Partners, preparation called key to entering Middle East markets
The fast-growing economies of the Middle East and North Africa offer tempting opportunities for exporters. But getting a foothold in the market takes some doing.
Peter Bradley is an award-winning career journalist with more than three decades of experience in both newspapers and national business magazines. His credentials include seven years as the transportation and supply chain editor at Purchasing Magazine and six years as the chief editor of Logistics Management.
Can you afford to take 20 to 25 days to deliver a critical parts shipment to an overseas customer? Of course you can't. Neither can Choice Logistics, but that's the situation the third-party logistics service provider (3PL) faced.
The problem began when Choice, which specializes in critical parts deliveries, started serving customers in Saudi Arabia from a regional DC in Rotterdam, the Netherlands. As it quickly discovered, shipping goods to that part of the world presents some special complications.
For example, Choice would have to clear a number of hurdles before the items could even be shipped from the Netherlands, explains Luisella Basso, the company's director of global trade compliance. Among other things, it had to provide a certificate of origin for each product as well as a certificate of conformity for each shipment, showing compliance with Saudi regulations. On top of that, it had to conduct a physical inspection of every shipment.
That added up to big delays. "The process was taking 21 to 25 days," Basso says. For Choice, this was unacceptable. "Our business is mission-critical shipping," says Michael Notarangeli, the company's vice president of field operations. "Every job is urgent. This went against everything we stand for."
Big potential
Welcome to doing business in the Middle East and North Africa (MENA), a market that can be as frustrating for exporters as it is tantalizing. The frustrations, of course, come from the confusing array of local and national laws, customs, and regulations. But for companies with global ambitions, the fast-growing economies in the region still have a powerful allure.
Figures cited in a September 2009 study conducted by Adrian Gonzalez of ARC Advisory Services for Wared Logistics provide some indication of how quickly these economies are expanding. "According to the World Trade Organization, GDP growth in the Middle East and Africa in 2008 was 5.7 and 5.0 percent, respectively," he wrote in the study, On the Growing Edge: Logistics in the MENA Region. That was well ahead of GDP growth rates in many other parts of the world, noted Gonzalez, who is the director of ARC's Logistics Advisory Council. While growth cooled off during the global recession, a World Bank report issued late last year noted that the MENA region had nonetheless weathered the downturn better than many others.
Clearly, the market opportunity is there. But how does a company go about setting up operations in the MENA region? Those who've been through the experience warn that careful preparation is crucial. "We advise clients to do their homework, to understand the environment, rules, and restrictions," says Basso.
It also helps to find a partner on the ground who can open doors. "Select an agent or vendor you can work with to help navigate the intricacies and complexities," advises Basso. "It takes a lot of time, but it's important to do that exercise."
Choice Logistics did just that when it needed a way to expedite shipments to Saudi Arabia. "We turned to a vendor in Dubai [Aamro Freight & Shipping Services LLC] and looked at the requirements for using Dubai as a hub," Basso reports. Choice became interested in shipping via Dubai because of the potential to reduce both transit times and paperwork. Both Dubai and Saudi Arabia belong to the Gulf Cooperation Council (GCC), a political and economic organization that opened a common market in 2008. "Because Dubai is part of the GCC, it gets preferential treatment for shipments into Saudi Arabia," Basso explains. In the end, Choice established a strategic stocking location in Dubai, which it uses as a point of dispatch into the region. As a result, it was able to reduce the clearance time to two days.
As for what it was like to work with Dubai (which is part of the United Arab Emirates), Notarangeli of Choice has nothing but good things to say. Dubai has proved itself to be friendly to business, much like Rotterdam and Singapore, he says. "Their business practices lend themselves to getting products in and out of the region," he adds. "It is becoming a major player in our network."
Getting better all the time
Choice's experiences with Dubai bear out what MENA experts have been saying for some time: that the region's trade climate is improving. "Doing business is becoming easier in the region," the World Bank stated in its 2009 annual report on MENA.
That's partly the result of large-scale investments in infrastructure to support logistics activities in the region. One of the most notable developments is the massive Dubai World Central (DWC) project, which aims to enhance Dubai's status as a regional logistics hub. It includes the Dubai Logistics City free trade zone, which offers warehousing, transport, and logistics services. DWC is also developing what it claims will be the world's largest passenger and cargo airport, DWC-Al Maktoum International Airport, when construction is completed.
Evidence of infrastructure improvements can be seen elsewhere across the region. The Kingdom of Saudi Arabia is investing on the order of $80 billion in the King Abduallah Economic City, Gonzalez of ARC reports. The development, which is specifically geared to attract foreign investment and global trade, includes a seaport and what the developers call an industrial valley. In addition, last year, the World Bank approved major infrastructure projects for Egypt, Jordan, Lebanon, and Morocco.
Not surprisingly, all that infrastructure expansion has led to increased demand for third-party logistics services. Problem is, the 3PL market in the region is still in the early stages of development, according to Gonzalez. In the September 2009 study, he described the 3PL market as highly fragmented, dominated by small players that offer discrete services such as transportation, warehousing, or freight forwarding as opposed to integrated end-to-end solutions. "Few providers have nationwide capabilities, and even fewer have the people, assets, and IT sophistication to serve clients across the entire region," he wrote.
But Gonzalez believes that is changing. "Pan-regional service providers offering end-to-end logistics services are starting to emerge, which will further accelerate the growth of the logistics outsourcing industry in MENA," he wrote in his study.
One example is Wared Logistics, which offers import, transportation, distribution, and logistics management services in MENA and operates transportation hubs, warehouses, and DCs in Saudi Arabia, Egypt, Syria, Lebanon, and the UAE. Another is Damco, a $2 billion company that is part of the A.P. Moller - Maersk Group. Damco, which has operations in every country in the Middle East, offers an array of services in the region, including customs clearance, storage, deconsolidation, and distribution.
The right stuff
With the outsourcing market in a state of transition, Gonzalez advises shippers to proceed with caution when choosing a 3PL in the MENA region. As for what attributes they should look for in a potential partner, Gonzalez puts local expertise at the top of the list. Because each country has its own unique set of rules and requirements, he says, it's important to make sure the provider is up to speed on local laws regarding such things as land ownership, operating authority, and labor practices (including regulations governing hiring, training, and retention) as well as customs regulations.
Another consideration, he says, is the provider's physical assets, like its trucks and warehouses. Gonzalez urges shippers to find out what the 3PL currently has as well as its plans for investment. A key consideration with warehouses, he says, is the facilities' proximity to industrial zones. "If your manufacturing and trade operations are located in these zones, so should your 3PL partner's," he says.
Finally, he says, evaluate the potential partner's IT capabilities. Shippers should seek assurances that the 3PL's systems can be integrated with their own, and that the service provider is able to provide visibility to logistics events and performance metrics.
Knowledge is power
All this might sound daunting, but experts say the challenges should not dissuade companies from setting up shop in the Middle East and Africa. Wade Thompson, chief commercial officer for Damco in Dubai and an 11-year veteran of the region, disputes the idea that doing business in the MENA market is difficult.
"It is a very common myth that the Middle East is difficult to deal with," he says. "I think with knowledge, it is an easy place to do business. Once you know the process, it is very smooth and efficient to manage."
The New York-based industrial artificial intelligence (AI) provider Augury has raised $75 million for its process optimization tools for manufacturers, in a deal that values the company at more than $1 billion, the firm said today.
According to Augury, its goal is deliver a new generation of AI solutions that provide the accuracy and reliability manufacturers need to make AI a trusted partner in every phase of the manufacturing process.
The “series F” venture capital round was led by Lightrock, with participation from several of Augury’s existing investors; Insight Partners, Eclipse, and Qumra Capital as well as Schneider Electric Ventures and Qualcomm Ventures. In addition to securing the new funding, Augury also said it has added Elan Greenberg as Chief Operating Officer.
“Augury is at the forefront of digitalizing equipment maintenance with AI-driven solutions that enhance cost efficiency, sustainability performance, and energy savings,” Ashish (Ash) Puri, Partner at Lightrock, said in a release. “Their predictive maintenance technology, boasting 99.9% failure detection accuracy and a 5-20x ROI when deployed at scale, significantly reduces downtime and energy consumption for its blue-chip clients globally, offering a compelling value proposition.”
The money supports the firm’s approach of "Hybrid Autonomous Mobile Robotics (Hybrid AMRs)," which integrate the intelligence of "Autonomous Mobile Robots (AMRs)" with the precision and structure of "Automated Guided Vehicles (AGVs)."
According to Anscer, it supports the acceleration to Industry 4.0 by ensuring that its autonomous solutions seamlessly integrate with customers’ existing infrastructures to help transform material handling and warehouse automation.
Leading the new U.S. office will be Mark Messina, who was named this week as Anscer’s Managing Director & CEO, Americas. He has been tasked with leading the firm’s expansion by bringing its automation solutions to industries such as manufacturing, logistics, retail, food & beverage, and third-party logistics (3PL).
Supply chains continue to deal with a growing volume of returns following the holiday peak season, and 2024 was no exception. Recent survey data from product information management technology company Akeneo showed that 65% of shoppers made holiday returns this year, with most reporting that their experience played a large role in their reason for doing so.
The survey—which included information from more than 1,000 U.S. consumers gathered in January—provides insight into the main reasons consumers return products, generational differences in return and online shopping behaviors, and the steadily growing influence that sustainability has on consumers.
Among the results, 62% of consumers said that having more accurate product information upfront would reduce their likelihood of making a return, and 59% said they had made a return specifically because the online product description was misleading or inaccurate.
And when it comes to making those returns, 65% of respondents said they would prefer to return in-store, if possible, followed by 22% who said they prefer to ship products back.
“This indicates that consumers are gravitating toward the most sustainable option by reducing additional shipping,” the survey authors said in a statement announcing the findings, adding that 68% of respondents said they are aware of the environmental impact of returns, and 39% said the environmental impact factors into their decision to make a return or exchange.
The authors also said that investing in the product experience and providing reliable product data can help brands reduce returns, increase loyalty, and provide the best customer experience possible alongside profitability.
When asked what products they return the most, 60% of respondents said clothing items. Sizing issues were the number one reason for those returns (58%) followed by conflicting or lack of customer reviews (35%). In addition, 34% cited misleading product images and 29% pointed to inaccurate product information online as reasons for returning items.
More than 60% of respondents said that having more reliable information would reduce the likelihood of making a return.
“Whether customers are shopping directly from a brand website or on the hundreds of e-commerce marketplaces available today [such as Amazon, Walmart, etc.] the product experience must remain consistent, complete and accurate to instill brand trust and loyalty,” the authors said.
When you get the chance to automate your distribution center, take it.
That's exactly what leaders at interior design house
Thibaut Design did when they relocated operations from two New Jersey distribution centers (DCs) into a single facility in Charlotte, North Carolina, in 2019. Moving to an "empty shell of a building," as Thibaut's Michael Fechter describes it, was the perfect time to switch from a manual picking system to an automated one—in this case, one that would be driven by voice-directed technology.
"We were 100% paper-based picking in New Jersey," Fechter, the company's vice president of distribution and technology, explained in a
case study published by Voxware last year. "We knew there was a need for automation, and when we moved to Charlotte, we wanted to implement that technology."
Fechter cites Voxware's promise of simple and easy integration, configuration, use, and training as some of the key reasons Thibaut's leaders chose the system. Since implementing the voice technology, the company has streamlined its fulfillment process and can onboard and cross-train warehouse employees in a fraction of the time it used to take back in New Jersey.
And the results speak for themselves.
"We've seen incredible gains [from a] productivity standpoint," Fechter reports. "A 50% increase from pre-implementation to today."
THE NEED FOR SPEED
Thibaut was founded in 1886 and is the oldest operating wallpaper company in the United States, according to Fechter. The company works with a global network of designers, shipping samples of wallpaper and fabrics around the world.
For the design house's warehouse associates, picking, packing, and shipping thousands of samples every day was a cumbersome, labor-intensive process—and one that was prone to inaccuracy. With its paper-based picking system, mispicks were common—Fechter cites a 2% to 5% mispick rate—which necessitated stationing an extra associate at each pack station to check that orders were accurate before they left the facility.
All that has changed since implementing Voxware's Voice Management Suite (VMS) at the Charlotte DC. The system automates the workflow and guides associates through the picking process via a headset, using voice commands. The hands-free, eyes-free solution allows workers to focus on locating and selecting the right item, with no paper-based lists to check or written instructions to follow.
Thibaut also uses the tech provider's analytics tool, VoxPilot, to monitor work progress, check orders, and keep track of incoming work—managers can see what orders are open, what's in process, and what's completed for the day, for example. And it uses VoxTempo, the system's natural language voice recognition (NLVR) solution, to streamline training. The intuitive app whittles training time down to minutes and gets associates up and working fast—and Thibaut hitting minimum productivity targets within hours, according to Fechter.
EXPECTED RESULTS REALIZED
Key benefits of the project include a reduction in mispicks—which have dropped to zero—and the elimination of those extra quality-control measures Thibaut needed in the New Jersey DCs.
"We've gotten to the point where we don't even measure mispicks today—because there are none," Fechter said in the case study. "Having an extra person at a pack station to [check] every order before we pack [it]—that's been eliminated. Not only is the pick right the first time, but [the order] also gets packed and shipped faster than ever before."
The system has increased inventory accuracy as well. According to Fechter, it's now "well over 99.9%."
IT projects can be daunting, especially when the project involves upgrading a warehouse management system (WMS) to support an expansive network of warehousing and logistics facilities. Global third-party logistics service provider (3PL) CJ Logistics experienced this first-hand recently, embarking on a WMS selection process that would both upgrade performance and enhance security for its U.S. business network.
The company was operating on three different platforms across more than 35 warehouse facilities and wanted to pare that down to help standardize operations, optimize costs, and make it easier to scale the business, according to CIO Sean Moore.
Moore and his team started the WMS selection process in late 2023, working with supply chain consulting firm Alpine Supply Chain Solutions to identify challenges, needs, and goals, and then to select and implement the new WMS. Roughly a year later, the 3PL was up and running on a system from Körber Supply Chain—and planning for growth.
SECURING A NEW SOLUTION
Leaders from both companies explain that a robust WMS is crucial for a 3PL's success, as it acts as a centralized platform that allows seamless coordination of activities such as inventory management, order fulfillment, and transportation planning. The right solution allows the company to optimize warehouse operations by automating tasks, managing inventory levels, and ensuring efficient space utilization while helping to boost order processing volumes, reduce errors, and cut operational costs.
CJ Logistics had another key criterion: ensuring data security for its wide and varied array of clients, many of whom rely on the 3PL to fill e-commerce orders for consumers. Those clients wanted assurance that consumers' personally identifying information—including names, addresses, and phone numbers—was protected against cybersecurity breeches when flowing through the 3PL's system. For CJ Logistics, that meant finding a WMS provider whose software was certified to the appropriate security standards.
"That's becoming [an assurance] that our customers want to see," Moore explains, adding that many customers wanted to know that CJ Logistics' systems were SOC 2 compliant, meaning they had met a standard developed by the American Institute of CPAs for protecting sensitive customer data from unauthorized access, security incidents, and other vulnerabilities. "Everybody wants that level of security. So you want to make sure the system is secure … and not susceptible to ransomware.
"It was a critical requirement for us."
That security requirement was a key consideration during all phases of the WMS selection process, according to Michael Wohlwend, managing principal at Alpine Supply Chain Solutions.
"It was in the RFP [request for proposal], then in demo, [and] then once we got to the vendor of choice, we had a deep-dive discovery call to understand what [security] they have in place and their plan moving forward," he explains.
Ultimately, CJ Logistics implemented Körber's Warehouse Advantage, a cloud-based system designed for multiclient operations that supports all of the 3PL's needs, including its security requirements.
GOING LIVE
When it came time to implement the software, Moore and his team chose to start with a brand-new cold chain facility that the 3PL was building in Gainesville, Georgia. The 270,000-square-foot facility opened this past November and immediately went live running on the Körber WMS.
Moore and Wohlwend explain that both the nature of the cold chain business and the greenfield construction made the facility the perfect place to launch the new software: CJ Logistics would be adding customers at a staggered rate, expanding its cold storage presence in the Southeast and capitalizing on the location's proximity to major highways and railways. The facility is also adjacent to the future Northeast Georgia Inland Port, which will provide a direct link to the Port of Savannah.
"We signed a 15-year lease for the building," Moore says. "When you sign a long-term lease … you want your future-state software in place. That was one of the key [reasons] we started there.
"Also, this facility was going to bring on one customer after another at a metered rate. So [there was] some risk reduction as well."
Wohlwend adds: "The facility plus risk reduction plus the new business [element]—all made it a good starting point."
The early benefits of the WMS include ease of use and easy onboarding of clients, according to Moore, who says the plan is to convert additional CJ Logistics facilities to the new system in 2025.
"The software is very easy to use … our employees are saying they really like the user interface and that you can find information very easily," Moore says, touting the partnership with Alpine and Körber as key to making the project a success. "We are on deck to add at least four facilities at a minimum [this year]."