The pivotal role of logistics for the broader economy is underlined by a 2016 Global Challenge Insight Report in which the WEF names ‘transport and logistics’ among the top five industries according to their number of employees. The report states: ‘The mobility industry is anticipating significant growth in transportation and logistics roles, as it plays its traditional role of connecting countries and industries in the wake of increasing globalisation.’

The sector is critical to providing a global competitive advantage, according to the 2015 Logistics Barometer, compiled by the University of Stellenbosch (SU), which points out the country’s strong appetite for logistics. It further states: ‘South Africa is indeed transport-hungry, making logistics not only a strategic resource requiring national attention, but a core competence that is deliberate and invaluable given the country’s regional position.’

The Logistics Barometer puts freight logistics costs at 11.1% of SA’s GDP in 2013. However, calculated as a percentage of transportable GDP, this means that more than 50% of the landed cost of agriculture, mining and manufactured goods are logistics related.

Transport remains the most significant component of national logistics costs (other components being warehousing; inventory carrying cost; and management and administration).

In SA, the majority of goods are transported by road, which holds roughly 80% of the market share, while the rail share varies dramatically, depending on the context. For instance, rail accounts for just 15% of surface freight tons, yet 36% of the total ton-kilometres transported.

‘Our logistics industry is doing well,’ Jan Havenga, co-author of the barometer and director of SU’s Supply Chain Management Centre told the Mail & Guardian. ‘The last 25 years since transport de-regulation has seen consolidation, the emergence of large global players with operations across Africa and globally. We have many companies of which we can be proud. The problem lies on the next level. This will mean co-operation with state-owned enterprises and more public-private partnerships.’

A step in this direction was the signing of MOUs in 2013 between Transnet, the state-owned freight transport operator, and two big JSE-listed players, namely Barloworld Logistics and Imperial Logistics.

Meanwhile, Transnet’s ambitious market demand strategy (MDS) centres on the extensive renewal and modernisation of rail, port and pipeline infrastructure to increase its share of freight volume, thereby reducing road congestion and transport costs. The parastatal’s group CEO, Siyabonga Gama, issued a media statement in June, in which he said: ‘The company plans to invest R340 billion to R380 billion over the next 10 years. This is likely to take the MDS spend to a record half a trillion rand of investment.’

Intermodal solutions between rail and road and sea, and to a lesser extent air, are crucial to alleviate supply chain bottlenecks and other inefficiencies. According to a recent journal article co-authored by Havenga, SA’s freight tasks are expected to grow 2.5-fold by 2043. He says that the development of domestic intermodal solutions will support the drive towards sustainable freight mobility.

Strategic logistics management is gaining importance. Havenga, however, says it’s a relatively new phenomenon. ‘During the 1980s, competitive advantage meant delivering flawless product quality, while in the 1990s, the focus shifted to providing superior customer service. When these avenues were exhausted, mainly due to emulation by competitors, companies became increasingly aware that a well-run logistics system could provide them with a sustainable competitive advantage.’

The 13th annual Supply Chain Foresight 2016 report by Barloworld Logistics has revealed that the supply chain – which in addition to logistics processes also encompasses those related to manufacturing and procurement, from original supplier to end user – has moved into the C-suite agenda.

Steve Ford, CEO of Barloworld Logistics, says: ‘We are encouraged to note that logistics and supply chain management strategies and functions are increasingly being embraced in the services industries, as they begin to recognise the extent of their supply chains and the related logistical processes involved in managing business systems, outsourced partners and the increased flow of information – as well as money between all parties.’

According to the report, the adoption of new technology tools and platforms has become a business imperative, with tech-related elements ranking highly as opportunities spanning data and connectivity issues, IT platforms and e-commerce.

One important aspect is supply chain visibility – the ability to track products from the manufacturer to their final destination, as well as to integrate all trading partners, and increasingly also the customer, into this network.

For example, Toyota SA was uncertain of the exact location and delivery times of its containers until it integrated every link in the supply chain, from dispatcher and forwarding agent in Japan, to local forwarder, clearing agent and container logistics company, as well as air and road transporters. Today, Toyota SA can electronically track and trace every single container, which has enhanced its planning efficiency and customer service.

‘In South Africa, the trend is moving towards centralised logistics and integrated supply chain planning. The idea is to digitise the entire supply chain,’ says Janie Basson, business development executive at Resolve – a subsidiary of the Imperial group, whose technology solutions cover the design and implementation of enterprise applications, operations planning and execution management, workflow and process automation, as well as tailored software development and business intelligence.

According to Basson, the advantages of digitisation and going paperless include significant improvement in visibility, time control, real-time planning, decision-making and analytics.

This ‘cost-to-serve’ model optimises the network by collecting and analysing data to enable planning adjustments and more accurate procurement processes; cutting waste by keeping minimum stock levels in the warehouse without running out; and optimising the supply chain while reducing the need for manual intervention.

‘Digitisation has become an integral part of industry players’ ability to advance and grow in today’s competitive landscape,’ says Peter Mountford, CEO of JSE-listed Super Group. ‘It has also helped the logistics industry to mature by gaining insights and analytical learnings from the vast amount of data that is available. Reaping the benefits in isolated pockets of success in the logistics chain, for example, visibility and traceability of delivery of goods to the end customer, has increased the desire to extend digitisation across the value chain to include complete end-to-end visibility of the movement of goods.

‘This drive toward digitisation is vital and has elevated the need for collaboration among partners, which means that technology providers need to be agnostic to – and integrate with – existing technologies, across multiple platforms and parties.

‘Most importantly, companies need not necessarily undergo an entire technology overhaul but rather start by implementing technologies that provide quick wins that fit into the company’s strategic vision for advancing technology in their supply chains,’ says Mountford, adding that this will ultimately lead to driving down costs.

‘Digitisation is not an option but a necessity,’ says Gerard de Villiers, logistics specialist at Arup.

‘It has moved from an “order winner” to an “order qualifier” and is a prerequisite to allow transparency in the supply chain, from origin to destination. Visibility in the supply chain has a profound impact on inventory management, as an example. If you know where stock is, you do not have to carry it in all the places, resulting in significant savings in inventory carrying costs.’

Basson says decision-making processes can be automated, ‘which enhances overall efficiency as it eliminates the potential for human error’.

Resolve, for instance, has created a logistics control centre for Sasol Oil that manages road logistics by streamlining the business processes between production, bulk storage and delivery to service stations. The system has substantially improved payload utilisation and trips per vehicle. Standardisation regarding the logging of shipments, historically done manually at each depot, now only takes a few minutes to complete.

A recent R400 million contract for a Pick n Pay (PnP) logistics control tower involves even more players as it centralises the retailer’s outbound supply chain, incorporating its own distribution centres as well as suppliers and transport partners. The new control tower will provide real-time updates across all aspects of the outbound logistics process, including warehouse performance.

‘One of the exciting capabilities of the system is to seamlessly integrate into our enterprise resource planning [ERP] system to avoid the manual capture process and errors that arise from it,’ according to Cobus Barnard, PnP group executive: retail office and supply chain and logistics. ‘It will also rationalise the manpower needed to integrate the system, and enable a seamless end-to-end management of the outbound supply chain.’

To illustrate how such a logistics control tower works, Basson says: ‘Imagine a house in which each room is a different player in the supply chain and the tower is the roof.

‘Every room has its own ERP system such as Microsoft, Oracle or SAP, so the communication between the rooms could become chaotic. But the tower sits on top of other technologies, pinging the information from every room to the roof, creating a common understanding in the house and optimising the communication between the rooms.’

Discussing centralisation, De Villiers says: ‘The trend in South Africa is probably slightly more towards centralisation than decentralisation, if one considers the high number of central distribution centres currently under construction along the R21 in Gauteng, although there are clear trade-offs between centralisation and decentralisation – or regionalisation. Transport costs reduce with decentralised distribution while warehousing costs increase.

‘It is important that each network should be designed for the particular portfolio of products and location of customers to implement the most appropriate logistics network.’

From Super Group’s perspective, the influence of centralisation has been marked, says Mountford.

‘In dealing with a broad range of customers across diverse industries, we have definitely noticed a move to centralised logistics and integrated supply chain planning. However, these two are not necessarily interdependent – you can still achieve great results by using the correct integration strategies on a decentralised environment.

‘Centralisation – or decentralisation – in logistics should be underpinned by a sound strategy that has been vetted against the balance sheet as well as customer service objectives, i.e. cost and efficiency objectives. This can be achieved by modelling operational history, applying different scenarios and aligning to the tactical level. Strategic network modelling tools are vital in the decision-making process in order to gain a theoretical understanding of the full impact of moving to a centralised or decentralised model.

‘Demand for integrated supply chain planning tools is on the increase in the South African environment, and companies where we have successfully implemented them have been able to achieve a competitive advantage by differentiating themselves from their peers with regard to efficiencies and customer service levels,’ says Mountford.

Commentators are unanimous regarding the influence and potency of technology and data on the future development of the sector.

‘Logistics depends on accurate information to allow for transparency in the supply chain and big data will undoubtedly lead to more efficient supply chains. The advantage is not so much in more data, but better data both on supply of logistics services [operations] as well as on the demand side in the form of visibility of key performance indicators,’ says De Villiers.

‘Business intelligence derived from big data can have a profound impact on business performance levels by providing instant access to accurate performance analytics on the desired level of visibility,’ says Mountford.

‘It allows for anomalies to be identified immediately, which could then trigger counter action in quicker response times than ever before.’

The tech trend is likely to spur more innovations. The rise in e-commerce is expected to see unmanned aerial vehicles as delivery drones, while driverless mega-trucks that move in auto-steered convoy could be used along road corridors. ‘Self-driving vehicles are already technically possible,’ says Basson. ‘We foresee large, self-driven trucks. The Mercedes-Benz Future Truck is ready to roll, but it still lacks the legal framework and social acceptance, which includes insurance issues.’ She argues that the introduction of predetermined shipping lanes for remote-controlled cargo ships may happen sooner.

These futuristic scenarios provide a taste of how technology may further change the logistics sector in transport-hungry SA.

By Silke Colquhoun
Image: Andreas Eiselen/HSMimages