Digital Transformation in Warehousing: A Case of Saudi Arabia

Abstract

Saudi Vision 2030 focuses on achieving a diversified technology-enabled economy. This can be done by accelerating the development of digitalisation. Although Saudi Arabia supports its implementation it is still in the early stages of digitalisation. The Saudi government is seriously investigating digitalisation in various sectors, including the logistics sector. This study examined the digitalisation of warehousing in Saudi Arabia and investigated its effect on warehouse performance. Digitalisation of warehousing systems has become crucial for logistics firms in Saudi Arabia to develop and remain competitive. This helps to streamline the supply chain and improve warehouse performance; which, in turn, will enable Saudi Arabia to position itself as a global logistics hub. Based on an extensive review of the digitalisation literature a conceptual framework was developed with the structuring, bundling, and leveraging constructs of the resource orchestration theory (ROT) as the drivers of warehouse digitalisation that creates value and improves warehouse performance. This study adopted a quantitative methodology to examine the relationships between constructs and validate the research model. A simple random sampling technique was used to obtain a highly representative sample of 323 responses. These responses were collected from participants who work in Saudi Arabian firms of different sizes and within different industry sectors, and who are involved in IT deployment in Saudi Arabia. Structural equation modeling (SEM) was employed to evaluate the conceptual model and test the hypotheses. Furthermore, a fuzzy set qualitative comparative analysis (fsQCA) method was applied to identify different configurations of digitalisation. Identifying alternative ways of promoting digitalisation in a warehouse through fsQCA complements the SEM results. The results of hypotheses testing indicated that all the ROT constructs were positively associated with digitalisation. In addition, it was found that digitalisation had a positive effect on value creation, financial performance, and operational performance. The results of this study showed that firm size, industry type and ownership structure did not have an impact on digitalisation. The results of SEM and fsQCA regarding the impact of digitalisation on performance aspects were compared. The fsQCA results confirmed that achieving high warehouse performance in Saudi 2 Arabia depends on the configurational effects of all the model variables, as opposed to individual effects. The fsQCA results for high outcome revealed that the combination of structuring, digitalisation, operational performance and financial performance led to high value creation. In addition, the combination of structuring, bundling, leveraging and digitalisation led to a high level of operational performance. Furthermore, the combination of structuring, digitalisation and value creation, with the absence of leveraging, led to a high level of financial performance. In summary, it was found that digitalisation had a significant impact on performance, and this is consistent with the findings of previous studies. This study has significant theoretical, methodological, and practical implications with regard to developing a theoretical model that conceptualises the digitalisation of warehouses and the impact on performance in the context of Saudi Arabia. The study’s contribution to the theory is the assessment of the dimensions and the configuration design of the dimensions to gain a theoretical understanding of the digitalisation process. Methodologically, this study is the first of its kind to use SEM combined with fsQCA to examine the impact of digitalisation on warehouse performance. From a practical perspective, the study findings can guide managers to develop a step-by-step procedure for implementing the digitalisation process in their warehouses. It will also assist managers to assess the type and level of the resources required for the digitalisation of their warehouses. In addition, the study will help managers to clearly identify the various roles of digitalisation in improving performance. Although this study has some limitations, they serve as opportunities for further research. Data were collected from only one country, namely Saudi Arabia and the results may vary in other countries that have different warehousing systems. This study also used cross-sectional data rather than longitudinal data, which may not fully reflect a phenomenon such as digitalisation, which develops over time. In addition, this study focused on several industry sectors to assess the impact of digitalisation. Future research could examine the validity of applying the proposed model to other developing countries with contexts that are similar to Saudi Arabia, such as Gulf Cooperation Council countries. Furthermore, a longitudinal study could better capture the development of digitalisation over time. Moreover, it is recommended that a comparative analysis of various sub-types of sectors in Saudi Arabia, as well as the different warehouses within each sector should be performed.