Beyond the speedbumps - How the transport and logistics sector is powering ahead - Bank of Melbourne
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TR ANSPORT + LOGISTIC S 2021 Beyond the speedbumps. How the transport and logistics sector is powering ahead. 1 TR ANSPO RT + LO GISTIC S 2021
WELCOME
On the frontline for growth.
Despite the challenges of 2020 for transport and logistics, the year
ahead promises to be one of transformation and opportunity.
Victoria may have been the Australian state At Bank of Melbourne, we’ve been monitoring
most disrupted by pandemic lockdowns over and supporting Victorian providers with our
the past year, but testament to the agility of specialist funding solutions, helping with the
many transport and logistics operators, 2021 gamut of business needs, from vital cashflow
is a promising year – and one of accelerated management to innovation initiatives.
transformation for many.
Working more closely with customers in
Great opportunities for growth are now turbulent times and, more recently, as new
presenting for the sector as Australia’s opportunities have emerged has given our
economic rebound continues apace and team inspiring and deeper insights, some of
research house Equifax sees a stronger than which we’re very pleased to share with you in
average recovery for transport and logistics. this industry report.
These are exciting times as supply chains are On the pages that follow we explore how the
reimagined following the profound shocks sector is travelling in 2021. Particular thanks to
that came with border closures, and the Tony Van Keulen of Metropolitan Express and
momentum of ecommerce accelerated by to the other industry leaders who have taken
fast-changing consumer behaviour shows the time to share their perspectives on recent
no sign of abating. Transport and logistics challenges as well as the bright prospects
providers on the frontline of these changes ahead for the sector, now and into the future.
are well positioned to take advantage of
the massive leaps in parcel delivery volumes, I hope you find this report useful and very
increasing demand for warehousing and much look forward to your feedback.
ever-smarter logistics strategies.
Darrell Till
Government backing for domestic Executive Manager,
manufacturing also looks set to offer Consumer & Transport
future benefits.
IMAGE: SUPPLIED
2 TR ANSPO RT + LO GISTIC S 2021
INTRODUCTION
Movers and shakers.
In the wake of the pandemic, the transport and logistics sector is
transforming and playing a crucial role in Australia’s economic rebound.
Transport and logistics companies are staring Given that many of the association’s
down significant threats – and eyeing off once members have not received government
unexpected opportunities – as markets battle financial assistance through programs such
the ongoing impact of COVID-19. Smart as JobKeeper, Carson says they are “battle fit”
operators in air, sea, road and rail freight are after trimming their costs, investing in new
trying to seize the moment, despite border technology and ensuring their workforce
closures, knowing that world trade and levels are fit for purpose.
commerce must stay connected and that
open supply chains are the key to unlocking “Our industry will play a crucial
those connections.
role in Australia’s recovery.”
As they reimagine how supply chains could Scott Carson, Company Secretary,
work, the focus for logistics leaders is on International Forwarders & Customs
fast, efficient and tech-driven channels Brokers Association of Australia (IFCBAA)
that streamline the movement of cargo and
freight in domestic and international markets All the same, they are monitoring air and
and drive growth sectors, such as retail and sea freight rates, especially, as they have
manufacturing. skyrocketed during the pandemic because of
volatile trading volumes and an imbalance of
The International Forwarders & Customs shipping containers in some key markets.
Brokers Association of Australia is adamant “If rates stay at the current elevated levels,
that many transport and logistics players are they may hamper any economic recovery,”
ready and able to contribute to the nation’s Carson says. “We expect both international
post-pandemic rebound, as they distribute air and sea freight rates to remain high for at
largely imported goods from warehousing least the first half of 2021. Then, looking to
hubs in major Australian cities to consumer 2022, as more ships and planes move back
markets and homes. “Our industry will play a into service, more capacity will be available
crucial role in Australia’s recovery,” says Scott and therefore more competition will occur to
Carson, Company Secretary at IFCBAA. bring rates back down.”
3 TR ANSPO RT + LO GISTIC S 2021
SHORT-TERM IMPACTS AUSTR ALIAN ECOMMERCE
Australian eCommerce experienced
How business models and
a phenomenal boom in 2020:
supply chains are evolving. 9 million
Number of Aussie households
who shopped online in 20201
Massive growth in ecommerce is driving the widespread
trend for providers to change their business models.
Australia Post has become pivotal to the However, the loss of walk-in customers at
81.9%
YoY growth in eCommerce in Victoria1
opportunities the pandemic offers for larger department stores such as David Jones,
AUD77.1 billion
businesses and logistics providers. According Myer, Big W and Target, in some instances,
to a Deloitte Access Economics report, the is already leading to store closures, creating
delivery activities of the postal services flow-on effects for smaller stores as anchor The expected total value of Australian
giant moved an additional A$2.4 billion in tenants depart. In turn, that could hurt some eCommerce sales in 2024, up from
e-commerce at the height of the COVID-19 delivery companies. “For logistics providers, if AUD$52.2 billion in 2020.2
crisis lockdowns from March to May 2020, as you’ve got the contract to deliver to all of the
online spending grew by 63% compared with north side of Sydney for Target, or whoever,
the same period the year before. At the same you’ll have fewer legs to run because there’ll
time, they helped facilitate an extra 26 million be fewer shops,” Ritchie says. “So that’s a risk While freight capacity crashed due to the
transactions which, in other circumstances, for your business.” reduction in scheduled flights:
may have occurred through in-store visits.
There will be widespread growth More than half of the world’s air freight travels in the
Online retail sales have been the big winner, holds of passenger airliners. The loss of these flights in
with stay-at-home orders encouraging more
for supply-chain aggregators 2020 devastated capacity, while demand has skyrocketed
and rates have soared.
consumers to shop virtually for products who use the latest delivery-
-23%
such as food and beverages, electricals,
homewares, garden supplies and items for do-
management software to deliver
it-yourself renovations and jobs. Luke Ritchie, goods for multiple retailers.
National Head of Retail and Consumer YoY change in Australian international air
Products for Grant Thornton Australia, says There will be widespread growth for supply- freight volumes, June 2019–June 20203
-16%
such growth has forced many transport and chain aggregators using the latest delivery-
logistics providers to explore if and how their management software to deliver goods for
business models should change. Existing multiple retailers, Ritchie predicts: “They’ll
couriers and new entrants, for instance, can say give us your online delivery and we’ll YoY change in Australian domestic air
broadly expect to benefit as online sales rise aggregate with other retailers to create freight volumes, June 2019–June 20203
in a market where a small number of logistics volume and use ride-share companies to
providers dominate. deliver these parcels relatively cheaply.”
Source: 1. Inside Australian Online Shopping, eCommerce Industry Report 2021, Australia Post
4 TR ANSPO RT + LO GISTIC S 2021 2. Global Data 3. Freight Australia
SHORT-TERM IMPACTS
Barriers to clear.
Rising costs and other pandemic-induced pressures
are triggering rapid technology adoption.
Amid the logistics boom, IFCBAA CEO to wear those costs with presumably reduced
Paul Damkjaer says many members have margins, but the longer that period continues,
shown resilience and an ability to adapt the more pressure there’ll be on inflation and
during uncertain times. After an initial dip in other financial factors.”
early 2020, demand has soared for imports,
such as food, construction items, oil and Onshore, warehouses have had to facilitate
gas-related products and personal protective social distancing against a backdrop of
equipment for COVID-19’s frontline workers. increased requirements for storage, while
“A number of members are saying it’s the best vehicles have been in short supply because
year they’ve ever had,” Damkjaer says. of the demand for transport services.
So how have the best transport logistics
A team effort emboldened the response to providers responded?
the pandemic, as authorities fast-tracked the
processing of trucks for interstate border- Some are trimming worker numbers, while
crossings and governments suspended conscious that skilled employees will be crucial
curfews to assist around-the-clock deliveries. to any post-pandemic success. Others, such
Not that it has been all plain sailing. as Victorian transport operator Metropolitan
Lockdowns and border closures have led to Express Transport Services are putting their
more red tape, especially in the maritime faith in a great workplace culture, strong
industry, which has had to deal with a highly financial management and technology
regulated environment under pandemic innovation. Director Tony Van Keulen says
restrictions that have disrupted crew changes a capacity to deliver new ideas to make
and, in some cases, customs clearances. its operations safer and more efficient for
customers has been key, with the business
IFCBAA’s Carson adds that freight rates have winning numerous awards for innovations
risen up to five-fold because of container such as automatic gate systems and fall-
shortages and associated cargo congestion. prevention safety systems for semitrailers.
“There’s a limit to what the market will be able “Innovation is crucial,” he says “and we need
to tolerate,” he says. “A lot of the retailers had to be open to all its forms.”
5 TR ANSPO RT + LO GISTIC S 2021CASE STUDY Metropolitan Express
is focused on market
demands, with its fleet of
more than 150 vehicles.
Metropolitan Express
Transport Services:
safe and sound.
As a transport operator in Melbourne – the Metropolitan Express lives and breathes by its
city that has endured the harshest COVID-19 slogan, ‘Safety: Our No.1 Priority’.
lockdowns in Australia – Tony Van Keulen has
had to get around some roadblocks in the As the business has grown, managing working
past year. The director of Metropolitan Express capital has been crucial. Since 2017, the Bank
Transport Services, a privately owned local of Melbourne has provided equipment finance
transport business, witnessed the market for the transport fleet, plus working capital
hitting new depths in 2020 as many clients support via Invoice Discounting, to allow fast
shut down sites temporarily and cut staff. access to funds tied up in outstanding invoices.
However, Van Keulen says an unstinting Stephen Reeves, Relationship Director,
commitment to three key business elements Consumer & Transport Industry Banking at the
– an ethical culture, robust finances and Bank of Melbourne, says that given business
technology innovation – has served the uncertainty during COVID-19, it has never been
business well during the pandemic. “We’ve more important for businesses to have trusted
always had the ability to change according to relationships with their banking partners.
what’s going on in the market.” “There’s a greater degree of scrutiny around
financing and more hoops to jump through,”
Trading since 1986, Metropolitan Express has Reeves says.
four main divisions – couriers, taxi trucks,
construction and warehousing – and a fleet of Van Keulen says cashflow certainty provides
more than 150 vehicles, including small courier peace of mind. “And we are fortunate to have
vans, crane trucks and semitrailer tautliners. blue-ribbon clients who don’t cause us pain in
terms of bad debts. One of the reasons I got
Since 2000, the construction division has into transport is there’s always a need to go
been a growth driver, training people to use from A to B, whether it’s goods and services,
equipment such as mobile cranes and helping or whatever. It’s just a matter of staying
clients manage issues around occupational focused on market demands so we will
IMAGE: SUPPLIED
health and safety. As part of that task, definitely ride it out.”
6 TR ANSPO RT + LO GISTIC S 2021IN FOR THE LONG HAUL CREDIT WATCH
Transport, postal and warehousing credit
enquiries are on the rise:1
Innovation to shine · T
hroughout much of 2020, the Australia and
amid a ‘bumpy’ recovery.
New Zealand Standard Industrial Classification
(ANZSIC) code credit enquiries for Transport,
Postal and Warehousing have been roughly
Massive digitisation and automation is transforming in line with other industry groups.
the sector, now and into the future. · H
owever, there has been a stronger-than-
average recovery in 2021. The increase
As JobKeeper and many other government Faster and more efficient movement of
cashflow boosts end for businesses, the imports and exports is expected to boost the
in enquiries has been driven across all
Australian economy can expect a patchy Australian economy’s bottom line. credit categories.
resurgence before some sense of normalcy
· A
sset Finance, while performing softer last
prevails, hopefully in 2023. “Technology investments make a year, has also seen a bounce back in 2021.
IFCBAA believes an innovative transport and phenomenal difference in terms of
logistics sector will provide a crucial lifeline operating efficiency. It’s something
for the nation’s business sector. High-speed % YoY change in credit enquiries:
digitisation of freight-forwarding and that will differentiate the top-end
customs-broking tasks is on the agenda, players in the long term.” 10%
while logistics operators are increasingly
using the Internet of Things and artificial Stephen Reeves, Relationship Director, 5%
intelligence to boost efficiencies. Consumer & Transport Industry Banking 0%
at the Bank of Melbourne
Carson hopes co-ordination with -5%
government agencies, such as the Australian Automation to rule -10%
Border Force and the Australian Department Global supply chain management company
of Agriculture, Water and the Environment UPS is setting the tone for delivery businesses -15%
will accelerate the digitisation of through exploration of new technologies, such -20%
international freight movement, from bills of as drones and self-driving trucks, to fast-track
lading to commercial invoices, packing lists its services. -25%
and declarations. “A lot of those documents Jan 2020 Apr 2020 Jul 2020 Oct 2020 Jan 2021
continue to be manual, so we’re working Elsewhere, recent innovations such as
with the relevant government agencies automated pallet-handling systems are Transport, postal and
on ways to help digitisation assist with drastically cutting shipment processing warehousing enquiries
efficiencies, but also to reduce the times, while automated parcel delivery bases All other credit enquiries
prospect of fraud.” in Europe are being used to reduce manual
handling and sorting by delivery personnel.
Source: 1. Equifax
7 TR ANSPO RT + LO GISTIC S 20215
IN FOR THE LONG HAUL VICTORIA: THE STATE OF PL AY
900 million tonnes
Predicted Victorian freight volumes in 2051,
up from about 360 million tonnes in 20141
In warehouses, advances in software the shift to purchasing its own planes under
AUD21 billion
Value of freight and logistics sector to Victoria’s
management systems are enabling real- the Amazon Air brand will allow it to become economy, employing about 260,000 Victorians1
time inventory tracking and ensuring better a credible logistics player in its own right.
controls over ordering. Grant Thornton’s
Ritchie says technology in warehouses will “Technology in warehouses +2.6% PER ANNUM
Predicted average growth for freight volumes
help retailers keep up with demand. Instead
of human beings using forklifts to pick and will help retailers keep up with in metropolitan Victoria between 2014 and 2051,
dispatch goods, expect automation and demand ... clever use of big data with regional freight tipped to grow 1.5%1
robotics to progressively take over such tasks.
“Within the big retailers, all of that human will be the other defining trend.”
labour will go over the next five years,” Luke Ritchie, National Head of The financial imperative
Ritchie says. Retail and Consumer Products As transport and logistics He acknowledges that operating
for Grant Thornton Australia players, old and new, emerge costs have increased for many
Clever use of big data will be the other from the COVID-19 crisis, a stable logistics companies because
defining trend, according to Ritchie, who The company is also transforming local source of funding will be crucial of delays at pick-up and drop-
observes that Amazon is already starting deliveries, launching new services in Sydney for their sustainability. off points, as a result of border
to send unprompted orders of goods to and Melbourne, whereby private individuals closures and social distancing
consumers based on their consumption deliver packages to consumers. The aim is Stephen Reeves, Relationship requirements within warehouses.
data. The e-commerce behemoth can, in to expand its logistics network and speed Director, Consumer & Transport “Deliveries take longer to
effect, predict whether customers want more up deliveries. Industry Banking at the Bank complete, but equally wages
toothpaste, batteries or other such items and of Melbourne, says financial don’t go down,” he says.
then dispatch them with an empty box to Amazon’s moves are a wakeup call for services providers will offer
return unwanted items. “That can only come logistics companies that they will have to increasingly effective tools to Reeves believes logistics operators
about when you have a good understanding move with the times, or potentially perish. manage cashflow and liquidity, investing in warehouse technology
of what the customers want, which is what including extending terms of now stand to gain in the years to
big data and advanced analytics can provide” credit to businesses for day-to- come. “While the set-up costs can
day operations and investments. be high, technology investments
Amazon is also transforming from being In volatile markets, Reeves says make a phenomenal difference in
a customer of the shipping industry to a scrutiny of finance approvals has terms of operating efficiency. It’s
competitor, having recently bought its increased, but that funding has something that will differentiate
own fleet of aircraft as it expands its generally been available to well- the top-end players in the
freight network. Since 2016, the company has run businesses. long term.”
leased aircraft, but industry analysts believe
Source: 1. Delivering the Goods: Victorian Freight Plan, Victorian Government, 2018
8 TR ANSPO RT + LO GISTIC S 2021THE FUTURE
New directions
for supply chains.
Complexity presents as the sector looks for new directions.
The disruption of supply chains during the warehousing, both direct and third party, and
pandemic has been a major impediment for within that lies opportunities,” Carson says.
Australian businesses. In particular, China’s
trade sanctions on Australian exporters of Although he appreciates the desire to reduce
barley, beef and lamb, cotton, wine, lobster dependence on China, Ritchie says it may
and coal have exposed the risks of being too be hard to “unscramble the egg”. Switching
reliant on one trading partner. factories to new countries takes significant
time and investment and initiatives to bring
IFCBAA’s Carson says China’s actions will manufacturing back home face the challenge
prompt some businesses to explore new of high labour costs. “Some new suppliers will
manufacturing hubs and supply chains spring up touting their local manufacturing
“where they can do business at a similar credentials, but you can’t just flick a switch
price”. That brings Southeast Asian trading and bring it all back home again.”
partners such as Vietnam, the Philippines and
Indonesia into the picture thanks to a spate One of a kind
of free-trade agreements in the region. The In future, Ritchie expects domestic
Australian Government has also announced distribution channels to become more
its A$1.5 billion Modern Manufacturing streamlined. Instead of one truck delivering
Strategy to scale up manufacturing across the myriad goods to retailers, they are likely to
country and develop better delivery channels. load up with a single product that is sent out
en masse to different stores. “There won’t be
In response, transport and logistics providers fewer trucks, but there’ll be fewer discrete
are set to rethink their supply chains. products on each truck, and then hopefully
Diversifying beyond China is a form of supply they can move through the whole supply
chain insurance, according to Carson, who chain faster,” Ritchie says.
expects the emphasis on lean, just-in-time
stock management to give way to higher A trend towards co-location – additional
stock levels in the aftermath of COVID-19 to warehousing capacity closer to demand
ensure access to fast-flowing goods and raw centres to shorten the time to get goods
materials. “That might apply pressures on to consumers – is also predicted.
IMAGE: CREDIT
9 TR ANSPO RT + LO GISTIC S 2021CONCLUSION
No turning back –
a future of opportunities.
Optimism reigns as transport and logistics
providers power towards a resilient future.
COVID-19 or not, the transport and logistics be a source of good jobs on the back of Contact
sector is gearing up for change and it’s such actions.
predicted to out-perform many other sectors Darrell Till
of the Australian economy in 2021. “Freight moves stuff,” Damkjaer says. “These M: +61 419 252 292
are really important jobs and transport and E: darrell.till@bankofmelbourne.com.au
Buoying this comparatively bright future, to a logistics is a really important sector.”
large extent, is the ongoing strength in online www.bankofmelbourne.com.au/consumer-transport
retail. According to GlobalData, Australia’s In the critical years ahead, one great
e-commerce sector is expected to maintain certainty is the vital role of transport and
double-digit growth in the next few years due logistics providers in building resilience as
to the impact of the pandemic. they keep Australia moving.
Meanwhile, the beleaguered airline industry
is adapting by reallocating fleet to exclusively
serve air cargo demands, while banks are
ready to support working capital needs and
finance future innovations.
As he contemplates a post-pandemic logistics
world, IFCBAA CEO Paul Damkjaer concedes
“we’re not out of the woods yet”. He is upbeat,
though, about the future of transport and The details:
logistics businesses. This information is general in nature and has been prepared
without taking your objectives, needs and overall financial
situation into account. For this reason, you should consider the
Vaccination rollouts offer the prospect of appropriateness of the information to your own circumstances
and, if necessary, seek appropriate professional advice.
more passenger flights and a chance to shift
more cargo at the same time; trucks are lining © 2021 Bank of Melbourne – A Division
of Westpac Banking Corporation.
up to deliver goods using the latest software ABN 33 007 457 141 AFSL and
to enhance efficiencies; and warehouses will Australian credit licence 233714.
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