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GAC predicts outsourced logistics growth

Outsourcing within the logistics industry will continue to strengthen as companies choose to focus on their core operations.

Outsourcing within the shipping and logistics industries will continue to strengthen as companies seek to control their costs by focusing on their core operations, according to Björn Engblom, group executive chairman, Gulf Agency Company (GAC).

Engblom made this forecast while speaking to a Singapore audience as part of the Dubai-based group’s 50th anniversary celebrations. He said that mounting competition, driven by globalisation and consolidation, has made it essential for companies to enter into partnerships, which freed them from operational tasks that were not among their core strengths.

“Business relationships will become far more intimate and sophisticated as globalisation drives companies to extract every possible competitive advantage in their markets,” said Engblom. “We are seeing a continued rise in outsourcing deals, where service providers such as GAC provide arms length services to shippers, manufacturers and the like.”

The GAC chairman also pointed to growth in ‘up-close’ outsourcing, where a service team works inside the client company as a provider of expert support in logistics, 3PL, freight forwarding, and an increasing range of shipping services. This trend is gaining significant momentum in the Middle East, where an unabated growth in shipping and logistics activities such as transport of crude oil is signalling further advancement of the industry and forcing regional players to concentrate on their main operations.

Increasingly, Middle East based companies are using 3PL services to help extend their reach beyond the region, and supporting their operations in emerging markets. Something GAC believes it is well poised to provide, especially with its Logistics Park in Jebel Ali Free Zone and distribution channels into Africa and Indian Subcontinent.

“Companies are realising that a more integrated relationship with an expert service provider can bring huge advantages by delegating previously in-house tasks and letting the company focus on what it does best,” he added.

Engblom cited the way Hub Agency services were now taking on voyage management and larger financial support services for ship owners, instead of simply handling port calls. For example Oman Ship Management Company (OSMC) has recently inked a deal to take advantage of the innovated Hub Services. “I expect that other services such as taking care of industrial clothing, ships’ catering and even hospitality services will become part of outsourcing arrangements in the future,” he said.

“In logistics, closer relationships, built on performance and trust, will see service providers handling all procurements for manufacturers. Not only managing raw materials in and finished products out, but taking care of all other supplies and materials a company might require in its day-to-day business,” Engblom concluded.

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