STAYING AFLOAT

Future of logistics and supply chain post-Covid

Mark MwangiMark Mwangi

In Summary
  • The pandemic exacerbated existing inefficiencies
  • Nationwide travel and border crossing restrictions as well as night-time curfews greatly reduced fleet utilisation

Across Africa, and in Kenya, most people spend over half of their monthly household budgets on food. For every $1 (Sh109) that a Kenyan spends, 45 per cent goes to food and drink according to the Kenya National Bureau of Statistics.

This comes from low level of income but also from high prices of food and overall cost of goods. Logistic costs are often among the main reasons for these high prices. It is therefore extremely important for logistics overall and goods transportation more specifically to become more efficient.

Logistic costs can end up making up to 75 per cent of the final price consumers pay for goods. The local landscape is filled with opaque, often insecure and fragile supply chains plagued by middlemen that can consume majority of the amount spent in the chain. Companies are seeking ways to control and monitor upstream logistics.

Taking control of downstream logistics and direct customer ownership is also becoming more important. The pandemic forced traditional distribution and retail outlets to close shop disrupting delivery of finished products to consumers.

The high cost of transporting goods can also be due to internal inefficiencies mostly caused by slow turnaround times and a lack of planning. With many businesses, logistics is a critical part of operations but often a non-core area. This can leave many companies with inflexible, internal transport fleets overwhelmed with the high level of management resource required. This is compounded by the single-sourcing and over-reliance on middlemen, greatly increasing the cost and liability of transporting goods.

The pandemic exacerbated existing inefficiencies. Nationwide travel and border crossing restrictions as well as night-time curfews greatly reduced fleet utilisation. This resulted in lower availability on the supply side. Cargo owners experienced supply chain disruptions and lower demand from customers thus reducing transport requirements.

This meant that cargo owners were demanding lower prices whilst transporters on the most part were experiencing lower demand, slower turnaround times and less availability of return loads, which increased their costs and raised their asking prices.

This pandemic has highlighted that far from just a cost centre, logistics is now increasingly viewed as a competitive advantage. Business leaders are finally ready to roll up their sleeves and revisit logistics with innovation, looking to employ technology to get efficiency and use data to address the challenges they faced through Covid-19 and future eventualities.

The future of logistics therefore lies not only in the ability of how quickly companies and transporters adapt, but how smartly they leverage on technology and data to reduce existing inefficiencies.

Utilising digital tools can help shorten turnaround times, increase flexibility, reduce costs for transporters and companies alike. Logistics companies such as Amitruck have invested in new technology ensuring that the cargo owners are able to efficiently get competitively priced, secure and flexible transport solutions. Using technology also enables data acquisition which can bring insights on areas of improvement or opportunities.

Other interesting new features such as dynamic pricing enable clients to make savings when the market demand is low but achieve client fulfilment when demand is tighter. Finally, these technologies enable companies to focus on their core operations and efficiently outsource transport requirements.

Companies that more closely partner with suppliers instead of the legacy arm’s length transactional relationships create leaner and innovative supply chains that lower costs for the end consumer, improve efficiency and increase flexibility.

The government also needs to work with development partners, especially on the Improvement on the road networks and location addresses with a special focus on the Belt and Road Initiative and AfCFTA (African Continental Free Trade Area Agreement).

These interventions will see a substantial reduction in final consumer goods prices and strengthened supply chains that can weather any eventuality.