Collaboration ”The Way Forward” - in spite of the dual benefit of cost and carbon footprint reductions, horizontal collaboration has very little traction in the market place. Collaboration takes work. It is not like flipping a switch. It’s the work, not talking, which will make collaboration happen.

Brian Bolam FCILT
Vice Chairman
ELUPEG Ltd
www.elupeg.com

Cedar House

Glade Road

Marlow, Buckinghamshire

SL7 1DQ

As businesses start to address their plans for reducing CO2 emissions by 20% by 2020 to meet Government targets and 80% by 2050, it is important to look at the contribution that intermodal transport can make towards achieving these goals. Switching freight from road to rail can reduce CO2 emissions by up to 70%, particularly on journeys over 150 miles, so it is well worth looking at your network operations to see if any conversions of freight flows can be cost and service effectively transferred to rail or intermodal rail in ISO containers or swap bodies. Government data shows that transport represents about 23% of UK domestic CO2 emissions of which over 30% comes from road freight. With proposed increases in the electrified network in the UK, these savings can be further enhanced.

Service expansion

In spite of a 10 – 20% reduction in traffic through the ports, containers moved inland by rail have only reduced by 2% thus indicating a growth in rail market share through the last year. Meanwhile Channel Tunnel traffic has grown by 4% before the addition of recently announced new international rail services into the UK. Novatrans has introduced a number of new services recently, some using their new hub terminal at Dourges in northern France, where connections can be made into other long distance services particularly to southern Europe. Last October, the Stobart Group and DB Schenker and Transfesa have started 2 new temperature controlled container train services from Valencia to Dagenham, whilst Colas Rail have begun a service from Novara in Italy into Hams Hall, thus demonstrating that intermodal rail can compete with road freight services even where a change of rail gauge and temperature controlled transportation is involved. Within the UK, the Malcolm Group. the Stobart Group, Russells and others have introduced new container services by rail during the past year and opened a number of new terminals. This is in addition to the expanding port to inland terminal services operated by Freightliner, DB Schenker and others. Whilst the majority of these new intra UK services have been between terminals in England and Scotland, others have been over shorter distances eg the Grangemouth to Paisley service of the Malcolm Group which crosses the Glasgow conurbation.

Support grants

At present there are some revenue support grants available from DfT and through the Welsh and Scottish Assemblies under the Sustainable Distribution Fund and capital support from the Freight Facility Grant scheme, particularly relevant for intermodal terminal expansion. Both of these budgets were increased in 2009. Even in Ireland, where average trunk transport distances are shorter than in the UK, the Government in Dublin has recently decided to “introduce an allowance per tonne for freight by rail in line with climate change objectives.” Previously no grant schemes had been available to encourage the movement of freight from rail to road. New container services are now being introduced eg Dublin – Ballina in Co. Mayo.

The UK network

To further develop new intermodal container services a national network of container terminals is required, some of which should be capable of acting as hubs for linking domestic UK container trains with the expanding continental services. At present there are some geographical gaps in our network compared with the old internal UK networks of Freightliner in the 1970s, whilst others are very congested or working close to capacity. Logistics Companies and Property Developers are both working hard to fill some of these gaps in spite of the recession. But are UK intermodal container terminals and facilities keeping up with new terminal designs and technologies and improving their productivity, efficiency and environmental impact in line with best practice being introduced elsewhere in Europe?

In our next issue we will look at recent investments in terminal facilities across Europe.

2 - INTERMODAL TRANSPORT DEVELOPMENTS

Facilities at terminals

At present UK terminals rely either on the reach stacker or rail or rubber tyred gantry cranes. (See photo 1 old technology). Whilst the reach stackers are slower than gantry cranes and require significant aisle space, typically up to 17m wide if handling 45ft long containers, they are cheaper than gantry cranes and are useful for smaller terminals handling 2 trains or less per day. The gantry crane is usually more efficient above this level with a capability of achieving c20 - 30 lifts per hour. With outriggers these rail mounted gantry cranes can typically cover 10 lanes of rail, road and storage and are generally found in most of the UK’s larger intermodal terminals.

In October 2009 a new design of intermodal terminal was formally opened at the Quadrante Europa Terminal Gate in Verona. The new terminal is situated alongside an existing intermodal terminal currently operating with 4 rail mounted gantry cranes, two with outriggers, and a number of reach stackers to link the 2 parts of the old terminal. About 30% of Italy’s combined transport movements currently go through the old terminal. It is also adjacent to a very large Distribution Park covering many acres of large warehouses, distribution centres and other forwarding activities. Geographically it is well situated to link the north – south European rail services via the Brenner pass with other regions of Italy.

To provide for significant expansion in intermodal services over the next decade,

and provide capacity to double the terminals throughput, the owners and management decided to invest in the most innovative technology available and chose the Compactterminal. Following the planning phase, the Compactterminal took only 11 months to build, install and commission. This was undertaken by  Tuchschmid Constructa AG from Switzerland. The new terminal consists of 2 side by side modules of overhead gantries 550m long; each module being 8 lanes wide. (See photo 2). The site is 66m wide. The transhipment module (See photo 3) contains 5 rail, 2 road and 1 storage lane whilst the storage / road module has 6 storage lanes with 2 high stacking and 2 road lanes. The modules are linked by 6 automatic horizontal transhipment devices all under the control of the overhead crane drivers. (See photo 4). 2 overhead cranes are provided in the transhipment module and one in the storage module. Further cranes can be added as traffic increases as required without additional infrastructure. The horizontal transhipment units obviate the need for any road or reach stacker movements from transhipment to container storage. The 2 cranes in the transhipment module of the terminal are designed to handle 13 x 550m long trains in and out per day. The terminal will handle ISO containers, and bottom lift swap bodies and semi-trailers. The storage module has capacity for about 1000 TEU.

The key advantages of the Compactterminal design using overhead cranes are the crane performance of c40 lifts per hour, a reduction in energy consumption of about 30% due to the lower tare weight of the cranes, reduced handling within the terminal, greater space efficiency and a low noise level of less than 70dBa on maximum lift. The Quadrante Europa Terminal Gate are looking for a much lower level of CO2 emissions than their conventional gantry crane or reach stacker terminal, higher productivity and container throughput, and lower unit operating cost from their investment.

Perhaps now is the time for your business to be considering the intermodal alternatives within your transport network.     

Anyone can cut costs, but how does one do it in such a way that it has a minimal impact on customer service which might pose a threat to the business’s market share?  This is what we call ‘sustainable cost savings’.  It is quite a challenge and one which managers are increasingly faced with today.  The more so in businesses where tight control over costs has been the principal focus of logistics and supply chain managers for years.  The pressures of just coping with the day to day operations often leaves management with little time to step back and analyse in an objective way what opportunities there may be to cut costs in a sensible manner.  This is where consultants can help.  However, this is no place for simplistic benchmarking exercises where dubious percentage comparisons are made with businesses or industries which have little connection with your own.  Benchmarks have meaning when there is a reasonable match between companies in terms of structure and market-place and where product offering and order sizes are similar.  In reality, it is often extremely difficult to get hold of such information with any confidence in the operational statistics and one is often left with doubtful cost comparisons with profit and loss accounts which may be structured in an entirely different way from your own.  In any event, one cannot take percentages to the bank.  The cost savings must be real and sustainable and these are not simply achieved by reference to hopeful commentaries on the profit and loss account.  So, where can one go from here?

One solution is to find consultancies like ours with demonstrable line management experience of cutting costs and dealing with all the pressures and trade-offs to which management are routinely exposed.  It is not just an issue of establishing credibility with local management.  Logistics and supply chain operations may only represent a relatively low percentage of net sales, but they are often very complicated and difficult to change without substantial risks.  The devil is in the detail.   Effective change management depends on far more than the logic of a good idea.  It requires practical experience of the good and bad consequences of implementation to help mitigate the inherent risks involved in change.  One must be able to identify waste and opportunities to reduce costs and this essentially comes from changing processes and the ways things are done.   If one does not understand how changing processes can go wrong, then it is very difficult to put in place the steps needed to manage the risk.   Sustainable cost savings are based on the identification of practical opportunities and careful thought about their implementation.   And there is a further important consideration.  If the management of the business does not own the savings project because it does not believe in the logic and the plan, then in our experience the cost savings are rarely ever achieved in practice.  The process of engagement between the consultancy and client management because a critical element in the success of the assignment.  This is a joint exercise and iterative process where the conclusions are agreed and shared together.  At the end of the day, however much help consultants may provide during implementations (and this varies widely), ownership of the project must lie firmly with the business for it to have any chance of success.        

Where do the cost savings come from, and what can businesses reasonably expect?  We carried out a straw poll within our own consultancy which is staffed by senior line managers from the logistics and supply chain industry and has been in operation for over 15 years.  After a great deal of debate, the following consensus emerged from our collective experience.  Businesses which have poor customer service levels almost invariably have high costs as well because of a lack of management control.  Such businesses offer the largest potential for cost savings alongside those which can be achieved through the process of mergers and acquisitions.  Savings on logistics and supply chain costs are in the range 15%-35%.  Often the greatest savings lie in the interfaces and channels between the different links in the supply chain.   One finds a similar experience in businesses which have not seriously reviewed their logistics and supply chain processes and costs in an integrated and holistic way in over 5 – 10 years.  The problem which such businesses can face is that while they may have responded to changing customer needs in terms of product offer, their logistics and supply chain service may not have been adapted at the same pace.  In such cases, the business often finds itself poorly equipped to deal with increasingly demanding markets which require a high level of service and flexibility.  The need to improve service at an acceptable cost through sensible restructuring becomes an ever more urgent task.  Formal supply chain and logistics reviews can kick start the process of constructive change.  In well run businesses, identifying cost savings is generally a much tougher proposition and the changes are often harder to implement.  In our experience, cost savings here are generally in the range 5%-15% of operating budgets. 

We take a naturally conservative approach to cost savings because there are so many variables involved in implementation.  Unless cost savings can be identified which easily exceed 5%, then one should be wary about declaring them because they can so easily be lost through the process of change during implementation.  Not every contingency can be accounted for even with the best experience and will in the world.  Cost savings come from many different aspects of logistics and supply chain operations, and it is rare indeed to find a magic bullet in a single area.  While it can happen, our experience is that sustainable cost savings are best achieved through actions on a number of fronts.  Those seeking revolutionary change are best advised to undertake it in an evolutionary manner.  If it does not pass the commonsense test, it is unlikely to be achieved in practice.  Pragmatic analysis and practical implementation plans are the secrets behind sustainable cost savings.    Neil Middleton

As the economies pull out of recession across Europe, Mark stressed the need for operations focus and most importantly consistent operations excellence. Many of the audience during conversations over the intensive two program confirmed that they were reviewing “Best Practice” across their business and were targeting to bring the least effective operations up to standard!

Mark has over thirty five years logistics and supply chain experience, initially working at Exel Logistics, where he was one of the founding directors, then some years at Danzas, before working for Accenture and then IBM as a Industry specialist.

One the fundamental capabilities in Bisham, explains Mark, are the teams focus and experience on operations, and “solutions that work”. He has identified that:- 

• The small dedicated team has over 300 year’s operational experience including, we believe, working in over 1000 warehouses!
• Whilst the team has deep analytical skills and access to and a high level of proficiency of using the appropriate modelling and simulation tools, it is their, intuition, insight, and practical experience that sets them apart.
• Bisham has a specific methodology, which supports the search for consistency of operational excellence. We have carried out for a number of clients a “Rapid Diagnostic Review”, a highly intensive root cause analysis. We are talking 4/10 people, depending on the scale of complexity of the operations for 3 /4 days to review an operation, and identify quickly and to the point, the issues, impacts, and likely resolution to performance problems. This process involves direct engagement with the site operational people, and continuous feedback to drive quickly to consensus.
• At the moment, the Bisham Consulting team is handling projects involving a logistics spend of 500 million Euros and a combined retail turnover in excess of 10 billion Euros in the UK and France.  We are currently reviewing operations totalling 500,000 square metres of conventional and automated warehousing and the fleet operations of 4,000 vehicles serving 3,000 retail stores and 10,000 home deliveries a week.

We believe in Bisham that we could help companies accelerate the pace of the drive to consistent operational excellence, with a combination of Rapid Diagnosis Reviews at target operations, the transferring of reusable skills and knowledge to enable companies’ teams to continue, and the ability to support specific implementation of operational change, by providing flexible, agile and highly professional resources.