Transport and Logistics in Dubai: A High Stakes Play

Transport and Logistics in Dubai: A High Stakes Play

Michael Thorpe (Curtin University, Australia) and Sumit Mitra (Indian Institute of Management Kozhikode, India)
DOI: 10.4018/978-1-4666-0065-2.ch002

Abstract

The phased development of Dubai’s transport and logistics sector over the past several decades has culminated in the establishment of a major regional commercial hub, a so-called “aerotropolis”. Although a work-in-progress, several stages of this long-term project are already operational, and construction remains ongoing. The future success of this government project is unclear. In the public sector, there exist major challenges, some reflective of the need to efficiently manage and coordinate such a huge undertaking while others stem from the uncertainties of a competitive global market-place. For individual companies and industries (public and private) looking to participate and commit to the venture, a number of issues need to be addressed in the formulation of business strategies.
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Industry Background

Transport and logistics comprise a large part of the global economy and in 2006 accounted for an estimated total revenue worldwide of USD 3.4 trillion. (DataMonitor, 2007). The sector broadly encapsulates three types of services: (1) transport services, which include air freight, express delivery services, marine transport and road and rail transport; in 2006 this industry accounted for almost two-thirds of the sector’s global revenues (Standard & Poors, 2006); (2) transport infrastructure services (comprising around one third of revenues) which includes airports, marine ports, highways and railways; and (3) logistical services, comprising freight forwarders, freight brokers and third-party logistics (3PL) providers.1

In recent years the demand for these complementary services has grown in line with the expansion in global trade which is linked to an increasing outsourcing of manufacturing support activities. Businesses, institutions and individuals now face a growing dependence on sophisticated transport and logistics systems to help operate uninterrupted supply chains. One particular feature of the international reach of the sector has been consolidation and cooperation across all its component activities, refelcting a demand for integrated global solutions. This has seen some operators (public and private) vertically integrating across various services in the supply chain in order to achieve economies of scale and scope (Waters, 2007).

Logistical efficiency and optimal supply chain operation is a necessary condition for competitive advantage of firms in today’s global market-place and depends on a number of factors. These include the need for a modern transport infrastructure, supporting information, legal and financial frameworks and ease of cross-border trade (including lower charges and more streamlined procedures). Competitive carriers and logistics providers along with stable and transparent government support are necessary to enable the movement of goods from a growing number of source locations to meet market demand.

A traditional strategy by national and regional governments has been to approach transport infrastructure investment on a mode-specific basis. As a result many regions are characterised by systems that remain congested and unreliable. Resulting inefficiencies have lead to loss of export competitiveness, reduced inward investment and rising costs for imported final goods and intermediate goods. Inter or multimodal transport systems are now emerging in response to this issue. This involves transporting passengers and freight on two or more different modes in such a way that all parts of the process are efficiently connected and coordinated.

To facilitate fast, low-cost global distribution, a successful regional logistic hub increasingly requires cargo (people and goods) to be moved from one transport mode to another quickly and efficiently. Such an approach facilitates point to point delivery, resulting in lower transit times, reduced packing costs, improved product quality, increased reliability and the development of new markets. Multi-modal transport has helped sea ports evolve from a break-bulk and terminal focus to an expanded role as funademental links in a global distribution chain. This involves not only carriers, but the activities of value-adding freight logistics providers and manufacturing companies (including such areas as light assembly, packaging, labelling, distribution and inventory management). Increasingly critical are those 3PL companies who design, implement and manage a client’s supply chain logistics needs, adding value based on information and knowledge rather than merely providing an undifferentiated service at the lowest cost. As a result successful execution of a coordinated, seamless, flexible and speedy movement of goods across two or more modes of transportation increasingly relies on timely and accurate exchange of information. Cooperation and coordination between all players, public and private, carriers and service providers, is an integral part of this endeavour.

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