In three-and-a-half years, this BEE joint venture has achieved reliability and efficiency improvements to Caltex outlets in the Eastern Cape. It has also helped to service and expand the Caltex franchise in the region. As a result, its territory has been expanded by Chevron – the owner of the Caltex brand.
In 2011, Clive Berlyn, the CEO of Caltex Eastern Cape Marketer (ECM), went on a fishing trip to Mozambique. Like most businessmen, he’d received a variety of industry and business magazines that he had not found time to read over the months, so he took them along – in case the weather turned foul. The weather duly turned foul, and he spent a day indoors reading various articles. In a neat bit of serendipity, one of those articles concerned Cargo Carriers. At the time, the transport giant was on the lookout for investment opportunities, either through acquisition or by taking over the supply-chain functions of companies that had previously managed logistics internally.
When Chevron and Texaco merged in 2000, by 2005 the first BEE codes of good practice were launched in South Africa. Chevron elected to channel Caltex retail distribution through branded-marketer partnerships in the local market, believing that engaging entrepreneurs on a regional basis was the best way to grow the brand and to encourage transformation in its distribution system. CECM won the contract to supply retail outlets in Eastern Cape in 2005, and by 2010 it was covering 38 retail sites – some owned by CECM, others at which CECM owns equipment, but all supplied by the CECM fleet – and the company was keen to grow. When he returned from his fishing trip, Berlyn set up a meeting with Cargo Carriers, and within a fortnight the two companies had worked out a memorandum of agreement that ultimately led to the formation of Uzuko Carriers.
A logical choice
Cargo Carriers was a logical choice because it has a recognised culture of integrity and ethics. Apart from its experience in supply-chain management, the company had established the highest standards for its Safety, Health, Environmental and Quality programme (SHEQ) and was already improving its broad-based BEE scores year on year. Many of the Uzuko Carriers drivers and staff were recruited from Cargo Carriers, specifically for their professional attitudes and strong work ethic. In June 2010, the Uzuko Carriers joint venture took responsibility for the last mile distribution of fuel to Caltex retail outlets in Eastern Cape.
“Transport is one of the most critical factors in the retail fuel business, so it’s also one of the biggest risks,” said Berlyn. “If you don’t have reliable delivery, it can close you down. One of the major benefits of creating Uzuko Carriers with Cargo Carriers is having a professional partner with a lot of leverage in other areas: banks, suppliers, etc.” He credits Uzuko Carriers with improving efficiencies and turnaround times, while maintaining constant visibility of demand, allowing “just in time” delivery route planning. These cost savings, in turn, have led to the steady growth in the number of sites Uzuko Carriers supplies, and the business has more than doubled the annual volume delivered to Caltex outlets in the past three-and-a half years. “The service levels have improved significantly,” Berlyn added. “We conducted a series of comprehensive service reports with 50 sites between Port Elizabeth and East London, and, by their assessment, service levels have risen by 50%. No one is sitting on their laurels.
CECM has now been awarded an extension on contract to supply fuel to retail Caltex outlets in the Eastern Cape, with an expansion of its territory into the entire Eastern Cape. Originally, Uzuko Carriers supplied 38 sites; today, that number stands at 95. Recently CECM and Uzuko Carriers have found that it has become more cost-effective to supply for certain outlets in the northern reaches of their territory from Durban.
Safety is of paramount importance when transporting fuel; however the haulier’s Safety, Health, Environmental and Quality (SHEQ) rating is non-negotiable. Like Cargo Carriers, Uzuko Carriers has achieved and maintained the highest SHEQ standards.
“It hasn’t all been beer and skittles,” said Berlyn. “We’ve had some operational challenges, admittedly, but Cargo Carriers has stepped up to the plate and fixed them – and they weren’t things you could fix overnight with a coat of paint. But they’ve set programmes in place and made whatever changes were necessary to ensure Uzuko Carriers is a world-class transport facility.”
A key to profitability
Although efficient, cost-effective supply chains are a key to profitability in so many businesses, managing them involves a variety of challenges; like the cost of vehicles and maintenance, and the need to optimise visibility of demand for optimum logistics efficiency. By partnering Cargo Carriers – experts in the supply-chain sector – to create Uzuko Carriers, CECM has established a BBE initiative that promotes broad-based ownership while delivering excellent growth. The result promises to be continued success for all three companies. “Our intention is to continue expanding; we’re not in it for the short haul,” said Berlyn. “Uzuko Carriers will continue to grow with us. We will probably add more capacity this year and, as our growth continues, we’ll keep adding to the fleet and retrofitting the older vehicles.”
By outsourcing their supply chain, companies can also recover a certain amount of capital – and decrease management and maintenance overheads – by selling their fleets to supply-chain partners; this capital can then be invested in expansion in other areas, while the lower overheads represent an immediate boost to the return on investment. Managed correctly, the outsourcing and off balance sheet financing of complex logistics can help companies both improve service levels and significantly impact ROI.