Case Study: Patchi’s supply chain first in GCC
Patchi is the first chocolate manufacturer in the region, and one of very few FMCG producers overall, to achieve a 100% halal certification for its supply chain. While this, on the face of it, may not seem particularly impressive, it’s a significant achievement and speaks to the quality of the supply chain that the chocolatier operates in the UAE and wider Middle East.
“A Halal supply chain is based on key Islamic principles, but it also represents an enhanced, more hygienic, healthier approach to logistics,” says Aline Ashkarian, country general manager, Patchi UAE.
“Being Halal has a huge impact on the supply chain, which is why many big companies are not able to get certification except after perhaps six to eight months of redevelopment of their supply chain,” she adds.
When Patchi decided to get certified, however, it took just three months to get the approval from ESMA (Emirates Authority for Standardization and Metrology). “All our systems and procedures were already derived from the Islamic rules, all we were missing was the certification,” says Ashkarian.
Aline Ashkarian, country general manager, Patchi UAE.
“It’s not only about not having pork products or alcoholic products, it’s the entire supply chain process,” she adds. This includes issues such as how the items are produced, how they’re handled, how they’re packaged, and how they’re delivered.
“It’s very close to HASAP and ISO, but following the Islamic rules and regulations,” explains Ashkarian. She points to Patchi’s wrapping materials as an example. “Most chocolate in the UAE is currently wrapped with materials that contain products not approved by ESMA. Another example is the disinfectant used, most contain alcohol, which is not Halal. Even the disinfectants used by workers to clean their hands must be alcohol-free. It’s a supply chain that maintains a higher standard of hygiene and cleanliness than most other certifications,” she says.
It is for this reason that Patchi has opted to conduct its logistics operations in-house. Raw materials such as the cocoa mass, the cocoa butter and the cocoa beans, are procured by the head office in Lebanon for the five factories that Patchi has across the region.
Patchi handles its logistics in-house due to it's stringent handling and storing proceedures.
They’re sourced from a set of globally approved suppliers. These ingredients are then stored in Jebel Ali Freezone, along with locally procured sugar and packaging, to supply its manufacturing facility in Dubai Industrial City. The finished product is brought to its distribution hub in Al Qouz, which also doubled as the regional head office.
“We procure sugar locally because we want to ensure that the sweetness of the chocolate matches the local sensibilities of the market. So between the UAE, KSA and Lebanon for example, KSA will prefer sweeter chocolate than the UAE and the UAE prefers sweeter chocolate to Lebanon,” says Ashkarian.
“We have 34 boutiques within the UAE, we’re present in all the emirates and our main distribution hub is here in Al Quoz,” she adds. “We also store our gift items here. We have a unit here called our workshop area where we assemble all our items, from gift items, to wrapped items, to display collections. We distribute in-house, through a fleet of 35 trucks to our boutiques as well as corporate clients.”
Patchi has taken this approach because of the unique nature of its chocolate product, which is produced without any additives or preservatives. “This makes it sensitive to changes in temperature, humidity and other factors, so we’re very strict on how they’re transported from one location to another. If they’re exposed to humidity they bloom, and bloomed chocolate doesn’t affect the taste or quality of the chocolate itself, but the look changes and it puts consumers off,” says Ashkarian.
The company is concerned with the minutia of logistics, down to how the chocolate is stored within the van, and how it is handled and by whom. “The driver needs to have food handling training, the vans needs to be cleaned with Halal-approved disinfectants, the trucks need to have temperate as well as humidity logging systems that can connect to our system and theirs. We need to be made aware immediately of any issues during transportation and a surprising number of logistics companies are not able to do this,” she says.
In Patchi’s view, ‘issues during transportation’ can be anything from a traffic accident, to a box falling over and the chocolates inside becoming mismatched within.
“In retail we always say that detail matters, and the way our chocolates look and are presented is extremely important and affects the supply chain,” says Ashkarian. “So all these considerations have to be taken into account, it’s an absolutely necessity for us.”
And it’s not just in the transportation where detail matters. The storage of the chocolate is important to, not just because of the temperate and humidity requirements, but because of the need to protect its taste. “We also don’t like to have our products stored anywhere near other products that might impact the taste,” says Ashkarian. “For example, if you store chocolate next to perfume, it will absorb the smell and the chocolate’s taste will be affected.”
The company is unable to conduct its logistics entirely in-house, however, especially during the two primary ‘rush periods’ of the year, when demand for its chocolate spikes. “Our very particular logistics requirements creates a major challenge during our rush periods, when the demand exceeds our in-house logistics capability. During Ramadan and Eid al-Adha is when demand spikes every year and during these times we’re inundated with orders from the boutiques and corporate clients so we have to rent additional fleet capacity from outside,” says Ashkarian.
Patchi has a select list of 3PLs that it works with during these periods, but Ramadan and Eid al-Adha require planning that goes far beyond deciding which 3PLs to work with. Planning and preparation for Ramadan starts a year in advance. It starts with the selection of the colours for Ramadan, the themes, and these are decided based on the major fashion shows in Milan and Paris.
“We send teams to these events and they then decide what our wrapping collection and flower decorated collections will look like,” Ashkarian explains. “Then a schedule for logistics, procurement, marketing, retail and so on is developed. All departments have to work together to ensure that there are no issues. Procurement is extremely important because we source most of our ingredients from outside the region, so we need to ensure that we have everything we need to produce the chocolate required for these rush periods.”
Patchi generally forecasts a 5% to 10% increase in demand each year to ensure there are no shortages and distribution starts two weeks prior to Ramadan, so for Patchi the ramp-up was occurring at the time Logistics Middle East went to print.
“We do the first part of Ramadan in a different collection to the second part, which creates another logistics challenge as we need to make sure that our Al Quoz distribution hub has all the materials required to change the packaging and wrapping,” says Ashkarian. Then during Eid al-Adha we have another collection that runs for three to seven days.”
With all of these issues in mind, it makes sense then that Patchi has decided to consolidate its manufacturing and logistics operations in Dubai Industrial Park. The chocolatier is developing a new hub in the freezone that Ashkarian says will be a milestone development for Patchi.
The 122,000sqft facility will also include 3,000 square meters of warehouse space to facilitate fast and efficient deliveries of Patchi’s chocolate products.
At the new facility being built in DIC, the manufacturing, storage and distribution will all be done from the same hub, except for the filled items, the baby and wedding selections and other collections that will be done by the workshop in Al Quoz. All the corporate business will also be done from the Al Quoz facility. “Everything else will be at the new facility, which will streamline our operations because currently we have the factory and the corporate brand Patchi under two different trade licenses,” says Ashkarian.
“Also, when we deliver from one location to another we have an issue of having to go much further for Abu Dhabi from Al Quoz than we would from DIC, and similarly to deliver to Sharjah and Ajman makes more sense from the Al Quoz location. So this will create more efficient use of the fleet,” she adds.
The new facility meets the latest sustainable goals of the UAE and will produce a lot of its own electricity through a rooftop solar installation, while also conforming to ESMA’s Halal supply chain certification. The 122,000sqft facility will also include 3,000 square meters of warehouse space to facilitate fast and efficient deliveries of Patchi’s chocolate products.