Almajdouie's Saudi Success

Almajdouie has witnessed considerable success by specialising in Saudi Arabia's petrochemical industry. However a shortage in skilled logistics professions must be tackled before the company can embark on its expansion plans.

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By  Robeel Haq Published  March 5, 2006

Almajdouie's Saudi Success|~|majdouie2.jpg|~|S. I. Mustafa, vice president, logistics, Almajdouie Group|~|Almajdouie started life as a Saudi Arabian land transport company, established by Shaikh Ali Ibrahim Almajdouie in 1965. The business witnessed considerable success during the early days and started to expand by diversifying into a variety of different activities, covering the automobile industry, real estate, travel and transportation. Today, Almajdouie operates throughout Saudi Arabia, as well as associate offices covering the Middle East, North America, Europe, Far East and Africa. Almajdouie Logistics and Distribution is one of the most successful businesses within the group. Headquartered in Damman, Saudi Arabia, it was established in 1994 to provide complete third party logistics (3PL) solutions under one roof. “When we started the logistics and distribution service in Saudi Arabia, the local companies did not understand the concept,” says Syed Mustafa, vice president, logistics, Almajdouie Group. “We had to educate the local market about the benefits of outsourcing logistics services and running efficient supply chains.” The company started by targeting importers based in the country, offering the service of collecting goods from the warehouse and delivering to retailers. However, gaining new business was not an easy task, because customers were reluctant to outsource logistics to external companies. “It was not easy at the beginning, because we needed to convince Saudi Arabian companies to think outside the box,” says Mustafa. “Companies in the region are not fully educated in outsourcing logistics. They feel the need to handle logistics themselves. They want to own their own fleet of vehicles and run their own warehouses.” The situation has started to change over the past decade. The trend of outsourcing logistics in the region is starting to take off and Almajdouie Logistics and Distribution has started to reap the benefits of its persistence. “We have been pushing this message for the past ten years and educating companies,” says Mustafa. “We had to explain that outsourcing logistics means the customer has greater access to expertise and economies of scale, which allows them to manage their business and concentrate on core activities.” The Middle East has since established itself as a logistics hub with great success, which makes the task of convincing companies to outsource considerably easier. Almajdouie Logistics and Distribution now has a client list that includes names such as Coca-Cola, Castrol and Burger King. “The importance of logistics in gaining competitive advantage is now recognised across all industries. Companies are more educated and understand the importance of logistics,” says Mustafa. Although the number of companies willing to consider outsourcing logistics is increasing, there are still issues regarding the costs of hiring external companies. “Customers will contact a number of different 3PL providers to obtain various quotes, but too many of them will automatically select the cheapest option, instead of looking for quality,” says Mustafa. “They should be searching for a reliable logistics provider with the capability of offering just-in-time delivery. At the end of the day, time is money. If deliveries are late, the costs associated can be very high, and the company’s reputation is affected.” Almajdouie Logistics and Distribution aims to offer customers the service of fully restructuring and developing the supply chain, based on its experience and knowledge of the Kingdom and the Middle East in general. At present, the company is distributing more than 4000 products to over 5000 customers. It owns over 20 warehouses all over Saudi Arabia and transportation is provided through a large fleet of vehicles, including dry, chilled and refrigerated trucks, as well as specially designed side curtain trailers. The company has specialised in petrochemical logistics, which has resulted in considerable success. Investment in the region’s US $33 billion petrochemical and chemical sectors is growing at 10-15% annually. “We expanded into petrochemical logistics, which involves handling operations at the plants and storage facilities, handling the products and loading onto trucks, and managing the transportation,” says Mustafa. The average cost of logistics from plant to customer is 12% of the sales price. Hence, logistics forms the largest costs to the industry. The petrochemical producers are now required to concentrate more than ever on logistics because it is one of the largest costs to the industry. In an export driven region, chemical producers are continuously faced with the challenges of keeping cost low and providing superior customer service. However, Almajdouie Logistics and Distribution does face a number of challenges associated with petrochemical logistics in the region. In particular, the shortage of logistics professionals with the specialised knowledge and skills needed to handle petrochemicals is a major hurdle. “There is a skills shortage throughout the world, including the Middle East,” says Mustafa. “There is not enough people with the right knowledge to handle this type of logistics. We have to search throughout the world before employing members of staff to join our team.” “It is very difficult to find the right professionals and bring them to Saudi Arabia. Some people simply do not want to move to Saudi Arabia. Even in India and Pakistan, the professionals there with the right experience are getting paid very well already. So we have to offer even better packages to get them to come here,” he adds. Finding ways to efficiently tackle this problem remains on the top of Almajdouie Logistics and Distribution’s agenda. In the future, the company also plans to continue expansion into other countries throughout the world by seeking international partners. “We have witnessed considerable success since we started the logistics and distribution company,” says Mustafa. “However, it is important to continue thinking outside the box when it comes to the future.” Almajdouie Logistics and Distribution is already the first 3PL company in Saudi Arabia to receive ISO 9001-2000 certification. It has also embraced technology, with software in place allowing customers to track goods online and obtain detailed logistics information. Mustafa feels this is a move in the right direction for expansion plans, not only in the company’s home country, but throughout the world. “There are plenty of opportunities in Saudi Arabia, especially with the World Trade Organisation development,” he concludes. “At the same time, we have to share our experience by finding new partnerships throughout the world, which will bring common benefits to both parties. This is the direction in which we are heading and I believe it will help Almajdouie to eventually become a global player in the logistics industry.”||**||

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