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Will Automation Revolutionize the KSA Warehousing Market and Ignite Unprecedented Growth?

July 18, 2023
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Automation. As the demand for Food and Beverage (F&B) and Pharmaceuticals continues to soar, the need for efficient cold storage services has propelled the warehousing sector into an emerging phase. However, challenges such as labor availability and inadequate infrastructure have limited its growth potential. That's where automation steps in. By streamlining operations, optimizing resource allocation, and maximizing efficiency, automation solutions hold the key to unlocking sustained growth and success in this industry. Want to discover how automation can revolutionize the Saudi Arabia Warehousing industry? Read the complete story to uncover the transformative power of automation. Take action now and pave the way for a prosperous future.

1. Saudi Arabia is emerging as a logistics hub due to its proximity to 3 major regions having a competitive cost advantage due to its favorable geographical location

Competitive Advantages of Saudi Arabia Logistics

Prime Location
  • Saudi Arabia is at cross roads of International Trade Routes between 3 major regions; Asia, Europe, Middle East & Africa
Exposure to Intl Trade
  • Saudi Arabia resides directly on Asia-Europe Trade route, with nearly 12% of total container trade moving annually.
Logistics Hub
  • Saudi Arabia is a key distribution (transhipment) region to markets of Middle East, Egypt and East Africa; with GCC being the major market for Re Export.

Cost Advantage of Saudi Arabia3

  • More than 10% cost distribution advantage to the Arabian Peninsula
  • More than 10% cost advantage to GAFTA countries
  • More than 5% cost advantage to Arabian Peninsula and East Africa.

Excellent Connectivity to Various Regions

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Key Facts, 2022

  • Fastest Growing Port: King Abdullah Port (KAEC) with 4 Mn TEU Annual Capacity1
  • Annual Port Capacity: Ports across Saudi Arabia had an annual capacity of more than 600 Mn Tons2
  • FDI: Non-Saudis are permitted to invest in the country in minority, majority or 100%-foreign-owned ventures in accordance with Supreme Economic Council enacted the Foreign Investment Act (FIA).
Source: Industry Articles, Saudi Investment Authority, Ken Research Analysis
1: King Abdullah Port Official Website | 2: Statista | 3: Saudi Arabia Investment Cluster Document

2. Presently the Saudi Arabia Warehousing industry is in an emerging phase owing to the High demand for F&B and Pharmaceuticals increasing demand for cold storage services

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I: Emerging Phase <2010

    PHASE 1

  • Warehousing demand limited to Retail sector, Limited or no regulations, Lack of cold storage facilities
  • Limited Players operating in the market, heavily involved manual labor for management
  • Focused on ownership of assets, attracting end users

Inception of Warehousing Market

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II: Growing Phase 2010 - 2030

    PHASE 2

  • High demand for F&B and Pharmaceuticals increasing demand for cold storage services
  • Emergence of several players shifting to an asset-light model thereby encouraging the 3PL demand
  • Real estate developers were earlier making warehouses and selling them off, now they make customized warehouses according to client requirements.

Contemporary Market

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III: Maturity Phase >2030

    PHASE 3

  • High demand for E-Commerce Tech enabled Warehouses and Cold Storage Service
  • Several new players expected to enter the market and shares among them are projected to even out
  • Most companies to operate on modern technologies such as automated robots, cloud computing & drones

Future Opportunities

Market Insights

Market Stage

  • Growing Stage
  • CAGR: 6.0% (2022-2027F)

Competition

  • Highly Fragmented Market with presence of major international companies dominating the market.
  • con
Source: Industry Articles, Industry Report & Ken Research Analysis

3. Increasing Automation, Rising Cold Storage Demand, and Increasing Multi-storey Warehouses are some of the recent trends and development in the Industry

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Growing Investment in City Clusters

  • The Saudi Vision 2030 encompasses a nine-point strategy to maximize its strategic advantage to evolve into the “go-to logistics hub”
  • The Saudi Logistics initiative involves development of ~60 logistics platforms in more than 50 different locations including Integrated Logistics Bonded Zone (ILBZ) and Al Khomra and many more
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Increasing Cold Storage Demand

  • Consumption upgrade is driving the demand for fresh foods and FMCG Sector, thereby supporting demand for cold storage warehouses in Saudi Arabia.
  • Hence, investments in cold warehouses or the transformation from general warehouses to cold warehouses is speeding up.
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Increasing Multi-storied Warehouses

  • Saudi Arabia’s booming E-commerce Market, especially after COVID pandemic, has led to soaring demand for warehousing facilities in the country which are nearer to the end users.
  • Hence, as land in major Urban Hubs is scarce and expensive, major real estate developers are setting their sights higher by adding floors to their logistics centres.
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Rising Automation & Technology

  • Connectivity driven by internet has led to more efficient flow of goods and faster problem solving.
  • Adaptation of IoT is prevalent across the industry, as the focus on customization and providing realtime data is increasing. Investment in streamlining processes through leveraging tech integration is becoming an area to monitor moving forward.
Source: Interviews conducted with Logistics Company Professionals, Industry Articles & Ken Research Analysis

4. Besides it, lack of Labor availability and inadequate infrastructure in the country are some of the challenges of the warehousing market that limits the growth of the sector

Labor availability E-Commerce Challenges Lack of Professional Warehouse Concentrated in Industrial Lands
KEY ISSUES

Challenges

 Saudi Arabia does not currently have enough blue collar labor available. This means that warehouses have a greatly reduced hiring ability, and this requires a viable replacement of labor in the warehouse. With scattered urban centers, long-distances b/w distribution centers & challenging transport routes, there is no efficient distribution plan to ensure consistent customer satisfaction for growing e-commerce sector Most of the warehouses in Saudi Arabia are just 7-8 meters high with no automation or upgraded facilities Majority of the warehouses in Saudi Arabia is concentrated in industrial lands in the southern zones, away from demographic expansion and population centers

Solutions

 Warehouse automation and a best-in-class system can integrate with all MHE and processes to reduce the demand on the current workers and reduce the workforce complement to a manageable number. Improvement of supply chain processes and a transport management process to reduce miles traveled for deliveries and inbound orders will aid in on-time deliveries and shorter wait-times for customers. In order to take advantage of the automation equipment, companies must heavily invest in warehouse control and WMS to keep at pace with modern mechanical software and technologies used. Companies in Saudi Arabia should focus on capturing the untapped market by opening their collection and pick up centres in local areas and can have associations /partnership with the local freight forwarders or 3PL’s of other emerging markets.
Source: Interviews conducted with Logistics Company Professionals, Industry Articles & Ken Research Analysis

5. But increased Automation due to rising Investment in Newer Technologies is driving the demand for Modern Warehouses in Saudi Arabia and will shape the future of the industry

Next generation supply chains in Saudi Arabia are utilizing robotics and automation to perform task such as picking, sorting, inspecting, handling to improve overall efficiency and speed to market. Some warehouses are turning to autonomous vehicles to bring merchandise to sortation while Drones & RFID will be used for Inventory Management. The opportunities seem endless which will result in greater efficiency and productivity.

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Source: Interviews conducted with Logistics Company Professionals, Industry Articles & Ken Research Analysis
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