REPORT: Logistics automation in the GCC

Automated systems are one of the fastest growing solutions at present in the Middle East’s logistics market, but most operators don’t realise their full potential.
Automation, Dubai, Logisitcs, Middle east, Technology, ANALYSIS


In 2014, the global automated material handling equipment market was valued at $22.5-billion, by 2016 that had increased to $33-billion, according to Forbes. Separate research by Markets & Markets expects global valuation of $44.6-billion by 2022, an annual growth of almost 8%.

This makes automated material handling one of the fastest growing sectors in logistics. In an industry that is saturated by conveyor belts and tote carriers, this makes sense. Now is the time for automatic guided vehicles (AGVs) to make their own space. Seegrid reports that sales of its automated autonomous vehicles doubled in 2016.

The manufacturer of vision-guided autonomous vehicles for material handling says that by making per-unit business more profitable for its customers, it has seen a significant jump in demand. In addition, the company has worked to customise options for clients, while also upgrading its backend software support. “Our customers aren’t just looking for advanced robotics systems to meet their immediate logistics needs, but a platform and vision to help transform their entire business,” says Jim Rock, Seegrid’s CEO in a report by Allied Market Research. “Seegrid’s success in 2016 can be attributed, in large part, to our ability to support forward looking Enterprise Intelligence initiatives.” Industry experts agree that AGVs do not serve the sole purpose of object relocation.

They have been designed to do much more than just that. When faced with an interaction other than the instructed item or shelf, these vehicles can reroute their movement based on the smart evaluation of surrounding parameters. In this way they are able to mimic human behaviour and adjust their route in a similar fashion. In the Middle East market in particular shipments of mobile robotics will grow from 4 million in 2012 to 25.4 million in 2020. The fastest growing sector in this expansion is predicted to be logistics, with unit shipments of logistics related robotics increasing from 1,400 in 2012 to 95,000 in 2020, according to a report by Frost & Sullivan.

Robotics and automation is an area that DHL believes will see rapid adoption within the next five years, particularly “collaborative robots” that work side-by-side with human employees, supporting repetitive and physically demanding tasks in logistics. DHL has said it has made inroads in logistics, with autonomous forklifts and other self-piloted equipment now “reaching a level of maturity” in warehouse operations.

The next step for self-driving vehicles in logistics will be to overcome regulatory and security challenges to deploy autonomous vehicles on public roads, according to a report by the logistics giant. Ian Snadden, president of global sales and high growth regions, Honeywell, agrees that the Middle East will be one of the pioneers of automation in logistics. “I think the overall sentiment here is one of innovation. Whether it be in roads, buildings, infrastructure, there is pride in being the early adopters and being at the forefront of technology advancement,” he says. “Logistics companies in this region have always been early adopters of new technologies, and part of that I think is because the Middle East is typically not dragged down by a lot of the legacy technology that the Western\ European or North American markets have.”

As such Honeywell is positioning itself to lead this charge in automation adoption. “Our most recent acquisition was a company called Intelligrated, and Intelligrated does warehouse automation, not WMS. It provides full automation of a warehouse, with the conveyors, the depalletisers, and the palletisers and all the other equipment necessary for full warehouse automation.” In addition, Honeywell has been building its software capability to support this automation expansion. “Put that in conjunction with our sensor based technologies and we are perfectly placed to realise the Internet of Things, to realise the value at the edge of the enterprise, and that is what customers want,” he says.

Yaduvendra Singh, head of business for GreyOrange, a software and warehouse automation solutions provider, sees great potential for growth in the Middle East market and recently opened an office in Dubai. “We felt that we needed to be closer to the market given the rapid adoption of these new technologies in the Middle East logistics sector,” he says. One of GreyOrange’s biggest clients is Aramex, for which it supplied a full range of automated sortation systems. “The advantage of our system for them is that it is tailor made to be able to handle odd sized items, so not a uniform product. The environment has changed dramatically over the last few years so that now there really is a need for an advanced, dynamic sortation system that can help companies like this automate their operations,” explains Singh.

A report by Frost & Sullivan of more than 200 logistics end-users from various industries across the GCC indicates that there is strong intent to adopt automation in warehousing and transportation to improve operational efficiency and processes, but that less than half are actually utilising automated systems. More than half of the survey respondents said they don’t use automated technology in their logistics operations because such systems were too expensive. “Automation of materials handling processes will become increasingly prevalent in the regional logistics industry as it rapidly scales up to meet the needs of the burgeoning market,” says Ahmed Pauwels, CEO of Messe Frankfurt Middle East, organiser of Materials Handling Middle East event.

“The tangible benefits of automation include the faster transit of goods through the supply chain, processing accuracy, minimised manpower and quality control. The longterm benefits and cost savings far outweigh the initial capital outlay.” “The biggest challenge is mindset,” adds Singh. “People get comfortable in the same processes and ways of doing things for ten or twenty years and they don’t want to change, no matter how great the benefits may be. The problem is that all industries are being affected by new, disruptive technologies and if you don’t adapt your business will suffer.” He uses one of his FMCG clients in Dubai as an example.

“Five years ago he was handling around 250 SKUs, now he’s handling 1,500. As end consumers ask for more variety, the supply chain becomes exponentially more complex.” Singh says that companies can either increase manpower, or pursue different forms of automation in sorting. “The advantage of automation is that it can do this and increase the amount of space available for storage because you no longer need aisles large enough for men and forklift machines,” he says. Swisslog is another automation solutions provider that has made headlines in the logistics industry recently.

In 2016 it secured a US $21-million contract with Mai Dubai to automate its storage and distribution systems, and a few months before that secured a deal to automate Al Marai’s distribution logistics for their operations in Al Kharj. By the end of 2018, Swisslog will implement automation projects in five phases for the Saudi Arabian food producer. “This region has major potential, we have many more projects in the pipeline and we are continually receiving requests from local businesses,” says Frédéric Zielinski, general manager, Swisslog Middle East.

“Businesses that are not going to implement any changes to the way they operate risk being left behind and the cost of inaction in this case can easily exceed the price of a modernisation project. Finding ways to improve time-consuming tasks like picking and storing in a cost-efficient manner is a top priority for any growing business that relies on logistics. Warehouse automation is certainly widely deployed by large businesses that have recognised a need for more cost-effective and less labour-intensive solutions to managing large amounts of stock.”

Automation is as much a back-end priority as it is on the warehouse floor, however. According to a study conducted by Gartner, there will be 26 billion networked devices worldwide by 2020 that will be able to exchange data among themselves interoperably. This entails major challenges for processing the enormous quantities of data in the Cloud. “Automation doesn’t only apply to hardware. If you look at trends in Europe like Industry 4.0, this is the future of business and it will impact logistics,” says Dr. Makrem Kadachi, general manager, Middle East at Ehrhardt + Partner Solutions. “All the different systems and solutions in a company need to be able to communicate instantly and seamlessly with each other.”

“Communications is the key word here, this is the basis of automation,” he adds. “Everyone is looking for one solution that will automate an entire process of delivery, but this will never exist. Automation allows a dedicated solution for each part of the business; WMS, fleet telematics, procurement. This enables higher efficiency because everyone can focus entirely on their own responsibilities, while the automation systems communicate the right information between the different areas of the business.” Makrem says that many of EPS’ customers are already doing this in the Middle East. “They use SAP, Oracle, Microsoft Dynamics, and other software for different tasks like purchasing and accounting and using our EPS software for their warehouse operations. Jumbo, Lulu’s, Marina Homes, are doing this, with each area of the business communicating autonomously so that each employee is focused on their tasks only.”

Makrem says that this is important for Middle East logistics companies especially due to the import-heavy nature of the consumer market in the GCC. “If you look at the nature of the logistics industry out here, the stock being kept in warehouses is huge, especially in the FMCG sector, which is one of the largest,” he says. “With the proper tools and proper solutions this stock could be reduced, but keeping the same level of business. Expiry dates in food logistics and pharma for example, to have full and proper control would reduce the stock being stored relative to turnover, which would lower costs and increase profit.”

“Automation out here will always be held back by the very low cost of labour compared to other markets, so people talk about ROI, but this is the wrong conversation, we need to talk about the quality of delivery, the cost of returns, in essence the total cost of ownership of the inefficient system currently being used by a warehouse operator,” he adds. “Retail dominates revenues in the UAE economy and the core of that is stock, so any CEO or chairman needs to be aware that having full control of inventory will increase efficiency by as much as 10%.”