Middle East Logistics: Looking Beyond Dubai

While Dubai draws much of the focus for companies looking for a point of entry into the Middle East-North Africa market, better options may be available to access the region's fastest-growing consumer markets


To date, however, the logistics and transportation market has largely been fragmented among a myriad of smaller players siloed in one segment of the supply chain or another, and in one country or another within the region. "Some of these players operate quite profitable businesses within their local, modal, or customer relation-based niche," the Booz & Company report notes. "But most lack a clear strategic perspective and still perform as traditional operators with limited skills, capabilities and positional assets." The report adds: "There is still a great scarcity of sophisticated supply chain solutions and IT capabilities in the region. Reliable, high-quality, network-based services are also hard to find in the market."

Changing the Dynamic

Wared's founders created the company in part to change that dynamic. The business model for the company provided for uniting two established surface transportation companies, together with an established, London-based international freight forwarder and customs clearance organization, and then concurrently organically growing a full-service, asset-based distribution network with warehouses in key locations throughout the region, adding a planned 2 million-plus square feet of warehousing this year alone, according to McHale. In addition, the company is building the technology infrastructure necessary to give multinationals the kind of detailed visibility into their inventory in motion through Wared's network that they have come to expect in their 21st century supply chains.

That ability to provide a "glass pipeline" will likely be a necessary condition for any logistics service provider looking to operate MENA supply chains for sophisticated Western enterprises. However, McHale believes that Wared's local ownership gives the company a strategic competitive advantage in a region where domestic partners are a requirement, not an option, to own major assets in a country like Saudi Arabia. "There really isn't a Western model being created in the Middle East, primarily because the major players can't get into the region without a 50 percent local partner, and that really guts their model. Wared doesn't have that constraint," he says.

Local expertise also will be an important differentiator for logistics service providers operating in the MENA region. The ARC report, for example, notes: "Simply put, for multinational companies like Caterpillar and Volvo, a logistics service provider like Wared enables them to effectively navigate the legal, cultural and logistics complexities inherent in the region to exploit the vast business opportunities that exist there."

Changing Perceptions

For his part, McHale says that he is not surprised that the prevailing perception is that Dubai is the go-to gateway into the MENA region. "They've done a wonderful job of marketing themselves," he notes. He views part of his job — and part of Wared's mission — as helping Western firms understand the opportunities available for enterprises that can bring product directly into major markets like Egypt and Saudi Arabia.

McHale himself says that many of his own perceptions of the region and the MENA logistics market have changed since he came on as CEO at Wared after the company's creation last year. "I've spent pretty much my whole career in the Western Hemisphere conducting third-party logistics for companies like Ryder, Menlo and NFI," he says, "And even though I did have pretty extensive international experience with Menlo and Ryder, I still had a one-dimensional view of what third-party logistics was."

For one thing, McHale thought he would be at a disadvantage moving into his position because he doesn't speak Arabic. But that has proved not to be a handicap because essentially everyone in the Middle East from the manager level on up is fluent in English. "You have a multilingual management pool throughout the MENA region," he says. He also was surprised to learn that the blue-collar workforce in the Kingdom of Saudi Arabia is almost entirely expatriate, even despite government's more recent efforts at "Saudiazation" — the drive to employ more Saudi citizens throughout the economy in positions currently held by expatriates.

Asked about his personal experience living and working in the region, McHale offers: "What I've learned is that regardless of culture, human nature is pretty much the same, and businesses — regardless of how they're legally formed or fiduciarily financed — are made up of people, and those people's interest all center primarily around looking after their families and themselves."

Reflecting for a moment, McHale concludes, "It's been incredibly intriguing, it's been exciting, and it's been frustrating, but it's also been renewing." ¦

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