Australia

[Loggie]

Let me kick off a discussion about the challenges within Australia.

Australia certainly brings its own unique challenges in terms of Supply Chain and Logistics. The greatest challenge is certainly the geography. The country is the size of North America, but only has a population of 20 million people. And the population is not evenly spread out as in many densely populated countries like the UK. Most of the population is concentrated on the East Coast, and then again in the State Capital cities like Sydney, Melbourne and Brisbane.

This means that in terms of Supply Chains, we have to face the following:

1. Very large distances between main population centres (ie 900 kms or so from Sydney to Melbourne and Sydney to Brisbane, with no really large twons in between)
2. Extended lead times for delivery and replenishment.
3. High transport costs.
4. Difficulty in having one National DC or warehouse if service lead times are less than 24 hours. (Sydney to Perth is 3-4 day lead time by road)

Given our large land area and small population, demand density is also very low!

[OMEGA]

Loggie - I agree

I would add to this by suggesting that from an IT & Electronic Industry perspective there is a big challenge in managing or maintaining IT and electronic equipment across Aust. Because of the vast distances and the dispersement of IT kit eg. Desktops, Servers, ATM's and others there are no large companies that have this type of reach. What normally happens is that everything remote (outside metro and regional) is subcontracted to an individual or small operator.

[OMEGA]

I would also add that Australia is not a large manufacturer of IT and Electronic equipment, and therefore it relys on it sources of supply from offshore, particularly our friends in AP North. This presents challenges with delivery and transport costs.

[apparelink]

Originally Posted by Loggie

• Very large distances between main population centres (ie 900 kms or so from Sydney to Melbourne and Sydney to Brisbane, with no really large twons in between)
• Extended lead times for delivery and replenishment.
• High transport costs.
• Difficulty in having one National DC or warehouse if service lead times are less than 24 hours. (Sydney to Perth is 3-4 day lead time by road)

Hi Loggie,

Good points. The geography is certainly true or can be looked at as challenges. I would also like to add that there are other human-imposed challenges in regards to your point on high transport costs. For example, price discrimination vs. price transparency.

The Australian transport industry is not too transparent in pricing. Although the basic plus kilo rate is the most common pricing structure among road freight carriers, they don't normally publish their rates on their Web sites. You can expect that there is great price disparity even if you are delivering from say MEL to SYD. Price discrimination is a common practice in the transport industry in Australia depending on the customer's profile (whether the items you sell are high-value, amount of business, monthly freight spend, etc.). How much you are charged is not entirely driven by weight. The business development approach is more like a "natural selection" process for each other. They always try to go visit you and your premises first when you have an inquiry before they will disclose any price information. Maybe this is just the way people conduct business here because customers are never too far away, usually within the same metro area.

In the U.S. there is a much better price transparency into road carriers (commonly to less-than-truckload (LTL) carriers in the U.S.) as they maintain a schedule of base rates commonly called "class rates." These rates apply to all points a carrier serves, and those carriers that are participants in the National Motor Freight Classification (NMFC). There is no similar association in Australia.

When I hear transport company say to me that they can help us optimize our supply chain, what they are really thinking is maximize their profitability after they win our contract. Price hikes and selective zone adjustments are not uncommon after they had bent their back just enough to get you to switch. This is why we had to keep on shopping, every season. The idea of strategic partnership may sound good in theory but difficult in practice because the partners (i.e., the customer and the service provider) at the table have very different objectives. I also know that there is one clothing distributor in Australia who is big enough to turn the table around; they have their own formula for fuel levy % and impose it back on its transport providers. On the other hand, Toll in2store lost us as an account two years ago when we switched to other transport companies and they never even bothered to call and find out why. They have too many accounts they will never become desparate like we are their last customer.

Also remember the high transport costs are partially due to the taxes imposed by the Australian government. Motorists and commercial vehicles can enjoy lower fuel cost in countries like the U.S. and China than Australia. The Australian government has a part in it as well.

Scott

[Pareto]

After visiting the Hannover Messe a few years back, a business associate and myself extended our trip up into Norway to visit a fellow logistics colleague and to visit a few facilities he could show us through.

It was interesting to note that in Norway the road transport distances, population distribution and large amount of imports via sea freight, made it quite similar to the eastern seaboard of Australia.

They did have to deal with the added difficulty of inclement seasonality (spiked tyres, heated warehouses, etc)

[TopLink]

Originally Posted by Pareto

After visiting the Hannover Messe a few years back, a business associate and myself extended our trip up into Norway to visit a fellow logistics colleague and to visit a few facilities he could show us through.

It was interesting to note that in Norway the road transport distances, population distribution and large amount of imports via sea freight, made it quite similar to the eastern seaboard of Australia.

They did have to deal with the added difficulty of inclement seasonality (spiked tyres, heated warehouses, etc)

Interesting. There are a few countries with similar geographic issues. Thailand is similar. Long distances, dispersed population density.