South Africa’s retail model has changed dramatically in the last 18 months, partially driven by the pandemic and lockdowns, which vastly accelerated the growth of e-commerce and altered buying patterns. This has put pressure on the distribution element of the logistics chain, which has had to adapt to these shifts in demand. Optimising processes lies at the heart of the ability to store, manage and deliver stock at the pace required today, which is where business process outsourcing (BPO) can play a pivotal role.
As traditional retailers have developed more robust online sales strategies and consumers have become more accepting of e-commerce in South Africa, we have seen significant growth in this space. This growth will continue, and the distribution element of the logistics chain needs to support the shift. There has already been a significant expansion of industrial areas to offer greater warehousing facilities, especially close to airports and major transport routes.
However, the physical storage space of the distribution centre (DC) is only one element. Managing the people element, especially given limitations on the number of staff permitted due to social distancing requirements, has become a real challenge. Furthermore, warehousing businesses face the challenge of sourcing trained and qualified staff due to occurrences of illness and isolation, brought on by Covid-19. Ensuring levels of output are met while balancing costs, requires an intelligent approach. This growth does, however, come with certain challenges, such as effectively managing warehouse storage space and human capital. The management of human resources is further exacerbated by making necessary considerations for Covid-19 regulations, such as social distancing. Ensuring adequately trained and qualified personnel further ensures business continuity should employees fall ill or be forced into isolation due to the pandemic. It is of utmost importance to maintain a delicate balance between input and output costs during this growth period, considering the unforeseen challenges that could arise due to the pandemic.
There is a physical limitation on the amount of work people can do, and increasing headcount is typically the first step in increasing output. However, in the current situation, this is not always possible and is often not the most effective solution in any case. For an increase or decrease in headcount to be effective, productivity and performance needs to be at a level of at least 95%. Therefore, improving productivity is the first step that any DC should take – and this includes training, process optimisation and warehouse capacity utilisation.
If warehouses are too small, and there is too much stock on hand, work areas will be congested. On the other hand, if there is not enough stock, then warehouses will not be able to fulfil orders. Both scenarios result in lost revenue. The key is to maximise volume over minimal time. Having a BPO partner not only ensures that processes are streamlined, but also that staff are trained to the level required to be highly productive. On top of this, should additional resources be required, the BPO provider will assist by scaling their workforce up or down as demand necessitates.
To meet the drastic increase in volumes required today and, in the future, expansion needs to happen rapidly. There are many elements to consider outside of human resources, and the infrastructure needs to support efforts to maximise capacity. In addition, as volumes increase and resources are under pressure, it can become challenging to meet service level agreements.