From the results of this case study research, it is evident
that there could be significant logistics opportunity costs
involved in modal choice decisions. This research entailed
the calculation of the logistics opportunity costs resulting
from a shift from rail to road transport for a relatively
small organisation in the mining industry. The logistics
opportunity costs, calculated over the three-year review
period were substantial. This study highlights the need for
firms to analyse their modal choice on a regular basis and
to base their decisions not only on transport costs but total
logistics cost, which include opportunity costs associated
with inventory holding levels and emissions costs.
This study indicates that it is imperative for TFR to not only
expand its existing capacity, but also to improve customer
service to achieve the necessary modal shift from road to rail
transport in order to attain the strategic objectives of their
MDS. By not providing satisfactory service to customers, the
customers will continue to use road transport for goods that
are suitable for rail transport, which, in turn will continue
to add significant costs to South Africa’s logistics costs. The
continuous use of road transport as opposed to rail transport
will also increasingly damage the condition of our roads,
which will result in excessive investment being required to
repair the damage. The ripple effect of poor-quality roads will
continue with transport operators’ overhead costs increasing
due to vehicles requiring more maintenance and repairs.
These costs will add to the price of the finished goods, which
will ultimately be paid by the end user. It is a well-known
fact that rail transport emits less carbon emissions than road
transport; as a result, the environmental impact of not having
a reliable rail service should not be underestimated.
Poor TFR service delivery, which greatly influenced the
decision to use road, as opposed to rail, transport had a major
effect on the total logistics costs of Firm A. If this impact can
be extrapolated, not only to the rest of the mining sector, but
also to other industries and supply chains, where appropriate,
the potential impact on the South African economy would be
considerable. TFR therefore must ensure that they not only
focus on expanding their existing capacity, but also focus
on improving customer service to potential and existing
customers. The impact on the South African economy by not
having a reliable rail service is therefore significant.
A limitation of this study is that it is restricted to one relatively
small company in the mining industry, only focusing on
the inbound transportation portion of its supply chain.
Opportunity costs associated with the so-called ‘last mile’
component of the supply chain were also not considered,
thus excluding costs associated with customer service,
such as lost sales. Further studies are required to explore
the logistics opportunity costs of using road in place of rail
transport in other industries in the South African economy.