2015
2 Supply Chain Report
CO
NT
EN
TS
FOREWORD 3 Rob O’Byrne......................SECTION A Economic Update......................Economic OverviewWorld’s GDP Growth 5Australia’s GDP Growth 5 Australia’s GDP Growth by Sector 6 Contribution of Transportation 6 and Storage Sectors to GDPGDP by Transport Mode 7Percentage Change of Gross 7 Product by SectorBreakdown of Gross Product in 8 Transport and Storage IndustryChange of Gross Product in 8 Transport and Storage Sub-Sectors
Australia’s Labour ForceAustralia’s Labour Force 9Australia’s Labour Force by 9 Industry
InflationInflation 10ContributiontoAnnualInflation11 by Product Group
Freight VolumeAustralia’s International Trade 11 Account (Goods Only)International Sea Freight: Volume 12 and ValueAustralian Sea Freight by Trading 13 Region (Exports)Australian Sea Freight by Trading 13 Region (Imports)Australian Sea Freight by 14 Commodity Sea Freight
...............
Container Throughput at 14 Australian PortsRoad Freight 15
Transport and Warehousing CostLabour Cost 15Fuel Cost 16Industrial Rental Cost 17
......................SECTION B Market Update......................An Update on Climate ChangeAn Update on Climate Change 19Greenhouse Gas Emission 19 Reduction Target
Significant Infrastructure ProgramsAustralia’s Future Infrastructure 19SignificantInfrastructure:Rail20SignificantInfrastructure:Road21SignificantInfrastructure:Ports24 and ICT
Warehouse Availabilityand TrendsDemand 25Supply 25
......................SECTION C Australian Industry Performance......................
International Logistics 27 Performance IndexInternational Logistics 27 PerformanceTotal Business Inventory 28Inventory to Sales Ratio 28
......................SECTION D Employment and Training......................Employment Level 31Current Transport & Logistics 32 Workforce by Level of EducationEmployment by Gender 32Projected Employment Growth of 33 IndustryTransport & Storage Industry Age 33 & Employment TypeEducation and Training in 34 Logistics
......................SECTION E Regulatory Environment......................Regulation Reform - 37 The DevelopmentClimate Change Related 37 Legislations
......................REFERENCES 43......................
Supply Chain Innovation: The Next 15 Years
40-41
Supply Chain Report 3
FOREWORD
elcome to our Annual Australian Supply Chain Report
At Logistics Bureau Group, ‘Community’ is a core focus for us, and so we are pleased to provide this report for our Supply Chain ‘Community’ here in Australia.
Undertaking this research with our free seminar and webinar programs as well as our Supply Chain Leaders Academy also reflects our commitment to education and promoting improved logistics and supply chain management practices.
Compiling this report takes a lot of time and resource, and I would like to thank my research and production team, particularly James, Hadley and Maybelle.
Contact: Rob O’ByrneLogistics Bureau Pty LtdLevel 57, MLC Centre, Sydney, NSW 2000, AustraliaTel: +61 417 417 307Email: [email protected]
This report is compiled from publically available data resources which are referenced at the end of the report.
Our aim, is to bring all this informationtogether for you, in one easy to read report.
But please be aware, that because the data comes from a wide range of sources, it may not always fully align 100%.
We do not attempt to interpret data in this report, we leave it to you, to draw your own interpretations. Although you may wish to look out for seminar and webinar invitations where I do review the report and share my thoughts on some of the key challenges we might face.
I hope you enjoy reading this report.
W
ROB O’BYRNE Group Managing Director
Logistics Bureau
Economic UpdateSECTION A:
..............................• Economic Overview• Labour Force• Inflation• Freight Volume• Transport and Warehousing Cost
Supply Chain Report 5
SECTION A: Economic Update
Shows continued growth of Asian countries as future economic leaders
*Asean 5 comprises Indonesia, Thailand, Philippines, Malaysia and Vietnam
ABS (2,3)
International Monetary Fund (1)
World’s GDP Growth
Australia’s GDP Growth
2.1%
2.5%
3.9%
2.1%
2.7%
1.9%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
2009/2010 2010/2011 2011/2012 2012/2013 2013/2014 2014/2015
AUSTRALIA'S GDP GROWTH
1.2%
2.9%
4.7%
3.6%
-0.9%-1.2%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
2009/2010 2010/2011 2011/2012 2012/2013 2013/2014 2014/2015
INDUSTRY GROWTH BY INDUSTRY: TRANSPORT, POSTAL & WAREHOUSING
>3.8%
India, China and ASEAN all exceed world average of
3.8%
>3.1%
Australia behind global average at
3.1%
1.9% 3.9%
While GDP growth has remained reasonably strong, growth within the Transport, postal & warehousing sector has declined the past 2 years
Mayindicateimprovementsinefficiencyratherthan a lack of investment within the sector
2012 2013 2014 2015e 2016e 2017e
China 7.7 7.3 6.8 6.3 6.0 6.1
India 5.1 6.9 7.3 7.3 7.5 7.5
Asean-5* 6.2 5.1 4.6 4.6 4.9 5.3
Australia 3.6 2.1 2.7 2.4 2.9 3.1
Euro area -0.8 -0.3 0.9 1.5 1.6 1.7
US 1.5 2.4 2.6 2.8 2.8 2.7
World 3.4 3.3 3.4 3.1 3.6 3.8
China
India
Asean-5*
Australia
Euro areaUS
World
-5
-3
-1
1
3
5
7
9
11
13
15
Pe
rce
nt
Calendar Year
WORLD AND SELECTED COUNTRIES' GDP GROWTH
Australia’s GDP has grown at between 1.9%-3.9% over the past 6 years
World and Selected Countries’ GDP Growth
Australia’s GDP Growth
Industry Growth by Industry: Transport, Postal & Warehousing
6 Supply Chain Report
SECTION A: Economic Update
The industry generated $74.2 billion for the Australian economy in 2014-15, an increase of over $15 billion during the previous decade.
ABS (2)
Contribution to GDP by Industry SectorsYear 2014-2015
Industry Sector % Contribution
Mining
Finance
Construction
Health
Manufacturing
Public Admin
Education
Transport and Storage
Retail
Wholesale
Real Estate
Electricity, Gas, Water Supple
Accom, Café, Restaurant
Agriculture
Others & Statistical Discrepancies
Total
8.61%
8.60%
7.71%
6.47%
6.20%
5.17%
4.66%
4.58%
4.44%
4.06%
2.78%
2.70%
2.39%
2.20%
29.43%
100%
GDP Contribution by Various Industry Sectors (Jul 14 to Jun 15)
ABS (2)
Contribution to GDP by Industry SectorsYear 2014-2015
Period
2000/2001
2001/2002
2002/2003
2003/2004
2004/2005
2005/2006
2006/2007
2007/2008
2008/2009
2009/2010
2010/2011
2011/2012
2012/2013
2013/2014
2014/2015
Transport and Storage Gross
Value ($b) GDP ($b)
%Contribution of Transport and
Storage to GDP
43.7
45.1
47.8
49.4
58.3
60.0
63.7
67.0
67.1
67.9
69.9
73.1
75.8
75.1
74.2
928.5
964.1
994.6
1,035.8
1,236.0
1,272.4
1,320.1
1,369.6
1,393.7
1,422.8
1,456.5
1,508.7
1,545.8
1,584.4
1,619.9
4.71%
4.68%
4.81%
4.77%
4.72%
4.72%
4.82%
4.89%
4.81%
4.77%
4.80%
4.85%
4.90%
4.74%
4.58%
Australia’s GDP Growth by Sector
8.61%mining
8.6%finance
4.58%TRANSPORT& STORAGE
4.44%retail sector
Australia’s largest contributors to GDP are the Mining and Finance sectors at 8.61% and 8.6% respectively.
>Transport & Storage contributes 4.58% to Australian GDP - higher than the Retail sector at 4.44%
Along with Manufacturing, the 2 sectors contribute more than the Mining sector
&
Contribution of Transportation and Storage Sector to Australia’s GDP
Sector contribution to GDP as a whole has declined though indicating the sector has grown at a lower rate thanaverage-couldindicateimprovedefficiency.
$74.2 billion billion
15
Supply Chain Report 7
SECTION A: Economic Update
The stability of the increasing trend lines suggest the individual sectors are good at matching capacity to demand as it increases.
Interestingly, Air represents a lower GDP sec-tor than Rail, Pipelines & Other
ABS (2)
Transport & Storage sector at 1.9% lags the average of 2.7%ingrossproductchange-thiscouldindicateimprovedefficien-cy as both Retail and Wholesale have improved gross product by a higher rate.
BothManufacturingandConstructionhavesufferedadeclineingrossproductof1.2% and 1.3% respectively.
ABS (2,3)
GDP by Transport Mode
0
10000
20000
30000
40000
50000
60000
70000
80000
GD
P G
row
th/
$m
illio
ns
Financial Year
GDP BY TRANSPORT MODE
Storage
Road
Rail, Pipeline, andOther
Air
Transport andStorage
Economic Update: Percentage Change of Gross Product by Sector
4.25%
-1.20%
3.89%
1.94%
-1.26%
4.28%
5.08%
2.46%
2.99%
1.31%
4.99%
1.91%
3.41%3.06%
2.65%
-0.02
-0.01
0
0.01
0.02
0.03
0.04
0.05
0.06
PERCENTAGE OF GROSS PRODUCTS BY SECTOR (Q2 2014 - Q2 2015)
GDP by Transport Mode
Percentage of Gross Products by Sector (Q2 2014 - Q2 2015
8 Supply Chain Report
SECTION A: Economic Update
Transportation industry contracted by -1.2% in 2014/15, down from 0.9% growth in 2013-14
ABS (2,3)
ABS (2)
Breakdown of Gross Product in Transport and Storage Industry
Road
30.7%
Road
30.7%
Air 9.0% Air 9.1%
Rail, Pipeline, and Other
14.6%
Rail, Pipeline, and
Other 15.3%
Service and Storage,
45.8%
Service and Storage,
44.8%
Jul 13-Jun 14 Jun 14-Jun 15
GROSS PRODUCTS GENERATED BY DIFFERENT SECTORS IN TRANSPORT
Service and Storage maintained its dominant position within the sector at 44.8% of gross product.
Of the transport options, the Road sector dominates transport modes at 30.7% of gross product.
Rail,PipelineAirandOthermakeupthefinal24.4% of the sector.
Change of Gross Product in Transport and Storage Sub-Sectors
Road, 1.7%
Road, -1.0%
Air, -1.6%
Air, 0.2%Rail, Pipeline, and
Other, -0.2%
Rail, Pipeline, and
Other, 3.7%
Storage and Services, -
2.6%Storage and Services, -
3.2%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
PERCENT CHANGE OF GROSS PRODUCT BY DIFFERENT TRANSPORTATION INDUSTRY SUB-SECTORS
Industry Overall Growth 2013-14, 0.9%
Industry Overall Growth 2014-15, -1.2%
Both Air and Rail, Pipeline & Other sectors managed growth at 0.2% and 3.7% respectively
Sector contraction can be largely attributed to the Storage & Services subsector - making up 44.8% of the sector and contracting at 3.2%
Gross Products Generated by Different Sectors in Transport
Percent Change of Gross Product by Different Transportation Industry Sub-Sectors
Supply Chain Report 9
SECTION A: Economic Update
Labour Force, Australia, June 2015
ABS (4)
Labour Force Australia 2015 (Seasonally Adjusted)
Change from June 2014Employment
Jun-15 Jun-14 Person Percent
F/T Employed persons ('000)
P/T Employed persons ('000)
Total Employed persons ('000)
Unemployed persons ('000)
Unemployment rate (%)
8,106.9
3,603.8
11,710.7
753.1
6.0%
8,003.5
3,521.9
11,525.4
745.5
6.1%
103.4
81.9
185.3
7.6
-
1.3%
2.3%
1.6%
1.0%
0.1 pts
Employment in almost all sectors increased with only Manufacturing, Mining, Agriculture and Others weakening
Share of Employment by Industry
Aug-14Aug-15
('000) Person Percent ('000) Person Percent
Retail
Healthcare
Manufacturing
Construction
Education
Professional, Scientific
Accom, Café, Restaurant
Public Administrative
Mining
Transport and Storage
Wholesale
Agriculture
Others
1,246
1,500
884
1,024
928
1,016
824
737
226
611
391
303
478
10.26%
12.7%
7.5%
8.8%
7.9%
8.6%
7.0%
6.2%
1.9%
5.2%
3.3%
2.6%
4.0%
1,235
1,377
913
1,038
906
936
794
731
246
593
387
321
484
10.7%
11.9%
7.9%
9.0%
7.9%
8.1%
6.9%
6.3%
2.1%
5.1%
3.4%
2.8%
4.2%
TOTAL 11,796 100.0% 11,525 100.0%
ABS (4)
Note: Detailed Labour Force Australia is released Quarterly by ABS
Australia’s Labour Force
Total employment rose 103,400 persons aiding the unemployment rate to reduce by 0.1% to 6%
Part time employees growing at a higher rate than full time employees & total employed
Could indicate that while job numbers are increasing, the security of those jobs in decline
Australia’s Labour Force by Industry - 2014-2015
Transport & Storage sector contribution of employed persons increased 0.1% and total persons increased from 593,000 to 611,000
593,000August 2014
611,000August 2015
10 Supply Chain Report
SECTION A: Economic Update
Over a shorter timeframe, prices within the Transportation sector can be seem reducing for multiple periodsTransportation sector is highly responsive to fuel prices and these have been declining
ABS (5,6)
2002/2003 2003/2004 2004/2005 2005/2006 2006/2007 2007/2008 2008/2009 2009/2010 2010/2011 2011/2012 2012/2013 2013/2014 2014/2015
All Groups 2.6% 2.5% 2.5% 4.0% 2.1% 4.5% 1.4% 3.1% 3.6% 1.2% 2.4% 3.0% 1.5%
Transport 0.1% 3.2% 3.4% 7.6% 0.2% 6.8% -5.9% 3.1% 3.6% 2.2% -0.5% 2.7% -2.4%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
PERCENTAGE CHANGE OF CONSUMER PRICE INDEX FROM FY 02/03 TO 14/15 FOR ALL GROUPS AND TRANSPORT GROUP
All Groups Transport
ABS (5,6)
Inflation - CPI
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15All Groups 2.5% 2.4% 2.16% 2.75% 2.93% 3.02% 2.31% 1.72% 1.33% 1.51%
Transport 1.4% -0.5% 2.69% 1.88% 2.46% 2.68% 0.19% -1.94% -6.24% -2.42%
All Groups Transport
More reactive to changes in the market - is to be expected as responding to fewer factors
Annualrateofinflationdeclinedto1.5% in 2014/15 from 3% in 2013/14
Transport sector more volatile than economy as whole declining from 2.7% to -2.4% in the same period
Percentage Change of Consumer Price Index for all Groups and Transport Group (Mar 2013 - Jun 2015)
Percentage Change of Consumer Price Index fromFY 02/03 to 14/15 for All Groups and Transport Group
Supply Chain Report 11
SECTION A: Economic Update
Price rises in the Education, Health and Alcohol & Tobacco sec-torshavecontributedhighlytotheannualinflationrate
Transportationsectorcontributesanegativeinfluenceof-2.4% onannualinflationon1.5%
Can indicate a number of things:1. Over investment within the sector leading to reduced prices2.Animprovementinefficiencytomeetdemand
1.1%
4.8%
-0.9%
2.5%
1.4%
4.3%
-3.4%
0.9%
5.4%
2.1%
1.5%
Food
Alcohol and tobacco
Clothing/footwear
Housing
Household contents and services
Health
Transportation
Communication
Recreation
Education
Financial and insurance services
All groups
Contribution to Annual Inflation by Product Group
-2.4%
ABS (5,6)
Contribution to Annual Inflation by Product Group
-300 -200 -100 - 100 200 300 400
2005-2006
2006-2007
2007-2008*
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
Year
$Billion
International Trade Account Balance on Goods
Debit (Import)
Credit (Export)
-25.0
-20.0
-15.0
-10.0
-5.0
-
5.0
10.0
15.0
20.0
25.0
30.0
$Billion
Monthly International Trade Account 2011-15
Goods Credit
Goods Debit
Australia’s International Trade Account (Goods Only)
Exports declined from 2013/14 t0 2014/15 while imports increased over the same period giving Australia a net negative account of $14 billion
Month on month, this pattern in common with Australia not experiencing a positive trade balance since March 2014
ABS (7)
Contribution to Annual Inflation by Product Group
Monthly International Trade Account 2011-15 International Trade AccountBalance on Goods
12 Supply Chain Report
SECTION A: Economic Update
Total sea freight went up from 1,169.2 tonnes in 2012/13 to 1,320.9 tonnes in 2013/14
99 99.1
1,0701,169
1,2221,321
0
200
400
600
800
1000
1200
1400
2012-13 Import 2012-13 Export 2012-13 Total 2013-14 Import 2013-14 Export 2013-14 Total
MT
International Sea Freight Volume (Million Tonnes)
BITRE (8)
International Sea Freight:Volume and Value
Freight value increased from $405.7 billion in 2012/13 to $441.6 billion in 2013/14
Thetonnagefiguresismainlydrivenbyhighvolume,lowvaluecommoditieslikecoal,cokeandore.This can be seen in the discrepancy in import and export tonnes and value between the two graphs
184.4 198.1
221.3
405.7
243.5
441.6
0
50
100
150
200
250
300
350
400
450
500
2012-13 Import 2012-13 Export 2012-13 Total 2013-14 Import 2013-14 Export 2013-14 Total
$ BillionInternational Sea Freight Value ($Billion)
1,169.2TONNES
1,320.9TONNES
2012/13 2013/14
$405.7billion
$441.7BILLION
2012/13 2013/14
BITRE (8)
International Sea Freight Volume (Million Tonnes)
International Sea Freight Value ($Billion)
Supply Chain Report 13
SECTION A: Economic Update
East Asia (727.9 million tonnes & $98.8 billion) was Australia’s largest export market by volume followed by Japan & North Asia (352.8 million tonnes & $67.8 billion).
6.7
727.9
23.5
352.8
15.0 3.4 6.0 2.5 5.444.2 33.9
0.50
100
200
300
400
500
600
700
800
Volume of Goods Exported from Australia (million tonnes)
BITRE (8)
Country ofDestination
East Asia
Japan & North Asia
South Asia
South East Asia
Europe
Middle East
Africa
North & Central America
South America
New Zealand
Pacific Islands & PNG
Rest of the World
Total
Exports(million tonnes)
Exports($ billions)
727.9
352.8
44.2
33.9
23.5
15.0
6.7
6.0
5.4
3.4
2.5
0.5
1,221.8
98.8
67.8
9.0
28.2
9.4
8.0
3.4
8.2
1.3
5.4
3.2
0.8
243.5
Over half of the import volume and value had its origin in 3 markets: South East Asia (29.1 million tonnes & $43.2 billion), East Asia (14.8 million tonnes & $42.3 billion) and Japan & North Asia (14.8 million tonnes & $29.4 billion) in trade.
Country ofOrigin
South East Asia
East Asia
Japan & North Asia
Middle East
Europe
North & Central America
Rest of the World
Africa
New Zealand
Pacific Islands & PNG
South America
South Asia
Total
Imports(million tonnes)
Imports($ billions)
29.1
14.8
14.8
7.1
6.5
6.1
5.8
5.5
3.3
3.3
1.4
1.3
99.0
43.2
43.3
29.4
5.8
34.6
20.2
2.4
5.5
6.4
1.5
2.6
3.2
198.1
Australian Sea Freight by Trading Region (Exports)
Australian Sea Freight by Trading Region (Imports)
BITRE (8)
5.5
14.8
6.5
14.8
7.1
3.3
6.1
3.31.4 1.3
29.1
5.8
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
Volume of Goods Imported to Australia (million tonnes)
Volume of Goods Imported to Australia(million tonnes)
Volume of Goods Exported from Australia(million tonnes)
14 Supply Chain Report
SECTION A: Economic Update
All major ports showing increasingvolume year on year apart from Melbourne between 2011/12 and 2012/13
Melbourne expected to reach previous high during 2015/2016
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
Port of Melbourne Port Botany Port of Brisbane Port of Fremantle
Container Throughput at Australian 4 Major Ports (TEUs)
2009-10
2010-11
2011-12
2012-13
2013-14
Period Port Botany Port of Brisbane Port of Fremantle
2012-13
2013-14
-2.7%
0.8%
4.5%
3.8%
5.9%
3.0%
2.0%
4.9%
Port of Melbourne
Machinery & Transport Equipment represents the highest value sector of imports at $71.4 billion
Crude materials, at $106.2, represents the highest export sector for Australia
0
20
40
60
80
100
$b
illio
n
Value of Imports & Exports by Commodity Groups2013-2014
Imports ($billion)
Exports ($billion)
Commodity Group
Food & Live Animals
Beverages & Tobacco
Crude Materials
Mineral Fuels
Animal & Vegetable Oils
Chemicals & Related Products
Manufactured Goods
Machinery and Transport Equipment
Miscellaneous Manufactured Articles
Commodities & Transactions
Total
Imports($billion)
Exports($ billion)
11.1
2.6
2.3
43.2
0.6
16.1
25.5
71.4
21.6
3.6
198
27.4
2.1
106.2
69.6
0.6
4.8
13.6
8.5
1.5
9.3
243.6
Australian Sea Freight by Commodity Sea Freight
Container Throughput at Australian Ports
BITRE (8)
65%MELBOURNE
& SYDNEY
Melbourne followed by Sydney are Australia’s largest ports by volume, accounting for over 65% of throughput
BITRE (8)
Container Throughput at Australian 4 Major Ports (TEUs)
Volume of Imports & Exports byCommodity Groups 2013-2014
Supply Chain Report 15
SECTION A: Economic Update
NSW accounts for highest tonnage of road freight at 538,503 tonnes
Together with QLD and VIC, make up the majority of road freight in Australia
NSW & QLD are the highest states for road freight kilometres travelled at 5,048,313 and 4,297,905 respectively
This can be seen as expected as the largest and most populous states incur the highest freight kilometres
538,503
480,418499,659
153,024
373,510
50,54925,199
10,841
0
100,000
200,000
300,000
400,000
500,000
600,000
NSW Vic. Qld. SA WA Tas. NT ACT
Road Freight by Origin (Tonnes)
5,048,313
3,766,140
4,297,905
1,226,207
2,237,742
308,875 210,115 118,147
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
NSW Vic. Qld. SA WA Tas. NT ACT
Road Freight by Origin (Kilometres)
Road Freight - 12 months to 31 October 2014
Labour CostSince 2009/10, the Transport & Storage sector has matched the overall labour price index reasonably consistently
2003/
2004
2004/
2005
2005/
2006
2006/
2007
2007/
2008
2008/
2009
2009/
2010
2010/
2011
2011/
2012
2012/
2013
2013/
2014
2014/
2015
All Sectors 3.5% 4.1% 4.2% 4.0% 4.3% 3.7% 3.1% 3.8% 3.7% 2.9% 2.6% 2.3%
Transport 3.1% 3.2% 4.3% 4.1% 3.9% 4.4% 3.2% 4.1% 3.8% 2.8% 2.4% 2.2%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
Change of Labour Price Index(All Sectors vs. Transport and Storage)
All Sectors
Transport
Labour cost within the Transport and Storage sector increased 2.2% in 2014/15
The overall market increased 2.3% in the same period
ABS (27)
ABS (9)
Road Freight by Origin (Tonnes)
Road Freight by Origin (Kilometres)
Change of Labour Price Index(All Sectors vs, Transport and Storage)
16 Supply Chain Report
SECTION A: Economic Update
• A clear trend of price decreases over the entire 40 week period from 135 cents to a low of 111 cents• Driving lower prices within the Transport sector• The weakened Australia dollar is less able to resist price increases if supply is restricted in future
108
110
112
114
116
118
120
122
124
126
128
130
132
134
136
138
21 28 5 12 19 26 2 9 16 23 30 6 13 20 27 4 11 18 25 1 8 15 22 29 6 13 20 27 3 10 17 24 31 7 14 21 28 6 13 20
(ce
nts
pe
r lit
re)
(week ending Sunday...)
Average Weekly Fuel Price (Diesel): 40 weeks to 20 March 2016
Jun July Aug Sept Oct Nov Dec Jan Feb Mar
• A clear trend of price decreases over the entire 40 week period from 141 cents to a low of 106 cents.• Driving lower prices within the Transport sector• The weakened Australia dollar is less able to resist price increases if supply is restricted in future
102
106
110
114
118
122
126
130
134
138
142
146
21 28 5 12 19 26 2 9 16 23 30 6 13 20 27 4 11 18 25 1 8 15 22 29 6 13 20 27 3 10 17 24 31 7 14 21 28 6 13 20
(ce
nts
pe
r li
tre
)
(week ending Sunday...)
Average Weekly Fuel Price (Unleaded): 40 weeks to 20 March 2016
Jun July Aug Sept Oct Nov Dec Jan Feb Mar
Fuel Cost - Diesel
Fuel Cost - ULP
AIP (10)
AIP (11)
Average Weekly Fuel Price (Unleaded): 40 Weeks to 20 March 2016
Average Weekly Fuel Price (Diesel): 40 Weeks to 20 March 2016
Supply Chain Report 17
SECTION A: Economic Update
Most major cities are holding steady for industrial property except Brisbane & Perth.
Perth has an oversupply from the Mining industry and prices are decreasing
Brisbane is experiencing an undersupply and prices are increasing to account for this
Industrial Market Indicators
City
Sydney
Melbourne
Brisbane
Perth
Adelaide
Area Rent/Sqm Trend
South
South West
Central West
West
North West
North Shore
City Fringe
North West
South Eastern
Trade Coast
Southside
Northside
Perth Core
North
South
East
Inner West
North West
North
$160
$105
$120
$110
$105
$160
$120
$75
$80
$135
$115
$120
$95
$90
$80
$70
$115
$95
$70
Steady
Steady
Steady
Steady
Steady
Steady
Steady
Steady
Steady
Increasing
Increasing
Increasing
Decreasing
Decreasing
Decreasing
Decreasing
Steady
Steady
Steady
Industrial Rental Cost
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Savills (12)
Market UpdateSECTION B:
..............................• An Update on Climate Change• Significant Infrastructure Programme and Progress• Warehouse Availability and Trends
Supply Chain Report 19
SECTION B: Market Update
Transport sector increased emissions by 0.5% over the period to 93.4 million tonnes – a higher rate than all emitters as a whole at 0.2%
Significantworktoachieve2020targetsof 5% below 2005 levels as the carry over reductions from Kyoto protocol agreements are being consumed
Australia is expected to be behind reduction targets by mid 2016
186.6
94.8
93.4
38.4
32.6
79.9
13.1
10.8
549.6
2.1%
0.1%
0.5%
-1.5%
1.2%
-3.6%
0.0%
0.0%
0.2%
Annual emissions through toSeptember quarter (Mt CO2)
Category
National Inventory
Energy: Electricity
Energy: Stationary energy
Energy: Transport
Energy: Fugitive emissions
Industrial Processes
Agriculture
Waste
Land Use & Forestry
National Inventory Total
% Change
182.7
94.7
92.9
39.0
32.2
82.9
13.1
10.8
548.4
Australia National Greenhouse Gas Inventory
Septemberquarter 2014
Septemberquarter 2015
100
200
300
400
500
600
700
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Mt CO2 Australia's Greenhouse Gas Reduction Target
National Inventory Trajectory to 2020 Target 2015-16 Update
An Update on Climate Change
Greenhouse Gas Emission Reduction Target
0.5%
Highest emitting sector remains the Electricity generation sector at 186.6 million tonnes
TRANSPORT SECTOR
$186.6Melectricity generation SECTOR
Department of Climate Change (13)
Australia’s Future InfrastructureHeadline Reform Aspirations in the National Infrastructure
Productive cities, productive regions- Higher density housing- Rapid public transport- Intelligent road systems- National Freight & Supply Chain Strategy- High speed broadband
Efficient Infrastructure markets- Balance taxpayer & user funding- Implication on low income households- Privatise energy sector- Privatise NBN- Close future funding gaps for investment & maintenance
Sustainable & equitable infrastructure- Regulatory frameworks to encourage innovation-Moreefficientnetworks- Encourage renewable energies- Develop remote area infrastructure
Better decisions & better delivery- Detailed analysis before public commitment- Post completion reviews- Improved evidence base for decision making- Frameworks & data driving improvements- Infrastructure skills plan
Department of the Environment (14)
Infrastructure Australia (15,16)
Australia’s Greenhouse Gas Reduction Target
20 Supply Chain Report
SECTION B: Market Update
SAGawler Line rail upgrade
Upgrade&electrificationoftheGawlerraillineincluding new signalling equipment. This will
rationalisethedieseltrainfleetandallowamore sustainable approach.
Significant Rail Infrastructure Programs
QLDCross River rail to CBDProvide north-south passenger rail from Bowen Hills to Salisbury via the CBD. A second rail river crossing to ease demand on buses.Port of Brisbane dedicated freight railImprove connectivity from Brisbane Port to freight terminal in Brisbane area. Aims to meet projected increase in freight volumes and encourage a shift from road to rail.
NSWSydney Metro (Chatswood – Bankstown) Singledeck,fullyautomatedrailservicetoexpandcapacityalongtheidentifiedGlobalEconomicCorridorwithinSydney. Analysis suggest without expanded capacity, 42,000 jobs would go unrealised by 2036.Port Botany Freight rail duplicationDuplication of 2.8km of the Port Botany rail line to maintain throughput capacity under the rail mode share strategy.Chullora Junction upgradeImprovements to low speed, at-grade junctions including a possible duplication of some areas. Aims to improve congestion under the rail mode share strategy.
VICCranbourne – Pakenham rail upgradeRolling stock and supporting infrastructure upgrade including signalling equipment. Additional initiatives to remove level crossings are also being considered.
Melbourne Metro simplification & capacity upgradeConstructing twin 9km tunnels from South Kensington to South Yarra, linking Sunbury & Cranbourne Pakenham rail lines. This will ease capacity constraints.
Infrastructure Australia (17)
Supply Chain Report 21
SECTION B: Market Update
NSWWestConnex Stage 3 (M4 – M5)Joining the M4 and M5 via a tunnel running under the inner western suburbs of Sydney. Aims to ease severe congestion along surface roads.Port Botany & Sydney Airport to WestConnexIntegrated, high capacity road connection from the WestConnex, St Peters interchange to the Sydney Airport & Port Botany precinct allowing airportandporttraffictobypasslocalroads.
Significant Road Infrastructure Programs
QLDIpswich Motorway (Rocklea – Darra)Road upgrades to ease congestion and delays including: widening between Oxley Rd and Suscatland St, northern service road across Oxley creek, ramp rationalistion.
WAPerth Freight LinkSeeks to remove the missing link to Fre-mantle Port. Extends Roe Highway west of the Kwinana Freeway to become the principal east-west freight link. Also adds a freight connection between Roe Highway and Fremantle Port.
VICCityLink – Tullamarine WideningWiden and introduce managed motorways on the M2 road corridor from Melbourne Airport to the M1.Hoddle St UpgradeThe heavily congested major road is unsafe and inefficient.Optionstoeasethisinclude:trafficman-agement systems, intersection operations, public transport incentives, limiting right turns.West Gate Freeway, CBD North & Port of MelbourneSignificantcongestionandarelianceontheWestGate bridge emerge from the lack of an east-west connection between West Gate freeway and the Port of Melbourne and CBD North. This project aims to provide that link and ease congestion.
Infrastructure Australia (17)
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24 Supply Chain Report
VICMelbourne Container Terminal Capacity EnhancementConstruction of additional container terminal capacity to cater forprojectedincreasedvolumes.Trafficattheporthasgrownat 6% per year over the last 2 decades. At this rate, even with the planned expansion project, the port will reach capacity by 2031. As a central role in Australia’s supply chain, inadequate port capacity could have broader consequences
SECTION B: Market Update
Significant Port Infrastructure Programs
WAPerth Container Terminal
Capacity EnhancementAdditional container capacity within
the port to extend the capacity horizon currently projected at 10 years.
Containertraffichasgrownat5.6%peryear and has an economic contribution
to Australia of over $3 billion.
SASouth Australia Regional mineral port developmentOptions for the development of bulk commodity port capacityintheSpencerGulfregion.Sitesidentifiedinclude: existing Whyalla Port in northern Spencer Gulf, planned Cape Hardy Port on the central eastern Eyre Peninsula, planned Myponie Point Bulk Commodity export facility on the northern Yorke Peninsula. Addresses a shortfall in a clear path to market for new mining projects.
Infrastructure Australia (17)
Supply Chain Report 25
SECTION B: Market Update
Region 2016 Demand Condition and OutlookDemand Forecast
Sydney Strengthening economic conditions in NSW are expected to provide a platform for net effective growth of industrial location assets.
Melbourne
Melbourne's attractive land values (43% cheaper than Sydney) play a key role in maintaining Melbourne's reputation as logistics capital of Australia.
Brisbane Supply has gradually been increasing with institutional investors driving speculative construction of almost 70,000 square meters of industrial estate location space.
Perth Competition for tenants remained high in the first half of the year, evident by moderating rents.
Adelaide Construction for large scale industrial assets is forecast to be at the highest rate for five years, with more than 85,000 sqm of space due to be completed for 2015.
Warehouse Availability and Trends: Demand
Region 2016 Supply Condition and Outlook Supply Forecast
Sydney The Sydney industrial market is characterised a
sea of capital bounded by a scarcity of stock.
ñ
Melbourne Compared to mining focused states such as
Western Australia and Queensland, Victoria will benefit from the lower value of the Australian dollar, which will drive demand for industrial property (the Port of Melbourne is a major driver)
ñ
Brisbane All Brisbane industrial markets are experiencing strong demand from domestic and international investors for investment grade industrial assets.
ñ
Perth Perth industrial market has continued to soften during the second half of 2015. Available space has increased and limited net tenant demand is leading to longer vacancy periodes in some assets.
óò
Adelaide Adelaide industrial market saw mixed results.
Vacancy in most industrial markets increased, with the exception of the south.
óò
Warehouse Availability and Trends: Supply
Australian IndustryPerformance
SECTION C:
..............................• International Logistics Performance Index• International Logistics Performance• Total Business Inventory• Inventory to Sales Ratio
Supply Chain Report 27
SECTION C: Australian Industry Performance
Index calculated via an international survey of logistics operators as well as quantitative measure-ment of key indicators
Australia’s Logistics Performance ranks 16th among 155 countries, up two places from the previous ranking in 2012.
Highest ranking is Germany at 4.12 while the previous leader, Singapore, has dropped to 4th at 4.00
Australia continues to be ahead of New Zealand, at an index of 3.81 and almost at par with the US & China.
APEC and ASEAN groups are both performing competitively at 3.5 and 3 respectively
LPI RankPrevious
RankCountry LPI Customs Infrastructure
International shipments
Logistics competence
Tracking & tracing
Timeliness
1 4 Germany 4.12 4.10 4.32 3.74 4.12 4.17 4.36 2 5 Netherlands 4.05 3.96 4.23 3.64 4.13 4.07 4.34 3 7 Belgium 4.04 3.80 4.10 3.80 4.11 4.11 4.39 4 10 United Kingdom 4.01 3.94 4.16 3.63 4.03 4.08 4.33 5 1 Singapore 4.00 4.01 4.28 3.70 3.97 3.90 4.25 6 13 Sweden 3.96 3.75 4.09 3.76 3.98 3.98 4.26 7 22 Norway 3.96 4.21 4.19 3.42 4.19 3.50 4.36 8 15 Luxembourg 3.95 3.82 3.91 3.82 3.78 3.68 4.71 9 9 United States 3.92 3.73 4.18 3.45 3.97 4.14 4.14 10 8 Japan 3.91 3.78 4.16 3.52 3.93 3.95 4.24 11 25 Ireland 3.87 3.80 3.84 3.44 3.94 4.13 4.13 12 14 Canada 3.86 3.61 4.05 3.46 3.94 3.97 4.18 13 12 France 3.85 3.65 3.98 3.68 3.75 3.89 4.17 14 16 Switzerland 3.84 3.92 4.04 3.58 3.75 3.79 4.06 15 2 Hong Kong SAR, China 3.83 3.72 3.97 3.58 3.81 3.87 4.06 16 18 Australia 3.81 3.85 4.00 3.52 3.75 3.81 4.00 17 6 Denmark 3.78 3.79 3.82 3.65 3.74 3.36 4.39 18 20 Spain 3.72 3.63 3.77 3.51 3.83 3.54 4.07 19 19 Taiwan 3.72 3.55 3.64 3.71 3.60 3.79 4.02 20 24 Italy 3.69 3.36 3.78 3.54 3.62 3.84 4.05
International Logistics Performance Index
International Logistics Performance
World Bank (19)
1 1.5 2 2.5 3 3.5 4 4.5 5
SingaporeJapan
Hong Kong, ChinaCanada
United StatesAustralia
Chinese TaipeiNew Zealand
Korea, Rep.China
MalaysiaThailand
PhilippinesChile
MexicoVietnam
PeruIndonesia
Russian FederationLao PDR
Papua New GuineaCambodiaMyanmar
ASEAN
APEC
World Bank (20)
28 Supply Chain Report
SECTION C: Australian Industry Performance
Total cost of business inventory is continu-ing the upward trend from 2002 from $101 billion to $147 billion
This is a clear indicator of the strength of the Australian economy
Inventory to sales ratio continues to improve from 2005 from 0.795 to 0.629
This indicates cautiousness in holding too much stock or, more likely given the previous indicators of economic strength, that improvements in supply chain management areprovingeffective
0
20000
40000
60000
80000
100000
120000
140000
160000
$m
Period
Inventories (Book Value, Current Prices)
0.000
0.100
0.200
0.300
0.400
0.500
0.600
0.700
0.800
0.900
Ratio
Period
Inventory to Sales Ratio
ABS (21)
ABS (22)
Total Business Inventory
$101 billion
$147billion
Inventory to Sales Ratio
0.795JUNE 2005
0.629JUNE 2015
Inventories (Book Value, Current Prices)
Inventory to Sales Ratio
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Employment andTraining
SECTION D:
..............................• Employment Level in Transport & Storage Industry• Transport & Logistics Workforce by Education• Transport and Logistics Workforce by Gender• Projected Employment Growth of Industry• Workforce Age & Employment Type• Education & Training in Logistics
Supply Chain Report 31
SECTION D: Employment and Training
Continuing trend of increasing employment within the Transport industry from 469,000 to 611,000 persons
0
100
200
300
400
500
600
700
('00
0) P
ers
on
Year
Employment Level in Transport Industry ('000) Person
Aug-03 Aug-04 Aug-05 Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Aug-13 Aug-14 Aug-15
Person Employed ('000) 469 482 495 500 540 574 575 574 576 562 588 593 611
Year on Year Growth 6.2% 2.8% 2.7% 1.1% 8.0% 6.2% 0.2% -0.1% 0.3% -2.4% 4.6% 0.8% 3.1%
Employment Level in Transport and Storage Industry
ABS (23)
611,000August 2015
469,000August 2013
Employment within the sector increased 3.1% between Aug 2014 and Aug 2015
0.8%AUG 2014
3.1%aug 2015
Employment Level in Transport Industry (‘000) Persons
32 Supply Chain Report
SECTION D: Employment and Training
Majority of workforce possess no qualifications
Aviation alone in largest group qualifiedtoVETCertIII/IVlevel
Maritime & Ports have highest proportion of University educated workers
The lack of formal education within workforces can contribute to lag in best practice procedure
0%
10%
20%
30%
40%
50%
60%
70%
Logistics &Warehousing
Road Aviation Rail Maritime & Ports
2014 Transport & Logistics Workforce by Education & Sector
No Qualification VET Cert I/II VET Cert III/IV Diploma/Advanced Diploma Higher Education
Current Transport & Logistics Workforce by Education
Employment in Transport and Storage Industry by Gender
• Males still dominating all sectors of Transport & Storage industry• Sector with highest proportion of female workforce is Aviation• Significantchangeswouldhavetotakeplaceforthisratiotoevenoutandismorelikelytobeviaincreasesinstaff
with a higher education
TLISC (24)
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Logistics & Warehousing
Road
Aviation
Rail
Maritime & Ports
Transport & Logistics Workforce by Gender & Sector
Female Male
TLISC (24)
2014 Transport & Logistics Workforce by Education & Sector
Transport & Logistics Workforce by Gender & Sector
Supply Chain Report 33
SECTION D: Employment and Training
All sectors except Aviation and Logistics & Warehousing have older workforces than average of 40% aged over 45
Allsectorsemploystaffatfulltimeatahigher rate than average of 68%
All sectors have workforces aging at a higher rate than average with Aviation aging at 2.5 times the average rate
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
Logistics & Warehousing
Road Aviation Rail Maritime & Ports
Transport & Logistics Workforce Size & Growth
2013 Workforce 2018 Workforce Job Growth (2013-2018)
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Logistics & Warehousing
Road
Aviation
Rail
Maritime & Ports
All Industries
Workforce Age & Employment Comparison
Aged Over 45 Fulltime
0
0.5
1
1.5
2
2.5
3
Logistics &Warehousing
Road Aviation Rail Maritime & Ports
Aging Rate Compared to All Industries
Projected Employment Growth of Industry
All sectors expected to experience job growth over the period to 2018
3 sectors expected to experience job growth of over 4%: Logistics & Warehous-ing, Road and Maritime & Ports
Logistics & Warehousing as well as Road transport sector to experience largest growth rates as well as largest absolute number of new jobs.
Overall the sector remains healthy and there exists opportunities for those with proper education to get ahead
TLISC (24)
Transport and Storage Industry Age & Employment Type
ABS (23) & TLISC (24)
Workforce Age & Employment Comparison
Aging Rate Compared to All Industries
Transport & Logistics Workforce Size & Growth
SECTION D: Employment and Training
Education and Training in LogisticsMajor channels which provide education and training in Logistics remain the same which are:
Universities and Collegesprovidequalificationsfrombachelortodoctoratedegrees.Degreesintheareaofprojectman-agement,operationsmanagement,supplychainmanagement,transportmanagementandengineeringarebeingofferedat most of the universities/colleges nowadays.
In terms of vocational studies, TAFE Institutions and Collegeprovideshortcourses,CertificatesI-IVanddiplomasindiffer-ent areas ranging over purchasing, transport, warehousing, maritime and aviation.
Training Institutionsoffercourses(someofwhicharegovernmentfunded)similartocertificatesandshortcoursesofferedby TAFEs.
Several companies in the industry also provide internal development programs, such as the graduate program or trainee-shipprogramofferedbyLinfox,KPMG,PWCandDHL.
Other training channels include: • SCLAA/APICS which coordinates a mentoring program and short courses.• TLISC which provides training packages in Transport, Logistics, Maritime and Aviation.• TDT Victoria whichofferscadetshipprogramsrelatedtotransport,distributionandlogistics.• MGSM and CSIROwhichoffersexecutiveprograms.• Supply Chain Leaders Academy (Part of the Logistics Bureau Group) accredited with CILTA whichoffersonline classes as well as comprehensive two-day schools three times a year covering a broad range of Supply Chain & Logistics best practices: www.SupplyChainLeadersAcademy.com.au
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Climate Change Authority (26)
Supply Chain Report 35
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RegulatoryEnvironment
SECTION E:
..............................• Transportation Related Legislation• Climate Change Related Legislation
Supply Chain Report 37
SECTION E: Regulatory Environment
Transportation Related Legislation
Climate Change Related Legislation
Special Review by Climate Change AuthorityGovernmentreviewintoETSprogramwillbediscussedandafinalreportissuedby30June2016Table below outlines possible regulatory options to achieve carbon reduction targets in Australia:
Type Policy Examples
Market Policies
Mandatory Carbon Pricing
Cap and Trade ETSs European Union, ETS, California ETS
Baseline and credit ETSs Alberta Secified Gas Emitters Regulation
Emissions intensity ETSs See AEMC (2015) submission to the ERF Safeguard Mechanism Consultation
Carbon Taxes British Columbia Carbon Tax
Voluntary Carbon Pricing Offset Schemes
Clean Development Mechanism (an international scheme)
Government purchase of emissions reductions
Emissions Reduction Fund Purchasing
Other mandatory price-based policies Renewable energy target schemes Renewable Energy Target
Energy efficiency target schemes NSW Energy Savings Scheme
Non-market policies
Regulation
Facility-level emission limits ERF Safeguard Mechanism
Appliance Standards Greenhouse and Energy Minimum Standards
Building Standards Energy efficiency requirement in the National Construction Code (eg. 6 star standard for new houses)
Vehicle Standards
The United States, Canada, the European Union, China, Japan, India, Korea and various other countries have vehicle efficiency and/or emission standards
Information Programs Energy labelling for appliances E3 Program (Australia and New Zealand)
Information and advice on energy efficiency
Your Energy Savings Website
Innovation Support Grants for research & development
Grants provided by the Australian Renewable Energy Agency
Public investment in commercialisation Loans provided by the Clean Energy Finance Corporation
Climate Change Authority (26)
Australian Government (25) & Infrastructure Australia (16)
Harper Review Recommendations
1. Introduce cost reflective road pricing in a revenue neutral way2. Reform liner shipping3. Reform aviation and shipping cabotage restrictions
Infrastructure Australia:
• Infrastructure Australia to develop a National Supply Chain Strategy to target nationally important supply chains and identify critical infrastructure and legislative bottlenecks
• Are currently recommending governments move to road user charging for heavy vehicles within 5 years.
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Supply Chain Report 39
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40 Supply Chain Report
Supply chains everywhere are under immense pressure. Driven by globalisation and custom-ers whose power to dictate to suppliers is ever greater, supply chains in every sector and niche are becoming more complex and subject to greater degrees of risk and volatility. At the same time, technology is advancing apace andofferingopportunitiesforinnovationwhichsupply chain organisations are seizing upon to remain competitive and meet the challenges they face.
Three Key Areas of InnovationIn the next 10 to 15 years, we can expect to see almost perpetual innovation in the following three aspects of supply chain management:
1. Visibility: As supply chains grow in complex-ity, it becomes ever more necessary to follow theflowofmaterials,informationandmoneythrough those chains in real time.2. Connectivity and collaboration: Few are the organisations today that can meet customer demand without collaboration. The next few years will see an increase in multi-party collab-oration, supported by increasingly sophisticat-ed webs of interconnected and interoperable systems.3. Automation: Many developed countries are sufferingadepletingpooloftalentfromwhichindustrial and commercial entities can recruit. If this situation continues, many companies will be looking at how much they can automate their supply chains to operate with fewer em-ployeesandlessexpense,withoutsacrificingcustomer satisfaction.
Taking each of these areas in turn, it’s worth looking at them in a little more detail, just to explore the trends we can expect to see as emerging technologies drive ideas and provide the means to turn them into practical reality.
Supply Chain Innovation: The Next 15 Years
1) Supply Chain Visibility
Supply chain leaders quite understandably spend a lot of time talking about visibility. However, few of them proclaim success in their effortstoattainit.Organisationalsilosalltooof-ten get in the way and when it comes to taking definitiveaction,costcontainmentseemstotrump visibility every time in terms of invested
capitalandeffort.
This is a shame, since improving supply chain visibility increases the opportunities to reduce cost. It’s all very well to say “what gets mea-sured gets done”, but before you can measure anything, you must be able to see it.
There is however, a focal shift towards visibility that’s slowly gaining momentum. Add the fact that technology is ready and ripe for exploita-tion and we have every reason to expect that for example, combinations of RFID and sensors will play an increasingly important role in trac-ing the status of materials through the supply chain.
Seeing Beyond RFIDWhile it seems that RFID labelling and tracking has only recently matured into a mainstream feature of supply chain monitoring, we could soon be seeing it take the next step in its evo-lution. This will likely be in the shape of RFID labels with additional sensing equipment on board,offeringmorethansimpleconfirmationof labelled items’ presence.
With active sensors on board, RFID labels will be able to provide valuable information about the status and condition of materials and products in transit. This is incredibly important, givencurrentdifficultiesinascertainingwhoshould bear the cost of goods that are dam-
aged or spoiled in transit.
Possible uses of RFID labels with on-board sensors include:
• RFID with embedded moisture sensors to detect the onset of corrosion to auto parts
• RFID tags with light sensors to identify when containers are opened without authorisation
• RFID with temperature sensors to moni-tor transport and storage of vaccines and serumsortemperature-sensitivefoodstuffs
These “smart RFID” labels will be able to take measurements and time-stamp them, so supply chain companies can reconstruct events which led to product spoilage or damage—or possibly even to monitor those events in real time and intervene to prevent losses.
Smart RFID is just one example of how supply chainvisibilitymaybenefitfrominnovation.Theinnovations themselves will be enabled by the rise of the Internet of Things (IoT) which con-nects “dumb” objects, via sensors to monitoring software.
Other Supply Chain Uses of Sensor TechnologyAlong with enhanced RFID, other uses of sen-sors can be expected to increase across supply chains,fromthefactoryfloortothepremisesof end-customers or even consumers. Inven-tory for example, will be able to count itself, enabling automatic replenishment and
SMART RFID IS JUST ONE EXAMPLE
OF HOW SUPPLY CHAIN VISIBILITY
MAY BENEFIT FROM INNOVATION
Supply Chain Report 41
prevention of out-of-stock situations. Transpor-tation units will transmit data relating to speed, location, load status and other vital information telling shippers and customers a real-time story of asset performance and location.
When it all comes together and sensors pop-ulate every aspect of the supply chain, all the way to the retailers’ shelves and beyond, real opportunities will exist to reduce latency by sensing, rather than translating demand. It’s unlikely however, that any one company will be abletoleveragesensortechnologyeffectivelyon its own. To ensure the picture is whole, we’ll need innovation to prevail in another area—connectivity and collaboration across complex supply networks, to share data and ensure materialandinformationflowsareseamless.
2) Connectivity and Collaboration
I’ve grouped connectivity and collaboration together, since in a supply chain context, one will not be able to take place without the other. Furthermore, both these elements are essen-tial to achieve the total supply chain visibility facilitated by sensor technology. Innovation in supply chain over the next few years will not be purelytechnological,ascompaniesmustfindways to break down silos and work together to generate visibility and capitalise on it. If we don’tfindwaystoinnovateintermsofcollabo-ration between say, retailers and suppliers, all that sensor data will be of limited value.
Ironically, many of the answers to collaborative challenges do lie with technology. Think of the following example, which although not related to supply chain (except perhaps, incidentally), illustrates how important a part technology plays in commercial collaboration.
I’m talking about remote project management; a growing trend that transcends industrial sectors and international boundaries; one that connects teams of individuals from around the world to deliver project objectives. These proj-ects are only possible because of advances in software and Internet technology, which enable project workers to share tasks in real time.
Perhapswe’llfindawaytousecollaborativetechnology in supply chain in a similar way to remote project teams. Right now, technology can help with collaboration, but it also has its limitations. Strings of ERP platforms belonging to disparate organisations, no matter how well they interface, will not be likely to promote collaboration, although they may help to some extent with the sharing of data.
A more helpful development might be the adoption of cloud-based services which pool data en masse from participating supply chain players. A step beyond cloud-based ERP or SCM, these platforms will pull organisations together on single instances, controlling access with authorisation rules, but essentially putting hundreds of companies on one system, where data can be shared without the need for pass-ing it via EDI.
Companies that wish to collaborate simply sign up to one of these services, while keeping their own IT platforms as isolated as they wish.They will also be able to decide what data they contribute to the pool and which other organi-
sations they share it with. For want of a better term, we might call these platforms “digital sup-ply chain hubs”.
ConnectivityIf visibility is the key to cost containment, then connectivity is the key to visibility. Here we’re not just talking about connecting supply chain partners. That, as already discussed will be criti-calsimplytoenableeffectivecollaboration.
When we talk about connectivity in the supply chain of the next decade, we mean everything being connected to everything. Machines will connect to machines. Dumb objects will con-nect to business information systems. People will be connected to those same systems, but in an ever less active and more supervisory capacity.
RFID will be used to trigger alerts from retail shelves, initiating a Kanban-style process which automatically calls for replenishment when shelf stocks get low. That in turn will trigger an order for replenishment of the store from the distribution centre, or perhaps directly from a supplier. Data from the same system will be utilised by forecasting software, to yield aware-ness of subtle trends and buying patterns and drive more accurate forecasts.
In a similar manner, transportation assets will be connected to business management plat-forms, sending constant streams of data which will feed into dynamic planning applications. Machine learning will allow these applications toutiliselivedataaboutdelays,trafficcondi-tions, and other environmental factors. As a result, logistics companies will be able to plan resourcesmoreeffectivelyandimproveon-timedelivery,aswellastocreatemoreefficientroutes, generating savings in labour and vehicle running costs.
In the warehouse too, connectivity will greatly surpass the degree to which it’s present today. The connected warehouse of 2030 will literally live up the term “connected”. MHE, opera-tives, inventory and even lighting and HVAC/temperature control will all be digitally linked, requiring manual management only by excep-tion—that’s in those warehouses which aren’t completely automated and operating with the lights out.
3) Automation
Supply chain automation is already common-place, although typically within larger organi-sations. Over the next decade or so, we’ll see the costs of robotic technology come down to the point where it’s within reach of smaller companies in the supply chain arena. Perhaps we’ll also see a lot more automated public warehouses and 3PL providers that specialise in lights-out warehousing.
Theseproviderswillbeabletoofferthirdpartyservices at reduced cost, perhaps even linking into digital supply chain hubs to automatically move inventory out to loading bays in response
Lest you concern yourself about what this will mean for the supply chain labour market, it should hardly prove to be an issue. Firstly, it may help to solve the global shortage in labour. Secondly, if multi-channel distribution contin-ues to proliferate, there will need to be a lot more warehouses 10 to 15 years from now. Even if the workforce in each is only 20% of what we’d expect to see today, the real reduction in avail-ablewarehouseworkisunlikelytobesignifi-cant, at least in terms of technical, maintenance and management personnel.
Automation Outside the WarehouseWhile warehouse automation is already a main-stream feature, transportation is currently lying on the cusp of a technological revolution, as the buzz about drones and driverless vehicles continues to get louder and more insistent. In the next decade or so, it’s not unreasonable to expect that large goods vehicles will be equipped with a much greater degree of auton-omy than they have today. Even if trucks don’t become driverless in that time, it’s probable that drivers will play a less active part in direct vehicle control and will even be able to spend periodsoftimeinhands-offmode.
This might in turn lead to changes in drivers’ hours legislation, enabling vehicles to keep their wheels turning for longer; so reducing costs and cycle times. In the United States, the state of Nevada has already licensed autono-mous trucks for commercial operation on its roads.
One particularly interesting innovation is the autonomous road train, which was the subject of a project successfully completed in 2012. The theory behind this idea is that trucks will travel in convoys or “platoons”, guided by a lead vehicle driven manually. The vehicles following the leader are linked electronically, allowing them to mimic the lead vehicle and therefore follow closely behind. Drivers in the following vehicles are present only to drive the last miles after the platoon breaks up. Otherwise they are passive occupants.
As with all things transport-related, the chal-lenge for autonomous vehicles and unmanned aerial vehicles (drones) is getting past the legislative barriers and obvious wariness of the public. For that reason, we might not see vehi-cles go totally “driverless” in the next decade. Similarly, distribution by drone may be further offthansomecorporations(readAmazon)would like to think. That said, I suspect we will see drones become commonplace in distribu-tion centres; used for building/yard/inventory inspections and similar utilitarian tasks.
Don’t be Surprised if You’re Surprised It’s never easy to predict what will happen next year, let alone 10 years from the present time. All it takes is one innovation, by one organisa-tion, in one area, for a chain reaction to take place. Then all the most educated predic-tions can be thrown to the wind. So don’t be surprisedifadifferentsupplychainproblemproves to be the one where innovation prolifer-ates. Visibility, collaboration and automation are simply good horses to bet on right now, based on needs within the supply chain environment and the available technology to help compa-nies to innovate.
IF VISIBILITY IS THE KEY TO COST
CONTAINMENT, THEN CONNEC-
TIVITY IS THE KEY TO VISIBILITY
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