2015 - Logistics Bureau Supply Chain... · • Freight Volume • Transport and Warehousing Cost. Supply Chain Report 5 ... future economic leaders *Asean 5 comprises Indonesia, Thailand,

2015

2 Supply Chain Report

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FOREWORD 3 Rob O’Byrne......................SECTION A Economic Update......................Economic OverviewWorld’s GDP Growth 5Australia’s GDP Growth 5 Australia’s GDP Growth by Sector 6 Contribution of Transportation 6 and Storage Sectors to GDPGDP by Transport Mode 7Percentage Change of Gross 7 Product by SectorBreakdown of Gross Product in 8 Transport and Storage IndustryChange of Gross Product in 8 Transport and Storage Sub-Sectors

Australia’s Labour ForceAustralia’s Labour Force 9Australia’s Labour Force by 9 Industry

InflationInflation 10ContributiontoAnnualInflation11 by Product Group

Freight VolumeAustralia’s International Trade 11 Account (Goods Only)International Sea Freight: Volume 12 and ValueAustralian Sea Freight by Trading 13 Region (Exports)Australian Sea Freight by Trading 13 Region (Imports)Australian Sea Freight by 14 Commodity Sea Freight

...............

Container Throughput at 14 Australian PortsRoad Freight 15

Transport and Warehousing CostLabour Cost 15Fuel Cost 16Industrial Rental Cost 17

......................SECTION B Market Update......................An Update on Climate ChangeAn Update on Climate Change 19Greenhouse Gas Emission 19 Reduction Target

Significant Infrastructure ProgramsAustralia’s Future Infrastructure 19SignificantInfrastructure:Rail20SignificantInfrastructure:Road21SignificantInfrastructure:Ports24 and ICT

Warehouse Availabilityand TrendsDemand 25Supply 25

......................SECTION C Australian Industry Performance......................

International Logistics 27 Performance IndexInternational Logistics 27 PerformanceTotal Business Inventory 28Inventory to Sales Ratio 28

......................SECTION D Employment and Training......................Employment Level 31Current Transport & Logistics 32 Workforce by Level of EducationEmployment by Gender 32Projected Employment Growth of 33 IndustryTransport & Storage Industry Age 33 & Employment TypeEducation and Training in 34 Logistics

......................SECTION E Regulatory Environment......................Regulation Reform - 37 The DevelopmentClimate Change Related 37 Legislations

......................REFERENCES 43......................

Supply Chain Innovation: The Next 15 Years

40-41

Supply Chain Report 3

FOREWORD

elcome to our Annual Australian Supply Chain Report

At Logistics Bureau Group, ‘Community’ is a core focus for us, and so we are pleased to provide this report for our Supply Chain ‘Community’ here in Australia.

Undertaking this research with our free seminar and webinar programs as well as our Supply Chain Leaders Academy also reflects our commitment to education and promoting improved logistics and supply chain management practices.

Compiling this report takes a lot of time and resource, and I would like to thank my research and production team, particularly James, Hadley and Maybelle.

Contact: Rob O’ByrneLogistics Bureau Pty LtdLevel 57, MLC Centre, Sydney, NSW 2000, AustraliaTel: +61 417 417 307Email: [email protected]

This report is compiled from publically available data resources which are referenced at the end of the report.

Our aim, is to bring all this informationtogether for you, in one easy to read report.

But please be aware, that because the data comes from a wide range of sources, it may not always fully align 100%.

We do not attempt to interpret data in this report, we leave it to you, to draw your own interpretations. Although you may wish to look out for seminar and webinar invitations where I do review the report and share my thoughts on some of the key challenges we might face.

I hope you enjoy reading this report.

W

ROB O’BYRNE Group Managing Director

Logistics Bureau

mailto:robyrne%40logisticsbureau.com?subject=

Economic UpdateSECTION A:

..............................• Economic Overview• Labour Force• Inflation• Freight Volume• Transport and Warehousing Cost


SECTION A: Economic Update

Shows continued growth of Asian countries as future economic leaders

*Asean 5 comprises Indonesia, Thailand, Philippines, Malaysia and Vietnam

ABS (2,3)

International Monetary Fund (1)

World’s GDP Growth

Australia’s GDP Growth

2.1%

2.5%

3.9%

2.1%

2.7%

1.9%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

2009/2010 2010/2011 2011/2012 2012/2013 2013/2014 2014/2015

AUSTRALIA'S GDP GROWTH

1.2%

2.9%

4.7%

3.6%

-0.9%-1.2%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

2009/2010 2010/2011 2011/2012 2012/2013 2013/2014 2014/2015

INDUSTRY GROWTH BY INDUSTRY: TRANSPORT, POSTAL & WAREHOUSING

>3.8%

India, China and ASEAN all exceed world average of

3.8%

>3.1%

Australia behind global average at

3.1%

1.9% 3.9%

While GDP growth has remained reasonably strong, growth within the Transport, postal & warehousing sector has declined the past 2 years

Mayindicateimprovementsinefficiencyratherthan a lack of investment within the sector

2012 2013 2014 2015e 2016e 2017e

China 7.7 7.3 6.8 6.3 6.0 6.1

India 5.1 6.9 7.3 7.3 7.5 7.5

Asean-5* 6.2 5.1 4.6 4.6 4.9 5.3

Australia 3.6 2.1 2.7 2.4 2.9 3.1

Euro area -0.8 -0.3 0.9 1.5 1.6 1.7

US 1.5 2.4 2.6 2.8 2.8 2.7

World 3.4 3.3 3.4 3.1 3.6 3.8

China

India

Asean-5*

Australia

Euro areaUS

World

-5

-3

-1

1

3

5

7

9

11

13

15

Pe

rce

nt

Calendar Year

WORLD AND SELECTED COUNTRIES' GDP GROWTH

Australia’s GDP has grown at between 1.9%-3.9% over the past 6 years

World and Selected Countries’ GDP Growth

Australia’s GDP Growth

Industry Growth by Industry: Transport, Postal & Warehousing



The industry generated $74.2 billion for the Australian economy in 2014-15, an increase of over $15 billion during the previous decade.

ABS (2)

Contribution to GDP by Industry SectorsYear 2014-2015

Industry Sector % Contribution

Mining

Finance

Construction

Health

Manufacturing

Public Admin

Education

Transport and Storage

Retail

Wholesale

Real Estate

Electricity, Gas, Water Supple

Accom, Café, Restaurant

Agriculture

Others & Statistical Discrepancies

Total

8.61%

8.60%

7.71%

6.47%

6.20%

5.17%

4.66%

4.58%

4.44%

4.06%

2.78%

2.70%

2.39%

2.20%

29.43%

100%

GDP Contribution by Various Industry Sectors (Jul 14 to Jun 15)

ABS (2)

Contribution to GDP by Industry SectorsYear 2014-2015

Period

2000/2001

2001/2002

2002/2003

2003/2004

2004/2005

2005/2006

2006/2007

2007/2008

2008/2009

2009/2010

2010/2011

2011/2012

2012/2013

2013/2014

2014/2015

Transport and Storage Gross

Value ($b) GDP ($b)

%Contribution of Transport and

Storage to GDP

43.7

45.1

47.8

49.4

58.3

60.0

63.7

67.0

67.1

67.9

69.9

73.1

75.8

75.1

74.2

928.5

964.1

994.6

1,035.8

1,236.0

1,272.4

1,320.1

1,369.6

1,393.7

1,422.8

1,456.5

1,508.7

1,545.8

1,584.4

1,619.9

4.71%

4.68%

4.81%

4.77%

4.72%

4.72%

4.82%

4.89%

4.81%

4.77%

4.80%

4.85%

4.90%

4.74%

4.58%

Australia’s GDP Growth by Sector

8.61%mining

8.6%finance

4.58%TRANSPORT& STORAGE

4.44%retail sector

Australia’s largest contributors to GDP are the Mining and Finance sectors at 8.61% and 8.6% respectively.

>Transport & Storage contributes 4.58% to Australian GDP - higher than the Retail sector at 4.44%

Along with Manufacturing, the 2 sectors contribute more than the Mining sector

&

Contribution of Transportation and Storage Sector to Australia’s GDP

Sector contribution to GDP as a whole has declined though indicating the sector has grown at a lower rate thanaverage-couldindicateimprovedefficiency.

$74.2 billion billion

15



The stability of the increasing trend lines suggest the individual sectors are good at matching capacity to demand as it increases.

Interestingly, Air represents a lower GDP sec-tor than Rail, Pipelines & Other

ABS (2)

Transport & Storage sector at 1.9% lags the average of 2.7%ingrossproductchange-thiscouldindicateimprovedefficien-cy as both Retail and Wholesale have improved gross product by a higher rate.

BothManufacturingandConstructionhavesufferedadeclineingrossproductof1.2% and 1.3% respectively.

ABS (2,3)

GDP by Transport Mode

0

10000

20000

30000

40000

50000

60000

70000

80000

GD

P G

row

th/

$m

illio

ns

Financial Year

GDP BY TRANSPORT MODE

Storage

Road

Rail, Pipeline, andOther

Air

Transport andStorage

Economic Update: Percentage Change of Gross Product by Sector

4.25%

-1.20%

3.89%

1.94%

-1.26%

4.28%

5.08%

2.46%

2.99%

1.31%

4.99%

1.91%

3.41%3.06%

2.65%

-0.02

-0.01

0

0.01

0.02

0.03

0.04

0.05

0.06

PERCENTAGE OF GROSS PRODUCTS BY SECTOR (Q2 2014 - Q2 2015)

GDP by Transport Mode

Percentage of Gross Products by Sector (Q2 2014 - Q2 2015



Transportation industry contracted by -1.2% in 2014/15, down from 0.9% growth in 2013-14

ABS (2,3)

ABS (2)

Breakdown of Gross Product in Transport and Storage Industry

Road

30.7%

Road

30.7%

Air 9.0% Air 9.1%

Rail, Pipeline, and Other

14.6%

Rail, Pipeline, and

Other 15.3%

Service and Storage,

45.8%

Service and Storage,

44.8%

Jul 13-Jun 14 Jun 14-Jun 15

GROSS PRODUCTS GENERATED BY DIFFERENT SECTORS IN TRANSPORT

Service and Storage maintained its dominant position within the sector at 44.8% of gross product.

Of the transport options, the Road sector dominates transport modes at 30.7% of gross product.

Rail,PipelineAirandOthermakeupthefinal24.4% of the sector.

Change of Gross Product in Transport and Storage Sub-Sectors

Road, 1.7%

Road, -1.0%

Air, -1.6%

Air, 0.2%Rail, Pipeline, and

Other, -0.2%

Rail, Pipeline, and

Other, 3.7%

Storage and Services, -

2.6%Storage and Services, -

3.2%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

PERCENT CHANGE OF GROSS PRODUCT BY DIFFERENT TRANSPORTATION INDUSTRY SUB-SECTORS

Industry Overall Growth 2013-14, 0.9%

Industry Overall Growth 2014-15, -1.2%

Both Air and Rail, Pipeline & Other sectors managed growth at 0.2% and 3.7% respectively

Sector contraction can be largely attributed to the Storage & Services subsector - making up 44.8% of the sector and contracting at 3.2%

Gross Products Generated by Different Sectors in Transport

Percent Change of Gross Product by Different Transportation Industry Sub-Sectors



Labour Force, Australia, June 2015

ABS (4)

Labour Force Australia 2015 (Seasonally Adjusted)

Change from June 2014Employment

Jun-15 Jun-14 Person Percent

F/T Employed persons ('000)

P/T Employed persons ('000)

Total Employed persons ('000)

Unemployed persons ('000)

Unemployment rate (%)

8,106.9

3,603.8

11,710.7

753.1

6.0%

8,003.5

3,521.9

11,525.4

745.5

6.1%

103.4

81.9

185.3

7.6

-

1.3%

2.3%

1.6%

1.0%

0.1 pts

Employment in almost all sectors increased with only Manufacturing, Mining, Agriculture and Others weakening

Share of Employment by Industry

Aug-14Aug-15

('000) Person Percent ('000) Person Percent

Retail

Healthcare

Manufacturing

Construction

Education

Professional, Scientific

Accom, Café, Restaurant

Public Administrative

Mining

Transport and Storage

Wholesale

Agriculture

Others

1,246

1,500

884

1,024

928

1,016

824

737

226

611

391

303

478

10.26%

12.7%

7.5%

8.8%

7.9%

8.6%

7.0%

6.2%

1.9%

5.2%

3.3%

2.6%

4.0%

1,235

1,377

913

1,038

906

936

794

731

246

593

387

321

484

10.7%

11.9%

7.9%

9.0%

7.9%

8.1%

6.9%

6.3%

2.1%

5.1%

3.4%

2.8%

4.2%

TOTAL 11,796 100.0% 11,525 100.0%

ABS (4)

Note: Detailed Labour Force Australia is released Quarterly by ABS

Australia’s Labour Force

Total employment rose 103,400 persons aiding the unemployment rate to reduce by 0.1% to 6%

Part time employees growing at a higher rate than full time employees & total employed

Could indicate that while job numbers are increasing, the security of those jobs in decline

Australia’s Labour Force by Industry - 2014-2015

Transport & Storage sector contribution of employed persons increased 0.1% and total persons increased from 593,000 to 611,000

593,000August 2014

611,000August 2015



Over a shorter timeframe, prices within the Transportation sector can be seem reducing for multiple periodsTransportation sector is highly responsive to fuel prices and these have been declining

ABS (5,6)

2002/2003 2003/2004 2004/2005 2005/2006 2006/2007 2007/2008 2008/2009 2009/2010 2010/2011 2011/2012 2012/2013 2013/2014 2014/2015

All Groups 2.6% 2.5% 2.5% 4.0% 2.1% 4.5% 1.4% 3.1% 3.6% 1.2% 2.4% 3.0% 1.5%

Transport 0.1% 3.2% 3.4% 7.6% 0.2% 6.8% -5.9% 3.1% 3.6% 2.2% -0.5% 2.7% -2.4%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

PERCENTAGE CHANGE OF CONSUMER PRICE INDEX FROM FY 02/03 TO 14/15 FOR ALL GROUPS AND TRANSPORT GROUP

All Groups Transport

ABS (5,6)

Inflation - CPI

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15All Groups 2.5% 2.4% 2.16% 2.75% 2.93% 3.02% 2.31% 1.72% 1.33% 1.51%

Transport 1.4% -0.5% 2.69% 1.88% 2.46% 2.68% 0.19% -1.94% -6.24% -2.42%

All Groups Transport

More reactive to changes in the market - is to be expected as responding to fewer factors

Annualrateofinflationdeclinedto1.5% in 2014/15 from 3% in 2013/14

Transport sector more volatile than economy as whole declining from 2.7% to -2.4% in the same period

Percentage Change of Consumer Price Index for all Groups and Transport Group (Mar 2013 - Jun 2015)

Percentage Change of Consumer Price Index fromFY 02/03 to 14/15 for All Groups and Transport Group



Price rises in the Education, Health and Alcohol & Tobacco sec-torshavecontributedhighlytotheannualinflationrate

Transportationsectorcontributesanegativeinfluenceof-2.4% onannualinflationon1.5%

Can indicate a number of things:1. Over investment within the sector leading to reduced prices2.Animprovementinefficiencytomeetdemand

1.1%

4.8%

-0.9%

2.5%

1.4%

4.3%

-3.4%

0.9%

5.4%

2.1%

1.5%

Food

Alcohol and tobacco

Clothing/footwear

Housing

Household contents and services

Health

Transportation

Communication

Recreation

Education

Financial and insurance services

All groups

Contribution to Annual Inflation by Product Group

-2.4%

ABS (5,6)


-300 -200 -100 - 100 200 300 400

2005-2006

2006-2007

2007-2008*

2008-2009

2009-2010

2010-2011

2011-2012

2012-2013

2013-2014

2014-2015

Year

$Billion

International Trade Account Balance on Goods

Debit (Import)

Credit (Export)

-25.0

-20.0

-15.0

-10.0

-5.0

-

5.0

10.0

15.0

20.0

25.0

30.0

$Billion

Monthly International Trade Account 2011-15

Goods Credit

Goods Debit

Australia’s International Trade Account (Goods Only)

Exports declined from 2013/14 t0 2014/15 while imports increased over the same period giving Australia a net negative account of $14 billion

Month on month, this pattern in common with Australia not experiencing a positive trade balance since March 2014

ABS (7)


Monthly International Trade Account 2011-15 International Trade AccountBalance on Goods



Total sea freight went up from 1,169.2 tonnes in 2012/13 to 1,320.9 tonnes in 2013/14

99 99.1

1,0701,169

1,2221,321

0

200

400

600

800

1000

1200

1400

2012-13 Import 2012-13 Export 2012-13 Total 2013-14 Import 2013-14 Export 2013-14 Total

MT

International Sea Freight Volume (Million Tonnes)

BITRE (8)

International Sea Freight:Volume and Value

Freight value increased from $405.7 billion in 2012/13 to $441.6 billion in 2013/14

Thetonnagefiguresismainlydrivenbyhighvolume,lowvaluecommoditieslikecoal,cokeandore.This can be seen in the discrepancy in import and export tonnes and value between the two graphs

184.4 198.1

221.3

405.7

243.5

441.6

0

50

100

150

200

250

300

350

400

450

500

2012-13 Import 2012-13 Export 2012-13 Total 2013-14 Import 2013-14 Export 2013-14 Total

$ BillionInternational Sea Freight Value ($Billion)

1,169.2TONNES

1,320.9TONNES

2012/13 2013/14

$405.7billion

$441.7BILLION

2012/13 2013/14

BITRE (8)

International Sea Freight Volume (Million Tonnes)

International Sea Freight Value ($Billion)



East Asia (727.9 million tonnes & $98.8 billion) was Australia’s largest export market by volume followed by Japan & North Asia (352.8 million tonnes & $67.8 billion).

6.7

727.9

23.5

352.8

15.0 3.4 6.0 2.5 5.444.2 33.9

0.50

100

200

300

400

500

600

700

800

Volume of Goods Exported from Australia (million tonnes)

BITRE (8)

Country ofDestination

East Asia

Japan & North Asia

South Asia

South East Asia

Europe

Middle East

Africa

North & Central America

South America

New Zealand

Pacific Islands & PNG

Rest of the World

Total

Exports(million tonnes)

Exports($ billions)

727.9

352.8

44.2

33.9

23.5

15.0

6.7

6.0

5.4

3.4

2.5

0.5

1,221.8

98.8

67.8

9.0

28.2

9.4

8.0

3.4

8.2

1.3

5.4

3.2

0.8

243.5

Over half of the import volume and value had its origin in 3 markets: South East Asia (29.1 million tonnes & $43.2 billion), East Asia (14.8 million tonnes & $42.3 billion) and Japan & North Asia (14.8 million tonnes & $29.4 billion) in trade.

Country ofOrigin

South East Asia

East Asia

Japan & North Asia

Middle East

Europe

North & Central America

Rest of the World

Africa

New Zealand

Pacific Islands & PNG

South America

South Asia

Total

Imports(million tonnes)

Imports($ billions)

29.1

14.8

14.8

7.1

6.5

6.1

5.8

5.5

3.3

3.3

1.4

1.3

99.0

43.2

43.3

29.4

5.8

34.6

20.2

2.4

5.5

6.4

1.5

2.6

3.2

198.1

Australian Sea Freight by Trading Region (Exports)

Australian Sea Freight by Trading Region (Imports)

BITRE (8)

5.5

14.8

6.5

14.8

7.1

3.3

6.1

3.31.4 1.3

29.1

5.8

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

Volume of Goods Imported to Australia (million tonnes)

Volume of Goods Imported to Australia(million tonnes)

Volume of Goods Exported from Australia(million tonnes)



All major ports showing increasingvolume year on year apart from Melbourne between 2011/12 and 2012/13

Melbourne expected to reach previous high during 2015/2016

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

Port of Melbourne Port Botany Port of Brisbane Port of Fremantle

Container Throughput at Australian 4 Major Ports (TEUs)

2009-10

2010-11

2011-12

2012-13

2013-14

Period Port Botany Port of Brisbane Port of Fremantle

2012-13

2013-14

-2.7%

0.8%

4.5%

3.8%

5.9%

3.0%

2.0%

4.9%

Port of Melbourne

Machinery & Transport Equipment represents the highest value sector of imports at $71.4 billion

Crude materials, at $106.2, represents the highest export sector for Australia

0

20

40

60

80

100

$b

illio

n

Value of Imports & Exports by Commodity Groups2013-2014

Imports ($billion)

Exports ($billion)

Commodity Group

Food & Live Animals

Beverages & Tobacco

Crude Materials

Mineral Fuels

Animal & Vegetable Oils

Chemicals & Related Products

Manufactured Goods

Machinery and Transport Equipment

Miscellaneous Manufactured Articles

Commodities & Transactions

Total

Imports($billion)

Exports($ billion)

11.1

2.6

2.3

43.2

0.6

16.1

25.5

71.4

21.6

3.6

198

27.4

2.1

106.2

69.6

0.6

4.8

13.6

8.5

1.5

9.3

243.6

Australian Sea Freight by Commodity Sea Freight

Container Throughput at Australian Ports

BITRE (8)

65%MELBOURNE

& SYDNEY

Melbourne followed by Sydney are Australia’s largest ports by volume, accounting for over 65% of throughput

BITRE (8)

Container Throughput at Australian 4 Major Ports (TEUs)

Volume of Imports & Exports byCommodity Groups 2013-2014



NSW accounts for highest tonnage of road freight at 538,503 tonnes

Together with QLD and VIC, make up the majority of road freight in Australia

NSW & QLD are the highest states for road freight kilometres travelled at 5,048,313 and 4,297,905 respectively

This can be seen as expected as the largest and most populous states incur the highest freight kilometres

538,503

480,418499,659

153,024

373,510

50,54925,199

10,841

0

100,000

200,000

300,000

400,000

500,000

600,000

NSW Vic. Qld. SA WA Tas. NT ACT

Road Freight by Origin (Tonnes)

5,048,313

3,766,140

4,297,905

1,226,207

2,237,742

308,875 210,115 118,147

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

NSW Vic. Qld. SA WA Tas. NT ACT

Road Freight by Origin (Kilometres)

Road Freight - 12 months to 31 October 2014

Labour CostSince 2009/10, the Transport & Storage sector has matched the overall labour price index reasonably consistently

2003/

2004

2004/

2005

2005/

2006

2006/

2007

2007/

2008

2008/

2009

2009/

2010

2010/

2011

2011/

2012

2012/

2013

2013/

2014

2014/

2015

All Sectors 3.5% 4.1% 4.2% 4.0% 4.3% 3.7% 3.1% 3.8% 3.7% 2.9% 2.6% 2.3%

Transport 3.1% 3.2% 4.3% 4.1% 3.9% 4.4% 3.2% 4.1% 3.8% 2.8% 2.4% 2.2%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

Change of Labour Price Index(All Sectors vs. Transport and Storage)

All Sectors

Transport

Labour cost within the Transport and Storage sector increased 2.2% in 2014/15

The overall market increased 2.3% in the same period

ABS (27)

ABS (9)

Road Freight by Origin (Tonnes)

Road Freight by Origin (Kilometres)

Change of Labour Price Index(All Sectors vs, Transport and Storage)



• A clear trend of price decreases over the entire 40 week period from 135 cents to a low of 111 cents• Driving lower prices within the Transport sector• The weakened Australia dollar is less able to resist price increases if supply is restricted in future

108

110

112

114

116

118

120

122

124

126

128

130

132

134

136

138

21 28 5 12 19 26 2 9 16 23 30 6 13 20 27 4 11 18 25 1 8 15 22 29 6 13 20 27 3 10 17 24 31 7 14 21 28 6 13 20

(ce

nts

pe

r lit

re)

(week ending Sunday...)

Average Weekly Fuel Price (Diesel): 40 weeks to 20 March 2016

Jun July Aug Sept Oct Nov Dec Jan Feb Mar

• A clear trend of price decreases over the entire 40 week period from 141 cents to a low of 106 cents.• Driving lower prices within the Transport sector• The weakened Australia dollar is less able to resist price increases if supply is restricted in future

102

106

110

114

118

122

126

130

134

138

142

146

21 28 5 12 19 26 2 9 16 23 30 6 13 20 27 4 11 18 25 1 8 15 22 29 6 13 20 27 3 10 17 24 31 7 14 21 28 6 13 20

(ce

nts

pe

r li

tre

)

(week ending Sunday...)

Average Weekly Fuel Price (Unleaded): 40 weeks to 20 March 2016

Jun July Aug Sept Oct Nov Dec Jan Feb Mar

Fuel Cost - Diesel

Fuel Cost - ULP

AIP (10)

AIP (11)

Average Weekly Fuel Price (Unleaded): 40 Weeks to 20 March 2016

Average Weekly Fuel Price (Diesel): 40 Weeks to 20 March 2016



Most major cities are holding steady for industrial property except Brisbane & Perth.

Perth has an oversupply from the Mining industry and prices are decreasing

Brisbane is experiencing an undersupply and prices are increasing to account for this

Industrial Market Indicators

City

Sydney

Melbourne

Brisbane

Perth

Adelaide

Area Rent/Sqm Trend

South

South West

Central West

West

North West

North Shore

City Fringe

North West

South Eastern

Trade Coast

Southside

Northside

Perth Core

North

South

East

Inner West

North West

North

$160

$105

$120

$110

$105

$160

$120

$75

$80

$135

$115

$120

$95

$90

$80

$70

$115

$95

$70

Steady

Steady

Steady

Steady

Steady

Steady

Steady

Steady

Steady

Increasing

Increasing

Increasing

Decreasing

Decreasing

Decreasing

Decreasing

Steady

Steady

Steady

Industrial Rental Cost

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Savills (12)

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Market UpdateSECTION B:

..............................• An Update on Climate Change• Significant Infrastructure Programme and Progress• Warehouse Availability and Trends


SECTION B: Market Update

Transport sector increased emissions by 0.5% over the period to 93.4 million tonnes – a higher rate than all emitters as a whole at 0.2%

Significantworktoachieve2020targetsof 5% below 2005 levels as the carry over reductions from Kyoto protocol agreements are being consumed

Australia is expected to be behind reduction targets by mid 2016

186.6

94.8

93.4

38.4

32.6

79.9

13.1

10.8

549.6

2.1%

0.1%

0.5%

-1.5%

1.2%

-3.6%

0.0%

0.0%

0.2%

Annual emissions through toSeptember quarter (Mt CO2)

Category

National Inventory

Energy: Electricity

Energy: Stationary energy

Energy: Transport

Energy: Fugitive emissions

Industrial Processes

Agriculture

Waste

Land Use & Forestry

National Inventory Total

% Change

182.7

94.7

92.9

39.0

32.2

82.9

13.1

10.8

548.4

Australia National Greenhouse Gas Inventory

Septemberquarter 2014

Septemberquarter 2015

100

200

300

400

500

600

700

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Mt CO2 Australia's Greenhouse Gas Reduction Target

National Inventory Trajectory to 2020 Target 2015-16 Update

An Update on Climate Change

Greenhouse Gas Emission Reduction Target

0.5%

Highest emitting sector remains the Electricity generation sector at 186.6 million tonnes

TRANSPORT SECTOR

$186.6Melectricity generation SECTOR

Department of Climate Change (13)

Australia’s Future InfrastructureHeadline Reform Aspirations in the National Infrastructure

Productive cities, productive regions- Higher density housing- Rapid public transport- Intelligent road systems- National Freight & Supply Chain Strategy- High speed broadband

Efficient Infrastructure markets- Balance taxpayer & user funding- Implication on low income households- Privatise energy sector- Privatise NBN- Close future funding gaps for investment & maintenance

Sustainable & equitable infrastructure- Regulatory frameworks to encourage innovation-Moreefficientnetworks- Encourage renewable energies- Develop remote area infrastructure

Better decisions & better delivery- Detailed analysis before public commitment- Post completion reviews- Improved evidence base for decision making- Frameworks & data driving improvements- Infrastructure skills plan

Department of the Environment (14)

Infrastructure Australia (15,16)

Australia’s Greenhouse Gas Reduction Target



SAGawler Line rail upgrade

Upgrade&electrificationoftheGawlerraillineincluding new signalling equipment. This will

rationalisethedieseltrainfleetandallowamore sustainable approach.

Significant Rail Infrastructure Programs

QLDCross River rail to CBDProvide north-south passenger rail from Bowen Hills to Salisbury via the CBD. A second rail river crossing to ease demand on buses.Port of Brisbane dedicated freight railImprove connectivity from Brisbane Port to freight terminal in Brisbane area. Aims to meet projected increase in freight volumes and encourage a shift from road to rail.

NSWSydney Metro (Chatswood – Bankstown) Singledeck,fullyautomatedrailservicetoexpandcapacityalongtheidentifiedGlobalEconomicCorridorwithinSydney. Analysis suggest without expanded capacity, 42,000 jobs would go unrealised by 2036.Port Botany Freight rail duplicationDuplication of 2.8km of the Port Botany rail line to maintain throughput capacity under the rail mode share strategy.Chullora Junction upgradeImprovements to low speed, at-grade junctions including a possible duplication of some areas. Aims to improve congestion under the rail mode share strategy.

VICCranbourne – Pakenham rail upgradeRolling stock and supporting infrastructure upgrade including signalling equipment. Additional initiatives to remove level crossings are also being considered.

Melbourne Metro simplification & capacity upgradeConstructing twin 9km tunnels from South Kensington to South Yarra, linking Sunbury & Cranbourne Pakenham rail lines. This will ease capacity constraints.

Infrastructure Australia (17)



NSWWestConnex Stage 3 (M4 – M5)Joining the M4 and M5 via a tunnel running under the inner western suburbs of Sydney. Aims to ease severe congestion along surface roads.Port Botany & Sydney Airport to WestConnexIntegrated, high capacity road connection from the WestConnex, St Peters interchange to the Sydney Airport & Port Botany precinct allowing airportandporttraffictobypasslocalroads.

Significant Road Infrastructure Programs

QLDIpswich Motorway (Rocklea – Darra)Road upgrades to ease congestion and delays including: widening between Oxley Rd and Suscatland St, northern service road across Oxley creek, ramp rationalistion.

WAPerth Freight LinkSeeks to remove the missing link to Fre-mantle Port. Extends Roe Highway west of the Kwinana Freeway to become the principal east-west freight link. Also adds a freight connection between Roe Highway and Fremantle Port.

VICCityLink – Tullamarine WideningWiden and introduce managed motorways on the M2 road corridor from Melbourne Airport to the M1.Hoddle St UpgradeThe heavily congested major road is unsafe and inefficient.Optionstoeasethisinclude:trafficman-agement systems, intersection operations, public transport incentives, limiting right turns.West Gate Freeway, CBD North & Port of MelbourneSignificantcongestionandarelianceontheWestGate bridge emerge from the lack of an east-west connection between West Gate freeway and the Port of Melbourne and CBD North. This project aims to provide that link and ease congestion.


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VICMelbourne Container Terminal Capacity EnhancementConstruction of additional container terminal capacity to cater forprojectedincreasedvolumes.Trafficattheporthasgrownat 6% per year over the last 2 decades. At this rate, even with the planned expansion project, the port will reach capacity by 2031. As a central role in Australia’s supply chain, inadequate port capacity could have broader consequences


Significant Port Infrastructure Programs

WAPerth Container Terminal

Capacity EnhancementAdditional container capacity within

the port to extend the capacity horizon currently projected at 10 years.

Containertraffichasgrownat5.6%peryear and has an economic contribution

to Australia of over $3 billion.

SASouth Australia Regional mineral port developmentOptions for the development of bulk commodity port capacityintheSpencerGulfregion.Sitesidentifiedinclude: existing Whyalla Port in northern Spencer Gulf, planned Cape Hardy Port on the central eastern Eyre Peninsula, planned Myponie Point Bulk Commodity export facility on the northern Yorke Peninsula. Addresses a shortfall in a clear path to market for new mining projects.




Region 2016 Demand Condition and OutlookDemand Forecast

Sydney Strengthening economic conditions in NSW are expected to provide a platform for net effective growth of industrial location assets.

Melbourne

Melbourne's attractive land values (43% cheaper than Sydney) play a key role in maintaining Melbourne's reputation as logistics capital of Australia.

Brisbane Supply has gradually been increasing with institutional investors driving speculative construction of almost 70,000 square meters of industrial estate location space.

Perth Competition for tenants remained high in the first half of the year, evident by moderating rents.

Adelaide Construction for large scale industrial assets is forecast to be at the highest rate for five years, with more than 85,000 sqm of space due to be completed for 2015.

Warehouse Availability and Trends: Demand

Region 2016 Supply Condition and Outlook Supply Forecast

Sydney The Sydney industrial market is characterised a

sea of capital bounded by a scarcity of stock.

ñ

Melbourne Compared to mining focused states such as

Western Australia and Queensland, Victoria will benefit from the lower value of the Australian dollar, which will drive demand for industrial property (the Port of Melbourne is a major driver)

ñ

Brisbane All Brisbane industrial markets are experiencing strong demand from domestic and international investors for investment grade industrial assets.

ñ

Perth Perth industrial market has continued to soften during the second half of 2015. Available space has increased and limited net tenant demand is leading to longer vacancy periodes in some assets.

óò

Adelaide Adelaide industrial market saw mixed results.

Vacancy in most industrial markets increased, with the exception of the south.

óò

Warehouse Availability and Trends: Supply

Australian IndustryPerformance

SECTION C:

..............................• International Logistics Performance Index• International Logistics Performance• Total Business Inventory• Inventory to Sales Ratio


SECTION C: Australian Industry Performance

Index calculated via an international survey of logistics operators as well as quantitative measure-ment of key indicators

Australia’s Logistics Performance ranks 16th among 155 countries, up two places from the previous ranking in 2012.

Highest ranking is Germany at 4.12 while the previous leader, Singapore, has dropped to 4th at 4.00

Australia continues to be ahead of New Zealand, at an index of 3.81 and almost at par with the US & China.

APEC and ASEAN groups are both performing competitively at 3.5 and 3 respectively

LPI RankPrevious

RankCountry LPI Customs Infrastructure

International shipments

Logistics competence

Tracking & tracing

Timeliness

1 4 Germany 4.12 4.10 4.32 3.74 4.12 4.17 4.36 2 5 Netherlands 4.05 3.96 4.23 3.64 4.13 4.07 4.34 3 7 Belgium 4.04 3.80 4.10 3.80 4.11 4.11 4.39 4 10 United Kingdom 4.01 3.94 4.16 3.63 4.03 4.08 4.33 5 1 Singapore 4.00 4.01 4.28 3.70 3.97 3.90 4.25 6 13 Sweden 3.96 3.75 4.09 3.76 3.98 3.98 4.26 7 22 Norway 3.96 4.21 4.19 3.42 4.19 3.50 4.36 8 15 Luxembourg 3.95 3.82 3.91 3.82 3.78 3.68 4.71 9 9 United States 3.92 3.73 4.18 3.45 3.97 4.14 4.14 10 8 Japan 3.91 3.78 4.16 3.52 3.93 3.95 4.24 11 25 Ireland 3.87 3.80 3.84 3.44 3.94 4.13 4.13 12 14 Canada 3.86 3.61 4.05 3.46 3.94 3.97 4.18 13 12 France 3.85 3.65 3.98 3.68 3.75 3.89 4.17 14 16 Switzerland 3.84 3.92 4.04 3.58 3.75 3.79 4.06 15 2 Hong Kong SAR, China 3.83 3.72 3.97 3.58 3.81 3.87 4.06 16 18 Australia 3.81 3.85 4.00 3.52 3.75 3.81 4.00 17 6 Denmark 3.78 3.79 3.82 3.65 3.74 3.36 4.39 18 20 Spain 3.72 3.63 3.77 3.51 3.83 3.54 4.07 19 19 Taiwan 3.72 3.55 3.64 3.71 3.60 3.79 4.02 20 24 Italy 3.69 3.36 3.78 3.54 3.62 3.84 4.05

International Logistics Performance Index

International Logistics Performance

World Bank (19)

1 1.5 2 2.5 3 3.5 4 4.5 5

SingaporeJapan

Hong Kong, ChinaCanada

United StatesAustralia

Chinese TaipeiNew Zealand

Korea, Rep.China

MalaysiaThailand

PhilippinesChile

MexicoVietnam

PeruIndonesia

Russian FederationLao PDR

Papua New GuineaCambodiaMyanmar

ASEAN

APEC

World Bank (20)


SECTION C: Australian Industry Performance

Total cost of business inventory is continu-ing the upward trend from 2002 from $101 billion to $147 billion

This is a clear indicator of the strength of the Australian economy

Inventory to sales ratio continues to improve from 2005 from 0.795 to 0.629

This indicates cautiousness in holding too much stock or, more likely given the previous indicators of economic strength, that improvements in supply chain management areprovingeffective

0

20000

40000

60000

80000

100000

120000

140000

160000

$m

Period

Inventories (Book Value, Current Prices)

0.000

0.100

0.200

0.300

0.400

0.500

0.600

0.700

0.800

0.900

Ratio

Period

Inventory to Sales Ratio

ABS (21)

ABS (22)

Total Business Inventory

$101 billion

$147billion


0.795JUNE 2005

0.629JUNE 2015

Inventories (Book Value, Current Prices)


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Employment andTraining

SECTION D:

..............................• Employment Level in Transport & Storage Industry• Transport & Logistics Workforce by Education• Transport and Logistics Workforce by Gender• Projected Employment Growth of Industry• Workforce Age & Employment Type• Education & Training in Logistics


SECTION D: Employment and Training

Continuing trend of increasing employment within the Transport industry from 469,000 to 611,000 persons

0

100

200

300

400

500

600

700

('00

0) P

ers

on

Year

Employment Level in Transport Industry ('000) Person

Aug-03 Aug-04 Aug-05 Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Aug-13 Aug-14 Aug-15

Person Employed ('000) 469 482 495 500 540 574 575 574 576 562 588 593 611

Year on Year Growth 6.2% 2.8% 2.7% 1.1% 8.0% 6.2% 0.2% -0.1% 0.3% -2.4% 4.6% 0.8% 3.1%

Employment Level in Transport and Storage Industry

ABS (23)

611,000August 2015

469,000August 2013

Employment within the sector increased 3.1% between Aug 2014 and Aug 2015

0.8%AUG 2014

3.1%aug 2015

Employment Level in Transport Industry (‘000) Persons



Majority of workforce possess no qualifications

Aviation alone in largest group qualifiedtoVETCertIII/IVlevel

Maritime & Ports have highest proportion of University educated workers

The lack of formal education within workforces can contribute to lag in best practice procedure

0%

10%

20%

30%

40%

50%

60%

70%

Logistics &Warehousing

Road Aviation Rail Maritime & Ports

2014 Transport & Logistics Workforce by Education & Sector

No Qualification VET Cert I/II VET Cert III/IV Diploma/Advanced Diploma Higher Education

Current Transport & Logistics Workforce by Education

Employment in Transport and Storage Industry by Gender

• Males still dominating all sectors of Transport & Storage industry• Sector with highest proportion of female workforce is Aviation• Significantchangeswouldhavetotakeplaceforthisratiotoevenoutandismorelikelytobeviaincreasesinstaff

with a higher education

TLISC (24)

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Logistics & Warehousing

Road

Aviation

Rail

Maritime & Ports

Transport & Logistics Workforce by Gender & Sector

Female Male

TLISC (24)

2014 Transport & Logistics Workforce by Education & Sector

Transport & Logistics Workforce by Gender & Sector



All sectors except Aviation and Logistics & Warehousing have older workforces than average of 40% aged over 45

Allsectorsemploystaffatfulltimeatahigher rate than average of 68%

All sectors have workforces aging at a higher rate than average with Aviation aging at 2.5 times the average rate

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

0

50000

100000

150000

200000

250000

300000

350000

400000

450000



Transport & Logistics Workforce Size & Growth

2013 Workforce 2018 Workforce Job Growth (2013-2018)

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%


Road

Aviation

Rail

Maritime & Ports

All Industries

Workforce Age & Employment Comparison

Aged Over 45 Fulltime

0

0.5

1

1.5

2

2.5

3

Logistics &Warehousing


Aging Rate Compared to All Industries

Projected Employment Growth of Industry

All sectors expected to experience job growth over the period to 2018

3 sectors expected to experience job growth of over 4%: Logistics & Warehous-ing, Road and Maritime & Ports

Logistics & Warehousing as well as Road transport sector to experience largest growth rates as well as largest absolute number of new jobs.

Overall the sector remains healthy and there exists opportunities for those with proper education to get ahead

TLISC (24)

Transport and Storage Industry Age & Employment Type

ABS (23) & TLISC (24)

Workforce Age & Employment Comparison

Aging Rate Compared to All Industries

Transport & Logistics Workforce Size & Growth


Education and Training in LogisticsMajor channels which provide education and training in Logistics remain the same which are:

Universities and Collegesprovidequalificationsfrombachelortodoctoratedegrees.Degreesintheareaofprojectman-agement,operationsmanagement,supplychainmanagement,transportmanagementandengineeringarebeingofferedat most of the universities/colleges nowadays.

In terms of vocational studies, TAFE Institutions and Collegeprovideshortcourses,CertificatesI-IVanddiplomasindiffer-ent areas ranging over purchasing, transport, warehousing, maritime and aviation.

Training Institutionsoffercourses(someofwhicharegovernmentfunded)similartocertificatesandshortcoursesofferedby TAFEs.

Several companies in the industry also provide internal development programs, such as the graduate program or trainee-shipprogramofferedbyLinfox,KPMG,PWCandDHL.

Other training channels include: • SCLAA/APICS which coordinates a mentoring program and short courses.• TLISC which provides training packages in Transport, Logistics, Maritime and Aviation.• TDT Victoria whichofferscadetshipprogramsrelatedtotransport,distributionandlogistics.• MGSM and CSIROwhichoffersexecutiveprograms.• Supply Chain Leaders Academy (Part of the Logistics Bureau Group) accredited with CILTA whichoffersonline classes as well as comprehensive two-day schools three times a year covering a broad range of Supply Chain & Logistics best practices: www.SupplyChainLeadersAcademy.com.au

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Climate Change Authority (26)

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RegulatoryEnvironment

SECTION E:

..............................• Transportation Related Legislation• Climate Change Related Legislation


SECTION E: Regulatory Environment

Transportation Related Legislation

Climate Change Related Legislation

Special Review by Climate Change AuthorityGovernmentreviewintoETSprogramwillbediscussedandafinalreportissuedby30June2016Table below outlines possible regulatory options to achieve carbon reduction targets in Australia:

Type Policy Examples

Market Policies

Mandatory Carbon Pricing

Cap and Trade ETSs European Union, ETS, California ETS

Baseline and credit ETSs Alberta Secified Gas Emitters Regulation

Emissions intensity ETSs See AEMC (2015) submission to the ERF Safeguard Mechanism Consultation

Carbon Taxes British Columbia Carbon Tax

Voluntary Carbon Pricing Offset Schemes

Clean Development Mechanism (an international scheme)

Government purchase of emissions reductions

Emissions Reduction Fund Purchasing

Other mandatory price-based policies Renewable energy target schemes Renewable Energy Target

Energy efficiency target schemes NSW Energy Savings Scheme

Non-market policies

Regulation

Facility-level emission limits ERF Safeguard Mechanism

Appliance Standards Greenhouse and Energy Minimum Standards

Building Standards Energy efficiency requirement in the National Construction Code (eg. 6 star standard for new houses)

Vehicle Standards

The United States, Canada, the European Union, China, Japan, India, Korea and various other countries have vehicle efficiency and/or emission standards

Information Programs Energy labelling for appliances E3 Program (Australia and New Zealand)

Information and advice on energy efficiency

Your Energy Savings Website

Innovation Support Grants for research & development

Grants provided by the Australian Renewable Energy Agency

Public investment in commercialisation Loans provided by the Clean Energy Finance Corporation

Climate Change Authority (26)

Australian Government (25) & Infrastructure Australia (16)

Harper Review Recommendations

1. Introduce cost reflective road pricing in a revenue neutral way2. Reform liner shipping3. Reform aviation and shipping cabotage restrictions

Infrastructure Australia:

• Infrastructure Australia to develop a National Supply Chain Strategy to target nationally important supply chains and identify critical infrastructure and legislative bottlenecks

• Are currently recommending governments move to road user charging for heavy vehicles within 5 years.

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Supply chains everywhere are under immense pressure. Driven by globalisation and custom-ers whose power to dictate to suppliers is ever greater, supply chains in every sector and niche are becoming more complex and subject to greater degrees of risk and volatility. At the same time, technology is advancing apace andofferingopportunitiesforinnovationwhichsupply chain organisations are seizing upon to remain competitive and meet the challenges they face.

Three Key Areas of InnovationIn the next 10 to 15 years, we can expect to see almost perpetual innovation in the following three aspects of supply chain management:

1. Visibility: As supply chains grow in complex-ity, it becomes ever more necessary to follow theflowofmaterials,informationandmoneythrough those chains in real time.2. Connectivity and collaboration: Few are the organisations today that can meet customer demand without collaboration. The next few years will see an increase in multi-party collab-oration, supported by increasingly sophisticat-ed webs of interconnected and interoperable systems.3. Automation: Many developed countries are sufferingadepletingpooloftalentfromwhichindustrial and commercial entities can recruit. If this situation continues, many companies will be looking at how much they can automate their supply chains to operate with fewer em-ployeesandlessexpense,withoutsacrificingcustomer satisfaction.

Taking each of these areas in turn, it’s worth looking at them in a little more detail, just to explore the trends we can expect to see as emerging technologies drive ideas and provide the means to turn them into practical reality.

Supply Chain Innovation: The Next 15 Years

1) Supply Chain Visibility

Supply chain leaders quite understandably spend a lot of time talking about visibility. However, few of them proclaim success in their effortstoattainit.Organisationalsilosalltooof-ten get in the way and when it comes to taking definitiveaction,costcontainmentseemstotrump visibility every time in terms of invested

capitalandeffort.

This is a shame, since improving supply chain visibility increases the opportunities to reduce cost. It’s all very well to say “what gets mea-sured gets done”, but before you can measure anything, you must be able to see it.

There is however, a focal shift towards visibility that’s slowly gaining momentum. Add the fact that technology is ready and ripe for exploita-tion and we have every reason to expect that for example, combinations of RFID and sensors will play an increasingly important role in trac-ing the status of materials through the supply chain.

Seeing Beyond RFIDWhile it seems that RFID labelling and tracking has only recently matured into a mainstream feature of supply chain monitoring, we could soon be seeing it take the next step in its evo-lution. This will likely be in the shape of RFID labels with additional sensing equipment on board,offeringmorethansimpleconfirmationof labelled items’ presence.

With active sensors on board, RFID labels will be able to provide valuable information about the status and condition of materials and products in transit. This is incredibly important, givencurrentdifficultiesinascertainingwhoshould bear the cost of goods that are dam-

aged or spoiled in transit.

Possible uses of RFID labels with on-board sensors include:

• RFID with embedded moisture sensors to detect the onset of corrosion to auto parts

• RFID tags with light sensors to identify when containers are opened without authorisation

• RFID with temperature sensors to moni-tor transport and storage of vaccines and serumsortemperature-sensitivefoodstuffs

These “smart RFID” labels will be able to take measurements and time-stamp them, so supply chain companies can reconstruct events which led to product spoilage or damage—or possibly even to monitor those events in real time and intervene to prevent losses.

Smart RFID is just one example of how supply chainvisibilitymaybenefitfrominnovation.Theinnovations themselves will be enabled by the rise of the Internet of Things (IoT) which con-nects “dumb” objects, via sensors to monitoring software.

Other Supply Chain Uses of Sensor TechnologyAlong with enhanced RFID, other uses of sen-sors can be expected to increase across supply chains,fromthefactoryfloortothepremisesof end-customers or even consumers. Inven-tory for example, will be able to count itself, enabling automatic replenishment and

SMART RFID IS JUST ONE EXAMPLE

OF HOW SUPPLY CHAIN VISIBILITY

MAY BENEFIT FROM INNOVATION


prevention of out-of-stock situations. Transpor-tation units will transmit data relating to speed, location, load status and other vital information telling shippers and customers a real-time story of asset performance and location.

When it all comes together and sensors pop-ulate every aspect of the supply chain, all the way to the retailers’ shelves and beyond, real opportunities will exist to reduce latency by sensing, rather than translating demand. It’s unlikely however, that any one company will be abletoleveragesensortechnologyeffectivelyon its own. To ensure the picture is whole, we’ll need innovation to prevail in another area—connectivity and collaboration across complex supply networks, to share data and ensure materialandinformationflowsareseamless.

2) Connectivity and Collaboration

I’ve grouped connectivity and collaboration together, since in a supply chain context, one will not be able to take place without the other. Furthermore, both these elements are essen-tial to achieve the total supply chain visibility facilitated by sensor technology. Innovation in supply chain over the next few years will not be purelytechnological,ascompaniesmustfindways to break down silos and work together to generate visibility and capitalise on it. If we don’tfindwaystoinnovateintermsofcollabo-ration between say, retailers and suppliers, all that sensor data will be of limited value.

Ironically, many of the answers to collaborative challenges do lie with technology. Think of the following example, which although not related to supply chain (except perhaps, incidentally), illustrates how important a part technology plays in commercial collaboration.

I’m talking about remote project management; a growing trend that transcends industrial sectors and international boundaries; one that connects teams of individuals from around the world to deliver project objectives. These proj-ects are only possible because of advances in software and Internet technology, which enable project workers to share tasks in real time.

Perhapswe’llfindawaytousecollaborativetechnology in supply chain in a similar way to remote project teams. Right now, technology can help with collaboration, but it also has its limitations. Strings of ERP platforms belonging to disparate organisations, no matter how well they interface, will not be likely to promote collaboration, although they may help to some extent with the sharing of data.

A more helpful development might be the adoption of cloud-based services which pool data en masse from participating supply chain players. A step beyond cloud-based ERP or SCM, these platforms will pull organisations together on single instances, controlling access with authorisation rules, but essentially putting hundreds of companies on one system, where data can be shared without the need for pass-ing it via EDI.

Companies that wish to collaborate simply sign up to one of these services, while keeping their own IT platforms as isolated as they wish.They will also be able to decide what data they contribute to the pool and which other organi-

sations they share it with. For want of a better term, we might call these platforms “digital sup-ply chain hubs”.

ConnectivityIf visibility is the key to cost containment, then connectivity is the key to visibility. Here we’re not just talking about connecting supply chain partners. That, as already discussed will be criti-calsimplytoenableeffectivecollaboration.

When we talk about connectivity in the supply chain of the next decade, we mean everything being connected to everything. Machines will connect to machines. Dumb objects will con-nect to business information systems. People will be connected to those same systems, but in an ever less active and more supervisory capacity.

RFID will be used to trigger alerts from retail shelves, initiating a Kanban-style process which automatically calls for replenishment when shelf stocks get low. That in turn will trigger an order for replenishment of the store from the distribution centre, or perhaps directly from a supplier. Data from the same system will be utilised by forecasting software, to yield aware-ness of subtle trends and buying patterns and drive more accurate forecasts.

In a similar manner, transportation assets will be connected to business management plat-forms, sending constant streams of data which will feed into dynamic planning applications. Machine learning will allow these applications toutiliselivedataaboutdelays,trafficcondi-tions, and other environmental factors. As a result, logistics companies will be able to plan resourcesmoreeffectivelyandimproveon-timedelivery,aswellastocreatemoreefficientroutes, generating savings in labour and vehicle running costs.

In the warehouse too, connectivity will greatly surpass the degree to which it’s present today. The connected warehouse of 2030 will literally live up the term “connected”. MHE, opera-tives, inventory and even lighting and HVAC/temperature control will all be digitally linked, requiring manual management only by excep-tion—that’s in those warehouses which aren’t completely automated and operating with the lights out.

3) Automation

Supply chain automation is already common-place, although typically within larger organi-sations. Over the next decade or so, we’ll see the costs of robotic technology come down to the point where it’s within reach of smaller companies in the supply chain arena. Perhaps we’ll also see a lot more automated public warehouses and 3PL providers that specialise in lights-out warehousing.

Theseproviderswillbeabletoofferthirdpartyservices at reduced cost, perhaps even linking into digital supply chain hubs to automatically move inventory out to loading bays in response

Lest you concern yourself about what this will mean for the supply chain labour market, it should hardly prove to be an issue. Firstly, it may help to solve the global shortage in labour. Secondly, if multi-channel distribution contin-ues to proliferate, there will need to be a lot more warehouses 10 to 15 years from now. Even if the workforce in each is only 20% of what we’d expect to see today, the real reduction in avail-ablewarehouseworkisunlikelytobesignifi-cant, at least in terms of technical, maintenance and management personnel.

Automation Outside the WarehouseWhile warehouse automation is already a main-stream feature, transportation is currently lying on the cusp of a technological revolution, as the buzz about drones and driverless vehicles continues to get louder and more insistent. In the next decade or so, it’s not unreasonable to expect that large goods vehicles will be equipped with a much greater degree of auton-omy than they have today. Even if trucks don’t become driverless in that time, it’s probable that drivers will play a less active part in direct vehicle control and will even be able to spend periodsoftimeinhands-offmode.

This might in turn lead to changes in drivers’ hours legislation, enabling vehicles to keep their wheels turning for longer; so reducing costs and cycle times. In the United States, the state of Nevada has already licensed autono-mous trucks for commercial operation on its roads.

One particularly interesting innovation is the autonomous road train, which was the subject of a project successfully completed in 2012. The theory behind this idea is that trucks will travel in convoys or “platoons”, guided by a lead vehicle driven manually. The vehicles following the leader are linked electronically, allowing them to mimic the lead vehicle and therefore follow closely behind. Drivers in the following vehicles are present only to drive the last miles after the platoon breaks up. Otherwise they are passive occupants.

As with all things transport-related, the chal-lenge for autonomous vehicles and unmanned aerial vehicles (drones) is getting past the legislative barriers and obvious wariness of the public. For that reason, we might not see vehi-cles go totally “driverless” in the next decade. Similarly, distribution by drone may be further offthansomecorporations(readAmazon)would like to think. That said, I suspect we will see drones become commonplace in distribu-tion centres; used for building/yard/inventory inspections and similar utilitarian tasks.

Don’t be Surprised if You’re Surprised It’s never easy to predict what will happen next year, let alone 10 years from the present time. All it takes is one innovation, by one organisa-tion, in one area, for a chain reaction to take place. Then all the most educated predic-tions can be thrown to the wind. So don’t be surprisedifadifferentsupplychainproblemproves to be the one where innovation prolifer-ates. Visibility, collaboration and automation are simply good horses to bet on right now, based on needs within the supply chain environment and the available technology to help compa-nies to innovate.

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