CFOs reveal how they are navigating the supply-chain disruptions brought on by crises.
Along with the cost of shipping and poor infrastructure, Africa continues to experience higher logistics costs than its global peers, which exacerbates long-standing issues like supply-chain bottlenecks, shortages, and lead times at borders. “Throughout the continent, the largest part of product-to-market costs is the cost of logistics, not the cost of manufacturing,” explains George de Beer, Imperial Logistics CFO.
George adds that Imperial has had to juggle international challenges, like Brexit creating a driver shortage in its European operations, and the worldwide semi-conductor shortage, which has severely affected the global automotive industry. “These are all out of our control,” he says. “But we can make sure that our financial metrics remain sound, and having a diverse portfolio gives you headroom if things go a bit pear-shaped.”
Economists predict that a return to normal for the global supply chain is “unlikely” for the rest of 2022 and possibly longer. The days of cost-effective shipping, or even reliable road and rail transportation in South Africa’s case, are no longer a given, and supply chains need to be fortified.
According to Laila Razack, Equites Property Fund CFO, a CFO in the logistics property space, supply chains are being bolstered to mitigate issues. “There is a paradigm shift from ‘lean and low-cost supply chains’ to ‘resilient and diversified supply chains’, which includes nearshoring manufacturing operations and using more suppliers locally. We are also witnessing a trend of retailers increasing inventory levels globally, as the strategy is evolving from a just-in-time to a just-in-case model.”
As technology improves and supply chains become smarter and more efficient, logistics companies and retailers are consolidating multiple facilities into “campuses”. This, Laila explains, results in operational cost-savings from warehouse management to security. “We are also seeing massive investment in IT infrastructure to ensure robust and resilient supply chains.”
Laila adds that retailers are rethinking their distribution models, and many are adopting omnichannel distribution. This means that customers can purchase and receive orders from several sales channels. For example, they can purchase online and collect at a brick-and-mortar store or purchase online and have the products delivered to their homes. “In this evolution of customer expectations, retailers have to re-evaluate their supply chains to provide a seamless offering to consumers,” she says.
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