Transport
Thursday, 22 November 2012 13:35

Rising to the supply chain challenge

In order to streamline their business approach, South African businesses need to assess their current supply chain management systems. 25 Degrees in Africa investigates.

Cost management and partnerships are essential to ensure a competitive advantage within the current South African supply chain, according to Barloworld Logistics’ 2012 Supply Chain Foresight: Growth, competitiveness and the African question Survey.

This year’s survey identifies and addresses many of the issues that South Africa faces as it moves forward as an emerging market, a member of BRICS and a key player in the Africa of the future. One of the key aspects covered is the link between business and supply chain management.

According to the report, local businesses face a range of supply chain objectives and constraints. In order to streamline and optimise its business approach, states the report, South Africa needs to assess its current supply chain management system.

The number-one supply chain objective remains increasing customers’ service levels. According to the report, this objective must still be achieved at the lowest possible cost, as there is an ever-present need to lower procurement costs and decrease lead times.



Collaboration

In a highly competitive environment of varied demands, customers’ needs must be met in the most cost-effective way possible. Notably, there is a paradigm shift with regard to how this can be achieved, according to the report. The next top objective, states the report, is improving visibility in the supply chain. This is followed closely by improving the flow of information between businesses, suppliers and customers. “This strongly suggests a maturing of the long-held mantra of the supply chain collaboration,” notes the report. Where the supply chain plays a critical role in industries’ success, such as the automotive industry, the information flow objective is supported by every single respondent.

 

Constraints

Costs: On the other hand, the top constraints demonstrate a strong focus on costs. “The leading constraint for South African-based businesses is the cost of doing business,” states the report. This includes bureaucracy, taxes and customs costs, as well as the high costs of electricity and labour. “While ‘rand strength’ features strongly as a constraint, it is perhaps more accurate to focus on the currency’s volatility as a business constraint, since this adds to planning uncertainty for both import and export trade, as well as for domestic production and consumption,” states the report.

Local competition: While “local competition” is listed as a constraint, this may be regarded in a positive light – local companies are becoming more competitive by deploying their supply chains more efficiently.

Supply chain strategies: According to the report, supply chain strategies can either support or hamper business. One of the key questions the report raises is whether businesses are partnering with the right companies to provide them with applicable expertise and skills to create a mutually beneficial relationship.

Workforce: Labour unrest, which featured prominently in the South African market and especially in the freight transport sector in the year under review, features as a major constraint.

Environmental issues: Reducing the environmental impact of the supply chain is listed as another constraint (it is the first time that this constraint entered the top-five list). “The increasing pressure to reduce carbon footprint and to hold suppliers accountable, set by legislation and tax regimes, undoubtedly accounts for this constraint becoming prominent,” the report states. The pressure on corporations to “go green” is thus now affecting the bottom line.

Transport costs: The cost of transport features as the greatest supply chain constraint for almost every industry sector. South Africa’s high logistics costs and the imbalance between road and rail have been well-documented. The report states: “This has been exacerbated lately with the imminent imposition of tolling and carbon tax fees. This is one area that desperately needs effective communication between all industry sectors, since all of them have to move goods, and government,” the report states.

Reducing costs: In addition to the fact that the public and private sector do not share the same objectives, companies need to ask themselves tough questions with regard to reducing costs. Are they moving their goods in the most cost-effective way possible? Is each industry considering innovative ways of moving their goods differently – through co-operation with other industry sectors, for example?

Sourcing the right skills: According to the report, the skills issue remains a burning matter that needs to be addressed. As such, businesses need to source people with the skills to enhance the supply chain.


Ultimately, in order to remain competitive, businesses need to constantly re-look their transport strategies and take on a more lateral approach. Ultimately, the report reiterates the fact that cost management and partnership play an essential role in ensuring that South Africa’s supply chain gains a competitive advantage.

Survey respondents

Well over 50% of the respondents are in senior executive positions across their businesses, including chief executive officers (CEOs), managing directors (MDs), as well as marketing and financial directors. A substantial percentage comes from supply chain and logistics senior management. Similarly, these senior executives come from large-scale multinational businesses – over one third comes from businesses with annual revenues of over R5-billion, and more than half with over R1-billion annual revenues.

In this contextualisation of the research sample, there is a comprehensive representation of industry sectors which have participated in this year’s supply chain foresight survey. The automotive, fast-moving consumer goods (FMCG), retail and mining sectors are all strongly represented, and there is significant participation from the building and construction industry, as well as ICT and agribusiness.

Full acknowledgement and thanks are given to www.supplychainforesight.co.za for the information given to write this article.