A key challenge for the South African logistics industry is the apparent lack of regulation and standards applicable to logistics and supply chain management companies, states materials management and logistics consultancy Greiner, Mendi & Associates (GMA) MD Lars Greiner.

He argues that the perception of the logistics industry as a simple, easily accessible market, along with a lack of any kind of barriers to entry to the market, has allowed more unqualified or unskilled logistics operators to enter the market, creating dangerous situations for people and cargo.

“Therefore, there should be greater regulation in the logistics proficiencies and technical qualifications of the materials handling and transporting equipment to support professionalism in the industry.”

This current lack of regulation is compounded by a lack of clarity on the identity and role of an industry regulator, he says.

“However, regulation could be managed by South African Revenue Service Customs or the Department of Transport, since associations, such as the South African Association of Freight Forwarders or the Association of South African Owners and Brokers, often do not have regulatory powers, but can only monitor and regulate active association members,” Greiner reasons.

He also suggests a renewed proficiency in logistics legalities and terminology, as well as in the technical aspects of loading and unloading cargo, or in understanding crane lifting capabilities.

The current skills shortage is another industry challenge and, with increased competi- tiveness in the industry, this makes for a dangerous combination; to remain competitive, companies waive skills and compete only on price, Greiner explains. This could lead to shortcuts in the transporting and handling of cargo or in supply chain provison, he points out.

Moreover, with more companies competing for the logistics management of fewer cargo, owing to the economic downturn, Greiner suggests that clients should focus on the skills base offered, insist on cost plus pricing from logistics companies and request company records or due diligences of the companies they are employing.

However, he hopes that, “in the future, the South African logistics industry will reap the benefits of policies enforced and agreements made between government, labour and business to support the industry”.

Drastically Downsized
Owing to the current global and local economic downturn, which has adversely affected the advancement of projects in the oil and gas industries, GMA has downsized drastically to make it through the current difficult period.

Although GMA’s order book comprised about 22 projects, with the company being profitable until March last year, Greiner notes that most projects have been cancelled or postponed indefinitely.

Nevertheless, the company’s largest projects in 2015 included materials handling and logistics management for construction major Basil Read’s St Helena Island Airport project and study work for the Harmony-Newmont joint venture, Morobi, in Papua New Guinea.

Greiner reiterates that “logistics was of major importance, as time and planning were key issues, and getting the logistics strategy right for all cargo from the start was imperative, with no room for error”.

GMA services for the St Helena project, on behalf of Basil Read, included chartering a suitable vessel – this included sourcing a ship, a crane and having it installed on the vessel – to service the project, setting up a master container lease agreement for all equipment worldwide and negotiating leasing for a bonded store from the Namibian Port Authority.

Project achievements included maintaining the project schedule with no significant damages to goods. GMA also achieved a 15% savings on the initial logistics budget, with the bulk of the project work having been successfully completed under budget, Greiner says.

He, therefore, retains a positive outlook, believing in the significant potential of future new projects.

Greiner continues to focus on assisting companies in finding suitable logistics solutions and partners in Africa, but has added a broking and educational element to the company’s offering, offering tailormade courses and education to procurement and logistics staff on the fine points of logistics in Africa and remote areas.

“When considering development into Africa – and with the South African economy under significant pressure – more South African companies are venturing into the continent and pursuing logistics opportunities,” he highlights.

Merging Industry
Greiner notes an increasing trend in mergers and acquisitions in the international logistics industry, attributing this to the mitigation of current challenges in an increasingly competitive market. He cites Denmark-based transport and logistics company DSV’s agreement in October last year to acquire logistics major UTi as a key example.

Similarly, France-based container shipping major CMA CGM announced a preconditional voluntary general cash offer for South-East Asia’s largest container shipping company, Neptune Orient Lines, last month.

“These acquisitions have resulted in fewer players, but, nonetheless, in players of a larger calibre,” he says.

Conversely, these mergers and acquisitions will create a new market of skills, as there will not be a need to retain large staff numbers in these organisations, Greiner concludes.