A new reality is taking hold of Australian supply chains due to e-commerce and online retail, major industry software company warns
By Rob McKay | August 13, 2012
A new reality is taking hold of Australian supply chains due to e-commerce and online retail and transport and logistics firms must get up to speed on it, a major industry software company warns.
Richard White, CEO of WiseTechGlobal, which owns international player CargoWise and recently took over TransLogix, believes there is no going back on the revolution overtaking the retail sector.
“That’s going to dramatically influence the supply chain – it’s going to tear it to pieces and put it back another way,” White tells ATN.
“I will predict that 50 percent of small parcel transactions in the supply chain will be on-line retail in five years.”
He notes that Australia Post is using his firm’s product to help handle 100,000 on-line-retail- sourced parcels a day.
White and WiseTech Marketing Director Ralf Moller points to the greater efficiency of the new model, especially as it relates imported goods.
Describing the likes of major retail stores, such as Myer and David Jones as essentially small warehouses attracting inefficiencies and expenses related to multiple handling of goods, under-productive real estate and relatively highly paid workforces, they see the new paradigm as entailing higher efficiency and less cost of operation.
Online retail is different.
“At its pure form, the customer talks directly to the manufacturer of the goods or the distributor for that manufacturer at origin,” White says.
“The goods are sold one piece at a time but they are aggregated at origin into huge consolidations of tens of thousands or hundreds of thousands of parcels and shipped through the Customs barrier much more efficiently than is possible with bulk goods – because you don’t actually do a Customs entry for low-value goods – and then distributed directly to the customers’ door.”
While the major accelerator for the phenomenon is the high Australian dollar, Moller believes the trend is likely to be irreversible, given the attractions of home delivery to individual customers means local goods are also being sourced on-line.
“I think we are seeing much more of it, quite possibly more than other geographies around the world, because of the dollar, but it is happening anyway and will continue to happen anyway,” he says.
The company believes the increasing complexity of the task coupled with greater demands on transport firms’ operations are putting intolerable pressures on individual schedulers who are not supported by technology.
And the move to online retail is also exacerbating the problem of planning and scheduling.
“Trucking companies are working with sub-optimal outcomes because it is too hard to get optimal outcomes [without support],” White says.
“If you combine real-time systems, so you know where the vehicle is and what it is doing, with the ability to optimise critically and on the fly and then reconfigure the network in real time” as circumstances change you can improve the result.
“Pick-up is very sub-optimal; delivery is much easier to optimise but both of them can be substantially improved over normal values because the computer can sit in the back ground calculating in real time and working out what is optimal.”
Meanwhile, WiseTechGlobal has moved into its own back yard through last month’s TransLogix purchase.
While it has its software installed in 75 countries at about logistics and freight forwarding 4,500 sites since looking for international customers in 2006 in the space, about 25 percent of its customers have domestic fleets and have sought products from his firm to help control them, White says.
Once the decision was made nine months ago to go down this path, White approached Translogix, the focus of which was strongly Australasian.
“We’ve got a technology platform, we will extend what Translogix has already got, we will take some of that technology and blend it with ours but ultimately we will have a fresh, modern, go-forward platform built on investments we’ve already made,” he says.
“Everybody will have an upgrade path that is very easy and very simple.”
The firm’s customers are responsible for 80 percent of Australian import and export and include the major retailers, Toll Mainfreight, UTI, UPS and Yusen amongst others, White says.