Making the most of our nationwide logistics network

Improving the efficiency of NZ’s import and

export supply chains New Zealand Rail Conference – June 2014

Scott Brownlee

Chief Executive DTL

Making the most of our nationwide logistics network

DTL at a Glance

• A cargo owner

• Outsourced freight manager

• No physical logistics assets

• People, data and technology

• South to north cargo flows

Optimisation Value Creation Partnerships

Safety and Compliance

Customers Carriers

Making the most of our nationwide logistics network

Our Rail Network

• Series of closed loops

• High volumes, long distances

• Not time critical

• Good access to rail

• 20 train services a day

• 6 main rail hubs

• 10 rail served satellite sites

Kauri

Hamilton

Whareroa

Darfield

Mosgiel

CHC IFH

‘closed loop’ Land based Consolidation

Future Freight Hubs

Making the most of our nationwide logistics network Making the most of our nationwide logistics network

Focus on Compliance

• 61 NCR’s YTD

• 140,000 containers YTD

• 0.04% fail rate = best in class

• 69% of NCR’s are temperature

fails

Making the most of our nationwide logistics network Making the most of our nationwide logistics network

Centralised Container Management

• Central visibility to manage

constraints

• 99.8% container supply

• Contributing to a 19%

increase in product onto rail

over last 2 years

CCM - Overview

Container

Ordered

Container

Released

Container

Delivered to

Pack Site

Container

Inspected

Container

Packed

Container

Delivered to PoA

DTL

Fonterra Pack Sites

DTL

Box Co / CT Site

Ship Cos

Kotahi

DTL

Kiwi Rail

TptCos

Fonterra Pack Sites

Fonterra Pack Sites

DTL

Kiwi Rail

TptCos

DTL

Box Co / CT Site

Ship Cos

Kotahi

% Containers Ordered within std. Lead times

% Container Release Attainment by Box

Co

% Containers Delivered by agreed Gate-in date

– incl. correct mode

% Containers failing inspection

– by Ship Co

% Container Pack Schedule

Attainment

% Containers Delivered to PoA within port cut-

off criteria

Process KPI’s

Daily DTL DMS Sessions Run by DTL with 3rd Parties contributing to

container supply

Daily Fonterra Site DMS Sessions

Outputs from DTL DMS feed Fonterra Site

DMSDaily KPIs used to manage quick fix aimed at

minimising operational impact of failureWeekly trend analysis used to manage service

delivery and to drive process improvement

Making the most of our nationwide logistics network Making the most of our nationwide logistics network

Physical Network Improvements

• 50% reduction in

mainline derailments in

the last two years

• Exponential decrease

over last 10 years

Making the most of our nationwide logistics network Making the most of our nationwide logistics network

A Joint Approach = An Efficient and Productive Network

• Good access to assets

• Taking a network approach

• Managing flows end to end

• Central coordination and

visibility

Making the most of our nationwide logistics network Making the most of our nationwide logistics network

Emerging markets – dairy on the rise

1. Growth rates represent forecast compound annual growth rates. Current volumes are represented by the area of the circles displayed

2. Although strong growth in demand is expected in India, it is expected that the ability to supply into India will continue to be constrained by relatively high barriers to trade for dairy products

Source: Fonterra estimates

MENA

2%

4%

10%

India2

7%

7%

China

4%

2%

LATAM

2%2%

ANZ

1%

1%

Nth America

<1%

1%

Europe

<1%

Outlook to 20201

ASEAN

2-3%

4%

Demand Growth Supply GrowthDemand Volume Supply Volume

Opportunity

Making the most of our nationwide logistics network Making the most of our nationwide logistics network

Global trends – driving need for change

• NZ is a long way from markets

• Lacking scale and flexibility

• Imbalance of trade flows

• Bigger ships must be full ships

• Infrastructure investment required

Making the most of our nationwide logistics network Making the most of our nationwide logistics network

Competitiveness – built on efficiency

• Consolidating freight to fill ships

• Integrating IMEX/domestic networks

• Match service requirements

• Taking an end to end view

• We must collaborate

Without freight owner/ stakeholder collaboration, there is a risk of an increase in waste and costs across the entire supply chain.

Co

sts

per

TEU

Ship Size

LANDSIDE COSTSwithoutcollaboration

LANDSIDE COSTSwith collaboration

OCEAN COSTS

Co-ordinated Import, Export & Domestic Flows

Napier

(Multi carrier – Med Vessels)

Current Future

-9%

$/MT

-9%

$/MT

Transit Premium 3-4 Days

Closest Port

(1 carrier – Small Vessels)

Current Future

Baseline

$MT

Baseline

$/MT

Transit Premium 7-10 Days

Tauranga

(Multi carrier – Big Vessels)

Current Future

-16%

$/MT

-29%

$/MT

Transit Premium 0 Days

Intermodal

Freight Hub

Whareroa

Auckland

(Multi carrier – Big Vessels)

Current Future

-16%

$/MT

-29%

$/MT

Transit Premium 0 Days

Making the most of our nationwide logistics network Making the most of our nationwide logistics network

Collaboration – making it sustainable

• Build freight owner network

• Aggregate complimentary freight – smooth flows

• Optimise backloads - Increase utilisation

• Container Triangulation

• Increase commitments

• Support infrastructure investment

Making the most of our nationwide logistics network Making the most of our nationwide logistics network

Intermodal – closing the loops

• Two closed loops in NI

• Import/Export triangulation

• Export/domestic utilisation

• Connected at Intermodal Freight Hub

• Close to ports

• Close to other cargo owners

Auckland IFH

Customer DC

(AKL)

Fonterra DC

(LNI)

Customer DC

(LNI)

Port

Export

Pack

Cross-dock

CT

Site

Fonterra Product; DC to Intermodal to IFH to Export Pack to Port

Customer Product; DC to IFH to Intermodal to DC/Store

Making the most of our nationwide logistics network Making the most of our nationwide logistics network

Imports / Exports – Capacity

• Import / Export Loop

• 50% more volume

• Rail corridor infrastructure largely in place

• Work required at both ports

• Intermodal exchange required

Making the most of our nationwide logistics network Making the most of our nationwide logistics network

Export / Domestic Exchange

• Product to container model

• Intermodal containers

• Complimentary cargo

• Train schedules are the key

IFH / Export Pack

PNTH

WROA PHTA

Customer / Freight Forwarder

South – Depart Auckland 1930

4 ½ hrs. travel time each way 1 ¼ hrs. travel time each way

1500 train departs Whareroa

Arrive Auckland 0730

Afternoon Train departs for Whareroa and Pahiatua

North – Depart PNTH 2000 Arrive PNTH 0600 hrs.

12hr turnaround

Proposed train plan

NO CHANGE NO CHANGE

Making the most of our nationwide logistics network Making the most of our nationwide logistics network

Taking a Network Perspective

• Not just about a freight hub

• Managing freight flows

• Network modelling

• Partnerships to bring modelling to life

– Government for rail infrastructure

– Cargo owners for volume

– Investors for interchange assets

– KiwiRail for operations

Making the most of our nationwide logistics network Making the most of our nationwide logistics network

Doing what we do well

• KiwiRail to focus on strengths

• Industry collaboration to further improve

• Take a long term approach

Making the most of our nationwide logistics network

Thank You