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Bus and coach industry explores new ways to overcome growing supply chain challenge

Many local bus and coach OEMs are hurting as they struggle to receive and deliver new models. ABC looks into how the industry can do its best to circumvent the current issues being seen at Australian ports

For bus and coach suppliers like Pete White, it’s been a nightmare.

After rebounding from the dramas of COVID to once again sell plenty of vehicles to local operators, the Bus Stop Sales managing director was expecting a fruitful 2023. With orders placed and a busy year set to ensue, White has instead been left as one of many bus and coach manufacturers and suppliers struggling to see vehicles slated for delivery reaching Australian shores this year.

“Bus Stop is currently awaiting 60 units from countries like China and Malaysia,” White told ABC.

“Port congestion on the east coast of Australia means that on average, four weeks in Brisbane, Sydney and Melbourne is adding 12 weeks to the voyage for new buses to arrive in Australia.

“This congestion and significant delays to products coming from those countries is not sustainable long-term.”

It’s a harsh reality that White is having to combat. Despite introducing and then receiving orders for a variety of new bus and coach models to local customers in the past year, he is yet to reap the reward of these arrivals and deliver them to paying operators.

White says the Bus Stop team is seeing a significant upswing in demand in all segments of the bus and coach market as transport makes a major return post-COVID. None of this upturn is turning into large delivery numbers due to unprecedented congestion at major Australian ports.

“We have some control over production timelines but we’re completely at the hands of Australian ports when it comes to offloading vessels promptly,” White says.

“There’s certainly an issue with efficiency at our ports and it’s having an effect on manufacturers and suppliers.”

White isn’t the only company struggling with supply chain delays. From Bus Stop Sales in Brisbane down to Irizar in Melbourne, manufacturers and suppliers have struggled to fulfil orders and receive new vehicles.

“We’ve struggled with handling inbound shipping delays,” Irizar Asia Pacific managing director Steve Heanes told ABC.

“When deliveries run late or don’t arrive, it causes a bottleneck at our own facility, meaning we have to do extra overtime to deliver vehicles for contracts. It’s been a headache.”

It’s a problem that Heanes doesn’t see changing anytime soon. To combat these issues, Heanes has tried new solutions, changing shipping lines and paying upwards of $12,000 more per vehicle to get them shipped to Australia.

It’s an impact Irizar has simply had to wear, as tariff rises aren’t being matched by prices and costs determined for bus and coach models in government contracts.

“It’s been a significant hit to our bottom line,” Heanes says.

Irizar is one company impacted by supply chain issues

“We want governments to recognise the cost and downward pressure being applied to suppliers and assemblers.

“Then there’s the cost of living problems for our staff. You try to do the right thing by the workers, but it causes larger pressures being put on the entire company – people are going broke in the most buoyant market.”

It’s an issue that is starting to be recognised by more and more people outside of the local bus and coach industry. As a supply chain expert at Melbourne’s RMIT University, Professor Vinh Thai can pinpoint the cause behind Australia’s current port congestion that is having such a damaging impact on local bus and coach manufacturers.

“Late last year we first started seeing quite a bit of congestion at Australian ports, especially along the east coast,” Thai told ABC.

“There are several reasons for this congestion, with a main symptom being that lots of vehicles are coming to Australian ports and are now facing delays.”

A post-COVID surge in volumes aboard cargo movements is inundating ports and terminals all around the world, but particularly along Australia’s eastern seaboard. Thai says the relaxing of both COVID and trade restrictions has caused this flood of ships arriving at ports throughout this year.

For example, recent trade restrictions between China and Australia have been lifted, resulting in larger quantities of import and export volumes travelling between the two countries. For the years prior to 2023, COVID caused a backlog in the global supply chain. Now, the seatbelts are off and the relaxed circumstances mean a surging volume of cargo is now arriving at Australian ports each day.

When it comes to roll-on, roll-off vessels that carry automobile traffic such as buses and coaches, an increase in traffic is only slowing the time it takes to get these new vehicles away from ports and onto Australian roads.

“A very important issue that is impacting the industry is quarantine and biosecurity requirements,” Thai says.

“All cargo coming into Australia must comply with our rules. As the ships arrive, cargo is offloaded and checked.

“When there’s then a shortage in labour for boat activity, including workers who offload the cargo from ship to shore and biosecurity checking staff, there’s a strain put on port productivity, resulting in these delays.”

In Thai’s experience throughout 2023 in particular, he says Australia’s unique port environment through its unions and industrial arms means productivity issues are yet to be fixed. This then has a flow-on effect, creating a backlog of ships at major ports that then results in lengthy delays for deliveries.

Thai says this situation is intensified at major ports such as Melbourne, where shipping lines are faced with even longer delays as the port tries to reduce the time that ships spend waiting to dock at the port.

“The ports want to make sure certain ships spend less time waiting to dock, meaning there’d be less vessels sitting at the port,” he says.

“This adds to the multiplier effect, with the lead time of receiving cargo into shores becoming longer and having an additional cost attached to it.”

The way major Australian ports work is through two main customers in the shipping line and the cargo owner. The shipping line serves the shipper to ensure cargo arrives at ports such as Melbourne, Brisbane or Newcastle.

However, when they know they’re going to face congestion at these ports and will be forced into sitting idle in a waiting area, shipping lines lose money.

“If a ship is sailing at sea, then shipping lines make money, but if it’s standing still then they lose,” Thai says.

“Depending on the size of the ship, every day sitting idle costs them money.

“Shipping lines have worked out the total cost of waiting and instead have begun skipping ports, heading to nearby ports to offload cargo before returning to their port of origin.

“For them, the sooner they leave an Australian port and head back, the better it is for the shipping line, as they can carry more cargo sooner. It’s an economic analysis from their perspective.”

From the shipper’s perspective, which is the likes of Bus Stop and Irizar, they’re forced to pick up their cargo from a different port then what they had initially planned. It’s another supply chain problem to add onto the entire equation that is causing manufacturers and suppliers to struggle to fulfil orders.

Work is slowly being done to rectify this issue. Last year, the ACCC began publishing reports into port productivity issues in Australia, with other voices such as the Commonwealth Bank and Shipping Australia also following suit.

While ports can’t be optimised by physically expanding space, the focus is instead on how to enhance productivity at ports to move cargo through as quickly and as safely as possible.

It’s also caught the eye of the Bus Industry Confederation (BIC). National technical manager Dean Moule says some companies have full order books for 2023 but aren’t necessarily making any money.

“We’ve been pushing an ongoing message to all state and federal governments and ministers that more long term planning is needed for our industry,” Moule told ABC.

“Some ports, like in Melbourne, are charging congestion taxes because they’re busy. We’re trying to see how that’s justifiable.

“The government must be made aware of the bigger picture to see how it’s hurting our industry.”

When it comes to solutions, there are a few options in place from certain parts of the industry. For OEMs like Irizar, something must change so that products reach customers at the right price.

Moule says BIC is using this issue to push the industry to consider partial payments during the build of vehicles. He says partial payments are an important part that, when coupled with long-term volume planning from governments, can make operations easier for OEMs.

“Currently, manufacturers and suppliers bear the whole cost until the vehicle is handed over,” Moule says.

“With batteries and electric vehicles being so expensive, partial payments help relieve that financial burden and we’ve been advocating for that.

“Then we need to look at skills retention and attracting people into the industry, not just to manufacturers but to other parts of the supply chain. Can we use incentives to support the industry?”

From Thai’s perspective, his solution is all about planning ahead. While demand and supply problems still require future fixing, he wants to see bus companies work with suppliers and overseas vendors to identify any potential biosecurity risks and address them before they leave their port of origin, making the quarantine process in Australia quicker and easier.

“Planning is so important – we have to plan to minimise the impact of congestion within reason,” he says.

“Measures need to be put in place from the port of origin before cargo is even loaded onboard, meaning there’s a collaboration between the entire supply chain to ensure Australian companies can plan their own resources for the import of cargo ahead of time.

“If you can spend more time over at the original port to get the process right, then the total time taken to receive vehicles may be shorter than the current scenario we’re seeing.”

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