Logistics Scene in Saudi Arabia and the Gulf Countries
Gulf Cooperation Council (GCC) have experienced immense growth in the last few decades due to the large gas and oil reserves in the region. The governments in the countries have also played a key role in diversifying the economies through increased spending in other sectors other than oil and gas. This has created a promising environment for various businesses to grow.
One of the industries that the governments have focused on growing in their bid to diversify the economies is the logistics industry, Especially in Saudi Arabia and in line with its ambitious vision 2030, This has presented the industry with huge opportunities.
The sector receives immense support from the governments in the region. This is achieved through investments in infrastructure (road, rail, maritime, airports and logistics zones) and creating a healthy logistics ecosystem by introducing new rules & regulations for involved stakeholders leaving no rooms for gray areas when it comes to contractual obligation & increasing the level of quality of service.
The growth of the economy in the region with an increase in population has led to an increased need to invest in expanding the transportation networks. As a result, urban transport systems like the metros and inter-urban networks like the high-speed rails have been introduced. This has been made possible through various public-private partnerships.
The countries’ strategic location gives them access to a wide range of global customers. Statistics indicate that more than 50% of the world cab access one of the countries in less than five hours by freight.
Therefore, the strategic location of Saudi Arabia and the Gulf countries connect the logistics and transport industry to more than 3.5 billion global potential clients. This speaks to the potential that the industry has.
One key challenge that the industry is facing is the increased number of locationswhere clients need to access services, especially if we talk about last mile delivery taking into consideration vast landscape & the increased customers’ expectations.
As the countries seek to better address the transport needs in their respective areas, there is a risk of redundancy or investments that are overlapping. For instance, the different countries may set aside resources to address a certain infrastructure issue in one of the areas commonly used by all of them. This may result in duplication of efforts, which in the long run would adversely affect the industry.
Despite the fact that the countries are working on having the best infrastructure, there is a challenge in the increased number of trucksand other machinery used in the industry whose ever-increasing demand is overwhelming the existing infrastructure. For instance, in some parts of some countries, there are major delays in the repairs and maintenance of key roads hence affecting the players in the industry who use the road. There is further a limited network of railroads that limit how bulky goods can be moved from one point to the next.
Lack of sufficient expertise in the industry is also a key challenge. The logistics industry in the region is not producing enough talents to keep up with the growing demand. As a result, the performance of the industry is limited due to a lack of expertise.
3. The Future:
If we aspire to go to the next level; Coopetition & Adaptation of new technologies in logistics has to materialize more often in the region, this obviously needs the private sector to step up.
A. Coopetition: (Collaboration between competitors)
The term coopetition has been used in industries like automotive & manufacturing since a long time. Even though a manufacturer would build something for a competitor (i.e. Monitor Screens) it pays a lot for everyone involved, whether for the competitor for getting a better cost of goods, or the manufacturer for lowering his fixed cost by utilizing resources more efficiently & for the economy as a whole since efficiency & utilization always pays off to society whether by lowering the cost to the end consumer or the benefit it gives to the sustainability of the environment.
If we look at airlines as well & the type of coopetition they apply in shape of alliances. So the term has been used by many industries, but unfortunately when it comes to logistics we see very little of it. We have seen some great Coopetition examples through the COVID19 pandemic but it paused as soon the supply & demand have reached more equilibrium levels.
Imagine 60 deliveries for two residential block are being delivered by one courier instead of 12 different couriers. Imagine If we see more trucks being fully loaded throughout the month doing transfers between DCs & Ports. Just Imagine the benefits it will give to all stakeholders, it can vary from lowering cost to the end consumer, lower CO2 emissions & better margins for the logistics players. Win-Win for everybody!
Ofcourse there are issues like branding, training & systems integrations that needs to be resolved but it worth venturing.
B. Adopting New Technologies :
Logistics & supply chain industry globally has a lot to catch up when it comes to true technologies injection especially if we compare it to other industries like finance or healthcare.
There are some initiatives but they are accused of being very rare or not scalable, here we ofcourse talk about disruptive technologies i.e. (AI, AR, VR, drones, blockchain, IoT, robotics & Big data) not just a simple platform & ERPs
Specifically blockchain since by its definition it ticks two boxes; A disruptive technology & Coopetition tool.
The governments in the region are willing to invest more in the industry. Therefore, the industry future will also be characterized by increased government support. For instance, governments are creating learning opportunities for individuals to study both locally and abroad in a bid to enhance the skill set in the industry. The government is also allocating funds to enhance infrastructure & creating a sustainable ecosystem by ensuring systems are in places to fast track the various processes involved in the industry.
Rules & regulations are clearer. Lots of barriers in regard to opening a business or importing shipments have been removed. This is geared towards enhancing the ranking of the industry globally (Logistics Performance Index – LPI) and hence increase the competitiveness of the industry in the region.
There are number challenges facing the logistics industry as a whole but with all the opportunities & rooms to improve the future looks very bright.