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Positive growth predicted for logistics sector this year

29th January 2016

By: Mia Breytenbach

Creamer Media Deputy Editor: Features

  

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Despite the rate of growth of the South African materials handling and logistics industry being slower than comparable sectors in its Brics trade bloc partner countries Brazil, Russia, India and China for the past two years, audit, tax and advisory services firm KPMG expects positive growth this year.

KPMG supply chain and procurement practices head and regional director Dr Dinesh Kumar believes that the increasing maturity and growth in the logistics sector will impact positively on logistics costs as a percentage of the gross domestic product (GDP) of South Africa.

Logistics costs, as a percentage cost of the GDP, is currently estimated at between 11% and 11.5%.

“Moreover, regional and African logistics integration, potential consolidations among logistics players and the refinement of sector policies would improve logistics costs, as it would result in reduced spending on logistics,” Kumar suggests, adding that this will lead to improved efficiencies within the sector.

This expected growth is in contrast to Kumar’s sentiments in 2014, when he highlighted that South Africa faced challenges of lower maturity in terms of materials handling, supply chain and logistics, especially in the sectors of consumer goods, transport and healthcare.

Performance Slip
According to the ‘Logistics Performance Index’ report by the World Bank, South Africa rates second-best among the Brics nations, behind China.

South Africa also ranked twenty-third among 155 nations in the index in 2012; however, the country slipped to twenty-fourth place on the index in 2014. This is a sign of South Africa’s recent regressive performance, Kumar laments.

“While South Africa has improved in aspects such as international shipment and quality, it has lapsed in customs, infrastructure, tracking and tracing,” he says, explaining that customs is regarded as a trade barrier and compliance function, rather than a trade facilitator and efficiency function.

Despite the materials handling and logistics infrastructure performing well in terms of services, the physical infrastructure is often not aligned to these services, Kumar adds.


Several challenges still mar the sector’s current growth, including policy, “which will still not be refined and aligned to practice in a quick turnaround this year,” Kumar says.

He also believes that there will still not be sufficient technology use in the logistics sector this year.

Kumar therefore stresses the need for interlinked technologies, such as Web-related data transfer (as opposed to desktop – or computer-based-transfers) that can encompass all aspects of the materials handling and logistics sector and the entire supply chain.

Another issue compounding the challenges that the materials handling and logistics sector faces is that the logistics function is still not considered a value-adding business function.

“The sector remains focused on core functions, such as production and marketing, and sales and finance, with the supply chain logistics not regarded as a core function,” he reiterates.

KPMG focuses on advisory work, such as crafting policies and suggesting trading mate- rials for the private sector, as well as government on a national department level, subsequently highlighting the importance of the supply chain and logistics management for South Africa.

The company has also liaised with materials handling and logistics service providers and principals for the private sector to identify inefficiencies, thereby positively impacting on their bottom line and increasing efficiencies.

While Kumar acknowledges an increased focus by government on supply chain management and logistics, he points out that the private sector has only pilot or standalone interventions at its disposal, where role-players aim to improve efficiencies and increase sustainability.

“Consequently, there is the need for a col- laborative roadmap and effort to ensure that supply chain and logistics management is incorporated into a sectorwide-learning effort,” he concludes.

Edited by Zandile Mavuso
Creamer Media Senior Deputy Editor: Features

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