Changes to global trading patterns are driving development of multimodal and intermodal logistics solutions, both within Europe and on the New Silk Road. Malory Davies looks at the impact…
Political change both in Europe and the US has been characterised as a “retreat from globalisation” – and it is likely to have an impact on supply chain thinking with organisations looking at on-shoring and near-shoring.
Danny Southby, head of European network at Davies Turner, says: “Onshoring and re-shoring is in part being driven by the new ‘normal’ in ocean freight, longer lead times due to overcapacity resulting in ‘slow steaming’. For many customers there is less sense perhaps in manufacturing everything in China and having goods at sea for long periods of time. This adjustment in the supply chain will undoubtedly mean a greater focus on domestic warehousing, and local solutions. It’s one reason why Davies Turner is part way through an ambitious programme to increase logistics capacity throughout its current UK network.
“Speed to market, and technology supporting both accuracy and information flow is becoming ever more important – and it’s for this reason that Davies Turner is watching developments around Customs border control related to Brexit which could potentially add unnecessary complication and delays setting us back in terms of ‘just in time’ capabilities here in the UK. We need at best free, at worst smooth trade arrangements with the EU to avoid the trickle of companies already re-homing their European distribution from the UK, becoming a flood,” says Southby.
However, Andrew Baxter, managing director of Europa Worldwide, says he has seen no evidence of a ‘retreat’ from globalisation in his business. “President Trump has made bold statements about his plans for trade and his resistance to globalisation, but we’re yet to see any impact and I doubt our business will. The USA’s agenda won’t affect logistics to and from the UK in my opinion. Some businesses have always produced goods onshore or near shore for faster transit times, but we certainly haven’t seen a rise in this. We’ve had an extremely strong start to 2017, running at around 25 per cent consignment and turnover growth and we are well on track to exceed our new business targets for this year.”
What is clear is that intermodal is increasingly offering an alternative to tradition ocean services from the Far East to Europe. Far East Land Bridge (FELB) has spent some seven years establishing a railway route for containers between Asia and Europe, based on the Trans-Siberian Railway. It reached an agreement with its initial Russian partner TransContainer enabling it to commence with the first pilot shipments in 2007. Over the years FELB became owner of more than 7,000 containers and increased the frequency of train departures from one per week to six per week. As a result of this also two special train operating centres – Block-Train Centres (BTC) – have been established, one in Asia and one in Europe.
In 2012 FELB established a forwarding company in Vienna – CEL Logistic Company GmbH – with the main objective of engaging in pure forwarding activities as well as conventional rail and truck transport within the group, covering Europe and CIS.
But it is only weeks since the first container train from China to the UK, travelling along the New Silk Road, arrived at DB Cargo’s Barking terminal. Tesco has been one of the first UK retailers to use the Silk Road to import products to the UK from China. The route gets goods from producer to Tesco in 26 days, and, according to Alistair Lindsay, head of global logistics and wholesale operations, rail is only 20 per cent of the cost of air transport and was faster than ocean.
The train service starts in Wuhan and travels from China via Kazakhstan to Moscow. From there it goes via Belarus into central Europe where it is transhipped to lorry and driven the rest of the way to Tesco’s distribution centre on Teesside.
Danny Southby points out that Davies Turner has been pioneering a number of now well established Silk Road routes. “There are big speed advantages over sea freight, and rail options typically cost around half the costs of an air alternative. Davies Turner is taking advantage of a number of routes, with one particular option connecting seamlessly in Poland to a daily, double manned trailer service competing head on with much publicised direct routes into the UK.”
The overland route is more expensive than ocean but significantly cheaper than air, he says. “Providing this third option gives procurement managers a chance to tailor their freight spend relevant to production.
“Instead of having to upgrade an ocean order to air, the rail option gives them a window to meet deadlines without having the full expense of air freight. Now procurement managers have a chance to factor their budgets to take into account the ability to see the majority move by ocean, see orders that could be “at risk” and decide on rail and generally reduce the number of upgrades of orders that previously only had the option of air. The service sits perfectly between the two and is marketed by Davies Turner as a ‘third freight option’,” says Southby.
Another example of the benefits of the route is a service now being operated by Geodis for Kaporal, the Marseille-based designer jeans manufacturer.
The train takes 18 days to get from Wuhan to Lyons – a distance of some 11,300 km.
Geodis consolidates the goods from multiple suppliers in China. Once loaded on the train, the cargo crosses China, Kazakhstan, Russia, Belarus, Poland, Germany and France. Containers are then routed to Geodis ’ logistics platform in Grans, near Marseille from where a total of 10 million textile garments are delivered each year to the Kaporal outlets throughout France. Eventually, three trains per week will use this route for Kaporal.
Alternative to air
Vincent Allal, head of Kaporal supply chain, says: “Rail transport is a real alternative to air travel that was previously considered. The transit is relatively short, we have halved our bill on this transaction and we are very sensitive to the low environmental impact of this solution.”
Certainly there is considerable growth potential – Southby points out that growth is only limited to capacity on the rails. In any case it will only be a minor dent against the massive volumes that move by ocean, the growth will likely come from the high value tech and clothing markets and of course the orders that no longer have to consider air as the only “other” option. More frequent and an increasing number of departures are forecast as more Chinese cities will be encouraged to participate.”
But the benefits of the overland route is not limited to bringing goods into Europe from China. A report produced by Bain and Co for the World Economic Forum examines the wider economic benefits.
Entitled “How Technology Can Unlock the Growth Potential along the New Silk Road”, the report argues that as the global economy continues to slow and the world searches for new growth engines, the Silk Road Economic Belt and the 21st Century Maritime Silk Road offers a major development framework and opportunity for connectivity, international trade, and economic development.
And it calculates that small and medium-sized enterprises along the New Silk Road could boost the GDP of their countries by four per cent to seven per cent as a result of increased market access.
The report’s recommendations include:
Facilitating direct access to markets for SMEs with online platforms designed to connect them with distant customers.
Creating improved market intelligence reports for SMEs that could enable much better understanding of product supply/demand dynamics, more agile adjustments to production plans and improved tracking of prices and their trends
Standardise clearance procedures and transforming human decision-making into machine intelligence with lower risk of corruption in customs clearance processes
By focusing on the adoption and implementation of new technologies that improve infrastructure efficiency, companies could achieve real-time supply chain visibility, eliminate inconsistencies in customs clearance procedures, reduce overall operating costs and increase the speed of goods transported along routes between Europe, Asia and beyond, the report suggests.
The growing importance of multimodal solutions in Europe was highlighted towards the end of last year by the €8 billion contract between the PSA Group and Gefco. Under the new agreement, Gefco will design and implement global logistics and transport solutions for the three PSA Group brands, Peugeot, Citroën and DS. It will manage and optimise the entire supply chain, from sourcing components for production and assembly plants to distributing finished vehicles. In addition to these outbound and inbound logistics services, Gefco will be responsible for distributing spare parts.
As a 4PL provider, Gefco will be the PSA Group’s sole partner in putting in place optimised multi-modal processes that combine rail, road, sea, air and inland water transport to create end-to-end solutions. It will also be responsible for coordinating the suppliers chosen to take part in the supply chain following calls for tenders. A central part of its integrated role will be applying its advanced logistics engineering skills, in combination with high-performance IT and data management systems, to provide real-time tracking and ensure the seamless interplay of the supply, storage and distribution chains.
First train from China to UK
The first container train from China to the UK arrived at DB Cargo’s Barking terminal in January. The train, operated by the InterRail Group, took 18 days to make the 12,000 km journey loaded with textiles and consumer goods – about half the time of transport by sea.
The train originated in Yiwu in the eastern Chinese province of Zhejiang.
DB Cargo is responsible for the section from Duisburg to London via the Channel Tunnel. The 34’x40’ containers required specifically for the UK were loaded on to Deutsche Bahn’s container platforms at the Duisburg container terminal, which are specially approved for the Channel Tunnel.
InterRail, a multinational transport operator headquartered in Switzerland, operates the service on behalf of China Railway subsidiary CRIMT. Various freight railways handle traction along the 12,000 kilometre route.
The 10,000 to 12,000 kilometre journeys usually take 12 to 16 days and require containers to be unloaded and reloaded multiple times due to changes of gauge. The service is used in particular by customers with time-sensitive commodities, including special promotional clothing items, and capital-intensive goods, such as automotive parts and electronics.
Analysing the trans-continental options
Intermodal and multimodal solutions are increasingly being used in Europe – notably to bring goods in from Turkey.
Southby points out that the majority (around 95 per cent) of Davies Turner’s Turkish inbound traffic is running on multimodal or intermodal routes. “This has dramatically increased our volumes, as well as saving millions of truck kilometres off the roads each year. Ultimately the aim is to bring trains direct from Trieste and Sete directly into the UK, and this is currently under discussion. This would take even more trailers off the already congested European and UK road networks but to do this the UK needs bigger infrastructure to cope with increased volume. Each Ekol train takes up to 32 mega trailers, the biggest efficiency wins come from bringing cargo as close as possible to the client and making the shortest possible ‘final mile’ road delivery.”
GreenBridge Multimodal recently launched a new round-trip train service between Turkey and Europe – the fourth round-trip, regular service connecting the Duisburg rail hub and the port of Trieste.
“The frequency increase vindicates the principles behind GreenBridge, which combines the benefits of Samskip’s European multimodal network and Intercombi’s in-depth industry expertise in the Turkish market,” says Marcel Delmee, GreenBridge manager multimodal services, Turkey Trade.
“GreenBridge offers major advantages over conventional road transport that include faster transit, elimination of border delays and traffic jams/road taxation, better security and lower fuel costs.
“Introducing the fourth round-trip train meets expectations set out at the launch of GreenBridge in 2014 and will enhance service for existing and new customers. Our ambition is to add a fifth train in the future.”
Samskip has also been working with Hector Rail, the Swedish company that recently bought GB Railfreight.
The train haulage company has launched a new service which sees six round weekly trips between Helsingborg in Sweden and Duisburg in the Ruhr area of Germany.
The journey is made via Copenhagen in Denmark.
The partnership already cooperate between Duisburg and Malmö, Almhult, Nässjö, Katrineholm and Gothenburg.
“We are pleased and proud about the extended confidence that Samskip is exhibiting in Hector,” says Mats Nyblom, Managing Director of Hector Rail AB. “Samskip’s forward-looking environmentally friendly concept focuses on quick and reliable rail services.”
Johan Logtenberg, managing director of Samskip Van Dieren Multimodal says: “Our offer to the market which combines cost efficiency and low environmental impact has proven successful and our operations continue to expand. We are happy to take this step with Hector Rail and together develop our intermodal concept further.”
One of the challenges to developing more intermodal services is the availability of suitable terminals.
P&O Ferrymasters and Transmec Group, which have been collaborating for 14 years, last year got a private intermodal terminal at Oradea in Romania to serve intermodal services linking Eastern and Western Europe.
“Our customers will now benefit from a dedicated and integrated intermodal product covering ferry, rail, road and terminal operations – all of which is focused on enhancing service levels and creating a future network to build upon,” says Wim Blomme, P&O Ferrymasters intermodal director. “The investments made to acquire and upgrade the terminal demonstrate our long-term vision and ambition to develop further into the east.”