Materials handling continues to be big business in the GCC market, where the ongoing growth of the logistics sector is creating parallel demand for intralogistics, warehousing, and the materials handling equipment required to run these operations.
The combined logistics market across the GCC region is currently estimated to be worth around $47bn, with Saudi Arabia accounting for around $19bn, or a 43% share.
Saudi Arabia is also one of the fastest growing countries in the world for logistics and warehousing, with an average annual growth rate of around 6%, and the country is increasingly being positioned as the primary entry point for goods entering the GCC.
This top-line growth in the industry is likewise translating into growth in demand for materials handling equipment — the market for which is forecast to grow by over 4% annually to an estimated $4.8bn to $5.0bn by 2020, according to Frost & Sullivan.
The largest markets in the region for this segment are Saudi Arabia, with a 46% share, and the UAE, with a 35% share, and both countries are expected to continue to lead market expansion going forward.
The sector is being driven by a high dependence of many of these countries on imports of goods and services, as well as the ongoing efforts by regional governments to develop their logistics infrastructure, including ports, free zones and export processing.
At the upcoming Materials Handling Middle East 2017 exhibition in Dubai, two themes focused on by the organisers and exhibitors will be automation and the concept of Industry 4.0 — a term for the growing data exchange between the cloud and physical systems, or cyber-physical interaction.
These developments represent both good and bad news for the workhorse equipment of the logistics and materials handling industry. Indoor forklifts and both powered and manual lifts, for example, could all find themselves increasingly phased out in a range of intralogistics and warehousing style operations. Wherever goods are stored in distinct parcels or pallets, warehousing solutions can be both automated and robotised.
This is precisely the business of the likes of Japan’s Daifuku, and Switzerland’s Swisslog and Kardex, which will all be attending the show. Together, they represent some of the world’s most advanced material handlings systems and integrated logistics solutions.
As Frederic Zielinski, GM at Swisslog Middle East, notes: “Industry 4.0 has the potential to reshuffle the cards in how businesses operate. With networked intelligence and self-organising production processes, the ‘factory of the future’ will see a quantum leap in productivity, flexibility and efficiency.
“The focus in the future will no longer be on the manufacture of purely mass-produced goods, but on customised product manufactured to customers’ requirements. This evolutionary step can only succeed, however, if we finally break down the barriers between the digital and real worlds.”
At the same time, not only are the vast majority of intralogistics, warehousing and supply chain operations in the Gulf years if not decades away from full automation, but these systems will also favour operations where the type and dimensions of goods are highly consistent, and therefore represent a poor match-up for a host of industries where operational flexibility is paramount.
This situation ensures that the demand for conventional material handling products, such as forklifts, should not only continue to grow in the region in line with the growth in the logistics segment, but maintain their primacy in the segment long into the future.
Mathew Abraham, MD at Hala Equipment Trading, notes: “The business in the MHE segment has actually grown within UAE in the first half of the year. This growth was driven by big forklift manufacturers — including Toyota, Mitsubishi, Caterpillar, Doosan and Hyundai — moving part of their manufacturing to China. This has enabled them to lower the price of their products.”
At the same times, he notes, a lot of smaller or less organised manufacturers and regional dealers are stuck with dead stock and are being forced to dump forklifts on the market at incredibly low prices.
Abraham continues: “The buyer is getting more sophisticated and knows what he wants. Today companies are buying a complete solution and only dealers with a long history are staying pertinent. We have been constantly evolving to meet the new requirements of our customers and have to prove our worth with every order.”
Lower oil prices and a slowdown in some segment have made customers very cautious when making a purchase, he explains, and he now sees that every product is being judged based on its total cost of operation.
Herve Quathromme, GM for Cat Lift Trucks Middle East, comments: “We have seen that the oil price fluctuation has had an impact on the materials handling industry. However, the preparations around the Expo 2020 are boosting several industrial areas. This might compensate for the decrease of the demand in the oil industry.
“The Gulf countries show growth in all products, and comparing the first seven months of 2016 and 2017 we see a positive trend in those markets. Specifically, internal combustion counterbalance products are exhibiting a strong growth trend. Electric counterbalance trucks are enjoying a significant increase — though not yet at the numbers of internal combustion models — and there is shy growth in warehouse equipment market. Overall, the growth across the segment is a good sign, and gives us confidence in the markets of the Gulf countries.”
Amer Azmi Mohammad, divisional sales manager for Galadari Trucks & Heavy Equipment, which distributes Komatsu forklifts, concurs: “Projects in the Gulf including the extension of Al Maktoum airport, Expo 2020, Dubai Creek harbour as well as ports and other projects have dramatically increased the demand for materials handling.
“There is always an ongoing demand for the supply of materials handling equipment for logistics and manufacturing facilities.”
He adds that the development of factories and the extension of existing industrial facilities are also contributing to the demand for materials handling products to meet the material demands of such projects.
Shrugging off the oil prices, Mohammad continues: “We are most interested in the logistics segment, which is expected to grow due to a surge in import and export volumes and an upward trend of local manufacturing. In the UAE, the sector also benefits from a government that has played an active role in developing world-class infrastructure.
“The UAE has poured billions into its logistic sector, investing in economic free zones, airports, and ports. Dubai is developing Dubai World Central, while Abu Dhabi is developing the Midfield Terminal Complex and continues to invest in the Khalifa Port and KIZAD industrial zone.”
Eyes on the prize
Cat Lift Trucks is targeting all of these segments, as Quathromme notes: “We provide a product range that covers 95% of the total materials handling equipment demands in the market. For each application, we have a specific product and options available to fit customers’ demands.
“We are very strong in applications that need strong, durable and reliable trucks, and our starting point is good in the Gulf. Our standard lift trucks match the heavy duty applications of this region, with options for severe and harsh applications that deal with the extreme temperatures outside or in cold storage warehouses — not to forget highly dusty applications. We also listen carefully to the market and our dealers when designing the products. All of this is part of the heritage of Cat Lift Trucks products and their perception in the market.”
According to Quathromme, the Cat product in the Middle East is also designed to fully meet the market’s demands in terms of reliability and total cost of ownership.
He adds: “When we look at the market trends, we see some similarities with the trends in Europe, where customers look at the complete package. They expect a great product from us and a good service from the dealer. In the Middle East, we have a dealer network in the Gulf with branches and workshops near all the critical areas.”
Hala is meanwhile targeting warehousing, logistics and various industries with its Heli electric and diesel forklifts, and construction and others segments with Heli wheel loaders.
Hala’s three-tonne diesel forklifts are performing the best, but Abraham is also seeing a distinctive market trend towards cleaner running machines, and seeing growing enquiries for its battery operated forklifts and warehousing equipment.
Quathromme concurs: “A shift is occurring and more and more customers are interested in our electric trucks and warehouse equipment. Middle East markets are increasingly demanding electric trucks that fulfil internal combustion applications.”
Galadari’s Mohammad, says that its forklift trucks are the best performing of its products and that the market continues to grow — a trend that is encouraging the business to invest more in the segment and extend its product line by bringing in a greater variety of warehouse products and technologies, and especially larger lift trucks in the near future in order to meet its customer’s varied demands and applications.
He highlights: “The fusion of advanced engines and Komatsu’s unique hydraulic system challenge the conventional concept of the forklift, and enables the latest lift trucks to improve performance while achieving a significant reduction in the total operation costs. Our machines comply with EPA Tier 3/EU Stage IIIA emissions standards and enable a significant reduction in annual CO2 emissions.”
From a broader perspective, Quathromme notes that in order for a manufacturer such as Caterpillar to nurture its competitive strength it must ensure that it reacts to structural market trends, and at present, the product trends are being steered by four main drivers. The first is the tightening of diesel exhaust gas emission requirements, which requires next generation engines and exhaust gas after-treatment systems. This might not be strong as in Europe but, Quathromme notes, as Caterpillar is a company that cares about sustainability, this is a point of concern globally.
Secondly, there is the transition from diesel or LPG internal combustion products to electric products. Quathromme highlights that this means more electric products in general, but also more capable of moving outdoor into the rougher terrains and into applications previously thought unsuitable for electric products.
The third is the increase in e-commerce, which is changing the logistic landscape, and leading to an increased demand for warehouse-based services and an increase in the use of specialised products. Finally, there is automation, including the development of automated guided vehicles, and digitalisation.
With regards to automation, Abraham notes that Heli has been experimenting with unmanned equipment but that it is still in the research and development stage for such products. However, Hala has firmed up plans introducing digitally integrated machinery as and when appropriate.
In Caterpillar’s case, the company offers automated guided vehicles solutions with various degrees of robotisation levels, from fully pre-programmed and teach-in systems to automatic/manual hybrids and fully automatic machines — thereby covering a wide range of applications.
Quathromme adds that trends including advanced telematics, 3D warehouse mapping and the integration of storage systems with cloud-based functionality or eco-friendly market demands are starting to become noticeable. He adds: “We are currently working on connecting our machines to the internet, opening the door to the digital arena, enabling faster remote support, new features and new business concepts.”
From Galadari’s side, Mohammad comments: “Customers are demanding more intelligent systems that require less maintenance making them more cost effective and a better overall investment.
“The material handling industry is answering that demand with advancements on multiple fronts: through equipment, software and integrated solutions. Our offering relates to these trends by delivering the latest technologies as and when they are required to satisfy our customers.”
Quathromme similarly cautions: “For the foreseeable future we also see a need for manually operated machines. We strongly believe that a comfortable operator is a productive operator and therefore having the very ergonomic products on the market is key to lowering operation cost.”
Mohammad adds that customers want solutions that not only deliver a return on investment, but they want it faster than ever before. The industry, in turn, has to respond with new equipment and technologies that allow customers to see how their investments are impacting their overall operation.
Caterpillar’s Quathromme adds: “In the past three years, we saw that low price products were catching the interest of some customers. They have realised now that purchasing a low price product has a big impact on the cost of ownership. Customers nowadays, are taking in consideration, not only the purchase price, but also the product support capacity of the dealer, and the total cost of ownership for the next three to five years.”
Hala’s Abraham similarly concludes: “Companies are looking for valuable products that will be productive for a longer period. Our principal, Heli, has been slowly developing their products, and Hala is building up its complimentary services to ensure that the customer gets better value.
Caterpillar has also seen a change in the way customers purchase their trucks — with a growing trend towards renting or long-term leasing options instead of direct purchasing.
Quathromme details: “Rental solutions from six months to 60 months are a very good solution that can help to rationalise and control costs by means of a fixed and transparent monthly fee. Renting also gives customers a better flexibility as they can adapt the size of their fleet more according to their needs. This is proving very interesting for example in seasonal business that experience high peaks of activity or production.”
Overall, the mood in the segment is one of buoyancy and dynamism, with numerous trends driving opportunities for the OEMs and distributors willing and ready to react to the change.
Looking forward, Abraham adds: “The material handling equipment industry is here to stay and will grow year on year.”
