Chapter 5: Logistics in the Table Grape Industry

5.1 Logistics operations and service providers in the trade chain

Once an exporter has successfully procured product in South Africa for an overseas market, it is normally his responsibility to move the product from the South African farm gate to the overseas importer’s distribution centre. This perishable cargo has to arrive in time and in the specified condition for a market that is often more than 10 000 kilometers from source. For this to happen, the exporter and his producer rely heavily on a number of service providers to carry out their functions professionally in the chain.

5.2Developments in logistics in the fruitindustry

The traditional mechanics of a trade chain involved fruit being transferred through a sequential set of separate logistics ‘operations’ - like trucking, forwarding and clearing, warehousing, terminal operations, stevedoring and shipping – from the supply end of the chain to the demand end of the chain. The implication was that these separate functions were carried out by separate organizations; that costs were accrued on a cost plus a margin basis; and that there was little or no integration of the individual logistics elements in this chain.

Figure 5.1 is a simplistic view of the table grape export chain showing these logistics operations.

In referring to figure 5.1 above, the following procedural steps will indicate how the flow of product moves through the chain.

Orders for South African table grape products start with the overseas importers responding to consumer demand ().

These importers communicate their exact product specifications to their South African exporters () who are predominantly marketing agents and producer-exporters.

The South African exporters, in turn, pass on the overseas requirements to their producers ().

The exporter then sets about ordering the packaging () and having it delivered to the farm.

He also books the container with the shipping line () and has it sent to the farm to be stuffed with the product.

The exporter books the road transport () to fetch the product and have it delivered to the cold store or port terminal (), whichever is appropriate.

Once the product has been cleared by customer for export () it is loaded onto the appropriate vessel (or) and shipped to the overseas market.

These logistics activities and the movement of the product from South Africa to the overseas market are recorded electronically at all times and communicated to all relevant parties via electronic data interchange ().

The product and transport equipment is also quality controlled repeatedly along the trade chain by the PPECB ().

Market forces have had to re-engineer the traditional trade chain, primarily because there has been a shift in gears from suppliers through to retail chains. The fact that growers and retailers are not experts in logistics has resulted in the emergence of a large number of third party logistics companies (3PLs) which offer a far greater range of services along the trade chain. These companies have integrated some of the formerly stand-alone functions within the chain to provide value-added logistics to their customers. In addition to this, 3PLs and other companies have clustered together in a way that form ‘logistical pathways’ or ‘value chains’ from the supplier to the buyer. The consequence of this is that there are fewer, larger integrated companies offering a wider range of services that stretch further up and down the value chain than before.

This approach to the fresh fruit logistics chain in the deregulated era has been driven by a number of major trends. It has been postulated that logistical service providers and their principals have been driven by just in time (JIT) production, total quality management (TQM) and continuous improvement (CI). In addition to this, overseas retailers have wanted to take greater control over the logistical aspect of the business, demanding this not only to satisfy their customers, but also to save costs and to extract greater income to their end of the chain. Other major drivers of the metamorphosis of the logistics chain include:

  • The emerging South African producer-exporters who are bypassing the services of the traditional marketing agents and contracting directly with the logistical companies themselves;
  • Strong and volatile exchange rates and deflationary product prices in the UK market that have forced growers to relentlessly scrutinize their costs in the chain. Growers have had to insist on a far greater element of transparency in the cost chain than has traditionally been the case;
  • The need for service providers to integrate forwards and backwards in the chain so as to have a greater degree of control over the product and to improve their profitability levels;
  • The growth of non-European destinations for South African fruit in general;
  • The growth in containerized shipping at the expense of conventional (reefer) shipping; and
  • The decay of productivity in, and the congestion of, the various South African ports.

5.3 Flow of fruit into the Cape Town port

Table grapes are exported to the EU market predominantly through the seaport of Cape Town. Export consignments are trucked from farm to port using either merchant haulage, which is the exporters’ responsibility, or carrier haulage, which is the shipping lines’ responsibility. These consignments arrive in the port either in refrigerated road trucks or refrigerated containers. Until recently, the railage of grapes to the port has not been a viable form of transport, as the correct rolling stock has not been available. This is despite rail being considered a more efficient mode of transport compared to road haulage. Huge strides have been made recently to increase the use of rail, and this is covered in the Tonnage off Tar insight box on the following page.

If the fruit is being loaded onto a conventional vessel, it is delivered to the break-bulk terminals that unload and store the fruit until it needs to be stevedored onto the vessel.

These terminals (as well as the inland storage facilities) provide cold sterilization functions and provide access for the DAFF and the PPECB to inspect the fruit. More recently, the conventional terminals have started handling some containers that are loaded on top of reefer vessels for the increasingly popular form of combi-shipping. The break-bulk terminal facilities have been dominated by Fresh Produce Terminals (FPT) in the deregulated era, which is a subsidiary of one of the exporters, Capespan. Currently FPT retains 90% of the current break-bulk terminal business countrywide with terminals in Cape Town, Port Elizabeth, Durban and Maputo. With the upsurge in container shipping at conventional shipping’s expense, FPT has been soaking up spare capacity by diversifying into alternative freight types. The typical logistical steps in conventional shipping are outlined in figure 5.2 that follows.

INSIGHT BOX – Tonnage off Tar - A Cooperative Initiative to Increase Freight Rail in the fresh fruit export industry

  1. Industry and TFR officials at the launch of rail at the SAFT offices in Paarl.
  2. Industry and TFR officials at a landmark meeting regarding the use of rail (from left to right; Sandra Baetsen, Malcolm Dodd, Ampies Grotsius, Stuart Symington, Suria Singh, Bheka, Elvin Harris, Daleen).
  3. A side loader lifting a 30 tonne container from a road truck onto a rail truck.
  4. Sandra Baetsen, project manager of the Tonnage off Tar initiative.
  5. An electric locomotive arriving in the Hex River to haul grapes to Cape Town port.

Fresh fruit logistics in South Africa is still largely dominated by road freight. Whilst this currently serves the needs of the industry, it is not sustainable, even in the short-term. One of the main reasons is the rapidly increasing road congestion within the main port cities, placing a high risk on the ability of the industry to deliver quality fruit to the market on time. Road freight has a carbon footprint more than twice that of rail freight. Together with the rising cost of fuel, these factors pose a threat to the global competitiveness of the fruit export industry.

The fruit export industry’s underutilisation of rail freight is mainly due to the unavailability of the correct rolling stock for the transport of containers besides it being a slower mode of transport compared to road transport. Currently, rail freight is only utilized by the grape, avocado and citrus industries in certain regions during peak production seasons. However, this is changing as the industry gathers a sense of urgency about moving more fruit using rail freight rather than road freight.

A forum of industry role-players, led by FPEF, is investigating ways of increasing the use of rail freight in the fruit logistics chain. A true partnership is being forged between exporters, Transnet Port Terminals, Transnet Freight Rail and the National Department of Agriculture’s Engineering Services Division to find innovative solutions to the rail challenge. This initiative, called Tonnage off Tar, aims to extend the current rail freight services to other export fruit growing regions, and to enable Transnet Freight Rail to optimally deploy rolling stock and traction engines for the fruit export industry for 11 months of the year. This involves shifting bulk freight from road to rail to improve the utilisation of existing rail assets. The usage of slots on the various rail routes is being investigated to increase the number of reefer fruit trains to and from the ports.

Retaining and expanding the rail freight service will not only complement existing road transport, but also serve as a competitive alternative, allowing the industry to reduce operational costs. A single freight train can replace the equivalent of 32 road trucks, each transporting a container of fruit. Rail transport is therefore more efficient than road transport where large volumes of fruit are transported over great distances. It allows shippers to maximize on cargo mass in the container, which is currently prevented by road-use legislation. Also, in the port terminals, rail is an effective buffer on productivity enhancement and off-peak moves.

In light of the changing global landscape of the fruit export industry, the benefits of rail freight have become more evident over the past few years. Besides the cost benefits mentioned before, and the reduction in carbon emissions increasingly being demanded by overseas markets, rail freight can provide better facilitation of product and cold-chain handling in reefer containers; reduced wear and tear of the National road system; and reduced bottlenecks at export terminals.


If the export consignment is being loaded onto a container vessel it is delivered to the Cape Town Container Terminal (CTCT) facility, which is located in a different area of the port to that of the conventional terminal site. The consignment passes through an administrative checkpoint (A-check) to ensure that the paperwork identifying the driver, truck and booking reference number correspond with what the terminal facility’s computer was expecting. Any deviation causes the truck to be held up, or sent away, until the exporter has rectified the problem.

If approved, the consignment then progresses to the physical checkpoint (P-check) where the truck registration number and the container number are verified via a wireless, hand-held device also connected to the terminal’s computer system. This is for security reasons. The seal on the container is also checked at this stage to ensure that it is intact. Any discrepancy means that the consignment is returned to the exporter.

Once satisfied that all is in order, the personnel at P-check inform the truck driver where to meet the straddle carrier inside the port facility, from where it is placed in the stacks and plugged into electrical power while awaiting loading onto the container vessel.

The container terminal facilities are owned by the state-ownedTransnet Port Terminals (TPT). It is important to note that in 1995, the share of container shipping was 24% of the fresh produce export business from South Africa; but by 2006, the container share had escalated to 70%. By 2007, more than 80% of all table grapes exported were shipped in integral reefer containers.This growth in containerized shipping has had a deep impact on the effectiveness and efficiency levels of the logistics chain in the deregulated era of the South African table grape export industry. The typical logistical steps in containerized shipping are shown in figure 5.2 that follows.

5.4 The future of table grape shipping

South African table grapes exporters are witnessing a dramatic revolution in the shipping side of their business. The container liner sector has grown at great pace while the conventional shipping sector has been trying desperately to compete.

The expansion of the global container shipping industry is a result of intense, inter-container liner competition, stemming from the industry’s high level of fixed costs; the widespread practice of governments subsidizing their shipping and shipbuilding industries; the entrance of newly-established, low-cost Asian shipping lines; and the ease with which containers are able to be transshipped from one mode of transport to another.

International shipping is moving away from the traditional port-to-port services towards door-to-door solutions. This has come about through the interoperability of transport modes, the interconnectivity of land networks with sea and the compatibility of information systems. And because these shipping lines are such an important link in the chain and essentially operate most of the containers, the extension of the services from specialized shipping to trade chain logistics was a natural progression. However the severe competition that has ensued amongst the container shipping lines has forced ship owners to adopt innovative, productivity-enhancing and cost-cutting measures which include:

-Deploying larger vessels;

-Rationalizing their businesses by participating in strategic alliances and mergers;

-Reducing the number of port calls, hubs and mini-hub ports, thereby increasing the volume of transshipment cargo;

-Developing a network of feeder services linking hub and regional ports;

-Developing new types of shipping services.

5.5 Conventional Shipping

The rationale behind the ebbing conventional shipping sector is fourfold: (1) the deregulation of export boards; (2) the mounting influence of retailers worldwide; (3) the ‘drift’ towards the use of containerization by exporters; and (4) the declining conventional shipping fleets. Gone are the days when a conventional vessel would come ‘tramping’ to your doorstep and service one client, with one shipload and one bill of lading. Today, a supermarket may require 5 to 50 pallets a week, and the same vessel now has 200 clients on board with 200 bills of lading. In addition, the vessel may now be carrying 100, 40-foot containers on deck, a sure sign of how adaptive the industry has had to become in order to compete. But the fundamental decline in this sector can be ascribed to no new conventional vessels being built in the sector for the last five years, the ageing of the existing fleet and older reefer vessels being scrapped. In addition, the surplus tonnage that has been created in the container vessel sector has forced the container sector to dampen its freight rates to lure cargo away from the relatively more expensive conventional sector.

Factors that favour conventional shipping include: (1) the combined shipping of cargo below deck and containers on deck; (2) self-contained vessels which have built-in cranes on the ship’s deck, making them independent of shore crane equipment; (3) capacity to sail at high speed; and (4) flexibility in terms of ports of loading and discharge.Transit times to certain markets are shorter with the conventional lines than they are with the container lines, and cold sterilization techniques used in conventional ships are more reliable than in containers.In addition, break-bulk ship loading can continue in high winds whereas container loading has to stop at a certain wind speed, for safety reasons. Currently there is also the question of whether the container industry can manage the entire fruit export crop with the infrastructural limitations being experienced. This is particularly in the ports, and including the shortage of container boxes to meet the rising demand of containers.

5.6Comparing conventional and containerized shipping

Insert pics of containers (Stu to advise James on this)

The relative demise of the conventional sector can be seen more starkly when analyzing the advantages that table grape exporters, service providers and the product glean from using the containerized mode of shipping. The advantages that have been cited include:

(1)Pallets in containers are handled fewer times (up to seven times less) than the conventional methodology which is advantageous for product quality;

(2)The product can be containerized at the pack house, and the cold chain is therefore unbroken from the pack house right up to the customer’s premises overseas, offering what is essentially an uninterrupted, door-to-door cold chain service;

(3)There are fewer parties involved in the ‘unbroken’ cold chain process making accountability for product quality losses a much easier exercise;

(4)With the phasing out of the 20-foot porthole containers and the introduction of the 40-foot integral containers, twice the amount of product can be moved (in one lift) than previously, making the cost per carton of fruit being shipped cheaper. Costs have been further cut by the introduction of high-cube containers and with the specialized integral containers shippers have had greater assurances on quality control than ever before;