Forming a company in Saudi Arabia requires the fulfillment of a series of administrative and legal procedures and the submission of various documents. The government of the country has taken measures to simplify this process, however, if you are a new entrepreneur you may find some bumps in the road. For this reason, in the following lines, we will teach you how to form a logistics company in Riyadh.
In this article, you will learn about the process to form a logistics company in Riyadh, the licensing system for these companies in Saudi Arabia, the benefits of partnering with these businesses, and more.
- What is a logistics company?
- Types of logistics
- How to form a logistics company in Riyadh?
- The difference between a 3PL company and a Brokerage firm (3PL vs Freight broker)
- Saudi Arabia logistics licensing
- Benefits of partnering with a logistics company in Riyadh
- Considerations before partnering with a logistics company in Riyadh
- How can we help you establish a logistics company?
1. What is a logistics company?
A logistics company in Riyadh implements, plans, and controls the storage and movement of services, goods, or information within a supply chain and between the points of origin and consumption. Some logistics companies handle all or some of these supply chain functions, depending on a client’s logistical needs. In addition, a business of this kind should count on a proper insurance plan.
Coordinating the movement of materials and supplies is now a globalized process. Today, the industrial sector uses logistics as a term to describe the efficient storage and flow of goods from point of origin to the point of consumption. The supply chain is an important aspect of this process.
A proper supply chain can include shipping, transportation, storage, receiving, receiving, and management of one or all of these functions. Logistics can also apply to inventory, transportation, information, warehousing, packaging, handling, disposal, and security within the industrial sector.
Are you looking forward to start a logistics company? Make sure that you have a solid strategy and business plan.
2. Types of logistics
A logistics company in Riyadh uses three processes to move and direct certain packages, goods, items, parcels, information, etc. These are reverse logistics, inbound logistics, and outbound logistics. The information about these supply chain directions is essential to know, especially for those entrepreneurs who want to establish a logistics company in Riyadh.
2.1 Inbound logistics
This type of logistics refers to the movement of goods from suppliers to production. This includes transportation and storage of various products and information from the suppliers, through the warehouse, and further through production facilities of manufacturers for processing and production.
The types of items or goods that are transported through this logistic flow are raw materials. Some could be tools for consumable products needed for fuel, manufacturing, or various components or spare parts for production inputs. Having efficient inbound logistics management makes the cycle more integrative. An excellent way to control inbound logistics is to use order-fulfillment systems or automatic ordering. With this, you can improve your organization’s success.
In a company formation in Saudi Arabia, inbound logistics is the first step in the logistics value chain. So, it is important that you have an improved process flow to ensure the impact on your network’s remaining processes.
2.2 Outbound logistics
This is the movement of finished products from production facilities to the next supply chain link. These items move through warehouses, further to the point of consumption (in the hands of the end-user). This is generally known as the order fulfillment process.
All the items are intended for the clients to move through this logistics flow. In business terms, these logistics refer to businesses shipping and delivering their products from the warehouse to the customer (whereas inbound refers to the change between companies and their suppliers).
2.3 Reverse logistics
In a business setup in Saudi Arabia, reverse logistics refers to the movement of goods or items from the end-users back through the supply chain to the appropriate party concerned. This happens in the event of returns or with products that may need repairs or servicing, resale, recycling, recovering, or proper disposal (in the situation that an item cannot be recycled due to certain elements and must be broken down appropriately and safely).
This logistics encompasses all the activities carried out after the end product life cycle or the point sale. Note that this process is the most common in the automobile and electronics industry.
2.4 How to improve your outbound, inbound, and reverse logistics processes?
To improve your outbound, inbound, and reserve logistics, your business must ensure that your 3PL partner can offer a wide range of services that will fit your strategies and will help in the long term with the compliance of the goals of your company.
3. How to form a logistics company in Riyadh?
A logistics company in Riyadh requires high-quality equipment and good management. But in order to succeed, you must learn the basics of a company formation in Saudi Arabia.
The first thing to define is the equipment that you will have to deal with. Is important that you think of what equipment you will invest in that can make your small business grow. Once you have decided on what to invest in, you have to find the ideal location next. Finding a strategic place can give you more opportunities of being seen by your public target.
You also have to decide if you will only buy and sell equipment or you will offer rental services for logistics equipment. Some companies have also tried the manufacturing of this equipment which gives them higher rates of profits.
Before opening your business, you have to create a brand first. Make sure that your clients can differentiate you from other logistics companies. This can be done in many different ways. You can be the one that offers unique services and products. You can also get people to know you by offering cheap products that are truly high quality. Try to find what works best for you and become known to the clients.
In this business, you get to choose your clients, so be careful about the decisions you make. When some clients place volume orders, try to know them first and think about your long-term relationship.
Knowing how to start a logistics company in Riyadh is just part of being successful. The quality of the products you offer gives the other part of this venture’s success.
4. The difference between a 3PL company and a brokerage firm (3PL vs freight broker)
4.1 What is a freight broker?
In a logistics company in Riyadh, a freight broker will generally focus on one single shipment and acts as a non-assets bearing intermediary between a carrier who moves the freight and a shipper with goods to transport. In essence, a freight broker works directly with owner operators-owners nationwide to coordinate individual shipments.
Freight brokers generally connect with thousands of small to medium-sized freight carriers to provide a large network of shipment options. This allows shippers alternatives to freight carrier providers.
Small carrier operations generally rely more on brokers for business than larger carrier providers. This is because these providers often have long standings relationships with 3PL companies.
4.2 What is a third-party logistics company in Riyadh?
3PL companies apply to any service contract that involves the shipping or storing of a commodity. A 3rd party logistics company in Riyadh may only offer a single service, like warehouses, inventory management, transportation, etc. However, it may also offer a system-wide bundling of management and services of a client’s entire supply chain. Generally, these companies integrate all operations. Transportation and warehousing services are all tailored to a client’s needs.
A third-party logistics company in Riyadh is typically an asset-bearing firm that establishes relationships with shippers on a broader scale. These companies usually make an investment in human and physical capital, including mortar and brick locations and wheels on the ground.
5. Saudi Arabia logistics licensing
On November 21, the Ministry of Transport and Logistics inaugurated the logistics license, which will simplify the procedure of obtaining a license for a logistics company in Riyadh.
The launch of this law has the main goal of strengthening the Saudi economy in accordance with the country’s vision 2030, which includes all transport sectors, sea, air, land, and railways. It also aims to develop more than 60 logistic zones to support re-exports and e-commerce and to encourage trade through land ports, the expansion of the e-commerce sector from 6 percent to 23 percent, and the growth of re-exports revenues from 42 billion riyals to 520 billion riyals.
The logistics license offers the holders several advantages. For example, simplified procedures for companies obtaining a license in the sector. The license for a logistics company in Riyadh also seeks to develop and raise the logistics performance index through the services provided, take advantage of the investment opportunities that empower the local economy, improve work in the sector, and consolidate the country’s strategic position as a global logistic center for economic management and trade.
Allow us to point out that while these commercial activities are extremely beneficial for the country’s economy, you should perform a careful analysis to determine whether this sector will be profitable for you. For this, we recommend that you find a qualified team of financial advisors.
6. Benefits of partnering with a logistics company in Riyadh
A logistics company in Riyadh has vast experience in managing the movement of items, which means they will know the most cost-effective, efficient, and streamlined way to do so. While some businesses manage certain parts, or all, of their supply chain logistics, partnering with a professional logistics business provides several benefits. For example:
Warehousing is becoming increasingly expensive and complex. A logistics company can take responsibility for finding affordable, appropriate, storage space in an optimal place and save their client the time and stress of doing so themselves.
Accurately fulfilling clients’ orders in time is a service that demands specialist equipment and an experienced workforce. Having already invested in the necessary staffing and technology, a logistics company in Riyadh can minimize errors and delays to ensure a business meets customer demand and maintains its reputation.
6.3 Transportation and shipping
Manufacturers will not typically invest in their own fleet of drivers and vehicles. It takes a great expense and a lot of effort to gain the necessary licensing to do so and train staff. A logistics company in Riyadh already has these services in place, which means they will be reliable and well-established.
These companies have the capacity to scale up or down, reducing the risk of delays. They also have the proficiency and resources to adapt processes and adjust transportation methods or shipping routes in the event of supply chain disruptions.
A logistics company in Riyadh has access to sophisticated technology to digitize the supply chain and ultimately drive greater reliability and efficiency. For example, collaborative transportation management software enables the automation of load schedules. Other technologies often used include Internet of Things devices (IoT), tracking software, and long-range RFID tracking.
7. Considerations before partnering with a logistics company in Riyadh
Before starting a business setup in Saudi Arabia and partnering with a logistics company, the entrepreneurs must consider the following factors:
Not all logistics companies are experts in every part of supply chain management. Entrepreneurs must consider their priorities, e.g. shipping, packaging, etc. And find a business that fully meets the company’s needs.
Entrepreneurs must establish whether the pricing of a logistics company in Riyadh is transparent. They should be aware of any hidden costs and if the quote provided matches with the level of service promised.
A logistics company in Riyadh must process orders within a certain time frame. An entrepreneur cannot partner with a business that cannot provide the services that your clients expect.
When you establish a long-term relationship with a 3PL, it is important that you find a reliable and trustworthy partner. Market research and background checks can help confirm if a logistic business will deliver on its promises.
8. How can we help you establish a logistics company?
If you are a new entrepreneur, and you want to start a business in Saudi Arabia, Company Formation Saudi is the ideal business setup agency to guide you through every step of the process. With several years helping investors make their dreams come true, we can offer you the most expert legal guidance.
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