Soaring fuel prices, together with growing road congestion and increasingly stringent EU legislation, are forcing freight and delivery services to rethink their transportation strategies so as to save money on fuel and limit their environmental impact.
The logistics sector (planning, organisation and execution of transport operations) is growing rapidly, in parallel with roughly 31% freight transport growth between 1995 and 2005. As the volume of world trade rises, the European Commission predicts a further 50% increase by 2020. Many companies rely heavily on planes, trains and ships or on fleets of cars, trucks and vans to run their businesses. Postal operators and express services, for example, often represent the largest vehicle fleets in a country and are particularly reliant on speedy, low-cost solutions.
But the logistics sector faces a number of challenges. Globalisation means supply chains have become longer and more complex, while increasing traffic congestion and soaring fuel prices are weighing down on the sector's competitiveness.
At the same time, studies show that transportation and logistics can account for up to 75% of a business's carbon footprint. And, amid growing concerns about air pollution, CO2 emissions and global warming, the sector cannot escape from the vast number of measures being put into place at EU level to 'green' transport and to reduce greenhouse gas emissions.
For companies, the greening of logistics not only has an environmental dimension, but is also a question of efficiency. Indeed, logistics are estimated to account for 10-15% of the final cost of finished products and businesses are increasingly seeking to cut costs by reducing fuel consumption and time spent in queues.
Currently, six member states account for two thirds of total EU-27 freight: Germany (517 billion tonne-kilometres or tkm), France (283 billion tkm), Spain (264 billion tkm), Italy (256 billion tkm), Poland (billion tkm) and the United Kingdom (206 billion tkm).
An unbalanced 'modal split'
There is a strong imbalance between the different transport modes in inland freight transport, with road transport well ahead. Indeed, looking at the four land transport modes (road, rail, inland waterways and pipelines), rail accounts for just 17% of EU inland freight transport (2006 data), while inland waterways and oil pipelines account for 5% each. Road, on the other hand, accounts for 73% of total freight transport in the EU 27, remaining the dominant freight transport mode in all member states except Estonia (65% rail) and Latvia (54% rail). In countries like Cyprus (100% road), Malta (100% road), Ireland (99% road), Greece (98% road) and, to a slightly lesser extent, Portugal (95%) and Spain (92%), other freight transport modes are practically non-existent, the latest Eurostat figures reveal.
Taking intra-EU maritime and air transport into account, the share of roads falls to roughly 45% but nevertheless remains dominant. Rail's share of inland freight transport then decreases to around 10.5%, while shipping accounts for nearly 40% and air transport 0.1%.
More efficient supply chains: promoting co-modality
In its 2001 White Paper on transport, the EU set itself the priority of shifting traffic away from roads to more sustainable transport modes in response to growing concerns regarding the environmental impact of road transport, the scarcity of fossil fuels and other negative external effects produced by road freight, such as congestion and accidents (see our LinksDossier on the Transport White Paper).
But a 2006 review of the policy conceded that road transport was likely to remain at the centre of EU transport operations for the foreseeable future and instead stressed the importance of promoting so-called "co-modality" – better integration of different transport modes into efficient logistics chains by using each mode to its optimal potential and combined with others – to resolve these issues.
An important part of this programme will be enhancing technical harmonisation and interoperability across systems to facilitate the use of several transport modes on a single trip. This is the main thrust of an EU Action Plan for Freight Transport Logistics adopted in October 2007 (EurActiv 19/10/07), which supports measures aimed at improving connections between the different modes, putting greater emphasis on quality criteria in modal choices, investing in modern trans-shipment hubs, and enhancing cross-border management of freight flows and the associated administrative reporting requirements.
The Action Plan notably indicates the need by 2020 to define "green corridors" and to reinforce their importance and role in the EU's trans-European transport network (TEN-T) priorities (see LinksDossier). Research activities to establish such corridors are currently being prepared.
A European financing programme, Marco Polo, has also been available since 2003 to promote innovative solutions in this field (see the Commission's pages on Marco Polo).
Optimising individual modes
The development of co-modality has been hampered by the fact that each transport mode suffers from specific problems. Rail is prone to lengthy delivery times, frequent delays and limited capacity, while road suffers from growing congestion, rising oil prices and a resoundingly negative environmental impact. Also, inland waterways are facing strong competition from tourism, leisure and housing development, meaning many ports are congested and often lack the necessary trans-shipment facilities and connections with the hinterland.
To reinforce the position of railways, three rail packages aimed at market liberalisation and harmonisation have been adopted at EU level, with the latest package aimed at opening up international passenger transport to competition as of 2010 (EurActiv 22/06/07). A Communication on a Freight-Oriented Railway Network was also published as part of the Logistics Action Plan. It seeks to give the declining rail freight sector a boost by tackling key efficiency, reliability, punctuality and competitiveness problems. Measures proposed include ending an existing priority given to passenger trains on lines with mixed traffic when networks are congested. It also proposes harmonisation of train lengths and loads so as to increase inter-operability between countries and prevent freight trains from being stopped and delayed at borders due to differing standards.
On road transport, the Logistics Action Plan suggests "assessing the need to review the current limitations of road vehicle weights and dimensions". The initiative aims to tackle congestion by removing an existing ban in most member states on 25-metre long, 60 tonne 'modular trucks' that can carry greater volumes without increasing the number of trips. But critics say the move would drive the price of road transport down even further, generating unsustainable demand and exacerbating competition with rail (EurActiv 23/07/07).
The European Commission is also looking to boost maritime transport by building on the success of short-sea shipping within the EU and establishing genuine "motorways of the sea". To revive inland waterways, the Commission, in January 2006, adopted a Communication on the promotion of inland waterway transport, also known as the 'NAIADES' Action Programme. It focuses on five strategic areas to make inland navigation more attractive.
The urban dimension (last mile)
The action plan also has a strong urban dimension as distribution in cities and conurbations is particularly troublesome (see our LinksDossier on Urban Transport). The establishment of urban freight distribution terminals, providing an interface between long-distance shipments and 'last-mile' deliveries, can help reduce the number of trucks driving in urban areas. The focus is also on ensuring that transport between production centres and customers within city centres is clean and efficient.
One suggestion is to strengthen the freight component of the EU's existing CIVITAS initiative, which provides support for cities wishing to test and introduce innovative urban mobility solutions and re-balance the modal split towards sustainable transport modes.
The Logistics Action Plan further calls on the EU to develop a roadmap for the implementation of the 'e-freight concept', under which freight could be traced in a paperless, electronic way throughout its journey across transport modes. This would facilitate safer, more reliable, more efficient and more expedient deliveries, while regulatory procedures would be simplified. Currently, widespread deployment of ICT in freight logistics is being hindered by a lack of standardisation between countries and transport modes. Nevertheless, the hope is that e-freight will take off and become more affordable with the development of emerging technologies such as radio frequency identification (see our LinksDossier on RFID) and the use of the Galileo satellite positioning system (see LinksDossier).
CLECAT, the European Association for Forwarding, Transport, Logistic and Customs Services, said the Commission's Logistics Action Plan represented a "good start" but warned that "swift disillusion" may be around the corner, as the proposed actions "are not simple and they will not be achieved overnight". It further stresses that, however "sophisticated" systems and devices become, "we shall always be confronted with the limits of our physical infrastructure". It continues, saying: "We should not flatter ourselves that electronics can multiply square metres: they will not," calling for a "real public commitment to investing in better freight infrastructure for all modes of transport" rather than the "dramatic underinvestment" observed today.
The European Intermodal Association believes 'green logistics' will be "the new driver for future innovation, job creation, CO2 reductions and energy conservation". It further thinks inter-modality will be essential to achieving more sustainable logistics. "Companies should understand that opting for intermodal transport solutions is a way of securing their own future. Climate change is not so much a threat to the intermodal industry but a fast growing challenge (growing congestion, scarce energy resources, restriction of greenhouse gas emissions, spatial planning restrictions and citizens demanding a high quality of life and environment) to the transport and logistics industry in general," it states.
The International Road Transport Union (IRU) insists that road must remain a key player in efficient logistics. "Road transport plays the most vital role in creating efficient supply chains and intermodal transport," stressed Bertil Dahlin, president of the IRU's EU goods transport liaison committee. He called on the EU "to give industry the means but also the freedom to attain them," referring to the stringent laws governing road transport.
Railway operators and infrastructure management companies say the logistics plan represents a "major step forward for rail freight". But the Community of European Railway and Infrastructure Companies (CER) said the timeline for establishing rail corridors "could be more ambitious". "There is no time to lose if we want to enhance rail freight capacity at the same pace as volumes are growing," said its director, Johannes Ludewig. European Rail Infrastructure Managers (EIM) added that emphasis on information and communication technology would help to further industry improvements, saying the "top priority" should be to develop "smart charging" to allow for the internalisation of different transport modes' external costs and facilitate the 'modal shift' to cleaner transport modes. It also vigorously opposed moves to allow so-called 'gigaliner' trucks.
According to the European Shippers’ Council, "the most significant and important aspect" of the Logistics Action Plan is that it "represents the first attempt by the Commission to truly coordinate and combine freight transport policies that had previously been considered and developed separately and in isolation from each other". It nevertheless voiced reserve as to the potential cost of the proposals, which could imply large business investments in new systems and processes. It further warns that parts of the action plan are "riddled with controversy," notably as regards common vehicle standards and loading dimensions, saying "the essence of successful freight logistics is the ability to be versatile and flexible". The Platform of European Sea and Inland Ports added that addressing capacity bottlenecks and the lack of hinterland connections, particularly by allocating more EU funds to this issue, was of "utmost importance" to ensure that "ports do not become a limiting factor and that they can continue, as they currently do, to be facilitators in the logistics chain".
The commercial sector, represented by EuroCommerce, criticised the absence of a link between the Logistics Action Plan and the recently published Green Paper on Urban Transport (see LinksDossier). "It still remains unclear which actions the EU wants to take, for example to tackle the congestion problems in urban areas," the organisation commented, adding: "Since many commercial activities, in particular for smaller businesses, take place in city centres, it is of high importance that the Commission works on solutions to make last-mile delivery more efficient. Like it or not, last-mile delivery to the shops will (nearly) always be by road and therefore urban distribution - carried out by trucks and vans – must be guaranteed to ensure deliveries in local shops. A proper balance between accessibility of goods and customer traffic must be ensured."
European and global postal operators have announced their intention to clean up their act and cut their greenhouse gas emissions by 10% by 2013, notably by optimising their transport logistics and using less polluting modes of transport. "This is the first time that a supply industry has come together to address its impact on the environment," said the CEO of the International Post Corporation (IPC), Herbert-Michael Zapf. The UK's Royal Mail highlights its active involvement in promoting carbon reductions and offset schemes, notably by creating a calculator for reducing individual carbon footprints and adopting 100% renewable electric energy. German logistics company Deutsche Post World Net believes maximising efficiency in its vehicles and shipping routes, as well as incorporating alternative fuels into its operations, will help it achieve the goal of cutting its European fleet emissions to 5% below 1990 levels by 2012.
Along those lines, Dutch logistics company TNT announced in March 2008 its intention to replace more than 100 diesel trucks with all-electric models by end 2009. "We are living in times of great change and the launch of the fleet represents a critical component in what we are striving for - to make TNT the first zero emissions express and mail company," said TNT CEO Peter Bakker. The French postal service (La Poste) also says it plans to order up to 10,000 electric delivery vehicles to partially replace the current 60,000 non-electric vehicles in its fleet in a bid to reduce its €70million annual fuel bill. "According to our tests, it is six times cheaper to run an electric vehicle than a diesel vehicle," said La Poste's chairman, Jean-Paul Bailly. The company also believes the change will cut emissions of the greenhouse gas carbon dioxide (CO2) by four tonnes per vehicle annually.
- 23 June 2006: Mid-term review of the EU's 2001 Transport White Paper identifies more efficient logistics as a key priority of a more sustainable European transport system (Euractiv 23/06/06).
- 28 June 2006: Commission presents a Communication on Promoting sustainable mobility through advanced transport logistics (EurActiv 28/06/06).
- 18 Oct. 2007: Based on its earlier Communication, the Commission adopted a package of measures on logistics, including a Freight Transport Logistics Action Plan as well as separate proposals for improving the competitiveness of rail freight and boosting maritime and short sea-shipping (EurActiv 19/10/07).
- 5 Nov. 2008: The first European logistics summit (see summit declaration).
- 11 Dec. 2008: The Commission adopted a proposal for an EU-wide rail freight corridor plan.
- 2009: Creation of European logistics platform.
- Autumn 2009: European logistics platform set to present a workplan for the logistics sector.