Transformation of the UAE Logistics Industry – Last 5 Years

The logistics sector in the UAE comprises four key service areas – warehousing, transportation, freighting forwarding services, VALS (value-added logistics services). The United Arab Emirates (UAE), a significant member of the Gulf Cooperation Council (GCC ), is considered a logistics hub in the region. The entire GCC (including the UAE) has this potential because their governments’ policies are very conducive for the logistics industry. Moreover, their strategic locations also play a key role to make them a major hub. However, just like other industries, T&L(transportation & logistics) industry in the UAE is also undergoing an evolutionary change. Any sort of change brings along risks and opportunities, both. New technologies in the last five years have revamped the entire industry with better outcomes. Challenges also accompanied, viz. disruptions, new entrants in the market, changing customer expectations as well as new business models, all-determining the transformation of logistics in the UAE over years. Lets’ see how the industry evolved in the last five years (2015-2020):

Growth Factors in 2020

Technological developments are leading to the automation of the logistic sector in the UAE. Wide-scale adoption of sophisticated technologies has disrupted the entire ecosystem like the Internet-of-Things, Robotics, Artificial Intelligence, Cloud technology, and so on. The key features that defined transformation in the logistics industry in 2020 were:

  • AI, data & predictive analytics have been helping in inventory visibility, predictive maintenance, cost reductions ( operational level), and smooth management.
  • Robotics technology, warehouse management bolstering productivity, efficiency in the sector.
  • Cloud-based ‘Virtual freight forwarding’ facilitating a smoother process.
  • Internet-of-things(IoT) enabled drones,driverless cars at operational level.

Growth Factors in 2019

Technology leaped a step forward in 2019 in the logistics in UAE. The industry started to explore digital technologies to a new level. High-end drones, AI-powered robots, virtual reality (VR),  blockchain, GPS, analytics, etc. added to the list. The key features that defined transformation in the logistics industry in 2019 were:

  • Boost to the wide application of automation and intelligence in supply chains.
  • Testing of collaborative robots to be used in warehouses (DHL).
  • DHL created two smart, collaborative robots and named them ‘Baxter’ and ‘Sawyer’.
  • These robots would help in co-packing, assembling, kitting, and packaging as well as pre-retail services in the logistics.
  • Blockchain technology use cases in the logistics surfaced(DHL announced to partner with Accenture to build a Blockchain supply prototype).

Growth Factors in 2018

Technology innovations paved way for further transformation in the UAE logistics sector in 2018. DHL emerged as a giant technological disruptor for GCC logistics and UAE in particular. DHL completed a successful technological trial of drones. The key features that defined transformation in the logistics industry in 2018 were:

  • The introduction of autonomous transport drones.
  • Successful trial of the Parcelopter, the very drone which would drop packages to the doorsteps of customers.
  • Cross-borders business opportunities created via DHL’s innovative technology-based Pacelopter.
  • A vision was set up for safe and speedy, secure deliveries of parcels across the borders.

Growth Factors in 2017

The logistics sector was set to fuel the country’s economic growth in 2017,  as per the Dubai Chamber of Commerce and Industry(DCCI). New investments, a huge expansion in varied projects, all amounted to strong growth in the sea freight and air freight markets in the UAE.­­ As per the DCCI analysis report, the demand in the air freight market increased at a CAGR of 8.6 % from the year 2012 to 2016.Thanks to the involvement of technology! The key features that defined transformation in the logistics industry in 2017 were:

  • Technology became the business disruptor.
  • Aramex, the UAE’s based logistics provider, became the global brand.
  • The Advent of digital technology-based transportation and logistics solutions.
  • A strong network of local logistics companies (partnerships) facilitating technology disruptions in the sector.
  • Aramex launched its AI-powered chatbot on Facebook Messenger. The very chatbot was named as ‘Aramex Bot’, which enabled personalized, scalable conversations with varied customers.
  • People in the UAE through chatbot services can now schedule their delivery timings for personalized shipments, e-Commerce parcels.
  • Thus, transformation saw a shift from handheld scanners to mobile phone-based applications(iOS and Android).

Growth Factors in 2016

Moving towards the ensuing year 2016, the massive industry, Logistics industry in the UAE was expected to grow by 4 %. The way Dubai is positioned, the immense infrastructure triggers international shipments towards the country. The key features that defined transformation in the logistics industry in 2016 were:

  • Capacity expansion, infrastructure investment strengthened Logistics Service Providers(LSPs).
  • Development of export-oriented free-zones, industrial centers.
  • Further growth in regional trade and Transshipment due to other transformations occurring in the industry.
  • Leveraging technology to boost process efficiency and enhance infrastructure.
  • Evolving towards being a supply-chain nerve center.
  • Sea transport accounted for 90% of all the freight in the UAE as technological intervention increased demand from Africa, Europe, and Asia.

Challenges were too, that impacted the logistics industry in the UAE:

  • Surging competitions from other countries under GCC.
  • A slowdown in the growth of global trading.
  • Global oil production undergoing stagnation.

Growth Factors in 2015

The UAE logistics market was worth $27 billion in the year 2015, a 15% higher than that in 2013. It was the strong figures that showed up in the import/export sector and also a big rise in the local manufacturing supporting the industry (as per Frost & Sullivan). The transportation and  Logistics (T&L) sector contributed almost $29.08 billion to the GDP of UAE,2015. While  Dubai led the logistics industry with a 45 % share, Abu Dhabi also followed a close second. The key features that defined transformation in the logistics industry in 2015 were:

  • Regional trade & transshipment growth.
  • Transportation infrastructure development.
  • New technology solutions leading to a multi-modal transportation system.
  • Integration of logistics functions.
  • Technology played a  major growth contributor, leading to wider disruption in the logistics industry.
  • Souq.com( now acquired by Amazon), an e-commerce platform, boosted inventory handling and warehouse operations. Its  ‘just-in time’ model facilitated the same-day delivery of products purchased.
  • Souq.com had its custom-built Android-based devices which were manufactured in China, but, it used its own, native applications. It helped pickers in the warehouses, fulfillment centers, where, pickers could see the location of picking products, in advance.

21st Year of the 21st Century

So, we are talking about Today, Now, and the coming Tomorrow.

It is the technology revolution unabated, that is leading evolutionary changes in the logistics industry in the UAE.

Stay tuned to this space, and will take you to the next phase of evolution, very soon!

Are you into the logistics business in the UAE and wish to transform from a legacy model to the digital one? Contact us.