Two forces drive businesses around the world; supply and demand. Both forces are pegged on the availability and accessibility of products and services to ensure customer satisfaction. Any disruption in either of them, supply or demand, has significant effects down the value chain. Sometimes there might be supply and no demand, but the typical scenario is where there is demand and no supply.
Many aspects play a role in ensuring a successful supply, among them logistics and transport. Logistics companies enable the handling and movement of products from one place to another either through offering transport services by land, rail, sea or air to Ports services , and warehousing services. Disrupting any of these logistics services have a ripple effect to the supply chain and eventually send shockwaves across the various global economic sectors.
Despite the critical role played by the logistics industry in the global economy, the past two years have been a nightmare for this sector and entire supply chains. The advent of the Covid-19 pandemic disoriented the world in terms of trade, handling and movement of goods, services and people. These movement restrictions by the different countries due to the pandemic told of an imminent collapse of the once vibrant global economies as supply chains were significantly disrupted. Income generation through trade was at risk!
As the pandemic continued to sweep across the world, the invention of the Covid-19 vaccines was a silver lining. Global economies started opening up and supply chains were once again restored. People, goods and services could now move from one point to another albeit with some level of caution and guidelines. Businesses that had shut down due to supply chain disruption began to revive their operations. At last, there was light at the end of the tunnel, and the whole world had hope again.
But even before businesses could enjoy the fruits of this return to normalcy after the deadly pandemic, the Russian – Ukraine conflict happened in February 2022. The ongoing conflict between the two countries has once again negatively impacted the global supply chain and the logistics industry more than one can imagine. With the conflict seeming far from over, the challenges in moving goods and services might worsen.
To put numbers into perspective, about 374,000 businesses across the globe use Russian suppliers, while about 241,000 businesses use Ukrainian suppliers. According to stats in the Dun & Bradstreet report, about 91.5 percent of these companies are based in the United States of America, but the aftershocks are being felt worldwide.
The raging conflict between the two countries has had its effects spread beyond both Russia and Ukraine and significantly disrupted the global shipping and freight sector. For instance, the Russian army has cut off shipping routes and disrupted flight networks, leading to logistics firms suspending their services and forcing those trying to remain afloat to increase their rates to survive.
The logistics industry cannot survive without fuel. This was the first industry to be severly hit by the shocks of the Russian-Ukraine conflict. It is essential to mention that the fuel industry is what runs the world, and anything that disrupts its supply touches the nerve centre that keeps the world economies going.
Kenya was among the countries that faced the worst fuel shortage in history. There was no fuel supply. People had money to buy fuel, but the commodity was nowhere to be accessed. The extreme fuel prices occasioned by the conflict have affected various sectors down the value chain. Freight and shipping companies have had to increase their rates to cushion themselves from the skyrocketing fuel prices.
The global shipping and the transportation sector, upon which the logistics industry is premised, has been hit by the conflict. Shipping and freight companies primarily rely on the products imported from other countries. To avoid going under, companies in this sector have been rerouting ground, ocean, and air shipping to avoid Russia and minimize fuel costs and delays.
However, this has led to longer transportation times and higher shipping costs for consumers. Cargo flights have been avoiding flying over the Russian and Ukrainian airspaces, leading to longer flight times and more fuel consumption.
As the conflict continues, experts have said that the fuel price is expected to continue rising hence affecting all other sectors down the value chain. The logistics sector will continue feeling the heat, and people in business should prepare to incur more costs in order to keep their enterprises afloat.
The writer is Siginon Group’s – Group Managing Director
The year 2022 has kicked off with significant events in the economic arena. These events though seeming far away from the African continent which continues to grapple with reviving the economies battered by impact of the COVID-19 pandemic, are events that need to be monitored closely due to their potential to disrupt African economies all over again.
The Russia-Ukraine war which began in February is a war that has reaffirmed now more than ever that the world is really a global village. As the 2 countries assert their sovereignty through military might, the world is slowly coming to terms that being a spectator in this war is akin to shooting yourself in the foot today with an anticipation to run and win a marathon tomorrow. Totally hopeless! Russia and Ukraine are major exporters of key raw materials such as; cereals, iron and steel across the globe and with this invasion there are significant challenges in accessing these countries safely nor any assurance on the condition or reliability of the existing infrastructure. This invasion has disrupted supply chains thus demanding players to re-strategize, respond swiftly to the disruption, and rethink operations to avoid a bad situation getting any worse. This has brought to the fore the need to seek alternative sources from regional and global markets as an option in case of disruption and crisis.
The City of Shanghai in China reported its highest number of COVID-19 cases since the beginning of the pandemic, over 2 years ago. As a response, the city has been put in a city-wide lock down with residents being required to stay home. Shanghai Port is the largest Port in China and the world. Owing to the sheer volume of trade through this port and its effect on the local population, Shanghai has been designated as one of the 4 large port megacities across the globe. The Shanghai Pudong International Airport (PVG) is amongst the top busiest airports in the world and has dealt with flight cancellations and delays because of this lock down. These interventions have a ripple effect across the world due to delays for both importers and exporters from this world’s manufacturing powerhouse and creates further challenges for airlines and shippers in future.
Fuel shortages are being experienced in various African countries that have posed challenges in sectors relying on fuel in service delivery. In the month of April 2022, cargo transporters in Kenya were struggled to fuel trucks so as to move cargo leading to delays in collecting and delivering cargo to or from the Port of Mombasa. The situation, should it persist, could potentially lead to port congestion due to uncollected cargo and result in customer dissatisfaction emanating from service delays. Embracing innovation to determine solutions will highlight available opportunities such as use of alternatively powered trucks such as electric.
Perpetual disruption is now the new normal. Traditional approaches to trade have now been put to test. Supply Chain players will now need to develop contingency plans as a reaction to disruption in whichever form it presents itself. There’s need to reduce over reliance on traditional ways to access source and customer markets. Stability and business continuity will best be approached with a constant finger on the pulse and react aligned to the market dynamics.
Mother’s Day is observed every year with dates varying across different geographical areas. This day is set aside to celebrate the gift that is motherhood and the people who bear this name directly or indirectly. Mothers have often been described as the epitome of love and sacrifice and set the pace for the rest of their children’s life. A mother’s influence over her child is seen both in the tangible and intangible attributes. For instance, it has been asserted that children get their intelligence from their mother. This is argued on the basis that the genes responsible for intelligence are contained on the X chromosome. The mother carries 2 X chromosomes and as such contributes one X to the child while the father donates either the X or Y chromosome which will also determine whether the child is male or female. The mother’s influence is also reflected in the child’s weight, temperaments, dominant hands, vulnerability to certain diseases, among others.
The one thing that the world seems to be united on, is that mothers across the globe need to be spoiled often and especially on Mother’s Day. As hugs and kisses along will not suffice, flowers which signify a mother’s sweet smell, gentle love, warmth, brightness, and optimism have become a tradition as a gift for mothers. Countries such as Kenya that are global flower power houses continue to supply the world with various flowers to bring this occasion to life. After all, a day like this is incomplete without a bouquet of bright yellow flowers.
Kenya’s vision to move to a middle-income economy driven by industrial transformation is hinged on its ability upscale the manufacturing sector and offer products that are competitive into the market. The Kenyan manufacturing sector has often agitated for solutions to the challenges the industry faces primarily, regulatory inefficiencies, high production costs, logistics, cash flow and liquidity challenges. These have been aptly summarized in the Kenya Association of Manufacturing (KAM) Manufacturing Priority Agenda 2021.
Transport and logistics inefficiencies at the port of Mombasa and the Nairobi Inland Container Depot have been highlighted as key manufacturing pain points. The high cost of transportation and delays during cargo clearance and evacuation of both raw material and finished goods has made it difficult for Kenya to produce competitive products. These costs have ended up in payment of high demurrage charges and delayed overall operations at manufacturing plants due to logistical hitches.
At a previous media engagement, the KAM Chief Executive Phyllis Wakiaga decried the port challenges particularly with clearance at the port and minimum tax. As a result of these inefficiencies the cost of products are affected and unfortunately passed on to the consumer.
There is no doubt that for the manufacturing sector to thrive, it must be supported by a well-oiled supply chain system that is guided by strategies and policies that encourage swift and cost-effective import and export of raw materials and finished goods. However, this is not always the case, players in the logistics sector find themselves stuck between a rock and a hard place when it comes to meeting and satisfying customer needs while ensuring their business breaks even. The over regulated logistics industry often must contend with challenges such as fuel hikes, traffic jams, poor road networks and border delays which then dilute the ambition for consistent service delivery in this capital-intensive sector. However, due to Kenya’s unique position in the region, the demand for service remains high indicating the critical role logistics players in serving various economic sectors.
Job Kemboi, Siginon Group’s Commercial Manager asserts that a healthy logistics sector will see all the other economic sectors thrive and prosper in Kenya and beyond the region. The Kenyan economy being a net importer of goods indicates that all sectors rely on our ports to efficiently import raw materials or finished products to enable them to focus on their trade. The demand for logistics via Kenyan ports extends to the larger East African region with customers from EAC and the Great Lakes regions using the Port of Mombasa to move their cargo.