Fuel price hikes is one thing that a business cannot avoid. Petrol is made from crude oil, which is extracted from the ground and then refined and exported from the main oil-producing nations to the rest of the world.
As with other goods, if the supply of oil increases, price will decrease and vice versa. The recent increases in the fuel price have much to do with political conflicts in the large oil-producing nations of the Middle East. Uprisings like these can change the fuel price in two ways – it may lead to a decrease in supply or the anticipation of future drops in supply will lead to other countries stockpiling oil and therefore raising the demand and price of oil.
The consistent rise of the fuel price has forced business to re-evaluate logistics costs. The rise in the price will lead to increased road and delivery costs, which have seen businesses streamline delivery processes in order to stabilize costs. Another strategy considered by businesses is to reduce petrol-related costs by planning smarter travel routes and shipments. Business owners have also started to actively outsource logistics to external partners in order to reduce costs and simplify delivery structures.
The increasing pressure in the current economic climate is on business to become and remain competitive, both locally and globally. A problem experienced by South Africa is also that foreign investors find our country less attractive. Many companies use South Africa as a gateway into Africa, but fuel costs are piling up on existing logistical costs leading to foreign businesses to look for alternative entry points into Africa.
To top this off, the average rand/US Dollar exchange rate had weakened in the last couple of months, causing fuel prices to rise even more.
In the long run, the upward petrol price trajectory will have a negative impact on all industries, especially the logistics industry, as firms with low revenues will most likely be unable to compete with the bigger market players who find themselves in a much better position to absorb these cost increases.
Smart logistics strategies could help to improve customer services and reduce product costs and unnecessary pressure on business owners. However, this needs to be done with much diligence and care, as failure of these systems could have far reaching negative effects. As far as the foreseeable future is concerned, petrol prices will keep on rising. It is therefore becoming imperative for businesses to create alternatives regarding transportation in order to reduce overhead costs effectively.
Written By Marleen Theunissen
Creative Writer for ATKA SA
No comments:
Post a Comment