Saudi Arabia’s logistics sector set for major takeoff and the long haul ahead
Thanks to massive infusion of capital and investment in roads, sea ports and airports infrastructure, Kingdom poised for the great leap ahead.
The Saudi Arabia freight and logistics market is currently estimated to be valued at US$ 22.95bn and is estimated to grow at a CAGR of 7.35% during the forecast period, according to Mordor Intelligence.
The Saudi Arabian freight and logistics industry is a large and dynamic industry, strongly supported by state-led investments in rail, maritime, road, logistics, and airport infrastructures. Economic growth,
population maturation, and rapid urbanization are the factors driving the Saudi Arabian government to invest in the massive expansion of the country’s transportation networks.
In January 2019, the erstwhile Saudi Arabian Energy Minister Khalid Al-Falih announced that the country is raising US$ 427bn in private sector investments, which may include roughly US$ 36bn for logistics infrastructure. The investment may be used to develop Saudi Arabia into a gateway for the trade supply chains of Africa, Asia, and Europe.
Saudi Arabia is determined to broaden the role of the private sector, as it pushes to diversify its economy. Private entities are being encouraged to collaborate with the government, as they develop the country’s transport infrastructure. Partnership is being sought for the operation of seaports, airports, and their related supply chains.
Public-private partnerships (PPP) are being pursued to fund several key schemes, while a number of the country’s publicly operated transportation facilities are being prepared for full privatization. Technology is improving the security, transparency, and control over the import-export process in the country. New measures are in place for better coordination between the Customs Authorities, importers and exporters, Port & Terminal Authorities, Road Transporters, Airport Operations and other
stakeholders in the wider ecosystem to streamline operations and processes.
Brief takes and observations from Gopal R, Global Vice President, Transportation & Logistics,
Frost & Sullivan, on the changing and evolving logistics landscape in the region:
• There would be more alternatives sought in the medium term for the next two to three years
in Supply Chain and Logistics (SC&L), to manage freight with minimal capital investments. At the
same time, this will be an opportunity for investors willing to invest and offer assets for logistics
• To capture and grow business opportunities in a post-pandemic business scenario, it is very essential
to maintain a good forecast and demand planning system. Being able to foresee two-quarters ahead,
with a deviation of not more than 20%, will be a key determinant for revenue growth and profitability in
SC&L business in the region.
• New business models and digital transformation should start with the end in mind, which is ‘The
Customer’. Only then would it have the right business impact.
• Logistics Service Providers (LSPs) need to understand changing client needs in Post-Pandemic scenario, so that they can tap new trade lanes that develop because of changes in sourcing,
procurement as well as trade flow.
• There are likely to be more local solutions and companies offering innovation and technology
support for SC&L business in the region, post-pandemic. Companies are sensing region-specific
niche to suitably develop new products and cloud based solutions for maximizing SC&L efficiency and
• Need for Supply Chain resilience will change thinking from ‘Just-in-Time’ to ‘Just-in-Case’. Expect
some fundamental shift in thinking of SCM approaches by Innovators in the region.
• Regional sourcing and procurement will benefit greatly due to near shoring. It is imperative for
Logistics Solution Providers to capitalise using local capability.
• Creating solutions for SME businesses will greatly enhance SC&L offerings and its growth in the region.
COVID-19 Responses in the Transport & Logistics Industry—Respond, Recover, & Thrive
SET UP QUICK RESPONSE TEAMS
Employee safety should be the priority at such times. Quick response teams should be allocated to manage uncertainties related to demand and supply of logistics services.
RESPOND TO FULFILLING CAPACITY
With the maritime and air freight industry experiencing capacity constraints, logistics service providers in the region should strive for transparency by assessing “what-if” scenarios with customers to understand planned volume and strategic needs.
CREATE FLEXIBLE SOLUTION MODELS
As a transshipment hub, congestion at ports is expected. To mitigate risks and ease the process, advanced capacity bookings should be arranged for customers on emergency shipments.
ADAPT DIGITAL AND IOT SOLUTIONS
Considering order backlogs, inventory stocking surfaces as an issue. Adoption of Internet of Things (IoT) technologies in warehousing and distribution operations would ensure the placement of the right
products in the right place at the right time.
In the long run, AI-powered robotics systems should be considered to help mitigate supply chain risks and promote sustainability goals and operational efficiency for warehouse operations.