Innovation in the Logistics sector
Logistics is defined as 'activities required for the movement and handling of goods and materials, from inputs through production to consumers and waste disposal'1. Logistics incorporates terms such as Transport and Logistics, Freight Transport, Value Chain Management and Supply Chain Management. Given its size and its significant enabling role, innovation in this sector is critical to the continued prosperity of the NSW economy.
The ABS Innovation Survey 2005 rated the transport and storage sector as having the 6th highest percentage of innovative businesses in NSW. 35 per cent of companies in this sector reported engaging in some kind of innovative activity.
Innovation in the Logistics sector is created around new or improved:
- Capabilities and processes: this includes improvements in managerial systems, skill development of logistics specialists and supply chain managers as well as the adoption of information technology based systems.
In this sector, capability and process improvements can relate to warehouse and inventory management, procurement and payment, cargo management, optimising distribution schedules and routes, asset utilisation, electronically connecting different levels in the supply chain and electronic import and export delivery orders.
Technological innovations which result in capability and process improvements include GPS tracking, voice pick, freight matching portals, radio-frequency identification (RFID) technologies and code sharing across multiple operators.
Two NSW research groups, the Centre of Excellence for Autonomous Systems (University of Sydney) and the Department of Computer Systems (University of Technology Sydney), work on important projects to improve capabilities and processes in the sector such as robotics and advanced communication capabilities.
- Products and services: innovation in this sector ranges from innovations relating to hardware, such as the design of rolling stock and trucks, to the operation of the transporting mechanism, whether it be a train, truck, plane or ship, to the methods and practices used for transporting goods.
Concern over fuel emissions and higher fuel costs has led to a greater focus on finding ways to save fuel and adopt new fuel sources. Some companies in the Logistics sector are experimenting with the production of biofuels such as ethanol and diesel engine hybrids to cut fuel costs and emissions.
Web-based logistics companies provide services including freight matching, data collection, data reporting and subcontractor allocation. Companies in this field include Moveitnet, FreightNow, Fillmytruck and Frayt. Web-based systems seek to reduce unnecessary truck trips, therefore reducing carbon emissions2.
In relation to shipping, the average twenty-foot equivalent unit (TEU) capacity per vessel has increased by 66 per cent over 12 years and the newest class of ships in 2007 have 50 per cent greater capacity than 2006 models.
- Major infrastructure innovation: the NSW Government is presently involved in a number of initiatives to improve infrastructure and increase capacity. These in turn will promote further innovation in the sector:
Current infrastructure projects include:
The expansion of Port Botany, relocating general cargo and car stevedoring from Port Jackson to Port Kembla and facilitating the construction of a new coal loader to increase capacity at Newcastle Port.
Developing intermodal logistics facilities to increase container movement on rail rather than road and improve the distribution of goods throughout the Sydney metropolitan area.
Working in conjunction with the Australian Government and the Australian Rail Track Corporation to develop an improved rail freight network. This will increase rail freight capacity and competitiveness, with specific initiatives by NSW to increase the share of port container freight carried by rail.
- Supply-chain innovation: the rise of supply chains has been an innovation in itself, resulting in freight flowing seamlessly from collecting raw material to delivering goods ready for consumption.
The widespread adoption of computerised planning and production and inventory control methods such as Enterprise Resource Planning systems, in particular for the outsourcing of the manufacture of goods, has been critical to the development of supply chain management.
In 2006 Lion Nathan Ltd formed a logistics joint venture with transport company Linfox Pty Ltd to provide warehousing and distribution services to the brewer and others in the industry. The joint venture company, Bevchain, is contracted to provide all Lion Nathan's deliveries and warehousing, but is free to build synergies with the volumes of its competitors. This new system provides a vehicle for competing firms in the industry to share resources to reduce supply chain costs.
The Hunter Valley Coal Chain Logistics Team is a cooperative organisation responsible for the planning process for the export coal supply chain from the Hunter Valley coal industry. It is the first cooperative model of its kind in Australia implemented to maximise export opportunities through a coordinated approach to planning.
The Innovation Unit's current projects and publications
Why was Logistics chosen as an innovation sector?
Value and importance
- According to a recent analysis undertaken by the Apelbaum Consulting Group Pty Ltd for the Australian Logistics Council, freight logistics is the number one contributor to GDP, contributing some 14.5 peer cent to Gross Domestic Product3.
- In NSW, freight logistics is estimated to account for up to 11.2 per cent or $34.3 billion of Gross State Product4.
- In 2006-07 about 50 per cent of Australia's international air freight was handled by Sydney Airport. At the same time some 220,000 tonnes move by rail each day, this being mostly sea freight.
- NSW's ports and associated transport infrastructure handle significant volumes of throughput, including: Port Botany - 26.7 million mass tones per annum; Port Kembla - 25.9 million tones per annum; and Glebe Island/White Bay - 1.4 – 1.5 million tones per annum5.
- There are at least 29,000 businesses in NSW supporting the freight logistics industry.
- NSW's largest freight task (by volume) is the domestic or intra State movement of goods within NSW at 62.4 per cent6.
- Coal is the largest category of product moved within NSW, making 33.4 per cent of the total task7.
Employment
- 97 per cent of the businesses in NSW supporting the freight logistics industry, employ fewer than 20 people.
- The NSW road transport and logistics industry in 2007 employed over 117,000 people or 33.8 per cent of the Australian road transport and logistics industry total. In 1997, there were 84,200 people employed in this sector in NSW. This represents an increase of 39 per cent in the level of employment in the sector in NSW over the last decade8.
Growth
- According to NSW Industry Value Added figures, the transport and storage sector exhibited average annual growth rate of 3.1 per cent between 1996/97 and 2006/07. In an analysis of the last five years, between 2001/02 and 2006/07, the growth rate increased to 3.7 per cent per annum9.
1 The Bureau of Transport Economics (2001). Taken from the SAHA International, Freight and Logistics Council of NSW: Path to Innovation: Innovation in the NSW Freight Logistics Industry, January 2008 (SAHA 2008).
2 SAHA International, Freight and Logistics Council of NSW: Path to Innovation: Innovation in the NSW Freight Logistics Industry, January 2008.
3 Australian Logistics Council (ALC), Contribution of Transport and Logistics to the Economy, 2007. Taken from SAHA 2008.
4 ALC, Contribution of Transport and Logistics to the Economy, 2007; ABS Cat. 5368; Saha International internal analysis. Taken from SAHA 2008.
5 SAHA 2008.
6 NSW Ministry of Transport, Transport Data Centre; Saha International internal analysis. Taken from SAHA 2008.
7 Ibid.
8 ABS, Labour Force, Detailed (Cat. No. 6291.0.55.003), November 2007.
9 ABS 5220.0 – Australian National Accounts: State Accounts, 2006-07.