State-owned defense company Israel Aerospace Industries Ltd. (IAI) (TASE: ARSP.B1) has signed an agreement with Globus Packing & International Forwarding Ltd., under which the latter will manage a new logistics center for IAI that will replace dozens of logistics centers currently operated by IAI itself in its units and plants.
In the framework of the agreement with Globus Packing, IAI is reducing its logistics staff by 120 through retirement of employees.
It is believed that IAI will pay Globus Packing tens of millions of shekels a year for operating the new logistics center. At the same time, senior IAI executives say that when the plan is completed and the new logistics center coordinates the activity of all of IAI's divisions and plants, IAI will save 30% in logistics costs.
Senior IAI managers called outsourcing the company's logistics setup a "dramatic strategic measure" that is part of the recovery plan formulated last summer in cooperation with IAI's management and workers' organization. IAI is calling this plan a "growth plan," in which the company aims to save NIS 2 billion in costs in the coming years. One of the most prominent elements of this program is reducing the company's staff by 800 employees. Hundreds of employees have already left the company under this plan.
IAI CEO Joseph Weiss told "Globes" that the growth plan was in the home stretch, and would be completed soon. Globus Packing is scheduled to build IAI's logistics center for the company's various units near IAI's main activity centers. Hundreds of thousands of components used in IAI's regular business will be supplied from the new logistics center. Five companies took place in the tender to select a company to operate the logistics center.
IAI VP procurement and logistics Yehoshua Eldar told "Globes" today that, under the tender terms, Globus Packing would build the logistics center at a location up to 20 kilometers from IAI's main activity sites. Lod, Airport City, Shoham, and Modi'in are among the locations being considered for the new logistics center. Eldar says, "This process will enable IAI to upgrade all of the international processes related to logistics and the supply chain, while releasing storage space in our various factories."
Eldar believes that tens of thousands of square meters will be made available in 18-24 months when the plan for the new logistics center is completed. The freed-up space will be used to speed up projects and consolidate various activities in the company, some of them new.
IAI said today that the companies that competed in the tender to build the new logistics center had been required to meet international logistics standards, including a high service standard, efficiency, and professionalism, with an emphasis on high output and use of advanced technologies to make routine activity more efficient.
Globus Packing, which is managed by founder and director Yehuda Levy, has been working in logistics since 1986. It has been part of the Maman Cargo Terminals and Handling (TASE: MMAN) group, one of Israel's major logistics services groups, since 2014.
IAI told "Globes" today that its orders backlog had reached $11.1 billion during the past year, the largest orders backlog of any defense company in Israel's history. The company said that this situation required the rapid implementation of advanced solutions in logistics and the supply chain, while saving on storage space, streamlining the operational setup, and substantially shortening timetables in the supply chain.
Published by Globes [online], Israel Business News - www.globes-online.com - on October 26, 2017
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