Last mile took centre stage at Leaders in Logistics
Although the agenda for Leaders in Logistics was a diverse collection of topics currently impacting the logistics sector, from Logistics 4.0 and Digital Talent & the Supply Chain to Sustainability and How to Combat Margin Erosion, it was the opening Last Mile panel discussion to which delegates kept referring back.
Much of this may have been due to the fact that the panel was the first of the day, but it also underlines the importance of last mile fulfilment within the wider logistics industry. The reason for this is the entry to the region of e-commerce platforms such as Amazon - with their acquisition of local platform Souq.com - which has resulted in increased consumer expectations for fast, free delivery.
Driving this interest in the last mile are the consumers at the end of the supply chain. Their round-the-clock purchasing habits and door-to-door demands are fuelling changes in retail businesses, but also in logistics. The challenge of last mile in the GCC was highlighted by Ulugbek Yuldashev, founder & CEO, AWOK.com, which is based in Dubai.
“Cross border is a major impediment, because as soon as you need to deliver cross border, you’re looking at two to three days,” he told delegates. “So if you really want to have same day or next day delivery in the region you need regional DCs, and if you only have one or two hubs, you’re looking at delivery times of five to ten days.”
Cross-border issues was a topic that Olaf Schirmer, senior director, Consumer & Industrial Products and Services Practice, PwC, spoke about in his presentation ‘Regional Industry Review & Outlook’. Schirmer pointed out that while Dubai is the logistics hub for the region thanks to its advanced customs regulations, neighbouring countries such as Saudi Arabia were fast catching up.
“The UAE is on-par with developed markets in terms of the logistics and transport sectors’ share of the economy, at around 10%,” he told delegates. “The UAE is also ranked at number 11 on the Logistics Performance Index for 2018, with Germany at number 1, while Saudi Arabia has dropped to 55, behind Oman at 43.”
This explains why the UAE remains dominant in terms of transshipment in the region, he said, but added that with infrastructure investment in Saudi Arabia ramping up for Vision 2030, this was unlikely to remain the case for long.
“King Abdullah Port was the eighth fastest growing port in the world in 2017, and this and other infrastructure improvements will help KSA increase its KPI ranking,” said Schirmer.
With the development of an integrated rail network between the two countries, the UAE’s share of transshipment bound for KSA was likely to shift significantly, he added.
“We expect a significant shift in cargo transport from road to rail in the UAE, Oman and KSA. There is a $350-billion investment in rail and port infrastructure between now and 2025,” he said.
“All these countries want to be logistics hubs, but how many more can we really have? In the UAE alone we already have Dubai, Abu Dhabi, in Oman we have Salalah for transshipment into Africa, but King Adbullah Port is trying to position itself for that as well.
“It’s a race for investment and tenants in the freezones. These developers need to be offering turnkey infrastructure solutions for tenants, at least the shell of the warehouse for example to entice logistics companies to set up shop there.”
In the ‘It’s the Last Mile that Counts’ panel discussion that followed, Rabih Allaf, growth director, at fetchr, argued that Dubai would remain the dominant e-commerce hub for the foreseeable future. “We work with sellers in the US, UK and China and for us we saw different models taken by different customers. I think it depends on your volume and your product. Initially, it’s probably best to establish first in Dubai because it has the best regulations,” he said. “Then as you scale-up, open warehouses in those tier one and tier two cities in Saudi Arabia and other countries in the region.”
Marcus Meissner, senior regional expert on smart cities, in his presentation ‘Next Generation Smart Cities – How is the Progress?’ pointed out that the development of smart logistics networks was essential to the growth of e-commerce in the region, because it enhances last mile operations.
“Smart cities are essential for the development of e-commerce, if you take a warehouse, it can be the most advanced warehouse imaginable, but if the surrounding infrastructure is inadequate you won’t be able to do same-day or next-day delivery,” he pointed out. Meissner added that, contrary to expectations, Abu Dhabi is actually leading Dubai in terms of smart city rankings.
“The UAE’s plans for smart cities follow a greenfield approach, which is much faster and easier to implement than in Europe, where there is legacy infrastructure,” he said. “It’s for this reason that Abu Dhabi was able to outrank Dubai because it’s less developed and so the green field implementation was possible.”
So while smart city infrastructure is necessary for the efficient implementation of last mile operations, it isn’t necessarily essential. This was expanded upon by Melanie Lenhardt, manager, Digital Transformation, Camelot Management Consultants Middle East and Diya Fathima, associate consultant, Camelot Management Consultants Middle East, in their presentation ‘Logistics 4.0 - Its Relevance & Potential for the GCC’.
“We need to have self-driving supply chains, so that they can utilize automation, AI and robotics to react to changing dynamics in real-time,” said Fathima. “For example, if a delivery is out for shipment, but my location has changed, the driver should still be able to deliver it wherever I am at the time of the delivery occurring.”
“This also helps with predictability, machine learning can pre-empt situations on a particular delivery route and AI can step in to take action when these circumstances change,” she added.
Within the warehouse as well, Logistics 4.0, which is basically an umbrella term for the implementation of automation, robotics and other forms of AI and machine-learning, can help enhance efficiency.
“In a traditional warehouses a custom order comes in, its checked manually, the order picker goes and get the order, checks the paper, and then informs the dispatcher when it has been sorted,” said Lenhardt. “This is time consuming and vulnerable to human error.”
She posited an alternative ‘modern’ warehouse scenario. “Using Logistics 4.0 the custom order would come in and the WMS would check whether the product is available and would take action depending on whether it is, so if it is, then the AVG will go and get the product and bring it to the dispatcher in the packing areas,” she said. Overhead costs are lower, operations are faster and there is a far lower probability of errors in addressing or product type or quantity occurring.
During the panel ‘Mind the Gap - Digital Talent & the Supply Chain’, one of the panellists, Shankar Subramoniam, executive director, National Association of Freight & Logistics (NAFL), highlighted the risks involved in failing to heed the wave of disruption being caused by Industry 4.0.
“Middle managers and senior managers are the ones facing the responsibility when it comes to adapting to changes in the market and whether to implement new technologies like blockchain, automation, robotics, and so on,” he said.
“Failure to do so, failure to innovate, can lead to business failure, such as what happened to Nokia. These innovations are called disruptors because they force us to change the way we work and the best way to prepare for it is by having a forward-looking supply chain.”
And the risk of business failure due to technology stagnation is very real, according to Ingo Kloepper, founder & managing director, toplogisticsmanagement.com, who during his presentation ‘Facing the New Reality – How to Combat Margin Erosion’, highlighted the growing threat from competition.
“According to Forbes, 288 logistics start-ups are launched every single day, which increases competition,” he said. “In addition to this, too many established logistics companies are using legacy systems that may require work-arounds and manual intervention, all of this eats away at profit margins.”
The final panel discussion of the day was the only one that didn’t touch on e-commerce, but instead led on from Kloepper’s discussion on margin erosion, because as energy costs rise and environmental sustainability becomes more important to consumers, 3PLs that don’t invest in sustainability risk losing business.
“The millennial generation is more concerned about the environment and how sustainable businesses are than any other in history,” said Kim Winter, founder & global CEO, Logistics Executive Group. “This in turn is forcing those retailers and manufacturers to be more environmentally-friendly in their processes and their supply chain, which is having a knock-on effect in the logistics sector.”
This had led to an unprecedented expansion in solar energy in the region, according to James Stewart, general manager, ALEC Energy. “Last year there were more solar plants installed than investment in any other energy field,” he said. “Its abundance means that it must be the first port of call for energy expansion in the Middle East. There isn’t a logical reason not to have a solar panel on every warehouse in the region to offset energy needs.”
But what’s holding the solar sector back, he added, was misconceptions about it from warehouse owners and operators. What puts them off are the myths about solar energy, it’s a very sophisticated, light-weight and robust technology that can work for 20 years without major maintenance,” he said. Some of those myths revolve around the cost of installing solar panels, but Dr Sreejith Balasubramanian, senior lecturer in Supply Chain Management, School of Business, Middlesex University Dubai, left delegates with a teachable moment as the conference closed.
“Some of the best sustainability initiatives require little to no investment,” he said. “A reducing in packaging, planning ahead to prevent rush periods that put huge demand on delivery networks, delivering cold chain goods at night when there is less pressure on the refrigeration systems, and fewer cars on the roads so less sitting in traffic, these can make a huge difference when done collectively.”