Southern African small, medium and micro enterprises (SMMEs) can be 15-25% more expensive than larger businesses with low shipment volumes and limited bargaining power contributing to higher transport costs.
This was highlighted during a Creamer Media webinar, on September 15, examining the structural barriers preventing SMMEs from entering supply chains and expanding their operations.
South African Supplier Diversity Council (SASDC) Special Projects Manager Ashok Deokiram said small businesses often lack the freight volumes needed to negotiate preferential transport rates.
“SMMEs rarely have the kind of volumes that they can depend on to negotiate better rates,” he said.
“They end up paying the normal retail price for whatever it is that they acquire and then offer, leading them to become uncompetitive.”
According to Deokiram, the playing field is not level from a competitive point of view.
The cost disadvantage extends beyond transport rates to inventory management and warehousing. Small businesses often have to carry the cost of infrastructure without access to the economies of scale available to larger companies.
Without shared facilities, SMMEs can also face higher costs when storing and distributing goods, Deokiram said.
Poor visibility of freight demand places further pressure on small transport operators who sometimes receive transport opportunities at short notice, leaving little time to plan loads or secure return cargo.
This could result in a truck completing a delivery and returning empty because the operator was unaware of freight that needed to be transported in the opposite direction.
“If that information can be made available, SMMEs could plan better and negotiate better rates because they have an opportunity to pick up a load and not come back to a place of operation empty,” Deokiram said.
Speakers at the webinar identified shared transport, warehousing and cold chain facilities as potential ways to improve capacity utilisation and reduce costs for SMMEs.
