Aptec - Excellence in Distribution

APTEC LOGISTICS SERVICES.

An IT Distribution company maintains 3PL standards.

Aptec not only has to move computers and cash as fast as it can, it now has to compete with the most experienced of 3PLs.

Dubai, UAE, 23 July 2009 – As Operations and Commercial Manager for Aptec, one of the region’s largest IT distribution houses, Mario Veljovic understands that the tangible products his company offers are nothing unique. “The bare IBM laptop is exactly the same as the one you can pick up from our competitors,” he says frankly. “The difference we make is the service we offer, the credit we offer, the price we offer and the overall support we can give them.”

With estimated annual revenues between US$300 million and US$400 million, Aptec distributes thousands of products from leading IT manufacturers to over 3,000 customers in 40 countries. Well-known retailers such as Sharaf DG, Plug-ins Electronics and Jackys Electronics, as well as corporate resellers such as Emirates Computers and Alpha Data rely on its services. “We never sell direct,” says Veljovic. “We only go through indirect channels.”

While the company’s 500 staff members work in offices and distribution centres in the UAE, Kuwait, Lebanon, Pakistan, Saudi Arabia, Turkey, Egypt and the UK, Aptec serves most of these subsidiaries through its 15,000 sq foot central warehouse in the Jebel Ali Free Zone. The facility contains a full racking system with bin locations, and can handle up to 3,500 pallet positions. On average, 2,000 SKUs of stock worth between US$10 million and US$15 million sit in the warehouse at any given time. The facility processes 30,000 orders and 360,000 order lines per year.

Aptec recently converted the formerly paper-based warehouse into an electronic one, installing the Exactus Aware warehouse management system from Dubai-based, Business Systems Group. “We are fully wireless and PDA-enabled,” says Veljovic, proudly. “It’s a paperless warehouse now.”

Modernising the facility was necessary, he adds. “We needed the WMS to have more visibility and transparency of each and every cost that is within the supply chain. In order to be more efficient, in order to start billing the subsidiaries, in order to use our space more efficiently, in order to be much faster in our turnaround time, we needed to go for an upgrade of the existing system.”

A Tight Chain
Aptec’s success relies almost entirely on the efficiency of its supply chain, says Veljovic. “We operate on a very tight margin. We’re talking about a range of five to 10 per cent. You can imagine that if you waste one per cent somewhere in the supply chain that can eat up your profit,” he explains.

“If I don’t stay ahead of my competitors in order to have my supply chain costs under control and operational costs under control control, I’m going to be forced out of business very soon.”

The fact that Aptec keeps its products on stock, ordering on demand only for specific projects, amplifies this risk. “Right now we have a stock of US$15 million which is not sold yet,” he says.

Aptec also has to stay on top of the ever-changing technology market, where new versions of hardware and software pop up daily, rendering previous versions passé. Some products expire quicker than many food products sold on grocery store shelves, explains Veljovic. “IT consumables, ink cartridges for printers for example, have an expiry date of 12 months,” he says. “If you keep them beyond that, you can just throw them in the bin. We are measuring our aging stocks on actual weeks.”

The company also manages the supply of money in the market, acting as a creditor to its customers. “For example, if I go to Acer and purchase product on 30 days credit, on day one, the counter starts ticking. After 30 days I need to pay,” he explains. “My customers will demand 30, 45, 60 days of credit from me. You can imagine that I have already
started financing that gap.”

For this reason, Veljovic says Aptec watches the flow of cash as carefully as it monitors the supply of goods. “We take cash, move it into assets, and take assets and move them into cash,” he says. “It’s cash flow which we actually produce. For that, we need to have very tight measurements every single day.”

Revolution
Just as the IT sector changes regularly, Aptec has had to change the way it does business internally. Over a year and a half ago, the company converted its logistics department into what Veljovic calls “an in-house service provider”. The department moved from sharing costs to charging costs to other departments. “We charge our subsidiaries just as they would be charged by an Aramex, an Expeditors or Mohebi Logistics,” he explains. “We actually operate like a 3PL in-house.” The logistics department now runs as a company within a company. “Logistics now has its own profit and loss account,” says Veljovic. “It has to show transparency to the various offices that are using it.”

The department also has to prove that it can out-compete any 3PL. “We just underwent an analysis where we asked, ‘How good are we compared to a third party logistics company?’” he says. “We invited several key service providers and asked them, ‘This is what we do in a year, how much would it cost us?’ We benchmark ourselves very toughly against the competition.”

He says the company has tried outsourcing services such as customer delivery in the past, but has no plans to return to that direction. “We saw a decline in our service levels when we outsourced,” says Veljovic. “Operating our logistics in-house is still the preferred option. It’s more efficient, it’s more customer service-oriented, it’s more flexible and, ultimately, even cheaper.”

He seems proud of his team’s customer service. “We deliver twice a day. So we have same-day delivery for orders placed in the morning,” he says. “We even deliver one paper license.”

Veljovic will not rule out the possibility of sharing Aptec’s expertise in IT logistics with external clients. “If we are having such a cost advantage, why are we not commercialising it? That is definitely an option which we could look into,” he says. “But, in order to do that, we would probably have to do a couple of changes to the system, for example having a logistics licence. You need to cover your legal grounds and then carve out a niche.

‘I would say we stand a very good chance of carving out this specific niche, because we get a lot of requests from our suppliers to keep their product In our warehouses in order to keep local buffer stock.”

Perhaps one day other IT distributors will be turning to a 3PL named Aptec Logistics. “We want to become a bit more visible in the logistics area,” says Veljovic. “Yes, we are talking to Jafza, we are working very closely with them. We have a very strong investor and we see that people are asking for it. We are exploring this. We can really start by acting as a logistics company internally, learning all the ins and outs, and then start marketing it.”

About APTEC

Aptec Holdings (www.apteconline.com) is the Middle East, Turkey & Africa’s largest technology distributor and a leading technology sales, marketing and logistics company. As a vital link in the technology value chain, Aptec creates sales and profitability opportunities for vendors and resellers through unique marketing programs, outsourced logistics services, technical support, financial services and product aggregation and distribution. The company offers a wide range of solutions and services to nearly 10,000 resellers and offers thousands of products from leading IT and Telecommunications manufacturers. From its offices and warehouses in the UAE, Saudi Arabia, Egypt, Lebanon, Turkey, Kuwait and Libya, and with more than 500 specialized staff, Aptec serves over 40 countries

More information is available at www.apteconline.com