Thought Leadership Article

Warehousing in South Africa today – and the near future

Worldwide, in the warehousing business, when future operations are discussed, the conversation is likely to be about more automation, greater variety, better systems, more integration, more efficiency and greater flexibility. The dreams, discussions and plans focus on issues such as robotics, the ‘Internet of Things’, tomorrow’s deliveries by drones, 3D printing, multi-channel fulfilment, ecommerce growth, rapid fulfilment and the need to individualise operations.

In South Africa the focus is somewhat different. As the exchange rate rapidly approaches R20 to the US dollar, coupled to declining commodity prices, labour instability, looming junk status and some concerning government decisions, local discussions are likely to focus more on “how do we survive in this hostile environment”.

The next few years in South Africa are going to be really challenging and it will be interesting to see how warehouse operators cope with these challenges. What happens when the cost of a reach truck moves over R1-million or grows to R2-million plus for a turret truck! The common forklift is going to cost close on  R600 000. Couple that to increasing interest rates – and life becomes really interesting.

As Einstein said “We cannot solve our problems with the same thinking we used when we created them.” South African companies are going to have to look at a whole different approach to business life. Capital expenditure is going to be really difficult to justify, and companies are going to have to sweat assets a lot harder. Businesses are going to be told “Keep your equipment another year or two” and “We will relook your capital request sometime in the future”.
Rather than solving growth problems by using some attractive new (many dollar) technology, South African companies may be forced to look at simply improving productivity or working longer hours with the existing equipment. Certainly managers are also going to see a lot more focus on removing existing constraints. The instruction is thus “do more with less”.


Unfortunately one of the effects will be that South Africa will start to lag behind the rest of the world in the application of some of the new technologies. That is also dangerous, as one day South Africans will wake up in a global village and find that we are uncompetitive – as we have simply not kept up with world class operations.

Other technologies such as voice picking, better Warehouse Management Systems, and processes with an IT focus are costing less and less every year and this will, to some extent, soften the import cost blow. For other equipment, companies will eventually have to face up to paying a lot more for new infrastructure.

Let’s also look on the bright side. There are many companies that make a living from exporting products that have not been hit by a global commodity slowdown – such as companies who manufacture industrial and consumer goods. Suddenly they will be faced with huge growth potential, and they will happily pay R20 to a US dollar for some shiny new technology in their warehouses.

Also there are many profitable companies in South Africa that have big piles of cash, who will now think twice before investing off shore. They will thus look at better value for money locally, and that means investment in new infrastructures in South Africa. This could result in increased investment from many organisations.

The future might seem very challenging, but, yes, there are many positives amongst the negatives. South African companies must seek out those positives and build on them.

Written by: Martin Bailey, managing director, Industrial Logistic Systems
Date: 17 February 2016
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