Can Australia overcome its unique transportation issues to substantially improve supply chain efficiency and successfully compete on the international stage? This is an important topic that can’t be ignored.
When it comes to supply chain efficiency, Australian businesses are inhibited by a number of dynamics, starting with our low population, the huge distances between capital cities and our poor road infrastructure.
Addressing our transport and supply issues, Australia’s arguably innovative transportation sector sees the majority of freight transported on our road system carried via the rather expensive less-than-truckload (‘LTL’) freight method. As a result, most trucks on our roads are burning fuel, clogging up congested urban roads and incurring driver hours, even though they are only 40 to 50 percent filled.
This inefficient scenario is forecast to worsen significantly unless the transport sector can make a paradigm shift in its transportation management approach, as Australia’s greenhouse gas emissions are expected to soar over the coming decades.
There are of course Australian businesses that have highly optimised their supply chains, but many others need to similarly act if nationally we want to have a sustainable competitive advantage. In other industrialised countries, many companies have implemented strategies in core areas including supply chain optimisation, transportation collaboration and consolidating freight management that contribute strongly to sustainable economies of scale and in turn, transportation cost savings.
For Australia, it’s time for transportation innovation and collaboration before we fall behind. In an increasingly global economy and with our reliance on international trade, our current transportation management approach places business and our economic growth at risk.
How could we start to transform our transport approach? Here are four key reasons why we believe that Australian businesses need to review their strategic supply chain planning, transportation planning, transportation management strategy and work to improve supply chain efficiency:
1. International market competition
Accelerating competitive forces are driving changes that strongly impact the marketplace. A good example of this can be seen in the recent growth of grocery retailers ALDI and Costco in Australia, forcing change in grocery supply chains throughout the country. In an industry currently dominated by major grocery retailers Coles and Woolworths, these companies currently make up more than 70 percent of the supermarket sector in Australia and maintain control of their inbound supply lines and freight from many of their suppliers.
If ALDI and Costco can maintain an edge in supply chain efficiency and pass efficiency of scale savings on to their customers, they have a distinct advantage in this extremely cost-competitive market.
As global competition continues in this and many other industry sectors, Australian companies will have to compete on a global scale against other companies that are implementing leading-edge supply chain practices in their international operations.
2. Supply chain collaboration on transportation
Transportation collaboration has long remained a key challenge for Australian businesses to address.
As transportation management consultants, we encounter companies who have collaborated with other businesses and even competitors to cut their transportation costs by more than 20 percent. Collaborators also enjoy benefits including boosts in customer service levels, stock keeping units (SKU) visibility, customer satisfaction and increased utilisation of existing assets that can be channelled into business growth. Sharing supply chain resources also strongly benefits sustainability and takes additional trucks off congested roads.
Although it’s simple to recommend, transportation collaboration can be difficult to achieve, with many businesses unsure of where to start. For example, 3PLs are ideally placed to negotiate transportation collaboration arrangements, acting as freight matchmakers and coordinating transportation and logistics.
Cloud technology is also pushing transportation collaboration ahead. These approaches provide all supply chain stakeholders with affordable access and real-time visibility over their supply chain management.
3. Truckload consolidation
As increasing numbers of European and US manufacturers have learned, by co-locating warehousing and consolidating orders with other suppliers to ship at the same time, either completely filling trucks or increasing their capacity utilisation, companies can maximise transportation collaboration value. Suppliers consolidating with each other achieve greater leverage in cutting transportation costs and waste. Passing on these cost savings through improved transportation management, increases their competitiveness for retailers.
Supply chain consultants and industry organisations can act as third-party intermediaries to promote trust and bridge corporate and cultural divides to assist companies in side-stepping roadblocks to warehouse and order consolidation. They can also help companies find the best partners to consolidate with, maximising the collaborative benefits while in tandem minimising the related challenges.
4. Supply chain network fragmentation
Operating over many decades without many outside influences in our geographic isolation, Australian supply chains have become very fragmented and complex, requiring innovative transportation management solutions. For our small population, we disproportionately have several thousand freight carriers on our roads.
Over the years, this complex logistical network has increased expenses for all supply chain participants and created layers of inefficiencies, such as partially-full trucks adding to congestion on busy suburban and urban roads and slow distribution centre turnaround times.
Bottom line? It’s time for change
The opportunity now facing us is to simplify our approach to supply chain management via horizontal collaboration and truckload consolidation so that we overcome our current supply chain efficiency gap. A ‘business as usual’ mindset is one of the primary barriers to enhanced supply chain efficiency.
Going forward, those businesses who adopt an innovative transportation management strategy and prioritise supply chain collaborative partnerships, will be the market winners, leaving behind those competitors who continue with a ‘business as usual’ mentality.
Supply chain and logistics management consultants are available at New World Business Solutions to provide you with expert assistance. Contact us today:
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