Supply Chain Collaboration in a wider context:

The role of government and the railway

Jan Havenga

Department of Logistics

Stellenbosch University

Logistics costs as a % of GDP – a 12 year time series

South Africa’s logistics costs in perspective

Logistics cost components tracked over time

South Africa’s freight profile….

Current freight

Future freight

South Africa’s freight demand

What does it say about how we manage freight

transport?

I’ve not seen a single transport indicator, where South

Africa is lower than world average

Demand side

• Reshoring (trade reduction)

• Lower choice

• Consumption at source

• Recycling at source

• 3D printing

Supply side

• More efficient trucking

• Drivetrain

• Fuel

• Driving habits

• More efficient logistics

• Scheduling

• Visibility and collaboration

• Lower empty haul

• Modal shift

Solutions

Tonne-kilometers by mode and typology

Rail friendly freight – The case for corridors

• Natal economic corridor

• Natal rail friendly corridor

We estimate that between 40 and 60% of corridor

freight is rail friendly

• Cape economic corridor

• Cape rail friendly corridor

•Imagine the iron ore line

• 20 000 ton train

• Single pick-up and offloading point

• Easy loading and discharge tech

• Commodity universally similar

• Unfortunately one-directional

• At 6c a ton-kilometre – a no brainer

• Not all freight can be categorised

like this

• But where is the cut-off?

• What does it mean?

• Heavy

• Unitised commodity

• Densified pick-up and distribution

• Specialised equipment/high volumes

• Bi-directional flows would be great

• Returns to density/learning curve for

transhipment could drastically reduce

costs in similar market segments

What is rail friendly?

BUT

Heavy intermodal fits the bill

• And that includes domestic intermodal

• But how large is this freight segmet?l

• Average is 700 TEU train

• Experiments with 1 200 TEU ongoing

Searching for ∆

∆

Co

st

0 d* d Distance

Intermodal

Road-only

Intermodal*

What informs ∆

• Volume and average travel distance

for different logistics systems

What informs ∆?

• Identify viable market spaces

• Macro reconfiguration leading to

• Lower fixed cost contribution (all involved)

• Learning curve opportunities to lower all variable costs

• Lower transaction and administration costs

• Negotiation and service design in good faith

The typical FMCG long distance supply chain has

natural “catchment” areas

DC DC

M R

M R

DC DC

M R

M R

DC DC

M R

M R

And logistics hubs should form

DC DC

M R

M R

DC DC

M R

M R

DC DC

M R

M R

Term

inal

Term

inal

Natural Logistics Hub Natural Logistics Hub

We’re stuck with this version of FMCG heavy haul…

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Source: Rapport, 31 July 2011

Is this a train?

Definitely not effective. This can be done cheaper

Collaboration – 4 spheres

• Freight owners

• Logistics service providers

• Railway

• Regulator

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Government 1. Framework for PPP 2. Internalise externalities 3. Industrialisation without industry

engagement impossible 4. Centre of Excellence

Railway 1. Lower contribution to fixed cost (initially

none?) 2. Visibility (Cost and Cargo) 3. Leaning curve assumptions 4. Lower overheads and transaction cost

LSP’s 1. Change fixed cost and overhead

assumptions 2. Visibility 3. Learning curve assumptions 4. Accept change in risk / return profile

Freight owners 1. Environmental accounting 2. Lower transaction costs 3. Outsourcing 4. Change purchasing habits 5. Choice?