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QUESTIONS 1. What global factors have contrinuted to the growth of the transportation and logistics industry? How have theyr contributed to this growth? What steps has Dubai Ports World taken to benefit from global economic changes? What economic factors influence the success of the international transportation and logistics industry? How can logistics companies increase business with countries in Europe, Asia or Africa? What threats exist for Dubai Ports World? How would you overcome these threats? 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? 9'5\""? 9'?" CASE 1: THE TRANSPORTATION AND LOGISTICS: THE CASE FOR DUBAI PORTS WORLD The world economy and globai trade has been gradually growing since the recession of 2003-2009. 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 contributed 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 transponation and logistics industry. Several factor have led to the growth in the transportation and logistics itdustry: 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. unnished 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-loot equivalent unit) that was handled globally. an increase of 113 percent over the year 2000. The Transportation and Logistics industry Ports play an important roles 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 indication {LPI} for around 150 countries. The LPl measure the different dimensions of supply-chain performance in the different countries such as customs clearance procedures. quaiity 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 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 efciency of the logistics business. This requires bringing all the integrators together in the logistics cha'n: 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 iogistlcs-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 Angeies. Dubai. Sac Pauio. 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 ope rations 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 aiso 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 Porto 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 globai 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 sewice 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 lite 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 handied more than 56 million TEU representing a market shate of around 8 percent and its capacity is expected to rise to more than 100 million by TEU by 2020. Dubai Ports Wodd 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 imo 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 (Pea) of the Unied 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 various markets offers opportunities as well as challenged. The opportunities include access to new markets. access to natural resources. and innovative technology. The industry remains dynamic and protable where emerging markets experience a signicant growth in business. Govemments 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 iobs while also providing opportunities to open new businesses. Dubai Ports World faces challenges with regard to the cornpiexity of operating in certain countries such as Africa. where the supply chain is an expensive and time-consuming activity. Transponation 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. 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. '1 becomes essential to attract. train. and motivate qualified people at al levels. One of the first issues that Dubai Ports World faces when it operates in a foreign country is fitding qualified and skilled labor. There is usually a low supply of qualied 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: geo- political 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 controled 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 comrnunioated 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 my 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 Thee 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 congestions, 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 stakeholders responsible for delivering the best service. Dubai Ports World is a global leader in logistics and transportation