The primarily export for the uae oil and gas

Logistics challenges in the United Arab Emirates 1

Logistics challenges in the United Arab Emirates

In an ultra-competitive business environment, where competition is increased and growth in business is accomplished globally, companies look beyond their organisational boundaries to develop their logistics capabilities. In the past, logistics and Supply Chain Management (SCM) were usually confused, and their function often overlapped (Lummus, Krumwiede, & Vokurka, 2001). Today, logistics is no longer defined as SCM. Logistics management is part of SCM that, and to plan, implement, and control the effectiveness and efficiency of the warehouse, transportation between the origin location and another location in both forward and reverse flow is designed to meet customers’ needs and expectations (Sadler, 2007). Because these two terms have been developed, more companies can recognise and distinguish the difference between them (Christopher & Holweg, 2011). Globalisation has affected logistics, strategic sourcing, and supply chain management. A variety of factors have driven globalisation in logistics, including containerisation, technological change, economies of scale, and growth strategies of multinational companies. The key achievement of the supply chain is directly related to the logistics of the organisation. Therefore, it is vital for companies to recognise the logistic challenges in order to maximise overall organisation performance and customer satisfaction (Prajogo, Chowdhury, Yeung, & Cheng, 2012). The company that fails to embrace change and recognise the challenges accordingly will fail, regardless of their prior success. This paper discusses the overall view of logistics in the United Arab Emirates (UAE) and critically analyses four logistics challenges in UAE. These macro issues are road freight transportation challenges, difficulty in sustainable logistics, fuel price fluctuations, and warehousing challenges.

Logistics in UAE

Inovative infrastructure
In addition to the geographical location, the innovative and quality infrastructure of the UAE establishes significant support that enables logistical development. Jebel Ali Port in Dubai is ranked as the ninth largest container port in the world and the largest marine terminal in the Middle East (World Shipping Council, 2018). Except for infrastructure, information systems and technology also a significant component of the UAE logistics sector’s success. Technology, with its numerous features, allows companies to enhance their communication, operation speed, document processing, and transparency in the logistics operation.

Free market economy policy
The UAE economy has been kept open and free to attract international business and investors. The government has minimum involvement in and control over the regulation of the private sector. Few free-market policies have been implemented to attract expatriate investors, and these policies, including customs duties, are low at 4%, and include many exemptions. Corporate tax and personal income are also exempt (except for oil companies) (Government of Dubai, 2018). The Free Trade Zones were set up to streamline trade and logistics activities. The UAE government has established 45 free zones across the country to encourage foreign investment with simple start-up processes, labour, and immigration procedures (Cherian, 2017).

Critical Aanalysis of UAE logistics challenges

1. Transportation – Road freight transport

Truck driver challenges
The UAE’s status as a logistics hub is dependent on the effective transportation of products throughout the region, However, with a crisis in the supply of drivers in terms of qualified experience and salary, it has the potential to cause service disruptions and increases in operational costs, ultimately reducing the competitiveness of the country.

Most of the truck drivers in the UAE are from India, Pakistan, and Bangladesh, and these drivers have no UAE drivers’ licences or and experience of the UAE road network. By employing drivers without the relevant UAE driving licence, overall employment procedures can be a significantly lengthy investment in terms of time and cost. This inexperienced workforce in the road network often causes delayed deliveries, thus, reducing logistics efficiency.

Organisations have increased their interest in operating supply chains through sustainable and green logistics (Pazirandeh & Jafari, 2013; Ubeda, Arcelus, & Faulin, 2011). Sustainable supply chains produce products through a supply chain that ensures control and minimises impacts on resources in the long term (Melnyk et al., 2010) The logistics outcome used to concentrate on cost, but with the high consumers request that the companies should take more environmental responsibility.

Because of the greenhouse effect from transportation, the UAE faces challenges in implementing sustainable logistics activities. Although logistics activities have some impact on the

Increase in fuel prices
Compare to ocean freight; air freight enables the companies to respond to market demand and clients rapidly. With the rise in petroleum price has enlarged the operation cost between air and ship cargo, and this make air cargo more expensive; therefore, reduce the responsiveness in the companies supply chain. The operational responsiveness provides companies with the flexibility to quickly react to unpredictable demand. A sufficient supply chain should meet six outcomes: cost, responsiveness, security, sustainability, resilience, and innovation to increase the competitive advantage (Melnyk et al., 2010).

The manual warehouse is less efficient because most of the picking activities are done manually. Inaccurate picking exacerbates the problem of improper stock levels and the build-up of obsolete inventory. Picking problems also increase when workers rely on inaccurate information, leading to the inefficient process. Lack of technology innovation increases information errors and mistakes in inventory management. Information technology improves supply chain performance and minimises errors (Fawcett, Wallin, Allred, Fawcett, & Magnan, 2011).

Conclusion

Logistics challenges in the United Arab Emirates 11

References

United Arab Emirates oil consumption [Image]. (2107). Retrieved from https://ycharts.com/indicators/united_arab_emirates_oil_consumption