Taking liberty

Charged with handling the merger between Liberty Logistics and SNTTA Cargo, industry veteran David Scott is planning to create the Middle East's latest powerhouse.
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Charged with handling the merger between Liberty Logistics and SNTTA Cargo, industry veteran David Scott is planning to create the Middle East's latest powerhouse.

When David Scott was first approached by Liberty Investment Company to head up a new integrated logistics division for the holding group, his first answer was no.

The industry veteran was working as the freight forwarding manager for Al-Futtaim Logistics at the time and had been there for less than a year. But when he saw the business plan on the table, he immediately changed his mind.

 

Dubai Logistics City may be two or three years later than many people are anticipating, so I may go into Jebel Ali instead.

His task was to integrate two separate logistics divisions - SNTTA Cargo and Liberty Logistics LLC. The merger will create a logistics company that he says will "easily" be among the top five operators in the UAE very quickly.

"The way we envisage the business, if we aren't growing at 40% a year, I'm not doing my job properly," says the senior general manager. "But I'm quite comfortable with that. I've worked at companies before where I would have suffered a heart attack if they had ordered me to increase business by that margin."

Since he was successfully headhunted for the company six months ago, big things have happened for Liberty. The previous two companies - majority airfreight business SNTTA Cargo and 3PL operator Liberty Logistics LLC - have been merged to a degree. All previous airfreight business under SNTTA Cargo has now been moved to Liberty Logistics, thus creating a total solutions provider.

As well as being the airfreight provider for UN supplies into Africa, SNTTA Cargo has also earned a reputation as a GSA for several major airlines, including Singapore Airlines, Emirates and Sudan Airways. That portion of the business will remain under the SNTTA Cargo brand, while logistical operations will be moved to Liberty Logistics.

"SNTTA was quite a large airfreight business," says Scott. "Liberty Logistics was your traditional 3PL and sea freight transporter. All we are doing is putting it together. Once we do that we will be in the top five in the UAE quite comfortably. It's not a major move, as the separate businesses were already operating. All I have to do is to ensure that Liberty Logistics will build on its strengths for airfreight. And at SNTTA we will make sure it has the ability to do the same for sea freight," he adds.

"Clients these days don't want to deal with one company for airfreight and one company for sea freight. They want someone who is a total provider."

The senior executive says the company has been through a period of upheaval with a large-scale restructuring of the management. "Some of the people who had been here for a long time might have lost that little bit of fire in the belly," he explains. The resultant company is vibrant, streamlined and forward-looking. Scott has left around six months for the current format to bed down sufficiently before the public face of the company changes early next year.

"From a customer point of view, the only thing they will see differently is that from 1st January, their invoice will come with a new logo on top," he says. "The drivers will also wear a different shirt. But it will definitely be the same driver and the same company."

Aside from shifting things around, the company also has radical expansion plans. A new 110,000m2 depot in Saja'a, the industrial zone near the Sharjah airport, is already well into its construction phase. Part of the thinking behind the facility in Sharjah was the tremendous prospects the area offers in terms of infrastructure.

"The centre of the universe isn't Jebel Ali Free Zone, and everyone else wants to put everything in there," he says, candidly.

"Jebel Ali is very expensive. In Sharjah, they are ramping up their port in Khorfakkan. The operators there are offering a guarantee of 17 hours from the time of berthing to the time you get your container. Jebel Ali now asks for an additional congestion charge of US$100 per TEU and it takes three days to get a ship into the dock. Shipping operators are looking to move over to Oman or Khorfakkan," Scott continues.

"We've got to be able to respond to that so a facility in Sharjah will bring us some advantages. Ships going into Khorfakkan don't need to go through the Strait of Hormuz, which is going to save three days. It's the natural deep water point in the UAE and it makes sense for a shipping company to go there. As a result, you are going to see a boom there in the very near future."
 

The Sharjah set-up is just one of three 110,000m² developments that the parent company has planned for the near future, with the other two in Dubai and Abu Dhabi. The company has also budgeted around $12 million to invest in a facility at Dubai Logistics City (DLC), but on broaching the topic, Scott seems doubtful.

Reports from a variety of sources suggest that the new management at DLC is asking to see the original business plans of many firms who had their documents approved about two years ago.

"Given how things are going at the moment, I may make the decision to go into Jebel Ali South," Scott says. "I think DLC may well be two to three years later than people are anticipating. I don't want to have a nice new facility out in the middle of the desert and not be able to do anything with it."

Another major area where Scott is planning on investing is Bahrain. Having set up facilities there during previous placements with TNT and GAC, Scott knows many of the Kingdom's big players.

However, at present, he has not decided whether or not to invest directly in the Airport Free Zone or to link with business partners that he already has.

"You've got people moving to logistics cities in Bahrain simply because it's too expensive in Dubai," he says. "But it makes sense - 75% of the freight that comes here is going elsewhere in the GCC and 50% of that is going into Saudi. You can get to Saudi quite easily across the causeway from Bahrain - it is a strong strategic entry point. Using the causeway, you can be in Dammam in four hours."

Conversely, the UAE/Saudi border has become notorious for its delays, with some trucks kept waiting for six days. "You've got to keep the trucks running, even those that are in queues, so in many cases you're just burning fuel and it becomes very expensive," adds Scott. "If you look at setting up logistics facilities in Bahrain, however, you can leverage from overnight trips into Riyadh."

With registration for new logistics companies at an all-time low of just over $4000, the marketplace is increasingly being flooded by start-ups desperate to cash in on the prospects for organic growth in the region.

So with the range of competition driving down prices, how can Liberty Logistics afford to keep rates at current levels? The answer is service efficiency. Where most of the Middle East's big players are non-asset companies, Liberty is looking into obtaining a wholly-owned fleet of trucks. The problem is that contracted trucking companies are all too frequently unreliable, affecting the performance of the business as a whole.

"To be better than everyone else you've got to control your own destiny," says Scott. "To do that you've got to own your own equipment. I'm talking $6-8 million worth of investment. But we then control the service levels to our customers. We own the contract for delivering the cladding for the Dubai Metro stations in partnership with a firm in China. Between now and Christmas there will be 4400 sea containers arriving. I don't want to put 4400 containers in the hands of someone who isn't able to do it properly."

Liberty has been working for a month on sourcing equipment. With a waiting list of six months to buy a truck locally, the firm has had to go around the world and bring the vehicles in by itself.

"You can't afford not to have good pick up and delivery services, especially when people use airfreight for quick deliveries," Scott adds. "Contracting that out is a bit hit-and-miss in this part of the world."

Once the trucks are purchased, it will enable the firm to stagger delivery times and avoid the worst of Dubai's mounting congestion problems.

"There's no point moving around during the middle of the day," says Scott. "The traffic is a nightmare. At night time we will deliver our sea containers. The public will probably be happier because it keeps the trucks off the road. There will be no grief on Emirates Road because everyone will be asleep. Instead of delivering the one or two sea containers that we are doing now, we will do three or four, depending on where they are going."

One thing is clear about where Liberty Logistics is going and that's right to the top of the market. The company has the full backing of the parent group, one of the most affluent Arab-owned companies in the UAE.

"There is no limit to how big this business could be," concludes Scott. "I've been told that the only limitation is how big I want it to be. We will have the support and we will have the funding. The resources backing this business are massive."

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