Centre Point

A multi-million dollar warehousing facility in Jebel Ali is helping the retail powerhouse Alshaya to consolidate its supply chain.

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By  Robeel Haq Published  July 2, 2006

|~|alshaya.jpg|~||~|Alshaya is undoubtedly one of the biggest success stories in the Middle East. The company’s portfolio of retail brands includes some of the biggest names in the industry, from the long-established Debenhams, Topshop and Starbucks, to recent additions, such as Boots, H&M and Footlocker. Alshaya, which has always considered logistics an essential component in its operations, is now launching an ambitious warehousing facility in Jebel Ali to centralise its supply chain and increase logistics efficiencies. The predicted success of the strategy could provide an interesting business model for similar businesses operating in the region. Alshaya, which was established in 1980, initially focused on operations in Kuwait and Saudi Arabia. Between the 1960s and 1970s, the company started a massive diversification programme, expanding throughout the Middle East and entering various different industries, including real estate, construction, automotive and tourism. However, Alshaya’s aspirations to become one of the gulf’s leading retailers truly began in 1983, when they launched the prestigious Mothercare franchise in the region. The success of Mothercare provided an ideal launch pad for Alshaya to introduce further international retail brands into the Middle East, in addition to other key markets in Turkey, Cyprus and Russia, which were also added to the company’s operational coverage. It has also secured contracts with some of the biggest retails names in the world and currently operates over 1000 stores, with a portfolio covering everything from health and beauty, fashion and accessories to pharmaceuticals and casual dining. “When you walk down Oxford Street in London, you will see all of our brands,” says Dave Harris, logistics director at Alshaya. “The brand portfolio currently consists of over 40 international retail concepts, including Debenhams, The Body Shop, River Island, Topshop, Topman, Next, Dorothy Perkins, Boots, Starbucks and Pizza Express. The list is constantly growing.” Many of the products handled by Alshaya originate from the UK, although stock also arrives from various European, Asian and North American destinations. “Although stock is imported from throughout the world, around 75% of the total volume originates from the UK.” says Harris. The stock is normally collected from the host brands and consolidated in a central UK warehouse, which is located in Middlesex in the UK. The products are later transported, either by seafreight or airfreight, to each country where Alshaya has its operations. Alshaya uses a freight forwarder in the UK to manage shipping line contracts and airfreight. “If we outsource the logistics to a 3PL service provider, who delivers a good service and remains competitive, we will not change them; unless they do something seriously wrong. Changing suppliers every five minutes is a false economy.” says Harris. Once the stock arrives in each country, it is transported to a local distribution centre, where the warehouse operators sort the consignments and hang them (mainly using state-of-the-art automated hanging systems). This is followed by some pre-retail activities, after which the items are delivered on a daily basis to the various retail stores. “Alshaya currently owns around 20 warehousing facilities throughout the Middle East Region,” says Harris. “However, the number is constantly rising to reflect the company’s growth. For example, we are planning to increase the warehousing in countries such as Qatar, Egypt and Russia.” Occasionally, Alshaya will transport products between various countries in the Middle East by road. A fleet of vehicles operated by the company’s service provider handles the inter-country deliveries. “They operate on a courier license, which has its advantages, because the customs process is streamlined. This makes crossing borders a lot simpler. For example, sending products from Dubai to Kuwait, measured on a door-to-door basis, is quicker by road than by air.” Operating individual warehousing facilities in each country is essential to provide the service requirements for a major retailer like Alshaya. However, the company is modernising its logistics strategy and adopting a more centralised approach. Instead of importing products to each individual country, Alshaya is constructing an impressive new warehousing facility in the Jebel Ali area of Dubai, which is going to operate as the company’s central logistics hub in the Middle East region. “The stock will be delivered to the Jebel Ali warehouse and distributed to each country by road,” says Harris. “There are various advantages to this strategy. For example, at the moment we have a number of sea freight consignments being transported directly to each operating country from the UK. These are not always full containers. By consolidating everything into a central warehousing hub, the company will achieve the economic benefits from better container fill rates. “This strategy also increases the efficiencies in meeting our customer demand. The buying requirements of our customers is different in each country. By consolidating, we can allocate the most appropriate level of stock to each market, whilst the remainder stays in the central hub, supporting the individual variations in demand for the local markets. The objective is to generate increased full price sales, which is achieved by allowing markets with the highest demand to pull stocks into it, satisfying their demand, with no overstocks in low demand markets.” The facility is located on a plot of land in the south side of Jebel Ali measuring 80,000m². The environmentally friendly design of the warehousing and office space, which measures 21,000m², includes special insulation to keep the air conditioning inside, without risk of the cool air escaping. “This is a long term investment and we worked hard to ensure the facility is designed to meet current and future requirements. Consequently we have obtained a plot of land that is big enough to accommodate our future growth.” The warehouse is split into different zones or sections and is designed to meet the varying individual requirements of each brand. For example, Starbucks requires a temperature-controlled environment to keep the coffee beans in optimum condition. Even the garments benefit from dust-free, temperature controlled storage. “No company wants damaged or tainted clothing reaching their customers. Therefore, the warehouse should be designed to protect the stock, allowing us to send everything to the stores in the same condition it was received,” says Harris. Alshaya has invested in Manhattan Associates’ warehouse management system (WMS) to enhance inventory management by optimising stock levels, improving order fulfilment and reducing order cycle time. The system allows Alshaya to track every unit down to the lowest level of detail, including country of origin, serial number and date code. “We researched the market for warehouse management systems and selected Manhattan because it suited our requirements. We have tested the system for some time and everything is performing well and meeting expectations,” says Harris. The facility is also equipped with radio frequency (RF) technology. This allows paperless, online communication between operators and the warehouse management system, resulting in speedier transactions, improved control, greater accuracy and reduced operation costs. The RF terminals can be mounted on lift trucks or hand held, to provide realtime updates of stock availability. It is used throughout the process to communicate with the warehouse management system. Alshaya’s centralised logistics strategy should help to bring immediate benefits for the company. However, future plans to further improve supply chain efficiencies are already being considered, including additional warehousing facilities. Alshaya’s logistics operations are certainly intricate, but Dave Harris and his team manage the process smoothly. “By the very nature of the company, the logistics operations are complex. We are dealing with so many brands from so many origins,” explains Harris. “It is important to keep everything in manageable packets, supported by the right resources, the right technology and equipment, and most importantly, the right people.” Alshaya has a stringent human resource policy to help the company hire and retain high quality personnel. The logistics team currently consists of over 1000 people, covering everyone from warehouse operators to Dave Harris himself. To handle the training needs of the workforce, Alshaya is currently setting up a logistics training facility with a dedicated manager. “Alshaya is delivering quite an aggressive programme to retain employees. The objective is to become an employer of choice in the region,” says Harris. “There are skills shortages in the Middle East, but at the end of the day, if you pay the right amount and make the work interesting and challenging, you can succeed in hiring the best people. Managing the training and development requirements of the employees is important and helps to ensure the company builds its own skills base, from within.” ||**||

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