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As South Africa enters the second phase of the country’s Covid-19 lockdown – Level 4, which includes some easing of the initial restrictions on business and movement – the supply chain industry faces new challenges, according to SAPICS, The Professional Body for Supply Chain Management. These may impact the availability of winter clothing and homeware, SAPICS notes.
“Businesses not supplying essential goods have had to find short-term storage solutions for their products during the lockdown. Some were able to move their products to bonded storage facilities to delay the payment of VAT and customs duties, thereby alleviating cash flow issues, but many have had to use any storage they could find. This has been at an additional cost. The current challenge is to efficiently move the stored product into their facilities, and in the case of retailers move summer stock out of distribution centres, to create space for the storage and processing of winter stock,” says Mungo Park, SAPICS member, past president of SAPICS and senior key account director at DSV.
“Clothing and homeware retailers face the challenge of having summer stock in their stores and distribution centres and need to receive, process and distribute winter stock as quickly as possible,” he stresses.
Because online shopping has been constrained, most retailers have a backlog of online purchases made, which must now be delivered. Park says that this will put pressure on couriers and distribution centre operations as the number of workers on shifts at the distribution centres has been reduced to facilitate social distancing. “Online shopping is definitely something the government should allow and support as it allows shoppers to have the ‘retail experience’ while practising social distancing,” he states.
Park says that while most businesses are expecting a drop in demand for their products, there is also the challenge of a shift in demand for items. “One example is computer and laptop suppliers, where the demand for laptops has increased dramatically with the number of employees now working from home, while demand for desktop computers has dropped, leaving suppliers with excess, aging inventory of desktops.”
Increased air freight costs have and will continue to impact businesses’ supply chains. Park expands on this issue: “Many customers began moving products by air, which has been hugely problematic given the constrained air freight volume which has been available. Airlines have been using passenger planes as freighters able to carry about 100 tons of cargo at a time. Some service providers and large businesses have been making use of charters, which is very unusual in the South Africa market. Even so, airfreight rates have increased at least five-fold since mid-March and are still increasing weekly. Covid-19 regulations in countries of origin are further exacerbating the movement of air freight where shutdowns or an increase in customs inspections is inhibiting and delaying the departure of shipments.”
Looking ahead, Park believes that South Africa’s supply chain industry and supply chain management professionals are well-placed to rise to the ongoing Covid-19 challenges. “I have observed the strengthening of relationships and the development of a culture of partnership between service providers and customers who are working together to address the challenges. Service providers are demonstrating remarkable flexibility in terms of managing debtors’ books. The strengthening of relationships is fundamental for service providers and their customers and they must work together to identify potential points of failure in supply chains and to build resilience and redundancy to mitigate further disruption due to Covid-19,” he stresses. “This will enable them to better manage future supply chain disruption.”
Also encouraging, Park notes, is how well the supply chain profession in South Africa has responded during this challenging period. “Service providers have been innovative in creating solutions for customers. Internal logistics operations are successfully guiding businesses in the adoption of different approaches to managing supply chain costs. These are testing times, but supply chain management professionals have risen to the challenges. Some of the short-term activities, innovations and interventions have proved so successful that they will become standard operating processes going forward.”
Since its foundation in 1966, SAPICS, The Professional Body for Supply Chain Management, has become the leading provider of knowledge in supply chain management, production and operations in Southern Africa. SAPICS builds operations management excellence in individuals and enterprises through superior education and training, internationally recognised certifications, comprehensive resources and a country-wide community of accomplished industry professionals.