Dynamic distribution

The Middle East is positioning itself as a hub for modern day logistics. The region’s ports are expanding at a rapid rate while third party logistics providers (3PLs) from around the globe are moving in and making them their homes, while local organisations are ramping up their own logistics as they look beyond their home markets. Each of these players has different goals and approaches, but all are investing in IT to drive efficiencies and become more competitive.

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By  Maddy Reddy Published  April 11, 2004

|~|ArulRaj12.jpg|~|Arul Raj, finance & operations director, Almasa IT Distribution.|~|From the earliest silk and spice caravans through to today’s massive ports and cargo carriers, the Middle East has always been a trading hub. Last year alone the 17 Arab nations traded more than US$420 billion in imports and exports and, as a region that manufactures little, the arrival and departure of goods is key. It not only provides the populace with what it needs, but also creates a thriving industry that creates jobs and opportunities for many. With logistics making up between 20% and 60% of any product’s price, the need to ensure that goods are shipped effectively is paramount. As a result, effective supply chains and ultra-efficient logistics are two of the most important business influencers for companies operating in the market. And, in a world where information technology is becoming increasingly omnipresent and promises to drive efficiencies and cut costs at every turn, it is unsurprising that IT has become a big part of the logistics industry, not only for the ports themselves but for the third party logistics providers (3PLs) that inhabit them and their own customers. The Dubai Ports, Customs and Free Zone Corporation (PCFC), for example, has already been investing in technology in line with the rest of the Emirate’s government bodies as it looks to create an infrastructure capable of sustaining growth rates that will see the number of transaction units (TUs) it handles increase by 23% and reach 5.3 million this year. One of PCFC’s most recent initiatives has been Dubaitrade.ae, a bilingual portal that combines all of the electronic services provided by Dubai Ports, Customs, JAFZA and the Free Zone Corporation. With more than 3000 companies already using electronic services for approximately 6.5 million transactions in 2003 alone, the portal is a vital link that brings together the 50,000-plus distribution and trading companies that interact with the PCFC. “We continuously invest in innovative technologies to simplify our clients processes and make them more efficient,” says Sultan Ahmed Bin Sulayem, executive chairman of the PCFC. Kuwait Ports Authority (KPA) is also investing in online technology and has started to deploy a portal solution that automates the management of commercial harbours across the country. Based on Microsoft SharePoint Portal Server and built using .Net technology, the portal will streamline and automate the authority’s internal business operations as well transactions with shipping lane operators, agents and customers. “As today’s digital world becomes a smaller and tighter global community, leveraging state-of-the-art technologies to modernise operations is becoming a necessity for all businesses. A portal is very important for our business to communicate and serve our clients faster and more easily. It helps us achieve our business goals by providing better service to our customers,” says Saad Al Mutairi, KPA’s IT manager. Developed by the Arabesque Group, Microsoft Consulting Services (MCS) and KPA’s inhouse IT team, the programmers chose to use Microsoft’s Visual Studio.Net due to its rapid deployment capabilities. The portal solution includes Microsoft’s Exchange 2003 as the standard corporate messaging platform across KPA for daily communication between its agents and contractors. A Windows 2003 Active Directory solution facilitates user authentication, application server, network management and network security. “It uses secure systems to protect against hackers and virus attacks. KPA is implementing an infrastructure based on Microsoft Windows Server 2003 and Microsoft ISA Server platforms to achieve a secure environment following security practices that have been implemented and proven globally,” say Mutairi. KPA expects the portal to deliver a major return on investment internally and reduce customer costs once the full benefits of its communication capabilities are utilised. Clients no longer need to send staff to KPA to find out about shipment status, as all this information is available online. They can also find out exactly where their shipments are located within a port, saving time on pick up. Furthermore, ships will spend less time in port because there is no need to wait while shipping manifests are finalised. “KPA plays a vital role in Kuwait’s economy by attracting foreign investment into Kuwait and establishing modern ports to facilitate higher volume trades between Kuwait and the rest of the world. Efficient operations, customer satisfaction and the attraction of investment to Kuwait’s ports are the objectives that underpin our investments in IT,” says Sheikh Dr Sabah Jaber Al-Sabah, general manager at KPA. Such dedication to technology is also evident among the 3PL community, which provides outsourced logistics, such as contract warehousing, transportation, distribution management and freight consolidation for companies unwilling to invest in their own specific departments. For example, GAC Logistics boasts more than 5000 employees spread over 200 offices and a 75,000 sq m facility in Jebel Ali Free Zone (JAFZA). To handle the logistics of more than 60 major corporations from diverse sectors such as retail, fast moving consumer goods (FMCG), automotive, pharmaceutical and frozen food, GAC has embarked on a US$5 million investment drive to beef up its IT and warehouse capacity. In the first phase of the project, GAC has web-enabled its core logistics applications to provide customers with realtime access to supply chain information. “We use IT for integration and synchronisation for collaboration with our supply chain partners,” says Damien O’Donoghue, manager, strategy & development, GAC Logistics. However, to take advantage of the technology-based services 3PLs are offering, those that outsource their logistics requirements in the Middle East still need to have some sort of technology infrastructure in place, especially if they wish to link seamlessly with the provider in order to create maximum efficiencies. “Only a holistic logistics system can provide both efficiency and security,” says Captain H. Salloum, CEO of logistics software provider Axiolog. Unilever Gulf, for example, works with PWC Logistics for its imports and Al Gurg Lever for local redistribution. However, even though it has outsourced the bulk of its logistics it still needs technology to deal with these providers effectively and track stock once it arrives in the country and makes its way to warehouses in JAFZA and Jeddah. As a result, the FMCG giant has invested in applications from Exceed and MFG Pro for warehouse management and it is looking to implement SAP to boost its integration with its partners. “The existing system does not allow for complete integration, so we manually exchange files [between the distribution points] over leased lines as it is not realtime. As a result, we are looking at SAP,” says Suraj George, logistics supervisor, Unilever Gulf. While Unilever and other multinationals are committed to outsourcing their logistics requirements and implementing technologies that make those relationships as efficient as possible, many local organisations have invested in their own logistics operations and are currently exploring how technology can improve those set ups. For example, Almarai in Saudi Arabia is set to pump US$34 million into its sales centre, distribution networks and supply chain management set up, with US$16 million of that going to IT.Elsewhere, Almasa IT Distribution, part of the US$400 million Almasa Group, is investing in major upgrades to its warehouse management system (WMS) and Orion enterprise resource planning suite (ERP), which includes supply chain management (SCM) modules, to streamline its logistics with resellers, retailers, assemblers and system integrators across Europe, the Middle East and Africa. Key to this investment is the company’s use of service level agreements (SLAs) and key performance indicators (KPIs) to ensure the delivery of 2.5 million Maxtor hard disks this year, all of which will arrive with customers between 24 to 48 hours of orders being placed. “Before we were a regional player, hence we didn’t have the need for IT systems. But now, because of the increased scale of operations across multiple time zones, we want to give customers and employees direct access to tracking information for cutting down overheads,” explains Arul Raj, finance & operations director, Almasa IT Distribution. The investment in IT by ports, 3PLs and companies taking charge of their own logistics is presenting a huge opportunity for local vendors. On the software side, the more automated the industry becomes at the back end, the larger the number of users who require ERP applications and SCM solutions will become. “[In the past] we had the demand to supply financials, accounting and other modules, but now that the Middle East is well connected to the rest of the world we see a surge in application software for the SCM and logistics industry. Most companies here already have their transactions systems, either manual or automated, in place and now they are looking at streamlining, cutting costs and making it efficient,” says Jiten Sharma, pre-sales consultant, Oracle Middle East. “From an IT vendor’s perspective, the supply chain management (SCM) and logistics industry represents a big opportunity,” adds Philbert Suresh, chief knowledge officer, TransLogistique. Concurrent to increased software sales, the region’s hardware industry is also benefiting from the logistics industry’s desire to squeeze even more efficiency out of its operations by extending the use of IT into the field. For example, vendors such as Pinnacle, LXE, Symbol, Intermec and ADB are pushing handhelds to the industry that allow users to carry live instances of an ERP system on the device and link back to base via a wireless local area network (WLAN) or GSM/GPRS network. These devices facilitate scanning, bar coding and imaging and help eliminate manual stocktaking and other time consuming tasks from the logistics cycle. “By incorporating wireless technology into the logistics ecosystem you put the power of an enterprise application in the hands of the mobile worker,” says Dr Jordan Samhuri, CEO of Pinnacle Technologies, the local partner of Psion. ADB, for example, has rolled out a mobile warehousing solution for Sabic to help it track more than 300,000 line items across 250 warehouses. “They faced a problem with the field staff, losing track of the inventory because of complexity. We implemented a wireless solution that scans the barcode of each product, takes a digital image of the product and synchronises it with the server for stock tracking,” explains Reema Ariss, vice president of marketing, ADB. While the latest hardware and software promises greater efficiency, the real benefits only come when disparate technologies work together and the weakest link — the people — are up to speed on the kit they are given and what they are supposed to do with it. As Suresh says: “The logistics system can only be as a good as the people using it. If the field workers are not trained how to use the technology, [then] nothing else matters.”||**||

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