Hani al Saleh, the chief executive of Arabian Hala Group and Pieter Spaarwater, his counterpart at Hala Supply Chain Services (HSCS), a Group subsidiary, prove a powerful combination as The Gulf meets the two executives at Group headquarters in Riyadh.
Between them, they are masterminding an extraordinary period of expansion for a Group established in the Saudi capital 35 years ago as a car rental company with a fleet of just 27 vehicles. In 1993, the Hala Group acquired the dealership in Saudi Arabia for Avis, the global car rental giant, which laid the foundations for the two decades of growth which followed.
My father, Suleiman al Saleh, started the business back in 1977, recalls Al Saleh, who assumed the chief executive role in 2002. Following the [Avis] acquisition, our fleet has grown to 9,000 cars and over the years we have also added a trucking business through Hala Express, which has evolved into a joint venture with Saudi Post called Naqel, delivering to 4,900 cities and villages [in the kingdom], he explains.
HSCS followed as a joint venture in 2004, offering what Al Saleh says is a complete logistical service within Saudi Arabia including transportation management, route optimisation, supply chain consulting, forwarding and clearing and warehousing. In the years since it was formed by Husam Al Saleh, the Groups deputy chief executive, its progress has been one of Saudi Arabias true corporate success stories.
Spaarwater reels off a list of figures which gives an insight into the scale of an HSCS operation which last year grew by 75 per cent, and which is targeting a further 50 per cent growth this year.
Today we are clearing and forwarding 175,000 tonnes of product and handle 15 million boxes, the South African explains.
We manage more than 2,000 trucks dealing with 35 transporters and hauling 5,500 loads each month from a network of 15 warehouses in nine locations including Tabuk, Khamis Mushayt, Jeddah, Medina, Taif and Riyadh, he says.
According to Spaarwater, HSCS Source to Shelf service has been particularly popular among the Companys high profile customers.
We have managed to reduce the turnaround time for a clothing retailer by 75 per cent, cutting the lead time from order to delivery from one month to just seven days, he claims. Additionally we have helped improve the shelf life for a food producer as well as expanding their distribution and reach throughout the kingdom, he says.
Spaarwater says the Companys Route Optimisation programme helps track and trace shipments, providing drivers with the best route to market and enabling customers to know exactly where their shipment is. Weve been able to reduce costs [for clients] by 25 per cent and have now received an enquiry from an international conglomerate customer to introduce our service in China, says Spaarwater.
The Company has also recently introduced two new business lines as part of the supply chain division Documentation Storage and Hala Baggage, the latter offering door-to-door luggage services for exhibitions and large families.
Competition for HSCS comes from a number of different local service providers. In a sign of the times the Company is competing with a growing number of courier companies in Saudi Arabia who have been forced to enter the supply chain management sector.
The market in Saudi Arabia has become more complex over the past five years and customers are becoming more demanding in terms of service levels, says Al Saleh We are lucky in that we have gained a track record of credibility and are considered both flexible and customer service-orientated.
Al Saleh sees the Saudi market maturing and changing this year, with in-sourcing providing opportunities for significant partnerships in the kingdom.
The trucking zones in Riyadh have added to the complexity of the industry and we are planning to increase our investment in assets such as warehousing and trucks, he explains.
Saudi Arabia is growing [economically] at a rate beyond five per cent with a booming population as well. Almost 39 per cent [of Saudis] are 18 years and younger, and the government is investing heavily in schools and housing.
It is also against this promising macro-economic outlook that Arabian Hala Group has continued its own diversification drive, including a move into online recruitment. oilwell7.com, an online recruitment portal, focuses on the niche overseas Saudi students market and, claims al Saleh, is the first Saudi-based recruitment online business that is viable.
In the summer of 2011 the Group also introduced Chinese-manufactured MG cars to the kingdom, the timing of which proved ideal according to al Saleh 2012 was a record year for car sales in Saudi Arabia and Specialised Automotive Company (SAC), the Group company which operates the MG franchise in the country, managed to achieve sales of 1,500 units over the last six months of the year.
We picked up the MG franchise in the summer of 2011 and we established retail outlets in Jeddah, Riyadh and Qassim and introduced a range of five models he explains.
What attracted us to MG was that its technology and design is UK-based with a focus on high quality materials and manufacturing, says al Saleh.
Developing into the auto industry was a natural step for Chinese manufacturers which have followed in the footsteps of the Japanese and Koreans. For 2013 we are targeting sales of 3,000 cars.
Apart from selling the MG brand in Saudi Arabia, Arabian Hala also has a vehicle manufacturing facility in Egypt. The Egyptian British Automotive (EBA) facility takes advantage of regulations allowing for customs exemptions into Egypt and other Arab countries to assemble MG cars locally. The factory has a capacity of up to 10,000 vehicles a year produced on a semi-automated CKD [complete knock down] production line and is expected to begin production this month.
Eventually we will look at in-kingdom manufacturing of vehicles, especially as currently the [Saudi] government is supporting initiatives to establish factories for parts, says al Saleh
We have a bitumen products factory in Saudi Arabia as part of our Group but we are looking at developing this outside the kingdom, possibly in the UAE or even as far away as China and Brazil given the [Saudi] ministry of petroleum's direction to reduce the export of bitumen membranes. [Waterproofing company] Dermabit distributes to 70 countries and we don't want to lose this advantage over government regulations. Now we are losing market share to cheaper Egyptian and UAE products that really dont come close to our quality, he says.
Arabian Hala, through group company Hala Automotive Services Company (HASCO) is also the agent for Kumho, the Korea-based tyre manufacturer. Al Salah is enthusiastic about that products potential in Saudi Arabia.
We have seen excellent growth and we have achieved this by expanding our network of dealers apart from our flagship stores in Jeddah, Riyadh and Dammam, he explains.
The company has a very sophisticated research and development department. The tyres are generally standard on most Korean manufactured cars and are also fitted to the Jeep Grand Cherokee from the USA. We also stock their truck tyres which on a cost per kilometer provide unrivalled value in the market, he adds.
With increasing customer awareness and demands for the highest level of service, Arabian Hala says it has identified a gap in the logistics market and positioned itself to provide a holistic service which the two executives claim is unmatched in the kingdom. Al Saleh is particularly proud of HSCSs Platinum Status for Saudisation, achieved he says, by investing in and empowering young Saudis in the classroom and through on-the-job training. This has been recognised through the ministry of labour with whom we had a joint promotional advertisement during Ramadan, he notes.
Together with the Groups diversification into vehicle manufacturing and other automotive products trading, the growth that the Company is currently experiencing looks set to be maintained in 2013 and, possibly, beyond.
