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By Jennigay Coetzer – first published in Business Day newspaper, 28 January 2011

The reduction of manufacturing and export volumes has had a knock on effect on the courier services industry, resulting in lower volumes of items to be delivered for the same number of customers. “So despite reduced volumes we have still had to keep the same infrastructure in place,” says Dorian Barella, MD of First Freight Couriers.

This has meant having to look at ways to trim costs, for example by not hiring new people when staff leave, unless the positions are crucial, and consolidating departments and spreading the workload, without impacting customer service. “It has been quite a juggling act,” says Barella.

At the same time customers are demanding even quicker delivery at a lower rate. “You have to be on top of the game to survive, and some have not done so,” he says. However, the upside of this is that the stronger industry players have cut out wasted costs, and are only spending money on the necessities, says Barella.

Eddie Vosloo, CEO of Dawn Wing Couriers says one of the challenges for the South African courier services industry for the coming year is to focus more on the profit of each item they deliver and optimise their routes to save costs. “Those just chasing volumes and not focusing on the bottom line are in danger of becoming busy fools.”

Another issue is that few courier companies have a footprint in rural areas and need to get closer to their customers instead of outsourcing to independent operators that handle deliveries for multiple courier companies.With this approach there is no continuity and there can be no national service levels, says Vosloo.

“It would be better to franchise than to outsource and just be one of a crowd.”  Stephen Gleisner, MD of The Courier Guy says increasingly stringent security at airports has become a major challenge for courier companies because it complicates the deliver process, and every time there is a scare the situation worsens.

For example, as a result of the well publicised case of the bomb hidden in a printer cartridge, any parcels containing these now have to be shipped by sea. “We have to educate staff and clients as to what can or cannot be sent by air, which has added to the cost,” says Gleisner.

He says parcels that have unknown content and no details of where they came from cannot be shipped by air, and if a courier company is responsible for shipping something hazardous it is held liable. “We have agents at the airports that X-ray parcels and if any are suspect or the sender’s address is missing, they are rejected and sent back,” he says.

Tim Steel, MD for South Africa at TNT Express says the cost of transporting any goods in SA and other parts of Africa is higher than in overseas markets due to the poor road networks, He says the soon-to-be-introduced road toll charges will add to this burden and will need to be factored in, although the actual cost implications are still unclear.

In addition, road borders between SA and other African countries are disfunctional compared to other parts of the world. Steel says the local border bottleneck issue needs to be sorted out, because it is a competitive disadvantage. “There are too many delays and too much corruption.”

Negotiations with the transport unions are also due to come to a head over the next few weeks through the National Bargaining Council for the Road Freight Industry (NBCRFI), says Steel.

Graeme Lazarus, joint MD of RAM Couriers says labour costs account for 50% of the total cost of doing business, and government departments have set a president in awarding above inflation increases. “The courier industry is expecting a lash back from this,” says Lazarus.

He says customers will not accept an increase that is above the Consumer Price Index (CPI), which is currently 3.5%, compared to 11% in the past. “But our labour costs rest with the national bargaining council, and if the wage increase demand is more than 3.5% the difference comes off the bottom line.”

Andy van der Velde, MD of Berco Express says challenges for the coming year, include managing credit risk in a continuing tight economy, the introduction of motorway toll charges, details of which still need to be clarified, and exchange rate fluctuations.

“When the rand is strong we have to reduce rates on certain international routes to be competitive and we have to raise them again when it weakens.”

Jennigay Coetzer is a freelance business and technology journalist with 25 years experience, and she writes regularly for Business Day. She also runs media training and writing skills workshops, and is the author of A Perfect Press Release – or Not?, a guide to writing and distributing effective press releases, an electronic version of which can be downloaded free from her website: www.jennigay.co.za.

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