Traffic congestion is increasing the operating cost of logistics companies in Dubai – and the problem could result in clients paying higher prices.
Some delivery companies are spending an extra Dh100,000 a month on fuel because of traffic jams.
Overtime for drivers who have to work longer hours as a result of the bottlenecks plus increased running costs are additional headaches for logistics companies.
Shaun Mathew, Fedex’s Director of Operations in Dubai, said congestion was the biggest problem the company was facing.
“Other difficulties are manageable but traffic jams are out of our control and that is hurting our business,” he added.
Fedex has a fleet of 82 vehicles in Dubai. Mathew said the extra expense arising from congestion often meant budgets went overboard – plus the rising price of fuel was also pushing up costs. Ram Islam, Operations Manager of Al Futtaim Logistics, said his company was spending more than Dh100,000 per month in additional fuel costs on its fleet of 450 trucks because of traffic delays.
“We are spending more than 20 per cent extra on our monthly transport budget,” he added. Besides fuel, we are spending a huge amount to pay drivers to work overtime as a significant percentage of their time is wasted in jams. And the company has to bear fixed and variable additional running costs such as depreciation, repairs and maintenance as a result of congestion. If nothing changes I am afraid the costs might have to be transferred to clients – and in the end it will be the consumers who will bear them.”
Another firm, Transatlantic Logistics, spends more than Dh1.2 million a year on additional fuel costs because of congestion.
Logistics consultant and analyst James McGregor said companies in Dubai were likely to incur extra costs of up to 30 per cent in future due to traffic delays.
“Companies will experience the costs through the need to recruit additional drivers and acquire more trucks due to the longer travel times. Emergency drivers will have to be used to avoid missing deliveries because of unexpected delays and there could be a loss of productivity. These costs might result in increases in commodity prices.”
Al Futtaim Logistics is considering expanding its fleet next year but faces a shortage of drivers due to recent curbs on the issuing of driving licences.
Islam said: “The company needs about 150 more trucks to help us but we do not have the people to drive them. This aggravates the situation.”