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Measuring National Business Logistics Costs: A South African Application and International Comparison

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International Journal of Applied Engineering Research ISSN 0973-4562 Volume 12, Number 18 (2017) pp. 7524-7529

© Research India Publications: http://www.ripublication.com

Wessel J. Pienaar – Stellenbosch University, Department of Industrial Engineering, Private Bag X1, Matieland 7602, South Africa.

Orcid ID: 0000-0002-3638-1111

Abstract

This article briefly illustrates the macroeconomic relevance of business logistics cost measurement on a national level.

The results of the 2015 logistics cost model for South Africa are presented. The country’s logistics costs are compared with those of several other countries. The major portion of logistics costs is attributable to road transport, of which the biggest cost driver is fuel, which, in turn, is determined by volatile oil prices and the exchange rate of the country’s monetary unit. This poses a significant exogenous risk to logistics cost management in South Africa.

Introduction

This article briefly illustrates the macroeconomic relevance of freight logistics cost measurement on a national level, shares the results of the latest South African national logistics cost model, and compares the country’s logistics costs with those of several other countries.

Sustained economic growth and development are dependent on productive regional specialisation, the continued improvement of production efficiencies and the profitable exchange, or trade, of goods, services and information.

Profitable trade presupposes local surplus production of those goods that might be more efficiently produced in a region in exchange for goods produced more efficiently elsewhere.

This prerequisite level of comparatively or relatively advantageous efficiency stems from the economies of scale achievable from labour specialisation (including the division of labour and development of skills), technological specialisation, productive utilisation of regional natural advantages and large-scale production.

To maximise a region’s net gain in wealth created through local economies of scale and comparative efficiency requires effectively integrated and coordinated transport and storage systems (known as business logistics systems).

According to United Nations research, [1] effective cost reduction in the national logistics system can only be accomplished by measuring and tracking logistics cost components to inform appropriate government policy.

The impact of both sufficient and insufficient measurement of economic performance was illustrated in South Africa previously.

Sound monetary and fiscal decisions, enabled by robust macroeconomic indicators, allowed the country to weather the global financial crisis of 2009 admirably.

However, a lack of management information on the impact of high economic growth and equal access to South Africa’s energy demand resulted in a severe backlog in electricity-generating infrastructure.

A lack of information leads to similar challenges within the freight logistics sector, and in terms of efforts to holistically plan for national transport infrastructure renewal and extension. [2]

Business logistics can be examined on various levels of granularity. On the lowest level, one considers the logistics function of an individual company, including only the processes from the supplier’s gate, through the focal company’s network and up to the customer’s gate.

One level higher, one considers the logistics processes across a sequence of supply chain partners that move freight through stages of transformation on the route from raw material to final product.

On the highest level, the macro-level, one considers not only the logistics activities associated with one supply chain but the collective of all logistics within the country and the aggregate impact these activities have on the economy. [Continues…]