UAE third-party logistics market was valued at US$ 3,940.9 Million in 2022 and is projected to attain a market valuation of US$ 6,529.7 Million by 2030 at a CAGR of 6.5% during the forecast period 2023-2030.

UAE third-party logistics market growth is driven by some of the key factors such as rise in focus of manufacturers and retailers on core competencies and government initiatives to promote trade in the country.  For instance, The Pilot Subsidy Scheme for Third-Party Logistics Service Providers will begin on October 12, 2020, according to a government announcement. Through EXPO 2020, free trade agreements, a change in the foreign ownership rule for some sectors, and the development of free zones near airports and seaports, the UAE government is pursuing initiatives to promote trade and economic diversification in an effort to entice foreign investors to establish manufacturing businesses in the UAE. The $300 million Pilot Scheme seeks to encourage the logistics sector to increase efficiency through the use of technology by giving financial support to third-party logistics service providers. It is anticipated to help around 300 logistics businesses. 

The United Arab Emirates (UAE) is a leading player in the logistics and trade industry, thanks to its strategic location and robust infrastructure. The country has emerged as a hub for international trade, connecting businesses in Asia, Europe, and the Middle East and Africa (MEA) regions.

The UAE's rise as a logistics and trade hub is driven by a variety of factors, including the country's pro-business policies, streamlined customs processing, and favorable location on the east-west trade route. Additionally, the majority of local and foreign banks provide services to small and medium-sized businesses, enabling them to deal with both domestic and foreign markets. This has led to the UAE becoming a gateway for international trade, and many firms are taking advantage of the country's trade facilitation reforms to use it as a redistribution hub.

In international trade, commercial letters of credit (LCs) are widely used as a form of payment, further emphasizing the UAE's significance as a trade hub. The country's government has been continuously implementing policies to attract more international investors and businesses, making the UAE an ideal destination for businesses looking to expand their reach in the Middle East, Africa and other regions.

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Market Dynamics 

Drivers 

Increased Focus of Retailers and Manufacturers On Core Competencies

Manufacturers and retailers are constantly looking for ways to improve their bottom line, and one effective strategy is to focus on their core competencies and outsource non-core tasks like logistics. By partnering with a Third-Party Logistics (3PL) provider, businesses can achieve specialized production and distribution in the market, while also maximizing the use of their transportation assets and achieving economies of scale.

By using a 3PL service, businesses can avoid the costly and time-consuming process of developing their own shipping and fulfillment network. 3PL providers have the expertise and resources to handle transportation and distribution operations efficiently, allowing businesses to focus on what they do best.

Additionally, because a 3PL provider serves multiple clients, businesses can benefit from economies of scale and lower costs throughout the logistics chain. By outsourcing logistics tasks to a 3PL, businesses can save time, money, and resources while also improving production and distribution.

In summary, partnering with a 3PL provider allows manufacturers and retailers to focus on their core competencies, promote specialized production and distribution, maximize the use of transportation assets and achieve economies of scale. It also enables them to avoid the expensive and time-consuming process of building their own shipping and fulfillment network and benefit from economies of scale.

Favorable UAE Government Initiatives to Promote Trade in the Country 

The logistics and warehousing industry in the United Arab Emirates (UAE) is set to experience a major transformation thanks to the government's commitment to innovation and technology. The Dubai IoT strategy, Dubai Blockchain strategy, use of drones for last-mile delivery, UAE National AI program, Smart Dubai 2021, Dubai 3D printing Strategy, Dubai Data Initiatives, and National Innovation Strategy are all initiatives that are driving this change.

To fully capitalize on these opportunities, the logistics market in the UAE will require the implementation of advanced technology and the deployment of skilled personnel. The UAE is actively involved in the World Trade Organization (WTO) discussions and Joint Statement Initiatives on e-commerce and investment facilitation, further emphasizing its commitment to a rules-based global trading system.

The UAE has also joined the Information Technology Agreement, accepted the Protocol relating to the Agreement on Trade Facilitation in April 2016, and the Protocol amending the TRIPS Agreement in January 2017. All of these actions demonstrate the UAE's commitment to the development of the logistics and warehousing industry and its continuous effort to improve its global trade operations.

Restraints

Lack of Control of Manufacturers on Logistics Service

Outsourcing logistics to another company can be a double-edged sword for manufacturers. While it allows them to focus on their core competencies, it also means they lose immediate control over logistics operations. Constant communication with their partner is helpful, but it does not replace real authority. Furthermore, there is always the risk of being contractually obligated to a service provider that defaults on its responsibilities. This can ultimately affect the effectiveness, profitability, and reputation of the business.

Moreover, the logistics industry is facing a shortage of skilled labor and specialized professionals. With the advancement of technology, the need for technically skilled labor has expanded, but the majority of laborers are underqualified, overworked, and lacking the necessary skill sets to guarantee effective logistics operations. As a result, companies deal with high employee turnover, rising training costs, and ineffective human resource divisions.

In conclusion, outsourcing logistics can be beneficial for manufacturers, but it also comes with its own set of challenges. The need for specialized professionals and skilled labor is increasing, but the shortage of such workforce can lead to inefficiencies and higher costs. Therefore, it's important for manufacturers to consider all these factors before outsourcing logistics operations.

Market Segmentation

Service Analysis

The storage segment of the UAE third party logistics market is projected to hold the highest market share in 2022. This is due to the growing demand for efficient and secure storage solutions from manufacturers and retailers. Third-Party Logistics (3PL) providers are the go-to choose for companies looking to optimize their warehousing processes.

Specialized in storing goods safely and securely, 3PL suppliers offer a range of storage options that can be customized to fit specific requirements. With a network of state-of-the-art storage facilities, 3PLs can get products closer to the final consumers, thereby speeding up deliveries and improving overall logistics efficiency.

Customer Type Analysis

The Business-to-Business (B2B) segment of the UAE Third-Party Logistics market held a significant 58.2% market share in 2022. This is because 3PLs are able to cater to the specific shipping needs and potential challenges of B2B shipping with their extensive experience, carrier access, and relationships.

For businesses, partnering with a 3PL provider can simplify the management of shipping schedules for all B2B shipments, leading to satisfied and loyal clients whose expectations are consistently exceeded. This can result in long-term business relationships and a positive impact on the company's bottom line.

In short, the B2B segment of the 3PL market is expected to grow in 2022, driven by the need for specialized shipping solutions for B2B transactions. Third-Party Logistics providers with extensive experience, carrier access, and relationships are well-positioned to assist businesses in navigating the complexities of B2B shipping, leading to satisfied and loyal clients and a positive impact on the company's bottom line.

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Mode of Transport Analysis

Based on mode of transport, the roadways segment held the 45% share of the UAE third party logistic market. The growth of the highways segment is anticipated to be driven by the expanding public-private partnerships model and a greater focus on logistics infrastructure in the country. This is further supported by a number of government programs promoting the expansion of the road transportation facilities. In line with this, the Federal Motor Carrier Safety Administration has recently enacted regulations that permit the use of cameras in place of rearview mirrors to increase safety for truck drivers.

End Use Analysis

Based on end use, the market is segmented into industrial, commercial and consumers.  Industrial sector is projected to continue holding over 50% of the market share thanks to rapidly expanding national production output in the UAE. In 2022, UAE industrial exports attained record growth and reached production worth $31.5 billion as compared to $21.23 billion in the last two years. Apart from this, the contribution of the industrial sector to the GDP reached $38.11 billion in the same year.

List of Key Companies Profiled:

• SAG logistic
• DHL International GmbH
• FedEx
• RAK Logistics
• Emirates Logistics LLC
• Global Shipping & Logistics Company
• Al-futtiam Logistics
• Freightworks
• Ceva Logistics
• Mohebi Logistics
• Consolidated Shipping Services group
• KUEHNE+NAGEL INC.
• Other Prominent Players

Current strategies adopted by key market players are:

• In February 2019, Freightworks expanded its position in the UAE and the global freight forwarding market by increasing its shareholding in two of its joint venture firms situated in Dubai. The remaining 50% of Dubai Express LLC, Freightworks was acquired by dnata. As a result of the deal, Dubai Express LLC now belongs exclusively to dnata.
• Al-Futtaim Logistics is expanding its scope to serve both private individuals and businesses who need local and international moving services, handyman services, and storage/warehousing solutions to save stock for their events in the surrounding markets.
• In 2018, RAK Logistics Company partnered with IBF Korea Link Co. Ltd a logistic solution provider. This partnership would enable the company to scale as per the customers’ needs. At the same time, it would present a competitive edge in the service offerings such as FOB, Airfreight, 3PL & Origin and Buyers Consolidation Services.
• in January 2022, in collaboration with Dorabot, FedEx launched an AI-powered sorting robot DoraSorter. The sorting robot represents the company’s latest push in digitizing of its operations and building a smart logistics network to handle the ever-growing volumes of e-commerce-based shipments in the region.

Segmentation Overview

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The UAE Third Party Logistics (3PL) market is sub-segmented into:

By Service

• Procurement
  • Contract Software/ Systems
• Storage
  • Public warehousing
  • Contract warehousing
  • Specialist storage
  • High-security storage
  • Value-Added Warehousing
• Order fulfilment
  • Dedicated Contract Carriage (DCC)
• Transportation
  • Domestic Transportation Management
  • International Transportation Management
  • Drayage
  • Cross-Docking
  • Intermodal Transport
  • Drop Deck and Lowboy Transport
  • Other
• Other Services
  • Freight Forwarding
  • Reverse Logistics
  • Environmentally Controlled Freight
  • Consolidation and Deconsolidation

By Customer Type

• B2B
  • LSP (Logistics Service Providers)
  • Carriers
  • CEP (Courier/Express/Parcel)
• B2C
  • CEP (Courier/Express/Parcel)

By Mode of Transport

• Railways
• Waterways
• Roadways
  • LTL
  • FTL
  • Express
• Airways

By End Use

• Industrial
  • Automotive
  • Heavy Industry
  • Agriculture
  • Food & Beverage
  • Paper & Pulp
  • Chemicals
  • Others
• Commercial
  • Post & parcel
  • Retail
  • Ecommerce
  • Packers & Movers
  • Enterprises
• Consumers
  • Relocation & Shifting
  • Vehicle Movement