The inescapable reality around just-in-time logistics

posted by Thani bin Ahmed Al Zeyoudi
23 November 2021

The impact the pandemic has had on the world’s supply chains has been well documented.

We have seen unprecedented disruption in almost every corner of the globe, and it has raised questions about how we combat supply chain insecurity.

It is a challenge that we cannot ignore, for our supply chains are the enablers of global trade which will ultimately underpin any recovery we hope for. Secure supply chains must therefore be understood as a critical part of the future trade agenda, and supply chain hubs such as the Emirates will be key to stimulating the necessary economic growth and development around the world.

The Emirates’ strategic location between East, West, North and South has allowed us to act as a central part of the global supply chain system for many years and we are positioned to be a central part of the solution to challenges we face today. However, as we look to transition to an era of supply chain security, strategic location alone is not enough. We have therefore been investing heavily in our logistics and freight infrastructure, developing our ports, airports and free zones to not only create an efficient supply chain system, but a robust one.

And our investment in this space is paying dividends. The logistics sector was valued at Dh220bn in 2020 and is expected to contribute 8% to the UAE economy by 2021, whilst just last month Abu Dhabi Ports Group announced 21% increase in revenue during the first six months of the year.

Of course, our existing infrastructure means we are well placed to meet the growing demand for secure supply chains; however, to truly address supply chain insecurity, we must learn the lessons of the pandemic and understand the structural changes the system requires.

The inescapable reality is that governments must rethink ‘just-in-time’ as our sole logistical model. The Ever Given crisis in April was a stark reminder of this, the unexpected blockage of the Suez Canal by a cargo ship held up an estimated $9.6 billion of trade. Instances like this one highlight the need to prioritise developing wider supply chain infrastructure that can maintain the just-in-time model, where needed, whilst ensuring we have supply chains that can manage global shocks.

In practice, this means developing regional storage hubs to allow nearby nations to secure their supply chains and allow suppliers to maintain demand. We are already seeing an increased demand for these sorts of facilities here in the Emirates, where the availability of assets and access to freeports makes it an incredibly attractive proposition for businesses.

However, it is only by having this supply chain infrastructure in place that we can begin to turn our attention to developing a prosperous global trading system. For the UAE, this means not only building on existing trading relationships but developing new ones.

We are embarking on economic partnership agreements with several countries who will play an important role in the future globalised economy: India, Indonesia, Turkey, Israel, Kenya, South Korea and Ethiopia. Our location means we can not only act as a springboard to the markets of the East and West, but also the entire MENA region.

We are also boosting our strong relationship with the UK, having recently signed the Memorandum of Understanding on Industrial and Advanced Technologies Cooperation, which will see the two nations work together to enhance supply chain resilience and utilise the Emirates’ logistics infrastructure. This builds on existing agreements with the UK, which have resulted in DP World helping to operate UK freeports including the recently launched Thames Freeport. 

Collaboration like this has enabled agreements such as the one recently struck between the Abu Dhabi National Oil Company, BP, and Masdar to provide clean energy technologies to the UK and UAE. What is clear to see is that with robust supply chain infrastructure in place, effective trading relationships will follow.

We cannot simply return to the status quo if we want to drive forward future trading prosperity and have the security in place to withstand future shocks. This rethinking of global supply chain infrastructure is a process that is well underway in the Emirates, and I believe our strategic location coupled with the strength of our logistics industries can help the global community trade efficiently and securely in the post-Covid era.

☛ Thani bin Ahmed Al Zeyoudi is UAE minister of state for foreign trade 

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