Navigating a hostile road-freight market

South Africa’s road-freight industry, with its direct link to manufacturing and consumer spending, is feeling the consequences of an economy which shrank by 3,2 percent in the first quarter of this year, according to official statistics.

“If people aren’t buying, there’s no demand for product, and if there’s no demand for product, there’s no need to transport goods,” says Marcus Ellappan, director of road freight at Bidvest Panalpina Logistics (BPL), one of South Africa’s largest logistics businesses, who points out that operations within the industry decreased by 4,4 percent during the period, due mainly to a contraction of 8,5 percent in the manufacturing sector, 10,8 percent in mining, and 13,2 percent in agriculture.

However, he adds: “We have to remain flexible, responsive and continually reassess how we address the challenges we face, regardless of the highs and lows.”

One of the systems introduced by BPL to combat the effects of the economic downturn is a hybrid distribution network designed to correct the imbalance of return loads versus outbound loads from various regions in South Africa.

The business has also grown its less-than-a-truckload operation to maximise payloads, preventing vehicles from running underutilised.

Operating in several industries – including retail, healthcare, chemicals, oil and gas, automotive, mining, manufacturing, engineering, defence and aerospace – BPL’s road-freight division has spread its reach instead of hedging its bets just on one industry. “This way we are able to mitigate risk,” says Ellappan.

“A distribution model that’s flexible and highly responsive to market challenges, much like holding company Bidvest’s model, has seen the company flourish in a notoriously volatile economy,” he maintains. “Our road-freight model is also decentralised, which means that daily operations and decision-making responsibilities are delegated to middle and lower-level managers.”

According to Ellappan, introduction of this method has resulted in quick and efficient response, freeing up senior management to tackle bigger, long-term issues. “It has also allowed various business units within the overall BPL organisation to support each other during market ups and downs, using either our own or outsourced assets, depending on the needs of a job and/or market conditions,” he says.

Ellappan says: “The negative factors affecting us will result in a downswing, which obviously impacts jobs and growth in gross domestic product.” However, he offers a glimmer of hope for road-freight business owners battling to sustain their companies in the highly contested industry. “The market will improve over the coming months,” he says.

Ellappan also offers some valuable advice: “Ongoing training, acquiring the right assets for a job, managing variable costs, and not shying away from technology are prerequisites for surviving. The right technology, in particular, will ensure that businesses are able to manage issues proactively and not be caught unaware by changes that present themselves.”