The launch of the "National Transport and Logistics Strategy" by Crown Prince Mohammed bin Salman on the 29th of July 2021 as a comprehensive program backed up by ambitious targets to deliver the Vision 2030 program had a significant impact on the industry. One of the main objectives of this strategy is to increase the contribution of the transport and logistics sector to the national gross domestic product from the current 6 percent to 10 percent. This will increase the sector's non-oil revenues to about SR45 billion ($12 billion) a year by 2030.
The launch of the "National Transport and Logistics Strategy" by Crown Prince Mohammed bin Salman on the 29th of July 2021 as a comprehensive program backed up by ambitious targets to deliver the Vision 2030 program significantly impacted the industry. This strategy will strengthen human and technical capabilities in the transport and logistics sector in the Kingdom. Also, It will enhance the connection with the global economy and enable the Kingdom to invest its geographical position, in the middle of three continents, in diversifying its economy by establishing an advanced logistics services industry, building high-quality systems of services, and applying competitive business models to enhance productivity and sustainability in the logistics sector.
This article will discuss how the smart city can interact with the logistics industry to create "smart logistics."
Online shopping and declining inventories
Online shopping was becoming an intrinsic part of our modern way of urban life. Covid-19 accelerated the trend. The smart devices equipped with the internet allow shoppers to purchase products anywhere and on any device. More than 2.14 billion people are expected to purchase goods and services online by 2021, compared to 1.66 billion online shoppers in 2016. The deliveries that bring goods to the retail stores and supermarkets create several challenges, including congestion, noise, emissions, air pollution, and safety. Below are some figures about E-commerce in Saudi Arabia:
Online shopping is part of the digital revolution. Without logistics, the e-commerce industry would not exist. But opposite to the digital online stores, logistics companies are slow digitizers. Furthermore, logistics and particularly transport, belong to the industries that are the hardest to decarbonize. At the same time, the pressure is rising. According to the World Economic Forum, the "demand for urban last-mile delivery is expected to grow by 78% by 2030, leading to 36% more delivery vehicles in the world's top 100 cities".
- Revenue in the eCommerce market is projected to reach US$7,703m in 2021.
- Revenue is expected to show an annual growth rate (CAGR 2021-2025) of 5.38%, resulting in a projected market volume of US$9,501m by 2025.
- The market's largest segment is Fashion, with a projected market volume of US$2,495m in 2021.
- With a projected market volume of US$1,542,551m in 2021, most revenue is generated in China.
- In the eCommerce market, the number of users is expected to amount to 34.5m users by 2025.
- User penetration will be 80.2% in 2021 and is expected to hit 92.5% by 2025.
- The average revenue per user (ARPU) is expected to amount to US$271.67.
- In 2021, 95% of total eCommerce purchases in the country will be domestic.
- In 2021, 35% of total eCommerce purchases will be paid by Cards.
Smart urban logistics solutions
The World Economic Forum report The Future of the Last-Mile Ecosystem analyses 24 interventions, including electric vehicles, parcel lockers, and double-parking enforcement that can decrease CO2 emissions and congestion by up to 30%. A broad range of solutions has been developed. Pilots are underway. Europe leads the pack in intelligent urban solution development. Cities can pick and choose from a long menu of different types of approaches and solutions. They center around several areas of initiative as:
The above options depend largely on the adoption of new technologies and require some form of collaboration and support from the public sector. Some solutions need the cooperation of the citizens too, for example, night deliveries. Optimization will bring us only closer to clean logistics but cannot close the entire gap. Significant reductions in carbon emissions require clean power. In the short run, electricity seems to be the most viable option for smart urban logistics.
- Multimodal transport, for example, the use for bicycle logistics offered by large delivery companies and smaller city couriers
- Delivery hybrids, such as locker systems, home parcel boxes, click-and-collect points at metro stations and post offices, pick-up-and-drop-off points in stores, and trunk deliveries
- Consignee communication, for instance, digital app-based services offering alternative delivery windows and re-routing options to different destinations
- Intelligent traffic and logistics management, based on smart infrastructure and vehicle-to-vehicle (V2V) and vehicle-to-infrastructure (V2I) communication providing services such as prioritization, speed advice, and eco-drive support, as well as parking and goods delivery areas information
- Electrification, i.e., the use of electric vehicles and bicycles
- Off-hour's operation, including night and weekend services with ultra-quiet equipment and electric vehicles to better utilize the infrastructure and flatten the delivery curve
- Micro-depots/hubs, i.e., smaller, more distributed, potentially highly automated distribution centers in combination with electric vehicles that can drive into the buildings to optimize loading
- Autonomous logistics, like drone and droid deliveries
- Consolidation, which can be supported by software-as-a-service (SaaS) solutions to pool delivery volumes for a specific city area to optimize transport capacity
Monitor logistics and minimize economic losses
Management of cargo freight such as sea containers is an essential element of world economic systems. The transport and delivery of goods from continent to continent and between locations on-land enable business growth and facilitate population access to necessary goods and consumer items. However, mismanagement and accidents with transport containers cause a significant impact on the economy, individual businesses, workers, communities, and the environment.
Each year, more than 100 million shipping containers circulate the globe, transporting goods in each of the world's seven seas. Shipping containers transport up to 90% of the world's non-bulk cargo. Inter-modal transport then connects these containers by road, rail, and air freight networks to deliver goods to all globe points. The World Shipping Council containers lost at sea 2020 report reveals that 1,382 containers are lost at sea every year, but there is a clear downward trend, and in the 2017-2019 period, 779 containers were lost every year.
The widespread of Internet of Things (IoT) supported real-time tracking in the vehicle fleet management, container goods control, and asset management sectors. IoT sensors provide position, sensing, and transmission capabilities for real-time tracking over 4G, 5G, and GPS networks. Besides, IoT modules can read geolocation coordinates and collect extra sensor data on humidity, luminosity, carbon emissions, temperature, and vibration. Such data can then be sent to a web or cloud server for further analysis.
Position information via GPS for real-time monitoring of vehicles, shipping containers, fleet tracking can include mapping info from geolocation servers. Source: Libelium
What makes Saudi Arabia ready for "smart logistics"?
As a part of Vision 2030 program, Saudi Arabia has a tremendous advancement in many sectors vital for the development of the logistics industry. Some of those sectors are:
The Kingdom has jumped in few years to become one of the worldwide leaders in terms of internet coverage. According to the OOKLA report about internet speed in Saudi Arabia for June 2021, the Kingdom is ranked 7th in mobile network speed and 50th in the fixed broadband speed. The internet coverage is expected to reach 90% of the Kingdom by 2021. This will increase the efficiency of IoT modules usage and performance and increase the usage of online e-commerce platforms among citizens.
Advance payment platforms
The presence of a variety of payment methods in Saudi Arabia, such as credit/debit cards, E-wallets like "STC pay" and "Halala," the presence of NFC payment using "MADA pay" and "Apply Pay" over smartphones, electric transfer, and payment services like "SARIE" and "SADAD," and many other services made the interaction with e-commerce and logistic much easier.
Reliable network of roads and services
Despite the strong network of Land, Air, and Sea transportation which the Kingdom has developed in the past years, the strategy launched by HRH the Crown Prince aims to position the Kingdom to become the 5th global Air Transit Passenger route, increase international destination reach to 250 destinations, alongside the launch an additional new national carrier, in Air Cargo capacity we aim to double our capacity to more than 4.5 million tons. On Maritime transport, his HRH, the Crown Prince, set a target to achieve an annual container capacity of over 40 million containers. Moreover, the strategy will increase the total future length of railways to an estimated 8,080km, including the flagship "Land Bridge" project, spanning more than 1,300km, with a capacity of over 3 million passengers and 50 million tons per annum and connecting the Kingdom's ports from the Arabian Gulf to the Red Sea. All this development will have a noticeable enhancement to the logistic network and be managed smartly.
The announcement of three mega airport cities in Riyadh, Jeddah, and Dammam to host the biggest logistic hubs for the e-commerce giant is another important factor for encouraging investment and management for e-commerce and logistics industries. This will create hustle-free zones for logistical operation, and it will be the bed test for all new smart technology in this field.
Cloud computing, Artificial intelligence, and Big Data
The new introduction for the three mega cloud data centers in Saudi Arabia with the alliance of local companies like Aramco and Saudi Telecom company has an essential impact on artificial intelligence (AI) and big data analysis. AI and big data are some of the most important parts of smart logistics. The analysis of shipping information, destinations, duration, peak time, and many other information is the key to having smart logistical services that will reduce cost, reduce the usage of many trips, and thus less CO2 emissions, less traffic, and less noise safety on roads. The data analysis section in Saudi Arabia is still under development. However, the tremendous development in AI and big data in other sectors in the Kingdom is promising to improve the logistic industry.
The logistic industry plays a significant role in the income of many countries and the development of many cities, especially those coastal ones. And since the Kingdom is targeting the non-oil income sources, one of the main objectives of this strategy is to increase the contribution of the transport and logistics sector to the national gross domestic product from the current 6 percent to 10 percent. This will help fuel business growth, expand investments, and increase the sector's non-oil revenues to about SR45 billion ($12 billion) a year by 2030.
“His Royal Highness the Crown Prince launches the National Transport and Logistics Strategy, one of the Vision 2030 pillars وكالة الأنباء السعودية.” https://www.spa.gov.sa/2248119 (accessed Jul. 20, 2021).
“eCommerce - Saudi Arabia | Statista Market Forecast.” https://www.statista.com/outlook/dmo/ecommerce/saudi-arabia (accessed Jul. 20, 2021).
“The Future of the Last-Mile Ecosystem | World Economic Forum.” https://www.weforum.org/reports/the-future-of-the-last-mile-ecosystem (accessed Jul. 20, 2021).
“Saudi Arabia’s Mobile and Broadband Internet Speeds - Speedtest Global Index.” https://www.speedtest.net/global-index/saudi-arabia (accessed Jul. 20, 2021).
“• Saudi Arabia: internet penetration 2025 | Statista.” https://www.statista.com/statistics/484930/internet-user-reach-saudi-arabia/ (accessed Jul. 20, 2021).
Author: Mohammed Khalil, Operations Manager. Alumni of the Master's in Global Smart City Management.