Logistics in Saudi Arabia: A Vision for the Next Decade

By Klaus Holmager, Executive Director, Starlinks For Support Services LLC

We can’t help notice that Saudi Arabia is undergoing a profound transformation, with its logistics sector poised to play a central role. We at Starlinks For Support Services, have central support from Saudi Arabia Vision 2030, a blueprint for economic diversification, identifying logistics as a key enabler. As we examine the growth trajectory of logistics in Saudi Arabia, supported by data and forecasts, we see significant opportunity. However, challenges exist which we need to collectively address.

A Strategic Starting Point: The Current State of Logistics

Over the past decade, Saudi Arabia became a key logistics player, supported by investments in infrastructure, technology, and government incentives. The logistics sector contributed approximately 6% to the national GDP in 2022, with projections to reach 10% by 2030 under the National Industrial Development and Logistics Program (NIDLP). So it’s growing fast. 

Key milestones achieved include:

• Infrastructure Development: Investments exceeding $100 billion have been channeled into expanding ports, airports, railways, and highways. The King Abdullah Port is one of the fastest-growing ports globally, with an annual throughput of over 3 million TEUs.
• Technology Integration: Saudi logistics firms have increasingly adopted digital solutions to scale effectively, including blockchain for supply chain transparency, Internet of Things (IoT) for real-time tracking, and AI for predictive demand planning. This is still nascent but likely to become more prominent in the next decade.
• E-commerce Surge: The e-commerce market in Saudi Arabia grew by 32% annually between 2019 and 2023, creating unprecedented demand for last-mile delivery and warehousing services.

Growth Drivers for the Next Decade

The logistics sector in Saudi Arabia is entering an era of accelerated growth. Several key factors will shape this trajectory:

• Saudi Arabia Vision 2030 Initiatives: The government’s commitment to positioning Saudi Arabia as a global logistics hub includes the development of free zones and the 59 logistics zones. The Saudi Logistics Hub aims to attract $10 billion in foreign investment by 2030, fostering trade facilitation and regional connectivity.
• Technological Advancements: Automation, robotics, and data analytics will redefine operational efficiencies in Saudi logistics. Adoption is light now, but as warehouse space lessens and rents rise, more logistics companies will adopt automation. Automation is expected to grow by 15% annually, enhancing inventory management and demand forecasting, making supply chains more efficient.
• Trade Agreements and Strategic Positioning: Located at the intersection of major global trade routes, Saudi Arabia is leveraging its geography to strengthen trade ties with Europe, Africa, and Asia. The China-Saudi partnership, particularly under the Belt and Road Initiative, will further enhance trade volumes. Winning the 2034 World Cup bid and hosting Expo 2030 are initiatives requiring significant logistics support.
• E-commerce Boom: The Saudi e-commerce market is forecast to reach $20 billion by 2030, driven by rising internet penetration and a young, tech-savvy population with expectations of same day delivery. This will necessitate further investments in last-mile delivery and local fulfillment centers. Dark stores may develop further, as grocery shopping moves online. 
• Sustainability Imperatives: As global trade increasingly prioritizes ESG (Environmental, Social, and Governance) principles, Saudi Arabia is exploring green logistics solutions, such as electric delivery vehicles and carbon-neutral warehouses. These initiatives align with its goal of achieving net-zero emissions by 2060. There is still some way to go, but we’re seeing ESG sitting in design proposals for future builds. Logistics is, by design, a low margin business so initiatives must be well thought through to be cost effective.

Data-Driven Insights: The Numbers Behind the Growth

• Port Throughput: Container volumes in Saudi ports grew by 17% in 2023, reaching 10.5 million TEUs, positioning the Kingdom among the top 20 global shipping hubs.
• E-commerce Logistics: The demand for warehousing space increased by 25% in 2022 alone, fueled by online retail expansion. Projections indicate the need for an additional 10 million square meters of warehousing capacity by 2030.
• Rail Freight: The Saudi Railways Organization reported a 30% increase in freight volumes in 2022, with the North-South Railway playing a critical role in mineral exports.

Challenges to Address

All this growth presents some challenges for logisticians, and collectively the industry with government enablement can lean into acting as a catalyst for growth:

• Regulatory Alignment: Variations in customs and trade regulations across GCC countries pose barriers to seamless cross-border logistics.
• Talent Gaps: A shortage of skilled professionals capable of managing advanced logistics technologies remains a challenge. Local training at the Saudi Logistics Academy supports Saudi talent development, and logistics companies can help through internships and talent development.
• Cost Pressures: High operational costs, rent costs, particularly in adopting green technologies, may impact profit margins for logistics firms. 

Opportunities for Industry Leaders

To capitalize on the sector’s growth, we must focus on pushing innovation, collaboration, and adaptability. Those investing in technology, forming strategic partnerships, and adopting sustainable practices will be best positioned to succeed.

The Outlook for Saudi Arabia’s Logistics Sector

By 2035, Saudi Arabia is set to firmly establish itself as a leading force in global logistics. Some of the key milestones we can look forward to include:

• World-Class Infrastructure: Completion of mega-projects like NEOM and the Red Sea Global will integrate logistics seamlessly into the broader economic ecosystem. And KSA will learn from delivering these mega projects.
• Digital Dominance: Fully automated supply chains powered by AI, blockchain, and IoT will enhance efficiency, data visibility and improve unit economics.
• Sustainability Leadership: Saudi Arabia’s commitment to green logistics will set benchmarks for the region, driving global best practices.

The next ten years are going to be a game-changer for logistics in Saudi Arabia. With smart policies, cutting-edge tech, and teamwork, the Kingdom can lead the global logistics scene. Everyone in the field must stay flexible, think ahead, and contribute to Saudi Arabia Vision 2030.

Freyt World Blog Contributor

Klaus Holmager

Executive Director, Starlinks For Support Services LLC, a member of the Freyt World Network

Freyt World is a global logistics network uniting members from around the world. Our mission is to revolutionize global logistics through collaboration and innovation. Our platform goes beyond networking, enabling members to excel and grow together, featuring articles by logistics professionals for their peers. This series will cover industry-relevant issues and news, providing valuable insights for professionals in the field.