Australia-China Services Trade: Opportunities and Challenges of a Free Trade Agreement

Beijing, 24 April 2006

Session Four: Transport and Logistics

Linfox Overview

Size, Scale and Capability

Linfox Logistics originated in Australia. It is a company that that formed in 1956, by a man who has become a legend in his own lifetime in Australia; a man by the name of Lindsay Fox.
Over the last five decades, Lindsay and his team at Linfox, have gained a wealth of experience and expertise in designing and delivering supply chain solutions for customers within Australia and across the Asian region.
As Linfox has grown in terms of scale, capability and geographic reach, it has faced many different challenges.
In Australia the challenge is to be competitive in a mature market, within a geographically vast country, with a very small and disperse population. It is a challenge that just keeps coming.
In other countries where we operate, we have faced very different challenges. Typical issues relate to infrastructure, security, regulation, recruitment, training and other issues besides.
It is true to say that Linfox has come a long way and learned a lot of lessons since its early inception.
As employees of Linfox, we are proud to say that we work for a company that has eventually overcome every obstacle on its way to becoming the largest privately owned logistics company in Asia Pacific.

Geographic Footprint

Linfox currently has an operational footprint in ten different countries within the Asia Pacific region and a focus on further expansion in the near future

Structured Asia Pacific Business Units

Linfox Logistics comprises four market focused Asia Pacific Business Units including

The Linfox parent company also owns airports, a large portfolio of property in Australia and overseas and an extensive cash logistics business called Armaguard.
In terms of capability, Linfox has continuously sought to develop the infrastructure, technology, and expertise needed to optimise customer and industry supply chains.
From basic transport and warehousing to sophisticated supply chain modelling and web-based track and trace systems, the Linfox solution focuses on three tiers of service depending on customer requirements:

Tier 1: Logistics Service Provider - Focuses on the provision of traditional asset based logistics services
Tier 2: Lead Logistics Provider - Focuses on the provision of LSP along with the subcontracting and third party management of key supply chain functions
Tier 3: Supply Chain Solutions Provider - Focuses on providing innovative logistical and technological solutions to customers with complex supply chains

Supply Chain Solutions – Skill Sets Required to be Successful

Linfox believes there are five key skills that are needed to deliver an effective and efficient supply chain for its customers.

Flawless Operations: The vast majority of our customers want reliability, security, visibility and speed to market.
End to End Visibility: Product visibility and tracking throughout the supply chain are essential elements of effective supply-chain management.
Appropriate Technology Applications: The increasing rate of globalisation implies that employing effective technologies such as RFID and track and trace are critical to maintaining control of inventory and cargo shipments.
Effective Communications: Effective collaboration with trading partners is among the keys to successful supply-chain optimisation. Strategies to ensure an ongoing exchange of information among supply-chain partners are vital for enterprises seeking to establish global value chains and maximising efficiencies for collaborative planning, forecasting, and replenishment.
Seamless Integration: Truly effective supply-chain management requires tight systems integration with suppliers and other trading partners. An increased level of integration results in improved timeliness and accuracy of shipments.

Challenges facing Third Party Logistics in China

Despite massive investment in transportation over recent years, the infrastructure in China remains under-developed and inadequate for present needs.
Diverse markets, local protectionism, a fragmented licensing regime and opaque regulations at both the local and national level have meant that foreign participation remains limited.

Key Trade Barriers facing Australian Service Providers

Current legislation prevents wholly foreign owned Australian service providers to provide integrated logistics services.
Restrictions exist with regards to the establishment of branches, including the location in which branches may be established, impedes business development.
Specifically, high-asset requirements and successful operational histories impede market access for Australian companies.
A limitation on the term of JVs adversely affects long-term business and investment planning.
This lack of streamlined procedures prevents service providers from delivering services on a nation-wide scale, ultimately hampering the development of a modern logistics sector in China.

Conclusions

Transport and Logistics Cooperation between Australia and China

Bilateral trade in transport services between Australia and China has doubled over the past decade to US$385 million in 2003-04 with the potential for further expansion.
Events such as the 2008 Beijing Olympic Games provide opportunities for Australian companies to benefit and contribute to the development of a comprehensive regional network.

Sophistication of Australian Transport and Logistics Industry

With the ongoing development of specialised skills, Australian supply-chain and technology know-how proves particularly useful for providing enhanced visibility of freight and cargo shipments. This translates into increased reliability for domestic and international clients.
Access to such experience would prove highly beneficial to the economy of China as it strives to increase capacity in logistics to meet domestic demand and modernise the freight logistics and transport
It is for these reasons that preferential liberalisation toward Australian transport and logistics companies through an Australia-China FTA would subsequently enable China to proceed with reform and liberalisation in a more measured and methodical manner and make any needed adjustments to regulatory and supervisory systems prior to extending liberalisation to other international logistics service providers.

In conclusion, Linfox believes that if the Chinese Government were to liberalise the regulations governing Australian service providers, the benefits would include Australian companies:-

Possible next steps

Communicate with this group and others, develop long term relationships and grow in mutual recognition and understanding
Work together to identify real and achievable strategies to overcome the key barriers still facing Australian service providers in China.