Warehousing shortage hurting economic growth in Kenya
Almost a fifth of Kenyan manufacturers have made losses in the last five years due to warehousing shortage in the country. This is according to a new report released today by mega-city developer, Tilisi Developments Limited.
A detailed survey of 56 companies in Kenya, spanning manufacturing, pharmaceuticals, horticulture, logistics, and retailers, found that 16% had sought new warehousing in 2017/2018, with a rising proportion failing to find any solution.
The search levels represented a sharp jump from the previous year, when 9% of respondents searched for new warehousing, while 5% did in 2015.
Moreover, “the majority of companies seeking warehousing in the last five years, being 31 percent of the total respondent base, suffered business damage as a result,” reported Tilisi.
Some 43 percent reported delays in meeting orders according to the report while 29 percent reported lost sales. A further 14 percent said the difficulty and longevity of their search for new space delayed their expansion plans.
“Kenyan GDP is being hampered excessively by the difficulties involved in finding new space for storing and sorting goods for distribution,” said Ranee Nanji, co-CEO of Tilisi Developments.
The business impact of the shortage was sharpest in manufacturing, despite being one of the pillars in the government’s Big Four agenda for development. But the greatest pent-up demand was found in the pharmaceutical industry.
In the last five years, 71 percent of the pharmaceutical companies surveyed searched for new warehousing, and 43 percent of them in the last year.
It took many of them up to a year to find facilities, while others have not yet found a solution. Moreover, 40 percent of them reported problems with their existing warehousing.
“By sector, the highest level of dissatisfaction with existing warehousing is in the pharmaceuticals industry at 43 percent, followed by FMCG/ manufacturing at 38 percent, and horticulture at 33 percent,” the report says.
Access and location were reported as the greatest difficulties, cited by close to two-thirds of those who were currently dissatisfied.
Many also reported problems with their existing buildings, including low heights, which are seeing many Kenyan companies stacking pallets to only one-third of the height that is normal in international warehousing, meaning the same storage requires three times the space.
Other problems include warehouses without loading platforms, which is meaning companies must lift items individually into trucks, considerably slowing loading and adding labour costs.
This lack of quality warehousing is also affecting the prices of goods and the cost of living in Kenya. According to McKinsey & Company, logistics costs in Kenya account for 40 percent of the price of consumer goods, compared to the global average of six percent.
“Businesses depend on lean supply chain processes to keep their costs low and achieve competitive advantage, yet poor inventory storage and management is leading to pricing in Kenyan that is at almost twice the best-case levels,” said Kavit Shah, Co-CEO Tilisi Development Ltd.