Share this
Twitter
Myspace
Mister Wong
Bookmarks.cc
Digg
Del.icio.us
Slashdot
Netscape
Furl
Yahoo
Technorati
Newsvine
Googlize this
Blinklist
Facebook
Wikio
Diggita
Hear this text
Export PDF
Print
E-mail
Tags
The results of South Africa’s State of Logistics surveyThe theme for the CSIR / Imperial Logistics fifth annual State of Logistics survey is: “Logistics value and cost drivers from a macro- and micro-economic perspective”, and the survey focuses on the influence of these drivers on South Africa’s global competitiveness.
“Pressures on reducing logistics costs internationally are even more acute in the South African context given our geographic location and therefore, the importance of the focus on logistics value and cost drivers,” says Hans Ittmann, director of the Built Environment at the Council for Scientific and Industrial Research (CSIR).
From a data analysis point of view, the survey covers the 2007 reporting year and with five years of data available, it is possible to show meaningful trends on logistics and land transport costs, something that was not possible before the start of this survey in 2004.
The next World Bank report on international logistics competitiveness is due out soon. In the first report, South Africa was fairly well placed at position 24 out of 150 countries.
For South Africa to remain in this good position, it is essential to maintain a comprehensive picture of the state of logistics, but the figures for this survey indicate that South Africa could be worse off in the next report.
The African Economic Outlook released by the Organisation for Economic Co-operation and Development (OECD) in May this year projects that the continent can expect only 2.8% growth in 2009, less than half of the 5.7% expected before the global economic crisis.
In South Africa, growth is expected to fall to 1.1% due to the impact of the crisis on demand for mineral exports compounded by a contraction in private consumption and investment.
The internal logistics costs – particularly the costs associated with transporting goods inside our borders – need to decrease.
The global economic downturn is going to make it difficult to remain competitive on an international level, but it is in these times that innovative approaches and solutions are required to at least retain South Africa’s position in the global marketplace.
Logistics costs
The logistics costs in South Africa for 2007 were R317 billion or 15.9% of gross domestic product (GDP), up by 1% from the previous year.
Compared to a first-world country such as the United States, which stands at 10.1% of GDP, South Africa is high, but US logistics costs have also risen into double figures for the first time since 2000.
The actual logistics cost figures for South Africa are depicted in Figure 1 below.
The percentage contribution of transport costs to total logistics costs (53%) is much higher than the world average of 39%.
Transport and inventory carrying costs also show an alarming upward trend.
Inventory carrying costs have doubled over the past four years and transport costs have grown by more than 50%.
The double jeopardy of more stock in a high interest rate environment therefore contributed to an extremely poor performance in this stack element, with a concomitant impact on logistics costs in general.
One of the contributors to increased inventory is the long transport distances in South Africa, which not only led to higher than normal transport costs, but also added to the time that inventory is delayed.
Land freight transport volumes and costs
Road and rail are the predominant means of freight transport in South Africa (contributing to 99% of all logistics costs).
Close to 1.6 billion ton of freight was observed on the four different typologies in South Africa in 2007 (see Figure 2 overleaf).
Almost 1.4 billion ton was observed on road at an average transport distance of 178km, delivering 245 billion ton-km. Rail only contributed 205 million ton at an average transport distance of 629km, delivering 129 billion ton-km.
The road / rail modal split has been constant over the past two years, with rail able to maintain its 13% market share in tonnage transported and 34% in ton-kilometres.
The picture for corridor traffic is marginally better, with rail securing 19% of the market share in tons transported, but South Africa’s corridor modal imbalance is one of the greatest inefficiencies in the national freight system and is partially responsible for the high logistics cost.
Transnet is providing the necessary institutional reform that is required in the first place to improve rail service delivery with their four-point turnaround strategy and four-point growth strategy being implemented, but viable intermodal solutions on the major corridors with less road transport are still what is needed to bring down transport costs in the country.
The State of Logistics survey further highlights an industry perspective on the value that is created in the logistics sector through effective supply chain management.
South Africa has outstanding value chains in the perishable products market and the banking sector.
Understanding that the state of logistics should be measured in terms of consumer satisfaction and the total effectiveness of the value chain, provides valuable guidance to logisticians and supply chain professionals.
Three important cost drivers, namely fuel, collaboration and skills development are addressed. The price of imported fuel is a core logistics cost driver, and logistics companies need to search proactively for innovative ways to reduce the impact of fuel cost on their supply chains.
The skills gap in the transport sector is becoming more evident and demand-side analysis indicates that employment figures remain mainly flat or are declining slightly for the transport, storage and communications sector. Supply-side analysis suggests that all indicators, in relation to the economy, are declining.
Future solutions for South Africa’s freight transport skills problems will have to focus on technical skills development involving all sectors of the industry, particularly the rail sector.
On the subject of collaboration, the survey looks specifically at the impact of this on the aerospace industry and how the industry can become globally competitive through domestic collaboration. Generally, partnerships with Logistics Service Providers (LSPs) mean that companies can focus on doing what they do best, but control could be lost and it is therefore important to work closely with LSPs to ensure the right level of detail and cultural fit are achieved.
LSPs are provided with opportunities to upgrade their capabilities, and offer value-added services through a collaborative approach to improve performance, efficiency and effectiveness.
The riding quality of a road has, for many years, been used as the primary indication of the condition of
a road.
The potential effects that worsening road conditions can have on the broader economy are numerous. The survey examines the effect of worsening road conditions on the economy by a limited case study that indicated trucks travelling on roads with a bad or very bad driving condition rating could experience enormous increases in maintenance costs.
South Africa emits 1% of the global annual CO2 emissions, but has an energy-intensive economy. Both its green house gas (GHG) emissions per capita and GHG emissions per unit of GDP (emissions intensity) are nearly double that of the world average.
Most companies’ carbon footprints come from transportation and logistics, placing a heavy burden on managers to take the required measures towards green supply chains. The perception persists that transforming to a sustainable, green supply chain results in reduced profit margins.
The effective greening of the supply chain necessitates a holistic systems and network assessment that leads to life-cycle optimisation.
The contribution of the Centre for Supply Chain Management (CSCM) at Stellenbosch University on the cost calculations is recognised. The State of Logistics Survey is available at www.csir.co.za/sol
