SA mining sector realising importance of logistics management

1st June 2012 By: Reggie Sikhakhane

An organised and efficient logistics component is imperative for the all-round, well functioning of an industry, the Chartered Institute of Logistics and Transport South Africa (CILTSA) VP Martin Bailey tells Mining Weekly.

“Looking over time at industries such as manufacturing, it is evident that this industry realised the significance of the role that logistics plays decades ago. Hence, the skill level of people that began moving into supply chain management changed.

“Management began shifting its focus towards logistics – where huge opportunities to reduce costs were available. In fact, we know how important logistics is in South African business, because it con- tributes about 20% to the country’s gross domestic product,” explains Bailey.

He points out that the mining industry is still behind the times regarding logistics management when compared with other sectors; however, Bailey concedes that, in the near future, the mining industry will begin to see its logistics management as a key component of its operations.

“This change is imminent, as the cost of material going into a mine is getting close to the resources spent by mining houses on labour,” notes Bailey, who is also warehousing, distribution and supply chain consulting company Industrial Logistics Systems chairperson.

“The mining sector is becoming more attentive to organised logistics management. Now and then, you hear about mining houses doing something to bulk up their logistics components.”

However, Bailey admits that there is still much work to be done by the mining sector to improve its logistics. “There is still a long way to go in the mining industry, although there seems to be an understanding that something needs to be done about the inefficient state of logistics.”

Further, he explains that the use of an efficient logistics system by the mining sector could be a significant differentia- tor, as it could result in alleviating time constraints. Having adequate stock of material and the ability to move it whenever necessary will eliminate the current logistics challenge faced by the industry.

Meanwhile, Bailey highlights that, among the main reasons why mining houses are slow to adapt to a completely free-flowing logistics system, is the fear of their valuable material being stolen.

“The free movement of materials in mining circles is significantly restricted, owing to the level of theft of mined material and, as a result of mining houses trying to reduce theft, they constipate their logistics systems.”

Education and Training
Bailey believes up-to-date education can play a significant role in improving the mining sector’s logistics and supply chain mechanisms, adding that the current level of education is worrying.

“There are gaps in the qualifications offered by educational institutions. If this can be addressed, it could benefit the mining industry’s logistics and supply chain systems.”

He says logistics and supply chain management should be incorporated into studies such as mechanical engineering, which will result in graduates having a better understanding of a mine’s entire operation, from the mining of material to the logistics involved in its quick and efficient transportation, as well as other related aspects.

“The global world of logistics consists of many complexities today, whereas in the past, businesses could rely on anyone to move their products without the technical aspects of today’s logistics industry. As a result, we need people who are trained in logistics but, unfortunately, the logistics industry offers better training than that which should be provided by universities,” says Bailey.

Further, he says the opportunities that will arise owing to State-owned freight utility Transnet’s medium-term infrastructure programme will require skilled individuals to maintain the efficiency of its operations and prevent their collapse.

“Investments into education need to be made so that skilled individuals are available to ensure that projects of this size function optimally and continue to contribute to the economy.”

R300-billion Transnet Roll-Out Programme
The South African government is probably the best strategist in the world regarding infrastructure programmes, says Bailey. However, he says the execution of its strategies is a problem.

“This roll-out by Transnet could be a significant benefit to all sectors, espe- cially mining, as products would be moved easily by rail to ports and other destinations.

“Currently, our rail network is not set up to handle the growth in commodities such as coal and manganese, while this service is crucial for the economy to be competitive,” says Bailey.

Further, he says the current port, railway network and inland port systems need to be re-engineered for the mining industry’s logistics system to be fully functional. “Many of these components are a mess and extensive consultation and planning are needed for this entire programme to be executed well.”

Bailey notes that there are new coal mines that could be established in the near future that do not have access to the Richards Bay Coal Terminal, which would result in major losses if planning around these possibilities is not undertaken with Transnet’s roll-out programme.

“In terms of exports, if South Africa’s mining industry, especially the coal- mining sector, wants to catch up with the China export boom, Transnet has to look closely at the railway network, which Bailey believes will be executed first.

He says there are some examples of South Africa’s ability to deliver significant infrastructure programmes well. “The Gautrain is an example of a well-executed infrastructure project.”

He also highlights that public–private partnerships are important for the success of such projects, warning that limited consultation with, and the inclusion of, business and civil society can result in the complete failure of a project and wasted resources.

“The e-tolling saga is a perfect example of how important it is for government to include both civil society and business in planning and executing infrastructure projects,” Bailey points out.

Going forward, he is optimistic that the mining industry will begin to use logistics services more frequently. “The mining industry has not changed yet in terms of using efficient logistics to its full advantage, but it soon will.”