UAE Third Party Logistics (3PL) Market

The UAE third-party logistic market has a huge capacity to grow over the forecast period with a sustainable CAGR of approximately 9%, a figure higher than many of peer countries.

The expansion of the third-party logistics market in the UAE is the outcome of the collective impact of several growth factors, including favorable government initiatives - the introduction of drones for last-mile delivery, Dubai IoT strategy, UAE National AI program, Dubai BlockChain strategy, Dubai 3D printing Strategy, Smart Dubai 2021. Smart Dubai 2021 aims to take its smart city transformation to a level such that digital transformation has a significant and positive impact on the city. Smart Dubai has implemented and delivered more than 60 shared ICT services utilized by more than 50 entities. Today more than 90% of all Dubai government employees and more than 95% of Dubai government budgets are managed by a single shared system. A total of US$ 1.2 billion in savings were achieved in just over a decade. Smart Dubai has saved US$ 5.6 for every US$ 1 spent for its shared ICT services.

Further, the market growth is supported by investment in infrastructure projects such as the initiation of the rail network. As per Etihad Rail, the project to build a rail network of 1,200 km to connect major transportation hubs, free zone areas, seaports, freight terminals, and major warehousing areas, cost around AED 40 Bn (US$ 11 Bn). The rail network infrastructure will become part of the Gulf Cooperation Council (GCC), which will connect UAE with Qatar, Saudi Arabia, Kuwait, Oman, and Bahrain and is expected to be ready by 2024. This connectivity is expected to have a direct and strong impact on the 3PL market in the country.

Moreover, e-commerce is swiftly expanding in the United Arabia Emirates. According to the UAE eCommerce landscape, consumers are increasingly using debit online, with an increase in usage of over 7% when comparing the period between March 2019 and February 2020 to the same period in 2018-2019. eCommerce retailers have been increasing their product selections, both organically and through partnerships. For instance, the integration of Souq into the Amazon family has enlarged the range of products easily available to UAE consumers.

However, third-party service providers are accountable for critical functions such as distribution, management of custom, and order fulfillment. Their mistakes or errors affect the manufacturers’ image and relations with customers. Thus, there is a risk associated with third-party logistics in hampering goodwill. Further, using third-party services, a manufacturing company rely on the competency, reliability, and honesty of service providers. Therefore, the manufacturer needs to rely on a third-party service providers which results in a lack of control. 

Covid-19 Impact - UAE Third Party Logistic (3PL) Market

Covid-19 has led to a huge impact not only in the social living aspects of society but has widespread economic and political implications throughout many countries across the globe. UAE has gone through separate phases of regulations before settling at ones that are the most conducive for the work environment. According to Dubai’s health and safety regulations, the state has divided the work environment into 3 separate sectors: Pre-work (home), travel to and from work, and the workplace (Dubai Government Human Resources Department, 2020).

Due to the pandemic, 90% of airlines reduced and or suspended passenger flight operations. Several companies experienced a reduction of 25% in the supply chain due to the covid-19 outbreak. However, the demand has been recovering since reaching a low point in May 2020.

Segmental Overview

The UAE 3PL market has been segmented based on services, providers, modes of transport, and industry. The major segments are further categorized into subsegments.

Services

• Procurement
  • Contract Software/Systems
• Storage
  • Public warehousing
  • Contract warehousing
  • Specialist storage
  • High-security storage
  • Value-Added Warehousing
• Order fulfillment
  • Dedicated Contract Carriage (DCC)
• Transportation
  • Domestic Transportation Management
  • International Transportation Management
  • Drayage
  • Cross-Docking
  • Intermodal Transport
  • Drop Deck and Lowboy Transport
  • Other
• Other Services
  • Freight Forwarding
  • Reverse Logistics
  • Environmentally Controlled Freight
  • Consolidation and Deconsolidation

Provider

• Services
  • Simple Services
  • Combined Services
  • Value-Added Services
• Operation
  • Contract Type
  • Public Carriers
  • Private Carriers

Mode of Transportation

• Airways
• Railways
• Roadways
• Waterways

Industry 

• Automotive
• Healthcare
• Chemical
• Consumer
• Retail
• E-commerce
• Computers and Technology
• Food and Beverage
• Industrial Manufacturing
• Others

Key Players - UAE Third-Party Logistics Market

The major players in the market are DHL, DB Schenker, GAC, Kuehne Nagel, Al Futtaim, DSV- Panalpina, Emirates Logistics, Hellman, Global Shipping Line, Yussen Logistics, Agility, Emirates Post, Fedex, Century Express, Skynet, DTDC, Skyexpress, Max Courier Services, TCS Express, Skycom Express. Several companies are focused on improving quality, creating new value, and building sustainable, resilient logistics infrastructures as it facilitates uninterrupted supply chains and stable employment and business opportunities. Also, some companies like Aramex, DHL, Al-Futtaim Logistics are focused on improving several initiatives such as first acknowledgment time, first case resolution (FCR), and quality of issue resolution. In all the market is characterized by a healthy mix of players from across the globe, strategically investing in the region to cement their position while creating ample growth opportunities.