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Thursday, June 4, 2020

How unstable power supply can affect business growth

Columns How unstable power supply can affect business growth

By Mupota Muchelemba
Managing Director of Seidor Zambia

In 2015 Zambia suffered from large scale and prolonged load shedding which had a substantial impact on the day to day running of businesses, resulting in a negative effect on the economy. At the time businesses were almost 100% reliant on the national power grid and there were very few alternative power sources. Today we are seeing less of an impact because there is a greater awareness of the importance of using power wisely and people have also started investing in alternative power. However, the lasting lessons from that time are clear – businesses need to have systems in place that allow them to plan around and manage unforeseen circumstances.

Disruptions like rolling power cuts can have a massive effect on mid-sized businesses. A very large part of the business is unproductive if there isn’t power and the repercussions are expensive. Diesel generators are expensive, and diesel is expensive, so you often find that production costs have to be increased due to the added expense of more expensive power.

Manufacturing businesses and businesses with moving assets, like logistics and transport companies, can be particularly affected as their systems are heavily reliant on electricity.

In the case of the transport sector, we see very particular problems arise in the area of maintenance when there are power cuts. A company that manages a fleet of trucks is unable to be productive if they cannot, for example, do tyre fittings. Each truck may have 20 tyres or more, and a fleet could have upwards of 2,000 tyres that need replacing during regular maintenance. It is also unlikely that a manager can effectively track his vehicles online without power, which becomes a security issue as well as a customer service issue (as the company cannot report back to a customer on where their freight is). These sorts of tasks are essential, and therefore being able to plan around potential load shedding becomes key to productivity.

The transport and logistics sector is a vital contributor to Zambia’s GDP as the country is land locked and relies heavily on trucking to move goods in and out. Outside of the companies that own the trucks, and physically do the transport, there are supporting businesses (like the 800 freight forwarding operators in Zambia) that operate in the background on vital operations like customs clearance and brokering. In total there are about 7000 users on the country’s customs system which gives us a good indication of the number of commercial entities reliant on the logistics sector to run smoothly.

Zambia’s GDP numbers from 2015 show that transport and storage contributed to 4% of GDP which was similar to the public administration and defence sector, and larger than financial and insurance activities. Macro-economic numbers from 2017 show that percentage as 7.3%, which is significantly higher and showing a clear growth in the field. Overall the GDP from transport in Zambia averaged 1168.41 ZMK Million from 2010 until 2019.
Given that transport and logistics can be seen as an important part of Zambia’s economy, how can businesses in this sector best mitigate the fall-out from load shedding? The answer lies in effective enterprise resource planning (ERP) with a system like SAP Business One.

A good ERP system will help businesses manage both pre-planning for outages, as well as how to keep the business running during load shedding.

SAP Business One has the capability to treat a generator as a cost centre in the business to track the running cost of the backup power compared to using grid power. In order for manufacturers to determine whether a generator makes financial sense SAP business One allows users to adjust their production plans to see how using back up power will affect costs. Plus, if they have used the system for a while, they have access to historical data to map out patterns. These patterns are particularly useful to manufacturers and large distribution business as they can predict, for example, what power outages would do for a set number of hours per day and they can then adjust sales forecasts accordingly. The system will also help businesses prioritise where to spend their energy.

An ERP system allows businesses to see how power outages affect their productivity and products and they can therefore adjust their strategic thinking. For example, the decision to invest in solar power or buying a backup power generator or whether to move systems from a server to a cloud can be entirely driven by data. As you can’t control what you can’t measure, I believe it is much easier to make a decision when you have access to accurate information. Information is power.

It has become essential good business practise to track how much power is being used across all parts of a business. In an environment where stable power supplies are rare, it becomes a powerful step towards building more sustainable businesses. Once smaller to medium businesses understand their power use, which they can do through an effective ERP system, they will have greater knowledge as to how they should be using and managing this scarce resource – to ensure productivity and profitability.

Knowledge is power and there is power in knowledge.

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  1. We are busy running the country here, take these kind of articles to Secondary Schools.
    We need the Linda Kasonde, Laura Miti, Matha Musipe, not these cheap pizza eating guys.

  2. He is writing about possible short term solutions for businesses in a climate that the politicians have messed up. The people you mention above will write from a longer term political angle about how to get rid of this lot.

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