Slower demand impacts logistics providers

Increasing fuel prices and road toll fees are cutting consumer spending powers – and concurrently the demand for everything from primary to luxury goods. This, in turn, is impacting the logistics industry, according to Mark Scott of NGL Logistic Solutions, with a slow-down in the volume throughput in the distribution network. And, although fuel surcharges and toll fee charges are currently included in most logistic distribution contracts, logistic service providers still feel that impact of reduced volumes being distributed through their infrastructure, Scott added. It’s a logical downward spiral, he told FTW. “Increases leave less disposable income to spend on primary and luxury goods. This slows demand for goods, which in turn slows order cycles to producers and suppliers. “Downstream distribution service providers generate less revenue, which is directly apportioned to volume or kilograms moved. Hence, the less you move the less you earn.” He believes costing models developed to capitalise on critical mass pushed through an infrastructure, attempting to drive down cost, will start being questioned by clients. The reason for this is twofold: Firstly, these costing models are based on covering the service providers’ fixed infrastructural cost – with the cost spread among clients and not based on each customer’s actual activity. In the current economic environment, where critical mass is not being attained, this cost is elevated for each client in the system. Secondly, clients using these standardised models are treated as just a number, not taking into consideration the client’s specific and specialised needs. However, road freight is still currently a much more flexible method of transport in SA despite the challenges, according to Scott. “This is due to the SA rail systems not having the infrastructural capability to deliver across a national platform,” he said. “Rail handling with our present infrastructure increases lead times to deliver – and unfortunately does not meet customer expectations.”