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Sea Logistics in the United Arab Emirates

Abstract

This research proposal seeks to inspect how the UAE economy will be enhanced through sea logistics. Further, the research looks to make an assessment of the UAE’s economic implications as a result of sea logistics effects and the proficiency of its supply chain networks. The research goes on to investigate the various flaws due to the supply chain models of the frameworks of the diverse sea logistics and to provide answers for sea logistics’ alleviating issues and the supply chain models. In addition, the study makes an appraisal of the UAE’s current trade scenario and the sea logistics extreme effects on its economy. The proposal looks to find the various barriers that affect UAE’s sea logistics and the percussion the global market confederates have on the economy of the nation.

Sea Logistics in the UAE

Introduction

According to Magnan, Lalwani & Fynes (2007), sea logistics carries the responsibility to evaluate and prognosticate the results from the marine transportation industry. Sea logistics is critical to the citizens of the United Arab Emirates. The water transport is very important for the economy of the nation with the borders of the Gulf of Oman and the Arab Gulf as its source. For several years, the UAE has embraced sea logistics as a fundamental exercise. As a strategic capacity, the nation has used sea logistics to accomplish various competitive benefits against rival businesses. Particularly in the 21st century, sea logistics was recognized by the general public when the business of several countries grew in regards to the volume and range of goods and services. The international firms view the entire world ultimately as a single potential hub for business sector exploring, capital raising, manufacturing, and sourcing to ensure the quality of the job done with the continued market's growth. Recently, sea logistics interests have gradually risen since it has consciously caused a reduction of operation cost, retailers’ power force, and enhanced deliveries. In addition, it has led to loyalty levels of consumer expansion, thus leading to the creation of aggressive affiliated organizations in terms of cost, flexibility, and quality.

Globalization and technology advancements have expanded the sea logistics value with the ever-rising multinational companies (MNC). The supply chains of sea logistics management are extremely complex although there is a worldwide scale of manufacture and distribution. Due to the UAE's location, it is considered as the world’s gateway to most progressive markets which include India, China, and Africa. It acts as a major link for shipping lines to Europe and the Far East, including Western and Eastern parts of the world for trade. The strategic geographic location of the UAE and its mobility in mainline infrastructures access make it a global sea transport center. As a financially savvy and efficient transport method, sea transport is highly cost-attractive in regard to both cargo expense and transit time. The multi-modular centers have led to the dire necessity in cost-efficiency improvement of sea cargo in comparison to fast but costly airship cargo.

The position that the UAE adopted as a major sea logistics center globally became a requisite in the recession period. Its uniqueness prompted the government to preserve it amid various effects such as major crises. As other economies succumb to recession effects, the UAE became more resilient to its legitimacy as a hub for logistics as global investors became more attracted. Jacobs & Hall (2007) proclaimed that the UAE commercial venture in sea logistics was anticipated to increase its revenues to approximately $8 billion. New researches project that it would make 9% improvement every year through the 2010-2020 period. Moreover, the revenue that it will achieve is projected to be roughly $16 billion by the year 2020. Recently, some researchers have speculated that the sea logistics would experience improved development in years to come. This is so due to its adverse developments in the volumes of world trade together with the continuous development in the domestic markets.

Literature Review

A literature review is a knowledge gained of a represented topic of discussion in summary form of a source providing the evaluation, implementation, and analysis of the facts. It is necessary that it plays a vital role in researches conducted presently and future ones because there is no extensive research performed in-depth. Ultimately, it requires more discerning insight into the various quandaries seeking the success it might add to the economy of the country. A literature review makes a summary of proved ideas and sound facts and timely presents examination for uncovering more sea logistics benefits. Lastly, it provides comprehension of sea logistics development and portrays numerous ways for their implementation and achieving higher results. Therefore, this study aims at investigating how sea logistics makes a contribution and enhances the economy of UAE.

Various researchers see logistics and its goals differently. Thorpe & Mitra (2011) are convinced that the indispensable responsibility of sea logistics entails the marine transport systems analysis and the overall transport development contribution. The authors have a belief that they would show thorough the study of the economy being affected by sea logistics. Jacobs & Hall (2007) meanwhile assert that both general logistics and sea logistics provide for planning the benefits and further expenses that the UAE has the expectation to achieve. Consequently, in the authors’ point of view, sea transport is one of the world’s vital tools for enriching the country’s budget. In dedication to marine transportations and sea logistics, the research dictates how sustainable it is and the kinds of benefits it brings to the UAE economy.

Firstly, the authors researched the functions of marine transport. Secondly, they provided the balance of the benefits and expenses that it would require. Thirdly, they inspected its general contribution to the UAE economy. Fourthly, the researchers questioned how the benefits could be both received and applied to the United Arab Emirates economy. The part of the UAE nearest to the Gulf regions benefits from the above point due to its access to harbors, ports, and sea-transport. Fernandes & Rodrigues (2011) recommended that it was highly essential for the novelty of a multi-model approach in regard to sea logistics. “The need for… multi-modal hubs are driven by the need to optimize the cost efficiencies of sea freight with that of quicker but slightly expensive air freight” (Fernandes & Rodrigues, 2011, p. 78). The authors came to the conviction that essentially sea logistics should be regarded as a three-dimensional model and not as a direct line. This model yields a versatile vision regarding both the internal and external processes of the area. Concisely, this approach has had huge success since it allows us to estimate the real state of affairs and control the sea logistics area development.

Fernandes & Rodrigues (2011) indicate ideas in comparison to the findings of Sundarakani, Tan & Over (2012). The sea logistics multi-model approach performs a vital role in increasing the economy of the UAE. However, Sundarakani, Tan & Over (2012) state that the multi-model hub implementation is not a true form of functioning. Therefore, the application of IT technologies that are currently developing at an alarming rate is crucial. The IT technologies can simplify the functioning of the mechanisms in question and seek to provide prospects in their continuous development. Computers assist in acquiring sea logistics requisite data and contribute to developing the economy of the nation. The approach above is highly valuable in the industrious marine transportation and beneficial for the economy of the UAE in many aspects. Former approaches by the authors yield further analysis taken by sea logistics.

Oppositely, Ashai, EL Dashan, Kubba, Talati, & Yousseffi (2007) proclaim that it is essential for the implementation of various strategies to improve sea logistics outcomes. One such direction is employee education of those that earn living through marine transportation and logistics in particular areas. The authors conclude that “specialized research and training services have been recognized as the UAE ranking in this category strongly improved” (Ashai, El Dahshan, Kubba, Talati, & Youssefi 2007, p. 8). The United Arab Emirates has portrayed how aims in the educational sector are in line with the provision of necessary researchers and employees in the area. The UAE government and the field of sea logistics have a huge task in providing new staff. Therefore, recent findings need to be critically inspected, and the specialists are expected to determine directions used for further developments. The approach is a prerequisite for industry development and in turn, contributes to uplifting the country's economy. As a consequence, the education of sea logistics specialists is a necessary approach for implementation and improvement in sea logistics quality, functioning, and the outcomes that it achieves.

Forte & Grimaldi (2013) support the idea of education by stating that a good quality of assignment has roots based on the quality education of the specialists. Additionally, the authors are convinced that the UAE economy is dependent on the role played by sea logistics due to the nation’s geographical position that permits the development of numerous ports as well as transportation. According to sea transportation, sea logistics has a dual nature. As a point of collaboration internationally, sea logistics ensures the international linkage among countries. On the other hand, transportation via sea follows an internal way: it entails transporting cargos that are nationally important. Globally, Saudi Arabia is significantly rich in oil. Saving money along the national scale is propelled by the domestic means that accompany oil transportation.

Consequently, shortages of expenses are occasional experiences for the country. The idea of Magnan, Lalwani & Fynes (2007) in developing sea infrastructure is perceived as a way for increasing the oil industry as the main business of the country and leading to prevention of unnecessary extra expenses. Similar to Fernandes & Rodrigues (2011), the survey by Magnan, Lalwani & Fynes (2007) is centered on proving ways that sea logistics can influence and increase the economy of the nation. In comparison to approaches of different countries to logistics and transportation, the authors make a conclusion that sea logistics of the UAE is outstanding globally despite the limited researches of the approaches. Ultimately, the author proposes numerous ways of multiplying the productivity and results of both sea logistics and marine transportation.

Jacobs & Hall (2007), Forte & Grimaldi (2013), and Thorpe & Mitra (2011) concluded that sea logistics was concentrated on numerous aspects that were indispensable in contribution to the economy of the UAE. The first aspect dictates the gained income from transportation costs. Analyzing the international arena bonds here is crucial: the establishment of transportation in regards to international relations leads to Saudi Arabia experiencing higher income, thus boosting its economy. The second aspect constitutes the transportation of goods that the country has interests in. Both state and private institutions contribute largely to industry prosperity. The international trade in regard to the innovative transport devices constitutes the third aspect. The multi-model hub proposed by Sundarakani, Tan & Over (2012) is contributed by this approach.

Furthermore, it is safe to conclude that due to the increase of the industry versatile vision, the economic income will have greater recognition. Moreover, over the years, the multi-model approach has grown to be mainstream. The model consolidates a complex mixture of several approaches taking over the sea logistics function process and the contribution that it has on the economy of the UAE. Essentially, this approach should be considered by the government in a profound manner to provide necessary financing and make a contribution to the development of the industry. Developing marine transportation as a consequence will lead to further sea logistics development. Through their research, Sundarakani, Tan & Over (2012) represent the most important aspects concerning sea logistics and the port and their consequent appliances for the benefit of the economy of the UAE.

The conducted research by the scholars concentrated more on the presumption that the UAE ports needed to be significantly raised since more benefits are allowed. Additionally, this fact will heavily be influential for the employment rate. Generally, the UAE is considered as a country having native employees in fewer amounts. In spite of this, a higher number of employees working for the benefit of the country will result in more income generated. Through the critical evaluation of the research, conclusions can be drawn that the outcomes of the investigation in question have to be inserted in the reports on sea logistics as the development section directions. Jacob & Hall (2007) support this ideology in that they believe that strategic and necessarily important directions need to be focused on the education, attraction, and appraisal of new employees that will improve the sea logistics area, thus making a great contribution to the UAE economy. In other words, the authors summarise the ideas indicated above and investigate them.

In general, the factors that have largely contributed to the UAE economy constitute the following: the multi-model approach implementation, used transport services, and the emergence of new UAE ports. Finally, sea logistics both sustains and contributes largely to the economy of the UAE in accordance with the analysis of the research paper. Sea logistics serves as a significant tool to control and analyze logistics with it being the country’s important area for business and economic activity.

Research Methodology

Research methodology entails the collection of information and data purposely for various business decisions. Here, it is the approach necessary for directing the research which may either be inductive or deductive. An inductive theory involves gathering theory-based information. On the other hand, a deductive theory dictates research strategized information. The geographical area of the research study is the UAE. The United Arab Emirates has become the choice of study because it is globally accepted as the best in terms of sea logistics. This proposal entails sampling 110 participants that are examined through a series of questionnaires and interviews to find their answers. Tables, graphs, and charts are drawn for findings interpretation after data collection.

Additionally, questionnaires, observations, and interviews are some of the various methods used for the study. The study has adopted a technique known as the selection which provides an opportunity for individuals’ selection that is adequately prepared for the subject under discussion. Random selection of both female and male participants has been used with the age limit of between 25 and 50 years. No particular consideration was assigned to the age of various participants regarding their sea logistics engagement. The 110 participants have included 10 members of management with remaining share being represented by stakeholders.

Nevertheless, conducting good research requires the analysis of the positivist and interpretivist paradigms of the primary research. The research analyzes factual figures and statistics which prompt the interpretive approach use. Generally, three major techniques are used for research studies: realist, positivist, and interpretivism. Firstly, interpretivism provides an opportunity for an individual to derive legitimate facts as conclusions. Secondly, positivism allows the research team to draw its own suppositions. Through the research, a big amount of statistical data is considered in relation to supply chains and predicaments that befall sea logistics. It extensively involves numbers, figures, and information; therefore, the research is both qualitative and quantitative by nature. The research was conducted in 2014.

Data Findings and Analysis

The analysis of data collected during the study was conducted with the help of calculations of mode, means, and percentages. The findings of the study were expressed in charts, tables, and graphs to provide a clear visual representation. Over the past two decades, compared to global growth, trade-in Dubai has increased by 12 times. According to the data as of 2005, Hong Kong, China, represents 23% of the throughput of the world. According to the Lloyd’s List special report (2007), Dubai ranked ninth among the world’s top nine container ports. Between 2005 TEU and 2006 TEU as seen in Figure 1, Dubai had a significant increase in variation, with only Shanghai having a higher percentage than it. This is largely due to the improved technological advancements implemented in marine transportation and sea logistics in general. The figures bettered significantly also due to government intervention to enhance the economy through sea logistics.

According to the study, the participants had different views with regard to their preferred choice of transport. Those who preferred sea transport comprised 60%, air transport entailed 20%, road transport had 15%, and the last 5 % favored other forms, such as rail transport, as their preferred choice. This is well represented with the pie chart (Figure 2). From the pie chart, it is safe to say that the majority of individuals in the UAE prefer sea transport as their choice of transport. This is reflected in the economic rise of the UAE through sea transport between 2005 and 2006 as shown in Figure 1.

Additionally, several participants from the study strongly agreed with establishing a joint venture between their current company and an international partner. The majority came to conviction that the international partner will be an added value to the rise of their company’s reputation, which will further enhance the economy of the nation. Dubai registered several participants expressing in unison the idea of having an international partner in their trading activities. The study also showed the barriers that exist for sea logistics regarding the attainment of desired economic aims. The majority of the applicants to the study asserted that sea transport in the UAE is greatly affected by unfavorable environmental conditions. The adverse weather conditions limit the smooth flow of transport, thus affecting the economy of the country. Others claim that continuous change in technology inhibits the transportation of items by sea. Small companies are greatly affected compared to larger ones in that the technology used is very expensive to maintain. In addition, the continuous competition from neighboring countries has kept these companies from profiting due to the technology of their competitors.

06

COUNTRY

PORT

05

2006 TEU

2005 TEU

VARIATION

1

Singapore

Singapore

1

24,800,000

23,190,000

+6.9%

2

Hong Kong

China

2

23,000,000

22,400,000

+4.1%

3

Shanghai

China

3

21,700,000

18,100,000

+19.9%

4

Shenzhen

China

4

18,468, 000

16,200,000

+14.0%

5

Pusan

South Korea

5

12,030,000

11,840,445

+1.6%

6

Kaohsiung

Taiwan

6

9,770,000

9,471,056

+3.2%

7

Rotterdam

Netherlands

7

9,700,000

9,300,000

+4.3%

8

Hamburg

Germany

8

8,900,000

8,100,000

+9.9%

8

Dubai

UAE

9

8,900,000

7,620,000

+16.8%

Figure 1: World’s top nine container ports

Source: Lloyd’s List special report. Mar 15, 2007. Top container ports

Pareto Analysis

This is a principle that seeks to pinpoint predicaments and provide solutions to counter them. The idea behind the 80/20 effect-to-cause ratio adds another definition of it: the 80/20 rule. The definition states that having 20% of work can generate individual benefits of up to 80%. As an illustration, 20% of the inventory is the major cause of the high percentage of problems (80%) in stock management. Pareto makes a suggestion that the customers (20%) bring the costs of logistics to a high percentage of 80%. Reasons vary in range from customer to customer. Cost of time and fuel used for delivery to a destination is gradually increasing. This leads to optimizing all the possible routes to save time and fuel used, thus contributing to the economy of the UAE. Technology advancements encourage the use of better and improved communication strategies between suppliers and customers. This can be met with accurate identification of the needs and desires of customers while keeping the cost in total control. Concisely, the opportunity created by logistics functions in performance improvement on the basis of revised operational targets.

Gap Analysis

This technique is commonly used by businesses and organizations to determine the required steps for change to a desired future state from its current state. In other words, it is known as needs analysis, needs assessment, and need-gap analysis (Magnan, Lalwani & Fynes, 2007). Firstly, it consists of listing the characteristic factors: competencies, performance levels, and attributes of the present situation. Secondly, it involves listing of factors required for accomplishing future objectives. Finally, it highlights the existing gaps that need to be filled. Through gap analysis, a company can reflect on its purpose of existence and work and what they want their future to hold. Several scientists have proposed to use gap analysis as the preferred analytic technique.

Regarding the findings from the study, gap analysis would provide essential results to determine the relationship between sea logistics and the economy of the UAE. The team of researchers must make an evaluation of financial opportunities relative to sea logistics. This will reflect the current cost factors, structure, and objective of its financial viability, company risk tolerance, and volume variability. If technology capability presents gaps, estimation of the capital investment is necessary for filling the gap and implementation time is needed. Government intervention can be required if the gap seems difficult to properly fill it. The subsidies that the government provides will effectively aid in filling the gaps fully.

Recommendations and Solutions

However, some of the solutions and recommendations are given based on the findings of the study will help further improve the country’s economy. The government should intervene by providing loans to smaller companies to acquire better facilities for sea transport so as to compete with their counterparts. Through the provision of small interest loans, these companies would be able to achieve their desired goals. Moreover, this will enable them to boost the economy of the nation. Consequently, as for the environmental hazards, the companies should strategize through their investors and shareholders on how to cope with these scenarios. Additional help from the government is also essential for the companies’ growth and sustenance.

Conclusion

The survey helped keep the focus on a wide area that contributes to determining the solutions to the problem statement. Essential aspects are represented in the research in regard to sea logistics together with the application of ports to reach the requirements of the economy of the United Arab Emirates. The researchers conducted the study keeping focus majorly on the maritime information of Dubai and the gained benefits that it associates with the economy of the UAE. According to the information presented above, a number of researchers believe that various advancements held in sea logistics have had a positive impact on the rate of employment. Generally, the UAE is acknowledged as a nation having a limited number of native workers. Critical evaluation of the research has enabled the scholar to adopt viable conclusions (Raguraman & Chan, 2014). Moreover, the outcomes of these conclusions are quintessential in drawing reports for acquiring directions used for the development and provision of better sea logistics.

The global sea logistics systems are extensively essential to both supply chains and globalization. Through the needs for administration systems of sea logistics, schedule integrity, stronger terms of frequency, and a large scope of administrations have been advocated globally. Evolution has been encountered by the UAE in the liner seaport operations and shipping systems. The shipment lines of the UAE have cradled ideologies inclusive in variety for liner administration setups to simplify product movement through service networks that are highly dynamic. The increased growth of trade trends amid troublesome conjunctures concerns economic, geographic, and global financial crises as an illustration. Therefore, consistency in making new shipping systems is necessary to satisfy the ever-rising demand.

Through the analysis of the data collected, it is wise to proclaim that sea logistics have a huge influence on the economy of the UAE, for example, the gradual increase in the container ports in the years 2005 and 2006. The economy of the UAE depends on logistics because it brings a lot of revenue to the country, thus improving the living standards of the citizens. Therefore, it is necessary for sea logistics to be handled professionally to sustain the economy of the UAE.