11/06/09The Middle East is receiving significant attention from transportation and logistics players worldwide. Thanks to substantial investments in infrastructure, as well as—until recently—significant economic growth, investors see attractive opportunities in the logistics industry in the region. Furthermore, local governments aim to establish a thriving logistics service industry and ensure that regional companies benefit from the new opportunities.
The current economic crisis has certainly had an impact on the transport and logistics industry in the Middle East. However, the market is structurally stable and the long-term outlook still very promising. The question that remains is how to master the challenges ahead and benefit from the long-term growth prospects. The answer is very clear—every new and existing logistics player must have a strategy that will allow it to dominate its chosen segment of the market. As there are only a few sustainable transport and logistics niche markets, only dominant strategic plays such as these three will provide an attractive future for transportation and logistics providers in the Middle East.
Express/Road Network Operator
For the foreseeable future, road-based transport will remain the dominant mode of transportation within the Middle East and any logistics activity will thus rely on efficient road transport services. Currently the market is heavily fragmented, which means there is opportunity for consolidation and growth in four subcategories: low-cost transport, high-quality transport, express services, and specialized transports.
Contract Logistics Provider
A strategic play in the arena of contract logistics demands high-quality transport and freight forwarding services, often paired with the ability to provide warehousing services. The true area of opportunity in contract logistics, however, is in the development of sophisticated supply chain management services. Although most of the regional contract logistics providers do not yet pay much attention to supply chain management, it is clear that global standards will have to be implemented in the region fairly soon.
Integrated Logistics Service Provider
Positioning as an integrated logistics service provider simultaneously builds on strong asset capabilities, such as a road network and a comprehensive warehousing infrastructure, and on the strong service capabilities of a contract logistics provider. There are two different structures to consider, even though the boundaries between them are blurring: global integrated service providers and regional integrated service providers. Global providers have the advantage of scale, but they will have to invest significantly to expand their regional footprint, in light of the ongoing consolidation of the global transportation and logistics markets, increasing regionalization of the distribution structures of the global industry players, and the emergence of global transshipment hubs in the Middle East. Regional providers will likely be able to capitalize on the strong prospects of the area, but there is some risk that their customers’ sourcing strategy could change and the strong regional positioning will not be enough anymore.