Page 9 - Logistics News - Issue 02 - 2024

L O GI S T I CS C O S T S

A clear correlation between the diesel price, consumer price maintenance, have increased by 56 percent and 51 percent over
index (CPI) and Steel and Engineering Industries Federation of the same three-year period.
Southern Africa (SEIFSA) indices is evident in the graphic on
page 6. While most companies apply the CPI as the non-fuel Another significant challenge that transport companies face

inflationary metric when negotiating transportation contracts, is the cost of diesel. Many transport companies that operate

the SEIFSA L2 index better represents the actual transport cost on COD at best have secured 14- or 30-day terms with fuel
basket. The SEIFSA L2 index comprises labour, tyres and tubes, suppliers, whilst the trend from manufacturers is to extend
spares/stores, amortisation and indirect costs – the real-world payment terms from 30 to 60 days. Some global corporations
costs that transporters deal with daily. The more applicable only offer 120-day payment terms, which makes managing cash

SEIFSA L2 index has averaged 2.4 percent higher than CPI over flow a nightmare for transport owners.
the previous three years, impacting the profitability of transport

companies that have to absorb this differential in real transport The specific cost items that comprise owning and operating
cost increases. a truck tractor and trailer combination are illustrated below
(note that the increase in cost of capital in 2022 is largely due to
For South African transport companies, the rising cost of increases in the asset price and higher interest rates).
labour, procuring new and replacement fleets, fuel, tyres and

vehicle maintenance eat into already tight margins. The impact Rates benchmarking: a beacon in the murky
of crime on their operations is ever-present, with hijackings, waters
looting and cargo theft adding a layer of uncertainty and cost, Rates benchmarking is a valuable tool for both companies and

resulting in significant increases in insurance premiums. their transport service providers to gain better insights into the
murky waters of transport costs. By comparing transport rates
According to the South African Road Freight Association to market averages, both parties can identify potential issues
Vehicle Cost Index (VCI), a prime mover (truck tractor) and and negotiate more effectively.
semi-trailer cost increased from R2.60m in 2021 to R3.55m in
2023. This means that in only three years, the cost of purchasing Transport rates benchmarking involves analysing actual
a new/replacement vehicle combination has increased by 36 transport rates against market averages for similar shipments
percent, whilst the cost of capital has increased by a staggering – a like for like comparison is essential here. This process
137 percent. Two other large expense items, tyres and requires collecting data on relevant shipments, including origin,

RFA Vehicle Cost Index Concept (18 December, 2023).

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