Abstract
M.Comm.
The concepts of logistics and supply chain management are relatively new in
South Africa. The concept of logistics management was more commonly known
in the 1960s and 1970s as physical distribution. In the late 1970s, the concept
evolved to logistics management and in the late 1980s and early 1990s, it
evolved into supply chain management. It was only after the end of apartheid in
1994 when South Africa was able to compete globally that there was great
interest in supply chain management in South Africa. There is virtually no
business or industry untouched by the business of logistics and supply chain
management. Getting the right product to the right customer at the right time as
efficiently and cost-effectively as possible is the main objective of logistics and
supply chain management (Gordon, 2000a: 14).
Logistics is “the process of strategically managing the acquisition, movement and
storage of materials, parts and finished inventory (and the related information
flows) through the organization and its marketing channel in such a way that
current and future profitability is maximised through the cost-effective fulfillment
of orders” (Anon1. ,2002).
The term supply chain is described by Lummus and Vokurka (1999) as “all of
those activities associated with moving goods from raw materials stage through
to the consumer. This includes procurement, production scheduling, order
processing, inventory control, transportation, warehousing, and customer service.
The information systems necessary to monitor all of these activities are also
included. All these activities are then integrated and coordinated into a seamless
process to involve all the partners in the supply chain”.
With every step in the supply chain management process, there are costs
involved and two of the major cost drivers in the supply chain according to
Palmieri and Africk (1999) are inventory holding and transportation. Stout is of
the opinion that this is more than a valid statement from a South African business
perspective and emphasizes that unnecessary inventory costs money as does
inventory that is distributed inefficiently (Gordon, 2000b: 21).
Excessive inventory holding together with under-utilization of transport can lead
to a major negative financial impact on total supply chain costs (Cooke, 2000:
12; Lambert, Stock & Ellram, 1998: 165; Hankanson, 1999). Therefore, the
reciprocal relationship between inventory holding and transportation cost is very
important. Christopher (1992: 25) also stipulates that the ultimate purpose of
any supply chain is to satisfy customers. The importance of customer service in
total supply chain functioning must therefore always be considered in a logistics
supply chain system design.
In South Africa, transport and inventory are two of the main cost drivers in the
supply chain. Factors that make inventory and transport two of the main cost
drivers in the supply chain are, among others: high fuel prices, high interest
rates, poor road conditions, security concerns and the weak performance of the
rand against major foreign currencies. It can therefore be said that inventory and
transport are just as important in obtaining an optimized supply chain in South
Africa as in the rest of the world.
Mr. P. Kilbourn
Prof. J. Walters