Interview: Claus Schmidt, Panalpina Middle East

Managing director discusses the Middle East's logistics opportunities.
Claus Schmidt, Middle East managing director, Panalpina
Claus Schmidt, Middle East managing director, Panalpina

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Panalpina is a respected brand in the logistics world. As one of the leading suppliers of forwarding and logistics services, the company operates around 500 branches in over 80 countries worldwide. Veteran executors of end-to-end supply chain management solutions and intercontinental air and ocean freight shipments, Panalpina’s own mantra, ‘Passion for Solutions’, perfectly sums up the vision and growth strategy of this logistics giant. It is this same passion that has been the driving force behind its commitment to take supply chain management solutions to a whole new level.

For the region’s logistics industry, having such a hot contender in the market place has been good for competition. With its high standards and years of experience, Panalpina Middle East has ground its footprint into the region’s landscape – promising more innovative and efficiency-driven supply chain solutions in the years to come. The Panalpina Group has often referred to the Middle East as a ‘linchpin between continents’ and it is easy to see why. Geographically located as a convenient hub between trading continents, the region has held a magnetic draw for leading logistics players for many years now.

Backed by forward-thinking leadership, the emirate of Dubai has paved the way for logistics innovation and growth in the region. Not surprisingly, this was Panalpina’s first port of call back in 1992 and is now the home of its Middle East headquarters. The firm has spread across the region, with offices in the neighbouring Emirate of Sharjah, Qatar, Bahrain and Kuwait.

“The main industries in this part of the world have always been closely aligned to some of our core competencies – oil and gas projects, logistics and the hi-tech side,” says Claus Schmidt, Panalpina’s Middle East managing director. “We recognised that we needed a regional hub in place to service these opportunities and to meet the needs of our clients here.” Traditionally, it was the oil and gas industry that provided the mainstay of Panalpina’s earlier work in the region. Although this remains an important market segment for the company today, diversifying its portfolio has been a key element of its current success. When the recession left targets unmet, Panalpina bounced back with new targets and contracts.

With many ambitious business plans, both in terms of geographical expansion and targeted market segment growth, the company is now looking to leave the effects of the global recession far behind. “We certainly felt the effects of the recession in 2009 and early 2010 on the oil and gas side,” says Schmidt. “Luckily we had other industries to focus on and this kept us steady and performing.” Focusing on a wider range of key market segments, known as ‘industry verticals’, including projects, pharmaceutical and healthcare, and hi-tech and telecoms, the company has been making strong strides in the Middle East.

Last year, Panalpina’s standing with the hi-tech market received a huge boost when it was selected by Ericsson as its local distribution warehouse and site delivery provider across the Middle East. “Ericsson has been a main global account for Panalpina worldwide for the last 15 years and we have had a very close relationship on a global scale,” says Schmidt. “This brought us closer to Ericsson in this part of the world and enabled us to provide more supply chain end-to-end services and build competence within this sector.”

Another fast-growing industry vertical for Panalpina, the pharmaceutical and healthcare sector, is also showing great potential for regional growth. Last year, the company was touted as one of the world’s biggest Qualified Envirotainer Providers (QEP) for active cooling solutions. Accredited in 2009, after meeting the requirements of Envirotainer’s stringent criteria for the distribution of temperature sensitive healthcare products, the company’s reputation in cold chain management received a huge boost.

For Schmidt, the lure of the pharmaceutical industry comes from a wealth of experience in dealing with complex and sensitive supply chains. “Coming from handling certain industries with a high level of complexity such as oil and gas, we saw healthcare as a perfect industry to transfer some of the competence and knowledge of managing really fast-moving supply chains, where there is no room for mistakes and execution is key,” says Schmidt.

“It was a natural next step in our strategy to move into the healthcare industry because of our extensive experience in managing this type of supply chain.” With its own control network of flights, the company is able to offer temperature control solutions from, what Schmidt terms, ‘cradle to grave’. “It was a perfect fit for us to bring our value proposition to the healthcare industry and it is definitely a market that we want to expand in,” he enthuses.

Schmidt is excited at the growth potential in the region. During the economic crisis, his job was to drive forward an even better plan for Panalpina’s growth strategy. And it has been a challenge he has relished.

“The highlight of the Middle East overall, is the complexity of the region − it’s a challenging region, but there are some amazing opportunities if you build relationships and put the right solutions into place,” he says. “The spirit and attitude of the organisation and its people has been inspiring.” And 2010 saw Panalpina’s quest for logistical domination in the Middle East move into fast gear.

Last year saw the opening of Panalpina’s own 41,806 sq. metre multi-modal transit and logistics hub in the ‘aerotropolis’ of Dubai World Central (DWC). The impressive state-of-art facility comprises 2787 sq. metres of office space, a 11,148 sq. metre multi-purpose logistics operating area and a 13,935 sq. metre lay down area. Tapa A certified, it also has 23 gates, including one mega door, ten dock levellers, air cargo pallet roller beds and a huge 13.7 metre ceiling height. After all that, there is still room left over for future planned growth.

“The facility represents a key milestone in our expansion strategy in the Middle East,” says Schmidt. “It will allow us to significantly increase our service offerings in supply chain management by providing a seamless integration of international air, ocean and trucking services, with our logistics and order fulfillment services.”
When it comes down to seamless multi-modal logistics, DWC is certainly the place to be. Covering a mind-blowing 140 sq. kilometres of space, the project encompasses the largest free zone in the UAE (Jafza), the sixth largest container terminal in the world (Jebel Ali Sea Port) and the world’s largest airport.

“It was a strategic decision to set up in a location where we could bring together multi-modal services and have a multi-modal platform which gives us the opportunity to combine ocean with land solutions and also have a contract logistics capability,” says Schmidt. “A platform here has great flexibility to fit between modes and the advantage of operating in the free trade zone.”

The key attraction of the facility for Panalpina’s customers, according to Schmidt, is that it provides a chance to reduce costs, whilst simultaneously maintaining a high level of service and reliability. “Having this hub and being able to move products in here from different regions and then feed it out, gives us the chance to be more innovative with our supply chain solutions,” he says.

At present, half of the facility is dedicated to transit operations, and the other half to contract logistics. “For the contract logistics part, we are looking to develop this to further support our plans for both hi-tech telecom and pharmaceutical/healthcare customers,” he adds. As well as handling both inbound and outbound cargo movements, the facility comes with the latest in temperature controlled storage capabilities.

As if opening up a massive regional facility was not enough to keep Schmidt busy last year, Panalpina Middle East hit the headlines again, as the first scheduled cargo service to fly to the much anticipated Al Maktoum International Airport.

The all-cargo, B747F aircraft, stopped at the airport on its way to Hong Kong from Luxembourg, as part of the company’s new bi-weekly flight rotation connecting Luxembourg, Dubai, South Africa, Hong Kong, North America and Latin America. “I think for five months, we were the only ones operating a scheduled cargo service from the airport!” laughs Schmidt. “It was an important part of linking our Dubai facility to our customers in Europe, a concept which we had put together as part of our strategy.”

With the facility’s strategic position, Panalpina’s global operations can only get easier and smoother – giving its customers short transit and time-definite solutions for airfreight consignments. “It will dramatically reduce lead times for our clients,” says Schmidt. “We were also the first to operate CTO to CH, where we basically take the full pallets directly from the airport and do the whole breakdown in our facility.”

Panalpina is not content to be a follower. “Being a pioneer is very much a key element of our service because it brings innovation and new products to customers and improves our value proposition to the clients,” says Schmidt.
And the company’s pioneering approach has certainly been paying dividends. In the first quarter of 2011, the Panalpina Group reported strong double digit profit growth across all segments, compared with the first quarter of 2010. Schmidt believes that the Middle East’s figures are not far behind. “We had a good growth level in the region and were close to double digits in terms of our gross profit growth,” he says. “It’s been a very positive start to the year.”

As well as its continued push in the newer industry verticals, Schmidt is excited about the continued growth potential of both oil and gas and projects, particularly in Panalpina Middle East’s newest emerging markets of Iraq and Saudi Arabia. This year has seen Panalpina breakthrough into the Kingdom, setting up its own legal entity after almost fifteen years of freight forwarding and logistics in the country, working through an agent. “It has always been a key market for us, but to be able to establish our own company there gives us enormous flexibility to grow Panalpina on the ground,” says Schmidt.

With so many ‘tremendous’ growth opportunities on the regional horizon, be assured that Panalpina Middle East will be there. Having both Saudi Arabia and Iraq already on its roster, its regional reign in the supply chain business looks set to continue. “We want to be the supplier of choice for the companies in our focus industries, but also an employer of choice,” says Schmidt.

“To achieve this, we will continue to bring quality and innovation to our client base and to bring the value proposition across. At the same time, we have to focus on creating a career path for our staff and attract and retain the talent that differentiates us in the market.”

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