Please answer the questions in this case study in terms of the studied topics "Transportation" and "Supply Chain"

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 reate 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.

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.

1-3. What global factors have contributed to the growth of the transportation and logistics industry?

How have they contributed to this growth?

1-4. What steps has Dubai Ports World taken to benefit from global economic changes?

1-5. What economic factors influence the success of the international transportation and logistics

industry?

1-6. How can logistics companies increase business with countries in Europe, Asia, or Africa?

1-7. What threats exist for Dubai Ports World? How would you overcome these threats?

1-8. 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?