Transport Logistics and the Fruit Export Value Chain ... · • The margin made by the main risk...

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Transport Logistics and the Fruit Transport Logistics and the Fruit Export Value Chain Export Value Chain Malcolm C Dodd Malcolm C Dodd Programme Manager, Programme Manager, Post Harvest Innovation Post Harvest Innovation Programme Programme

Transcript of Transport Logistics and the Fruit Export Value Chain ... · • The margin made by the main risk...

Page 1: Transport Logistics and the Fruit Export Value Chain ... · • The margin made by the main risk taker (the grower) is very low at 9 to 15% and this is very sensitive to sales price

Transport Logistics and the Fruit Transport Logistics and the Fruit Export Value ChainExport Value Chain

Malcolm C DoddMalcolm C DoddProgramme Manager,Programme Manager,

Post Harvest Innovation Post Harvest Innovation ProgrammeProgramme

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The aim of the Φ

Programme

is to raise the competitiveness of South African Fruit

Exports.

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Presentation content.Presentation content.

• The Logistics/Value/Cold/Export chain• Evaluate costs in the value chain for apples,

grapes and oranges.• Discuss these costs and the issues that can

be addressed.• Examples of initiatives to reduce costs in the

value chain.• Conclusion.

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FRESH PRODUCE VALUE/LOGISTICS/COLD FRESH PRODUCE VALUE/LOGISTICS/COLD CHAINCHAINInspection

Inspection

Inspection

Inspection

Orchard Pack-house Cold store

Ship/container Import port Discharge

DepotSupermarketConsumer

Transporter

Cold store

Loading Transfer

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How fruit should be handledHow fruit should be handled

•• ““ Controlling product temperature Controlling product temperature and reducing the amount of time the and reducing the amount of time the product is at lessproduct is at less--thanthan--optimal optimal temperatures are the most important temperatures are the most important methods of slowing quality loss in methods of slowing quality loss in perishablesperishables””..

Thompson, Mitchell and Thompson, Mitchell and KasmireKasmire, Chapter 11, Post , Chapter 11, Post Harvest Technology of Horticultural Crops. University Harvest Technology of Horticultural Crops. University of California, Publication 3311. 2004.of California, Publication 3311. 2004.

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HEAT OF RESPIRATION OF VARIOUS FRUITSHEAT OF RESPIRATION OF VARIOUS FRUITSPRODUCE KIND STORAGE TEMP ºC VITAL HEAT IN BTU/TON/HR

GRAPES 0 400

5 1000

APPLES 0 700

5 1350

SUMMERPEARS

0 1100

5 1650

CITRUS 5 1200

10 2600

PLUMS 0 550

5 1450

NECTARINES 0 1150

5 1700

AVOCADOS 5 5500

10 24500

MANGOS 10 9900

15 24900

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Evaluation of costs in the South Evaluation of costs in the South African fruit export supply/value African fruit export supply/value

chain.chain.

• Evaluation of costs within the South African fruit export supply chain end to end for:– Apples– Grapes– Citrus

• Data is averaged over several packing operations within each fruit kind.

• Study was commissioned to provide us with facts to aid in decision making of where money could be best spent to aid in improving the competitiveness of the value chain.

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Methodology.Methodology.

• The intention of the study was not to highlight the regional production differences but to obtain a South African average cost for production through to market

• The cost after the farm gate are very similar for all the regions barring one.

• Transport of citrus to port varies greatly depending on the distance to nearest suitable port.

• Transport to port varies between R1.20 and R10 per 15kg carton.

• In the study an average distance of 150 km from farm to port was used with a cost of R1.91 per carton.

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Methodology 2.Methodology 2.

• The costs of each operation within the supply chain were gathered from four export houses.

• The export houses varied in size. This information has been averaged.

• Five citrus, apple and grape pack houses were used in the study to obtain an average cost for packing.

• The costs were very similar. For each fruit kind.• Adjustments were made for electricity, labour and distance from

raw material (packing material) costs.

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Cost item Rand value

Retail profit (Gross) 42.00

European transport 4.25

Importers commission 8.65

European logistics 13.00

Europe duties -

Freight 26.88

Insurance 0.75

Exporters commission 5.10

Port costs 2.26

Cargo dues (conventional) 0.42

Transport to port 2.13

Finance charges 1.00

DFPT Levies 0.30

PPECB 0.36

Packing materials 11.08

Packing charges 11.33

Farm costs 14.64

NFI 14.89

Analysis of cost chain for apples (12.5kg.) Sale price ofZAR 175.00.

Figures researched and supplied by Reinhardt Siegruhn of Oursource

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Cost item Rand value % of value

Retail profit (Gross) 42.00 26.11

European transport 4.25 2.64

Importers commission 8.65 8.08

European logistics 13.00 7.4

Europe duties - -

Freight 26.88 16.71

Insurance 0.75 0.47

Exporters commission 5.10 3.17

Port costs 2.26 1.41

Cargo dues (conventional)

0.42 0.26

Transport to port 2.13 1.32

Finance charges 1.00 0.62

DFPT Levies 0.30 0.19

PPECB 0.36 0.22

Packing materials 11.08 6.89

Packing charges 11.33 7.05

Farm costs 16.45 10.23

NFI 14

89 9 26

Analysis of cost chain for apples (12.5kg.) Sale price ofZAR 175.00.

Figures researched and supplied by Reinhardt Siegruhn of Oursource

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Cost item Rand value % of value

Retail profit (Gross) 42.00 26.11

European transport 4.25 2.64

Importers commission 8.65 8.08

European logistics 13.00 7.4

Europe duties - -

Freight 26.88 16.71

Insurance 0.75 0.47

Exporters commission 5.10 3.17

Port costs 2.26 1.41

Cargo dues (conventional)

0.42 0.26

Transport to port 2.13 1.32

Finance charges 1.00 0.62

DFPT Levies 0.30 0.19

PPECB 0.36 0.22

Packing materials 11.08 6.89

Packing charges 11.33 7.05

Farm costs 16.45 10.23

NFI 14

89 9 26

Analysis of cost chain for apples (12.5kg.) Sale price of ZAR 175.00.

Figures researched and supplied by Reinhardt Siegruhn of Oursource

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Cost item Rand value

Retail profit (Gross) 29.25

European transport 6.50

Importers commission 7.28

European logistics 5.85

Europe duties -

Freight 13.40

Insurance 0.75

Exporters commission 4.00

Port costs 0.50

Cargo dues (conventional) 0.16

Transport to port 3.90

Finance charges 0.50

SATI Levies 0.36

PPECB 0.30

Packing materials 8.60

Packing charges 2.30

Farm costs 29.00(20 t/ha))

NFI 14.00 (20 t/ha)

Analysis of cost chain for grapes (4.5kg. equivalent) Converted Sale price of ZAR 126.75.

Figures researched and supplied by Reinhardt Siegrund of Oursource

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Cost item Rand value % of value

Retail profit (Gross) 29.25 23.08

European transport 6.50 5.13

Importers commission 7.28 5.74

European logistics 5.85 4.62

Europe duties - -

Freight 13.40 10.65

Insurance 0.75 0.59

Exporters commission 4.00 3.16

Port costs 0.50 0.39

Cargo dues (conventional)

0.16 0.13

Transport to port 3.90 3.08

Finance charges 0.50 0.39

SATI Levies 0.36 0.28

PPECB 0.30 0.24

Packing materials 8.60 6.79

Packing charges 2.30 1.81

Farm costs 29.00 (20 t/ha) 16.90

NFI 14

00

(20

t/ha) 11

05

Analysis of cost chain for grapes (4.5kg. equivalent) Converted Sale price of ZAR 126.75.

Figures researched and supplied by Reinhardt Siegrund of Oursource

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Cost item Rand value % of value

Retail profit (Gross) 29.25 23.08

European transport 6.50 5.13

Importers commission 7.28 5.74

European logistics 5.85 4.62

Europe duties -

Freight 13.40 10.65

Insurance 0.75 0.59

Exporters commission 4.00 3.16

Port costs 0.50 0.39

Cargo dues (conventional)

0.16 0.13

Transport to port 3.90 3.08

Finance charges 0.50 0.39

SATI Levies 0.36 0.28

PPECB 0.30 0.24

Packing materials 8.60 6.79

Packing charges 2.30 1.81

Farm costs 29.00 (20 t/ha) 16.90

NFI 14

00

(20

t/ha) 11

05

Analysis of cost chain for grapes (4.5kg. equivalent) Converted Sale price of ZAR 126.75.

Figures researched and supplied by Reinhardt Siegrund of Oursource

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Cost item Rand value

Retail profit (Gross) 42.97

European transport 10.59

Importers commission 5.60

European logistics 13.00

Europe duties -

Freight 25.93

Insurance 0.63

Exporters commission 5.36

Port costs 5.00

Cargo dues (conventional) 0.23

Transport to port 1.91

Finance charges 0.90

CGA Levies 0.32

PPECB 0.22

Packing materials 11.08

Packing charges 18.06

Farm costs 9.82 (80 t/ha) 11.85 (60 t/ha)

NFI 25

14

(80

t/h

)

23

10

(60

Analysis of cost chain for citrus (15.0kg.) week 27Sale price of ZAR 159.25.

Figures researched and supplied by Reinhardt Siegrund of Oursource

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Cost item Rand value % valueRetail profit (Gross) 42.97 26.98

European transport 10.59 6.64

Importers commission 5.60 3.5

European logistics 13.00 8.16

Europe duties -

Freight 25.93 16.28

Insurance 0.63

Exporters commission 5.36 3.3

Port costs 5.00 3.19

Cargo dues (conventional)

0.23

Transport to port 1.91 1.1

Finance charges 0.90

CGA Levies 0.32

PPECB 0.22

Packing materials 11.08 6.95

Packing charges 18.06 11.06

Farm costs 9.82 (80 t/ha) 11.85 (60 t/ha)

NFI 25.14 (80 t/ha)23.10 (60 t/ha)

Analysis of cost chain for citrus (15.0kg.) week 27Sale price of ZAR 159.25.

Figures researched and supplied by Reinhardt Siegrund of Oursource

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Cost item Rand value % valueRetail profit (Gross) 42.97 26.98

European transport 10.59 6.64

Importers commission 5.60 3.5

European logistics 13.00 8.16

Europe duties - -

Freight 25.93 16.28

Insurance 0.63

Exporters commission 5.36 3.3

Port costs 5.00 3.19

Cargo dues (conventional)

0.23

Transport to port 1.91 1.1

Finance charges 0.90

CGA Levies 0.32

PPECB 0.22

Packing materials 11.08 6.95

Packing charges 18.06 11.06

Farm costs 9.82 (80 t/ha) 11.85 (60 t/ha)

NFI 25.14 (80 t/ha)23.10 (60 t/ha)

15.78

Analysis of cost chain for citrus (15.0kg.) week 27Sale price of ZAR 159.25.

Figures researched and supplied by Reinhardt Siegrund of Oursource

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Comparing citrus cost chain between Comparing citrus cost chain between week 27 and week 43. Converted to SA week 27 and week 43. Converted to SA

Rand.Rand.Item Week 27 Week 43

Sales price 159.25 113.75

Retail profit 42.97 29.32

Europe transport 4.81 4.81

Free on truck 18.60 18.60

Freight cost 25.93 25.93

FOB costs 10.59 8.04

Delivered in port 3.35 3.35

Packing cost 18.06 18.06

Farm cost before interest and depreciation

16.01 16.01

Farm profit (Loss) 18.94 (10.36)

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Summary of analysis of the Summary of analysis of the value chain 1.value chain 1.

• The margin made by the main risk taker (the grower) is very low at 9 to 15% and this is very sensitive to sales price and exchange rate.

• For example the SA Rand has moved from 9.5 to 7.5 to the US$ during the course of this year.

• The picking and packing costs make up between 8 to 18% of the total cost.

• Across all fruit kinds the gross margin made by the supermarkets varies between 23 to 26%.

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Summary of analysis of the Summary of analysis of the value chain 2.value chain 2.

• The European importers commission is 3.5%. • The European inland transport is 6.64% of the total

value chain. • Logistics costs 8.16% of the total.• Freight costs are fruit type dependant and vary

between 10.6% to 16 %.• Packaging costs are also fruit kind dependant and

vary between 9.5% to 18%.

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A Project to audit A Project to audit the energy consumption of the energy consumption of

packhousespackhouses

and cold stores .and cold stores .

• An Engineering Consultancy was commissioned to develop an audit tool to capture and analyse the energy consumption in pack houses and cold stores.

• This revealed some startling information regarding how much energy was being wasted.

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Relative rankings for fuel energy consumed Relative rankings for fuel energy consumed ((litreslitres/ton fruit produced)./ton fruit produced).

0

20

40

60

80

100

0 10 20 30

liter/ton

Citrus

Pome

Grapes

EfficiencyRank

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Energy consumption by the different Energy consumption by the different components in a cold store operation .components in a cold store operation .

Compressors49%

Extractor fans25%

Lighting5%

Condenser Pumps

2%Condenser Fans

3%

Evaporator Fans15%

Other1%

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Improvement PotentialImprovement Potential

(The Yellow line is Pome CA storage)

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Refrigeration Plant ControlRefrigeration Plant Control

• Suction Temperature• Discharge Temperature• Units in Balance• Re-use Condenser Heat• Avoid Peak Tariff

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Packaging Considerations

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STANDARD CARTON

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NEW A15C CARTON

Base Lid

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SOUTHERN BELLE IN PLASTIC CARTONSSOUTHERN BELLE IN PLASTIC CARTONS

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Value chain service

SOUTH AFRICA CHILE NEW ZEALAND

Pack House 87 91 109

Infrastructure &Operations

36 49 45

Road Transport Fleet 22 27 30

Rail infrastructure 15 0 15

Infrastructure & operations

32 49 44

IT Systems 13 19 22

Container ports 21 28 28

TOTAL RANKING 21 28 28

Commonwealth Secretariat benchmarking Commonwealth Secretariat benchmarking of the South African supply chain farm to of the South African supply chain farm to

port.port.

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Benchmarking study comparing South Benchmarking study comparing South AfricaAfrica’’s s

fruit export supply chain from farm to local fruit export supply chain from farm to local port to Chile and New Zealand.port to Chile and New Zealand.

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Conventional reefer terminalsConventional reefer terminals

CAPE TOWN

DURBAN PORT ELIZABET

H

SAN ANTONI

O

VALPARAI SO

AUCKLAN D

Typical pallet consignment

4150 4250 3500 4500 5500 4250

No. of containers per vessel

85 80 35 na 115 100

Pallets/berth/day 2150 2750 2000 2750 3200 2650

Containers/crane/h our

10 6 6 na 12 10

Shifts per day 2 x 8 3 x 8 3 x 8 3 x 8 3 x 8 2 x 8

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The competitive costs of transiting The competitive costs of transiting South African reefer container South African reefer container terminals. Costs in US$terminals. Costs in US$

TYPICAL STEVEDORING

CHARGE

ESTIMATED PORT DELAYED

COST *

SHIPPING DELAY COST

**

TOTAL

SOUTH AFRICA 225 145 35 405

NEW ZEALAND 185 15 5 205

CHILE 215 22 24 261

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ComsecComsec

Benchmarking study. Benchmarking study. Proposed action items.Proposed action items.

Comsec ranking Action item Industry ranking

1 Centralised information

technology hub

1

2 Establishment of remote (away from port area) logistics zone for trucks and

containers

2

3 Boost rail use to move fruit from production

area to port

4 Establish a continuous innovation resource

5 Introduction of private expertise into

ports

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Ranking Action item

6 Electronic data interchange.

3

7 Ocean freight charges.

8 Government- led reforms to stimulate excellence in the fruit logistics sector.

9 Alleviating container terminal congestion.

ComsecComsec

Bench marking study action Bench marking study action items 2.items 2.

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Transporter

Loading

THE THE COLD/SUPPLY/VALUE CHAIN FOR PERISHABLESCOLD/SUPPLY/VALUE CHAIN FOR PERISHABLES

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CONCLUSIONCONCLUSION

There are many costs associated with the supply chain.Some of these are out of our control.Analysis of the costs show that there are few we can control in order to reduce them.

PackagingEnergy use in the pack house cold stores

Consider vertical integration to further reduce costs.To be able to analyse and improve we must measure as many cost and quality influencing issues , for example:

Energy use,Air and fruit pulp temperatures.

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THANK YOUTHANK YOU