4 Things to Know Before Starting a Logistics Business in UAE
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4 Things to Know Before Starting a Logistics Business in UAE
The logistics business is a thriving business sector in the UAE. There is an immense opportunity for logistics companies in the UAE to facilitate global as well as local trade.
The strategic location of the UAE makes it a perfect destination for logistic companies.
Get the right business advice from a reputed Business Consulting company in the region regarding incorporation of logistics company
4 Things to Know While Setting Up Logistics Business
1. Awareness about Customs Process and Paper works
Before venturing into the logistics business, the company must be well aware of the customs process, procedures, and paperwork requirements.
Logistic companies must be aware of the UAE’s Customs guidelines and clearance process to facilitate trade in the right way.
2. Meeting the Client in Person
A face-to-face meeting with the supplier is crucial in the logistics field as suppliers are based out of other countries and there are high chances of fraud or miscommunications to occur.
SMEs to start gaining momentum in the logistics business must be equipped and focused on working with a tighter budget and smaller margins.
Also, agreement on the credit terms with a signed agreement is essential. It will help any conflict later on as the paper works are clear and are agreed upon by both parties.
3. Logistics Market in the UAE is very Fragmented
The Logistics market is very fragmented with numerous suppliers in the UAE. As a rule of thumb, in logistics, it is ideal to go with an experienced company. They will be well aware of the local customs rule.
Going forward with a known player in the logistics industry would help save costs from fines, clearance fails, etc.
Knowledgeable logistics operators will ensure 100% transparency is maintained with the Customs authorities and also speed up the clearance at the borders and checkpoints.
4. Large Scope and Cash Flow Requirements
Logistics companies cover a large scope of activities from warehousing, order fulfillment, demand forecast, and more.
It helps the trading companies to easily scale up their business and gain more business.
Logistics Company requires a Huge Cash Flow
There is a huge cash flow requirement in the logistics sector. Usually, the payments to airlines and shipping services are made upfront and for a minimum period of 3 months.
Also, around 20-30 percent of the upfront cost is attributed to contingencies. Hence, logistics companies have to maintain sufficient capital budgets for funding operating expenses.
All transactions, records of imports, customs duty calculations, all commodities transfers, customs clearance, VAT, etc., need to be recorded properly for later inquiries or customs checks.
Know-how of the E-Mirsal 2, the software used by Customs to record all the transactions. in the UAE is very essential.
Logistics Company Setup in UAE
Sharjah Airport Free Zone
Sharjah Airport Free Zone is one of the biggest hubs of logistics companies in the UAE. The investors can avail the facilities of huge warehouses of 600 Sq m with office facilities.
The nearest seaport is Khalid Port at Sharjah, 20 minutes drive from SAIF Zone. Sharjah International Airport is where all cargo carriers including Lufthansa operates.
The Airport is located adjacent to the Free Zone. Logistics License with Warehouse can be obtained within one day from SAIF Zone.
Dubai Logistics City
Dubai Logistics City in Dubai South is the ideal choice in Dubai for setting up a logistics Company. It offers a top-class infrastructure for logistics companies to set up an office.
Also, the easy access to the Jebel Ali Port, well-connected road transport network and Airports in the UAE makes it the right choice.
The warehouse facility with custom sizes and ultra-modern facilities, the dedicated transport links from warehouses to the ports and airports, etc., forms the perfect ecosystem for logistics companies.
Managing a Logistics Company in Dubai
Almost 90% of businesses in the UAE rely on a logistics partner for the exchange of goods.
There are certain areas in the logistics business that requires to be given additional attention to ensure the logistic company scales up as desired quickly.
Here are areas of focus for setting up a successful logistics company in Dubai as well as anywhere in the world.
1. Company License Approval
Get the right company license & business activity approved from the desired business jurisdiction.
2. Manage the Finances
Financial Management of your logistics company is very crucial. Logistics services company requires a huge amount as upfront advances and for payment of shipping and airplane freights.
Also, the operational expenses for a logistics company are on a higher side due to the low margins.
3. Taxes and Customs Checks
As a logistics company, it is crucial to understand the tax rates and customs duties across the world to initiate trade profitably.
Also, VAT registration in UAE for your logistics company as well as the required customs registration and clearances for conducting logistics services.
4. Streamline Business Operations
All your business operations with the clients must be monitored and recorded. As logistics involve a lot of cross country transactions, it is bound to scrutiny and high-security surveillance.
So the item imported, places of origin, place of exports, all have to assessed and reported to Customs Authorities on a timely basis.
5. Infrastructure facilities
The logistics company must be well equipped with the latest logistics methods, shipping lines, and airline tie-ups.
Also, warehousing facilities, distribution units, etc., must be of world-class standards to invite global business partnerships.
Hence, a logistics company in UAE is very lucrative at the same time high-risk type of a business setup.
There is a huge requirement in Dubai for third-party logistics support for trading and export companies to ship their goods to different countries.
So, logistics companies in the UAE are always on a significant growth rate due to the demand from local and international trading companies in the UAE.
To know more about setting up a logistics company in UAE, give us a call right away!
Contact: Aurion Business Consultants