As the GCC countries pursue economic diversification and sustainable growth plans, the need to digitise freight transportation and logistics is becoming increasingly important, according to a recent study by management consultancy Strategy& Middle East, part of the PwC network.
At present, the transport and logistics industry in the GCC, which is one of the key drivers of economic activity in the region, faces a combined threat of declining business revenue and outdated infrastructure, according to Strategy& Middle East.
The study reveals that freight revenue in the region grew at a steady pace of about 10 percent from 2010 to 2014, but since then has seen a decline of 5 percent per year due to low oil prices, which has resulted in a decline in imports, businesses scaling back projects and governments spending less on freight infrastructure.
The region’s transport and logistics industry significantly lags behind its peers in developed markets when it comes to the use of emerging technologies or investing in new digital solutions.
Adding to the dilemma of regional transport and logistics companies is the constant flood of new technologies which can be confusing.
“Rather than choosing from an ever-changing range of available technologies, transport and logistics leaders must first determine their business objectives, and then identify the right application of technology to meet those objectives,” says Dr. Ulrich Koegler, partner with Strategy& Middle East.
Dr. Ulrich Koegler, partner with Strategy& Middle East.
Digital solutions offer two key benefits to transport and logistics companies. One benefit is increased operational efficiency, and the other benefit is it allows for the redesign of business models.
Jean Salamat, principal with Strategy& Middle East added: “Digital solutions can increase operational efficiency of transport and logistics companies by reducing operating costs up to 10-30 percent and minimising operational risks and breakdowns by 75 percent.”
“This is critical at a time when the industry is facing financial pressure and lower freight volumes,” he adds. “Deploying new digital solutions also allow companies to fundamentally redesign their existing business models to enhance the customer experience as well as create new avenues for value-creation and revenue growth.”
Jean Salamat, principal with Strategy& Middle East.
The Strategy& Middle East report identifies the nine essential technologies that GCC T&L players can adopt and areas these technologies can effectually support. These include:
Big data analytics – transferring physical goods to managing information and goods
Internet of things – facilitates real-time information to support decision making and improve operations
On-demand mobility – supports with getting real-time data securely and reliably into the hands of those who need it
Robotics automation – for fully automated loading and unloading operations
Drones – for immediate delivery solutions
3D printing – on-site manufacturing solutions as new delivery concepts or to optimize maintenance operations
Blockchain – eliminates the need for distributors or other intermediaries
Cloud – provides flexible, scalable, and commoditized IT infrastructure
Augmented reality – for simplified and efficient operations
“With the implementation of digital technologies, transport and logistics companies will radically have a new way of working,” says Camil Tahan, principal with Strategy& Middle East. “It is, therefore, important for companies to structure their approach and consider a framework regardless of which technology they choose to prioritise.”
Before embarking on digital transformation, transport and logistics companies must first define their digital business strategy and rethink their business model, says Tahan.
“Next, they need to think about the digital solutions that will enhance their customer interaction. They then need to lock down the choice of technology based on their roles within the value chain,” he says.
Transport and logistics companies also need to invest in upgrading their digital skills particularly in cybersecurity and data mining, the report finds. Finally, these companies need to re-engineer their business and operation processes to capitalise on the new digital tools.
Digitisation is rapidly disrupting different sectors, and logistics companies in other markets are already capitalising on this trend.
It is, therefore, imperative for GCC logistics companies to start embracing the use of digital technologies to support the region’s economic aspirations.