Hub and Spoke – The Future Grain Supply Chain
This document presents a radically revised/reduced rail infrastructure and new storage hubs to totally reorganise the way grain may be received, stored, organised and transported to market.
A major Intermodal facility on a key rail line becomes the “hub”, with the road network being the spokes that are used to accumulate grain from other storages for assembly and blending into the required shipping quality parcels.
Background
The mid 1980’s were a time of intense activity in the Australian Grain industry. Declining real prices for grain were placing an intense focus on all aspects of the industry. The issues of supply chain costs were viewed so seriously that a special intergovernmental 'Royal Commission' was established to review all aspects of the industry structure.
Deregulation of the grain handling and transport sectors eventually occurred as a result of this process.
It was during this time that I developed and prepared this 'Hub and Spoke' concept paper – basically as a private endeavor. It achieved near instant notoriety for being too radical. While major efficiency gains and costs savings could be demonstrated, the perceived loss of services – particularly the closure of railway lines – was too difficult to stomach.
In terms of the East Cost of Australia, the paper and the concepts then gathered dust for the next 12 years until the AWB – a grain marketing organisation – decided to directly enter the grain storage handling and transport markets.
In the meantime major new high capacity and efficient sites were constructed in both South and Western Australia
Dimboola – a major junction center in western Victoria – was selected as the first AWB site to be built using the hub and spoke concepts. It was opened in late 1999 and has proved to be both popular and controversial at many levels. A record receival figure of 330,000 tonnes was achieved in the 2003/04 harvest.
Sea Lake and other sites followed soon after. In total the AWB has constructed a network of 22 major sites which operate in the competitive east coast market.
In many ways the developments parallel the moves in North America to consolidate into high efficiency sites. The major difference in Australia is the local requirement to receive and store large quantities of grain at harvest time, as distinct from the primary on farm storage role in North America.
The primary purpose of presenting this 'Hub and Spoke' paper on the web is to provide an avenue for the continued existence of the original (and still controversial) document.
The lessons encapsulated in the paper remain salient. The regional rail network has seriously declined in many areas of regional Australia.
Tough decisions now have to be made on what can be kept versus what must be closed. The tough decisions are even more pressing in the post Cole inquiry era as the grains industry moves closer to full deregulation and true market forces will force the industry to further rationalise and innovate.
Ray Fehlberg
April 2007
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