ENDORSING PARTNERS

Supply chain driven
Intermodal systems
A Decision framework

The following are confirmed contributors ...
Supply chain driven Intermodal systems
A Decision framework

Shanta Hallock
Purpose

• Thinking around long term Supply chain (SC) solutions
involving infrastructure are artificially constrained.
• ...
Cause & Effect
• Options Analysis too narrow
– New paradigms unexplored

• Market inefficiencies
– Allocative -investment
...
How should we approach decisions in respect of Supply chain
driven intermodal systems?

• Progress to date

• Integrate Sh...
4 pillars
•  Value capture
•  Supply Chain(SC)
•  Short Sea shipping(SSS)
• Decision frameworks
Traffic intensity
Modelled congestion hotspots on arterial roads
in Melbourne, 2021 (am peak)

Source: DOI for the Commission
Map motorways of the sea
In California
Value migration & capture
• Inevitable [Slywotzky 1996]
• Pervasive creating new paradigm [Robinson 2006]
–Integrated 4PL ...
Supply Chain -what is it?
•“management of upstream and downstream relationships with
suppliers and customers to deliver su...
SSS definitions vary
•Seaborne flows of all kinds of freight irrespective of the vessel
flag -Marlow et al. (1997)
•Jurisd...
New Paradigm

Value capture SC/SSS
• Economic

• Strategic Marketing

• Operational
Value drivers

value capturing in the SC–SSS
• Sustainability

•Minimises economic and environmental disbenefits

• Strate...
Operational

Ports role value capturing in the SC–SSS
• Ports /cargo interchange embedded in trade supply chains
• Proacti...
Operational

value capture Terminalisation
• Trading off time utility vs. space utility
– Unlocking value
– Strategically ...
Value drivers

Capturing value in the Supply chain –SSS
• Sustainability

•Minimises economic and environmental disbenefit...
Strategic competitive advantage
• Europe, North America and parts of Asia
– JVC Belgium’s Euro distribution centre in Boom...
Marketing themes
Choice

• Reduce transportation costs and manage working capital

• Ease scheduling and equipment shortag...
Value propositions
• Reducing traffic congestion.
• Ecologically sustainable
• Marine Highway,
– eliminate more than a mil...
Map motorways of the sea
“Motorways of the Sea”
“a motorway of the sea route could be developed along the Atlantic coast to

provide a sea-lane run...
“Motorways of the Sea”
• Trans European Transport Networks
• Marco Polo Program
• Policy intervention perceived “Value add...
In California
Value drivers

Capturing value in the Supply chain –SSS
• Sustainability

• Minimise economic and environmental disbenefit...
SSS fares better European Union (27 states)
Source

CO2-e emissions (million tonnes)

Road

902.0

Rail

7.8

Shipping
Coa...
Australian evidence is similar
Table 2 – CO2-e emissions by transport mode, 2000 - 2020
Emissions of CO2-e by transport mo...
Decision making
• Research will establish non government drivers

• Good practice
– Governance models
– Decision choice
• ...
Governance models
• Gateway
– Transparent & focussed on Value for Money
– Structured
– Used by State treasuries

• Opportu...
Decision processes
• NTC guidelines
• Strategic choices advocate MCA
• Handling long term uncertainty ??
•
•

BCR used ???...
Surveys / Investigation
Where will infrastructure decisions be made?
How are decisions currently made
The impact of exogen...
Recommendations
• Use research to test /investigate
• Competitive advantage perceptions
• Value migration (Robinson)

– Te...
Supplementary
may be used at my discretion
Congestion impacts 4 large cities
• Average speed of trucks in peak time
• Within 3 km transport distance from center 14 k...
Capturing value in the Supply chain
-SSS
• Economic

• Externalities
– SSS pollution mitigation potential (Marlow 1997, EC...
Shanghai
•
•
•

Jihai deploys largest container vessel for Wuhan-Shanghai shuttle
4 July 2012
Jihai Shipping, a subsidiary...
Marketing today APL
• “Our transportation services include movement by inland
waterways as part of an integrated logistics...
Marketing this today- Barges(1)
Advantages of barge services

• Cost – Barge shipping offers a cost-effective means of tra...
Marketing this today- Barges (2)
• APMT offers Rotterdam barge service to avoid road congestion
• “APM TERMINALS, in partn...
Capturing value in the Supply chain SSS

• Operational

• SSS integrates into a buffer terminalisation model

• Replaces o...
Capturing value in the Supply chain
• Ports embedded in trade supply chains
• Value capture strategies -Robinson (2002)
– ...
Decision processes
Where will infrastructure decisions be made?
Nodal interchange points(ports, distribution centres)
Prin...
Getting SSS on the map
• Conclusion
•SSS is viable because :
•Works elsewhere
•Addresses Sustainability -congestion and ex...
Supply chains

What decisions do they drive?
The nodal and modal relationship

Stakeholders commitment to sustainability c...
Themes in the SSS literature
• Key factors –
• Shipper requirements
– Transit time
– Price

• Cost
• Image
• Externalities...
Shipper requirements -Transit times &
Price

• Slower but less expensive mode acceptable (Brooks and Trift 2008)
• Distanc...
SSS literature –Image & Externalities

• Image /Awareness

– Central America -Sánchez (2005)
– N/America Service Character...
SMART International Symposium for Next Generation Infrastructure: Supply Chain driven Intermodal systems A Decision framework
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SMART International Symposium for Next Generation Infrastructure: Supply Chain driven Intermodal systems A Decision framework

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A presentation conducted by Mr Shanta Hallock, DRH Logistics.
Presented on Wednesday the 2nd of October 2013.

A research study identifying the role of ports, a forward timeframe of 30 years in servicing national supply chains is
being undertaken. A paradigm shift to ‘water based’ freight solutions by barges and other forms of Short Sea Shipping (SSS proposed in Hallock (2009 and 2010) as well as investigating stakeholder commitment to reducing their carbon footprint will be researched as part of this. Funding and better investment criteria will also be explored. The paper draws on European policy and governance frame works incorporating SSS as a component of the logistics response to sustainability. The green supply chain is now an important determinant of competitive advantage and is commercially acceptable.

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SMART International Symposium for Next Generation Infrastructure: Supply Chain driven Intermodal systems A Decision framework

  1. 1. ENDORSING PARTNERS Supply chain driven Intermodal systems A Decision framework The following are confirmed contributors to the business and policy dialogue in Sydney: • Rick Sawers (National Australia Bank) • Nick Greiner (Chairman (Infrastructure NSW) Monday, 30th September 2013: Business & policy Dialogue Tuesday 1 October to Thursday, 3rd October: Academic and Policy Dialogue Presented by: Mr Shanta Hallock, DRH Logistics www.isngi.org www.isngi.org
  2. 2. Supply chain driven Intermodal systems A Decision framework Shanta Hallock
  3. 3. Purpose • Thinking around long term Supply chain (SC) solutions involving infrastructure are artificially constrained. • Solution –Short Sea Shipping(SSS)
  4. 4. Cause & Effect • Options Analysis too narrow – New paradigms unexplored • Market inefficiencies – Allocative -investment – Distribution costs -congestion
  5. 5. How should we approach decisions in respect of Supply chain driven intermodal systems? • Progress to date • Integrate Short sea shipping(SSS) into SC.
  6. 6. 4 pillars •  Value capture •  Supply Chain(SC) •  Short Sea shipping(SSS) • Decision frameworks
  7. 7. Traffic intensity
  8. 8. Modelled congestion hotspots on arterial roads in Melbourne, 2021 (am peak) Source: DOI for the Commission
  9. 9. Map motorways of the sea
  10. 10. In California
  11. 11. Value migration & capture • Inevitable [Slywotzky 1996] • Pervasive creating new paradigm [Robinson 2006] –Integrated 4PL replace terminal and trucking operations • Value migration Value capture –Long term strategic positioning [Porter] • Collaboration value creation and value capture • Value proposition of SC must now meet end user needs
  12. 12. Supply Chain -what is it? •“management of upstream and downstream relationships with suppliers and customers to deliver superior customer value at less cost to the supply chain as a whole” Christopher [1998,p15]. •SC is now considered part of a value chain. •SC decisions require i/d of Value Proposition. •1)Value proposition = market attractivity, opportunity, org structure and resourcing •2) Demand chain processes - customer and stakeholder expectations •3) Outcome- value capture and value creation •Walters et al model [2007]
  13. 13. SSS definitions vary •Seaborne flows of all kinds of freight irrespective of the vessel flag -Marlow et al. (1997) •Jurisdictional definition i.e. based on state borders – cabotage – coastal shipping –ECMT, 2001 –Australia the Navigation Act (Australia 1912, sec 7)
  14. 14. New Paradigm Value capture SC/SSS • Economic • Strategic Marketing • Operational
  15. 15. Value drivers value capturing in the SC–SSS • Sustainability •Minimises economic and environmental disbenefits • Strategic Marketing • Sustainability pricing CO2 offsets • Competitive advantage • End users want sustainable SC –survey of 44 Fortune 500 Co’s [Golicic2010] • value proposition matched to cargo needs • CONTARGO • Leverage operational advantages – It unlocks value using a changed operational paradigm
  16. 16. Operational Ports role value capturing in the SC–SSS • Ports /cargo interchange embedded in trade supply chains • Proactive vs Reactive (Agility ) [Bichou & Gray 2004] • Proactivity enables Value capture, control of alliances – Terminal operator vs Landlord vs Carrier • Leverage Value migration Robinson (2006) – value capture if opportunities are spotted and exploited – Terminalisation – SSS
  17. 17. Operational value capture Terminalisation • Trading off time utility vs. space utility – Unlocking value – Strategically widened role • terminal operators & dwell times • Terminalisation of Supply chains -Rodrigue and Notteboom (2009) • Terminals can be constrained/ driven by – Operational bottlenecks – Warehouse as the buffer • Encountered elsewhere by author • Driven by flexible and agile Supply chains
  18. 18. Value drivers Capturing value in the Supply chain –SSS • Sustainability •Minimises economic and environmental disbenefits • Strategic Marketing • Sustainability pricing CO2 offsets • Competitive advantage • End users want sustainable SC –survey of 44 Fortune 500 Co’s [Golicic2010] • value proposition matched to cargo needs • CONTARGO • Leverage operational advantages – It unlocks value using a changed operational paradigm
  19. 19. Strategic competitive advantage • Europe, North America and parts of Asia – JVC Belgium’s Euro distribution centre in Boom (midway AntwerpBrussels) • Shanghai International Port Group (SIPG) (CI, 2009) – Yangtze Strategy has barges as key element – Owns 700 trucks • Shenzen port complex uses shuttle barges (CI, 2008) • North America the Great Lakes feeder lines offer 221 TEU ships (CI, 2008). • California
  20. 20. Marketing themes Choice • Reduce transportation costs and manage working capital • Ease scheduling and equipment shortages • Create a “green” supply chain • Bring jobs to the community
  21. 21. Value propositions • Reducing traffic congestion. • Ecologically sustainable • Marine Highway, – eliminate more than a million truck trips • • • • Safe The bottom line and the environment Planning Demurrage prevention – Cost
  22. 22. Map motorways of the sea
  23. 23. “Motorways of the Sea” “a motorway of the sea route could be developed along the Atlantic coast to provide a sea-lane running parallel to motorways” (ECT 2005). – Funding programme for projects – Intermodal integration – Mode shift to sea, rail and inland waterways. – – – – – Sustainable, Congestion reduced on key bottlenecks Remote regional access Structural change in the future Economic development.
  24. 24. “Motorways of the Sea” • Trans European Transport Networks • Marco Polo Program • Policy intervention perceived “Value add”
  25. 25. In California
  26. 26. Value drivers Capturing value in the Supply chain –SSS • Sustainability • Minimise economic and environmental disbenefits • Strategic Marketing • Sustainability pricing CO2 offsets • Competitive advantage • End users want sustainable SC –survey of 44 Fortune 500 Co’s [Golicic2010] • value proposition matched to cargo needs • CONTARGO • Leverage operational advantages – It unlocks value using a changed operational paradigm
  27. 27. SSS fares better European Union (27 states) Source CO2-e emissions (million tonnes) Road 902.0 Rail 7.8 Shipping Coastal International 23.4 171.3 Total Shipping 194.6 Air Domestic International Total Air 25.6 129.8 155.4 Other Transport 10.1 Total Transport 1269.9 Total Emissions 4558.7 Source: EEC (2006)
  28. 28. Australian evidence is similar Table 2 – CO2-e emissions by transport mode, 2000 - 2020 Emissions of CO2-e by transport mode (gigagrams) 2000 2020 Car Road Freight Air 40,696 50,110 20,762 31,874 4,996 11,922 Year Rail Coastal Shipping Other Total 3,518 4,848 1,505 1,359 1,980 2,292 73,456 102,406 Source: BTRE (2007) Table 3 – Non CO2 emission projections to 2020 Emissions (gigagrams) Source Rail (non-electric) Coastal shipping NOx CH4 NMVOC CO N2O 2623.0 28.6 64.40 0.07 0.23 1.16 21.80 2.94 0.08 0.04 Source: BTRE (2007, pp. 213 and 231)
  29. 29. Decision making • Research will establish non government drivers • Good practice – Governance models – Decision choice • Wheat from the chaff
  30. 30. Governance models • Gateway – Transparent & focussed on Value for Money – Structured – Used by State treasuries • Opportunity to think outside square – Options and business case stage – Testing of validity of investment proposition
  31. 31. Decision processes • NTC guidelines • Strategic choices advocate MCA • Handling long term uncertainty ?? • • BCR used ??? Types of investment and rates of return • Research will consider • • • • Real Options Full blown MCDA Scenario analysis Etc
  32. 32. Surveys / Investigation Where will infrastructure decisions be made? How are decisions currently made The impact of exogenous factors Supply chains Stakeholders attitude to sustainability Paradigm shifts are required now • The decision criteria • • • • •
  33. 33. Recommendations • Use research to test /investigate • Competitive advantage perceptions • Value migration (Robinson) – Terminalisation model as example (Notteboom) • Willingness to learn from overseas practice • EEC’s Motorways of the Sea & other examples • Predictions in the literature • Investment Decision basis • Longer time horizons • Private and public investment drivers
  34. 34. Supplementary may be used at my discretion
  35. 35. Congestion impacts 4 large cities • Average speed of trucks in peak time • Within 3 km transport distance from center 14 km/h (no time guarantee) • Within 10 km transport distance from center 24 km/h (no time guarantee) • Speed inland ships directly into the center: 20 km/h (plus time guarantee)
  36. 36. Capturing value in the Supply chain -SSS • Economic • Externalities – SSS pollution mitigation potential (Marlow 1997, ECT 2005) • Evidence of pollutants GHG emissions -BTRE ( 2007), EEC (2006) – True cost of Land transport( Musso and Marchese) • Marginal social opportunity cost • Evidence
  37. 37. Shanghai • • • Jihai deploys largest container vessel for Wuhan-Shanghai shuttle 4 July 2012 Jihai Shipping, a subsidiary of Shanghai International Port Group (SIPG), has recently deployed the biggest container barge on the Yangtze for its Yangluo-Yangshan shuttle service. The 8,000 dwt self propelled barge, 110 metres in length and 19 metres wide, was built in February and is capable of carrying 518 standard containers. The Shenda Hexie departs Wuhan once a week and reaches Yangshan terminal in Shanghai within 72 hours. Jihai already operates four weekly scheduled services for Yangshan and three weekly scheduled services for Waigaoqiao terminal, also in Shanghai. It has been operating at 100 per cent capacity since the end of 2010, according to Wang Hui, General Manager of SIPG Yangtze Logistics in charge of the group’s commercial interests on the Yangtze. However, the new vessel will not be able to sail all year round due to restrictions on the waterway. Jihai’s largest shipper is Foxconn, which is expected to transport 32,000 TEU in 2012, up from 24,000 TEU last year.
  38. 38. Marketing today APL • “Our transportation services include movement by inland waterways as part of an integrated logistics offering, providing an environmentally friendly alternative to truck and rail transportation. APL Logistics has considerable expertise in managing barge transportation in Europe and China. Rotterdam, Europe’s largest container port moves 40% of its container traffic to and from its hinterland by barge. • In China, transporting containers by barge is relatively low cost, safe from pilferage and provides cross-border opportunities.”
  39. 39. Marketing this today- Barges(1) Advantages of barge services • Cost – Barge shipping offers a cost-effective means of transporting bulk and container cargoes where navigable waterways – directly linked to main sea ports and customs bonded warehouse – penetrate to interior markets. • Planning – Once delivered by barge to a local inland canal or river depot, customers have more flexible control over when the container is called off, reducing warehouse planning requirements. • Demurrage prevention – Moving containers away from inbound main sea ports can eliminate or reduce demurrage at the main sea port. Detention and storage costs at inland canal and river depots can often be cheaper than demurrage. • Avoid road traffic congestion – The road network infrastructure from many deep sea ports is becoming more congested. The use of barge transport would help customers alleviate this problem
  40. 40. Marketing this today- Barges (2) • APMT offers Rotterdam barge service to avoid road congestion • “APM TERMINALS, in partnership with Delta Marine Terminal, is to offer a barge shuttle service from its Moerdijik harbour at Rotterdam into the Dutch interior and Europe hinterland to avoid road congestion ahead of extensive construction work between 2011 and 2015. The shuttle service will be operated by Moerdijk-based Barge Line and will run between the extended gateway at its Moerdijk terminal allowing priority to containers transhipment service reducing storage costs and transport rates. It will also allow eight days ahead of cut-off times with priority scheduling at the depot.”
  41. 41. Capturing value in the Supply chain SSS • Operational • SSS integrates into a buffer terminalisation model • Replaces other land side transfers – Unlocks time utility and place utility
  42. 42. Capturing value in the Supply chain • Ports embedded in trade supply chains • Value capture strategies -Robinson (2002) – higher levels of productivity and efficiency – Strategies for a regional port to –Magala (2008) • Market access • Perceived benefits (economic & non economic) • Resource availability • Value migration Robinson (2006) – Integrated 4PL replace terminal and trucking operations – value capture if opportunities are spotted and exploited
  43. 43. Decision processes Where will infrastructure decisions be made? Nodal interchange points(ports, distribution centres) Principal and peripheral Transport modes (air, sea, rail, road) Where will value creation be most likely to occur? Who makes them(Private enterprise, States, Federal)? What are the criteria? How are decisions currently made How may this be improved The impact of exogenous factors such as : Trading partners and buyer preferences Carbon pricing Economic efficiency costs, environmental costs Supply chains What decisions do they drive? The nodal and modal relationship Stakeholders commitment to sustainability choices: reducing their carbon footprint appetite to adopt sustainable transport practices such as Short Sea Shipping (SSS) and long distance rail? Urban and interstate congestion and amenity trends What decisions or paradigm shifts are required now to meet these requirements? The decision criteria (see below)
  44. 44. Getting SSS on the map • Conclusion •SSS is viable because : •Works elsewhere •Addresses Sustainability -congestion and externality issues •Captures Value in the Supply Chain
  45. 45. Supply chains What decisions do they drive? The nodal and modal relationship Stakeholders commitment to sustainability choices: reducing their carbon footprint appetite to adopt sustainable transport practices such as Short Sea Shipping (SSS) and long distance rail? Urban and interstate congestion and amenity trends What decisions or paradigm shifts are required now to meet these requirements? The decision criteria (see below)
  46. 46. Themes in the SSS literature • Key factors – • Shipper requirements – Transit time – Price • Cost • Image • Externalities • State policy/funding
  47. 47. Shipper requirements -Transit times & Price • Slower but less expensive mode acceptable (Brooks and Trift 2008) • Distance – Overlapping – Economic • Price –mode choice (Garcia-Menéndez et al. (2009) – Changes in relative price of road transport – Mode change by an ECOTAX on road transport • 35% differential for change (EC 1996) • Sustainability pricing CO2 offsets – CONTARGO – value proposition matched to cargo needs
  48. 48. SSS literature –Image & Externalities • Image /Awareness – Central America -Sánchez (2005) – N/America Service Characteristics -Brooks and Trifts (2008) – EC –Marlow (2007) • Externalities – SSS pollution mitigation potential (Marlow 1997, ECT 2005) – True cost of Land transport( Musso and Marchese) – Evidence of pollutants GHG emissions -BTRE ( 2007), EEC (2006)

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