Consumers must play a role in logistics re-engineering

Logistics in South Africa will have to change if escalating costs are to be brought under control. According to Professor Jan Havenga who pioneered logistics costs research at the University of Stellenbosch (US), consumers are going to have to learn to make do with less. “We have to change our demand profile. Costs are continuing to escalate and unless we make some drastic changes it will simply become too expensive.” He said in countries around the world where logistics costs were far lower than in South Africa, one of the key reasons was better logistics demand management. “We have a geographically widespread economy that requires commodities to cover vast distances to service demand. In the context of already high and escalating input costs, our demand for logistics is just too high,” he says. “We have to ask ourselves if we really need 100 different kinds of soap in every supermarket across the country. Do we need to service this demand or must the demand change?” He says in Europe the changes being made by consumers are already being felt in the logistics industry. “It is an increasing trend to no longer eat out of season. The Northern hemisphere is moving towards importing less out of season goods because of the high carbon footprint. There is also a definite move towards consuming more locally produced goods and reshoring manufacturing industries which means less goods have to be transported further afield.” According to Havenga, these are just a few changes that can be made to address the demand for logistics. Equally important is the efficiency of the way in which the industry supplies logistics services – modal choice, transport efficiency and labour productivity remain critical elements in the South African landscape. “Ultimately we have to take a very close look at what we are doing and how we are doing it. We will, as a country, have to decide what we are going to change and how to change it. But we can’t keep on doing what we are doing.” The Logistics Barometer South Africa 2015, launched by the US earlier this year, calculated logistics costs up until 2013 and found that they equalled 11.1% of the country’s GDP. The Logistics Barometer is a continuation of research previously published in the State of Logistics survey for South Africa by the Council for Scientific and Industrial Research (CSIR). “This publication has a far keener focus on the cost drivers and industry behaviour that shape logistics costs. We want to highlight key insights that industry and government can act on in a meaningful way,” says Nadia Viljoen co-editor of the Logistics Barometer. “We do not compare well to developed regions like North America and Europe whose logistics costs are estimated at 8.8% and 9.2% of GDP, respectively. On the other hand, compared to South America (12.3%) and other developing regions we are quite competitive,” says Zane Simpson of US. They expect the percentage for South Africa to have increased in 2014 and forecast a further increase in 2015. With a transport-intensive economy Havenga says transport costs make up the most significant portion of logistics costs in the country, but this year’s research points out that the impact of inventory-carrying cost and warehousing costs should not be ignored.