Transportation and Logistics:

The Case for Dubai Ports World

The world economy and global trade has been gradually growing since the recession of 2008–2009. Growth is
coming from Europe and Japan where trade is stronger than expected, from China and India where high growth
rates continue to be recorded, and from less developed countries where trade is primarily based on petroleum and
basic commodities. The global transportation and logistics industry is one of the most important factors that
contributes to the expansion of trade and logistics. Thus, it is important to understand how business is done in this
industry and know more about the trends in the transportation and logistics industry.

Several factors have led to the growth in the transportation and logistics industry: the separation of raw materials,
labor and production, decline in tariffs, import restrictions, and exchange rate controls are some of the main factors
that led to this growth. These factors have resulted in an increased demand for transporting raw materials, unfinished
goods, and finished goods in the global economy. These trends have increased the demand for global transportation
and logistics services. For the year 2010, it was estimated that there was a total of 545 million TEU (twenty-foot
equivalent unit) that was handled globally, an increase of 113 percent over the year 2000.

The Transportation and Logistics Industry

Ports play an important role in the transportation and logistics industry. They provide quality services, advanced
technologies, and skilled labor that lead to increased productivity. The World Bank has developed a logistics
performance indicator (LPI) for around 150 countries. The LPI measures the different dimensions of supply-chain
performance in the different countries such as customs clearance procedures, quality of trade-related infrastructure,
quality of transport services, timeliness of delivery, and ability to track and trace consignments. The World Bank has
also highlighted the influence that government policies have on logistics performance. Countries that attempt to
develop policies to improve supply-chain activities find themselves scoring higher on the LPI than countries that do
not pay attention to such policies.

Logistics has in the past focused on reducing barriers to trade, and on governmental procedures implemented
regarding getting clearance for goods at customs. While the laws and regulations are important, they are not enough
to advance the industry that includes various stakeholders working and interacting together. It is also necessary to
develop policies that integrate all elements of the supply chain so that various players can easily manage different
steps of their business. This aspect has been lacking lately and arguably should be given more attention. An
approach that centers on all the policies will have a major impact on the productivity and efficiency of the logistics
business. This requires bringing all the integrators together in the logistics chain: cargo handling, storage,
warehousing, freight services, air road, and courier. This should result in an improvement in the global supply chain
business.
Developing Logistics Clusters

Logistics clusters are geographically concentrated sets of logistics-related activities. They are known to have high
transportation services, low transportation costs, and an efficient flow of goods. According to the World Financial
Review, governments around the world are investing significant resources in developing logistics clusters. The
advantages of such clusters are economies of scope, economies of scale, economies of density, better service, and
price stability. They also bring value by generating other business activities and bring in new jobs. These benefits
create a positive feedback loop attracting more companies to them, resulting in further cost reduction and better
efficiency.

Developing logistics clusters requires investment in seaports, airports, railways, and highways. This helps in
improving the overall infrastructure of a nation. Examples of leading logistics clusters include Singapore, the
Netherlands, Los Angeles, Dubai, Sao Paulo, and Aragon. These clusters are also referred to as logistics parks,
transport centers, logistics platform, and logistics centers.

Doing Business in Different Countries

Local or domestic policies may affect the logistics operations in various markets. Some of these policies may raise
costs, reduce efficiency, give preferential treatment for local or public owned corporations, and put limitations on
investment in certain activities. These policies can significantly impact the supply chain, which may add costs to a
firm and also affect the business activity.

Foreign countries may introduce restrictive policies such as importing raw material as opposed to processed
products where the processing might be more efficient. Other restrictions include bilateral agreements that distort
competition, embargoes, business visa restrictions, and security requirements.

About Dubai Ports World

Dubai Ports World was founded in 2005 as a result of the merger of Dubai Ports Authority and Dubai Ports
International, the latter of which having been founded in 1999. It has more than 28,000 employees across its global
operations. Excellence and innovation are two values the company embodies in its commitment to customers,
profitable global growth, and responsible corporate and personal behavior.

Dubai Ports World attempts to provide the best customer experience to its customers. It heavily invests in its people
and technology to provide better customer service worldwide. This customer-oriented approach has resulted in
strong relationships with customers and superior customer service levels. Dubai Ports World Jebel Ali facility has
been voted as the “Best Seaport in the Middle East” for 19 consecutive years. Dubai Ports World operates in more
than 65 terminals across 6 continents: North America, Europe, Asia, Africa, Australasia, and South America. In 2012,
it handled more than 56 million TEU representing a market share of around 8 percent and its capacity is expected
to rise to more than 100 million TEU by 2020.

Dubai Ports World is among the top three global terminal operators. It is one of the new players in the global market,
with an aggressive growth and acquisition strategy. The majority of its business comes from emerging markets in
South America and Africa. Their global expansion initially started in the Middle East, then extended into major ports
in India. One of the major expansions for Dubai Ports World took place in 2006 when it acquired Peninsular and
Oriental Steam Navigation Company (P&O) of the United Kingdom in 2006, for US$ 7 billion. This was considered
highly controversial by many in the United States, because it included a number of ports in the U.S. as well. These
ports were sold shortly after they were purchased.

The Overseas Environment

Operating in various markets offers opportunities as well as challenges. The opportunities include access to new
markets, access to natural resources, and innovative technology. The industry remains dynamic and profitable where
emerging markets experience a significant growth in business. Governments are constantly aspiring to open their
ports to logistics companies to facilitate economic growth and jobs. Logistics companies offer blue-collar, white-
collar, and no-collar jobs while also providing opportunities to open new businesses.

Dubai Ports World faces challenges with regard to the complexity of operating in certain countries such as Africa,
where the supply chain is an expensive and time-consuming activity. Transportation costs comprise up to 75 percent
of the retail price in markets such as Malawi, Rwanda, and Uganda. For example, transporting a car from China to
Tanzania could cost around $5,000 while transporting the same car from China to Uganda would cost $9,000. Dubai
Ports World’s mission is to use a global approach in local business environments, and of course to offer good value
and service to their customers.

Finding the Right Skills

The logistics industry is primarily a people’s business. Around 25 percent of the costs of logistics are labor costs.
Thus, it becomes essential to attract, train, and motivate qualified people at all levels. One of the first issues that
Dubai Ports World faces when it operates in a foreign country is finding qualified and skilled labor. There is usually
a low supply of qualified candidates, low wages, low industry profile, and poor working conditions.

Risk Issues

Addressing risk in the supply chain is becoming a priority for businesses. Supply-chain risk can be caused by various
disruptions: environmental risk such as natural disasters; geopolitical risk such as threat of attacks and terrorism;
economic risk such as currency fluctuations, demand shocks and supplier failings; technological risk such as outage
in IT and telecommunication systems, etc. Risk can be controlled by conducting scenario analyses, collaborating
with the different players by sharing information, identifying vulnerabilities and synchronizing back-up plans.

Technology in Business

Dubai Ports World has been keen to use advanced information technology tools to facilitate its business. It has been
using mobile technology to make life easier for customers by saving time and money. They also use mobile
technology for their employees. Issues such as labor deployment, vessel arrival and gate appointments are
communicated via mobile devices. This is linked to the human resource department which assigns labor to points of
work, which results in more efficient work. Recently, this technology enabled container shipping lines to access bay
and stowage, which helped reduce port call time.

Environmental Considerations

The presence of logistics companies may result in air pollution. This increases the health hazards around those
clusters. Thus, there is always a tradeoff between the economic benefits of logistics operations and the hazards of
their effects on the environment and health of the surrounding community. There are “green innovations” in logistics
operations and processes that are ultimately minimizing the negative effects of logistics operations on the
environment.

The Future

The logistics industry has high prospects for growth as the global economy grows. There are several matters that
need attention to support this growth. There is a need for more comprehensive logistics policies that bring the various
components of logistics together: land transportation, railway, shipping, commerce, and finance. More coordination
is needed between these institutions. Additionally, more investment in logistics infrastructure such as roads, rail, and
shipping is needed to ease traffic congestion, reduce costs and air pollution. Thirdly, people issues are becoming
increasingly prominent and need to be addressed by those with the right skills in order to ensure high quality services
throughout the industry. The future of Dubai Ports World looks promising. It continues to sustain its growth by
penetrating new markets while offering a unique customer experience. Its people remain the key stakeholder
responsible for delivering the best service. Dubai Ports World is a global leader in logistics and transportation.
Names: _______________________________Day/Time:_______________ Score: ________________
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CASE TITLE: “Transportation and Logistics: The Case for Dubai Ports World”
CASE QUESTIONS
1. What global factors have contributed to the growth of the transportation and logistics
industry? How have they contributed to this growth?

2. What steps has Dubai Ports World taken to benefit from global economic changes?

3. What economic factors influence the success of the international transportation and logistics
industry?
4. How can logistics companies increase business with countries in Europe, Asia, or Africa?

5. What threats exist for Dubai Ports World? How would you overcome these threats?

6. Discuss some of the legal issues that have faced Dubai Ports World? How has this affected
their operations in the United States and other places?