Most South Africans are spoilt for choice when it comes to the wide array of products and different brands that can be found in supermarkets countrywide – but certain fast-moving consumer goods (FMCG) don’t get where they need to go in time … We discover how supply chain management can resolve many FMCG problems.
The business glossary BusinessDictionary.com defines FMCG as frequently purchased, essential or non-essential goods – such as food, toiletries, soft drinks or disposable diapers. Naturally, some are more perishable than others …
According to the United Nations Children’s Fund (UNICEF), malnutrition in sub-Saharan Africa sees one in eight children die before the age of five. “This is despite having the food to feed them,” says Hermann Haupt, GM for the sub-Saharan Africa business of CHEP – a logistics solutions provider. Haupt alerted supply chain professionals, at the 37th annual SAPICS conference, to the severity of the food crisis.
“At five percent, compared to the western world’s 60 percent, food waste in Africa (by the consumer) isn’t the main problem,” stresses Haupt. “It is food loss. We lose about 220-million tonnes of food annually through incidents during the early stages of the supply chain, from post-harvest and production to retail, but the food deficit needed to feed the hungry is only 45 million tonnes. We need to resolve only 20 percent of the losses to fix this crippling problem.”
CHEP is a division of supply chain logistics giant Brambles, which is actively looking at ways to remedy the situation. Haupt continues: “Fourty percent of the continent’s children are stunted – physically and mentally underdeveloped as a result of malnourishment.
“This makes them more susceptible to disease and less able to learn, ultimately influencing their ability to work and develop themselves both from a personal and professional standpoint.”
He emphasises that Africa has five times fewer roads than the developed world. “On top of that, congestion at seaports and delays at border posts makes for a challenging cold chain environment.”
Haupt adds that there are five stages of food loss and crucial supply chain management details often overlooked. These include:
• Production: “Yield in Africa is just 1,1 t per hectare, but 3,2 t in the rest of the world!” he says. “Even a small increase in yield can make a massive difference to the malnutrition problem. We need to find a way to transfer skills to African farmers.”
• Harvest processing: Problems include timing, storage and refrigeration methods.
• Industry processing: Taking consumer-ready product and getting it to market. “Packaging is a major issue here,” Haupt explains. “When products are packaged in bulk or in containers that aren’t suitable, the packaging is easily crushed and the food wasted.”
• Distribution and sales: Forecasting is not accurate; resulting in oversupply and waste. “Retailers focus only on displaying perfect-looking food, rather than concentrating on whether the food is still nutritionally perfect.”
• Waste: Consumers buy too much and do not monitor sell-by dates.
Haupt maintains that while some are long-term solutions – such as closer collaboration of African governments, building road/railways and processing facilities; in the short term, the most sufficient supply chain is obviously one where the production facility is as close as possible to users.
“Ultimately, we need a coordinated and collaborative effort if we are to make a difference,” he points out, citing that the supply chain management industry is the place to start. “Correctly managing food supply chains can have an immediate result by overcoming obstacles in the distribution of goods to those in desperate need.”
Fast-moving consumer goods also face other challenges as transport owners and operators, even at their most efficient, are at the mercy of escalating road tariffs, upped driver fees, rising maintenance costs, and, of course, erratic fuel prices.
“We are running out of options,” cautioned Zane Simpson in his presentation of the Logistics Barometer, launched in June 2015 by Stellenbosch University, at the recent SAPICS conference.
The talk highlighted various solutions that could curb rising costs throughout the supply chain …
Unlike Europe, where most agricultural goods are produced within a small kilometre radius of the point of sale, South Africa’s transport distances are extensive, compounded further by inland mineral reserves that must be transported to seaports. Inland Gauteng, especially, has a high demand for goods requiring long-distance carriage.
Based on the current rate of demand growth, freight is likely to triple over the next three decades from the current 781 million tonnes moved annually. “Imagine three times the number of trucks on our road network and the impact this would have on road infrastructure, traffic and delivery times. If we don’t change, a system shock is inevitable,” explains Simpson.
“What we can still change is behaviour on the demand side. Consumers are spoilt for choice,” says Simpson. “By demanding less variety, consumers will inevitably reduce the amount of transport needed. This will save money, result in less road congestion and, ultimately, benefit our environment. The logistics industry, too, must be transparent about these benefits.”
He adds that there has to be a change in the way goods flow between points; whether driven by technology or by this reduction in the variety of brands and options on offer to consumers.
“In cases where no alternative exists other than to convey goods over long distances, intermodal transport (moving containers using multiple transport modes) could have a dramatic impact, but requires significant investment in rail systems.”
Simpson and his team propose that all other conveyance options and alternative technologies, even the unconventional, need to be considered.
“For example, 3D printing items close to source, rather than having to transport from afar, would help to reduce transport demand and subsequent costs. Seemingly ridiculous ideas, such as building a canal between KwaZulu-Natal and Gauteng, long-distance conveyor belts, or drones, need to become part of mainstream conversations if we are to reduce logistics costs,” he says.
“Overall, instead of trying to reduce transport costs in isolation, we need to work hard at economic growth, which will solve more problems than just increasing logistics costs.”