Oreo you ready?
Mohamed Shalaby discusses how the right public-private partnerships have allowed Mondalēz to expand its presence in the country and meet the growing market demand in the GCC.
US-based confectionary powerhouse Mondalēz has expanded rapidly in the GCC region since it built its first factory in Bahrain in 2005. In more recent years, however, its existing factory has not been able to keep up with demand. For example, Mondalēz Bahrain’s biggest market for goods and services is Saudi Arabia, 25 kilometres away via the King Fahad Causeway. At its existing production levels the Bahrain factory was struggling to meet growing market demands. Mondalēz needed to expand its manufacturing facilities.
In 2016 the company began construction on its brand-new 85,000-plus square metre Bahrain-based cake and biscuit factory. This $90 million plant is based on a 250,000 square metre plot, and will be the manufacturing hub, not only for Bahrain but for the whole GCC, according to Mohamed Shalaby, Plant Director of Bahrain and Dammam–Mondalēz.
“This [new factory] is our second investment in Bahrain, and is an expansion of our existence in the country. We started with our powder beverage category in Bahrain 10 years ago with a $50 million investment plant, and now, up to 47 countries are reached from it,” said Shalaby.
The Bahrain Government has allocated an additional 250,000 square metres which are to be dedicated to suppliers. The allotted 250,000 square metres will be located next to the new manufacturing plant, thereby building a supply chain model that Mondalēz wants to create.
The FMCG business’s success relies heavily on being able to meet the market’s demand for fresh products quickly, and the development of the newer, larger manufacturing hub will assist in the confectioner’s goal to cut transportation times to one of the company’s biggest markets.
“This year we reached an average of 22 to 24 hours crossing time between Bahrain and Saudi. Products can be shipped the same day from Bahrain to any location within Saudi, which is almost 70 per cent of the GCC market volume. We want to reach these countries within 24 to 48 hours maximum, so we can deliver fresh products to our consumers and be able to react quickly to the market. Logistics and transportation were key challenges and partnering with the Government to resolve these issues encouraged us to make the second investment in Bahrain,” said Shalaby.
The strong relationship with governing bodies included customs officials, with Bahrain boasting some of the best clearance times in the GCC. Mondalēz can clear its raw materials properly within 24 hours, and move them swiftly into operation.
Mondalēz does not need to allow for a two-to-three-week time buffer for compliance spot tests on ingredients as could be the case in other countries when it comes to receiving raw materials. If something were to go wrong in this process, or if another test was required, or if the process is ill-defined on the clearance side, these are all occurrences that can disturb business flow. The fact that this potential delay is not an issue in Bahrain is a distinct advantage that the country has.
“We have highlighted that this is an edge that Bahrain needs to maintain–even if the capacity increases on the harbour, this edge should not be lost because it is one of the country’s strongest elements,” said Shalaby.
The Bahrain Economic Development Board (EDB) and the Government have also helped to improve the consistency of the processes in place. Instead of requiring two or three documents per truck leaving the Mondalēz factory, to the causeway, and then to customs, this procedure has been improved and streamlined to a one-document process.
Mondalēz is currently working with the Government to further improve the 24-hour crossing time over the causeway. They are hoping to reduce it to four hours. The EDB and customs departments are working hard with Mondalēz, as well as regulators in Saudi Arabia to improve these processes and protocols so that this can be a reality. According to Shalaby, while, there is still much work to be done, Mondalēz hopes that the quicker crossing time will be able to be implemented by the end of 2017. This will benefit Bahrain immensely, allowing it to not only be a regional manufacturing hub, but a highly important logistics hub too.
As an FMCG business Mondalēz only sells approximately three per cent of its volume within Bahrain so an export model had to be set up to remain competitive. Building an effective supply network has helped to ensure this competitiveness.
“We had to work aggressively as a company in developing our suppliers, to qualify them and improve their standards of quality. In the first year we started with a couple of suppliers but now, 10 years later, we have 350 local suppliers and 12,000 indirect employees for Mondalēz in Bahrain. It’s not really about our operation but it’s really developing the suppliers that work with us. The Bahrain Investment Industrial Park (BIIP), where we are situated, the Ministry of Industry and the EDB all worked together with Mondalēz to develop these local suppliers. Some of these suppliers even qualify to supply our plants outside of Bahrain. There is still more to do,” added Shalaby. “Suppliers will not have to carry as much stock and they will be very flexible to the market and manage demand fluctuations. Imagine if the amount of market fluctuation requires a supplier to change their sourcing cycle, when their material has a two-month month lead time, or even a four-week lead time. Their response time will be delayed by those four weeks or two months, which is not what the consumer expects,” he added.
The human element
Mondalēz places a high value on the safety, health, and well-being of its work force not only from a physical safety perspective, but also from an employee value perspective. Shalaby said there is a high level of engagement between management and staff, with management driving training and education amongst its employees and actively developing and nurturing a company culture.
“We have high engagement with the families of our employees; we invest in training them onsite on topics such as family home safety, and road safety. We work with the wives of our employees on kitchen safety; we speak to the kids on how to carry their school bags correctly on both their shoulders, and how to avoid back problems in the future. We do this because we really want to make sure that our employees are safe everywhere. It’s not about just being safe in the plant when using the equipment,” said Shalaby. “This vested interest in staff well-being has resulted in high engagement levels across all the Mondalēz teams, with employees visibly committed to improving the business.”
He added the result of implementing these values can be seen in the company’s performance. The Bahrain hub is globally recognised within the Mondalēz group as a benchmark in efficiency, cost, and safety standards. The entire team is working to deliver robust results to the business.
In order to meet the consumer demand within the GCC, Mondalēz needed to invest in improving and expanding its manufacturing and logistics hub. Mondalēz also needed to streamline the customs procedures to reach its market quickly.
- The Bahraini Government allocated 250,000 square metres for a manufacturing plant with an additional 250,000 square metres of land dedicated to its suppliers right next to it.
- Customs processes and procedures were refined to cut down on the required paperwork to bring in raw materials and send out manufactured goods.
- The company has invested heavily in health and safety training and in the overall well-being of its staff.
- Mondalēz can now work closely with suppliers to respond quickly to market fluctuations and requirements, by cutting down the supplier lead time.
- Customs procedures allow for goods to be cleared within 24 hours and sent into operation immediately.
- The supply chain of products sold into the GCC has been significantly simplified.
- Staff engagement is high with employees committed to the development of the business.