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Warehousing Insights
The swift surge in E-commerce bodes well for the GCC Warehousing sector
The importance of Warehousing Management Services (WMS) and its applications in logistics and supply chain, both regionally and globally cannot be underplayed. A key, crucial service, it essential for organizing and ensuring the smooth and streamlined inflow and outflow of goods from single or multiple storage and distribution points and for effectively monitoring a structured system for receiving, accounting and placing stocks in a warehouse.
Warehousing will continue to play its seminal role in the logistics and warehousing ecosystem. Automation and digitization in the warehouse will only increase exponentially as companies seek to make their supply chains agile and efficient.
Warehousing is essential in supply chain management as goods are transported from the maker to end recipient. That is clearly a given. The benefits of warehousing in logistics indicate that if a warehouse operation is ineffective, the entire supply chain may be immobilized, for example, a lack of goods, delays, or blockages. All logistical efforts performed within the scope of a warehouse should avoid the warehouse from becoming a bottleneck of the supply chain.
The purpose of warehouses is to support manufacturing processes, which can be accomplished by maintaining sufficient resources, materials, and packaging for production, allowing for uninterrupted output.
Permanent access to packages allows for the systematic receipt of finished goods and delivery to the intended recipient. It’s worth noting that warehouses support marketing processes by providing constant access to resources required for the completion of a promotional action or the production of promotional sets.
Global Supply Chain conducted an exclusive interview with Bijay Oram, Director, Supply Chain & Logistics Practice, Frost & Sullivan, who shared his professional insights and observations on the state and criticality of the warehousing sector in the GCC.
Global Supply Chain (GSC): Briefly, what are key takeaways / broad observations of the Covid-19 effects and fallout on the GCC’s warehousing operations?
Bijay Oram (BO): The Covid-19 pandemic-related restrictions such as self-isolation and social distancing have caused significant workforce shortages, affecting warehouse operations. Companies have opted to use automation and digitalization to overcome disruption in warehouse operations.
The rapid increase in E-commerce sales has opened up opportunities for state-of-the-art fulfillment centres across the major urban centers. Being a major trade hub in the East-West trade lane, the GCC regional supply chain network is expected to benefit from supply chain diversification initiatives of advanced countries in Europe and Asia.
GSC: In your opinion, how much of the professional work environment / ecosystem in the warehouse changed as a result of the pandemic onslaught?
BO: The industry has witnessed a series of changes. Firstly, a shift from lean manufacturing/just-intime (JIT) management method in favor of inventory strategies with adequate buffer stocks to minimize the costs associated with disruptions.
Governments and the private sector continue to increase their focus on logistic/warehouse infrastructure-logistics parks, free zones, cold storage capacity expansion, and e-commerce fulfillment facilities.
The industry is witnessing an Increased level of digitalization including adoption of automatic storage and retrieval systems, Automated Guided Vehicle (AGVs), and conveyor belts at warehouses
have significantly reduced the dependence on the workforce.
GSC: With the Pharma / Food / Cold Chain and critically required medical / PPE (personal protective equipment) supplies industry in the frontlines of the fight against the virus, how have the industry’s priorities been rearranged and what kind of new demands / pressures are being put on the business now?
BO: Bottlenecks along the healthcare supply chain include safe transportation of vaccines, sourcing, and procurement from vaccine manufacturers, realtime temperature monitoring at warehousing, and cold storage facilities at consumption centres.
The National Vaccination Programmes are largely successful, with number of new cases brought under control. GCC being a major logistics and distribution hub, the development of vaccine distribution infrastructure is given priority in some of the key ports.
For example, the Hope Consortium has developed freezer facilities at Khalifa Industrial Zone Abu Dhabi (KIZAD), with a capacity to store vaccine doses for global distribution.
Smart Logistics Hub, located in Bahrain, will focus on storing and distributing perishables, vaccines, and medicines to the GCC region. The smart hubs are backed by blockchain driven smart
contracts for speedy movement of pharmaceuticals and food products across the customs ports.
GSC: How can the Warehousing Industry in the region help to ensure food security and supplies in the region?
BO: GCC as a whole depends on imports which account for about 85% of domestic consumption; Shortage of land suitable for agriculture and climate conditions are the main factors contributing to lower agriculture production in the GCC region. Saudi Arabia and UAE accounted for nearly 75% of the total regional food consumption, estimated at 33 million metric tons in 2020.
Covid-19 related supply chain disruptions have affected the regional food supply chain due to restrictions on cross-border movement and lockdown measures. Countries have diversified their supply base, increased collaboration to strengthen domestic food production and supplies to ensure the availability of food products.
Food Security Network was established to allow movement of essential goods such as food and medical supplies at GCC customs centers with fewer restrictions. Storage and warehouse capacity expansion has become an important part of food value chain to minimize wastages.
Cold storage capacities in ports and major cities are likely to be given priority in the short term to strengthen storage and distribution network.
GSC: What are the new technologies / trends emerging in Warehousing and what role will WMS, automation and robotics for example play in this segment?
BO: Key warehousing technologies adopted to improve productivity and efficiency in the region includes automated picking and packing, robotics, automated guided vehicles, augmented reality, wearables, and warehouse management systems (WMS).
The next phase of digitalization will focus on blockchain-based long-term warehouse contracts, inventory optimization tools backed by predictive analytics, supply chain visibility solutions, while warehouse automation will continue to play an important role in the medium term.
Blockchain and IoT solutions would make the supply chain more transparent through peerto-peer networks by increasing real-time visibility and reducing shipment delays, human error, and transaction errors.
GSC: What opportunities and challenges confront the warehousing segment in the region?
BO: On of the challenges is the lack of skilled, qualified workforce. Workforce shortages in the warehouse segment result in lower productivity levels
Furthermore, social distancing and workforce safety measures resulted in worker shortages during lockdown periods. Restrictions on port operations have resulted in a shortage of storage capacities in some of the key ports.
Current low levels of technology adoption are also proving to be challenge but there is scope for increased us and therefore in turn an opportunity for technology service providers.
High level of fragmented market structure is the main cause of the varying level of technology adoption in the warehouse segment. Large operators have invested in digital technologies, while adoption levels are low
Bijay Oram
Bijay Oram has over 16 years of functional and consulting experience in Supply Chain and logistics in large and mid-sized companies. He has hands-on experience in working with business leaders and stakeholders in developing insights and actionable strategies for various strategic and operational challenges.
among medium and small operators.
These challenges provide enormous opportunities for supply chain technologies and solution providers. Increasing demand for same-day delivery in e-commerce is expected to drive demand for state-of-the-art warehouse facilities to accommodate the growing demand for personalized last-mile delivery services.
GSC: How is the Warehousing Industry faring in the region and where (in the region) do you foresee expansion / growth?
BO: The Warehousing segment comprises 20% of the regional logistics market and is one of the fastest-growing with an estimated growth of over 5 % driven by e-commerce, retail demand, pharmaceutical, and food sectors. Warehousing capacity expansion is given high priority by private companies to meet the increased demand.
The following segments are expected to witness high growth between 2021 and 2025. These include Free Trade Zones and Logistics Parks; Commerce Fulfillment and Distribution; Regional trade and transit hubs; Cold chain storage facilities and Bonded Warehouses and Inland Dry Ports.
GSC: How important is the Warehousing sector for the Free Zones / Special Economic Zones sector in the region?
BO: The region’s geographical location on the trans-continental trade has facilitated its focus on the development of logistics hubs for both domestic and transit goods. As part of economic diversification initiatives and national infrastructure plans, the development of free zones are given priority to increase trade.
Storage and warehousing capacity in free zones are a critical part of movement of both inbound and outbound goods and is expected to play a key role in the growth of GCC warehousing growth. Other important drivers include logistics hubs and e-commerce fulfillment and distribution facilities.
The Al Khomra Logistics Zone in Saudi Arabia’s Jeddah Port, launched by Saudi Ports Authority will become one of the largest integrated logistics zone in the region. Dubai Commerce City is developed to support global and regional brands to expand their e-commerce trade in the GCC region.
GSC: In summary, what insights you would like to share on the short and long term vision and objectives for the Warehousing Industry in the region?
BO: As national policy priorities from different states are focused on improving logistics efficiency, logistics/warehouse infrastructure will be given priority. Economic cities, logistics parks, free trade zones, bonded warehouses, inland dry ports are some of the segments expected to see expansion.
Being a major trade hub in the East-West trade lane, GCC regional supply chain network is expected to benefit from supply chain diversification initiatives of advanced countries in Europe and Asia.
Digitalization of warehouse operations are expected to gain prominence as companies are expected to accelerate adoption of digital technologies such as warehouse automation, wearables for picking and sorting, supply chain visibility supported by tracking, and realtime cargo monitoring solutions.
