Logistics and Global Value Chains in Africa

The Impact on Trade and Development

Adebisi Adewole, John J. Struthers, Adebisi Adewole, John J. Struthers

• Publisher: Palgrave Macmillan
• Year: 2018
• ISBN:
  9783319776521
• Topic: Business
• Subtopic: International Business
• Index: Business

Focusing on global value chains and their importance to trade, this edited collection explores the strategic role of logistics and supply chain infrastructure in the development of Africa. Skilled authors present critical analysis of the current state of logistics in Africa, and suggest improvements to policy and practice which address the issue of poor trading relationships. This book will engage entrepreneurs, academics and policy-makers interested in international business, raising awareness of the need for better trade infrastructure in Africa in order to ensure the continent's economic development.

Part ILogistics and Supply Chain Strategy

© The Author(s) 2019

Adebisi Adewole and John J. Struthers (eds.)Logistics and Global Value Chains in AfricaPalgrave Studies of Sustainable Business in Africahttps://doi.org/10.1007/978-3-319-77652-1_1

Begin Abstract

1. Trade and Economic Development in Africa: The Interaction Between Logistics and Global Value Chains

Adebisi Adewole¹ and John J. Struthers¹

(1)

School of Business and Enterprise, University of the West of Scotland, Paisley, UK

Adebisi Adewole (Corresponding author)

Email: [email protected]

John J. Struthers

Email: [email protected]

End Abstract

1.1 Overview and Structure of the Book

This book provides a comprehensive explanation of the relevance of logistics and global value chains (GVCs) to trade on the African continent. It takes the reader through a structured but logical development of knowledge relating to these issues, backed up by extensive coverage of recent trends in African trade. A strength of the book is that the sections build on each other, thus it can be read on a section-by-section basis. Readers are assisted by pertinent and up-to-date references on the many different topics covered.

With the development and advancement of integrated logistics and supply chain frameworks and the untapped potential for trade in Africa, there is a need for a critical appraisal of the significant roles of logistics and GVCs and the relationships between the two concepts. This book sets out to examine how the demand and supply dimensions of supply chain architecture interact with the economic concepts of GVC. This inter-connectedness between supply chains/logistics and global value chains is conceptually critical to ensure a clear understanding of: long-term sustainability of supplier–customer relationships; environmental accountability; social responsibility; and the economic viability of actors within GVCs. These four elements are closely bound together and are reflected in each of the chapters that follow.

It is the authors’ contention that this book will fill a significant gap in the trade literature on Africa by combining these two related but distinct areas of study. In so doing, the authors hope that justice will be done to the complexity of these intertwined aspects of trade in order that progress can be made on the African continent to achieve viable and sustainable supply chain/logistics along with equitable and efficient GVCs. Moreover, this can also contribute to a more collaborative multi-stakeholder approach that can help to bring about much-needed fair and more competitive trade deals for Africa.

1.2 Key Concepts in Logistics and Supply Chains

1.2.1 Logistics

The word “logistics” originated from the military lexicon during the Second World War when the allied forces employed logistics skills to try and win the war. Since the end of the First World War, business organisations have adopted similar logistics management skills to create competitive advantages. There have been varying views with regard to what logistics truly means. While some see logistics as having mainly to do with the application of mathematics in military concerns, others (particularly in the latter part of the twentieth century when the term crept into the non-military, commercial lexicon) regard it as a source of competitive advantage for business organisations.

The UK’s Chartered Institute of Logistics and Transport (CILT 2018) described logistics as the time related positioning of resources to meet user requirement, and this involves getting the right products to the right place in the right quantity at the right time in the right conditions at the right costs; whilst the US -based Council of Supply Chain Management Professionals (CSCMP) suggests logistics to be “the process of planning, implementing, and controlling procedures for the efficient and effective transportation and storage of goods including services, and related information from the point of origin to the point of consumption for the purpose of conforming to customer requirements. This definition includes inbound, outbound, internal, and external movements” (CSMP 2013).

These definitions suggest that logistics functions comprise processes and activities such as transport, warehousing, forecasting, order processing route design and customer services among others, which entail the movement of goods from point of origin to the point of use.

1.2.2 Supply Chain Management

The term “supply chain management” (SCM) was first conceptualised by consultants in the mid-1980s and has since gained considerable recognition from academics and business managers. The concept of SCM is wider than logistics and is derived from the idea of a network of processes linked together to form a web or a loop. SCM represents the management of a much broader inter-organisational relationship across the upstream (supplier end of the chain) and the downstream (customer end of the supply chain) echelons.

Christopher (2016) defines SCM as “the management of upstream and downstream relationships with suppliers and customers to deliver superior customer value at less cost to the supply chain as a whole”. He noted that the focus of SCM is on co-operation and trust and the recognition that, properly managed, the whole can be greater than the sum of its parts.

The supply chain comprises the flow of all information, products, materials and funds between the different stages of creating and selling a product. A company’s supply chain represents every step in the process, starting from creating an idea for a good or service, designing and manufacturing the product, transporting it to a place of sale and then to selling it. In essence, the supply chain concept includes the management of all functions from initial idea to delivery (Fig. 1.1).

Fig. 1.1

A supply model. (Source: Model developed by author from the literature)

1.3 Global Value Chains

The idea of value chain was pioneered by Porter (1985). The five steps in the value chain give a company the ability to create value that exceeds the cost of providing the good or service to customers. Maximising the activities in any one of the five steps allows a company to have a competitive advantage over competitors in its industry. The five steps or activities are: inbound logistics; operations; outbound logistics; marketing and sales; and service. Inbound logistics include receiving, warehousing and inventory control. Operations include value-creating activities that transform inputs into products. Outbound logistics include activities required to get a finished product to a customer. Marketing and sales are activities associated with getting a buyer to purchase a product. Service activities include those that maintain and enhance a product’s value, such as customer support.

The difference between a value chain and a supply chain therefore is that a supply chain is the process of co-ordinating all parties involved in fulfilling a customer requirement, while a value chain is a set of inter-related activities that a company uses to create a competitive advantage. Fredrick (2016) described the value chain as “the full range of activities that firms and workers do to bring a product from its conception to its end use and beyond”. This includes activities such as design, production, marketing, distribution and support to the final consumer. The activities that comprise a value chain can be contained within a single firm or divided among different firms. Value chain activities can produce goods or services and can be contained within a single geographical location or spread over wider areas. In the context of developing countries, especially in Africa and in relation to commodities trading, the concept of value chain has expanded to include a stream of activities in GVC networks that comprise “the full range of economic activities that are required to bring a product from its conception, through its design, its sourced raw materials and intermediate inputs, its marketing, its distribution and its support to the final consumer ” (Kaplinsky and Moris 2001). Simply put, a GVC includes all of the people and activities involved in the production of a good or service and its supply and distribution activities at the global level. A GVC is therefore similar to an industry-level value chain but encompasses operations at the global level.

GVCs also have another dimension that relates to the extraction of surplus or “rents” at different stages of the production, distribution, marketing and selling stages of the cycle. A number of authors, such as Gereffi and Korzeniewicz (1994), Fitter and Kaplinsky (2001) and Ponte (2002), have written seminal work on GVCs, which has been built upon by others since the turn of the century. International organisations such as UNCTAD (2013) and the Keane and Baimbill-Johnson (2017) have also focused on the role of GVC upgrading on the part of primary commodity producing countries as an essential requirement for them to benefit fully from world trade. A key point made in all of these studies is that every commodity (or material) has its own “bespoke” GVC, which is unique to that commodity. So, while the overall structure of a value chain may have common elements, they are all commodity specific. Even within commodity groupings, there are differences. For instance, within the “soft” tropical beverages group, the GVC for tea will be different from the GVC for coffee, and the GVC for coffee will be different from the GVC for cocoa. Similarly within the “hard” commodities group, the GVC for copper will be different from the GVC for iron ore, and so on.

1.4 Chapter Summaries

1.4.1 Part I

Chapter 1 is the introduction. The chapter discusses the relationships between logistics and SCM and GVC in relation to their contributions to, and facilitation of, trade and economic development in Africa. The chapter presents the reader with an overview of the contents and structure of the book.

Chapter 2 provides a general view of the dynamics of logistics infrastructure and its impact on trade and development in Africa. Adewole takes the view that despite Africa rapidly emerging as a strategic trade bloc with a growing wealth, the continent’s inadequate infrastructural landscape is holding back trade and economic development. The author discusses the critical challenges facing logistics infrastructure in Africa, particularly in modes of freight movement, such as rail , road, sea and air transport. Adewole attributes the slow pace of logistics infrastructure development in Africa to: inadequate inland roads and railways; the high cost of operations; the lack of adoption of new technology; bureaucratic and inefficient port management; the absence of a defined strategy for freight transport; inadequate investment; ineffective regional collaborations; and a lack of political will. Despite these limitations, the chapter outlines some recent and on-going advances in trans-African highway development projects assisted by the African Development Bank and the United Nations Economic Development in Africa. He recommends better transport infrastructure with more connectivity across borders; a collective approach to an improved and more efficient intra...

Table of contents

• Cover
• Front Matter
• Part I. Logistics and Supply Chain Strategy
• Part II. Global Value Chain and Commodities Trade
• Back Matter