The failure to embrace digital will put GCC's freight transportation and logistics (T&L) companies need to embrace digitization in order to cut back on operating costs and minimize risk, management consultancy Strategy& said in a recent report.
The GCC’s T&L industry, which is one of the key drivers of economic activity in the region, currently faces a combined threat of declining business revenue and outdated infrastructure.
Freight revenue in the region grew at a steady pace of 10 percent from 2010 to 2014 but has declined 5 percent per year since then due to low oil prices, which resulted in a decline in imports, businesses scaling back projects, and governments spending less on freight infrastructure.
Meanwhile, T&L companies in the Gulf significantly lag behind peers in developed markets when it comes to the use of emerging technologies or investing in new digital solutions, the report said.
Adding to the dilemma of regional companies is the constant flood of new technologies, which can be confusing if not well understood when and what to apply them for.
“Rather than choosing from an ever-changing range of available technologies, T&L leaders must first determine their business objectives, and then identify the right application of technology to meet those objectives,” said Ulrich Koegler, partner, Strategy& Middle East.
Digital solutions offer two key benefits, namely increasing operational efficiency and allowing for the redesign of business models.
“Digital solutions can increase the operational efficiency of T&L companies by reducing operating costs up to 10 to 30 per cent and minimizing operational risks and breakdowns by 75 per cent,” said Jean Salamat, principal at Strategy& Middle East.
“This is critical at a time when the industry is facing financial pressure and lower freight volumes. Deploying new digital solutions also allow companies to fundamentally redesign their existing business models to enhance the customer experience, as well as create new avenues for value creation and revenue growth."
Additionally, T&L companies also need to invest in upgrading their digital skills particularly in cybersecurity and data mining, and re-engineer their business and operation processes to capitalize on the new digital tools.
"T&L companies in other markets are already capitalizing on this trend. It is therefore imperative for GCC T&L companies to start embracing the use of digital technologies to support and engine the region’s economic aspirations," Strategy& noted.
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