Transport logistics: market and efficiency

The problem with markets, particularly large ones, is that unless there is free and ready access to information, they are far from being perfect. This is certainly so in the case of the market for the transport of goods in Australia. Lack of an informed transport market has serious, though largely avoidable, consequences for the economy and the environment.

Inefficiencies in the transport market arise from sub-optimal use of vehicles moving goods. This is due to difficulties management faces in ensuring that trucks and rail containers are used efficiently. To achieve improvements in this area, it is necessary to make certain that for the longest possible period vehicles are fully laden, are able to use the most direct route and have minimum down time.

Achieving these outcomes requires far wider information than is currently available to participants in the transport industry. Management needs comprehensive information on all freight available and the right to bid for its movement. Nationwide information of this kind is simply not available to all industry participants.

Those in the haulage business know better than anyone about the inefficiencies which plague the transport industry. These make it difficult to earn a reasonable return on capital invested, let alone a decent income which covers operating and borrowing costs and pays drivers a decent wage. They include difficulty in obtaining a full load, or any load for the return or forward journey.

The transport industry is faced with increasing prices for oil-based fuels. Despite likely price fluctuations in the future, the trend of fuel prices will be upwards until alternative cheaper fuel becomes available. There appears to be only one alternative - electricity - and that is not likely to be relevant until a rapid charge high density battery becomes commercially available. That is probably two to four years away. In the short term, the industry is therefore faced with inflationary pressures, as are retailers and consumers.

The Garnaut Report on climate change expects introduction of an Environmental Trading Scheme will have significant structural effects on the economy. One of the higher priority changes should be the establishment of a National Transport Market, open to all engaged in the transport industry.

Desirably the market would be internet-based, accessible to all shippers and haulers and to start with, posting information on the availability of goods for shipment on it might be voluntary. It is suggested that entries should cover all goods above a certain volume or weigh for shipment for a distance of 100km or more. Information would include details of pick-up and destination and dates on availability and delivery - and of course price offered by the shipper.

The market would be opened to all incorporated haulers via an access code. Haulers would either accept the price offered by the shipper or make an alternative offer in terms of price or delivery time. When shipper and hauler both indicate their agreement, a binding contract would come into existence between the two parties.

The only goods which would not have to be entered on the open market are those which are carried by a shipper using its owned transport, where the goods are covered by a long-term contract with a haulier, or where the distance between pick-up and delivery points is less than 100km and the volume or weight is below a certain amount.

Although entering information on the open market about the availability of goods for transport may be voluntary, ultimately it should be mandatory and required by Commonwealth legislation. The latter should provide for administration of the National Transport Market managed by an appropriate statutory authority or an existing private sector representative organisation.

Operation of an open market would permit all shippers and hauliers access to the same information ensuring that all interested parties are able to competitively bid for the right to transport available goods on standard and/or special conditions agreed by both parties. This would constitute a binding contract between the parties. At present many industry participants, particularly truck owners, are not protected by a contract binding both parties.

An open market would enable hauliers offering transport by road, rail, air and sea or a combination thereof, to bid for the right to transport available goods. This open competition would quickly result in the cheapest and most reliable means of transport being selected by shippers based on the nature of goods involved and the distance to be transported. Information available on an open market would also assist vehicle owners make better decisions.

This would result in greater efficiency with a trend towards selecting the modes of transport which use the least fuel and therefore emit the least greenhouse gas emissions. The tendency would be towards selecting haulage companies with the best reputation for reliability. This would tend to favour those companies which were the most efficient in terms of management and administration.

In summary, an open market would provide all parties with:

• information on which to base an offer or make a counter bid;
• a mechanism promoting operational efficiency - particularly among hauliers; and
• the ability to select the best form(s) of transport to ensure timely and cost efficient delivery.

In addition, an informed market would:

• enable shippers to select the best available price - minimising inflationary effects of fuel price increases;
• bring about reduction of greenhouse gas emissions through efficiencies in the mode of transport used;
• promote technology needed to replace fossil fuels for transport with cheaper alternatives;
• increase profitability of and competition among transport companies;
• reduce freight costs through improved efficiencies; and
• initially help lower the retail price of transported goods, particularly outside capital cities.

This proposal was put to the Federal Transport Minister for his consideration. Shortly thereafter, his Department advised that a more appropriate way of achieving transport efficiencies was to build the inland rail link from Melbourne to Brisbane proposed by government. How this would provide the transport industry with access to greater information and an open national market was not explained.

The implication is that officialdom regards the present state of the transport market as acceptable. Is it? Can it be improved and if so, are there better ways of achieving this than those suggested above?