OVERVIEW. There is much logistics activity in the six countries of the Gulf Cooperation Council (GCC). The six are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. Much has, is and will be invested in ports, highways, railroads, airports, warehouses and more. The LOG.Middle East Yearbook 2010 provides a good overview.
The investment was and is being done as part of an economic vision strategy for the respective countries. The purpose of the strategy is economic diversification beyond the oil and gas industry and job creation for the citizens.
REALITY. The results of the overall GCC investing show -
STRATEGY AND EXECUTION ACTION PLAN. Wherever a country is in its logistics efforts, from strategy development through to strategy execution, there is opportunity to adjust and adapt to becoming the logistics leader for the Gulf. A strategy is not easy. The two steps of development and execution are difficult. (See "Plan of Attack", Log.AE, April 2011).
Logistics has been an effective growth sector for Rotterdam and for Singapore. Panama is looking, beyond the Canal, to use logistics for its economy. What logistics and trade have done for The Netherlands and for Singapore attract interest as a viable approach for diversification, expansion and growth-to establish the dominant position as the Middle East logistics park for the Gulf.
Every two years, the World Bank rates and ranks the logistics performance of 155 countries. Each country is ranked as to Customs, Infrastructure, International Shipments, Logistics Competence, Tracking & Tracing and Timeliness. The 2009 Logistics Performance Index prepared by the World Bank shows Singapore ranked #2 and The Netherlands is #4.
This plan places the logistics center in a leadership role in the GCC and, even, in MENA. There are billions of dollars in potential gain with the successful logistics center. That gain has a GDP multiplier effect and translates into long term economic viability and employment.
The design recognizes the success of Rotterdam with regard to logistics by emulating it. But it also reflects regional differences. It especially recognizes and builds on the perceived void in what is being done presently. It is not intended to mimic what others ports. It works on what countries is not doing. There is an appreciable difference between a logistics hub and a transshipment facility. Transshipment leaves much economic opportunity as unrealized; the logistics park does not. The intent is not to spend in a shotgun manner; it is to spend on targeted, smart opportunities.
The comprehensive, integrated action strategy has four purposes and benefits -
Key components of the strategy and execution are:
The logistics hub creates value for end customers and will bring customers. Competitive costs and simple administration are important to bring customers-logistics service providers, exporters, importers, suppliers and buyers. It also enables the development of value propositions that create more customers and better customers for the logistics center.
More than transshipment. Successful implementation will separate and elevate the country from regional competitors and targeting the two sets of customers creates the foundation for a value proposition. The logistics center and its value proposition will enable the winner to take the lead as the Gulf's logistics center and to maintain that lead.
The plan recognizes that the transport carriers, both ocean and air, are important to the success of being the logistics center for the GCC. For example, being a transshipment center makes a country and its ports dependent on the carriers. That approach misses opportunities. More is needed.
Being a logistics park builds a base of activity that will bring the carriers and make a mutual relationship. It will also build a base of activity among exporters and importers in the Gulf and potentially beyond.
Success for the logistics center will require strong, efficient capabilities with multiple modes of transport-ocean-including deep sea, short sea, breakbulk and bulk; air; trucking/intermodal. This transport diversity provides flexibility and fluidity and is needed to handle the variety of logistics capabilities that the different market sectors will require from the logistics center.
Success will also require efficient capabilities-and high scores--from the logistics sectors that are part of the World Bank Logistics Performance Index. These are Customs, Infrastructure, International, Logistics, Tracking and Tracing and Timeliness. These factors are also important for customers and their supply chains.
The logistics center will be about the container. It will be about the pallet of cargo. It will be about the customer. It will be about the supply chain. With the two direction approach, identifying needed assets and services-and the investment required-will be demonstrated. This view contrasts with what some ports have done with just investing in assets with no clear understanding of markets, customers and services required. Investing in assets without recognition of customers and market sectors can result in underutilized assets and frustration with the overall results.
Some have invested in transport, warehouses and other hard assets. Each of these assets provides a traditional commodity service. Many ports use a general approach based on transport sectors and their niches. That is a narrow view that misses the bigger picture that goes beyond country borders and leads to trade development. Assets by themselves do not make a logistics hub.
The action plan presented here builds a logistics hub utilizing the integration of transportation, warehousing, forwarding and other services. This means investing and developing a logistics approach that provides value services for customers throughout the GCC.
The logistics center would be about more than warehousing and similar operations. The center would provide value services, such as kitting and assembly, light manufacturing, postponement packaging, reverse logistics and other services. All this would create more imports (of parts and products) and exports (of assembled and finished products). It would be unique in the area for select market segments, including consumer goods, Halal, and oil and gas.
Doing all that the plan envisions places the investments, assets, capabilities, services, service providers and jobs into a dynamic sector of the economy. It also puts the investments, assets, capabilities, and services into an integrated approach as compared to those with standalone assets and services. The action plan creates synergies by and among the private sector and the country which will enable it to be the Middle East logistics park of the Gulf.
End-use customers require much more than track and trace technology to manage visible, integrated supply chains. Supply chain management technology will be an anchor and bridge for the logistics center to draw exporters and importers from various GCC and MENA countries. The logistics center will be involved with product enhancement and movement and with information movement.
The leader must have both logistics and technology. It must take this vital, integrated view of supply chain management. They look at shipping and warehousing and not at supply chain management, which is how end-users look at the total activity. Focusing on supply chain management with technology is another important factor that will distinguish the GCC Logistics Center from the competition and will drive the success of the center.
The primary focus will be needs of the two customer sets, the logistics service providers and the end-user customers who will utilize the Logistics Center. Potential areas of technology application include, but are not limited to-
Supply chain execution. This will provide global online visibility, integration and management for products that move through the logistics centers from suppliers to customers worldwide. It will cover the supply chain from purchase order through to delivery at the customer or store shelf, including activities within the Logistics Center.
E-Freight Portal/Center. This may be the shining technology program to draw both sets of customers. It would enable exporters, importers, 3PLs, freight forwarders and others to book their cargo for all carriers and modes. This would be done online and provide full booking capabilities and order visibility. It could include insurance and other tasks. Forwarders and others would book and manage it all through one portal rather than going to different carrier websites as they must do now. The present fractured booking approach creates confusion and extra work. No one else in the GCC or MENA has this online capability.
RFID (Radio Frequency IDentification). It reflects state-of-the art technology whose usage is becoming a requirement of supply chain management and use within and by the logistics center.
Cargo flow management. For ports, depots, warehouse and container storage yards that includes chassis and container use and availability, integrated hazmat information, load and discharge to vessels, receive and dispatch at gates, consolidate and deconsolidate at warehouses and docks, damage notification system to record equipment problems, maintenance and repair system to record damage repair bills, roadability checks on equipment to be dispatched, replacement of the paper EIR/TIR using wireless hip printers and real-time visibility into all activities.
Recognizing and accelerating the information and operational technology platforms can propel the center growth. The capabilities meet and exceed the World Bank LPI with regards to tracking and tracing and the information technology aspect of timeliness. All this will strengthen the leadership position as the logistics park for the GCC.
This action plan has a focused view of specific market sectors and logistics capabilities. This means that the overall design, operation, and infrastructure will have an integration that supports growth and targets investments.
It will build a foundation of the number and type of carriers that call at the port. The leader will be the logistics hub and center of the GCC, using logistics/supply chain services and logistics/supply chain technology that, in turn, positions it as the trading center for the Gulf. The success of the plan lays a solid foundation for economic growth.
Two market analyses should be made. These would indicate market sectors that have strong potential as customers for the logistics center. This gives market focus to the design and implementation. It also aids in defining the logistics infrastructure, capabilities, services and service providers for the center. Potential markets are those in the Gulf, not just one country.
The results would be shown in two matrices-
The above analysis, as shown in the matrix, would identify markets of interest and of nominal interest. Large market size sectors with high product value would be very strong candidates as customers for the logistics center. Large size with less value and large value with less size could yield customers also. Small size and small value would not likely be viable for the logistics park.
The above analysis, as shown in the matrix, would identify markets of interest and of nominal interest. Large market size sectors with high logistics/supply chain complexity would be very strong candidates as customers for the logistics center. Large size with less complexity and large complexity with less size could yield customers also. Small size and small complexity would not likely be viable for the logistics center.
Results of these analyses would facilitate the "reverse" logistics center approach and design based on markets/customers. It would identify needed assets and capabilities that otherwise may not be recognized, yet that are vital for the logistic center. This would help prioritize funding for the center. It would also identify possible assets that have less priority for investment.
The consequence of being the logistics center would be multiple logistics parks located in areas that would facilitate efficient operations for different market sectors. This adds to the success of the program.
The focus on markets and logistics assets and capabilities permits design of each park to provide lower economic operation costs. This will add sustainability as logistics leader. It also facilitates planning for each park and the overall logistics center.
This is an underlying and crucial area for project success. Developing the needed balance between the public and private sectors is very important. It is important for success during each phase-design, implementation on sustain/grow-and for having ongoing and continued progress with the plan, including funding. It will include questions as to who does what, when it is done and how it is done.
While the present situation is evaluated, attention should be on the future. Possible institutional arrangements for the logistics center and dominance in the GCC may include the creation and development of a Logistics Center Board, a high level body, in respect to logistics and supply chain management. This would recognize the distinct contribution of logistics to the country's economy. The board, while makeup would have to be determined, would:
Implicit with the Logistics and Technology will be the need for people and training and education. The country will need to develop a program for the training and education so its own people can get the many jobs and the good jobs that arise from Logistics and the Technology programs with the Logistics Center. Strengthening the logistics talent training will accelerate the development of the logistics industry in the country and solidify its position in the Gulf as a Middle East logistics park.
This includes training for maritime, air cargo, warehousing, forwarding and customs (with the changed approach for the logistics center). It also includes education for supply chain management. For example, logistics and supply chain management are majors in colleges in the United States and Europe. This training further facilitates the employment issue for its citizens.
Doing all this and achieving each step includes these actions, questions and issues -
CONCLUSION. Everyone wants to build ports, warehouses, airports and roads. That is nice. But the real logistics potential-and the real need--in the GCC is to design, develop and implement the logistics center concept, such as Rotterdam and Singapore have done. This type of logistics park requires more than investing in infrastructure and assets.
Design and development must recognize there are two customers and should be built on logistics and technology. It also creates a value proposition for customers and differentiates the country with the GCC logistics center and supply chain leadership from other ports and competitors. All this, combined with institutional infrastructure and training, creates a dynamic, sustainable opportunity for economic diversification, growth and employment.