Intermodal transports

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Could the Swedish intermodal success story be transferred to Denmark?

BackgroundIn Sweden intermodal transport has undergone a dramatic process of change and

the transport work has doubled since the millennium. This change has not only

occurred on the traditional distances for intermodal transports, i.e. large volumes

over long distances, but even occurred on large volume over distances down to

150-200 kms. Rail deregulation, realized new business opportunities between new

entrant rail operators and hauliers, shippers and forwarders changed transport

strategies and increased degree of containerization in the global transport market

are some dimensions explaining this process. Consequently, the aim of the

presentation is to transfer the knowledge and experiences from the Swedish market

to the Danish market in order to discuss opportunities and obstacles on the Danish

market for a similar process..

Discuss if the experiences of the Swedish Intermodal Success story could be

transferred to Denmark?

Aim

Volume and transport work development

3

Swedish trends in the intermodal market

• Growth 1997 – 2011

• Domestic +116 %

• International +292% (includes transit traffic from

2009) +218% until 2008

• Break in 2002. • Market share increased from 3 % to 6 %.

Ex Network replaced by single lines

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Gothenburg Port

2001 – 2012: +247%

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Train operators who traffic Port of Göteborg

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Example of international development

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Accessibility to and establishment of terminals

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New operators trafficed new

makeshift terminals

Municipalities etc. came to be interested in establishing

intermodal terminals

Many of the new intermodal transport

services traffic newly established

terminals

• Intermodal terminals has been considered to be commercially closed by new

operators

• Convenient and cost efficient terminals

- Rail access

- Road access

- Transshipment capacity & cost

- Closeness to customer

Terminal congestion?

• Overlapping catchment

area

• Limited transport

market

=> risk of cannibalism

• Cooperation or

competition?

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0

50

100

150

200

250

300

350

400

10 30 50 70 90 110 130 150 170 190 210 230 250 270 290 310 330 350 370 390 410 430 450 470 490

Road

Rail EL

Rail El - VXL Diesel

Rail Diesel Td

Rail Diesel TMZ

Rail Diesel Kapillär

Road 32 mKo

stna

d pe

r ton

Intermodal transport costs – a calculation example

Economy of scale –

large volumes required

Breakeven distance

varies depending on:

- Port or inland

transport shuttle

- Locomotive type

- Truck size

- Unlawful

competition

Barriers• Transport time, reliability, cost

• Road solutions a base alternative – intermodal as volume back-up

• ”If our competitor use the service we will not”

• Share of information, consolidation hindrance• No offer of door-to-door intermodal transport services

• many companies involved in intermodal transports chains• Low cost hauliers

• Marketing and logistics uncoordinated

• Central warehousing – short transport lead times

• No (economical) incentive for change

• Short term contracts

• Lack of willingness from Infrastructure managers to improve business conditions

for freight operators 12

Stimulating factors

• Deregulation of the rail network

• Modest track charges and incresed fuel prices

• Containerisation

• Container and trailer shuttles

• Customer and agent initiated transport systems

• Subsidies as Marco Polo

13

Successs factors

• Large shippers that initiate intermodal transport shuttles/systems is a great driving force. They guarantee a base volume from which the transport service can be built around.

• High utilisation in the trains is fundamental. Otherwise the transport service will not be economically sustainable.

• Transport buyers takes the initiative for intermodal transport and not primarily the train operators or transport service providers as forwarders.

• Real Rail one exception: initiative from a haulier• Sweden has a large scale production industry that has a large

transport need. However, the growth is mainly driven by import volumes.

Transport buyer driven developments requires…

• A few dedicated individuals • Restructuring logistical solutions – warehousing, order time,

flow coordination• Affects purchasing and/or sales – top management support• Take an investment – long term contract/set-up• Examples

• COOP (Helsingborg – Bro) • Waggeryd Cell (Vaggeryd – Göteborg)

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Questions?

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Reflections – barriers or market opportunities

Business perspective

Operational perspective

Sustainable perspective

Shippers

Transport & terminaloperators

Society

Sustainable

transport system

Barriers

Barriers

Shared objectives

Problem description

A fragmented and functional approach

Socio-oriented

Regulative

sid 19

Organisational

Infra-

structural

Market oriented

Technical

IT, administrative and planning

Production and operational

Barrier categories

Market aspects – shippers perspective I

• Deregulated transport market in Sweden has increased accessibility to rail/intermodal transports for medium and

large shippers, however for a majority of shippers rail and sea is not an option.

• Minimum transport volume has increased from wagon-wagons to Block train-full train. The IMO regulation will (most

likely) result in concentration of flows to fewer ports called by larger vessels.

• Marketing and sales are focused on dedicated customer oriented solutions => barrier towards inter-organisational co-

ordination and consolidation of different consignors/consignees shipments.

• Transport service providers are often closely connected to road transport hauliers and focus on maximum utilization

of these resources. Intermodal and rail is mainly used to handle fluctuations. Consequently, difficult for intermodal

operator to maintain stable freight volumes and thus profitability.

• An intermodal service provider offering door-to-door transport based on “a phone call” or an IT-application.

Procurement of intermodal transports is – related to road transport – a long resource demanding process.

• Commercially closed terminals affect the accessibility to rail transport for SME-enterprises.

Market aspects – shippers perspective II• Passenger transports are prioritized ahead of freight – resulting in increasing lead times (short term

affecting costs by 10-20%) or for new entrants/new transport solutions non-accessibility.

• SME enterprises very seldom get offers from rail operators. Even for medium and large enterprises it

takes weeks or months to get an offer.

• Accessibility to low-cost hauliers from Eastern Europe has transformed the Swedish transport

market. Accessibility to these hauliers has decreased road transport costs from 11.5 SEK per km to

0,85 SEK per km per EU18.75m. Incentives to change transport solution is very low.

• Choice of transport equipment are made based on tradition rather than customer needs.

• Too much focus on operational issues –shippers, transport service providers or operators lack

incentives to discuss long-term issues

sid 21

Market aspects – operator perspective• Shipper’s market and logistics departments are seldom co-ordinated. Resulting in short-lead time from

time of logistics notice to time-of-delivery.

• Marketing and logistics: one willing to co-operate with competitors and one not. Two opposing internal

perspectives.

• Marketing often selling on conditions that is difficult to full fill for logistics department. Delays and

disruptions not acceptable. Misinterpretation among shippers of the concepts of JIT.

• Lack of incentives to change logistics operational behavior and consequently the willingness to

logistical long-term co-operation among shippers.

• Still tight inter-organisational-ties between freight forwarders and hauliers – affecting the service

portfolio offered to shippers. Consequently, primarily road service is offered and in a second step of

decision the choice intermodal/road is an operational decision.

• Short-term contractual agreements – impossible to make new transport solutions profitable.

• Shipper’s and freight forwarders require a reasonable kick-back if a change may occur. For the

operator this limits chances for profitability during implementation.

• Shippers often dictate the transport conditions based on a tender adopted to road transport

conditions.

• Costs and benefits – how are these allocated in an intermodal chain. Transport actors are investing,

however who benefits from these investments?

sid 22

• Lösningen hos företag är att – drivet av en eller ett fåtal personer inom samma

organisation – driva utvecklingsprojekt där man ifrågasätter hela nuvarande

logistikupplägg och genomför större förändringar – så har skett inom svensk

dagligvaruindustri (ex COOP).

• Hela affärsmodellen för företagen – hur man säljer varor, hur varor köps in med tillhörande management system anpassas (två bra exempel är Waggeryd Cell och COOP).

• Hela logistiken behöver ses över för att göra en omställning som är mer än marginell.

• Denna utveckling drivs inte av transportindustrin => hela transportindustrin är

reaktiv – sällan de kommer med egna omvälvande lösningar.

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Organisational aspects – shipper perspective

• Structural barrier; freight forwarders are not willing to open their terminals and their ware housing service.

• Shippers and transport operators not willing to share logistical information

• A critical question is how to consolidate shipments? The key is new business models with vertical and horizontal co-operations along the supply chain

• Changed logistics structure from regional distribution towards national distribution. Next step distribution incorporation all of Scandinavia?

• A process of change towards changed behavior in logistics almost need a top-management decision and allocation of resources.

• To many actors involved in intermodal transports (economy and control)

• Transport operators internal organizations are barriers towards change (tacit knowledge).

• Lack of willingness from Infrastructure managers to improve business conditions for freight operators

Tillgänglighet terminaler

• Nya aktörer på den svenska marknaden hittade till nya terminaler, vilket i sin tur

fick kommuner och myndigheter att satsa på nya terminaler på nya orter. En

positiv spiral. Få av de konventionella terminalerna har idag regelbunden

intermodal hamnpendel trafik utan merparten går till och från nyetableringar.

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Organizational reflections – operator perspective

• A neutral forum, including change agent, is needed to identify, initiate process and in co-operation with industry

• Coordination regarding transport volumes, transport and terminal resources is needed.

• New transport solutions require co-operation/ collaboration indication a need for long term decisions and agreements. At present all decisions are made on short-term conditions. How to bridge this gap in planning horizon?

• A large share of the problems can be derived to communication, tacit knowledge and understanding. Inter-/ and intra-organizational communication and learning seldom occur. The knowledge is sufficient in all functions, however few have a system knowledge.

• No one put himself in pole position. The explanation is simple: non of my business. However someone must be initiator and here is an business opportunity.

sid 26

• Etableringen av intermodala speditörer (som van Dieren och Real Rail) med

ansvar för att fylla tåget.

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IT, administrative and planning reflections – shipper perspective

• Lack of Transport service support – planning, booking, operations and monitoring of

intermodal transports

• Lack of transport quality – improved quality including development of B-plans needed.

• Control of shipments (contractual issues)

• Unloading at free loading areas or freestanding terminals affect the reception of

consignments

• Conflict in scheduling - top-down or regional bottom-up

• Planning horizons time slots do not match the planning processes within logistics – too

long, too beaurocratic

Productional and operational aspects– shipper perspective

• Cost for delays and disruptions are often much higher than transport costs.

• Delays/disruptions may cause production at sites

• Lost sales• Passenger transports are prioritized ahead of freight – resulting in increasing lead times

(short term affecting costs by 10-20%) or for new entrants/new transport solutions non-

accessibility.

• Operational prioritization of passenger transport affecting time reliability and costs on

freight transport.

• Lack of logistical knowledge among traffic planners of regarding logistical effects due to

changed schedules.

• Lack of methods to incorporate business economical aspects from logistics into models

for prioritizing in the scheduling process.

• Lack of time slots from rail yard to terminals/private sidings

Productional and operational aspects– operator perspective

• The sum of several small and medium flows along a corridor creates spatial and time

complexity. Intermodal management systems are needed to manage this network

complexity.

• Volume growth is critical. Declining volumes results in closure and in contrary rising

volumes. This is a clear threshold phenomenon for terminals, ports and industrial

sidings. Concentration of flows and larger vessels/transport units belongs to the

dominating paradigm in transports and logistics.

• Are there supporting IT systems support who are prepared to make this investment?

Opinions are divided.

Regulative aspects – shipper perspective

• Increased sea transport costs (by 25-40 %) when IMO regulation is introduced in 2015.

Few shippers are prepared or are preparing for this change.

• Unharmonised standards for intermodal units loads between road and rail in Sweden –

affecting opportunities (costs) to transport consumer goods by intermodal transport.

• Introduction of the European market has improved efficiency in the road transport,

however often including violation with the Cabotage regulation and traffic safety

regulation.

sid 31

Regulative aspects – operator perspective

• Responsibility for cargo securing/cargo lashing differs between Sweden and other

countries.

• Road transport standards differ in Scandinavia, however primarily between Scandinavia

and the EU

• Road vehicle length

• Road vehicle height/width

• Gross weight• Unlike in Europe the weight regulations affect intermodal transports negatively.

Intermodal equipment are more expensive and heavier than unimodal equipment

affecting the cost efficiency of intermodal transports.

sid 32

Regulative aspects – societal perspective

• Introduction of heavy vehicle fees in Germany, Poland, Austria and Switzerland have affected

routing of road vehicles. New vehicles are routed towards these destination (Euro 4 and

Euro 5) and the previous redirected towards Scandinavia where the fees are zero.

• A fundamental question is what authority/organisation to create the conditions and/or

incentives for initiating the process of change? Who is responsible and who has got the

knowledge?

• I tangible question is to what extent the commitment of authorities that is needed to initiate

and stimulate the ongoing process? The public debate indicates responsibility, however the

question is if this indication is enough to benefit from it?

sid 33

Successs factors

• Att stora transportköpare har primär tillgång och initierar intermodala transportsystem är

i sig inget problem utan snarare en förutsättning. Det behövs en aktör eller ett par aktörer

som garanterar en viss basvolym för att systemet skall komma igång. Därefter kan det

erbjudas till ett bredare spektrum av kunder (ex Vänerexpressen).

• Ett tågsätt (ex 400 km transportavstånd kostar i storleksordningen 140 – 150 000 SEK för

ett omlopp och med tanke på den låga lönsamheten i branschen körs ett företags

ekonomi snabbt i botten om utlasntningsgraden understiger 70 %.

• Initiativet att ställa om från landsvägstransporter till intermodala kommer främst från

transportköparna och inte från tranportindustrin. Måste finnas en mottagare till

efterfrågan – finns den i Danmark.

• Sverige har till skillnad från Danmark en industri som i mångt och mycket består av

storskalig produktionsindustri, vilket gynnar den intermodala potentialen väl. Det skall

dock påpekas att det i Sverige främst varit importindustrin som övergått till

intermodalitet. Industristrukturen i Danmark är dessutom varit mer irniktad mot livsmedel

och tillverkning, vilket påverkar potentialen.