KEY POINTS:
Ports of Auckland managing director Geoff Vazey warns New Zealand's "society of abundance" will fail if the country's supply chain fails, or our productivity does not improve in step with the world.
Vazey - who has overseen a period of rapid expansion at NZ's premier port - says the vast array of choice New Zealanders have at the mega store, the specialist store, and the direct mail seller is only possible because of today's sophisticated supply chain.
"Look around you right now - the majority of products that you see have come across this seaport here in Auckland," says Vazey from his portside office. "The groceries, your furniture, your clothes, your watch, your ceiling panels, your car, your pen, your toothpaste."
The Ports of Auckland boss wants to get a message across to Aucklanders and New Zealand at large.
Companies no longer compete for market share by differentiating their products. Technology is now so advanced that almost anything can be copied. Communication is instantaneous. The result is products don't compete. Supply chains do.
"Few people realise that 10 per cent to 40 per cent of the cost of most goods is supply chain cost.
"For example, 45 per cent of the cost of a leg of New Zealand lamb sold in the UK is supply chain cost."
In his view, that's why the nation's future depends on being able to get goods to and from global markets as quickly and with as low a supply chain cost as possible.
Ports of Auckland came under siege last year when Economic Development Minister Trevor Mallard proposed putting a national rugby stadium on the downtown wharves for Rugby World Cup 2011.
Documents released months later under the Official Information Act under-pinned why Ports of Auckland strenuously opposed Mallard's dream. Setting up such major infrastructure by the 2011 deadline was difficult and there were concerns at potential disruption to trade.
"These responsibilities are taken very seriously by the company and will not be over-powered, nor should they be, by occasional whims of emotional prospect of converting parts of the port for such things as a game of footy,"says Vazey.
Debate over whether Auckland should host the country's major international port was settled (for now) when major international shipping line Maersk chose Ports of Auckland as its North Island hub.
The proposed merger with rival Port of Tauranga is off as the Auckland port gears up to challenge Australian ports for the role of becoming Australasia's premier container port hub.
At issue is whether Ports of Auckland could, for instance, leverage Fonterra's supply chain - which uses Maersk - to entice Australian exporters to route containers through Auckland to the rest of the world.
This is a serious opportunity for Vazey's successor, Jens Madsen, who takes over next month.
Madsen managed Maersk's NZ operations before heading its global refrigerated container services based in Denmark and has the international know-how on how to better plug leverage Auckland's container operations.
Auckland's port already handles 60 per cent of the upper North Island and 37 per cent of NZ's container trade.
In the June 2006 year, Ports of Auckland handled more than $21 billion of New Zealand's exports and imports, twice as much as any other NZ port and the volume is expected to increase as Maersk expands through Auckland.
Initial hiccups as Ports of Auckland worked through the additional through-put from Maersk have been overcome.
A huge amount of strategic planning has gone into how greater efficiencies can be achieved by increasing the port's footprint towards its eastern end, and, increasing capacity by stacking goods and empty containers higher, and by having goods for less time at the port. The port runs 24/7, increasingly trucks move goods at night or weekends, and, plans for an improved rail link will ultimately enable more goods to be carried.
Vazey reckons the port's capacity could be increased - perhaps as much as 12 times.
Major projects are underway to expand the Ferguson container terminal through reclamation, introduce new cranes and expand container handling and storage at two inland ports: Wiri and East Tamaki.
Ports of Auckland handles more than 685,000 containers. Imports make up 55 per cent of full containers coming through the port and exports 45 per cent. Container volumes increased 6.5 per cent last year. The Ferguson project will increase handling capacity by an extra 100,000 units each year.
It's not just the container business that is growing.
The cruise ship business is now booming with the number of ships visiting Auckland swelling by 50 per cent in the 2006 season to 48. Each ship brings an estimated $1m into the Auckland economy.
More than 100,000 passengers were exchanged during the season. Projections suggest nearly 70 cruise ships will visit this year - with a number of mid-winter visits.
The map of Ports of Auckland's footprint shows how the company is gradually transferring its operations towards the eastern end of the port, freeing up land for public spaces and commercial development.
But Vazey suggests Ports of Auckland does need to keep emphasising its value to New Zealand with debate surging from time-to-time as to why NZ's major city should host a port.
Reducing the port's footprint would reduce its ultimate capacity and cap the Auckland supply chain.
"Such a decision would never be taken lightly by Ports of Auckland Limited," he warns. "It would be irresponsible to do so."
Closing the port would impose enormous costs on Auckland-sourced exports and Auckland destination imports and wreck the supply chain of the "society of abundance."
Ports of Auckland is 100 per cent owned by Auckland Regional Holdings, the investment arm of the Auckland Regional Council. Total dividends for June 2006 year were $152 million.
Vazey will remain a director after he steps down.
