Business Day Courier Services Insight (March 17 2022)

6

BusinessDay www.businessday.co.za Thursday 17 March 2022

INSIGHTS

COURIER SERVICES Sponsored content

Industry responds to Covid-19fuelled boom in e-commerce panies •mixCom it up as

pandemic disrupts ‘business as usual’, writes Lynette Dicey

S

A’s economy might be struggling but one sector that is seeing good growth is the courier services — also known as the express parcel or express logistics — sector.

Specialising in moving shipments within a 48-hour timeframe, the industry consists of hundreds of companies, employing about 18,000 employees with more than 10,000 vehicles in operation.

Garry Marshall, CEO of the SA Express Parcels Association (Saepa), the industry association representing a number of courier companies including FedEx, DHL, UPS, CourierIT, PostNet, RAM, DSV and

Garry Marshall … more options.

Globeflight, among others, says the express logistics industry plays a critical role in supply chains across sea, land and air, ensuring time-sensitive commodities reach their intended destinations quickly and efficiently.

Prior to the Covid-19 pandemic, SA’s express logistics industry was behind the global curve insofar as e-commerce transactions were concerned, says Marshall. Courier delivery vehicles often battled to make door-to-door home deliveries on the first attempt, often

because nobody was at home to take delivery of the item and, in the case of estates, because vehicles were refused access.

“As drivers often only managed to make the delivery on the second or even third attempt, the cost of providing the service was expensive,” explains Marshall.

The pandemic acted as the big disruptor, creating an environment that was more conducive to deliveries.

“Suddenly everybody was at home. Homeowners in estates pushed for their estates to give courier drivers access so that deliveries could be made.

Technology started to become more user friendly, allowing senders and recipients to track the progress of their delivery.”

The pandemic resulted in rapid growth in some areas of the industry, including business-to-consumer home deliveries which saw 60% growth. It also resulted in the growth of e-commerce.

“Fast forward two years and e-commerce and express logistics have become a standardised product and the

/123RF — RIDO industry is maturing,” says Marshall, adding that growing volumes mean that prices have stabilised.

That’s not to say the industry is without its challenges, among which is inflation and poorly maintained road infrastructure which means that delivery vehicles frequently suffer damage. Rapidly rising fuel costs are also a significant variable which the industry has to take into consideration.

The pandemic also saw a rise in e-commerce. Many courier companies and even road freight businesses started offering deliveries of grocery

retailers. “RTT was a classic road freight company before it started working with Checkers to fulfil its popular Checkers Sixty60 delivery platform, or DPD Laser which shifted from conventional deliveries to fulfilling Pick n Pay’s Asap platform,” says Marshall.

Innovation has also been the name of the game, frequently using technology to drive down costs and increase efficiencies.

DSV introduced an anytime courier option called DSV Lockers which means that neither the driver, parcel, recipient nor sender need to be at the same place at the same time. Strategically positioned at fuel forecourts and other publicly accessible locations, they are a direct to consumer service which cuts costs and increases efficiencies.

“These locker boxes are a fantastic product, providing consumers with an alternative option,” says Marshall.

The Courier Guy has introduced a similar service called PUDO — which stands for “pick-up, drop-off” — an appbased platform that gives

consumers access to a smart locker delivery system. Once the sender has completed all the delivery details on the app, the package is picked up by a courier and delivered to a PUDO locker. The recipient is notified their package has arrived and accesses the locker via a pin code which has been sent to them via SMS. Another exciting trend which will in all likelihood also be shaping the industry is a growing number of start-ups in areas such as Soweto focusing on the delivery of fresh vegetables and other grocery items to consumers.

“What is not in doubt is the industry is innovating at a remarkably rapid pace,” says Marshall.

INNOVATION HAS ALSO BEEN THE NAME OF THE GAME, USING TECHNOLOGY TO DRIVE DOWN COSTS AND INCREASE EFFICIENCIES

Providing logistics for a global reach The local logistics industry has evolved throughout the pandemic as consumers become increasingly comfortable with purchasing a variety of goods online.

Natasha Parmanand, MD of Sub Sahara Africa Operations for FedEx Express, points out that e-commerce has evolved as one of the largest drivers of retail today, providing consumers with a convenient way to shop for goods.

“Consumers today aren’t just online, they’re on their phones buying what they want wherever they are. For small and medium-sized businesses looking to expand to international audiences and reach more customers and new markets, investing in e-commerce while considering how this will look and if it will be easily accessed via mobile devices is vital.”

She says matching this expanded audience with the services and solutions provided by a logistics provider such as FedEx means that businesses benefit from global reach, and a seamless shipping experience.

“We continuously review our systems and solutions to deliver an outstanding experience, including air and ground connectivity and reach to crossborder and global markets,

Natasha Parmanand … review. and access to tools and solutions, such as those offered for e-commerce and supply chain solutions.”

FedEx client Gary Swinson, head of Global Trade at DG Capital, says the delay on the fulfilment of orders for clients from their international suppliers made the company re-assess how it drafts its export project plans and plans its supply chain efficiently.

“Gone are the days of booking the freight portion of our transactions last minute. We now plan months in advance.

The process of checking and drawing of samples way ahead is pivotal to ensure goods meet shipping specifications. Thanks to FedEx and their global team, this part of the supply chain now runs seamlessly.”

Expansion plan puts firm on path to being a ‘game-changer’ In the first phase of its global expansion strategy, SkyNet South Africa recently acquired SkyNet’s operations in the UK, Germany, Belgium, Mozambique. Its expansion strategy is designed to provide access to international lanes, reveals Tommy Erasmus, CEO of Skynet Worldwide Express.

“We plan to remain proudly South African and will continue to encourage the entrepreneurial culture inherent in our local operations.”

SkyNet’s market share is significant within the European countries in which the company operates where it is a notable player within the e-commerce space. The company also provides logistic solutions to a number of small and large local e-tailers that are looking at ways to grow their business both locally and globally.

“The efficiencies realised from the acquisition will provide cost-effective opportunities our customers can leverage to support their international business growth,” says Erasmus.

“The combined offering resulting from the acquisition makes SkyNet a global player of scale while retaining the high levels of innovation and agility which are core to our operations. Our ambition is to become the game-changers in the express courier parcel market,” he adds.

Being a game-changer, he explains, requires ongoing innovation and re-invention to stay ahead of the pack. One of these areas is the e-commerce industry. “With an increased appetite for online shopping and a prediction that SA’s e-commerce transactions will soar to R225bn by 2025, e-tailers are looking to expand their brands into the global markets. As an independentlyowned network and with a

WE CREATE SOLUTIONS TO SOLVE PAIN POINTS, ALLOWING OUR CUSTOMERS TO FOCUS ON GROWING THEIR BRAND AND THEIR BUSINESS footprint in more than 170 countries SkyNet is well positioned to support the growth opportunities presented to e-tailers, not only with domestic services but also through international service options,” says Erasmus.

Diederick Stopforth, commercial executive of SkyNet Worldwide Express, adds that solving customers’ pain points is the business’s biggest priority.

“In the e-commerce industry

Your delivery choice.

Your payment choice.

DSV Direct puts the power to choose in your hands.

We’ll collect your package and deliver it to a DSV Locker or a delivery address via DSV Courier. Either way, you pay by credit card, online, whenever it suits you!

Or you can go to a DSV Locker yourself and pay as you send your parcel.

Whichever option you choose, your parcel will get to its destination safely.

DSV Direct. Your anytime, anywhere convenient courier. dsv.com/en-za

these pain points often include IT integration solutions, warehousing, providing the appropriate payment gateways and, most importantly, the last mile delivery. We are able to create solutions to solve these and other pain points, allowing our customers to focus on what’s important to them — growing their brand and their business,” he says.

In addition to providing the best-in-class solutions to the e-commerce industry, the company also continues to adapt and scale its solutions to address the requirements of other industries such as ITC, high-end consumer goods and cosmetics, lifesaving pharmaceuticals and critical medical devices.

“Skynet’s Secure Solutions division has gained enormous traction in the market and we continue to advance this offering as part of our omnichannel approach with home, business, counter and contactless deliveries through various partners, including ADT Fidelity,” says Stopforth.

Erasmus adds that one of the biggest benefits for customers is that they don’t need to wait for IT solutions governed by red tape, but instead have on-tap solutions available.

“We’re an agile business with a game-changing mindset, wholly invested in our customers,” he says.

7

BusinessDay www.businessday.co.za Thursday 17 March 2022

INTERNATIONAL

Broken rice is nice for boars as the price of maize soars

• Higher wheat and maize prices are lifting demand for low-grade rice in animal rations across Asia Naveen Thukral Singapore A surge in wheat and maize prices is boosting demand for low-grade rice in animal rations across Asia, pushing up prices of the world’s most important staple at a time when global food inflation is already hovering near record highs.

Global crop importers are scrambling for supplies after Russia’s invasion of Ukraine severed grain shipments from the two countries, which together account for about 25% of world wheat and 16% of world maize exports.

Chicago wheat futures hit a record high last week while maize climbed to its highest in a decade after war-torn Ukraine shut its ports and Western sanctions hit Russian exports.

The price spikes in wheat and maize in turn pushed buyers to seek alternatives, including in China, by far the world’s largest feed market.

Importers there are in talks to buy extra volumes of broken rice — inferior rice where the grains have been fractured during the milling process — to fatten hogs and other animals, traders and analysts said.

Rice typically trades at a steep premium to wheat, but wheat’s blistering 50% price surge from a month ago has sharply cut the difference between the two grains, and even made wheat more expensive than some lower grades of rice.

Grain pain: With the price of wheat soaring due to the war in Ukraine, buyers are turning to low-quality rice to feed their animals, and some analysts say broken rice could be bought for human consumption if prices continue to rise. /Bloomberg Benchmark food-grade rice from Thai exporters made its biggest weekly gain since October 2020 last week on the back of firmer food and feed demand, climbing 5% to about $421.50 a tonne.

That’s the highest since last June, and sources say prices may keep rising if the disruption to Black Sea flows persists.

Export prices from Vietnam and India have also climbed.

“There could be greater interest in broken rice for animal feed if the strength currently domi-

nating wheat and corn markets persists,” said Rome-based FAO rice economist Shirley Mustafa.

“It is not just animal feed, there could also be a substitution in other use sectors, such as more people turning to rice for their meals.”

MAIZE CUP

China had booked up to 2-million tonnes of Ukrainian corn imports for this year, but most of those shipments are now in jeopardy given the disruption to Ukraine’s logistics chains.

To replace those lost volumes, China is expected to import about 3-million tonnes of broken rice, up from about 2-million tonnes annually in the past two years, said a Beijingbased rice trader.

One importer in Guangdong is looking to buy broken rice from Thailand, while others have recently bought Indian broken rice for feed, according to another source.

“Demand for Indian broken rice has gone up because of higher corn prices. Feed makers

are trying to replace corn with rice,” BV Krishna Rao, president of India’s Rice Exporters Association, told Reuters.

Prices of 100% Indian broken rice have moved up to $320 a tonne in March from $290 in February, he added.

Further underpinning rice prices, feed makers in Thailand are also looking at using more broken rice to replace maize, pushing up domestic prices across the country, said Bangkok-based traders.

“There is tremendous

increase in demand for lowerquality rice from Thailand’s animal feed industry,” said one trader in Bangkok. “In fact, much of Thailand’s broken rice is likely to be consumed in the domestic market.”

FOOD FEARS

Global rice prices could rise further in the second quarter if wheat consumers in India — the second largest rice user after China — switch to rice due to record high domestic wheat prices, which would accelerate any decline in rice inventories, said Chookiat Ophaswongse, honorary president of Thai Rice Exporters Association.

While global rice inventories are set to hit a record 190-million tonnes in 2022, according to the US department of agriculture, global rice output is expected to exceed world consumption by less than 5-million tonnes in 2022, so a sudden climb in worldwide demand could quickly start to deplete those inventories and reinforce bullish sentiment in the market.

In turn, an increase in rice prices will intensify food security worries for some of the poorest nations in Africa and Asia, where millions rely on cheap availability of the staple.

“As of now, broken rice is mainly for the feed sector, but as the war gets prolonged and buyers are not able to get hold of adequate wheat, then it comes to food security,” said one Singapore-based grains trader. /Reuters

AGRICULTURE

India steps in to fill the gap in global wheat supplies Mayank Bhardwaj New Delhi India will introduce measures to help the country become a major exporter of high-quality wheat as importers scramble for supplies after Russia’s invasion of Ukraine, two government sources said.

Steps to be implemented over about two weeks include ensuring government-approved laboratories test the quality of wheat for export, making extra rail wagons available for transport and working with port authorities to give priority to wheat exports, the sources said.

India, the world’s biggest wheat producer after China, has been pursuing deals to export wheat and take advantage of surplus stocks at home and a sharp rise in global prices.

It sees the disruption caused by the conflict involving Russia, the world’s largest wheat exporter and Ukraine, the fifthbiggest, as an opportunity to sell its wheat on the world market.

Despite surplus wheat stocks, logistical bottlenecks and quality concerns have previously stymied India’s efforts to sell large volumes on the world market. Exports picked up last year to reach 6.12-million tonnes

INDIA HAS BEEN PURSUING DEALS TO EXPORT WHEAT AND TAKE ADVANTAGE OF SURPLUS STOCKS AND A SHARP RISE IN GLOBAL PRICES

of wheat from 1.12-million tonnes a year earlier.

The new measures could result in the export of 10-million tonnes of wheat after the new season harvest begins this month, the sources said. The changes follow consultations with ministries, state governments, port and railway authorities, export promotion bodies and big export houses, they said.

Prime Minister Narendra Modi’s administration is keen to help farmers and traders export higher-quality grain to show global buyers that India can provide a steady supply of highprotein wheat, the sources said, asking not to be identified as they are not authorised to talk to the media. A government spokesperson did not respond to a request for comment.

Modi’s administration has recruited 213 governmentapproved laboratories to test the quality of wheat for export and has asked the state-run Bureau of Indian Standards to monitor quality, the sources said.

Extra warehousing capacity was being created near ports to ensure faster turnaround times for railway wagons that transport grain from major wheatproducing states, they added.

India exports wheat primarily through two ports on the west coast, but would soon be able to use other ports, especially in the east to handle wheat cargoes, the sources said.

In addition to raising farmers’ incomes, higher exports from India would reduce the amount the government spends on domestic wheat, which it buys to support local growers. /Reuters

INSIGHTS: COURIER SERVICES

Sector players quick to innovate

A DSV temperature-controlled vehicle outside the DSV Cold facility.

Automated •solutions, cold

chains, security and compliance are critical

C

ompanies in the express logistics industry are innovating at a rapid rate as they look to leverage their capabilities.

DSV, a leading global supplier of transport and logistics services and which is listed on the Nasdaq Copenhagen in Denmark, offers a suite of cold chain logistics solutions, including DSV Cold, a specialist cold supply chain service.

Brenda Pritchard, GM for Pharma, Air & Sea, says that when it comes to medicines in particular, there are critical features essential to successfully protecting the

Brenda Pritchard … framework. integrity of medicines. These include keeping the product at the right temperature, keeping them safe and complying with global and local standards.

“Keeping the product within a specified temperature range, from origin to destination, is essential to their efficacy and safety,” she explains.

“DSV Cold does this at OR Tambo International Airport through our innovative Polar Cabin which mitigates exposure to tarmac temperature

fluctuations and helps reduce visibility to prying eyes, as well as an onsite DSC Cold facility with its three different temperature-controlled chambers, before the product starts its onward journey in temperature-controlled vehicles to its final destination.”

Security risk-mitigation is a nonnegotiable when moving high value, temperature controlled sensitive cargo around the world, she adds.

Compliance, she says, is the third critical ingredient, transcending the entire end to end process.

“We comply with World Health Organisation guidelines and various standards such as GDP and ISO, as well as quality risk management software. In addition we use Pharma QMS, a DSV framework that defines the minimum rules and framework for temperaturecontrolled shipments, allowing us to constantly map, monitor and document the temperature at these facilities as well as in our vehicles.”

SA Post Office parcel showdown looms The express parcel industry has been bracing for a court showdown with the SA Post Office (Sapo) for a number of years. The dispute is over whether Sapo has the exclusive right to deliver packages weighing less than one kilogram.

In 2019, a court found that PostNet was in contravention of the Postal Services Act, promulgated in 1998. According to the act, Sapo has the exclusive right to deliver letters, postcards, printed matter and small parcels weighing up to one kilogram. PostNet secured an interdict which meant it could continue to deliver

packages weighing less than one kilogram until the case is heard in the Gauteng high court.

The outcome of the case has implications for the entire industry. The courier industry falls under the ambit of the Independent Communications Authority of SA (Icasa), the same body that regulates Sapo, which is a wholly owned government entity. Icasa’s mandate is to regulate the communications sector in the public interest and promote competition.

SA Express Parcels Association (Saepa) CEO Garry Marshall argues that the courier industry is not treading on Sapo’s turf as it is not offering a

mail service, but rather an express logistics service.

“Nobody would consider sending critically urgent business documents via the Post Office. However, they would consider using a courier company that can deliver the document by a specified time, and provide tracking and a proof of delivery,” he points out.

One of the recent claims by a former CEO of Sapo was that couriers had “stolen their lunch”. In fact, Marshall says it’s not the express logistics industry that has stolen market share from Sapo, but rather email.

He criticises the Postal

Services Act, which also refers to telegrams, for being out of date and increasingly irrelevant, and says the judgment against PostNet is clearly not in the public interest.

RELIABILITY

“The Post Office clearly does not have the capacity to provide the same express delivery service as the courier industry. The latter’s service includes track and trace, proof of delivery and a high level of reliability which the Post Office cannot compete with,” says Marshall.

The growing number of courier companies has also been a key element of the

industry’s competitive offering.

As Marshall points out, if Sapo has no competition, it has no incentive to provide a quick, efficient, reliable and affordable service, and drive continuous improvement. “Ultimately, the Post Office is a legacy business which needs to reinvent itself.

However, this should not be at the expense of its competitors.”

Far from regarding this looming court action as an inhibitor, the industry continues to make investments, confident that it will eventually triumph.

“It’s annoying and expensive,” says Marshall, adding that even if the industry loses in the high court, it will persevere.