A lack of supply chain awareness is hampering the competitiveness of South Africa’s wine industry. However, supply chain experts believe that with some changes made to the industry’s supply chains, SA wine will be able to compete far more effectively on the global market.
This belief is backed by a recent study conducted by Stellenbosch University (Wine Supply Chain Survey 2012: Van Eeden, Goedhals-Gerber, Louw – in conjunction with van Dyk (CSIR) and Kussing (PwC)).
“Many cellars are still thinking like fruit farmers who merely sell their produce to exporters. It’s a mindset that can – and must urgently change – if the SA wine industry is to be competitive,” says Joubert van Eeden, study author and senior lecturer at Stellenbosch University’s Department of Logistics. “Right now, increasing supply chain efficiency should also become a priority for struggling cellars to become more competitive in these tough economic times.”
Lack of supply chain awareness
In perhaps the most alarming finding of the study, the authors found that many of the cellars surveyed do not have detailed quantitative supply chain information available. Supply chain management deals with getting the right product or service to the right place at the right time and cost in order to satisfy customer needs. Many cellars don’t recognise the existence of several supply chains – and most that are engaged in supply chain management are in the very early stages of supply chain maturity,” he says.
A lack of supply chain capability is the root cause of this lack of understanding. With this in mind, Van Eeden has identified easy first steps for cellars to streamline their supply chains:
Understand the segments
The first step in streamlining one’s supply chain is to understand which segment of the market you’re serving, e.g., whether you’re dealing with bulk, basic or premium packaged wines and whether the target market is international or local. Next, you need to understand how that supply chain works and figure out an appropriate strategy. For example, with bulk wine the focus should be on cost, but with premium packaged wine, reliability and responsiveness in terms of delivery become more important.
Which channel/s?
Doing things the old way – because that’s how they’ve always been done – can spell doom for any business owner. With an understanding of the demands of the target market, combined with an awareness of the various channels available to deliver product to them, wine cellars must next select the most innovative and appropriate option to suit their customers’ needs.
Obviously, common sense is critical when it comes to determining the delivery cost per unit that your business can afford. With a wine club for example, one’s unit cost of delivery is likely higher, but the trade-off is that you’re probably dealing with premium wines and customers that are willing to pay a premium for delivery. However, in the retail environment, delivering less than a full truckload becomes very expensive.
Need for further research
A major conclusion of the research was the need for an in-depth study into how the industry gets wine into the glasses of wine lovers both locally and abroad. While researching the profitability of the wine industry, we discovered that literally millions of Rands are spent on research related to growing grapes and making wine, but little if any research is being done to figure out how best to get the wine from the cellar to the table.
We hope to secure funding in 2014 that will enable a detailed study to also establish appropriate benchmarking capability and to see how supply chain profitability of the wine industry may be improved.
The results of the Wine Supply Chain Survey 2012 will be presented at the upcoming Western Cape regional SAPICS conference.
Joubert van Eeden, study author and senior lecturer at Stellenbosch University’s Department of Logistics
