Assessment Type – Individual Assessment
Assessment Type – Individual Assessment. 2500 +10% report
Purpose: To allow students to continue and extend their application if the knowledge and skills of the subject to a real world example facing current issues in logistics management. This assessment relates to learning outcomes a, b, c, d and e.
Value: 30% of total marks
Due: Week 10
Topic: Port Logistics City
Task: Students will need to: Students must first read the case study on page 249 of the textbook before answering the included questions.
Research requirements: Students need to support their analysis with reference from the text and a minimum of eight (8) suitable, reliable, current and academically acceptable sources – check with your tutor if unsure of the validity of sources. Students seeking credit or above grades should support their analysis with increased number of reference sources comparable to the grade they are seeking.
The following criteria will be used to mark the assessment:
- Research and analysis of company information (30%)
- Application of relevant theories of logistics (30%)
- Development of arguments/ responses recommended (30%)
- Written communication and referencing (30%)
Read the case study to complete your assessment.
Port Logistics City: A Case Study of Melbourne in Australia
THE PORT LOGISTICS CITY CONCEPT
A port logistics city is an integrated multimodal port‐centred freight system, which spatially connects the inland freight networks to a port and functionally links the city economy to global markets. The port logistics city is an extensive spatial accumulation of port‐driven, logistics‐related, value‐adding activities, including transportation, storage and warehousing, freight consolidation and transshipment, light industrial and pre‐processing, and assembly. This is to consolidate and distribute the influx of increasing quantities of products into and out of specific regions from and to various global locations.
Global logistics hubs – such as the deep‐sea ports of Singapore and Rotterdam, the growth of new ports in the Pearl River Delta, China and newly developed bespoke ‘logistics cities’ of Dubai – are all planned and built on the port logistics city model. Typically, a port logistics city contains numerous distribution centres located at the ports to break bulk shipments and sort them for distribution to different markets. Mangan et al.1 and Sheffi2 argue that such port‐centric clusters have increased their scope of activities to include more value‐added logistics services beyond conventional storage and supply.
MELBOURNE AS A PORT LOGISTICS CITY
Melbourne is the capital of Victoria and the second most populous city in Australia. It has evolved as a port city, and has served as a key trade centre during the Victorian Gold Rush between 1851 and the late 1860s. The port of Melbourne is Australia’s busiest port for containerised and general cargo. Port logistics has been a key concern for Melbourne because of its location on the Port Philip Bay, near to the estuary of the Yarra River. In the early days, cargo destined for Melbourne had to be unloaded outside the city centre and then transferred by rail or road as large ships were unable to navigate the Yarra River. Recent dredging of the Port Phillip Bay, however, has deepened the shipping channels so as to allow larger ships into the port requiring access to a minimum of a 14‐metre draught at all times.
Melbourne as a port logistics city has undergone two key changes in recent years. The first change is the consolidation of land use introduced by the Victorian Government to promote greater agglomeration of logistics and transportation firms in closer vicinity
to the Port of Melbourne. This strategy was intended to enable a more efficient use of underutilised resources, expand markets through more effective and efficient competition and increase the opportunity to enhance productivity/reduce costs.
The second change is the ‘suburbanisation’ of freight activities, which started to migrate inland in Melbourne. This inland shift of freight activities is also caused by the phenomenon of ‘de‐agglomeration’. Firms often migrate to outer suburbia when the costs associated with traffic congestion, technological sharing and rent increases in the inner city begin to escalate. This phenomenon of the ‘suburbanisation’ of freight activity has created three key logistics clusters, which are similar to what are commonly referred to as ‘footloose inland ports’. These suburban logistics clusters contain freight business parks, freight transshipment or transit hubs and freight storage and handling yards. Congested gateways, increased containerisation and high levels of throughput, and cheaper industrial land, have all contributed to the inland shifting of transport and logistics firms to suburbia.
KEY CHALLENGES FOR A PORT‐LOGISTICS CITY
The reconfiguration of Melbourne’s metropolitan freight systems has resulted in an inefficient movement of freight into and out of the port. The greater concentration of population in the east and south‐east of Melbourne also requires moving freight from the port to the logistics clusters in the west and then back again to the market through the key freight corridors. This has generated empty container movements on road, which not only increases the demand of empty containers at freight terminals but also escalates the cost of inland transportation. Heavy reliance on trucks operating on a point‐to‐point schedule in Melbourne further increases the delivery lead time, causes transportation bottlenecks and lowers the utilisation of vehicles. Infrastructure Australia estimated the traffic gridlock costs to be $13.7 billion in 2011, which is projected to increase to $53.3 billion by 2031.3. In Melbourne alone, the estimated cost of congestion was about $3.6 billion in 2011. Furthermore, direct transfer of shipments to their destination by one mode of transport (predominately trucks) in a large city such as Melbourne is also difficult and expensive.
POSSIBLE STRATEGIES TO ENHANCE MELBOURNE’S FREIGHT NETWORKS
The efficient functioning of freight systems within a large metropolitan setting requires a highly agile freight network. Providing a quick response to rising just‐in‐time demand for global products, which often arrive simultaneously at inland gateways from multiple locations, is difficult. Consolidation, transshipment and break bulk functions also present numerous logistical challenges. A number of strategies can be deployed to cope with an increased demand, diversified value‐adding functions and infrastructure capacity bottlenecks. ‘Transloading’ is one such logistics strategy, which if successfully implemented could potentially improve the efficiency of land‐side freight distribution in Melbourne. It is a multimodal strategy for transferring freight with minimum handling from one mode of transport to another. Bulk resources (e.g. coal and iron ore) are transloaded to rail from mining sites and then transported to a port using more sophisticated handling equipment such as an automated conveyer belt. Transloading, however, is a necessity for freight transport at railroad break‐of‐gauge points where two lines of different gauge meet. This requires a transfer of goods between gauges as trains and rolling stock cannot operate across a disjointed rail network.
The transloading strategy could be implemented in Melbourne’s metropolitan region by developing inland logistics terminals as dry ports for the transshipment of sea cargo to inland destinations. It is an effective strategy for freight, which requires, for example, transporting from a warehouse by truck to an inland freight consolidation terminal to a port by rail to be then shipped to its final destination. As shown in Figure 1, this strategy advocates the greater utilisation of rail transport for long haul, while the short‐distance deliveries to final destinations can be transported by trucks. It is anticipated that this strategy could reduce road freight movements in Melbourne. However, transloading operations require specialised infrastructure such as materials handling equipment (e.g. conveyer belt, automated straddle and gantries), warehousing facilities (e.g. grain silos, storage space for containerised cargo or oil storage tanks) or rail yards to minimise handling of freight between different transport modes. Transloading, therefore, is an additional expense to customers and thus adds to the total logistics costs.
Cross‐docking is a commonly known strategy whereby freight is distributed directly to customers or retail chains with marginal to no handling or storage time. The efficiency of Melbourne freight logistics hubs would be significantly enhanced if they operated as cross‐docking terminals. Inbound freight arriving by trucks, trailers or rail in Melbourne could be unloaded, sorted, screened and then transported directly or indirectly to outbound destinations. Cargo rotation is another strategy for tackling the empty container problem in Melbourne. The key technique of cargo rotation is to minimise the empty movement of trucks or containers between port and inland freight hubs. Cargo rotation enables re‐allocating empty containers from an import‐oriented (surplus) to export‐oriented (deficit) inland freight hub, which in turn reduces empty trucks or containers on roads. The deployment of these strategies would potentially improve the efficiency of freight distribution and strengthen Melbourne’s performance, reputation and capacity to emerge as a global logistics city.
QUESTIONS
- What are the three major challenges for Melbourne as a port logistics city?
- What would be the key advantages or disadvantages of implementing a transloading and, or cross‐docking strategy in Melbourne?
- Draw a diagram to illustrate how a cargo rotation technique would help to reduce the empty container movements in a multimodal port logistic city.
- Will a transloading strategy work in other port logistics cities? If not, why not?