Cost-cutting imperative hits warehousing sector

An international focus on cutting costs is putting the screws on the warehousing sector in SA, according to Johan Dekker, MD of contract logistics for UTi. The need for cost reductions along with innovation are two of the big trends being seen in the industry at present, he added. “In terms of cost reduction, we are seeing it specifically around global organisations, where cost pressures in Europe are driving cost reduction policies across the board – even here in SA,” Dekker told FTW. However, this pressure is not an easy trend for the warehousing industry to comply with. Although the industry is increasingly looking for variable pricing structures, and with that flexibility – like a pay-per-use system – most warehousing cost is typically fixed, according to Dekker. “This poses a challenge to service providers on cost-effective variable pricing, especially when expected volumes don’t materialise.” At the same time, he added, the lack of warehousing best practice knowledge at management level is impacting the industry. “As a result the service provider often becomes part of the extended management team in terms of expertise. But finding and keeping the right skills, especially at management and supervisory level, is increasingly becoming more difficult,” he said. For Dekker, the solution to many of the challenges facing the warehousing market lies in innovation. “It is all about using one’s space optimally – while improved partnering with landlords goes a long way in driving down cost. At the same time it assists one in becoming more flexible, allowing for a happier client. The best way to work with a warehousing service provider is to partner with him to improve collaboratively, rather than having an old school win-lose supplier/client relationship,” he said. “At the same time it is critical to understand one’s clients’ growth plans and strategies to ensure everyone is working towards the same goal.” INSERT ‘It is all about using one’s space optimally – and improving partnering with landlords’.