TRANSIT – A model for simulating infrastructure and policy interventions in agriculture logistics: Application to the northern Australia beef industry

https://doi.org/10.1016/j.compag.2015.03.018Get rights and content

Highlights

  • Australian agriculture has long distance and high cost supply chains.

  • TRANSIT – a GIS tool to evaluate infrastructure investments and policy changes.

  • Application to northern Australia livestock industry.

  • Transport cost savings of up to $15 million in some locations.

Abstract

Australia’s agriculture industry, particularly in the north, is characterised by supply chains of long travel distances, often in excess of 2500 km and costing up to 35% of farm gate price. Such travel distances increase the vulnerability of the industry to climatic variability and extreme events. Infrastructure investments in roads, bridges, processors and storage, along with changes in policy, have the potential to substantially reduce costs and increase resilience of the agriculture industries. In this paper, we outline the model, TRAnsport Network Strategic Investment Tool (TRANSIT) which is based on ArcGIS, and utilizes the Origin to Destination Cost Matrix solver within the Network Analyst toolkit. TRANSIT estimates the transport costs for all movements between enterprises, accommodating road conditions, vehicle types, vehicle access restrictions and regulatory requirements. TRANSIT was applied to the northern Australia livestock industry, consisting of 12 million cattle across 10,000 enterprises and 89,000 unique trips between these enterprises. Its ability to estimate the transport benefits from road upgrades, new processing facilities and biosecurity changes are shown using three priority case studies identified by industry and government.

Introduction

Agriculture and horticulture in northern Australia is characterised by long supply chains between production and processing and markets in Australia, with transport distances often upwards of 2500 km. All year round access in the north is not possible due to a sparse road network that is regularly inaccessible in the wet season due to flooding or wet road conditions. The industry in the north is almost exclusively reliant on road for both business inputs and outputs. In the case of livestock, the northern beef herd of 12.5 million, across Queensland, Northern Territory and northern Western Australia (data based on Australian Bureau of Statistics Agricultural Commodities for 2012–2013, www.abs.gov.au) supplies nearly 90% of Australia’s live export cattle, with 694,000 head exported in 2011 (MLA, 2014). Non live export cattle are usually transported to feedlots and abattoirs in South Australia, Western Australia and Queensland. For example, nearly 50 per cent of cattle in the Northern Territory travel upwards of 1000 km between breeding property and abattoir (or port), with the transport cost exceeding A$150/head. Fig. 1 illustrates the location of northern Australia livestock enterprises in relation to the road network. A review of the northern Australian beef industry in terms of productivity and profitability (McCosker et al., 2010) indicated that a significant increase in costs of production has meant many properties are marginal and struggle during poor seasons. While the declining financial performance is largely a result of reduced real beef prices (Gleeson et al., 2012) as well as reduced turnoff and increased farm debt, McCosker et al. (2010) also identified rising overhead and direct costs such as freight as major contributors. The extensive spread of properties and declining financial performance is further complicated by market dynamics. Investment to support the resilience of the northern beef industry must anticipate and address future challenges, opportunities, and conditions. Infrastructure investments in roads, bridges and storage have the potential to substantially improve viability and resilience of the northern industry.

There is also an extensive range of cropping on irrigated land in the north (e.g. Ord River, Mataranka) and the high rainfall east coast. These include melons, mango, sugar, bananas, chickpeas and citrus. Produce is mostly trucked to markets and processors in southern Australia, at a distance of often greater than 2500 km and a cost of A$280/tonne. Whilst ports at Darwin, Wyndham and Townsville are a much shorter distance for exports, they provide limited facilities and economies of scale for refrigerated exports and storage. There is an anticipated major expansion of irrigated production in the north to over 110,000 hectares, and several cropping scenarios have been considered. To enable export supply chains through northern ports, infrastructure investments in the form of storage, processing and upgraded roads will be needed.

In this paper we outline a GIS based tool, TRAnsport Network Strategic Investment Tool (TRANSIT) that was designed to estimate the transport cost implications of investments and policies to enterprises across the agriculture supply chains from farm gate to processing or export. Road and rail transport are considered, including intermodal transfers, different vehicle combinations as well as regulatory constraints related to drivers and biosecurity.

The literature has a large range of methodologies to analyse and optimize transport logistics in agriculture supply chains. These include static analyses that map out existing chains to understand the performance of different segments of the supply chain, as well as to identify opportunities for increased efficiency and international competitiveness (Francis et al., 2008, Economic Associates, 2011, Uddin et al., 2011). The Council for Scientific and Industrial Research, CSIR (2005) conducted a major state of logistics study in South Africa aimed at defining infrastructure investment priorities across the major industry sectors including agriculture. In light of the high level analysis and recommendations from the work, several sector specific logistics projects between CSIR and South African agriculture industries were established. This includes a more detailed analysis on South African fruit logistics (van Dyk and Maspero, 2004) with a focus on providing recommendations for priority investments in infrastructure. The main disadvantage of these studies that analyse existing supply chains is that they do not allow alternative scenarios to be evaluated and compared.

Computer based models based on simulation and optimization have been used extensively in most agriculture industries to improve transport efficiencies for operational and seasonal planning. See Higgins et al. (2010) as well as Ahumada and Villalobos (2009) for reviews of such methods and applications. For strategic planning, the most common methods have been in location science. Location models have many potential applications for developing and optimizing scenarios for logistics infrastructure investment in agriculture, particularly to minimise transport costs. Lucas and Chhajed (2004) surveyed several past applications, which included location of sub-terminals for grains; processing plants for soybeans; rail-based grain distribution systems; feed and slaughter plants; and citrus packing houses. These older location model applications do not accommodate the complex geographical landscape of agriculture transport (e.g. road conditions, vehicle access) or the broader range of variables (energy supply, labour, biosecurity, access to amenities) related to the decision of where to locate an agriculture facility. In more recent research related to livestock strategic planning, Domingues-Zucchi et al. (2011) applied dynamic programming to optimize the location of abattoirs in Brazil accommodating transport costs and subject to a large range of spatial constraints.

The TRANSIT approach to modelling agriculture logistics scales up from of every vehicle movement between individual enterprises. This provides the capability to analyse a wide range of infrastructure or policy opportunities, whether small or large scale. There have been limited such ground-up attempts at modelling agriculture logistics. In cotton, Ravula et al. (2008) implemented discrete simulation to represent truck movements of cotton and biomass, to test management practices to increase utilization. A State of Logistics study by Higgins et al. (2011) aimed to develop and test a methodology that estimates the costs of logistics in Australian food industries and identify its drivers and challenges. Marquez et al. (2010) developed a freight flow model for all fruit and vegetable movements within as well as in and out of Victoria, with the goal of evaluating the costs of transport logistics under various scenarios of extreme weather events and price shocks. The broader agriculture logistics studies by Higgins et al. (2011) and Marquez et al. (2010) were restricted to small case studies or required heavy data interpolation on resource movements and routes, since detailed data sets on movements were not publicly available. A major advantage of the research to develop TRANSIT has been the ability to obtain and link the range of industry data sets to geographically map out individual supply chain movements across the industry.

TRANSIT was initially developed for the livestock industry in northern Australia, and was co-funded by the Australian federal and state governments (Queensland, Western Australia, Northern Territory) representing the north. Two workshops were held with government, industry and transport representatives to formulate the capability requirements of the model, which then helped define the methodology. The workshops revealed a broad range of capability requirements in identifying financial benefits to agriculture enterprises arising from:

  • Upgrades of roads and bridges to accommodate larger combination vehicles and greater wet season accessibility.

  • New road connections to reduce detours.

  • Impacts of new facilities (processors, storage, cattle yards, driver stops) at different locations.

  • Better utilization of rail transport and suitable hubs and loading points.

  • Changes in bio-security regulations such as reducing some requirements of tick clearing. Livestock transported into a tick infested region must be treated at a facility to ensure they are not carrying any live ticks.

  • Changes to driver fatigue regulations.

  • Impact of extreme weather events on accessibility and transport costs.

Some of these applications (e.g. new abattoir or major highway upgrade) were very large scale and would benefit a large number of enterprises across more than one state, whilst other applications (e.g. minor bridge upgrade) would only benefit a small number of vehicle trips for a few enterprises. Through these applications, TRANSIT informs government and industry on infrastructure investment (and policy changes) by providing transparency on the transport benefits to each agriculture enterprise. The hypothesis behind TRANSIT was that industry wide efficiencies may be gained through a range of small changes and/or improvements to the network through strategic investment at critical locations. Financial benefits from more efficient transport may be accompanied by reductions in deterioration to the quality of the agriculture upon arrival at the destination, increased driver safety, and reduced emissions. There is the challenge that some enterprises will benefit a lot more than others and that agriculture transport often represents a small portion of some infrastructure usage (e.g. highways). A further challenge is “who pays” for infrastructure, whether it is a public or private investment.

Section snippets

Transit inputs

To develop and implement TRANSIT for livestock, data was gathered from more than 20 government departments and industry groups. Data were used for the TRANSIT model in three ways: constructing the routable transport networks, defining the vehicles and their travel features for the network; and constructing the livestock supply chains between different enterprises connected to the transport network.

Transit methodology

The goal of the TRANSIT engine is to optimize the transport route along the road/rail network for each O–D trip, and then calculate the cumulative impacts at the enterprise or regional scale by aggregating across the vehicle trips on each route. The current routes selected by vehicle drivers for transporting agriculture commodities between each origin and destination may not be the most efficient. Depending on a range of constraints at the origin, or along the transport route (e.g. flooded

Applications

Since the development of TRANSIT, it has been applied to several infrastructure and policy scenarios in northern Australia. These scenarios were identified by government and industry stakeholder groups and represent current major opportunities being investigated in the north. We demonstrate TRANSIT using three such case studies in this paper, and highlight how the analysis has been used by government and Councils.

Discussion and conclusions

Agriculture supply chains in Australia, particularly the north, are often characterised by long travel distances between production, processing and markets. This not only substantially increases the total cost of production, but also makes the industry vulnerable to market changes and climate events. It is well known in the industry that infrastructure investments and policy changes would address the transport challenges in agricultural supply chains. However, there was no tool available that

Acknowledgments

This work was co-funded by: Commonwealth Government – Office of Northern Australia; State Governments of Queensland, Western Australia and Northern Territory, Meat and Livestock Association, and Flinders Shire Council. A large amount of industry and state government support was provided to the project team in the form of local expertise, model requirements and key data sets. The authors thank the National Livestock Identification System for granting access to the historical movement data of

References (20)

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