Roughly 18 months ago I was doing the costings for the warehouse business and that included trying to find a logistics partner that would deliver pallets of goods to Cape Town via Johannesburg. At the time the business was paying R4500 per pallet which I thought was extreme and it was having eventually whittled the price down to R2500. Even at half the price I knew we were being robbed, but that price still worked and could do nothing about it at the time and took this as a win.
Over the last few weeks I have been doing a similar exercise with regard to the viability of purchasing a couple of trucks. Initially our client suggested we use our own truck to deliver their stock to Cape Town as in their mind they thought it would be cheaper.
One or two years ago this would have ben the correct assumption, but the pallet delivery prices for some reason have been continuing to tumble in price and I have no idea why. The rate per pallet today is in the region of R1300 which is half the agreed rate and back then that was the best price available. What has caused this 50% cut in prices could be due to competition as I see no other reason for this. The only difference is Amazon have entered the market having purchased a local logistics and courier company and this may have removed some greed.
The scary part about all of this is how many companies are still charging those exorbitant rates and how many of their clients have no idea the rates have dropped. I am sure if I phoned around again I would still be quoted prices close to R4500 per pallet and would think that is the going rate for those not in the know.
Back to the trucking exercise which just goes to show you need to know the figures as the fuel and tolls for the delivery there and back is more expensive than the delivery costs now using the R1300 rate. Forget the time, wear and tear on the vehicle and the drivers salary plus accommodation and food.
I have decided the business only needs an 8 ton truck and a 4 ton truck for local deliveries in Johannesburg and this will hopefully be financed next month in time for the festive season which runs from September to the first week of December. Even with these purchases we will still need to book trucks for this period as deliveries even with early booked slots will only be doing one delivery per day. Most of the receiving bays at these warehouses do not run like clockwork and will be a good 4 hours behind scheduled times.
Already the one online platform has shut down there one facility as it is already full and this will be there own stock and not that of clients. This is how they operate and these items already purchased and ready for sale will compete against their customers using their platform. I find this kind of skullduggery distasteful and what you kind of expect to see today with companies who have no moral fiber. They are only in this position of financial strength due to their customers and now they are fighting and competing directly against those who have been supporting them.
Our client is the number two online business supplier in the country for online and we do not get preferential treatment and have no real direct competition as the online platform cannot compete with us due to owning the brands and licenses. If you do not have this then you are fair game and expect to be ousted at some point by the owners of the online platform. This is how the likes of Amazon and Takealot work and are basically a large database of manufacturers around the world that they have been fed as a requirement for those using these platforms.