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Carbon tax inevitable: Little

Toll boss says a carbon tax is inevitable but the onus is on customers to make the right choices

By Anna Game-Lopata | May 10, 2011

Toll Group CEO Paul Little says a carbon tax is inevitable but the onus is on customers to make the right choices.

Speaking at the 2011 Chartered Institute for Transport and Logistics International Conference, Little told industry professionals that forwarders offer carbon efficient alternatives, but most customers choose speed, moving goods by air and road freight rather than by more carbon efficient modes such as rail and sea.

“In particular the big supermarket chains consistently choose road over rail despite rhetoric to suggest they prioritise the environment,” Little says.

“The supermarkets say they have a commitment to carbon efficient alternatives, but I don’t believe them.”

Little says Toll is working towards becoming more fuel efficient in the business and reducing carbon emissions. However he says most Australian companies will only take that kind of path if there is a financial incentive.

While one approach Toll uses involves combining air freight with shipping, which Little hopes to move towards a more equal balance of the two, he says the airfreight market is increasing overall.

“Our express business is run off its feet,” he says.

“Internet ordering is adding another layer of complexity to the market which will generate a huge change in the traditional supply chain. It will be good for air freight, because companies will need to be nimble and move with the changes.

“For example, Nike has moved its manufacturing base to Vietnam to take advantage of cheaper labour rates. If Toll expects to benefit from this customer’s business it needs to respond,” Little says.

“People want to move goods faster, because the capital cost of inventory is great. Businesses that move goods to market more slowly will start to struggle.”

Little also took the opportunity to talk about the transport and logistics giant’s strategy to corner the global forwarding market, which he says is very much misunderstood in Australia.

“The industry is misunderstood because there aren’t any global forwarders in Australia,” he says.

“Australia’s forwarding profile overseas is pretty poor, we don’t have much of a presence in the Asia Pacific. International forwarders in Australia are there to flesh out their network not to generate revenue.

“It’s not about a port to port focus, global customers want seamless integrated services which offer speed to market and they only want to deal one person,” he says.

“Traditional thinking in Australia needs to be questioned. The focus on big is better, on bigger scale being the key to a better service has gone by the wayside. Customers want a different package.”

By the same token, Little observes the major multi-million dollar transport juggernauts have limited services.

Formed in 2008, Toll’s global forwarding business is the newest in its stable.

Intended to take advantage of the $6 trillion Chinese market, which is growing 10 percent annually, Toll’s global forwarding business established itself in China and Hong Kong.

While Toll has made eight acquisitions since then, the latest being air and sea forwarder SAT Albatros this year, and boasts a $2 billion annual revenue, Little says the global program is not close to being finished.

Toll has 107 branches across 27 countries and ranks number 11 overall in terms of volume and market strength.

“Our major competitors in the global space are European companies with annual revenues starting at $ 4 billion,” Little explains.

“We need to get sufficient scale to match this, which means sourcing good people and technology. In terms of people there was no one in Australia with international forwarding experience. They have experience moving goods internally, but the global space is different.”

“We can’t train people fast enough but we have managed to attract key people from within the industry internationally on the promise that they will be part of something unique, exciting and fresh.”

Little says the motivating factor to develop a global approach stemmed from the attitude of the Australian Competition and Consumer Commission (ACCC) which imposed strict divestment conditions on the company’s acquisition of Patrick in 2006.

“Growth is critical for a public company like Toll. Our group has a reputation for aggressive growth, which is the reason for the investment we enjoy. The ACCC was telling us we had to limit that growth,” he says.

“Going global was frankly the only option.”

While the company has made its point of difference its Asian base, globally integrated offering and highly acquisitive strategy, Little says he still has not won over the equity markets.

“From Toll’s point of view the biggest challenge we’ve had was to win over shareholders to our ambitious growth strategy,” he says.

“In the US we are only just starting to get traction in the equity markets. Perhaps they are now starting to say this little Aussie company can carry it off.”

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