With a growing number of companies benefiting from collaborated supply chains, the concept is expected to become a major talking point for the Middle East logistics industry in 2008, explains Ralph Drayer, founder and chairman of Supply Chain Insights.
What prompted your recent tour of the Middle East?
I've been invited to discuss the issue of supply chain collaboration by CHEP Middle East, which has recently launched its international pallet pooling service in Saudi Arabia. To mark this occasion, we organised a number of different presentations to FMCG business leaders in Damman, Riyadh and Jeddah, in addition to the University of Wollongong in Dubai.
When did the concept of supply chain collaboration really take off?
Over the years, a number of individual companies have been participating and contributing to the development of best practices in supply chain collaboration, with very encouraging results. This concept really started back in the United States during the early 1990s and steadily grew in popularity to most parts of the world.
How can businesses in the Middle East address the topic of collaboration in their supply chains?
At the moment, the majority of companies around the world are focused on their individual supply chains, which covers the activities in their direct control. However, to remain competitive and improve their operational efficiencies, these companies would benefit from increasing their supply chain collaborations with trade partners. This process could start with the supplier of raw material and continue right through to the retailer of the product, with closer relationships and better supply chain integration between each of the companies involved.
How do companies benefit from increasing their supply chain collaboration with partners?
A number of companies have adopted a collaborative approach for their supply chains, especially from the CPG (consumer packaged goods) industry. Amongst the benefits are greater speed to market, reduced operational costs and a solid foundation for business growth. These advantages are being well documented by CPG companies, which have since caught the attention of other sectors, such as the automobile industry.
Have companies in the Middle East been proactive in supply chain collaboration?
The continued development of the Middle East's economy, especially in countries such as the United Arab Emirates, Qatar and Saudi Arabia, has accelerated the need for companies to analyse and develop their supply chain operations. I believe the opportunity is tremendous for companies to dramatically improve their supply chains in this region. However, at the moment, only a limited number of companies have actually invested the time in researching their logistical operations and quantifying the types of improvements that are possible.
Why do you think companies are showing reluctance in this region?
This process involves a cultural change for most organisations, so it depends on the individual company's willingness to embrace a change in their operations. In addition, there might be concerns about security, especially in terms of sharing information with external sources. It's important for each party to demonstrate their ability to deliver the necessary benefits from this shared information, without compromising on privacy of their partners. It's a trust issue, which needs to be overcome.
Did you discuss the security issue during your recent seminars in the Middle East?
Yes, I think it's important to openly discuss these concerns with companies. To be honest, we didn't know what response to expect from attendees, but people have generally showed an understanding about the issues on hand, together with a willingness to embrace change. This is very encouraging and I am pleased that there's a realisation about these opportunities in the Middle East. I'm also noticing some important catalysts over here, such as Panda, the Saudi Arabian retailer, which is pioneering a state-of-the-art distribution centre in the Kingdom. This will have a huge impact on the whole industry and their customers will definitely notice the benefits.