As a key meeting point for East-West intercontinental trade, the Middle East straddles the crossroads of the major Asia-to-Europe and Asia-to-Africa trade routes.
The rapid infrastructure development and diversification into non-oil products and services have positioned this region as one of the world's key trading areas.
The regional logistics industry is one of the most dynamic emerging markets in the world today. According to Fredrik Lindblad, Business Manager, 3PL-Logistics Services, GAC, "Driven by capital investment which the oil and gas revenues have precipitated, the logistics sector has grown rapidly.
Over the next few years continued foreign investment and government policies favouring economic expansion are expected to boost the growth of the regional logistics sector." A recent industry report has valued the GCC logistics market at more than $11 billion (Dh40.4 billion). Currently Dubai alone channels more than $17 billion (Dh62.4 billion) of imports a year.
There are several key factors that contribute towards the UAE's growth as a logistics hub. "The UAE government's commitment to investing in integrated multimodal infrastructure that helps in product distribution within the UAE or the region as a whole enhances the region's role as a redistribution hub," says Lindblad.
"Its excellent connectivity with the multimodal infrastructure of airports, seaports and road networks makes it an ideal transport and logistics hub to serve as a bridge to regional markets.
The fast growing Europe-Asia trade lane is just one of the opportunities for the UAE to capitalise on global trade.
The region also has access to the broader region, such as North and Middle Africa in the south west, Pakistan in the east and the Caucasian CIS states such as Kazakhstan, Turkmenistan and Uzbekistan in the north.
The Dubai Logistics City is also set to redefine regional logistics operations as a truly integrated multimodal logistics platform in a single-bonded free zone environment."
Demand for excellence Third Party Logistics operators (3PLs) see the Middle East as offering more growth potential for logistics and transport than either North or South America.
However, as David Christmas, Managing Director, Middle East, for DHL Exel Supply Chain Management, says, "There is a need to understand and develop the 3PL service in the region, which is probably less developed than other parts of the world. There are, indeed, a lot of activities in the logistics sector and competition is ever increasing.
Whether a retailer, manufacturer, oil field supplies company or public sector works project, the pressure is always to do better, faster and be more efficient.
One very clear trend with multi-national companies is that they now expect the same standards, processes, behaviours and performance throughout the globe.
If they have proven a successful warehouse management system with us in Dallas, they expect the same system and the same smooth implementation in Dubai.
They also expect to see the same high calibre of people, health and safety standards, processes and employment policies.
Therefore, the role of the 3PL is more and more about bringing excellence to the market, acting as a change agent and to demonstrate what really can be achieved when 'best-in-class' capability is deployed."According to Dr. Cedwyn Fernandes, Consultative Committee Member of the Supply Chain and Logistics Group, Middle East, "As per the Dubai Strategic Plan 2015, Dubai's development as an integrated logistics hub will transform it into a hub of business excellence by raising the productivity of economic sectors and maintaining high production quality standards.
This is necessary if Dubai is to integrate into the regional and global economy and achieve a targeted real GDP growth of 11 per cent per year. Transport and logistics have been identified as one of the key drivers of growth."
Among the new developments in this sector, the development of the Al Maktoum International Airport at Dubai World Central will enable quick transfer of shipped goods from Jebel Ali Port to air cargo.
Jebel Ali Port is undergoing major expansion and an additional capacity of 5 million TEUs will be created. The main USP of Dubai Logistics City is to offer an unrivalled multimodal transport and value-added logistics platform, which will enable companies to proactively manage their supply chains and reduce transit time.
At the third World Air Cargo conference in Bahrain, Michael Proffitt, CEO of Dubai Logistics City (DLC), said that the DLC will have a major impact on future air cargo growth.
"The Middle East air cargo growth is the highest among all other regions in the world. DLC's Phase One, which will start operations by the end of 2008, has already been leased out and every major global player has either expressed interest or leased land in DLC.
"More than 40 per cent of DLC's 25 square kilometre leasable land has been reserved. The contract logistics and forwarding areas will be completed by 2010 and 2012 respectively.
With the Dubai World Central Al Maktoum International Airport — fully operational by 2015 — DLC will become the central hub for global and regional businesses looking for centralised supply chain initiatives.
"Challenges and opportunities
Proffitt feels the Middle East's emerging logistics and shipping industries are not only experiencing major challenges, but are also being offered great business opportunities.
Dubai, home to the world's eighth largest container port and the largest cargo airport, is driving that growth. "With globalisation, the demands of world trade are increasing and logistics issues will continue to be a top priority for every multinational.As such the efficiency of the supply chain is becoming an increasingly essential component in the worldwide flow of goods and services." According to Dr. Fernandes, "Supply chain management is no longer just about logistics operations relating to transport and storage.
It now embraces the management of all activities from raw materials to end customer.
The UAE imports more than 80 per cent of its consumer products, and most of its imports come from the Far East, Europe and India. Due to the long transport lead time, if companies in the UAE want to succeed in the marketplace, supply chain management is mandatory.
Close collaboration between all players, such as suppliers, manufacturers, distribution centres, third party logistics providers, transporters and retailers is a must."
The first stage in the supply chain, according to Christmas, is always quality of service. "The fundamental role of the supply chain is to supply goods and services at the right time and place. Without this there is no platform to build on.
The second stage is direct costs. The supply chain is often a significant proportion of a company's overall cost base, but not one that is always fully understood. Once the quality of service is consistently high, cost per unit has to be minimised (no partner likes to have any wasted resources in its supply chain).
This is done by analysing each step in the chain and, for instance, redesigning warehousing processes and layouts, changing delivery vehicle types and schedules.
The third stage is where a leading 3PL can add real value and that is by looking across the entire chain, bringing experience from across the globe and across industry sectors."
All major 3PL providers are present in the UAE and consider it their major regional base. However, Dr. Fernandes says, "If the UAE has to move up the world ranking in logistics performance from its present position of 20, it has a long way to go.
The UAE has to bring down its transportation costs which are on the higher side in the Middle East region.
Also it has to increase IT penetration in the various supply chain processes. Though the initial investment may be high, it pays off in the long run." n
Steady growth
Investments in logistics have received special attention in the Dubai Strategic Plan (DSP). The emirate has shown remarkable progress in the development of its logistics sector since 2000.
Dubai's logistics sector (including storage and communications) represented 13 per cent of Dubai's GDP.
In nominal terms, the sector recorded 20 per cent growth in 2005 compared to the previous year, placing itself among the fastest-growing economic sectors in Dubai.
The sector employs nearly 7 per cent (i.e., 75,000) of Dubai's total workforce, which represents 47 per cent of the UAE total workforce of the sector.
The gross fixed capital formation (GFCF) of the logistics sector stood at almost Dh9 billion in 2005, which represents 24 per cent of Dubai's total GFCF.
Information courtesy
The Supply Chain
and Logistics Group, Middle East
