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Humanitarian crises will always have significant implications for businesses. Covid-19 has put pressure on economic growth, causing a massive slowdown in world trade and disruptions across global supply chains.
What is more, companies that built markets on the back of an integrated global trade network have felt the vulnerabilities that their trade dependence creates, and the South African import and logistics sector is no different.
Fundamental disruptions across the supply chain
“We have seen a fundamental disruption across supply chain components,” says Dr. Greg Cline, head of corporate accounts at Investec for your Business.
“While it initially started as a network type disruption, given the lockdown in China – where these would usually be easily managed with risk mitigation strategies - it quickly became evident that as organisations and people became more impacted and facilities were shut down, the knock-on effect created fundamental shifts in not only supply and demand, but operational execution, capacity and cargo flows – something we are still seeing today and is likely to impact the sector going forward.”
Gert Pretorius, MD for MiX Telematics Africa agrees, saying that many companies in the supply chain and the industry itself have been severely impacted. “The prohibition on the movement of certain types of cargo during the initial lockdown stages has disrupted supply chains and transportation activities. Given the economic slowdown, major losses will be seen in the long run, as many companies struggle to get back on their feet.”
Cline notes that at the start of this pandemic the country was hampered by confusion. While preference to essential goods needed to be given at the ports, there was still the matter of the Road Freight Association understanding what was permitted in terms of the transporting of these goods from the ports through to the warehouse.
“As such, we saw many businesses in this space applying for permits to be able to operate while under Level 5 of the lockdown, however clarification and changes were needed, given there was a segment of the economy that was classified as essential goods but was not significant enough to affect or reduce the impending unemployment figures, which we are now starting to see.”
The knock-on effect created fundamental shifts in not only supply and demand, but operational execution, capacity and cargo flows – something we are still seeing today and is likely to impact the sector going forward.
Where to from here?
Cline says that while businesses need to evolve over time to address what they believe is the new norm, to do this means understanding what services are important (where the opportunity lies) and move to capitalise on them – evolving as they must.
From an import perspective, there has been a substantial decrease in trade. While the focus has shifted internally in terms of preparing health care sector capabilities and trying to manage the impact on people’s livelihoods, there have been significant efforts from government and the private sector to fuel business. However, the economy hasn’t opened up enough for businesses to create enough demand to be ordering and importing aggressively.
Says Cline: “Many companies are trying to preserve their cash flow given the uncertainly of the market, timeframes around the easing of lockdown levels and how much disposable income consumers will have. As such, there has been a definitive slow-down in the number of imports and the anticipated demand is not yet well understood. So this is the time to re-examine the relationships with your suppliers and customers. Make sure that you have negotiated equitable payment terms with your suppliers and at the same time, create an overall customer experience that will bring customers to your door.”
For the logistics sector, this also means greater use of digital technology to achieve optimal customer service levels, timely delivery and improved customer communication.
“Transporting and delivering goods across the country plays an integral role in the supply chain. Operational efficiency and having more visibility throughout the value chain is vitally important,” says Pretorius. “In a time when volatility is the new norm, strict asset management and having a full view of the fleet at any given time is critical, as businesses cannot afford more losses.”
Over the lockdown period, MiX Telematics has seen fewer high-risk incidents in general but, as lockdown levels ease, crime is likely to increase again.
“As a result, actively managing assets, protecting cargo being transported, helping keep drivers safe while delivering goods and feeding into the turnaround of the supply chain as a key player in economic recovery, is paramount. It is critical for transformation to a more digital environment where telematics data influence operating efficiencies. The logistics and supply chain sector must make sure they can capitalise on opportunities now, to continue successful operations into the future,” concludes Pretorius.
About the author
Patrick writes and edits content for Investec Wealth & Investment, and Corporate and Institutional Banking, including editing the Daily View, Monthly View and One Magazine - an online publication for Investec's Wealth clients. Patrick was a financial journalist for many years for publications such as Financial Mail, Finweek and Business Report. He holds a BA and a PDM (Bus.Admin.) both from Wits University.