Report: Middle East logistics trade associations
To use boxing terminology, the Middle East has copped a one-two punch. The first knock came when the global financial crisis engulfed the region in 2008, and despite still being battered and bruised, it was dealt another left-hook earlier this year when governments fell due to the Arab Spring social revolution.
The UAE logistics sector was never down and out, but it has come back fighting even harder, with direct non-oil exports surging 36 per cent year-on-year for January-October 2010, boosted by the global economic recovery, the strongest rise in the last five years. In the same period, re-exports were up by 23 per cent, a record increase, economic data from the emirate’s customs showed.
Behind the scenes, pulling the levers of success, is a dedicated group of people who educate, and influence policy, supporting and guiding the growth of the industry.These people most likely belong to a trade organisation, the key drivers of Middle Eastern logistics policy within the context of the broader economy.
Supply Chain and Logistics Group (SCLG) is a non-profit organisation established to promote the cause of supply chain and logistics. The group has the legal backing of the Dubai Chamber of Commerce and Industry and states its main objectives as striving to bring the best of education, seminars and interaction through partnership/alliances with a variety of similar bodies across the globe.
Shashi Shekhar, founder and group president, SCLG, says that the industry is on the precipice of significant growth. “In a new normal of post financial confusion period, the supply chain and logistics industry is poised to grow significantly. The growth of industry again needs a different set of competencies to handle growth and hence SCLG must strive to determine the extent of upcoming growth, the pace of growth and needs of infrastructure, policy and human assets.”
The optimistic outlook is supported by a recent forecast by the IMF, which is predicting growth to remain steady in the UAE at about 4 per cent for the next six years. The improved outlook reflects large public investment spending by Abu Dhabi, as well as stronger tourism, logistics and trade in the emirate of Dubai.
It is important to point out that 25 per cent of the UAE’s gross domestic product is derived from oil and gas. However, that can be a double-edged sword for the economy as a whole, which is also heavily reliant on oil to fuel its logistics sector.
Trade associations are acutely aware of this issue, but it’s a catch-22. In many ways energy exports drive demand for logistics services, but at the same time, logistics firms incur higher costs as the oil price rises.Jordan Logistics Association (JLA), president, Nabil Al Khatib, agrees, identifying the biggest obstacles as being how to reduce costs and improve transportation services.
The price of fuel is the single biggest cost faced by most logistics firms. If the price of fuel increases, that price increase is usually passed on in one way or another to the consumer. It is a delicate balance, considering the aim of the logistics sector is to deliver the right goods, to the right place, within the right time frame, at the right price.
Trade associations play a significant role in advocating for the advancement of the industry as a whole and are involved with the future of the industry as a whole. During the downturn, these trade associations were still focused on logistics, but it was a case of logistically matching the right staff to the right role.
“CIPS (Chartered Institute of Purchasing and Supply) has been able to help members to improve their skills and have access to a wider network when it comes to looking for job opportunities,” says Middle East general manager, Rebecca Fox.
Structurally, one of the most significant issues facing the industry is a mismatch of skills, and lack of training, which is constraining the industry. There is a real opportunity to train local Emiratis according to Fox. “There is a big drive in the GCC countries to up- skill the local populations, which represents a major opportunity for us in that we can offer high quality accredited learning and development programs, as well as silver and gold certification at an organisational level.”
National Association of Freight and Logistics (NAFL), which is the exclusive representative of the UAE in the International Federation of Freight Forwarders Associations (FIATA), identifies that the skills shortage problem, particularly in the UAE, is closely linked to workers coming and going from the region.
“Approximately 90 per cent of the population are expatriates, so employee movement is high. Therefore, there is a constant need for manpower training and certification,” says David Phillips, executive board member and treasurer, NAFL. Universities are now increasingly offering courses in logistics, as professionals wake up to the fact that the logistics sector is a growing area and one in which they are likely to find employment.
According to SCLG, the supply chain and logistics sector needs help in growing skills for many functional domains. The skills shortage has been observed in all areas of; operations and tactical and strategic management. Such shortages need to be addressed by educational and training institutes to help build excellence and enhance productivity in the industry.
Trade Associations have observed their membership numbers dramatically increasing, in what can be interpreted as anecdotal evidence of the sector expanding.CIPS has seen a dramatic increase in membership in recent times.
“In terms of membership, the Middle East is our fastest growing region with 30 per cent growth over the last year - out of 67,000 members globally, just under 1,000 of our members are based in the Middle East, 80 per cent of which are in the GCC countries. In fact, what we are seeing is that most of our growth is coming from outside the UK, with over half our members now internationally based. China in particular has been a major source of growth,” Fox explains.
You may ask, what exactly is a trade association? Who belongs to it? And what are the benefits? In simple terms trade associations are groups that are generally founded and funded by businesses that operate in a specific sector. Their goals include, but are not limited to; advancing supply chain and logistics industry locally, regionally and globally by formulating policy to support governance, research, learning, and leadership. Members enjoy seminars and training programs aimed at building their skills and knowledge.
Whilst each trade association may differ in the services they provide, such as some being able to offer accredited programs, the core intent of advancing the industry remains the same. There are many trade associations throughout the Middle East, but some of the more active ones include; Jordanian Logistics Association (JLA), National Association of Freight and Logistics (NAFL), Oman Logistics and Supply Chain Association (OLSCA), Supply Chain and Logistics Group (SCLG), Chartered Institute of Logistics and Transport (CILT) and Chartered Institute of Purchasing and Supply (CIPS).
Some trade associations are relatively young, such as OLSCA, which began in 2009. CIPS, on the other hand, a professional body that represents supply chain and procurement professionals, was founded in the UK in 1932 and now operates in Dubai and Abu Dhabi. Despite the difference in industry maturity, regional trade associations seemingly exhibit a common theme. That is, that each group draws its members from across an entire spectrum of industries.
Areas such as retail, distribution, transportation (airlines, shipping lines, and surface transportation), manufacturing, trading, warehousing, forwarding, infrastructure service providers like ports, airports and depots, and financial sectors like insurance and banks, are all represented. As trade associations such as SCLG extend their reach into other countries, they are also seeing a growing number of international companies seeking to become members.
There are a number of benefits that membership of a trade association affords. All associations will provide an opportunity for connection and collaboration through various networking forums. Regional director of CILT, Alex Borg, explains that his trade association offers members the opportunity to network, as well as assist their personal and professional development. “We have four categories of membership and encourage people to progress from student membership to chartered fellows,” he states.
A CIPS membership affords the same privilege. Fox comments that: “It gives members access to meet other professionals through branch networks and events, and gives them an opportunity to access the latest knowledge, publications and continuing professional development.”
In addition to networking opportunities, trade associations also offer policy support for governance and organisations by deploying numerous government interaction forums to discuss industry specific challenges. SCLG reports that it has now initiated research in close co-operation with research and educational institutions to mine much awaited industry specific data and information in the region.
According to Shekhar, such data will help with strategy formulation for organisations and also act as a policy support formulation for governance. Each trade association has objectives which underpin their organisation. Warith Kharusi, chairman, OLSCA, sees his trade association’s main objective as being locally focused. “The objectives are to promote the cause of education in logistics and the supply chain among Omani nationals. It’s not only important to network and encourage exchange of knowledge and skills related to logistics and supply chain within members, but to also be a think tank and support government institutions in any policy decisions, as and when required,” he explains.
SCLG on the other hand, takes a broader view, emphasising that its main objective is to advance the supply chain and logistics industry locally, regionally and globally by providing opportunity for policy formulation, support to governance, research, learning and leadership.
“The association provides an opportunity for connection, collaboration and communication through a variety of networking forums and annual global strategy summits,” says Shekhar. SCLG is now also engaged in promoting innovation and sustainability to further attain growth and leadership for the supply chain and logistics sector. “We intend to step up efforts for adoption of best practices, technology and innovation principles,”
As the variety of goods imported and exported by the UAE increases, so too has interest peaked from specific industries within the country. With more than 35 shopping malls, it’s no wonder there is increasing interest coming from Dubai-based retailers. “SCLG is now witnessing a growth of membership from the retail, manufacturing and trading sectors, in addition to a growing number of companies joining from logistics service sectors. As the SCLG model is being deployed in many countries, a growing number of international companies are seeking to be members,” Shekhar explains.
The burgeoning economies in the region have created the necessity to influence and guide policy to support the logistics industry. In Saudi Arabia, predictions by Frost & Sullivan that the market will earn revenues of US $20.54 billion in 2015, compared to $13.78 billion in 2010, highlight the growth the region will experience.
The key to this growth is a functional road transport sector enabling the efficient import and export of goods. However, road networks, particularly at international borders with the United Arab Emirates, Yemen, and Oman, pose capacity issues, resulting in long waits for load carriers raising transportation costs. These sorts of issues will require attention at a policy level, with informed input from trade associations, a key to realising future growth.
More than ever there is a need for trade associations to stay at the forefront of the industry and abreast of the issues. All membership driven organisations need to be agile and respond to their members informing them of changes that impact the industry, to keep them up to date with goals and industry growth.