How to select the best logistics company for your business

No matter what area your business operates in, at some point, you will need logistics support in the way of packaging, warehousing, or freight. However, the kind of logistical vendor you employ will eventually depend on the size, scale, and specifics of your company and product. This means that you first need to define your needs and requirements – the types of services you would like to have, the modes of transportation you want used, and the average volume of shipments you expect. This basic information is crucial in helping you decide on a 3PL or 4PL provider and the forwarder’s ability to judge if they can do the job for you.

If you have large shipment requirements, you need to look for freight companies that have warehouses and storage facilities in the areas you wish to ship to. They should also be able to suit your needs of any transportation mode (air, ship, or road) that you will require to ship to your destination.

It’s advisable that you do not compromise your quality of service with affordability as low-cost companies offer less visibility and reliability.

This article discusses some of the criteria that a logistics provider should meet to help you make the right decision.

INDEX

1. Make an accurate assessment of your logistics needs
2. Industry experience and area of expertise
3. Company financial security and sustainability
4. Credibility
5. Network and reach capabilities
6. Customer service and support
7. Safety records
8. Technology
9. Pricing
10. Flexibility, agility, and scalability
11. Efficiencies

HOW TO SELECT THE BEST LOGISTICS COMPANY FOR YOUR BUSINESS

If you are considering outsourcing logistics, you need to have the right provider who meets your needs. However, before you choose a company that works for you, you need to identify your particular pain points and establish a detailed outsourcing plan that can help you decide what kind of logistics services can benefit your operations.

If you are an organization that is facing:

• Irregularities across business processes
• Expensive transportation costs to carry goods
• Customers complaints about poor service
• A lack of visibility and reliability across the supply chain
• Inventory mismanagement
• Expensive labor costs for logistics tasks

If the abovementioned pain points are familiar to you, then a reliable logistics partner can help you streamline and expand your business. They can also help reduce risks and costs through their logistics solutions involving transportation, warehousing, and distribution, shipping, and receiving.

Selecting an appropriate service provider

Choosing a suitable logistics company is not as easy as it seems. There are many factors you have to take into consideration before deciding on the right partner.

First and foremost, you yourself have to understand your business’s needs. Only then can you explain them to a third party. Additionally, you have to ensure that the logistic supplier you employ has detailed knowledge about transportation management services, customs brokerage, logistics consulting, freight forwarding, logistics information systems, warehousing, and other related domains.

Listed below is a checklist of criteria you need to keep in mind when choosing the right logistics partner:

1. Make an accurate assessment of your logistics needs

Before starting on a search for a logistics provider you need to determine your exact requirements for an effective supply chain – where are your gaps and inefficiencies?

It is recommended that you form a cross-functional team drawn from your executive management, IT, distribution, logistics, and customer service departments to collectively share their opinions on the gaps in your company’s supply chain. Only after reaching a more comprehensive understanding of your current challenges, as well as matching them to your business goals will you be able to get a fuller picture of what you expect from your partnership with a 3PL or a 4PL.

2. Industry experience and area of expertise

It pays to be mindful of the fact that not all logistics vendors cater to everything, but rather have specialized areas of expertise. This can include transportation, warehousing, distribution, shipping, and receiving, or a combination of one or two of the services. If you are a smaller enterprise that is looking for support across a specific area of your business, you need to find a supplier who matches your needs with the correct kind of capabilities.

When reviewing a portfolio of prospective logistical partners, consider their clients and the kind of industry experience demonstrated by their customer profiles. A portfolio of several large clients shows that the vendor has the capacities, resources, and skills to run their business successfully.

It also goes without saying that as a basic requirement a potential logistics provider should have previous experience in serving other companies in your industry, as well as have demonstratable knowledge and capacity to deal with your business-specific demands.

3. Company financial security and sustainability

A logistic provider’s financial standing and sustainability have a direct impact on your business. It is not uncommon for business partnerships to begin in good faith and later suffer due to poor revenue models. Before taking on an outside logistics vendor, examine their financial background thoroughly. Consider the kind of information that will give you a good sense of their financial acumen. Ask to see a basic set of financial documents, that can include cash-on-hand, outstanding debts, disaster recovery plans, sourcing areas and costs, and customer concentrations.

A major red flag to be mindful of is when a company is not forthcoming with its financial information. Instead, opt for a company with a long-term proven success record. Not only will a stable business partner be able to cope with all possible emergencies and urgent needs but will also be able to provide optimal logistics solutions that you can count on.

4. Credibility

Credibility is crucial if you want to build a long-term logistics partnership. To find a credible logistics partner, you have to investigate their industry and market reputation amongst customers, suppliers, and business partners. Have they consistently honored their business commitments and met expectations? Go through their online customer reviews, testimonials, and market feedback to ascertain how clients feel about them. Reach out into the industry through your resources and get evaluations of their services. Once you have all the information at hand, only then decide.

5. Network and reach capabilities

When considering partnering with a third-party logistics vendor, two of the obvious factors that you need to keep in mind is their network and reach capabilities. In order for the partnership to work, the vendor must not only operate in the regions where you have demand but also in areas and territories that you plan to grow into. A 3PL or 4PL with a wide range of contacts has the additional advantage of helping your business grow into geographically diverse areas. They can act as endorsers and advocates for your services, helping you gain further validity and support.

In the case of international logistics, your vendor should be able to exhibit a cultural understanding of how business is done in those target locations. Work ethic, business rules, and legal requirements vary across countries and even different cities within the same country — a familiarity with these cultural nuances is an essential aspect of a logistics partner’s knowledge base.

It pays to remember that if your logistics vendor runs afoul of international legal requirements, your company will be held accountable as well!

6. Customer service and support

In the fast-paced world of business, a company wants its problems addressed and questions answered on a priority basis. When a vendor is not able to deliver on that front, it can make for a very frustrating partnership and be the cause for broken agreements.

When researching, it is worth the effort to inquire about your logistics suppliers’ customer support options. How much visibility and trackability can they guarantee you across your supply chain? Do you have access to key players, and can the company provide excellent customer service, responsiveness, fluid communications, and effective solutions to urgent issues? These elements are crucial to determining if your logistics provider can prioritize and meet your requirements.

Additionally, be mindful of companies that outsource their call centers and customer services. You don’t want to be stuck having long phone conversations with a person who may not even be familiar with your business environment and market conditions.

7. Safety records

Logistics services are a sum of many moving parts that have to operate in perfect unison to ensure that everything goes smoothly. For this to happen it is imperative that your logistics provider has a proven safety management record and optimal facilities. A logistics vendor that does not regularly meet its safety protocols can cause you huge losses that are hard to recover from. For example, a deadly fire in the transferring warehouse can cause unrecoverable damage to your stocks, inventories, and business.

Some things to keep a note of as you decide. A good logistics provider:

• Regularly offers safety training to their employees
• Places safety warnings and notices in visible places
• Regularly checks its facilities for possible accident-causing materials and supplies
• Documents a company-wide safety standard in line with industry safety rules and regulations
• Ensures safe handling and management of your products throughout the supply chain

8. Technology

Modern-day logistics has gone digital. That means your company’s supply chain data can and should be at your fingertips – at all times. This kind of transparency is non-negotiable in this day and age. A professional logistics provider, therefore, must be equipped with the latest technology innovations to offer transparency and efficiency.

When hiring a 3PL or 4PL provider, it’s a good idea to determine whether they will be able to give your company real-time access to information, including immediate and accurate updates about the location of goods at all times.

They should also be able to provide live information about:

• Purchasing histories
• Sales demands
• Marketing budgets
• Inventory availability
• GPS tracking
• Return freight logistics

You need access to this data so that you are empowered to make quick and cost-effective buying decisions, whilst forecasting and budgeting more accurately.

Additionally, a company that utilizes technologies like warehouse automation, cloud computing, web-based booking and tracking system, etc., can deliver error-free, consistent service with quick reports and efficient distribution systems. Choosing a logistics provider that enjoys great automation technologies means that you benefit from economies of scale, reduced shipping costs, and increased efficiencies. For example, when you partner with a logistics company that can integrate their business system with your ERP, you can submit orders at any time, and track when and where your order gets processed, packed, picked, and shipped.

9. Pricing

Before you decide on a provider you need to be asking yourself if their pricing is transparent or are there any hidden charges? The price charged by a logistics provider is a key metric for you to consider.

You need to track the price per delivery before you make your final decision. Normally, the costs charged by logistics companies should include transportation costs, receiving costs, warehousing fees, pick-and-pack fees, shipping costs, account set-up fees, and the monthly minimums.

When you get your candidates’ quotations for your long-term partnership, you can figure out the best one for your business. Bear in mind that the cheapest provider often comes with many caveats and loopholes. You need to review both price and service quality together before you determine if a vendor is worth it.

10. Flexibility, agility, and scalability

Supply chain and logistics vendors tend to market themselves based on industry expertise. However, it is important to remember that there are key differences in operations even whilst there are similarities in pricing and distribution strategies within an industry. Each business is unique, and a qualified vendor will be ready to tailor their supply chain solutions to your exact business needs and objectives. Moreover, the right kind of logistics provider will also mold their offerings to suit the ongoing business processes at your company. If you want to scale up or down, they need to be able to meet an expected increase and/or decrease in demand.

Moreover, a vendor should also have an informed game plan for how they intend to achieve more with less, and how they can pass on those savings to you. In this regard, you need to know in advance if your logistics provider does the service by itself or sub-contracts to other small local carriers or entities – as well as the possible impact of subcontractors on flexibility and agility.

You also need to be mindful of how a vendor reacts to market conditions. Normally, a good logistics partner will be capable to respond quickly to the changing market needs. They need to be able to offer quick and effective solutions to a customer’s specific situation.

11. Efficiencies

The time it takes to pick an order, pack and label it and ship it can determine how customers see your business, as well as their satisfaction concerning your product. The shorter the time, the more efficient a logistics vendor’s services.

For a logistics company, both the transportation routes and modes play a key role when it comes to the order of deliveries. Having a professional logistics provider also means that they can play an advisory role and consulting function, where they can guide you on more optimal options.

Choosing the right logistics partner is a challenging task – something you should not take lightly. Doing a thorough analysis of your needs as well as detailed homework on options can help you in your search.

To find out about how to select the right logistic support and warehousing solutions to meet your business’s needs, get in touch with us.

A logistics hub in Saudi Arabia thrives as the world continues to adapt to the impact of Covid-19

With tighter margins, reduced capacity, and lengthier supply chains, there are not many businesses that have been immune to the challenges of Covid-19. However, a young Saudi logistics hub is bucking the trend. Despite being in operation for just 18 months, The Eastern Gateway has seen substantial growth since the start of the pandemic.

The secret behind the hub’s success has been its road freight operation, specifically its ability to rapidly reduce clearance times for vehicles entering Saudi Arabia from the UAE. Each year over 245,000 trucks enter Saudi Arabia from Dubai alone, many of which will transit through Saudi onto other countries. Before the pandemic, processing at the UAE-Saudi border tended to be a lengthy affair, far from ideal for businesses transporting time-sensitive goods. Unless these trucks had Saudi number plates, they would often spend 2-3 days awaiting clearance.

Once Covid-19 arrived, it was clear to the Saudi authorities that there was an urgent need to reduce delays within the supply chain. So, an exemption was given allowing companies working with The Eastern Gateway to send sealed trucks from the UAE, straight through the Saudi border and onto the hub. With this system, the trucks are unloaded and make the same return route to the UAE border.

Aside from the customs exemption, there are a number of factors that further increase the speed at which vehicles are processed. The Eastern Gateway has its own internal team of customs officers, where each individual only works with specific customers, creating effective relationships and smoother processes. Another important factor is the hub’s ability to virtually preclear trucks. As soon as a vehicle from the UAE crosses the border on route to The Eastern Gateway, the clearing process can start remotely, removing much of the time-consuming paperwork by the time the truck arrives.

With imports via sea taking at least nine days and imports via air proving too expensive for lower ticket items, the faster alternative provided by The Eastern Gateway has certainly appealed to businesses during the pandemic. In the hub’s first year of trading, over 8,000 trucks were processed which amounts to 192,000 tons of road freight, around double the amount processed at Dammam airport.

Speed is undoubtedly The Eastern Gateway’s USP and a key reason why businesses are joining the hub. It also has ambitious plans to enhance its 3PL capabilities and has more global companies flying their products directly to the hub for distribution across the region.

The burgeoning hub is an exciting addition to KSA’s logistics sector, and definitely one that Saudi businesses should keep an eye on.

SUMMARY

Most rapidly growing businesses, at some point, need to seriously consider the benefits of running their own internal logistics versus outsourcing to a 3PL provider. But debating which option is a better fit for you is largely dependent on your core competencies, areas of focus, and particular pain points.

Whilst a 3PL can add value to your operations, it’s important to learn all the possible logistics services that may be relevant to your business model. Smaller businesses, for example, that don’t have a clear idea of the volume they expect to be storing and shipping are better advised to manage logistics internally before tapping a 3PL provider. Large organizations, conversely, can benefit from a third-party logistics provider’s extended network, advanced technologies, resources, and cost efficiencies to help them increase productivity. In both scenarios, a business needs to do a detailed cost-benefit analysis and study of each option.

This article details the pros and cons of running your own logistics so that you are better able to make an informed decision.

INDEX

1. Questions you need to ask yourself
2. Pros of running your own logistics operations
3. Cons of running your own logistics operations

WHAT ARE THE PROS AND CONS OF RUNNING YOUR OWN LOGISTICS OPERATIONS?

Shipping and logistics operations are an essential part of any business. However, as companies get bigger, the complexity and scope of supply chain processes can get complicated, and handling logistics internally can overwhelm staff and resources.

A failure to handle logistics properly can result in missed deadlines, loss of client confidence, and a decline in profitability. For any business contemplating outsourcing logistics versus managing in-house, you first need to think about the advantages and disadvantages of each.

However, even before doing that, first, consider whether or not your business has outgrown its internal logistics operations. Here are some questions you need to ask yourself:

• Do you need more time for other tasks? Are you failing to give attention to other vital areas of your business?
• Do you want to reduce your back-office work? Warehousing and logistics require the processing of thousands of bills and repeat audits within a short period of time. It’s time-consuming work that needs meticulous attention to detail and is not manageable if you are short on
• Are your customers satisfied with your level of service? Are you meeting all your order and shipment requirements?
• Do you have many logistics liabilities? Are you able to manage inter-connected carrier contracts, vetting processes, safety ratings, insurance certificates, as well as communication between carriers and different actors in your supply chain?
• Is the handling of petty expenses dragging you down? Are smaller expenditures like insurance costs, docking costs, transportation, or fixed warehouse costs, taking up a lot of your accounting department’s time and resources?
• Are your transportation costs very high? Are costs subject to supply chain disruptions? Do you need to take advantage of economies of scale?
• Do you need more efficient tracking and supply chain visibility? Do you have the technologies that give you real-time tracking and visibility of loads? Are your warehouse management systems (WMS) and enterprise resource planning (ERP) systems updated?
• Are you suffering from poor inventory and warehouse management? Are you failing to record and manage your goods-related activity within a physical space?

Pros of running your own logistics operations
Whilst there are many upsides to outsourcing your logistics operations, 3PLs are not the right call for every business. You need to evaluate the size, scale, and specific needs of operations before you opt to outsource. Carefully consider the following advantages before you make your decision.

• Retain control over supply chain operations: When all services are handled internally, a company’s decision-makers have the final say in all matters. The most obvious advantage of handling logistics in-house is the complete control you have over every aspect of your supply chain. You can customize routes, strategies, systems, and technologies to specifically meet your needs. As your business grows, you are also well placed to make system investments to incorporate changes swiftly. What’s more, if you manufacture an unusual commodity or good that needs special logistics solutions, it is easier to handle logistics internally rather than entrusting it to unqualified or generic 3PL
• Complete transparency within every aspect of business: When you keep logistics inhouse, you retain not just control but also transparency along every internal business process – from sourcing, manufacturing, to delivery. In situations when you need important information or quick feedback, communication is much faster and without loopholes.

• Saved costs: It is very important to analyze the needs of your business. Depending on the size and scale of your organization, and your particular pain points, keeping logistics in-house has huge cost benefits. If you already have some scale of in-house logistics running, fine-tuning it is a better option than
• Close contact with merchandiser and materials: Running your own logistics, keeps you in close physical proximity with your merchandisers and material suppliers. This helps you communicate faster and keep a hands-on approach on all aspects of warehousing and
• Synced systems: When logistics is an in-house concern everything is operating off the same management This means that all elements of your inventory management and IT functions seamlessly integrate into each other. The system is tighter, more secure, and less vulnerable to outside industry disruptions and concerns.
• Expertise over every end of service: With your own logistics compliment you have free reign in designing your supply chain operations. Dealing with a separate company, with its own practices and offerings, comes with restrictions on how far they can go in tailoring services to suit a single client

Cons of running your own logistics operations
Whilst the decision to hire a 3PL can seem daunting, modern logistics companies offer such a vast range of customization options that outsourcing becomes not only easier but also more cost-efficient. In fact, repeat studies show that the time and cost of running your own internal logistics operation increases dramatically the faster your business grows.

It goes without saying that a 3PL logistics provider can improve your business in many ways. However, you are well-advised to seriously consider any changes you make to your organization. It’s wise therefore to consider the following disadvantages of keeping logistics inhouse:

• Long-term increased costs: 3PL services might seem more expensive at first glance – especially if you already have your own fulfillment and distribution processes in place. However, over an extended period of time, inhouse logistics lose value from missed economies of scale and infrastructural deficiencies. By struggling with your internal logistics processes, you may be losing money and customers as you fail to perform optimally.
• Reduced efficiency: In-house logistics work well across small distribution networks. However, if your operations require global links, multiple routes, and flexible warehousing options, at some point your capacities will max out. Without expansive networks and consolidated storage and shipment pricing benefits, your logistics reach will shrink, and expenses will start eating into
• Limited means to mitigate unforeseen circumstances: It takes large, worldwide conglomerates to function as both manufacturer/ producer of a product as well as its distributor. Those kinds of industrial monopolies are few and far between. For most businesses, disruptions to products, materials, or other items along a supply chain can make or break a company. You need to consider carefully if your business is equipped to handle unforeseen circumstances.

• Old technology: Whilst every industry needs to undertake regular digital upgrades, every business owner knows that they are expensive investments that require money, time, and energy to incorporate. Given how quickly processes change, being stuck with old IT systems can slow down inventory management, shipment tracking, automation, and If you’re handling logistics operations in-house, it falls to you and your team to stay up to date on these ever-changing systems. It is hard to keep up with the variety of new platforms, tools, machines, and software that 3PL providers use to remain competitive.

It pays to be mindful of some of the technologies that are changing logistics:

• • Warehouse robotics can reduce labor costs, safety risks, and improve efficiency by getting jobs done by
  • Real-time tracking platforms and web portals allow visibility into every step of the supply chain to respond
  • Transportation management systems organize the planning and execution of supply chain processes to find the best warehousing and freight
  • Inventory management software and mobile applications provide real-time information to retailers and distributors on the status of their
  • Automatic guided vehicles (AGVs) use radio waves, magnets, wire, or lasers to follow a set path along warehouse floors to complete
  • Cybersecurity systems keep your data safe from malicious factors in the industry.
  • Barcode scanning systems have become a necessity for any warehouse, storage center, or distribution center to track the movement of goods as well as the information relating to
  • Autonomous delivery, driverless vehicles, and unmanned aerial systems are being used to make contactless deliveries and have become especially relevant in the current
  • Shortage of expertise and experience: If 2020 has taught us anything it’s that disruptions are an inevitable part of industry cycles. The warehousing and logistics problems that have arisen as a result of the COVID-19 pandemic have proven that we need out-of-the-box solutions, industry expertise, and experience to counteract them. For any company that doesn’t specialize in logistics, you’re likely to be stepping out of your comfort zone when you take on shipping, fulfillment, distribution, and other supply chain responsibilities. This is a huge added burden and is often better handled through professional 3rd and 4th party logistics
  • Poor navigation of supply chain regulations: Shipping and logistics aren’t just about figuring out the best way to carry something from point A to point It also means dealing with myriad rules that restrict and regulate movement along highways and across borders. These include government regulations, export-import taxes, customs brokerage rules, freight audits, picking and packing fulfilments, labeling, assembly and knitting processes, and reverse logistics as a regular part of everyday business. It takes an expert to know how to navigate these rules without a hitch. Whilst you might have a good handle on the shipping requirements for your items, businesses looking to expand their scope of products, or forge into new markets, will have to grapple with unfamiliar regulations. Conversely, 3PL providers are better placed to navigate international supply chain regulations and improve your existing processes.

• • Reduced networks and logistical infrastructure: Another big disadvantage of managing your own logistics is that you have access to smaller network routes with reduced warehousing and distribution If you are content with where you are as a company and have no ambitions for expansion, this is a safe way to proceed. However, any company looking to grow knows that they need to leverage a wider network in a cost-effective way to keep their products moving along the supply chain.
  • Poor routing and inventory management: Logistics management is both an art and a science. It optimizes inventories and route management through advanced systems developed over years of experience. It’s not every businesses’ cup of tea to make these critical processes work for themselves and for their customers. Poor logistics can reduce customer satisfaction and seriously impact your
  • Scaling a business: One of the main reasons that companies look to outside help for their logistics services is to help their business grow. Setting up your own distribution channels, locating and securing new warehouses and storage facilities, and hiring and training new workers to handle the influx of shipments take your energies and focus away from your core business. If your volume has outpaced your ability to effectively manage it, you are better off outsourcing logistics and support.

• Missed opportunities to network: Some of the disadvantages of managing logistics inhouse are less concrete or immediate than But when weighing the pros and cons of 3PL providers, it’s important to remember that any new business partnership can pay dividends down the line. Forming a relationship with a respected, competent 3PL company and its representatives can help you build a wider network of contacts that you would otherwise miss out on. Keeping logistics in-house can lead to insular processes that can halt differing perspectives.

There are many reasons why you should seriously consider the pros and cons of outside fulfillment and distribution services. If you want to focus more narrowly on core competencies and on growing, you should consider tapping a 3PL company for your logistics needs. Factors to consider in making the decision to switch include costs, efficiency, scale, flexibility, level of control, customer service, and much more.

Smaller businesses and larger ones will prioritize different elements. There’s no one right answer to this question – rather, it’s about finding out what’s the best logistical solution for your business.

To find out if outsourcing to 3PLs and 4PLs is the right fit for your company, get in touch with SBT here.

The Jeddah-Jizan coastal road is being upgraded into a highway as the Kingdom’s Ministry of Transport has resumed construction on the project. The contract for expansion works extends over 46 months, with contractors conducting upgrades to convert the Jeddah-Jizan coastal road into an expressway with 6 lanes and 9 intersections that span a length of 465 kilometers.

The project’s expansion work is among the 95 bridge, causeway, road, interchange, and tunnel developments currently underway in Saudi Arabia. Providing a land route from Jeddah to the south of the country, the expansion scheme is a module of a two-part plan to develop roads in Jizan worth $2.6 billion (SR10 billion). At present, the government is seeking Expressions of Interest (EOIs) from both local and international contractors for the project.

A report by the Saudi Gazette states that the scheme will include the expansion of the Jeddah-Jizan coastal road worth $1.06 billion, as well as the construction of a 136-kilometer-long road between Asir and Jizan worth $1.59 billion. The latter will also have a duration of 46 months and will comprise 55 bridges spanning 19 kilometers. Back in 2019, these projects were announced by Prince Turki bin Talal at a ceremony.

Both the Jeddah-Jizan highway and the Asir-Jizan road were first tendered in 2015. The work, however, had to be deferred as a fall in oil prices changed the course of government expenditure. Presently, both expansion developments have been tendered and will be awarded by early 2021. Completion is scheduled for the first quarter of 2025.

An Orient Planet Research report titled ‘Fast Tracking Development: Road Infrastructure in GCC’ highlights the Kingdom among the top 12 global markets for infrastructure investment.  Infrastructure upgrades and road and highway expansions worth an estimated $15.3 billion are currently at different stages of pre-construction and construction stages in the country.

Of these projects, the largest one is the cross-country King Hamad Causeway worth approximately $3.5 billion. Planned as a strategic artery, the highway is expected to accommodate growing economic activities between Bahrain and Saudi Arabia after expansion work is complete. The current phase involves a 48 dual-carriage lane bridge measuring 1.5-kilometers, with a capacity for up to 4,000 vehicles per hour. The expansion is also being undertaken in such a way so as to provide custom areas capable of accommodating up to 400 buses and a waiting area for up to 400 trucks.

Similarly, the Saudi-Oman Highway, a 680-kilometer road that links Oman with Saudi Arabia is scheduled to facilitate easier travel through the two countries. Opened in October 2018, the route is expected to bring in trade and tourism by reducing distances that allow for smoother and faster travel. Another cross-country project, the Mafraq-Ghuwaifat International Highway is a 327-kilometer, $5.3 billion project that links Abu Dhabi to the Saudi border. The highway project aims to facilitate commercial transport between UAE and Saudi Arabia via Abu Dhabi’s western region.

Summary

Logistics services are critical for any business involved in the transportation of goods. As companies grow, processes become more complicated. Deciding if it is the right time to outsource your logistics requirements differs from business to business and depends on many factors.

At some point in a business’s lifecycle, managing logistics in-house becomes too taxing, especially if there are other matters requiring attention. What’s more, the cost of logistics and transportation is increasing every year. If you are bogged down with unnecessary and time-consuming logistics paperwork, have trouble fulfilling orders, and are facing exorbitant shipping costs, outsourcing to a 3PL can prove to be a wise decision in the long run. Specialized logistics providers offer product-related operations, like transportation, warehousing, and delivery, on a regular basis. They can offer customized superior outsourcing strategies and transition plans at cost-effective rates.

You can also rely on 3PLs to deliver real benefits, which are scalable and customizable for your business goals and requirements. Additionally, by partnering with a logistics company you can benefit from existing transportation management systems that provide visibility and real-time information and analysis. This means that in addition to cutting costs, outsourcing transportation management clears up more time to focus on your core business.

This article highlights five critical points to consider before committing to a third-party logistics provider. Read on to find out more.

INDEX

1. WHAT ARE YOUR PAIN POINTS?
2. WHAT ARE YOUR REASONS FOR OUTSOURCING YOUR LOGISTICS?
3. HOW DO YOU SELECT AN APPROPRIATE SERVICE PROVIDER?
4. HOW CAN YOU BENEFIT FROM YOUR 3PLs CORE COMPETENCIES?
5. KEY CONSIDERATIONS

OVERVIEW

5 WAYS TO DECIDE IF IT’S THE RIGHT TIME TO OUTSOURCE YOUR BUSINESS LOGISTICS REQUIREMENTS

Successful organizations are built with meticulous attention to detail. For many companies, the thought of outsourcing operations feels like relinquishing control. It is understandable that as a business owner, you do not want to add to your costs with outside vendors who perform tasks usually managed by internal staff and resources.

However, ignoring potential problems and areas for improvement can create an inefficient workplace that can be detrimental to your company’s growth and profitability.

Outsourcing is largely dependent on where you are as a business and the pain points you are experiencing. However, it’s worth noting that in the last decade, outsourcing logistics has emerged as a strong trend among manufacturers and sales organizations involved in the transportation of goods. Research shows that more than 80% of current Fortune 500 Companies outsource to third- or fourth-party logistics (3PL/ 4PL) partners to increase their speed to market[1].

Whilst these businesses have had considerable success through outsourcing, you may want to consider your options carefully before deciding if a logistics partner is needed for your enterprise. This will not only help you find the right provider but also avoid an expensive transition cycle.

Here are five things to keep in mind before you commit to a 3PL provider.

1. WHAT ARE YOUR PAIN POINTS?

Traditionally, transportation management is low on a company’s priority list as the core business takes up most of the focus. However, recognizing your business’s weaker areas can help you manage inefficiencies and save costs before real issues develop.

Do you identify with the following pain points?

• Are there irregularities across business processes?
• Do you face expensive transportation costs to carry goods?
• Do your customers complain about poor service?
• Do you lack visibility and reliability across the supply chain?
• Is there inventory mismanagement with shortfalls or excesses?
• Is labor for logistics tasks too expensive?

2. WHAT ARE YOUR REASONS FOR OUTSOURCING YOUR LOGISTICS?

Because outsourcing has many advantages, a business may have different reasons for partnering with a 3PL. Outlined below are some reasons why you may want to hand over logistics operations to an outside organization:

• Do you need more time for other tasks? If you are overwhelmed with managing logistics services in-house, outsourcing to a company with in-depth expertise and experience helps you free up resources and focus your attention on other vital areas of your business.
• Do you want to reduce your back-office work? Outsourcing logistics back-office tasks to professional vendors frees up your time and increases productivity. Most 3PL service providers have operating systems and sufficient manpower already in place.
  Through repeat business with other companies like yours, they have streamlined procedures for optimal execution. For example, they can process thousands of bills and audit them appropriately within a short period of time, which is not manageable for most companies relying on in-house resources.
• Do you need to enhance your customers’ satisfaction? Most service providers specialize in logistics services only. They know the domain and develop innovative ideas and strategies to reduce costs for you and your customers, as well as deliver a better retail experience for your clients. This leads to enhanced customer satisfaction, which in turn builds your brand’s reputation.
• Do you want to reduce your logistics liabilities? Logistics service providers manage all inter-connected carrier contracts, safety ratings, and insurance certificates. They already have back-office staff working with invoicing, carrier vetting processes, etc.
  This means that you face minimal liabilities if things go wrong. Your 3PL partner takes care of all coordination and communication between carriers, saving you from unnecessary hassle.
• Is the handling of petty expenses dragging you down? Smaller expenditures, like insurance costs, docking costs, transportation, or fixed warehouse costs, are all taken care of by logistics service providers. You do not have to deal with petty expenses, thereby freeing up your accounting department’s time for more pressing business-related work.
  
• Do you want cheaper transportation through better economies of scale? You might end up spending a lot on trying to scale up your existing team to perform logistics services in-house.
  Conversely, a third-party logistics provider can help you achieve economies of scale as they specialize only in providing logistics services. This means that they can provide a lower cost for shipping the same goods and can easily ramp up or ramp down facilities to meet your customer demand within a short period of time.
• Do you need more efficient tracking and supply chain visibility? Most 3PLs are technologically adept and allow for real-time tracking and visibility of loads. Some providers also offer integration with warehouse management systems (WMS) and enterprise resource planning (ERP). By being able to track your shipments with ease, you spend less time worrying about delivery timelines and more time focusing on other core areas.
• Is your business suffering from poor inventory and warehouse management? Professional 3PLs have WMS software that can help you record and manage all goods-related activity within a physical space. This includes remote monitoring of goods – picking, packing, shipping, and receiving. This means that you are ensured more efficient inventory management as well as the safety of your goods.

3. HOW DO YOU SELECT AN APPROPRIATE SERVICE PROVIDER?

If you are considering outsourcing logistics, you need to identify the right provider. A detailed outsourcing plan can help you decide what kind of services can benefit your operations.

Specialist logistics companies usually have detailed knowledge about transportation management services, customs brokerage, logistics consulting, freight forwarding, logistics information systems, warehousing, and other related domains.

Here are some steps you should take when choosing a provider:

• Review critical aspects like gap analysis, cost analysis, supply chain operations, and feasibility of outsourcing.
• Identify the service providers’ expertise – number and capacity of warehouses, transportation system, procurement process, and customer service channels.
• Check if major logistics processes, such as pre-receiving, receiving, inbound inspection, pick up and drop, etc., are in place, and to what extent.
• Perform a competitor analysis for cost-to-benefit ratio and check their customer interaction levels, back-office support, exceptional incidence rates, performance index, etc.

4. HOW CAN YOU BENEFIT FROM YOUR 3PLs CORE COMPETENCIES?

In today’s economic environment, businesses everywhere are looking for a competitive advantage. If transportation management isn’t a core strength for your company, it makes sense to outsource. Outsourced warehousing and distribution allow you to leverage some of the following 3PL core strengths:

• Peace of mind: Nothing delivers peace of mind like knowing you have trustworthy partners in business. A reliable logistics service provider, experienced in all modes of transportation, such as road, rail, air, and sea, is able to provide professional service, as well as cost-effective and efficient cargo transport solutions.
• Benefit from intelligent logistics: 3PLs have a good relationship with carriers to ensure that you get the space required. They control and monitor your order fulfillment process and arrange crucial elements, such as storage of cargo, distribution, and delivery as per your orders, without you having to invest in these assets or micro-manage. They can also drive efficiencies across logistics channels to provide you with real-time visibility of your cargo while in transit.
• Better pricing: A professional logistics provider can negotiate freight prices using their buying power (usually supplemented by their volumes) to get you better rates.
• Improved supply chain operations: The business of supply chain management is a science that increases performance and efficiencies through thoughtful and strategic engineering. A professional logistics provider will develop solutions to optimize your current operations and offer customized logistics networks that mitigate your business’s supply chain risk. They can implement best practices, built on analytical and engineering expertise.
• Take advantage of built-in technology infrastructures: Businesses require complex supply chain operations, with visibility and efficiencies gained from warehouse and transportation technologies. 3PLs are specialized businesses that excel at these tasks.
  A full-service 3PL is usually equipped with technology that can be difficult for a company to acquire, learn and manage on its own. They forecast and plan, manage labor, reduce inventory, and deliver on time. A full-service logistics provider will have these systems in place and will be able to integrate your logistics operations into them. This will provide you with 24/7 visibility and business intelligence systems that may not otherwise be available to you.
• Smarter warehouse real estate solutions: Warehousing and distribution solutions, such as labor and staffing optimization, can greatly benefit your business as you don’t have to worry about storage space for cargo.
  WMS offers inventory visibility, optimization, and automation of warehousing and distribution processes. Your logistics partner can meet the demands of your business and scale offerings up or down as per your requirement.
• Grow your network and opportunities: Through a logistics partner, you can gain a global network and footprint. This gives you credible access to agents and reliable vendors across wider regions.

5. KEY CONSIDERATIONS

If you decide to outsource logistics, you must be sure you’re doing so for the right reasons. Outsourcing is not always the way to improved logistics services. Much depends upon the performance of your in-house operation and the ability to leverage it for your competitive advantage.

Are you better off serving yourself, or having a third party take care of logistics on your behalf? Consider the following four questions carefully before you commit.

• Does outsourcing guarantee saved time and money? The answer to this question should be “yes,” but that doesn’t mean it should be taken as a foregone conclusion.
  The key to saving by outsourcing logistics is to find the provider that’s best matched to the unique needs of your supply chain. Remember, too, that it’s not just your current needs that matter but your expectations as to how they might change over the next few years.
• Will outsourcing logistics make your business more agile? Some companies choose to outsource logistics as a way to increase agility. After all, with another company handling your warehousing and transportation, you can scale your logistics operation up or down without the complications that arise with an internal workforce.
• Will outsourcing logistics improve your core operations? What are your core operations? If your business is centered on sales or manufacturing, you might want to outsource logistics in order to remove supply chain distractions and concentrate more effectively on those core activities.
  If your company has spent years building a customer service reputation, though, you might stand to lose more than you gain by entrusting distribution services to a third party.
• Will outsourcing logistics reduce supply chain risk? It’s true that third-party logistics providers can shoulder a lot of your supply chain burden, helping to protect your company from liabilities and uncertainty. It’s important to remember, though, that to some extent, handing off your logistics activity to a service provider introduces new risks, which you must be confident will be managed effectively.
  This is especially important regarding the satisfaction of your end customers. There is little benefit to improved supply reliability, for instance, if you are losing customers because of poor service from your 3PL. You need to be sure your outsourcing decision will reduce net risk, and not just exchange one set of potential problems for another.

OVERVIEW

Whether you are a small business or a major conglomerate, you have your own scope of activities at which you excel. Perhaps, you’ve considered your logistics operations to fall under your scope. However, shipping, freight, and logistics are complex processes that involve monitoring, documentation, and cumbersome dealings with government and regulatory bodies. For most manufacturing and trading companies, shipping and freight is not a core strength but is something that has to be done as a part of the business.

Before committing to an outsourced provider, you may want to cross-check with your 3PL provider about their capabilities and experience with:

• KPI developments
• Implementation and development of quality management systems
• Dedicated continuous improvement and cost out project teams
• OSHA regulations and standards
• Environmental health and safety (EHS) best practices

Outsourcing to 3PLs is a growing trend as they offer superior logistics strategies at cost-effective rates. Already an estimated 42% of global businesses are outsourcing to logistics service providers.

Where business leaders previously questioned outsourcing, now they debate how much should be outsourced. Whilst businesses have subcontracted warehousing and fulfillment tasks for years, today more companies are looking for providers that can design, build, run and measure logistics functions for them.

For businesses looking to scale operations, partnering with specialist 3PLs can be a good idea. 3PL operators are well equipped to adopt new and effective warehousing capabilities that can give businesses like yours an edge in a challenging environment.

To find out about third-party logistic support and warehousing solutions that can help your business grow, get in touch with SBT here.

Summary

As companies grow, their distribution and warehousing needs increase. Eventually, there comes a point when alternative methods should be incorporated into logistics processes to meet demand. One of the most effective solutions is to integrate technological systems into warehousing and distribution facilities. These systems can be implemented through digitalization, automation, and artificial intelligence, potentially helping you achieve greater efficiency, reduce costs, improve consistency, and control fulfillment times.

That said, automation may not be the best choice in all cases, and in this article, we are going to discuss the pros and cons of digitalization. It’s important for companies that are experiencing growing pains in their warehousing and distribution operations to consider all facets of adopting automation, including the pros and cons as they relate to your specific business. Whilst there are many benefits that can be obtained through digitalization, it is not a magic solution that solves all problems. As with any technology, it comes with its limitations. Therefore, understanding what considerations need to be made is critical to making it work in the best way for your company. 

INDEX

1. NEW TECHNOLOGIES IN USE IN LOGISTICS
2. PROS
3. CONS
4. QUESTIONS YOU NEED TO ASK YOURSELF
5. DIGITAL SOLUTIONS THAT CAN WORK FOR YOU

TECHNOLOGY IN LOGISTICS: IS IT REALLY WORTH THE INVESTMENT?
5 THINGS YOU NEED TO KNOW

Now more than ever, technology is pushing boundaries and changing how the world does business. Today, more people find it easier to shop online instead of in retail stores, and distributors are constantly racing to keep up. Customer demand for faster deliveries is pushing warehousing professionals to overcome packaging and inventory challenges to move goods more efficiently.

Whilst digitalization makes it easier to meet demand and reduce human error, like any technology it comes with its disadvantages. If you are an industry professional debating whether technology can help your business, you must educate yourself on what options are open to you.

1. NEW TECHNOLOGIES IN USE IN LOGISTICS

Here are some of the recent technological and digital advances that are shaping the logistics industry. Familiarizing yourself with these options will help you decide which ones suit your needs.

• Automation is the process of using specialized equipment, storage, and retrieval systems to perform repetitive tasks that are being handled by unskilled or semi-skilled labor. Automation can be integrated at varying levels within warehousing and logistics to improve operational efficiency – from moving goods within spaces, package labeling, to streamlining sorting systems.
• Robotics refers to the use of automated systems, robots, and specialized software to transport materials and perform various tasks to further organize warehouse processes.
• Drones are aircraft devices that can fly and carry materials. Whilst they are recognized more for their potential in coordinating new forms of express consumer delivery, they are increasingly used in warehouses for patrol and scanning functions.
• Cloud computing allows storage and access of data by multiple parties and vendors at the same time. It has the potential to lower costs in IT maintenance, increase information accessibility, and provide quicker solutions.
• Internet of things (IoT) or connecting physical items to internet-enabled devices and systems is gaining popularity in warehousing. Today, the logistics industry uses IoT in diverse ways, from temperature and humidity sensors to monitoring quality control, to RFID tag sensors­­­­­ that can detect tampering on a product.

PROS AND CONS OF USING TECHNOLOGY IN LOGISTICS

However advanced, no technology is perfect. That is why you need to be made aware of the pros and cons of how artificial intelligence is being applied across warehousing and logistics.

2. PROS

• Automation: Automation is the most important benefit of using artificial intelligence (AI) to control supply chains. AI-powered warehouses mainly rely on robots to store, locate, and select goods.
  By introducing automation to your logistics processes, pre-programmed machines can perform most of the routine repetitive work, thereby speeding up processes. This has the potential to take productivity to a whole new level. It also has the following advantages:
  – Reduces operating expenses, overheads, and unnecessary costs from errors.
  – Increases efficiency and productivity of human resources.
  – Minimizes manual processes and handling of stock-keeping units.
  – Maximizes warehouse space utilization, layout, and flow.
  – Coordinates how material handling equipment, such as barcode scanners and mobile computers, are being used.
• More efficient inventory management: By incorporating digital warehousing management systems into your business, you can accumulate, filter, and analyze large databases faster and more efficiently.
  Cloud-based AI can further improve inventory management as it allows for remote coordination and information sharing. Smart AI systems can analyze consumer habits and manage supplies to meet demands whilst keeping stocks to a bare minimum. This helps you operate at maximum utility without disrupting the supply chain.
• Timely delivery: Digitalization and smart warehousing management systems make logistics simpler and more accurate.
  New technologies can track multiple factors simultaneously, such as weather forecasts, alternative routes, traffic, delays, etc. making them capable of creating highly accurate estimations. This allows you to deliver more quickly and reliably.
• Improved safety: By introducing digital automation across logistics, supply chain processes get more organized and workplace safety is ensured.
  Effective internal procedures create a safer environment, whereas the use of machines and robots eliminates the risk of any manmade accidents.
• Reduced operational costs: By adding AI to your supply chain, work becomes automated and you can employ fewer people.
  As machines can work 24/7 without a break, there are fewer mistakes, and workplace incidents decline. Your supply chain becomes more profitable, benefitting you in the long term.
• Better customer service: Digitalization allows for chatbot technologies. Fast becoming the norm across most business websites, chatbots can help companies save on customer service costs by speeding up response times and answering 80% of clients’ routine questions.
  Artificial operators are available around the clock and they get smarter with each conversation, so they are likely to fully replace human agents in the near future. Your logistics operations could be available 24/7 to answer questions and queries in real-time and deliver better customer service and response.

3. CONS

Whilst there are many benefits of incorporating technology and digitalization to your warehousing business, you need to be made aware of the downsides as well, which can include:

• Skill gaps: Upgrading to new technologies to allow more AI integration requires time and expert knowledge, which can be a big burden for companies.
  If you are switching to digital systems, make sure you understand software development, data science, and how the upgraded systems work. Otherwise, you will be left with a lot of tech and no one who can operate it!
• Technology needs operators: Although capable of doing many great things, AI is not a self-sufficient system.
  On the contrary, you still need to control it and give it inputs to ensure effortless functioning. This means hiring tech professionals, who can be an additional burden to your wallet.
• Difficult to spot mistakes: AI systems not only process information but are also learning all the time to become more intelligent.
  As you become dependent on complex monitoring systems, it is sometimes harder to identify mistakes when they occur.
  
• Security issues: Digital systems monitor and administer lots of sensitive business information.
  This can be a potential threat if you don’t invest in high-quality protection systems with state-of-the-art safety mechanisms. A single security breach can jeopardize supply chain performance.
• Not suitable for all businesses: Digitalization and automation of processes provide the greatest benefit when used at a consistent level – near to maximum capacity. For businesses that experience varying levels of order volume, such as those engaged in markets impacted by seasonal factors, this can be a big problem.
  In such cases, automation systems are operating significantly under capacity during the down seasons. Equally, during peaks in the business cycle, the warehousing capacities are incapable of managing surges. In either case, the result is an ineffective allocation of resources that can have a ripple effect through other areas of the business.
  
• Substantial monetary investment: Initial and ongoing costs of digitalization can simply be too much for smaller warehouses to take on.
  Whilst modern technologies and robots help lower labor costs by eliminating the need to pay for health insurance and employee benefits, you still have to pay for digital maintenance and programming. Since skilled programmers are scarce, you could be paying a hefty sum to maintain your digital technologies, robots, and drones, etc.

4. QUESTIONS YOU NEED TO ASK YOURSELF

Having reviewed the pros and cons, you may still be wondering if introducing technology can help your warehousing enterprise. Here are some questions you need to ask yourself before you commit to investing in AI and digitalization:

• Are your current processes labor and time-intensive?
• Are you struggling to get orders out on time?
• Is order fulfillment inaccurate?
• Have you had to increase headcount to check and recheck order accuracy?
• Can you trust your inventory levels?
• Are counts on inventory correct?
• Do your legacy solutions require too much upkeep?
• Are your customers unhappy no matter what you do?

If the majority of your answers were ‘yes’, then you need to consider introducing digital processes to better streamline your productivity.

Essentially, warehouse digitalization is needed when the burden of handling warehouse processes manually, with paper, spreadsheets, tribal knowledge, etc., has exceeded the needs of the organization. When this happens, you may need to rethink your options.

5. DIGITAL SOLUTIONS THAT CAN WORK FOR YOU

As businesses like yours grow and evolve, they experience a wide variety of pain points when it comes to certain aspects of logistics operations. When this happens, it is important to recognize the signs and consider how digital automation may be a smart move.

Digitalization can help you address issues and set the stage for future growth and success. If your business is experiencing some of the recurring problems we mentioned above, then it may be wise to consider an investment in automation and technology.

Here’s how five leading logistics technologies can be incorporated into your business to help you improve your warehousing capabilities:

• Drones for enhanced monitoring
  Whilst Saudi Arabia still has some way to go, drone capabilities are expanding in conjunction with international demand for rapid distribution, which has led to increased interest in the multiple uses and potential of drones. For your warehousing needs, drones can help monitor and patrol premises smarter and faster, delivering increased vigilance and security. This means you have more eyes on the ground that can do the job without tiring or taking breaks.What’s more, with drones being put to more innovative uses regionally, their potential is huge across 3rd-party partnerships. This can offer an untapped area of profit for companies that can provide this service.
• RFID tags to expand inventory visibility
  Radio-frequency identification (RFID) tags use electromagnetic fields to automatically identify and track tags attached to objects. An RFID tag consists of a tiny radio transponder, a radio receiver, and a transmitter. When triggered by an electromagnetic interrogation pulse from a nearby RFID reader device, the tag transmits digital data, usually an identifying inventory number, back to the reader. Some RFID tags are powered by a battery and can be read at a greater range from the reader (up to hundreds of meters). Unlike a barcode, the tag doesn’t need to be within the line of sight of the reader, so it can easily be embedded in a tracked object.With the rise of the Internet of Things (IoT), smart warehouses can provide real-time, accurate visibility into inventory situations, locations, and the supply chain as a whole. Internationally, the use of active and passive RFID tags has increased the amount of product data that can be accessed remotely for any individual item.

  With RFID tags, warehouse operators know where their inventory is and where it’s going in real-time. This advanced location tracking can greatly improve the speed of order processing as it provides a new level of reliability in planning.

  

• GPS capabilities for better deliverability
  By coupling RFID tags with GPS, it is possible to track shipments in real-time (and with greater precision) during transportation. Adding these advancements to your logistics solutions can provide you with a consistent, end-to-end view of the logistics delivery channel. Better visibility facilitates improved communication between retailers, distribution centers, and end consumers. This will help you deliver faster and to greater customer satisfaction.
• Artificial Intelligence technology to boost efficiency and accuracy
  The use of collaborative mobile robots within warehouses boosts picking efficiency and accuracy. These mobile warehouse robotics systems are capable of choosing the best movement routes whilst eliminating longer paths in the warehouse.
• Automation-as-a-service – scaling to meet shifting demands
  Balancing supply and demand is an important function for warehouse owners to maximize utilization from their space. However, doing so requires flexibility. That’s why hiring automation-as-a-service is on the rise internationally. This means introducing part-automation to your warehouse to readily scale resources up or down to accommodate shifts in demand. These systems can provide more flexibility when it comes to managing costs, priority deliveries, and distribution channels. For instance, international companies like 6 River Systems allow warehouse operators to rent collaborative robots during a peak period and return them when demand returns to baseline levels, avoiding major investments in equipment that would sit idle during non-peak periods. This is something worth investigating as it allows for a softer introduction to digitalization for you to test the waters.It’s clear that innovations in logistics technology will continue to have a noticeable impact on the entire supply chain landscape well into the future. Warehouse operators who are able and willing to continually adopt new and effective warehouse capabilities will give themselves an edge in a challenging environment.

To find out about efficient warehousing solutions and logistics support that can help your business grow, get in touch with SBT here.

Maersk and MSC, the world’s leading maritime shipping companies, have chosen the King Abdullah Port as a logistics station for two new shipping routes, launched by the two companies, on the Red Sea.

The first shipping route, i.e. Maersk TP17, and MSC Americas, connects East Asian countries like China and Singapore, with the east coast of the USA. This rote will pass through King Abdullah Port as one of the fastest shipping routes connecting Eastern Asia, with the West, through the Red Sea.

The second route, i.e. Maersk AE15, and MSC Tiger, connects East Asian countries with South-Eastern Europe. Passing through the King Abdullah port, routes from South Korea, China, and Singapore will be linked to Turkish and Greek ports, the southeastern gateway to Europe.

The Kind Abdullah Port enjoys a strategic location, playing the role of an important link between the East and the West. The port has the potential to play a major role in the trade exchange between the world’s continents, hence supporting the global shipping industry.

The decision of Maersk and MSC to choose King Abdullah Port as a logistics station corroborates the port’s strategic significance.

King Abdullah Port is already one of the world’s 100 largest ports despite operating for less than four years. The port has quickly become the second-largest container port in the KSA within its limited years of operation. By assuming the role of an important logistics station at the Red Sea for two new shipping routes, the King Abdullah Port has been transformed into a major hub for global trade. The port will serve as the main shipping route between the East and West, thereby facilitating trade for major world economies.

Apart from the strategic advantage that its geographical location provides, the King Abdullah Port also rivals leading ports of the world due to its advanced, state-of-the-art infrastructure. This structural advantage will undoubtedly solidify its role as a link between Asia, Europe, and Africa.

Built-in accordance with the latest industry specifications, the King Abdullah Port is stocked with cutting-edge equipment, including the world’s deepest 18-m berths. These berths enable the port to service giant container ships. Currently, ten of the largest shipping lines work at the port to offer integrated services to importers and exporters.

While the port serves as a major international shipping station, it also continues to run local operations. The port not only ensures the continuity of international shipping through the strategic advantage of its geography, but it also guarantees the supply of goods inside the Kingdom through its access to highway networks connecting major cities to the port.

Cities such as Jeddah, Yanbu, Makkah, and Madinah are ensured a supply of goods to meet consumer needs through the speedy operations of the port. These goods include food, medication, and medical equipment. Even though the constraining times of COVID-19, the port’s efficient services and enhanced terminal facilities enabled the KSA to streamline its supply of necessary goods without major impediments to imports.

King Abdullah Port is the region’s first port to be fully owned, developed, and operated by the private sector. The port is run by the Ports Development Company and has been listed as the world’s fastest-growing container port. Its development plan is progressing steadily and with developments such as the Maersk and MSC decision, the port will mark its position as one of the leading ports worldwide. The port can reasonably depend on its facilities, technology, as well as proximity to a bonded and re-export zone and logistics park, for growth in the future.

Riyadh’s long-awaited metro service is poised to begin operations in the coming months, according to recent industry reports. The six-line metro is said to be launching lines 2, 3, and 4 soon, while the remainder will start later in the year.

The USD 22.5 billion project, which was jointly awarded to three consortiums (BACS, Arriyadh New Mobility (ANM), and FAST) in 2013, is being completed within budget and on time, according to Alwalid Alekrish, Deputy CEO for Programs and Projects with Riyadh Development Authority.

“We will open lines 2, 3, and 4 first, which is one line from each consortium. This is logical because there is a lot of work to do. This will be just a few months before the remaining lines open. By the end of 2020, we will have launched the whole system,” Alekrish said.

The inaugural lines will connect King Abdullah Road to the King Fahad Stadium (Line 2), Madina Al Munawara to Rahman Al Awal Road (Line 3), and King Khaled International Airport to the new King Abdullah Financial District (KAFD) (Line 4).

The remaining lines will run from Olaya Street to Al Hayer Road (Line 1), King Abdullah Financial District to Prince Saad Ibn Abdulrahman Al Awal Road (Line 6), and King Abdul Aziz Road onwards (Line 5).

Passengers will be able to access the metro system through a network of 85 stations, including four main stations — namely, King Abdullah Financial District, Olaya, Qasr Al Hokom, and Western — where passengers could change lines or transfer to a bus.

The bus network, also part of the Riyadh Public Transport Project, will travel along routes amounting to 1,900 kilometers and stop at 3,000 locations.

The heavy construction for the Riyadh Metro project has been completed, and road detours are being removed. While all trains have been delivered and test running has been taking place on lines 2, 3, and 4, operators are recruiting staff for the launch.

The metro network is expected to transport 1.2 million passengers every day. In addition, it is hoped the network will contribute towards the reduction of pollution and easing of traffic in Riyadh.

With the Riyadh Metro close to launch, development authorities are already planning its expansion with a bid for proposals for preliminary designs having taken place in June. In Phase 2 of the Riyadh Metro project, it is expected that Line 7 will be introduced to connect Diriyah Gate with other hotspots like King Khaled International Airport and King Salman Park. Line 2 will also be extended to cover Diriyah Gate and Misk Foundation City. The metro network will extend into Qiddiyah entertainment city in this new phase of expansion.

As economies around the world continue to grapple with trade obstacles created by the COVID-19 pandemic, Saudi Arabia has remained steadfast in its mission to strengthen the kingdom’s logistics sector.

As part of Saudi Ports Authority (Mawani)’s  National Industrial Development and Logistics Program (NIDLP), KSA has launched three new shipping lanes this year as part of its ongoing efforts to spearhead industrial development and transform the kingdom into a leader in global logistics. NIDLP also aligns with the Saudi Vision 2030 transformation plan.

It is encouraging for the local logistics sector that the expansion of sea lanes has remained uninterrupted during the COVID-19 crisis, with the latest routes being introduced in May and June 2020. Local supply chains will benefit from a boost in KSA’s connectivity with neighboring trade partners like Jordan and Egypt as well as further regions like East Asia.  It also sets the stage for KSA to market itself as a regional distribution hub in the Gulf and East Africa areas, while improving its own export potential.

Let’s take a closer look.

The new trade route between Jeddah and Jordan, Egypt: Operating since early June, this is the latest of three shipping lanes to launch this year. Originating from Jeddah Islamic Port, the lane will allow commercial ships to make weekly trips to Jordan’s Port of Aqaba, King Abdullah Port in KAEC, and Egypt’s Port of Sokhna before rounding back to Jeddah. The lane is managed by Maersk.

KSA reaches out to East Asia: In mid-May, Mawani launched a shipping lane from Jubail Commercial Port to East Asia. The route will see the weekly passage of container ships serving industrial companies in Jubail and Ras al-Khair. The route will be managed by Hyundai Merchant Marine and involves its collaboration with Hapag-Lloyd of Germany, OEN of Japan, and Yang Ming of Taiwan.

The new shipping lanes help KSA strengthen its trade network across the Red Sea, which will positively impact and ease trade as well as open up direct routes for imports and exports. This is expected to make it easier to ship locally produced goods and diversify KSA’s non-oil exports. The handling capacity at KSA’s ports has also increased. Additionally, the new routes will attract international investors, including major stakeholders like global shipping companies.

The rapid expansion of shipping lanes spells good news for KSA’s logistics sector. The steady development of ports means that the government is striving to shelter trade activities from the economic fallout of the COVID-19 crisis.

Summary

At some stage in any business’s growth cycle, it will need logistical support to meet its expansion objectives. When seeking logistical support, a business can partner with a third-party or fourth-party logistics provider. There is the option of managing logistics in-house as opposed to partnering with an outside vendor, and both choices can be analyzed through a cost and efficiency analysis as applied to the company’s current business model.

3PL will require coordination across a specific set of parties, including the primary business producing a product, the logistical provider, and the different carriers it employs. With 3PL logistical support, a business retains overall management of the process and uses an outside provider to outsource the transportation and logistics aspects.

A 4PL, or lead logistics, model represents a higher level of supply chain management as compared to the 3PL model. A 4PL acts as a single coordinating point for a business and includes procurement, materials planning, logistics, inventory management, finance management, packaging, warehousing, and delivery and returns. Contrasted with a 3PL, a 4PL offers more strategic insight, management logistics, and execution across the entire supply chain.

Both models offer different advantages and disadvantages, and businesses are advised to consider their inventories, order volumes, specificity of the product, and degree of third-party involvement before they decide which option best serves their needs.

INDEX

1. Third-Party Logistics
2. Fourth-Party Logistics
3. Differences Between A 3pl And 4pl Vendor
4. Choosing The Right Model For Your Business
5. Industry Examples – 3pl Vs 4pl

What Are Your Logistics Outsourcing Options?

Organized logistics are the key to successful business growth, which requires supply chains that can meet pressing customer demands, show agility and demonstrate innovation in an ever-changing environment. To meet these objectives, keep pace with customer demands, and outperform competitors, requires implementing seamless logistics.

Choosing The Right Logistics Vendor Model For Your Business

Before deciding on a logistics partner, you need to ask yourself how much control you want to retain over how your product is assembled and delivered.

This question must be weighed against the amount of investment you are willing to commit to scaling your business. If a company is having a difficult time coordinating along its supply chain or is losing precious time and resources in this process, it should outsource.

When it comes to logistics, many businesses find that outsourcing to a logistics partner is the most cost-efficient approach. Both third-party logistics providers (3PL) and fourth-party logistics providers (4PL) can offer logistics support for a growing business, but they tend to cater to specific sectors with different service parameters and oversight.

But what, exactly, are the benefits and drawbacks of 3PLs and 4PLs?

Third-Party Logistics

In a 3PL model, a business maintains overall management and only outsources the transportation and logistics to a provider.  The 3PL provider may assist with additional warehousing services, such as crating, boxing, and packaging, to add more value to the supply chain.

A 3PL supply chain model is simpler and coordinates across three broad parties:

1. A business
2. A logistics provider (packaging, warehousing, and inventory management)
3. A carrier

With 3PL, a business oversees its supply chain. The 3PL provider does not take ownership of the products being shipped, but only facilitates their movement from supplier to manufacturers, as well as finished products from manufacturers to distributors and retailers.

3PL services include:

• Transportation
• Warehousing
• Cross-docking
• Inventory storage and management
• Picking and packaging
• Freight forwarding
• Customs brokerage and contact management
• IT solutions

Advantages of a 3PL

• For small businesses, a 3PL is usually the first point of logistical support when they enter their growth cycle. Ensuring delivery of a product, in addition to producing the product, is an expensive and time-consuming task for a business. Finding the right 3PL can save your business money through economies of scale. An SME can particularly benefit from outsourcing logistics to concentrate exclusively on production.
• Partnering with a 3PL is a faster way to move goods across greater distances, as businesses can benefit from speedier deliveries by utilizing multiple 3PL storage locations.
• 3PLs work well for a fast-growing business with rising order volumes by exploiting the provider’s scalability. Logistics can easily be scaled up or down without a company worrying too much about inventory and warehousing costs.
• A business still retains control over customer service and returns.
• As the model is decentralized, it reduces risk across the supply chain, but still allows for quick responsiveness to meet customer expectations.

Disadvantages of a 3PL

• A business has limited direct oversight and control over its inventory once it is secured by the 3PL provider.
• Ensuring quality control and customer service can become more difficult. Errors made by a 3PL vendor, such as slow delivery, may be attributed to the business rather than to the logistics provider.
• Finding a provider who you can trust and rely on, and who understands the specific needs of your business, can be a time-consuming task.
• 3PL providers can create a level of dependency, making it difficult to switch to another vendor. Equally, it is hard to move operations in-house if pricing and service levels no longer meet expectations.
• The cost-benefit could be lost if orders are low in volume.
• Generally, 3PLs are more suitable for small-to-medium business enterprises.

Fourth-Party Logistics

A 4PL, or lead logistics, model represents a higher level of supply chain management as compared to the 3PL model. Compared to a 3PL, a 4PL offers more strategic insight, management logistics, and execution across the supply chain.

With a 4PL, a business outsources its entire supply chain management, including procurement, materials planning, logistics, inventory management, finance management, packaging, warehousing, and delivery and returns.

Acting as a single coordinating body across all aspects of the supply chain and client organization, a 4PL provider may enter into a joint venture or long-term partnership with a primary business to manage the logistics for a specific location or lines of business.

Some of the services rendered by 4PLs include:

• Consultancy services that offer advice on how to streamline supply chains
• Freight sourcing strategies
• Logistics strategies
• Analysis and development of product-specific transportation routes
• Analysis of carrier performance
• Effective management of 3PLs, as typically 4PLs do not own transportation or warehousing assets, but instead, coordinate those aspects of the supply chain with other vendors
• Business planning and project management across supplies, demands, and timelines
• Management of inbound, outbound, and reverse logistics
• Proper coordination of a wide supplier base in various geographical locations
• Network analysis and designs
• Analysis of capacity utilization
• Proper inventory planning and management

Advantages of 4PLs

• Versatile, agile, and professional operational support
• As a single point of contact for all parties involved in the supply chain, outsources and coordinates all the logistical requirements of a business across different vendors
• Provides cost-effective supply chain solutions that improve profit margins
• Outsources all logistics to third-party professionals, letting manufacturers focus on their product
• A 4PL is objective in choosing suppliers, concentrating on finding the best combination of value and service, which is passed on to the client as a cost-benefit
• Typically, a 4PL employs more efficient, integrated technologies to deliver a higher level of visibility through the supply chain

Disadvantages of a 4PL

• A business has less direct control over fulfillment and logistics processes
• 4PL operations tend to be better suited for larger enterprises or smaller businesses with growth potential

Differences between a 3pl and 4pl vendor

In a 4PL model, manufacturers outsource both the organization and oversight of their supply chain. The 4PL can, in turn, manage the operations of multiple 3PLs to deliver overall more efficient supply lines.

To put it simply, a 4PL handles the entirety of a supply chain while a 3PL is mainly concerned with handling just the logistical processes.

The size, scale, and needs of an enterprise determine whether a 3PL or 4PL is right for your business. A business may end up working across both 3PL and 4PL vendors for different situations.

It becomes critical, therefore, to identify some key differences between the two to help companies decide which one option suits their current needs and plans for growth. Below are the key differences between 4PLs and 3PLs, directly compared to each other.

3PL	4PL
A 3PL is usually better suited for small-to-medium businesses.	4PLs are usually a better fit for large business models.
3PLs focus more on daily operations.	4PLs operate to optimize different lines of a supply chain to integrate functions better, including coordinating the activities of different 3PLs.
3PLs tend to focus on one-off, linear methodologies.	4PLs provide a more complicated level of coordinated logistics across multiple avenues, often operating simultaneously, and include managing inventory, timelines, and trend analysis, making them more efficient than 3PLs.
In a 3PL model, businesses often take care of certain aspects of the supply process themselves.	4PLs operate as a single point of contact for a business’s supply chain.

How Can You Decide If A 3pl Or 4pl Vendor Is Right For You?

When choosing between 3PL or 4PL vendors, a business should ask itself the following questions:

Where am I in my growth cycle?

Deciding whether to employ a 3PL or 4PL model depends on where a business stands in its growth cycle and how ambitiously it wants to scale.

For many businesses, partnering with a 3PL is the first step toward growth. One way to recognize that it’s time to onboard a 3PL provider is when order volumes and inventory control become too much to manage in-house.

However, as a business expands even further, it may also outgrow its in-house capacity to manage 3PL services. At this point, a 4PL can become the single point of coordination between subsidiary 3PLs, carriers, warehouse vendors, and other partners. A 4PL can integrate more advanced technology and resources for visibility and reach across a wider network.

How much control do I want to retain?

4PLs are more directly involved in a business’s operational components. The business relies on its data and input for major decisions. Additionally, as 4PLs usually enter into a long-term relationship with their clients, they have a bigger stake in how the business runs.

A 4PL is more accountable to the customer because it has “ownership” in the processes. For a business that values customer service as a part of its brand image, a 3PL may not be able to deliver the seamless quality of service across the entire customer journey that a 4PL can bring.

While a business relinquishes some direct control over how it runs end-to-end to a 4PL provider, partnering with one offers a business a source of expert feedback and insights. Having a professional 4PL partner means that an enterprise can focus on its product and services without worrying about other aspects of the business.

What are my cost advantages?

Most 4PLs have no assets to protect and are in a position to act exclusively on behalf of a client. With no margins on transportation, 4PLs can objectively offer controlled costs.

This position, combined with logistics sourcing (through subsidiary 3PLs), can lead to substantial savings for a business. By taking the weight of logistics off a company, businesses can focus more exclusively on expansion and growth.

Additionally, for some businesses, 3PLs may not be suited to carry their products. Generally, 3PLs do not have existing frameworks to handle flammable, hazardous, or perishable goods. Partnering with a logistics provider that can’t handle your product properly will be an expensive (and ineffective) proposition in the long run.

Industry Examples – 3PL Vs 4PL

Medical devices and supplies

• 3PLs work well across industries where visibility in the movement of goods is necessary. According to regulatory requirements in the healthcare sector, for example, medical devices and supplies need to be tracked at every step of the process with a verifiable chain of custody. 3PLs can track inventory across multiple locations and carriers through technology solutions. Equally, 3PLs can manage delivery, on-site inventorying, returns and repairs, and other small but vital steps in serving customers. By consolidating deliveries, a 3PL can help reduce costs significantly.
• However, in the face of natural disasters, global conflicts, resource shortages, or even pandemics, 3PL solutions may not be enough to cater to disrupted supply chains, last-minute orders, and multiple inventory requests. Equally, when it comes to the movement of perishable and hazardous medical goods, a 4PL partner may be better positioned to meet a business’s logistics needs because it can manage complex routing optimization, chain-of-custody requirements, and tight delivery schedules while reducing inventory costs.

Field services

• In increasingly competitive markets, businesses that supply and fit parts as part of their service contracts have had to significantly raise their game. Successful businesses are those that achieve this, reduce costs, and still add value to their customer proposition by paying special attention to aftersales service. Small and medium enterprises offering field service equipment and products can use 3PLs to quickly distribute products through spread out, smaller distribution hubs. This low-cost response directly benefits a business by delivering products much more quickly. Additionally, a 3PL can efficiently manage inventories to quickly scale up or down to meet demand.
• A 4PL can perform the same function as 3PLs in field services, except it employs more advanced, integrative technologies that enable it to optimize all aspects of the supply chain. This includes determining anticipated demands, what products to supply, in what quantities and locations. Deliveries can be managed faster to improve efficiency and maximize customer satisfaction.

Retail/ E-Commerce

• As 3PLs give businesses more flexibility and scalability, they can help develop personalized strategies to improve supply chain management across retail businesses. Many e-commerce businesses choose 3PLs because they provide a good combination of support, flexibility, and cost-effectiveness.
• If a business is servicing a large market with fast-moving parts, materials or products, across multiple warehouses, they need a fast-moving, forward-deployment inventory model that is best served by 4PLs.

By managing the entire supply chain network, a 4PL can allocate inventory to meet customer demand faster. In retail and e-commerce, 4PLs enable companies to provide same-day delivery regardless of location, as well as same-day replenishment.

For more information on how SBT can help your business grow through efficient logistics support and supply-chain methodologies, get in touch with us here.