Allocation of Regional Logistics Hubs and Assessing Their Contribution to Saudi Arabia’s Logistics Performance Index Ranking

Abstract

In 2016, Saudi Arabia published its vision for the year 2030, which is based on the Kingdom’s geographical, financial, social and religious potentials. Developing the logistics sector and improving the Kingdom’s ranking in the World Bank’s Logistics Performance Index (LPI) to the twenty-fifth rank was one of the most targeted success factors. Unfortunately, Saudi Arabia’s rank in this index has declined over the past years, until it reached the fifty-fifth rank as per the last published LPI report. This research proposes a set of logistics hubs (LHs) which are located at key multi-logistics areas within the regional trading zones of the country. A spatial model was implemented on a macro level to integrate multi-logistical, infrastructural and natural geographic information system (GIS) layers, and highlight their intersections as initial feasible areas. Subsequently, an optimization model based on integer linear programming (ILP) was used to maximize the number of allocated LHs and minimize the overall distances between allocated LHs and international trading nodes considering multiple factors. More than 80 selected subject matter experts (SMEs) from 9 different countries have participated in World Bank’s driven surveys that assess the contribution of the LHs’ allocation proposal on Saudi Arabia’s LPI ranking. An improvement of about 10% in the LPI overall score with a 20 rank promotion has been estimated as per the SMEs responses. These results demonstrate that investing in logistics infrastructure and ranking in LPI are perfectly, positively and highly related.