Logistics cost in South Africa increased by 9% from 2004 to 2005, to reach R223-billion.

This is the finding of the third annual State of Logistics survey for South Africa 2006, released by the CSIR in July 2007, and incorporating 2005 data.

The reports notes that the share of logistics costs dropped from 14,6% of gross domestic product (GDP) in 2004, to 14,5% in 2005.

However, it states that “it is unlikely that these changes occurred as a result of improvements in the structural efficiency of the logistics system.

“It is far more likely that logistics operators are able to better utilise available spare capacity in the an environment where the GDP has increased substantially.”

The CSIR report also notes that total land transport in South Africa increased by 8%from 2004 to 2005, to reach 1,4-billion tons. Importantly, though, this growth was captured by the road industry.

“Rail transport tonnages have now remained more or less stagnant for the past decade,” states the report.

“Considering the predicted growth in the economy, it is clear that revolutionary change is required in the long-haul road/rail relationship to avoid road gridlock.”

In 2004 road carried 1,1-billion tons of goods in South Africa, with rail’s share at 205-million tons.

In 2005 road carried 1,21-billion tons, with rail moving 206-million tons.

Research shows that freight transported in the South Africa economy will double in the next 20 years.

The 2006 State of Logistics survey had a special focus on the fast-moving consumer goods (FMCG) market.

FMCG refers to products with a quick shelf turnover, and which is purchased at a relatively low cost, such as food, beverages and household products.

In 2005, South Africa’s FMCG retail industry had an annual turnover of R146-billion, growing at an annual rate of 5,5%.

The report notes that logistics performance indicators in the local industry lags behind global best practices with, for example, lead times for supply into retail outlets at 85,6 hours, with the global figure half of that.

One of the reasons for this is a 21% increase in the number of stores between 2003 and 2006, with declining volumes per store – which means smaller-volume deliveries more often.

The report says the current state of the South African FMCG logistics system, “with the industry incurring billions in unnecessary costs due to inefficiencies, has two implications.

“Companies with considerable opportunities for cost and inventory reduction and customer service improvements are prime acquisition targets for overseas multinational retailers, or equity players who add value and sell them on.

“(And) first movers who manage to address the supply chain challenge will have great opportunity to reduce costs and improve service, and consequently gain market share and margin ahead of the competition.”

PUBLICATION: ENGINEERING NEWS
AUTHOR: Irma Venter
DATED: 24th August 2007