Beyond KSA

Hala Supply Chain Services has a huge logistics outsourcing business in Saudi Arabia, despite the county's reluctance to outsource. Now, the company is set to spread regionally.

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By  Neil Denslow Published  October 8, 2005

|~|Al-Saleh,Husam-(hala)_m.jpg|~|Husam Al-Saleh, general manager, Hala Supply Chain Service|~|Saudi Arabia is probably not the most inviting country in which to launch a logistics company. The economy is dominated by family-owned groups, which have traditionally had little knowledge or interest in supply chain management. As such, they have tended to treat their warehouses and logistics operations as cost rather than as an opportunity to gain a competitive edge. “Historically, warehouse personnel [in Saudi Arabia] are people who have been working in the company for years that the management do not want to fire,” says Husam Al-Saleh, general manager, Hala Supply Chain Service. “They do not know what to do with them though, so they put them in the warehouse.” The problems caused by this approach were clearly seen, however, on one consultancy visit done by Hala at the warehouse of an office supplier. The warehouse was full of inventory, of which around 70% was redundant stock, such as 10 year old printer ink cartridges. “They did not want to write it off because they would have looked bad,” says Al-Saleh. “It is the type of situation where to get people to understand, you have to take the owner down to the warehouse and show him,” he adds. Such an approach is allowing Hala Supply Chain Services to build up a significant third party logistics business in the Kingdom, as the company is able to persuade businesses uninterested in logistics not just to take their distribution and supply chain seriously, but to hand it over to someone else as well. Hala is able to achieve this for a number of reasons, starting with its long history in Saudi Arabia. Arabian Hala launched operations as a hire car company in 1977 with just seven vehicles. The company grew over time, winning the Avis franchise for the Kingdom in 1993, and it now boasts over 4500 vehicles in just its hire fleet. In 1994, the company also launched Hala Express, which focuses on the express delivery of packages weighing over 20 kg. This express business now has a dominant market share in the Kingdom, making daily deliveries to 260 cities, towns and villages across the country. It was also Hala Express customers that persuaded Arabian Hala to move into third party logistics. “Towards the end of 2002, more and more Hala Express clients were asking us if we could store goods for two or three days. Also, because we were doing a good job in distribution and had one of the biggest networks in Saudi…. they started to give us more of their distribution and to outsource that part,” Al-Saleh explains. ||**|||~||~||~|Hala Supply Chain Services was therefore set up in 2003, and it has subsequently won a number of major outsourcing deals in the Kingdom. The most notable was the recent win to install 1.2 million RFID-enabled mailboxes across the county on behalf of Saudi Post. Other key clients include the Saudi Ministry of Health, soft drinker maker, Aujan, fashion retailer, Al-Sawani and the Elegant Home furniture chain. The company also recently signed a major outsourcing deal with Basamh Trading Company, which distributes a number of FMCG products in Saudi Arabia, including Nestlé’s non-chocolate lines. Under the deal, Hala took control of Basamh Trading’s complete supply chain, including its existing warehouse, distribution, freight forwarding and clearing. “To differentiate ourselves from the other 3PLs and 4PLs in the region, we offer a menu of solutions,” comments Al-Saleh. “We do not just go for the usual selling point: we have a central warehouse, store your goods here and we will do everything. Instead, we actually tailor our solutions to individual companies… That’s what makes us different from everybody else.” As part of its move to become a full 3PL, Hala also signed a partnership deal with South African-based Super Group, which will soon become a full joint venture. Hala has benefited from the partnership, as it has given the Saudi company access to Super Group’s consultants, resources and technology, as well as to the South African group’s global forwarder network, Micor, and its purchasing arm, Sherwood International. “[Super Group] help us in almost every industry, as they have the experience, the know-how and the best practices,” says Al-Saleh. “It is a partnership and it will soon move into a joint venture… as people usually say [to us] ‘you don’t have a foreign investor,’” he adds. “But seeing them [Super Group] over here shows that they know what they are doing and that they believe the industry will grow…. The whole purpose is to go public in Saudi eventually as well,” Al-Saleh continues. Alongside the growth of Hala Supply Chain Services, Hala Express is also expanding internationally. The company is aiming to establish a presence across the GCC, beginning with the UAE and Oman. However, the move is not primarily designed to win customers in these countries. Instead, Hala will be using the base to better support its Saudi customers, as well as forming partnerships with non-Saudi express companies looking to access the Kingdom. “We do not want to compete within the UAE market, we just want to be present there,” Al-Saleh explains. “We are now looking at the corridor between Oman or the UAE and Saudi, and, eventually, Kuwait and Qatar. We think we have an advantage here, and that most of the express companies there will be using our services [to serve the Saudi market],” he adds. “We have also had lots of interest from our clients in Saudi Arabia, who want us to take goods to the UAE, so the customers are certainly there.” In the longer term, the company is also aiming to build on these operations to create a truly regional presence, equivalent to its current size in the Saudi market. “In five years’ time, I think Hala Supply Chain Services, or maybe Arabian Hala as a group, will have the largest network GCC-wide,” Al-Saleh predicts. “We currently have the largest network in Saudi, and we are also growing in Oman and the UAE,” he says. “Before the end of the year we will have all of the hubs running, then we will look into the other countries. When we set up, we are going to set up big, there will be no half-measure,” he concludes. ||**||

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