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Not long ago, Saudi Arabia was a closed market, but lately, the government is actively heading its economy in the direction of privatization and liberalization. In line with the objectives of Saudi Vision 2030, the government is welcoming full-fledged foreign logistics businesses and offering them 100% ownership, increasing the non-oil exports and strengthening the overall logistics, thus, nudging the businesses towards having efficient freight management software in Saudi Arabia.
Furthermore, the COVID-19 pandemic jolted customer buying patterns in a way that it set a preference for online deliveries over traditional offline shopping.
This entails an increasing demand for reliable, technology-powered logistic providers for both domains – transportation and retail product distribution. This further creates the demand for logistic companies that understand the changing client needs and deliver real-time solutions. It also paints a lucrative landscape for freight management software in Saudi Arabia.
In this blog, we discuss the key growth drivers and the current landscape constraints that are influencing the market trends in freight management software in Saudi Arabia.
Saudi Arabia is at the crossroads of three continents – Europe, Asia, and Africa – making it an important logistics hub for international trade, goods distribution, and supply chain. The Saudi Arabian freight and logistics market is expected to register a CAGR of 6.53% through 2022-2027.
It is an ideal market for freight management software in Saudi Arabia, especially for companies in logistics and supply chains to tap a regional market of approximately 2 billion potential clients across three continents.
The strategic geographical advantage combined with the recent government reforms to improve logistics infrastructure under the Saudi Vision 2030 has encouraged participation from local as well as global logistics businesses and supply chain companies.
The increasing competition coupled with growth in the e-commerce industry has created a demand for innovative and technology-led freight management: one that is seamless, agile, and provides end-to-end updates and solutions.
However, there has been an apparent demand-supply gap in the logistics industry. The challenges faced by the businesses, like lack of expert logistics orchestration and optimization, less availability of reliable delivery partners, etc., are pushing people to rethink freight management. Also, incomplete customs documents, increased delivery costs, inefficient freight management software, etc., are affecting timely deliveries.
Having a reliable, flexible, and AI-powered smart freight management system in Saudi Arabia can solve the issues at hand by performing functions like automating manual processes and reducing the chances of errors. Such solutions should also help in assessing contingencies in traffic and other elements to calculate an apt arrival time, send real-time automatic updates, facilitate detailed planning, plan efficient deliveries, and ultimately bring down costs.
The COVID-19 pandemic, online shopping, and customer demands led to massive growth in the e-commerce sector. Consumers found this new channel to offer value for money and convenience, and today, they are turning to e-commerce channels for their daily needs.
Other factors contributing to the growth are improved purchasing power backed by increased per capita income, a better logistics network, government reforms for transparent digital payments, and easy internet access.
With a projected market volume of USD 1,412.00 bn in 2022, the number of e-commerce users in Saudi Arabia is expected to amount to 26.4 million by 2025.
As the e-commerce market in Saudi Arabia continues to grow, it is difficult to manage customer expectations using conventional logistics. The supply chain companies will have to improve the last-mile operations to ensure great transparency and the shortest lead times.
All these factors have created a demand for efficient freight management software in Saudi Arabia.
The Saudi Arabian transportation network has a large and dynamic air, road, and maritime infrastructure that is undergoing a revolution. In alignment with the Saudi Vision 2030, the government is strengthening and improving the integration of human and technological capabilities in the transportation and logistics sector in KSA.
The reforms aim at increasing the air cargo capacity, expanding maritime connectivity with road and rail networks, increasing the total length of rail networks, and ensuring road quality and safety.
An efficient and smart freight management software in Saudi Arabia can work wonders to manage logistics in a developed infrastructure with good connectivity.
Saudi Arabia’s government spending on technology by 2025 will be approximately $24.7 billion – the highest in the world, accounting for 21.70% of national spending.
By leveraging new-age technology like advanced data analytics and visualization, artificial intelligence, cloud computing, IoT, automation, etc., the Saudi Arabian government is fueling economic growth in sectors like banking, finance, healthcare, and retail.
Consequently, the manner in which the key operations such as inventory, sales order, freight, and production are managed will change, and eventually, the logistics need to adopt a better approach to deal with process complexities.
Companies can perform logistics planning only by anticipating the changes and developing product-oriented, geography-oriented, and customer-oriented logistic strategies. In order to accomplish this, businesses would need freight management software that offers data-driven business intelligence and actionable insights.
Saudi Arabia’s national transport and logistics strategy aims to boost non-oil export revenues to around $12 billion by 2030. The strategy aims to improve all transport networks and make the country a global logistic hub connecting it with Europe, Asia, and Africa.
With a streamlined logistics network, businesses would require freight management software that streamlines all the data, optimizes the workflow, minimizes the freight cost, and manages functions like freight forwarding, cross-docking, and warehousing.
The railway network expansion in Saudi Arabia is a part of the National Transports & Logistics Industry that aims to increase the total length of the rail network to about 8080 KM. The expansion will connect the country’s ports on the Arabian Gulf Coast and the Red Sea Coast.
Increased transport capacity and new transport corridors result in the simultaneous management of various logistic components. To name a few, tracking location, forecasting train ETA, managing demurrages and other charges, knowing availability, and scheduling orders raise the demand for freight management software in Saudi Arabia.
As part of its giga-projects, the Saudi Arabian government has been deploying fiber optics, mobile broadband, and wireless networks to facilitate easy anywhere and anytime internet access. Internet penetration in Saudi Arabia is forecasted to increase from 84% in 2019 to 97% in 2025.
The growing penetration has augmented the e-commerce industry, which is culminating with buyers preferring online shopping and wanting correct and timely deliveries. To cater to the surge in the number of orders and yet keep the operating cost to the minimum, having a robust logistics system becomes vital.
Presence of a large number of trucks in 2021 led various truck aggregators to surface and onboard carriers. The digital truck aggregator platforms allow businesses to find carriers and fulfill orders quickly. They also equip businesses with freight listing and brokerage.
Most freight aggregators provide an AI-enabled platform where the shipper can navigate amidst the carriers and get real-time updates about courier movements, ETAs, and estimated delays.
Now having freight management software that could integrate shipper, carrier, and consumer in a single platform so that every real-time update reaches directly to the consumer could come in handy.
As more capacity is connected with more load, a smart logistic system becomes imperative to keep up the supply at par with the increasing demand.
Saudi Arabia’s warehousing market has been rapidly growing, and an annual growth rate of 2.11% is expected (CAGR 2022-2025). The key drivers for growth have been increasing manufacturing activities, a booming industrial trade, ease in government regulation, and high domestic consumption.
However, the demand for increased automation, higher quality, and well-managed stocks is changing the warehousing status quo, driving the demand for modern warehouses in Saudi Arabia. The new warehouses are being equipped with technologies to streamline and automate different processes, for instance, robotics for choosing, sorting, and handling SKUs.
The Road Freight Market in KSA is highly fragmented and in urgent need of organization. There are 15,000+ players, and revenues growing with a CAGR of 4.7%. The country is currently diversifying away from an oil-based economy and is heading to become a go-to logistics hub.
The number of 3PL service providers is rising, and the freight aggregator market is also expanding. However, all this has come with a huge management challenge that entails efficient and robust management of 3PL providers, freight aggregators, and management of multiple logistics partners simultaneously, without raising costs.
All this calls for a highly reliable and smart freight management software in Saudi Arabia that has advanced capabilities for management, monitoring, controlling, and tracking multiple components.
Paving the way towards more stable growth, the Saudi Arabia Vision 2030 aims to diversify the economy and transform it into a sustainable economy with a strong economic outlook focused on enhancing productivity and empowering the private sector.
The government has made reforms that are focussed on the adoption of AI in sectors like healthcare, banking, retail, and logistics. These would enable the companies to automate manual processes, thus reducing the chances of errors and downtime.
Next, we explore the major challenges to be solved by freight management software in Saudi Arabia.
In accordance with the National Logistics & Transport Strategy, the Saudi Arabian government is working on its infrastructure. But due to the ongoing work, there have been some challenges in transportation via road, rail, and air.
Traffic in urban areas, border delays, and truck driver shortages are causing delays in pick-ups and deliveries. Additionally, in some parts of the country, the roads are under repair and maintenance, and hence it is affecting deliveries via road. Further, the restriction on the movement of bulky goods in some areas is also a contributing factor.
Secondly, the country is witnessing increased vessel turnaround time due to congested ports and labor unavailability. Lastly, the shortage of cargo capacity and increased demand for time-critical cargo add to the challenges.
Saudi Arabia’s logistics and transportation landscape is facing several management challenges in terms of timely deliveries, availability of skilled truck drivers, and real-time tracking.
Today, the demand for trackable and faster delivery has risen to the surface with prominence, but traditional freight management and manual processes make it difficult to meet customer expectations without errors and financial loss.
This has made it necessary to replace the manual processes with automated freight management software that could package, sort, and allocate the parcels, automatically assign drivers and schedules dispatch, performs automated route planning, and tracks consignment for vendors and end-customers.
With an increase in eCommerce, warehouse operations, and logistics, skilled and qualified labor is required. However, owing to the restricted movement of blue-collar laborers in the country, there is a non-availability of blue-collar labor.
Furthermore, it is easier to manage a global workforce who is fluent in English, but with native labor not equipped with English, companies face language and training barriers. Hence, it is important that the automation helps make the most optimal use of existing resources and plan for working with different types of staff, such as floating fleets, freelancers, etc.
The rise in e-commerce over the period has changed consumer expectations. They want faster local and cross-border deliveries without any hassle.
However, with the Saudi Arabian infrastructure going under massive changes, the supply chains are disrupted. Owing to the vast landscape, increased number of delivery locations, long distances between the distribution centers, and difficult transport routes from warehouse to residential areas, the challenge has been to efficiently plan out the last mile delivery schedule and ensure timely deliveries.
Logistics and warehousing companies face problems navigating the situation when there are serious fluctuations in demand. When there is a dip in demand, the warehouse managers find it difficult to store increased inventory. It further adds to the increased storage cost in contrast to the decreased revenue due to the seasonal rush.
In case of a surge in demand, logistics companies also suffer from delays in recording, processing, labeling, dispatching, and shipment tracking.
In order to effectively manage the seasonal rush, companies require logistic software that performs data mining and fetches accurate data about manufacturing and retailing. It should also fill the information gaps between warehouses and other concerned entities. This way, the businesses will be able to anticipate the rush, calculate ETA, and respond appropriately to demand changes.
Sometimes, warehouse employees handle the same product several times due to the repetitive nature of manual warehousing processes. He passes the same tickets through multiple channels via multiple hands. This procedure is not only time-consuming and redundant but also increases the labor cost and health & safety risks.
To get rid of these redundant processes, barcode technology should be used in combination with centralization to ensure maximum resource utilization. These global trends are nudging warehouse managers to adopt and adapt efficient AI-enabled freight management software in Saudi Arabia.
The air cargo industry in Saudi Arabia has faced a lot of challenges lately because of the pandemic, rise in demand, and port disruption. There has always been an imbalance between cargo and passenger transport. In 2022, the cargo capacity is likely to overflow.
Additionally, with trade imbalances, and uneven demand, the air cargo shipping industry faces a capacity challenge, including poor storage capacity. Uneven demand will also affect cold chain logistics as there might be a surge in demand for the goods that require dedicated storage until air freight.
While companies need to invest in automation and have efficient, AI-enabled freight management software, there is no single-dashboard software that could perform all functions right from tracking to freight management, order management, and warehouse management. There is a need for software that is centralized and also provides granular visibility into last-mile delivery tasks.
Shipsy is an AI-powered end-to-end logistics orchestration and management platform that helps logistics companies and shippers manage their shipments in an agile, efficient and scalable manner.
With continuous orders on the move across various transportation mediums, organizations need 360-degree real-time visibility into the movement of goods. Shipsy integrates all stakeholders into a single platform, provides granular visibility into the package movement, and sends alerts to all for key events.
Further, to prevent delivery partners from faking their location or entering a wrong status, Shipsy’s intelligent platform is equipped with geo-fencing capabilities to track the delivery partner’s location. Platform’s data mining and data analytical capabilities identify contingencies like transport delay, demurrage charges, detention, etc, to ensure a disruption-free movement of order.
Unlike traditional logistics management systems that falter with changes in order volume, Shipsy’s intelligent logistics management solution provides businesses with an uninterrupted flow of the supply chain- Be it a seasonal rise in the number of orders or sorting orders based on factors like size, geography, etc.
Shipsy, being a digitized logistics management system, automates redundant yet important back-office operations like preparing invoices and bills of lading, etc. This facilitates the reallocation of finite in-house human resources to key processes.
Other advantages of using Shipsy as Freight Management Software in Saudi Arabia include faster data integration, information availability, smart upscaling and downscaling as per business demands, and a lot more, such as
For more information or to get started with a highly agile, scalable, efficient, and optimized freight management platform, please get in touch with us or schedule a customized demo.
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