Analysis: PMV Logistics in the Middle East

How can the region's PMV sector ensure an efficient supply chain?
Logistics, ANALYSIS

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As PMV (Plant, Machinery, Vehicle) companies gear up for a returned rise in demand from a recovering regional economy, the necessity of a having in place a smooth and efficient supply chain is high on the agenda. In an industry that relies heavily on meeting tight timescales, an efficient logistics process is imperative to success. From the timely supply of cranes, forklifts or heavy trucks to the urgent delivery of spare parts, every step of the supply chain has to be flawlessly executed to avoid costly client delays and the loss of business.

As part of MAN Truck and Bus Group, David van Graan, vice president sales and marketing, and head of MAN Centre Middle East, is acutely aware of how important it is for his customers to minimise the time between order and delivery. “That applies to all our products and services, from the delivery of trucks and buses, completely built up vehicles and TiB assembly units, to the delivery of genuine parts and components, we depend on efficient logistics to meet our customers’ demands,” he says.

As a global player, MAN has activities in more than 180 of the world’s markets and van Graan knows that running an efficient supply chain in the Middle East comes with its own challenges. His main complaints relate to the availability of ships and containers. “As our order intake in Middle East increased in 2012 by 60%, our order centre has to book the space well in advance, as the number of ships from Germany to the Gulf is limited,” explains van Graan. “We clearly need more vessels and containers because the region is booming.”

Despite the Middle East ambitions to reduce red-tape in government procedures, complicated and time-consuming customs clearance processes also remain something of an issue.

Whether relating to over-sized goods transport or urgent spare parts deliveries, logistics processes for PMV companies frequently involve complicated supply chains. As Tom Nauwelaerts, managing director of Al-Futtaim Logistics (AFL), points out, logistics for PMV firms are often defined by their variability and flexibility in developing durable solutions. “This can vary from gigantic dump trucks, to a tiny spare part, to moving massive pieces of equipment onto a site,” he says. “The speed of the supply chain varies from well-planned flows to emergency procedures. In essence, logistics in this kind of market combines all the challenges that can be found in many other supply chains.”

As a logistics service provider, AFL has seen an increasing number of PMV companies turning to the specialists to ensure the smooth running of their supply chain. “Since a lot of the work that PMV companies undertake can involve unexpected changes, the right logistics partner who uses premium equipment and technology and employs rigid processes can contribute to the success of the company.”

“Although many companies may be able to develop good internal logistics solutions, it makes sense to work with a company like ours since our scale of operations in this field gives us the ability to leverage greater capacity, experience and knowledge.”
But not all PMV companies agree that outsourcing logistics operations is the best way forward. Bauer Equipment Gulf, for example, made the switch from outsourcing in March this year, and now manages its logistics in-house. “Bauer has 143 subsidiaries worldwide so it is not always easy to coordinate between them to ensure sufficient delivery times for our customers,” says Jareer Jadallah, managing director at the company.

Although more expensive, he has found that in-house operations afford the company more flexibility and efficiency. “We have one of the highest machine populations in the region,” says Jadallah. “This means that we are obliged to offer our customers a fast and first-class after-sales service.” As a result, Bauer centralises all operations from its German headquarters, and supplies most of its customers directly from Germany or through its regional subsidiary. “But we do store most of the parts here in our warehouse in Dubai, as we know that in order to be competitive you have to be fast.”

Presented with the option of outsourcing or managing in-house, an increasing number of PMV companies are opting for the middle ground – with an effective combination of both solutions to provide a successful formula for supply chain efficiency.
MAN Truck and Bus Group is the classic case in point. For the genuine parts logistics, the company has its own world class logistics supply hub in Dachau, Germany. “With supply to 95 countries daily, moving 485 tonnes of parts and accessories and covering 30,000 line items, our Dachau logistics organisation understands what customers of the world demand,” says van Graan. “Day and night, we deliver genuine parts from our supply hubs to the regional workshops and customers in a fast, reliable and cost-effective way.”

When it comes to vehicles in the Middle East, the company opts to arrange the logistics with its preferred partners. “Due to our long -standing partnerships in the region, there is plenty of experience of the shipment of our goods in the region,” says van Graan. “But we also offer delivery by our in-house logistics providers. Depending on the customer needs, MAN and these respective supply partners tailor-make supply solutions that would fit in a mutually beneficial way.”

There are clearly many benefits to adopting this dual logistics approach. As well as giving PMV companies the flexibility to offer different supply-chain solutions to different customers, the approach also enables them to spend less core time on logistics operations.

As a supplier of premium warehousing products, FAMCO’s Storage and Handling Solutions Division has also successfully adopted a regional model that leverages the best of both in-house and outsourced services. Core logistical operations are managed in-house with outsourced freight and forwarding services removing the unnecessary load from in-house resources. “What suited the operations in the early days was no longer suitable for the rapidly-expanding business model that FAMCO became,” says David Dronfield, GM of the firm’s storage and handling solutions division.

“Depending on the product and point of supply, our supply chains are modelled to ensure that the ‘one size fits all’ approach does not result in efficiency losses. As a result, specific larger suppliers are able to leverage their own networks for the lowest shipping rates, while some smaller suppliers can more efficiently ship under FAMCO relationships.”

Combining both methods has enabled the company to ensure that projects are instigated and completed within the required schedule, specification and budget criteria. Dronfield knows, however, that successful logistics does not simply come down to a debate about who implements the logistics procedures. “A mistake or delay in a single item of supply can disrupt a whole project, hence FAMCO makes a serious effort to ensure that its supply chain is operating as efficiently as possible,” he emphasises.

For FAMCO, a ‘critical path analysis’ is key to managing the various supply chains that make up a successful project. “Local stock level supplies are utilised to maintain schedules, interlinked with indent orders and maintained to ensure maximum order fulfillment within agreed forecasted stock levels,” says Dronfield. This also applies to FAMCO’s spare parts depot, which holds 45,000 line items and has impressive KPI’s including 95% fast moving parts availability.

Logistics experts agree that ultimately procurement plays a huge role in the holistic supply chain and rarely is this so important than when dealing with high-value goods such as machinery. Chris Gallagher, strategic development director at professional body Chartered Institute of Purchasing and Supply Chain, states inventory management continues to be a major challenge for PMV companies, together with geographical spread, and the global complexities outside of the region. “Buying the right goods and services in the first place requires much greater sophistication than ever before,” he says “But incredibly important to this is the wider supply chain. It‘s complexity, the ability to drive and derive value across the whole supply chain - not just the costs - that can make or break a business.”

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