If your business is based out of the Middle East, you can be spoiled for choices on which airline to use for your business travel and cargo needs. There are new airline companies, terminals, warehouses and airports springing up all across the region.

You can choose an airline to fly your people and goods to almost any part of the world.

Well almost any. Not Afghanistan. That’s where United Nations Humanitarian Air Services (UNHAS), sometimes referred to as WFP-Aviation, comes in. Operating out of Terminal Two of Dubai International Airport, it provides the vital Dubai – Kabul link for diplomats, aid agencies and the media. It operates flights to Islamabad and two loops within Afghanistan. The northern loop runs from Kabul to Mazar-e-Shariff, Kunduz, Faizabad and back to Kabul; and the southern loop connects Kabul to Kandahar, Herat and Bamiyan. Both flights leave Kabul in the morning and are back in the evening.

If it hadn’t been for these destinations, Afghanistan would have been cast off from the rest of the world.

There is no rail transport in the landlocked country and the road infrastructure can be rated on a scale of bad, worse and non existent. If you add the security element, air transport seems to be the only way to keep this rugged country connected. One of the by products of constant conflict for the last 40 years has been the creation of air strips in almost all major towns in the country.

Loic Lataste, Chief Air Transport Officer, UNHAS

Frenchman Loic Lataste from Bordeaux is the Chief Air Transport Officer of UNHAS in Afghanistan. He works under the WFP Country Director, Stefano Porretti, and has been in the position for the last six years. Prior to this position, Lastaste was with the French Army for 10 years.

The UNHAS comes under the World Food Programme (WFP), because the WFP has the United Nations’ greatest logistics capabilities. In 2002, the UNHAS mission inherited air operations from the United Nations Office for the Coordination of Humanitarian Affairs (UNOCHA). Its mandate is to provide a safe, efficient, reliable, cost-effective air support to the humanitarian community in Afghanistan.

Samir Sajit, Regional Air Safety Officer, is responsible for making sure that all planes, staff and systems are up-to-date. From his office in Sharjah, he also conducts safety courses for field staff from Afghanistan, Kenya, Sudan and Congo. Commercial carriers Emirates and Etihad play a vital role by sponsoring these programmes. UNHAS is the only air service in Afghanistan whose domestic flights are approved by the UN Safety and Security Department and are considered compliant with international flight standards.

Although there are other private operators providing air transport to and within Afghanistan, there are no other carriers that meet international safety standards, keep to a schedule and fly to airports like Faizabad in the North and Kandahar in the South. Hence, for most flyers, UNHAS is the only option. Several planes (owned by a local Afghan businessmen and registered as scheduled airlines) are parked at Kabul Airport and sitting idle, because no one will fly them.

To buy a ticket or transport goods on an UN flight you need to be listed as an official humanitarian, diplomat or media organisation. Until mid-2003, the fares were fixed and subsidised. “We can’t keep flying if we are losing money, just like any other airline,” says Lataste. “But what makes us different is that we rely on donations to keep going, we don’t have any traditional financing operations like commercials airlines do. We don’t own anything.”

Porretti’s response is more direct, “Just tell them we are stopping, then the donations start coming in again.” And he is not kidding – as recent as June 2008, the IRIN news agency reported that the UNHAS may have to abandon its operations in Afghanistan due to a shortfall of US$2.5 million.

Since mid-2005, UNHAS has operated on a full cost recovery basis. The Dubai-Kabul flight costs US$400 one way. It is more expensive (and has no in-flight entertainment) compared to Safi Airways who fly the route from Dubai Terminal One; but Safi fails to meet the safety standards required by all international organisations for carrying their people and goods.

Air transport is the only option for Afghanistan’s difficult terrain

Overcoming challenges

Intensifying conflict-related violence and deteriorating security in different parts of Afghanistan have increasingly impeded humanitarian and development access. Increased insurgency and criminal attacks have, meanwhile, restricted missions by road to almost half the landlocked country for most aid workers, including UN agencies.

UN employees are only allowed to travel to provincial capitals in the south, west, central and southeast by air and UNHAS is the only security-cleared airline with flights between Kabul and Jalalabad, Kandahar, Herat, Kuduz, Mazar, Faizabad and Bamiyan.

Kennedy Ooro, Air Transport Officer, UNHAS Kabul Airport, keeps a track of all aircraft movements across Afghanistan. UNHAS operates the UN terminal at the Kabul Airport. Complete with its own immigration, customs and check-in counters.

Tickets can be bought from the UNHAS offices in Kabul, Islamabad and Dubai though its accredited agency. Previously the UNHAS office was within the WFP office, but they had to move out due to lack of space. The new office is lacking a bank, so those wishing to make a booking in Kabul need to make payments separately at a bank outside as the UNHAS will not directly accept payment. In addition, the UNHAS also runs a ‘pouch’ service for NGOs and other international organisations on a complementary basis.

The domestic northern and southern loops are serviced by Canada-based Regional 1 Airlines. They operate the Bombardier Dash 8 200 series (formerly the de Havilland Canada Dash 8, sometimes abbreviated as DHC-8). According to Susan Smart, Director of Inflight at Regional 1 Airlines, their company has grown from two aircrafts to five in the last year alone because of UNHAS related work in Afghanistan and the Congo. And both Sajit and Lataste say that the Dash 8 is ‘the’ ideal aircraft for humanitarian work. These planes can land and take off on short runways and can be configured for cargo and passengers depending on the load. Landing and taking off from the Faizabad runway is a good example of this aircraft’s capabilities as the entire runway is made of metallic sheets. According to Sajit, Canadian planes and pilots have an advantage in Afghanistan because they have experience in the same terrain.

Samir Sajit and Kennedy Ooro

The Dubai-based Eastern Skyets provides UNHAS with the vital Dubai-Kabul link. They operate a McDonnell Douglas DC-9 (initially known as the Douglas DC-9). Naturelink, a South Africa based charterer operates an Embraer 120 Brasilia on the Kabul-Jalalabad- Islamabad route. Lataste changes schedules to bring in traffic from overseas in the morning and then leave in the early evenings (all airports in Afghanistan only operate during daylight), this increases the number of people on the route as a large number of people want to fly in and fly out within a day.

So far, the UNHAS operations in Afghanistan has carried 371,000 passengers, 8.1 million kilogrammes of cargo, burned 32 million tonnes of fuel by flying for 27,000 hours covering a distance of 11.5 million kilometres. Over 700 agencies use this service to fly to eight domestic and two international destinations. But the best figure that stands out is zero – notifying the number or accidents or incidents.

In 2008, UNHAS had an annual budget of US$19.5 million. Of this, 42 per cent was spent on the aircraft contract, 40 per cent on fuel, 10 per cent on staff and the remaining eight other expenses. Operations on its own generated an income of US$16.3 million and received a donation from UN’s CERF (Central Emergency Response Fund) of US$340,000 and the Government of Finland chipped in US$179,000. There is still a shortfall of US$2.7 million. But Lataste is confident that governments will chip in more to keep their services going.

UNHAS has also had to deal with the steep rise in aviation turbine fuel (ATF) prices which increased by up to 150 per cent this year. Even though prices have started to come down internationally, in Afghanistan ATF prices still remains high (UNHAS provides all its planes with fuel). The fuel supply in Afghanistan is controlled by a single company and they have not reduced prices. Lataste intends to add pressure on the supplier to reduce the prices. As fuel is transported across the country on road, security and infrastructure problems jack up its cost. In fact the pilots check the fuel before each refuel to make sure that they have not been adulterated.

War Risk Insurance and its rising premium is another major factor in the cost of services and lack of good operators.

It is also difficult to find operators willing to come to Afghanistan. Security for the staff and planes is a major issue for the air charter companies. The UNHAS cannot pick just anyone to fly for them, it needs operators who fit its high standards. “Our standards are not easy, they are something you only gain by maintaining a standard of aircraft, staff and procedures for a period of time,” says Sajit. The final decision of chartering aircrafts is taken at their headquarters in Rome.

The heavily fortified UNHAS head office in Kabul

No stranger to danger

According to the WFP’s latest country report, security has progressively worsened in much of the country throughout the year. Commercial trucks transporting WFP food were increasingly targeted, especially along the southern ring road from Kandahar to Herat, through the restive provinces of Kandahar, Helmand and Farah. Incidents also occurred in the south eastern provinces of Paktika, Paktia and Ghazni, in the central Wardak province and in Nuristan in the east.

For the three days this reporter was present for breakfast with Porretti and the conversations mostly centred on security and hijacking on WFP trucks and envoys. In most cases the trucks were stolen and food items left on the road. Recently transport contractors have preferred to travel without escort of the Afghan police as they are less likely to be attacked when not in the presence of police. The attackers seem more interested in the armoury of the envoy than the biscuits carried by WFP trucks.

More than 30 attacks against commercial vehicles or convoys carrying WFP food were reported in the 12 month period, compared to just five in all of 2006. In all, 870 tonnes of food, valued at US$730,000 was lost. Worse, in at least four of the incidents, vehicle crew members and Afghan police escorts were either killed or wounded. It remains unclear whether many of the attacks were conducted for political reasons, pure criminality or a combination of the two.

Hunger pains

According to the WFP annual report, despite poor road conditions, extreme seasonal weather and heightened insecurity, in 2007, the WFP brought into the country over 200,000 tonnes of food for distribution in all provinces. The majority was received through the southern corridor – via Peshawar and Quetta in Pakistan (75 per cent) – where WFP operates large transhipment bases exclusively for food destined for Afghanistan.

Significant tonnage also entered from Uzbekistan (15 per cent) and Iran (10 per cent). As the 2007 cereals harvest was much better than the previous year, 4,000 tonnes of Afghan wheat was also purchased in Herat province, while a further 400 tonnes were received at Mazar-e-Shariff as a balance from a purchase made in 2006. Overall, WFP dispatched 220,000 tonnes of food from its main warehouse complexes in Kabul, Kandahar, Herat, Mazar-e-Shariff, Faizabad and Jalalabad to its implementing partners for distribution to beneficiaries.

Out of the total food dispatched, 23 per cent was delivered by the WFP fleet, with the rest by commercial transporters. Increasing challenges were faced throughout the year due to

deteriorating security in much of the country. More than 850 tonnes of WFP food was looted between January and December while being transported. Most of the looting incidents took place in the southwest, especially Kandahar, Helmand and Farah provinces. The direct consequences of the risks faced by transporters were a shortage in available trucks to operate in some areas, and transport rates that ranged as much as 50 per cent higher than the previous year.

As in past years, prior to the onset of winter and the consequent loss of access to many areas of higher elevation, WFP began the positioning of 23,000 tonnes of food in 18 provinces. By the year end, 95 per cent of the target had been reached, aided by the later arrival of heavy snow compared to the year before.

Though it operates its own fleet of 135 trucks, WFP mainly uses unmarked commercial vehicles to transport the majority of its food throughout the country. Unfortunately, 2007 saw a marked deterioration in security that often halted food movements and threatened the vehicles and even the lives of drivers and crew.

WFP lost over 850 tonnes of food in more than 30 separate attacks, mainly on the commercial transporters operating in the south. The attacks have frightened the drivers, limiting the availability of willing transporters and pushing the already high cost of transportation even higher.

Other factors hindering transport and logistics activities are seasonal road blockages due to snow, floods and extensive landslides and the largely neglected road infrastructure owing to decades of war. Afghanistan is one of WFP’s largest operations in the world with more than 6.7 million beneficiaries being reached in 2007.

NOTE: The 2007 annual report is the latest report from Afghanistan, the 2008 report will only be out in 2009.

Outlook on Afghanistan

According to the Afghanistan Investment Support Agency (AISA) Afghanistan’s large and growing market for basic logistics and transportation services presents a ground-floor opportunity for new providers. This opportunity is open to domestic and foreign firms of all sizes and origins. While investment in the sector is increasing, the field is virgin territory for many services. The timing is right to cultivate customers and establish a “first mover” advantage. Early investors in the sector report modest start-up costs and relatively low overheads, and even smaller operators are moving large volumes of freight.

It is estimated that 60 per cent of overland transportation comes to or from Pakistan, 30 per cent to or from Iran, and a combined 10 per cent through borders with the Central Asian republics. To the north, in Turkmenistan, Uzbekistan and Tajikistan, goods and commodities flow on main transit routes south through Afghanistan to the ports of Bandar-e-Abbas and Chabahar in Iran, and Gwadar and Karachi in Pakistan. A planned bridge will link Afghanistan and Tajikistan over the Amu Darya (Oxus) River, which carries barge traffic along the borders with Turkmenistan, Uzbekistan and Tajikistan. Within Afghanistan, the main “Ring Road” is connecting Kabul to Kandahar in the South, Herat in the East, and Mazar-e Shariff in the North, hence linking the country’s key commercial centres, while other roads are extending to the border crossings with Iran, Pakistan and other neighbouring countries.

Today Afghanistan is ideally situated to again function as a strategic gateway, serving landlocked countries to the north and the Iranian and Pakistani seaports to the south. Afghanistan is potentially the shortest route to the open sea for the Central Asian republics and Russian industrial centres of western Siberia. For Pakistan, Afghanistan offers a primary route for trade with Central Asia. In fact, Afghanistan shares borders with six neighbours – Iran, Turkmenistan, Uzbekistan, Tajikistan, China and Pakistan – and is considered a “land bridge” connecting proximate country markets, as well as potentially large trading partners, such as Iran and India. Afghanistan offers a point of access to an extended regional market of more than 2 billion people, linking the Middle East to Southern, Central and Southeast Asia.

Commercial transport is a high-growth sector in Afghanistan. Among the commercial markets as well as the donor community, demand for transport services is expected to remain strong in the medium and long term. Afghanistan has immediate, almost unlimited demand for both industrial materials and consumer products. Transport volumes for commercial goods, which are almost double that of donor material are expected to rise as Afghanistan’s commercial infrastructure continues to improve. Finally, improving infrastructure and security is resulting in increased transhipment of goods through Afghanistan.

An important demand in the logistics sector is the provision of cold transportation and storage facilities such as cold rooms and refrigerated trucks and containers. Some 20 to 40 per cent of post-harvest horticulture products are wasted because of poor packaging. In cold storage transportation, there are currently less than 50 refrigerated trucks available around the country.

Brian Shepherd, Senior Vice President, Al Tayer Logistics

Gucci handbag. Check. Pucci jacket. Check. Jimmy Choo shoes. Check.

No, this is not an article about the day in the life of a fashionista but about Brian Shepherd, Senior Vice President, Al Tayer Logistics LLC. Part of this group, after all, is Harvey Nichols, one of the world’s most stylish stores. Sheperd happens to be the behind-the-scenes-guy who makes the life of a fashion obsessed diva complete.

Sheperd is a logistics industry veteran of 40 years, so he knows exactly where he’s coming from and where he’s going. “The basics of logistics are the same in any industry,” he says. “It’s all about how you deal with different products, whether it’s coffee or clothes, you have to know how to manage inventory, move stock in the best possible way and handle costs.”

But the logistics of luxury fashion must still be different. Shepherd agrees. He says, “Fashion is treated very differently than other businesses, because we’re talking about high value luxury products which are very fast moving.” Other lifestyle brands like GAP, Banana Republic, have four seasons – Spring, Summer, Fall and Holiday. So essentially, warehouses are stocked up with merchandise for one particular season which are pushed out into the store in two phases, for example, Summer Phase One and Two. Summer One is the biggest push from a marketing perspective. Next follows Phase Two which lasts till almost the last bit of summer.

And unlike luxury brands, stocks of any particular season of lifestyle retail brands are purchased approximately six months in advance. Stock for Holiday 2009 (approximately from October 2008 to January 2009), for example, is purchased in January or February of 2008. This gives the team a large gap and ample opportunity to organise themselves and start bringing the first part of the product to the stores around September or October 2008. The launch and marketing happens by November and the range lasts right through December and January 2009.

Luxury designer fashion is changing all the time. This sets it apart in treatment and handling. Fashion savvy consumers want to find a new collection each time they go to a store, so they can be the first to be seen wearing a new piece of clothing. Buyers at Harvey Nichols buy selected styles in small quantities from suppliers selected by the buyers for the store. Harvey Nichols has a large number (close to 400) of suppliers. Bigger, more established brands like Bottega Veneta and Gucci may require larger orders since a number of these brands are exclusive franchise partners with Al Tayer Insignia and therefore buying is consolidated at a company level.

Buyers travel to brand headquarters a few times each year to select a range of products suitable for the region. These brands can be relied upon to provide a running range of styles to the buyers who have a certain value at their disposal and are very specific about their purchasing requirements. Buyers also continuously visit high fashion clothing fairs where they meet with new suppliers whose designs are of potential appeal to the Middle Eastern customer. Buyers are also regularly on the lookout for new suppliers from a variety of sources. This makes for a variety of stock in the store.

Accessories such as handbags are purchased in even smaller quantities. “We only purchase a limited number of different styles in handbags as that is the kind of business we do and also, here in the Middle East, we do not carry stock of fashion brands,” comments Shepherd.

Throughout the season, Harvey Nichols introduces new products so as to be up to date with the trends in the other fashion capitals of the world. This cross stocking gives UAE consumers the opportunity to own the latest designs from around the world. Almost everything is air freighted so as to ensure that fashion lines in the Middle East are usually launched at the same time as the rest of the world. The cost of air freighting is still very low compared to the value of the products coming in. Within a week from the time the stock arrives, it is processed through the warehouse and arrives at the shop floor.

And what happens to stock that does not get sold? “We have two major sales before and during DSF (Dubai Shopping Festival) and around DSS (Dubai Summer Surprises),” replies Shepherd. “To satisfy customer demand we have the option to move stock around from one store to another depending on demand. Whatever else is still left is sent to the outlet mall.”

Store in Style

The warehouse that stocks Harvey Nichols’ merchandise is in the Al Quoz Industrial area and is just one of the warehouses operated by Al Tayer Logistics. It is not exclusive to Harvey Nichols and services all the companies luxury brands. Purchased in 2005, it was converted into a distribution facility by the Al Tayer Logistics project team. All Al Tayer warehouses are temperature controlled.

As soon as stock arrives, it is unpacked, put on hangers, priced, security tagged and sent to the store. The store conducts further value added services such as steaming, but because the stock is moved so quickly it’s hardly subjected to any creasing. “Everything is treated with great care,” says Shepherd. “We ensure that all merchandise reaches our stores in perfect condition.”

Shipments arrive in Dubai by air from over 500 suppliers located in countries mainly in Asia, Europe and the Americas. The 52 staff members segregate shipments by store, scan them into the WMS system and place them in pallet storage by reach trucks, using hand held RF (Radio frequency) scanners. Within three to five days, the pricing is complete and the stock is withdrawn from storage and transferred to a processing area where the individual merchandise is priced and security tagged and made store ready. Merchandise is then scanned out of the warehouse and transported directly to stores within the average seven day window.

Fashionably challenged

We do face certain challenges in the region,” says Shepherd, explaining that the Middle East customs authorities require a country of origin statement for every item coming in. “As a number of the origin countries do not require this statement,” adds Shepherd, “some suppliers may face a challenge giving us a country of origin statement. This is an issue that can affect our overall efficiency. Although, this is not that much of a problem in Dubai.”

Another issue is organising the international supply chain. Shepherd says that some countries do not have regular flights coming into Dubai, hence they have to fly their merchandise through other centres, consolidating it in central, easily accessible ports, for example. Because the quantities purchased are generally small, however, bringing the supply chain together can be a challenge. “Dubai as a major international airline destination is not that much of a problem because now almost all major airlines come here, but some markets in the region can pose a difficulty at times and offer more of a challenge for our stock, as it may take longer to reach the stores,” he says.

Al Tayer is mulling expansion across various Middle East markets. Moving into Saudi Arabia could prove to be even more challenging as the kingdom’s customs procedures are traditionally stricter than other Middle Eastern countries. Efficiency is also a problem area there. “They’re not as efficient in Saudi Arabia as we are in Dubai for clearing shipments,” says Shepherd. “Our air shipments arriving in Dubai get cleared within a day of arriving. We’re also a known and accredited Platinum customer of Dubai Customs, which gives us the validation of having excellent, certified products.”

The portfolio

Al Tayer’s attire section is divided into two categories: Al Tayer Trends, which are the mass market brands like Gap, Banana Republic, Mamas and Papas, At Home, Texture and Galler Chocolates. The second category is Insignia. Labels that fall under Insignia are Gucci, Giorgio Armani, Emilio Pucci, Jean Paul Gaultier, Sergio Rossi among others. As if being the biggest high value fashion brand retailer in the UAE was not enough, expansion is being considered all over the region.

Ingo Roessler,
Vice President Cargo, Royal Jordanian

The best
We have not increased in volumes a lot, but we have been able to find more attractive business, and have done a lot more charters. If you compare this year with 2006, for example, we are at almost ten times the volume. The 310 freighter has become particularly popular. Obviously, the more expensive fuel gets, the less competitive were the Ilyushins or Antonovs that are able to fly loads in the 35 to 40 tonne range.

The year we made a lot of changes. The second phase of our complete warehouse remodelling is being completed now. We doubled the amount of pallet storage, and can now store more than 7,000 pallets in a semi-automated environment with bar codes. We put in new doors, we put in fencing, we put in access control, we put in a lot of new equipment to store and move the pallets. On January 1, we will move over to our new IT solution, Cargospot from Champ Cargosystems. We are also working on an improved interface to Jordan Customs. Eventually we will have the ability to offer on-line booking for the clients, via our new website.

The worst
The worst thing to happen was the spike and sudden drop in fuel prices. Yes we did some hedging to mitigate, but I don’t think any mathematic model actually reflected such a development. It has been a difficult situation for everyone. If the price had stayed at US$150, we would not have seen many freight operators continue to operate the aircraft.

Bill Hill,
Group Vice-President, Logistics Services, GAC

The best
The wide-ranging investigations into the global freight forwarding and air cargo industry by anti-trust agencies in several countries, including the United States and European Union, which started back in early 2006 has put the spotlight on possible anti-competition practices engaged by selected industry players. The probes have led to heavy penalties for errant companies which have violated anti-restrictive business laws with price fixing of cargo rates, fuel and other surcharges – the events culminated in one of the largest antitrust settlements in history in June this year. The resounding message sent by the governments is that they will not tolerate any malpractices. This is a big step forward for the global logistics industry towards the cleaning up and eradication of unfair and restrictive business practices. This action not only helps level the playing field for all industry players, especially those who practice ‘good corporate ethics’, but more importantly, benefits our customers through greater transparency and competitive pricing.

The worst
With the onset of the global financial meltdown, all businesses including the transport and logistics market are now entering a period of uncertainty as the effects of the crisis, start to be felt. In the interconnected world which we operate in, all industries and markets will be affected to varying degrees.

Konstadina Kottoros,
Legal Consultant, Fichte & Co Legal Consultancy

The best
Pre credit crunch and in the not so distant past, the UAE industry was booming at an exciting rate with an expected sustainability for at least the next five years. Import of project cargo was on a roll to facilitate the construction boom, the number of tonnage entering the region doubled in capacity, further attracting investors worldwide in real estate and shipping. Given the booming year for shipping and in the region, our firm has dealt with a high number of shipbuilding and sale and purchase contracts and ships finance transactions related to the new build vessels expected for delivery in the next years, with further popularity over the purchase of second hand vessels as well while shipowners speculated the market. There has been in fact a high demand for tonnage to accommodate this significance in commodity trading, while at the same time airports and sea ports throughout the UAE equally embraced the burgeon and put forth plans for expansion.

The worst
We have experienced a healthy 2008 throughout up until the recent crash in the economy which has slowly but surely leered its head in our parts of the world. How and to what extent this financial crisis will affect private practices in the region remains to be seen.

André N. Verdier,
Senior Vice President Supply Chain, Itsalat International Company

The best
The realisation that the supply chain is actually the value chain and it has a place at the corporate top.

The worst Rising oil prices and terrorism in Pakistan.

Duncan Alexander,
Vice President, Mercator

The best
The best thing to happen in 2008 was SkyChain. It will transform cargo operations and improve it for everybody. It’s a fundamental change in the way we do business. It will be much more affective and profitable.

The worst
The worst was the global economy and prices. Logistics are a barometre of world trade, so people in the industry could see the problems coming very early. That has been the worst thing for everybody. Margins are now wafer-thin. Normally, our region just lies through crises but this is a different wind of change that might be a real problem.

Des Vertannes,
Executive Vice President Cargo, Etihad Airways

The best
The best thing to happen in the air cargo logistics industry was having to compete with an understanding that ocean freight has become more competitive in terms of timelines. It’s not just about faster ships. It’s the fact that they can accelerate their process on the ground while air cargo still has to fight with greater security requirements before it can get its freight in the air. Of course, the cost variation precipitated by fuel prices has meant that a lot of the air cargo commodities have been converted to sea. That’s going to make people working in the air cargo supply chain think of ways to make up for the differences. I think this is a good thing, because if you’re challenged you tend to stretch yourself that much further. As your competitors start to close the gap, you want to try and widen that gap. It causes you to be far more innovative.

The worst
The credit crunch and the impact is has had on consumer confidence, the economies of the world. Consumers are feeling the pinch and putting their hands in their pockets and not spending. This means that less goods are going to be purchased, shipped and moved.

 Viktor Fuchs,
Managing Director, Pro Service GmbH

The best
In the first half it was a pretty good year. Our VIP cargo business for Arab tourists lasted until August/September, so there was not much I could complain about.

The worst
The worst thing to happen in 2008 was the start of a global economic crisis. Nobody really knows where it is going to take us. Germany, as you know, depends on three main commodities for business: cars, machinery and chemistry. All three of them were badly affected by this situation, so fingers are crossed for a lucky development. Logistics companies are directly connected to such developments: Every order missing in the industry is a transport missing in our books. My hopes go to the new US President elect, a more steady political situation in the world’s biggest economy might stabilise other economies as well, or at least help the situation.

Satya Prakash Singh,
Senior Manager, Warehouse / Logistics, Landmark Group

The best
Infrastructure development in the UAE, for example roads, logistics cities, rail and free zones has supported the supply chain and logistics industry in 2008.

The worst
Differences in diesel prices in two emirates of the same country (Dubai and Abu Dhabi) put logistics companies under pressure to look into their bottom line.

Alexander Borg,
Regional Director & Co-ordinator, The Chartered Institute of Logistics and Transport

The best
The logistics industry in Dubai is contributing to nine per cent of the emirate’s total GDP. The Government of Dubai has recognised this important factor and sector and this year has issued a Directive to the Department of Economy to start working on a strategy to increase this sector up by 13 to 15 per cent. Also, with the increase of this year’s budget, about 30 per cent was budgeted for education in which logistics education plays an important role. All this shows that this sector is giving positive results and it is growing at a rapid pace as Dubai continues to distinguish itself as a logistics hub.

The worst
Cost of fuel made international shipping and transport difficult. Companies had to revise their costs of operations to remain competitive. The worst is when you have already forecasted and planned your operations and in the middle you have to revise your costs. This impacts the bottom line and could lead to less investment from the private sector.

Gerhard Mattrisch,
Daimler AG, Research and Development Society and Technology Research Group

The best
The best thing to happen in 2008 was related to vehicle technology, especially hybrids. From my point of view, the majority of commercial vehicle manufacturers made a considerable step in the direction of sustainability. Sure, the looming market crisis might form some kind of a retarding moment in this development, but in the long run the movement will gain momentum, ending up in those advanced drive technologies as electric and fuel cells. This way, the sustainability footprint of the whole transport sector should become much more “dainty”.

The worst
The worst thing to happen in 2008 was related to fuel prices. What happened in the first half of 2008 was almost a catastrophe for the logistics business, and, as we can see now, was completely inadequate. In other words – the financial and energy markets have been in the position to grab (or steal) hundreds of billions of dollars from private consumers and energy-consuming industries, including transport and logistics. This money has gone, and insofar cannot be used for modernisation, upgrading and investments.

Dirk S. van Doorn,
Business & Product Development Manager,DHL Express

The best
The best thing to happen this year was the excellent boom in the supply chain industry across the Gulf. Investments are at an all time high and there is a massive demand for services from the various industry and sectors across the Middle East. The foundations have been laid by the supply chain industry as a whole for a competitive industry to operate out of the Gulf and the UAE. The industry is well positioned to be in the top three when it comes to the management of supply chains globally.

The worst
The worst was the continued hike in the fuel price. The industry as a whole in the Middle East and specifically in the GCC countries is facing spiraling costs. From trucking costs, to aircraft costs, to the cost of construction of warehousing and distribution centres – all have taken a toll on the profits of the supply chain industry. However there is a silver lining and that is if the industry as a whole in the UAE and Middle East can manage its costs in times like this, it should be in a strong position to achieve a competitive position in the global supply chain and make reasonable returns.

Kamel El-Ghossaini,
Senior Manager – Supply Chain Solutions, SPAN Group

The best
As the leading provider of supply chain solutions in the ME region, SPAN has experienced during the past year, a significant increase in the number of customers who have adopted its best-of-breed technology and automation solutions. This reflects that companies are finally realising the value of technology in minimising labour cost and improving service levels. Furthermore, the emergence of new players in the supply chain management solutions market has helped prospects distinguish SPAN’s unique solutions and service offerings in a more objective way.

The worst
The recent global economic crisis has had a negative effect on the supply chain and logistics industries. This crisis will hold down customers’ expenditures which will bring about a challenging year to come for all players in the logistics industry.

Prakash Rao,
DGM Logistics, Landmark Group

The best
The supply chain is being increasingly recognised as a competitive factor across companies. Supply chain professionals are entering into the boards of various companies and educational institutes are placing special emphasis on supply chain and developing specialised courses for the same. There has also been substantial investment in logistics infrastructure across the world with a view to the future requirement.

The worst
The increase in crude prices adversely affected the end consumer in terms of inflationary pressures. All links in the supply chain from manufacturing to transport were adversely affected in terms of price escalations. The reduction in export benefits offered to Chinese suppliers has also pushed up the manufacturing cost index. Locally in the GCC, it was a very challenging year with double digit inflation and a shortage of road freight and warehousing capacity. The Ramadan season in 2008 was also adversely affected due to the Jebel Ali Port congestion with delays in upper gulf shipments. This created increased pressure on the already constrained road freight capacity in the Gulf.

Nimesh Parekh,
Director, Calipar Trading

The best The value and importance of different services (eg. 3PL, 4PL, areas related to supply chain and logistics) became very prominent to all companies (multinational or domestic) as other costs were increasing globally. The requirement of higher standards of service has increased where the companies are willing to invest more time and effort, which in turn means higher investment.

The worst The development of different logistics parks, export oriented units, special economic zones and logistic cities in different countries has been very slow and caught up in different political stages with respect to each country. There are many sanctions and development plans which were launched two years ago but the entire process has been slow. Further, the fluctuations globally have been skewed with respect to the costs of the services to be provided which has led to windfall gains and losses.

Flemming Ravnsborg Andersen
Director, East Arabia Cluster, Maersk Logistics

The best
Mirsal II by Dubai Customs and the e-token system of JAFZA – only through automation of the processes around entry and exit of the port can we continue to support the growth in volumes.

The worst
The closure of Port Rashid causing major constraints on in-land moves and leading to the ongoing congestion of Jebel Ali port. Delaying this closure by one or two years would have enabled Jebel Ali to have completed its Terminal 2 and the hinterland infrastructure (partly DP World/partly RTA).

Auriel Newman,
Executive Manager, South African Airways Cargo

The best
The best thing we ever did was go back into Kinshasa. This year, we made a phenomenal run in terms of developing that market.

The worst
We went through a really rough patch with our long haul freighter when the volumes subsided. The worst thing that could have happened to us was losing capacity. We lost an MD 11 on May 1, but with the subsequent economic conditions it might have been the best thing that ever happened to us. We managed to recover fairly quickly and now it has opened up a whole lot of other opportunities.

Joseph Ghazal,
Senior Vice President, Prologis

The best
The better understanding of logistics and supply chain have led companies to raise the bar of their requirements or to outsource to a specialist in order to optimise their operations. As a result, the region as a whole is on its way to catch up with practices from Europe and North America in order to be able to face the continued growth and challenges of the supply chain industry. Outsourcing operations or real estate is no longer a “taboo” as companies are focusing on their core business and using their capital to grow it. Also, sustainable development is finally directed towards the industrial projects. Being a leader in sustainable development in our field, we are delighted to see that more customers are sensitive to this issue, which will certainly differentiate the players in this market.

The worst
The proliferation of logistics parks, or hubs, across the region can leave one puzzled somehow. Of course, not all the locations are 100 per cent suitable from a supply chain perspective, therefore each developer and the end user should be very diligent in his assessment to ensure the success of the operations.

Sandeep R Prabhu,
Sr. Manager Supply Chain Management and Operations, Philips Consumer Lifestyle

The best
Being recognised as the heart of the business organisation and not as a back office.

The worst
There is not enough transparency on what is happening and will happen in the supply chain.

Fervez P. Puthiyapurayil,
Operations Manager, Imation

The best
Overall the government has been very proactive in ensuring and planning ahead in terms of dedicated areas or zones for facilitating warehousing and distribution services. One has been the operational start up of Dubai Industrial City, additional space being let into the market and emphasis on dedicated zones for specific product and food groups. The planned roll out of Dubai Logistics City this and next year will also decongest the Jebel Ali Free Zone area. But importantly the government continues it’s positive approach to ensuring more options for the growth of the industry.

The worst
The phasing out of services and closure of Port Rashid. For the last one and a half months Jebel Ali Port has been congested which is hampering container traffic inbound and outbound. A direct result of this has also been the surcharge by shipping lines in terms of cost and delays in meeting customer commitments. I feel this shut down should have been planned when Jebel Ali was close to being ready to take on the extra load.

Nathan Vellasamy,
Regional Manger, Air Capacity Sales Asia Pacific, DHL Express

The best
The best thing that happened was that we saw positive growth in the beginning of the year, which was carried over from 2007.

The worst
Due to the financial crisis which started in the US, the Asian economies are badly affected. The goods and services transportation is a key factor to see the GDP growth of any country. We did see in July, August and September a gradual reduction in transportation. I do think this is cyclical, and will probably last about a year.

IN DEPTH

Dr. Rajiv Aserkar, Professor and Vickram Srivastava, Student,
SP Jain Centre of Management, Dubai

The best
The best thing to have happened to the industry in 2008 is the launch of the new 53-foot containers by APL Logistics. Though the first container was delivered in November 2007, the real impact of the launch could only be gauged in 2008. The new containers are poised to change the way containers are moved around the world. In the first phase, the containers have been launched in the South China-Los Angeles service route of APL. The 53-foot containers have long been in use in the USA for intermodal transportation, but have not been deemed strong enough for rigorous sea transit. The newly designed containers are reinforced and have been specifically designed for this purpose. After extensive pilot runs, APL, is set to revolutionise the supply chain. The bigger boxes have 60 per cent more capacity than the standard 40 foot containers. The extra space allows shippers to consolidate more cargo into fewer containers. The growing business in Middle East with Dubai turning out to be a major hub, will soon see the new containers being shipped to Europe and Western markets through the Suez Canal. This will have major impacts on the industry. First of all, shippers can gain better cube economics using the bigger containers. Also a lot of cost can be eliminated in trans-loading expenses. Secondly, the new containers can hold more cargo. Two 53-foot containers can hold contents of three 40-footers. This will result in fewer containers to handle, fewer moves, better consolidation and collaboration across the supply chain. Finally, the environment will benefit. Using the 53-foot containers would result in more being shipped every container resulting in less trucks required, less moves resulting in lesser exhaust emissions and pollution.

The worst thing to have happened to the industry in 2008 was the sky rocketing fuel prices. Fuel prices shot up from around US$100 per barrel touching the almost US$145 mark in just around four months in 2008. This rising fuel price forced a lot of strategy change by companies to cope. Rising fuel prices meant companies could afford fewer moves of goods. With fewer moves of goods to avoid stock out, companies had to over stock. This led to an increased level of inventories lying in the warehouses and to match these increased level of inventories companies had to invest more. Hence a full vicious circle of cost cutting led to a new cost being incurred. The sub-prime crisis in USA didn’t help much to this cause. The depreciating US dollar value added to the woes of supply chain managers, who had a tough time managing the finances attached to their respective supply chains as the biggest consumer in the world went into a recession period. The economic slowdown of the US economy coupled with the rising fuel cost resulted in a double impact to the supply chain all around the globe. Logistics and transportation costs became the point of contention with companies. With the rising fuel cost, additional costs were passed on to the end user. This resulted in inflation and a rising cost of goods in the market. With oil and logistics costs higher than the past few years, we’ll see more efforts in trying to keep these costs down. Many companies will ‘slow down’ their supply chains by using less expensive and slower transport modes. This will of course mean that inventories will increase – especially in-transit and at justin- time sites. Shippers and carriers will tend to exit non-profitable service lanes and will continue to cut costs to stay afloat as with low volumes and reduced margins their cash flow will be crunched anyways.

AND FINALLY

Brian Shepherd,
Senior Vice President, Al Tayer Logistics

The best
All doom and gloom. It is very difficult to think of anything if you take the full year into perspective. Over the last two months, I would believe that the positive adjustment in the price of oil and steel/materials for building new facilities has helped to reduce costs in the short term. How long will it last?

The worst
The worst things to happen in 2008 included oil prices, Middle East port congestion,  and costs and building costs which have all seriously affected the cost of logistics and fuelled inflation.

With the abundance of heavy trucks on the GCC roads today, one rarely takes the time to consider the qualifications of these load hauling drivers. Before truckers receive the necessary category four license, they must partake in a rigorous seven week course in which they receive classroom instruction, testing, vehicle simulation and controlled and open-road driving lessons.

To date, the Emirates Driving Institute remains the largest and most successful driving institute in the Middle East. Based in Dubai, the 50,000 sq metre headquarters is bustling with aspiring couriers of cargo, both young and old. With an unquenching demand for certified heavy haulers in the region, the institute remains packed with applicants who are fully aware of recent trucker pay increases and job availability. Offering courses in heavy motor vehicles, heavy bus, light motor vehicle, motorcycles and forklifts, it seems as though anyone interested in attaining these abundant employment opportunities must come through EDI.

Additionally, the ISO certified institution retains close ties with The Motor Industry in the United Kingdom, The Institute of Advanced Motorists of the UK and the German Cultural Institute for Driver Education, and takes great pride in its reputation abroad.

I was fortunate enough to take a day course offered by EDI in heavy vehicle trucks and learned just what makes this course so renowned. My instructor, Khalid, was a well-built man in his late 30s and was as professional as he was instructive. By the
end of the day, I was required to have memorised the 19 elements for passing a driving test. This was no easy feat, however the elements’ usefulness remains unquestioned.

After our session in the classroom we were on to the driving simulators. I was amazed at the level of technology used as all monitors used were state of the art with up to the minute graphics translating to successful recreations of real life road conditions. The simulators were a favourite of the other students as well.

Finally, the time came where I could drive the big rig, with my instructor of course. Taking a drive around the enclosed track, the sheer mass of the vehicle quickly reminds me of the caution I must use. That, and Khalid sitting next to me with a keen eye on my driving (as well as any innocent bystanders).

After our session, I had a chance to ask Khalid a few questions about the trucking industry here. He was quick to attribute EDI’s rise in applicants to the UAE’s booming market and companies looking for qualified personnel. The labour shortage extends to certified heavy truckers as well and subsequently EDI’s applicants have indeed been steadily growing. Some companies have established contracts where their drivers’ education is paid for. However, more often than not, EDI’s fees are paid by the students themselves. This creates a level of stress on drivers, says Khalid, as they feel they must pass the first time because they cannot afford a second opportunity.

After a long valuable day at EDI, I can say I feel like a more astute driver. Though the chances of me getting on the open road behind the wheel of a 20-tonne hauler remain slim, I do have a new appreciation for those who do. And I still haven’t forgotten about those 19 elements.

Requirements: The minimum age for participation in the heavy vehicle course is currently 20 years old. Those interested in signing up must bring in their original passport with a valid Dubai visa, seven passport size photos, and a no-objection certificate (NOC) from their sponsor.

Those 19 elements: What you need to know to pass a heavy truck driving test:

1.  Vehicle starting
2.  Use of gear
3.  Proper stopping and parking
4.  Obedience to traffic lights, traffic
     signs and pedestrian crossing
5.  Applicant causing a serious
     danger (hazard)
6.  Precautions before starting the
     vehicle (seat belts)
7.  Use of clutch, accelerator, brakes, mirrors and hand brake
8.  Use of indicator, hand signals
    and horn
9.  Left turn, right turn and U-turn
10. Emergency stopping
11. Lane discipline and lane changing
12. Approaching junctions,
     roundabouts and traffic lights
13. Yielding to pedestrian crossing
14. Maintaining speed limit
15. Over taking
16. Maintaining safe distance
17. Ensuring that the road/
     roundabout is clear before entering
18. Control of the vehicle and
     attentiveness
19. Stalling

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

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

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

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

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

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

KS: Is this region frustrating to work in?

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

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

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

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

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

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

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

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

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

KS: Are things changing?

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

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

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

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

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

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

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

AT: They have nothing to lose then.

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

GL: I think so.

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

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

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

KS: So where do we go from here?

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

Dr. Saleh Moussa Al Taee, Secretary General, UAE Red Crescent Authority

While the UAE may be a small country, its Red Crescent Authority is larger than most other Red Crescents or Red Crosses.

“Our organisation is the second largest and most powerful in Asia,” says Dr. Saleh Moussa Al Taee, Secretary General of the UAE Red Crescent Authority (RCA), referring to the 185 other members of the Federation of International Committee of the Red Cross (ICRC). “We are also number four in the world, in terms of the amount of relief and emergency support we supply.”

The UAE RCA has activities in 135 countries and larger projects in 35 countries. “Our organisation not only does relief action,” explains Al Taee, “we also build cities and hospitals, amongst other things.” He estimates that the charity has touched the lives of “millions”.

Al Taee says the RCA’s biggest projects are in Palestine, for example, for the redevelopment of Jenin. “We built up the city completely, including 230 flats for the needy, as well as schools, hospitals and mosques.”

They also developed Sheikh Zayed City in the Gaza Strip. “Everyone is talking about problems in Gaza, but we have many projects there,” says Al Taee. “We have two hospitals, one city and we have a small, small clinic.”

But the Red Crescent helps more than Muslims. “We are not looking at the colour or religion or geographic area of the people we help,” he says. “For example, following the South Asian Tsunami, we worked in Phuket, Thailand. They are not Muslims, yet we built and bought many things for them.” He says they have even built Buddhist temples in Sri Lanka.

While most of the UAE RCA’s efforts have focused outside the UAE, Al Taee says they plan to start looking inwards as well. They will, for example, start offering their mobile open heart surgery team free of charge and work to increase health awareness in the country.

He says money for charity flows quite freely in the prosperous UAE. “We are lucky that our Chairman, His Highness Sheikh Hamdan Bin Zayed Al Nahyan, pays from his pocket. And his mother, Her Highness Sheikha Fatima Bint Mubarak is also with us.”

In fact, between 2002 and 2007 donations from wealthy individuals and the UAE government allowed the UAE RCA to spend over US$1 billion outside the country.

“You can buy five fighting planes with this money,” says Al Taee. “But we are saving thousands of people with it.”

Ramadan, being a time for introspection, for cleansing one’s soul and for peace, is also a time for giving. It is a month in which piety, asking for forgiveness and charity are advised in abundance. These are things to be done all year, but the month comes with a mission to make people mindful of these qualities.

The UAE’s Red Crescent Authority speeds up its activities of spreading cheer, peace and charity in Ramadan, but that does not mean they are idle at other times. Ramadan or not, their logistics office in Jebel Ali Free Zone is a full house.

And Fahad A Rahman Bin Sultan, Manager, Red Crescent Humanitarian Logistics Centre, Dubai, is at the centre of this.

But he’s not complaining. In fact, he might have more job satisfaction than anyone else in Dubai, as his days are full of stories of goodwill. “Working in charity, there is no pressure,” he says. “You do your job because you are driven out of the peace that comes from seeing someone in need happy. It’s selfish.”

“We are here because of the donors,” he continues. “There is so much good in this world, it cannot be expressed.”

His team starts preparing for Ramadan two months in advance. “Usually, we have some very rich people who approach us who want to have Ramadan tents providing free iftar daily for everyone,” he says.

Bin Sultan’s office then takes it from there, contacting restaurants and tent suppliers, scouting for suitable locations to set up the tent, as well as sources of electricity, furniture and carpets. When the Red Crescent has the final cost of the iftar, they contact the donor who provides the financial backing. An iftar meal for one person costs about AED15 (US$4). A tent generally feeds thousands daily.

“You don’t have to provide a tent, we are here for donors from all walks of life,” says Bin Sultan. “If you want to donate a meal for one person or 10, it is up to you.”

For the convenience of all, the Authority provides drop boxes at supermarkets and malls, so anyone can give whatever they are comfortable giving. At different locations volunteers collect money for iftar, zakat (financial support), sponsoring an Eid meal, or Eid clothes.

“Our government helps out a lot, too,” says Bin Sultan. “They’ve provided us with unlimited supplies of air conditioners and fridges to provide to those who need them to beat the summer heat. There are a lot of people who are not exactly needy but this kind of assistance helps. In the charity business, we have to be careful of recognising who the real needy person is, as a lot of people approach us. To establish the truth, we do our own research, of course.”

UAE Red Crescent Authority helps in times of crisis and provides general aid

The UAE Red Crescent also does work outside the UAE. “We have been given directives by the government to prepare to send supplies two months in advance, things such as dates to surrounding Muslim and non-Muslim countries such as India, Yemen, Africa and other Middle Eastern countries, as all have Muslim populations,” says Bin Sultan.

The Red Crescent charters planes in times of crisis, but also to transport Ramadan essentials. “Chartering works out to be a better solution for us rather than having our own air crafts,” he says.

What about unavailability of flights when a disaster strikes and there is a worldwide rush to provide aid to the needy country? “We do not wait,” says Bin Sultan. “The minute there is an appeal from a country, we move in any way we can. If there are no commercial flights available, then we send a few of our volunteers with cash to the strife-affected region. There we start buying the necessary items and distributing. Within three to four days when we get a flight available, we have another delegation go over with more essentials.” But they have a different modus operandi when the disaster struck country does not appeal for help. “Recently, when there was an earthquake in Sichuan, China, they did not appeal for three to four days,” says Bin Sultan. “In cases like this, we can do nothing. In crisis when countries don’t appeal, it could be because they think they are capable of handling the repercussions themselves or they are so overwhelmed they do not know what to do.”

Eventually, the Red Crescent approached the Chinese government with support and were accepted into the country. “The disaster-affected area was in the mountains so it was also a logistical nightmare to reach it,” says Bin Sultan. “The existing roads had collapsed.”

During the Southeast Asian Tsunami, the Authority was flooded with offers of support by UAE residents. Even people with very few clothes washed the few pieces they had, packed them and brought them to the logistics office to be sent to the affected areas, says Bin Sultan.

A shipping company offered its services free of cost, another company supplied around 75 to 80 containers and yet another offered its staff members to sort and pack all items to be sent. All this help resulted in about a 1,000 tonnes of aid.

Over the years, experience has led the Red Crescent team to keep warehouses stocked with essentials like non-perishable food products, mattresses, tents, blankets and to also have enough trained volunteers on their files. This prevents them from wasting time looking for supplies and manpower in times of disasters.

Bin Sultan says that the location of their logistics centre in Jebel Ali is crucial as it provides close proximity to all airports (approachable in about an hour). With Dubai World Central, things will get even better. The Jebel Ali office also provides close proximity to factories of essentials, making it easy to purchase large stocks. The same applies to their warehouse in Abu Dhabi.

HELP OUT

The UAE Red Crescent Authority accepts donations at any of their branches in all seven of the emirates. Those interested in donating their time can also fill in volunteer application forms.

www.log.ae

Pick up any major newspaper and chances are Iran is headlined, in not so pleasant terms, on the front page. With so much negative press about the Islamic republic’s ‘ambitions’ it is often difficult to decipher
any substantive, unbiased information on the country. Yet as one of the world’s oldest civilisations, most experts agree that Iran remains largely untapped potential. So what gives? Well, self imposed regulatory hurdles and crippling western sanctions aren’t doing its economy any favours, while the looming threat of war assuredly wards off any potential investors.

And while possessing 10 per cent of the world’s proven oil reserves, and 15 per cent of natural gas reserves, Iran’s economy remains predominantly government administered, though a more liberalised approach remains the topic of much debate.

Iran’s main port is Bandar-Abbas on the Strait of Hormuz. Other major ports include Bandar Anzali and Bandar e-Torkeman on the Caspian Sea and Korramshahr and Bandar e-Khomeyni on the the Persian Gulf

Consider that today, with a population of 70 million, more than two-thirds of Iranians are under the age of 30, and boast an 80 per cent literacy rate. But with the average salary just US$2,700 a year, many young Iranians are leaving for greater opportunities abroad. The subsequent ‘brain drain’ is not going unnoticed by the government. According to Manouchehir Kabiri, the Director General of Iran’s Management and Planning Organisation’s Commerce Department, Iran’s current Five-Year Economic Development Plan (2005-2010) hopes to create more opportunities for its youth, while opening up Iran to outside investment.

“The focus will be on expanding trade interaction with the global community and pursuing an active presence in international markets,” says Kabiri. “To achieve this would require raising exports substantially.”

Iran’s major trade partners include China, Germany, South Korea, Japan, France, Russia and Italy. From 1950 until 1978, the US was Iran’s foremost economic and military partner; thus participating greatly in the modernisation of its infrastructure and industry. After the Iranian Revolution in 1979, however, the US ended its economic and diplomatic ties, banned Iranian oil imports and froze US$12 billion of Iranian assets. In 1996, the US government passed the Iran and Libya Sanctions Act (ILSA) which prohibited US companies from investing and trading with Iran, with the exception of pharmaceuticals, medical equipment, caviar and persian rugs.

So just what is Iran producing for export these days? Petroleum and petroleum chemicals, automobiles, agricultural, utilities, pharmaceuticals, textiles, construction materials, metallurgy, armaments and electronics are recognised as the largest industries.

In 2007, Iran’s GDP was estimated at US$206.7 billion. In 2008, about 55 per cent of the government’s budget is expected to come from oil and natural gas revenues, and 31 per cent from taxes and fees. The service sector contributes the largest percentage of the GDP, followed by industry (mining and manufacturing) and agriculture.

“Pistachio and saffron are traditionally the main agricultural products sold overseas,” says Kabiri. “Also in recent years, Iran has secured a foothold in fruits, vegetables and flower markets.”

Determined to increase exports, Iran is seeking to better utilise its free trade zones. Approved by Iranian Parliament in September 1993, Kish Island, Qeshm Island and the Port of Chabahar are the only designated free trade zones, though many liberalised economic zones currently exist as well.

“So far, free trade zones have acted as import channels,” says Kabiri. “The Economic Plan tries to change that status and make their activities export-based and to aim for global industrial production.”

Pistachios and saffron are Iran’s main agricultural exports

With the abundance of free trade zones springing up throughout the Middle East, Kabiri acknowledges that competition for investment will be stiff.

“One has to admit that Iran’s free zones are not able to rival those in the nearby states,” he says.

“Performance of Iran’s free trade zones has an impact on social, political and economic parametres, which is not the case on the other side of the border. What the government has tried to do within the Economic Plan is to continue eliminating import incentives and push for trade liberalisation policies.”

On the domestic front, Kabiri says the priority is on improving the overall situation; i.e. regulating the domestic market on the one hand, and maintaining a well functioning supply of basic commodities on the other. The latter would need improving the subsidy distribution system to relieve the government of the huge financial burden on subsidy payments. Another obligation the plan places on the government is to provide economic justification for the pricing of basic commodities and public services.

“By offering modern trade services, the government hopes to win the confidence of foreign investors and open the way for foreign banks and insurance companies to set up branches in the free trade zones,” says Kabiri.

One central issue when debating Iran’s trade sector these days is joining the World Trade Organisation (WTO). Since 2005, Iran has faced resistance from the United States, consistently blocking any Iranian attempt to join the WTO, citing among other things, copyright infringements.

“Discussions about joining the World Trade Organisation are high on the agenda,” says Kabiri. “Officials and experts continue to advise against protectionist production policies which they say contradicts principles and guidelines of the World Trade Organisation.”

Yet, if Iran does eventually gain membership status in the WTO, copyright laws will have to be obeyed. This would require a major overhaul of business and trade operations in Iran, a change which many experts believe would be a price too heavy for Iran’s economy to pay at the present time. Still, Iran is hoping to attract billions of dollars worth of foreign investment while creating a more favourable investment climate, such as reduced restrictions and duties on imports and the creation of free trade zones like Qeshm, Chabahar and Kish Island. Time will tell whether Iran gets its wish.

So Iran’s desire for liberalisation and modernisation is apparent, but what about its infrastructure? Currently, it has an extensive paved road system linking most of its towns and all of its cities. In 2007, the country had 178,152 kilometres of roads, of which 66 per cent were paved. There are 55 passenger cars for every 1,000 inhabitants. However, one statistic you won’t hear the Iranian government praising is the rate of road accidents. Iran ranks first worldwide in terms of having the largest number of road accidents claiming 38,000 deaths in 2007. In fact, road accidents account for the majority of deaths in Iran and are perhaps one reason the government is eyeing rail transport as a possible solution.

President Mahmoud Ahmadinejad is acknowledging the need to further develop public transportation systems. As the average journey length currently for both passenger and freight is approximately 600 kilometres, the country remains ideally suited for rail development. To date, passenger tariffs are heavily subsidised and budgetary allocations for rail transport for 2008-2009 are poised to double. According to the Iranian government, the objective is to double its existing 8,300 kilometres of line. At the moment, the rail network is basically single track and there is substantial capacity shortage on several main routes, accentuated by inadequate levels of signalling. Only the Tehran area lines are double track including those going from Tehran to Mashhad and from Tehran to Qom. A programme of track doubling is in hand between Bafq and Bandar Abbas (613 kilometres) and all other routes remain under consideration. The government is financing rapid development of the rail system but rolling stock provision and managerial capacity has not kept pace with the growth inhibiting overall development. Not to be overlooked remains the lack of private investment coming in, compared to the likes of Saudi Arabia or UAE.

The country’s major port of entry is Bandar-Abbas on the Strait of Hormuz. After arriving in Iran, imported goods are distributed throughout the country mostly by trucks and freight trains. The Tehran Bandar-Abbas railroad, opened in 1995, connects Bandar-Abbas to the railroad system of Central Asia via Tehran and Mashhad. Other major ports include Bandar Anzali and Bandar e-Torkeman on the Caspian Sea and Korramshahr and Bandar e-Khomeyni on the Arabian Gulf.

Dozens of cities have airports that serve passenger and cargo planes. Founded in 1962, Iran Air remains the national airline, operating domestic and international flights. All large cities have mass transit systems using buses and several private companies provide bus service between cities. Currently, Tehran, Mashhad, Shiraz, Tabriz, Ahvaz and Esfahan are in the process of constructing underground mass transit rail lines, though the dates for completion are yet to be determined.

For all of Iran’s ambition, the future will be largely determined by external forces. Most notably, war. However, Iran is determined to maintain course, regardless of the potential consequences of her actions or ‘ambitions’. Time will tell whether Iran’s position within the global marketplace will improve, or be left behind.

BY THE NUMBERS

In 2006 Iran had more than seven million vehicles, mostly manufactured or assembled domestically.

Iranian trains operate on 11,106 kilometres of railroad track, though plans call for this to be doubled.

Agriculture contributes to 11 per cent of Iran’s gross national product and employs a third of the labour force.

www.log.ae

UNDER PRESSURE

The United Nations has imposed three rounds of sanctions on Iran over its refusal to halt uranium enrichment, a process the U.S. and others fear it will use to produce nuclear weapons. The sanctions bar financial dealings with 35 companies and impose travel bans and other restrictions on 40 individuals. The sanctions also prohibit shipments of material to Iran that could be used for its nuclear and missile programmes.

U.S. sanctions are stronger. They bar weapons transfers and dealings with a wider range of companies particularly Iran’s top banks although they don’t seek to halt all trade with Iran. In fact, U.S. exports to Iran have increased dramatically during the Bush administration, from US$8.3 million in 2001 to US$146 million last year.

Source: US Treasury Department

www.log.ae

COLD STORE COMPLEX FOR GULF WAREHOUSING COMPANY IN DOHA

Client:                      Gulf Warehousing Company (GWC)
Consultant:               Gulf Engineering & Industrial Consultancy
Contractor:               Amana Contracting & Steel Buildings
Location:                  Doha Industrial Area
Completion Date:       December 2005
Duration:                  8 months
Built-Up Area:           25,000m2
Total Area:              47,300m2
Scope:                    Design-Build

Situated on 47,300 square meters of land, this 25,000 square meters distribution facility is designed to contain over 43,000 pallet positions. The complex is a high-bay facility with an internal very narrow aisle (VNA) racking system and state-of-the-art material handling equipment with a useable height of up to 13.5 meters. The entire facility was designed and constructed in less than 210 days.

The facility offers a number of storage environments including:

• 4,200 pallets of frozen storage (-30ºC to -20ºC)
• 4,200 pallets of chill storage (0ºC to 12ºC)
• 12,604 pallets of A/C storage (12ºC to 18ºC)
• 22,776 pallets of ambient storage

The complex is also equipped with a positive power air system to significantly reduce dust contamination and humidity levels and a state-of-the-art security system consisting of full CCTV coverage and card-swiped access gates.

Supplied by Amana Contracting

Global economic growth has become dependant on the clean-burning LNG

Setting sail in January 1959, a converted World War II freighter traversed the Atlantic Ocean, fully laden with liquefied natural gas (LNG). Billed as the world’s first LNG tanker, the Methane Pioneer would carry seven additional loads from Louisiana, United States to Canvey Island, United Kingdom, chartering a course for all future natural gas transports.

In what is today a multi-billion dollar industry, global economic growth has become dependant on the clean-burning fuel. Used for heating and cooking in homes, as well as the manufacture of fabrics, glass, steel, plastics and paint, natural gas maintains a reputation for burning cleaner than other fossil fuels, such as oil and coal, and produces less carbon dioxide per unit energy released.

LNG is the condensed form of natural gas. In fact, it is principally used for transporting natural gas to markets. More than 200 ships carry over 150 million tonnes of gas each year.

While it takes up about 1/600th the volume of natural gas in a normal state, LNG proves far more efficient for transporting natural gas long distances. Often termed the ‘floating pipeline’, LNG’s supply industry has logged 50,000 plus voyages with no major accidents.

Once ashore, LNG is re-gasified and distributed as pipeline natural gas. It remains odourless, colourless, non-corrosive, and non-toxic, and when vapourised, burns only in concentrations of five to 15 per cent when mixed with air. Contrary to popular belief, neither LNG, nor its vapour, can explode in an unconfined environment.

“There are statements likening LNG ships to floating bombs,” says Bill Wayne, General Manager of Society of International Gas Tanker and Terminal Operators (SIGTTO).

Left: Bill Wayne, General Manager, Society of International Gas Tanker and Terminal Operators (SIGTTO) Right: A LNG tanker

“This is nonsense because, while clearly flammable, the rate of release of energy, in the event of ignition of a vapour cloud from spilled LNG in order of magnitude, is lower than that for high explosives (TNT) or nuclear bombs. The blast potential, hence damage, remains a function of rate of release of energy,” says Wayne.

“There is an issue behind all this because the popular misconceptions are frequently raised in planning processes and not all planners know better.”

Attending an LNG conference, one cannot help but notice the theme that seems to permeate throughout the entire logistics industry: staffing shortages. In the case of LNG, the unprecedented global demand has been accompanied by a drastic increase in ship construction, subsequently creating a need for more qualified personnel.

“Perhaps the biggest concern of all is will there be enough skilled manpower to handle the booming future ahead,” says Nigel Carden, Deputy Chairman, Thomas Miller P&I.

“The future poses new problems, but we see no reason to suspect those manpower problems can’t be resolved,” says Carden.

“The simple answer is to train, train and train,” says Wayne, who also thinks the foreseeable shortage will be overcome. Though as time progresses, new concerns will inevitably arise.

“There are further issues, like how to take a person who has completed training and develop them into a fully competent officer. There has to be an element of experience which only comes with time on board. Having trained and developed a fully competent ship’s officer, there are then issues around retention which need addressing,” he adds.

In 2007, the world production of LNG stood at about 170 million tonnes. When Qatar completes their current processing upgrade, the Middle East will be contributing around 50 per cent of the world’s demand. A staggering figure. This does not account for Egypt, who is currently supplying 12 million tonnes, and has a further five million tonne production capacity planned, as well as Yemen who will begin turning out 6.8 million tonnes by 2009. As demand grows, so too must supply and the Middle East is ready to position itself accordingly on the global stage. How important, then, is the region to the current and future success of LNG supply?

“Absolutely essential,” says Wayne. “For the future health of the industry, it is vital that all the existing capacity continues to operate reliably and the new capacity comes smoothly and on time.”

So just how regulated is the LNG industry? Not very, say most insiders, as regulation remains pretty minimal. Could the global trade stand to use more?

“The LNG industry is relatively lightly regulated – in a way, this is a measure of its success as it is based on a record of safe and reliable operation,” says Wayne.

“Perhaps one area worthy of looking at is that relating to treatment of seafarers in ports and by port states. There is a tendency towards criminalisation of response to issues which should be resolved by civil law.”

One such example would be the imprisonment of the master of the VLCC Hebei Spirit in December. The oil tanker, inadvertently struck by a barge off the coast of South Korea, subsequently spilled 11,000 tonnes of her crude in the Pacific. As it was later acknowledged, the fault was not of the tanker, or the master. Wayne feels the criminal-civil approach to the problem is worthy of international attention and perhaps regulation.

“Another aspect is the prevention of seafarers going ashore for R and R (rest and relaxation), usually the International Ship and Port Facility Security (ISPS) code is used as an excuse. These issues also link back into the problem of staff shortages.”

How it works

The liquefaction of natural gas involves removing components such as dust, helium, water and heavy hydrocarbons, which can cause difficulty downstream. It is then condensed into a liquid at close to atmospheric pressure (maximum transport pressure set around 25 kPa (3.6psi) by cooling it to approximately −163 degrees Celsius (−260 degrees Fahrenheit)). The reduction in volume makes it much more cost-efficient to transport fuel over long distances where pipelines do not exist. Where moving natural gas by pipelines is not possible or economical, LNG can be transported by specially designed cryogenic sea vessels or cryogenic road tankers.

Source: SIGTTO
www.log.ae

What
LOG.Middle East’s first round table
Who
Sujit Subramanian, General Manager, Middle East & Africa, Lufthansa Cargo Charter, Dirk van Doorn, Middle East Business & Product Development Manager, DHL Express, Bill McKnight, Transport Consultant, A.T. Kearney, Kathryn Semcow, Editor, LOG.Middle East
Why
To answer the question, “How are you dealing with rising oil prices?”
Where
Radisson Media City, Online Room
When
Monday, June 16, 2008

Left: Dirk van Doorn, Middle East Business & Product Development Manager, DHL Express, Sujit Subramanian, General Manager, Middle East & Africa, Lufthansa Cargo Charter and Bill McKnight, Transport Consultant, A.T. Kearney

KS: Let’s start with the service providers. Dirk, how are fuel prices affecting your business?

DV: We’re taking a bit of a hammering on that side, but to some degree we’re passing a lot of those increases in price back to the customers as best as we can. We have the Rotterdam Fuel Index, which we link directly back to the customer by saying, “This is the rate per kilo, or the cost for the aircraft,” and then quote the rate. The Rotterdam Index is a floating surcharge and is public information, so no one is trying to pull the wool over anybody’s eyes.

The other part you’re going to start seeing is airlines working much more closely together. I think the era of big 747s going east and west, north and south, and everyone having their own plane with their own flag is going very quickly. For example, in the US, DHL has just made a huge announcement that we are getting rid of all our aircrafts and outsourcing them to UPS, primarily for domestic inter-US linehaul. You can’t have two or three big carriers all travelling in the same direction, and not everybody filling up their aircraft, especially at the rate which fuel is going up.

SS: Dirk, your core business is the courier business. I come from the airline side, so for us when we talk about fuel, it can range anywhere between 40 per cent and 60 per cent of our operating costs. Our customers are forwarders, and forwarders know the business, they know how airlines operate. Still, it becomes all the more difficult for us to pass on the fuel surcharge increase to our direct customers. But Dirk, is it easier for you as a courier company to pass on the increase to your end customer?

DV: It doesn’t hurt that your CEO had an interview in the newspaper yesterday, saying that Lufthansa managed to hedge its fuel prices between US$80 and US$83. If I were a freight forwarder, I would be pointing that out to you right away.

But, to answer your question, you’re right. To a large degree, customers accept that when they read in the press, or hear on the business channels, or read LOG.Middle East magazine, that fuel is going up, and they accept that there is going to be a repercussion somewhere down the line.

SS: You mentioned hedging, which is true, everybody hedges fuel by buying at today’s price and saving it for the future; but airlines also have to pay a huge fee for hedging. If I say I want to buy fuel for February, 2009, at a price of US$85 per gallon, I pay a premium to that. This is a big risk from the airline’s point of view. It also means the airline needs to have that much financial strength. Only the top five airlines can afford to do fuel hedging. So many of the small airlines are disappearing before you know it.

DV: There is going to be a lot of consolidation in the industry. We’re already starting to see a lot of that in the passenger market. I think the cargo market is not far behind. You will either die or you will be bought. In the US market, they’re going to feel the biggest pain.

BM: They are well on their way already. If you add up the announced capacity reductions between now and the end of the year by United, American, Continental, Delta and the other American airlines, you are basically taking out the equivalent of an airline. That is like a major US airline coming out of the marketplace.

This is a horrible situation, not only for the passengers, but for the shippers as well; as the reduction in capacity gives the airlines pricing leverage.

The problem is, even when you take this capacity out, it still doesn’t get you to profitability. All of this capacity reduction is like putting a bandaid on major surgery.

DV: In terms of this region, I think the Gulf market will only become more and more difficult. Everyone wants to play in the Gulf, but the Gulf is only so big. A lot of guys are trying to come in, but I’m not sure everyone is going to end up making money.

SS: We see a lot of forwarders consolidating, and I think we will start to see this on the airline side soon.

BM: It’s hard to imagine exactly what the solution is. What the airline industry is facing right now is basically the result of the western world failing miserably to have an energy policy, globally or internationally, that works. This situation was not that hard to predict.

DV: One thing we’ve started to do is have discussions with our customers about how urgently they need their delivery – can their next-day delivery be deferred? The moment the word ‘deferred’ comes into the equation, you can actually transfer the delivery from air to road, where clearly the operating costs are reduced. DHL Express has built a huge road network in the Middle East, to some degree at the expense of our airline. This network, to an extent, is actually mitigating some of the cost increases.

KS: ‘Fuel efficiency’, what are the possibilities? Is this a buzz word, or does technology make a difference in any of this?

SS: To a large extent, yes. If you compare the aircraft manufactured by Boeing and Airbus 10 to 15 years ago, to the aircraft they are building now, in terms of fuel consumption per hour, you will see a vast difference. Fuel efficiency is the deciding factor today in the airline business. But, again, it is a chicken and egg scenario. Only the airlines who have the money can buy these aircrafts, and they will keep getting stronger; and the weaker airlines will settle for the second-hand planes, and keep losing money.