A Rail Focused Supply Chain Service for Africa
Moving large volume products such as ore, fuel and raw materials, across Southern Africa for import and export has been a historically tricky and frustrating business. Forcing companies (for example the region’s world-class mining operations), to tackle the ongoing challenges of supply chain management and stealing valuable focus from a company’s core reason for existence, is an all-too familiar issue for many.
In a region where economic growth is hugely dependent on trade, efficient and-cost effective supply chain solutions are in great demand. One company rising to the challenge is the African Rail Company (ARC), experts working to offer customers a highly integrated, rail-focused supply chain management service to move product in and out of Zimbabwe, Zambia, Botswana and the Democratic Republic of Congo to the Mozambican ports of Maputo and Beira.
“Cost-effective supply chain solutions are critical to the success of most companies in the region. For example, there are the most wonderful mines with great product in Zambia, but they are miles from their markets. Therefore their success is determined by the effectiveness of their logistics,” says Dave Beek, Director at ARC.
“We see ourselves as being a supply chain partner to African companies, and allowing them to focus on their core businesses, rather than fighting the fires that come with logistics in Africa.”
Prior to joining ARC, Beek worked as a director for Unitrans Supply Chains Solutions, one of South Africa’s premium trucking companies. Beek played a significant role in transforming the company from a straight trucking enterprise to becoming the expert supply chain service provider it is today.
“That was in response to a number of things. Companies were no longer just looking for an A-to-B trucking company, but for a company that could assist them with their entire supply chain. We partnered with these companies in ways that would make their logistics an asset, rather than a liability,” he recalls.
“We achieved this very successfully and the profitability of the business has tripled over the last five years. We created a model which was very successful and attractive to our customers, and was based very much on partnership and open-book relationships with long-term contracts.”
Then Beek was approached by a group of entrepreneurs who asked him to do the same thing for ARC. They told him that they believed rail was the way forward for Southern Africa.
“They were quite right,” Beek says.
“The current rail service in the region is unreliable, and as a result most of the companies transporting large volumes are forced to utilise roads. At Unitrans I capitalized on the poor service offering of rail and switched a large amount of volume onto roads. In general, the trucking industry has flourished, but the road transportation of high volume products has dramatically increased the number of trucks on the road, resulting in issues such as road deterioration and road safety. Ideally therefore, these product types should be transported by rail.”
Beek joined ARC on May 1, 2009, with a view to create a rail-based supply chain solution provider. “It’s a company that doesn’t just offer rail management services, but is a rail-based solution provider which can offer end-to-end solutions, such as warehousing, freight forwarding, customs clearing, and to manage the rail authorities on behalf of customers,” he explains.
“When you’re trying to move product across different countries with different rail authorities, you face all sorts of nightmares. What we offer to our customers is to take the headache away. That’s the premise.”
Beek says that the ARC shareholders are an entrepreneurial group with a vehement belief in Africa. The company’s origins stem from the formation of its Mozambique-based subsidiary, Glenscare Limited, in 2002 following successful partnership agreements with the national Railways of Zimbabwe (NRZ) and CFM, the Mozambican Rail authority. These partnerships opened the Maputo and Beira rail routes for Glenscare to transport, on a common user basis, a diversity of goods including grains, fuel, nickel, granite blocks, chrome, fertilizer and empty containers.
The growth in the demand for rail-based logistics solutions in the region has led to the formation of ARC, whose international structure currently encompasses a head office in Switzerland and operational hubs in Johannesburg, South Africa; Harare, Zimbabwe and Maputo, Mozambique.
Staying flexible, meeting demand
Beek keenly enforces ARC’s value, adding role between customers and the rail authorities. The ability to operate an integrated, yet predictable rail service across numerous countries and different rail authorities is a challenge.
“You have to coordinate the changeover of responsibility, of locomotives, and to ensure the correct documentation is in place. We therefore have offices and staff in all of the strategic points in where we operate. In Africa you can’t work remotely. You can’t think that you know what’s happening; you have to have people right there when you’re discharging a train. You have to have your staff watching everything that happens.”
To this end, ARC has a strong partnership with FFZ Logistics, a Zimbabwe-based clearing and forwarding company with a network of clearing and cross-border monitoring offices throughout the region.
Beek explains that working through its various companies enables ARC to satisfy the changeable requirements of each individual country, whilst providing a single point of contact for its customers. In order to cultivate and maintain this effective balance, a flexible approach is vital.
“Our customers are not interested in which rail authority you’re using, they just need their product to be delivered as promised, and at a price that is attractive,” he says.
“The thing that’s most critical to us is that we’ve built, and are still building, very strong partnerships with the various rail authorities. Understanding what we’re doing and understanding the value proposition both to themselves and to the customer has taken some time. We’ve been flexible and innovative in coming up with solutions.”
Very early on, ARC identified the need to own their own rolling stock, as this would give them the opportunity to actively manage the wagon fleet, rather than rely on only hiring wagons as required. A large portion of the wagons operated by ARC are now company owned. “Owning and managing our own wagons has significantly increased our service offering, as it introduces predictability and certainty into our operations” Beek says, “I think that’s one of the major things that differentiates us from our competitors.”
Progress, potential and ARC today
ARC is currently focused on moving cargo into and out of Zimbabwe, Zambia, Botswana and the DRC, through the Mozambican port cities of Maputo and Beira.
“We initially focused on this market segment because we wanted to show what we can do: build credibility and attract customers. We’re achieving much of what we set out to do, and now we will grow the business in two areas,” Beek explains.
“The first is to further diversify our product and customer base in the region where we currently operate. We will therefore move a whole lot more product down the same channels. The second is to replicate what we’ve done in other areas. We’ll do that as we see opportunities in neighbouring countries.”
In developing the ARC solution, Beek explains that both owning the main bulk of the company’s wagon fleet and having people on location are two essential qualities which have allowed greater control over the logistics and supply chain process.
The company has also recently embarked upon using satellite tracking systems. From this year most of the ARC fleet will be fitted with the technology.
This will position ARC to further establish partnerships with their clients, and to preserve the core business models of ARC clients by reducing the risk and resources they need put
“If you consider a mining company, their core business is to take their ore body and to mine that product as best and as efficiently as possible. That alone doesn’t make them successful. They now have to move that very well-mined and efficiently-produced ore to the market,” Beek says.
“They’re forced to become logistics experts and you find that companies start focusing a huge amount of their time on managing the supply chain, when they’re not necessarily supply chain experts.”
“When your logistics do not meet your requirements it becomes your weakest link in your supply chain. You need to throw all of your resources and efforts at it,” he says.
“ARC is therefore positioned to partner with those companies and to allow them to focus on their core business, and we will do what our core business is, managing those logistics.”
The difficulty in this is company scepticism about outsourcing such a vital business component, but Beek explains that this is where relationship is key.
“You have to do it slowly and in partnership with the companies. You have to show them that you’re not there to make a quick buck, but you’re in it for the long haul, and to compliment their skills,” he says.
“We’re looking to build a long-term relationship where the customer receives sustainable and value-added benefit from us. You have to start building that relationship and trust.”
In drawing on his experiences and success at Unitrans, Beek shows that by working towards firm and long-term relationships with customers and rail authorities, and a flexible yet focused approach to providing pioneering rail-based logistics solutions, ARC rises to the challenges of Southern African rail logistics. Goals are mutually beneficial, company shareholders strongly believe, and a bright future for the company approaches.