Six considerations to keep SA competitive in freight forwarding and logistics
Supply chain has become one of the key strategic hubs of many companies’ activities. Business is now conducted in a world where players as far away as Turkey and China are able to compete with a South African company successfully in terms of price when moving goods from point to point. This indicates that freight forwarding and logistics works on a new set of rules in the 21st century, and that breaking with tradition may just be the only way to remain a player in a sector that has no borders.
Zak Sivalingum, FNB Regional Head in Gauteng East, shares six areas that should be addressed in order for SA’s freight forwarding and logistics industry to remain competitive. These six areas were recently discussed with stakeholders from the logistics industry, where the focus was around some of the challenges, as well as opportunities that currently exist in this industry.
Adopting technology and a millennial mindset
Technology has made it easier and more cost-effective to use specific tools to move freight. Making use of optimisation engines, routing and scheduling tools can ensure that cargo is distributed timely and with optimal capacity, helping to decrease the overall cost of moving goods between two points.
South Africa’s infrastructure impeding competitiveness
There is a general lack of infrastructure, which puts SA companies in the top end of pricing. Government initiatives such as the Durban Dig Out Port and Tambo Springs in Ekurhuleni are a step in the right direction. However, the predominant form of delivery mainly makes use of roads infrastructure, as opposed to rail, which is far more expensive.
Alignment between government and business
Better alignment between business and government could improve the speed and process of transfer of cargo. Where you may find that customs makes use of cutting-edge systems to ensure rapid clearance, other related stakeholders are either not using the same system or have no access to the existing system. This increases the time required to move cargo. It also increases opportunity for fraud and, in the end, hits the respective business and consumers the hardest.
Cost of physical logistics is too high
The size of southern Africa means the distances that cargo moves takes too long from point of departure to its final destination. One of the major cost drivers is that southern Africa uses road as opposed to rail.
Over time the cost of fuel, toll gates and wear-and-tear of vehicles all add to an expensive total cost of overall operations. If we are to compete globally, we may need to use countries such as the USA as case studies where freight also travels over land for a significant distance, yet their costs are lower.
Industry collaboration needs to be considered more
As cargo vessels increase in size all the time, naturally it will become cheaper to move cargo from point to point due to shared costs for a single trip. A truck, in sharp contrast, only carries one, maybe two containers, making this a lot more expensive. Both importers and exporters need to consider more consolidations.
If you consider that by 2050 Africa will have almost half of the world’s population, then you see that the future of growth in this industry lies in being able to execute both cost and speed of delivery effectively to the rest of Africa, and doing so using new thinking that incorporates the use of technology.
“This is the challenge for an industry steeped in a traditional way of doing business. It is important now and will remain so in the future to embrace the concept of ‘data mastering’, which will ultimately determine the winners, moving away from a ‘cost-oriented’ approach to a ‘value-oriented one’,” concludes Sivalingum.