Tackling the Last-Mile Distribution in Africa

The challenges of on-time, in-full delivery to the consumers

The Context

As a manufacturer, you have shipped resources to one single site, combined ingredients to manufacture a valuable product, then stored the product in a mass warehouse for final transfer to the consumer. It is this final step, the shipping of the product from the warehouse to the consumers’ hands, that is defined as the last mile delivery.

To a manufacturer, after all the procurement, production, advertising and promoting, the most crucial element to all this is ensuring that the product is “available” on-time and in-full, where the consumer will demand it. Without the product being available, the opportunity is lost and not recoverable.

The world over has recognised this crucial cog to the wheel and focused a huge amount of analysis and experimentation on how to ensure product availability to the right consumer, on time every time. Examples of the experiments being tested include the use of drones, using driverless vehicles, distribution apps, mapping aids and several other various vehicle methods. Gone are the days when courier companies like DHL or FedEx monopolised this space. Today almost the entire Silicon Valley is working on something that improves efficiency of the last mile delivery

Unfortunately, most of the worldwide last-mile pilots, analysis and experiments are aiming to resolve Western urban-world opportunities and they copy-past the solutions to African peri-urban and rural situations.  Don’t get me wrong, sometimes those solutions do work. Just look at Uber or Airbnb. These are solutions that are working and thriving in African urban settings and are mimicking the situations and opportunities in the countries of design

The Local African Farmer Challenge

Farming and manufacturing industries are growing astronomically within Africa. Thousands of registered and unregistered small businesses sprout every day with ingenious ideas for small-holder farming, soap production, hair-care products, furniture manufacturing and so on. You name it, Africans can make it and have the enterprise. But here's where we lose it all… 

Villagers will produce it and suddenly realise they don’t have access to many alternative locations to sell their wares. So, if its vegetables, they end up selling them at unsustainably low prices to the local community market, under a predictable situation of seasonal over-supply. They display their products within the community with no value-add, little to no merchandising and very little pride if any. In Africa, this is where the understanding of the last mile fails us

If the same products could find their way from the site of production, to targeted premium markets (for example from rural areas into the urban cities), one could make 10 times the income. But then in many parts of Africa, the last mile supply chain is filled with a barrage of transport cartels, unscrupulous buyers, government taxes, fraudsters; all littered across the route to market. The same ingenious entrepreneur would therefore prefer to avoid the supply-risk by earning just that minimum amount from the local market. To most of them, a bird in hand, is better than two in the bush

The Local Manufacturer Challenge

Local or multinational manufacturers, would like to have their product available broken from cases into units in the +/-10,000 kiosks, table-top and groceries across a city. Many of them attempt hit & miss solutions for targeting wholesalers or using targeted strategic stock points. Few have the complete mapping and routing data of the regions they operate. Few track the outlets they are selling to. Very little is done in calculating or understanding the last mile cost. If you don’t know your immediate cost, how can you then know where to save in that cost structure? Manufacturers then simply resign to the "this is Africa" mode and turn a blind eye to the last mile potential savings. The consumer loses by having to absorb higher priced stock because of the inefficiencies that are inherently passed on

 Cost Saving in the Last Mile

It is estimated that the average international cost to the last mile, for a manufacturer is around 28% of the cost of the product. In general, this often gets passed on to the customer. If it doesn’t get passed on, it can have a negative impact on the bottom line and sustainability of the manufacturer.

Within Africa however, I estimate this cost spirals to about 35-55% because of man-made challenges including corruption, poor infrastructure, limited delivery options and poor supply chain analytics. Most rural areas are not even considered because their remoteness, small drop size transactions and perceived notion that rural folk don’t need certain product. This forces so many rural consumers to travel vast distances (incurring unfair additional travel charges) to buy their requirements. The last mile cost here would rise to up 60-70%. The downside to manufacturers is their product becomes unaffordable and they lose sales.

What is the solution for Africa?

• As a starting point, at a corporate and governmental level, the various components of the last mile cost including vehicle costs, fuel costs, taxes, utilities, retailing costs, pilferage losses, labour and many other factors need to be budgeted
• After understanding the costs, there needs to be a dedicated initiative to look at the opportunities to reduce the costs at every level through infrastructural initiatives or direct company and product initiatives
• There needs to be a concerted effort towards getting operational stations closer to the end-of-chain or consumer. Tea is Kenya’s biggest export and its biggest success was to roll out fair-priced coop farmer collection points and factories next to the farms and farmers across the country. This allows farmers to enjoy premium payments for their harvest and encourages the farmers to invest in better grade tea. A win win for the community, the industry and the government
• New innovations like the apps, drones, driverless vehicles, remote stations and innovative delivery services are necessary to automate and improve efficiencies

Conclusion

In conclusion, while the rest of the world might be focusing on getting to the consumer faster, Africa's focus (corporate and government) must remain cracking the last mile conundrum. That is, making product available to the consumer everywhere and on-time. The cost of distribution needs to be reduced to make product to the bottom of the pyramid consumer more affordable. Local trader accessibility needs to be within targeted radius levels to ensure that the value chain passes on the financial benefits to the source producer. This all will have the impact of improving the lifestyles, health and opportunities for the consumers in the bottom of the pyramid. 

Farayi Ziswa is a specialist sales consultant for retail trade and route-to-market strategies within Eastern and Southern Africa. Get in touch...