All the ingredients are in place to ensure that automated solutions are set to become prevalent throughout the region in the long term.
A general increase in market awareness about the benefits of automated warehousing is helping international and regional suppliers expand into new territories.
So say the conclusions of four solutions providers currently operating in the region, who also reveal that the changing economic environment currently facing the GCC countries, while potentially causing headaches for other sectors, is actually beneficial to the concept of automated warehousing.
Despite being rocked by the departure of Ecolog from the market at the beginning of 2008, the consensus is that the long-term prognosis for the industry is robust, with the ongoing education of the consumer remaining key, and with patience remaining the watchword to success.
On the face of it, the evolution of automated solutions seems inevitable.
The rising costs of business in the region, combined with a limited labour supply and slowdown in the availability of reasonably priced real estate all point towards a significant take-up of a solution that has the ability to negate these concerns.
With inflation currently running high in most GCC nations, thus pushing salaries, rents and other associated costs upwards, the sector is buoyant about its future.
However, these cheering predictions also need to be offset against current realities. Whilst awareness of the solution is growing, some within the industry feel that the positive aspects of the sector still need to be broadcast to a wider audience.
Unsurprisingly, none of the operators surveyed felt that international player Ecolog's withdrawal was a negative indictment on the future of automated warehousing in the region.
Reinhard Wind, general manager for Ecolog before its parent company pulled the plug on the firm's operations, comments that: "Ecolog pulling out of the market just was a strategic decision of the mother company, the TGW group.
This had nothing to do with the potential of the market", an assessment with which Geoff Wheatley at SSI Schaefer International is happy to concur.
Wheatley's view is that Ecolog's recent takeover by a European equipment manufacturer "who by their actions reflect little interest in the Middle East, or the cost of sustaining such an option was not attractive to them".
Wind, whose confidence in the Middle East's prospects has convinced him to stay in Dubai and form a partnership with Swisslog, admits that operators need to invest time and effort, as well as cash, to ensure profitable returns over a period of a few years. Many view the Ecolog experience as a useful subject lesson for new operators on the market.
"The message from the Ecolog entry and exit for all future automation customers is to work with a local partner that has the history and experience in the regional market.
The GCC is attracting investors and companies try their luck. In various industries we have seen how some new entities come and the next day they are gone," observes Hani Francis, engineering director at Span Group, explaining that the stability of a local partner is crucial as it has the means and knowledge to experience any local market fluctuation.
A further reason for the exit was the company's lack of diversification, according to Ramon Thoms, of German firm Ehrhardt + Partners. "Companies offering complete turn-key solutions for warehouse management and logistics deliver much more value to customers.
Warehouse automation means not only having automated material handling but also professional warehouse management. Such systems should not only support existing but also future processes," he comments.
A key benefit the automated solution aims to provide is a better quality of service. In an environment where the scarcity of labour has led to higher prices for effective employees, the long-term pay-offs gained via the use of this technology-in terms of higher throughputs, fewer errors and faster turnovers-are obvious.
Added to this is the space requirement of an automated storage facility; it is estimated that such systems usually require only 20-40% of the designated storage space in the warehouse, leading to reduced premise costs or further space for expansion. Furthermore, the lower staff numbers contribute to a greater level of security.
The system can also be built vertically, thus improving storage costs even further, and is also tailor-made to an individual company's needs, thus improving savings still further.
Francis is keen to accentuate the streamlining of operations that the automated solution provides. "When properly designed, automation improves the warehouse processes, allowing efficient utilisation of equipment such as carousels, shuttles, sortation and automatic storage and retrieval systems.
It induces savings on building and utilities cost and leverages the IT structure to levels that are not possible in a manual or mechanised environment."
Recognising that there is not necessarily a need to automate every system is a key component, argues SSI Schaefer International's Geoff Wheatley.
All projects are planned on their operational criteria whether they are conventional or automated, and in most instances not one system can satisfy the many facets of a distribution centre and are very often a mix of both conventional and automated components."
A flexible and intelligent approach to the individual operator's needs is thus often the main driver in a company's decision to become automated, especially in the current climate, with a number of multinational companies now investing in the region.
According to Wheatley, local operators are slowly starting to see the light, a factor that has led directly to SSI Schaefer International establishing an automations division within its facility in Dubai, which, despite only having come online in March 2008, has already garnered several consultancy contracts for automated warehouses.
With such an array of benefits, the delay in the pick-up of automated solutions in the Middle East initially seems surprising. However, the expense and the long-term investment returns are seen as hindrances for some companies.
While all those surveyed expressed the enthusiasm of potential customers, there were some misgivings about the ability to convince regional clients to commit to a hefty initial outlay, and providers pointed towards the need to orient and instruct customers about the long-term savings.
While it is understandable that some companies may have worries about the price of automation, according to Thoms from Ehrhardt + Partner, it is also worth considering the immediate benefits of the technology.
Cost justification and return on investment is the main hurdle for greater success in the short term," he states. "As long as manpower is less costly than modern technology, the justification for such investments is hard to justify.
Modern companies should rather focus their view on transparency, performance and reduction of errors. They will not only gain more efficiency, but also more revenue."
Again, however, customer fears can be allayed by the individual response to their needs-as Wheatley states, "there are many entry levels of automation that can be considered to meet both the budget and the operational requirements of the client."
So what kind of solutions already exist in the GCC countries? From an overall perspective, regional clients are blessed with a wide range of choice, as some companies not currently present in the Middle East are easily able to provide services from abroad, and companies that are present can source those solutions they don't have themselves overseas as well.
In terms of the automated systems that have already been sold, these largely exist in the airport sector, for example in Dubai Duty Free, the Freezone Logistics Centre in the Dubai airport, and the Mega Cargo Centre, also in Dubai. Currently under construction in the emirate is an automated warehouse for the NTDE group and other designs are also being considered by the larger companies.
In Saudi Arabia, the Al Marai dairy-produce giant already has in place a sophisticated automated warehousing system.
But the burgeoning developments across the region offer far more scope for automated solutions; as Thoms indicates, "developments like Dubai Logistics City in Dubai, the King Abdullah Economic City in Saudi Arabia and the Khalifa/Zayed industrial city in Abu Dhabi are giving more hope for the logistics market to develop further, even with regard to automated warehouses".
So the long-term assessment of the industry's future is strong, although the Ecolog experience is a warning to future operators to have patience in the market, build partnerships with locally experienced firms and not to expect a quick return on investment.
But the prevalence of the automated solution to the problems of warehousing in the Middle East, given the current climate, does seem certain, with Reinhard Wind insisting that "in two years' time, it will be a must for certain industries to go with automation solutions to ensure a long-term profitability of the operation".
The downturn afflicting Western economies, and the resulting investment in the region by industry giants used to the effectiveness of automated systems, combined with the rising costs, are the drivers that will ensure that the future prospects of the sector remain rosy.
A better-informed client roster will only speed this process up, a point that industry operators, both old and new, would do well to heed.
A further marker of the sector's attraction to investors and operators is drawn by Span Group's Francis' parallel with the past. "Rising real estate prices, the anticipated growth in population and in the economy, the constraints in the labour market and the advent of a sophisticated consumer that will not accept late or wrong deliveries.
These are all the same reasons that forced Europe and North America to transform the warehousing industry from a labour-intensive one to an automated and semi-automated one 20 or 30 years ago.
Are we any different today?"