Introducing transportation concepts as key leverage for increasing the value of logistics'...

Introducing transportation concepts as key leverage for increasing the value of logistics' infrastructure for LSPs

February 8th/9th of 2010

Abu Dhabi / UAE

Workshop Presentation at Kick Off Meeting

Global Logistics Forum Presentation – Michael LUEBKE and Dauaride EMPERE / February 8th/9th of 2010 / of XX

Forum Workshop – Transportation Concepts

Workshop Agenda

Topics Time Responsible

1. Personal introduction and outlining of workshop details

2. Dornier's workshop presentation

3. Group work with participants

4. Presentation of group results and closing of workshop

09:00 a.m.

09:30 a.m.

10:30 a.m.

11:30 a.m.

All

Empere, Luebke

All

Group leaders



Content of Dornier workshop presentation

1. How does Dornier rate Logistics on a global scale?

2. How does Dornier experience Logistics in the region?

3. Which role do transportation concepts play for Logistics in the region?

4. How do real life transportation projects look like?

5. Where do we go from here?



Global and regional trends in the Logistics’ industry (1/4)

Worldwide trade and supply markets extension result in changes of goods flows and transport corridors used

Trade pattern origins and destinations changed through increased globalization, e.g. Europe, USA and Japan are sourcing from China and India

Global container volumes are expected to double again in the coming 10 years 3 billion new consumers in Asia - becoming the global manufacturing hub -

change transportation demand and service requirements Logistics is a global business – so is competition Continuous market consolidation, resulting in less but larger international logistics

service providers Logistics is increasingly becoming a vital key industry with independent rules and

development mechanisms (No. 4 industry in Germany) Logistics industry possesses high differentiation potential and is driven by

technology, know-how, experience and assets




International transport container traffic and intermodal transport will continue to increase

The growing economic development will lead to higher import and export volumes of consumer goods

Middle East attempts to become a strategic location for global logistics Main corner stones have been set and are being developed aggressively Global development in logistics offers a key and fast growing opportunity

especially in the Middle East region Ports and inland modes are already congested not only because larger vessels

are increasingly congesting US, Far East and European ports Lack of sufficient, modern Terminal infrastructure, however, time lines for

developing new ports and infrastructure are long




1980s 1990s 2000s Future

GCC was established in 1981

Middle East markets major import markets

Low GDP due to low oil prices and a fully oil-dependent economy

Establishment of Pan Arab Free Trade Area in 1997

Important transshipment location

First steps of promoting trade and industry to minimize reliance on oil

KSA and UAE driving economic growth in GCC region

Professionalizing bagales to professional retail markets

New airports, seaports, Free Trade Zones

Import for sea-air traffic

Economic growth due to rising oil price

International logistics providers go ME and ME providers go global

Ongoing development of shipping companies from simple carriers to door-to-door operators

Import of project cargo

Industry acknowledgement of transportation and logistics activities as a core corporate process that has to be managed professionally

Increased willingness of the industry to outsource supply chain services

Change from passive driven to active driving economy

Increased railway activity




Introduction of Containerization and intermodal transport. First mergers

Fragmented market structure for all Logistics services.

1990s 2000s1980s

Containerization increasingly replaces general cargo shipping on global level

Logistics development in ME driven by imports from oversea shipping

Consolidation of number of service providers

Introduction of container trading patterns

Container shipping crises. Merges and Acquisitions, change of shipping lines from maritime haulagers to carriers haulage/door-to-door services

Import market dominated by shipping line haulage, however, following classical market structures and on-carriage organized by forwarders and agencies

Integration of individual logistics services towards global SCM

Carriers haulage arrives in Middle East, first attempts of intermodal transport

Global merges in land and maritime logistics, providers, contract logistics and fulfillment

For the very first time, ME chances from driven region to driving region while developing global turntable strategies.



Service portfolio of LSPs in the Middle East is being broadened gradually

2015 2010

Logistics integration level

Procurement

Requirement planning

Supply chain management

Production planning

Warehousing

Land transport

Air/Ocean transport

Intermodal transport

Global LSPsMiddle East

today

Global LSPs Europetoday

(e.g. DB Schenker)

2005

Packing / Distribution

Railway transport

Tra

ns

po

rta

tio

nV

AS

Su

pp

ly c

ha

in

2020

Global LSPsMiddle Easttomorrow



Global LSPs based in Europe are more and more facing high quality regional market players

Transport

System service provider (3PL)

Freightforwarders

Systemintegrators

(4PL)

Global

Regional

Portfolio

Low high

Playing field

K&N

DHL~500‘€

Aramex>250‘€

Panalpina

GAC

Al Futtaim

DP World

Bubble size = revenue indicator

Four Winds S.A.

Orient Company

ATCO

Namma

Kanoo

Agility> 1‘‘€

MML

Al Majdouie

DB Schenker



Freight volume flows in ME require transportation concepts focusing on intermodality as well as road transportation concepts

Source: Dornier Consulting GmbH



Global Logistics in the Middle East - a typical supply chain

Supplier:OverseasSupplier:Overseas

Hub 1:DubaiHub 1:Dubai

Hub 2:Abu DhabiHub 2:Abu Dhabi

Consignee:Consignee:

->Short-distance truck->Short-distance truck

Sea transportSea transport

Seaport

Bulk storag

e

Steel Factory 1

Constr. Site 1

Constr. Site 2

Constr. Site n

-> Long-distance/heavy truck-> Long-distance/heavy truck

Bulk storag

e

Cement Factory

Road transportRoad transport Road transportRoad transport

-> Logistics infrastructure-> Logistics infrastructure

I F

I -> Information-> Information F -> Financing-> Financing

I F I F I F



Key Performance Indicators (KPIs) from a logistics point of view



Reaching the goals set for KPIs requires an integrated approach

Transportation network

Security level

Delivery concept

Vehicle specifications

Comprehensive transportation concept

Framework conditions:

Standardization

Rules & regulation

Training & education

Law enforcement

General safety & security



Cargo defines the ideal transportation mix…

Road

Pro

sC

on

s

Rail Sea Air

Dependant on weather and traffic situation

Limited capacity Limitations for

dangerous goods Danger of accidents

Cost-effective for short distances (regional)

Time-effective for long distances

Flexibility

Side tracks necessary Costs for special

vehicles Inflexibility

Heavy cargo capacity Timetables Low failure rate Ability to transport

dangerous goods

Dependant on weather (storm, ice, fog)

Inflexibility

Heavy cargo capacity Very high loading

capacity Availability of special

vehicles (dangerous goods, etc.)

High costs Limitations for

dangerous goods

Very time-effective Easy packaging

Traffic counts Transport modeling Junction capacity analysis

Parking demand External/Internal road network

Other traffic (except T&L) Mitigation measures



…however the realities of the region limit the feasible options

Road Rail Sea Air

xxx xxx xxx xxx

E.g.: LoRoCo E.g.: UAE Rail E.g.: Red Sea Ferry E.g.: Saudi Airlines



Puzzle piece 2: Security level

Transportation as starting point for security Explosion Events

The larger the vehicle, the larger the explosive device that could be hidden aboard, and the longer the time required for security checking

The worst case is a large articulated vehicle which could carry an explosive device up to 40 tons. Such vehicles can be and are usually prevented by their size from entering standard public parking facilities

The next is ordinary trucks which could carry an explosive device up to 10 tons. They can be prevented by a height bar (usually 3m) from entering standard public parking facilities

Utility vehicles could carry an explosive device of 6 tons, a 4x4 passenger car 1 ton, a saloon car a box or large package 150kg, and on a person or in a briefcase up to 30kg

In explosion events, distance is a crucial factor since the blast force decays inversely with the square of the distance from the device, e.g. if the device is 10m from an object the blast force would be 1/100th of what it would be at 1m

Confined spaces provide ideal conditions for causing damage to a structure because the “contained” pressure from the blast will be much higher than in the open air. Survival of the building structure is the ultimate issue for security. This highlights the importance of preventing explosive devices from entering covered parking facilities, particularly basements and other closed structures. Vents through the ceilings of parking stations may be used to reduce blast pressure if open to unpopulated areas above ground level



Puzzle piece 3: Delivery concept



Puzzle piece 4: Vehicle specifications



Vehicle Specifications have a significant impact on intermodal potentials

Vehicle standards in the GCC are especially required if intermodal solutions are planned for the future

Intermodal solutions road-rail could especially help to solve feeder and distribution problems from and to the main ports

Moving the line haul part of long distance transport to rail could contribute to diminish the problem of availability of skilled drivers

Long-term innovation of the interfaces will be required to improve competitiveness and acceptance of intermodal solutions – as on the road solutions are required that focus on a selected group of containments to reduce complexity and costs

Intermodal solutions (IMS) could especially contribute to improve the land bridge

Besides that innovations of IMS could leverage industrial business opportunities in the region



CASE STUDY: CHINA (Longer combination vehicles)

Parameter values for the case study

Source: UNESCAP working paper P/07/02

Effects of LCVs regarding, CO2, diesel fuel, transport costs and traveled kilometers.



Transport vehicles in the Middle East

Mostly 2x4 Truck tractor with tandem semi-trailer

Similar vehicles to KSA with exception of DP World who have road train of 2 x 40ft containers!

No proper legislation is in place



Transport vehicles in North America and Europe

USA transport limited by GVM and the use of long cab truck tractors

25.25 m and a total weight of 60 tons

18.75 m and a total weight of 44 tons



Transport Vehicle in Australia and South Africa

Road trains 53m long (however not used in cities) 22 Meter, GVM 56,000 KG, (net payload of 36-40 tons)



Dornier’s transportation project experiences in the region (INPUT LÜBKE)



Conclusion 1 – Developments in the region have formed specific strengths & weaknesses

Strengths of the Middle East Weaknesses of the Middle East

Xxx Xxx Xxx

Xxx Xxx Xxx



Conclusion 2 – Europe’s highly integrated logistics’ services hold numerous opportunities and threats

Opportunities in the logistics’ industry Threats posed by logistics’ industry

Xxx Xxx Xxx

Xxx Xxx Xxx



Key Essential

Path to an integrated Logistics industry in the Middle East places some obstacles...

...so how do we overcome them?



Having carefully listened to the presentation…

GROUP 1: …which key opportunities do you see for LSPs in the region? …what are improvement challenges that have to be tackled by LSPs?

GROUP 2: …what are business challenges that have to be tackled by LSPs? …which risk management measures definitely have to be initiated by LSPs?

INSTRUCTIONS: Please use the following template Provide detailed statements



Re

gio

na

l F

ac

tors

Our approach to create a comprehensive workshop result

Weaknesses

Strengths

ThreatsOpportunities

Industry factors

SWOT-Analysis

Risk Management

Improvement Challenges

Key Opportunities

Business Challenges



Template for GROUP 1

Key opportunities Improvement challenges

Xxx Xxx Xxx

Xxx Xxx Xxx



Template for GROUP 2

Business challenges Risk management

Xxx Xxx Xxx

Xxx Xxx Xxx



Dornier Consulting says “Thank You”

Dauaride EMPERE

Senior Consultant

[email protected]

+49 (0) 151 52 630 110

Michael Luebke

UAE Country Director

[email protected]

+971 50 812 24 79

UAE Address:

Dornier Consulting GmbHKhalifa Street, Liberty TowerP.O.Box 48327Abu DhabiUnited Arab Emirates



Back-up


Forum Workshop – Transportation ConceptsThe competition is investing significantly in the Middle East market

Global players

Competitive environment

Agility Has made the biggest impact through the acquisition of forwarder GeoLogistics and the deal with the supply of the US troops in Iraq

Al Futtaim/Exel Offers full range of supply chain solutions that include warehousing and distribution, road transportation, sea and airfreight forwarding; also comprehensive range of VAS

Aramex Revealed that is was negotiating to acquire companies in UK (Priority Airfreight + Twoway Vanguard) and in US

GAC GAC Group consists of GAC Shipping, GAC Logistics and GAC Marine; the GAC Logistics Park is the largest facility in the Middle East spreading over 125,000 m2 with over 125,000 pallet positions

DP World Large port management operations company; dominant in the region; P&O services

P&O ferries; Terminal at Jebel Ali Free Zone

DHL Possesses 3.2 m square feet operations and have invested significantly in the region

Kuehne&Nagel Regional turnover is 140 m US$; K+N used to operate through a JV company

Panalpina In 2006, three regional oil companies extended their contracts with Panalpina for the provision of logistics services in Saudi Arabia and Qatar, while two global computer and semiconductor manufacturers chose the Group as their distribution partner in UAE


Forum Workshop – Transportation ConceptsThe competition is investing significantly in the Middle East market

Orient Company Provides national and international customers with international freight forwarding services that range from transportation, import and export by air, sea and land to customs clearance, domestic distribution, turnkey jobs, as well as industrial projects.

Four Winds S.A. Specialized in design and management of local and international transportation, freight forwarding and customs clearance services

ATCO Is the largest specialist company in the KSA transportation and logistics sector; offers one-stop transportation and logistics services on a domestic and international basis.

MML Offers freight forwarding services – domestic & international, Air/Sea/Land; Shipping & NVOCC Agency, chartering as well as container terminal operations

Namma Handles total movement of cargo from worldwide locations for Saudi Chevron Petrochemical Co., Gulfguard, Saudi Crane, Middle East Power Company, Middle East Battery, Saudi Bea Fasteners and many other companies

Kanoo Offers shipping, airline cargo GSA’s, door-to-door air & sea cargo, customs clearance & transportation, packing and house removal services, project cargo handling, exhibition services, international freight forwarding

Al Majdouie ALMAJDOUIE Logistics & Distribution provides SCM solutions and 3PL; ALMAJDOUIE Heavy lift transport & engineering is a leader in heavy lifting and transport not only in Middle East and generally maintaining a market share of over 50%

Competitive environment

Regional players



Backup Transition of World Exports



Backup Transition of World Exports

Source: http://socialisteconomicbulletin.blogspot.com/2008/12/rise-of-asia-in-particular-china-in.html



Backup Doubling of container volumes by 2020 despite downturn

Even allowing for the current downturn in global trade, and the first potential decline in container traffic ever in the more than three decades since the inception of wide‐scale containerization, current projections call for world‐wide container volumes to double by the year 2020.

World‐wide container volumes may have fallen by 20% or more during the first months of 2009 as compared with last year, but the fact is that there are still ports in the developing world where limited capacity is still very much a significant and current problem, or that sufficiently modern ports and terminals simply do not even yet exist which can accommodate any moderately‐sized modern cargo vessels, containerized or otherwise, let alone the latest generation giants. Current World Bank analysis calls for a decline in world trade volume of ‐2.1% for this year, before rebounding to a projected 6% growth in 2010.

The World Trade Organization foresees a 9% drop on manufactured export this year, though‐ significantly‐

with a smaller decrease among the developing economies. While global GDP has been forecast to expand by only 0.9% in 2009, the anticipated economic growth of the Developing World is still 4.5%, with sub‐Saharan Africa projected for 4.6% growth this year, and 5.8% in 2010. According to the most recent WTO data for 2008, Africa continues to experience significant growth in both exports and imports. Exports increased 29% to $561 billion, and imports rose to $466 billion, 27% higher than in 2007. This reflects increases in basic commodity and mineral exports, but also a surge in imported consumer goods from an increasingly important African trading partner: China. Africa will continue to see economic and trade growth, and the interest of shipping lines and the global and local port and terminal developers and operators who serve them.

http://www.apmterminals.com/uploadedFiles/corporate/Media_Center/Speeches/090404%20World%20Bank%20Transport%20Speech.pdf



Backup Logistics Sector Germany

Weighing in just behind trade and the automotive industry, logistics is the third largest sector in Germany, employing some 2.6 million persons. Annual turnover of 166 billion € is earned throughout the industry, representing approximately 7% of German gross domestic product.

The logistics sector also displays far-aboveaverage growth. Around 15 billion € are invested in logistics real estate, technologies and qualification measures each year.

http://www.kompetenzcluster.org/fileadmin/vdidaten/Logistik/Fakten/Germany-Logistics-Hub.pdfStand 2005



Backup Challenges in the MENA Region

Although the region is not as dependent on the international economy as are other areas of the world, Middle Eastern agriculture and manufacturing are the main providers of job opportunities and have still become less competitive because of the increasing pressure to export goods to the global markets at lower prices. At the same time, inflation is running above 10% in much of the area due to rises in commodity prices. Inflation is also being driven upward because the currencies of many of the countries in the Arab region are pegged to the US dollar.

Before the financial downturn, the large inflow of foreign exchange into the nations of the region, whether from oil or aid, resulted in a sharp appreciation of domestic currencies. Now, with the US dollar depreciating, the region's Central Banks are forced to keep interest rates below the rate of inflation. With a prolonged global financial downturn, consumer price inflation in food and oil will not be offset through higher revenues from food and oil production. Although price increases in commodities would benefit some producers and investors, wages are not increasing fast enough to match the rising costs of food, fuel and rents, and this will have a continuing impact on poor areas.



Backup Challenges in the MENA Region

These combined factors are increasing the social and economic disparity in the region between a super-rich sector, a lower middle class and an impoverished sector. With the recent drop in the price of oil to below $70 a barrel, along with the loss of Arab investments in world stock markets, the level of revenue coming into the region from trade and foreign direct investment is dropping. A prolonged slowdown in the international economy will also cause remittances, job creation, tourism and foreign aid to decline and unemployment to increase, particularly among the youth. The economic downturn will also slow the flow of educated Arab workers into jobs in the oil sector.

Before the global financial crisis, the region benefited whether oil prices were high or low, since the region has both oil producers and consumers. But Middle East producers and consumers are now likely to suffer from either higher or lower oil prices as the financial crisis spreads -- because of the sustained drop in foreign investment coming into the region, as well as the volatility of regional currency values due to the region's monetary pegs to the American dollar which is gradually deflating. Even if oil prices were to rise to their previous high levels of July 2008, this would place a heavy burden on the unemployed and poor as well as the wealthier social sectors because of their reduced purchasing power.

http://the-stars.ch/public/uploads/Al%20Ghurair_speech.pdf

Introducing transportation concepts as key leverage for increasing the value of logistics'...

Documents

Transcript of Introducing transportation concepts as key leverage for increasing the value of logistics'...