Logistics Service in Saudi Arabia

This document provides information about logistics service in Saudi Arabia, including the definition of 3PL firms and their role in supply chain management. It discusses the reasons for using third party logistics services in Saudi Arabia, along with examples. The document also highlights the challenges faced by third party logistics arrangements and the advantages and disadvantages of outsourcing logistics. The increase in demand for third party logistics services in Saudi Arabia is also mentioned.

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LOGISTICS SERVICE IN SAUDI ARABIA
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Q 1. What are 3PL firms?
3PL or TPL is the abbreviation of Third-party logistics in a supply chain management,
where the particular company uses various other third-party business companies so as to
outsource products or services to distribute it to the customers. The third party logistics
companies various operations to the companies like warehousing of the products as well as
transporting the products and services, which can be measured on the basis of the customer
choices and preferences, condition of the market (Wu, Lirn and Dong, 2014). The products and
services can be customized by the third party logistics authority so that the demands of the
products and requirements of the services can be met. It often happens that the third party
logistics exceeds their services for the procurement of the products or goods. The companies or
the providers of the services which are integrated are known as the Third Party Supply Chain
Management Providers (3PSCM). The general targets of the Third Party Logistics within the
supply chain are:
 Primal matter provision
 Transport
 Providing Stockroom
Various third party logistics companies offer many types of warehousing facilities. The client
who is proposing to offer the business can hire the logistics company so as to store the goods and
products send to them in a store which is controlled by the providers. This attracts the clients to
invest their products as because it fully removes the necessity of taking a warehouse on lease and
spend a lump sum amount of money (KARIA and ASAARI 2015). The Third party organization
affords an excessive investment of capital in the process of warehousing allowing it to have an
increase in the efficiency of work through the use of modern technologies.

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The third party logistic companies provide various types of transportation services which is
one of the common facility they provide. Transportation of goods include the movement of good
and product or services from one place to another. The transportation can be provided from the
coastal areas or the port to a storehouse which is from a retail store to another. Transportation of
goods across different countries which is pretty not valuable. It is because the local business
persons does not have that much of capital for further investments in the trucks and provide a
license to allow them to transport goods from one country to another. Still there are much
transport providers presents huge fleet of truck which can move the goods very efficiently as
well as quickly from one place to another.
Q 2. Reason for using the third party logistics service in Saudi Arabia? Along with
examples.
Saudi Arabia is mainly an oil based country which is having the largest reserves of oil
and petroleum jelly in earth which is around 28% of the total reserves found. The reasons why
the oil organizations are outsourcing the oil and petroleum jelly (Wong 2015). Due saving the
high rates of export duties, import services, and better solution to transport problems as well as
professionalized behavior of the logistic services in Saudi Arabia is the main reason why clients
use the third party logistics services. Which is the reason why the third party logistics services
need to focus more on the core business solutions which includes:
 Best transporting facilities
 Cost saver and less import service to be provided
 Upgrading to the latest technologies available in the market and 24*7 technical assistance
 Fully developed computerized systems for better work.
 Better equipment to serve the logistics support.

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These are the most important criteria which the client company should look upon when it is
selecting the third party logistics services. While choosing a proper Third party logistics service
a department of the client company should decide as because they should know all the strategies
of the different departments (Niemann and Oliver 2017).
Satisfaction is one of the very important factor when dealing with the third party logistics
company Outsourcing of the gods and services by the third party logistics services has seemed to
be increased from the last decades. It is seen that almost about 80% of the client companies who
has used the third party logistics are satisfied or are very much satisfied with the work or
delivery service provided by the TPL.
DHL, FedEx and TNT are the most outlined third party logistics service providers found in Saudi
Arabia where they are extending and are in a verge of establishing larger footprints in the Middle
East countries so as to diverse the products which are offered to the customers in those regions.
The full team of the DHL who are working mainly in the Middle East countries has worked hard
to extend their business in services like refurbishment and expanding the distribution. They make
and annual expenditure of around US $75 million to increase their infrastructure which are
planned in every four to five year (Zhong-ming 2013).

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2018 2017 2016 2015 2014 2013
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20
30
40
50
60
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72
60 59 56
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45
Series 1
Fig 1. Increase in the demand of the TPL service in Saudi Arabia
(Source: Yang and Chen 2013)
Q 3. Why Third Party Logistics arrangements are not always successful?
The major reasons why the arrangement of the Third Part Logistics arrangements are not
always successful because the two buyers’ organizations really get stressed when they hear about
the loss of controlling the logistic functions. This is a very big risk which is taken by the
organisation or the companies when they think about outsourcing the goods and services. It is
often seen that once the products or the goods are outsourced they cannot be returned back to the
company if found damaged. It is only because of the huge amount of investment which is made
on the facilities as well as in maintain the assets of the companies. There is also a long gap in
perceiving the flexibility regarding the changes in the market and in the logistics sector as well
(Wang and Rao 2015). From further research it is also found that the buyers face problems
regarding the development of the servicing specialization, detailed writing of the contracts as

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well as monitoring the performance of the third party logistics are few ways of avoiding the risk
of choosing the right TPL. It is also found that the buyers are too often confused about the
requirements of required data and the exact cost of the logistics. There are also various factors
which affect the performance and arrangement of a proper third party logistics service. It
becomes a very difficult task for the company to realize whether the Third Party Logistics
provider company is reliable or not. Every firm has to put a huge amount of attention in selecting
their logistics partners with whom they can outsource their goods and services (Schober et al,
2014) Due to the lack of financial position the companies cannot chose the reliable logistics
companies which is their greatest mistake.
The major disadvantages of using the TPL services are
 It leads to control over the shipping function.
 The third party business logistics services also impacts on the customer satisfaction as if
the products or the goods are not delivered by the due date. This can also lead to loss of
the relevant customers in a certain place or area
 The in house logistics service which are provide by the outsourcing company has better
knowledge of the delivery procedure and services rather than any third party logistics
service provider.
 The cost factors which are provides by the logistics service provider company is not
always clear as because it may increase with the change in the time. It may be found
cheaper at present but it might increase the cost of the service provided in no while. It
mainly happen due to the increase in the shipping charges, handling charges and the
operating services Chen and Zhang 2015,.

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References
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Enterprise Distribution Model Based on AHP. In International Conference on Materials
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development, pp.206-211.
Niemann, W., Hall, G. and Oliver, K., 2017. South African 3PL firms’ approaches to sustainable
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