Improving Competitiveness of Companies in South Africa through Logistics and Supply Chain Management Session 1D, 15:30 to 16:00, 10 July 2017 Gerard de Villiers Pr Eng Logistics Specialist

Contents State of logistics in South Africa Public sector perspectives Setting the scene Firm level logistics performance Defining logistics and supply chain management The supply chain of the future Importance of logistics Conclusion Transport mode comparison Inland intermodal terminals Improving Competitiveness through Logistics and Supply Chain Management

1. Setting the Scene

1 "Supply chains compete, not products, commodities or companies" (Martin Christopher 2016) Mar-keting Mix Place Promo-tion Product Price Process People Improving Competitiveness through Logistics and Supply Chain Management Setting the Scene (1/1)

2. Defining Logistics and Supply Chain Management

Defining Logistics and Supply Chain Management (1/1) 2 Logistics Functions/Elements: Transport Warehousing Inventory Procurement Customer service Information systems Order management Materials handling Packaging Reverse logistics Freight forwarding Customs clearing Supply Chain Management: "Integration of all logistics functions/elements" Improving Competitiveness through Logistics and Supply Chain Management Defining Logistics and Supply Chain Management (1/1)

3. Importance of Logistics

Importance of Logistics (1/2) 3 Cost of Logistics in 2014 in % of the Gross Domestic Product (GDP) (Logistics Barometer 2016) Improving Competitiveness through Logistics and Supply Chain Management Importance of Logistics (1/2)

Importance of Logistics (2/2) 3 Supply Chain Factors and Business Performance "Last Mile" (supplychainforesight 2016) Improving Competitiveness through Logistics and Supply Chain Management Importance of Logistics (2/2)

4. Transport Mode Comparison

Transport Mode Comparison (1/3) 4 Transport Modes Primary modes: Road (trucks/road trains) Rail (trains) Sea (vessels) Air (aircrafts) Pipelines Secondary modes: Conveyors Canals/inland waterways Drones (rotating and fixed wings) Improving Competitiveness through Logistics and Supply Chain Management Transport Mode Comparison (1/3)

Transport Mode Comparison (2/3) 4 Transport Mode Comparison Economic characteristics Service characteristics Functionality Road-friendly Rail-friendly Compete vs complement Durban - Gauteng: ≈ 600km Improving Competitiveness through Logistics and Supply Chain Management Transport Mode Comparison (2/3)

Transport Mode Comparison (3/3) 4 Container versus Tautliner Improving Competitiveness through Logistics and Supply Chain Management Transport Mode Comparison (3/3)

5. Inland Intermodal Terminals

Inland Intermodal Terminals (1/3) 5 Inland Intermodal Terminals Developed to integrate various individual components in adding logistics value at a facility that acts as an intermediary in the supply chain. Improving Competitiveness through Logistics and Supply Chain Management Inland Intermodal Terminals (1/3)

Inland Intermodal Terminals (2/3) 5 Improving Competitiveness through Logistics and Supply Chain Management Inland Intermodal Terminals (2/3)

Inland Intermodal Terminals (3/3) 5 Improving Competitiveness through Logistics and Supply Chain Management Inland Intermodal Terminals (3/3)

6. State of Logistics in South Africa

State of Logistics in South Africa (1/4) 6 Logistics Performance Index (LPI) (World Bank 2016) Improving Competitiveness through Logistics and Supply Chain Management State of Logistics in South Africa (1/4)

State of Logistics in South Africa (2/4) 6 Top 3 Supply Chain and Logistics Objectives (supplychainforesight 2014) Lowering procurement costs and reducing order lead times Improving the flow of business intelligence Integration of technology Improving visibility in the supply chain Aligning with key players in the supply chain Warehousing and distribution optimisation Optimising inbound and outbound transportation Improving inventory deployment across supply chains Outsourcing functions for cost and service improvement Improving service levels to customers Improving Competitiveness through Logistics and Supply Chain Management State of Logistics in South Africa (2/4)

State of Logistics in South Africa (3/4) 6 Long-term View of SA's Logistics Costs - % of GDP (Logistics Barometer 2016) Improving Competitiveness through Logistics and Supply Chain Management State of Logistics in South Africa (3/4)

State of Logistics in South Africa (4/4) 6 Trends in South Africa's Logistics Costs Elements (Logistics Barometer 2016) Improving Competitiveness through Logistics and Supply Chain Management State of Logistics in South Africa (4/4)

7. Public Sector Perspective

Public Sector Perspective (1/2) 7 Transnet (Strategic Thrusts, 2016) AGILE - Fit and focused in a volatile world ADMIRED - Trusted, innovative South African brand DIGITAL - Evolve or die UNITED - Together we succeed National Development Plan 2030 Lowering the costs of transport and logistics and investing in remedies to address spatial divides; Industrial zone developments and trade promotion will rely on competitive logistics; Creating adequate warehousing and logistics facilities; Instituting efficient procedures and customs and border posts; and Corridors of logistics hubs, road, rail, fuel and other infrastructure, is vital to the future of the national economy. Improving Competitiveness through Logistics and Supply Chain Management Public Sector Perspective (1/2)

Public Sector Perspective (2/2) 7 Department of Transport Draft White Paper on National Rail Policy (June 2017): Indicative Gauge Change Map - 1065mm / 1435mm Cabinet approved the Road Freight Strategy on Wednesday, 24 May 2017 Improving Competitiveness through Logistics and Supply Chain Management Public Sector Perspective (2/2)

8. Firm Level Logistics Performance

Firm Level Logistics Performance (1/3) 8 Strategic Profit Model (Stock and Lambert 2001) Improving Competitiveness through Logistics and Supply Chain Management Firm Level Logistics Performance (1/3)

Firm Level Logistics Performance (2/3) 8 Category Description Impact Income statement Sales Sales increase due to better customer service Cost of goods sold Lower cost due to new or more efficient manufacturing facilities Lower cost of purchased materials Variable expenses Reduced order management costs Fewer last minute production changes Fewer less-than-truck-load (LTL) shipments Fewer freight claims Lower freight costs Insurance Taxes Variable storage costs Inventory risk costs Fixed expenses Fewer employees required Lower third-party warehousing costs Reduced information system costs Reduced cost of supervision Balance sheet Inventory Reduced inventory investment Accounts receivable Reduce accounts receivable due to more promptly paying customers (lower errors) Other current assets Less warehouse space required Increased investment in modernised production facilities Improving Competitiveness through Logistics and Supply Chain Management Firm Level Logistics Performance (2/3)

Firm Level Logistics Performance (3/3) 8 Improving Competitiveness through Logistics and Supply Chain Management Firm Level Logistics Performance (3/3)

9. The Supply Chain of the Future

The Supply Chain of the Future (1/1) 9 The new industrial revolution (Industry 4.0) 1. Rapid manufacturing 2. Advanced robotics 3. Digitisation of supply chains (Internet of Things / Big Data) (Martin Christopher 2016) Improving Competitiveness through Logistics and Supply Chain Management The Supply Chain of the Future (1/1)

10. Conclusion

10 So, what can logistics and supply chain management do to assist businesses in South Africa to gain, maintain or improve their competitive edge? Transport Improve efficiency of rail and develop inland intermodal terminals at centres of gravity Warehousing Centralisation at centres of gravity to allow for economies of scale Inventory Visibility in the supply chain to assist with reducing inventory carrying costs Skills Relevant education and training towards Industry 4.0 and the supply chain of the future Improving Competitiveness through Logistics and Supply Chain Management Conclusion (1/1)

Questions? Thank You!