[EN-LOG] South Africa's Supply Chain Future

According to research conducted by Frost & Sullivan for Barloworld Logistics, South Africa still lacks the logistics and transportation infrastructure to compete on a global level. Sharon Gill reports ...

While there are early indications that South Africa's major industries are optimistic about the ways in which their supply chains will enable recovery from the recession, the country is somewhat hamstrung by poor infrastructure, high costs and currency instability.

In the course of last year's research, South African CEOs addressed recession survival tactics This year, the focus has shifted to how industries can become more competitive in what is bound to be a cautious post-recession economic world.

According to this year's study, South African CEOs have already begun to focus on the following:

• Strategic alignment - this aspect was underway in 2009, and will be a key focus of redesigned supply chains in 2010. Business decisions will be taken more holistically, with more understanding, post-recession, about how supply chain planning will affect the cost and effectiveness of global supply and demand networks.

• Lead time reduction - the recession has shown the pitfalls of a global supplier base, and the difficulty of balancing global demand with efficient local supply that cuts lead times. A focus on more localised supply continues to be important, however.

• Technology deployment - the use of, especially, ERP technology can represent a competitive advantage for markets like South Africa's that are geographically remote from major markets. Such technology is now more mature, cost effective and can be more effectively.

However, all the good intentions in the world won't get round the fact that South Africa is burdened as an international competitor in a few areas:

• The country's currency stability is low and its rate of GDP decline high.

• South Africa's investment in rail and road infrastructure exceeds only Germany - a country that actually needs little further investment in these areas.

• South Africa's emission standards are worse than the UAE - an oil-producing country.

• Private sector involvement in the rail sector rates less than China's, which is also state-owned.

• In terms of ports and airports and land transport, lead times are at best average and costs high, compared to key strategic competitors such as Brazil, India and China.

• In terms of land transport, South Africa's export and import costs are high.

• In terms of conducting cross-border business, South Africa is among the worst in its competitor group. In almost every area, such as clearance times, numbers of export and import documents, and quality assurance measures such as frequency of inspections, South Africa makes it relatively hard to do business.

• While multi-modal strategies are in place and apparently working, there appears to be insufficient capacity and service levels available in the country's rail infrastructure.

It is common knowledge that South Africa's freight system is heavily imbalanced towards road freight. While this often means a better, more direct service, it also causes heavy road use, congestion, cost escalation and infrastructural damage.

Currently, 80% of companies move less than 10% of their goods by rail. If adequate rail capacity were available, 46% of companies would move more than 20% of their goods by rail.

This is a tragic indictment of the country's key economic failing. Businesses are subjected to needless costs and competitive pressures, while governments elsewhere provide infrastructure and trade incentives to business as a key strategic priority.

The fact that 21% of South African businesses spend more than 10% of the cost of their goods on transport is a clear indication of the country's infrastructure inadequacies.

Source : EFT, 19.02.10.