Kmart: Using the supply chain to pull back from the brink

Five years ago, Kmart Australia was on the verge of bankruptcy. Today, the company is one of the most profitable retailers in Australia – a turnaround credited in large part to their supply chain.

The original Kmart stores were set up in Australia in 1968 as a joint venture with the Kmart group in the US. Today, they are 100 percent owned by Wesfarmers and the name is used under a long-term licensing agreement.

In 2008, the retailer was in trouble, caught in the midst of a recession with zero profit.

That same year, Managing Director Guy Russo was hired to lead the turnaround of the struggling company.

Russo set about reducing costs and optimising product selection, but also displayed clear focus, leadership and a strong strategy, which led to a complete overhaul of Kmart Australia’s sourcing and supply chain process.


This article originally appeared on Ferret. To read the article in full click here.

New range of forklifts launched

Mining is focused on achieving efficiencies like never before.

Finding new uses for existing technology, and smarter ways to do business.

Miners are now looking to use single machines for multiple applications, able to service the workshops and warehouses as well as outside of these areas.

While rough terrain forklifts have been working on mines, both above and underground for some time, they have not been able to be used inside many workshops as they are simply too wide to be useful.

On the other hand, warehouse based forklifts become a potential hazard as soon as they leave the floor as they have a greater chance of tipping on uneven surfaces – a danger which is heavily multiplied when taking into account the rough mine site.

Seeing the gap in the market, Manitou is launching its new series of semi industrial forklift trucks – the MI range.

The company is more known for its telescopic handlers, and its innovative, intrinsically safe, underground coal mine telehandler, which provided new capabilities for underground miners.

Having been focused on rough terrain forklifts since the creation of its first vertical mast RTH forklift in the 1950s, and with 70 per cent of its business still focused on the space, Manitou is now making greater inroads into the industrial material handling space in Australia.

The company launched its new range into Australia last month.

Speaking to Jean-Pierre Guérand, the global vice president of marketing for Manitou, at the launch at its warehouse, he told LMH that this MI range was developed "as our aim is to get more into the industrial materials handling sector".

However it was not a spur of the moment decision, with Guérand stating that it "was developed after we received customer feedback and saw the existing market demand".

"Around 5800 hours of research and development went into the new MI range.

"The ease of operation has been a major focus in its design."

It has taken a two pronged approach to the new vehicles, offering both a gas and diesel powered variant (dubbed the MI – G or MI – D respectively) and available in a 1.5T, 1.8T, 2T, 2.5T, 3T, and 3.5T version, providing 12 different models in the range.

Guérand explained that "after looking at the needs of operators, buyers, technicians and maintenance teams, as well as the dealers, we have redesigned the frame, counterweights, and increased safety".

The diesel variant will be powered by a Yanmar engine, while the gas powered forklifts will use a Nissan engine, both of which have high level air intakes, air filter safety cartridges, and vertical exhaust for the operators' health.

Regarding operator comfort, Guérand told LMH that "we are also looking at potentially increasing the seat weight handling, from its current level of 120 kilograms, up to 150 kilograms".

All of the forklifts in the MI range come with an Okamura transmission, which Manitou says aids the inching function and ensure a jerk-free approach.

They have a wide mast opening, an open work roof for increase vision

All the models will be available in Australia in both gas and diesel variants, expect for the 1.8T machines gas version as they currently have the global standard sizing for gas bottles and will need to be adapted to the Australian market due to Australia's differing standards.

New steel pallet racking standards

Despite safety campaigns over previous decades, too many people leave for work in the morning and never return.

In 2009-10, 216 people lost their lives due to injuries sustained while working, and transport and storage (including warehousing) was one of the most dangerous workplaces. Furthermore, there were almost 9000 non-fatal injuries and muscuskeletal disorders in the transport and storage industry alone.

A new Australian Standard covers the design of steel storage racking systems, and incorporates several changes to operational requirements and end-user responsibility.

With the introduction of the AS4084:2012 in February this year, the supply chain industry is about to take a step in reducing industrial fatalities.

Dexion National Engineering Manager Peter Geoghegan said the new standard covers around 90 per cent of steel pallet racking being used in Australia.

“That includes adjustable static pallet racking, but not drive through, mobile or cantilever racking or racking made of materials other than steel,” he said.

Geoghegan said all racking manufacturers and end user customers of racking products have a duty of care to comply with AS4084:2012. 

He said the rigorous standard is because steel pallet racking presents unique challenges and dangers, and requires specific governance.

“For example, a 1000kg pallet on a typical pallet rack system has approximately 50 times the applied load per weight ratio compared to a high rise building floor system.

Geoghegan said businesses will be affected in a few areas with the new standard including storage density ratios reducing as the standard necessitates an increase in flue space between pallets and in vertical separation over six metres.

Secondly, the new standard has tiers of analysis that allows for more economic racking design.

Third, changes in statistical analysis of the testing data means it now uses standard deviations, not just averages.

The standard also has a more definitive repair procedure.

“This will help minimise confusion during maintenance and provide a safer workplace environment,” Geoghegan said.

Geoghegan said readers should ask for independent evidence of compliance from prospective racking manufacturers or suppliers.

He recommends document from an independent NATA laboratory or University. To ensure compliance of a racking manufacturer and structure design to the new standard ask the following questions:

  • Was the independent testing done by a reputable University or NATA accredited authority?
  • Which components were tested? What tests were conducted? All mandatory tests as specified in AS4084:2012?
  • Have the results of the tests been used to design structures to AS4600: Cold Formed Structure Code?

He said business owners should be aware of the changes to the maintenance of steel racking.

 “The standard requires inspections of racking structures to be carried out on a regular basis, at least once every twelve months, and should be carried out by the racking manufacturer or an appropriately trained person.”

He added owners should keep a record of the inspections and any corrective action. Damage to the structure must be recorded under a new green, amber and red light type coding system.

Earlier this year, Dexion announced the regional unveiling of the new Speedlock racking system.

The company’s CEO, Peter Farmakis, said the launch was the most significant development in Dexion’s industrial business since the introduction of the iconic Keylock range.

He said the new standard means the industry spotlight is very much on compliance in the interests of safety.

“The new standard incorporates an extended range of tests which accommodate advanced engineering techniques with regards to product testing not currently included in the EN 15512:2009 Standard (formerly FEM),” said Farmakis. 

In the months before the introduction of the standard, Dexion’s racking components were exhaustively tested by University of Technology, Sydney.

Pallets – an irreplaceable part of materials handling

Pallets are definitely not a hot topic of every day conversation, but they are surely an irreplaceable element of the materials handling landscape.

In fact, it’s hard to imagine ‘materials handling’ with no pallets.

Without them, it would be nigh on impossible to run a warehouse; for large retailers to receive their goods; for products to be shipped interstate; or for world trade to exist.

As such, a company such as CHEP has a solid presence in Australia. According to the company’s website, CHEP manages 237 million pallets, 600,000 bulk containers and 34.9 million reusable plastic containers.

The choice comes down to plastic versus wooden.

To read the full breakdown plastic and hardwood pallets, click here.

More than just MACHINES

A new mining equipment manufacturing and service centre for the Hunter Valley is aiding growth in the region.

The site will manufacture and service coal mining equipment.

Despite apparent turmoil gripping the global mining industry, Australia is still riding high on its resources and mining know-how.

Recognising the still high demand for Australian mining equipment, Valley Longwall International have taken a major step forward.

Valley Longwall International (VLI) have opened a new headquarters and service centre just outside of Newcastle, that will contribute an estimated to $150m to the local economy.

At the opening was the NSW minister for resources and energy Chris Hartcher, as well as members of local parliament, and a high level delegation from China's Taiyuan Mining Machinery Group Coal Machine Company (TMG), which is a major shareholder of VLI.

The new centre of excellence will supply specialised equipment and allied services to the coal mining industry, both here and overseas, predominately to China and the US.

The new centre will manufacture and service Australian-made mining equipment such as drift runners, drill rigs and jugs.

The site will be home to over 200 staff, with more than 12 research and development staff at the Beresfield site.

"The centre of excellence will provide a major boost to the local Newcastle economy and it will be our centre for developing new technology and driving safety improvements and training for our employees who work in the longwall coal mining industry," said VLI CEO Brett Lynch.

VLI, a majority Chinese-owned company, operates specialise in drilling, diesel and conveyor systems generating over $60 million in exports.

The NSW minister for resources and energy said the new centre signalled the growing trade ties between Australia and China. Previously the main trade between the Australian mining industry and China was essentially just ore, however now there is a growing focus on the additional skills that Australia's industry can bring particularly in terms of technology, safety, and experience.

"Up until now there has been a concern that Chinese investment was simply on raw materials but now we're seeing a new stage of Chinese investment.

This is exemplified in this centre, in resource enrichment and the development of ancillary industries to support the mining industry rather than simply mining itself," Hartcher told Australian Mining.

"It's very important and we would like to see it encouraged more and we want to see a far more mature relationship between our trade and China rather than simply 'we're the raw materials, we're the producer and you're the consumer.'

"This is now the start of a good two way trade."

However Lynch added that even though there is now a greater Chinese influence and stake in Valley Longwall's operations and focus "Australia will remain a home for VLI's research and development centres covering underground diesel equipment, drill rigs, and bulk materials handling equipment".

Hartcher said he expected the recent slump in the coal market to improve, and touted the new centre as proof investors had not lost confidence in the sector.

"The mining industry is cyclical, it's essentially export orientated, we think the scene for the markets is still good, obviously it's not as good as it was, but there's also a need for mining for the domestic consumption so centres like this will always have an important place," he said.

"They may not be on such a high as they used to be, but we expect that high to return."

Lynch echoed this sentiment: "The industry will ebb and flow, but if we've got that quality base, that technical advantage, we will see the storms and troughs through.

"VLI is committed to delivering high quality, innovative solutions for all types of mining, transportation and bulk materials handling industries.

"That is why we have invested in developing this new Centre of Excellence," he stated.

BHP accused of rolling over on vehicle safety

In a phased approach from this year onwards, only vehicles with a Five Star Australasian New Car Assessment Program (ANCAP) rating will be allowed on BHP mine sites.

The policy applies to both BHP fleet and contractor owned vehicles on any BHP site anywhere in the world and to all new vehicles brought into service from January 2013 onwards.

The policy also prohibits the fitment of non-ANCAP compliant bull bars and aftermarket suspension kits (and upgrades) as well as roll over protection. But why now?

When contacted by Australian Mining, a BHP spokesperson said the company was committed to safety.

“The health and safety of all of our employees and contractors is our absolute priority,” she said.

“BHP Billiton continually reviews the company policies and procedures to ensure best practice is maintained.

 “Our decision to move to the highest ANCAP safety rating will, by 2016, improve the safety rating of an estimated 50,000 vehicles a year in Australia alone, resulting in broad community benefits as safer vehicles appear on the road."

ANCAP have applauded the new measure by BHP stating that it will force car manufacturers into implementing higher levels of safety in light commercial market vehicles.

ANCAP chief, Nicholas Clarke, said the move would encourage car makers to take on similar policies.

“This demonstrates the supporting influence big business can have on manufacturers and we encourage other businesses, large and small, to consider adopting a similar policy,” Clarke said.

“With one third of compensable work related fatalities involving a vehicle, vehicle safety is paramount in protecting our employees, and investing in safer vehicles is an investment in the safety of these employees.”

But with the ANCAP rating focused on the issues of on-road safety, not off-road, many believe the new policy will present increased safety risks to employees.

Critics are also concerned over the fact that aftermarket products like bull bars and upgraded suspension cannot be retro-fitted, further adding to on-site safety issues.

The Construction, Forestry, Mining and Energy Union have also expressed concerns over the safety of the new policy.

Health and safety representative Greg Dalliston said he was concerned that new standards reduced rollover protection.

“All I've asked is that they show the standard that was on the vehicles before and the standard they've got now, the new standard, is equal to or better than what they had before and so far they can't show me that.”

 Dalliston said while they accounted for only a small number of total accidents, one-in-five fatalities were from rollovers.

 “We've had 29 rollovers since January last year on mines in Queensland — 17 on coal mines and with the protective structures we've had in place, we've only had one person with some slight injuries,” he said.

The Australian 4 Wheel Drive Industry have also questioned the occupant safety protection afforded by the introduction new the policy.

Spokesman for the 4WD Industry Council (4WDIC) Stuart Charity, said it strongly supports the drive to improve vehicle occupant safety on and around mine sites but is disappointed by the lack of consultation.

"On the surface, most people would view the BHP policy as a great step forward. However, the 4WDIC is disappointed at the lack of consultation and the 'one size fits all' policy outcome,” he said.

"Australia has a large and innovative 4WD aftermarket industry. It offers a wide range of Australian Design Rule (ADR) approved products designed to protect vehicles and occupants in our hostile remote regions.

"Among those proven products are bull bars, suspension enhancements for additional load bearing capacity and roll over protection systems (ROPS). The BHP policy takes little from the aftermarket industry's extensive knowledge and experience in engineering vehicles to suit their intended end use.

"While the 4WDIC supports the move to ANCAP Five Star ratings for mining vehicles, we see no need to ban the fitment of safety equipment that does not adversely affect compliance with mandatory vehicle standards and does not reduce the safety performance of the vehicle.

“The 4WDIC believes this ban will result in vehicles that are less safe on public roads and in remote areas."

Charity has also accused the major miner of slashing costs at the risk of workers safety.

"We believe their intent was to reduce costs on the fit-out of vehicles using an ANCAP [rating] as a justification for everything but as I say, ANCAP has significant limitations when you're driving in the sort of conditions that these vehicles are driven in.”

Charity says the policy does not make sense.

"We know that vehicles need to be modified for their end use – we've got supporting data to prove that," he said.

"We've given that [to] BHP, they've chosen to ignore that.”

He added that vehicles are built off global platforms and sold into 40 different countries.

"We don't believe they're designed for the end use of mining applications," he said.

According to Global NCAP, BHP’s decision was based on recent research at Crashlab in Sydney, to assess if bullbars and ROPS contribute to an increased risk of injury to vehicle occupants.

In its testing, four Toyota Hilux dual cabs were used – three of these vehicles were fitted with ROPS and one without.  All four test vehicles were fitted with a steel bullbar. 

The vehicle fitted with ROPS rolled 180 degrees onto its roof in the first test.  The vehicle without ROPS rolled onto its side.  The vehicle without ROPS was re-tested with 35kgs of ballast above the rear screen of the cab (to simulate the weight of ROPS at roof level) and rolled onto its roof.

For these vehicles and test configurations, the results showed:

  • for the corkscrew rollover test the ROPS structure appeared to increase propensity for the vehicle to roll by increasing the centre of gravity height.
  • ROPS did not eliminate roof crush over the front seated occupants and, for a rollover of this type and severity, the ROPS demonstrated limited potential to reduce the risk of serious injury to the front seat occupants
  • any ROPS structure which prevents the as-designed deployment of side curtain airbags for the front and rear seat occupants greatly increases the risk of serious head or brain injuries in side impacts (with trees, poles and other vehicles).
  • the bull bar fitted to the frontal offset crash test vehicle caused intrusion into the footwell and displacement of pedals which was not present in the ANCAP test of the same vehicle without a bull bar.

However, Susie Bozzini, a researcher at the Center of Injury research in California, is not convinced.

“Production vehicles generally have weak roofs: they crush at the front pillar when the windshield breaks and the roof caves in on the front seat occupants,”she explained.

“BMA ran a test with a production vehicle with a weak roof and the roof crushed significantly. Then BMA performed the same test on the same vehicle with an internal 4-posted ROPS structure. This type of structure is fitted behind the front seats at the B-Pillar area and extends rearward to the C-Pillar. This internal ROPS works when the vehicle rolls without forward pitch, meaning nose down. However, when a vehicle  rolls over with pitch, the forces are on the front of the roof at the A-Pillar and windshield header. 

“So, it is not surprising that BMA got the same result with a production vehicle and an internal 4-posted ROPS for the type of test they did

“I believe their goal was to be able to say that ROPS didn't make a difference, so why spend the money on them?” she said.

“We recognise that industry members and representative may have concerns when we implement changes to our safety policies and procedures,” BHP told Australian Mining.

“However no changes are implemented without extensive research and consultation to ensure the most relevant safety technologies are adopted globally.

“We remain confident this is the right decision for our workforce and the community as safer vehicles appear on the road.”

But with the CFMEU claiming that the company refuses to hand over information regarding safety ratings –evidence of how the new policy will affect workers will result from the statistics collected when accidents occur.

From the reaction from our readers who work on mine sites, most are clear about which vehicles they would rather operate.

“I would prefer to be in a vehicle with roll over protection on a mine than 5 star ANCAP,” one said.

“The ROPS secondary function is to give structural integrity (survival space) to the vehicle body in case of a landslide falling on top of the vehicle, especially on a rollover off ramps to open pits,” another worker noted.

The only thing left to see is if BHP will roll over to public opinion, or crush dissent.


Broken road funding and planning system needs fixing: ATA

The Australian Trucking Association claims the existing road funding and planning system is broken and needs urgent attention.

Chairman of the Australian Trucking Association, David Simon, launched an independent report by Price Waterhouse Coopers into the road planning, funding and charging system.

Simon Mr Simon congratulated the current government and its Infrastructure Minister, Anthony Albanese, for establishing the NHVR, Infrastructure Australia and consulting effectively with industry, but said more needed to be done.

“…too many infrastructure decisions at state and local level are still made without a long term plan. And when governments do put plans together, they are often abandoned before they are implemented,” Simon said.

With the amount of freight on Australia’s roads projected to double by 2030, Simon said the use of larger trucks was imperative in dealing with growing freight needs.

“With continued government investment in roads, the trucking industry will be able to deal with the growing amount of freight, as long as we can use high productivity vehicles like B-triples and super B-doubles on key routes,” he said.

A B-triple consists of a prime mover and three trailers linked by turntables. To deliver a thousand tonnes of freight, you would need 770 of the light trucks you can drive with a car licence, 42 semitrailers – or 20 B-triples.

“Very often, the industry can’t use these advanced, safe vehicles due to government regulation or the need for road upgrades.

“The report recommends that governments should set defined target standards for the roads in each tier of the freight network. The standards would be set so the industry could use high productivity vehicles on key freight routes.

“There should be a transparent formula for allocating the charges paid by the trucking industry to upgrading key routes, last mile connections and local roads to meet the standards.

“Of course, governments would then need to allow the industry to use high productivity vehicles on those routes. The place to start would be to allow B-triples and super B-doubles on the Hume Highway between the outskirts of Melbourne and Sydney as soon as the Holbrook Bypass is completed.

“As a longer term prospect, the report argues that road funding and access decisions should be separated from day-to-day politics – potentially through the establishment of a national road fund.

“The report recognises that it may be necessary to consider setting up state and territory level road funds as a first step.

“We don’t ask government ministers to make decisions about where to site water mains or what capacity is needed on a power line. Yet road ministers spend a lot of time making relatively small decisions about road funding and access.

“The national road fund would develop investment and maintenance plans for major freight routes.

“Governments would be responsible for the overall direction of road investment through a master planning process. The report recognises there would also need to be a ministerial power of direction available for use in exceptional circumstances,” he said.

The report also examined the way the trucking industry is charged for its use of the road system.

The industry currently pays a fuel tax of 25.5 cents per litre and high registration charges.

It costs more than $14,400 a year to register a nine-axle B-double, without including the cost of compulsory third party insurance.

Simon said there were serious problems with the current charging system.

“The very high registration charges raise cash flow issues for small businesses, who have to find the amount as a lump sum. This is very hard when you’re running a business on tight margins,” he said.

“The charging system penalises operators that travel short distances. The information provided by the state governments is not audited or benchmarked to give them a reason to get the best value for money.

“The report recommends that a third party should review the figures that the state and territory governments provide the NTC.

“It also recommends that governments should reduce truck registration charges and increase the effective fuel tax paid by trucking operators to offset the decreased role of registration charges. The industry would pay a similar amount compared to the current system, but small operators wouldn’t have to manage their cash to make a huge lump sum payment once a year.”

Simon said Australia’s governments were looking at a new road charging and investment system, with mass-distance-location pricing the favoured option.

“Under this option, every one of Australia’s 534,000 trucks would be fitted with a regulatory GPS device. Trucking operators would receive invoices based on the distance their trucks travelled, the roads they used and some sort of assessment of their mass.

“The governments’ own research shows this reform could have economic benefits for Australia of minus $500 million.

“The report argues that Australia should not move to a system like mass-distance-location pricing until there is a proven business case. It does not support the suggestion that mass-distance-location pricing is needed to provide governments with information about where trucks go. In reality, there is a large amount of information available.

“The report also rejects the suggestion that trucking operators should have to fit specific technology to their trucks. It recommends that governments should explore low cost approaches that harness existing business systems.”

Simon said the report was a report to the ATA, not an industry policy statement.

“We will consider its recommendations, but they have a great deal of merit: they build on existing policy, they are workable, and they are a step by step solution rather than a big bang,” he said.

As another toll road bites the dust, what is the future for PPPs?

BrisConections has been placed into administration only seven months after opening the Brisbane Airport Link toll road/tunnel. It has not had sufficient users to make the project viable. So what does this mean for future public-private partnerships (PPPs)?

In the short term, it will mean very little. The citizens of Brisbane have a great tunnel that (from my experience) cuts significant time off a trip to the airport. The investors have done their dough. And there may be various lawsuits about who misled whom.

However, this is the fourth in a series of PPP toll road failures, including Sydney’s Lane Cove and Cross City tunnels, and Brisbane’s Clem7. If PPPs are to have a future, we need better ways to handle the project risk.

The risk associated with large infrastructure projects can be significant. For toll roads, the viability of a project depends on projections of future traffic flows. But these flows may be highly variable, depending on a range of choices by the government and car users.

Under a traditional PPP contract, much of this risk is directly borne by the private investors. However, this risk will be reflected in the contract that underpins the PPP. So the risk will be indirectly borne by car users and taxpayers.

Most obviously, the greater the risk, the higher the tolls that will be demanded by the private participants in the PPP. So car users bear the risk of the project through high toll charges. This can undermine the social benefits of the toll road. Instead of taking traffic off congested suburban roads, high tolls may mean too few cars use the toll road.

More subtly, car users may bear the risk through limits placed on the government. The PPP contract may restrict future government transport policies that would alter traffic flows – even if these policies were in the publics’ best interest. If the government wants to implement these policies in the future then it will need to renegotiate the PPP contract. This can be a messy and costly process, meaning that desirable transport policies are left in the ‘too hard’ basket.

Taxpayers may also bear the risk of a PPP through guarantees on revenue or via ‘take or pay’ contracts that guarantee a flow of government funds.

In the extreme, taxpayers bear the risk through the potential for a government bail out. If the government decides that a PPP can’t be allowed to fail for political reasons, taxpayer funds may be used to protect private investors.

If car users and taxpayers are going to bear the risk of a PPP toll road, what is the point of using private funding? The government can fund a PPP and directly bear the project risk, even if it is built and operated by the private sector. And government funding is currently significantly cheaper than private funding. Indeed, as Michael Pascoe notes in the Age:

“Australian governments can borrow more cheaply than the private sector to invest in infrastructure. The federal government in particular can borrow extremely cheaply on very long terms”.

Unfortunately, this option for improving the nation’s infrastructure appears to be off the agenda. The current ‘budget surplus’ fetish means that long-term government borrowing and investment in public projects is ruled out on the grounds of short-term political pragmatism.

So, if we want on-going investment in public infrastructure, we need better PPPs that handle the risk in clever ways. One alternative, being investigated by Melbourne University’s Centre for Market Design, is to provide the private investors with a fixed return in current dollar terms.

Rather than specifying a length of time for the toll operator to charge road users, this approach allows the private operator to charge tolls until it receives a certain amount of money. This shares the risk between the private operator and the car users. If traffic volumes are high, the private operator will get their return quickly and the road will move back into government hands sooner than expected. If traffic volumes are low, the private operator will have a longer time to get their return.

Such an approach to a PPP will not save private investors when traffic flows are so poorly predicted that they can never get their money back. But it does protect them from short-term fluctuations.

The approach also improves flexibility over future government policies. To the degree that government policies change traffic flows, the private operator is protected. Changed traffic flows automatically change the length of time for the payback to the private investors. The PPP contract will only need to be renegotiated if the changes in traffic flows are so significant that the private operator cannot ever receive the full return on their investment.

The failure of BrisConnections does not spell the end of PPPs. If we want infrastructure investment and government budget surpluses, then PPPs are a must. But it does spell the end of naïve PPPs and it signals the need for research in order to design better PPPs. That is, unless we can find some more private sector bunnies who are happy to lose their money building roads for the rest of us.

This article was originally published at The Conversation. Read the original article.

Can Australian docks support a third stevedore?

The arrival of Hutchison Port Holdings Australia as a third stevedore onto Australia’s waterfront is designed to provide increased competition but raises the vexed issue of whether three may be too many.

HPH will begin operating from its $250 million Brisbane facility in early 2013 and Sydney early 2014.

At the same time, the Port of Melbourne Corporation (PoMC) aims to have a third operator commence operations in 2016 as part of its new terminal development at Webb Dock.

The increased competition comes at the same time as incumbent stevedores Patrick (owned by Asciano) and DP World Australia announced they are introducing new technology and equipment that will increase the capacity at their container terminals.

Historically there have been a large number of stevedores operating in Australia. However since the introduction of containers (in the late 1960s) the stevedoring business has become more capital intensive, due to the need for dedicated and expensive equipment, resulting in a consolidation into just two stevedores (the incumbents, albeit under different names and ownership) in the late 1990s /early 2000s.

The Maritime Union of Australia (MUA) under the leadership of national secretary Paddy Crumlin has been opposed to the introduction of a third stevedore. Crumlin has been quoted as saying that they prefer the status quo to remain as the union is not convinced that the economic argument for a third stevedore stands up. On the other hand, the MUA has been dealing with HPH, which has been prepared to employ their members.

Annual container growth rates have been 6% to 7 % over the years. However, they seemed to have slowed recently (certainly on the eastern seaboard) reflecting the current state of the Australian economy and the high Australian dollar.

Port of Brisbane CEO Russell Smith commented recently on the viability of three stevedores at the Port of Brisbane given the total throughput is just over one million TEUs. It is generally accepted that to have a viable modern container terminal operation in an OECD country, volumes upwards of 500,000 TEUs are required.

In June 2012 Asciano’s CEO John Mullen indicated that having three competitive stevedores in Australia is unlikely to work in the long run. If you consider the large capital investment that is required upfront (before one revenue-earning container is lifted) you will need to take a very long-term view.

For instance, HPH Australia will not get much change out of $250 million for their terminal set up costs at Fisherman Islands in Brisbane. At the same time DP World in Brisbane is resurfacing Berth 7 to prepare for the introduction of Automated Stacking Cranes (which will increase their capacity but comes at a substantial cost) and Patrick has already spent a large amount of money in automating its terminal in Brisbane.

The situation in Sydney is similar with HPH again required to invest a large amount of money upfront for the set-up of their new terminal at Port Botany (as well as the Intermodal Logistics Centre at Enfield) and Patrick announcing that they will be investing up to $350 Million over the next three years in automating and expanding their Port Botany terminal.

Admittedly the total Sydney container throughput volume is twice that at the Port of Brisbane, but still not large by international standards and not growing as fast as previously forecasted.

In the meantime the shareholders and Chief Financial Officers of HPH, Asciano and Citi Infrastructure Investors (75% owners of DP World Australia) are demanding a reasonable return on investment.

Could the impact of this be that in the not too distant future we will see another consolidation of container operators in Australia with a rationalisation of terminal developments? The Australian Competition and Consumer Commission (ACCC) certainly hopes not given their long held view that there is not enough competition on the Australian waterfront and the current operators are making too much money.

Or will there be a reversal of roles? A decade or so ago HPH put in a bid for Chris Corrigan’s Patrick Corporation (which Mr Corrigan rejected as being too low). Will QUBE Holdings (of which Mr Corrigan is chairman) now put in a bid for HPH Australia or even DP World Australia or the Patrick Terminals and Logistics division?

Only time will tell.

Peter van Duyn

Maritime Logistics Expert at the Institute for Supply Chain and Logistics at Victoria University

Peter van Duyn does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations.

The ConversationThis article was originally published at The Conversation. Read the original article.



Gender agenda gathers momentum at QTA

Scott Emerson MP, Minister for Transport and Main Roads enjoying QTA womens breakfast
Queensland Minister for Transport and Main Roads Scott Emerson enjoying the International Women’s Day breakfast in Brisbane.

The gender agenda appears to be gaining momentum in Queensland, as participants found at the Queensland Trucking Association

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