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Logistics is seeing renewed growth

By Tom Nauwelaerts

H ow will the global economy develop in the months ahead? Are we out of the crisis yet? Is there a chance of a double dip recession? Will the Dubai logistics market return to its former glory? All these questions are at the back of our minds and have lately been addressed in many different fora, and yet nobody seems to have consistent answers.

What we do all agree on is that these are volatile times. But, as some great people have said, crisis situations as such are not always bad, as they often create great opportunities. Without question, the global credit crunch has left its mark on the logistics industry worldwide, linked directly to the clear reality that global trade volumes have dropped dramatically.

No doubt, the effect on the UAE logistics market has also been felt at all levels though the degree may vary. Throughout 2009, the logistics industry has had to digest significant shifts in logistics flows. When outbound volumes reduced because of reduced sales, this resulted in a large accumulation of stock. Meanwhile, inbound flows kept coming in steadily, since much of the product was already on its way through the supply chain. As a corrective measure, companies abruptly reduced their incoming product flows in order to realign their stockholdings to reduced market demand.

Today, we can say that the logistics sector has stabilised, albeit at reduced levels of activity, with less ongoing impact from volatility.

I am sure that valuable lessons have been learned in the past year especially the importance of strong demand and inventory management. Concepts like supply chain visibility and supplier collaboration have once again proven their worth. And logistics companies play an instrumental role in ensuring this visibility and communication between the different nodes of the supply chain.

Overall, I believe the logistics industry has performed in 2009 at the levels we were enjoying in early 2008, and this trend seems set to continue. The enormous growth of 2008 has been largely erased, but we see early signs of renewed growth in the market.

Predicting the future of the logistics industry has never been more difficult than it is today, since the industry correlates closely with the global economy. As I have mentioned on other occasions, it would be wise not to get too overexcited yet on a global upturn of the logistics business. There is still too much uncertainty around.

There are strong signals indicating that global markets are stabilising, so it is reasonable to expect that we might see associated growth in the logistics industry going forward. Nevertheless, caution and vigilance are key words to me.

There are certainly good reasons for some optimism. The success of the UAE logistics industry has been mainly built on strong vision, pure entrepreneurship and a relentless drive to succeed, and that spirit hasn't gone away. In fact, from my personal view, we came out even stronger during the past year. Many companies here have taken the opportunity to rethink their business models and evaluate all the options in their markets.

Companies who are agile enough have developed new windows of opportunity and will be able to profit from the possibilities created. In the UAE logistics market, investments for upgrading and further expanding the general infrastructure have continued, so the foundations are in place for buoyant growth once the global economy fully recovers. Additionally, the transport infrastructure, which has been put in place, will allow the UAE to benefit in full from its position as a regional trans-shipment and logistics hub. So, if all turns out well, we can look forward to once again seeing blue skies above.

The writer is Head of Logistics, Al Futtaim Logistics, Dubai. The views expressed are his own


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