strategies for increasing inter modal freight transport[1]

8/6/2019 Strategies for Increasing Inter Modal Freight Transport[1]

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Association for European Transport and contributors 2007 1

STRATEGIES FOR INCREASING INTERMODAL FREIGHT TRANSPORTBETWEEN EASTERN AND WESTERN EUROPE

Jost WichserUlrich Weidmann

Nikolaus Fries (Corresponding Author)

Andrew NashInstitute of Transportation Planning and Systems

ETH ZurichWolfgang Pauli Strasse 15

Zurich, 8098Switzerland

ABSTRACT

An important European Union policy is to decrease the share of freighttransport moving by truck in favor of alternative land transport modes (rail and

waterway). The research projects purpose was to identify strategies forincreasing the share of intermodal freight transportation between Eastern andWestern Europe. The project evaluated the demand for transport in thismarket and identified a potential candidate corridor. This corridor was used tohelp analyze strategies for addressing the key problems in increasingintermodal transport.The three main problems with intermodal transport are: quality, price andcoverage; more specifically, intermodal transport is often slower, less reliableand more expensive than truck-only transport, and furthermore it is onlyoffered in selected corridors. Addressing these problems is the key toincreasing intermodal transport.Quality is the most important factor in todays freight transport market. Thereare two main ways to improve the quality of intermodal transport: consolidatemanagement and improve the infrastructure.Intermodal transport in Europe today is relatively disorganized; often itinvolves multiple parties working together on an ad-hoc basis. The best optionwould be a single company providing door-to-door service (similar to trucktransport), but this is practically impossible for long distance intermodaltransport. Therefore, to increase quality, a single responsible party mustmanage all transport chain partners, information flows must be improved,quality improvement strategies must be implemented, and all partners mustshare the same objectives.There are several alternative organizational structures that could achieve

these objectives. One common requirement is that the intermodal terminaloperator be responsible for providing the pre- and post-haulage service (toincrease PPH efficiency). Ideally both the origin and destination terminalswould be under the control of the same operator. The terminal operator couldeither contract with a railroad for the main haulage or (preferably) operate itsown trains (under Europes Open Access rules) between terminals. In caseswhere the origin and destination terminals are operated by differentcompanies, these companies must develop a real working partnership.


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Europes intermodal transport infrastructure must be improved to increase itsshare of the freight market. New terminals must be built and the capacity ofexisting terminals increased to support development of new operationalstrategies (e.g. liner trains or hub-and-spoke systems). In some locations newtrack infrastructure must be built to help freight trains travel quickly andefficiently between terminals. The main responsibility for planning and

financing these infrastructure investments must be government because oftheir high cost, long life and impact on economic development; however,intermodal operators should strongly support these efforts.Many of the recommendations for increasing quality will also reduceexpenses. A good example is using coordinated information systems toquickly and accurately transmit information between partners. The researchfound that the cost of inefficient pre- and post-haulage process adds up to37% to the cost of intermodal transport in typical markets. Two ways to reducethese costs are to better plan the PPH operation (making more efficient use ofPPH trucks) and locating intermodal terminals closer to customers (or vice-versa).The best markets for intermodal transport are large volumes of freight moving

on a concentrated axis over relatively long distances (around 1000 km ormore). Intermodal operators can build these markets using the cooperativestrategies outlined above. Another strategy is to increase freight volumes byserving smaller markets with a multi-level service offer (which increases thenumber of efficient direct trains).

1. INTRODUCTION

East-West trade in Europe is growing rapidly due to the 2004 European Union(EU) expansion and development in former Soviet Union countries. EasternEuropes transport infrastructure often does not meet Western standards andis oriented eastward. The combination of rapid growth and insufficientinfrastructure has created fears of increased traffic congestion, logisticbottlenecks and environmental problems.An important EU policy (also shared by many individual countries) is to shiftfreight transport from road to rail. [European Commission (2001)] Theresearch purpose was to analyse possible business, market and operatingstrategies for increasing east-west intermodal transport and thereby helpachieve this policy.Intermodal freight transport (or combined transport) means movement ofgoods in an intermodal transport unit (ITU), using two or more modes oftransport without handling the goods themselves when changing modes (inthis paper the term container will be used to mean ITU). This research study

focuses on road-rail transport, i.e. the principal transport process (mainhaulage) is done by rail, while the comparatively short connection betweenterminal and consignor or consignee is by road (truck). The studymethodology consisted of four steps:

Evaluate market conditions, infrastructure, and legal conditions in centraland Eastern European countries;

Identify promising transport markets (axes) between Eastern and WesternEurope;

Prepare a detailed market and cost analysis for the most promising axes;


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Identify potential business, market and operational strategies to increaseintermodal transport in these markets.

This paper presents a summary of the full research report. [Wichser et al.(2006)] It focuses on the research methodology and strategy development toprovide ideas and information for an international audience of transport andlogistics managers rather than the analysis details (which apply mainly to

Europe).

2. MARKET, INFRASTRUCTURE AND LEGAL CONDITIONSANALYSIS

The first step in the research was to analyze market, infrastructure and legalconditions in Eastern European countries to help identify the most promisingmarkets. The analysis was completed by ranking conditions using a threepoint scheme with 3 being the highest (indicating a high potential for success)and 1 being the lowest (indicating a low potential). The full report describesthis process and the data used in detail. The main indicators and examplemeasures are presented in Table 1.

AnalysisType

Indicator Example Measures

Market Economic SectorMajor Industries, GDP, GIP;Employees contribution (percentage %)

Industrial SectorResource orientated vs. productionorientated: approximate contribution

Foreign Trade Major import/export goods

Economic GrowthGIP/GNP, per inhabitant in purchasing-power parity

Gross Wages Average gross wage in purchasing-powerparity

InfrastructureRail Network Qualityand Capacity

Possible trains; reliability; axes; number oflocomotives; network density

InteroperabilityWeight per axle; track gauge; electricalnetwork; structure gauge

Intermodal Terminals Existent / non-existent; quality; capacity

Road Network Qualityand Capacity

Road quality; capacity; conditions; networkdensity; possible bottlenecks

Topography Flat/hilly; bodies of water, etc.

LegalConditions

Fiscal SystemQualitative evaluation of how these impactintroducing and/or expanding intermodaltransportation

Customs Regulations

Economic Policy

General Settings

Table 1: Country Analysis Indicators and Example Measures


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3. EAST-WEST TRANSPORT CORRIDORS EVALUATION

The second step was to identify main east-west transport corridors andevaluate their potential for increased intermodal transportation.

3.1 Corridor Identification

The European Unions Maastricht Treaty (1995) calls for development of aTrans-European Network (TEN). This network is designed to link the majorcities and economic areas throughout Europe (both inside and outside theEU). It consists of ten multimodal (e.g. road, rail and waterway) corridors. Theidea is to concentrate international traffic in these corridors.As part of the EUs development strategy, a large number of infrastructureimprovement projects have been identified for the TEN corridors. These highprofile projects are intended to better coordinate national and internationalnetwork development and to improve trans-border transportation. The

projects include improvements to infrastructure of central, eastern and south-eastern European countries. Progress on implementing the TEN corridors andinfrastructure projects differ significantly between regions and countries.The corridor analysis began by identifying the main east-west transportationaxes by linking the key economic regions in Western Europe to key regions inthe east. Key economic regions were identified using the market data outlinedabove and demographic data (e.g. population). These data were used toeliminate unpromising areas and markets with little expected economicgrowth.The research identified six main east-west axes and two sub-axes (Figure 1).The axes were designated A, B, C, D1, D2, E and F, to differentiate them fromTEN corridors (which are numbered).


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Figure 1: East-West Transportation Axes (Source: [Wichser et al. (2006)])3.2 Corridor Evaluation

The six east-west corridors were evaluated using infrastructure data anddetailed market data to estimate their potential for intermodal transport.The detailed market data consisted of foreign trade statistics for EU member

states from Eurostat. [Eurostat (2005)] First, the raw Eurostat data was usedto identify goods that could be transported by container based on the followingcriteria:

It must be possible to transport the goods in containers;

No bulk goods (e.g. cereal grains);

No goods that can be transported by unit trains (e.g. coal); and

No goods that require quick transport (express goods).Next, the country-to-country flows of goods suitable for intermodaltransportation were used to identify feasible east-west routes. An essentialcondition for successful intermodal service is to minimize moving emptycontainers (for example by having approximately equal volumes of goodsmoving in both directions).The detailed evaluation showed that Axis D had the most potential forincreasing intermodal transport. This is logical since the Axis D corridor linksmany major Western European markets to newly developing industrial(especially automobile related) regions in Eastern Europe. In fact, many newfactories were built in this part of Central/Eastern Europe specifically becauseit had relatively good transport links to Western Europe.

4. DETAILED TRANSPORT COST ANALYSIS

One of the main problems with intermodal transport is that, often, it is moreexpensive than truck-only transport on similar routes. To better understand

this problem, a detailed analysis comparing the costs for moving goods byintermodal and truck-only modes was completed.

4.1 Cost Analysis Data

The project developed country-specific unit costs for moving containers. [NEITransport (2001)], [Hubauer (2005)] These costs depend on manyassumptions and reliable data were not always available to make extremelyaccurate estimates for all countries. Therefore, the specific cost valuesdeveloped are not directly applicable for other studies, although they aresufficient for purposes of this research.The cost analysis considers production costs only (no profits for operators).

Furthermore, it assumed that the necessary infrastructure and containerinvestments have already been made, although amortisation costs for rollingstock are included. Thus, the analysis considers only specific costs dependingon time, distance and number of containers transported.

4.2 Cost Analysis Results (Summary)

The project analyzed several different scenarios for shipping a container(specifically a twenty foot equivalent unit - TEU) on three specific routes:


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Frankfurt-Prague (500 km), Frankfurt Krakow (1000 km), and Frankfurt-Kiev(2000 km). This section summarizes main findings of the cost analysis.The largest cost element for truck-only transport is fuel, which representsabout 36% of the total cost per consignment. Driver cost represents only 15 20%, and amortization 18 21% of the total costs. As expected, the analysisshowed that the total cost for shipping a TEU by truck is directly proportional

to the distance. One important caveat is that the driver costs in EasternEurope (which were used in this analysis) are lower than the average rates fortruck drivers in Western Europe.The cost analysis for intermodal transport evaluated the two main differencesbetween intermodal and truck-only transport in detail, specifically the costsassociated with pre- and post-haulage, and the costs of transshipment.The analysis confirmed that pre- and post- haulage (PPH) is a significant costfactor for intermodal transport. It represents up to 37% of the overall cost perTEU although it covers only a small portion of the total distance travelled. Thedifference in efficiency with shorter PPH distances is considerable. The costfor PPH on the 1000-km route evaluated in the study is 77% higher for a 50-km PPH distance than for a 20-km PPH distance and increases the total

transport cost per TEU by 19%. The two main reasons for this cost increaseare the longer travel distances and the longer waiting time in terminals causedby inefficient internal organization.The analysis also confirmed that transshipment is a significant cost. Costswere estimated for three transshipment scenarios: continuous main haulage(2 transshipments: truck-train/train-truck), main haulage with intermediatetransshipment (3 transshipments: truck-train, train-train, train-truck), and posthaulage only (1 transshipment: train/truck, for example in the case of seaporthinterland connections). Transshipment costs represent up to 23% of the totaltransport costs in the continuous haulage scenario and up to 31% of totaltransport costs in the broken main haulage scenario.Due to the costs of transshipment, it is clear that by eliminating a pre- or post-haulage, intermodal transport can be a good alternative to truck-only transporteven on medium distance trips. Seaports are especially attractive forintermodal transport because, in addition to eliminating the need for prehaulage, they are much more likely to fill a train to capacity given the greatercommodity flows passing through a typical seaport.

4.3 Cost Comparison: Intermodal Versus Truck-only Transport

Once the costs for the example scenarios were calculated, they were plottedon cost (per TEU) versus distance graphs. These graphs help provide a betterunderstanding of the factors that influence intermodal transports

competitiveness. This section presents several of the more interestingcomparisons.Figure 2 compares the cost of shipping a TEU by truck to the cost byintermodal transport (continuous main haulage with 50 km PPH distance).Figure 2 clearly illustrates the main difference between intermodal and truck-only transport: intermodal transport has higher fixed costs while truck-only hashigher variable costs. Thus, truck-only transport is less expensive over shortdistances and intermodal transport is less expensive over longer distances.Figure 2 shows that the break-even point for this specific case is about 1400


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km. These results agree with actual conditions in Eastern Europe in thatintermodal transport does not compete seriously with truck-only transport atdistances less than 1000 km.

Figure 2: Break-even analysis: intermodal versus truck-only transportassuming 50 km PPH process.

Figure 3 illustrates the impact of pre and post haulage on intermodal transportcosts. In Figure 3 the green line represents the cost per TEU for intermodal

transport with 20 km PPH distance, the red dashed line represents the 50 kmPPH case, and the blue line represents the truck-only transport cost(unchanged from Figure 2).


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Figure 3: Influence of PPH distance on intermodal versus truck-only break-even analysis.

Figure 3 makes clear the importance of an optimised terminal location.Reducing the average distance between intermodal terminal and theconsignor/consignee by 30 km reduces the break-even point between truck-only and intermodal transport by 293 km (or 21%) to approximately 1100 km.Another important point to keep in mind is that PPH costs for intermodaltransport can also be significantly reduced by using intelligent tour

management techniques to serve multiple clients with one truck.Once the status quo analysis was completed, a sensitivity analysis wasperformed to test the impact of changes to three selected variables (fuelprices, wage costs, and road tolls) on the competitiveness of intermodaltransport. Two scenarios were tested: a Trend Scenario which assumed thatexisting trends with respect to these variables would continue and aMaximum Scenario which assumed that these trends would accelerate.Table 2 summarizes the variables that were tested in this analysis.

Cost Element Trend Scenario Maximum Scenario

Energy Costs1) +50% Truck

+25% Intermodal

+100% Truck

+50% IntermodalInfrastructure Costs (Toll) 0.125 /km (EU-wide) 0.15 /km (EU-wide)

Wage Costs +50% in road transport +100% in road transport

Notes:

1) Assumptions based on [Energy Information Administration (2005)]

Table 2: Cost Sensitivity Analysis Parameters


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Figure 4 compares the truck-only and intermodal transport costs (continuousmain haul and 50 km PPH) versus distance under the maximum scenario (ingreen), the trend scenario (in yellow), and the status quo scenario (in red).

Prognosis - Cost per TEU (incl. inflation)pre/post haulage 50 km

0.00

200.00

400.00

600.00

800.00

1000.00

1200.00

1400.00

0 500 1000 1500 2000 2500

distance (km)

Road (maximum scenario) Road (trend scenario) Road (status quo)

Intermodal (maximum scenario) Intermodal ( trend scenario) Intermodal (status quo)

1380898640

482 (35%)

740 (54%)

Figure 4: Influence of cost parameters on intermodal versus truck-only break-even analysis.

As shown in Figure 4, the trend and maximum scenarios show a significantdecrease in the break-even distance. Under the trend scenario the distance is

reduced by 35% from 1380 km to 898 km, while under the maximum scenarioit is reduced by 54% to 640 km.

4.4 Cost Analysis Summary

The cost analysis shows that intermodal transport has a good chance ofbecoming competitive on medium distance routes and increasing its marketshare in the coming years. The most optimistic scenarios require the EU andnational governments to make changes in transport policies (e.g. increase fuelprices, tolls). However, the analysis also shows that intermodal transportoperators themselves can increase their competitiveness using strategiesincluding more efficient PPH processes and improving intermodal transport

chain organization.Finally, it should be emphasized that the cost analysis neglected thequalitative aspect of transport service. Unfortunately, in most cases,intermodal transport in Europe today cannot meet customer qualityrequirements (e.g. time window of delivery). Clearly, if intermodal transportcannot meet the clients quality requirements, it will never be competitive withtruck-only transport even if it is less expensive. Quality is considered in thenext section.


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5. IDENTIFY BUSINESS, MARKET AND OPERATIONAL STRATEGIES

This section identifies strategies for increasing intermodal transport byimproving quality. The first part outlines problems in intermodal transportsector and the second presents business, market and operational strategiesto address these problems.

5.1 Key Problems with Intermodal Transport in Europe

From the customers perspective, intermodal transport on many Europeanroutes is not competitive with truck-only transport [Krueger (2005)] because it:

costs more;

takes longer;

is less reliable; and

its service offer (routes, frequency) does not meet customer needs.From the providers perspective, todays small market for intermodal transporthas high growth potential, but the current business environment (ageographically dispersed market with many operators) makes it very difficultto build-up an attractive and efficient network.Customer and operator problems can be grouped into two main categories:

Quality (i.e. reliability, speed etc.); and

Coverage area (i.e. network density/number of routes offered).The effects of these problems are higher production costs and a lesscompetitive service for intermodal transport compared with truck-onlytransport.

5.2 Quality

The most important aspects of quality are speed, reliability, and security (the

goods arrive undamaged). When a shipper chooses a transport mode, often,quality is more important than cost. [IRE and Rapp Trans AG (2005)], [Bolisand Maggi (1999)] Therefore, quality problems must be addressed withhighest priority. Quality problems have three main causes: complex transportchain organization, infrastructure capacity/priority on the main haulage, andpre- and post-haulage inefficiency.

Complex Transport Chain Organization

The intermodal transport process is a chain of independent companiesworking together to move a container from shipper to receiver. It consists ofthree main processes: pre- and post-haulage (picking-up/delivering the

container to the intermodal terminal), transshipment (loading the container on-to/off-of the train), and main haulage (container carried by train to destinationterminal). Today, these processes are often completed by different companiesand the main haulage process may even be completed by several companies.An example are the trans-alpine train services managed by HUPAC. [HUPAC(2006)]In general, the more independent partners involved in the transport chain, themore complex the process becomes, and the more difficult it is to insure highquality service. There are four main, mutually reinforcing, causes of increasing


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difficulty: competitive partners, self-interest, information transfer, and unclearresponsibilities.In many cases a particular intermodal transport chain will include companiesthat are competitors in other markets (for example when the truckingcompanies that provide pre- and post-haulage also provide long distance roadtransport). In these cases companies lack incentive to work together efficiently

on the intermodal process and each company will try to optimize its ownprocess independently making it difficult to optimize the whole transport chain.The management of information flows between partners is a huge problem. Insome cases there are technical problems transferring information, while inothers companies dont want to share data for strategic reasons even whentechnically possible (maybe they are competitors in another market).Therefore information must be re-entered into the next partners informationsystem at the interfaces, which takes time, increases costs, and increases thelikelihood of mistakes.Finally, unclear responsibilities among partners to customers and each othermake it difficult to guarantee reliability and quality standards. Customersgenerally want one partner to be responsible for the whole transport chain

since this helps avoid finger-pointing when problems occur and leads tohigher quality service.The following strategies are recommended to reduce organizational problems:

Reduce the number of independent partners;

Create a clear hierarchical organization; and

Develop a uniform information management system.Some particular ideas for implementing these strategies are presented for themain haulage and PPH processes below.

Infrastructure Capacity/Priority on Main Haulage

The three most important aspects of quality in the main haulage process areschedule reliability, service frequency, and speed. In some cases these arenot exclusively under the control of the main haulage operator (railway). Twoexamples are insufficient capacity on the rail network for intermodal traffic(both track and terminal capacity) and low freight train priority in Europe.These problems can only be solved with freight infrastructure investments(capacity upgrades) and policy changes both of which require some level ofgovernment action.In other cases improving quality on the main haulage is under the control ofoperators. The main haul operators railroads like for example Railion arein the process of evolving from national integrated companies (responsible forinfrastructure and operations) into separate companies that (may) operate

services in multiple countries. Clearly, a single train operating companyproviding the main haulage would improve transport chain organization.However, today there are only a few companies operating multi-nationalnetworks and these networks are limited. A good example is HUPAC, whichoperates for example intermodal trains between Germany and Poland. In themeantime, individual railroad operators must cooperate to improve quality.


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Pre- and Post-Haulage Inefficiency

As outlined above, the PPH process is often inefficient and expensive due topoor use of capacity, organizational problems, and long pre- and post-hauldistances. Improving efficiency of the PPH process can help to reduce costand quality problems for the entire intermodal transport chain.

One strategy is to increase the efficiency of PPH truck usage. The costanalysis considered three levels of PPH truck efficiency: 30% (which assumesno coordination between the terminal and PPH trucks), 50% (which assumesgood coordination), and 70% (which assumes maximum coordination). Theanalysis showed that for a 500 km shipment from Germany to the CzechRepublic the share of total cost expended on the PPH process falls from 34%to 20% (for 20-km PPH) and from 46% to 31% (for 50-km PPH) as efficiencyincreases from 30% to 70%.Under the 70% scenario the PPH trucks would be used efficiently over thewhole day and would experience a maximum waiting time of 10 15 minutesat terminals and shippers/receivers. Unfortunately, generally PPH efficiency inWestern Europe is less than 50% because shippers or forwarders organize it

exclusively for their shipments. This means many trucks arrive at terminalswith no coordination, resulting in long waits especially in the early morningand late afternoon.Another strategy to increase PPH process efficiency is to reduce PPHdistances. The cost analysis found that the difference between a 20-km and a50-km PPH can be up to 19% of total transport costs. This difference meansthat operating a network with many smaller terminals located near customers(short PPH distances) can be more cost effective than operating a few largeterminals (long PPH distances).In summary, the PPH process can be improved by having drivers transport asmany containers as possible during the working day. This requires, first,minimizing the waiting periods at the consignor/consignee and at the terminal;second, reducing the distance between terminals and consignors/consigneesas much as possible; and third, optimising the route planning. A good strategyfor making the PPH process more efficient would be for terminal operators tomanage and control the PPH process. Under this option terminal operatorscould either own their own trucks or subcontract to trucking companies. Theimportant point is that the terminal operators would manage the process.

5.3 Coverage Area Network Density

The second main problem for increasing intermodal transport betweenEastern and Western Europe is the lack of service currently offered. In many

cases a shippers needs cannot be satisfied since there are only a fairly smallnumber of existing intermodal transport routes. This chicken and egg problemmust be addressed by creating new routes and denser intermodal networks.There are three aspects of this problem: infrastructure, cooperation, andoperating strategies.


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Infrastructure

Often the infrastructure necessary to provide efficient intermodal transport(defined as meeting the customers quality requirements and generating aprofit for operators) does not exist. This is especially true for well-located andefficiently operating intermodal terminals.

Terminals are the key part of the intermodal freight transport network. Sincethey perform the same interface function between transport modes aspassenger railway stations, terminals should be part of the publicinfrastructure and thus should, at least partly, be financed by government.Furthermore, government should be involved in coordinating terminal planningand location to insure equitable access and efficiency. [UIC (2004)]In some cases the rail network also needs to be improved to provide capacityfor improved intermodal transport. Governments also need to support theseimprovements financially and from a policy perspective.Shifting freight transport from roads to rail is a key transport policy of theEuropean Union and of almost all European countries; one of the main waysgovernment can help encourage this shift is to provide funding and policy

support for infrastructure improvements needed to provide efficient intermodaltransport service.

Cooperation

While it would be ideal for a single company to own and operate all parts of anintermodal transport network, this is probably unachievable for internationalfreight in Europe. Therefore, different transport companies must cooperate tocreate and operate effective intermodal transport networks. The basicconditions for successful cooperation of independent companies are:

Similar business objectives;

Reliability of partners; and Medium/long term prospect for success.Once companies have agreed to work together they must adopt thesestrategies to work efficiently. If necessary contract penalties can be aneffective way of assuring reliability and quality among partners, ifresponsibilities are clearly defined throughout the transport chain.Finally, since intermodal transport requires large investments (e.g. in terminalinfrastructure and rolling stock), partners working together to improve serviceface high financial risks. One solution is to share these risks with publicauthorities as part of public-private partnerships or other financing techniques.

5.4 Main Haul Operating Strategies

In this research the intermodal trip main haulage takes place by rail. Main hauloperating strategies are techniques operators can use to support creation ofan efficient intermodal network. There are four main types of main hauloperating strategies.Direct trains, which move entire trains between two terminals without shuntingor adding any containers en route, are the simplest and most efficient type ofmain haulage. Since they can only be offered between terminals with highdemand, several alternative operational strategies including feeder trains, liner


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trains, and hub-and-spoke systems have been developed to increase marketcoverage (Figure 5).

A B

Direktzug

A

B

ZA > Z B > Z

Feeder System

B>C

A>C

A>D

B>D

A BA>B

C D

A>C A>D

C>D A>D B>D

Linienzug Hub & Spoke System

HUB

A

B

C

D

E

F

B>D B>E B>F B>E

A>FA>D

A>EA>D

C>F

C>E

C>D

C>F B>F

C>FA>F

C>F

C>E B>E A>E B>E

A>D

C>D

B>D

A>D

Figure 5: Main haulage operating strategies (Source: [Wichser and Weidmann(2003)]).

Feeder trains collect cargo from local terminals and take it to a centralregional terminal. There the feeder trains are coupled together to form a directtrain that runs to a central terminal in the destination region. (The system alsooperates in reverse for distribution.) The advantages of feeder trains are thatthey allow service to be provided in less dense markets and they have arelatively short transport time (the time loss for coupling and splitting trains ison the order of 10-20 min). The disadvantages are increased costs for thefeeder trains and the need for high train punctuality.Liner trains are direct trains that connect several different regional terminals.At each terminal they pick-up containers bound for the upcoming terminalsand drop-off containers for the current terminal. The distance betweenterminals should be approximately 100-150 km. The advantages of liner trainsare that they allow service to be provided in less dense markets and can beheavily used (thus helping to build an effective network). The disadvantagesare that they place heavy demands on loading capacity (terminals must beable to load/unload containers very quickly to minimise stop time) and theyhave longer end-to-end transport times than feeder trains.Any combination of the systems described above may be called a hub andspoke system when several branches of a network are linked together in acentral hub. At the hub, all trains arrive at the same time, then containers are

transferred from train to train in a short time window. The main advantage of ahub-and-spoke system is the ability to efficiently connect a large number ofsmall terminals. However this advantage comes at the cost of longer transporttimes, high requirements for train punctuality, additional transshipments atterminals, large infrastructure needs at hub terminals (high loading/unloadingcapacity and one loading track per train), and inefficient use of hub terminalcapacity (it may only be used for a short period of time every day).Finally, while in most cases intermodal trains are operated separately fromother rail freight transport (wagonload transport), it is possible to create trains


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that combine intermodal and wagonload cargo into a single train. Theadvantages of this system are that it can connect small terminals and makeuse of the existing train network/schedule. The disadvantages are that it haslong transport time and high costs (due to shunting).In Europe today, main haulage is generally operated using direct trains (dueto their cost effectiveness). There are several examples of feeder systems in

operation, but no operating examples of liner trains or hub-and-spokesystems. A main problem with both liner trains and hub-and-spoke systems isthat they require expensive high capacity loading/unloading equipment toreduce train stop time.In summary, feeder, liner and hub-and-spoke systems have fewer risks foroperators introducing new transport services, because the minimum demandnecessary is lower than for direct trains, but they require careful analysis andplanning. The choice of an appropriate strategy depends on marketconsiderations, specifically the quality of service required (main haulagetransport time, departure/arrival time, punctuality, frequency of service), andthe coverage area (number of point-to-point connections).

6. CONCLUSIONS AND RECOMMENDATIONS

The research projects purpose was to identify strategies for increasing theshare of intermodal freight transportation between Eastern and WesternEurope. The project evaluated the demand for transport in this market andidentified a potential candidate corridor. This corridor was used to helpanalyze strategies for addressing the key problems in increasing intermodaltransport.The three main problems with intermodal transport are: quality, price andcoverage; more specifically, intermodal transport is often slower, less reliableand more expensive, than truck-only transport, and furthermore it is onlyoffered in selected corridors. Addressing these problems is the key toincreasing intermodal transport.

6.1 Increasing Quality

Quality is the most important factor in todays freight transport market. Thereare two main ways to improve the quality of intermodal transport: consolidatemanagement and improve the infrastructure.Intermodal transport in Europe today is relatively disorganized; often itinvolves multiple parties working together on an ad-hoc basis. The best optionwould be a single company providing door-to-door service (similar to trucktransport), but this is practically impossible for long distance intermodal

transport. Therefore, to increase quality, a single responsible party mustmanage all transport chain partners, information flows must be improved,quality improvement strategies must be implemented, and all partners mustshare the same objectives.There are several alternative organizational structures that could achievethese objectives. One common requirement is that the intermodal terminaloperator be responsible for providing the pre- and post-haulage service (toincrease PPH efficiency). Ideally both the origin and destination terminalswould be under the control of the same operator. The terminal operator could


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either contract with a railroad for the main haulage or (preferably) operate itsown trains (under Europes Open Access rules) between terminals (e.g.HUPAC between Germany and Poland). In cases where the origin anddestination terminals are operated by different companies, these companiesmust develop a real working partnership.Europes intermodal transport infrastructure must be improved to increase its

share of the freight market. New terminals must be built and the capacity ofexisting terminals increased to support development of new operationalstrategies (e.g. liner trains or hub-and-spoke systems). In some locations newtrack infrastructure must be built to help freight trains travel quickly andefficiently between terminals. The main responsibility for planning andfinancing these infrastructure investments must be government because oftheir high cost, long life and impact on economic development; however,intermodal operators should strongly support these efforts. If Europe is to besuccessful in its effort to shift goods transport to rail an important EU andnation policy in many countries government must take a more aggressiverole in infrastructure development. Detailed approaches are presented in[Tyrinopoulos and Giannopoulos (2006)].

6.2 Reducing Expense

Many of the recommendations for increasing quality will also reduceexpenses. A good example is using coordinated information systems toquickly and accurately transmit information between partners.The research found that the cost of inefficient pre- and post-haulage processadds up to 37% to the cost of intermodal transport in typical markets. Twoways to reduce these costs are to better plan the PPH operation (makingmore efficient use of PPH trucks) and locating intermodal terminals closer tocustomers.The combination of a single terminal operator and better information flows willhelp improve the efficiency of the PPH operation. Intermodal operators and alllevels of government must work together to locate, plan and finance efficientintermodal terminals.

6.3 Increasing Network Coverage

The best markets for intermodal transport are large volumes of freight movingon a concentrated axis over relatively long distances. Intermodal operatorscan build these markets using the cooperative strategies outlined above.Another strategy is to increase freight volumes by serving smaller marketswith a multi-level service offer (which increases the number of efficient direct

trains) similar to the three-level system illustrated in Figure 7.Level 1 is the principal network (multinational scale). It consists of highdemand axes with central intermodal hubs at connecting points. Frequentdirect trains on these axes guarantee a consistently high quality level. Level 2represents a number of regional networks structured around the central hubsof the principal network. Those networks increase market coverage toincrease freight demand on the core network. Finally, Level 3 provides serviceto very small markets and to private sidings. The quality is lower than on the


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first two levels, because transport times are longer and operational costs arehigher.

Figure 6: Proposed multi-level intermodal operating network (Source: [IVT etal. (1996)]).

6.4 Recommendations for Further Research

The key problem identified in this research was the generally low quality ofintermodal transport quality and coverage in Europe for East West transport.This is especially problematic given the EUs adopted policy of increasing railfreight transport. Two of the projects main recommendation for increasingintermodal transport is to reorganize transport chains for strongermanagement and to improve cooperation between different partners in thetransport chains. There are several intermodal operators who are moving in

these directions, it would be very interesting to study the specific techniquesthey are using and to evaluate their success. Another area for further researchis the process for locating, planning and financing intermodal terminals.Finally, it would be interesting to analyze the costs of intermodal transport inmore detail.


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Eurostat (2005) Various Statistics on Transport and Economics(http://epp.eurostat.ec.europa.eu).

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Krueger, O. (2005) Rail versus road: assessing the various modal options,Presentation at The Adam Smith Institutes Conference The Future of RailFreight in Europe, Amsterdam.

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Wichser, J., Besters, S., Bojanic, B., Bollinger, S. and Fries, N. (2006)Strategies for Increasing Intermodal Transport between Eastern and WesternEurope, Final Report, IVT-Schriftenreihe No. 133, Zurich.

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strategies for increasing inter modal freight transport[1]

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