High flyer

Warehousing and logistics systems are going to play a big role in Dubai Duty Free's ability to cope with business growth that should see the world's third largest airport retailer quickly become a $1-billion entity. Colin Edwards finds out what its plans are.

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By  Colin Edwards Published  June 1, 2006

|~|MAN-12-200.gif|~|Cidambi: The number of orders to be fulfilled will increase, but quantities per order will go down.|~|When Ramesh Cidambi joined Dubai Duty Free (DDF) nearly 19 years ago, it was a fledgling four-year old operation turning over around US$50 million. By 2001, revenues hit $256 million. This year, it is expected to top $670 million, so it is fair to assume that once new concourses open in 2007 and 2008, sales will hit $1 billion very quickly.

Such growth projections do not phase Cidambi. As director of information technology and logistics, initially recruited to set up DDF's IT department, he is used to making sure the company has the right IT infrastructure to handle such growth.

What is different this time is that warehousing will have a much more critical role to play because the opening of Concourse 2 and Concourse 3 at Dubai Airport will result in a totally new sales delivery model for DDF.

Currently, 85% of its business comes from seven outlets within the single duty free retail area at Terminal 1. Keeping outlets fully stocked is a relatively simple exercise as bulk deliveries - some 300 pallets a day - are concentrated in one area.

When the new concourses are opened, the warehouse will have to fulfil a much higher volume of orders, but made up of smaller consignments to be delivered to three major locations comprising some 40 to 50 outlets.

“As soon as Concourse 2 opens 60% of the 85% of the business currently generated in Terminal 1 will migrate there because all Emirates flights will go to Concourse 2. There will be further migration when the third concourse opens,” says Cidambi.

“So there will be fragmentation of our sales across the three concourses and across many more retail areas. This will make the merchandising much more difficult. This is why we felt we needed a semi-automated distribution centre that can cope with a large number of orders, with smaller quantities per order.”

Overall management of the new centre's logistics operations, from bay scheduling of incoming trucks, goods receiving and storage allocation to order picking and distribution to the retail outlets, will be handled by the implementation of Oracle Retail Warehouse Management (ORWMS). This is an application based on the Retek Distribution Management (RDM) suite that Oracle acquired last year and is the first deployment of its kind in the region.

“The new ORWMS will be critical in accelerating and optimising the flow of goods from store to shelf, reducing lead times, freeing up people to focus on other areas, and ultimately eliminating lost sales due to out of stock situations,” says George Horan, deputy managing director, DDF.

Despite DDF having a high-volume captive market at its airport retail outlets, Sarah Taylor, retail industry director for Oracle EMEA, stresses they have exposure to this market only for a short time, hence the importance of having the right stock on the shelves.

“The key thing for DDF is that it has enormous aspirations and aggressive growth plans. And therefore for them to remain profitable in that growth strategy, IT is forming a key part. To do that certainly they want to focus on how they can impact their customer so getting availability on shelf in real time is key to them. ||**|||~|dutyfreetaylor200.gif|~|Taylor: It means they can sing harmoniously with their partners and suppliers.|~|"They have to grab their customer within a few minutes of them walking into the store, so they have to have that product available for them. Having that supply chain right is fundamental to success,” she says.

“Couple that with forecasting, planning and allocation, it means they can sing harmoniously with their partners and suppliers too. So this is an important phase for them in terms of their growth.

"At the moment they are only looking at warehousing because this will enable them to button down supply chain and ultimately improve availability on the shelf. Being able to manage their inventory effectively in real time will have a significant and rapid impact on their business.”

According to Cidambi, DDF was looking at the different warehouse management systems on the market at the time Oracle acquired Retek. As a major Oracle Applications house, the acquisition could not have happened at a better time
for DDF.

“We were pleasantly surprised when Oracle decided to take it over. It allowed us to select a system which was proven in the retail area, and which now also had the support and resources of a large organisation such as Oracle behind it. DDF was already an important customer of theirs (Oracle), so it was a perfect fit for us. It accelerated our decision to take the Retek route,” he says.

The new warehouse will be commissioned and operational in March 2007 to coincide with the opening of Concourse 2. Cidambi's IT and logistics teams are working with a Portuguese company, Enabler, to integrate the ORWMS and the material handling system and Oracle back office applications. These are to be tested by the end of the summer.

On-site testing at the warehouse will take place in the December timeframe ready for the go-live in March. Enabler is also looking at business processes within the warehouse and helping DDF to optimise its operations.

“Enabler has a long track record working with retailers and with Retek solutions and they have particular experience and expertise in warehouse systems. We started the project in February and we have already completed the conference room pilot for the implementation. Now we are doing the design and development phase of the project,” the IT and logistics director says.

“With Concourse 2 scheduled to open at the same time as us, it's going to be great fun,” he quips. “I'm going to move into a hotel near the airport.”

Integration between the different systems is being effected by the Retail Integration Bus (RIB), which Cidambi says is not only a strong integration tool for integrating the Oracle suite with the WMS, but more importantly for integrating other retail products or services, such as merchandising.

“We are very happy with what we have seen so far in terms of the RIB. But we think that the overall integration momentum or effort between Oracle Applications and the former Retek suite is a work in progress. I don't think one can say it is an effort that is completed,” commented Cidambi.

“The architecture within Oracle Retail itself and the use of the RIB makes the overall integration much easier. We expect to prove this soon. We are about to start an integration project between the WMS and our Oracle back end systems and hope to be able to design test, develop and go live within about 12 weeks.”

The new, semi-automated, 27,000 sq m distribution centre and supporting warehouse management solutions have been designed to make sure DDF can service the airport's growth projections over the next six years.

Passenger volumes are expected to increase from 28 million today to 70 million in 2012. To meet such growth, Cidambi is adamant that it will not entail continually adding warehouse headcount as has been the case in the past.||**|||~|dutyfreeairport200.gif|~|Concourses 2 and 3 will allow DDF’s sales to soar to $1bn in the next few years.|~|“As our business grew, the warehousing part of our operation became very manual and labour intensive. With every increase in the amount of business and the volumes of merchandise we were putting through, we simply increased warehouse staff,” he says, adding that today there are 135 warehouse personnel located at the 6,000 sq m facility at the airport and the 4,000 sq m satellite warehouse nearby.

For the future, we realised we needed a logistics operation that was scalable and which did not require us to add people as we grew, but which still enabled us to support the retail areas effectively,” says Cidambi, who expects to be able to meet an increase of 15% in order picking workloads with half the staff currently employed.

“We also expect productivity improvements on the receiving side, though at the moment it is a bit harder to quantify because on the picking side we have already done our sums. We also hope to deliver more frequently to the shop floor and replenish more quickly with fewer people in the warehouse,” he adds.

Instead of having people dedicated to receiving or picking tasks, the new system will allow staff to be moved to areas where the workload is higher. For example, the load increases on the receiving side between 7am and 10am.

“They are using hand held devices and most of the instructions are driven by the system. So you have flexibility in terms of your labour force, which currently we don't have. This is why we're implementing Oracle retail,” he adds.

Storage location will also be optimised; the system will help DDF quantify the number of times items are accessed so that slow and fast-moving items can be identified and space allocated accordingly. It will help to measure the productivity of employees in receiving and picking.

“Once we open the new warehouse we will allow it to bed down over six months and then we will start gathering and measuring data in terms of productivity on the receiving side, picking side and dispatch side and then set standards and benchmarks in terms of the expectation for operators in the warehouse,” he says.

Cidambi is also looking for improved procurement processes. The back-end Oracle purchasing modules will be integrated with the WMS to give users full visibility of DDF’s stocks.

The integration will also facilitate processes such as scheduling appointments with suppliers, linking these with purchase orders and onwards to scheduling docking bays where the items are going to be received and unloaded. This will enable the warehouse to plan subsequent tasks, such as pricing of goods or re-packaging items, more effectively .

“Instead of a system where you order the item and it is only seen by the user after it has come to the warehouse and only then logged into the system, they will have full visibility of the item throughout the process. This we believe will improve the purchasing process and help track suppliers' performance.

"Quality and vendor performance will improve. If suppliers are monitored better and you can tell them that this is their performance then automatically you can drive improvements,” says Cidambi.

In the future, DDF is considering using Oracle Retail Merchandising. This will improve the automation of the replenishment process. “Today our replenishment is part manual and part automated. If we improve that process with Oracle Retail Merchandising then we will help purchasing further. We're also looking at modules that help with forecasting demand and planning.

"This will be the last bit, but we need to go through the technology step by step. We believe the first step is to implement the WMS and materials handling and successfully open the new distribution centre.”

The new centre, located in Ramoul, close to the airport, will allow DDF to store merchandise more densely than is possible now and stack and retrieve stock far faster. The WMS will have to manage about 18,000 to 20,000 unique items, though DDF has a database of about 180,000 different products representing seasonal goods and those that are no longer on the current buying list because of churn or seasonal demands. Every month about 2,500 products, mainly fashion and jewellery items, are added to the database.||**||Consumer goods distributors go in search of supply chain agility|~||~||~|Fast moving consumer goods distributors Saudi Arabia-based IATCO and the Qatar-based Ali Bin Ali group are looking to become more demand driven and improve supply chain agility through quicker order fulfilment and increased accuracy.

IATCO has more than doubled its penetration of the small grocer sector in Saudi Arabia over the last four years, and needed a demand driven warehouse management solution that would allow it to execute, monitor and optimise complex inventory requirements, enabling end-to-end fulfillment from the point of order through to shipping.

Ali Bin Ali, which provides sales and distribution services to companies across the Middle East, and has also seen a rapid business growth and a dramatic increase in the volume of goods being handled.

Both companies have selected SSA Warehouse Management (SSA WMS) supplied by Dubai-based SPAN, an SSA reseller in the Middle East to meet their needs.

SSA Global's WMS 4000 3.9 solution provides IATCO with increased visibility across its network of warehouses and distribution centres helping it to reduce out of stock situations and enhance the utilisation of space across the network.

“SSA WMS solution has a proven track record in the industries we serve; their strong commitment to retail and third party logistics industry made it the ideal solution for our unique requirements,” says Hisham El-Sawi, Logistics and Customer Service manager at IATCO.

“We are confident that it will allow our business to be more agile and demand driven so that we can increase fill rates, reduce lead times, reduce supply chain costs and improve service,” he adds.

At Ali Bin Ali, the SSA WMS 4000 is focused on enabling the company to better manage the growth of its business and help it penetrate new industries. It allows Ali Bin Ali to become more demand driven by tailoring supply chain execution processes to customer needs and enable it to increase product throughput, improve space utilsation and order fulfilment accuracy and reduce stock shortages through increased supply chain visibility. As a result, the company is expecting to provide more customised and value added services across its customer-base.

“SSA Global and Span's proven track record in the Middle East and its experience in outsourced logistics, coupled with a strong understanding of our local requirements and business practices, made it the ideal choice,” says Mohamad Ebrik, general manager, Ali Bin Ali Technology Solutions. ||**||

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