Phil Ruthven Columnist

Phil is founder and chairman of IBISWorld, an international corporation providing online business information, forecasting and strategic services. He is considered one of the nation's most respected strategist and futurist on business, social and economic matters.

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Transport must move beyond limits

Published 12 April 2012 05:01

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The transport of freight and people is in a state of constant change, competition and ownership. If we went back far enough, a few centuries, there was little in the way of a transport “industry”, as most of it was DIY by households and businesses with their own vehicles: be they shanks’ pony (walking), horses (and drays), boats and barges, barrows or whatever.

We still do a lot of DIY transport, both as households and businesses.

For households, they have still outsourced less than one-quarter of their total mobility to public transport, valuing as they do their own personal freedom, flexibility and convenience. This year they will spend about $105 billion but most of it (more than 75 per cent) will be on their own vehicles and operating costs – cars, utes, vans, Mosman and Toorak tractors, motorcycles, boats, the odd plane (for the super-rich), bicycles – and surrogate transport, being telecommunications (Skype and telepresence, emails, social media, SMS, etc); a trip when you don’t make one.

Businesses have done a lot more outsourcing, of course. That said, there are hundreds of thousands of employees, tradespeople and contractors using cars, utes, trucks, pipelines and other transport vehicles and devices on a DIY basis. But the big, heavy and bulk goods have gravitated to a “do it for me” or DIFM basis, using road, rail, water, air and other transport industry services. So, too, have goods where speed and time are of the essence; especially, but not only, long distance, where express freight and couriers have come into their own.

The extent of this outsourcing is shown in the chart.

In the 2011-12 financial year, it is expected that the industry’s revenue will pass the $200 billion mark for the first time. The bulk of this will be spent by businesses and government.

Road still dominates, with 30 per cent of the spending, to which can be added related services (freight forwarding, logistics, et al) that lifts this mode’s share to more than one-third of the total. Postal and courier services, being mostly road-based, add to this figure, lifting that mode’s share above 40 per cent.

Air transport comes in second, then rail and water (sea and inland). Warehousing is, naturally, a vital adjunct to transport and accounts for nearly one-fifth of the industry’s revenue in depots, silos, tanks and other storage facilities.

The 1 per cent “other transport” is a mixed bag and includes pipelines, ski-lifts and other modes.

The domestic freight task is expected to more than double to more than 1500 billion tonne-kilometres by the middle of this century, yet such growth will not match the nation’s gross domestic product growth, mainly due to the much faster growth of services in the economy compared with goods.

But it is a sector that demands productivity to ensure we stay competitive in the dynamic Asia-Pacific region.

And the industry has enormous challenges. Harnessing logistics, faster broadband, advanced software and analytics will help the industry in this task but it also has to grapple with excessive government ownership, regulatory authorities and the accompanying bureaucracy.

Other hurdles are shifting demographics, the changing export mix (more minerals, yet more inbound tourists, too, in the decade ahead) and the growing importation of finished goods displacing local manufacturing. Then there is the changing transport task arising from online shopping.

It is an industry with its time cut out, all right; a big job ahead indeed.

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