Trends Transforming Logistics and Supply Chains In the MENA Region in 2023
Trends Transforming Logistics and Supply Chains In the MENA Region in 2023
by Dr Shereen Nassar, Global Director of Logistics Studies and Director of MSc Logistics and Supply Chain Management Suite at Heriot-Watt University Dubai
According to the UAE’s Ministry of Economy, the first quarter of 2021 saw the highest amount of quarterly funding raised in the logistics industry in the MENA region over the past 4 years, rising year-on-year by 179 per cent. Digital transformation has evolved on a sector-wide level, organisations restructured their business models and adopted a more agile and flexible approach to remain competitive and stay relevant to the changing dynamics of the industry. Companies with resilient supply chains had a sustainable advantage during the unprecedented logistical turbulence that emerged during the pandemic. Adjusting to the new norms, companies learnt the need to revise their existing business functions models, reorganise their labour and redefine the roles and skills of their labour. Majid Al Futtaim Group, an Emirati holding company and a leading business conglomerate in the UAE, skilled and redeployed close to 1000 staff members working across various functions. Furthermore, the UAE government’s rapid response to the pandemic has catalysed business confidence and economic growth in the region. Dubai CommerCity, the first e-commerce free zone in the MENA region opened in April 2021 in Dubai. The Dubai Chamber indicates that UAE’s e-commerce market value is expected to hit 9.2 billion USD by 2026.
Given the competitive nature of the logistics industry, companies are increasing collaboration across their entire value chain and working towards making logistics more efficient and sustainable. Technology and automation are major enablers towards this.
Demand Sensing for Accurate Planning and Forecasting
A McKinsey’s report published in 2022 indicates that 32 per cent of people from industries like automotive, consumer goods, and pharmaceutical find demand variability and forecasting responsible for value chain disruptions. Companies that predict demand, will be able to respond efficiently. Furthermore, using qualitative and quantitative forecasting to manage product inventory and distribution enables the wider operations of the business and results in improved customer experience. Moreover, demand sensing using advanced technologies such as artificial intelligence and machine learning enables access to enterprise-level analytics for businesses and is widely used for automation and supply chain activities, including demand and sales planning which enhances the accuracy of demand planning and forecasting.
Investing in data analytics along with innovations in big data will have a significant impact on the business. Predictive analytics will empower them to leverage data and make informed decisions related to inventory requirements, warehouse space optimisation and usage.
Flexibility for Resilient and Optimised Logistics and Supply Chain
The lack of structural flexibility exposed the vulnerabilities of the traditional supply chain model during the COVID pandamic. The recent major disruptions forced businesses to transform into a more flexible and adaptable approach to managing their supply chains. With technological advancements becoming a necessity, the flexible logistics model has recently started gaining popularity since it supports agility and resilience.
This is an asset-light model which does not rely on long-term agreements and is not restricted by locations or areas. and empowers a more responsive and adaptable supply chain and logistics activities when facing disruptions. The flexible logistics model enables omnichannel logistics operations and allows the designing of e-commerce fulfilment networks. A dynamic logistics model can be more feasible, combining the benefits of the fixed (constrained) and flexible (costly) models.
Businesses should understand and identify how the dynamic model should be implemented to maintain the right trade-off between responsiveness, resilience and cost optimisation. Supply chain network design is a determinant of the success of logistics operations and the use of network optimisation tools and software support building cost-effective supply chain networks including the last mile delivery is the key challenge.
The dynamic logistics model must incorporate all areas of the business including warehouse management, inventory, storage and last-mile delivery. Companies can improve the overall efficacy of the logistics process, reduce price instability, minimise risk, efficiently run supply chains, minimise expenses, and manage inventory requirements with the flexibility of upscaling and downscaling operations according to market sentiments and business requirements.
Technologies Driving the Logistics Sector
As the logistics industry continues to boost its digital infrastructure and develop its business environment, the significant shift in consumer preferences is driving demand for warehousing and distribution facilities, and efficient last-mile delivery. The findings of a survey by Peerless Research Group highlighted that only 5 per cent of supply chain professionals confirmed that their order fulfilment processes are automated. The era of recovery from the pandemic brought several changes for businesses. Harnessing technological advancements is helping businesses to optimise and automate overall operations. Therefore, technologies like cloud computing, automatic identification, robotics and automation, and predictive analytics will continue driving facility operations. The use of smart technologies like automated warehousing, cloud-based transport management system, and blockchain will continue to propel the growth in the logistics sector. An effective decision on the scope and the scale of automation and digital implementation requires a deep understanding of the business needs and the supply chain they operate in.
Micro Fulfilment Boosting Last-Mile Efficiencies
Last-mile delivery services account for 41 per cent of the global supply chain costs. A recently published report on the automated micro-fulfilment centres market forecasted the sector will be worth USD 5.3 billion by 2025.
With increased requirements for delivery within a day or less, inventory must be positioned in close vicinity to the potential buyer. Also, companies must adopt more robust solutions like micro-fulfilment centres, and small distribution facilities to enhance perfect order fulfilment and improve customer experience.
In 2021, Majid Al Futtaim opened a fully automated micro-fulfilment centre at their Carrefour store in Dubai where the task of managing orders is automated, Autonomous Mobile Robots provide insights and assistance to human associates in maintaining stock level. Amazon is planning to establish an advanced fulfilment centre by 2024 in partnership with the Abu Dhabi Investment Office. These projects have immense potential to transform the logistics industry in the region.
Sustainability and Decarbonisation Practises in Logistics
In line with UAE’s Net zero by 2050 Strategic Initiative, logistics companies are adopting sustainable practises in the region. There is a rise in eco-friendly warehouse facilities, and improved use of electric fleets in the industry.
Recently DB Schenker, one of the world’s leading logistics service companies opened a green logistics facility in the UAE which will imply sustainable operations. The green zone at Ajman Freezone supports commercial and industrial activities using eco-friendly methods. The future of green logistics will rely on how companies acknowledge the environmental impact of traditional logistics practises and their preparedness to adopt ways like capitalising solar power for warehouse management or using green transport modes to reduce carbon footprint.
The global and government pressure will continue and the recent COP 27 conference in Sharm El sheikh concluded with a serious action plan. Since logistics and transport contribute to 80 per cent of annual global carbon emissions, businesses have to respond and promptly develop their decarbonisation strategies with quantifiable goals in which logistics is the main focus. Global supply chains will continue to share their best practises and they have a major role to play in enhancing awareness and supporting other stakeholders in their journey towards decarbonisation.
High Demand for Logistics and Supply Chain Professionals
The logistics sector is evolving due to the ongoing digital transformation, along with the pressure of sustainability and decarbonisation compliance which involve new practises. Talent gap and talent retention were already one of the top challenges for logistics and supply chain leaders. This will continue in the coming years. As a result, there is a growing need for talent who are capable and equipped with end-to-end logistics and supply chain knowledge and skills in this field. The most in high demand professions in the logistics sectors require specific knowledge and skills development in the form of technical training, short courses, a university degree or a Masters’s degree for higher supply chain and logistics management roles. Furthermore, the professional demands of the sector require advanced educational programmes to address the constant changes and disruptions necessitating personnels to be upskilled and reskilled.
The UAE’s logistics industry is all set to reach USD 31.4 billion by 2026. The sector will continue to grow at a fast pace with ongoing advancements like the development of a rail network to connect seaports, and major transportation hubs, a global, private sector-led initiative World Logistics Passport and initiatives like Dubai Industrial Strategy 2030 and Abu Dhabi Vision 2030. However, there is a need to catalyse the industry to invest in people, harness the potential of technology and incorporate sustainable strategies. Data is paramount for the logistics industry. However, there is an abundance of data which makes it crucial for companies to have the right ways to access it and use it to make the right decisions. To continue the growth momentum in the industry, business leaders in the logistics sector must focus on talent, collaboration, and sustainability to scale up their businesses in 2023.