Mr. Ezekiel Ojabulu is the chief executive officer(CEO) of E-Transit Africa. He was one of the speakers at 2023 Awards and Dinner night of the African Centre Supply Chain(ACSC). He spoke on the topic:“Strategies to Cushion the Effect of the Rising Cost of Logistics”.
As logisticians, one of our major callings is to solve problem. Just as I first heard when I came into the industry, logistics has no formula and because of this, the leadership team, the clients, all they wants to hear is result, how you did it is no one’s business. We all know what’s happening in Nigeria today. The challenges are enormous and each time we have series of problems like this in Nigeria, it always stock up on the table of the logistics profession. When forex begins to go high, it is always important that the logistics manager need to be very proactive because everybody in the industry expects the company to stand the test of time.
The main logistics aim is to deliver the right product, to the right person at the right time, minimising losses and maximising value. This is the basic of what every logistics manager is called to do.
Three major objectives of logistics functions
In logistics, it is either you are in the service side or department side. If you are in the service side it means you are rendering the service directly as maybe a transport service provider or as a warehouse service provider, but once you are in the department side, you are operating in the logistics department as a function to helping the company deliver at expectation, helping the company reduce cost from the logistics aspect, so wherever you fall into, these three are involved. So the three major objectives of logistics functions are, first, to minimize cost, logistics is always a major factor in production and that’s why any manufacturing company must have a logistics person or supply chain person in the leadership team because of the cost implication in the entire supply chain.
Maximizing efficiency, of course without due processes in place, you can’t minimize cost. You must be able to put the right things in place, using the right tool, given what we have today to help you minimize cost and have competitive advantage on the market.
Ensuring timely delivery, time is another major factor in the logistics market. You must ensure you meet up time, at all time, these are the basic KPIs they will always set for you as a logistics manager.
Basic logistics cost elements
Fuel, it is always a problem to a logistics manager and each time there’s a fuel price hike in Nigeria, it changes his whole plans.
Also transportation and vehicle maintenance, of course we are also talking about freights.
Infrastructure and road toll charges.
Inventory holding cost and labour cost.
The major causes of rise in cost of logistics in Nigeria today.
Poor infrastructure; we all know the state of our roads today. You must understand that in Nigeria today there are no roads and then you have to understand your routes
Fuel price volatility, it continues to rise.
Human factors, human inefficiency and corrupt persons within the logistics sector is also a major factor. It’s pertinent to state here that, most of our colleagues who are sitting as head of logistics, head of procurement, head of warehousing, are very corrupt and the corruption is growing day by day. If you have the right persons in the right place, they can help you reduce the cost of logistics.
Exchange rate fluctuations, this has been prevalent for some time now.
Security challenges.
High import duties and taxes.
Limited use of technology, a lot of companies are yet to 100 per cent automate their supply chain processes.
Lack of standardization.
Bureaucratic processes, we have to reduce some of our bureaucratic processes.
Shortage of skilled manpower, most of us are very fortunate to be here as we are not well trained in logistics.
Inadequate truck and warehouse access, I am privileged to be working in the trucking industry, we are not meeting about 65% of our demand fulfilment. That’s to say there are more goods to move in Nigeria today than trucks available.
The practical steps to navigate the rising cost of logistics in Nigeria
Organize a human resource management orientation. If you must navigate the rising cost of logistics in Nigeria, it is a people oriented problem, we need to have the right people. I’m sorry to say, a lot of us that are logistics managers, supply chain managers, procurement manager, we need to challenge ourselves. A lot of us are lacking in professionalism and integrity. 50 per cent of heads of logistic, procurement and supply chain are foreigners, because of integrity issues. It not because they are professionals.
Data analytics, if there’s no activity, there’s no data and if there are no data, there is no later. So logistics company must know how to maximise the use of technology. The technology we need in logistics environment is very dynamic. A very good manager from the first day he steps into office, he starts accumulating data.
Out sourcing, this could help you to reduce your logistics cost drastically and give u a measure of control.
Technology, attention should be given to technology as it is the hub of present day business.
KPI and performance index method, this is very important and it goes a long way to reducing the cost of logistics. You must set KPIs for your workers. This help track and measure the efficiency of logistics operation. Implementing a performance reward system based on the KPI help employees to meet and exceed performance target. No good manager who understands that he has a performance level to meet up with, that will want to defraud the system. They will always want to keep their job and also have a performance reward.
Warehousing, the likes of Honeywell, Lafarge, Flour Mill use some of these methods to reduce logistics cost. The season for cargo movement is different from the season for movement of passengers. In the season of heavy rainfall, good managers use warehouse to stuck their goods because during that period freight rate is relatively cheaper, so that they are able to surmount the peak period when it comes.
Cross-Ducking, it ensures faster transit time by avoiding unnecessary storage. It can lead to quicker product turnaround time, reducing transportation cost and labour cost because the travel time for a container from Lagos to Kano and back to Lagos is about 14 days minimum during the rainy days and about 10 days during the dry.
Approach to strategies adoption and execution
Collate data
Analyse data
Define cost in fragment
Confirm your current cost
Identify levers for reducing cost
Estimate average cost per reduction indices expected
Come up with clear cut communication
Present to management for approval
Define your execution plan
Carry out pilot in fragment
Full scale adoption staff.
