01 February 2010

Sustainable Distribution: Have we arrived yet?

Joint Sheffield Hallam University/CILT(UK) seminar
The chosen subject for the most recent annual joint seminar between the Institute's North-East Region and Sheffield Hallam University was:
Sustainable distribution: have we arrived yet? It proved a million-dollar question, discovered the seminar's co-ordinator Chris Brooke-Taylor.

The pressures on the logistics sector are becoming ever more severe. Costs are rising, concerns about carbon dioxide emissions are increasing, yet customers still want things delivered on time and cheaply.Whilst road haulage is the dominant sector and attracts criticism over its negative externalities, other modes have their problems, too, and often cannot match road for service quality. But, notwithstanding the environmental concerns, owing to port expansion coming on line in a number of locations and continuing economic growth, traffic volumes are likely to grow into the future.The aim of this seminar was to review trends in the various modes since publication of the Government's strategy on sustainable distribution in 1999, consider projections for the industry and examine the role that intermodal freight transport can play as part of the drive for sustainable growth.

Ted Kitchen, Chairman and Emeritus Professor, Sheffield Hallam University, opened the seminar and welcomed any newcomers, especially students, and thanked seminar sponsor South Yorkshire PTE for its support.

Intermodal rail freight

The first presentation came from Dr Allan Woodburn. Senior Lecturer in Freight and Logistics, University of Westminster: Intermodal rail freight d success story? He opened by setting the current context. Between 1976 and 2006, the domestic freight market had grown by around 60%. Road was the dominant mode and rail had declined from 18% to 9% between the mid-1970s and mid-1990s, but was now expanding since privatisation. Volume is now higher than at any time in the last 30 years. Figure 1 shows the proportions of rail freight moved by commodity Figure 2 shows intermodal rail volumes and share of the total rail market between 1998/99 and 2007/08.

A major growth area in rail freight is the deep-sea port-based container market. Figure 3 shows the past and anticipated growth in the container market for the period 1985 to 2030. Figure 4 shows the total number of weekly loaded rail freight services for port-based containers and Figure 5 breaks this down by operator share.The market is becoming increasingly competitive, albeit with a noticeable downtown post-Hatfield, although the rail industry has fully recovered and has, in fact, increased its trade.

The key strengths of rail in the container market are:

* Generally supportive policy environment
* Proven growth record in this market
* Development of on-rail competition
* Recent investment in equipment .
* New/expanded terminals
* Commitments to route enhancements
* Long-term contracts evolving between shipping lines and rail freight operators that is, stability

These strengths are offset by weaknesses:

* Existing terminal and network congestion
* Loading gauge restrictions on main corridors
* Limits on maximum train lengths
* Perception that rail freight is treated as secondary to passenger services

Key opportunities for rail include:

* Continued expansion of containerised trade
* Capacity enhancements at rail-connected ports and new rail-connected container terminals
* Government funding for rail upgrades
* Potential for further improvements in train capacity utilisation
* Impacts of changing road conditions
* Higher volumes likely on key hinterland routes
* Development of eastwest services across Britain
* Potential for further long-term contracts
* Against these had to be considered threats:
* Lack of strategic direction within the rail industry
* Increasing rail network congestion
* Lack of consistency in Government policy
* Continued growth of high-cube container market
* Lack of diversionary routes limits flexibility and robustness
* Competition from feeder ships may reduce inland market for rail

A key issue is loading gauges that is, the standard height and width dimensions for railway vehicles and loads to ensure safe passage through bridges, tunnels and other structures. Currently, the UK is beset by a wide range of loading gauges, largely going back to the railway construction era, but even the most generously gauged lines are to a smaller loading gauge than Europe. The problems of loading gauge are all too apparent from Figure 6, and Figure 7 sets out the current wide range of loading gauges that exist. The minimum loading gauge considered versatile enough for international container traffic is WIG.

The problem can be further summed up as:
* Rapid growth in use of high-cube units swapbodies for domestic/mainland Europe traffic; ISO containers for deep sea/mainland Europe traffic
* As already mentioned, the UK has a restrictive loading gauge; solutions to this are rolling stock solutions for example, lower wagons, see Figure 8 and infrastructure solutions, such as larger loading gauges
This analysis focuses predominantly on deep-sea
market to/from UK:
* Key ports Felixstowe, Southampton
* Other important ports Tilbury,Thamesport, Seaforth

A number of gauge enhancements are planned that
will provide key routes:

* A series of route upgrades planned by 2014, with funding from various sources: Transport Innovation Fund (TIF): Strategic Freight Network (SAN); Network Rail funds: and third parties, such as ports and regional development bodies
* Further route upgrades are planned to follow

However, what will be the impacts on current service provision of these improvements? Planned gauge enhancements are shown in Table 1.These enhancements will lead to the changes to percentages of services using WIG gauge-cleared corridors see Table 2. The improvements taking place on routes to Felixstowe and Southampton in particular are a major step forward.

Allan Woodburn summed up the key findings of his presentation:

* Intermodal traffic is increasingly important for rail
* Rail is increasing its mode share at key ports
* On-rail competition is increasing
* Slow development and implementation of
* Government policies and investment
* Greater co-ordination now in enhancing network capability for containerised flows
* Long lead-time for infrastructure projects for example, gauge enhancement

There is a general widely held concern that Governments defer decisions for years, making long-term planning very difficult. However, as Government awareness increases there are grounds for optimism, but not necessarily on timescales.

Privatisation
The second speaker was Tom Jones, Senior Rail Strategist, Freightliner Group Ltd, who gave a synopsis of how the privatisation had transformed a loss-making business with tired and outdated assets into the 2Ist-century logistics company specifying in rail'.

From an operating loss of about a million at privatisation in 1996, the group, subject of a management buyout and now owned by investment bank Arcapita, has expanded from its traditional intermodal business into bulk commodities with its heavy haul operation, and has matched more than a doubling of market share with investment in new locomotives, wagons and terminal facilities, which are worked hard to achieve optimum output.

Building on Allan Woodburn's comments, Tom Jones went on to explain why Freightliner has been successful, in recent years. Innovation and quality featured heavily, attuning the whole business to the basic requirements of the customer choosing and empowering the best people to make things happen on the ground. Naturally, price is everything so far as intermodal competition is concerned, and road hauliers are ready to pounce at the first sign of the railway failing to deliver. Tom Jones graphically illustrated this point, citing traffic that had been lost to rail in the days following events such as the Hatfield accident and the engineering overrun at Rugby, which had not returned. Despite this, customer focus, reliability and competitive pricing has seen Freightliner grow, operating at the time 87 rail services a day between ports and inland terminals. Service quality is assured by Freightliner's provision of its own road fleet to provide a total end-to-end offering to customers, and the company operates over 300 lorries.

Rail's market share having increased from 17% to 25% between privatisation and Hatfield,Tom Jones turned to the challenges ahead. It was a privilege, he said, that the major shipping lines choose to call their largest vessels at British ports; over 80% of UK-destined deep sea containers move through the ports of Southampton and Felixstowe. It was his view that these ports would continue to grow and dominate trade between Britain and the wider world. With 90% of Freightliner's container trains from these ports traversing the West Coast Main Line, amongst the busiest in Europe, the British rail network is the last major link in the worldwide logistics chain.

Gauge clearance, the process of making rail routes fit to accommodate the largest containers, of which the proportion in the market is increasing exponentially, is crucial to rail's competitiveness in the market, and Tom Jones noted with pleasure that work was due to commence on the works to allow 9ft 6in containers on standard wagons to transit between Felixstowe and Nuneaton, and critically also on the route north from Southampton to the Midlands. Availability of suitable routes for freight all through the week is crucial if rail operators are to meet the expectations of their customers, who are familiar with a road network that they take for granted as being available on this basis.

Concluding, Tom Jones made a fervent case for measures to ensure that rail is given its rightful place in the logistics choices we make, not least by ensuring all modes contribute to the external costs they cause. Noting that Freightliner operates rail trunk haulage with a complementary road end-deliver offering, he ventured that each mode should be used to do what it does best, noting that the current proposals for longer heavier lorries simply created a road-borne inferior clone of a train, which imposes greater costs on society, to boot.

Meanwhile, the recession may be taken as an opportunity to invest in modal shift to rail. This would deliver immediate step change benefits in emissions and also serve to increase rail market share ready for when the economy recovers.

Freightliner would like to see an end to 'modal agnosticism'. Tom Jones noted that the modest sums invested in modal shift grant by government represented excellent value for money and also suggested that the playing field could be levelled further through lorry road user charging, ensuring that all modes are financially accountable for the external costs they cause.

On the railways, he said, more should be done to balance the needs of passengers and freight on what is a shared use and congested network, and the 'strategic freight network' should be continually developed to permit customers, and volumes, to switch to rail. He implored logisticians with no direct or recent experience of rail service offerings to come to the industry, see the progress that has been made, the delivery to promise that Freightliner prides itself on and to engage further with the rail freight industry, to help them develop strategy to make modal shift a reality.

Anticipating a bright future for the industry, Tom Jones predicted with confidence that the achievements of the past decade can and should be surpassed by those of the decade to come.

Question-and-answer session

Ted Kitchen then opened the floor to questions, with the two speakers forming a panel. Discussions were wide ranging and included:

* The debate over the relative benefits of road and rail for the transhipment from the UK mother ship port one questioner suggested delivering by sea to the port nearest the destination and then direct to lorry; generally, rail can offer a relative efficiency of 3:1
* Rail tends to be less competitive the shorter the distance
* All modes have their strengths, including the lorry, particularly at the very beginning/end of the shipment
* There was a lot to learn from Europe about keeping
railways open 24/7, which is essential if rail is to compete against road; delivery needs to be when the customer wants it and not when there is operational capacity on the network; adequate diversionary routes are essential and priority needs to be given to increasing capacity at key points
* HS2's benefit would be to deliver freight capacity on the existing network, rather than allowing high-speed freight operation; HS2's main role would be to shift traffic from air
* The rail freight industry needs to improve its image, as potential customers think either of BR days or immediately post-Hatfield; currently. Freightliner exceeds the expectations of its customers
* On the subject of sustainability, a lot more work is needed on assessing the relative merits of road, rail and sea; there are some huge challenges ahead, and, in addition, the mechanics of the supply chain business are constantly rapidly changing
* lntermodalism needs a lot of effort, global thinking and, most of all, the political will that probably is not there yet
* Electrification is a solution, but will be driven by the needs of the passenger railway

Summary

When asked by Ted Kitchen to sum up:
* Tom Jones gave a plea to non-rail people to come and talk to the rail industry and see how it can help their needs
* Allan Woodburn said that rail freight is doing a lot more than people understand it to be doing and still think
it is as unreliable for time-sensitive delivery as it was 25 years ago

Ted Kitchen then closed the meeting and thanked the two speakers and audience for what was a well-informed and vibrant seminar and looked forward to seeing everyone next year

Source: Logistics & Transport Focus