Digital technologies can aid a lagging GCC transport sector, says Strategy&

10 July 2018 3 min. read

In a report on the critical transportation and logistics sector of the GCC, the strategy and management firm Strategy& has outlined the slow pace of the region in capitalising on digital technologies in order to remain globally competitive.

Already knocked by the flow-on effects from a period of low oil prices, the flagging transport and logistics industry of the GCC – one of the region’s key economic drivers – is also suffering from aging infrastructure, with, according to the PwC network strategy arm Strategy&, the local industry significantly lagging worldwide competitors in the uptake of transformative digital tools.

Yet, as the firm contends, where there is a challenge there is also an opportunity, this one a critical, once-in-a-generation chance for transport and logistics companies to implement digital technologies such as big data analytics, blockchain and robotic automation which will not only improve operational efficiencies but could transform traditional business models entirely.Declining revenues in the GCC transport and logistics sector

The report shows the recent decline in regional freight revenues, brought about as a result of low oil prices impacting imports and private and public project spending, with the period between 2014 and 2016 seeing a 5 percent compound drop in sales following five years of steady gains at a CAGR of 10 percent, including for water transportation, warehousing, support activities, and postal and courier services. The industries in Saudi Arabia and Kuwait have been the worst hit during this time.

Under greater financial pressure on performance, the first thing the report notes for GCC transport companies is the potential savings through digital technology. Jean Salamat, Principal with Strategy& Middle East says, “Digital solutions can increase operational efficiency of T&L companies by reducing operating costs up to 10-30 percent, and minimising operational risks and breakdowns by 75 percent. This is critical at a time when the industry is facing financial pressure and lower freight volumes.”

Further, digital technology according to the report can fundamentally redesign business models to enhance customer service, with the potential to create additional avenues for value creation by unlocking fresh revenue streams. Such technologies include; big data analytics, which can boost performance from the movement of physical goods to the management of information; the Internet of Things, offering real-time information to support decision making and improve operations; fully automated loading/unloading operations through robotics, and; blockchain, which offers smoother and more reliable transaction processes.Essential digital technologies for the transport and logistics sectorAs a traditionally-minded industry, the transport sector has been one of the slowest to move toward digital. Transport firms worldwide, however, have started to embrace technology as a means for redesigning their business models, with the GCC at risk of being left behind. Additionally, this cautious approach and slow adoption could see transport businesses in the GCC have the technology imposed on them by other sectors, without sufficient time for effective strategy and implementation.

As the report observes, however powerful the range of new technologies on the market might be, they are “merely tools that are most useful when applied to a specific purpose.” Ulrich Koegler, Partner with Strategy& Middle East, advises: “Rather than trying to choose from an ever-changing menu of available technologies, T&L leaders must first determine their business objectives, and then determine the right application of technology to get there.”