Saudi Logistics Sector: Towards 2030 Vision and Beyond

Meshal Almofadhi, a researcher at Aston Logistics & Systems Institute, UK, specialising in the supply chain and logistics sector in the Middle East summarises the key challenges for the Saudi logistics sector.
Meshal Almofadhi, a researcher at Aston Logistics & Systems Institute, UK, specialising in the supply chain and logistics sector in the Middle East summarises the key challenges for the Saudi logistics sector.
Meshal Almofadhi, a researcher at Aston Logistics & Systems Institute, UK, specialising in the supply chain and logistics sector in the Middle East summarises the key challenges for the Saudi logistics sector.

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Saudi Arabia is going through a development shift to diversify its economy and reduce its dependence on oil.

On April 25, 2016, the government has announced 2030 vision, which focuses on three pillars. One of these is the strategic geographical location of the country and the logistics sector, which is the focus of this article.

The Saudi logistics sector has become critical to decision makers, economists, logistics and manufacturing companies.

Logistics is a core part of the supply chain stream which represents the backbone of the organisations and manufacturing process, which has been the centre of economic attention in recent years.

This looks great, but of course, there are existing challenges summarised as follows:

First, there are challenges related to performance and governmental support for the sector.

For example, the government plans to improve Saudi Arabia’s position in the LPI ranking; this requires the application of international practices and logistics competencies in this field, such as intensive training to raise professionalism, which is also an important factor for promoting foreign investments.

In fact, the infrastructure may not be a big challenge as Saudi Arabia has a modern rail network that has recently been completed, well-connected roads and ports built to international standards, such as the King Abdullah Port in the Economic City.

However, the biggest challenge may be improving the current status of ports and developing logistics hubs around to cope with the rapid growth of e-commerce and private-sector-led development, which lack the appropriate legislation and technology according to recent reports.

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Technology-related and its legislation has become an important engine in support of today's logistics operations, as well as supporting the entire supply chain system. On the other hand, environmental impact concerns are greater now than ever before, becoming crucial for government and the private sector.

Therefore, legislation governing environmental impacts is also another important element of recent international developments. Even though customs regulations need upgrading, the good news, however, is that the government has already started to work on.

The custom’s authority has also recently undergone rapid development, which gives a very positive signal to local and foreign investors.

This is also followed by the establishment of the national industrial and logistics development programme which aimed to focus on monitoring and delivering a specific plan for the logistics sector’s development.

A second challenge is related to the private sector, which is a key partner in the 2030 Vision.

Suppliers and manufacturers are the real development focus of all countries. The private sector is the main engine of economic growth and diversification, and the logistics sector is one of the reasons for its success.

The development of the logistics system drives the development of the entire supply chain system, which together will allow Saudi Arabia to create an attractive environment for logistics companies.

This in turn will accelerate growth in the manufacturing system. Manufacturing, whether light or heavy, requires effective logistics support that supports the principles of logistics, or 'The Seven Rights', as they are known.

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In most developed and non-developed countries, the supply chain and logistics sector represents small and medium-sized enterprises, so developing special initiatives for enterprises in this field will accelerate the creation of jobs and develop the sector even faster.

The recent establishment of “Monsha’at” (The General Authority for Small and Medium Enterprises) may help to support such decisions, especially as the new Saudi Supply Chain Association joined the authority in the last few months.

Finally, the development of manpower in this sector is extremely important to support challenges related to local sourcing and “Saudization” programmes. Education, training centres and scientific research are other areas that should not be overlooked.

The number of universities and specialised institutes that are interested in teaching supply chains and logistics is low, approximately five. Universities must take the lead by supporting the education sector in such disciplines and by investing in scientific research to accompany them.