Being at the centre of trade between East and West, Saudi Arabia and the GCC with its massive hydrocarbon resources has the potential to become a global player in the world. With companies like Sadara Chemicals, the GCC is widening its product portfolio, as well as increasing its specialties and commodities supply from Western countries to the Middle East.

The presence of raw materials fueled by the aspiration of the region to increase the hydrocarbon value chain has resulted in major investments across the industry. Saudi Arabia’s Vision-2030 will also accelerate direct foreign investment, enabling companies like Saudi Aramco to opt for initial public offerings (IPOs). In the area of renewables, with solar and wind being a widely available natural source, the GCC region could take a leading role and so far many initiatives have been launched as part of Vision 2030.

Sadi: rooting for an advanced optimisation approach

It would be interesting to look at how logistics service providers (LSPs) in the GCC are developing their strategy for emerging industries and changing economical and environmental conditions in the region. The European logistics industry conducted a study, which shows that with the petrochemical industry becoming stagnant, there is a direct impact on the LSP industry. On the contrary, the expansions in the petrochemical industry shall result in growth for the LSPs as well. Is the LSP branch in the GCC adapted to these trends? What contribution can they make to maximise value to the entire supply chain?

Generally, there are three areas where LSPs can contribute: (a) improve horizontal and vertical integration along the supply chain to improve efficiency; (b) continue development of sustainable logistics strategies; and c) ensure continuous improvement in supply chain safety and security.

With the leadership of the Gulf Petrochemicals and Chemicals Association (GPCA) as an overarching network organisation for the region, its committees and various working groups, such as supply chain and responsible care, many initiatives that have been started under the visionary leadership of the founders have indeed, paid off.  

Within Saudi Arabia, Almajdouie Logistics played a leading role in developing bespoke logistics and supply chain solutions to the petrochemical industry. Over the past 50 years, Almajdouie Logistics is a pioneer in transferring the technical know-how of the industry leaders from Europe and Asia in the form of joint ventures, such as Almajdouie De Rijke Logistics (MdR). The result is: leveraging the knowledge and expertise of De Rijke from Netherlands with the specific petrochemical know-how of Almajdouie Logistics, in providing integrated solutions. 

Container stuffing, marshalling, in-/outbound transport and freight forwarding

The solutions that can be offered in terms of integrated services for the downstream manufacturing supply chain system are endless. LSPs can add value while at the same time take away the none-core activities of producers if a LSP is the key-interface between the goods manufacturer and the end-customers, by connecting and optimising the two ends. Rudy Sadi, general manager, MdR, explains: “The interface cost is a measure of motion (product from A to B), waiting time (warehouse, terminal, port) and inventories. The ability of LSPs to minimise the interface cost will determine the value adding for the entire chain.” The trend in the industry for LSP’s to increase contribution to the value chain.

How can LSPs like Almajdouie de Rijke (MdR) contribute to this trend? First, contrary to Europe, value add services provided by LSPs contribute to a much lesser extent to the entire supply chain in the region. Two reasons for that are: the level of outsourcing to 3PLs on logistics is less matured and the type of services is fragmentised into transport or warehousing or freight forwarding, which on its own is less value adding. Streamlining and optimisation remain the responsibility of the manufacturer at site, resulting in less scope for LSPs in this region. Definitely, it has to do with maturity level in terms of competency building.

In Almajdouie›s opinion, LSPs are ready to take on a greater part of the supply chain role in terms of value-add services, associated with getting the products out to end customers or bringing in services that are not considered core-activity of manufacturers. The key word is improving supply chain efficiency in terms of ‘How Fast’ can one deliver the product, at ‘What Cost’ without compromising Safety? It is very important to understand customers’ need in this context by drilling down into the ‘customer wants’ and identifying the CTQ’s (Critical to Quality). Little attention is often given to customer’s KPI’s from the design stage and understanding of the underlying processes, as well as the linkage to the internal KPI’s of the LSP.

In the example of Sadara Chemicals, MdR has been engaged from the early design stage by providing valuable advices on how to optimise the supply chain. Secondly, the in-house knowledge and expertise in the area of pull system (make to order) was utilised in close cooperation with the client, meriting a win-win scenario for both parties. MdR has started recently a workshop with key-staff to further optimise its approach to ‘on-site logistics’ by adopting ‘Lean Logistics Services’ through the introduction of pull system (make to order) inspired by Toyota’s previous work.

Sadi concludes: “We believe that rather than sub-optimising parts of the supply chain, an advanced optimisation approach will yield a more sustainable and profitable results for both client and logistics service providers. Hence, the value added logistics services can be increased and made sustainable.”