Brent Melvin

WHAT IS THE SCOPE OF GALLEGA?

Gallega is the logistics arm of the Ghassan Aboud Group, which runs the Grandiose chain of supermarkets in the UAE and offers catering services out of facilities in KIZAD and the Jebel Ali Free Zone Authority. Gallega serves not only the internal Group business but also third-party logistics. When you look at automotive logistics, we handle all the automotive import, storage and re-export for the Group. We have a storage capacity of up to 14,000 cars, with the total size of the facility being about 275,000 square metres. And on that site, we also do maintenance operations as well as vehicle fit outs and accessorisation. If there is specific fit out to be done to the vehicle, in principle, it is just a matter of bringing it into the facility. We have spray booths, denting centres and maintenance facilities. So, it is a fully functional workshop that is designed around value-added services to the automotive sector.

IS TRANSPORT REFRIGERATION PART OF THE SCOPE OF WORK, SIMILAR TO WHAT GORICA OR SCHMITZ HANDLE?

We are not getting into the business of building up reefer trailers or commercial vehicles. I would rather leave that to the specialists. But if you were to look at the truck before the box was fitted on to it, we handle that. So, I have ready-built commercial vehicles that we provide logistics services for in to international and domestic markets. We would also sell built-up reefer vehicles to international markets, but again, we have body builders that we talk to, who offer that value to our customers.

WHERE DO YOU COME IN AS FAR AS THE COLD CHAIN IS CONCERNED? WITH GRANDIOSE NOW, YOU ARE LOOKING AT THE FOOD HYGIENE. SO, HOW DO YOU PLUG YOUR SERVICES INTO SOMETHING LIKE THAT?

If you look at our value proposition on the food side, our footprint today is UAE-based – KIZAD and Jebel Ali. So, we have a small cold store in Jebel Ali, which is around 250 pallet positions, and for mostly dry food, and then the rest are some small chambers to deal with frozen, ambient and chilled cargo. But this right now is very much about the internal business.

If you and I sit in a couple of months’ time, I will tell you about a facility outside of the free zone, which is based around our catering central kitchens, and then also a central distribution centre for the supermarket chain. By creating that environment, we are not trying to really penetrate the third-party chilled warehousing spaces – it is more of an internal requirement.

What I am more interested in is the distribution business, which has to do with, obviously, warehouse to last mile. Now, whether that is B2B or B2C, we are focused very much on the B2B presently. So, it is that particular market segment, where we can leverage customer opportunities, using vehicle tracking systems and route-optimisation software; and this is more about where we are focused in moving the business forward.

PERSONALLY SPEAKING, HOW ARE YOU LEVERAGING YOUR MANY YEARS OF EXPERIENCE IN COLD CHAIN TO ADDRESS POSSIBLE COLD CHAIN BREACHES?

At the time of creating our process and our roadmap, we take into account all the possibilities. So, when I talk about technology, for me, it is one of the overriding factors to ensure that cold chain integrity is maintained. I have very strong views about the quality and performance delivery of the cold chain.

A lot of our food production is done in Europe, and we have to maintain end-to-end food chain integrity from source to point of delivery here in the UAE. I am just leveraging what I know from the industry, including benchmarking current best practice and building it in as a basic philosophy of the business.

A FEW YEARS AGO, MEAT & LIVESTOCK AUSTRALIA, IN AN INTERVIEW THEY GAVE TO CLIMATE CONTROL MIDDLE EAST , EXPRESSED CONCERN ABOUT COLD CHAIN BREACHES OCCURRING AT THE PORT OF DELIVERY. DO YOU HAVE AN INTEGRATED APPROACH WHEREIN YOU SOURCE THE FOOD IN EUROPE AND MAKE SURE IT COMES ALL THE WAY ACROSS INTACT, AND BEYOND THE PORT OF DELIVERY, TO THE LAST MILE?

If you look at technology today, shipping lines monitor the reefer containers, so, naturally, their responsibility sits with ensuring that the cold chain is maintained whilst transporting the container in their custody. Once it arrives here at the port, a very common practice is that a reefer container will be handed over to a transporter who won’t have a genset on a trailer, so it could be without power for some hours and not have any cooling. The duration of the move from port to store and then how it is handled directly into a cold environment is absolutely vital, so that you don’t have any core temperature fluctuation. If that is maintained, it is acceptable.

Usually, cargo inside the containers will have some form of data logger to be reviewed by the receiving party to verify that the cold chain was maintained throughout the journey.

You will see that a lot of the meat suppliers from Australia fly their product, because they are really concerned about the cold chain, but naturally it is expensive to fly, so you can’t have massive volumes to feed this market continuously. So, I can understand their concerns, but like any supply chain, there are parties that play a role, and there are technologies that can be put into containers today to monitor the status. I am talking about the shipping lines offering this ability through GPS technology, to monitor the internal temperature data of a container whilst on a vessel. Again, there is very little one can do about it, when a vessel is in deep ocean, and you have no GPS signal to monitor the cargo. You know, we are relying on the shipping lines; all we can see is that when that container comes back into signal range, we will get a data dump, and then we would be able to determine how the quality of the end- to-end cold chain has fared. Once the cargo is in our control, after we have done the clearances and the port pickup; this is where we play our part to ensure the destination consistency of the cold chain, right to the point of distribution to the retail outlet, and that is done through technology, of course.

ONCE THE CONSIGNMENT IS THERMALLY ABUSED, THEN OF COURSE WHEN YOU RECEIVE IT AND THEN YOU TAKE CARE OF IT, IS THAT GOING TO MAKE MUCH OF A DIFFERENCE?

Once cargo is thermally abused, it requires a different handling procedure to determine if the cargo is damaged or wasted. There is not much we can do for the cargo as a logistics company.

The first step is to notify the parties of the temperature breach and, thereafter, to inspect the cargo and, in many cases, have the cargo tested for contamination. We can only support the customer as far as guidance from the cargo owner, the municipality or consignee. Based on the condition of the cargo, the next steps will take place, which if all is well, will be to continue with the logistics process, or alternatively having to dispose of the cargo.

WE ARE SEEING A TREND, WHERE QUITE A FEW CAR LEASING COMPANIES ARE COMING FORWARD AND OFFERING TRANSPORT REFRIGERATION SERVICES TO MILK PRODUCERS AND THE SUCH. THERE ARE THOSE THAT ARE QUESTIONING THE QUALITY OF THE SERVICES – ABOUT HOW COST CUTTING AND VALUE ENGINEERING ARE RAMPANT. THESE COULD AFFECT THE FLEET IN TERMS OF INSULATION AND GENERAL MAINTENANCE AND UPKEEP. HOW IS IT WITH GALLEGA – DO YOU LEASE VEHICLES? IF SO, WHAT DO YOU LOOK OUT FOR? We presently lease some smaller vehicles for distribution operations. We will always play the game of determining which is going to be the best, asset-based ownership model or leasing model. If you look at the benefits of leasing, it means that you can shorten your replacement lifecycle, so the beauty is that you can essentially have a new vehicle every 3-5 years, depending on which particular size of vehicle you are operating. The second thing is, if you are involved with the leasing company from an early point, you would say, “Tell me your brand, tell me your box, tell me what you want, and we will build it.” And then, we will commercially price it up over whatever lifecycle you opt to take it.

The difference between leasing fundamentally and owning your assets is actually based in the residual value of the resale of the assets. So, today, we are an asset operator for my automotive fleet, so I have various carriers and recovery vehicles, and we have opted to own those vehicles adopting a fairly aggressive depreciation cycle. We hold the residual, because we know that after my depreciation cycle I can probably exceed my residual value at point of sale, meaning that I am subsidising my next acquisition. It is a science all to itself. When you adopt a depreciation model, you have to be very disciplined to stick to your depreciating cycle end period. If you are selling a vehicle off after five years, sell it after five years, because if you don’t and you are holding a residual value, your residual value will be eroded. And when you look at it from a qualitative perspective, you don’t necessarily have an asset that is meeting the expectations or requirements of your customer. So, again, in order to overcome those kind of boundaries and parameters, you can reduce your cost of maintenance , you can reduce your cost of operators and other overheads by shifting it to a leasing model, where the leasing company would absorb all of that cost, and all you are doing is essentially paying a monthly fixed price. So, it fundamentally works same as a depreciation. It might be marginally more expensive, but no longer is there a maintenance issue, no longer is there a ownership issue, and no longer do you have issues around breakdowns, so you are taking the pain out of asset ownership and creating flexibility at a marginally higher cost, but it is a winner.

SO, ARE YOU ARE SAYING IT IS A GOOD MODEL FOR THE INDUSTRY?

It’s a good model for the industry, because it drives quality up and cost down. It gives flexibility. And from a leasing company perspective, as long as they are not greedy, and you understand your cost of asset ownership, and you are dealing with a good leasing company, you can actually get a good deal, which is going to play into your hands.

BUT, WHAT OF THE INSTANCES CITED OF QUALITY BEING COMPROMISED?

Quality shouldn’t be affected, because it depends on who is building the box, it depends on who is creating the assets, and it depends on what kind of reefer engine you are buying from the outset. So you are defining the equipment, and that way, you shouldn’t have a quality breach. Your involvement in the process is essential to get the right asset provided by the leasing company.

YOU ARE REALLY TALKING ABOUT MARKET DISCRIMINATION, WHERE YOU HAVE PLAYERS WHO ENSURE THAT THE VEHICLES THEY LEASE OUT ARE GOING TO MEET THE PURPOSE OF PROPERLY TRANSPORTING PERISHABLE GOODS. AND THEN YOU HAVE LEASING COMPANIES, WHOSE VEHICLES SIMPLY ARE NOT GOOD ENOUGH FOR THE PURPOSE.

I want to give you an example. In my prior companies here in the UAE, we adopted a leasing approach, but in terms of design and in terms of actual equipment utilised, we used Gorica, because I was absolutely adamant that even though it was leasing, the quality of the unit had to meet my requirements. So, if you talked to Gorica, they would tell you I am a real pain, because I am pedantic about the makeup, the insulation panels thickness, the reefer engine utilised and the flooring. There are no shortcuts. So, to your point, if the party engaging the leasing company is not involved, and the leasing company is selling an asset at X price but then undermines the price by utilising sub-standard quality product for the reefer box or engine, then yes, you are going to have a massive problem. You are now talking about temperature management. So, you know as well as I know, I can have a 50mm thick wall, and then in winter operating, my reefer engine can still attain the temperatures I am looking for, but the same 50mm thick wall, same density is not going to work – it’s as simple as that. So, you have to build for the climate, you have to know what type of product you are carrying and what your intent is. And if you want to carry something at minus 24 degrees C, you have to build the appropriate trailer, it’s that simple.

Now, there are two critical components – one is your flooring, and the other is your roof, because these are your two major insulations from road reflection of heat and obviously from sun bake on the roof. Then, you have to look at the reefer engine and at the internal design of the trailer to make sure you have your temperature throw, so that you are not getting heat at the back door and frozen at the front. So, it really is about the design. Somebody like Gorica or one of the good body builders is going to sit with you, and they should take into account the total design of the trailer, which finally you are going to sign off on.

You also need to have the know-how and the means to check that the vehicle is delivered on the basis it is ordered. It is like anything. I can go to somebody and buy a trailer and if it is built sub-standard and I am not smart enough to know the difference, what am I going to end up with? I will still end up with an owned asset that is sub-standard. So, it is really about how you interact with your partners and build the appropriate equipment.