Into The Channel – Lesson From Emergence of Dubai As A Key Port of Trade

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Some time back there was a write up circulating in the media comparing the cost and time to move a container from China to the port of Mombasa on one part, and then from the port to the border town of Busia. The story compared the cost and showed that it costed more in both time and cost to move the container a mere 935 KM compared to almost 13,000KM from Shanghai to Mombasa.

The effect of that is obviously higher cost of production, delays in pushing products to the market and less than effective ROI. The volumes are obviously less than areas with more efficient systems. It is important to note containers have standard sizes, be it 20feet, 40feet, 45feet …etc.

This implies gains are only realized in a more efficient environment. Hence, a trader in Busia receives the same size of a container like any other trader who procures the same size. Let’s assume the trader in Busia has a manufacturing outfit and is competing with another manufacturer in a more efficient environment. Let’s also assume the capacity and all other structures are same standard. However, the trader in Busia will at the end of it all produce less than the competitor due to the said inefficiencies.

One of the ports that have emerged as a major transshipment hub is the Jebel Ali port in Dubai. It acts as a key part of the chain between east and west; between bulky single shipment v/s small multiple consignee on the same container. The key objective is to facilitate movement of goods from one point to the other – whether large or small.

The efficiencies noted above trickle down to businesses due to predictable time it takes to move an item. This works well across for everyone, from traders to manufacturers. We are in the era of outsourcing, component manufacturing among others. Gone are the days when all the manufacturing was in own backyard. It is with this understanding that Dubai has emerged as a key port to facilitate trade and movements within markets. How has the port done this?
According to Dubai Exports, the government body that strives to ensure the success of the exports sector in Dubai and the UAE, a number of factors have contributed to the success:

  1. The focal point – Jebel Ali port, one of the world’s largest commercial ports and among the top ten busiest. In addition, there are dedicated free zones and business clusters that are targeted specifically at export trading with more than 6,400 companies. These businesses are around the port, making it easier and faster to facilitate movement of their goods.
  2. The intermodal connectivity between sea and air transport, state-of-the-art warehousing facilities and a strong base of regional and international transportation and logistics organisations also add to Dubai’s role as a premier re-export destination. Soon, there will be a railway connection – Yes, there has been no railway connection during all those years of development.
  3. Dubai Logistics City, Dubai Cargo Village and Al Maktoum International Airport – set to be the largest air freight hub in the world – all deliver expert services and resources to worldwide exporters and re-exporters.
  4. A number of trade agreements, which ensure smooth flow of goods. These include agreements such as:
    a.The Gulf Cooperation Council (GCC)
    b.The Greater Arab Free Trade Agreement (18 Arab countries and four associate members from the Organisation of Islamic Countries)
    c.The GCC and Singapore Free Trade Agreement
    d.Bilateral Trade Agreements with countries within the region.
  5. Allowance of 100% repatriation of capital and profits, no foreign exchange controls and a stable economy with a dollar-pegged currency

These enablers, at a macro level, have stimulated business, facilitating movement of goods along the channel. The adherence to key indicators ensures efficiencies, which helps in proper inventory planning, manageable costs, warehousing among others. In other words, the indicators provide a clear time frame to execute a transaction, from the source to the end destination. A marketer can therefore work in peace knowing that you can promise your client a certain delivery within a given time. You will have clear service level agreements (SLAs) with your deliveries / supplies team as you understand there are almost no extraneous factors to hinder your movement within the channel.

Such factors as the numerous road blocks end up costing more to the business. Assume you have 6 check-points between Mombasa and Nairobi, and in every point you spend 15 minutes. At the end of the day you will spend one and half hours just on those stops. That makes a difference getting to your client, at say 5PM vs. 6.30PM when they have already closed for the day; enough time for a forklift to lift off the container and start the return journey. However, due to the stops, you have to wait until the following day when the forklift driver check in for the day. This delay has a cascading effect on subsequent activities be it warehousing, vehicle / motor cycle deliveries, or even input on manufacturing …etc.

There are numerous examples that we can provide, but most important is to develop ways to provide solutions and enhance delivery within your teams.

In conclusion

To ensure effective flow within the channel, marketers can enhance efficiencies by:

  1. Within the business
    1. Work closely with the logistics teams to ensure timely and realistic deliveries.
    2. Have clear SLAs with these teams.
    3. Develop clear lines of communication – from the office to the field team, the drivers, riders…etc. In most cases, the client is in contact with you, not the delivery/supplies team.
  2. At a Macro-Level
    1. Marketers should be lobbying with relevant agencies such as roads boards, customs teams at revenue authority …etc., with clear indications of how macro-factors are affecting your business.
    2. Marketers should develop relationship with other relevant stakeholders, e.g. logistics teams, institute of supplies management …etc., to have one voice on how issues within the channel are affecting business.
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