Report: UAE logistics and automation focus
The Gulf Cooperation Council (GCC) e-commerce market is growing rapidly and is expected to reach US $23.7 billion by 2022, according to research commissioned by Gulf Pinnacle Logistics. The findings of the study conducted by an independent research firm shows an expected annual growth rate of 7.2%, but according to Shailesh Dash, chairman of Gulf Pinnacle Logistics, the outdated nature of the e-com supply chain operation in the GCC is one of the major factors holding back further growth.
“GCC consumers are still looking for higher delivery performance, especially on the time and cost fronts, with late or long delivery time being the most common complaint,” he says. “UAE and KSA consumers both value lower cost when making online purchases, however, UAE consumers value primarily fast delivery while KSA consumers find free or cheap delivery more important.”
Thoraya El Ghawi, marketing director for the MENA region at Honeywell
For either fast delivery or cheap delivery, greater use of new technologies is essential, according to Thoraya El Ghawi, marketing director for the MENA region at Honeywell. “You need to have integration between the front end, delivery store, online platforms and the backend warehouse,” she adds. “This is crucial because a logistics company or retailer needs to be able to provide a seamless customer experience in an increasingly more competitive market.”
A study conducted by Honeywell this year found that 3,000 hours of productivity are lost every year in warehouses in the Middle East due to inefficient workflows in distribution centres. Worker productivity is another area that is suffering as a result, according to El Ghawi. “Around 89% of managers invest in new technology because they believe it will save time and increase worker productivity and voice is one of the areas that will do this,” she says.
Workers gather information and input it to a specific workflow and it takes around 40 words per minute to do, but with voice it takes one minute to input 150 words, according to Honeywell’s data. “So it’s more than three times faster. It also improves safety, accuracy of picking and staff morale,” El Ghawi adds.
“The Middle East is one of the fastest growing e-commerce markets globally, and Honeywell understands the competitive pressures being faced by the region’s retailers and logistics operators in this space,” says Edmond Mikhael, general manager, Honeywell Safety and Productivity Solutions (SPS), Middle East, Turkey and Africa (META).
Edmond Mikhael, general manager, Honeywell Safety and Productivity Solutions (SPS), Middle East, Turkey and Africa (META).
“Consumers have high expectations that need to be met, including a desire for faster delivery times, and for their online orders to be shipped free of cost,” he added. “To respond to these increasing demands, Honeywell saw the need for comprehensive and scalable solutions, and has introduced the Mobility Edge Platform as a result.” The devices are used globally by distribution centres, transportation and logistics providers, and retailers to increase worker productivity and capture critical data.
Kuehne + Nagel is one of the first major logistics companies to deploy Honeywell’s solutions globally. The 3PL giant will deploy Honeywell's supply chain technology solutions at its warehouses in the UAE and rest of the world, including voice-directed solutions, cloud-based software and warehouse automation solutions.
These developments come against the backdrop of the recent Leaders in Logistics Conference where Leena Khalil, co-founder of Mumzworld.com, blasted 3PL inefficiency in the GCC.
“In more developed logistics markets there are 3PLs that talk about delivery KPIs in terms of minutes not hours, there is no one in the UAE or wider Middle East that is even thinking this way let alone practicing it,” she told delegates during our E-commerce Panel discussion.
She was responding to a question from conference chairman Michael Stockdale, CEO of B2C Logistics regarding Amazon’s new one-hour and half-hour delivery windows, but it was part of a broader discussion around the need for express logistics companies in the region to adapt their services to the needs of online retailers.
The primary challenge faced by e-commerce companies is in the last mile. According to statistics compiled by Invesp, at least 30% of all products ordered online are returned compared to only 8.89% bought in a physical store, and the vast majority of these returns occur within the first 24 hours, because a huge percentage of online purchases, as in physical stores, are impulse buys. So e-com platforms need to get their product to customers quickly.
Khalil (centre) on the E-Commerce Panel at the Leaders in Logistics Summit.
However, according to Khalil, few express logistics companies in Dubai are able to do this. “There are 130 3PLs and express courier providers in Dubai, but there are only two types of solution,” she said. “We don’t want standard delivery packages, we want the courier to plan their schedules, their solutions around the needs of our consumer.”
The advancements being made by Amazon serve as a dire warning for 3PLs in the e-com space in Dubai. Amazon’s new delivery service aims to compete with UPS and FedEx. The Shipping with Amazon (SWA) is an end-to-end shipping solution that picks up from businesses and ships to consumers. SWA is initially being rolled out in Los Angeles with the ultimate goal of offering shipping services to any other business undercutting both FedEx and UPS on rates.
This means Amazon could be the first retail brand to cross the finish line to supply and logistics chain automation. That is going to have an unprecedented impact in the whole logistics industry. Traditional 3PLs and couriers need to find a way to stay relevant by investing in automation, and many are. The 2018 Warehouse and Distribution Center (DC) Equipment Survey, found that the percentage of respondents saying that they’re “proceeding with investments” reached its highest level in four years.
And this trend isn’t just happening overseas, its gaining ground here in the Middle East. “Speed of logistic operations and the growing multiple product volume is the DNA of e-commerce, and it has ripped apart conventional warehouse logistic systems,” says Syed Mohiuddin, sales manager, Eonmetall MENA. “To overcome such a challenge, we are witnessing a close bond of IT software and racking system, such ERP and ASRS.”
“Rail guided turret trucks, and man lifters have been the proven solution of the last decade, but they’re now reaching saturation,” he adds. “Shuttle racking and automation is the next point of interest, to increase efficiency and cut short the margin of error in logistic operations.”
Geoff Walsh, DHL Express UAE country manager.
DHL Express, a leading courier in the e-com space in the UAE, says that it is for this reason they have expanded their Terminal 2 facility at Dubai International Airport. “That extends our lifespan on the airport for another ten years, but will allow us to process the growth that we see coming for probably another ten years because of the automation in the process,” says Geoff Walsh, DHL Express UAE country manager. “Very few things are man-handled so that obviously leads to much greater productivity and accuracy.”
The 13,100 sqm facility, which cost AED70-million, will have the capacity to manage up to 5,000 shipments per hour. That will double its current capacity of 2,500 and serve nearly 70,000 customers across the Middle East and North Africa (MENA) region. The new facility will enable consolidated export, transit and import operations with a customs’ clearance and hold area that will feed inter-continental and region-wide air-and land-network distribution. An automated conveyor system with dual-view x-ray screening of parcels, image-capture technology and an automatic bar-code parcel sorting system will enable the delivery of more than 120,000 shipments a day.
While the vast bulk of DHL Express’ regional shipments are still for B2B, Ken Allen, member of the board of management at Deutsche Post AG, Division Express, says that the automation of the facility puts DHL in position to ride the e-com wave sweeping the region. “This facility has been built for our customers of course, and while that traditional B2B demand is still growing, there is also a global and especially local phenomenon of e-commerce, which is fantastic for our business and anyone involved in trade,” he says.
According to Walid Daniel, CEO of SPAN, an increasing number of retailers themselves are also investing in their distribution centres as they prepare to add or expand their e-commerce offering. “Even though the physical size of the operations might not grow, all the organizations [we work with] are exploring ways to intelligently manage their warehouse operation,” he says. “By introducing smart technologies and solutions – such as automation, pick-to-light systems, and voice-directed solutions, they are able to optimise their strategic assets (space and people).”
“We are actually working on several other projects with Landmark Group, as well as retailers in the FMCG, fashion, and electronics business; in addition to the usual suspects including automotive, aviation, 3PL and pharmaceutical, that require advanced automation,” he adds. “We have been fortunate to have gotten a few large and complex projects where we have been able to deploy our SMART solution range and are confident they will bring a very positive impact on our market space.”