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Logistics means having the right product, at the right time, at the right place and at the right cost.

Dubai's Al Futtaim Retail Division is braced to open the biggest distribution centre in the emirate. Lynne Nolan discovers its plans and why retailers should invest in inventory management.

It is "criminal" and "pathetic" when FMCG companies neglect inventory management, the most costly element on balance sheets, according to Sebastian Thomas, supply chain manager of Dubai-based Al Futtaim Retail Division.

"Ageing inventory is a menace, and will have a lot of financial implications.

If you keep a product for one year, there is no margin in that so it is very important that you closely monitor the ageing inventory and how many months of stock you have. Anything beyond four years is going to kill you.

"Stock will generate revenue when it reaches supermarkets, but if it's sitting in the warehouse then it's adding cost. Inventory management is a gold mine worth exploring, as it will pay by itself. A lean supply chain aims to eliminate waste and reduce the cost in handling.

"Without warehousing, proper replenishment is impossible, which reflects the products' availability at retail stores," he adds.

The company is currently in the final stage of negotiations and working with Al Futtaim Logistics to build the city's biggest distribution centre, Thomas reveals, at Dubai Logistics City (DLC). "It will support in-house business and it is also for third parties. Al Futtaim Retail will occupy a major portion of that facility.

"It could be ready within 16 months, and firstly we would move over our IKEA operation, our biggest volume business." Thomas reveals the brand is set for expansion into other countries, including Qatar and Egypt, which will increase its volume.

The facility would be "one of the best and most modern facilities in this part of the world, with complete solutions for warehousing and distribution," and it will provide value-added services, such as labelling, bar coding and total solutions for traders.

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