A lack of supply chain awareness is hamper- ing the competitiveness of South Africa’s wine industry, Stellenbosch University, Department of Logistics senior lecturer Joubert van Eeden tells Engineering News.
At the recent SAPICS conference for supply chain professionals, Van Eeden noted that, traditionally, the focus has been on producing the right cultivar and quality grapes, as well as on producing wine of which the winemaker is proud. Logistics and supply chain management is a knowledge area not adequately covered when someone studies viniculture or viticulture, he adds.
“Demand for supply chain education is a necessity and it falls into three broad categories that assist key industry players in the long term, including core supply chain skills, supply chain functional excellence and supply chain integrative excellence,” Van Eeden states.
He points out that a lack of awareness means that key industry players are missing opportunities to serve the South African and international market more cost-effectively.
“Wine cellars that have realised the importance of supply chain awareness in their businesses are reaping the benefits by increasing their levels of customer service. This has led to higher unit-sales prices and sales volumes at reduced costs.
“Wine cellars that have not realised this have lost face with the customer and this has resulted in lower unit-sales prices, lower volumes and reduced profits,” he states.
Van Eeden adds that supply chain experts believe that by making some changes to the wine industry’s supply chains, the South African wine industry will be able to compete more effectively on the global market.
“This belief is supported by a recent study conducted by Stellenbosch University. Many cellars are still thinking like fruit farmers who sell their produce to exporters,” he notes, adding that this type of mindset must change if the South African wine industry is to become more competitive.
Increasing supply chain efficiency, Van Eeden states, should also become a priority for struggling cellars, as it will aid them in becoming more competitive in tough economic times.
“The most alarming finding of the study is that many of the cellars surveyed do not have detailed quantitative supply chain information available. Supply chain management deals with delivering the right product or service to the right place, at the right time and at the right cost to satisfy customer needs,” he states.
Van Eeden explains that many cellars do not recognise the existence of several supply chains – and most cellars that are engaged in supply chain management are in the early stages of supply chain maturity.
He emphasises that a lack of supply chain capability is the root cause of this lack of understanding. With this in mind, he has identified steps for cellars to take to streamline their supply chains.
“The first step in streamlining a supply chain is understanding which segments of the market you are serving. For example, the suitability of a supply chain solution will be determined by your dealing with bulk, basic or premium packaged wines and if the target market is international or local.
“Next, you need to understand how that supply chain works and identify 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,” Van Eeden notes.
“After gaining an understanding of the demands of a target market and being aware of the various channels available through which to deliver the product, wine cellars must select the most innovative and appropriate options that suit their customers’ needs,” says Van Eeden.
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 to be higher, but the trade-off is that you are probably dealing with premium wines and customers who are willing to pay a premium for that special delivery. However, in the retail environment, delivering less than a full truckload becomes expensive,” notes Van Eeden.
A major conclusion of the research conducted by Stellenbosch University, he reveals, is the need for an in-depth study on the process of how the local industry gets wine into the glasses of wine lovers 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 establish how best to get the wine from the cellar to the table,” he adds.