Spoornet streamlines coal deliveries

Bulk Logistics Collaboration in Action: The Spoornet and Anglo Coal Case Study Picture a pasture open to all. It is to be expected that each herdsman will try to keep as many cattle as possible on the commons.

Such an arrangement may work reasonably satisfactorily for centuries because tribal wars, poaching, and disease keep the numbers of both man and beast well below the carrying capacity of the land.

Finally, however, comes the day of reckoning, that is, the day when the long-desired goal of social stability becomes a reality.

At this point, the inherent logic of the commons remorselessly generates tragedy. As a rational being, each herdsman seeks to maximize his gain. Explicitly or implicitly, more or less consciously, he asks, "What is the utility to me of adding one more animal to my herd?"

This utility has one negative and one positive component.

The positive component is a function of the increment of one animal. Since the herdsman receives all the proceeds from the sale of the additional animal, the positive utility is nearly + 1. 2.The negative component is a function of the additional overgrazing created by one more animal. Since, however, the effects of overgrazing are shared by all the herdsmen, the negative utility for any particular decision-making herdsman is only a fraction of - 1.

Adding together the component partial utilities, the rational herdsman concludes that the only sensible course for him to pursue is to add another animal to his herd. And another.... But this is the conclusion reached by each and every rational herdsman sharing a commons. Therein is the tragedy. Each man is locked into a system that compels him to increase his herd without limit - in a world that is limited. Ruin is the destination toward which all men rush, each pursuing his own best interest in a society that believes in the freedom of the commons.

Freedom in a commons brings ruin to all. (Source: Gareth Hardin, The Tragedy of the Commons,1968).

Many Supply Chains in industries such as Coal today are subject to the "Tragedy off theCommons" reg. no. 1999/000659/07 Directors: Dr Chris Jardine (Chairman)*, Carvel Webb*, Harry Mashele*, John Rowlands*, Pr By its very nature Supply Chain Collaboration is a process in which different organisations come together and share their knowledge, expertise and/or resources in every effort involved in producing and delivering a final product or service as efficiently as possible.

This paper presents the process followed to establish Supply Chain Collaboration in the coal industry in terms of:

* Developing the foundation for collaboration
* Challenges in initiating collaboration
* Vision and objectives of collaboration
* Developing the collaborative solution, and
* Anticipated benefits of collaboration

Coal is at the core of South Africa`s economy. It generates the energy that fuels virtually every production process, from steel and paper to cement and power. Industry`s heavy reliance on coal necessitates a highly efficient supply-chain backbone to ensure continuous, timely delivery of vast quantities of this strategic raw material.

However, the coal supply chain itself is complex. First, the volumes required for rail-based domestic consumption are enormous, amounting to over 19 million tons per year. Second, the primary production base is extremely diverse and geographically scattered, comprising several coal mines distributed throughout the country. Third, there are literally thousands of individual end-users, spanning multiple sectors and multiple destinations, each with widely varying coal consumption patterns and requirements.

Amid such complexity and with so many players and geographical variables in the equation, the potential for delivery bottlenecks and inefficiencies is intrinsically high. Coupled with the predominantly manual planning, tracking and communication processes traditionally used in the supply chain, the risk of uneven or disrupted supply is greatly magnified. To date, this has frequently been the case in practice in South Africa. At any given time, the national railway company, Spoornet, is required to freight coal on as many as 450 different routes, causing capacity constraints that are exacerbated by poor planning and communication between Spoornet, the coal producers and coal consumers. These capacity constraints have at least partly fuelled perceptions among the industry that Spoornet has been the weak link in the supply chain.

For Spoornet, the streamlining of coal deliveries, while optimising its own resources, is a strategic business objective, since coal accounts for over 22% of its entire general freight business and generates over 17% of revenues. It is against this background that the company initiated a coal collaboration initiative aimed at bringing trust, timing, transparency and technology into the coal supply chain.