Wednesday, January 31, 2024

Railroading our supply chain

Railroading our supply chain

The Australian Rail Supply Chain report came out recently, outlining a clear state of play, recommending various moves, and illuminating many challenges for the future logistics sector. The Australian rail industry contributes nearly $30bn per annum to the Australian economy and is responsible for generating over 165,000 jobs. Over the last three years alone, the rail industry’s economic contribution has risen by 16%, adding 20,000 jobs to the national economy. However, the future health and long term sustainability of the Australian rail supply chain is at a critical juncture. The combination of a record $155bn rail investment pipeline over the next fifteen years, a wave of replacement investment for ageing technologies, systems and rollingstock, and a fundamental rethinking and reorganisation of global supply chains in the wake of the COVID-19 pandemic provides an unparalleled growth opportunity for the local rail industry and the broader Australian economy. Severe threats and challenges remain but meeting these challenges has the potential to yield tremendous business and employment growth, as well as broader social and economic benefits, in coming years. Action is required now if Australia is to maximise these benefits. Industry and governments urgently need a better understanding of the current capabilities and capacity of the Australian rail supply chain, the challenges they face which stymie growth and jobs creation, where opportunities for reform exist and recommended actions which will maximise benefits for all Australia.

This is the purpose of the rail supply chain report, which has been informed through mapping hundreds of organisations linked to the Australian rail industry, direct industry consultation from surveys and interviews, and reviews of existing practices and policies. From this analysis, this report provides recommendations which are designed to inform a blueprint for a stronger, more sustainable local Australian rail supply chain which, in turn, will support Australian economic growth and the generation of skilled jobs well into the future.

Key messages

According to BIS Oxford Economics which prepared the report here, the rail supply chain is a major contributor to economic and social well-being in Australia and also provides valuable export dollars, but its economic and social contribution and capability is often underrated. While parts of the supply chain are more concentrated in some states than others, all states and territories have supply chain businesses that can benefit from policies which seek to raise participation from the Australian rail industry. However, current industry policies tend to place state priorities above the broader national interest. While rising investment has improved the health of the local supply chain in recent years, challenges and threats to its longer term sustainability remain. In particular, the domestic rail industry has numerous well-known legacy issues which impact its ability to scale up, innovate, increase efficiency and effectively compete against international rivals.

COVID-19 is providing short term challenges to the local supply chain but is also providing an unparalleled opportunity. The local supply chain has been resilient in the face of disruptions to global manufacturing and production and the closure of international and state borders which has constrained the movement of vital rail skills. On the upside, local firms have accelerated their uptake of productivity-enhancing technologies and data analytics, while more flexible working arrangements are making the industry more attractive to a more diverse range of employees. But most of all, the pandemic is leading to a fundamental rethink of where all rail components, products and services are sourced, providing an unparalleled opportunity for local firms to position themselves into more diversified local and international supply chains.

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