Massive FMCG logistics costs one of SA’s biggest challenges

Cost,

infrastructure,

congestion and

skills remain the

biggest obstacles in the fast

moving consumer goods

(FMCG) sector in South

Africa, says Professor

Jan Havenga, director

at the Centre for Supply

Chain Management at the

University of Stellenbosch.

FMCG accounts for

nearly a quarter of the

country’s total logistics

bill.

“The 40 million tons

of FMCG (of which

approximately 80% is

processed foods) that we

have to move in South

Africa every year amounts

to less than 5% of the total

volume of 870 million

tons,” he told FTW. “It

however contributes 10%

of tonne-kilometres (ie,

30 billion ton-kilometres),

meaning when compared

to tonnage contribution it

moves double the average

distance of all other

commodities.”

In addition, said

Havenga, at R20 billion

the long-haul transport

cost of FMCG amounts

to 17% of the total longhaul

transport cost for the

country.

“The total logistics costs

of all FMCG commodities

in South Africa amount

to R110 billion, which is

nearly a quarter of the

total logistics bill for South

Africa,” he said. “A total

of 5% of our commodities

(FMCG) accrue nearly 25%

of freight logistics costs. It

is therefore the country’s

biggest logistics cost

challenge,

and macro

infrastructure

solutions

can have a

significant

impact.”

There is no

denying that

South Africa

has well

organised and

functioning

logistics

service providers.

“When it comes to

downstream logistics we

outperform our BRICS

counterparts,” said

Havenga.

“The long-haul challenge

is however concerning.

The majority of unitisable,

long-haul freight is on road

– a major contributor to

high national

logistics

costs and

unsustainable

freight

externalities.

This freight is

the textbook

design for

a domestic

intermodal

solution where

rail provides

the longhaul

leg for palletised and

containerised commodities

between logistics hubs such

as Cato Ridge, Harrismith,

Tambo Springs and Belcon,

and road provides the

feeder and delivery services

to and from these hubs.”

He said alleviating

the long-haul congestion

challenge was of increasing

importance for the already

expensive FMCG sector.

“Domestic intermodal

solutions, which include

accelerated infrastructure

investments in logistics

hubs, are imperative,”

he said. “The challenges

within the school system

also need to be urgently

addressed, not only for

FMCG logistics, but for the

prosperity of the country as

a whole.

“And, naturally,

strengthening the

manufacturing base to aid

in job creation and provide

the market for logistics

solutions is imperative to

address cost.”

INSERT AND CAPTION

FMCG accounts for

nearly a quarter of

the country’s total

logistics bill.

– Professor Jan Havenga