Chartered Institute of Logistics and Transport.
1st November 2006
Chartered Institute of Logistics and Transport.
They say that the NZ economy is fast becoming uncompetitive internationally.
This is a pretty bold statement. Attending the CILT forum were three Ministers of the Crown, the head of Land Transport NZ, Civil engineer researchers, Tony Friedlander - representing Road Transport Forum, the head of Infratil - Airports and Buses, Coastal Shipping, and individual members of CILT. Masterpet is now represented along with Foodstuffs, PEL, EziBuy, Mainfreight, Fonterra, The Warehouse, Toll, and many other NZ businesses.
What is significant from the forum is the meteoric adoption of "just-in-time" practices of businesses in NZ, as with global business, driving efficiencies in logistics and supply chains to the point of "over servicing" and congesting the NZ Road systems. In Cities like Auckland and Christchurch, freighting companies now have 5 trucks doing the work that 4 used to do only ten years ago - creating a 20% loss in productivity. As Distribution Centres replace retailer storerooms, transport is replacing capital. Yet the transport industry has not grown more than 1% in the last year. One proposal suggests that NZ look to strengthen Coastal Shipping - including barges - imagine the delivery times then! They appear to be serious with a strategy document and funding being negotiated.
Congestion can delay delivery. Congestion costs the NZ economy more than $NZ1b a year. $700million of that is lost in Auckland alone. The Government is about to intervene and introduce congestion pricing. We will no doubt get used to this term very quickly in the future. Road tolls, e-tags, private roads, pay-as-you-go and prepay option will become the norm. You just have to see what is happening in Sydney to see our future. The research statistics show Christchurch is overtaking Auckland as NZ's worst congested city. NZ is in far worse economic state than economists realise. Land Transport predicts that there will be a $500million shortfall in funding every year for the next 10 years to get on top of the problem of congestion. It will get worse and freight costs will rise.
Interestingly, a swing-lift (container) truck costs $60 an hour to operate and $260 each container delivery. With road congestion, these increased costs are being passed onto business customers. Masterpet receives a substantial number of container deliveries each month. One suggestion was to promote night time delivery when the roads are less congested and negotiate cheaper rates. Growth in demand for freighting continues to outpace supply. NZ infrastructure now splits usage thus: 83% Road, 13% Rail, and 4% Coastal Shipping. They believe Rail only has the potential to grow to 20%. Compared to Australia and USA where Road and Rail is a 50/50 split because of their geography, NZ will always rely on road. NZ charges 2-3 times greater than US and Australia.
What relevance has all this to Masterpet? It has a great deal of relevance. Masterpet is certainly affected by "just-in-time" practices of its clients. Masterpet has made the capital investment that traditionally has been made by the client. Masterpet has acknowledged the "slippage" in what constitutes a "break-even" order and has altered the rules on handling fees and freight recovery accordingly.
