The findings of the Australian Government’s National Freight and Supply Chain Priorities Report released on 18 May 2018 identify 54 priority actions aimed at making the freight and logistics sector more efficient and competitive. The Government anticipates the national freight task will almost double over the next 20 years. Is the industry positioned to meet the requirement?
Deputy Prime Minister Michael McCormack says that the report will inform a strategy intended to make moving freight faster, easier and less expensive for consumers. The industry, which currently contributes about 10% to the gross domestic product (GDP), plays an essential role in Australia’s domestic and export economies.
We take a look at three key issues that will be critical to meeting increased market demand and the need for competitiveness, and the role insurance protection can play in managing these challenges.
A recent IBISWorld report identifies three key factors for the success of integrated logistics companies:
- Proximity/access to key markets
- access to highly skilled workforce
- ability to quickly adopt new technology.
While the most recent Federal Budget identified key transport infrastructure projects to improve freight movement across the country, the total amount allocated to funding – more than $70 billion over the next two to three years, with an additional 10-year funding allocation for road and rail investment – did not increase.
In addition, both geographically and in terms of facilities, the benefits of infrastructure upgrades can be unevenly distributed, with ports and rail upgrades falling behind investment in road systems. While improvements to port infrastructure can deliver greater competition, cost reduction and productivity, ports can represent ‘bottlenecks’ during the infrastructure growth initiatives. The 2018–19 Budget allocates $3.5 billion for a Roads of Strategic Importance fund, and $1 billion to an Urban Congestion Fund targeting ‘pinch points’.
At the 2018 Australian Logistics Council Forum held March 2018, the 200-plus attendees called for governments across all jurisdictions to adopt planning approaches designed to attract infrastructure investors. Insurance has an important function in this, helping reduce and manage risk exposure.
Transport and Logistics Industry Reference Committee (T&L IRC) findings covering the prior 12 months to February 2017, identify that 87.17% of industry employers reported experiencing skills shortages.
The main areas of demand were
- truck drivers
- logistics supervisors and managers
- warehousing staff
- forklift drivers.
The reasons for these shortages included
- ageing workforce and/or current staff retiring
- remuneration and/or employment conditions
- negative perception of the industry
- few skilled and/or qualified personnel available
- time involved in achieving qualifications.
With the second oldest industry workforce in Australia, according to the T&L IRC findings, recruitment to replace retirees presents a challenge, with casualisation of labour and limited pathways for career progression serving as deterrents.
The introduction later in 2018 of Chain of Responsibility regulations to improve industry safety should contribute to improving the appeal of freight and logistics as a vocational choice. Working with an insurance broker to reduce risk and provide employee benefits can also enhance job prospects in terms of recruitment.
One pressing reason why the industry needs to attract new talent is the increasing importance of technology and data analysis.
From drone deliveries to automated trucks, technology has the potential to transform the transport industry, using telematics for fleet tracking and managing deployment and maintenance, and the internet of things (IoT) to improve efficiency and visibility of deliveries, for example.
Some of the larger Australian companies are moving to adopt these innovations, but many small businesses are limited by budgetary restrictions. Capacity, both financial and in terms of appropriate skills, could result in consolidation in some sections of the industry, while businesses offering remote logistics management are poised for growth.
Commercial transportation companies canvassed in a 2017 Commercial Transportation Trends report by PwC identified the biggest barriers to further digitisation as
- lack of digital culture and training (a challenge for 50% of companies)
- skills shortages and insufficient talent (28%)
- unresolved questions around data security and privacy (38%).
Given 10.3% of the Australian transport sector has been targeted by cyber attacks, the fourth highest recorded industry incidence after banking, financial services and communications, security of data and connectivity remains a key concern. The global attacks on TNT and AP Moller-Maersk are international examples of the importance of cyber security, highlighting the need for analysis of cyber exposures and protection through cyber insurance.
We can help
If you would like personalised advice on managing your freight and logistics business’s risk exposures, Gallagher’s brokers have the expertise and industry knowledge to formulate insurance solutions that meet your operation’s needs.