Rising fuel costs are not just rising fuel costs…

Transportation plays a crucial role in the supply chain. The concept of supply chain management refers to the entire process of sourcing and transforming raw materials into a usable end product for retail sale. In general, transport contributes between 37% and 39% of the total production costs of a product. In reality, each time a part of the materials is transported from the point of origin to the point where it is needed in the production process, the proverbial counter ticks and the costs pile up.

Let’s take corn flour as an illustration. Starting with seeds, planting, maintaining vegetation, harvesting, loading, unloading in silos, transporting to different places where the corn is processed to the consistency required for different types of use, packaging, transport to the wholesaler and transport to the retailer, each step of the process costs money. So every time the wheels turn in this convoluted process, which has geographically dispersed sub-processes, an increase in the price of fuel has a direct monetary impact.

Direct input costs for a 10 kg bag of maize flour, which costs around R100, range between R37 and R39. At some point, the increase in the price of fuel will have to be reflected in the selling price, so users of this staple food will have to pay more than R20 for the same amount of maize flour as there is. a year. Apart from this, the direct burden of paying for public transport has also increased, preventing users from purchasing the same quantities of corn flour as a year ago. Taking all of this into consideration, it paints a very bleak picture for the average person on the street.

The South African government has very strategically chosen not to release details of fuel price increases for extended periods. Although they have been informed of the monthly fuel price increases and recognize that they are getting less for their money; many South Africans are rushing to fill their tanks. The typical South African is unaware of the specific changes.

There are several stakeholder groups in the transport sector, including those who provide transport (either as a primary or subsidiary function of a business) and those who consume it (goods and passengers). No one is immune to the absolute direct effects of a rise in fuel prices.

Service providers in the transportation sector are feeling the pinch, as the cost of fuel accounts for more than 55% of their total operating costs. Despite their best efforts to manage their operations according to sound economic principles, they are unable to overcome this obstacle. They have no choice but to pass on the cost of this increased fuel cost to the customer. This adds to the emotional pressure to keep prices stable so as not to exclude the poorest of the poor.

The active population in South Africa is mobilized daily by public transport. These commuters usually choose this type of transport because they have no other choice to get to and from work. They are called captive users who only have access to mobility so they can put food on the table at the end of the month and have no other choice. Any price change will not significantly affect the demand for public transport as it is essential.

As more of a user’s disposable income is used for transportation, this has the direct effect of leaving that user with less and less money at the end of the month. Despite all efforts, South Africa’s transport and related industries are under threat. Transport is no longer a way to make money – businesses are going into survival mode and just getting by.

It will become necessary to think about and use newer, wiser and better transport solutions. Rich options like work from home and 4IR solutions are irrelevant to the ordinary captive user sitting in a crowded taxi on the way to a survival job, day in and day out.

At the NWU Vanderbijlpark campus, a new study subject called “Transport Economics and Logistics Management” has recently been created. Relevant issues are recognized and integrated into our programs with input from industry and key stakeholders, ensuring graduates are competent for the demands of the ever-changing transport sector. No one can control world events, but we try to educate our graduates on how to respond to them. Covid and the conflict between Ukraine and Russia have negative effects on the whole world. Many companies were caught off guard and were unable to react in a way that ensured their sustainability. A carefully researched curriculum, which incorporates the latest industry trends and advancements, best positions our graduates to enter the industry and make a big difference. Our ultimate goal has been to always be able to react to unforeseen circumstances while minimizing the impact on the industry. DM

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