By Robeel Haq
Rebounding from its biggest meltdown in decades, the automotive industry has presented 3PLs with fresh opportunities in the Middle East, explains Al-Futtaim Logistics managing director Tom Nauwelaerts.
While numerous automotive manufacturers have suffered a well-publicised meltdown in volumes over the past couple of years, there are still lucrative opportunities for logistics providers that can respond to the industry’s fast-changing needs, according to a recent trade report by Transport Intelligence.
Indeed, despite the gloomy picture that was painted by the bankruptcy of certain vehicle manufacturers, a variety of positive developments have also surfaced in recent months, such as production increases at the existing facilities of Toyota, Nissan and Honda, together with the opening of new plants by Hyundai, Volkswagen and Daimler. In response to these green shoots of recovery, it’s essential that logistics providers choose the right markets and form partnerships with leading stars in the automotive industry, rather than choose those mortally wounded by the downturn, explains Thomas Cullen, chief analyst at Transport Intelligence.
“The financial crisis has accelerated a root-and-branch re-structuring, which has serious implications for the automotive logistics industry,” he states. “Although many providers are failing, there will be opportunities for those with global scale and the agility to respond to changing customer needs. In fact, many of the largest logistics service providers could do quite well in the long-term, but first they have to survive a market downturn unparalleled in its ferocity.”
Although demand for automotives has declined in the Middle East as a result of the global recession, the impact has been less severe in comparison to developed regions such as Europe and the United States. Recent studies have suggested that over 1.2 million new car sales are registered in the Middle East every year, while the associated logistics market is valued at upwards of AED2 billion. This has created a vibrant niche for Dubai-based warehousing and transportation specialist Al-Futtaim Logistics, especially since the various brands of its parent company, the Al-Futtaim Group, represent a 45% market share of the UAE automotive industry.
“The Al-Futtaim Group represents some of the biggest names in passenger cars and heavier commercial vehicles, such as Lexus, Toyota, Honda, Chrysler, Jeep, Dodge, Volvo and Hino, and we are responsible for all of their full logistics execution,” states Tom Nauwelaerts, managing director of Al-Futtaim Logistics. “With such a large market share, the demand for our automotive logistics services is second-to-second.”
Automotive customers can select a wide range of solutions from Al-Futtaim Logistics, such as ocean exports, multiple-tier deliver modes across the United Arab Emirates, and cross-border transportation services to the GCC and wider Middle East region, with customs clearance and documentation also included. “In essence, automotive logistics is about getting the right car, or part, to the requested delivery location within the specified period and in original condition. It’s without a doubt a highly specialised transportation sector,” continues Nauwelaerts. “The only players that will survive and thrive are those with correctly specified equipment, sound infrastructure, bespoke training, proven SOPs, benchmarked QA controls and hard local experience.”
The customer base of Al-Futtaim Logistics’ automotive division is not limited to sister companies within the Al-Futtaim Group either. It has secured a growing number of contracts from other automotive franchises in the region too, including Volkswagen, Audi and Porsche, even though certain players still run their supply chains in-house, often with mixed success. “There has been a constant shift towards outsourcing and that will continue in the future, which represents a growing and exciting market for logistics companies,” he continues. “We differentiate ourselves from others by placing quality and reliability as our cornerstones, and hence we enjoy unparalleled superiority and truly are the service provider of choice.”
To prove his point, Nauwelaerts notes that Al-Futtaim Logistics has achieved up to 99% in terms of on-time delivery KPIs, while from a quality control angle, it has a damage ratio of 0.05% for units handled. “Forget about standards within the GCC or wider Middle East region, this is far superior to international best practices too,” he boasts. “The expectations of our principals for service quality are continuously exceeded by our local and regional operations.”
This quest for world-class standards is perfectly highlighted by a state-of-the-art 45,000m2 Toyota Parts Distribution Centre in Dubai, which is operated by Al-Futtaim Motors and located on a 135,000m² plot of land in Dubai Investments Park, around 20km inland from Jebel Ali Port and opposite the new Dubai World Central development. Operated 24-hours-a-day, the temperature-controlled facility receives around eight to ten containers every day, mostly coming from Japan and Australia.
“This is the leading facility of its kind both in the Middle East and in the world,” claims Nauwelaerts. “It has allowed us to create previously unheard of just-in-time delivery service levels exceeding 99.9% on-time to all corners of the UAE, whilst providing a highly productive and employee-friendly environment.”
The success of the parts distribution centre has supported an aggressive strategy by Al-Futtaim Logistics to continue gaining its market share, with plans to bolster its capacity by 30% in 2011.
“We expect the wider automotive market to grow steadily in response to the economic recovery and above-average GDP growths in the MENA region. In response, we want to further expand into the region and leverage the anchor clients in our group, in order to offer cost-competitive solutions that are supported by improved IT platforms and fleet utilisation initiatives,” says Nauwelaerts. “The key challenge is to exceed the expectations of customers. Since the onset of the global economic crisis, the focus in all markets has intensified quite rightly onto the clients and in that regard every day we are faced with improving our service levels and quality aspects, and we love it!”