Rapid growth in logistics industry in Saudi Arabia seen companies increasingly challenged

These include growing complexity, variation in customer demand and increased volumes in their supply chains. Failure to adopt the correct supply chain strategy in dealing with such challenges can threaten a company's sustainability. This is because the quality and level of service delivered is put under threat.

The Saudi Arabian Supply Chain Intelligence Report (SCIR) is a study into the supply chain and logistics industry in Saudi Arabia commissioned by Hala Supply Chain Services. The study has highlighted the disparities between supply chain objectives and practises in the region. One of the main outcomes of the study indicated that the improvement of service levels is a top priority for companies. However, the strategy and actions currently being implemented to achieve this goal need to be redefined in order to optimise service levels and ensure long term success.

The highest ranked challenges faced by the industry identified by the SCIR survey include increasing volumes and complexity, varied needs of customers and the skill level of supply chain staff. The survey also asked how supply chain management is dealing with such challenges. In the responses it became clear that current strategies in the Kingdom do not follow international trends which have proven to yield positive results.

The survey revealed that companies in Saudi Arabia are accustomed to a Do It Yourself (DIY) supply chain strategy. This approach implies that supply chain improvement projects are entirely internally managed, which have shown low levels of success. Since skills and capabilities of staff were highlighted as a challenge the low rate of success is not surprising.

Pieter Spaarwater, Business Development Manager at Hala Supply Chain Services, said:

"Companies clearly need to consider a different approach. The current scenario of internally managed improvements puts further pressure on the supply chain, and does not overcome challenges which hinder service levels."

The survey also found that the only consistent outsourcing currently implemented by companies in Saudi Arabia is that of transport functions - mainly outbound and to a lesser extent inbound. This also goes against international trends which see a wide range of supply chain outsourcing models. These can vary from full outsourcing, through to 4PL or lead logistics arrangements to supply chain consulting in combination with internal management. Such an approach has shown its value in improving service levels as the resources available to, and capabilities of a company are significantly enhanced both regionally and globally.

A section of the survey on collaboration highlighted low levels of collaboration between suppliers, suppliers' suppliers, customers and customers' customers. Respondents reported that the majority of meaningful collaboration takes place at a supplier level only. International best practise has shown upstream and downstream collaboration as essential in successfully dealing with a number of challenges. This includes planning, forecasting and coping with increased volumes, which are all directly related to improving service levels.

"The urgent need to redefine supply chain strategies, in line with tried and tested international practises which promote visibility, flexibility and responsiveness, is paramount. Service delivery is directly related to the capabilities of a supply chain, ultimately determining a company's sustainability in an increasingly demanding market," said Spaarwater.