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Home » Why is the mindset in South Africa’s cold chain logistics still stuck with old technology?

Why is the mindset in South Africa’s cold chain logistics still stuck with old technology?

  • marimac 

By Fred Albrecht, managing director of Logistics Systems Engineering

Savings to increase the bottom-line, that everyone is desperate for these days, are all around us. The simplest way to find them is to evaluate a facility – starting with their operations which is a particular point we see at many sites that have potential for improvement.

Image credit: All images by Logistics Systems Engineering

Image credit: All images by Logistics Systems Engineering

As my first column in Cold Link Africa, I thought it would be appropriate to start off by addressing this subject that is highly relevant as the sector is in a strong growth phase, but to top that, a lot of storage systems have reached end of life term, and it’s time for system replacements and upgrades.

There are certainly several reasons for the mindset of facility owners and managers in regard to ‘evasion of technology adoption’, and if I had to talk honestly, the majority of businesses in the local environment have this view. I like to think that we don’t need to continue to ‘trade like a third world country’ because we already have access to great advances made in Europe and available now to all facilities in Africa.

One of the major factors that we see in logistics and storage solution designs, is the fact that decision makers are just not aware or familiar with what is actually available as a solution, and what is already adopted widespread in other countries around the world. They may have seen a video or heard about the technology but have not actively embraced the thought of investigating the technology and understanding how these advanced systems in cold storage technology will set them apart from their competitors. In many cases it is due to the fact that they may be very focused on the day to day, and no one has provided then with the understanding of how this will change their business in the short, medium and long-term.

Image supplied by Logistics Systems Engineering

Image supplied by Logistics Systems Engineering

Coupled to that lack of knowledge for a roll out of technology in this country is the disadvantage that there are very few companies that can design and deliver any specialised and integrated handling and storage systems. Limited experience or exposure to international trends and technology of course means an equal result in the solutions that engineers can provide – even if they can conceptualise a great idea – there are a lot of intricacies involved other than just the storage of goods.

So, the typical situation for local projects is that because of these two factors there is a total disconnect between clients and service providers, and the proposal process is turned on its head. The various pitches from suppliers cater to their individual thoughts on a solution rather than the client specifying exactly what they want, and then each supplier proposing appropriate technology related to their ability of what they can offer in their company scope, omitting the true client centricity approach.

If it is a logistics consultant, and not an expert storage system engineering firm, or storage solutions engineering expert, the reality is that in many cases, the DCs all look like the same “cookie press solution” of a competitor project they have done, which adds no value to the customer seeking advancement in technology.

In my follow up columns, I will explain this resistance to change by logistics consultants and customers in a larger context to ensure the mould can be broken and SA can gain greater efficiency in warehouse and cold chain storage technology, and not play leap-frog to their competitors. The major reason is that the consultants in many cases play it “safe”, and design what they themselves are familiar with due to them attempting, and in some cases rightfully protecting their own reputation, but regrettably and without a doubt, this means they are not giving the customer and user the advantage of technological advancements made in the intralogistics equipment sector daily, which they need in order to be more efficient, safer, faster, and have a better OPEX than any of their competitors.

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When this happens, the inevitable is that the client doesn’t get what they want – or indeed needs as they are now informed about what they need – and automation and technology gets a ‘bad name’ as we have seen, even within our borders as many white elephants are installed that the designer and supplier just supplied what they had – impressing customers and end-users with that what they have available, and at the time of the roll out, customers’ true needs and true bottom-line savings are not understood and addressed.

I have visited thousands of installations where systems that were supposed to provide the customer the leading edge, became the bleeding edge, and not because of the technology that cannot achieve the outcome, just the complete holistic process from concept to completion that was not executed in the manner that it could and should have been.

When technology and automation systems don’t work or perform poorly because a holistic view was not considered, and progress can’t happen because of the obvious failures, it is obvious that other companies and end-users that are indeed interested in technology don’t have any suitable working sites that they can then refer to or use as motivation for advancement of their own businesses.

In such cases you may then wonder why international sites cannot be used as an example and replicated here locally? Well, in simple terms that comes down to the reality that conditions, regulations and standards, efficiency, productivity and most importantly cultural differences and values are evident. It is well documented that the South African workforce comparatively to international counterparts is overall far less productive. This then means, for example, a system adopted in China or the Eastern Block where the worker-picking is in excess of 2500 items an hour, would not work effectively locally with an average picking rate of perhaps 400 or 600 items an hour for the same case.

On the converse, when a customer, client or end-user is interested to embrace semi-automation and full warehouse automation and loves the idea of going for a high spec system, another problem arises that we see, particularly when a supplier itself, even having the agency or a derivative of what the new solution will entail, doesn’t have an explicit and definitive understanding of these systems they are intending to manufacture or promoting. The impact onto a business is the result that there is an un-intended effect onto the facility that was too severe to handle while a comprehensive change management strategy should have been included to be implemented.

Another outcome, as one example, is an unfortunate result of the general South African mannerism to always choose the cheapest solution, while time and time again it has been proven that this strategy affects facility operational expenditure significantly long term. The decision-making process ends with the facility owner or management, but is also influenced by other role players such as consultants or suppliers claiming to be experts, but the reality remains that if such contributors to decision making don’t have international experience of the various systems and techniques available, they will only recommend what they know and are familiar with – even when better solutions exist.

Image supplied by Logistics Systems Engineering

Image supplied by Logistics Systems Engineering

Logistics consultants, for the lack of a better word, and in many cases integrators, therefore show savings upfront, and customers and users are excited to see the lower CAPEX, but do not get the filtered OPEX costs to the right exco that will sit up straight if they realised what this approach to finding the perfect balance of CAPEX vs. OPEX and the company’s bottom-line would mean for them.

Today, and for the future, much more thought needs to go into the operational aspects than saving a few percent on capital costs. Storage facilities of any nature would generally have a life expectancy of 20 to 30 years and operational effectiveness will, without a doubt, become a major element in the increasingly competitive environment and speed of throughput requirements – as we have already experienced industry changes like the growth of the e-commerce sector that can already deliver your preferred wines to your favourite fresh fruits.

From a holistic facility view one would need to consider control systems, warehouse management systems, component communications, types of equipment required such as bespoke storage systems, “intelligent” mobiles, “advanced new age” shuttles, pallet and box conveyors, reach trucks and the range of material handling equipment, etc. All aspects working in unison gain larger importance the greater the proportion of automation that is implemented at a facility that owners and managers need to be aware of.

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And of course, fixing an incorrectly designed or supplied system is also far more costly that the “savings up front” which seldom get acknowledged. In 22 years I have yet to meet a decision-maker to acknowledge that a system, solution and/or supplier was chosen incorrectly, as that will greatly affect their reputation and stature. The commonly used statement of: “It was the right decision at the time”, has to be changed and for this, a cultural change has to take place within South Africa where decision-makers are incentivised for not spending less, but improving the bottom-line to their organisations.

The expert intra-logistical and storage system engineering company must be the role-player that gains buy-in from the shareholders, executive teams, and all at the customer, client and end-user.

All of these circumstances, and many more actually, contribute to people becoming ‘afraid of automated systems’ because they have heard about all the problems or themselves been bitten before – perhaps many years prior when the particular automation or technology was in its infancy. In fact, in many cases they also just stay with who they have known and the resistance to change is evident in South Africa, contrary to the evolution in the sector globally. And, as we know full well, it takes a lot to change that mindset – especially when decision makers ‘never want to touch technology again’ because of perhaps an incident where an automated vehicle tipped over and caused damage, or their mobile racking solution didn’t take into account certain placing and picking parameters – all thoughts of times when they nearly had to close their businesses down or were in a worse position after tech upgrades. And yes, in truth, as new technology is developed the reality is that 10 or 15 years ago compared to what is available today, the technology of those years was indeed horrible and riddled with troubles. Certain equipment for example had no acceleration and deceleration controls, they were prone to jerking motions that led to toppling, and so forth.

Today however there is a new era of technology and solutions that are reliable, efficient, and seamless to implement and manage remotely at low cost and high efficiency, provide unthinkable visibility into the system’s performance which was not possible 5-10 years ago, and, given the partnership of the correct experienced professionals – well proven installations around the world that can be looked at for relevant case studies across multiple industry sectors and handled goods similar to ones specific operational requirements. This has to be high on the agenda of any facility owner and operator.

The application of better operations is a key element for long term sustainability and country trends – one of which locally is labour and this item’s relationship to operational costs on financials. While there may be resistance to higher capital costs, the continued risk associated with the uncertainty around labour – be this availability, productivity, attendance or even industrial action, all have a dramatic effect on a company’s capacity and output over lifetime (where even partial-automation has shown to be two and a half times more economical to run). For large companies, this equates to huge impacts and improvements onto bottom line, which at the end, are what drive business success and sustainability.

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Failure to adapt is actually impeding effectiveness, and in the current economic environment as well as what we can expect to see in the future, is a strategy that produces another stressor whereby the consumers have to be burdened by paying significantly higher costs for products than they need to. Profitability can also only be achieved by becoming more efficient as well as providing greater customer service. Satisfied customer, which is complex to measure the true financial impact in SMEs, has been proven to create brand loyalty and that is only achieved by the facility owners providing greater efficiencies.

Efficiencies may be deemed to cost money, but in fact strengthen the bottom-line. When it comes to the supply and demand equation in food supply as an example, generally speaking, one can only buy for certain price deemed right, and sell at a rate based on demand as the market will only pay up to a certain price point. Every chain would have more or less the same conditions to work with. How companies then compete is based on that middle portion where logistics, storage and warehousing, distribution costs, marketing, and of course profit margins, amongst other inputs, need to be covered.

Better operational efficiency is a direct benefit to a businesses’ bottom line – you don’t need to be a scientist or economist to work that out. With the adoption of better technology, savings can be realised immediately, but more significantly the possibility arises to decrease facility footprints with increased speeds or increase speeds and capacity – all scenarios that add directly to revenue or savings respectively. It also enables far less human involvement. This is another particular challenge where the thought process usually reverts to job security, but again, as we have seen in countless examples from other countries – automation does not mean job losses – it means a shift in skills and increased opportunities for higher wages which then in turn means a country’s population gains better living conditions. Japan and India are very good examples of how adaptation to technology has increased the population’s living standards three-fold already above our country’s over the same reporting period.

Technology in logistics, product handling and storage related to facility operations has advanced so much that it can deliver much more when handled correctly and it just makes sense on many levels. Role players need to adapt their mindsets and adopt the right partners to implement the right systems to remain competitive, make money and also be able to transfer savings to consumers.

In a future column I will explore this subject further and also look at how industry dynamics have already changed from the past era.

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