Growth prospects for the Saudi Arabian logistics industry look promising over the next five years thanks in large part to the country’s economic diversification efforts, says Frost & Sullivan.
In Frost & Sullivan’s recent analysis of the market, analysts forecast growth to US $60.68 billion by the end of 2024, driven by government initiatives in trade and industry promotion, development of economic cities, infrastructure development, and economic diversification.
Economic diversification, policy reforms, tax regimes, and FDI policies are shifting in favour of an open economy and encouraging private investment.
The advent of technology and the nation’s vision on economic diversification are creating opportunities across several industry sectors such as retail, eCommerce, healthcare, and other non-oil-based industries.
"The Kingdom of Saudi Arabia (KSA) is focused on diversifying from oil and increasing GDP contribution from non-oil sectors by developing economic, industrial cities,” said Frost & Sullivan.
"Until recently, KSA was a closed market. However, the recent initiatives on economic diversification have opened doors to industrial, retail, and logistics players around the world by allowing 100% FDI ownership," the analysis added.
Frost & Sullivan’s recent analysis, Saudi Arabia Logistics Industry—Growth Insights, Forecast through 2024, analyses the key developments and trends related to economy and trade and the freight transportation, logistics, and warehousing sectors in Saudi Arabia.
"This region is extensively focusing on industrialization and improving the transport infrastructure to become a transhipment hub," noted Frost & Sullivan. "With the rapid growth in eCommerce, automation of warehouses with built-to-suit models is likely to be in high demand through 2024.
“In addition, the rail freight transportation is underutilised and the government is taking necessary steps by developing new rail lines and building better port connectivity to increase the usage," it added.
A few key strategic imperatives for service providers to stay ahead of competition include:
Digitisation: Providers that adopt warehouse automation technologies, such as robots, Automated Storage Retrieval Systems (ASRS), Augmented Reality (AR), and sensors, can streamline operational processes and reduce operational costs, while also addressing shortages in the skilled workforce.
Personalised Service Offerings: Deploying digital technologies, such as data analytics and process automation, enables providers to focus on speed and cost, as well as offers a more personalized customer experience.
Competitive Environment Success: To mitigate the competitive threat posed by unorganized transporters, service providers should pursue contracts with large brands/organizations. In addition, providers can use competitive pricing to further penetrate into most industry segments.