The impact of road traffic congestion on supply chains: insights from Auckland, New Zealand

Extant research into traffic congestion in relation to freight transportation and logistics is usually conducted in the context of economies (e.g. he USA) where road traffic congestion in a single region (e.g. Los Angeles County) will have negligible overall impact on supply chains. The Auckland region in New Zealand (NZ) represents an exception: it accounts for a third of NZ’s population but only about 2% of NZ’s landmass. (Only Athens in Greece and Buenos Aires in Argentina manifest similar population concentrations.) Therefore, road traffic congestion in the Auckland region is considered a national problem: in terms of lost income, time and pollution, congestion is estimated annually to cost the NZ economy about 1% of NZ’s GDP. The Auckland region, then, serves as a fertile context for uncovering rich, micro-level insight into the impact of road traffic congestion on manufacturers and distributors and their supply chains. We found congestion affects businesses in varied ways and degrees depending on the nature of the market for the company’s products, the nature of raw materials and finished products, the location of the factory/warehouse, etc. Congestion is often an amplifier of delays and costs, which themselves burgeon for a variety of reasons. These include business growth, increasing levels of service, urban sprawl and bio-security regulation. Since it is not always easy to isolate the impact of congestion on logistics costs, organisations are tempted to impute rising logistics costs to congestion more than is justifiable. In some cases, however, the same strategies that are employed to satisfy efficiently just-in-time replenishment by customers in small consignment sizes also blunt the impact of congestion.