Standing Tall: How Dubai's Logistics Industry Got Through The COVID-19 Crisis
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With Dubai having been marked as the region’s gateway to the Arab, Asian, and African markets, its transportation and logistics industry has been known to continually invest in the development of its infrastructure and technology. However, with the outbreak of the COVID-19 pandemic, several companies have faced challenges in this sector, which include supply chain capacity constraints, governmental restrictions, and more. But what’s been interesting to see is how both corporate players and small businesses in this domain have found ways to cope with the current environment- while also tapping into the opportunities that presented themselves in this tumultuous period.
Like every other player in the logistics industry, DHL Express MENA had to navigate obvious challenges brought on by the disruption of global supply chains, constrained cargo capacity, broken links and delays, as well as ensuring seamless and timely delivery since airports and closed borders became the biggest hurdles. But CEO Nour Suliman says that despite all of these changes, the company was able to adapt quickly to meet worldwide demand and resume business operation in the midst of a pandemic. Suliman boasts that as a global company, epidemic and pandemic risk scenarios are an integral part of a company such as DHL Express MENA, and as such, the company had robust contingency and business continuity plans.
“We repurposed our fleet capacities and reengineered our operations to accommodate the shifting trade and consumers’ patterns, and the spike of e-commerce demand,” Suliman explains. “We relied heavily on our own fleet of more than 250 freighter aircraft to make up for the loss in commercial belly space by increasing flight frequencies and rotations, while shifting some non-time-sensitive shipments to ocean or rail.” The situation also pointed out areas where the company needed to focus on better- as an example, Suliman notes how the timely provision of critical medical products could be disrupted as a result of lockdowns and air travel bans, which is certainly not acceptable for the times we are in today. “What became very clear was how disturbances to supply chains can cause major problems to the supply of critical products, and how there is still work to be done to improve the medical-products supply chain, especially now that vaccines are currently in development and will soon hit the market,” Suliman notes. As such, the logistics entity doubled down on the important role it needed to play in terms of ensuring that time-sensitive shipments reach destinations on time. “We are continuously working on better preparing for emergency operations within our industry,” he adds.
Nour Suliman, CEO, DHL Express MENA. Source: DHL Express MENA
Another player in this domain that experienced the disruptive influence of the COVID-19 pandemic was global cargo airline Emirates SkyCargo. As part of its normal operations, the company transports cargo on dedicated freighter aircraft as well as in the bellyhold of passenger flights, with the latter being an integral part of the company’s functions. “Prior to COVID-19, around 70% of the total freight we transported were carried on passenger aircraft,” says Nabil Sultan, Divisional Senior Vice President of Emirates SkyCargo. “When COVID-19 forced the complete suspension of passenger flight operations in late March, this entire capacity suddenly was no longer available to us, and we were left only with operations on our 11 Boeing 777 freighter aircraft.” At that point of time, there was still a global demand for transportation of cargo, as it encompassed urgently required goods such as PPEs, medical equipment such as ventilators, pharmaceuticals and food items. And in order to fulfill its social responsibility to transport such urgent commodities, Sultan reveals that the company essentially reinvented its business model by both streamlining its operations in Dubai, while also making additional air capacity available to customers for transport of essential goods through Dubai to across the world.
Such agile behavior was seen in players operating on the ground as well. Ramez Hamdan, Managing Director – Industrial Equipment (FAMCO, HINO, Toyota Material Handling), Al-Futtaim Automotive, which is the exclusive distributor of HINO trucks in the UAE, notes how the company’s swift efforts in terms of ensuring customer service continuity and delivery of the same standards of aftersales allowed it to navigate the crisis effectively. The company had to redeploy associates, “putting more people on our mobile service vans to ensure our customers receive our support on time,” notes Hamdan. Despite movement restrictions, the company was able to deliver parts to customers twice a day, thereby ensuring critical logistics functions were carried out without any delay- this was especially crucial as the majority of its customers fall into high-demand critical sectors such as FMCG, logistics, e-commerce, and food and water distribution industries. In fact, according to Hamdan, during the lockdown period, “we had the highest sales for HINO trucks in a single month in the UAE.”
Entrepreneurs and startups operating in this space have also keenly felt the impact of the COVID-19 crisis on their operations. “There were many problems that were external to our organization, like the functioning of our supplier and vendor base, who were scrambling to put in remote work policy and infrastructure for their business continuity,” recalls Atif Rafiq, CEO and founder of Qafila, a Dubai-based startup digitizing freight forwarding services. But as for Qafila itself, being a digital-first entity gave it an edge over others in this space. “We didn’t have any lag, as we moved to an all-online operations and put in a work-from-home policy,” he says. “Also, being bootstrapped helped us as, we didn’t have any extra ‘fat’ to shed away with to survive the disruption.”
Nabil Sultan, Divisional Senior Vice President of Emirates SkyCargo. Source: Emirates SkyCargo
At Qafila, Rafiq and his team held true to the mantra that cash is king, and therefore made cash flow their top priority. Besides making use of government stimulus initiatives, the startup also negotiated existing contracts with vendors and suppliers for deferred plans or lower price points, limited credit exposure to new customers, and increased its focus on the recovery of funds. The startup also took the opportunity to focus more strongly on profitable sectors amid the crisis, like food production, hygiene, and relocation to help sustain itself. The Qafila team also doubled down on building its digital capacities, which include new product and partner integrations, as well as a redesign of its user interface and user experience.
Stories like that of Qafila are characteristic of how small businesses in this industry made sure they adapted themselves quickly to the environment they found themselves in here in Dubai. Natalia Sycheva, Senior Manager, Special Projects and Entrepreneurship, at Dubai Chamber of Commerce and Industry, notes that following the COVID-19 outbreak and the subsequent lockdowns, SMEs with a strong digital presence were the ones that thrived in the Emirate, as opposed to those that were reliant on brick-and-mortar. “SMEs in Dubai were extremely fortunate, as the government acted swiftly and efficiently in rolling out several stimulus packages and relief measures, which have reduced the cost of doing business,” Sycheva adds. “Free zones like DAFZA and JAFZA also introduced additional incentives to help logistics businesses such as the decision to waive fines and fees, delay rent payments, and facilitate the efficient movement of goods.”
Sycheva also points out that while other economies experienced a halt in trade activity, the Emirate remained open for business and capitalized on opportunity to handle exports and re-exports from neighboring transit hubs, strengthening its competitive position as a global trade hub. Suliman agrees with this notion, noting that local access to COVID-19 tests was one of the highest in the world, as well as the availability of PPEs for nationals and residents- this, he says, reflects Dubai’s resilient logistics capabilities. Al Futtaim’s Hamdan also commends the UAE’s response to the disrupted supply chain, saying, “The government’s swift actions and foresight and its investments in its infrastructure and facilities made over a decade from both the government and private sector all resulted in limiting the impact of COVID-19. We are seeing the benefits of these investments, and the government and private sector’s collaborative efforts to boost the economy.”
Ramez Hamdan, Managing Director – Industrial Equipment (FAMCO, HINO, Toyota Material Handling), Al-Futtaim Automotive. Source: Al-Futtaim Commercial Vehicles
DHL Express MENA’s Suliman also points out that the pandemic has been a catalyst to the exponential growth of e-commerce, most particularly to global shopping habits (coupled with more people now working from home) and its vast opportunities that brands can capitalize on. And in order to ensure DHL Express MENA’s support for its clients in this domain, the company has had to rely more on its own air fleet to support operations. “We added two Boeing 767-300Fs to our MENA aviation fleet and boosted load capacity by over 25%,” says Suliman. “We are now analyzing reliance and spend on partner airlines, and looking to continue to maximize usage of our own fleet.” DHL Express MENA is also aligning its investments with rising trends, with Suliman pointing out how the company has invested in digitization for real-time visibility, increased flight frequencies, added courier and customer service capacity, and encouraged innovations in last-mile delivery methods.
At Emirates SkyCargo, restoring air cargo connectivity to markets around the world was the first order of business to ensure the continuous transport of essential commodities required in response to the outbreak. For this purpose, the company started operating its Boeing 777-300ER passenger aircraft as cargo-only aircraft. “This had never been done before, and our team had to work within a very short time to plan our new route network with our partners across the world, and also work with relevant authorities to get the required permissions to operate the flight,” Sultan remembers. The deployment of the Boeing 777-300ERs thus allowed Emirates SkyCargo to increase its destination network from 35 (served by 11 of its Boeing 777 freighters) at the end of March, to around 50 by April. But that wasn’t the end- in the next two months, the company increased its network to more than 75 countries, and it is currently flying to more than 130 destinations.
Emirates SkyCargo also came up with other solutions to increase air cargo capacity, such as loading cargo on the seats of passenger aircraft and in the overhead bins, while ensuring that such processes still followed all safety guidelines. For instance, in June last year, the company went about removing seats in the economy class from 10 Boeing 777-300ER aircrafts to convert them to what they called as “mini-freighters.” As for the road ahead, the company is anticipating the need in terms of the transportation and distribution of COVID-19 vaccines around the world, and it is therefore working on re-opening its terminal at Dubai World Central as a dedicated airside hub for this purpose.
Natalia Sycheva, Senior Manager, Special Projects and Entrepreneurship, at Dubai Chamber of Commerce and Industry
Source: Dubai Chamber
Such initiatives are pointing toward the recovery happening in the logistics sector. At Al Futtaim’s Commercial Vehicle Division, Hamdan says that the market has remained stable even as the company switched its strategy to focus on high-demand vital sectors. “We believe the market is recovering on the back of the concrete steps taken by the government to boost economic activities and the stimulus measures announced,” he explains. Going forward, Sycheva is optimistic that Dubai will continue to attract companies from around the world and surrounding markets in particular that are looking to leverage the Emirate’s logistic infrastructure to restart their business and expand their global footprint. As such, she believes there are a lot of opportunities up for the taking- and entrepreneurs can definitely take advantage of it. “Entrepreneurs in the logistics sector should [invest] in technology that can drive their business, ensure that their offerings meet a market need, and stay informed about the latest government-issued regulations and available support and resources,” she concludes.
The Executive Summary: Advice For Entrepreneurs In The Logistics Sector
Nour Suliman, CEO, DHL Express MENA
“Firstly, hire the right talent. People are the heart of any business, and if we have learned anything from the pandemic it is that our biggest and our most worthy asset is our people. They are the core of our excellence and the reason behind our success. Secondly, focus on quality. The customers of today are quality focused, it is a fast-moving world with an abundance of options the only way to stay in business is to deliver exceptional quality that will keep you always in demand. And thirdly, choose the right partner. Our partners are part of our existence, choose the partner that will always deliver on your promise to your customers; in fact, choose the one that will over deliver on your promise to your customers. Partners are just as important to your business as your own people.”
Ramez Hamdan, Managing Director, Al-Futtaim Commercial Vehicles
“Companies should consider foregoing old practices, like relying on multiple suppliers for goods and resources. Instead, the focus should be on a few, even favoring local companies to help boost the local economy. Also, there is an immediate need for greater automation, such as GPS tracking and tracing, paperless or online transactions, software systems for warehouse and transportation management, as well as robotics and drones for smoother operations.”
Atif Rafiq, CEO and founder, Qafila. Source: Qafila
Atif Rafiq, CEO and founder, Qafila
“My top three advice would be to focus on digitalization, cash flow, and finally, work on business continuity planning.”
Nabil Sultan, Divisional Senior Vice President of Emirates SkyCargo
“Firstly, always stay on your feet. Do not become complacent just because you have built a good product or solution. If COVID-19 has taught us anything, it is that even the best product offering can be challenged overnight. The only option is to continuously innovate and stay ahead of the game. Secondly, harness the latest technological innovations- use of AI and other smart technology promises to revolutionize the logistics industry. Finally, do not despair in the face of setbacks. Tough times do not last forever but tough people do.”