22 May 2012 – Rising costs, in particular related to electricity and transport, are exerting pressure on the gas products industry, and forcing companies to rethink their supply chain strategies. Seelan Gounden, general manager supply chain at Air Products South Africa, a company that supplies industrial and speciality gas products, says, “Pressures, such as tariff increases, have forced us from time to time to change the goal, so an efficient supply chain may have to make way for business effectiveness.
“When product has to be pooled from production sources that are geographically widely spread throughout the supply chain, transport costs increase. It is a matter of having an understanding that supply chain efficiencies may need to be prioritised on occasion, to realise a larger goal, that of business effectiveness, or, put simply, saving money,” he says.
This is the approach that Air Products has had to take in the winter months, to cope with increased winter power tariffs in South Africa. Sizwe Nkonde, general manager packaged gases adds, “Electrical energy is by far the biggest portion of our production costs, so hikes in Eskom tariffs have a significant impact on our bottom line, necessitating a change of approach to one of flexibility in response to these pressures.”
According to Gounden, Air Products has been looking for creative solutions within its production and supply chain to meet the challenge of Eskom’s proposed hikes in power tariffs. Such solutions range from using buffer product which has been stored in summer, to switching off equipment, such as compressors, when possible, to minimising operation plant usage.
“It necessitates a reconfiguration of plant usage, as well as that of auxiliary equipment such as cooling fans in the winter months,” Gounden says. He stresses, however, that managing power usage is also closely aligned with managing demand in a fluctuating market.