The role of rail in port of arrival supply chains

The national freight task is growing at a rapid rate. Transporting an increasing volume of imports and exports across the country will put more and more pressure on the nation’s infrastructure and communities. We had the chance to speak with Peter Koning, Technical Director Strategic Planning & Advisory at AECOM and NSW Chapter Chair at the Chartered Institute of Logistics and Transport about some of the biggest challenges ahead.

Q: According to a study by the Bureau of Infrastructure, Transport and Regional Economics (BITRE), the domestic freight task is forecast to grow by 2.8% between 2003 and 2020. Given the current mode share of freight in Australia, what does that mean for the capacity of our transport infrastructure?

Peter Koning: Major roads are currently being duplicated, that’s ok and provides safer intercity transport. Moreover, ports and their logistics infrastructure are likely to become more critical in the future. This will include efficient short haul rail.  With increasing globalization there is currently a real threat to any labor intensive activities completed on shore in Australia, “port of arrival supply chains” will become highly critical.

The Moorebank Project Office (MPO) has arrived at the conclusion that interstate transport would not be required until 2030 which is challenging. Our research with Industry indicates that there is a willingness to adopt rail if a cost effective, reliable and predictable service can be provided.  I am consciously avoiding the word speed here.

There has also been much talk recently about an introduction of mass distance charging on interstate routes. We believe any change from the status quo will be politically difficult to achieve until there is a viable alternative presented.

Q: Rail is widely considered as the most environmentally, economically and socially sustainable transport mode for long-distance freight. Why is rail in Australia in such a challenging position?

Peter Koning: Coastal shipping also has many advantages… I see several challenges that rail must overcome to improve its competitive edge:

• The demand between road and rail is relatively inelastic. They are not at present, easily substitutable.
• Road sets an extremely high benchmark service level that rail needs to work to match.  If this is achievable and predictable, people will plan for the few extra hours it takes.  A prime example is slow moving ocean shipping: people manage with it.
• Obviously the below rail infrastructure must be in place and slots provided to promote a competitive landscape
• Either services must be provided by the supply chain market leaders – and they will need to be largely responsible for filling their own trains – or open access terminals at either end need to be put in place and operated by accredited parties. It is not so easy to see how this is going to get kick started. The capital involved is a considerable risk.
• Services and equipment need to be presented to the supply chain industry that can match road equipment and will not require excessive (or any) handling of goods.

The rail will not be adopted until supply chain planning is improved. Given it is not easily interchangeable; the adoption must be very deliberate and prepared. Businesses internal supply processes through to order release and warehouse management processes are geared around road transport speeds. This would need to be worked at and overcome.

Q: “First and last mile issues” are often stated as the biggest problem in freight transport. With the population expected to reach 35 million by 2050, the issue is likely to exacerbate. What can the industry do to prepare for an era of growth?

Peter Koning: Rail cannot survive without road transport, that’s clear. The ideal scenario would be Freight Transport Orientated Developments of which an intermodal terminal capability would be a part. This could substantially reduce first and last mile moves subsequently making rail increasingly competitive.

We also need to consider efficient approaches; we cannot let the freight task grow unchecked. By 2050 the freight task per capita is forecast to double. That doesn’t sound efficient.

For Interstate freight transport let’s focus on time sensitive goods, that’s where the key potential is. Services are likely to be more acceptable to logistics managers if there is better equipment used for cargo integrity that minimizes or removes the handling of freight; that will also expedite the services.  A trailer on rail concept would probably be the most acceptable service to suit the flexibility requirements of the logistics industry.  The ideal scenario to industry would be to drive a trailer up, load it to a train then retrieve the trailer at the destination and deliver.

Earlier I mentioned the criticality of “port of arrival” supply chains, which become crucial when looking at short haul freight. Australia’s geography is quite unique, in the sense that there aren’t any major populous inland cities like in just about every other country around the world.  In all our key cities 80-90% of freight is delivered to the local metropolitan area. It makes sense then that we focus on this approach. To do this we need an efficient transport interchange from the ports, especially if the ports are going to remain in our major cities. Trucks on road are deeply unpopular with other road users and often wrongly blamed for causing congestion, this is not the case right now but they will increasingly impact it as the ports grow.

A rail approach does not make sense in all of Australia’s key port cities but it is going to be critical to some to alleviate pressure on roads in the proximity to ports.  Ideally, the rail lines will connect to large logistics precincts offering a full range of logistics services including inland port capability (customs, Australian Quarantine Inspection Services) and let’s not forget empty containers.  Such facilities could also be key business locations for freight exporters.

Q: In how far can technology be a driver for change in the supply chain?

Peter Koning: Driverless trucks and driverless trains are rapidly becoming a reality. There are multiple technologies internationally available right now in the form of equipment and IT capabilities that still have limited adoption in Australia. The earlier corporations are improving supply chain and transport planning capabilities through technology the greater the potential for it to serve as a catalyst for unleashing the potential of greater Interstate rail adoption. Australia also has one of the globally highest oil use and carbon production per capita, that is a risk especially where there is limited innovation happening

Q: You will be speaking at the annual AusIntermodal conference in Melbourne. What discussion would you like to provoke at the forum?

Peter Koning: I would like to have a discussion on how can we develop more logistics capability near ports not inland intermodal terminals that will not improve logistics efficiency.

Also, with increasing focus from major retailers on offshore labor and port of arrival logistics just how critical will interstate be? I am not fully convinced that it will grow at the expected rate.

The 12^th annual AusIntermodal conference will be held on the 30^th and 31^st October 2012 at the Hilton on the Park in Melbourne. For more information and the complete speaker line-up, visit the conference website or call +61 (0)2 9080 4307.