A visitor’s perspective on a possible strategy to reduce port-related traffic congestion around the Auckland port.

01 December 2017

By Mark Ferguson

I’m a professor at the University of South Carolina, on the east coast of the United States, and have been enjoying a sabbatical semester working with the Supply Chain and Operations Management group in the Business School at the University of Auckland.

Having spent a couple of months in the wonderful city of Auckland, I can’t help but notice a few challenges that are very similar in nature to ones that we face at our major port cities back in the US.

In this article, I’ll briefly describe my impression of these challenges along with a proposal for a new strategy to help mitigate these problems.  I’ll start with what I observed as some of the major challenges and then offer a very rough idea of a potential solution.    

A partial list of supply chain challenges with existing supply chain infrastructure for New Zealand

  • Your largest port is in the middle of your largest population center (Auckland).
  • The population of Auckland continues to grow at a faster rate than the rest of the country.
  • Traffic congestion from this population growth is causing longer lead-times and increased variability in the truck shipments of containers to other cities.
  • The size of container ships will continue to increase while the required time to load/unload the large ships will continue to decrease. This required time to load/unload will require increasing investments in automation from the ports that want to service international cargo ships.
  • Without significant investments, the smaller ports will become increasingly unattractive for large global ocean shippers.

Potential solution: Adding cross-docking facilities to the Auckland Port

The concept of cross-docking was reportedly first implemented by the US Postal Service in the late 1800s, but was made famous by the retailer Wal-Mart, in the 1980s and 90s.

To understand the concept behind cross-docking, first consider the practice at a traditional distribution center, where products are unloaded from delivery trucks sent by suppliers, stored in the distribution center according to strict pallet locations, and then “picked” and loaded on regional distribution trucks once a replenishment order is received.

Depending on the industry, products can spend from days to years sitting in these distribution centers before they are sent to a retail store or local distribution center.

At a cross-dock distribution center, by comparison, the products are rarely stored for more than one day inside the distribution center.  Instead, they are unloaded from the supplier’s container, deconsolidated, added to other (different) products that are needed at the next location and shipped in a mixed-load container to the retail store or local distribution center.

An example of a typical implementation of cross-docking for a retail supply chain is shown below in Figure 1.

The advantages of cross-docking are readily apparent.  Each product spends less time being handled, stored and shipped, all of which are not value-adding processes, and increase the chances of damage, theft or the product losing significant marketplace value before it is sold. 

So, with all of these reported benefits, why doesn’t every supply chain adopt cross-docking?  The short answer is that it is very challenging to organise and coordinate the deliveries and shipments to the level that cross-docking requires to be run efficiently. 

Wal-Mart, for example, built up this expertise over many years and often spent twice the amount (as a percent of total sales) as other retailers on its information technology capabilities, which served as the backbone of its cross-docking system.  Once established, however, the competitive advantage provided by the cross-docking system was substantial, allowing Wal-Mart to grow from a single store in the early 1960s to the largest retailer in the world only forty years later. 

So how does this distribution strategy of a US retailer relate to the transportation problems faced by New Zealand?  New Zealand needs a strategy to reduce the number of containers from the motorways going to and from the Auckland Port.  The growing size of the container ships and the shorter turn-around times (requiring more sophisticated cranes) of the major shippers are both going in directions that will make it more difficult for the smaller ports to be able to direct services to the international shippers. Thus, the traffic congestion caused by trucks going to and from the Auckland Port is expected to increase, as the Auckland Port serves an increasing percentage of international import and export container cargo. 

One possible idea for relieving this increasing traffic congestion is to continue to serve the international shipments with the Auckland Port but to then distribute these shipments to the rest of the country in smaller cargo ships rather than trucks.  A major impediment to trans-shipping by cargo ships is that the international containers often contain large quantities of the same product, requiring them to be sent to inland deconsolidation centers where the cargo can be broken up and distributed (typically by truck) to the different regions. 

With some better coordination and a cross-docking facility built onsite at the Auckland Port, however, this deconsolidation could take place at the port and mixed-load containers could then be sent to the regional ports.  Figures 2 and 3 provide a pictorial example of how this network might work for local trans-shipments from Auckland to Whangarei. A side benefit of this strategy is that it may also reduce the need to invest in expensive technology at the regional ports in order to meet the turn-around times required by international shippers, since most of the shipments under the cross-docking strategy will now be local trans-shipments of mixed-load containers.           

Figure 1: Typical retail cross-dock supply chain

Figure 2: Proposed seaport cross-dock supply chain

Figure 3: Shipments of mixed-load containers from Auckland to Whangarei