Reference no: EM131460901 , Length: word count:2000

Supply chain and logistics management

Oman's Logistics Industry

With its deep-rooted traditions in early logistics, Oman is now renewing its quest to become a modern-day logistics leader, explains Warith Al Kharusi, chairman of Oman Logistics Association.

Oman has a strong heritage in logistics, with a seafaring tradition dating over 4000 years. The ancient town of Salalah itself houses the ruins of the fortified town of Sumharam, a port city that controlled the thriving maritime trade of frankincense back in 100BC-400AD. From the old silk routes to the camel trains used to transport wares, one could say that logistics has long been in the blood of the Omani people.

The country's economy has shown a steady growth over the past 40 years, with the government encouraging both private and foreign investments into the country. With regional trade and consumer demand for imports on the rise, logistics firms are increasingly being drawn to Oman as their regional base for operations.

With the firm backing of the country's visionary ruler Sultan Qaboos Bin Saeed, Oman's government has been eager to invest in its transport hubs and road infrastructure, despite the recent global economic recession. The key driving factor behind this has been the government's agenda for diversification - moving away from sole reliance on its successful oil and gas industry and looking at other ways to supplement the country's GDP.

"If anything, the government has used the recession as a stimulus for growth," comments Warith Al Kharusi, chairman of the country's recently formed logistics forum - OLA (Oman Logistics Association). "Oman views the growth as part of the country's diversification and there is no doubt that the logistics industry is going to play a huge part in this."

The past ten years have been testimony to this commitment, as the region has seen vast improvements in the size and efficiency of its transport hubs and road infrastructure. Even forty years ago, Al Kharusi points out, Oman only had a handful of cars on a few kilometres of road. "Today we are looking at thousands of kilometres of excellent roads, dual carriageways and super-highways," he adds.

As well as road infrastructure, Oman has been investing heavily into its ports and reaping the benefits. The Port of Salalah is recognised as one of the fastest growing ports in the world, offering a reduction in sailing time for ships coming from Europe and traveling to the Far East. "In terms of a strategic geographical area of Oman, it is well placed out in the sea, with a coastline of 1800km. Plus you don't have the restriction of the bottlenecks found in the Gulf or the Red Sea," emphasises Al Kharusi.

All three of the region's main ports, Sohar, Salalah and Sultan Qaboos, recorded growth in terms of cargo volume this year. The Port of Sohar is promising even bigger developments in the future, with more than US$12 billion being pumped in for its development in a joint venture agreement between the government and the Port of Rotterdam through the Sohar Industrial Port Company (SIPC).

The airports too have been undergoing a major transformation, with the country's main hubs in Muscat and Salalah due to grow five-fold in the next five years. New regional airports are in the pipeline including in Haima, Sohar Ras Al Had and Duqm. One of the leading hydrocarbon exploration and production company, Petroleum Development Oman (PDO), has itself built three private airports to support its oil and gas activities. A rail network providing connectivity between Sohar and Muscat with a hub in Barka is also on offer, with plans for the rapid extension of the network. All these facts considered, one can fully appreciate why global players will be drawn to Oman's growing logistics proficiency.

Being able to offer lower costs and higher resource availability compared to some of its Middle Eastern neighbours, Oman has been working hard to sell its attractiveness to the outside world. Building on its free trade agreements, the Sultanate is keen to boost up the development of free zones to encourage more global businesses into the region. "The free trade zones are now available where international companies can work 100% independently," explains Al Kharusi.

"The country views investment as a joint affair, by encouraging investment and allowing good commercial governance in a mature way to make global companies feel very secure."

By taking steps to streamline customs procedures and improve road safety, Oman's agenda is definitely focused on attracting international firms into its field. "Oman wants to be a global player with responsibility and is environmentally conscious as well," agrees Al Kharusi "International players will feel confident with such solid standards."

The country recognises that the key to the successful growth of its logistics industry lies in what Al Kharusi has termed ‘strategic partnering'. "Oman encourages having global strategic partners to give it a leapfrog opportunity," he highlights. "If you have strategic partners who already have a lot of knowledge and expertise together with a local partner that has the right infrastructure and resources, the growth potential is explosive."

Indeed the country has become a living testimony to this philosophy, with many of its most successful ventures coming from a strong strategic partnership base with a global player. For example, current logistics partnerships include US-based BDP International's joint venture with Oman's Mustafa Sultan Enterprise to offer international logistics and supply chain solutions.

Dubai's own Aramex also has a joint venture with Oman's Zubair Corporation to build an integrated logistics centre in the sultanate.

The newly-forming OLA has an important role to play in the market's growth. "For Oman to support its development and attractiveness to international players, the logistics profession has to be grown," says Al Kharusi, who is also chairman of the forthcoming TransOman 2010 event. "Institutes such as Sultan Qaboos University and Sohar University are taking a leading role in building the right curricula in logistics and skills training. We also want to encourage young people to be attracted to the industry, and give them better guidance."

Source: Times of Oman Newspaper; Ministry of Transport of Oman; Ministry of Higher Education in Oman.

Questions to be answered by the student:

Q1. Do an analysis of the major challenges and opportunities facing Oman in the logistics and supply chain field with reasons why these challenges are there and offer possible solutions as a logistics and supply chain student. Justify your answer with an applied Oman example.

(Doing analysis of the major challenges and opportunities facing Oman in the logistics and supply chain field with reasons why these challenges are there plus solutions is 15 marks.

Q2. There is a suggestion that the new proposed rail system for Oman and the GCC would be highly beneficial. Critically explain the advantages and disadvantages of rail transport for Oman and the GCC.

Q3. Oman recently introduced the globally connected Oman Logistics Centre and the Oman Supply Chain Association. New degrees have also been introduced in Supply Chain and Logistics

Management in Oman colleges/universities. Critically explain the contribution of these institutions to the development of logistics and supply chain in Oman. Why is there less research output in logistics and supply chain in Oman when compared to the United Arab Emirates? (20 marks) (Critically explaining the contribution of academic and research institutions to the development of logistics and supply chain in Oman, and explaining why there is less research output in logistics and supply chain in Oman when compared to the United Arab Emirates).