Middle East - Connecting the Middle East to the World: Key Success Factors for Logistics Companies by Dr. Mehmet Gumus American University of
Outline 1. Logistics costs as % GDP 2. Integrated Logistics Activities 3. Transportation part of Logistics 4. Sectors and products in the regions 5. Trade in UAE 6. Factor to consider
Logistics in a Global Economy Country GDP (US $ billion) Logistics (US $ billion) Logistics (GDP %) China 5.8 1.0 17.9 India 2.8 0.487 17.4 Taiwan 0.406 0.057 14.1 Germany 2.2 0.374 15.7 Spain 0.878 0.124 14.1 Denmark 0.166 0.023 13.6 Italy 1.5 0.186 12.2 Approximate - 2003 National Logistical Expenditures, Bowersox et al., 2006
Region s Position in a Global Supply Chain Air, Water, Land (Truck), Rail, Pipeline
Integrated Logistics Management Challenges: - Different processes has to be integrated - Multiple companies located in different counties are involved Facility Network Warehousing Material Handling Packaging Integrated Logistics Management Order Processing Transportation Inventory
Relationship among Transportation Participants Physical movement of goods Public Governmental regulations Government Shipper Carrier & Agents Consignee Movement of Information Internet Risk and Security Issues
GCC Top Companies Gulf Cooperation Council (GCC) is composed of Kingdom of Saudi Arabia, United Arab Emirates, Kuwait, Bahrain, Qatar and Sultanate of Oman. Rank Country Company Sector Market Value ($ billion) 1 KSA SABIC Industrial 94.0 14 KSA Savola Group Food & Bev. 10.2 32 Kuwait PWC Logistics Services 5.0 43 KSA Yamam Cement Cement 3.6 52 UAE Dana Gas Industrial 2.9 103 UAE Kingdom Hotel Investments Hotels 1.2 Sectors: Banking, Cement, Electricity, Finance, Industrial, Real Estate, Services Industrial Products: Petrochemicals; basic chemicals, fertilizer, metals, PVC and polyester
Closer look at the trade in UAE - The Multi Commodities Centre - Commodity market place in - Rated A by Standard and Poor s - gold & precious metals, diamonds & colored stones, - energy and other commodities industries - Free Zones: One-stop-shop for companies, located by ports Example: Jafza, the free zone in Jebel Ali - DP World UAE: The region s leading port operator - Customs: GCC Common Customs Law
- The Sun Never Sets Logistics Hub and T o u r i s m World Class Shopping Malls - all sorts of products from all around the world - tax-free shopping World Class Hotels/ Real Estate - construction International Fairs -products and people e.g. GITEX 2006
Factors to be considered for Logistics companies Cost Competitive pricing: all units/incremental units discounts Incoterms: Excellent understanding of pricing structures Quality Goal: the right product at the right time and at the right place Delivery time: Shorter Delivery date: On time delivery Delivery quality: Avoid quantitative & qualitative defects en route Flexibility Delivery flexibility: Respond quickly to changes requested by the customer Readiness to provide information at all stages Technology Ability/Eagerness to employ the latest concepts and technologies in transportation logistics
Risk Factors - Sample questions of risk evaluators - Did any problems with delivery dates occur in the past? - Are there any problems with the agreed type of delivery? - Is the provider always accessible at normal business hours? - Does the provider have any emergency concepts? - Does the provider support future-oriented concepts in logistics? - Is the price level acceptable in comparison to the function?
How Logistics Risks Evaluated by Purchasers Total Cost of a Risk Factor = Probability of occurrence (risk evaluation) x Duration of the impact (days) x Cost impact ($) of the Risk per unit time (day) - Risk: High - Medium - Low - Work with the purchaser company to achieve success in the long run PARTNERSHIP IS THE KEY TO THE SUCCESS IN GLOBAL SUPPLY CHAINS