Material handling outlook

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Kamel El-Ghossaini, senior manager, supply chain solutions, SPAN Group.

Following a relentless period of growth, fuelled by the Middle East’s growth as a logistics hub, has the recession created a stumbling block for the material handling sector?

As with every other industry on the planet, the material handling sector has faced an increasingly tough outlook over the last year or so. And that fact has prompted some significant soul-searching amongst executives, especially in the Middle East region. Whereas Dubai, in particular, has been known for the ‘big is best’ strategy, players in the logistics sector have been looking at less overt ways of keeping hold of their customers and streamlining their operations in what is the toughest operating environment that anyone can remember.

No-one needs to be reminded that materials handling depends on the peaks and troughs of world trade; it is an industry that traditionally lags just behind economic cycles. Equipment provider Jungheinrich, which could be seen as a bellwether of the global industry, indicated that it did not expect to see a loss in 2009, although its most recent results pointed to the fact that the world market for material handling had dropped heavily in the last quarter of 2008, a trend that had continued - and worsened - in the first two months of 2009. The company stated that the value of incoming orders had dropped by a worrying 31%.

For Jungheinrich’s figures, read the collapse of world trade. But here in the Middle East, downward trading trends have not been nearly so pronounced. This may not be fantastic news, given that the material handling sector is, by definition, a global one, but the resilience of this part of the world should not be ignored.

Generally speaking, the need to ‘keep close to the customer’ is one of the phrases that is being wheeled out again and again. “The main challenge for the sector in this region is to fully understand their customers’ business environment, and the strengths and weaknesses of each customer bearing in mind the critical economic situation,” says Hermann Ehrhardt, founder and managing partner of Ehrhardt + Partner Solutions (EPS). “Having the newest material handling equipment is of course necessary, but you really need to ask yourself whether it is really bringing any benefits to the customer.”

This is a position with which David Dronfield, divisional manager UAE at Famco, entirely agrees. “Patience and understanding of customer situations is required,” Dronfield argues. “We need to work even more closely with our customers to ensure that the best possible solution is available and offered. Optimisation of fleet uptime is a priority for our customers, and all suppliers must ensure that the best possible servicing is offered to maximise the customers’ ROI.”

The Famco executive is also keen to remind regional players that cuts made during downturns have the ability to seriously affect a company’s ability to return to success swiftly during the inevitable upswing. “Pricing pressures are, to a certain degree, driving equipment selection, from what is required, to what is “affordable”. End users require effective systems to fulfil demands, and even though those demands are currently falling, they will return to higher levels as the region returns to growth. Selections and purchases made now based on economic constraints, may result in obsolete equipment during the growth years of the future,” Dronfield adds.

Another way to defeat the current crisis is by focusing on your available equipment and the extra service you can provide. “Companies with existing material handling equipment should invest in ensuring that their equipment is fully operational and in excellent condition,” says Kamel El-Ghossaini, senior manager – supply chain solutions, for SPAN Group. “Furthermore, local companies should shift their focus from the sales to provide better after-sales services.”

SPAN has certainly been walking the walk on this front; at the recent event held by software giant Infor in Dubai on 22nd April, company executives showed up in force to answer the many questions SPAN’s clients had about Infor’s supply chain solutions. In addition, Famco has also expanded its after-sales service department in a bid to maintain the importance of product quality in an environment where even minor errors can cause the loss of a huge portfolio of business.

Difficult times mean changing trends. And with companies currently focused on the bottom line above all else, some products are now more in demand than ever before. For EPS, consulting has become something of a watchword. “Customers do not feel well served by some material handling suppliers,” says Ehrhardt. “The phrase ‘they just filled my warehouse with steel instead of offering a matching solution for my business’ is something that we are hearing more and more frequently.”

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