FROM MAGAZINE: Covid-19 puts e-commerce supply chain
The Covid-19 pandemic has tested logistics services and other features of supply chains like no other event in recent history. Due to the lockdown mandated across different countries in the African continent to contain the further spread of the virus, e-commerce in goods has faced supply chain disruptions.
The Covid-19 pandemic has impeded the logistics and supply chain of various industries like never before. The e-commerce supply chain has been in the spotlight after lockdowns were mandated across different countries in the African continent. While the pandemic has highlighted the importance of e-commerce logistics, but it has also exposed the vulnerabilities in the supply chain.
A majority of countries across the African continent are currently in a state of lockdown to contain the spread of Covid-19. These lockdowns or stay-at-home orders have spurred the need for on-demand and to-the-door delivery services in these unusual times. E-commerce has thus become a critical enabler to opening the economy through contactless transactions, reducing the movement of consumers, and the density of shoppers in retail spaces. They are now adopting innovative approaches in response to a volatile, uncertain, complex and ambiguous situation.
China-dependent business models suffer
Most manufacturers and producers in Africa depend on China for their raw materials and products. Since February, there have been no shipments from China due to border closures and this has caused an adverse effect on various businesses in Africa. Even though China has restarted operations, it will still take at least two months for products to reach Africa. Majority of the shipments that is currently taking place from China to Africa is that of critical medical cargo and pharmaceuticals.
Between March and April, the number of delayed vessels increased from 70 percent to about 90 percent of incoming port traffic. Air freight capacity in Africa also dropped 70 percent. The reduction of goods moved across the continent has gone up from 30-40 percent. Production in the agro sector increased by 18 percent while industrial production dropped by 39 percent. The production of FMCG goods also went up by 5 percent within the last one month.
"We see certain challenges, on supply and logistics, in some parts of the business. On supply, the cross-border operations were disrupted from manufacturing shutdown in China. This supply chain disruption in China also impacted some of our local sellers, especially those we source their goods from China. In consumer electronics, phones, fashion category. And we also faced cross-border logistics challenges, due to country lockdown, which has impacted the cargo operations," highlighted Sacha Poignonnec, co-founder and chief executive officer, Jumia Group during the company's Q1 2020 earnings call on May 13, 2020.
Online groceries sales boom
While cross-border businesses hit various product categories hard, online grocery sales have seen a significant spike. Jumia has witnessed a four-fold surge in grocery sales, especially in Tunisia and Morocco where lockdown measures resulted in a 100 percent spike in sales at different points in the last two months. While only essential products were delivered in Nigeria and South Africa due to the local Covid-19 regulation during the local lockdown, in all the other markets, e-commerce companies were allowed to deliver non-essential products as well.
"Prior to the outbreak of Covid-19, we were providing convenience to our consumers but now, the context is different. We are now providing them access to basic and essential products and services to allow them to stay safe. We are trying to provide solutions today, more than ever, to all their important daily needs. Jumia has become increasingly relevant to our consumers in the African continent during this pandemic, especially since online shopping has proved most reliable in reducing the spread of the virus from person to person," said Apoorva Kumar, senior vice president, Jumia Group.
For the essential products, Jumia did a group partnership with Reckitt Benckiser (Dettol products) and Procter & Gamble. "They helped us to operate in South Africa to deliver their products. The demand of those products increased due to Covid-19 and those deals helped us to reduce the prices of those products and fight against the speculation," revealed Kumar.
For the groceries, Jumia used its on-demand services to deliver most of its supermarket products. "We used our same logistics network pre-Covid-19, they have just adapted themselves to the contactless deliveries and by following all the sanitary guidelines," he added.
Ecommerce companies were charged with securing the essential goods for the millions of Africans that rely on their service. Individual companies have been working with their network of suppliers, drivers and manufacturers and key player partnerships to pool their resources to ensure that movement could continue; from cross border, to intra-state and last mile deliveries.
In Kenya, Twiga Foods, a marketplace that supplies retailers with fresh produce from farms, tied up with Jumia to widen the scope of its reach, during the lockdown where households can directly order and foodstuff can be delivered to their doorsteps without having to pay a visit to the supermarket.
Nigerian agri-tech startup Farmcrowdy also ventured into the e-commerce space with the launch of Farmcrowdy Foods, a digital marketplace that allows consumers to conveniently purchase highly affordable fresh food products from the comfort of their homes.
Another interesting initiative taken in the wake of the crisis was fintech startup Flutterwave's newly launched Flutterwave Store, a portal for African merchants to create digital shops. The product has no inventory or warehouse requirements and allows users, after the creation of a profile, to showcase inventory and link up to a payment option. Regarding pickup and delivery, Flutterwave Store operates through existing third-party logistics providers, such as Sendy in Kenya and Sendbox in Nigeria. The service will start in 15 African countries and, at this moment, Flutterwave will only charge fees on payments. Apart from that, SMEs can create an online storefront and buyers and sellers can transact goods, free of charge. While the initiative is a result of the spread of Covid-19 cases in Africa, there are plans for it to be continued after the pandemic as well, according to company officials.
Managing logistics amid lockdown
As most ventures turn to the e-commerce mode, how is the logistics being managed? The logistics sector has been in disarray because of disruptions caused by the lockdown. With the embargo on movement, logistics players are faced with operational constraints.
"On logistics, we are facing capacity limitations, which, of course, affect our ability to fulfill consumer demand. We have curfews in many countries, which are impacting the operating hours and, of course, in turn constrained the delivery capacity. In South Africa, for example, the deliveries of fashion items were just completely suspended for a few weeks. And overall, the implementation of the safety measures, which I mentioned in our warehouses, like team shifts or safety distancing are leading to reduced order processing capacity. Those are the challenges," said Jumia's Poignonnec.
Despite the challenges, tech companies are working on ways to ensure seamless movement of goods amid the crisis. Tech-enabled logistics platform Kobo360 officially launched its Global Logistics Operating System (G-LOS), a blockchain-enabled platform which provides remote access to the entire supply chain, allowing for business continuity during the crisis by facilitating a steady stream of trips. G-LOS facilitates the social distancing practice as drivers can secure their jobs with cargo owners through the app. To keep costs low for drivers, it has subsidized their fuel, tyres and spare parts for maintenance.
Talking about how the pandemic derailed their operations, Kagure Wamunyu, chief strategy officer at Kobo 360 said, "The lockdown has definitely impacted the African logistics industry and Kobo360 is not exempt. In East Africa, we have been experiencing severe delays at the Kenya-Uganda border due to the mandatory Covid-19 tests which have reduced clearance for Kobo360 truck drivers of essential goods to less than 50 percent."
Wamunyu further added that truck drivers have been experiencing additional fuel expenses, increased mileage per trip and even truck and cargo security, which have caused an escalation in the drivers monthly costs. Lengthy turnaround times have also been leading to financial pressure on truck drivers, some of which are defaulting on loans.
Meanwhile, logistics platform Sendy launched a home delivery solution in an effort to boost local traders during the pandemic. Dubbed Sendy Go, the platform gives shoppers access to a wide variety of household supplies from local traders and also enables them to support families in need by matching every order made on the platform with a donation.
Speaking during the announcement, Sendy Founder and CEO Meshack Alloys said, "We want to help shoppers buy items and get them delivered at their doorsteps thereby minimizing their movement during this time. We are also going a step further by matching every order made through the app with a donation to a family in need. Our objective is to feed 5,000 families across Nairobi for the next few months."