Third-Party Logistics (3PL) Market Analysis in the Kingdom of Saudi Arabia

• A critical factor that will determine the outlook in Saudi Arabia is the oil price. A continued slump may lead to a slowdown in public expenditure and, subsequently, project awards. Commitment from the government to move forward with social infrastructure spending will sustain project market activity going forward
• While population growth underpins demand, the leading factor for growth is the oil price, that spills over into the economy through increased government revenues and spending. With the risks posed by the recent oil price slump, plans to diversify the economy through trade and infrastructure investment will drive growth in upcoming years
• KSA is a net export of fuel and lubricants but is a net importer of all other products. However, in 2019-2021 period we can notice the net trade for materials and supplies indicates that the country was a net exporter of these products. In this period the government-imposed regulations to protect domestic industries from imports
• Saudi government spent on an average 5.6 per cent of its budget on developing road and transport infrastructure, with an emphasis on road expansion to support its expanding industrial sector
• The Logistics market was estimated to have reached SAR 69.28bn in 2019, excluding the market for owned warehouses. The total warehousing market represented both owned and outsourced services. However, the market estimated that only 10%-13% of the warehouses were outsourced, as most multinational companies operating in KSA had JV partners with local companies that owned warehouses. As a result, these were considered owned rather than fully outsourced.

Table of Content:

Phase I – 3PL Market Analysis

• GDP & demographic indicator review & analysis
  • Review, analyze, and forecast macroeconomic indicators for the KSA. Key indicators under review to include:
    • Nominal GDP and real GDP growth
    • Inflation
    • GDP breakdown
  • Review, analyze, and forecast demographic indicators including:
    • Population size and structure
    • Population growth rate
  • Analyze economic drivers and risks that are affecting the logistics sector as a whole
• 3PL Market
  • Review and analyze trade statistics including:
    • Import and export data
    • HS code level analysis of the trade statistics (by category)
    • Countries of origin of imports and destination of exports
  • Contact customs department in KSA to collect the data on cargo volume in TEU/tonnes for break bulk
  • Based on the trade statistics, develop a size of the potential total logistics market from a trade vantage point
  • Conduct detailed analysis of GRC Projects to define the warehousing market, contact major industrial cities in KSA to develop a better understanding of the warehousing market size and trends (subject to data availability)
• Key Assumptions & Sources of Information
  • The client will be asked to provide any market and research data that could be of benefit to the engagement
  • GRC internal resources including existing reports and databases will be exhausted prior to seeking secondary sources
  • Where necessary, secondary sources including government websites, publications, white papers, and public databases will be reviewed to complement GRC internal resources
  • Government data are assumed to be accurate

Phase II – Customer Interviews

• Customer identification
  • Co-develop with the client a list of targeted customers that the client will be focusing on in the future
  • The list will include up to 25 target companies
  • GRC will interview a minimum of 15 customers
  • The focus of the interviews will be on (this list is not exhaustive):
    • Who is your logistics service provider (give names)?
    • What services do you use from them?
    • How much do they charge (subject to willingness to disclose)?
    • How satisfied are you with their service?
    • Why did you choose them?
  • The interview guide will be shared with the client for approval before proceeding with the interviews
  • Develop a list of 3PL service providers in KSA based on interviews with customers
  • Develop a ranking model based on customer feedback on the identified 3PL companies in KSA
• Key Assumptions & Sources of Information
  • The number of meetings conducted will depend on third party cooperation with GRC
  • We do not guarantee that each interviewee will be able or willing to answer every question
  • Meetings will be conducted face-to-face

Phase III – 3PL Companies Interviews

• Identification of 3PL service providers in KSA
  • Agree with the client on the top 10 companies as per the ranking from previous phase
  • Develop the interview guide
  • Share with the client and seek approval before proceeding with the interview
  • GRC will interview a minimum of five 3PL companies in KSA, the additional 5 identified companies will be interviewed only when a company refuses to participate in the interview
  • Conduct secondary research on identified competitive set for initial profile preparation. Formulate and execute a competitor survey, to obtain/ validate:
    • Year of establishment
    • Number of employees
    • Geographic coverage
    • Distribution model
    • Sector focus
    • Key clients, if available
    • Pricing estimate
    • Relevant regulatory framework
    • Perceived market share
    • Key market trends and market outlook including challenges
  • The focus of the interviews will also include (this list is not exhaustive):
    • What sectors do you focus on?
    • What services do you offer?
    • Who are your main competitors?
    • What are your strengths and weaknesses?
    • What geographies do you cover?
    • Where are your warehouses located?
  • Prepare competitor profiles based on information obtained in the customer and competitor survey, supplemented with information obtained through secondary research
  • From the interviews we will aim at collecting the following information regarding the market analysis:
    • Estimate the share of the 3PL market from the total trade market size as compared to captive logistics market
    • Identification of challenges, opportunities and market potential in the future.
    • Understating of the product segments that are most important from 3PL perspective
    • Distribution channels and network and challenges around it
  • Key Assumptions & Sources of Information
    • The number of meetings conducted will depend on third party cooperation with GRC
    • We do not guarantee that each interviewee will be able or willing to answer every question
    • Meetings will be conducted face-to-face

Phase IV – Opportunity Assessment

• Market assessment
  • Based on the interviews and data collected from previous phases, GRC will work with the client on developing the market size assumptions per vertical. GRC will do its upmost to collect this information and conduct the analysis to come up with Total market size and addressable market size per vertical.
  • Based on the findings from previous phases, GRC will develop an opportunity assessment matrix based on economic factors, sector development factors and market potential
  • Collate and analyze the findings from the competitor survey to develop a Porter’s Five Forces analysis, to summarize the competitive landscape
  • Develop a SWOT analysis of the Client relative to the competitive landscape in the region
  • The analysis will then be used to develop a high-level strategic recommendation for the client with regards to establishing a new 3PL company serving the KSA market