The herd effect in transport logistics and the increasing risk of delayed decisions

South Africa’s unreliable road and rail network is posing an increasing risk to the country’s already fragile economy, now tipped to enter a recession., A key contributing factor to increasing risks in the logistics sector is collective inertia when it comes to decision making, says Volker von Widdern strategic risk principal at Riskonet Africa.

Right now, the country does not have a fully capacitated, functioning and integrated transport infrastructure, with roads, rail, and ports in disarray and costing the economy billions of rands.

The South African Institution of Civil Engineering (Saice) last year highlighted how the country is at risk of becoming a “failed state” if it does not address its infrastructure crisis.

Von Widdern says South Africa is highly dependent on its logistics infrastructure and services.

“For instance were it not for the high number of heavy commercial vehicles (HCVs) that have been deployed in the SADC region to carry imports and exports, we would have had greater problems.

We have had a type of load shedding in our rail services for decades as reflected by the increasing market share of road haulage. From a strategic risk management perspective, there has been an oversimplification of the risk mitigation for poor rail services, being the diversion to HCVs and we should be considering the strategic risks in our transport and logistics sectors on a much wider scale and using scenario analysis.

Von Widdern says risk managers need to be increasing their interrogation on main logistics components, as a minimum, starting with the ports, the roads and rail networks and then ask questions about where potential Black Swans could come from. 

“We have already seen significant disruption in the road sector arising from protests related to the use of foreign drivers. The recent accumulation of over 600 coal trucks outside Richards Bay and related blockages of regional road networks was a hint of future significant disruptions.”

Von  Widdern believes risk managers and their executive colleagues should generate new strategic options for critical logistics exposures because the cost of delayed decisions and herd behaviour are substantial, not the least being the loss of competitive advantage. 

So, what then are possible alternatives? Von Widdern says hybrid model scenarios need to be considered such as privatised rail corridors with independent mandates that provide guaranteed service capacity; alternative staging and warehousing areas outside the main centres and conveyor systems for bulk carriage to ports.

Notes Von Widdern, unless more urgent attention is paid to scenario planning  the consequences will be disastrous including a continuing decline in the capacity of the rail sector; sudden and significant inflationary pressure in the operating costs of HCVs and massive traffic disruption around the ports and access points to industrial sectors.

If this happens, he says, the knock-on effect on the entire transport value chain will further batter the economy.