SA Logistics must make bold steps to drive costs down

| 0 Comments


Increased fuel price still biggest cost driver

 

10StateOfLogistics.jpgRising costs and the global economic situation spell out increased competition and tighter margins in the logistics industry. Driving down the cost of logistics and making South Africa more competitive will require no less than bold steps forward, finds the 10th State of Logistics Survey.


Published by the Council for Scientific and Industrial Research (CSIR) in collaboration with Imperial Logistics and Stellenbosch University, the survey reports that South African logistics has moved beyond survival to an optimised mode, where costs, inventories and lead times have been minimised within individual supply chain functions.


“The results of the survey indicate that it’s not a case of improving our current methods; we have to do South African transport completely differently,” said Nadia Viljoen, Scientific Editor of the 10th State of Logistics Survey.


This year’s survey looks back over a decade of measuring logistics costs while for the first time providing a forecast of the current calendar year’s costs.
In 2012 the absolute cost of logistics was R393-billion, 2013 is estimated at R423-billion and 2014 is forecast to be between R456-billion and R470-billion, depending on fuel inflation.


Logistics costs as a percentage of GDP have remained at a stable level of 12.5% for 2011 to 2013 and are forecast to show a slight increase in 2014, again depending on the magnitude of fuel inflation.


Fuel cost pressure


A deeper investigation of individual cost components and cost drivers shows that the increase in logistics costs is perhaps not the result of deteriorating efficiency in the industry, but rather the disproportionate growth in cost drivers – especially fuel.


Fuel is overarchingly recognised as the main driver of transport costs (at 25-30% a few years ago and now sitting at close to 40%), however, driver wages are also pushing up costs quite a bit, said Jan Havenga, Director at the Centre for Supply Chain Management, Stellenbosch University.


“Driver wages have always been the number two in terms of transport costs, but if one considers current events [in the platinum belt] and what happened last year in the trucking industry, we are becoming aware of how important your people are in your organisation foundation, which touches again on the skills issue,” said Viljoen.


“But I’m still more concerned about fuel cost,” said Havenga, “because it is something external to us (we import it), and it’s hard to project; reputable sources ten years ago forecast the crude oil price today to be $30 - $45 a barrel - they were out by a factor of more than two - the same margin of error carried forward means we’ll be dead!” jested Havenga.


“The fuel economy of road trucks has improved by about 10% in the last decade,” said Paul Nordengen from the CSIR, but the cost of fuel price increases far exceeds any efficiency cost savings. A route to significant fuel and energy efficiency improvements lies in rail, said Sandra Gertenbach, Executive Manager at Transnet Freight Rail.


“We need to increase the tonnage that the country moves by rail. This will take advantage of, for example, the capability that [Transnet is] implementing into its electric locomotives enabling them to regenerate electricity back into the grid, [thereby] lowering the cost of transport.”


Demand driven pressure


While we must focus on increased fuel efficiency and moving more to rail, we must also look at what drives the demand for logistics, said Cobus Rossouw, Chief Integration Officer at Imperial Logistics.


“South African consumers are becoming more demanding, placing pressure on logistics to move smaller loads to more locations while balancing cost pressures. The challenge is: how do businesses operate and take bold steps forward while continuing to make these tradeoffs in the logistics system?


To that end, the study, in conjunction with the Department of Trade and Industry, is beginning to consider the influence of the country’s economic production on logistics, and vice versa, said Viljoen. Furthermore, the pair is considering how the drive for local production will change the way freight flows in our country.


“Is there a role for logistics in making this change possible, to help local trade flourish?”


Download The 10th State of Logistics™ Survey for South Africa is downloadable at: www.csir.co.za/sol and at www.imperiallogistics.co.za/stateoflogistics


Panellists, from left to right:
Cobus Rossouw, Chief Integration Officer at Imperial Logistics
Jan Havenga, Director at the Centre for Supply Chain Management at Stellenbosch University
Paul Nordengen from CSIR
Derek Watts, State of Logistics’ host
Hans Ittman, Owner at HWI Consulting
Nadia Viljoen, Scientific Editor for the 10th State of Logistics Survey
Sandra Gertenbach, Executive Manager at Transnet Freight Rail.

 

Leave a comment


SmartProcurement Newsletter
X

Please enter your details below to receive the SmartProcurement Newsletter for FREE on a regular basis.

As part of the SmartProcurement Newsletter you will be receiving World Class Procurement News, Tools, Tips, Tactics, Procurement Training updates, Upcoming Events, and the latest Procurement Career Openings.

* Email Address:
* Title:
* First Name:
* Surname:
* Company:
  Position:
* Country:
* Public / Private:

 

Career opportunites

Head: Supply Chain Management (P6)

  • <500 000 >500 000 Limpopo Permanent Procurement Management Supply Chain
North east of the Tropic of Capricorn, just ...More

Purchasing and Supply Manager

  • <500 000 >500 000 Gauteng Permanent Procurement Management Supply Chain
Purchasing and Supply ManagerThe CSIR has a vacancy ...More

Senior Manager Public Sector

  • >500 000 Gauteng Permanent Procurement Management Projects / Category Management
 Senior Manager Public SectorTotal Cost to Company: R1.1mil ...More

Senior Manager: Mining

  • >500 000 Gauteng Industrial Engineer Permanent Projects / Category Management
Senior Manager: MiningTotal Cost to Company: R900k – ...More

SUPPLY CHAIN MANAGER

  • >500 000 Gauteng Permanent Procurement Management Supply Chain
SUPPLY CHAIN MANAGER(Total Cost to Company R750k – ...More

Master Data Management Advisor

  • >500 000 Gauteng Permanent Procurement Management Projects / Category Management
 MASTER DATA MANAGEMENT ADVISOR(Total Cost to Company R750k ...More

PRO - Performance Reporting

  • >500 000 Permanent Procurement Consultant Procurement Management Projects / Category Management
PRO - Performance ReportingTotal Cost to Company: R800k ...More

PRO - Risk & Governance

  • >500 000 Gauteng Permanent Procurement Management Projects / Category Management
PRO - Risk & GovernanceTotal Cost to Company: ...More

Supply Chain Site Manager

  • >500 000 Gauteng Permanent Procurement Management Supply Chain
Supply Chain Site ManagerTotal Cost to Company R1mil ...More

Chief Financial Officer

  • >500 000 Gauteng Permanent Procurement Officer / Specialist
Chief Financial OfficerTotal Cost to Company R1.5mil – ...More

Process Engineer- WMS

  • <500 000 >500 000 Industrial Engineer Permanent Projects / Category Management Western Cape
Process Engineer- WMS(Total Cost to Company R350K – ...More

Forecast Analyst

  • <500 000 Analyst Permanent Procurement Management Western Cape
Forecast Analyst(Total Cost to Company R350K – R500K) Location: ...More

Group Category Manager: Indirects

  • >500 000 Permanent Procurement Management Projects / Category Management Western Cape
Group Category Manager: Indirects(Total Cost to Company R700K ...More

Group Category Specialist: Chemical

  • >500 000 Gauteng Permanent Procurement Officer / Specialist Strategic Sourcing
Group Category Specialist: Chemical(Total Cost to Company R700K ...More

Sourcing Specialist - 3rd party

  • >500 000 Gauteng Permanent Procurement Officer / Specialist Strategic Sourcing
Sourcing Specialist - 3rd partyTotal Cost to Company ...More

Global Procurement Lead (Processing)

  • >500 000 Gauteng Permanent Procurement Management Supply Chain
 Global Procurement Lead (Processing)Location: JohannesburgTotal Cost to Company ...More

Global Supplier Performance Manager

  • >500 000 Gauteng Permanent Procurement Management Supply Chain
Global Supplier Performance Manager Location: Johannesburg  Cost to ...More

Group Customer Service Lead

  • <500 000 >500 000 Analyst Gauteng Permanent Procurement Officer / Specialist
Group Customer Service Lead  Location: Johannesburg As the ...More

Business Intelligence Manager

  • <500 000 >500 000 Gauteng Permanent Procurement Management Supplier / Business Development
Business Intelligence Manager Location: JohannesburgLead the development, implementation, optimization ...More

Group Procurement Manager

  • <500 000 >500 000 Gauteng Permanent Procurement Management
Group Procurement Manager Location: Johannesburg  A Global Organization ...More