The Distribution Channels and Freight Modes of Australia - Case Study Example

Running Header: The Distribution Channels and flight modes of Australia Student’s Name Lecturer’s Name Course Title Date Introduction The supply chain and world economy globalization has expanded at drastic speed. The development of world trade and matching movements of cargo container continues to significantly exceed general economic growth. The growing freight flows have been a fundamental element of modern modifications in economic systems at the local, regional and global scales. These modifications are just qualitative with extra freight in circulation and in operational and structural (Supply Chain Digest, n.d, p.1). Structural modifications mostly entail manufacturing system with their extended production geography, while operational modifications mostly regard freight transportation with distribution geography, known as intermodal systems of transport. In this case, the important question does not essentially depend on the freight movement destinations, origins and nature but on particular way in which the freight is moving. Novel production means are associated with novel distribution modes that bring forward the logistic realm (Rodrigue & Hesse, 2015, p.1). The paper focuses on Australia logistics and their contribution in enhancing the supply chain development and economic growth in the country. Australia contains a considerable freight task which is met via a number of operators accessing national spanning freight network. This network is very essential to the Australian economic components. It include intermodal, roads and railway lines terminals. Freight network operators utilizes air, sea, pipeline, rail and road either individually or in combination. These modes of transportation in the country enhance the flow of goods, services and raw materials in and out of the country and thus, they contributes a great deal in the growth and development of the Australian economy. Roads and rails are highly utilized in enhancing the transfer of commodities within the country, particularly from the source of raw material or production to the export terminals or across the country, or from the terminal to different parts of the country. However, air, sea and pipeline are commonly used for both national and international freights, either exports or imports. Australian freight movements have significantly grown over the past 30 years, especially non-bulk road freight. Concurrently, rail based bulk movement, specifically of minerals has significantly grown. Railway carriage accounts for about 49% of the entire domestic freight, where coal and ore accounted for more than 80%. Road freight accounted for roughly 35% while coastal sea accounts for about 17% of the total freight. Air freight accounts for below 0.01 percent of the entire freight while computed based on the weight (Bitre, 2014, p.2). The paper analyses the Australian logistics and supply chain, its trends, technological change and the challenges it is facing while contributing to the global supply chain. Globalization and the Importance of International Supply Chains to Global Economic Growth No country is self-sufficient in a global economy. Every country is involved at varying levels in trade to acquire what it cannot produce, to sell what it can make and to enhance its production efficiency in particular economic sectors as compared to its trade partner. This processes is enhanced by globalization. Globalization is referred to as increasing financial and economic integration of the world economies. It is widely used as global changes, which are happening to eliminate national boundaries from distribution, financing, sale and production of services and goods (Rodrigue, 2015, p.1). Globalization has been facilitated by transnational corporations, which perceive the globe as a single market. Globalization can also be perceived based on global supply and value chain, which allows raw materials from one part of the world to be available in another part of the world for processing, to create finished goods that may also be sold to the country where the raw material was sources. This ability to develop a single market for the world and to make items from one part of the world readily available to all others through supply chain are some of the aspect that made Friedman (2005), to describe the world as a flat place. Friedman perceived the economic changes that took place in the 21st century as a way of eliminating the world trade barrier and enhancing products accessibility through effective supply chain management. This nullifies the initial economic gap felt between nations and make everything accessible to all without putting much effort. Among the aspects featured by Friedman which made him to regard the world as flat include the development of the IT technology that enhanced communication, and hence the control and management of supply chain, and also which enhanced the process of outsourcing and ensuring that all workers work in one platform despite being located in different places. This eliminates the previous variation in the world economic development supremacy, and provide an equal chance to all and thus making the world a flat place. In the past 30 years, there have been progressive cross-border transactions liberalization, improvement in transport services and logistics, advancement in information services, and production technology which offered companies greater enticements to geographically delocalize production process and to fragment them. Production chains or global supply where strategies of cost reduction yields to goods being frequently produced with transitional inputs originating from different nations are currently common in a number of industries and spread over to an augmenting number of developing nations. When perceived economically, the global supply chain emergence is associated to the comparative advantage concept. In this case, by repositioning processes of production which include retailing and distribution, research and development, design, marketing, concept, packaging and manufacturing in different nations, transnational corporations can benefit the best available physical or human resources in varying nations, with the aim of upholding their competiveness by costs minimization and increasing productivity (Nicita et al., 2013, p.1). The integration of the developing nations into the global supply chain has turned to be an essential pillar of their export-led development policies. The global supply chain permits producers in the chain to get hands-on information and management knowledge on technology and quality standard, and thus, they end up being more competitive. These producers can swiftly learn about patterns of demand and consumer preferences in high-income markets. Taking part in global supply chains could also develop economic-wide externalities for growing nations that include improvement in skills and technology, employment, export diversification and upgrading in productive capacity. These externalities would augment the developing nation’s attractiveness for extra direct foreign investment. It is therefore evidence that global supply chain enhances the general growth of economy in all corners of the world and provide all countries an equal chance of advancing their economy using own resources and outsourced resources and thus, making world a flat place (Nicita et al., 2013, p.1). Logistics as Lifeblood of Supply Chains Logistics play a very essential role in the supply chain. Logistic entails an extensive set of operations dedicated to the goods distribution and transformation from sourcing of the raw material to final distribution in the marked and the related flow of information. It refers to the set of activities needed for goods to be availed on markets or particular locations. Logistics application allows for greater movements efficiency with a suitable selection of mode, routes, scheduling and terminals. The logistics implied purpose is to avail commodities, raw materials and goods to the market, fulfilling the four main needs associated to cost, quality, delivery and order fulfilment. Therefore, logistic is a multidimensional value improvement activity that include time, location, production and element control in a supply chain. It therefore allows an improved managerial space-time relations level and essential transport geography aspect. Logistics operate as the organizational and material globalization support needed to make complex decisions regarding a set of problems that include suppliers’ location, modes of transport to be employed and the deliveries sequencing and timing. (Rodrigue & Hesse, 2015, p.1). Logistics management has played a great part in the development of globalization of the economy. This is because, logistics and supply chain have enhanced the distribution of goods, and raw materials within a country and to other parts of the world where they are needed. Logistics have eased the process of changing from one mode of transport to another for convenience in transportation. This have made it more possible to transport goods and raw materials from their source to where they are needed in any part of the world. In this regard, logistic acts as supply chain livelihood and contributes to economic wealth, cost savings and the profitability of business, since it provide the company with an opportunity to choose what will work for them in terms of mode of transport, route and the destination (Ptgmedia.pearsoncmg, 2004, p.83) Logistics in Australia Supply Chain The network of Australian freight is the infrastructure which allows goods movement between different geographic areas. The network of freight in the Australian eastern states follows the coastline greatly, with exception of main railway line and road to Mt Isa located in Queensland and up to South Australia via Broken Hill railway line. The eastern Australian states are linked to the Western Australia through rail and road network in the south as well as a road through north. A railway line and road also connects Adelaide to Darwin. Freight network in Australia overlaps with passenger transport and thus, it should not be evaluated in isolation. The two share a number of common infrastructure with enhancements of the freight network of the country, having the ability to enhance traffic safety of passenger and lower congestion. The figure below demonstrates the roads and railways network in the Australia (Allen Consulting Group, 2010). Figure 1: Railway and roads network in Australia The task of Australian freight is different and involves the bulk exports commodities movement within or outside the country. These commodities include grains, liquefied natural gas, coal, iron ore, imported vehicles transportation, machinery as well as other manufactured good. It also involves the distribution of household consumption finished goods to retail outlets via distribution centres. The major Australian freight elements movements are demonstrated in the figure below as per in 2012. Figure 2: Elements Movement in Australia Australia has four main goods transportation modes in their freight network. They include air, road, shipping, and railway. However, the country also has a pipeline network though it is only used in transportation of liquefied gas and petroleum products. The best mode of transportation is selected based on a number of factors that include the goods bulkiness, fragility and perishability of the goods, volume and weight of the goods, reliability and timeliness, service frequency and availability, the cost and the transportation distance. In most cases particular modes are almost always selected to transport particular cargoes. For instance, high valued and perishable commodities are characteristically extra time sensitive, making air or road the most common option. Railway Freight Railway is the most suitable mode for handling heavy bulk goods with long-haul, large volumes and regular cargos. About 48% of bulk freight task in Australia is transported via railway. This is mostly because of the huge volumes of iron ore and coal related with mining activities combined with rail transport. It is also used in transportation of sugar, cotton, rice and grains for export or processing. Non-bulk freight are more important on the long Perth corridor of Eastern states, where it represents the main origin-destination inter-capital non-bulk freight, and the corridor of Melbourne-Brisbane where it roughly contains approximately 30% of the total non-bulk inter-capital freight. Rail transports much less share on other corridor of non-bulk inter-capital freight (Bitre, 2014, p.3). Rail is not able to utilized scale-induced urban areas cost advantages. Railway has generally upheld volume but has lost on predominantly non-bulk, shorter, corridors of north-south freights, which are dominated by road freights. Although there is great competition between road and rail on non-bulk, long-distance line-haul segment freight, rail freight is characteristically reliant on pick-up road freight transportation and freight delivery at intermodal terminals (Allen Consulting Group, 2010). Road Freight Road transportation acts as the major form of freight in the Australia. The road freight cost effectiveness has markedly improved since the early 1960. The improvement is attributed by the government effort to enhance productivity of road vehicle and quality of road infrastructure, the gradual elimination of road freight carriage regulations restrictions, and an exponential intrastate trade growth. Road freights dominate the developing non-bulk inter-capital freight market. Non-bulk freight is transported predominately by road, since it is essentially more complex and diverse as compared to bulk freight with regard to delivery, packaging and distribution network requirement. Normally, road is the most effectual means of transportation in urban regions. This is due to the integration of frequently dispersed destinations and origins, comparatively small volumes of shipment and short distances. Road is frequently the only accessible option of freight transport outside urban regions. Contrasted to railway, road freight provides considerable flexibility, and is particularly suitable to transport fragile, time-sensitive or perishable freight. The flexibility and the on-board communications improvement have enhanced the utilization of road freight by just-in-time stock control business, door-to-door delivery and small inventories that generally demand for smaller and more frequent, shorter-haul deliveries. Road transport productivity in Australia has been enhanced by the articulated trucks introduction which contains higher capacity, for instance B-triples and B-doubles. Moreover B-doubles and semi-trailers fixed with quad axle categories can safely transport heavy loads on a road defined network. The extensive quad axle categories on B-doubles and semi-trailers for a section of transport national reform agenda of Australian Government Council (Allen Consulting Group, 2010). Sea Freight Ports and shipping are an essential interface with the land based freight role such as road and railway, carrying raw materials and Australian manufactured goods between main gateways and domestic centres for international market. Coastal shipping accounts for about 17% of the entire domestic freight movements and contains 10% of the entire volume via Australian ports. Bulk goods that include petroleum, iron ore and aluminium ores stand for more than 70% of local coastal shipping transportation. Bauxite transportation between Gladstone and Weipa in Queensland as well as core between Port Kembla and Pilbara represented 30% and 20% of the entire domestic sea freight respectively based on 2011-2012 statistics. Eastern Bass Strait and states-Perth combined stands for more than 18% of the entire coastal shipping transportation. The major coal and iron ore exporting ports based on the volume include Glandstone, Dampier, Hay Point, Port Hedland, Newcastle and Cape Lambert are the biggest ports of Australia, standing for about 80% of the entire exports volumes for merchandise. The figure below also demonstrate the sea freight flows from 2011 to 2012 Figure 3: Freight flow in the Sea Port The Fremantle, Brisbane and Sydney are the capital city ports are among the following five biggest ports based on the total volume traded. On the contrast, Fremantle, Brisbane and Sydney capital city ports are among the five biggest ports in Australia based on 2011 to 2012 merchandised trade value, as a result of their significance as main export gateways. Merbourne is the biggest goods import port based on vale while Sydney is in the second position (Bitre, 2014, p.6). Air freight Air freight is highly suitable to high value and low density commodities that include gemstones, newspapers, precious metals, parcels, short-lived or perishable products, and usually contains only a minute part of freight volumes. Local air freight for instance represents below 0.01% of the entire local freight movements with most of them transporting of parcels, newspapers and other light products, between main cities in either regular passenger aircraft with freight service or dedicated freighters. In addition, international air freight accounts for below 0.1% of total merchandise trade in Australia by volume, though this trade accounts for more than 21% of the entire trade by value. The biggest air export or import airport in Australia is Sydney, based on integrated trade value. The three biggest groups of commodities that include computer equipment, mobile phones and pharmaceuticals accounted by value for more than 30% of the entire air imports while combined (Bitre, 2014, p.7). Figure 4: Air Freight trade flow in Australia Pipelines Pipelines also offer important transport services for specific products that would otherwise depend on conventional modes of transport. For instance, pipes are specifically essential for natural gas and oil transportation over long distances, mainly from the gas and oil fields to ports for export or to domestic markets. Pipeline are also responsible for providing the huge number of Australians with sewage services and potable water. Pipelines are a bit more expensive to construct and thus there are a bit more limited in the country. In addition, they have a low transportation speed. In this regard, they are not highly preferred. However, despite their limitations, pipelines are very cheap to manage and maintain. In addition, they can highly manage to hold high capacity, and allow in transit storage. In addition, pipeline eliminates pollution at a great extend unless when there is a fault that would lead to leakage. Thus they can be more efficient in liquid transportation as compared to all other forms of transportation (Energy Advice, 2014). The major Australian pipeline system based on the 2011 situation is provided in the diagram below (Pipeliner, 2011) Figure 5: Pipeline network in Australia Freight Future in Australia Freight task growth in Australia is anticipated to continue for the following 20 years with entire domestic freight being anticipated to increase by 80% from 2010 to 2030. This is attributed by strong development in bulk commodities domestic movements exports, specifically coal and iron ore, as well as by continuing development in the role of road freight. The total movements of containers via Australian ports by 2030 is anticipated to be about 2.5 times the volume managed in 2010. The entire national road freight role by 2030 is anticipated to be 1.8 times what was recorded in 2010. In addition, the total rail freight role in the country is anticipated to be over 1.9 times its 2010 records by 2030 particularly because of continuous increase in exports of iron ore. Nevertheless, local costal shipping transportations are anticipated to grow by only 15%, from 2010 level by 2030. However, this result is highly reliant on development of other coastal freight to balance probable continuing decrease in the local coastal petroleum and to a lower level iron ore transportation (Bitre, 2014, p.9). The projected change in the country is attributed by the population growth and growth in volumes of freight. The two have created a pressing requirement for new transportation and social infrastructure. The local freight role continuous growth is attributed by a number of factors. These factors include domestic and GDP population growth. The anticipated increase in total volumes of freight is related to the anticipated GDP growth, though the anticipate growth is much higher compared to the anticipated growth in population for a similar time period (Maribyrnog, 2008). Another factor that has highly enhanced the anticipated growth in Australia is the growth in Asian countries including China and India among others, which will augment the Australian products demand, especially resources. For instance, it is anticipated that LPG, coal and iron ore exports demand will increase by 100 to 160% in terms of mass from 2010 to 2025. The anticipated growth in the Australia freight up to 2036 is demonstrated in the line graph below (Bitre, 2014, p.9). Figure 6: Freights projected growth in Australia Australian government is planning to construct the Brisban to Melbourne inland rail line and international freight terminal in Moorebank. Railway infrastructure development will lower the utilization of roads in transportation of goods and it will as well increase the cost efficiency and time management in freights and passengers transportation by road. It will also lower the level of carbon emission especially during traffic jam. The government is also planning to expand its pipeline network to facilitate the availability of gas and oil in the country. Currently, there are a number of under construction pipeline one being the connection between Moomba and Alice Springs that will allow the transmission of gas from south to northern parts of the country (Energy Advice, 2014). Challenges Facing Australian Freights There are a number of global and local factors which will directly impinge or impact operations of domestic freights in Australia in the long run. Oil prices is one of the long lasting challenges facing the freight sector in the country. The increasing volatile and potentially increasing prices of oil present long term and short term challenge of energy sourcing. This increases the freight business risk in the future. The land transport sector of the country is heavily reliant on crude oil founded energy. This is due to high limitation of the alternative sources of energy available in the instantaneous term. This means that this mode of transport which is highly relied on may continue depending on this one source of energy for a long time. This implies that road transportation stability can highly be influenced by the cost of oil as well as its availability in the county. This means the mode is also highly dependent on the pipeline freight mode as well (Australian Government, 2014). Another aspect that is posing a threat to the current freight situation in the country is the change in the climatic situation in the country. Climatic change conditions are anticipated to increase the Australian surface temperature by 1oC in the following years and extreme weather days by 20 to 40% by 2030 based on particular future warming situation. Climatic change long-term impacts are debatably being witnesses, and they can halt or hinder freight movement by compromising essential infrastructure particularly the rail networks in extreme hot condition. This might impact the location of local production process, specifically in agriculture, changing the freight pattern and volume and priorities of infrastructure. The community regards on externalities of environment will also affect the sector. Transportation is one of the sectors that highly depend on intensive sources of carbon. This creates challenges for the sector to manage decarbonisation to the required community level. The sector inability to observe green operation measures may create operation problems in the future especially now pollution prevention is among the established international goals in environment conservation (CSIRO, 2007). In addition, the growing Australian population is approximated to hit about 30 million individuals by 2030. Although this is anticipated to increase in the freight demand via consumers goods, this will also increase the demand for passenger transportation and hence passage vehicles. This will impact the freight efficiency movements as heavy trucks and trailer share progressively congested roads and thus, more time will be lost while trying to fight traffic jam especially during rush hours and at almost all the times in the urban centres. In addition, rail freight will be forced to compete with trains transporting huge number of passengers from one point to another on available rail infrastructure. The situation may frustrate the freight sector especially in urban centre and if not controlled before then, the situation may create a great strain and add to the level of pollution in the country. Beside all this, the global economic situation is altering the Australian economic structure, with declining manufacturing as GDP share moderate to services, and augmented manufactured imports. This impacts the freight transport services demand directly, with lowered demand from previous manufacturing centres and extreme dependence on the port-founded services. Another major problem facing freight sector in the Australia is the freight rights over that of passage services in shared rail and road network. According to Allen Consulting Group (2010, p.25), there are few dedicated infrastructure of rail and road freight in Australia. In most cases rail and road freight works on shared infrastructure with vehicles and trains offering passenger services. This is basically meant to cut on the infrastructure cost. However, this arrangement highly impact the freight sector due to high priority provided to passenger services as compared to those provided to freight services. For instance, Sydney provide a curfew against freight train in rush hours. This is despite of the high net gain provided by freight transportation as compared to passengers’ transportation. The government future challenge in enhancing freight efficiency in the country would be the development of common freight hubs especially for land freights; road and rail. Australia utilizes roads and rail to transport goods from the interior parts of the country to different terminals and also from terminals to different parts of the country. The country’s road highways and rail network help linking different cities but via different terminals. This makes it a bit hard to do intermodal transfer in freight despite of the two modes of transportation having terminals in similar cities. To reduce the time and the cost required to do intermodal transfer in in-land freights, air and sea freights, the government should consider developing common hubs in different cities and terminals where possible. This will reducing loading time and cost. Conclusion Australia uses different modes of transport to enhance the movement of goods and raw materials from one part of the country to another, and also from the country to other international countries and from other international countries to the country. This is done by use of different modes of transportation that include road, rail, sea, pipeline and air. Rail, road and pipeline are commonly used to ship goods within the country where air and sea are used to transport goods outside the country. Therefor forms of transportation have enhanced the expansion of the Australian economy. However, the Australia freight system is faced by a number of challenges which are hindering its efficiency. Nevertheless, the Australian government is employing different measures which include the expansion of road, rail and pipeline network to enhance efficiency. In this regard, it is anticipated that the Australian freight system may increase in efficiency in the future. References Allen Consulting Group, 2010, ‘National freight network strategy: Background paper,’ Melbourne. [Online] Available at< http://infrastructureaustralia.gov.au/policy-publications/publications/files/freight_network_background_paper_Feb_2010.pdf> [Accessed 13 October, 2015] Australian Government, 2014, ‘Investment opportunities in Australian infrastructure,’ Investment Opportunities in Australian Infrastructure, The Australian Trade Commission Bitre, 2014, Freightline 1 –Australian freight transport overview. Australian Government Department of Infrastructure and Regional Development. 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[Online] Available at http://pipeliner.com.au/pipeline_map_of_australia/ [Accessed on 14, October 2015] Rodrigue, J & Hesse, M, 2015‘Logistic and freight distribution,’ The Geography of Transport Systems, [Online] Available at< https://people.hofstra.edu/geotrans/eng/ch5en/conc5en/ch5c4en.html> [Accessed 13 October, 2015] Supply Chain Digest, n.d., ‘The 10 keys to global logistic excellence,’ Red Prairie [Online] Available at http://www.scdigest.com/assets/Reps/SCDigest_Global_Logistics_Excellence.pdf [Accessed on 14, October 2015] Read More