DHL Exel Supply Chain, part of DHL logistics, is to invest about Dh1 billion this year in expansion projects for its business in the Middle East.
The investments will be carried out mainly in the UAE and Saudi Arabia to tap the growing demand for logistics services triggered by the booming trade in the two regional heavyweights.
The influx of capital into the sector is expected to boost the company’s standing as the number one supply chain operator in the region and help DHL meet its 40 per cent growth target for 2008 and 2009.
“DHL Exel is greatly focusing on the Middle East as one of the top three emerging markets after China and India. There is great potential for logistics services in the entire region, which calls for further investments in the logistics sector,” David Christmas, Middle East Managing Director for DHL Exel, told Emirates Business.
DHL Exel Supply Chain has been growing at an average of 35 per cent annually in the past three years and according to Christmas, the same level of growth is expected in the next five years.
“The main reason for this level of growth is basically because almost all our clients have been growing at the same level. As our clients continue to grow, DHL Exel will grow with them.”
DHL Exel operates in 16 countries in the Middle East but the largest share of its operations are in Saudi Arabia, where it foresees huge growth potential of the market. With 120 facilities across the region and 10,000 staff, DHL Exel is currently ranked number one in the region, with 10 per cent of the market, which is shared with several other players.
The company has four road hubs and two air hubs in the region, a fleet of 2,000 vehicles and 17 aircraft operated from Bahrain air hub to serve the GCC market and link it with East Asia and Europe. DHL Exel, which is also number one in the world with a market share of 5.8 per cent, will be building three large facilities in Saudi Arabia to support its supply chain services in the country. It already has a 10-year contract with oil giant Saudi Aramco valued at Dh162 million that encompasses the provision, management and operation of four material distribution centres or cross-docks in Dammam, Riyadh, Jeddah and Yanbu, a fleet of vehicles, personnel and 14 material service centres.
DHL Exel currently has 20 logistic centres in the UAE. Late last year, the company bought a warehousing building measuring 22,000 square metres in Jebel Ali South free zone. In July, the company will complete the construction of a 55,000 square metres warehouse, also in Jebel Ali, which it intends to use for storage of medical goods. “The health sector is one of those booming in the region and besides the traditional sectors that we have mainly concentrated on, we would like to invest more in storage facilities for medical items,” said Christmas.
The company has secured an additional 155,000 square metres in the Dubai Logistics City’s specialised contract logistics area with an option for another 78,000. It is also set to expand its operations at Dubai World Central by more than 300,000 square metres over the coming years. According to Christmas, the Middle East presents a potential of more than Dh12bn in the logistics market and much of the potential is in Saudi Arabia.
“According to our recent market studies in Saudi Arabia, only 12 per cent of the logistics services are outsourced as several businesses still look after their supply chain and logistics themselves. This is in sharp contrast to elsewhere in the world where between 30 to 40 per cent of logistics services are outsourced. This tells us how much potential exists in the country.”
Christmas is optimistic that more firms in the Middle East will opt to outsource their logistics services because of the role logistics companies play in the growth of their businesses. “As a logistics company, we play a big role in the growth of businesses by eliminating costs that result from operating on a lean supply chain basis. We also manage risks and ensure constant availability of stock due to our expertise in the market. This protects business shares from falling.”
Christmas said the industrial sector as well as the oil and gas sector continue to lead the logistics business in the Middle East with more growth registered compared to other sectors.
DHL extends reach with Dh1bn investment