< PreviousREPORT | SUSTAINABLE SUPPLY CHAINS 20www.logisticsmiddleeast.comFEBRUARY 2024 | LOGISTICS MIDDLE EAST BUILDING SUSTAINABLE SUPPLY CHAINS HOW DECARBONISING THE SUPPLY CHAIN POSES OPPORTUNITIES AND CHALLENGES FOR LOGISTICS FIRMS TODAYSUSTAINABLE SUPPLY CHAINS | REPORT 21www.logisticsmiddleeast.comLOGISTICS MIDDLE EAST | FEBRUARY 2024 THE CURRENT STATE OF SUPPLY CHAIN EMISSIONS The logistics sector in the Middle East, a pivotal hub for global trade, faces unique challenges regarding greenhouse gas (GHG) emissions. Globally, the transportation sector accounts for approximately 20% of all GHG emissions, with freight and logistics being substantial contributors. The Middle East experiences high emission levels in the road freight sector, primarily due to the heavy reliance on diesel trucks. Globally, road freight accounts for about 9% of global CO2 emissions. Air freight in the Middle East is especially notable, with the region possessing global aviation hubs such as Dubai. While air freight globally accounts for approximately 2% of CO2 emissions, its impact in the Middle East is likely higher due to the concentration of cargo traffi c. Maritime shipping also plays a critical role in the Middle East, especially with major ports like Jebel Ali in Dubai. Globally, maritime shipping contributes about 3% of GHG emissions, which is relevant to the Middle East because it is a critical node in international shipping routes. The warehousing sector in the Middle East, which has grown rapidly in response to e-commerce and trade, adds to the region’s emissions profi le as well. Energy consumption in these facilities, particularly for cooling in the region’s hot climate, is signifi cant. Finally, the last-mile delivery segment in Middle Eastern urban centres contributes to the region’s logistics emissions. This challenge is global. However, the negative eff ect is heightened in Middle Eastern cities due to the rapid growth in e-commerce and the resulting demand for delivery services. The Middle East and North Africa (MENA) region’s total e-commerce market is expected to reach $57 billion in 2026, with a CAGR of 11% over 2022-2026. OPPORTUNITIES FOR DECARBONISATION The Middle East’s logistics sector has several vital opportunities for decarbonisation, supported by emerging trends and initiatives. The shift to electric vehicles (EVs) in logistics is gaining momentum. For example, the UAE aims to have 42,000 EVs on its roads by 2030. Regarding maritime shipping, the Middle East can explore LNG-powered ships, which can reduce greenhouse gas emissions by up to 23%. Saudi Arabia, for instance, invested in its fi rst LNG-powered tanker in 2023, setting a precedent in the region. The Middle East, particularly Saudi Arabia and the UAE, heavily invests in solar energy. Saudi Arabia’s Vision 2030 includes a plan to generate 9.5 gigawatts of renewable energy each year. Logistics facilities can integrate solar panels to reduce reliance on fossil fuels. An I n today’s world of diverse and interconnected business, the need to address climate change has become a focal point of discussion for logistics fi rms across the globe. Traditional business practices no longer meet the demands of stakeholders, and companies must balance the need to make a profi t with sustainable operations. As we reach a tipping point between supply chain effi ciency and environmental consciousness, companies must seek to build sustainable supply chains to facilitate growth and opportunity in the age of going green. Companies are challenged to unravel the multifaceted dimensions of the sustainability question and are expected to fi nd answers without compromising quality or effi ciency. While this can pose challenges for logistics companies around the globe, those who seize the initiative and focus on decarbonisation will be well-positioned to rise to the forefront of the industry.REPORT | SUSTAINABLE SUPPLY CHAINS 22www.logisticsmiddleeast.comFEBRUARY 2024 | LOGISTICS MIDDLE EAST In the Middle East, the logistics sector’s impact is magnifi ed due to the region’s signifi cant role in global logistics, driven by its strategic geographic location connecting Asia, Africa, and Europe example is DP World’s solar power project in Dubai, which aims to generate enough clean energy to save around 21,000 tonnes of CO2 emissions annually. Furthermore, the adoption of green technologies in logistics is on the rise. For instance, investments in energy-effi cient warehouse designs are becoming more common. The UAE’s Khalifa Industrial Zone Abu Dhabi (KIZAD) has warehouses with energy-saving features that aim to reduce carbon emissions signifi cantly, based on robust modelling for GHG emissions. Advanced analytics and AI for supply chain optimisation are making inroads in the Middle East. The use of these technologies can lead to a signifi cant reduction in fuel consumption. Moreover, Saudi Arabia’s National Industrial Development and Logistics Program aims to optimise logistics services, potentially reducing emissions through increased effi ciency. This is part of the Saudi Green Initiative (SGI), aiming to achieve net zero greenhouse gas emissions by 2060. CHALLENGES IN DECARBONISING THE SUPPLY CHAIN While there are signifi cant opportunities for decarbonisation in the Middle East’s logistics sector, enormous challenges also need to be addressed. To begin, the transition to green logistics can be costly. For example, the initial investment in electric vehicles (EVs) is still high compared to traditional modes of transport. The cost of an electric truck can be 1.5 to 2 times higher than a diesel truck. Additionally, implementing renewable energy solutions, like solar panels, requires substantial upfront investment. Balancing these costs with traditional practices is challenging in a region where oil is a signifi cant economic driver. The Middle East also faces infrastructural challenges in supporting sustainable logistics. For instance, the availability of EV charging stations is limited. The UAE, one of the region’s leaders in EV adoption, has only around 600 charging stations. Similarly, there needs to be more LNG infrastructure for maritime shipping. Developing this infrastructure requires time and investment. While countries like the UAE and Saudi Arabia are making strides in sustainable policies, especially following COP28, the overall regulatory landscape in the Middle East is still evolving. The inconsistency and lack of enforcement of environmental regulations can hinder decarbonisation eff orts. For example, the variation in fuel emission standards across countries in the region can complicate eff orts for logistics companies operating cross-border. Furthermore, cultural and institutional resistance to change poses a signifi cant challenge. The logistics industry in the Middle East, dominated by traditional practices, may need to show more support to adopt new technologies and processes. This resistance is often due to concerns about the return on investment and the reliability of new technologies compared to established methods. FUTURE TRENDS AND EMERGING TECHNOLOGIES The logistics sector in the Middle East is gearing up for signifi cant transformation through emerging technologies and trends. As mentioned, the shift towards EVs is gaining momentum in the Middle East. In the logistics sector, battery technology is one of the most promising areas of electric mobility advancement. This is crucial for the widespread adoption of EVs in logistics, directly impacting their range, effi ciency, and overall viability. Recent advancements in lithium-ion battery technology have led to signifi cant improvements in energy density, which directly translates to longer ranges for EVs. For example, the latest EV models can achieve ranges exceeding 400 kilometres on a single charge. This is particularly relevant for the Middle East, where logistics routes can span long distances. Furthermore, new battery technologies that can be charged much faster than traditional lithium-ion batteries are emerging. For instance, some batteries can achieve an 80% charge in just 30 minutes. Expanding fast-charging infrastructure across the Middle East, especially in logistics hubs, will signifi cantly reduce downtime for electric trucks and vans. Hydrogen fuel cell technology is emerging as an essential innovation in decarbonising the logistics industry, and the Middle East is uniquely positioned to capitalise on this advancement. Hydrogen fuel cells generate electricity through a chemical reaction between hydrogen and oxygen, producing only water as a byproduct. This technology off ers a higher energy effi ciency compared to traditional The Middle East is home to major global portsSUSTAINABLE SUPPLY CHAINS | REPORT 23www.logisticsmiddleeast.comLOGISTICS MIDDLE EAST | FEBRUARY 2024 The Middle East is a central point of connection between Asian and European markets internal combustion engines. Fuel cells can convert the chemical energy in hydrogen to mechanical energy with effi ciencies ranging from 40-60%, signifi cantly higher than the typical diesel engine effi ciency of around 25- 30%. The Middle East is increasingly investing in green hydrogen production. For instance, Saudi Arabia’s NEOM city project aims to be a global hub for green hydrogen, with plans to build one of the world’s largest green hydrogen plants, producing 600 tons per day by 2025. This aligns with global market trends, where the hydrogen fuel cell market is predicted to grow at a CAGR of 9% from 2023 to 2032. Hydrogen fuel cells are particularly well- suited for heavy-duty transportation in logistics, such as trucks and shipping. These applications benefi t from hydrogen’s high energy density, which is crucial for long-haul transport. Drone technology is rapidly emerging as a critical player in the logistics industry in the Middle East, off ering solutions for delivery and supply chain management. Drones are particularly eff ective in urban areas or remote locations. The UAE is leading the way in drone delivery trials in the Middle The circular economy model has risen in popularityREPORT | SUSTAINABLE SUPPLY CHAINS 24www.logisticsmiddleeast.comFEBRUARY 2024 | LOGISTICS MIDDLE EAST East. For instance, Dubai’s drone delivery project aims to handle a signifi cant percentage of the city’s delivery services, potentially reducing delivery times by up to 70%. Drones are also environmentally friendly, which aligns with the Middle East’s sustainability goals. For example, electric drones can emit up to 42% fewer greenhouse gases per parcel delivered than diesel vans in a city environment. Crucially for drone delivery, the Middle East is actively developing drone regulations. The UAE’s General Civil Aviation Authority is a regional leader in this regard, aiming to integrate drones safely into national airspace. Integrating digitalisation and AI in the supply chain will also transform the logistics sector in the Middle East. This shift is enhancing effi ciency and driving signifi cant reductions in carbon emissions. AI applications in logistics, such as predictive analytics and route optimisation, are becoming increasingly prevalent in the region. In the UAE, AI integration in logistics is part of the national strategy, aiming to contribute up to 14% of the GDP by 2030. Furthermore, digitalisation is a critical component of the National Industrial Development and Logistics Program in Saudi Arabia, aiming to streamline logistics services nationwide. Another advance is blockchain technology, which is being adopted to enhance transparency and effi ciency in supply chains. The future of logistics in the Middle East hinges on its ability to balance economic growth with environmental stewardship The road to a greener logistics landscape presents both opportunities and challenges The UAE government has largely supported blockchain technology in recent years, with various initiatives to propel its country to the forefront of blockchain adoption. These eff orts include the Emirates Blockchain Strategy 2021, which aimed to digitise at least 50% of government transactions. THE JOURNEY TOWARDS DECARBONISATION The Middle East is critical in the rapidly evolving global logistics landscape. While challenging, the journey towards decarbonising the supply chain off ers a unique opportunity for the region to redefi ne its role in the global logistics industry. The shift towards sustainable practices is a response to environmental concerns and a strategic move to stay ahead in a competitive global market. Adopting green technologies such as electric vehicles, solar-powered logistics facilities, and hydrogen fuel cell technology shows a willingness to transform the sector. These initiatives, coupled with the emerging trends in drone technology and AI, are reducing carbon footprints and enhancing effi ciency and cost- eff ectiveness. The Middle East’s strategic investments in these areas demonstrate a commitment to pioneering a new era in logistics. However, the path to sustainability is laden with challenges. High initial investments, infrastructural hurdles, and cultural resistance are signifi cant barriers. Additionally, a unifi ed regulatory framework across the region is imperative to streamline eff orts and maximise impact. Overcoming these obstacles requires a concerted eff ort from governments, industry players, and the community. Embracing innovative technologies and sustainable practices is not just a choice but a necessity for a greener, more effi cient, and resilient supply chain. As the region moves towards a sustainable future, it sets a precedent for the rest of the world, showcasing that economic prosperity and environmental responsibility can go hand in hand. The journey towards decarbonising the supply chain in the Middle East is not just a regional concern but a global imperative, off ering lessons and insights for the entire world. SPONSORSHIP ENQUIRIES Bethany Bardsley Commercial Manager M: +971 58 214 0689 E: bethany.bardsley@itp.com REGISTRATION ENQUIRIES Karim Tolba Editor, The Aviator Middle East T: +971 4 444 3714 E: karim.tolba@itp.com EVENT ENQUIRIES Dmitry Lazarenko Marketing & Events Manager T: +971 4 444 3659 E: dmitry.lazarenko@itp.com SCAN TO REGISTER Wednesday 27th March 2024 Grosvenor House, Dubai, UAE REGISTER TO ATTEND itp.events/TheAviatorMiddleEastConference NAVIGATING THE SKIES OF TOMMORROWOPINION | LAST-MILE DELIVERY 26www.logisticsmiddleeast.comFEBRUARY 2024 | LOGISTICS MIDDLE EAST By Nishith Rastogi, CEO and Founder, Locus HOW TECHNOLOGY IS STREAMLINING LAST-MILE DELIVERY FOR FMCG FIRMS IN THE MIDDLE EAST FMCG businesses must adapt to changing demands in the region Last-mile delivery failure rates range from 15% in the UAE to 40% in Saudi Arabia EXPLORING HOW TECHNOLOGY IS THE KEY TO E-COMMERCE GROWTH FOR FMCG COMPANIES ACROSS THE REGION B ain & Co. has highlighted the role technology is playing in streamlining last-mile delivery for FMCG fi rms across the Middle East and North Africa (MENA) region in recent times. In 2019, the company identifi ed a transformation in the MENA region’s retail sector, marked by the boom of e-commerce. This shift redefi ned customer buying experiences and opened growth avenues for all retailers, challenging traditional business models. Historically, the Middle East’s consumers heavily relied on brick-and-mortar stores. However, predictions indicate that change is coming in the way technology is used in the MENA region. A report predicted that smartphone penetration will rise 92% by 2030, up from 76% in 2022, which shows the potential to capture consumer’s imaginations digitally. OMNICHANNEL SELLING With the rise in diverse preferences of consumers shopping online, retail stores in the Middle East have adopted omnichannel as the way forward. Supermarkets and grocers have expanded their online presence, off ering on-demand delivery services to cater to the increased consumer demand. Furthermore, several home delivery apps for groceries and essentials have sprung up in the MENA region, simplifying the shopping experience by fulfi lling consumer needs for everything from products to cooked meals. Moreover, major consumer goods brands are exploring Direct-to-Consumer selling options to boost their revenue. By bypassing any third-party retailers, brands are seeking to boost revenues and growth, as well as customer satisfaction. Furthermore, there has also been an explosion in the number of stock-keeping units for every store, and shelf space remains the same. The strong competition among FMCG businesses to ensure prime visibility on shelves and app catalogues underscores the need for effi cient fulfi lment. LAST-MILE DELIVERY CHALLENGES With well-developed infrastructure in urban areas, the MENA region does not suff er from connectivity issues. While route complexities exist, the region does not have to face issues from massive urban sprawl, poor infrastructure, or complexities in inter-state customs regulations. However, incorrect addresses can pose a problem. Industry reports have shown that last- mile delivery failure rates could disrupt over $7.42 billion of e-commerce revenue in the MENA region. Overall, this represents around 20% or more of the region’s total e-commerce revenue. On the operations’ end, ineffi cient sorting, picking, loading, and route planning also hampers every vehicle’s ability to make the maximum number of trips across deliveries. Consequently, there is no real-time visibility on the status of deliveries made or stores visited, which makes it diffi cult to resolve any issues on the ground eff ectively. LAST-MILE DELIVERY | OPINION 27www.logisticsmiddleeast.comLOGISTICS MIDDLE EAST | FEBRUARY 2024 THE ROLE OF TECHNOLOGY This is where innovative logistics solutions enable decision-making that fosters effi ciency, uniformity, and transparency in supply chains across the region. Cutting-edge solutions can now ensure that each vehicle carries the optimal volume of product for each truck and that it is stored in the ideal, last-in, fi rst-out combination for more effi cient unloading at various stores. Unique geo-coding engines can turn complex addresses into precise coordinates, reducing planning time and boosting delivery success rates. In addition, advanced route planning systems generate optimal route recommendations that take vehicle capacity and traffi c factors into consideration. They also enable zone-based routing for optimal vehicle utilisation. Paired with cloud-based fl eet tracking tools for real-time visibility and predictive alerts, these solutions empower logistics managers to maintain operational control, manage deviations, and monitor productivity. With these benefi ts, companies can ensure peak productivity when it comes to their last-mile delivery. FMCG businesses can also handle demand during peak seasons with the help of third-party delivery providers. Dedicated solutions can fi nd the right provider for the right price and the right service levels. To provide retailers with greater fl exibility and convenience, delivery-linked checkout features enable companies to optimise their routes, capacity, and resources so that the packages are delivered to customers at their preferred time windows. Finally, proof of delivery, whether complete or partial, is also a key challenge that can be met with dedicated driver apps that can capture and tally such information. ADAPTATION TO TECHNOLOGY Pioneering technologies are globally transforming logistics operations, enabling FMCG fi rms to streamline their delivery operations. Middle Eastern companies can leverage these solutions to enhance distribution and customer experience, fostering trust and strengthening brand loyalty. In turn, this adaptation of technology will foster growth for companies utilising these methods over the coming years. The strong inclination towards physical shopping and cash payments made e-commerce adoption slower in the regionONES TO WATCH | GREEN MOBILITY 28www.logisticsmiddleeast.comFEBRUARY 2024 | LOGISTICS MIDDLE EAST ONES TO WATCH 5 EXCITING GREEN MOBILITY STARTUPS IN THE MIDDLE EAST I n a region synonymous with oil wealth, a green revolution is quietly unfolding in the Middle East’s mobility sector. Driven by the global urgency to address climate change and the growing emphasis on sustainable living, a new wave of startups is redefi ning transport. These ventures are not just challenging conventional mobility models; they’re setting new standards for eco-friendliness and effi ciency. This feature highlights fi ve exciting green mobility startups in the Middle East. Each is pioneering unique solutions - from electric scooters to smart logistics - to collectively shape a more sustainable future for the region. WIZE (UNITED ARAB EMIRATES) Founded in 2022 in Dubai, Wize has emerged as a forerunner in green mobility, particularly in eco-friendly last-mile delivery solutions. The startup, focusing on sustainable logistics, is changing the delivery landscape in the UAE and the wider MENA region. Wize’s approach and potential were recently recognised in November 2023 with a signifi cant $16 million pre-seed funding round. This investment, backed by MENA-focused angel investors, is propelling the company’s expansion within the UAE, fostering product development and enabling the exploration of new partnerships across the region. Central to Wize’s off ering is its fl eet of electric motorcycles, tailored for effi cient and eco-friendly delivery services. These motorcycles come in various models, such as swift, rapid, and speedy, all designed to meet the UAE courier transport regulations. They off er businesses a chance to cut transport emissions by up to 30%. Wize distinguishes itself with its rental and subscription online platform, enabling business owners to manage their fl eets eff ectively and providing insights into driver behaviour, vehicle locations, and operational metrics. Furthermore, Wize’s eff orts in developing software for battery swapping stations - a fi rst in the UAE - show the company’s commitment to technological innovation in the green mobility space. REDBOX (SAUDI ARABIA) Established in 2019 by Thamer Altuwaiyan, Saudi-based startup RedBox is changing the concept of delivery and logistics with its innovative approach. At the heart of RedBox’s operations are its smart lockers, a solution that addresses the increasing demand for effi cient and environmentally friendly delivery options. RedBox’s smart lockers link e-commerce and consumers, off ering a streamlined, secure, and convenient method for collecting shipments. The system signifi cantly reduces the need for repeated delivery attempts, thus minimising GREEN MOBILITY | ONES TO WATCH 29www.logisticsmiddleeast.comLOGISTICS MIDDLE EAST | FEBRUARY 2024 Green mobility startups are on the rise across the Middle East the carbon footprint associated with traditional delivery methods. Presently, these lockers are accessible in over 18 cities across Saudi Arabia. The company is targeting growth by expanding its operations to Qatar and Bahrain. It has also set its sights on further expansion across the GCC, including the UAE, Kuwait, and Oman. Beyond the smart lockers, RedBox is also diversifying its off erings. The RedBox Express service facilitates intra-city shipments, while the Smart Mailroom provides tailored package stations for clients such as private companies and government agencies. RABBIT MOBILITY (EGYPT) Co-founded by Kamal ElSoueni and Mohamed Mansoury, Rabbit Mobility has quickly become a front-runner in the region’s micro-mobility sector. The startup’s core off ering is a fl eet of electric scooters and bikes designed to address the fi rst and last mile of urban transport. Since its inception, Rabbit Mobility has grown quickly, expanding its user base from 18,000 to 300,000 between January 2022 and April 2023. Its services span seven key cities in Egypt, including Cairo and Alexandria, showing a widespread willingness among Egyptians to adopt such solutions. The company operates two rental models: ‘Unlock & Go’, a pay-per-use system where users can locate and unlock vehicles through an app, and ‘Day Rentals’, a long-term rental option that delivers vehicles directly to users. Notably, the ‘Day Rentals’ model has seen signifi cant uptake among women, accounting for about 55% of its users, and even off ers a lease-to- own option. Rabbit Mobility’s success is not just in numbers; it is changing urban mobility mindsets. Its eco-friendly approach aligns with global sustainability goals, off ering a practical solution to short-distance urban travel. This aligns with the startup’s vision of fulfi lling trips under 8 km with their electronic vehicles. Fuelled by a pre-seed funding round and ongoing fundraising eff orts, Rabbit Mobility is eyeing expansion across North Africa. The company’s approach to market and rapid growth mark them as a signifi cant player in green mobility, making Rabbit Mobility a company to watch in the Middle East’s evolving transport landscape. LOOP MOBILITY (QATAR) Doha-based Loop Mobility has emerged as a startup fuelling eco-friendly transport. As Qatar’s fi rst scooter-sharing service, Loop Mobility is looking to reinvent urban mobility. This innovative startup, characterised by its fl eet of electric scooters, off ers an alternative mode of transport that aligns seamlessly with the global shift towards green and sustainable living. At the heart of Loop Mobility’s operation is a user-friendly mobile app, making it easy for residents to locate, access, and ride these scooters across the city. This ease of access and the environmental benefi ts of electric scooters position Loop Mobility as a front- runner and leader in Qatar’s green mobility landscape. A signifi cant milestone in Loop Mobility’s journey is its collaboration with the Qatar Mobility Innovations Centre (QMIC). This partnership, cemented through a Memorandum of Understanding, explores avenues of cooperation in intelligent mobility. By integrating Loop Mobility’s services with QMIC’s technology platform, Super-Wain, the company can enhance its service delivery, off ering a more effi cient user experience. Furthermore, safety and sustainability are at the core of Loop Mobility’s ethos. With stringent age restrictions and a strong emphasis on rider safety and hygiene, particularly in the post-COVID era, Loop Mobility is setting a benchmark in responsible and eco-friendly transport. NEO MOBILITY (UNITED ARAB EMIRATES) Neo Mobility has emerged as a top prospect in the Middle East’s green mobility scene. Founded in 2020 by Abhishek Shah and Anish Garg, Neo Mobility is a UAE-based startup that stands out in electric vehicle (EV) logistics. At the heart of Neo Mobility’s success is its innovative business model, which focuses on all-electric last-mile logistics services. This approach aligns with the UAE’s Net Zero and COP28 goals and marks Neo Mobility as the MENA region’s fi rst B2B startup to leverage a captive EV infrastructure business model. Neo Mobility secured a $10 million seed funding round in 2023, attracting investors like Delta Corp Holdings and Pyse Sustainability Fund. This capital is set to be used for an ambitious expansion plan, aiming to scale the operation to a fl eet of 5,000 two-wheeler and four-wheeler EVs by 2025. Neo Mobility’s fl eet features GSO-certifi ed EV motorbikes approved by the Ministry of Industry and Advanced Technology and Dubai Roads and Transport Authority. These bikes are designed for the unique challenges of the Middle East, off ering a driving range of about 175 kilometres on a single charge and are equipped with advanced safety features. Looking beyond logistics, Neo Mobility is also setting its sights on the ride-hailing sector with a fl eet of Tesla cars alongside its fast-charging EV infrastructure. Furthermore, their innovative leasing solutions, including a lease-to-own model for drivers, demonstrate a commitment to fostering sustainable transport practices in the region. Neo Mobility’s unique combination of technological innovation, a robust business model, and a clear vision for the future places it as a leading green mobility startup in the Middle East. Next >