Data management top tech priority for global supply chain

A new survey carried out by supply chain operator Geodis has found that the top five technology supply chain priorities globally are all related to data management, they are data analysis, Internet of Things, cloud computing, info security and predictive analytics.
“In the wake of globalisation and rampant digitalisation, commercial trade flows have evolved dramatically,” the company said in a statement. “Both the volume and the scope of services managed within supply chain have reached unprecedented levels.”
Seventy per cent of respondents of the 2017 Supply Chain Worldwide survey stated that they consider their supply chain to be either ‘very’ or ‘extremely’ complex, and they also emphasise the strategic position it has reached in their overall organisation.
The majority – 57 per cent – of firms surveyed said that they consider their supply chain to be a competitive advantage, and 66 per cent dedicate 5–15 per cent of their turnover to supply chain spends.
Three quarters of the firms Geodis spoke to reported that they use four or five different transportation modes in their supply chain, with road (full truckload) and airfreight the two most common.
Focus on achieving full visibility over the supply chain – from suppliers of suppliers to clients of clients – has increased in recent years – it is now the third most important priority reported, while it came in sixth place in the 2015 survey. Only six per cent of firms succeeded in reaching this target, however.
“[The] supply chain has become more customer focused and mostly considered as a lever to win competitive advantage,” the statement concluded.
 

Found in translation – Exporting the Australian logistics mindset

This article first appeared in the February/March 2017 issue of Logistics & Materials Handling.
Three Australian logistics veterans have been tasked with rethinking Japan’s supply chain strategy, mixing the traditional and the modern to achieve unprecedented growth.
Even when you’re the biggest name in your market, that’s no reason to rest on your laurels. While Coca-Cola is the market leader for beverages in Japan, there are five other major players vying for a share of the action. Market pricing has been declining steadily over the past 16 years, putting a squeeze on margins and forcing beverage suppliers to stay vigilant to remain relevant. According to Bruce Herbert, Chief Supply Chain Officer at Coca-Cola East Japan (CCEJ), consolidation and diversification have been key strategies for many in the industry. “Coke in Japan is not just carbonated drinks, over half our volume is sugar-free teas, coffee and water,” he says. “A very strong innovation and new product pipeline has to be filled every year from our own plants and a network of contract packers.”
Covering over half of Japan and serving a population of 60 million, Coca-Cola distributor CCEJ is in a constant state of metamorphosis, always looking for ways to increase efficiency and cut costs. The US$6 billion ($8.2 billion) bottler was originally formed in 2013 through the merging of four smaller bottlers and has since absorbed a fifth one. It will soon merge with Japan’s next biggest beverage distributor – Coca-Cola West – and cover some 90 per cent of the market. Set to take place in 2017, the merger will increase the company’s value to US$10 billion ($13.7 billion) and increase its assets from eight factories to 17, 250 sales warehouses from 150, and 800,000 vending machines from 400,000 and 3,500 daily semi-trailer loads shifted per day from 2,000.
CCEJ recruited supply chain experts from around the world, including Bruce, to come to Japan and lend their expertise and, as a result, has been hugely successful in cutting costs and increasing profit. Bruce is joined by two other Australian supply chain experts, cherry-picked for their knowledge of the beverage and retail industries with decades of experience working with supply chains in Australia, Asia and Africa – Edward Walters, now Senior Executive Officer, Planning, Logistics & Distribution at CCEJ; and Distribution Transformation Manager, David Sim.
The Japanese market has presented a challenge, thanks to the country’s complex traditional business etiquette, though Bruce found its workforce’s strong work ethic and customer service to be worthy of admiration. “In Australia we take for granted that change and improvement are part of working life,” he says. “Especially at [Coca-Cola’s Australian-based bottler, ed.] Amatil, where supply chain transformation has been progressing since the mid-90s and many world-leading initiatives were started. Coming to a business which was effectively five small Japanese businesses just three years ago, I have realised just how far ahead some of those things we were doing in Australia were.
“In one way we have a big advantage of having lived in what will be ‘the future state’ for the supply chain here. Of course, there are many things to be learnt from the Japan model as well, but knowing that changes needed here have worked elsewhere gives us a big head start.
“I respect the Japanese working style. My Japanese colleagues are extremely hardworking and focused on detail, in a way that most Australians would find very challenging. Workers regularly work very late in the office, never hesitate to stay back or work over weekends and don’t give up on a problem. So much so that Government and companies are focused on encouraging people to relax more and take more time off, take more holidays etc. – this is definitely not a problem in Australia.”
The Japanese approach to life in general, including even how seemingly ‘logical’ issues are approached is quite different to the West, according to Bruce. “Not better or worse, but different,” he adds. “Whilst basic human reactions and motivations are the same, the way they express themselves is different. Relationships are much more important and sensitive here, as is loyalty to the business or community. All of these things translate into business culture and relationships.”
In some aspects, Australia’s logistics sector could benefit from observing the Japanese workplace, says Bruce. In particular, he believes that the value placed on quality and customer service in Japan would do wonders for Australian business. “Japan is surely the most quality-focused country on earth, and customer service is seen as an extension of quality,” he says. “Near enough is not good enough, perfection is sought after and worked towards at every level. It is deeply ingrained into everyday life – I don’t think we would ever have to ‘train’ for customer service as it is intrinsically understood. This often leads to failures by multi-national companies who don’t understand what Japanese consumers and customers expect. Likewise: quality. Australian businesses may be more ‘lean’ but often do so at the cost of customer service and quality.”
CCEJ looked at successful logistics strategies in use around the developed world when searching for ideas to rejuvenate their own approach and, according to Bruce, flexibility and a laid-back Australian style have been instrumental in ‘cracking the code’ for the company’s logistics strategy. “I think openness to different ideas has been key,” he shares.
“I experienced some changes put in place here earlier by some of our colleagues from the US, but many of them did not work as they were simply ‘cut and pasted’ ideas from the US. Aussies may be proud of their country, but they usually don’t expect that they have all the answers.”
Edward likens the challenge of solving CCEJ’s issues to the task of unravelling a badly tangled set of Christmas lights – difficult to unravel without breaking a light and stopping the business. “We discovered that, over many years on the quest to providing high service and quality, network efficiency at CCEJ had been eroded severely,” Bruce adds. “This had happened steadily and high transport, warehouse and other costs had been accepted as ‘normal’. As there was little benchmarking of supply chain costs outside Japan, and since the costs were not easily ‘visible’, they had not been tackled by investment or progressive change either and a gap grew between global practice and Japan Coca-Cola practice.”
In order to ‘crack the code’, Bruce shares that two major changes needed to be introduced. “First was a painful implementation of a new SAP ERP system which replaced multiple legacy systems and gave central visibility to live data,” he says. “Second was more instinctive – we cut inventory by about 20 per cent – a very brave move in Japan – and thereby decongested the network, eliminating double handling, waiting times, extra transport and product write-off.”
A third big change, which is currently in progress, involves moving inventory upstream, closing small sales centres and cross-docking others, together with possible investment in new warehouses at plants and picking automation. CCEJ is already seeing positive results from the change, with over 25 billion JPY ($290 million) supply chain savings both from manufacturing and logistics/distribution improvement since its inception in 2013.“This year, heavy transport cost is down 20 per cent and write-offs are down 50 per cent,” Bruce shares. “So we are already almost halfway to the long-term cost reduction goal after just one year.” The 2017 merger of Coca-Cola East Japan and Coca-Cola West is expected to create opportunities for further savings.
Bruce attributes his team’s success to a combination of factors, from slow and cautious implementation of changes to constant re-evaluation of direction. “We didn’t approach this as a ‘project’,” he says. “We tackled this as a management challenge – to implement changes, monitor them closely and adjust as we went along. In that way the original ‘plans’ were gradually changed – with successes amplified and failures dropped quickly. Good real-time data access and manipulation was crucial here.
“Thanks to methodical and detailed execution of strategies by our team here, the changes we made to inventory levels, planning processes, truck routing, pallet configurations etc. were executed without impacting customers or quality. This meant that the costs we saved were not lost in upset customers or lost sales, but could flow directly to the bottom line.
“We discovered a clear and costly link between inventory levels and transport costs, which had never been uncovered before. I’d like to say we found this by a big analytical study, but actually it only became clear by trial and error – which is why an army of experts and analysts had failed to find it before.”
CCEJ now encourages its employees to make suggestions for improvement of processes, and implements over 100,000 small innovation ideas per year on ways to improve quality, safety, service and cost.
The notoriously rigid traditional Japanese business culture presented a particular challenge for the CCEJ supply chain team, Bruce explains, though they were still able to achieve “massive change and results” thanks to their measured approach. “Resistance to change remains a constant both within the business and with customers and some suppliers,” he says.
“This is largely due to the extremely high standards set by customers and consumers and fear of making big mistakes. We were able to overcome this by making many small progressive changes, and avoiding – for the most part – big bang or sudden, unplanned change.”
Bruce believes that if applied in Australia, his team’s strategy could result in similarly positive outcomes. “The approach we have taken here has been based on numerics and data combined with good management routines, not just ‘hardware’,” he shares. “It can therefore be applied anywhere, to any problems.”
The CCEJ supply chain team have developed their own version of the revered – though oft-misunderstood – ‘Kaizen’ (kai: change, zen: good) business philosophy whereby big changes can be achieved through small, continuous improvements in all aspects of business. They are confident this method could be applied with success in any business environment. Bruce adds, “All I know is that after 35 years in this game there has never been a change as big and fast as what this team has achieved here in Japan this year.”

Moorebank to support continued land value growth in Sydney

The completion of stage one of Moorebank Intermodal and commencement of stage two is likely to help land value growth rates in Outer West and South West Sydney over the next 12 months, according to Colliers International’s recent report – Sydney’s second airport: The catalytic effect of transport infrastructure.
Over the previous 12 months land values in the Outer West and the South West sub markets have increased by 24 per cent and 21 per cent, respectively.
Other factors set to help maintain double-digit growth over the coming year include developments under the Western Sydney Infrastructure Plan and the continuing shift of industrial users to the west of Sydney. Relocation is proving popular due to relatively cheaper land values and rents, larger sites with custom-built facilities and stronger infrastructure links with new facilities coming soon.
“Industrial land values across the Sydney market have recorded positive annual growth over the past few years, and have entered double-digit growth since March 2014,” said Sass J-Baleh, Manager – Research, Colliers International in the report. “More recently, land values have soared, with annual growth rates in the high 20 per cent since the end of 2015. Record growth rates are expected to continue across all of Sydney’s sub markets. However, there are different fundamental drivers for this growth between the inner sub markets and the outer submarkets.”
Growth in the inner sub markets was found to be driven by stock scarcity due to rezoning, a situation that is not expected to reverse as land previously zoned as ‘industrial’ is being developed into residential infrastructure including dwellings, roadways and train stations.

Bolloré Logistics becomes Australian Trusted Trader

Bolloré Logistics Australia has become the first international transport and logistics company in the country to be officially accredited as an Australian Trusted Trader under the Australian Economic Operator (AEO) programme developed by the Australian Border Force (ABF).
To obtain the Trusted Trader accreditation companies must undergo an extensive audit process to satisfy the AEO that they set and maintain a high level of international supply chain and customs compliance.
“Being certified an Australian Trusted Trader further supports and facilitates the handling of clients’ international supply and expedites the flow of legitimate trade from all sites in Australia,” says Michael Pinnock, National Customs Manager at Bolloré Logistics Australia.
The certification is applicable to all five Bolloré sites in Australia – Brisbane, Darwin, Melbourne, Perth and Sydney.
Certified companies have access to benefits such as reduced cargo inspections at the border, improved cargo lead time, duty deferral, streamlined reporting and priority trade services.

Qube raising $350 million equity for Moorebank

Qube has announced a $350 million equity raising to fund new warehousing and strategic growth initiatives for Moorebank Logistics Park, Australia’s largest intermodal precinct.
Earlier in May, Qube officially commenced development at Moorebank and it is now in discussions with potential tenants for the development.
Qube has announced that it expects to fund the construction of at least $80 million of new warehousing for Moorebank, including the warehouse for the soon-to-be-announced first tenant as well as an initial warehouse facility for Qube Logistics, and construction is expected to commence in early 2018.
“Qube is pleased to have achieved a further important milestone, with the development of the first new warehousing at Moorebank bringing us a step closer to realising the substantial benefits that the Moorebank project will deliver for customers, suppliers, and the entire East Coast freight and logistics chain,” said Maurice James, Managing Director, Qube.
“We are delighted with the initial reaction of potential tenants to the transformational proposition that is provided by the Moorebank facility” he added.
New warehousing at Moorebank is to be built on demand and with pre-commitments from tenants.
Qube has invested around $140 million in the 2017 financial year to date to acquire the remaining 33 per cent of Moorebank it did not already own and on initial development capital expenditure, Qube expects to invest $400 million of capital expenditure in the development of Moorebank – excluding warehousing and rail shuttle capital expenditure ­– over the first 5 years.

DB Schenker CIO AU/NZ on the cloud, disruption and technology

Charlie Macdonald, Chief Information Officer, DB Schenker AU/NZ, recently shared insight on the impact of disruptive technologies on the transport and logistics sector with the university of Sydney’s Institute of Transport and Logistics Studies.
Macdonald has over 25 years’ experience working around the globe in the transport and logistics industry, and a passion for learning more about the innovative information technologies shaping the modern world.
He spoke at a recent seminar held by the Institute, one of a series focused on leadership and policy issues in transport and logistics.
Macdonald’s presentation focused on the impact of disrupting technologies on the transport and logistics sector, in particular how the adoption of the cloud and mobile technologies has changed many industries and transformed supply chains globally.
He noted that he foresees the next wave of disruption coming from the combination of the cloud and mobility technologies with the Internet of Things, Big Data analytics and machine learning.

ALC cautions against passenger traffic on Inland Rail

The Australian Logistics Council (ALC) has spoken out against suggestions of route changes along the length of the Inland Rail to incorporate passenger rail, noting that the planned alignment of the Inland Rail project must be maintained to give certainty to industry and ensure the travel times forecast in the business case can be realised.
“The Inland Rail Route was surveyed and planned seven years ago, in 2010,” said Michael Kilgariff, Managing Director, ALC. “The business case for Inland Rail was developed based on that route.
“Moreover, other organisations have made investment decisions about locating new freight infrastructure based upon that route. This includes projects such as InterLinkSQ’s intermodal facility, which is already under construction near Toowoomba.
“To alter the planned route now would retrospectively penalise those investors, undermine the business case and risk yet more delay to a project that has already been decades in development.”
Kilgariff added that more effective long-term planning is critical for improving the efficiency of Australia’s supply chains and freight networks.
“It’s important to remember that Inland Rail is about establishing a port-to-port freight rail link from Melbourne to Brisbane, with a journey time of less than 24 hours – some 10 hours faster than the current rail route through Sydney,” he said.
“We can’t afford to lose sight of that unambiguous objective by beginning to debate passenger rail links to regional airports. Frankly, that is not what Inland Rail is about.”
Such discussion, he added, would cause further delays to a project that has been planned for decades.
“The last thing our industry and the national economy can afford is further delay to the Inland Rail project because of speculative discussions about altering the route or incorporating passenger services,” he said.
“Such delays will do nothing to deliver the clear economic benefits of Inland Rail, and will simply undermine investor and industry confidence.”

US and Chinese delivery giants form partnership

UPS and SF Holding, the parent company of SF Express, have announced plans to establish a joint venture through which the pair will develop and provide international delivery services, initially from China to the US with plans to add other destinations later.
“UPS is excited to form a joint venture with SF,” said Ross McCullough, President of UPS Asia Pacific. “This joint venture will support products that provide competitive benefits to our Chinese customers who trade or seek to trade internationally.
Alan Wong, Group Vice President, SF, added, “China is leading the world in terms of e-commerce market size, growth, penetration and mobile business usage. Coupled with a rapidly growing and internet-savvy consumer base, it’s imperative that SF and UPS collaborate to revolutionize the logistics sector.  Together, we aim to bring greater competitive advantages to our customers in China, to succeed globally.”
The joint venture is subject to regulatory approval.
 

Input sought on Australia’s future supply chain

Minister for Infrastructure and Transport Darren Chester has called for submissions on a discussion paper for the Inquiry into National Freight and Supply Chain Priorities.
“The Australian Government has announced a record $75 billion infrastructure investment programme, which comprises a range of freight initiatives including the Melbourne to Brisbane Inland Rail and the Western Sydney Airport,” Chester said.
“Feedback on the discussion paper will help the inquiry examine how our investment in the freight network can boost the nation’s prosperity and meet community expectations for safety, security and environmental amenity.
“It will also further our understanding of what challenges and opportunities lie ahead, and how we can take advantage of them.
Chester noted that the discussion paper offers an opportunity for key freight stakeholders such as carriers, shippers, forwarders, primary producers, land developers and consumers to have their voices heard.
“Everybody is part of the national supply chain, whether you are a consumer, business owner, producer, farmer or freight operator,” he added.
Submissions close on 28 July 2017. For more details on how to make a submission, visit the infrastructure.gov website.
The Australian Logistics Council (ALC) has welcomed the release of the Discussion Paper.
“[The] ALC believes there is merit in engaging in a wide-ranging public debate involving government, industry and the community to ensure road funding reform proposals improve supply chain efficiency against the backdrop of an increasing national freight task,” said Michael Kilgariff, Managing Director, ALC.
“[The] ALC supports a critical analysis of the current PAYGO formula for road pricing, which is an inefficient and ultimately unsustainable approach to road pricing. As the 2015 Harper Review stated, ‘roads are the least reformed of all infrastructure sectors’, and the Discussion Paper makes it clear the Federal Government is prepared to address this problem.
“As ALC has consistently said, a reform of this nature will only succeed if the freight logistics industry is actively involved in the development of the new road pricing system. It is therefore pleasing that the Government is seeking industry comment on the options put forward in the Discussion Paper.”

A Private Port – The outlook for Australian logistics

This article first appeared in the February/March 2017 issue of Logistics & Materials Handling
The privatisation of the Port of Melbourne in late 2016 will have major economic and infrastructural implications for the city, Victoria and the country for the next half-century. For the region’s logistics industry, it will be anything but business as usual.
Australia’s largest container and general cargo port, the Port of Melbourne, was recently leased for 50 years to a private syndicate, the Lonsdale Consortium. Victoria’s logistics industry is set to benefit from massive investment by the new owners to improve the Port’s efficiency and increase its capacity.
The deal follows the privatisation of the east coast’s other major marine transport hubs, the ports of Brisbane, Botany Bay, Kembla and Newcastle, in recent years. The Victorian gateway handles the bulk of Australia’s freight task and, as such, the agreement will impact the region’s logistics industry at every level, in the region and across the country.
The successful bidders secured the lease in September 2016 in a deal worth $9.7 billion, and promptly took control of the Port of Melbourne on 31 October. Having expected to settle around the $7 billion mark, the Victorian Government was pleased with the result, vowing to invest the money on improving the region’s transportation links. Along with an additional, expected-though-disputed 15 per cent top up from the Federal Government under the asset recycling agreement, Victoria’s $11 billion windfall will have massive implications for its trade, transport and infrastructure ambitions.
Several projects have already been earmarked for investment with the proceeds of the sale, each aimed at relieving transport woes around the region. Lease proceeds going to the Victorian Transport Fund will be allocated to improved rail and vehicular access to the Port and the removal of 50 of the area’s worst level crossings to ease urban traffic congestion. Also to receive funds is a major urban rail project, Melbourne Metro, designed to ease commuter congestion on highways, and the ‘Western Distributor’, a five-kilometre toll road to link the West Gate Freeway at Yarraville in Melbourne with CityLink at Docklands, allegedly taking 6,000 trucks per day off the West Gate Bridge.
At the time of the sale, ALC Managing Director Michael Kilgariff voiced his support for major investment in logistics infrastructure. “Infrastructure Australia has predicted the volume of containerised trade going through our ports and airports will increase by 165 per cent from 2011 to 2031,” he said. “This significant growth underscores a need for all governments, including Victoria, to invest in appropriate national infrastructure to ensure our landside infrastructure can keep pace with waterside growth.
“Now is the time to get Victoria’s supply chains right by investing in the State’s logistics infrastructure to maximise the Port’s future potential.”
Tim Pallas MP, Treasurer of Victoria, has given assurances that the money obtained from the lease sale will directly benefit road users, and commercial vehicles in particular. “The Victorian Government is already working to take thousands of trucks off the West Gate Bridge and to the Port of Melbourne by a new dedicated road link, easing congestion for city-bound traffic,” he wrote in an official release. He has, however, already expressed concerns over funding and the politics of progress after the Federal Government refused to offer the full 15 per-cent asset recycling scheme top-up payment. Nonetheless, it would appear that, at least for the near future and the current government, the coffers are full and investment is possible.
On the other side of the transaction, the Lonsdale Consortium, comprising the Future Fund, QIC, Global Infrastructure Partners and OMERS, has secured a valuable deal. For their money, they have gained control over Australia’s largest and busiest container, automotive and general cargo port, and the 3,000 vessels that visit each year handling 36 per cent of the country’s container trade.
In addition, the deal specifies that the State will be required to pay compensation if a second container port in the region is constructed within the 15 years of the lease’s commencement.
Some observers worry that in order to recoup their cash, the Consortium will hike up fees and rents as soon as an agreed 15-year fee freeze period has expired, resulting in a loss for the Port’s users and, indirectly, consumers. ANL Container Line Managing Director John Lines warned at the time of the sale that port users and the broader Victorian community would soon feel the squeeze. “Port and other State asset privatisations are a tax by stealth which will be paid over decades to come,” he told Lloyd’s List Australia. “If we look at the numbers for Melbourne and do some very simple calculations, the Port made EBIT in 2014–15 of $121 million which at the sale price of $9.7 billion for a 50-year lease, is $195 million per year just to get their money back, let alone make a good investment return. So the only way is up for prices. There is some comfort in the 15-year price cap in the lease agreement but after that, for another 35 years, it will be open slather…and we will all be paying dearly for it.”
The Victorian Transport Association (VTA), meanwhile, has advocated the private lease, welcoming the infrastructure improvements to come as a result. “The VTA played a significant role in the process behind leasing the Port of Melbourne, through numerous submissions, appearances before the Upper House lease inquiry and advocating for transport projects lease proceeds,” said VTA CEO, Peter Anderson. “The windfall from the lease will fund projects through the Victorian Transport Fund, such as strengthening roads and bridges to accommodate high productivity freight vehicles.
“It was also notable that through our efforts, the legislation was modified to address the major concerns we had about protections at the port, giving operators certainty against excessive price hikes.”
As the Lonsdale Consortium and Victorian Government congratulate themselves on a job well done, thoughts must move to the realities of a privatised Port for the thousands who pass through it each day.
In return for the anticipated rise in fees, port users will ideally benefit from the spoils of a transition from state ownership to private management, including increased efficiency, faster decision- and change-making powers thanks to a less bureaucratic system and investment in facilities.
In reaction to a once-popular opinion favouring government intervention, Harvard Professor of Economics, Andrei Schleifer, stated in his much-cited 1998 paper State Versus Private Ownership that capitalism limited by government regulation – not socialism – should be the answer. “Private ownership should generally be preferred to public ownership when the incentives to innovate and to contain costs must be strong,” he wrote. “Many of the concerns that private firms fail to address ‘social goals’ can be addressed through government contracting and regulation, without resort to government ownership.” Schleifer’s vision, however, relies on the absence of monopoly, a fact that the Lonsdale Consortium’s contenders for the lease will now be keenly aware of, though the Victorian Government will retain responsibility for some aspects of port business – notably safety and environmental regulation.
According to former ports boss Michal Frydrych, while privatisation or leasing of terminals and port operations can be beneficial, selling or leasing entire ports can lead to serious abuse of power. “I have always operated on the premise that ports are vital to development of countries and should play a supporting role to the rest of the economy,” he wrote. “We cannot have expensive ports with limiting power over other port developments. We need ports in correct places, practical and managed by port people.
“Ports are far too important to be used for quick cash to be used to build bridges that should have been built anyway.”
The privatisation of the Port may lead to an increased cost of business for its users, with owners pursuing profitability and shareholder interests. Already it seems likely that a levy introduced by the Victorian Government in 2012 to improve infrastructure around the port and increase supply chain efficiency, the ‘Port Licence Fee’, will continue to be collected beyond its original projected end date of 2022. Peter Van Duyn, Maritime Logistics Expert at the Institute for Supply Chain and Logistics at Victoria University, warned in late 2016 that the ‘temporary’ charge is likely to be collected until the end of the lease agreement. “The Port Licence Fee, which currently contributes approximately $80 million per year to the Port’s coffers and is CPI indexed…was originally meant to be levied for a duration of about 10 years, or until it had raised $1 billion,” he wrote. “It looks like importers and exporters are now stuck with this fee for the next 50 years.”
There are big changes ahead for the Port of Melbourne. Over the next 50 years, the Lonsdale Consortium will be responsible for the success, or failure, of Australia’s most important port and its many dependents. So far, many promises have been made, but it shall soon become clear whether the Lonsdale Consortium will deliver, or if the people of Victoria are being taken for a ride.
Air logistics – outlook
The Port of Melbourne lease is not likely to have a dramatic, direct impact on the region’s air logistics industry. Indirectly, though, it is sure to benefit from the upgrade projects and investment in other parts of the region, with shorter Port-to-airport times thanks to reduced road congestion, the construction of dedicated freight routes and the reduction of commuter traffic if a metro system is developed. Additionally, with members of the Lonsdale Consortium holding stakes in Melbourne Airport, the region’s air cargo hub may well figure in the group’s long-term vision for Victorian logistics.
Marine logistics – outlook
Set to benefit most from improved efficiencies in processes in the Port of Melbourne, marine logistics is also positioned to take the brunt of added fees. With no second container port in the area to help deal with the projected doubling of freight volume in the next decade, and with a 15-year block on the construction of a new one, the Port of Melbourne will continue to face the massive task alone, with some operators worrying they will be at the mercy of the owners’ management, rules and fees. ANL Container Line Managing Director, John Lines, expressed serious concerns about the privatisation, for example: “Ports are big, lumpy bits of vital infrastructure for each region and, being a natural monopoly, are best owned by the state. The prices paid to cash-strapped governments are no doubt attractive but these prices can only be recouped by the purchaser by increased flows or increased prices and only one of these, prices, is under their control,” he says. “These extra costs will flow through the whole economy.”
Rail logistics – outlook
Rail logistics are set to benefit from the privatisation of the Port of Melbourne, both directly and indirectly. Russell Smith, Partner at Global Infrastructure Partners (GIP), part of the winning Lonsdale Consortium, advised at the time of purchase that the group has plans to use its experience in managing port and rail assets to make the rail logistics chain from regional NSW and Victoria into the Port more efficient and pricing more competitive with other ports. “GIP looks forward to bringing to bear our strong port and rail industry expertise to drive forward the efficiency and capacity of the Port of Melbourne and focus on the necessary transformational change in the road/rail mix servicing the freight task,” he commented.
Some proceeds from the sale are to be directed towards developing better rail infrastructure in anticipation of growing freight volume. At the time of the purchase, ALC Managing Director, Michael Kilgariff, commented on the importance of investment in road and rail infrastructure linking the port to the wider transport network, including the development of an inter-modal terminal. “This includes an appropriate investment of the $58 million set aside for the port rail shuttle, which has been on hold while the port lease transaction was finalised,” he said. “Investment must incorporate all modes of transport, including short-haul rail, which needs to play a greater role into the future as our ports continue to move greater numbers of containers each year.”
Road logistics – outlook
If planned infrastructure developments come to fruition, fleets will benefit from better port access and traffic conditions, avoiding the overloaded West Gate Bridge thanks to the ‘Western Distributor’ project. “An appropriately regulated port, supported by efficient road and rail links, is vital to sustaining the Victorian economy and driving productivity improvement across the supply chain,” said ALC Managing Director Michael Kilgariff. Beyond the port, improved infrastructure in the region funded by the sale will contribute to more efficient journeys, directly through the removal of level crossings, and indirectly by getting cars off the road and people onto a city-wide metro system.
Sources: Lloyd’s List Australia, Shleifer, A. (1998) ‘State Versus Private Ownership’. Ferrier Hodgson (2014) Transport and Logistics Insights: The road ahead. AFR (2016) Record $11b Port of Melbourne sale rides infrastructure boom. Infrastructure Victoria (2016) Advice…on options to secure Victoria’s future ports capacity.
 

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