Forecasting methods know tomorrow’s demand today

On some days there is just metal on the shelves. A few days later the cash counter rings briskly. Department managers, who can account for each item on their product range weeks in advance, are faced with neither over stocking nor unavailability of stock.

Their customers are satisfied because the shelves are stocked to the optimum. They have no need to maintain surplus inventory for unexpectedly high demand periods and can use the storage space for a greater variety of products instead.

Today, modern forecasting systems are capable of informing months in advance and with accuracy what, when, where and the quantity that will move across the store counter. This is possible even though the demand varies for days of the week, seasons, promotions, price fluctuations and for so many other reasons. “We analyse data from the past with a view to the future,” explains Dr Andreas von Beringe, CEO of SAF AG in Taegerwilen, Switzerland. The resulting sales data builds the foundation for a forecast of every single product – day after day, location by location and for years ahead. Based on this information, the SAF software determines the future requirements for many thousand products. The enterprise is based on mathematical and statistical methods.

The consumer decides

Through this method it is the purchasing pattern of the consumer and not the manufacturer that determines the flow of goods in the logistics chain. The supply chain is transformed into a demand chain – the demand drives the process of value addition. The result is a system of ordering that is strongly linked to the actual customer requirement. By repositioning to the demand chain, dealers kill two birds with one stone: on the one hand they reduce warehouse costs and at the same time increase product availability in the store.

Peak calendar sale dates like Valentine’s, Easter and Christmas as well as promotion dates and special offers build the basis for the forecasting of future demand. Additionally the data for minimum inventory, purchasing costs, purchasing restrictions like ware house costs, date of expiry and packaging sizes are taken into consideration. How formidably enormous the data input that has to be monitored is seen through a case in point of a provision store: with a network of 800 branches with 20,000 items per branch, it adds up to 2.5 billion data entries yearly. This data is accumulated if a branch orders three times in a week. To execute this manually is impossible, not just from the cost aspect but also for reasons of accuracy.

A study backs the result

This is also proved by a study conducted by Metro. The company carried out a three year long CPFR project (Collaborative Planning, Forecasting and Replenishment), in 53 of its Cash and Carry supermarkets. Within its framework the achievement of the SAF forecasting system implemented there as opposed to the traditional methods of ordering were compared. Two test groups concentrated on the procurement of washing agents and detergents, hygiene products and home cleaning agents. One manually adapted the automatically generated purchase proposal. The other ordered as per the purchase recommendations of the SAF system. The participants managed 940 different products from seven purchasers for 53 super markets.

At the core of the study were three criteria: the development of the sales figures, the availability of products and the respective stock volume at the end of the promotion. “The result was unequivocal,” reported von Beringe. “The group implementing the forecasting software strode ahead at all times. During the 36 month long study, the gap between the manually managed trial group increased. In the case of the manually run trial group the availability of all products reduced from 97.6 per cent to 94.8 per cent. Conversely the value with the software implementing group rose from 98.8 per cent to 99.5 per cent. Equally striking was the difference in the product range: it increased with the manually operating group from 24.8 to 37.3 days. In the case of the automatic ordering system the number of days reduced from 22.2 to 18.9 days. In view of the forecasting quality it was observed for all product categories: the automatically generated sales forecasting is so excellent, that a supplementary manual adjustment/application offers no positive contribution.

RFID is being incorporated in a variety of industries showing just how versatile the technology is.

From its wide use on toll ways, to its extensive use in libraries to track, borrow and return books, to tracking products, improving visibility and also reducing inventory in the fashion industry, RFID is the technology of today and the future.

At the recent Arab-RFID 2008 conference, delegates from a variety of industries converged to share information about how RFID was being used in their respective fields to yield significant benefit and enhance overall effectiveness.

Daniel W Engels, Chief Technology Officer, Authenticrypt says, “RFID is going to enable a revolution in the medical industry in how we are going to take care of people.”

A shortage of nursing staff is commonplace in all hospitals. With RFID, nurses will be able to do their jobs more efficiently and have more time to care for patients. Since RFID enables greater asset management and efficiency, it makes it easier to find IV pumps, beds, determine correct patients, freeing up time for a nurse. This leads to better management, better monitoring of drugs being given to patients reducing patient errors, pharmaceutical errors, medical errors which happen in hospitals and in some cases can have lethal/life altering effects on patients.

Mistakes happen directly due to human error. Human error occurs if nurses are over worked and if there are no strict and regular checks as sometimes errors can also be caused through the system. “RFID can automate and take the human completely out of the loop,” adds Engels.

Another example where RFID can be of great use and benefit is in the case of implants. Implants such as pacemakers and their batteries need to be replaced in a timely manner. Stents are implanted in arteries to expand and push it open. They are medicated in order to reduce the inflammation caused by the blockage. One of the biggest causes of re-blockage of arteries typically within six to 12 months is scar tissue which starts forming on the ends of the stents causing another heart attack. The only way to know what is happening inside the artery is to put a catheter and check. Being a long procedure many doctors do not usually go through with it so effectively another heart attack could prove the re-blockage! If a RFID pressure sensor is put on the stent, a reader will be able to detect a change and would be able to point to doctors to check on the patient’s heart.

Tyres

As diverse as tyres are from the medical field, RFID is being used to identify tyres for transport fleet managers making fleet management easier.

RFID being a hard chip seems to be out of place in flexible and bendable tyres, not according to Patrick F King, Global Electronics Strategist, Michelin. He says, “B2B industries like transportation companies with a number of trucks, airlines and construction vehicle companies have a potential business benefit. I don’t know if passenger tyres will ever have RFID because of the cost factor involved.”

Michelin is cautiously moving forward to a place where RFID in tyres will be widespread and they are mitigating a risk by wilfully releasing the research they are conducting on the use of RFID in tyres in order to establish a tyre standard for the future. “So, if our plan is effective and if RFID does end up in tyres (which for trucks, airlines and other industries get re-treaded) it will be of immense value for an organisation.

King believes that where there is a real value in assets and if there is a chain of custody involved, RFID is necessary. “Our approach is different, we believe it’s going to happen, we believe in standards, in having harmonisation. It has to be a disciplined process and has to have benefits.”

From left: Patrick F King, Global Economic Strategist, Michelin and Daniel W Engels, Chief Technology Officer, Authenticrypt

Robotic future?

So what about the future of this technology? “An organisation led by the government of Korea has what it calls the Internet of Things. Also known as ubiquitous RFID, what actually happens is if you have a certain number of tagged items and with the way in which the technology is moving forward, the items can actually interact with themselves,” says King.

In simple words, if you have say a number of tagged cutlery and if you send a piece of information through a reader, which is captured by one of the tagged items say a napkin, it could actually inform you that it was sitting next to a plate! And so they would have some interaction.

Another vision sees devices actually looking at their location, proximity and other details and reporting as a community. With the more distinct part also dealing with sensors with which devices can not only communicate to you about what’s going on but also give each other commands!

Here’s to the future.

The Emirates Group software division is softening up to cargo

Duncan Alexander, Vice President, Mercator

Who would have thought that one day international companies would be using software developed in the Middle East? Innovation coming out of this region, and copied in others, after all, is mostly unheard of. This is not the case, however, for Mercator, the software arm of the Emirates Group, which is marketing its developments to airlines around the world.

It all started 14 years ago when Emirates built its own revenue accounting system, says Duncan Alexander, Vice President, Mercator. “Twenty per cent of international ticket sales worldwide go through that system.”

And now Mercator is looking to score a large share of the freight market, with its cargo management system SkyChain. The software developed one and a half years ago takes care of sales and reservations, pricing, capacity management and cargo operations. “It completely drives out paper,” says Alexander, “Dubai is the only place in the Middle East that is completely e-freight compliant. The airline and the customs are paperless. Everything is processed automatically.”

Mercator has already scored international clients Swissworld Cargo, Sri Lankan Airlines and Virgin Atlantic Cargo. “Now we’ve got Midex, a local carrier which is very small,” adds Alexander. “We implemented them in 69 days. It demonstrates that we have enough flexibility for a very small airline. Swissworld Cargo, in terms of size, is probably somewhere in between Emirates and Midex. We’re now able to say, ‘Look, it doesn’t matter the size or shape of your operation, we can do it.’”

The company also has a new revenue accounting system designed specifically for cargo. This is unlike any other product, says Balraj Nair, Senior Business Analyst (IT) for Mercator. “Usually you have a revenue optimisation system, which uses algorithms to compute demand,” he explains. “We’ve taken a different approach, which is cost-based. You can feed in different costs into the system, like your station cost, your ground handling costs and your operating costs. The moment you create a reservation, the system has the ability to tell you if that shipment is making a profit or not.”

ON BOARD

Mercator has just joined Cargo 2000. “From an airline point of view, we are fully compliant,” says Balraj Nair, Senior Business Analyst (IT), Cargo & Logistics Deparment, Mercator. “The next step is to create an interface with the freight forwarders.” He says the company currently does not have plans to develop such a common data management platform. “We are thinking about interfacing to an existing CDMP,” he says, but he’s not sure which one. “We have not decided yet, we have started the negotiations.”

The region is out-doing itself to be the best in every way possible. Airports play a large role in attaining that position. So what exactly is going on?

The region’s airports are something to watch

These days, the GCC is getting downright dusty. Ever notice how the sky just refuses to be blue, preferring rather an opaque haziness? Some attribute all this dust in the air to “construction induced pollution”. This, they say, is the price of progress. Dubai is no exception, as the colossal undertaking of building the Al Maktoum International Airport is certainly swirling up dust and sand particles. Rather than look to bluer skies, we decided to check out all the new airport construction in the region, to see what’s happening.

Al Maktoum International Airport With a price tag checking in at US$82 billion, the Al Maktoum International Airport (JXB) will be a record breaker. Just to give you an idea, prior to JXB, the Hong Kong International Airport (HKG) was the most expensive airport to construct, and cost US$62 billion less, at a mere US$20 billion. The numbers on this still uncompleted project are staggering, and when the dust settles on construction, JXB will be the world’s largest passenger and cargo hub, sitting 10 times larger than Dubai International Airport (DXB) and Dubai Cargo Village combined.

Consider that with 16 cargo terminals and an annual capacity of 12 million tonnes, JXB will have more than three times the handling capabilities of Memphis International Airport (MEM), today’s largest cargo hub, and a passenger capacity of more than 120 million – almost 30 percent more than Hartsfield-Jackson Atlanta International Airport (ATL), currently the world’s busiest passenger airport. It will have the required volume to handle all next-generation aircraft, such as the A380 and Boeing 787, and will be able to facilitate up to four aircraft landing simultaneously, 24 hours a day, which should minimise in-air queuing.

Meanwhile, construction of the airport’s approximately US$75 million cargo terminal is more than 50 per cent complete. The first phase of the project will see the terminal initially handle 700,000 tonnes per annum. By 2013 it is expected to become the largest of its kind in the world, at full capacity and handling 12 million tonnes of cargo annually.

According to reports, JXB will be open to all foreign carriers. Emirates operations (both passenger and cargo) will remain exclusively at DXB. Plans call for a link between the two airports through a high-speed express rail system. “A customs-bonded road and rail corridor between the two airports will enable fast cargo and passenger movement,” says H.H. Sheikh Ahmed Bin Saeed Al Maktoum, President of the Dubai Civil Aviation Authority and Chairman of Dubai Airports.

In addition to the express rail, the Dubai Metro and designated light railway throughout Dubai World Central will also facilitate traffic in and out of JXB.

JXB Specifics- Al Maktoum International Airport will have six parallel runways, 4.5 kilometres in length, each separated by a distance of 800 metres (2,600 ft). It will also have over 100,000 parking spaces (most likely underground) for airport staff and passengers.

New Doha International Airport Built over 22 sq kilometres, half of which is reclaimed land, the New Doha International Airport (NDIA) airport will feature some 40 contact gates, 22 remote gates. NDIA’s hub will have a runway of 4.2 kilometres and a second one at 4.8 kilometres in length, each capable of handling the superjumbo A380s and 787s.

“The core business of the airport would be the transfer of passengers. We will definitely reach the 24 million-passenger mark in 2010,” says Abdul Aziz Mohammed Al Nuami, Chairman of Qatar’s Civil Aviation Authority.

Eventually, NDIA’s cargo facilities will be capable of facilitating 750,000 tonnes of cargo movement per year. One major staple of the project will be the multiple cargo aircraft maintenance centres, worthy of hosting aircrafts of all sizes. This capacity expansion seems to be the regional trend, as carriers’ ever-increasing size dictates such infrastructure upgrades.

An additional expansion phase, planned between 2020 and 2025, expects an ultimate airport capacity of 48 million passengers and 80 contact gates.

Abu Dhabi International Airport For the past few years Abu Dhabi International Airport (AUH) has been undergoing expansion. And with the proposed midfield terminal, they have no intention of stopping.

The new US$6.8 billion Abu Dhabi terminal will be opening in phases, beginning at the end of 2011. Once phase I is operational, the new airport will be able to accommodate 20 million passengers per year. Upon the completion of phase II, capacity is expected to increase to 40 million passengers.

“When it opens, the new midfield terminal at Abu Dhabi airport promises to be one of the finest passenger buildings in the world and as it is the first impression for visitors flying into the capital city of the UAE,” says Greg Brennan, Etihad’s Project Manager for the new midfield terminal. “The challenge will be to deliver this massive development on time, within budget and to the very highest of standards.”

One of the first parts of the project will be the construction of a second category III runway 2,000 metres north of the current runway. The new 4,100 metres parallel runway and taxiway will be able to cater for the latest generation of superjumbo aircraft. The development master plan also includes a large (mega) terminal building, a new 110 metre Air Traffic Control (ATC) tower, a cargo and logistics centre, maintenance facility and commercial area incorporating a free zone and associated retail development.

Kuwait International Airport Cargo operations at KIA are really flying high with the introduction of upgraded facilities dedicated to meeting the needs of Kuwait’s freight community. Already handling in excess of 126,000 tonnes of cargo annually, the launch of the new consolidation facility has boosted throughput by roughly 10 percent,enabling local forwarders to improve efficiency. The new facility is just one of a series of upgrades to the airport’s 8,000 cubic metre cargo complex, to ensure it doesn’t get left behind in the Gulf freight community. While in comparison to other regional airports it seems minimal, over KD1 million (US$3.1 million) has been invested in the last few years to modernise and expand KIA.

In addition to large quantities of belly hold cargo carried on scheduled passenger services, several airlines operate regular freighter flights to and from Kuwait. Comprising a 5,600 cubic metre import warehouse and 2,300 cubic metre export facility, KIA’s cargo terminal is equipped to handle a diverse range of traffic. With capacity for up to 600 tonnes of freight, the cargo complex boasts a range of specialised facilities, in addition to general storage, enabling it to handle any kind of consignment.

Kuwait International Airport can currently handle six million passengers a year and has a new terminal under construction that seeks to increase the annual passenger handling amount to 14 million. Terminal II is due for completion by the end of 2010.

Forget handbags and shoes. The industry is abloom with stylish material handling equipment. LOC8, Span and FAMCO share their hottest products with us

MINI ME The Mini Rack is a lower cost alternative to pallet racking for heavy and bulky items which are non-palletised and can be hand loaded.

• Frames and stepped beams galvanised for long service life
• Inlay decks: chipboard or steel panels
• Frame heights from 2,200 to 3,000mm
• Frame depths from 650 to 1,050mm
• Level load capacities for beams: 1,400, 1,800 and 2,200 = 600 kg max; 2,600 = 490 kg max
• Bay load capacity 4,600 kg max (udl)

Available at LOC8, 800-LOC8 (5628), +9714 368 1565

A WINNER Linde’s K-Truck is a very narrow aisle (VNA) modular combi-truck concept that enables you to enhance your storage capacity in the smallest space. It is designed for high-level pallet load storage and retrieval, as well as for single item picking or mixed applications.

With protection against draughts and noise, the cab offers a comfortable operational environment and allows the operator to work effectively and with minimum fatigue.

The smart electronics of Linde System Control (LSC) continuously monitors the truck’s technical potential in order to deliver optimum simultaneous lift and travel speeds relative to lift height and load weight. The K-Truck has been awarded Red dot design award in 2007, a prestigious and globally recognised seal of quality, for its unique ergonomic design and high performance.

Available at FAMCO +9714 213 5100

AUTOMOTIVE ACTION IN every commercial storeroom or warehouse there are bulky or awkwardly shaped items which need to be efficiently held in stock and easily handled. In the automotive trade, body panels, tyres, wheels and exhausts are typical examples. The META CLIP® boltless shelving system augmented by beams, chipboard decks, separators and spigots can often offer the best solutions for this type of storage.

• Shelf loads up to 400 kg udl
• Bay loads up to 2400 kg udl
• Shelf loads adjustable at 25mm centres
• Stepped beams perforated at 200mm centres for locating separators (and to accept flush chipboard decks)
• Galvanised or light grey powder coated finish – RAL 7035

Available at LOC8, 800-LOC8 (5628), +9714 368 1565

COMFY CONTRAPTION Linde’s new enhanced series (359) of forklifts provides the highest performance within competitors along with ergonomic and comfort operator’s compartment. The optimised position of the cabin combined with carefully located instrumentation and operator controls, facilitate a high level working environment to optimise productivity and safety. Features include:

• Low counter balance contour for better rearward visibility
• The unique Linde’s hydrostatic transmission
• Optimal visibility through the mast
• Easy access to the cabin by non-slip covered steps
• Spacious cabin with high comfort seat and centralised control lever

Available at FAMCO +9714 213 5100

SHELVES ON DEMAND From only two system components (frames and shelves) combined with a comprehensive accessory range LOC8 modular programme can range from a simple bay of shelving to a custom built small part store. Typical applications are parts stores, industrial, commercial and trade locations or even Vendor Maintained Inventory (VMI) applications where its versatility ensures the most efficient layout can be achieved.

• Individual shelf capacity up to 400 kg udl
• Bay load up to 3,700 kg
• Shelves adjustable at 25 mm vertical pitch
• Shelves perforated at 50 mm centres to accept divider accessories
• Stepped beams for flush inlay chipboard decks (perorated for divider accessories at 200mm centres)
• Galvanised and powder coated finishes available – standard powder coated colour RAL 7035, light grey
• Shelves S100, MS 230 and MS 330 all with safety factor of 2X udl

Available at LOC8, 800-LOC8 (5628), +9714 368 1565

SIDE SLIDE Jungheinrich has launched two new ranges of electric counterbalance trucks. The front trucks of the ranges EFG 213-220 (3-wheel) and 316-320 (4-wheel) feature sideways battery access, electric steering and a new operating concept. The forklifts are able to lift loads up to 2,000 kilogrammes to a lift height of up to 6,500mm. The top speed of the trucks is 17 km/h.

Available at SPAN +9714 289 5111

LEVEL TWO Jungheinrich’s EKS 110 is the ideal truck for stock picking between the first and third levels. The platform and load section can be raised up to a height of 3,000mm. This allows for picking up to a height of 4,600mm. The counterbalance design allows a wide range of load storage units to be raised off the ground both longitudinally and crosswise. The load section is optionally available in a walk-on design (with a pallet surround, if required) or with auxiliary lift (without reducing the residual capacity). The auxiliary lift ensures that the picked
goods can be stored at an accessible height

Available at SPAN +9714 289 5111

WALKING AROUND The new EJC pedestrian truck of Series 2 from Jungheinrich was designed for demanding task profiles in the warehouse and is available in three lifting capacity classes. Whereas the EJC 212 can lift up to 1,200 kilogrammes, the EJC 214 and the EJC 216 manage 1,400 and 1,600 kilogrammes, respectively. The truck combines high performance with a big residual lifting capacity at lifting heights of up to 5,350mm and long operating times. The Jungheinrich pedestrian truck can at the same time be manoeuvred more safely and more easily thanks to the possibility of also shunting it with the control shaft raised. With an overall width of only 800mm, electric pedestrian trucks are also suitable for operation in very confined spaces.

Available at SPAN +9714 289 5111

SAFETY FIRST Linde’s Electric Pallet Trucks with rider platform (T20SP/AP and T24SP/ AP, series 131) feature a complete safety zone operator compartment. The surrounding steel shield forms an efficient protection against rear and side impacts. With the compact design of the truck, all movements remain within the cockpit keeping the operator’s shoulders, arms and hands safe.

Available at FAMCO +9714 213 5100

From top-down to bottom-up, Grand Mills for Flour & Feed Company is harvesting the benefits of a new supply chain

Syed Wajihuddin, Supply Chain & Logistics Manager and Senior Sales Manager, Grand Mills for Flour & Feed Co

If flour and water are two of man’s most basic needs, imagine the demand for these products in the booming UAE market. Perhaps this is the reason for Emirates Foodstuff and Mineral Water Company’s (Agthia’s) financial high. In the quarter ending March 31, 2008, for example, the Abu Dhabi-based entity which includes Al Ain Mineral Water and Grand Mills for Flour & Feed, reported an increase in net revenue of 41 per cent and growth in profits of 104 per cent compared to the same quarter of the previous year.

Or perhaps these staggering numbers come in part from Agthia’s new supply chain. In the past year and a half, new management has entirely changed the company’s structure, says Syed Wajihuddin, Supply Chain & Logistics Manager and Senior Sales Manager, Grand Mills for Flour & Feed Co, over pizza in his office at the factory in Port Zayed.

“When we joined this organisation, it was not a supply chain organisation, so we built it from the basics,” he recalls. “There was no planning function. The organisation was running on order-based production.”

Wajihuddin, who has worked for both Gilette and Unilever, says his team started from the top down.

“We put in place a supply chain unit and demand planning function. Then we started building on the sales business intelligence, based on averages, seasonalities and trends. This top-down forecasting system gives you visibility as a business unit in terms of a sales forecast across a rolling period.”

But once this orthodox system was up and running, it was time to change again.

“In quarter one of this year, we moved to bottom-up supply chain forecasting, which was always my dream,” says Wajihuddin.

“You start managing your budgets with a real-time forecast coming from each individual salesperson,” he explains. “Each month, a sales man will sit down on a tailor-made system outsourced to an ERP company and he will input a forecast for each SKU and for each customer, predicting what he will sell in the current month and for the next three months.”

Each salesman’s forecast is then tallied to create a total sales forecast.

“A bottom-up forecast challenges the business intelligence of an organisation, because it comes directly from its roots,” proclaims Wajihuddin.

The demand planner then consolidates these numbers, sanitises them, reviews any variances and passes the forecast on to the sales manager. The sales manager reconciles the data and agrees upon a final number with the supply chain manager.

“Sales people tend to get excited, so you tone the numbers down,” explains Wajihuddin. “If a sales guy is not enthusiastic, he does not belong in sales. If a supply chain guy is not logical, if he is not thorough, he does not belong in the supply chain.”

This unconstrained demand plan then goes to the production planner who determines the feasibility of the forecast and formulates a rough cut capacity plan (RCCP). “RCCP tells you if you need to make a long-term investment decision, or if you need to manage within given operations by pre-poning and post-poning production,” says Wajihuddin.

The RCCP helped his team decide to outsource certain stages of production. “We needed support with packing for the feed business,” he admits.

Wajihuddin insists bottom-up forecasting is highly accurate and detailed. “When you get to the level of forecasting each SKU by each customer, it’s amazing,” he exclaims. “Immediately you start having more analytical power within your organisation. Which segment is growing the most? Which sales guy is bringing in the most business? With which customers are we losing sales? With which customers are we increasing sales? Which are the exact SKUs we need to rationalise or discontinue? Where are the sales guys failing to focus? This comes from the ground.”

The finance team then reviews the demand and supply plans and converts them into financials, focusing on costs, profits and inventory, asking, ‘Do we see a gap?’” says Wajihuddin. “Fortunately, we as a company are doing so well that we need to fill a gap on the production side,” he adds.

Lloydstar provides Grand Mills with a dedicated fleet

Sales and operations then agree on one number – a financial goal for the entire company. Sales, supply chain, finance, logistics, customer service are all aiming to reach this one target. “With any function, the language becomes the same,” says Wajihuddin. “We have developed a culture where people talk one single business plan.”

He says this bottom-up forecast clarifies ownership amongst company departments and tells them exactly what they have to do: “We know that we need to deliver that one single number.”

This new supply chain has brought the company a reality check, according to Wajihuddin. “You bring people so close to the reality of the business that all the flashy slides and power point presentations mean nothing,” he says. “What makes the difference for us at Agthia is numbers. Reality. We don’t like butterflies. We like things on the ground.”

Stocking up Wajihuddin says accurate forecasting helps the organisation know exactly how much inventory it needs to keep, and how many pallets to spare. “Warehousing functions are then aligned with the requirements. Each unit knows how much it will stock.”

This comes in handy in a touchy grain market. “Grain buying is very strategic, so at times it is not linked with your planned demand. In some situations you buy for the next nine months. Other times, you buy for only one month,” he says, explaining that grain has an extended shelf life.

“You can then take the money you saved and put it into sales and marketing, rather than focusing on inventories.”

On the ground When faced with a scarcity of transport providers in the UAE, Grand Mills came up with its own solution – partner with a transport provider who will supply a dedicated fleet in exchange for guaranteed business.

Grand Mills processes its grain on site

Wajihuddin’s team convinced Lloydstar to set up an office on the Grand Mills premises. “We told them, ‘Listen, why don’t you outsource your fleet to us? This is our full year requirement, this is our monthly spread, this is our daily spread and this is our SKU spread. This is the proper number you need to deliver, with variations of 10 per cent.’”

He says the two companies no longer work on an invoice-by-invoice basis. “That can be very tedious,” he explains. “Imagine you make up to 5,000 shipments per month. Each invoice has to be checked, signed and paid – so much complexity.”

Instead, Lloydstar hands Wajihuddin one invoice per day to keep track of shipments.

He says having a transportation company on site makes life at Grand Mills much easier. “The beauty is that customer services, warehousing and logistics are sitting on the same lot. I don’t need to fax, I don’t need to call.”

And the well-established relationship with Lloydstar benefits Grand Mills’ relationship with its customers. “Logistics is the physical contact between you and your customer,” says Wajihuddin. “If you fail in logistics, you have actually failed physically.”

In terms of gross tonnage, efficiency and marketplace importance, it’s hard to top today’s container cranes

Moving millions of tonnes of goods daily, container cranes remain an integral part of global commerce. These massive structures efficiently and effectively load and unload roughly 90 per cent of the world’s shipped goods, in an almost robotic fashion. Operating 24 hours a day, seven days a week, these colossal cranes offer little in subtlety or wastefulness, moving on average 25 to 30 TEU containers an hour, with very little downtime.

Classified by their lifting capacity and the size of ships they can load or unload, container cranes are generally grouped in three categories: Panamax, Post-Panamax and Super-Post Panamax. Panamax cranes can fully load and unload ships capable of passing through the Panama Canal, normally 13 container rows wide. A Post-Panamax crane often handles ships too large for the Panama Canal, normally 18 container rows wide. Today, the popularity of Super-Post Panamax cranes remains unprecedented, capable of handling vessels 22 container rows wide or more. As larger container ships such as the Emma Maersk continue to set sail, ports must be capable of taking on today’s ever-increasing larger loads. As ships continue to grow, so too must container cranes.

Today, Shanghai Zhenhua Port Machinery (ZPMC) is recognised as the gold standard for container cranes. As the only crane manufacturer in the world that owns vessels for transportation, ZPMC’s cranes sit in 120 terminals around the world. According to World Cargo News, ZPMC has maintained the largest order book for the past eight years, while continuing to increase market share. Their latest quayside container cranes are drawing rave reviews within the port community and remain in high demand. They are renowned for the ability to handle twin 40 foot containers, or four 20 foot containers in one pull. Cranes capable of lifting six 20 foot containers have been designed, but have yet to reach implementation.

As the only crane manufacturer possessing its own bulk cargo ships, ZPMC builds cranes at any of its six Chinese manufacturing bases and delivers them fully assembled and ready for operation. With 18 bulk carriers (60,000 DWT), able to carry up to four quayside container cranes at a time, these loaded ships are truly a sight to behold. The cranes are 103 metres high with the boom up and weigh 1,850 tonnes a piece. Total time from order to delivery takes about two years with ZPMC being able to construct 125 cranes at one time.

Though automation is becoming more and more common, crane operators remain an important asset. Their training is a rigorous one, as mistakes can prove costly, both in terms of damaged goods and time lost. DP World puts its trainees through a thorough four-week simulator course that would rival most airline pilots’ schooling. Sitting inside the simulator, fully equipped with state-of-the-art visuals and lifelike movements and controls, it is easy to see how these crane operators become so efficient and mistake-free.

“Today, Rotterdam Port is fully automatic. They process 20 to 25 containers an hour, requiring wholly automated synchronisation of trucks and cranes,” says Mansour Rashed of DP World.

“However, in Jebel Ali Port, with a greater combination of manpower and automation, we can do 35 an hour. We take this to mean, as of today, a fully automated port is not as efficient,” says Rashed.

Whether this can be attributed to a better-trained labour force, or perhaps just slower automated processes, Rashed agrees the future lies in automation. Though in his opinion, technology still has a long way to go.

POWERLIFTING

Typically, container cranes derive their power from either of two sources: Older cranes are predominantly driven by diesel generators; while more modern cranes are operated by electric power from the dock. Requiring 10,000 to 12,000 volts, these electric container cranes experience fewer breakdowns and, as one DP World official explains, are far more ‘green’. With ambitions of eventually taking on a staggering 80 million TEUs annually, DP World recently purchased three fully-assembled ZPMC quayside container cranes that operate with electricity and it has several more on order.

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If 75 per cent of empty containers were foldable by 2010, it would amount to an estimated 50 per cent reduction in ship cargo movement costs

In an age when the whole world is screaming ‘green’ and energy conservation is the order of the day, the benefits of a foldable container need little elaboration. Prof. Anoop Chawla and Prof. Sudipto Mukherjee from the Indian Institute of Technology, Delhi – Department of Mechanical Engineering, have successfully designed a container that folds to a fourth of its size. Avinder Bindra, an ex-banker, initiated the invention.

Typically, cargo is moved in large steel containers from its place of manufacture to the market where it is sold. Containers are convenient and integral to multi-modal transport. In logistics jargon, shifting an empty container to where it is required is called repositioning. Today, entire ships are chartered to reposition empties from surplus to demand locations, which makes for poor green economics.

If trade were balanced, there would be cargo to offset the cost of return containers. A pronounced imbalance has emerged, however, in the two main Asian trades with Europe and North America. As a consequence, the ratio of empty to full containers has increased to well over 20 per cent. Result: about 2.5 million TEUs of empty containers are stored in yards and depots around the world.

Room with a view “What if all those boxes could be folded?” was a thought that came to Bindra’s mind. During his 26-year stay with Citigroup and four years with HSBC, he had a ring-side view of the two largest container harbours in the world – Hong Kong and Singapore. From his office, he could see ships loaded with towering stacks of empty containers sail by his window – returning after delivery to giants like Wal-Mart, Nike, Home Depot, Tesco and others.

A little enquiry and some research later, he found that attempts at making collapsible containers had been unsuccessful – the manual folding process was too difficult to handle, the separable parts tended to get lost during hectic transportation and the structure was not strong in spite of the high cost.

“I felt confident that a collapsible container would have enormous potential, and approached the IIT-Delhi with an offer to fund the research. Three and a half years later we have filed the patents applications,” says Bindra.

Four in the box “Four folded containers will equal one container in size,” explains Chawla. “The container will be folded and unfolded automatically with the help of a base station or platform which will be positioned at the point of origin of the empties. It will take one or two semi skilled workers to complete the job within three to four minutes. Additional containers can be stacked on the folded containers and carry the same weight load as a normal container. The collapsible container has an effective locking mechanism, is water tight and has the strength and stiffness to match original containers,” he elaborates.

Forecasting growth The CAGR, or compound annual growth rate for global container trade volumes, from 2002 to 2015 is estimated to be six per cent. Shipment is to grow from 77.8 million TEU in 2002 to 177.6 million TEU by 2015. Essner Planco Consulting, specialists in maritime development planning, estimate that the number of containers that would be handled at German ports alone will triple in the next 20 years – from 13.4 million TEU to 36 million TEU.

The persisting imbalance will see the proportion of empty containers increase to nearly 23 per cent in 2015. A US$320 billion annual US trade deficit with Asia has resulted in a near 3:1 cargo and equipment disparity favouring imports in the Pacific market. “Considering the enormous number of empty containers moved by shipping companies (about one in four), there would be huge scope for the product if accepted by the industry,” says Sailesh Garg, Director and GM, Drewry Shipping Consultants.

Design and use “The present scenario is a replay of 52 years ago when McLean invented the container to promote multi- modal transport. The now ubiquitous container was viewed then with skepticism,” comments Garg. “Once the initial glitches are smoothed, innovative uses will be found. For the present, the product has to be proved sea worthy or water tight. Reactions and comments have been positive so far,” he adds.

The Port of Singapore handles about one fifth of the world’s total container trans-shipment throughput

More efficient tri-modal terminals in the ports hinterland would allow for containers to be sorted, and then delivered just in time by rail to the loading docks. Trailers would carry four foldable empties, significantly reducing traffic at docks. Turnaround time of ships would be faster due to quicker loading of empties. Collapsible containers would contribute in various ways toward decongestion of sea ports.

Avinder Bindra

Costs and compatibility Containers make up 25 per cent of the operational balance sheet. Approximately US$16 billion of the yearly US$100 billion that ocean carriers spend operating their container assets goes towards global repositioning, according to International Assets Systems. To reimburse the costs, shipping companies impose
heavy surcharges on loaded containers that leave industrialised nations. The US$100 to US$1,000 per TEU surcharge forms a significant chunk of freight rates on sea routes to countries in Asia, Africa and the Caribbean.

“Naturally the new concept would offer big savings to container ships,” says R.P.Singh, Deputy General Manager, Ebony Ship Management Ltd (part of Noble Group, Hong Kong). “The biggest advantage is complete compatibility with existing intermodal transport equipment,” he adds. “A stack of four folded containers equals one in volume. Of significance here is no changes need be made either to handling equipment like cranes or to the design of trailers, ship-holds etc. However,” continues Singh, “the final veto will come from the classification societies such as LRS, BV or DNV for example.”

Sudipto Mukherjee

Benefits Mukherjee expands on the economics of scarce real estate in ports. “Everywhere ports are faced with a problem of space shortage. The collapsible container can conserve 75 per cent storage and space reducing traffic in port areas. In financial terms, savings can total to over US$1,000 per empty folding container, a substantial saving to shippers. Added advantages are that four containers stacked vertically will have a self locking mechanism. When stacked, the pillars will have the necessary holes for lifting and lashing on board,” says the inventor. “In this age of terrorism, the folding container ensures better security since it cannot be used as a means of smuggling,” he adds on an afterthought.

Anoop Chawla

The purchase price of a collapsible container is expected to be 10 to 15 per cent over the price of a regular one. The base station or platform will cost approximately as much as two containers. H.D. Gujrati, Group General Manager – International, CONCOR India, says, “The collapsible container will benefit domestic mass overland transport, especially where an imbalance of traffic is prevalent. Containers travel with no back haul cargo after
delivering raw material to production locations. Although the prototype was very promising, customisation of the product would help greatly. I would certainly try out the new design depending on the economics after the add-on cost of the base station.”

Customisation The new design currently offers top loading. In this regard, Garg feels that some technical modification might be required before a wider range of applications can be adopted. “Once the limitations are removed, the invention has vast potential – say in the transport of iron ore; even FMCG could be considered with a change in design.

Ship owners and ports need to get familiar with the new invention before they learn to handle it effectively. After that there will be no looking back,” Garg adds confidently.

Bindra says the team has shown the proof of concept and designs to a number of shipping lines including Maersk, CSAV, Noble Group, ZIM, APL and some port operators. The feedback has been very encouraging.

If all goes as planned for the team, the ‘off ice with a view’ may soon offer a new vista.

First published in DVV Media’s
LOG.India

Managing the supply chain for any product is a formidable task. What, then, would the procedure be like for a company that manufactures pastries, cakes and ice creams? In this case study by Psion Teklogix, the focus is on these perishable products

Founded in Milan, Italy in 1946, Bindi is world renowned for its imaginative ice creams, cakes and desserts. Over the years, traditional skills and original recipes have been combined with modern production techniques to ensure consistent, high quality products for their customers. Bindi is the prestige brand of the Society of Italian Alimentary Producers (S.I.P.A). The company produces roughly 35,000 pastries per day. It supplies 180 concessions, provides other companies with products for branding, as well as selling directly to the final consumer via its own stores.

Total annual revenue of S.I.P.A. is approximately Liras150 billion (US$75 million), of which 30 per cent is derived from markets outside of Italy. Foreign sales are rapidly increasing, particularly in western Europe, US and Japan. The company supplies both fresh and frozen final products.

This translates to extremely complex logistics for S.I.P.A. “It’s a fairly unique situation,” says Dr. Marco Scurati, Operations Director. “Not only are the products delicate, they must reach the final consumer in excellent condition. Therefore, the timelines of handling are of utmost importance, and the warehouse must be strictly managed.”

The main warehouse is kept at a temperature of -22 degrees Fahrenheit
to maintain the quality of its frozen products. It holds 7,000 to 8,000 pallet sections and manages approximately 700 different codes. More importantly, there are 70,000 to 80,000 containers delivered per year, each with multiple layers, which require an incredible amount of sorting. As a result, management of the logistics is extremely complex. Staff must manage an extraordinary number of references for various types of customers with different service requirements, all in an environment of -22 degrees Fahrenheit.

The complex logistics of the warehouse gave rise to a need for automatic individual identification and tracking of each Bindi product. Another critical aspect to consider was the passage of equipment from a temperature of -22 degrees Fahrenheit to approximately 32 degrees Fahrenheit. This thermal increase results in condensation, which is harmful to normal electronic equipment and cables. “It was very important that the portable terminals function in both environments,” said Paolo Zanini, IT Manager.

The solution Psion Teklogix was chosen to provide the solution due, in part, to the reputation of its hardware to be rugged enough to withstand the frigid conditions of the warehouse. “We wanted a supplier who had proven that they could meet our needs,” says Scurati. Psion Teklogix devices have been subjected to laboratory tests that verified their ability to endure and perform in such conditions.

The automatic identification system is based on narrowband radio frequency transmission, in part because of its known reliability. The system is comprised of one Wireless Gateway operating as a mini-controller and one operating as a Base Station on slave mode, managed via the Ethernet, using TCP/IP protocol. In phase one of the system implementation, the company adopted the use of five hand-held terminals (Psion Teklogix 7030) and four vehicle-mount, full screen terminals, as well as eight scanners.

The automated system identifies each product by means of a barcode, and tracks its progress from production, to the warehouse and through to delivery. When the products arrive at the warehouse, the operator can determine from the terminal where to place them, based on the required conditions as well as optimisation of warehouse spaces. Products entering the warehouse are first considered ‘on hold’, pending laboratory analyses. The lab, based on a strict set of guidelines, must approve the products.

Upon receipt of a customer order with defined expiration dates, the system determines availability. The warehouse operator verifies the information and gives the order to prepare the product for release. Operators receive all order information and verification via the terminals, and arrange for the loading of the product onto the appropriate vehicles. The system retains all the information on the released product, including the name of the customer to whom it has been sent.

Diversification is the order of the day in the UAE. The latest project aiming in this direction is the Abu Dhabi Polymers Park, the UAE’s first industrial cluster committed to the plastic conversion industry

Left: Abdullah Al Darmaki, Vice President, Petrochemicals at ADBIC Right: Abu Dhabi Polymers Park Model

As part of its strategy for the future, Abu Dhabi plans to variate its sources of income by choosing a policy based on boosting investment and focusing on the industrial sector as the force behind economic growth and development. In simple words, the launch of the Abu Dhabi Polymers Park is a step in the proposed direction.

Established by the Abu Dhabi Basic Industries Corporation (ADBIC), the park is made up of 4.5 sq kilometres of land with an investment potential estimated at AED15 billion (US$4 billion).

Located 20 minutes from the city centre and 40 minutes from the new Khalifa Port, the new world scale industrial and container port aims to capture both the international and local markets as most of the manufacture and conversion of plastics taking place at the park will be for export. Considering the slated conversion capacity is one million tonnes per annum, the region will be poised for an increase in their exports of polymers. With the setting up of this park, the regional production of polymers is expected to double to 33 million tonnes by the year 2011.

Polymers Park aims to attract a host of tenants that convert a wide variety of polymer resins to end products for the packaging, original equipment manufacturing, construction and infrastructure segments including goods such as pipes, cables and intermediate blow moulded containers. Its goal is to create opportunities for international and regional private investment in developing downstream products and original equipment manufacturing (OEM) segments.

Purported advantages of being located in the park include: the higher availability of raw materials, labour, infrastructure and utilities at competitive costs; the provision of efficient, shared logistics services; a technical centre for quality and innovation; efficient supply chain management; logistics; warehousing; silo facilities; a business park for commercial and office space and training and vocational institutes. Tenants will also benefit from competitive long-term lease rates, say developers.

Abdullah Al Darmaki, Vice President, Petrochemicals at ADBIC, added, “Abu Dhabi is uniquely placed to become a world centre for plastics conversion with ready access to raw materials and export routes. By launching this park we plan to extend the local value chain for petrochemicals and encourage innovation in end-product plastic manufacturing.”

The park’s proximity to international trading routes is expected to spur the interest of those organisations looking for an export base from the UAE. Land for development is currently available, with full park capacity planned for 2012.