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The high cost of transport is one of the biggest challenges for almost every industry in Africa. It is estimated that the cost of transporting goods is 60-70% higher than the US and Europe. In particular, landlocked countries such as Burundi, Rwanda and Uganda are very negatively impacted, as these countries depend on transit solutions in neighbouring Kenya and Tanzania. For example, a report by Trademark East Africa revealed that it takes up to 71 days to import goods to Burundi from any of the other East African Community member states.
Below are a number of issues to consider when planning your outbound transportation:
Road network
The transport systems of Africa vary significantly across region and countries. For example, Chad has only 60 km of paved roads per million people, whereas countries like Algeria, Tunisia, Namibia and Botswana boast over 2000 km of paved roads for a similar population. Organizations need to have a good understanding of the road network, including trade corridors.
Network design
When considering your network design in Africa, you also need to consider the absence of all-season roads in certain areas. In many countries, a number of cities and villages are isolated during the rainy season. During a recent network design project in Tanzania, these additional issues provided some challenges for our network design software.
Rail
The railway, a relatively inexpensive means of transportation, has also been neglected with very few rail extensions in most countries. However, the cost of rail freight is double the cost in Asia and one-and-a-half times as high as in Latin America (UNECA). However, rail remains an option in some countries, and there is increased investment in the rail network.
Road safety
Road traffic injuries are a major concern in Africa. Many organizations restrict any night travel, as roads are considered too dangerous.
Fuel
Prices vary significant across the continent. In some countries large volumes of fuel have been smuggled across the border. For example, in Benin is estimated that 80% of the fuel is smuggled across the border. In Nigeria the fuel price is about N140 ($0.89) a litre, where in Benin is retails for N250 ($1.59) at the pump, and N200 on the black market.
Third party logistics (3PL)
When considering outsourcing your road transportation, it is important to determine where 3PL companies operate in the country. 3PLs often cover the major roads well, and will likely offer reasonable rates for these routes. However, these costs escalate the rougher the road, as transporters need to factor in truck maintenance for these rough roads.
Agents
In some cases agents are used to find and negotiate on the behalf of the company. Often agents are in a better position to negotiate better rates than big multinational companies.
Collaboration
Assess potential organizations that you can collaborate with to consolidate shipments. In African markets, volume tends to be low and cash flow is limited. Hence, more frequent deliveries are required, resulting in Less than Truckload (LTL). For example, it is a common practice for distributors and wholesalers in African markets to consolidate shipments ( e.g. Lagos Fair Trade), ensure Full Truck Load (FTL) and in the process reduce distribution cost.
Backhauling
Organizations also needs to review backhauling opportunities. There are real opportunities in smaller towns to negotiate favourable rates where trucks are backhauling. Backhaul is a return journey of a vehicle from its destination to its point of origin with a non-paying load. However, the concept is still foreign to many transporters and most will try to charge you the full amount.
Transportation maintenance
You also need to understand the make of vehicles that have readily available spare parts and maintenance in the country. During a project in South Sudan, we identified a make of vehicles that could not be serviced in the country. The vehicles had to be driven back to Kenya for service as there were no spare parts available in the country. Finding qualified technicians also turned out to be a major challenge. In a country that struggled for years with civil war, there are just not enough technicians in the country.
This article is re-published with permission from Frontier's content partner, The Supply Chain Lab.
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