Logistics opportunity costs: A mining case study

Leani Van Jaarsveld,Peter J Kilbourn,Gert J Heyns

doi:10.4102/jtscm.v7i1.120

Abstract

This study highlighted the importance of determining the impact that an ineffective mode of transport has on a firm’s transportation model and costs. The main focus of this study was to determine the logistics opportunity costs of using road transport within a mining firm. A case study approach was followed, as the investigation aimed to analyse a complex problem experienced by one company and present it in an easily understandable format. From the results of this study, it was apparent that the logistics opportunity costs associated with the mode of transport was substantial. This highlighted the need for firms to revise their choice of transport mode on a regular basis, as it has a major impact not only on their transportation costs, but also on their inventory holding and carbon emissions. The results also have implications for South Africa’s only freight railway, Transnet Freight Rail, which should not only focus on expanding its existing capacity, but also on improving its customer service delivery whilst containing tariff increases.

Highlights

Transport plays a pivotal role within the South African economy as it enables the country to achieve economic growth and development
This study highlights the need for firms to analyse their modal choice on a regular basis and to base their decisions on transport costs but total logistics cost, which include opportunity costs associated with inventory holding levels and emissions costs
This study indicates that it is imperative for Transnet Freight Rail (TFR) to expand its existing capacity, and to improve customer service to achieve the necessary modal shift from road to rail transport in order to attain the strategic objectives of their Market Demand Strategy (MDS)

Summary

Introduction

Transport plays a pivotal role within the South African economy as it enables the country to achieve economic growth and development. The transport industry does facilitate the movement of freight and people, it employs a great number of individuals and forms a major part of South Africa’s Gross Domestic Product (GDP). The 9th Annual State of Logistics Survey for South Africa indicated that transport costs were accountable for 7.7% and 7.8% of the country’s GDP in 2011 and 2012 respectively (Havenga & Simpson 2013). One of various interdependent components that form a logistics system. For this reason, transport mode choices should be made based on transportation costs but rather on total logistics costs (Pienaar & Vogt 2012)

Objectives

Methods

Findings

Conclusion