Thursday 14th Dec 2017 - Logistics Manager

Challenging the conventional

The need to reduce carbon emissions, together with the development of innovative network services, means that the dominance of traditional FTL and LTL road services is being nibbled away at in the pan-European transport market.

This article first appeared in Logistics & Supply Chain, October 2016.

Aircraft might be faster, and ships might be cheaper, but moving goods around continental Europe still relies heavily on ground transport networks – road and rail.

The value of a strong road networks was highlighted by FedEx when it launched its takeover bid for TNT. In the offer document it said: “The combination’s customers would enjoy access to a considerably enhanced, integrated global network. This network would benefit from the combined strength of TNT Express’ strong European road platform and Liege hub and FedEx’s strength in other regions globally, including North America and Asia.”

The past few years have seen the dramatic growth of some emerging players, such as Hungarian group Waberer’s. The company can trace its history back more than 60 years to the foundation of Hungary’s state road transport company Volán Tefu, but it has expanded rapidly acquiring Hungarocamion in 2002, and now has a fleet of more than 3,500 trucks operating FTL and LTL services across Europe. Over the past couple of years it has expanded its operations with additional offices in the UK, Italy, Benelux and Germany.

But, increasingly, the established groupage networks are being challenged by the expansion of the pallet distribution networks. These first hit the road in the UK in 1992 when a group a regional freight transport specialists formed Palletline to provide a hub and spoke solution to the problem of delivering small quantities of pallets. Growth has been dramatic since then and networks have been expanding across the continent.

Palletways, the largest UK-based pallet operator was recently acquired by Imperial Holdings, the South African group that already has a €1 billion business in continental Europe. This provides contract logistics, warehousing, inland waterway shipping and container port management, contract manufacturing in the chemical industry. It targets the automobile, steel, aluminium, paper and chemical industries.

Palletways already has a substantial business in continental Europe. Group chief executive officer James Wilson sees greater potential in the expansion of cross border movement of goods within the group: “Our growth has also been driven by our ever-expanding pan-European service for palletised freight deliveries. Since the start of 2008 we have increased the number of countries we serve from 9 to 20. Today we collect and deliver over 38,000 pallets across Europe every day and we predict that cross border volume growth will grow again this year following our 30 per cent-plus growth last year.

“When Palletways opens its fifteenth hub in Poland shortly, it’ll mark another successful delivery of a tried-and-tested formula; use existing logistics infrastructure to test the market, then establish a permanent base if the commercial results are good.

“Palletways has also invested €10m in the creation of a new hub in Germany, which is fully operational and will triple the capacity of its nearby existing hub in Homberg. A space has also been reserved for another plot which can be used to accommodate future growth and create storage capacity for fulfilment services.

Expansion

“France is likely to see another hub in the next 12 months that builds upon three existing facilities in Paris, Montpelier and Lyon.

“Over the next two years, expansion north and east is on the cards. We’re likely to look north first. Partnerships already exist in the Nordic countries, and beyond that, we’re looking closely at markets in Southern Europe such as Greece, Hungary and the former Yugoslav states.”

French group Geodis has a dedicated long distance road transport operation in European including a UK pallet network, Fortec, which has been expanding its European services making use of Geodis’s large continental network. Earlier this year it introduced ‘simply European’, a service that provides daily and scheduled departures, to 24 European countries. The service is intended for frequent low pallet volume loads.

The premium service delivers the ‘quickest possible transit times’ and ‘places freight as priority on the next daily outbound trunk to Europe’. This service is available to 14 countries – Austria, Belgium, Czech Republic, Denmark, France, Germany, Hungary, Italy, Luxembourg, The Netherlands, Poland, Slovakia, Slovenia and Spain.

The economy European service delivers to these 14 countries, as well as Bulgaria, Estonia, Finland, Latvia, Lithuania, Norway, Portugal, Romania, Sweden and Switzerland with scheduled departure days.

Pall-Ex Group has expanded operations in Europe this year by signing a deal with Econt, which handles over 40 per cent of the parcel market in Bulgaria. With a central hub to be based in Plovdiv, the new network will launch with 18 members and will cover all territories next day as standard.

Pall-Ex’s continental network now spans the UK, Spain, Portugal, Romania, Italy, France, and shortly the Benelux regions. Pall-Ex is also looking to secure partnerships in Germany, Hungary, Slovakia, Czech Republic and Scandinavia. Pall-Ex has also been developing operations in Belgium, the Netherlands and Luxembourg. Pall-Ex operations now include the UK, Spain, Portugal, Romania, Italy, and France. It is also looking to secure partnerships in Germany, Hungary, Slovakia, Czech Republic and Scandinavia.

Carbon Emissions

But road transport is increasingly in the sights of European legislators as they struggle to cut carbon emissions. The European Commission has launched a consultation on legislation on monitoring and reporting of heavy-duty vehicle fuel consumption and CO2 emissions, which is due to close on 28th October.

It calculates that road transport accounts for about five per cent of total greenhouse gas emissions and says that despite some improvements in fuel efficiency, CO2 emissions from heavy duty vehicles rose by some 36 per cent between 1990 and 2010 – mainly due to increasing road freight traffic. “Projections indicate that, without policy action, total heavy duty vehicle emissions would still be close to current levels in 2030 and 2050. This is clearly incompatible with the goal of reducing greenhouse gas emissions from transport by around 60 per cent below 1990 levels by 2050.

Earlier this year some of Europe’s leading brands, companies like Nestlé, Philips, DB Schenker, Deutsche Post DHL and IKEA, demanded that the EU introduce energy efficiency standards within the next two years.

In a letter to European Commission president Jean-Claude Juncker, they argued that simply monitoring truck CO2 emissions would not be sufficient to kick start the market for ultra-fuel efficient trucks in Europe, and call for post-2020 fuel efficiency for new trucks and trailers.

Bart Vandewaetere, Nestlé’s assistant-vice president relations with European institutions, said: “Increasing the fuel efficiency of trucks will give the transport industry the required boost to further reduce overall CO2-emissions after 2020, when most of the other options have been fully exploited.”

Another obvious option is to expand rail freight, and there is work going on in this area. Audi is now holding special presses for body components at a rail connected warehouse at Gyr in Hungary.

This is a response to the move towards greater customisation of vehicles in the motor industry. DB Cargo is operating a 1,800 sq m warehouse for Audi in which it temporarily stores the special presses for body components while they’re not required in production. When custom parts are required for the Audi A3 or TT models, the presses have to be immediately available at the plant. “We’re on call night and day to provide this service,” says terminal director Katalin Váczi of DB Cargo Hungária.

The presses can weigh up to 48 tonnes. Audi now takes delivery of the presses by rail at the plant and stores them appropriately. “If they’re needed in the manufacturing process, we transport them to the production hall and then back to the warehouse afterwards,” says Váczi. Six RILS wagons were acquired specially for this service. “Transporting this heavy equipment by road would be extremely laborious.”

Multimodal

Samskip has been developing pan-European multi-modal services. For example, it partners with Turkish company Netlog Logistics Group to operate the joint initiative GreenBridge Multimodal, offering frequent connections between Turkey and Europe.

It operates three block trains a week between the Samskip rail terminal at Duisburg and the port of Trieste for onward connection to ships operating between Trieste and Istanbul. This give journey times of seven to eight days from Istanbul to Germany and ten to 12 days from Istanbul to the UK Midlands.

Gefco is particularly well placed to develop Europe-Far East rail services as its majority shareholder is RDZ, the Russian railway operator. Earlier this year it started trials on behalf of BMW to assess the reliability, lead times and quality control of a ‘Silk Road’ solution for transporting cars in containers by rail from Europe to China.

It has worked with container racking specialist Trans-Rak to equip containers to move cars with minimum handling, zero damage and optimal loading. A pilot in November last year proved successful and now a second trial shipment of 40 vehicles has been completed, moving the vehicles from Regensburg to Chengdu within just 15-17 days, compared to 55 days by sea. Traditionally, the solution has been to ship vehicles to the Eastern seaboard, but the opening of a new Inland Freight Terminal in Chongqing has for the first time made a pan-China road and rail solution viable, which reduces lead times, saves costs and is sustainable.

And RZD Logistics has started testing refrigeration technology for rail transport of perishable goods from China to Russia. The first refrigerated container train carrying fruit and vegetables left Dalian on 8th August with a transit time to Orekhovo-Zuevo station of Moscow railway of some 20 days. RZD reckons that transit time could be optimised to 12 days – three times shorter than carriage of goods by sea. And the low cost of delivery in China means that the cost of rail transport is competitive with road.

The flexibility, cost and convenience of road means it will retain a dominant position in European transport networks for the foreseeable future, but market changes and environmental considerations will open the way for growth in rail and multi-modal services.