Time to re-think centralisation: AWA

Building large complexes to centralise warehouse operations is not the way to go in Australia, AWA warns

Time to re-think centralisation: AWA
Time to re-think centralisation: AWA

By Anna Game-Lopata | November 8, 2011

With another flood season nearly upon us, it may be time to decentralise the networkss, according to Australian Warehousing Association, (AWA) National President Bill Henman.

Henman argues recent experience shows if there’s industrial action or a significant fire or flood, the centralised network comes to a halt and customers of the business suffer.

"As we saw in January last year, customers are not usually carrying much stock so there’s no buffer to meet demand," Henman says.

During last year’s disasters, there were many businesses unable to service their customers, leading to critical shortfalls .

"Although supply eventually came from interstate, transport and other costs increased and supply was erratic. You can never make up for a ‘lost sale’," Henman says.

Given most centralised warehouses are not green field sites, Henman also argues layout and material flow is compromised.

"The majority of warehouses cannot handle a B double in their receiving or despatch bays," he says.

"The buildings are built to maximise the footprint of a block of land.
This results in many poorly designed and unproductive facilities.

"The most ideal flow of material is a straight line from receipt to dispatch," he says.

Henman’s view is that the ideal warehouse of the future will only hold fast moving stock in company or 3PL operated facilities and be located in delivery areas of a day’s drive.

"Depending on what happens with the carbon tax and its associated on costs, Australia will see more warehousing decentralisation as is the case in the United States," he says.

"In the US, many businesses are moving to source product from Mexico instead of China as lead times are shorter and quality can be better monitored."

In Australia,
Henman says transport industry regulation may make it more cost-effective for businesses to be closer to customers versus long distances which rely on fast transport systems.

To explain further, Henman again points to the American model, which has drivers leave and return to the same depot in one day.

"Maybe the Australian trend to have B triples and heavier loads is not smart," he says.

"The cost per kilometre for a 12 tonne truck is much lower than a semi trailer over short distances, especially given increases to registration fees, fatigue management and other regulation and of course the carbon tax."

In addition Henman says if the ideology of 'food miles’ or kilometers is adopted by Australian consumers, decentralisation might prove critical.

The practice, which involves calculating carbon emissions related to the production of food, including transportation,
as way of making purchasing decisions, could leave the Australian fresh food industry in need of a serious shift.

"For example, tomatoes grown in Bowen and delivered to Melbourne markets would incur approximately 1600 kilometers," Henman says.

"Centralisation does not provide any employment opportunities for regional towns.
This is resulting in a movement to work in larger towns and cities," he adds.

"With a distribution centre in a regional area, smaller vehicles can be used, fatigue and working hours are better and the community prospers."

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