Fecc: The long drive to improve transport

Europe’s distributors are working hard to get the best out of the region’s transport system, despite the regulatory and infrastructure road blocks

Transport is at the heart of the chemical distribution industry. However, the European transport industry is dominated by many challenges, both short-term and long-term, which are hampering companies up and down the supply chain.

Copyright: Volvo

These include escalating fuel costs, a continuing shortage of trained and qualified drivers, poor European inter-operability and non-harmonization across Europe.

For instance, says Andreas Zink, director at Austrian transport firm LKW Walter, and president of the Brussels, Belgium-based European Chemical Transport Association (ECTA), there are varying weekend and night driving bans as well as differing weights and dimensions of trucks within European countries. “There is ongoing discussion to revise the EU directive on weights and dimensions with debate surrounding whether trucks should weigh 44 tonnes or 40 tonnes,” Zink says. “These national variations jeopardize productivity and efficiency.”

Outdated legislation remains another key issue. For example, modern intermodal trains weighing 1,500 tonnes cannot use the Brenner Pass through the Alps. This mountainous pass running between Italy and Austria, which is one of the most important traffic connections between northern and southern Europe, can take a maximum weight of only 1,200 tonnes. This, says Zink, is a legislative hangover in Italy from the days when the older locomotives were not strong enough.

The European Commission’s White Paper on Transport, published in March 2011, could provide the framework to remedy many of Europe’s structural transport problems. Zink believes that the strategic goals outlined in the White Paper will provide a more stable future for the sector and encourage investment.

In broad terms, the Commission’s main aims include opening further road transport markets and eliminating the remaining restrictions on cabotage, adapting legislation on weights and dimensions to new circumstances, technology and needs, reviewing tachograph rules, and creating multimodal freight corridors.

Among the 40 initiatives laid out in its roadmap for Europe are plans to cut carbon emissions in transport by 60% by 2050. The Commission states that by 2030, 30% of all European transport moving further than 300km (186 miles) should be intermodal. By 2050, this figure is set to rise to 50%.

Zink says there is no doubt that intermodal – road, rail and shortsea shipping – is the future for Europe. “Intermodal can reduce carbon emissions, get trucks off the road and is politically of high interest.”

He concedes, however, that transport firms need to be competitive on a tonne per kilo-meter rate to get customers interested. “You need an equal price or better to make industry interested in intermodal development. There are solid opportunities but not all are of commercial interest,” he says.

Chemical distributors such as US-headquartered firm Univar and Netherlands-headquartered IMCD Group are using intermodal options when the economics make sense. Jan Heyneman, logistics leader for Univar Europe, Middle East and Africa, says that intermodal transport is economical over long distances but, as chemical distribution typically occurs over shorter distances, using intermodal would mean an increase in cost for the customer and, in most cases, an increased lead time. He says: “For inbound and outbound over longer distances, intermodal is used wherever the customer requirements and expectations allow this.”

IMCD’s supply chain director, Stan Bijsterveld, says that the driver of intermodal transportation has undoubtedly been the container, which allows easy handling between modal systems. He adds that intermodal’s share of medium and long-haul freight flows is growing and rail intermodal services are ­becoming well established between the major ports in Europe. “We aim to move more volume by rail or barge in order to be more cost competitive while ­reducing our carbon footprint,” he says.

Using transport modes other than road is a key focus for distributors and their transport partners as they seek to ­optimize their networks and drive sustainability within their business strategies. Many large distributors operating in Europe combine a local and pan-European approach to optimize efficiency.

In Bijsterveld’s words, the scattered nature of the business, great number of relatively small shipment sizes, mix of products ranging from hazardous chemicals to food and pharmaceutical ingredients as well as the increasing cost of diesel are typical challenges facing the chemical distribution business across Europe.

IMCD handles its logistics procurement centrally to leverage scale but cooperates closely with local supply chain managers to ensure local regulations are covered.

Bijsterveld says the company operates a fully outsourced state-of-the-art supply chain with third-party logistics partners who also recognize the importance of sustainability. He says: “Because we operate in partnership, we look at the longer term, invest time and effort in sustainable operational models and commit to each other, which gives maximum flexibility to our principal suppliers and customers.”

Heyneman states that optimization of transport requirements is maximum if the balance between optimally serving the customer (lead time to deliver the goods, customer proximity) at a competitive price is achieved.

Sustainability remains a hot topic in the transport world, particularly with regard to the reduction of carbon emissions and safety. Both IMCD and Univar stress the importance it plays in giving true competitive advantage. Bijsterveld says: “Sustainability makes us look at consolidation, network optimization and utilization of other modes of transport in order to remain competitive while offering high service levels.”

IMCD has committed to reduce its carbon ­dioxide (CO2) emissions by at least 20% in 2012. The distributor is participating in the Sustainable Logistics programme, initiated by the Dutch Ministry of Transport, which supports logistics companies in their aim to cut carbon emissions while increasing profitability.

IMCD says it is the first distributor in the scheme to be awarded the Lean & Green award in May 2011. In order to comply with the program, IMCD investigated the combination of the flow of goods, enforced sustainability requirements on suppliers and reduced the number of unloaded kilometers in collaboration with hauliers and customers.

Although it is a Dutch project, IMCD and Connekt, an independent network of companies and authorities that supports collaboration in the scheme, have agreed to expand the project on a European scale. In fact, work started in January this year on a similar project in Italy where IMCD intends to achieve a 20% reduction of its carbon footprint by 2014.

Univar says that sustainability is at the heart of its business and operational strategy and its major challenge is to offer its customers tailored transport solutions where quality and sustainability are guaranteed at the optimal price level. “We have a huge, complex international logistics network and we realized a long time ago that it represented a key area of opportunity to improve our sustainability performance,” Heyneman says. He cites as examples the new generation of delivery vehicles Univar is bringing into service that are designed to minimize their environmental impact and maximize the safe transportation of chemicals. Also, the introduction of route planning software has increased efficiencies and led to a reduction in fuel use.

Heyneman says that Univar has an ongoing improvement program to engage in regular pan-European sourcing exercises covering all modes: express, road packed, road bulk, ocean and air freight. The objectives of these recurring initiatives are to optimize the cost/quality balance, reduce the number of providers, and standardize in areas such as rate cards, transit times tables, standard operational procedures, and service level agreements.

“Every time we ask the question: do we operate this route at the optimal cost/quality balance for the customer and the environment?” he says.

The surging cost of fuel is a real problem for everyone at the moment, not least ­transport and distribution companies where it comprises a large part of their cost base. Fuel accounts for about 25% of IMCD’s road transportation costs so the increases have a big effect on the logistics charges that have to be added to its products.

Bijsterveld says that IMCD, together with its logistics partners, is always looking for opportunities to minimize the impact of rising fuel prices. “We can consider service providers that invest in new trailers with sloping roofs, configuration of speed setting in trucks, courses for economic driving for drivers, ­eliminating unnecessary miles by better planning and of course creating awareness by ­publishing figures. All initiatives should result in minimum impact towards our customers,” he says.

A key, and perhaps radical, scenario for the future is industrialization of the transport sector in Europe – in other words, decoupling the driver from the truck. Zink says that several studies on the European transportation industry talk about possible industrialization in the period 2020-2030. “In Europe, once the driver is tired after eight hours’ driving, the truck stops and the driver goes to sleep in the cab. Decoupling needs to happen. It is a different approach and a challenge but it is also an ­opportunity,” says Zink.

Despite the myriad challenges, solid possibilities do exist for Europe’s transport sector. Undoubtedly, intermodal is the major trend at the moment and is highly demanded, but all partners in the supply chain must unite to prepare capacity and infrastructure for a sustainable future.