. “It’s a paperless warehouse now.”

Modernising the facility was necessary, he adds. “We needed the WMS to have more visibility and transparency of each and every cost that is within the supply chain. In order to be more efficient, in order to start billing the subsidiaries, in order to use our space more efficiently, in order to be much faster in our turnaround time, we needed to go for an upgrade of the existing system.”

A tight chain
Aptec’s success relies almost entirely on the efficiency of its supply chain, says Veljovic. “We operate on a very tight margin. We’re talking about a range of five to 10 per cent. You can imagine that if you waste one per cent somewhere in the supply chain that can eat up your profit,” he explains.

“If I don’t stay ahead of my competitors in order to have my supply chain costs under control and operational costs under control control, I’m going to be forced out of business very soon.”

The fact that Aptec keeps its products on stock, ordering on demand only for specific projects, amplifies this risk. “Right now we have a stock of US$15 million which is not sold yet,” he says.

Aptec also has to stay on top of the ever-changing technology market, where new versions of hardware and software pop up daily, rendering previous versions passé. Some products expire quicker than many food products sold on grocery store shelves, explains Veljovic. “IT consumables, ink cartridges for printers for example, have an expiry date of 12 months,” he says. “If you keep them beyond that, you can just throw them in the bin. We are measuring our aging stocks on actual weeks.”

The company also manages the supply
of money in the market, acting as a creditor to its customers. “For example, if I go to Acer and purchase product on 30 days credit, on day one, the counter starts ticking. After 30 days I need to pay,” he explains. “My customers will demand 30, 45, 60 days of credit from me. You can imagine that I have already
started financing that gap.”

For this reason, Veljovic says Aptec watches the flow of cash as carefully as it monitors the supply of goods. “We take cash, move it into assets, and take assets and move them into cash,” he says. “It’s cash flow which we actually produce. For that, we need to have very tight measurements every single day.”

Revolution
Just as the IT sector changes regularly, Aptec has had to change the way it does business internally. Over a year and a half ago, the company converted its logistics
department into what Veljovic calls “an in-house service provider”. The department moved from sharing costs to charging costs to other departments. “We charge our subsidiaries just as they would be charged by an Aramex, an Expeditors or Mohebi Logistics,” he explains. “We actually operate like a 3PL in-house.” The logistics department now runs as a company within a company. “Logistics now has its own profit and loss account,” says Veljovic. “It has to show transparency to the various offices that are using it.”

The department also has to prove that it can out-compete any 3PL. “We just underwent an analysis where we asked, ‘How good are we compared to a third party logistics company?’” he says. “We invited several key service providers and asked them, ‘This is what we do in a year, how much would it cost us?’ We benchmark ourselves very toughly against the competition.”

He says the company has tried outsourcing services such as customer delivery in the past, but has no plans to return to that direction. “We saw a decline in our service levels when we outsourced,” says Veljovic. “Operating our logistics in-house is still the preferred option. It’s more efficient, it’s more customer service-oriented, it’s more flexible and, ultimately, even cheaper.”

He seems proud of his team’s customer service. “We deliver twice a day. So we have same-day delivery for orders placed in the morning,” he says. “We even deliver one paper license.”

Veljovic will not rule out the possibility of sharing Aptec’s expertise in IT logistics with external clients. “If we are having such a cost advantage, why are we not commercialising it? That is definitely an option which we could look into,” he says. “But, in order to do that, we would probably have to do a couple of changes to the system, for example having a logistics licence. You need to cover your legal grounds and then carve out a niche.

‘I would say we stand a very good chance of carving out this specific niche, because we get a lot of requests from our suppliers to keep their product In our warehouses in order to keep local buffer stock.”

Perhaps one day other IT distributors will be turning to a 3PL named Aptec Logistics. “We want to become a bit more visible in the logistics area,” says Veljovic. “Yes, we are talking to Jafza, we are working very closely with them. We have a very strong investor and we see that people are asking for it. We are exploring this. We can really start by acting as a logistics company internally, learning all the ins and outs, and then start marketing it.”

The idea of a dedicated freight corridor (DFC) for India was born in early April 2005. In October 2006, a special purpose vehicle, the Dedicated Freight Corridor Corporation of India Limited (DFCCIL), was formed to oversee the project. While at the moment only two freight corridors (eastern and western) are sanctioned and work has started on them, there are four more legs to the corridor that are also being considered by the government.

Last month, former member of the Planning Commission, Anwarul Hoda, reportedly said that the commission was ready with a plan for four new dedicated freight corridors: Kolkata-Mumbai, Delhi-Chennai, Kharagpur-Vijayawada and Chennai-Goa. If accurate, this plan could be a timely solution. One of the key reasons stated for sanctioning western and eastern corridors is the high rate of saturation in the existing trunk routes of Mumbai-Delhi on the western corridor and Howrah-Delhi on the eastern corridor. The existing system on these routes is believed to be heavily
saturated, with capacity utilisation of 140 to 150 per cent. These new freight corridors are expected to provide long overdue relief and create additional capacity
for future use with a line capacity on the designated routes for another 25 to 30 years.

Industrial Corridor
A memorandum of understanding was signed between the Indian Ministry of Commerce and Industry and the JapaneseMinistry of Trade and Industry in December 2006 for the development of an industrial corridor along the freight corridor between Delhi and Mumbai. An inter-ministerial group was set up to work out the project outline and an Indo-Japanese taskforce was set up to guide the process. The taskforce, after several meetings, came up with a concept paper for the development of an area of 150 kilometres on either side of the freight corridor.

In August 2007, the Government of India gave its ‘in-principle’ approval to the Delhi Mumbai Industrial Corridor (DMIC) project outline. The Delhi Mumbai Industrial Corridor Development Corporation Limited (DMICDC) was incorporated on January 7, 2008. The DMICDC, with the help of state governments and private participants, is responsible for developing the industrial corridor with sufficient connecting infrastructure and industrial hubs to facilitate trade and cargo movement to ports and the hinterland. To enable this, DMIC would also include the development of the required feeder rail and road connectivity to the hinterland markets and select ports along the west coast.

Several industrial belts in the areas bordering the DFC are already expected
to benefit, including the general manufacturing region of Noida, Greater Noida and Ghaziabad; Gurgaon, Faridabad and Sonepat, which specialises in automobiles, electronics and handloom goods; Jaipur, Alwar, Kota, Bhilwara and Jodhpur, which produce marble, leather and textiles; Ahmedabad, Vadodara, Anand, Bharuch and
Surat, which specialises in engineering, chemicals, gems and jewellery; and Mumbai, Pune and Nashik, which specialises in automobiles and automobile
components, pharmaceuticals and aluminium.

Ground reality
The freight corridor is currently under execution mode, with the tedious process of land acquisition being implemented under a central government act. The corporation is being assisted by state government officials who have nominated their officers specifically for this activity. This project passes through 52 districts and in every district a land acquisition officer has been appointed.

The land acquisition process is divided into three stages – initial land plans, announcement and compensation. Currently,this process is in different stages in different areas. Stage one has been completed for 80 per cent of land to be acquired and about 40 to 50 per cent of required land is expected to be acquired by March 2010. Currently, contracts are being awarded with the Indian Railway’s available equity. A disclosure by DFCCIL shows that over INR1,600 crores (more than US$329 million) worth of tenders, each valued at over INR1 crore (approximately US$205,445) were awarded as of April 20, 2009. Hyderabad-based Soma Enterprises has won the contract to design and construct 54 important and major bridges for the western freight corridor between Vaitarna and Utran on the Vasai Bharuch section in the states of Maharashtra and Gujarat, worth INR605.15 crore (US$124 million).

A joint venture between B.S.C and C&C has been awarded a tender worth INR781.06 crore (US$161 million) for the design and construction of formation including blanketing and major bridges on the Mughalsarai-Sone Nagar section of the eastern corridor in Bihar and Uttar Pradesh. Another tender worth INR133.86 crore (US$28 million) for general consultancy services for works such as signalling and telecommunications concerning the double-line electrified railway track for the Bhaupur-Mandrak stretch of the Kanpur-Khurja section of the eastern freight corridor was won by Parsons Brinckerhoff India.

Funding
Complete funding for both the western and eastern corridors is yet to be secured. The DFCCIL is negotiating with multilateral funding agencies for the same. It is in talks with the Japanese Bank of International Cooperation (JBIC) for funding the Rewari to Makarpura stretch near Vadodara on the western corridor, and is negotiating with the World Bank for funding from Mugalsarai to Khurja along the eastern corridor. In addition, funding is being sought for tracks from Khurja to Ludhiana.

These negotiations are expected to bear fruit by year-end or at the latest by January or February 2010. While the development of these dedicated freight corridors will definitely decongest critical areas, the timelines need to be strictly adhered to, and a continuous evaluation of business plans based on reasonable freight forecasts is a must to ensure that India’s first dedicated freight corridors don’t leave a sour aftertaste.

DFCCIL has identified several locations (see blue dots on map) on the western dedicated freight corridor to act as nodes for aggregation of traffic. The plan includes all facilities required for this within terminals and logistics parks being built around these nodes. The corridor is expected to run long-haul freight trains that are about twice the size of present trains. The maximum length of these trains as currently planned is 1,500 metres on loop lines, which can accommodate two trains together. The total length of the western and eastern freight corridors is 2,762 kilometres, with 1,483 kilometres and 1,279 kilometres, respectively. This combined with heavier axle load, track loading density and speed on gentler grades is expected to significantly boost container movement.

If Mahmood Al Bastaki’s wish comes true, all trade transactions in Dubai will one day occur online. As Director of Dubai Trade, Al Bastaki oversees the portal described as a single sign on, single window channel to the online services of DP World, Dubai Customs, Economic Zones World, and Jebel Ali Free Zone Authority. Users can register documents and activitiessuch as free zone licenses, manifest and cargo handling services, cargo clearance and haulage, invoicing and payments, and electronic warehouse receipts. “Our main goal is to provide a single window for trade,” he says.

His team has made major headway with the portal since he joined the organisation in December 2006. “For DP World, all the containerised cargo services are now on the Dubai Trade portal,” he says. “For bulk cargo, everything is still off-line, but the exact services that are offered for containerised cargo will soon be added for bulk cargo. We are trying to complete the cycle.”

Last year, Dubai Trade added a highly- popular e-payment gateway to the cycle. The site called ‘Rosoom’ allows DP World and Jafza clients to pay for charges such as customs duties, handling charges and administrative services through the web. Customers can pay with credit card, direct debit, or through online banking with a selection of banks. The programme has already proved a success, with DP World-based transactions alone totalling more than more than 97 million dirhams (US$26.4 million) between April 2008 and April 2009. “Meanwhile, we are adding more services to be paid online,” says Al Bastaki.

Developing the portal seems to be a never-ending process, with constant updates and audits. “In the next year, Dubai Trade will be looking at the untouched areas of trade facilitation,” he says. “For example, we will aim for the insurance of cargo to be transacted online. We will also be looking at other parts of trade finance, where letters of credit are issued online.” He also hints at a future strategic alliance with the Roads & Transport Authority for online sharing of vehicle information, as well
as the Department of Economic Development which handles licenses for nonfree
trade zone businesses.

Dubai Trade also faces the challenge of educating potential users about its offerings. “In some trading communities, e-literacy is not high,” says Al Bastaki. “We have to really walk them through and tell them how to use our services. Truck drivers, for example, are very difficult to convince; but surprisingly some of them are even using
our e-services now.”

Jebel Ali Free Zone (Jafza) may soon become a bit more hospitable. Its management, Economic Zones World (EZW), is looking beyond standard warehouses to providing services such as showrooms, food courts, labour accommodation, a hotel and convention centre, and office towers. At least five new projects are slated for release in the coming
year. Here are some to watch out for:

Light industrial units
Six blocks of light industrial units cum warehouses will be available in the North Zone of Jebel Ali near roundabout 7, around 300 metres from the port, in September 2009. These 43 warehouse will provide 126 sq metres of front-office space on ground and mezzanine floors, as well as 513 sq metres for light industrial or warehouse use. These buildings stand 10 metres high to allow for storage.

Warehouse showrooms
Jafza is developing 68 units for product display, as well as storage and distribution in its South Zone. “It is not only a showroom,” says Talal Al Hashemi, Managing Director, EZW UAE Region. “It is a showroom, storage, office and light industrial unit all in one.”

He says the facilities target light and medium-sized manufacturers. “This idea came from requests we were receiving from our clients who are producing here and
re-exporting their goods to neighbouring countries. They wanted to sell to or have contact with the public in Dubai.”

“With this concept, the public will have the opportunity to view the products of Jebel Ali companies and to purchase directly from the manufacturer or main importer of these goods. It’s a one-stop shop.” Stretching over two kilometres, these buildings will run parallel to Sheikh Zayed Road and Emirates Road.

Staff accommodation
Seventeen blocks of staff accommodation are complete and ready for lease in the South Zone. With eight buildings for senior and junior managers and nine buildings for labourers, they can legally accommodate between 18,000 and 25,000 residents,
depending on how many are allocated to each of the 3,380 rooms. With the North Zone accommodation full, people are already moving in, according to Al Hashemi.

Jafza Mall
Jafza is also developing a shopping mall in the South Zone. This will include a food court with 28 restaurants and coffee shops. “We are expecting to fill this with clients by July or August,” says Al Hashemi. Located close to the South Zone staff accommodation, the mall will be accessible to the North Zone community once the new interchange near Gate 4 is complete.

TechnoPark
Two buildings, each with 14,000 sq metres dedicated to research, development and technology are expected to be completed in August 2009.

Convention centre
The AED2.5 billion (approximately US$680 million), 700 sq metre convention centre adjacent to Sheikh Zayed road will feature a four-star business hotel with 305 rooms managed by the Millennium Group, an auditorium with 600 seats, banquet hall, 22 meeting rooms, conference halls, a business centre, a 22-outlet food court, two terrace restaurants, a fitness centre, a recreational area, retail outlets and a VIP Majilis. Over 100,000 sq metres, as well, will be leased as offices. “I have never seen such a project in any free zone around the world,” says Talal Al Hashemi, Managing Director, Economic Zones World UAE Region. “I have visited most of them, and this is certainly the largest and most expensive.”

Everyone knows the typical story of Gulf real estate: buy your home, office or warehouse while the only tangible evidence of the property is a pile of sand; believe the developer’s promise that the entire area will be fully operational in X number of months; wait X plus 12 months to take hold of the property while the developer finishes surrounding roads and sets up water and electricity; move into the property
as soon as you can; and, having completelyforgotten what the original artists impression looked like, tell yourself, “At least I have a home/office/warehouse.”

This is why I’m a bit surprised when Hamad Fakhro, Assistant General Director for the Bahrain Logistics Zone (BLZ), tells me that his team waited until infrastructure such as roads and electricity on the one sq metre plot of reclaimed land adjacent to the new Khalifa Bin Sulman port was 100 per cent complete before asking customers to sign contracts. “We have handed the contracts over to the potential tenants, and we expect the signed contracts back within the next one or two weeks,” he says. “We made sure that everything was finished, and only then did we bring the contracts and the design codes to the customers.”

Over the past year, his organisation has signed memorandums of understanding
with large companies such as Landmark, CEVA, Danzas and Marina Furniture; and Fakhro expects all the contracts sent out to return signed. “Customers were very eager to join the BLZ in recent times, even with the economic crisis. Also, upon meeting each single company when we handed them the contracts, they were quite excited,” he says. “There are no signs that anyone will change their mind.”

Hamad Fakhro

“Companies will start construction within a few months, and it will take them a year to finish the construction,” he adds.

The new port is finished, however, having welcomed its first shipments the first week in April. “Now, the old port, Mina Salman, is closed. There are only a few small operations such for the flour mills and livestock,” says Fakhro. “The rest of the cargo and containers are coming to Khalifa Bin Sulman. Operations are running smoothly.”

He expects throughput to increase quickly. “Our current volume is between 250,000 to 260,000 TEUs,” he says. “But the new port capacity is 1.1 million TEUs with the potential of increase to two million TEUs by adding more equipment.” He says port operator APM Terminals has guaranteed to turn Khalifa Bin Salman into a transhipment hub. “There is a very good chance that before the end of the year we will see transhipment into Bahrain.”

Unlike other Gulf real estate projects, the BLZ’s greatest challenge is currently
excess demand. “The BLZ is a very small, boutique logistics zone,” says Fakhro. “Land is limited.”

Plots are unofficially full. “We have enough land for three to four players, and we have kept that because we are in discussion with a few companies and we are holding the land for them until deals are finalised,” he says. “The companies that we accepted are the ones that will provide the most value for the economy of Bahrain.”

His team, however, is already working on plans for Phase 2. “We are looking at the option of having the private sector contributing or being a partner to reclaim another 1.5 kilometres of land right next to Phase 1,” he says. “We are also working with the government to identify other locations on the island for specific logistics sectors such as petrochemicals.”

He hardly seems concerned about securing financing. “Because of the success of Phase 1, we are seeing a lot of interest from banks to support us, especially because the government is backing this,” says Fakhro. “Bahrain is considered very, very stable and there is a lot of trust from the financial institutions to support the Government of Bahrain.”

Warith  Al-Kharusi  has  a big  job.  As  Logistics Manager  for  Petro-leum Development Oman  (PDO)  he oversees  the  logistics  functions  of Oman’s national  oil  drilling  company.  This  includes  cargo  haulage,  passenger  movements,  leet management  and  emergency  response  across  a more  than  200,000 sq  kilometre  country.  “It’s  a US$300 million a year activity, and  
to do it on your own is very difficult,” says Al-Kharusi.

But in 2005, his job became easier when PDO made the decision to outsource  the movement of  its  rigs and cargo  such  as  pipelines  to  Bahwan DHL  Exel  Supply  Chain.  DHL  essentially serves as a 4PL, managing various  sub-contractors  and  service providers  to move  rigs over 400 times per year.  “We’re talking about 500 next year,” adds Al-Kharusi.

Warith Al-Kharusi

By 2006, PDO could already seeing  the  value  the DHL  relationship was  adding  to  its  business.  Rigs were moving  faster, and  thus sitting idle for less time and drilling for oil more. “We’ve got about 40 rigs  that we move, and if we move them better we can actually  take one rig out of  the  sequence,”  he  explains.  “It’s not  about  only  creating  cost  reduction but also value creation.”

The  transition  to  outsourcing, however, was  not  so  easy. “We  had to invest a lot of time in articulating what we needed out of  the  relationship,” he says. “We created the right expectations,  and  we  created  the right suppliers.”

Al-Kharusi says the partner selection and transitional phases were the biggest challenges of outsourcing its logistics  activities.  PDO  chose DHL  out  of  over  160  bidders for  the  contract. The  selection and  design  process  took  four
years  and  implementation  took two  years.  He  emphasises  the importance  of  committing  a task  force  to  develop  the  outsourced  relationship. “You need a transitional management team  to manage  the  transition away from the everyday operational  side,”  he  says.  “People doing their everyday work will have a hard time thinking about process improvements.”

He  also  emphasises  the  importance of having a clear plan in  place.  “In  any  outsourcing project, you have  to articulate your  vision,”  he  says.  “What do  you  really want  out  of  the relationship?  What  are  the critical  success  factors?  You have  to  think  about  this  well in advance. You’ve also got  to measure  where  you  are  starting  from  and where  you want to end up.”

Al-Kharusi  says  PDO  may even  outsource  more  of  its activities,  for  example,  the management  of  its  three  airports  in  Fahud,  Qarn  Alam and Marmul; as well as warehousing and material handling activities. “Now we  are going through  the  second generation of contractors,” he says. “The process could take a couple of
years.  We  have  to  excite  the market now.”

“Ships were different then,” says the UAE national who serves as Chief Executive Officer for the freight forwarding company and shipping agency STALCO. “You learned proper shipping.”

Captain Mansoor Ghafoor

“Nowadays, a lot of formerly manual tasks are done using computers. For your positioning now, for example, you use GPS. We used to use a sextant for our positioning. It took us half an hour to justify our position, while now crews can do it in less than a minute using a satellite.”

“Sometimes if it was raining, or cloudy, or foggy, you wouldn’t even know your position. You just moved on assumption. Nowadays, it is much easier.”

He describes his life at sea as one of danger and adventure. “You face everything,” he says. “It sometimes happened that someone would get injured, or fall overboard, and we wouldn’t find them. Nowadays, if someone has an accident, a helicopter can fly in and rescue him. In the past, if you had an accident you would have to wait until you reached the next port, which could be five or seven days away.”

Pirates were also an issue, although he never encountered them face-to-face. “We used to have them in the waters between Indonesia and Singapore,” he says, explaining how he shifted his route to avoid them.

While Ghafoor has seen plenty of economic ups and downs in the industry, he says this ‘down’ is the worst he has seen. “Shipping is always a cycle,” he explains. “Every five years you have peaks that then go down. Now, there is a new factor which was never there before – the financial crisis.”

He has seen freight rates drop dramatically. “I would say they are 60 per cent less than eight months back,” the estimates. In fact, in the period between March 2008 and March 2009, the Baltic Dry Index dropped approximately 6,000 points, from around 8,000 to 2,000. Certain lines, such as Senator Lines (Hanjin) from Germany and Great Ocean Container Lines from Hong Kong, have even gone out of business. Ghafoor says he wouldn’t be surprised if plenty of smaller companies in the industry follow.

And many of the shipping lines that remain have excess capacity. “There is a large supply of ships around,” he says. “All the shipping lines were building more ships so they could make more money.”

While his business is down as well, Ghafoor refuses to lay off any of his nearly 300 staff. “I am against this,” he says. “It’s not fair to lay people off. That solution means disaster to others, people who will lose their jobs.” Plus, getting rid of employees now can hurt a company in the long term. “If you lose experienced people who have been with you a long time and they go home, when business becomes normal you may need them back,” he says. “You have to be together in the good and bad.”

Ghafoor does not agree with the statement that Dubai is ‘dead’. “Yes, we are affected, but we are not paralysed,” he says. “Business is still running, just at a lower volume. I don’t think it is that bad.”

He says he expects Dubai’s economic situation to look brighter with in a year. “By the end of 2009 things should be much better,” he says.

“I’m not talking about real estate – that’s a different story. But, in general, I think things should be back to normal.”