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02 March 2024

Regional logistics firms to adopt new practices

By Ashaba K Abdul Basti

Growing competition in the regional logistics industry spurred by the influx of new international and local third party logistics players is expected to generate high levels of innovation this year, said industry experts.

The sector is also anticipating a drive by regional players in helping develop local talents while improving skills of existing employees.

Third party logistics (3PL) companies in the UAE and the region have in the past two years embraced advanced technology to enhance efficiency in storage and supply chain management, but the move is expected to go into overdrive this year due to more international companies bringing in new practices.

"There is growing competition in the industry while at the same time demand for logistics services is increasing, causing complexity within the industry. 3PL companies are continuously opening up to new technology," said Michael Waechter, Managing Director of Westfalia Logistics Solutions in the UAE.

"Companies are looking at best ways to minimise costs while increasing efficiency of their services."

Huge warehousing complexes under construction or being planned will instal latest systems to secure a competitive advantage.

Enormous investments are being channeled into new supply-chain technologies that will revolutionise the face of the industry. Among the most significant innovations in the fully-automated warehouses are mobile racking systems and driverless retrieval cranes.

Automated warehouses remove the need for a large workforce as they require only a handful of controllers and maintenance staff. "With economic conditions tightening, 3PL companies will seek cost effective means by eliminating unnecessary staff and replacing them with automated machines that are much more efficient and eventually cheap," added Waechter.

"Two years ago labour was cheap in the UAE and it made no business sense for logistics companies to venture into automated warehousing systems.

"But this has changed as labour has become costly on the back of the weak dollar. Labour accommodation costs are rising fast, prompting logistics companies to seek non-labour oriented alternatives. Companies are weighing up the options and most are seeing the benefits of automation."

Westfalia opened its office in Dubai three years ago to introduce logistics technologies that were already in use in most European countries and to popularise the concept of automation among local players.

The company is a solution provider for in-house development and production of logistics system components such as storage and retrieval units, loading technology, conveyor roots, vertical lifts and checking stations aimed at guaranteeing continuous quality and reliability.

Westfalia's supply chain solution is linked to the automated warehouse to help minimise time windows for goods retrieval and to eliminate common mistakes related to goods specifications.

"Optimum distribution and warehouse technology is a pre-requirement for correctly-functioning interplay within logistics," says Jacob George, Managing Director for Alpha Logistics.

"This is growing in importance within the fabrication and logistics sector."

He believes that supply chains are being driven to transform and evolve due to market realities such as the globalisation of supply, increasing competition and dwindling product life cycles by seeking best processes from industry thought leaders and technology providers on site.

Al Futtaim Logistics is hoping to build new fully automated warehouses fitted with the latest technology over the next two years.

Besides heavy investments into new technologies aimed at improving efficiency, the regional logistics industry will see new programmes geared towards skills development especially following the departure of experienced staff last year as the dollar weakened.

"The majority of the workforce in this industry comprises expatriates. With the weakening of the dollar and the local currencies that are pegged to the green back, it became increasingly uneconomical for people to work here compared to other countries or their own home countries," says Dilip Krishna, Managing Director, Operations, at Al Futtaim Logistics.

The situation was further worsened last year as economies in the home countries of most expatriates were booming and people found it more attractive to work in their own countries where they can save more.

"People are an essential part of this industry, so we will step up training programmes to enhance skills and also develop programmes aimed at retaining staff. We already have running programmes aimed at career development, but we will streamline them," said Hussein Hachem, Aramex CEO for the Gulf region.

He said the company will at the same time increase innovation through new technologies to raise efficiency.