Forecasting methods know tomorrow’s demand today

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

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

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

The consumer decides

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

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

A study backs the result

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

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

The region’s biggest cargo fleet is here to stay, Jassim Al Bastaki tells Kathryn Semcow

You could say all-cargo carrier Midex Airlines entered the market at one of the worst times in aviation history. When it launched its first flight from the Al Ain Airport in June 2008, fuel prices were high as ever and airlines around the world were wondering if they could survive.

But Jassim Al Bastaki, Director General, hardly looks bothered. “Once you give a commitment to the market that you are flying to, you have to fly,” he says. “You have to take a risk. You have to pay from your own pocket in the beginning.”

And he is hardly bothered by the current global cash shortage either. “Our aircrafts are 100 per cent owned by the company,” he says. “We don’t have the cost of leasing. The other airlines in the UAE lease their aircraft, so their overhead is too high. This will push them to go out of the market, or at least to reduce their fleets.”

The company he is referring to is Midex International Group, said to be the world’s fifth largest integrator. It is the agent for clients such as La Poste, Royal Mail, Swiss Post, ABX in Belgium and Chronopost; and turns over approximately US$5.44 billion a year. “The idea is to build an airline to help and support the express courier business,” says Al Bastaki.

Midex set up its airline in the UAE with the government of Abu Dhabi’s blessing and encouragement to make use of Al Ain Airport. “So many people ask, ‘Why did you choose Al Ain?’,” says Al Bastaki. “Al Ain Airport is not in an economic city, but from a technical and operational point of view, it is one of the most recommended airports.”

He also likes the airport’s proximity to Dubai. “If I will use Sharjah Airport, for example, I will need four to five hours just to reach the airport and take my cargo. But Al Ain is a maximum of two hours driving by truck.”

“There is no traffic right now in Al Ain, so as a carrier, I think that is a positive,” he adds. “Plus, Al Ain is very close to Oman, only one hour from Sohar Port on the Indian Ocean.”

 Jassim Al Bastaki, Director General, Midex

Al Ain’s dry weather is also a bonus. “There is no fog during winter seasons, so there is no way your aircraft will be delayed,” he says.

Midex currently has six Airbus A300B4-203Fs and one Boeing B747- 200F based in Al Ain. It also has seven 747s based at its hub in Orly, which it operates on dry lease. “Today, Midex Airlines has one of the biggest fleets in the region,” says Al Bastaki.

He says the company is considering moving two of its Orly planes to Al Ain. “Internationally, other regions aren’t doing so well, but the Middle East is still booming.”

And he seems to think this will continue. “We are negotiating now to buy another 747-400,” he says.

Al Bastaki says Midex now has scheduled flights to Bombay, Madras, Dhaka, Colombo, Beirut, Damascus, Hann and, of course, Orly. It trucks cargo from Orly to the rest of Europe, and relies on agreements with North American carriers to move it across the Atlantic. Since June, it has operated150 scheduled flights and moved around 11,000 tonnes of cargo to Europe. Al Bastaki says the company also has plans to start chartering soon.

Although faced with a dramatic economy, Al Bastaki says dropping any of these routes is nowhere in his plans. “Once you bridge this period, you will be there in the market, because you have shown the big cargo companies that you are committed, that you have your big aircraft flying on time,” he says. “Once you think you need to drop services a bit, or stop services a bit, you will lose your client. You need to keep going on, moving forward.”

Good luck trying to move goods in and out of Palestine

At JoTrans at the Dead Sea in Jordan last month, Palestinian Minister of Transport Dr. Mashhour Abudaka began his speech insisting that he would avoid discussing politics. But he couldn’t help it. How could he sidestep the fact, after all, that Israel took Qalandia Airport (renamed Atarot Airport) in 1967, that there is a “total siege in Gaza Strip” and that Palestinians are not allowed to transfer goods from one truck to another?

“We don’t actually have door-to-door in Palestine,” he said. “We have back-to back.” This means that truck shipments of food and supplies entering Palestine from Israel, or Israel from Palestine, must be unloaded and reloaded onto a different truck at a back-to-back area.

Dr. Munib A. Younan, a Bishop with the Evangelical Lutheran Church in Jerusalem, in his newsletter, estimated that a shipment travelling from the West Bank town of Jenin in the North to Hebron in the South, also in the West Bank, would have to be unloaded and reloaded as many as 14 times. Abudaka also explained that Israel has set up at least 650 fixed blockades on the road.

Abudaka added that Yasser Arafat International Airport (formerly Gaza International Airport), is totally destroyed. “Even rehabilitating it will cost a lot of money.” The airport, which opened in 1998 with US$86 million of funding from Japan, Egypt, Saudi Arabia, Spain, Germany and Morocco, was shut down in 2001 after Israeli military forces destroyed the radar station and control tower. In January 2002, the same forces bulldozed the runway. Israel cited concerns that the airport allowed for the transport of threatening goods such as weapons. In 2007, bedouins began to set up tents on the property, and more recently Israelis have suggested setting up their own neighbourhoods there. The closest airport is currently El Arish International Airport in Egypt.

Gaza’s sea port is incapable of accepting containers, according to Abudaka. “There are plans for Gaza Port expansion on paper,” he explained. “But nothing has been implemented.” Israel and the Palestinian National Authority signed a deal to rebuild the port in September 2000, but not a quay has been laid.

Plans for redeveloping pieces of the historic Hejaz Railway which once ran to Haifa, as well, are stalled. The Ministry of Islamic Affairs, according to Abudaka, is holding onto the land. “If the Palestinian Authority were to take over ownership of the land, it would open it up for the Israelis to take over,” he says.

Nabel Mohammed Saleh, Director of Roads, Roads and Traffic Agency (RTA) gives
Munawar Shariff a clear picture of how the RTA is handling the issue of constructing
new roads, reducing traffic and building the infrastructure for Dubai’s future growth

Munawar Shariff: By how much are you expanding your roads? What is the capacity of vehicles you are targeting to absorb on all the new road constructions?

Nabeel Mohammed Saleh: To provide traffic congestion relief, we have transformed many grade interchanges into grade separations and interchanges greatly increasing road capacity effectively and minimising delays. Most of these are the biggest and most unique ones in the world. The number of bridges constructed in Dubai have doubled during the last two years.

Highway capacity is defined to be the maximum number of vehicles passing over a given section of a lane or a road during a given period of time. It is normally given in units of vehicles or passenger cars per hour.

RTA is keen to increase the capacity of the Dubai road network to accommodate the huge increase in traffic volumes. Road capacity can be increased through widening and adding new lanes to the existing network and through increasing the operating speed by solving different intersection and bottleneck problems.

We continuously measure the level of service over each link in the Dubai road network and try to reserve an acceptable level of service over the links according to the international standard (Highway Capacity Manual 2000).

Through these procedures we can and are achieving our targets of relieving traffic congestions, minimising delay time and providing safe and smooth transport for all.

Which are the new areas/developments in Dubai that are being linked and will be linked in the near future with these new roads?

Currently Dubai’s economic development is sky rocketing, and through development of major new road projects, we are trying to keep up with Dubai’s growth and also help accelerate its growth through our initiatives.

Construction of new roads is happening all over Dubai, however, areas where new roads are being developed include: the area around the Arabian canal, the area around Mohamed Bin Rashid Park, the Dubai World Central, the Dubai Land area, the Business Bay and the Dubai Lagoons project.

Nabel Mohammed Saleh, Director of Roads, Roads and Traffic Agency (RTA )

What are the factors you consider when planning the infrastructure of such a fast developing city like Dubai?

Factors to be considered during the planning stage of infrastructure construction are: identifying the target design year based on which design will be carried out, identification of the nature of development around the infrastructure, identification of the land use of the development, anticipating the trip generation rates and the trips generated from the assigned development, perform a trip distribution process, perform traffic assignment and modal split task, perform the soil investigation analysis process and the infrastructure design steps.

By going through the above-mentioned steps, we can predict the number of anticipated users and hence be able to start planning the relevant infrastructure.

Typically, what is the time frame involved from the planning stage of the development of a new road complex to link a new part of town?

There are a number of stages. They are:

1) Strategic Planning Stage: The idea of constructing a new road has to be seen from the strategic planning point of view to predict the impact of the new road on the network.

2) Feasibility Study Stage: Before proceeding with any project, a feasibility study has to be performed on the project to provide an overall view about the benefit cost ratio to see whether the project is feasible or not.

3) Geometric Design Stage: At this stage, the idea of building a road is transformed into engineering drawings and material quantities and specifications of the project. This stage may involve the following steps: preliminary study which involves a traffic study and analysis about the volume of traffic expected on the road, the preliminary design which involves preparation of the preliminary project drawings and lastly the final design which is the preparation of the final project drawing.

4) Tendering Stage: The determination of the lowest bidder of the contract who will do the construction works of the project.

5) Road Construction Stage: The construction and supervision of the project to ensure that the project has been constructed according to the specifications and standards.

The time frame of these stages varies according to the importance and the size of the project.

How does this time frame differ from that of expansions of existing roads?

Developing/expanding an existing road may not take that long comparatively as some of the above-mentioned stages will not be present.

What are the challenges you face in planning and executing the construction of your road networks?

Our biggest challenges during the planning stage are predicting the traffic volumes that will be expected to use the road, anticipating trips generated due to the development of the area around the project, simulating the anticipated traffic movement over different interchanges to simulate the actual movement, overcoming different design restrictions to design a road that complies with the international standards within limited conditions and avoiding major expropriations of the existing plots needed for widening roads and constructing major interchanges.

The challenges we face while construction are: developing a traffic detour plan to divert traffic into alternative routes to avoid delaying road users during the construction stage; overcoming construction problems, choosing the most promising and optimum method statement for infrastructure construction and tallying the planned project schedule with the actual schedule to achieve the milestone project dates.

Which roads are being planned for the near future?

We are planning an extension of the Nad Al Hamar Road, parallel roads up to Jebel Ali -Lihbab Road, the Dubai Academic City Road, the Al Qoudra Road, the Bawady Boulevard, the Meydan Road and the Business Bay Road.

How is this planning of a new road network connected to the overall vision of Dubai’s expansion?

The idea of developing a new road is born from the overall vision of the proposed expansion of Dubai. The construction of a new road contributes significantly to the development of the area around the new road. So, the proposed planning is studied well first. The proposed new roads network will be studied accordingly to be complying with the nature and the size of expansion and development.

Moving on to traffic congestion, how do you plan to lessen the load of cars on Dubai roads?

In order to overcome congestion problems in Dubai, we have developed comprehensive execution plans. They are

1) Developing Dubai’s roads network, through: a) widening and developing the existing road network, b) extending and constructing new roads in different locations, c) ensure network connectivity, d) develop and upgrade different interchanges.

2) Develop public transportation modes, through: a) developing the metro project which can be considered to be the first rail transport project in the GCC. It will contribute significantly in solving traffic congestions, b) developing the modern bus transport and reserving a dedicated lane for buses, c) encouraging people to use different public transportation modes, d) developing modern and air conditioned bus shelters in different Dubai locations, e) extending the metro lines to cover origins and destinations of different trips.

3) Develop strategic operational Polices such as a) encourage car pooling, b) implementing toll roads system (SALIK), c) restricting issuance of new driving licenses, d) implementing some policies towards reducing car ownership percentages.

Jordan is moving ahead with its railway development plans … as soon as it can get the cash

“Time is very limited for us,” says Laith Dababneh, Director, Multi Transport Department for Jordan’s Ministry of Transport, on finding investors for Jordan’s rail projects. By mid-2012, Aqaba Development Corporation will have moved Aqaba Port’s phosphate terminal 18 kilometres from its current place, which means the railway which transfers phosphate from the El Abiad, Hassa and Shediah mines to the port (a distance between 140 and 290 kilometres) will also have to move.

“If we do not connect the railway to the new port, we will have 300 trucks entering Aqaba every day only for phosphates,” says Dababneh. When the port reaches its full capacity, this could reach up to 600 trucks, he adds.

The country has finalised its study to upgrade its current narrow gauge network to a standard gauge connecting its main cities. A North-South track would run from the Syrian border through Mafraq, Zarqa, Amman and Aqaba; and an East-West route would go from Irbid to Mafraq, Zarqa and the Iraqi border, with a branch to the Saudi border. Dababneh says the project will cost US$6 billion, including US$4 billion for construction and US$2 billion for rolling stock. He says the project will offer a 15 per cent economic rate of return, for example, in the jobs it provides and trade it encourages.

The financial rate of return for investors, he says, is between 12 and 16 per cent. “There should be a government subsidy for these projects,” he says. “Part of this subsidy is the cost of the land.”

“If the government will subsidise, we will not need to have a yearly revenue guarantee for investors,” he adds.

Dababneh says the government has purchased the land, and is looking to employ a transaction advisor to help it with a public-private partnership and build-operate-transfer tender. To speed up this process, he says the government will soon award a tender for preliminary design, environmental impact analysis and geotechnical studies for the project. This part could take between 10 and 12 months, he says. “We expect an investment tender in the second half of 2009.”

Dubai is known to be a centre of trade from time immemorial and as much as it
grows as a business hub, illegal cargo still uses the route to reach other destinations

The demand for antiquities is phenomenal. And whenever there is phenomenal demand for a product, it is usually matched by supply. This is where the supply chain of smuggling antiquities gets kicked off – in the want of the consumer.

Dubai Customs recently held a press conference announcing a major interception of antiquities which were being smuggled in a secret compartment of a wooden ship. The compartment in which the treasures were found on the ship was built to look like a part of the ship’s structure. When Dubai Customs’ officers asked the captain to open the hollow area, he said that if he did so his ship would sink.

“Our officers are trained in all aspects of judging people through their expressions, reactions and body language, and the crew’s body language gave them away,” says Ahmed Butti Ahmed, Director General, Dubai Customs.

Acting on their hunch, the officers found more than a 100 items dating back between 1,000 and 5,000 years hidden away in that secret compartment. Ahmed wouldn’t say where the ship’s port of origin was or where it was headed. He also wouldn’t give out the nationalities of the captain and crew and to which country the antiquities belonged.

Illegal supply chain

Although Ahmed did not acknowledge the origin of the antiquities, many invitees were sure the antiquities were from the ransacked Iraqi museum. Since the beginning of the 2003 American- led invasion, much of the Iraqi culture and history has been systematically looted.

Prior to the war, people who did not have anything to eat used to dig artifacts from the ground and sell whatever they found for food; but ever since the looting of the Iraqi museum, the illegal antiquities trade from the region has exploded, leading many countries to levy heavy restrictions on its activities, thus sending it underground.

Coming back to the supply chain of this business, many say its starts from the time something valuable is dug up or looted, after this the artifact is driven to Jordan or further north to Syria. After reaching either Jordan or Syria, it is sent to one of three cities – Beirut, Dubai or Geneva, in order to create ‘documents’ for the artifact and for it to surface in the market. From this point it is sold to private collectors or established auction houses until it gets a new home.

This illegal trade is even rumoured to have an underground tariff system, with the Hezbollah (from Lebanon) apparently taxing the artifact when it passes through the country.

Improving standards

This is not the first time such a large cache of antiquities have been intercepted in the country. Sharjah, too, has in the recent past captured many ships passing through its port carrying this illegal cultural cargo. Dr. Sabbah Jasem, Head of the Sharjah Directorate of Antiquities, says, “We need to have a federal antiquities law that prevents the buying and selling of historical artefacts all over the country, as Sharjah is currently the only emirate that has one.”

Watch your back

Are you feeling paranoid these days? I am. I was in the Taj, Oberoi in Mumbai only a month before it was attacked, and my boss was there when the gunmen entered the main doors. Thankfully, he made it out, but we here at DVV were all left a little shaky.

Just when we thought the shakiness left by September 11 was over, the threat of terrorism is making headlines again. Having an incident occur so close to home leaves me wondering if this threat is here to stay.

And turbulence in the economy won’t help. The tighter money becomes, the more people move to the margins, and look for violent methods to take out their frustrations. While not all desperation leads to mass terror attacks, it can still increase crime and security threats, such as money laundering, smuggling, theft and hijacking. If the Somali pirates were economically satisfied, after all, they would probably lose the need to take over ships.

Maybe these threats are just media hype. Maybe they are perceived risks, rather than real risks. The risks we worry about, however, can be far more dangerous to our industry than actual risks. Perceived risks mean more rules (C-TPAT anyone?) and security checks, which mean more bottlenecks. And let’s not even talk about the rise in insurance costs.

We will all be affected by these concerns. An example: A major shipping firm in Dubai sent an empty vessel from Karachi to Mumbai just before the terrorist attacks occurred. While the ship had no suspicious cargo, to outsiders it appeared as if it had transported the assailants into India. The Indian and American navies showed up to investigate, and only recently was the company able to clear its name.

Governments around the world are likely on alert for suspicious activity. While I am not accusing you of anything, I recommend that you make yourself aware of the security rules of any country you deal with, and follow them accordingly. The last thing you need is authorities knocking on your door. After all, should anything go wrong, we will be the first industry to take the blame. Not that I want you to be paranoid.

Happy New Year

Kathryn Semcow
Editor
kathryn.semcow@dvvmedia.com

Afghanistan, a nation ravaged by decades of war, is being fed – literally – through the efforts of the United Nations

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.