If you refer to Ramon Thoms as a software provider, he will likely get offended. While  his company sells the highly popular LFS 400 warehouse management software, he describes his team more as consultants than salesmen. “We are not just selling a software,” says Thoms. “We are selling a complete solution. We begin with consulting and planning of warehouses, we are training and educating people, we are recommending warehousing material, we are calculating the demands and quantities of devices.” On his visits to customers and potential customers, he often sees areas in which they could improve. Often, he offers the following advice:

Ramon Thoms

1. Focus on processes
Always concentrate on the process itself, not on technologies, not on pricing. Analyse the processes that you want to establish in your warehouse. Do not analyse them only for the next 12 or 24 months. Take a wider look into the future. Do you want to grow? Do you want to add some brands? Do you want to add some new suppliers? Try to think about this. The process within the warehouse defines how many people you need to hire to run the operation, how high your costs will be and how efficient the complete complex will operate.

2. Try voice picking
Pick-by-voice technology is well established in the rest of the world, meaning Asia, Australia, Europe and North America. In Africa and the Middle East, however, labour is cheap, and it is less expensive to hire one or two more staff than to purchase a pick-by-voice terminal.

But, customers from other regions that come to the Middle East as the future central logistics hub do ask for this technology because it offers transparency, reduced errors, high worker security, high performance and efficiency. An employee can use pick-by-voice technology even while driving a vehicle, because he has his hands and eyes free. Pick-by-voice technology is highly innovative, and something logistics providers should consider.

The technology is also ideal for a freezer environment, where workers have to wear thick glasses and gloves. Even if they have paper, they cannot use a pen because the ink can freeze. They have to use pencils. But we all know that if you write with a pencil for more than 15 minutes, it will go dull, and at the end of the page no one will be able to read your writing any more. With pick-by-voice you can wear the sensor over your cap. You have your hands free, and you have your eyes free. The system tells you to go to shelf one, bin number five. It’s very easy and the pickers in the warehouse like it.

The Middle East is five years behind Europe in terms of logistics standards. Five years ago voice picking was new in Europe, innovative companies were investing money in it and it was expensive. Now, you can buy voice terminals from each and every IT company. It is a well-known technology.

Awareness is rising here, however. The EMKE Group’s Lulu Hypermarket chain will be implementing pick-by-voice with us very soon. I believe Choitrams supermarket is already doing it in Saudi Arabia as well.

3. Use pick-by-light wisely
Pick by light is a high performing method of picking goods, but very un-flexible. Let’s say I shift my goods from warehouse location ‘left’ to warehouse location ‘right’. With traditional manual picking it is easy to send my picker from left to right. I can shift my goods as per my requirements. With pick-by-light, however, I have to dismantle the lighting rack and erect it somewhere else.

If you have highly valuable goods and the number of items and the items themselves will not change, then nothing else is faster or better than pick-by-light. Cigarettes, for example, are an excellent product for pick-by-light, because the size of the boxes never changes.

But, if you need a flexible environment – if you have changing products, changing quantities, changing bin sizes and locations, and changing handling units – pick-by-light is not for you.

4. Pick in multiples
On a visit to a prospective customer’s facility, I recently witnessed something very disturbing. A worker went to the racking to pick a box of corn oil on his pick list. When he returned, his new pick list also called for a box of corn oil. His visits to the same warehouse location were only minutes apart. With the correct warehouse management system this will not happen. An intelligent system will tell you, “If you go to pick corn oil, pick two boxes.”

A multi-pick trolley is also highly useful for consolidating orders. If you have a supporting trolley that you can push around the warehouse, with six, eight, even 10 of its own bin locations, you can pick up to 48 orders at the same time.

5. When purchasing warehouse management software, choose a
well-known brand
Many companies in the region avoid using the big software names. They have designed and programmed a solution in their own office or garage that is okay from their point of view. But as the Middle East wants to be the central hub of the world in terms of logistics, these companies need to follow international logistics guidelines. For example, Sony is distributing from Asia to Europe and North America, and if it wants to distribute through the Middle East it will expect the same logistics standards as it already has existing in Europe, Australia and North America. There, local knowledge ends and our knowledge begins. We can help these logistics companies to grow and be ready for international customers.

6. When designing your warehouse, involve a consultant from day one
Consultants like us can advise you and save a lot of money and hassle afterwards if you give us the chance to review plans made by architects. An architect may build a beautiful warehouse, but whether this warehouse matches the requirements of the customer is a different story. We just had a customer hire us to review a brand new warehouse in Jebel Ali and it was a complete mess. There were pillars behind doors, and you could not drive forklifts or unload containers because there were steel pillars supporting the ceiling and wall.

Rack suppliers are not the right address for this. Rack suppliers sell steel, and most could care less about processes and picking products. They don’t care, they just sell racking.

7. Increase dialogue between middle and upper management
Business here in the Middle East is interesting and challenging. There is a lot of potential in the market, but customers or managers in certain positions are afraid of making certain decisions because they might make a wrong one. This is preventing the region from growing and innovating in terms of logistics.

I think the problem lies with the way the decision-makers think and interact with lower positions. Upper management is receiving feedback from middle management who may be afraid to take risks or express their opinions. Encouraging the decision makers to think longer than their table is deep is the challenge in the Middle East. If they look not only left and right, but also to the front and back,

 
A warehouse management system (WMS) provides a set of procedures that are computerised and automated to handle the end-to-end warehouse operations right from the receipt of goods until delivery to the destinations. It provides a logical flow and represents the physical activities of a warehouse in managing the stock of goods. It covers all the operations which are receiving, put away, order processing, order filling and shipping. A WMS can be stand alone system software or a part of an enterprise resource planning (ERP) system. The WMS market is maturing with a number of players entering the market. Though this competition is healthy in terms of development of advanced technologies, it is difficult for the customers to understand the various new features being added to the WMS and select the most appropriate system to suit their needs.

While a warehouse team may appear to operate ‘just fine’ without WMS, working with unwritten rules and unarticulated processes; WMS can help systemise these processes, ensuring that the entire team is operating at maximum efficiency. It can also provide measurements key indicators such as timeliness, productivity and accuracy.

Need for WMS
Since warehousing is an important function which interfaces manufacturing and retailing, it is essential to have a system which optimises cost without compromising on the service level. A WMS system is necessary for the following reasons:

- To maintain an optimum level of inventory
- To reduce labour costs
- To optimise warehouse storage space
- To increase service levels
- To increase inventory accuracy

A WMS helps in managing inventory on a real time basis and with the advent of technology, the system can help a company towards a more paperless system. It is increasingly interfacing with RFID, bar codes and automatic storage and retrieval systems to offer warehouse management solutions.

However the need for WMS should be justified by the volumes and sales value since purchasing a WMS programme involves a substantial investment. There will be high costs incurred initially, for example for set up and installation, as well as a team or even department to manage information systems. The returns can be seen when labour costs are saved, inventory accuracy is improved, service levels are enhanced,
warehouse space is optimised and inventory quantity is minimised.

Warehouse operations
The various steps involved in the supply chain process are receiving, put-away, order processing, order filling and shipping. Each process has its own scope for improvement and requires well-defined key performance measures to identify the areas of improvementon a continuous basis.

Receiving
The receiving process has the following steps:
- Create appointment
Create an appointment for the confirmed purchase order. The appointment
will have details such as trailer number, scheduled date and time, and gate number.
- Finalise appointment
When an appointment arrives, it is said to be finalised. The purchase order (PO) for that appointment is frozen and arrival date and time are recorded.
- Match actual received quantity with ordered quantity
In case of shortage:
1. If the order is for items to be stored inside the warehouse, continue with step 3.
2. If the order is for items to be cross-docked, check if the PO has stock for more than one store. When the PO is for multiple stores, the shortage quantity has to be allocated to stores based on a fair algorithm.
3. The quantity can be apportioned if all stores are of equal priority. If there is priority assigneds, an order can be fulfilled as per the store priority.
- Create a discrepancy report When there is discrepancy in the received quantity, generate a report which has the shortage or overage quantity along with the item number, vendor number and appointment details.
- Create container IDs
Generate a container ID for every container received. The container ID can be an intelligent number with details such as item number. If your WMS imposes the constraint that one container should have one item only, dummy container IDs can be created for system sake and one container ID can be mapped to child container IDs.

Put-Away
Put-Away covers identifying the right slot for the pallet and moving the pallet to its slot. The steps are as follows:
- Identify slot
Slots should be classified into prime and reserve. Prime slots are pick slots and reserve slots are used for storage. When items are received, they are generally in full pallets. They should be put on the reserve slots. For every pallet, a slot is selected based on the space availability and it is within the specific temperature
zone. In case of cross docking, the pallet is put away in the shipping dock. Each store will have a slot in the shipping dock where all the pallets
for a store will be consolidated to load into the truck.
- Move the pallet to the assigned slot

Order processing and order filling
Order processing is where the picking instructions are generated by the system.
It covers the following steps:
- Allocate quantity
- Create waves
- Release orders for processing
- Generate picks
- Generate order filling instructions
- Perform order filling

Shipping
Shipping includes the following:
- Validating the orders
- Packaging of goods into containers
- Preparing documents such as shipping papers, packing lists, container labels and bills of lading
- Sorting the container by destination
- Loading the containers into trucks
The following are some of the key performance indicators for receiving, put-away, order processing and order filling, which are incorporated in the WMS to measure the efficiency of a warehouse. The metrics are framed for a day’s values. The table opposite demonstrates how they are calculated.

Receiving
- Delivery
Delivery performance is measured by the percentage of appointments received fully. This is calculated by dividing the number of containers actually
received by the total number of containers scheduled to be received. This can be calculated for every item or store and in terms of measurements such as volume and weight, instead of containers. Another way of measuring
this is by finding the mean square deviation of the expected quantities from the actual quantities.
- Timeliness
Timeliness of receiving can be measured through the percentage of appointments
received on time. This is calculated by dividing the number of appointments arrived on time by the total number of appointments. It can also be measured through the mean square deviation of scheduled versus actual time received.
- Productivity
Productivity of receiving can be measured using the number of containers
received and unloaded per unit labour hour. This productivity can be compared with standard productivity. The formula for this measurement involves dividing the number of containers received by the number of labour unit hours worked.
- Efficiency
Receiving efficiency can be measured by dividing the time taken to process an appointment by the standard time it takes to process an appointment.

Put-Away
- Accuracy
Put-away accuracy can be measured through the percentage of pallets put away in the correct slot. This is calculated by dividing the number of containers put away in the right slot by the total number of containers put away.

- Accuracy of WMS
Accuracy of the put away in WMS can be measured by the percentage of slots correctly identified by the WMS compared to the total number of slots put away
- Utilisation
Utilisation can be measured by the percentage of space utilised in the warehouse.
This is calculated by dividing the space utilised in the warehouse by the total space available for storage.
- Productivity
Put-away productivity can be measured by calculating the number of containers put away per unit labour hour or machine hour.
- Efficiency
Put-away efficiency can be measured by comparing the time taken to put one container into its slot and the standard time it takes to put one container into a slot.

Processing and order filling
- Service level
Service level can be measured through order fill rate. This is calculated by dividing
the number of orders fulfilled by the total number of orders received.
- Efficiency
Order processing efficiency can be measured by comparing the average time it takes to fulfil a day’s orders to the standard time it takes to fulfil and order.
- Productivity
Order processing productivity involves an examination of the number of orders
fulfilled by each worker per hour. It is calculated by dividing the number of orders fulfilled per unit of labour per hour by the standard number of orders that can be fulfilled per unit of labour in one hour.

While the Middle East certainly offers outstanding logistics and transportation infrastructure, its distribution centres play a key role in its bid to become a logistics
hub. Proper warehouse management is therefore essential to increasing standards and efficiency in the industry as a whole. With the growing market, warehouses are becoming bigger and warehousing operations are becoming more challenging with increasingSKU volumes. Technology can help us to overcome these challenges with WMS.

Dr. Sabri Hamed Al Azazi, Chief Information Officer, Dubai Holding
“From a logistics and supply chain perspective, you cannot find a better technology to help you. In a warehouse, just by scanning the air with an RFID reader, you can always find the item that you are looking for amongst thousands of other items. Your partners, if they have a common system, will also know the status of the good – when it arrives in the warehouse, how long it takes to process. I haven’t seen any technology that can support you like RFID. RFID is also becoming cheaper. The price of passive tags has dropped to 40 cents each and active tags now cost around US$1. The hardware for RFID is very inexpensive. The integration, software and implementation, however, might cost you. If you’re a company with a large number of legacy systems and you need to link all these business support systems to the RFID system, that part is the expensive part. If you want to do a lot of customisation, that’s also expensive. But a normal, vanilla installation
is not costly at all. Cost is not an obstacle. The greatest challenge that RFID faces is whether or not people will accept it.”

Richard Bell, General Manager, RHS Group Logistics
“For us, RFID is great. It saves a lot of manifest reporting. How can you not believe
in it? From a logistics provider’s perspective, it provides a huge benefit. It is hugely time-saving, incredibly accurate and almost foolproof. I suppose as RFID becomes less expensive we will all be using it. We will certainly embrace it.”

Julian Sperring-Toy, Business Director, SICK Automation
“I’ve been in the logistics technology business for about 16 years now. When I joined, RFID was the ‘next biggest thing’. But I’m still waiting for it to be the next biggest thing. Every single large scale RFID trial or implementation has failed. If you look at Walmart in the United States, RFID didn’t work at the level they were expecting it to; and the same thing happened with Gilette. The United States Department of Defence – that experience worked – but they were using it on much more high value pieces of equipment. If you’re using RFID to track a very high value piece of equipment, then the cost of integration is worth it. If it’s a piece of luggage where the information is critical, then RFID is absolutely worth the integration cost. If you’re going down to case level or pallet level – say a case of razor blades – it’s absolutely not worth it. Until the price of RFID chips come down massively to equal the price of a barcode, I can’t see it ever happening.”

Ramon Thoms, Regional Manager, Erhardt + Partner Solutions
“RFID is on everybody’s tongue, but no one really knows what is really behind this technology. There is no international standard. Right now, if you invest in RFID, it is only an island solution. RFID tags that you can use in the UAE might not be readable in Europe, Asia, Australia or the United States. It’s very specific, it’s very limited in its ranges. We at Erhardt + Partner Solutions are an innovation leader in Europe. We are always on top of the latest information thanks to our link to universities and researchers. But, to be honest, we only have a few customers that do use RFID right now to support only parts of their processes, for example an insurance company identifying its contracts. This is an island solution and the customer knows it is an island solution. It is an internal solution for the customer. He is not able to share this information with others.”

The oil field is a complex network of nodes with the ultimate objective of extracting, processing, and delivering hydrocarbons from source (ground) to destination (consumer).

This is a simplification of an intricate supply chain that provides a very unique set of challenges for a ‘delivery network’ that is dependant of people, products and processes for its success. Ultimately, without the right people, performing the appropriate processes, using the proper products, the delivery network fails.

For example, on an oil platform, if a tool is not available to perform a particular process, then this tool must be procured or the operation cannot be performed. Such an event, or rather lack of it, can prevent drilling activities from continuing.
The ‘tool’ can be a stud-tensioner used during the handling of risers, a tubular
pipe used for drilling, or any piece of equipment that is required to perform a particular task on a platform.

In some cases rather than a tool or piece of equipment being unavailable, it is unusable. For instance, when fracing (an activity performed to increase
or restore hydrocarbon output from the formation), field products used in the process require frequent servicing cycles. If field products are used excessively without servicing they risk structural failure. These field products with attributed servicing dates are then rejected for use and must be sent back for servicing. Worse yet, those that are not identified as ‘unusable’ are used in the field and create a hazard for personnel and the operational itself.

Finally people, are the most important component of this network. A person walking across an oil field platform, retrieving ‘tools’ or performing ‘processes’ is a very dynamic asset that requires the utmost attention. In the case of an emergency on an oil platform, personnel must be evacuated in what is typically called ‘mustering’, an assembly of the staff at a particular location. With some platforms capable
of housing several hundred people, even a simple assembly of people can become a difficult task to manage.

The same fundamental people, product, and process subject matters are prevalent across every aspect of the oil field supply chain, across every field product that is used and with every staff or visitor to a facility.

Data collection using Radio Frequency Identification (RFID) technology, the fusion of this data to activities, and the interpretation of this data through Business Intelligence (BI) application systems, delivers the necessary framework to control the people, products, and processes within the oil field supplychain. Furthermore, the complexity of the assets when it comes to orientation and assembly, the accumulation of mud and dust on the products, the shifting of the product through various stages of ownership, and the high value of some of these assets, validate the need for RFID to be the data collection technology of choice.

Now that we understand the technology, it application uses, and its value to the oil field, let us take a look at a particular case study at a glance.

CASE STUDY
Company Type: Integrated oil producer
Location: United States/Gulf of Mexico
Application Type: Using RFID to control field product movement from distribution yard to offshore platform

The company stages items that include risers, bushings, stud tensioners, running
tools, and other field products across its terminal yards. Upon demand these components are loaded onto barges and moved into the sea port, for preparation to be shipped to offshore rigs. The long-term objective of this system is to RFID tag all field products moving through the supply chain and develop an underlying software system or extend the existing system such that it can identify and locate these products, as well as providing information on the maintenance and repair, and operational time of each product on a one-on-one basis. The approach was as follows:

1. Scope: Identify all the field products that are required and/or auxiliary to the riser and riser assembly/disassembly.
2. Process analysis: Understand the types of processes that are associated
with a selected field product as it moves through the supply chain.
3. Handling process: Understand the manipulation of the field product during
its movement throughout the supply
chain as a means of understanding what potential abrasions can occur during its handling.
4. Value requirements: Determine the functional needs of both the software system and the tagging and reading locations.
5. Process analysis mapping: Using the data gathered during the ‘value requirements’ and ‘business process analysis’ steps perform basic business analysis using business process and performance analytics engines.
6. Stress Analysis Mapping: Using the data gathered during the handling process analysis in conjunction metallurgic and mechanical variable elicitation and testing, simulate an engineering analysis on the underlying field products using a component design/modification via CAD.
7. Solution and system design: Consolidate all the process and handling analysis data to determine the optimal RFID hardware selection and RFID read locations in addition to the integrationpoints to the software system.
8. Deployment: When requesting a field product, a shipment request form is issued to the terminal. Items are located through a web-based application which provides quantity, bin location, assigned field and other related data. Items are loaded into shipping containers and are validated using either mobile RFID readers or fixed RFID readers, depending on location. During the final loading process, items are hoisted onto a barge. On arrival at the seaport, items are unloaded and scanned into the system using a fixed RFID reader system. They are staged temporarily until they are loaded on a vessel for their designated field location. Upon loading, they are scanned once again using a fixed RFID reader setup at each docking bay.

On arrival at the rig, items are hoisted onto the surface of the rig and stored in inventory designated areas. They are scanned on arrival using mobile handheld RFID readers. Some items are used only on the rig platform for the assembly of risers; other times, namely risers are lowered sub-sea. These are scanned at the borehole using a fixed RFID reader.

Conclusion
The upstream, midstream and downstream operations of the oilfield are the conduit of hydrocarbons from a reservoir to the consumer. Each of these sub-units contains a diverse ecosystem of companies that explore, drill, separate, refine, transport or consume hydrocarbons or their derivatives. Assuring that the delivery network functions efficiently entails managing field products and staff to perform various activities. These activities can include the use of field products, maintenance and repair of field products, movement of field products, allocation of staff to particular jobs, and the safety and security of field products and staff. The oilfield demands a system that can manage these assets and personnel and achieve corporate objectives, such as minimising time-to-total-depth, reducing costs of transport, increasing reservoir output and improving safety protocols. To achieve the capacity to deliver this business intelligence, data must first be collected at the ‘operational edge’.

Edge data collection is facilitated through automatic identification (AID) technologies that include barcoding and RFID. RFID takes precedence to barcoding technologies within the oilfield space because it is able to deliver hands-free data collection
and rewritable field product identifiers. These two basic capacities of the technology enable faster and more accurate processing of field products and staff. Whether the objective is to locate a field operative on an offshore oil rig, perform a maintenance inspection of a pipeline in a refinery, or use a stud tensioner to assemble a riser, RFID technology provides groundbreaking methods of streamlining these processes.

As the technology continues to evolve, standards emerge, and success stories accumulate, this ‘wireless barcode’ should not be overlooked by anyone in the oilfield. It provides significant differentiating advantage to those using it and will be the data collection technology of choice as the oil field moves deeper into the 21st century.

Whether food, body care products or detergents – by deciding to buy the brands of
Unilever Schweiz GmbH, every day 150 million people around the world convert
these products into part of their lives. The company was founded in 1929, employs
approximately 1,250 people and disposes of a wide range of 400 qualitative
branded products. Since July 2005 the four international business areas of
Unilever Schweiz – Foods, Home Care, Personal Care and Foods Solutions –
have been concentrated at the Thayngen, Switzerland site. The warehouse has now
been modernised – with SSI Schaefer as the general logistics contractor.

This retro-fit project has some fairly complex angles. These include several not necessarily compatible storage areas, warehouse extensions based on different
“control generations” and project management while the facility is in operation.
Quite a challenge to the Unilever and SSI Schaefer implementation teams, with the
warehouse operating a two-or-three shift system and 300 employees in the production and supply chain.

Starting out
The warehouse is subdivided into several sections corresponding to the product range (raw ingredients, packaging and equipment, finished products). The dried products are stored in a seven aisle, high bay warehouse. Additional storage areas for refrigerated and frozen products are immediately adjacent to production.

The Unilever warehouse in Thayngen has been in operation since 1997. Over the years the company has extended the warehouse several times. Stacker cranes are equipped with PLCs from different generations, Simatic S5 and Simatic S7. In 1997 an electrical overhead conveyor was installed in the pre-zone. A vertical conveyor transports goods to and from production over several different floor levels. A transfer carriage links production with the pre-zone. Both the lift and the transfer carriage date from 1995. Between the lift and the transfer carriage is a horizontal conveyor system, built in 1997 and featuring a Simatic S5 controller.

The objectives and requirements of Unilever Schweiz GmbH were as follows:
- Upgrade the outdated control technology to Simatic S7 to ensure that spare parts are available and that the system is reliable and stable, as well as to reduce operating costs and achieve performance improvements
- Implement WAMAS warehouse management and material flow systems for optimised control of goods flow across all sections of the warehouse, including online picking
- Integrate existing system components, such as the electrical overhead conveyor and vertical conveyor into the logistics system
- Interface to SAP

SSI Schaefer provided goods and services such as analysis, proposal and planning; project management with detailed restructuring scenarios; replacement of Simatic S5 with Simatic S7 control technology; implementation of WAMAS warehouse management, material flow, picking, stacker guidance and control systems as well as interfacing to SAP; commissioning the entire system and training Unilever
staff.

Changeover
In order to have a minimal impact on production and warehousing operations the SSI Schaefer team drew up a changeover plan, including transfer scenarios, in consultation with the customer. They also installed a test system in parallel to the existing system. Comprehensive testing and the gradual upgrading of the stacker cranes, trolleys, conveyors and lifts to Simatic S7 took place during weekend shutdowns or between 10 p.m. and 5 a.m. during the week. The old system could be up and running again within half an hour at any time.

The next phase saw the implementation of the WAMAS logistics software systems and the link to SAP. To test communication between SAP and WAMAS, the team installed an SAP test system and put specific processes “through their paces”.

Once the function tests were complete, all the article master data was transferred from the old system to WAMAS, the old Simatic S5 controllers removed and production with the new system started.

Flowing with software
The WAMAS software reorganised the automatic processes and goods flows, from goods-in and replenishment of production to processing complete pallets for goods-out. It records data consistently and logs all actions without impeding operatives in their work. The result is consistent transparency in the warehouse processes.

Staff enter orders into the SAP system and they are then forwarded to WAMAS. Once goods have been entered and marked at goods-in, pallets are either taken to the selected storage areas on stackers or automatically using the overhead conveyor. A three-shift system is in operation which sees raw materials and packaging material sent to the production area and the finished goods returned automatically to storage again via a simplified goods-in process. Goods-to-man picking is organised in two shifts. Once the desired quantity of goods has been taken, the remaining goods are automatically transported back to the high bay warehouse on the overhead conveyor.

Without paper
By introducing paperless order picking, Unilever has succeeded in significantly reducing the incidence of errors. The W-LAN routes orders directly to operatives’
terminals and operatives are directed to the shelves by the most efficient route. Operatives work in two shifts receiving goods-in, picking orders and preparing them for dispatch.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

When Rais Hassan Saadi opened its RAIS-MILS facility in Dubai Airport Free Zone (DAFZA), a joint venture with Malaysia’s MISC Integrated Logistics, it had plenty of experience working with warehouse management software (WMS). RHS Group Logistics, the company that manages the facility, had been tinkering with EXE Technologies’ EXceed at its distribution centre in Jebel Ali Free Zone (JAFZA) since its opening seven years before. “EXceed was an appropriate purchase for us at JAFZA, especially as we were finding our way in the logistics field,” explains Richard Bell, General Manager, RHS Group Logistics. “We also stayed on the upgrade path, so as the provider released new versions we would bring them into our facility. The idea behind this was that we would always                        Richard Bell
be relevant to the market’s logistics requirements.”

But as RHS Logistics gained more experience in the WMS field, it realised
that it understood client needs better than any packaged software. “At RHS Logistics in Jebel Ali we now develop all the functionalities around the system,” says Bell. “We’ve developed all the entries into the EXceed WMS ourselves. If a client needs a specific functionality that is not performed by EXE, we can develop that functionality outside of the system but still have a relationship with EXE.”

Bell says it now makes more sense for RHS Logistics to program its own software. “As we’ve found over the years, it is the clients who dictate what functionality they require, not software providers,” he says.

So when the company developed its 1,700 sq metre facility in DAFZA, it purchased a basic storage and retrieval system from Focus, which it could tailor to its needs. “We bought the source codes with it, which is what you would not get when you buy a packaged software,” explains Bell. “Once we had the source codes, it meant that we could develop the software into our own.”

With the help of a software developer, RHS Logistics has created a programme which Bell describes as “open-ended”, answering clients’ demands such as on-line inventory tracking and specific kinds of reports. “It is the way to go, because you never know what is around the corner,” he says. “We are constantly surprised by what our clients require.”

He expects other companies to follow. “This is a direction that good logistics providers will take going forward. Even with our operations at Jebel Ali, we will go the same way,” he says. “It is much more flexible if you’re writing your own software. You can dictate the functionality. You are not dictated to by the confines of a package.”

Bell says operating without the backing, a big name such as EXE has had no impact on RAIS-MILS’ credibility. The DAFZA facility is at 90 per cent capacity, and RHS Logistics plans to more than double its size from 2,500 to 6,000 pallet positions within the next eight months. “The key now is functionality. I believe that is what the client demands,” he says. “Clients are becoming less and less hung up on the brand name software package.”

Due diligence is an analysis of a companies activities and records and is a key step in the acquisition, or potential acquisition, of a business. This review is done whether the company being bought is small and privately owned or is a multi-national corporation.

What differs between the two is the number of topics and records to be investigated. Basic points often include:
- Financial
- Property and assets
- Legal
- Operations
- Marketing and sales
- Management and personnel

Each of these topics can be further broken down with more details. The purpose is to assess the company to determine if it is worth acquiring and at the price being offered.

Tom Craig

Despite the effort, due diligence does not always succeeded in its purpose. The challenge with the due diligence will intensify going forward as the cost of credit increases. Cheap credit is a factor in many mergers and acquisitions. As the global economy and credit markets rebound and evolve, easy, low-cost financing will not be as plentiful as it once was. Private equity and other capital sources will put increased emphasis on performing due diligence properly.

The general problem with acquisition analysis is using the past to predict
future results. But this is not the only issue. The traditional approach to due diligence is suitable for a general company doing all its business and operations in one country. That view is not realistic for most companies that source offshore, have factories in other countries, sell nationwide and to customers in different countries and compete against companies headquartered in China, India, Germany
and other locations across the world. Cross-border is the real world for a large number of manufacturers, wholesalers, retailers and platform companies.

What the new business reality has and what is missing in the classical view of due diligence is supply chain management. Supply chain management as a specific, vital part of due diligence has been overlooked, treated as a hidden side of operations or lightly regarded. Supply chains exist both internally and externally with companies which also makes them complex. The failure to properly examine supply chains cannot continue as the costs for acquisitions increases, and with that, the importance of performing due diligence correctly.

Supply chain management is often the largest cost operation with purchasing, inventory, transport, warehousing and technology to effectively manage the complex supply chain entity. The service impact for supply chains that extend from suppliers
factories through to customers’ warehouses or to store shelves is also considerable.

The need is to evaluate the entire supply chain, not just select areas or functions
within the supply chain. Otherwise firms will miss the forest for the trees. They will not see or will fail to understand symptoms versus problems or cause versus effect.

Supply chain management impacts market position and differentiation; company strategy success; operating costs and operating margins; use of working and general capital; lean operations and the removal of the waste of time and raw, in-process and finished goods inventories; and global responsiveness. Performing due diligence with regards to supply chain management involves more than looking at supplier invoices for ‘cheap’ prices, or at what transport carriers are used and the contracts, or how warehouses operate.

Due diligence for supply chain management should start high in a company and drill down to the details.It should include a trend analysis of these measures:
- Inventory analysis: Assess total dollars tied up, turns overall and detailed
as to ABC classification and as to customer and market segmentation. In-transit inventories should also be recognised, especially with regards to international sourcing and procurement, intra-company transfers and customer sales.
- Outsourcing: Analyse how providers perform – overall and individually.
- Cycle time: Determine the time from purchase order issued through to payment received from the customer for his purchase. This is a critical measure for profitability and for cash flow. Supply chain management is central to the time.
- Customer service: Analyse what percent of customer orders are shipped complete, accurate and delivered on time. Also look at lost sales from stockouts or having to make multiple shipments for each customer order, especially where a company has many dollars tied up in inventory and has poor inventory turns.
- Supplier performance: Determine how well suppliers perform, overall and for key vendors, as to delivering on time, accurately, completely and as to quality.
- Forecasting accuracy: Offshore sourcing adds to the lead time for replenishing inventory. Additional lead time adds to the challenge of forecasting accuracy. Longer stocking/restocking has a significant impact for products with short product life cycles and for inventory levels and customer service.
- Risks: Identifying offshore manufacturing and sourcing has potential supply and other risks. These risks should have been defined and proper mitigation steps have been taken.

What’s next
Due diligence actions can tell us what events have happened in the supply chain. The next challenge is to determine why they happened. What is controllable and can be corrected?

This work could include:
- Evaluating the supply chain process, its technology and people. Identifying
gaps, the reasons for their existence and what must be done and invested to improve the situation.
- Determine if systemic problems are driven by the management within the supply chain organisation or whether they are forced on supply chain management by top executives. This determination can have an influence on which people are retained. People who caused the problem would be suspect for being able to correct them.

Conclusion
Investigation of supply chain management has generally been overlooked with due diligence, despite its costs and impact on company operations and performance. Many times outdated standards have been used for today’s globally active and competitive companies. Increased costs of acquisition capital should drive the need for better due diligence with a hard analysis of a company’s supply chain.

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

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

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

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

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

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

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

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

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

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

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