If anyone has firsthand knowledge of Gulf shipping it is Captain Mansoor Ghafoor. Before joining the business world in 1987, the current President of the UAE’s National Association of Freight Logistics (NAFL) and Vice President of the International Federation of Freight Forwarders Associations (FIATA) spent 14 years at sea. He recalls his climb from Cadet to Bridge Captain in the Seventies and early Eighties with fondness.

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

Captain Mansoor Ghafoor

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

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

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

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

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

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

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

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

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

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

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

For the logistician tearing his hair out over careless longshoremen or angry calls from distressed retailers, consider this – it could be worse.

Imagine that the freight might have to endure not one, but two quarantines. Think about consolidating travel information for multiple international entourages. Visualise getting necessary medical histories for each international shipment. And one more thing – make sure the cargo will be ready to run, fast, within days of arrival.

For all the excitement of thoroughbred racing in Dubai, with its multi-million dollar purses and glamorous parties, the logistics behind the ‘Sport of Kings’ is no day at the races.

“It takes so many people to bring one horse,” explains Martin Talty, Manager of the Dubai Racing Club’s International Department. From chartered planes to travelling vets, the process is an obstacle course to be negotiated by teams that must be experts not only in logistics, but the equine temperament as well.

Talty, an “ex-racing journo”, left his native Australia in 1994, passing through Hong Kong and London before arriving in Dubai in 1996. He has been with Dubai Racing since 1999.

“International travel of horses has modernised a lot in the last few years,” says Talty. “It is no longer considered a huge, huge undertaking to ship horses overseas.”

Easy for him to say. Horses begin landing in Dubai in early December and continue to arrive through the second week of March, before the weather gets too hot. According to Talty, horses shipped from South Africa, for instance, must start their first quarantine the preceding July. “They’re quarantined for 40 days in South Africa, then another 30 in Europe.” Once a horse arrives in Dubai, its barn is actually quarantined for the duration of the horses’ time in the country, except for races and morning workouts.

The barns (or ‘boxes’) must be ready before the horses’ arrival. “Just like we like to arrive at a hotel with the room ready and have a hot shower, a horse likes to have his room ready,” says Talty. This begs the question – “Do horses get jet lag?”

“Yeah,” says Talty. “They can get off the plane and run very well five days later. The second race they may fall off a bit, then recover.” Acclimating can be at once easier and more complex than for humans. Differences in water, for instance, may be felt more acutely. Diet is another concern. Each animal arrives with enough feed for a week or so. Some owners may ship their horses’ feed for the duration of its stay; for others, Dubai has its own feed mill where the horses’ diets can be maintained according to familiar specifications. Meanwhile, grooms and vets pay particular attention to the horses’ condition upon arrival. “They’re monitored for the first 48 hours,” says Talty. “They don’t get on the track before then.”

Thoroughbreds must contend with more than jet lag, however. They also need their own passports. “Identification marks, vaccination history… it’s all got to be given within a certain timeframe,” says Talty.

Here the logistics dovetail with equine expertise. Using the Dubai World Cup as an example, Talty explains that the list of entries results from some 1,200 invitations for each of the different races. As acceptances come in, e-mails are sent to the veterinary department as well as the travel department. Janah Management Company, Dubai Racing’s shipper, contacts the trainers and owners with flight information. Horses from the US may fly charter non-stop from either the east or west coast, while European horses usually fly commercial. Horses may travel up to three to a pallet, but that, explained Talty, “is really flying economy.” For the Dubai World Cup, the horses ship two to a pallet, sometimes even taking an entire pallet for a single horse.

Horses also travel with grooms, vets and all their tack. Forgetting to pack the horse’s favourite bit isn’t like replacing a toothbrush in the hotel lobby.

When we hear about war-torn countries in the news, we hear about the ‘heroes’ – those establishing security and legitimate governments, bringing in drinking water, education and healthcare, and building up infrastructure so citizens can go on with their lives. But most of us likely never think about what it takes to keep those ‘heroes’going. Someone, after all, has to provide the less glamorous basics the supplies and infrastructure that allow them do their job.

In steps RA International, a company which helps military and humanitarian organisations work in locations most companies will not dare go. “We allow our end customers to operate in difficult operating environments,” said CEO Yaser Moustafa in an interview in January.

Soraya Narfeldt, Founder and Chairwoman

“We facilitate every part of that solution, whether that is food, procuring trucks or computers, taking care of their waste or transportation. We offer a whole suite of services for our customer to operate.”

The company was born in Afghanistan in 2003, started operations in South Sudan in 2005 and will begin working in Chad for a United Nations (UN) contract this year. They have offices in Afghanistan, Sudan, Kenya and Dubai, and say they plan to open an office in Somalia by 2010.

One of its latest projects is servicing the United States State Department’s

aerial poppy eradication programme in Afghanistan. The military destroys opium-producing poppy crops, and RA International manages their forward operating base. RA has provided full camp support services for four years to the sub-contractor of the US State Department’s International Narcotics and Law Enforcement Bureau’s international civilian police programme.

Yaser Moustafa, CEO, RA International

“We generally have a large caravan o trucks, usually around 100. We’re servicing 400 to 500 personnel with these caravans,” said Moustafa.

“We provide breakfast, lunch and dinner. We take care of the waste that they generate and airlift it out. We also make sure fuel is provided.”

He said there are only two things his company won’t do: “We don’t provide weapons and we don’t provide security.”

So far, external providers have warded off any security threats, including farmers passionately willing to defend their poppy crops. “Obviously this is a sensitive thing to be doing,” admitted Moustafa when discussing the poppy eradication programme. “You are taking away someone’s livelihood, whether it’s the Taliban or a local farmer. Sometimes we have skirmishes with people, in which they are shooting at us.”

Working in Afghanistan comes with daily reminders of security threats. “Everyday there is an incident,” said Moustafa

“Yesterday there was a bombing in Kabul. We were not affected, but we have to take care of our personnel, so we put our camp on lockdown.”

He said not one of the company’s 350 staff in Afghanistan had experienced an injury or fatality. “We’ve not had any casualties or incidents as long as I’ve been here,” he said. This, he explains, is partly because his company hires locally. “Local employees have a better feeling for what is going on on the ground,” he said.

“We know the routes. There are certain places you drive, and there are certain places you don’t drive. There are certain types of drivers you use, and certain types of drivers you don’t use. You want to use the savvy local staff.”

This strategy also benefits the local economy. “We develop our employees,” said Moustafa. “A lot of those employees we hired as manual labourers have come up with training to be middle-level managers for us.”

He said the company has no shortage of demand for its services in Afghanistan. “A lot of the big spenders – the US, the UK and NATO – are willing to spend a lot more in Afghanistan to address the terrorist threat and address the Taliban,” said Moustafa. “You’re seeing increased competition in the North where it’s a little bit easier to do business. Kandahar is a little difficult to do business, because the security threat is so high.”

Projects in Kabul include operating the base camp for Armour Group North America, a company of 500 providing security for American diplomats. “It is essentially a turnkey operation,” said Moustafa. “We do construction for them.

We build a lot of their housing. We provide food, we provide waste removal, we procure items for them, we do ground maintenance, pest control. We do everything. It’s a massive contingent.”

In Kandahar, the company sources supplies for the United Kingdom Ministry, of Defence. “We do a lot of procurement under their hat – trucks, computers,” said Moustafa. “These are very mundane things, but it is actually very difficult to get that stuff into the country.”

Getting there RA International sources food from numerous sources. For its Afghan projects, for example, they often airlift fresh meat from Europe and tend to buy produce in Afghanistan itself. “Kabul has a very developed local market, in terms of fruits and vegetables,” said Moustafa.

The company ships most of its dry food such as beans and noodles through Dubai into Karachi and relies on Pakistani freight forwarders to move the goods into Kabul.

“Pakistan can be very tricky,” said Moustafa. “They have a fair amount of security concerns, so they will vet your containers pretty rigorously.”

“Obviously, there are problems with graft and corruption in these places,” he adds. “As a company policy, we do not do that.” Overall, he said this policy works to the company’s advantage. “Sometimes we’ll get burned,” he admits. “There are always problems with graft in these countries. As long as you make it clear from the beginning that you’re not paying, then I think that you will establish that reputation. And you’ll find that in the end, people will respect you more.”

Moustafa insisted that his company has maintained an excellent reputation in the countries it works in. “We provide a valuable service at a cost-efficient price,” he said. “We have local know-how, yet I think we operate a company that has financial transparency, good corporate governance, and we operate according to the US Foreign Corrupt Practices Act.

I think we have the best of both worlds. We’re kind of a western solution with very local knowledge on the ground which a lot of companies don’t offer.” He said professionalism can be hard to find in his industry. “A lot of these companies are really cow-boy companies. A lot of companies will do things that are not very professional – they will stop a project midway through because they are not making money, and they will walk away and take the money they’ve made.”

But by no means does following standards make his work easy.

“This is the most challenging operating environment I have ever had to deal with,” he said.

Why? Considering the challenges – not to mention life threats – that come along with doing business in places like Afghanistan, why would any company bother?

“Because there is a demand,” said Chairwoman Soraya Narfeldt, who founded the RA International in Afghanistan in 2003 after volunteering with the United Nations.

“You have people who are sent to do a particular job, such as the UN and other agencies that have funding, but in order for them to do their job, they have to get their people settled and get everything they need to get that job done.”

“I used to get a lot of phone calls from people asking, ‘How can I…? Where can you…? What do you….? What? What? What?’”

She said it makes solid business sense for organisations such as the UN to rely on her company’s services. “The UN is a large entity. As a smaller, private player we’re much more efficient,” she explains. “What would cost them an arm and a leg and be a complete distraction to do internally, they outsource to us. We can do it cheaper, more efficiently and better. Ultimately, the funds that are being allocated to the UN are being used more efficiently.” But going into recovery zones is about more than the money.

Having lived through a war in her home country of Sierra Leone, she knows that people must continue their lives. “Most people assume that in a war everything stops. It doesn’t actually. Children go to school, doctors operate, women give birth life does go on.”

And with the same straight-forward attitude she is not afraid to walk the streets of Kabul. “I know Kabul pretty well, like the back of my hand,” she said.

How is she still alive? “Violence in these areas is targeted violence,” she explained. “I’m not part of that issue. I’m coming in to work within that issue. We are not politically affiliated, we are not giving our opinions. We are staying out of it, we are just doing our job.”

Narfeldt also said a little cultural understanding can go a long way. “The average Afghan ‘hello’ takes between seven and 12 minutes depending on how much they like you.”

At the end of the day, they have to work one step at a time. “When you go in looking at the bigger picture, such as ‘This country has to stand on its own two feet’, the smaller picture is, ‘How do we it in? What services can we offer?”

These services are certainly not going to be everything. We would love to build the whole country ourselves, but it is not going to happen.”

Still, she has hope for the bigger picture. “There is no expectation that anyone is going to solve a problem over night.

But slowly but surely you will get there. Schools will get built. They will get delayed, but they will get built. Who would ever say that girls would go to school in Afghanistan? But there are girls graduating now.”

Why would a company spend eight years to grow potatoes, and six years to get its lettuce right?Because it knows it is worth the effort. Praveen Kurup provides insights into the intense supply chain and logistics activities at McDonald’s India

McDonald’s India does not own any part of its supply chain. It has only a handful of suppliers and partners. About 40-odd suppliers, atleast ten of whom are today pioneers in their respective areas of operation, be it Vista Processed Foods in food processing, RK Foodland in cold storage and perishables distribution, Dynamix Dairy in processed milk products, or Trikaya Agriculture in worldclass lettuce cultivation.

And McDonald’s India does not have a written contractual system with any of them. Everything runs on trust and commitment. The entire supply chain works on what the company calls ‘a handshake relationship’ with all its suppliers. It does not have a written protocol of any nature with its suppliers. “We don’t give any guarantee to our suppliers, nor do they give us any guarantee,” says Abhijit Upadhye, Director – National Supply Chain, Menu Management and New Business Channels. “The whole system runs on trust. We don’t have a written protocol that makes it binding on our part to give any specific volumes to a supplier for any timeframe just because the supplier is putting in so much investment.”

Abhijit Upadhye, Director – National Supply Chain, Menu Management and New Business Channels

At any given point in time, any supplier can walk out of the relationship, and McDonald’s could be in a big soup.

Similarly, the company could also walk out on any of its suppliers and almost certainly bring their volumes down to a trickle. But this never happens because the trust among them is very strong.

This system could have been mistaken for one based on non-committal, short term relationships had it not been for the fact that McDonald’s has done it in every single market it has entered. The company does not wash its hands of a commitment. It has built itself on the simple belief that if its suppliers show the dedication to invest in a supply chain that will deliver its products, it should also be willing to trust them on the deliverables. And as long as these are met, both ends of the supply chain are amply rewarded. This is how the whole McDonald’s system started. Even before he set out to build the McDonald’s chain, the legendary Ray Kroc already knew that to grow quickly he had to rely on his partners. Over the course of selling milkshake machines he had very clearly realised that the restaurant chain business was not scalable because of the parasitic relationship between the proprietors and their franchisees. The owners preferred to milk their franchisees no matter how short term the benefits would be.

Ray decided that he could expand rapidly by doing the exact opposite. And how he revolutionised the franchisee business model is a legend that every management school teaches scores of students who hope to make it big in the business world.

But Ray Kroc knew equally well that to deliver what was needed to run a restaurant chain, a strong supply chain was a prerequisite. And he ensured that this was done without owning a single bit of the supply chain. He built an exacting system that was based on standard operating procedures. He brought discipline into a business that was hardly an industry back in the fifties. He brought the concept of standard specifications into a business that had a reputation for being non-standard.

And he did that without owning a single bit of the supply chain that today delivers all that it takes to run the very epitome of globalisation – nearly 32,000 local restaurants in more than 100 countries.

Startup blues

Even a McDonald’s with all its legendary experience had a tough time setting foot in India. The abysmal state of the required elements in the supply chain left them with no choice but to set up most of it on their own. Their guiding light has been long term planning because of the way infrastructure has been developing especially on the food side. It took them over six years to build the required supply chain, after which they finally opened the first store in 1996.

There was practically nothing to rely upon. Even the largest of companies in the food processing sector were not into products that McDonald’s required.

Finding a reasonably good cold chain was out of question. The only refrigerated trucks available were the ones used by the ice-cream manufacturers. But again, the quality of the trucks were not good enough to deliver its products.

And most of the truckers were not reliable as well. “They would switch off the refrigeration unit to save on costs,” says Upadhye. “Knowing these challenges we decided that the best way out was to set up the whole value chain on our own. We simply could not have gone ahead with all the quality issues present in the supply chain back then.”

There was tremendous pressure from the parent group to deliver according to international standards. This presented unique problems beyond the obvious in India. Deciding upon the right menu, for instance, became a huge challenge especially during those early days. India is the only country where the menu is drastically different from the standard McDonald’s menu. This had to be done to ensure that religious sentiments are not hurt.

“We couldn’t get beef and pork into our menu here, which are main items internationally. Without them we had to do a lot of work on developing products for India,” explains Upadhye.

Chicken was possibly the only ingredient that could be readily introduced. But then the challenge of developing a vegetarian section cropped up.

The vegetarian population was too large to be ignored. But McDonald’s does not have a vegetarian section in any other country.

“So we had a dual challenge of not only meeting international quality standards, but also catering to local tastes that very unheard of in other countries. Some of the non-vegetarian products like a McChicken burger would be exactly the same, but the sauce in the McChicken burger presented a challenge because it uses egg as an ingredient. Because the same sauce is being used in a McVeggie burger, we decided to develop an eggless version of the sauce,” says Upadhye.

This ensured that there would be no discomfort for the vegetarian customers. But it presented its own problems.

McDonald’s has a central quality lab in Singapore that evaluates products from all countries to check if they meet international product specifications. Even the taste, feel and smell of the product matters. “We had to score a minimum percentage to qualify as going to a restaurant. So the eggless mayonnaise had to qualify as a normal mayonnaise sauce because that was the only reference available at the international labs. Such instances presented a very big challenge on the development side, but the company managed to overcome these by developing the required expertise among its local suppliers.”

Small is enough

For all the challenges conquered in India, the company has a very small supply chain team. McDonad’s India has two franchisees – Connaught Plaza Restaurants takes care of north and east, while Hardcastle Restaurants manages the western and southern regions. Between the two, there are about 155 stores. Most of the departments are functionally different and operate as separate entities within the two companies. Supply chain, quality assurance and new product development (Menu Management) are the only three functions that are common to both.

Both supply chain and quality assurance have a single head, while Menu Management has a separate head. Both of them report into Upadhye. The supply chain team has close to six people, new product development around two people, and quality has three employees. So, overall, a team of about ten people are all that the company has to handle these crucial functions.

Upadhye explains that this is possible only because the company ensures that its suppliers handle their roles responsibly and are very serious about the stringent deliverables. The team from McDonald’s only has to ensure that the rules are laid down properly, and there are enough controls in place to keep track of things. The rest is taken care of by its partners and suppliers.

A Helping Hand

Placing such heavy demands obviously has the potential to leave its suppliers gasping for breath. McDonald’s knows this and tries to help them in two simple ways. First it encourages its specialised international partners to come in and set up a technical joint venture or an equity joint venture with some of the better suppliers in India. For instance,Vista Processed Foods got both technological help and funding from OSI International. Similarly, its local distribution centre received technological assistance from the main international distributor based out of Australia. Such help has gone a long way in ensuring that its supply chain is miles ahead of others in India.

The second approach is even more innovative, and involves less interference from Mcdonald’s. “We have a lot of councils in the McDonald’s system. There is a lettuce council, a chicken council, etc. In the chicken council, all chicken suppliers from across the world come together and understand the current developments in their field,” explains Upadhye. “They discuss challenges, process changes and share useful information among themselves.

If a supplier in any specific country is facing a challenge on developing a specific product, or is looking at new product development as an initiative, he can readily discuss it in the council and take help from experienced chicken suppliers from any part of the globe.”

There could be competing suppliers from the same country, although this typically happens only for large countries like the US. Each council holds conference calls on a monthly or a bi-monthly basis. “Once in a year, all members of the council get together and it is very surprising that in that entire council meeting there is just one McDonald’s executive; all others are supplier representatives. And all they discuss is McDonald’s!” exclaims Abhijit.

Apart from these ongoing measures, the company regularly conducts a lot of training sessions with its partners.

He informs that these are not ordinary softskills training, but hardcore functional training sessions based on years of operational experience.

Trust meter

Trust and commitment with suppliers ensure a good long term relationship. But to keep day-to-day operations under control, McDonald’s collects a large amount of data at every point in its supply chain.

Every supplier in the supply chain has a separate scorecard – McDonald’s calls it the supplier performance index.

It covers all aspects starting with various managerial measurements in terms of their values and expectations, and goes all the way down to how precise quality requirements are being met on the field. How many complaints are there against each supplier? What kind of scores are they getting in the lab? How are they matching up on the cost parameters? How are they meeting assured supply requirements? Everything is measured. A direct result of such extensive measurements is that the company can easily verify if its suppliers are indeed meeting quality and quantity requirements. Because of such clarity, McDonald’s India does not place any restrictions on its suppliers sharing their assets with other customers.

“Our critical requirement is that we need complete assured supply. Our restaurants should never run out. As long as our quality norms are met and we are the most competitive priced customer for the supplier, he is free to do anything with his assets. That is the minimum expectation we have. In the end, the asset is owned by him and not us,” is how Upadhye puts it.

McDonald’s regularly benchmarks this data against current and historical data from other countries. When comparing the data, the company uses specific variables to identify similar countries and then groups them together to compare all other collected data. This is done because for most products there might be no point in comparing data from India with that from the US, it might be more useful to compare it with, let’s say the Philippines, or some other country that has similar volumes. In some product categories, like deboned chicken, the volume might not be that significant because the pricing can be similar. Such intense calculations help the company maintain a clear view of how its business is faring across the spectrum.

Demanding quality

Over the past 18 years, McDonald’s India has built a supply chain that few might think of even now. International exposure might have gone a long way in understanding the intricacies of the supply chain, but implementing it must have only made it all the more difficult. Knowing what is missing can get frustrating if you cannot fix it. How did the company manage to fix it and continue to improve it?

“The challenges are many, but they all seem to be fairly basic, it’s just that not many seem to be thinking about fixing it,” says Upadhye, who believes that the shippers are to be blamed. “Shippers have to demand quality. If my team does not look at measurements during our business reviews, we will suddenly find that partners have started compromising down the line. If we are firm on what we want, it builds pressure in the system, and they will deliver according to standards.”

According to Upadhye, if the food processing giants in India had the technology and expertise to meet some of the company’s requirements it would have helped McDonald’s quicken its supply chain implementation. Shippers need to be quality conscious and sternly demand more from their partners to make them deliver.

52 million people a day validate McDonald’s logistics model, says Jack Bunker

Only a handful of iconic brands can begin to approach the familiarity of McDonald’s famed ‘Golden Arches’. According to the company’s website, over 52 million people pass through the restaurants’ doors each day at more than 30,000 locations worldwide. McDonald’s annual 10-K filing with the US Securities Exchange Commission lists global revenues exceeding US$23.5 billion in 2008. That’s a lot of Big Macs.

Notwithstanding a universally bleak world financial picture, the McDonald’s machine hums along, not only boosting revenue, but squeezing inefficiency out at every seam. Untold trillions have evaporated from the world economy in recent months, yet McDonald’s has shown staggering sales growth. Global comparable sales for 2008, fourth quarter, 2008 and January 2009, increased by 6.9 per cent, 7.2 per cent, and 7.1 per cent respectively. Dynamic operations in the Asia Pacific Middle East and Africa (APMEA) region drove much of this growth, with respective sales increases of nine per cent, ten per cent and 10.2 per cent for the same periods.

Murat Üngün, Purchasing Director for McDonald’s Middle East and Africa Group

So what has driven the APMEA region’s exemplary growth? According to a recent official release, “operations excellence and a sharp focus on breakfast, convenience and everyday affordability.” After speaking with Murat Üngün, Purchasing Director for McDonald’s Middle East and Africa Group, one understands that the first of these components, “operations excellence,” is the cornerstone of the success model. In short, not just savings, but sales increases depend upon the McDonald’s supply chain concept.

Üngün, a food engineer by training, began his career in Turkey with Unilever, followed by a stint with the Coca Cola Company, before joining McDonald’s in 1994. He has been posted in Dubai since 2007.

To understand the company’s success in the region, explains Üngün, one must first appreciate the McDonald’s formula, reduced to an algebraic equation:

“Quality (Q) plus service (S), over cost (C), results in value (V) for our customers. As long as we increase value, that’s how we make profit at the end of the day,” says Üngün. McDonald’s is doing something right – operating income for 2008 increased a breathtaking 33 per cent (28 per cent adjusted for constant currencies) for the APMEA region. The value to the McDonald’s customer is thus a product of not only the food’s cost, which must be competitive, but also the food’s quality, which cannot be compromised.

Üngün’s geographic region of responsibility, the Middle East and Africa, oversees some 650 locations or ‘stores’. These stores are completely franchisee-owned as “developmental licensing markets” – the McDonald’s corporation itself owns no outlets in the region. With the exception of Saudi Arabia (which is divided into East and West regions), each of the 15 countries in the group is considered a single market, each with one license holder. In addition to Saudi Arabia, the MEA Group has stores in Oman, the UAE, Bahrain, Qatar, Kuwait, Sri Lanka, Pakistan, Lebanon, Jordan, Egypt, Cyprus, Turkey, Mauritius and Reunion Island.

What makes the logistical operation so impressive is that, according to Üngün, “about 70 per cent of purchases in the region are locally sourced.”

Üngün calls this “a good mix” of local and import sourcing, with very little coming from the US. Turkey, for example, is completely self-sufficient, and Egypt nearly so. Bigger markets have more mature infrastructures, while smaller markets such as Mauritius, Reunion and Jordan may need more logistical support from Dubai.

Where infrastructure does permit, the preference for local supply results from more than just convenience. Customs duties, for example, may be extraordinary, as in the case of Turkey, a country that Üngün says imposes a 245 per cent duty on imported beef. Price, however, never trumps quality. “If the local supplier is not up to McDonald’s standards, no matter what the cost, we must import,” says Üngün. Maintaining that consistent quality around the world cannot be faked. “A Big Mac has to taste the same, whether from New Zealand, or wherever,” he emphasises.

To ensure this bottom line result, McDonald’s treats supply chain not as a quixotic endeavour to pinch a few pennies at the margins, but as an indispensable component of the success formula. To illustrate, Üngün draws up a diagram of a three legged stool. One leg represents the suppliers, another the franchisees (or license holders) and the third the company itself. A collapse of any one leg shatters the entire operation. “Our successes are team successes,” explains Üngün. “Our failures as well.”

The role of the local supplier in the process its hand-in-glove with that of the market’s distribution centre. McDonald’s uses approximately 400 SKUs, sourced by scores of suppliers within the Africa and Middle East group. The SKUs break down into three categories.

Local suppliers provide the majority of ambient products, for example, such as cups, napkins and sugar packets. Likewise, chilled products – those stored at between one degree Celsius and four degrees Celsius (lettuce, tomatoes, cheese) usually come from local sources. Some frozen products kept at between minus 18 degrees Celsius and minus 22 degrees Celsius (beef, chicken and fries) may be imported; but here as well, the company prefers to source locally wherever possible.

With so much riding on the critical relationship with the local supplier, not surprisingly, McDonald’s undertakes a stringent vetting and auditing process.

McDonald’s standards incorporate all local law requirements in the various markets, explains Üngün. “But McDonald’s has its own high level of quality,” he says. “This is usually more stringent than the local laws themselves.”

“We identify potential suppliers and we use third party companies to check on them. We’re looking into not only food quality, but their history, financials, how they’re doing business, processing capability, sustainability, promoting social responsibility, product quality, food safety, traceability.”

The vetting process is comprehensive.

“Nothing is left to chance.”

This scheme places tremendous responsibility upon the local distribution centre. These centres “collect weekly orders from restaurants, place orders with the suppliers, receive the products and store them and then prepare mixed pallets to send to the stores. The distribution centre then collects the money from the store and pays the suppliers,” says Üngün.

“They also apply quality control and food safety checks.” “All this is being done by independent distribution centres,” he says. “The whole process is very much transparent and controlled.”

Indeed, McDonald’s takes transparency a step further with its “invisible delivery.” “In some countries the distribution centres deliver products to the stores with their own keys to the restaurants.” The distributor enters in the wee hours of the morning, stocks the shelves and leaves. “There is a huge level of trust between the distribution centre and the franchisee,” says Üngün. “It is a big family – supplier, franchisees and the company – all working to increase value to the customer.” Invisible delivery is more than just a convenience, it underscores the McDonald’s rationale – allow personnel to focus on the customer, rather than back room distractions. “This is how we differentiate,” says Üngün.

The transparency of McDonald’s distribution is remarkable as well in that the distributors, themselves sometimes competing for business outside the McDonald’s organisation, maintain regular councils. “There is a logistics council. Some distribution centres hold quarterly meetings, exchange information and best practices. The meetings are organised in a different country every time.”

According to Üngün, distribution centre candidates are sent to other distribution centres to visit and get a feel for the McDonald’s way of operating. “For example, a distribution centre in Malaysia has sent an expert to train in the UAE.”

Returning to the family concept, Üngün adds, “If you’re in the family of suppliers in McDonald’s, all doors are open for you.”

The supply chain is not only transparent, but as one would expect, sophisticated. Using GPS technology, the company and the distribution centres can monitor not merely the location of every truck on the road, but the temperature inside the vehicle as well.

Like any organisation, the entire operation must respond to special peaks and valleys in demand. “We have a very good inventory management system,” says Üngün. “All distribution centres are using sophisticated IT systems.” Distributors and license holders also employ historical data to meet unique phenomena such as demand during Ramadan, for example.

McDonald’s has built its success not by paying lip service to logistics, but by a detailed commitment to ensuring quality control at each link of the supply chain.

The company knows what others may only surmise – that active participation in supply chain management drives their competitive advantage.

Only some companies have what it takes to balance tough times

The economic downturn has resulted in less international trading, with companies feeling the financial squeeze worldwide. Manufacturers are struggling to use their existing capacity by sourcing additional orders, leaning their supply chain and, inevitability, reducing their workforce to save costs. They are flooded with enormous exogenous pressures due to growing uncertainties in trade and market disruption.

Small and medium enterprises, which form the bulk of the supply chain, have been badly hit and have sought substantial financial support from banks and governments to improve their cash flow.

Dr. Albert Tan, Associate Director, The Logistics Institute- Asia Pacific

Throughout the turmoil, the logistics industry has not been spared. With a dramatic drop in international trade, many companies within the industry are resorting to the following:

Carriers are reducing their capacities or cutting down trips to countries with small shipments;

• Logistics companies are willing to rationalise their services and products offered only if they still add value to their customers;
• More companies are exploiting the use of information technology (IT) to automate some of their existing manual tasks;
• Because most companies currently have lower than usual workloads, some are using this downtime to send their staff to upgrade their logistics skills or, alternatively, some employees have been asked to take unpaid leaves;
• Some companies are worrying about the survivability of their suppliers who may have cash-low problems resulting from deferred customer payments and reduced credit from the banks.

Interestingly, some logistics providers are still profitable and sustainable under such harsh conditions. Further analyses of such providers exhibit the following trends and characteristics:

• They focus on offering niche and innovative logistics services that are difficult to duplicate. For example, some offer specialised expertise in collecting, processing and storing a ready supply of umbilical cord blood units to treat patients;
• They have very strong engineering or technical staff members that form the foundation of their service offering. This includes, for example, the collection and repair of LCD monitors requiring highly technical skills, for LCD manufacturers;
• They have developed a comprehensive set of IT systems to support their business processes. For example, many successful logistics providers have scanning and imaging capabilities and offer storage facilities to legal firms and governments to archive their contracts and other legal documents;
• They offer logistics services in new and emerging markets, such as Africa and other developing countries.

While the road ahead for economic development is still unclear, some governments are stepping up initiatives to prepare themselves for recovery. Economically developing countries are investing or upgrading existing infrastructures to take advantage of lower material and labour costs. Road and port upgrading projects are being introduced to stimulate the economy and generate employment. Others are providing generous incentives to traders to stimulate international trading and, thus, generate more logistics services for the economy. In fact, some governments are subsidising training costs as part of workforce upgrading or to aid employees’ career transitions from other sectors to logistics sectors.

Dr. Balan Sundarakani, The Logistics Institute- Asia Pacific

Executives preparing their organisations to succeed will need to focus on what has changed and what will likely remain the same for their supply chains and industries. The result could be an environment that, while the economic landscape might have changed, the opportunities that arise from the change may be advantageous for those who are well prepared.

How much should your public relations company know about your business plan? More than you think, Brett Bowes says.

At first, I’m confused as to why I am sitting across from Brett Bowes, Chief Executive Officer, TerraNova Strategic PR. I have shown up at the Rolla Residence in Bur Dubai, after all, for an interview with a representative from Hala Supply Chain Services to discuss the logistics industry in Saudi Arabia.

“Why have they sent me their public relations guy?” I ask myself.

But I quickly realise that Bowes is more than your typical public relations representative. He not only manages the marketing and communications for Hala, but has played an important role in developing the Saudi-based logistics provider’s business plan.

Brett Bowes, Chief Executive Officer, TerraNova Strategic PR

“I have worked more in client businesses than I have communication strategy businesses,” says Bowes.

“My sense of communication businesses – public relations and advertising in particular was that they were populated by very able, very creative people who knew a lot about what they did, but not as much as they should have known about their customers.”

Bowes’ services appear to expand past those of the typical eventholding, interview-arranging, press release-emailing communications company. “Having been a user of advertising, public relations and communication businesses, I thought that there was a gap for a communication business that did understand strategy, and maybe even created the strategy,” he explains. “That way you can write cutting-edge stuff that actually opens the way for sales growth and for market expansion, as opposed to just reporting when a deal is made.”

TerraNova’s logistics work began in 2002 with its young client, South African based Barloworld Logistics (Barloworld now owns Dubai-based Swift Freight). “Barloworld is probably the fourth biggest logistics business in South Africa now, after five or six years,” says Bowes, “and by far the biggest top-end logistics solution provider.”

Impressed by Barloworld’s success, the Hala Group, which owns television stations in Saudi Arabia, as well as Avis car rental and parcel delivery giant Hala Express, approached TerraNova to help them set up a supply chain company in the Kingdom. “Hala Supply Chain Services had positioned themselves as a 4PL and they were having limited success,” says Bowes. “They thought it would simply be a matter of doing what Barloworld did again.” But Bowes recommended conducting research before moving forward.

“If you don’t understand the terrain, don’t go out there and start talking,” he says.

TerraNova was able to gather enough information on the status of Saudi supply chains to offer targeted advice. “What we found was that Saudi Arabia has a logistics environment 15 years behind in terms of its development, even compared to South Africa,” he says. “The country was not ready for a 4PL provider at all.”

Bowes describes Saudi supply chain managers as the “DIY” (do it yourself) type. “They want to run everything and control it themselves,” he explains. “The only thing they outsource at all is transport, and only because of the massive growth and high cost of additional trucks. By law they have to clear through customs with an agent, so there is quite a bit of clearing, but not a lot of forwarding.”

According to TerraNova’s soon-to-be-published Supply Chain Intelligence Report, the status quo needs help. “Despite the fact that these supply chain managers are mainly DIY, their improvements in the supply chain yield very bad results,” says Bowes.

“They don’t achieve the success they want to achieve. They’re failing horribly from a service point of view. As the economy grows every year, the same old creaking supply chains start falling over.”

Thus, Hala had been aiming too high over the industry’s head. “I think their mistake at the beginning was to look at the supply chain industry and look at the high-end, high-value part of the industry,” says Bowes.

He recommended that the company first focus on basics such as warehousing. “We advised Hala that they need to make their dollars and dirhams and riyals in a 3PL environment,” he says. “That will be the next move, no question.”

Bowes says the company will start with overflow warehousing, offering space to businesses in need. “Lots of companies have built their own warehouses, but they are bursting at the seams because of high volumes,” he explains. “When they find out how useful and efficient overflow warehousing is, they might say ‘Hey, that’s the way!’” But, he says Hala should not give up entirely on high-value work. “We have told them they must position themselves as capable of 4PL work and capable of consulting,” he says. “There are early adapters and innovators who are significantly changing their supply chains.

The government is looking at improving the infrastructure of Saudi Arabia, and they understand that the supply chain is critical. Hala will get some very big 4PL and consulting work out of that, I have no doubt. They have got to keep that intellectual high-ground.”

Bowes says successful businesses defined purely as 4PLs are hard to find. “I think the 4PL thing is a piece of jargon,” he says. “I am not sure it exists anywhere.”

He explains that such companies are unsustainable because they earn their revenue based solely on improvements they implement. “When the improvement has been in process for five or six years, the clients are saying, ‘Why do we need you?’” he argues. “The 4PL is a very difficult model just on its own.”

Another piece of jargon Bowes would rather avoid is the word ‘outsource’. “The word ‘outsource’ is almost a scary term to these supply chain managers,” he explains. “We use the word ‘insource’, because we like to think that we are coming into their business and offering more control and more visibility, not taking things away from them.It is a different emotional approach."

So why should a logistics company focus so heavily on words? “Perception is a target market’s reality,” says Bowes. “Whether you say something or not, they will judge you on their perception of who you are and what you do. If you say nothing, they are going to judge you on what they see, as opposed to what you want them to see. In my opinion, not to communicate is just stupid.”

The art world is selective about who it lets handle its goods. The organisers of Art Dubai expect no less than the best, reports Kathryn Semcow

Chris Chackal looks exhausted. The Fair Manager for Art Dubai only has three and a half days left to set up one of the region’s largest displays of international art. While he barely has enough time to finish his sentences, he is certainly having fun. “This is the part I love,” he says of the final preparations. “With all the meetings and discussions and debates, you are finally making it happen. These are the days that are crucial to giving the final delivery of what we’ve promised to everyone.”

By the time LOG.Middle East goes to press, Art Dubai will have passed, giving 5,000 visitors a view of works from 465 artists, selected by 60 of the world’s leading galleries from more than 30 countries. In only its third year, the event, held at Madinat Jumeirah, has already achieved a strong following. “We are proud to say that we are on the collector’s calendar,” says Chackal.

And these collectors often have big budgets. While works are on show for less than US$1,000, prices can go up to US$12 million, the cost of an installation by American abstract expressionist Sam Francis courtesy of L&M Arts gallery in New York.

Chris Chackal, Art Dubai, Fair Manager

With values like these it is no wonder that Art Dubai screens its carriers and handlers carefully.

“We scout the market and meet up with all the credible suppliers that we can match with in terms of our requirements,” says Chackal.

Not everyone makes the cut. “There are a lot of shipping companies now who are opening, and are interested in opening art divisions,” he says.

“The question is whether they are ready for it.”

Art handling, after all, is fairly new to the region. “It is a young market not only for the arts, but for suppliers,” he says.

This year Art Dubai chose German company Hasenkamp as its official shipper. “So far, our experience with them has been absolute excellence,” says Chackal. “What else can you expect from Germany?”

They are also using British company Constantine and UAE-based Bridgeway for art handling.

“There is an art of itself in handling the pieces,” he says.

Amidst global economic downturn, the logistics industry is facing increased challenges in order to stay afloat. So what does this mean for those working in the sector?

Phillip Richardson is sitting at Starbucks, scouring the employment section of a local newspaper when I meet him to discuss his search for work. He is surrounded by others doing what appears to be the same thing. After three years working for one of the largest employers in the UAE as a logistics manager, he was recently made redundant and now faces what most would assume is a tough challenge to find a new position at a time when ‘job losses’ seems to be a far too common phrase.

“Unfortunately, I seem to be one of many that have lost their job and I certainly wasn’t the only one in my department to do so,” he says. “Now, I’m trying to send my resume out to as many companies as possible. I have a family to support.”

Statistics on just how many job cuts have been made in the region differ wildly, depending on the source. Gulf News recently reported 3,200 jobs had been lost in Dubai since January, while a number of news outlets have reported on the “1,000s” of cars left at Dubai International Airport as expat workers lee the emirate, unemployed and in debt.

Further abroad, the figures stack up to paint a bleak picture. Speculation is rife that logistics powerhouse Kuehne and Nagel will axe up to 4,500 jobs globally should declines in cargo volume continue (a review of the careers section of their website indicating no jobs in Africa, the Middle East, North and South America), significant given the company has a workforce of 54,000 people.

In Europe, PKP Cargo, one of the region’s largest freight carriers, has announced it will cut 9,000 jobs by the end of the year, over 20 per cent of its staff. The total tonnage moved by the company fell from 145 million tonnes in 2007 to 122 million tonnes in 2008.

Norwegian operation Teekay Shipping has faced immense pressure from trade unions after revealing plans in February to replace 200 Scandinavian seafarers with Pilipino staff in order to reduce overheads. This figure has since been downscaled to 100. Unions called upon the government to protect the local industry, who reacted by introducing new regulations requiring Norwegian work permits on ships operating within Norwegian territories.

Back in the Middle East, it seems the news is not all bad. Bryan Fuge, Head of Recruitment for Al-Futtaim Group, which includes Al-Futtaim Logistics, says the division are currently recruiting a number of staff.

“We are in good shape, we will definitely need to recruit this year,” he says. “I cannot quantify the exact number, we currently have tenders out for lot of business so it’s linked to some extent to that.”

Fuge explains that, while recruitment will go ahead over the coming year, the process followed and the type of staff they will hire will differ from other years. “We are focused on seeking fewer, higher quality candidates; paying better than the average salaries across the Gulf and recruiting a higher calibre of staff, rather than lots of low paid workers,” he explains. Al-Futtaim hopes this will help them provide a better quality of service, particularly on the front line, where business is often won and lost in troubling times.

Nigel Moore, Managing Director for the Middle East and Africa arm of recruitment and consultancy firm, Logistics Executive, agrees.

“We saw a period of denial up until mid January and then people woke up, realised what was happening would affect them and froze recruitment. Eighty per cent of our clients were doing no recruitment at all,” he says. But this soon changed, he explains, “the Middle East still had projects going ahead so it didn’t make sense not to do any recruitment.”

Moore says Logistics Executive are seeing more and more clients, particularly large international companies, while not recruiting on large scales, still sourcing candidates with specific skill sets and qualifications. “Good candidates are always going to be scarce in the logistics and supply chain industries,” he says, explaining that in times of downturn, companies are more likely to retain their best staff.

He concedes that companies face continued pressure to cut costs, but says reducing headcount is not necessarily the answer. “Now is the time to review the organisation and talent and make sure the talent aligns with the company’s long term plans and strategies.”

Moore explains that ‘talent management’ is the key to ensuring organisational efficiency, thus keeping costs in check. This involves ensuring staff at key levels operations, divisional and regional departments, for example – have the skills, qualifications and experience to do the best job possible, “Do you have the right strengths at each level?” is the question that should be asked, he says.

In Moore’s opinion, organisations need to focus on recruiting and retaining quality staff, particularly in key positions, in order to get through the next two years. “The past five years have been all about growth, growth, growth, and this has meant that often quality was overlooked in favour of quantity, staff-wise,” he says.

Perhaps this was the case for global shipping, logistics and marine group, GAC, who recently announced that it will shed thirty of its 1000 UAE workers. They are now looking at other measures to avoid further redundancies. “We are increasing the amount of training and cutting down on overtime,” says the Dubai-based company’s Group President Lars Safverström, although he concedes this will not be enough to save those being let go from the logistics operation.

Perhaps a lesson has been learned. “Our strategy is such that we are flexible and we want to stay close to the market so we can immediately adjust to circumstances rather than just making a snap decision now and reviewing it six months later when we have to take drastic action,” says Safverström, adding that he is confident of an upturn in business in 2010.

It seems that while the current economic climate makes any kind of business tough, the logistics industry in the Middle East is poised to fare better than many other regions, with lower numbers of job cuts and higher numbers of replacement and new hires.

“I think it’s a case of, if you work in the logistics industry, the Middle East is the place to be right now, compared to anywhere else in the world,” explains Brian Fuge. Many, including Phillip Richardson, are hoping he’s correct.

National Food Products Company ensures the movement of its water, milk and juice flows like-well-water, milk and juice.

Judging from his office, it is hard to believe that Ian Buckingham manages the supply chain of one of the UAE’s most popular beverage companies. You would expect stacks of papers on his desk waiting for approval, reminders and schedules pinned to his walls and frantic employees’ running back and forth through his door.

But rather, his space at the National Food Products Company (NFPC) headquarters in Jebel Ali is sparse, quiet and calm.

“I’m here to work, not to show,” says the UK native, jokingly, when asked about this.

Actually, he admits, he is in this office too little to make a mess. “Because of the number of facilities we have across the UAE, I don’t spend too much time in one location. We have four production facilities and seven regional distribution centres (RDCs) within the UAE, and a further four RDCs in Oman. Plus, we export to approximately 20 countries.”

While Buckingham’s office maybe minimalist, his operations certainly are not. NFPC manufactures Oasis water, Lacnor juice and Milco milk products.

The company says it is the market leader in five gallon water jugs and yoghurt; and judging from the prominence of its other products in grocery stores, you can guess it comes close to leading in its other categories as well.

That is a lot of liquid. “If you take the Lacnor full cream milk, for example, we produce 130,000 litres a minimum of once per week,” says Buckingham.

“If you take the Milco drinks, we’re producing approximately 180,000 litres of orange and 180,000 litres of mango. With Oasis water, we’re doing over a million five gallon units per month.”

The company ills its ive gallon water jugs at its Abu Dhabi and Dubai facilities. It produces Milco in Abu Dhabi at the same facility it produces Oasis, and Lacnor in Sharjah, where it has a factory and three warehouses.

NFPC also has a sister company, Milco Plastic, based in Abu Dhabi, which produces a large part of its packaging. “We can bring in a lot of our requirements such as the five gallon bottles we use for Oasis and the plastic cups that we use for Milco yoghurt,” says Buckingham.

He says NFPC co-packs for Saudi milk company Al Marai in the UAE. “We pack their products and then they distribute it,” he says. “At Lacnor we’ve co-packed for other brands as well. It depends on the time of year, our availability and whether we’ve got capacity on our production lines.”

Other kinds of packaging come mostly from the GCC. “We have our locally sourced products, of which you have the labels, the cartons, the trays,” says Buckingham. “The majority of our tetrapaper comes from Saudi Arabia. We try to bring in as much as we can from the GCC, predominantly the UAE. Obviously, that assists us with transportation costs.”

NFPC tanks in fresh milk for Milco by road from Saudi Arabia and ships milk powder mostly from Australia and New Zealand. Tomato paste comes from either Al Ain or Turkey, and sugar, as well, is purchased locally.

“Concentrates for juices usually come from America, specifically for grapefruit, cranberry and orange; but also from Brazil, Spain, Holland, Egypt and South Africa,” adds Buckingham.

“The majority comes in by sea,” he continues. “We receive product into Jebel Ali, Abu Dhabi and Sharjah.”

On rare occasions, they do ship by air. “Only if we’re looking at additional volume requirements because we’ve oversold the budget, or if we’re bringing in small quantities of raw materials for product development,” says Buckingham.

And, as many of us may wonder when we are drinking it, where does Oasis water come from? “The water comes from the Dubal plant and then it is treated,” says Buckingham.

Ian Buckingham, Supply Chain Manager, National Foods Product

Dubal, or Dubai Aluminum, sits adjacent to the Oasis plant in Jebel Ali. The company explained the water treatment process in an emailed statement, “In its original form the water is semi-pure and upon reaching the Oasis facility it undergoes further purification and filtration. The final stage is reverse osmosis which results in pure water which has been 100 per cent stripped of all its content. Oasis then adds back its proprietary and unique blend of minerals which gives Oasis its distinct taste and mouth feel.”

NFPC stressed that this was the method used by all UAE bottle water companies, and that their water was more than healthy to drink. “The Oasis plant is ISO and HACCP approved and in addition is strictly regulated and audited by government bodies to ensure we only supply the highest quality of safe drinking water,” said the statement. The company also washes and sanitises all five gallon bottles before reusing them.

While the company uses its own five gallon containers, it purchases performs for the smaller water bottles from outside suppliers. These forms come in the size of test tubes and expand to full size when blown out at the Oasis factory. Buckingham says this process helps them cut back on shipping and storage.

“Imagine trying to store five million empty bottles,” he says. “That’s a hell of a lot of space.”

Buckingham says all products are kept in temperature-controlled environments.

“Everything is perishable,” he says. “Everything has a shelf life, whether it is 12 months or 24 months. Milk powder, for example, has a 12 month shelf life. Even the tetrapaper we bring in will have a shelf life to it.”

Planning ahead

According to Buckingham, his team’s greatest challenge is accurate forecasting, which requires both long-term and short-term purchasing, due to the nature of their raw materials. “If you take oranges, for example, they are harvested once a year. So we’re actually buying between 12 and 18 months into the future. That means we have to

do our long term procurement based on business objectives and the budgets determined by management. The delivery schedules will then be amended to meet with the rolling forecast,” he says.

They use short-term forecasts, on the other hand, for locally sourced materials such as packaging.

“We operate a four month rolling forecast for all three business units, and that’s obviously so we can monitor and track our raw material consumption, bring forward or delay scheduled shipments, or go and source additional materials if they are required.”

Buckingham says surges in demand come from competitors falling out of the market or experiencing shortages.

“That is when our ability to react because of our size greatly assists us,” he says. “Being the predominant manufacturer in the UAE gives us the flexibility that smaller companies do not have.”

While the company is currently using a spreadsheet to forecast demand, he says they are moving towards software for the purpose. “We are implementing JD Edwards forecasting module, which is tied in with the manufacturing module,” he says.

JD Edwards is a history-based system, which predicts sales by using algorithms.

“We can improve upon the accuracy,” he says. “Given the tools that are available, moving into JD Edwards will give us a bigger, more powerful tool.”

On their own

NFPC currently manages its own transportation. “Everything is in-house at the moment,” says Buckingham. “Outsourcing is something that I will look at in the future to see if it is cost-effective for us, and we will make a decision probably later this year.”

He says transport falls into two areas trailer logistics and sales-guided logistics. “With trailer logistics, 75 per cent is on a fixed route. Every day the trailer drivers know where they’re going and what time they are going to be there. We have to allow the additional 25 per cent flexibility for volume increases, seasonality and changes within the market.” The company operates 21 trailers (either 40 or 50 feet) mostly to transport the Oasis five gallon jugs. “These trucks are working 24 hours a day, seven days a week,” says Buckingham.

The sales team manages the company’s other vehicles, ensuring that their customers receive the correct quantities at the correct times. “Each production facility works as a distribution centre for our sales teams as well,” explains Buckingham.

“We are currently operating 460 3.5 tonne sales units. That will increase to 510 by the end of the first quarter of 2009.”

He says the sales team’s activities ensure the company delivers to even the smallest stores. “We deliver directly,” he says proudly.

In store

Buckingham says NFPC is looking to expand its warehouse capacity and improve its standards. “We are HACCP and ISO accredited and we have to maintain that,” he says.

And he expects the company will need more capacity. “Since the company was started in the early 1970’s by Fadi Antonios it has grown year-on-year,” says Buckingham. “Even though times are hard for most, we are still planning growth within the local region and with our export opportunities. The demand is still there.”