Cost reductions rule in intensely competitive market

In the intensely competitive automotive industry, the priority focus is efficiency and cost savings. “For manufacturers it’s a question of looking into innovative solutions for cost reduction and efficiency improvements such as inventory control and optimising material flow from suppliers into manufacturing plants,” says UTi’s regional vice president – automotive for Africa, Frank Vorrath. “The focus is always on freight optimisation and network modelling to ensure that we come up with innovative solutions like packaging optimisation.” One of the company’s award-winning solutions did just that. “By increasing the packaging density and coming up with a product to increase utilisation we were able to reduce transportation costs for a major car manufacturer, resulting in a saving in excess of R80m – which is significant,” Vorrath told FTW. “We’re working with some of our customers on similar systems and combining that with inventory control and material flow to ensure synchronised supplies.” Automotive has always been a major focus for UTi, says Vorrath. “We’ve been in the automotive game for 15-20 years in South Africa and have developed several innovative end-to-end supply chain solutions that have been transferred globally. We believe in knowledge and solution transfer and there’s a lot of global alignment, much of which has started in South Africa.” The company recently opened a supply design and innovation centre at Coega where there are 20 experts concentrating on supply chain optimisation. “Their focus is cost reductions and efficiency improvements as a part of the supply chain innovation and design. Shareholders are looking for cash flow improvements and we are focusing on bringing the solutions to this.” While the company’s automotive business is largely import-driven, Vorrath notes that exports of fully built units are accelerating. “Volumes are not where they were in 2006, but there is a definite upturn. “The industry has a vision called 2020 where South Africa wants to produce one million vehicles for export. Our aim is to support industry to achieve those kinds of volumes – but it will only happen if the industry remains competitive which means optimisation and supply chain solutions are key.” Equally important is collaboration, in Vorrath’s view, particularly in South Africa where volumes are small compared to the rest of the world. “South Africa focuses on exports to traditional markets like Europe and you can only compete with countries like Thailand, Turkey and Mexico if you are cost-efficient.” For the future Vorrath is upbeat. “My outlook is very positive. We foresee an increase of at least 15% based on our big clients like Volkswagen, which concentrates on exports. They have big plans to increase volumes from 100 000 to 150 000 vehicles per annum, which is a very positive sign for the entire industry. “Others will follow soon with positive volume growth.”