NEW ZEALAND`S FREIGHT TASK – Connecting road, rail, sea and

Logistics & Transportnz
$7.50
THE OFFICIAL PUBLICATION OF CILT NEW ZEALAND
Volume 11 Issue 4
JUNE 2013
NEW ZEALAND’S
FREIGHT TASK
– Connecting road,
rail, sea and air
for productivity
Developing a shared blueprint for improving NZ freight supply chains
Wellington – paving its way to capture transport-related growth
South Pacific strategic architecture
LOGISTICS & TRANSPORT NZ IS THE OFFICIAL JOURNAL
OF THE CHARTERED INSTITUTE OF LOGISTICS & TRANSPORT NZ
ON THE COVER
KiwiRail Freight’s forestry business is experiencing strong growth
in response to international demand for export logs, and the key to
maintaining this growth is to continue to build capacity – see page 4.
Photo by Michael Kilgour
13
8
Contents
Guest editorial: Greg Steed 1
Small country, smart thinking 2
Growth through investment and improved performance 4
The CILT UK Knowledge Centre 5
Developing a shared blueprint for improving NZ freight supply chains 6
Looking at freight through a different lens 8
Trucks, certificates of fitness and public reassurance 9
FIGS now has data for all of 2012 10
Supply chain management as a team sport 12
Wellington – paving its way to capture transport-related growth 13
Value delivery to customers through network optimisation 14
Letter to the editor 15
South Pacific strategic architecture 16
In the next edition
The editorial team welcomes expressions of interest for submitting an article for
the September 2013 edition, which will focus on funding Auckland’s transport future.
Contributors should in the first instance contact the editorial convenor, Murray King
(email [email protected]) to discuss their article.
4
Deadline for the September 2013 edition: 23 August 2013
6
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Disclaimer: This publication is the official magazine of the Chartered Institute of Logistics and Transport New Zealand Inc (CILT NZ). It is published quarterly. All material appearing
in this publication is copyright and may not be reproduced without the permission of CILT NZ. The views expressed in this publication are not those of the editorial committee,
CILT NZ, its council, officers or Aston Publishing Ltd, unless expressly stated as such.
June 2013 1
BIGGER SHIPS
Guest editorial – Greg Steed
WHAT’S HAPPENED to the bigger ships?
In August 2010, the New Zealand Shippers’
Council released a report calling for bigger
ships to call at New Zealand ports. It identified economic value, infrastructure investment requirements (mainly around ports),
supply chain vulnerabilities and constraints
faced by all those involved in the supply
chain for the next 10 years.
As a case study to answer questions
about the feasibility and cost benefits of
bigger ships, we focused on bigger ship services between New Zealand and South East
Asia, being the biggest route by volume.
The net benefit after all costs (including
infrastructure investments and aggregation costs) was estimated at $144 million
per year from having ships between 5000
and 7000 TEU operating on the South East
Asian trade route calling at two ports in
New Zealand by 2015/16.
It was also recognised that if New Zealand ports are not capable of handling bigger ships, these benefits will not be realised
and there is a risk that shipping services
would hub through Australia – increasing
net supply chain costs by $194 million per
year. So the real value of bigger ships to
New Zealand is $338 million per year.
So how are we positioned now to cater
for bigger ships? The answer is we are proceeding forward diligently.
Are the ports making progress?
The main requirement is for the four major
ports – in Auckland, Tauranga, Lyttelton
and Dunedin – to invest to become big
ship capable. All four will be needed by
2020 even at modest cargo growth rates.
Progress has been mixed on an individual
basis:
•Ports of Auckland – updated development plan released subject to consultation; funding to be confirmed
•Port of Tauranga – capital plans and
funding in place; berth extension complete and a new crane commissioned;
resource consent for dredging finally
achieved March 2013
•Lyttelton Port of Christchurch – earthquakes have required remedial work and
altered development plans; funding to be
confirmed; resource consent for dredging
in process
•Port Otago – development plan finalised;
“While ports are readying
themselves to become capable of handling bigger ships,
surface transportation modes
need to plan for the increase
in cargo movements that will
inevitably arise. Road, rail
and coastal shipping will all
have a role to play.”
funding confirmed; resource consent
appeal close to agreement.
Can cargo volumes support bigger
ships?
The answer to this is yes. The Bigger Ships
report analysed data from Statistics NZ for
the 2008 calendar year, then used growth
forecasts supplied by a number of sources.
From there we chose mid-points of 4% for
export growth and 5% for import growth to
estimate future volumes.
To update this, we obtained high-level
volume figures for the 2009, 2010 and
recently the 2011 years. Total container
growth being exports is estimated to have
increased 10% in the 2009 year, 11% in 2010,
but decreased by 4% in 2011. Imports have
decreased by 4% in the 2009 year, but
increased by 11% in 2010 and 5% in 2011.
Growth is therefore on track.
Is non-port infrastructure investing
for bigger ships?
While ports are readying themselves to
become capable of handling bigger ships,
surface transportation modes need to plan
for the increase in cargo movements that
will inevitably arise. Road, rail and coastal
shipping will all have a role to play.
Roads have been allocated $10.7 billion
over 10 years, with the Roads of National
Significance grabbing the lion’s share.
Specific improvements
dedicated to freight have
not been numerous, but
freight has shared in upgrades or new corridors for all types of vehicles. The linkages
required to meet container exchanges
of over 4000 TEU need reviewing and
planning to ensure gridlock is prevented,
particularly at the four major ports. The use
of inland ports and night running must be
considered.
In 2010, rail track capacity was sufficient
to move significantly larger volumes of
cargo on the existing network. Since then,
KiwiRail has made significant investments
both above and below tracks, particularly
on the line between Auckland and Tauranga.
New passing loops and coupling equipment
upgrades have been steadily completed.
At the same time, new rolling stock and
locomotives have been purchased.
Coastal shipping is likely to increase with
big ships. The introduction of a new vessel
by Pacifica is encouraging.
Infrastructure investments are therefore
heading in the right direction.
Are there ships of the right size and
configuration available to meet our
needs?
According to Alphaliner, 69% of the global
container fleet vessels are larger than
4000 TEU, and if the ships in the order
book are all delivered, the total rises to
78%. In the 4000 to 7500 TEU range, the
figures are 38% currently in service, but
only increasing to 40% as ships greater
than 10,000 TEU dominate ordering. The
economies of scale associated with larger
fuel-efficient ships are too compelling to
resist for ship owners, as well as expansion
in the Panama Canal to allow 10,000 TEU
ships to pass through.
If we look individually, there are ships
being delivered right now that would suit
our trade. The 7450 TEU Maersk Laguna was
delivered in December 2011, eighth of 16
ships. It has 1700 reefer plugs and is aimed
at the East Coast South America trade lane.
Hamburg Sud also has similar ships.
Bigger ships are on their way – and New
Zealand can look forward to benefiting
from them.
Greg Steed has been the chairman of the NZ Shippers’ Council
since January 2008; he can be contacted at [email protected]
2 Logistics & Transport NZ
CLOSING THE GAP
Small country, smart thinking
by Nigel Jones
Although as an economy we are small and remote, we are relatively smart – and in recent years there has been an increasing level of
smart thinking demonstrated across the logistics and supply chain sector
NEW ZEALAND is the most remote country
in the developed world. Compared with
key competing nations, our supply chains
lack scale, flexibility and responsiveness.
Our export supply chains are disadvantaged by the balance of trade – in volume
terms we export more than we import. In
relative terms they have to carry high costs,
and competing economies are becoming
more competitive every day.
This means New Zealand needs to pursue
the most effective and efficient supply
chains practicably possible, not to improve
our competitive position, but to ensure it is
not eroded any further. We must constantly work just to keep the international
playing field level (or as near level as we
can hope for).
Although as an economy we are small
and remote, we are relatively smart, which
in theory should work in our favour when
it comes to collectively innovating to close
this gap. In recent years there has been an
increasing level of smart thinking demonstrated across the logistics and supply
chain sector.
Future potential
Leading the charge six years ago was the
Ministry of Transport when they undertook the National Freight Demands Study
(NFDS), for the first time developing a consolidated long-term view of the country’s
potential future freight activity. It is good
to see that the NFDS is to be refreshed
over the coming months.
Building upon and complementing the
NFDS, the MoT has also established its
Freight Information Gathering System
(FIGS). This system was developed to provide an overview of containerised freight
movements around New Zealand. Building
upon information currently provided by
Statistics New Zealand, the system makes
valuable new information on freight movements available for the first time (more on
FIGS on pages 10–11).
The role good-quality, reliable information and data have to play in helping us
work and think smarter should not be
underestimated. I had the privilege of being
part of the team that researched and then
wrote the New Zealand Shippers’ Council’s
report, The Question of Bigger Ships. Having the sort of data now being collated and
published by the MoT to hand then could
have dramatically reduced the time to
produce such a piece of work.
Enabling smarter planning and strategy
through access to good data is a positive
start, but action needs to follow. Rather
than excuses and procrastination from its
supply chain community, New Zealand and
its economy need to see progress that will
deliver the efficiencies that will keep the
country competitive.
Infrastructure investments
It’s really encouraging therefore to witness
how the port sector has responded to the
discussion relating to bigger ships. It has
to be appreciated when looking at large,
step-change infrastructure initiatives that
approvals can take a while.
Undertaking dialogue and initiating the
resource consent processes must start
years before any particular asset may
eventually be required. It has literally taken
years, but finally the country now has two
ports with the required consents to dredge,
hopefully helping to future-proof New
Zealand Inc’s links with the world.
Action hasn’t only come from the ports.
Reinforcing the value of quality information
has been the New Zealand government’s
preparedness to support the KiwiRail
Turnaround Plan. Fronting up with large
amounts of money isn’t easy, even at the
best of times. I suspect therefore that
having the necessary confidence to invest
in New Zealand’s rail operation would not
have been easy, especially given that the
fallout from the global financial crisis was
still at the forefront of everyone’s thinking
when key decisions needed to be made.
Had not visibility as to the magnitude
of the pending freight task been available in the form of the NFDS, would we
have received the commitment required
to enable investment in key assets such as
locomotives and wagon renewals?
Regulations and systems
Supply chains aren’t only about physical
assets; industry also needs the right regulation and systems in place. The government
has shown a lead on this front also, with
the NZ Customs Service progressing their
Trade Single Window (TSW) initiative. TSW
is a major component of a system that
ultimately will enable parties involved in
international trade and transport to submit
clearance data that is required by our
border agencies electronically, just once,
through one entry point.
On the regulation front, progress is also
being made. Maritime NZ (with support
from the New Zealand Shippers’ Council)
championed the cause of New Zealand
exporters when it came to an IMO (International Maritime Organisation) proposal
for the compulsory weighing of shipping
containers. If not familiar with the issue,
Denmark, The Netherlands and surprisingly
Australia tabled a proposal with the IMO
requiring the mandatory weighing of every
shipping container prior to loading.
There is ample justification for clamping
down on erroneous declaration of con-
June 2013 tainer weights. Safety through the entire
supply chain has to be non-negotiable, and
unfortunately around the world there are
numerous occasions when safety has been
jeopardised through blatant, at times intentional mis-declarations being made. The
approach initially put forward, however,
would have penalised all and added costs,
even for those exporters who can and do
already declare weights accurately.
The final form is still pending, but at a
meeting late last year, a provision was put
forward for an alternative to include the
use of “a certified method approved by
the competent authority of the State in
which packing of the freight container was
completed”. Although perhaps resulting in
a further audit process, this will enable the
majority of New Zealand exporters who
are reputable and able to measure weights
to avoid the costs and inefficiencies that
would have otherwise been associated with
the weighing of every individual container.
International freight
It is not only transport-related departments
who have been active. We’ve also had the
Productivity Commission undertake its
International Freight Transport inquiry. Historically, supply chain practitioners – perhaps with some justification – felt freight
was left off the agenda when it came to
government policy (freight doesn’t vote),
yet here we were, second cab off the rank
with the Productivity Commission’s report.
A key recommendation made by the
Productivity Commission was the proposal
to reform the Commerce Act, removing
liner shipping’s exemption from collective rate-setting legislation. The proposal
– welcomed and supported by shippers
– requires shipping companies wishing to
collaborate to fix prices or limit capacity to
demonstrate to the Commerce Commission
that there will be a public benefit which will
outweigh any anti-competitive effects.
Equally (and perhaps more importantly),
the Productivity Commission report
acknowledged the efficiencies and benefits
realised by shippers from carriers being still
able to enter into operational arrangements
such as vessel-sharing agreements.
As legislation and supporting guidelines
are developed, of critical importance to
New Zealand importers and exporters over
the coming months is that the Productivity
Commission’s original intent is not lost or
eroded. Whatever form the final guidelines take, they have to recognise the role
vessel-sharing arrangements have to play
ensuring adequacy of services to and from
New Zealand. This needs to be achieved by
still enabling carriers to develop and revise
vessel-sharing arrangements with a level
3
Photo courtesy of the NZ Customs Service
NZ Customs’ Joint Border Management System (JBMS) will ultimately provide the Trade Single Window,
through which importers and exporters can deal directly with government agencies, and Customs and
the Ministry for Primary Industries can more effectively manage risks for goods crossing the border
of agility and responsiveness that reflects
the dynamics of the international world of
shipping, while at the same time avoiding a
costly and potentially bureaucratic compliance regime – either of which would not
be in New Zealand’s interests.
Collaboration
Using good data and quality information to
ensure we have the right infrastructure and
regulations in place are great starting points,
but collectively these are only enablers (be
they very important ones). Operationally,
business needs to ensure the supply chain is
then utilised and optimised appropriately.
A more collaborative approach towards
how we manage freight and use infrastructure is the only way this will be achieved.
If New Zealand is truly serious about
being a global player, its shippers need to
come together and take the New Zealand
economy to the world.
Acknowledgment of this challenge was
behind Fonterra and Silver Fern Farms
coming together to form Kotahi. Perhaps
unique in the world, Kotahi represents a key
piece of the jigsaw that will help lift the
performance of the country’s supply chains.
It’s only by working collaboratively through
arrangements such as this, across a variety
of importers and exporters, that New
Zealand will be able to
create the necessary
efficiencies along the
entire supply chain.
Through thinking
and working smarter, reducing waste and
improving utilisation, New Zealand will
ultimately have more sustainable and international competitive links with its global
markets. Compared with only six or seven
years ago we’ve come a long way, not only
defining what is required to future-proof
our supply chains, but taking some significant steps to deliver them.
As a logistics and supply chain community, we can look back with some pride
as to what has been happening, and the
progress that is being made. We shouldn’t,
however, sit back as there is still much to
be done.
New Zealand is and will continue to be a
country whose economy is more dependent in relative terms upon seaborne trade
than most other comparable or competing
economies. Just as many in our primary
industries view their businesses and investments on a multigenerational basis, then
so must the logistics and supply chain
community too. This will mean we must
at times be prepared to challenge populist
debate on topics such as port footprints
and the corridors serving them. For trade
to operate, we need access to adequate
infrastructure and capacity, not just today
but long term.
Just as efforts are going into enhancing our infrastructure, effort is needed
to ensure existing assets that are hard to
replace are protected.
Nigel Jones is the general manager of strategy for NZ milk products,
Fonterra, and a fellow of CILT NZ; he can be contacted at
[email protected]
4 Logistics & Transport NZ
KIWIRAIL FREIGHT
Growth through investment and
improved performance
by Leonard Sampson
The new DL locomotives have enabled KiwiRail to meet increased demand in two areas of strong growth – forestry traffic out of the eastern Bay of Plenty and
MetroPort services from Tauranga to Auckland Photo by Michael Kilgour
THE NUMBERS tell a very positive story for
KiwiRail as our freight business, constituting approximately 65% of KiwiRail group
revenue, continues to grow both revenue
and volumes.
Overall, there was an 8% growth in freight
revenue in the first half of this financial year
(FY), which in turn followed a 25% increase
in freight revenue over the previous two
years. Over the same period, there has been
an increase of just under 3 million tonnes in
rail freight volumes from 14.7 million tonnes
in FY 2010 to 17.4 million tonnes in FY 2012.
The biggest success story is in the
import/export market segment which as
at 1 May was 12% ahead of the same period
last year and has seen positive growth of
34% from 2010.
Our forestry business is also experiencing strong growth, showing a 12% increase
in the same period in response to international demand for export logs, along with
the development of log-hubs in the lower
North Island and increased volume from the
eastern Bay of Plenty as harvests mature.
Unfortunately, over the past 12 months
our bulk sector has not achieved the same
results, largely due to the Solid Energy
closure of the Spring Creek mine. This,
however, has been partially offset by
growth in domestic coal and strong early
season bulk milk volumes which have now
obviously finished with the drought in the
North Island.
Whilst we have also seen some growth
in our domestic market segment, this has
been flatter than in the export sector – a
reflection of the subdued retail market
in New Zealand. Nevertheless, we have
recorded a 6% increase over the previous
12 months, and there are promising signs of
further growth as existing customers commit more volumes to rail and returning or
new customers use our services.
Locomotives
This growth across all our markets is driven
by the provision of additional capacity
through investment into new equipment,
technology and infrastructure, and the
resulting improvements in our performance.
The key to maintaining this growth is to
ensure we continue to build our capacity – and strengthen our performance.
Investment already made in new rolling
stock has led to significant improvements
in the on-time performance needed for
customers to be confident of a reliable
rail freight service. The new DL locomotives have proven their worth over the past
18 months with their performance being
amongst the best in our fleet. They have
A dedicated log train operating on the key eastern Bay of Plenty route
Photo by Michael Kilgour
enabled us to meet the increased demands
in the two areas where we have seen strong
growth – forestry traffic out of the eastern
Bay of Plenty and MetroPort services from
Tauranga to Auckland.
A further 20 locomotives are currently
in production and due to arrive in New
Zealand mid-year. Their arrival will allow
the deployment of DLs to the lower North
Island to support growing demand through
those regions. It also allows the transfer of
locomotives to the South Island and retirement of older locomotives.
A further 10 DLs are proposed for the
next financial year, with the longer-term
intention to build the fleet to 80 locomotives over the next five to 10 years.
Containers and logs
Already 535 56-tonne container flat wagons
are in operation around the network, and
a further 300 will be in the country and in
use for the 2013 peak. The intention is to
continue to build the fleet progressively,
adding 300–400 a year over the next five
years to form the backbone of our fleet.
Complementing these has been the provision of intermodal equipment that gives
us the flexibility to meet seasonal demands
across differing market sectors and the
specific requirements of customers.
Our long-term strategy – to build a
standardised container wagon fleet complemented by intermodal containers – is
already driving operating efficiencies as we
are able to merge seasonal demand from
the import/export and domestic market
sectors to provide both greater capacity
and improved utilisation of wagon assets.
Further log bolsters, a proven technology
widely used throughout Europe, have been
acquired to meet demands for growing
forestry traffic complementing the fleet
of 100 wagons we already have in service.
The bolsters allow for up to three bunks
of short logs on a 15 m deck, fitted onto
June 2013 5
older container wagons, providing a cost-­
effective option to cater for increasing
export log demand.
Partnering for freight
As we continue to see Key New Zealand
ports invest in new infrastructure, along
with larger vessels becoming the norm in
global fleets, it is inevitable that the effects
will cascade to New Zealand.
From a rail perspective, our role is to
continue to partner with the country’s
major exporters and shippers to ensure
we are able to provide the appropriate
investment in both infrastructure and rolling stock in the right areas to meet further
consolidation of
freight to meet these
larger vessels.
Leonard Sampson is
the general manager,
sales, for KiwiRail
Freight
Log bolsters allow for up to three bunks of short logs on a 15 m deck, fitted onto older container
wagons, and provide a cost-effective option to cater for increasing export log demand
The CILT UK Knowledge Centre
by Murray King
ONE OF the benefits of CILT NZ membership is access to the CILT UK Knowledge
Centre. To gain access, you become an
e-member of CILT UK (unfortunately
though through the payment of an additional fee of £40).
The Knowledge Centre has a normal
‘bricks and mortar’ library – The John
Williams Library – which is at Corby in
Northamptonshire in England, somewhat
inconveniently located for New Zealand
members. But it does lend books, which
might be useful to us.
However, the Knowledge Centre offers
extensive online services, with 4600
journals and 37,000 journal abstracts, 1400
country economic reports, and 5200 fulltext industry reports. It also has access to
a worldwide database of 10,000 companies. So if you want to find information
on Maersk, there’s a company profile. So
too is there one for Fonterra, along with a
35-page report from Datamonitor.
There are further links to periodical
articles relating to each company, and
even to academic journal articles. So if you
want to know about ‘Characteristics of Ice
Cream containing Flax Seed Oil’, you can
find it there.
Media and legal
There are 2200 full-text newspapers from
97 countries, including 112 from New Zealand, not only the majors, but also provincial newspapers and give-aways. The papers
are right up to date, and there is a 90-day
archive. There is a legal database, and even
legal advice, though this is likely to be UK
oriented.
A list of links to other transport websites
(freely accessible), and to various logistics, supply chain, and transport glossaries
of terms; book reviews; and discounted
transport-related publications complete
the offering.
As well, the membership includes a
weekly current awareness bulletin, albeit
with a UK focus.
Staff are available to help with queries
and searches, and users report that the
online resources, including this help, is
what makes the Knowledge Centre valuable
to them.
Further details are to be found at
www.ciltuk.org.uk. CILT NZ’s national office
can assist with arranging membership.
And look out for Global Logistics and
Transport News – an online TV channel in
conjunction with the UK ITN channel. This is
promised to give news and insights into the
key issues in transport and logistics. Check
out www.ciltuk.org.uk from June this year.
Logistics and Transport New Zealand wishes to formally acknowledge the following organisations for their national sponsorship of
CILT NZ. It is because of this support that this forum for transport and logistics professionals is possible.
6 Logistics & Transport NZ
A COORDINATED APPROACH
Developing a shared blueprint for
improving NZ freight supply chains
The use of high productivity motor vehicles (HPMVs) is seen as a ‘quick win’ to achieve greater freight efficiency
IT HAS been over a year since the Productivity Commission released its report into
international freight transport services.
One of its key recommendations was for
the government to play a greater role in
coordinating investment planning across
the freight transport system.
The freight system, being the infrastructure and services that make New Zealand’s
freight supply chains work, contains many
different public and private components.
Each component has its own decisionmakers, which include those that own the
freight (freight producers), organise its storage and distribution (logistics providers),
move it (transport operators), as well as
the private and public sector organisations
that provide infrastructure and services to
enable commercial activity (port companies, KiwiRail, local, regional and central
government).
Because our freight system is complex
with many decision-makers, there is a risk
of what the Commission called ‘coordination failures’. These may result in poor or
inadequate investment, missed efficiency
opportunities, or insufficient/excessive
regulation.
The Commission’s call for a government
coordination role was a response to submissions it received asking for greater certainty around the government’s long-term
intentions for investment and regulation.
Greater certainty would give industry a
better idea of what investments they could
make to improve productivity and grow
their businesses.
The Commission found that the public
sector also needed to understand private
sector intentions to plan its investment.
This more coordinated approach was a
middle ground between having an atmosphere of investment uncertainty, which
could reduce business confidence, or
a return to centralised planning where
well-intentioned public agencies sought to
mould how the private sector manages its
freight task.
Developing a national freight
discussion
The NZTA has been involved in coordinated
freight planning processes around the
country – in the Upper North Island Freight
Story development led by the Upper North
Island Strategic Alliance (UNISA), as well
as in Central New Zealand and the South
Island (both facilitated by the NZTA).
The processes have involved engaging through workshops with people from
across the freight system to discuss the
challenges and opportunities they face,
and the strengths and barriers they see
in their businesses and regions. Through
this we have gained a much richer insight
into the critical questions that need to be
addressed to ensure our freight system is
effective, efficient, resilient and safe.
Much of the feedback was about local
or regional issues, such as providing more
efficient access to and from ports and their
economic hinterland. However, a number
of critical questions are emerging that
are national in scope – see below. These
questions may not be new, but through
bringing everyone into the discussion with
good information we can better test our
assumptions.
Challenges and opportunities
What will New Zealand’s freight task look
like in 30 years?
The forecasts are for a 100% increase in
by Marinus LaRooij
Photo courtesy of the Road Transport Forum NZ
freight moved by 2040. This squares with
the growth in heavy vehicle kilometres
travelled over the last 10 years (about 2%
on average every year). The Commission
recommended the need for better freight
data to better inform planning, so the
Ministry of Transport has work underway
on this. But to better understand this data,
we will need insights and information from
decision-makers across the freight system.
What impact would changes in international
shipping and ports have on the land transport
system (including coastal shipping)?
Most agree that significant changes to
international shipping services are coming (if not already happening). But there is
little agreement on how fast change will
happen, the form it will take, and its impact
on access to markets, the cost of moving
freight and the investments needed in the
freight system to respond.
How do we improve the options businesses
have in moving their freight, including recognising the value of competition and modal
choice?
All the modes in New Zealand’s freight system (air, coastal and international shipping,
rail and road) have a role in getting goods
to market. Most see the value in the modes
going forward, but how do we ensure
better connectivity between the modes, as
well as encouraging greater choice?
Importance of the strategic freight
network
Another major question is how do we
deliver a high-performing strategic freight
network? Investing in the strategic freight
network and better connecting New
Zealand is something the government has
already identified as a priority.
June 2013 The NZTA is delivering improved connectivity on the strategic national network
through delivering the Roads of National
Significance (RoNS) programme. The RoNS
will provide significantly improved network
capacity and enhanced safety on critical
parts of the state highway system, while
also improving connectivity to ports,
airports, areas of significant freight production, storage/distribution and consumption.
Those moving freight, together with
other road users, will have improved travel
times, greater travel reliability, reduced fuel
costs and a safer transport system. KiwiRail
is also focusing, through the Turnaround
Plan, on improving capability and capacity
on key rail lines.
Building on these improvements is
the next step. How can we take further
advantage of these network improvements, identify further significant blockages that remain, and ensure the strategic
freight network is protected for its critical
freight function? Another major question
is ensuring land-use planning (especially
private sector investment in new freight
facilities) is integrated with network planning. Knowing what New Zealand’s future
industrial land-use needs are, and how this
land should be integrated into the strategic
freight network, is a significant question.
Fewer truck trips to move more
freight
We are also hearing about the value of
moving more freight with fewer truck trips.
Using high productivity motor vehicles
(HPMVs – being heavier and/or longer
trucks) is seen as a ‘quick win’ to achieve
greater freight efficiency.
A review of HPMVs, undertaken in 2011,
concluded that these trucks allow for
productivity improvements of around
–20% decrease in truck trips (for over-mass
HPMVs) and –14% decrease in trips (for
over-dimensioned HPMVs). These efficiencies include reduced fuel consumption,
vehicle operating costs and driver hours
(per unit of freight moved). HPMVs also
provide safety benefits as fewer truck trips
reduce the crash risk exposure of these
trucks on our roads.
Accelerating the uptake of HPMVs is
therefore something that can be done
now. The current National Land Transport
Programme 2012-15 (NLTP) has signalled
investment of around $45 million over
three years to deliver a strategic HPMV network across the country. This network of
4500 km of state highways and local roads
will allow HPMV access up to 62 tonnes.
While these kilometres represent only a
small proportion of the overall network,
they account for around 50% of heavy
LOCAL
ROAD
7
STATE
HIGHWAY
RAIL
LOCAL ROAD
PORT
STATE HIGHWAY
The NZTA’s freight planning approach takes a ‘whole of supply chain’ perspective that recognises that the
private sector makes many of the key decisions about how freight is moved
road freight movements. Consolidating
this freight onto fewer truck trips will have
significant economic and safety benefits.
For the remainder of the road network,
in cases where heavier HPMV access is
not feasible, the NZTA has developed the
50MAX HPMV concept. This innovative
truck design allows for the carriage of an
extra five tonnes of freight, with minimal
infrastructure upgrades. The design of
50MAX HPMVs, which uses nine axles to
spread out the load (the ninth axle making
up the other tonne), will mean its impact
on pavements and bridges will be comparable to the current 44-tonne trucks operating across the network.
50MAX HPMVs have the potential to
provide safety and efficiency benefits
through reduced truck travel in areas where
the road infrastructure is not suitable for
full HPMVs. Work is underway with local
councils and industry to further develop
this concept.
Smarter regulation and moving
beyond compliance
Another major national theme is the idea
of developing a new regulatory paradigm that encourages, and even rewards,
operators for making the right choices and
operating at best practice.
Land transport regulations are designed
to ensure public safety,
protect infrastructure
from damage and
enable fair market
competition. In developing a refreshed
regulatory model we have the opportunity,
particularly with the use of intelligent
transport systems (ITS), to better focus on
areas of significant risk.
We also have the opportunity, working with the NZ Police, local government
and transport operators, to better recognise and reward compliance and free up
resources to focus on non-compliance.
While there is much to work through, the
economic and safety benefits could be significant to industry and most importantly
to the New Zealand public as a whole.
A coordinated approach
Our task ahead is to ensure an ongoing
coordinated approach that ensures the
exchange of information and ideas. This
coordinated approach also needs to produce clear actions as the answers to critical
questions emerge.
While we have made progress, there is
more work to be done and this work is
not something that the public sector can
or should tackle on its own. We therefore
look forward to developing a national
discussion, with those working across New
Zealand’s freight system, on what we can
do to improve the safety and efficiency of
freight movements.
Marinus LaRooij is the portfolio manager – freight, strategy &
performance – for the NZTA, and is on the committee of the CILT NZ
Central Section; to contact the NZTA freight team,
email [email protected]
8 Logistics & Transport NZ
UPPER NORTH ISLAND FREIGHT STORY
Looking at freight
through a different lens
THE UPPER North Island Strategic Alliance
(UNISA) is a local government collaboration
initiative which consists of elected representatives and senior staff from Northland
Regional Council, Whangarei District Council, Auckland Council, Waikato Regional
Council, Hamilton City Council, Bay of
Plenty Regional Council and Tauranga City
Council. The overall objective of UNISA
is to maximise sustainable development
opportunities for all of the upper North
Island and its contribution to New Zealand.
Due to the potential economic gains,
UNISA’s 2012 work programme focused
primarily on the priority areas of transport
and ports (mainly in a freight context),
through two pieces of work:
•An independent investigation of current
and future freight demand and supply
and scenarios to meet that demand in
the context of ports and other associated infrastructure for the upper North
Island (led by Auckland Council)
•An Upper North Island Freight Story in
partnership with the NZTA, KiwiRail and
Auckland Transport.
Developing the Story
The Upper North Island (UNI) Freight Story
(the Story) is designed to identify land-based
freight system issues at a UNI scale and provide supporting evidence so that decisionmakers can then make more informed land
use and transport planning and investment
decisions. The aim has been to “reduce the
cost of doing business in New Zealand
though an upper North Island lens”.
A collaborative ‘facilitated discussion’
approach has been taken to develop the
Story, allowing key decision-makers to be
better informed and able to agree on a
shared evidence base to support decisions
on critical issues.
This included regional workshops with
local and central government partners (e.g.
other territorial authorities) and stakeholders (e.g. industry) facilitated during the
preparation of the Story. As an example,
three of the four regions in the UNI identified the need to improve implementation
of the high productivity motor vehicles
(HPMV) programme as a critical issue as
it has potential to undermine economic
productivity in New Zealand.
A summary of the seven confirmed critical
The Upper North Island Freight Story is designed
to identify land-based freight system issues and
support decision-makers to make more informed
land use and transport planning and investment
choices
issues for the UNI identified through the
Story are summarised below:
•Strategic road and rail network constraints
•Delivery of an HPMV programme
•Utilisation of industrial land
•Lack of strategic, integrated land use and
transport planning and investment
•Lack of shared and accurate data
•Need to understand cost of freight supply chains for critical industries in UNI
•Challenging local government and central government funding structures.
Copies of the UNI Freight Story’s Summary of Critical Issues and Summary
Evidence Base documents can be sourced
from the project partners’ websites.
Constraints and benefits
Key considerations for the Waikato region
related to the Story include the amount of
industrial land zoned
and/or planned in the
UNI, the management
of HPMV routes and
permits, and the role
of key strategic road
by Greg Morton
and rail corridors in the region in providing
gateway port options for exporters moving freight across the UNI area, given the
region’s geographic location.
Waikato Regional Council, like other
project partners, realised there are benefits in having a clearer understanding of
neighbouring region characteristics and
issues to appreciate where constraints and
benefits lie at a UNI scale. The council has
noted that while the Story isn’t a statutory
process or recognised strategy or plan, it
has raised awareness and made transparent
for all partners the key freight system issues
(and related evidence) and can be used as
an input to statutory planning processes
across the UNI area.
The project has also identified key
strategic questions that are beyond project
partners’ ability to answer. As an example:
“How do we develop a robust, integrated
way in New Zealand to gather, share, monitor and use freight data across public and
private sectors?” This strategic question has
relevance to more than one of the critical
issues identified in the Story.
Other initiatives
On reflection, while different in approach,
the UNI Freight Story is of similar value to
and compatible with industry-led initiatives such as the Bay of Plenty-based Bay
of Connections Freight Logistics Advisory
Group (FLAG) – the Waikato Regional
Council is a participant. The FLAG has
been an illustration for the council of the
effective pragmatic action that can come
from industry and services collaboration
and effective leadership within the freight
logistics sector.
The two pieces of work to be undertaken
by UNISA in the 2013/14 financial year pick
up on the two critical issues identified in
the Story that local government is best
placed to progress, relating to the integration of land use and infrastructure, and the
provision of industrial land. The latter will
include working with industry to better
understand the need and future plans for
this land, as well as identify what attracts
(and/or places barriers on) industry to
develop across the UNI area.
Greg Morton is a senior transport planner with the Waikato Regional
Council; he can be contacted at [email protected]
June 2013 9
ROAD FREIGHT
Trucks, certificates of fitness
and public reassurance
by Ken Shirley
Under proposed changes for CoF inspections, operators will have more choice over where inspections
take place and by whom – which is good news for rural operators
THE ROAD freight sector has a fundamental difference from virtually every other
industry. Its principal workplace is a public
place, the road, which it shares with literally millions of other users every day. They
rightly need reassurance that the trucks on
the road with them meet suitable safety
standards. Certificates of fitness (CoF) for
heavy vehicles help provide that comfort.
The Road Transport Forum strongly
favours retention of regular CoF testing.
What it wants, and has long argued for, is
more choice in vehicle inspection services,
not just because we are a strong supporter
of competition in the provision of services
to the trucking industry, but mainly because
of the time and cost implications of a limited number of vehicle testing providers.
The current restriction to ‘bricks and
mortar’ service providers has major implications for rural operators who may have to
travel a considerable distance to an accredited service provider. It’s also an issue for
the industry generally, with the wait times
for pre-CoF and CoF inspections.
The government has certainly picked up
on these points. It has calculated that about
$20 million in time is spent annually getting
a CoF. It also says the benefits from its proposed changes are estimated to be between
$160 and $460 million over 30 years.
This isn’t covered in the current proposed
amendment to the Land Transport Rule,
but good news for the industry and their
customers that the NZ Transport Agency
has been tasked with reviewing its policies
to make more inspection options available.
More choice
As usual, the devil will be in the detail.
The government, in its previous discussion
Vehicle licensing reform
THE VEHICLE LICENSING REFORM PROJECT is
a joint Ministry of Transport and NZ Transport
Agency initiative that is looking to reform
warrant of fitness/certificate of fitness, annual
vehicle licensing (commonly known as registration), and transport services licensing. Work
on the reforms was announced by Transport
Minister Gerry Brownlee in March 2012.
Recommendations for change were developed following an in-depth process involving
research, analysis and modelling, discussions
with transport sector stakeholders and wideranging public consultation.
Changes to the WoF and CoF systems were
documents, has said that operators will
have more choice over where inspections
take place and by whom. It mentioned that
inspections will be able to be carried out
at the place where vehicles are serviced,
and is also proposing operator workshops
be used.
The RTF has reservations about this,
basically on the grounds of possible public
perceptions, so the auditing and monitoring of in-house CoF testing will be critical.
It is significant that the government papers
acknowledge that what it calls “robust”
auditing and monitoring of approved
inspection providers is a transition risk.
Greater flexibility in
the periods for CoFs is a
good idea, and extending the maximum period
to 12 months will reward
operators with good
safety records while
announced in January this year. The current
six-monthly CoF default inspection frequency
will be retained, with the NZTA able to apply
a different frequency between three and 12
months, depending on the operator’s safety
record.
In addition, there will be opportunities for a
broader range of CoF inspecting organisations
and sites, including allowing providers to do
vehicle maintenance as well.
Changes to the CoF system will be made
through the Land Transport Rule: Vehicle
Standards Compliance 2002 and are expected
to be in place by July 2014 or earlier.
potentially focusing attention on operators with poor CoF or roadside inspection
records. However, in practice the NZTA has
only sporadically used its current powers to
require a three-monthly CoF check, so again
it will come down to the resources available
to make it work in a worthwhile way.
Agricultural vehicles
What does concern the RTF, and should
concern other road users, is the proposed
removal of WoF or CoF requirements for
agricultural vehicles operated at speeds
under 40 kmh on the open road and only
an annual WoF inspection for those travelling at over 40 kmh. These vehicles can
easily be carrying loads of 25 tonnes or
more – as much as a heavy truck.
The RTF is firmly of the opinion that
all vehicles carrying such loads should be
required to meet the same standards, for
the safety of all road users.
Ken Shirley is the chief executive officer of the Road Transport Forum NZ
10 Logistics & Transport NZ
FREIGHT INFORMATION
Port of Tauranga is New Zealand’s largest export port,
both by volume and value – its current investment
programme in its container terminal is the largest
expenditure since the facility opened two decades ago
FIGS now has data for all of 2012
THE MINISTRY of Transport’s freight
information gathering system (FIGS) was
introduced in an article in this journal in
December last year. The MoT now has a full
year’s worth of data from more participants
than previously, and so their quarterly
information report (published in March
2013) has extensive information on movements for all of 2012. The report is available
online (see below) and this includes extensive data in spreadsheet form, allowing
users to easily make their own calculations
from the data.
New in this report, as well as the full
year’s data, are import and export information on air freight from New Zealand
Customs records, information on container
services calling at New Zealand ports in the
year, and a full year of rail freight data.
Sea trade
Customs data provides a rich source of
information on what comes in and out of
our ports. FIGS summarises this both by
commodity and by port, and in terms of
volume and value. There are no surprises
on the commodity side. Wood products
(principally logs) are the single biggest
export by volume. Dairy products are the
biggest by value. For imports, minerals,
coal and fuels (mainly oil) dominate both
volume and value.
Tauranga is the largest export port, both
by volume and value, and Auckland the
largest import port by value (by volume it is
beaten by North Port, for oil). An interesting analysis is the average value of freight
per tonne, Auckland having the highest
value for both imports and exports.
A valuable part of FIGS is its information on coastal cargo, not available for
several decades until FIGS started to gather
it. There are figures for oil deliveries by
coastal tanker, and container movements
for general cargo. Coastal containers are
subdivided into transhipments of exports
and imports, and domestic cargo.
Of the 1,653,831 containers handled
at New Zealand ports in 2012, 16% were
domestic; 81% of all coastal containers (half
of them empty) were carried on international ships.
The overwhelming majority of containers,
71%, were imports or exports that were not
transhipped to or from coastal vessels. FIGS
gives data for net weight of containers, so
the load per container can be calculated.
The average load for a 20 ft container was
15.76 tonnes, and for a 40 ft 19.26 tonnes.
There is even an analysis of the types
of containers used for each commodity,
although there are a large number of containers where the commodity is not known.
by Murray King
The ship call information shows not only
the number of container ships that visited
New Zealand, but also how many port calls
were made, and how many containers were
exchanged during those calls, by port. During 2012, 925 ships made 2481 port calls. The
average number of containers handled per
ship visit varied from 1271 in Auckland to
350 in Taranaki. There are also figures breaking this down into ship sizes. There is further information on the number of visits by
other types of ship, including cruise liners.
Road dominates the land side of port
traffic: 72% of traffic into ports and 77% of
traffic from ports went by road.
There are time series by port of containers handled, and productivity numbers.
Auckland has the best ‘ship rate’, the number of containers moved on or off a ship
per hour (and a sharply improving trend),
but Tauranga and Wellington have the best
‘crane rate’, the number of containers lifted
on and off a ship per crane per hour. Our
best ports exceed the average for the top
five Australian ports.
Rail traffic
Apart from the data in the 2008 National
Freight Demands Study (NFDS), there has
been a drought of detailed information on
rail traffic since it ceased to be published
in rail’s annual reports as far back as 1962.
June 2013 Now there is very detailed information on
rail traffic from inter-regional flows to commodity analysis, in both tonnes and tonne
kilometres.
The ‘golden triangle’ of Auckland, Waikato
and the Bay of Plenty is the most important
part of the rail network. Its share of total
traffic was 47%. That is, 47% of the traffic
was generated by only 17% of the total
operational network (and nearly 60% has
one end or the other of its route in the area).
Traffic within the golden triangle accounted
for 25% of all net tonne kilometres.
FIGS also gives traffic flow ­information
for wood products, coal, dairy and containers. Wood products were 2.9 million
tonnes. This figure includes logs, timber
and panel products like fibreboard, but
excludes pulp and paper. Wood products
mainly flowed within the Bay of Plenty, but
there were important flows elsewhere, like
within Northland, within the Wellington
region (mainly from the Wairarapa to the
port), and from Southland to Otago. Pulp
and paper tonnes were 1.2 million tonnes,
making forestry products the largest single
commodity group with 4.1 million tonnes.
There were over 3 million tonnes of
coal moved in 2012, from the West Coast
to Canterbury (mainly for export), from
Huntly to the steel mill at Glenbrook, and
from Nightcaps in Southland to Temuka for
the Clandeboye dairy plant. A significant
flow identified in the NFDS, from Tauranga
to the Huntly power station, has disappeared entirely.
Dairy products are the second biggest
single commodity group carried by rail
(after forest products), with 3.9 million
tonnes hauled in 2012, 22% of all rail tonnes.
The largest flows are from Waikato to the
Bay of Plenty (export product) and within
Waikato (from the plants to the Crawford
Street packing hub), and from Manawatu to
Taranaki (bulk milk), Taranaki to the Bay of
Plenty and Hawke’s Bay, internal Canterbury,
and Otago and Southland to Port Chalmers (export product). An interesting recent
flow is from Canterbury to the West Coast,
westbound across the Southern Alps, which
is largely bulk milk for the Hokitika plant,
providing some balance to the mainly eastbound flows on that route.
On average, a tonne of goods is hauled
265 km on rail, but this figure varies a lot
between commodities. Dairy is hauled only
190 km on average, and forest products
145 km. At the other end of the scale,
freight forwarding traffic is hauled
571 km, reflecting the important Auckland–Christchurch flow, and fuels 701 km
(inter-island movement of LPG).
Of KiwiRail’s traffic, 42% was hauled in
containers not owned by KiwiRail, essen-
11
Key findings: January - December 2012
Largest TEU imports/exports by location
36.6%
Imported through
Ports of Auckland
46.9%
Exported through
Port of Tauranga
Coastal container traffic
81%
of coastal TEU’s were moved on
international ships
Most exported commodities (value)
Most exported commodities (volume)
Commodities are both bulk and containerised
Commodities are both bulk and containerised
28.0%
12.4%
10.0%
47.6%
17.9%
8.0%
Dairy products
Meat products
Foodstuffs
Wood
Minerals, coal
and fuel
Dairy products
Rail: top 3 commodities
21.5%
16.8%
Transportation mode of containers
to/from port
16.2%
3,892,864 tonnes 3,038,148 tonnes 2,918,353 tonnes
Dairy & milk
Coal
Wood products
74.3%
21.7%
4.0%
by road
by rail
by unknown
land mode
Exports/Imports of 20ft and 40ft containers
20 ft.
Exports 79% full
Imports 89% full
40 ft.
Exports 89% full
Imports 66% full
20 ft.
Exports 99% full
Imports 17% full
40 ft.
Exports 95% full
Imports 39% full
Dry
tially import/export containers, showing
the importance of import and export
traffic to it. The major flows were from the
Bay of Plenty to Auckland and vice versa,
reflecting the MetroPort traffic, followed
by Waikato to the Bay of Plenty and within
Canterbury (dairy products).
Air cargo
Volumes of air cargo are small relative
to sea, but they are valuable. Nearly all
air freight comes in and out of Auckland:
85,700 tonnes inwards and 83,700 tonnes
outwards. Christchurch handled 27,600
tonnes in total.
But each tonne of Auckland’s imports
was worth $106,000 and exports $56,000.
Total value of all Auckland’s imports was
$9.1 billion, and exports $4.7 billion. By
Refrigerated
value, Auckland Airport is the country’s
third largest export port, after Tauranga and
Ports of Auckland, and the second largest
import port, behind Ports of Auckland.
A full commodity analysis is given as for
sea traffic. The biggest volume exports for
Auckland and overall are fish, vegetables
and fruit, and the biggest imports machinery and electrical goods. As for value, a
small quantity of ‘stone/glass’ was worth a
national average of nearly $1.3 million per
tonne. This is dominated by gold out of
Christchurch, worth $59 million per tonne!
Conclusions
This article has barely scratched the surface
of the great wealth of information that
FIGS provides. Readers should delve into it
for themselves to see what it can tell them.
The Freight Information Gathering System January to December 2012 quarterly report
(published in March this year) is available at www.transport.govt.nz/ourwork/Sea/FIGS/
12 Logistics & Transport NZ
PRODUCTIVITY
Supply chain management
as a team sport
Supply Chain Dependency Network Example
Forestry Wood Mills
Hauliers
>
=
>
Wood Processor
>
=
>
>
>
>
=
Farmers
Chipping Companies
=
> Supplier Dependence
=
= Independent
< Customer Dependence
IN NEW ZEALAND today, seamless value-creating supply networks
remain little more than academic fantasy. Far from transforming
the economy, real-life supply chains are hindered by a lack of customer visibility. They are disjointed and rendered dysfunctional by
internal competition and opportunistic behaviour toward supply
chain ‘partners’.
Although recognised around the world for our friendliness,
laidback attitude and ability to perform at sport, it seems that as
soon as we go to work, the culture becomes one of unhealthy
competition, mistrust and one-upmanship. Why is it that organisations seemingly cannot work together towards achieving a shared
business goal? How can this cultural schizophrenia be overcome to
improve supply chain productivity?
We have been investigating New Zealand supply chains for over
a decade, and time and again we discover indifferent performance.
The underlying root causes typically involve short-termism and
excessive use of power by supply chain members.
Despite the rhetoric of supposed collaboration and commitment
to long-term relationships, most decision-makers struggle to see
beyond this year’s bottom line. Thus there remains a significant gap
between the rhetoric and the reality of supply chain management,
caused by behaviours that have perhaps been exacerbated by
recent recessional pressures.
Case example
Last year we were required to investigate a supply chain that provides an important resource for dairy farmers – a product which
has its roots literally in the forestry sector. The network diagram
(above) illustrates the key members of the supply chain and its
three alternative material flows from original source to final customer. We studied the dependencies between the different supply
chain members and their behaviour toward one another.
Once again we were struck by the opportunistic use of power
for short-term individual gain. Due to great demand for the forestry byproduct, which helps farmers increase their stocking rates,
the dairy farmers are dependent on the hauliers for timely material
supply. Wood mills and similar processors also need hauliers to
by Paul Childerhouse,
Pradtana Amornchat and Eric Deakins
reliably dispose of their byproducts. In combination this places the
hauliers in an enviable position of strength in this supply chain.
Not content with enjoying their dominant power situation, the
level of service offered by the hauliers can be truly appalling; the
quality of the byproduct is extremely variable and farmers may
have to wait months for delivery as hauliers focus on maximising
utilisation of their own assets.
Given the power dependency of the network, the farmers are
price-takers who currently have little option but to accept the
terms of trade of the hauliers. In short, the extra value being
created by recycling forestry byproducts as inputs into the dairy
industry is being seriously jeopardised by the opportunistic behaviour of a select powerful few.
Acceptable practice?
Our experiences suggest that this short-term opportunistic behaviour by the hauliers is typical of many powerful New Zealand businesses. Of course, the hauliers run the risk of being circumvented
in some way – perhaps by a dairy cooperative investing in its own
haulage, or by flexing its collective muscle in some other way. That
being said, as soon as one member is brought into line, another
one will likely seize the chance to flex its muscles.
While this might be accepted Kiwi business practice, what
shared opportunities are not being identified? And what about the
intangible value of a partner that can come to your aid when you
are in strife? And while that cheaper overseas supplier may seem to
be a better ‘value’ proposition, without a cultural appreciation how
does what they say really translate into what you understand?
Coopetition – another way
For as long as people have traded there has been tension between
getting the most out of today’s exchanges and fostering shared
benefits over the longer term. In supply chain ‘speak’ we call this
the transactional partnership continuum, and it is well recognised
that excessive use of power leads to adversarial relationships typified by limited information sharing, stagnation and lost opportunities. So, could the answer be to foster the desirable types of
teamwork behaviour we observe in sport?
Coopetition is the paradoxical relationship that emerges when
two firms cooperate in some activities, and at the same time compete with each other in others. Net realised value can be enhanced
by focusing first on how to grow the opportunity via synergies
between supply chain members. The idea is that, through cooperation and agreeing to equitably share the spoils, the relationship will
deepen and endure beyond the first round of price negotiations.
Often people at the company interfaces are fully aware of these
issues, so a good starting point is to encourage them to educate
their colleagues to the pitfalls of excessive use of power for shortterm gain.
Paul Childerhouse is a professor and director of logistics and supply
chain management at Massey University; Pradtana Amornchat is
a masters gradate from Waikato University; and Eric Deakins is an
associate professor of management systems at Waikato University
June 2013 13
CENTRAL NEW ZEALAND
Wellington – paving its way to
capture transport-related growth
by Blair O’Keeffe
THE NEW ZEALAND economy depends on the efficient movement
of freight and people. Both domestic and international transport
systems must operate effectively for the nation to maximise its
competitive position.
Connecting road, rail, sea and air transport to people and cargo
and local and international markets is vital. At the heart of a successful transport network is a working transport hub which connects the transport modes and aggregates and relays both people
and freight. From such transport and trade hubs cities are born.
Wellington is a working example of this.
The capital city’s origins are anchored in its roots as one of New
Zealand’s leading transport hubs. Today, Wellington remains one of
the largest transport hubs in the country, with approximately 20
million tonnes of cargo and 40 million people passing through it
each year, by road, rail, air and sea.
With its central location, large population, deep-water big-shipcapable seaport, its status as a key part of the nation’s main-line
state highway and rail network, and quality airport, Wellington has
considerable capacity as a transport hub. This is an important point
when the nation assesses its readiness for growth.
Investment in infrastructure
The movement of both people and freight is increasing across
New Zealand. The freight task is predicted to double over the next
20 years. By the end of this period the population is predicted to
be just over 5 million people, and tourism is expected to grow 4%
annually.
This growth demands considered and timely investment in
infrastructure to meet these needs. In most cases, the investment
needs to occur years – if not decades – in advance to maintain the
seamless flow of the transport modes.
Whilst some question the source of future economic growth in
the Wellington region, those involved in providing transport infrastructure read a different set of tea leaves. Wellington is literally
paving the way to capture its share of transport-related growth,
with unprecedented levels of investment occurring across all key
modes of transport.
Millions have been invested in the seaport, which now boasts
industry-leading productivity and capacity to increase container
traffic to 400% of current scale. All that remains is its dredging
programme which comes at a fraction of the cost of other New
Zealand ports.
Billions are being invested in the primary road networks, with the
‘Levin to Ports’ Road of National Significance, including Transmission Gully.
Millions have been invested in the rail network and trains, with
double tracking to support freight and passenger growth, new
passenger trains, new freight wagons and development of the Wellington rail yard.
Millions have been spent upgrading Wellington Airport, with
runway extension plans also under development. And both coastal
ferry operators have also recently upgraded their fleets, commissioning larger vessels.
Wellington remains one of the largest transport hubs in the country, with
approximately 20 million tonnes of cargo and 40 million people passing
through it each year, by road, rail, air and sea
All of this investment is predicated on Wellington continuing
to be one of New Zealand’s leading transport hubs. It is a positive
growth story featuring actual growth and a financially supported
belief in more to come.
Centre hub
The ‘golden triangle’ in the upper North Island and the Christchurch rebuild are not the only infrastructure investment stories
of our nation. This country needs a strong north–centre–south
transport hub system to operate efficiently and effectively. This
reflects the logical aggregation points of New Zealand for people
and cargo.
Wellington has always been the logical transport hub for the
lower North and upper South Island area (the ‘centre’ hub). This
logic prevails in the investment decisions being made today. With
much of the necessary investment already completed or started,
the ‘centre’ of New Zealand is well positioned for the predicted
growth.
The locational advantage of Wellington, proximity to a large
central New Zealand cargo base and population, and core infrastructure created by the critical mass of this transport hub create
a clear model for the future of New Zealand – the north–centre–
south transport hubs.
For those looking for speed to market, short transit times, reliable daily transport services, connections to multiple markets (local
and international), and low-cost land for transport and freight
options due to the abundance of two-way services and competition, Wellington has the platform to offer it all,
providing certainty, sustainability and profitability as part of its basic value proposition.
It is an exciting time for the transport sector
in the centre of New Zealand.
Blair O’Keeffe is the chief executive of
CentrePort Wellington
14 Logistics & Transport NZ
DOMESTIC FREIGHT SERVICES
Value delivery to customers
through network optimisation
THE NEW ZEALAND freight task is estimated
to be around 225 million tonnes, with the
road transport industry carrying more than
92% of this. Our freight task is growing at
1.3 times our real GDP, a relatively higher
growth rate than the rest of the OECD due
to our export-based freight demand created
by the primary product industries such as
dairy, forestry, meat and pip fruit.
Due to industry collaboration, those
companies with substantial market share of
these commodity products hold significant
country-wide freight transport networks.
Together with the retail (consumption)
and domestic manufacturing markets, they
create the road transport freight tasks that
make up the strategic freight corridors of
the country.
More than 80% of the total New Zealand
freight task is moved within the Auckland,
Northland, Waikato and Bay of Plenty
regions, indicating that the majority of the
freight task is short haul. Only 18% of the
freight volume contributes to long-haul
transport demand.
There is no single carrier who has the
capability and capacity to provide a comprehensive transport solution covering the
geographic scope of the country, or even
more than one region. Many carriers have
specific regional and local strengths, but
lack overall regional and national coverage
with consistent capability.
This means customers with significant
country-wide freight tasks have to contract
multiple carriers with varying degrees of
capability and capacity in order to create
uniform transport solutions in an optimal
manner across the whole network.
Freight service providers
The supply side of the New Zealand road
transport industry is heavily fragmented.
There are more than 5000 transport operators owning just over 20,000 commercial
vehicles, with the majority (up to 92%) of
the operators owning less than five trucks.
Only 6% of the operators own more than
20 trucks, and a handful of operators own
more than 50 trucks. This demonstrates the
substantial challenge faced by customers
with significant freight transport networks
spread across the country.
Over the last two decades New Zealand
has seen increased centralisation of the
freight management tasks of the large
freight owners, similar to the trends seen in
the more mature US and European markets.
Transport companies have evolved as
lead logistics providers by offering a single
freight desk, consolidating the multi-site
multi-carrier operations environment
through transaction workflow transport
management systems.
However, the transport-companyprovided single freight desk limits valuecreation potential due to the inherent
conflict that exists between the company’s
own asset utilisation and pure market
optimisation.
The lack of specialised independent
freight management service providers has
not only hindered the freight owner’s ability to evolve out of the current model to
reap the full benefits of transport optimisation available, but has also reduced the carrier’s ability to maximise its asset utilisation
across the total market capacity available.
Netlogix’s service offering targets this gap in
the market.
Domestic transport requirements
As in any industry, in the long run almost
all of the fixed and variable costs are
subject to domestic CPI (consumer price
index), PPI (producer price index) and
other cost impacts, except fuel which is
exposed to global macro-economic conditions and the socio-political environment.
This cost impact, adjusted for transport
capacity availability, national freight
transport demand, and long-run optimisa-
by Chinthaka Abeywickrama
tion opportunities embedded structurally
in the freight corridors, sets the market
transport rate for any given route in the
short run (up to two years) with variation
over time and a long-term continuous
trend upward.
Freight owners who have significant
domestic transport requirements spread
locally, regionally and nationally can cap
their exposure for shorter periods and seize
the benefits due to their scale, reputation
and certainty. This capping of costs creates
certainty in the short run, but denies the
opportunity to maximise value due to the
fixed nature of the price.
This can be mitigated by contracting a
multitude of carriers with different rates
for a single route, but this in turn brings
complexity – the bigger the carrier mix
and the spread, the higher the value and
complexity. Not only does it deny optimisation opportunities for the short-run
transport network, it also provides no
certainty beyond two or three years (some
customer contracts offer only a one-year
term) for carriers to invest in assets to
sustain the levels of service demanded by
their customers.
The Netlogix solution
Netlogix brings together high-tech transport management systems, comprehensive
business processes and people capability
and capacity, and adopts a mix of strategies to keep the short and long-run freight
cost below the fixed-term-rate model,
with no compromise on service delivery
and improved carrier asset utilisation.
Netlogix provides this by contracting
multiple carriers for each route to improve
rates, optimising loads by consolidating
less than truck load (LTL) consignments to
full truck loads (FTL), determining optimal
drop routines and targeting complementary
customers with directional product flows.
Netlogix employs around 12 staff and
June 2013 uses an OPSI transport management
system, together with cloud-based finance
and purpose-built business processes to
manage the complex freight transport
requirements of its customers. On a typical
day, Netlogix moves more than 500 full
truck-and-trailer loads across the country
from its customers’ manufacturing and
distribution centres to their end customers,
secondary processing centres and ports for
exports.
The transport task includes bulk cargo,
such as wood residue and coal, which
requires constant monitoring of demand
through various means (including CCTV),
to very time-sensitive pick-up and delivery
driven timber products, wood pulp, paper
reels, recycled fibre and packaging products.
Long-distance and inter-island transport
moves are routed through Netlogix and
third-party-managed cross-docking facilities across the North and South Islands.
These cross-docking facilities enable
Netlogix to move inter-island and longdistance freight efficiently by utilising the
carriers with regional and national distribution networks.
Netlogix uses more than 100 carriers
across the country to manage its day-today transport demand as no single carrier
has the capacity or the regional or national
reach to provide true national service from
Kaitaia to Invercargill.
Technology at work
Netlogix deploys OPSI-PLATO systems to
manage its complex transport task. OPSIPLATO is a suite of next-generation fully
integrated workflow systems that bridge
the gap between primary and secondary
transportation tasks. OPSI-PLATO also
manages the entire workflow process
from a customer’s ERP system that generates a transport request via EDI interfaces.
Phone/email transport orders complete
load build, carrier selection, carrier
allocation and acceptance, pick-up and
final delivery, including a one-stop billing
mechanism for customer and individual
carrier transaction settlements. It complements other cloud-based plug-and-play
applications to provide a unique blend
of technology and methods specifically
targeted at addressing the emerging needs
of the New Zealand
transport markets.
OPSI Systems is
headquartered in South
Africa and in the recent
decade its products
have been widely used across Australasia
by leading transport providers and companies with complex transport demands.
Netlogix’s decision to use the OPSI-PLATO
transport management system as its core
engine was based on its scalability, stateof-the art enterprise planning platform,
four-tiered architecture and its 10-step
transaction workflow management.
OPSI-PLATO features complex heuristic
optimisation modules. Its optimisation
module (business logic tier) caters for almost
all of the variables you would find in any
complex transport task or challenge within
New Zealand – or any part of the world.
Our OPSI-PLATO transport management
system, together with our experienced
staff, established business processes,
and initiatives that concentrate on rate
optimisation, asset utilisation (by minimising empty backhaul transport legs, for
example) and using economies of scope
and scale, provides Netlogix with a leading
edge and unmatched capacity to improve
costs and service delivery for its customers
and carriers under demanding and complex
circumstances.
Chinthaka Abeywickrama, FCILT, is the CEO of Netlogix and the
president-elect of CILT NZ
Letter to the editor
6 April 2013
Dear Sir …
It was exciting to read in the March issue
of the redevelopment of Christchurch
into a smart, thrilling and vibrant city.
But I was shocked that no mention was made of creating a
suburban rail system using the existing rail infrastructure, which
at minimal cost would do much to blunt the main road corridor
traffic peaks, decongest the city centre, promote a one-city
atmosphere and provide a most satisfactory way to shift all
those cruise-ship passengers around the varied delights of the
greater Christchurch area.
The great drawback is that the railway corridors do not come
nearly close enough to the city centre, but that can be so easily
fixed. Picture a double-track alignment leaving the Main North
Line in the Addington area (where a new station would serve
those smart office towers), east across South Hagley Park, past
the hospital, along Tuam Street adjacent to the Sports, Justice
and Emergency Services precincts, to platforms at the new
transport centre. From there it passes the new stadium before
swinging south to join the Lyttelton line at Waltham.
All three radiating lines (to Lyttelton, Rolleston and Rangiora)
would be directly linked to the city centre, and all passenger traffic would be segregated from freight in the busiest central zone
of the rail network. The central transport station would include a
platform for long-distance trains so arriving passengers would no
15
longer alight in a suburb miles from the attractions of the city.
Some former double-track areas would need to be reinstated,
and modern signalling installed, but still this would cost only
a tiny fraction of the money spent on urban rail in Wellington
and Auckland in recent years, and yet could support attractive,
fast and frequent services with no outward sign of having been
built on a shoestring.
As-new SA train-sets (perhaps about 10) would of course be
transferred from Auckland, and equipped with a quieter, greener
motive power unit at each end to give first-class level-crossing
safety, acceleration rates, economy and reliability.
Existing mechanical maintenance facilities at Waltham could
be renovated modestly to support the fleet. Structures clearances should allow for future electrification.
The new Christchurch will be such a handsome and liveable
city it would be tragic to ‘spoil the ship for a half-penny worth
of tar’. Great cities, even great little cities, use rail services to
improve their quality of life, and history will judge us harshly if
we miss this historic and affordable opportunity to re-introduce
them to Christchurch.
Yours faithfully,
Randall Prestidge,
[email protected]
16 Logistics & Transport NZ
RISK ASSESSMENT
South Pacific strategic architecture
36th Parallel’s interactive map identifying all major trade routes, including the risks, threats and
opportunities that lie within them, is best viewed on the 36th Parallel website
THE SOUTH PACIFIC strategic architecture
involves trade, politics/diplomacy and
security. Although intertwined, they can be
analytically distinguished from each other.
The regional strategic architecture can be
subdivided into production, commerce
and services, political regimes/foreign
relations, and enforcement authority and
armed force.
Four major trade routes cross the region.
The Western trade route covers the
north–south sea and air lanes of communication between Japan, China and South
Korea through Singapore, Jakarta, Sydney
to Auckland and Christchurch. The Eastern
trade route extends north–south from
Chile to the Panama Canal and west coast
of North America and includes the major
ports of Valparaiso (Chile), Callao (Peru)
and Guayaquil (Ecuador). The Northwest/
Southeast route traces its course from East
Asia to the South American west coast via
the south-central and southeastern Pacific.
The Southwest/Northeast trade route
connects Australia and New Zealand with
North America via the transshipment ports
of Suva and Apia.
A fifth trade route, the Southwestern/
Southeastern route from Sydney–Auckland
to the South American ports, is expected
to increase in importance over the next
20 years.
Asia/Pacific–Latin American trade has
risen from US$10 billion in 2000 to US$241
billion in 2011. China has replaced Japan
as South America’s largest Asian trading
partner, with South Korea also a significant
player in trans-Pacific commerce. Likewise,
China has become the largest trading
partner of Australia and New Zealand, and
is increasing its commercial and diplomatic
presence throughout the South Pacific.
According to the Asian Development
Bank, South American exports to East Asia
rose from 9.7% of total exports in 2001
to 23.4% in 2011, while imports from East
Asia to South America rose from 13.4% to
24.6% during that time period. Over those
10 years, the overall share of world trade
between the two regions rose from 11.5% to
24.0%. Aggregate trade between Australasia
and South America is now worth in excess
of US$500 billion a year.
Asian foreign direct investment (FDI),
especially from China, in South America
and the Antipodes has also increased markedly. The US continues to be the main trading and investment partner for most Latin
American states, but China is on its way to
overtaking the US by 2020. In support of
its expanding trade and investment ties, in
2010 China provided US$376 billion in loans
to Latin American states, more than that
lent by the World Bank, Inter-American
Development Bank and US Import-Export
Bank combined.
South Pacific trade
The boom in South Pacific commerce is
brought about by two factors: rapid growth
of Asian and Latin American economies,
which has led to an expanding middle class
hungry for consumer durable consumption; and the rise in commodities prices
worldwide as a result of increased demand
brought about by Asian-fuelled growth.
Australia, New Zealand and South
America are commodity exporters, mostly
in primary goods and raw materials. Asian
demand for those commodities continues at a sustained pace, although the rise
by Dr Paul G. Buchanan
in value of regional commodity exports
exceeds the increase in volume of these
goods due to high prices.
The impact of increased volumes of
South Pacific trade has placed strong pressure on infrastructure as well as regulatory
and enforcement mechanisms. Capacity limits at ports, poor road and train
networks, and a lack of skilled labour have
contributed to inefficiencies in the commodity chains binding the region’s east and
west flanks. The demand for skilled labour
in the Antipodes and South America has
produced labour market distortions, along
with a rush of legal and illegal migration to
production centres.
Inadequate infrastructure in the face
of increased trade volumes has created
logistical and transportation logjams, at
the same time that it offers opportunities for investors in those sectors. Service
sector provision relevant to international
commerce and trade stands to increase
markedly in the South Pacific over the next
decade.
The 2008/09 recession alleviated some
pressure on South Pacific infrastructure,
but in the ensuing years of rebounding
growth, the maritime and airfreight overcapacity built up prior to 2008 has had
negative consequences on shipping rates
and transportation sector profits. Although
trans-Pacific trade volumes have returned
to positive figures and the value of imports
and exports has risen concomitantly since
2010, shipping demand and freight rates
can be expected to continue at pre-2008
values until 2015. Air cargo services will
extract premium rents until then.
Regulatory context
One significant aspect of the South Pacific
strategic architecture is the absence of
uniform regulatory capabilities. Some
member states have robust systems that
remain consistent in application in spite of
changes in government. Other states, while
exhibiting regulatory authority on paper, are
more susceptible to government variation in
interpretation and sometimes interference.
Many South Pacific states do not have
the enforcement capability to ensure that
what is written is followed in practice.
This is particularly true for the maritime
environment, where small island states, as
June 2013 well as Indonesia, New Guinea and New
Zealand, lack the force projection capability to ensure adherence to national standards within their territorial limits, much less
enforcement of international conventions
in adjacent waters.
The absence of a regional enforcement
capacity, on top of limited national capabilities in that regard, raises the risk profile
of the region for legitimate enterprise
while creating opportunity for illicit ventures (such as piracy, arms, drug and human
trafficking, hazardous waste dumping and
illegal fishing).
The lack of effective regulatory enforcement matters because of the increased
economic utility of South Pacific resources.
Coupled with high commodity prices,
advances in technology have made
endeavours such as deep seabed mining
and drilling economically viable. Likewise,
access to forestry and mining in previously
remote and inaccessible areas in the region,
particularly in Melanesia and the Andean
foothills, has opened significant avenues
of commercial opportunity. Investment in
mining and drilling operations has been a
major vehicle for South American growth,
and extra-regional investors are now
competing in Melanesia and Polynesia for
onshore and offshore resource concessions.
The commodities boom has led to a
commercial rush on the part of interested
parties, which in the absence of effective
regulatory enforcement and oversight has
compounded problems of governance in
weak states and contributed to a ‘cowboy’
capitalist culture in some newly opened
economic sectors. That culture often
involves militarised private security, acceptance of private and public corruption, and
direct involvement in contentious local
community politics. The hallmark of this
approach is self-maximising opportunism,
which is accentuated by the lack of shared
corporate ethics standards amongst multinational actors with differing approaches
to business ethics.
Governance issues
The problem is made acute in some areas
because of the geography and culture
of many South Pacific nations. Most of
Polynesia is resource-poor outside of traditional fishing and limited agricultural cultivation, now supplemented by traditional
and eco-tourism. In Melanesia pre-modern
culture often outweighs modern practices,
to include traditional forms of deference
and authority.
These pose risks in two ways. The
resource-poor or pre-modern nature of
some societies can lead to economic
opportunism on the part of decision-
17
One significant aspect of the South Pacific strategic architecture is the absence of effective regulatory
and enforcement mechanisms – not many South Pacific states have the enforcement capability to
ensure that what is written is followed in practice
makers, to include governments. The opportunity can be constructed in several ways.
For example, it can take the form of tying
contracts and business regulations to political or personal favours. This involves more
than lobbying and political endorsements.
The sale of tokens of sovereignty has
become a major revenue generator for small
island states. Innocuous when it comes to
things such as stamp issuance and retail flag
or other emblem sales, the traffic in tokens
of sovereignty has potentially negative
consequences when it comes to passports,
offshore banking accounts and maritime
vessel registration. Loose regulatory environments provide incentives for abuse of
sovereign tokens in pursuit of profit or as a
cloak on legally nebulous activities. Money
laundering in national banks, passport fraud,
commercial shipping regulatory evasion and
violation of international fishing standards
under flags of convenience are common
abuses of sovereign tokens.
Corruption is a significant regional
problem. In island states, the influx of
extra-regional money has compounded
traditional cultures of tribute, whereby
elites exact treasure from subjects and
prospective investors or partners. This
has eased the way for side-payments and
exchanges of favours in pursuit of material
and diplomatic gain.
A similar situation occurs on the South
Pacific periphery, where poor wage
conditions for government officials and
bureaucrats, coupled with traditional
patronage-based approaches to business,
contribute to ‘off the books’ rent-seeking.
The Antipodean neighbours and Chile have
largely honest bureaucracies. However, even
they have issues with corruption, in part
owed to reduced state oversight in increasingly deregulated domestic markets. Immigration, labour relations, resource licensing
and political party-business links have been
areas in which non-transparent approaches
have been uncovered in these countries.
Growing South Pacific commerce has
attracted the attention of governments situated along trade routes as points of origin,
destination and transit. New taxation and
levy schemes will be employed by governments seeking to generate revenue off the
increase in trade. Increased taxation will be
used to enhance the enforcement capabilities of states, so the regional regulatory
environment can be expected to tighten in
future years.
Assessment
The regional investment climate is fluid, but
one of strong growth. Given that fluidity,
commercial interests need to weigh riskassuming versus risk-avoidance approaches
to inter-regional commerce.
Risk assumption will not insure against
catastrophic loss, but can maximise shortterm opportunities that leave a foundation
for long-term returns. Risk-adverse strategies can maximise long-term opportunity
by avoiding short-term entry costs and
uncertainty, but can lose the means for
establishing a foundational stake in the
long-term governance of a chosen sector.
Private agents should not rely exclusively
on home government assurances about
foreign investment or trade relations, as
diplomatic necessities influence official
appraisal of international, regional and
bilateral trends.
Dr Paul G. Buchanan is the director and principal of 36th Parallel
Assessments, a non-partisan, non-governmental geopolitical risk and
strategic assessment consultancy which is located in Auckland; for
further information, visit www.36th-parallel.com
The Chartered Institute of Logistics and Transport
in New Zealand Inc.
2013 ANNUAL FORUM
AND AWARDS DINNER 17 OCTOBER 2013
FORUM THEME:
GETTING CONNECTED
– Globally, Nationally and Locally
The highlight of the year is the annual CILT NZ Forum and Awards, at which
those that have excelled in academic, industry and personal achievement
are recognised.
Join the CILT NZ Northern Section at Auckland’s Rendezvous Hotel from
10.00am for the morning Forum of presentations, followed by lunch, and
then a choice of two afternoon site visits: the Waterview Connection
project, one of the country’s most important infrastructure developments;
or Pacifica’s container ship Spirit of Endurance in port at Auckland.
The CILT NZ AGM will be held at 4.30pm at the Rendezvous Hotel, followed
at 6.00pm by the Annual Awards and Dinner.
Award nominations are now open
If you know of a company, person or project that has made an outstanding
achievement this year, nominate them for a CILT Award.
Full details are available on the CILT NZ website – click the ‘Awards’ tab
Full details of the Forum will be advised shortly –
visit www.cilt.co.nz for further information
For further information,
contact Marilyn Henderson
CILT NZ National Office
PO Box 1281, Shortland Street, Auckland 1140, New Zealand
Phone 09 368 4970
Email [email protected]
Website www.cilt.co.nz