We can’t delay the hard decisions

Michael Kilgariff, Managing Director, Australian Logistics Council.

Michael Kilgariff, Managing Director, Australian Logistics Council.

This article first appeared in the August/September issue of Logistics & Materials Handling.

By Michael Kilgariff, Managing Director, Australian Logistics Council.

In the lead-up to the 2016 Federal Election, the Australian Logistics Council (ALC) urged the development of a comprehensive National Freight and Supply Chain Strategy to address these challenges.

The Federal Government subsequently agreed to undertake the development of such a strategy during the Prime Minister’s Annual Infrastructure Statement to the Parliament in November 2016.

Throughout the months of 2017, the ALC has been working closely with its members, supply-chain participants and other interested parties to catalogue the unique challenges faced by the transport and logistics sector, and to craft recommendations for appropriate policy responses from the Government.

The ALC believes the development of a National Freight and Supply Chain Strategy presents an ideal opportunity to establish a high-level framework that will facilitate the safe and efficient operation of Australia’s supply chains, which will:

  • provide an integrated and efficient freight transport and supply chain network for Australia’s international and domestic supply chains;
  • to the fullest extent possible, ensure that policy settings and regulation are competitively neutral between the different freight transport modes;
  • allow freight operators to innovate and increase the productivity of the freight logistics services they provide, in order to improve outcomes for consumers, Australia’s industries and the wider economy; and
  • contribute to continuous improvement in the safety of all freight logistics operations, as well as improved societal and environmental outcomes.

In early August, the ALC released Freight Doesn’t Vote – its final submission to the Inquiry Into National Freight and Supply Chain Priorities. This comprehensive document sets out a pathway that will equip the nation’s supply chains to deal with the economic needs of the future.

The reality is that Australia’s economy is being transformed by population growth, by technological change and by the changing behaviour of ever-more-discerning and empowered consumers. Like all other industries, the freight logistics sector must adapt to an economy in transformation.

Moreover, given the exponential growth of the middle class throughout Asia, and thus the importance of exports to Australia’s continuing economic performance, becoming a world leader in supply-chain efficiency and safety is not merely desirable, but essential.

The lived experience of Australian society over recent decades points to increasing levels of urbanisation. Effectively, this means we are trying to do more in a limited physical space.

In particular, resurgence in the desirability of inner-city living coupled with rapid rates of population growth present some urgent challenges for our freight logistics industry.

The essential items that most Australians take for granted in everyday life – food to eat, household appliances, clothing, medications and vehicles to name just a handful – are generally not grown or manufactured close to the places where most of us live.

These commodities must be transported from their point of origin to the retailers from which we purchase them, or otherwise delivered directly to our doorsteps from ports, freight depots or warehouses.

Yet, as we create more populous cities, it is fast becoming apparent that our existing planning regimes and approaches to development fail to adequately prioritise the movement of freight.

The congested state of many major freeways and key arterial roads – as well as traffic gridlock within cities themselves – is a constant source of annoyance for many Australians. However, more than simply being an irritation, these problems are symptomatic of a far deeper issue.

Capacity constraints in the road network are not only a problem for motorists – they also impose significant costs on the freight logistics industry.

The disruption to the supply chain that occurs because of road congestion as well as capacity issues afflicting ports, airports and rail freight facilities all have an impact on the cost of moving freight – and ultimately, the prices paid for goods by Australian consumers.

Australia’s supply chains do not stop at state borders. Our economy is national – and accordingly a nationally consistent approach to infrastructure and the regulation of freight movement is required.

In an ideal world, a national economy should be managed by the national government. This includes the responsibility for the development of the infrastructure and regulatory settings necessary for the nation’s supply chains to operate safely and efficiently.

In many circumstances, the Australian Government has encouraged the development of individual pieces of infrastructure through financing. However, many of the decisions relating to the planning and delivery of such projects are made by state and/or local governments.

This is the reality of Australia’s federal structure. Like all other industries, the freight logistics sector must work within the restraints imposed upon it by the Australian Constitution.

The unfortunate by-product of this constitutional reality can often be duplication and delay in achieving the sort of policy reform that industry – and the entire economy – badly needs.

Freight Doesn’t Vote makes a total of 41 specific policy recommendations, dealing with challenges faced by all modes of freight transport, as well as the inefficiencies that are acting to curb growth, and regulations that fail to adequately account for a changing economic environment.

Unless freight movement is given far greater consideration when planning decisions are made, business and consumer expectations about rapid and efficient delivery of goods will be difficult to meet in the future.

This is particularly true of CBD freight delivery, where competition for road space between passenger and commercial vehicles is already adding to business costs and consumer prices.

Continuing investment in infrastructure that permits deliveries from freight distribution centres to CBDs is critical if we are going to successfully meet our increasing freight task.

Some form of freight-only infrastructure should be considered by governments to improve freight delivery and decrease congestion and emissions in high-demand environments.

This may include the establishment of urban consolidation centres for freight delivery, as well as the adoption of ‘reverse curfews’, which would provide freight vehicles with the right of access to parts of the road at non-peak times, in order to improve efficiency of deliveries.

In its submission, the ALC contends that this is one area where the Federal Government can play a leadership role, by incentivising the incorporation of such measures in urban planning systems, and commissioning a formal review of practices such as curfews that inhibit efficient CBD freight delivery.

Freight Doesn’t Vote also urges the Federal Government to prioritise greater use of technology enhance the efficiency and safety of our freight networks.

This includes assisting small and medium providers with the adoption of global data standards to enhance supply-chain visibility, and moving towards the mandatory use of telematics in heavy vehicles as a means of improving driver safety and establishing a fairer, more effective model for road pricing.

Blunt instruments such as fuel excise charges and registration fees are no longer raising sufficient revenue to support the road network of a 21st-century economy.

As such, it is imperative that we move to a fairer, more efficient road pricing and investment model, under which users pay according to where and when they travel.

Technological enhancements, such as GPS tracking, now make it easier than ever to monitor vehicle use.

It is time to use these technologies as the basis of a fairer, more responsive approach to road pricing which delivers investment where it is most needed – not where it is most politically expedient.

This measure will undoubtedly produce its fair share of controversy.

In its submission, the ALC recommends that in order to manage that, it will be important to have a respected, independent umpire in charge of making pricing decisions. The ALC suggests that the Australian Competition and Consumer Commission (ACCC) is the most appropriate body.

To ensure its effectiveness as an independent economic regulator for the transport sector, it may be prudent for the ACCC to appoint a specialist Commissioner to deal with transport and logistics issues.

Further, the ACCC should establish a specialist unit to identify regulatory issues in the transport sector, working closely with industry stakeholders and state and local governments to ensure a pricing approach that delivers the right investment outcomes.

Freight Doesn’t Vote does not shy away from recommending initiatives that may prove to be politically challenging in the short term – particularly when it comes to having greater Commonwealth involvement in planning, as well as road pricing and investment reform.

The political challenges associated with pursuing difficult reforms now, however, will be as nothing compared with the political and economic pain that will be the lot of future governments if we fail to get the policy settings right today.