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TRANSBALTICA 2011 The 7th International Conference ISSN 2029-2376 print / ISSN 2029-2384 online May 5–6, 2011, Vilnius, Lithuania ISBN 978-9955-28-840-4 Selected papers http://transbaltica.vgtu.lt Vilnius Gediminas Technical University Transport Engineering Faculty, J. Basanavičiaus g. 28, LT-03224, Vilnius, Lithuania UTILISATION OF TRANSPORT CAPACITIES AND OPPORTUNITY TO MITIGATE NEGATIVE ENVIRONMENTAL IMPACT OF LOGISTICS OPERATIONS Aurimas Vilkelis Dept of Transport Management, Vilnius Gediminas Technical University, Plytin s st. 27, LT-10105 Vilnius Lithuania. E-mail: firstname.lastname@example.org Abstract. The industry has worked hard on the efficiency of its own and its suppliers’ logistics operations for many years. An effective management of the supply chain delivers environmental benefits by reducing resource con- sumption and, therefore, cost savings. One of the problems faced today in the logistics industry is the underutilization of assets, including trucks, trains and containers. Around 25 % of truck kilometers in the EU are running empty. Empty journeys are not only wasteful economically, but also carry an environmental cost. The reasons behind empty trucking are diverse: poor coordination of purchasing, sales and logistics, unreliable delivery schedules, vehicle size and weight restrictions, demand fluctuations, incompatibility of vehicles and products, just-in-time (JIT) deliveries, among others. The article provides an analysis of the load efficiencies, and logistic companies inefficiency. Keywords: transport mode, strategic solution, supply chain, capacity management1. Introduction threats to civilians, have emerged (Fig. 1.). To mitigate negative environmental effects of transport, it is vital to Since products are usually not produced where they come up with innovative solutions that would be adaptedare consumed, a distribution network has to be set up, in to the current situation.order for the goods to reach the final customer. Distribu-tion strategies are mainly concerned with network design, 2. Design of Transport Network, Consideringgeographical distribution of warehouses and transship- Negative Environmental Impactment points, as well as the modal mix – that is, the modeof transportation used to connect the nodes of the net- Most companies currently design their distributionwork, including warehouses and production sites. networks based on cost and speed. However, these pro- Reductions in freight intensity in one country may cesses also have an influence on other factors, includingsimply be counter-balanced by an increase in another. carbon emissions. Out of 1.62 billion tons of truck emis-There will, however, to be a net increase in total energy sions in Europe, roughly one quarter are caused by trucksconsumption in the freight transport worldwide, partly running empty.because of the growth in international trade volumes but Optimizing a network design, including the nodesalso because the energy intensity of freight movement in and interrelated transport flows, can reduce both costsdeveloping countries is often significantly higher than in and carbon emissions significantly. The problem today isdeveloped countries (Piecyk and McKinnon 2009; that a lot of networks are inefficient due to change inertiaKamakate and Schipper 2009). and failure to factor sustainability into their design. From The majority of manufacturers develop intermodal a sustainability point of view, the design of a networkschemes focused on sea or railway transport in an effort faces two contradicting objectives: on the one hand, toto achieve their environmental objectives, however, this have the lowest inventory and warehousing CO2 emis-may lead to interruption of road transport connection sions, while, on the other hand, to achieve the lowestroutes and weaken the link between factories and trajec- transportation CO2 emissions. A common way to improvetories of road traffic. Intermodal solutions should be as- the sustainability of networks is for companies to comesessed in the global respect of the manufacturer and the together and create consolidation centers and multi-userretailer, as well the local respect of carrier or a logistic warehouses, which can improve the load factor of thecompany, considering the use of energy resources. transportation, while keeping the warehousing costs to a Road transport accounts for carrying the largest minimum (Sathaye et al. 2010; Liimatainen and Pöllänenamount of cargo, therefore, problems, such as transport 2010; Humpf et al. 2009).congestions, overfilled road network, air pollution and 275
A. Vilkelis / TRANSBALTICA 2011 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% EU27 BE BG CZ DK DE EE GR ES FR IT LV LT HU NL AT PL PT RO SI SK FI SE UK Inland waterway Rail Road Fig. 1. Modal split of freight transport in EU countries 2008 (% in total inland freight tonne-km) (Source: Eurostat) Many manufacturers and retailers build their distri- processes, the efforts should be focused in four mainbution channels on individual solutions. However, to areas:ensure more efficient use of intermodal transport, the 1) Increase in low-emission transport;tendency today involves reduction of the number of 2) Use of intermodal solutions;warehouses and terminals and increase of the distance of 3) Optimisation of transport capacity;transportation. The network of warehouses and terminals 4) Better route planning.was shaped in a way to curtail distances to the end con- Legislative measures, such as vehicle taxation, roadsumer, however, in larger countries, the arrangement of usage charges, congestion charges, and carbon taxes, willterminals allowed serving certain regions from a few further push companies to increase their vehicle utiliza-terminals, which were relatively close to each other. This tion levels. The reasons behind empty trucking are di-led to overlapping of logistics operations. To avoid over- verse: poor coordination of purchasing, sales and logis-lapping of operations and increase the distance between tics, demand fluctuations, unreliable delivery schedules,terminals, it is necessary to reduce the number of transi- vehicle size and weight restrictions, incompatibility oftion points. This would also allow enhancing the potential vehicles and products, goods-handling requirements, JITof use of intermodal transportation. In longer distances, deliveries, and regulations (e.g., cabotage restrictions inthe use of railway and sea transport is more efficient, it Europe, which oblige trucks to run empty cross-borderalso enables to achieve a higher degree of economies of after providing services in a neighboring EU memberscale. Evasion of long-distance haulage and use of inter- state), among others. While increases in fuel prices aremodal transportation increases the efficiency of the use of forcing companies to give greater priority to vehicle utili-road transport, thus diminishing the degree of traffic con- zation, there is a limit to how much an individual compa-gestions and CO2 emissions. ny can do to improve its utilization. While changes such as the redesign of distribution Some companies are highly responsible in their re-networks, the optimization of transportation modes or the sponse to negative environmental effects and use low-implementation of city logistics concepts can notably emission transport in their transport operations (needs).improve the CO2 footprint of logistics, the industry will For example, since October 2009 for inbound transport ofnot become a low carbon sector without operational components and materials, Fiat Group Automobiles haschanges, especially without adopting new, more efficient been using low-emission (Euro III-IV-V) vehicles only.technologies. In fact due to the inclusion of specific terms in transport agreements, vehicles that fail to meet the Euro III stand- 2.1. Optimization of Transport Operations ard were prohibited from enetering plants. For outbound transport in Europe, Euro III or even stricter standard Transport efficiency is an important way to reduce vehicles are used for approximately 33 % of shippingan environmental impact. Logistics can be made more requirements (Fiat Sustainability Report 2009).efficient through two major approaches. One is to raise A significant problem for logistics is managing ca-the loading ratio, by increasing the amount that is carried pacity. In most cases where capacity is exceeded, theat one time and decreasing the number of shipments, the logistics firm will use sub-contractors to take up excessother is to shift the transport mode from trucks to ships or material. Using sub-contractors on a regular basis cantrains, which emit less CO2 (Dinwoodie 2006; Humpf et increase the environmental impact because capacity utili-al. 2009). To reduce the environmental impact of logistics sation, fuel efficiency and emissions standards may be lower on sub-contractor vehicle. Contracts with logistics 276
A. Vilkelis / TRANSBALTICA 2011companies should contain clauses stipulating that all sub- It’s pricing must therefore reflect the fact it is only onecontract hauliers must meet the same standards as the leg of the delivery chain. The main negative issues withmain logistics companies. EU rail tend to be: − Geographical infrastructure relative to access to 2.2. Integration of Rail Transport into the Supply suppliers; Chain − Excess cost given that road has often to be used at each end of the journey; No general statistics are compiled on the efficiency − The bulk nature of rail, with small loads beingof freight movement by rail transport. This is a serious uneconomic. Infrequent delivery results.anomaly given the strenuous efforts of governments and The vast majority of the European network accom-the EU to transfer large amounts of freight from road to modate passenger and cargo trains, that due to their lowrail, primarily for environmental reasons. In the absence (relatively to passenger train) speed, reduce dispropor-of data energy efficiency on the rail freight system, it is tionately the network capacity in mixed circulation. Fornot possible to compare the environmental performance that reason, the commercial trains travel usually over-of the different modes on a consistent basis. However, night and are served during the day (Janic 2008; Knörr etsome countries such as Poland, Spain and others provide al. 2010).utilization rates of rail freight at the national level(Fig. 2.). 3. Efficiency of Utilisation of Transport Capacities 70% Using government data it is only possible to assess the efficiency of road freight transport. It is also likely 60% that the definition of empty varies both within and be- tween countries, as often this is not exactly specified in 50% the questionnaires. Operators are sometimes unsure 40% whether to classify as empty vehicles returning various types of handling equipment. While a truck carrying only 30% enough wooden pallets for the next load may be consid- ered empty, another returning empty roll cages from su- 20% permarket to a distribution centre could be considered loaded. One haulier moving an empty ISO container back 10% to a port might consider this to be load, as they are being paid to move it, while another might, for statistical pur- 0% poses, record the as an empty journey. There is a need for PL SK CZ SI LT ES HU more rigorous definitions of what types of trip should be classified as empty. The interpretation of empty running Fig. 2. Rail freight utilization (load factor as % by tkm) – na- statistics also requires some qualification. There is a tional 2007 (Source: European Environmental Agency) common perception that empty running is the result of a prodigal use of transport capacity and clear evidence of It is widely believed that rail as an alternative mode inefficiency. In practice, it is often very difficult, if notof transport has a lower environmental impact per tonne impossible, to obtain a return load and thus eliminateof product transported than road. Rail commands a much empty running. Much empty running, for example, is thesmaller share of the freight market in lighter, higher value result of geographical imbalances in freight traffic flows,manufactured goods. Move to more flexible JIT manufac- in many countries it is illegal for companies operatingturing: the intrinsic inflexibility and slower speed of rail trucks on an own account basis to collect a return loadfreight services make them less suited to the systems of from another company (McKinnon 2010).order replenishment that have evolved over the past few Most of the available data for road is compiled bydecades (Piecyk and McKinnon 2009; Woodburn 2003; EU countries and published by Eurostat. This comprisesJeong 2007). statistics on the distances that trucks run empty and laden. Rail transport is generally slower than road The proportion of truck-kms run empty varies widelytransport, but on sufficiently long distances, for instance across Europe and averages around 25 % (Fig. 3). Inter-of 500 km and more, the average speed may decrease as a national variations can reflect differences in the size ofresult of the driving time regulation: truck drivers must the country, the nature of its freight market, regulatoryspend sufficient resting time. Theoretically, resting time controls and regional imbalances in freight flows.regulation should make long distance transportation time The longer the haul the greater is the financial incen-quite comparable between single mode road and inter- tive to find a backload. In larger countries, therefore, themodal transport (Davydenko et al. 2006). Lack of infra- level of empty running tends to be lower. Reductions instructure, vandalism and reliability have also played their empty running are likely to be the result of several factorspart in the demise of rail. In order to have any chance of including the development of load matching agencies,recovery, rail must realize that in virtually all cases road online freight exchanges, the strengthening flow productstransport have to be used for final delivery to the dealers. going back along the supply chain for recycling and re- 277
A. Vilkelis / TRANSBALTICA 2011manufacture, backloading initiatives by retailers and economies of scope or economies of scale. Equally, own-manufacturers and the outsourcing of transport to third- account transport may be the preferred or even the onlyparty carriers (Piecyk and McKinnon 2009; Van de option because the goods traded need special care orKlundert and Otten 2011). knowledge, or when marketing strategies include delivery by the manufacturing company itself (Aberle et al. 1999).45% One of the leading manufacturer of automobiles in the world Nissan has been sending its own trucks to take40% delivery of needed parts from suppliers since 2000, mak-35% ing it the first Japanese automaker to do so. This has ena- bled to “visualize” waste during transport that had been30% hidden in the past. They have worked with suppliers to optimizme the frequency of deliveries and transport25% routes. The result is better loading ratios and reduced truck runs (Nissan Sustainability Report 2010).20% Breaking down the empty journey total by type of15% operator, shows a higher incidence of empty journeys for “own account” than for „hire and reward“ operators but10% with some exceptions. For Sweden and the United King- dom, this again may reflect very strong competitive pres- 5% sures, forcing efficient organisation of logistics, as for the 0% major supermarkets chains. Empty running was lower for CZ DK DE ES FR LT HU NL AT PL PT SI SK FI SE UK international transport than national transport. However, all countries recorded higher levels of empty running in international transport for own account operators, who Own account Hire or reward may find more difficulty in obtaining return loads on international journeys than hire and reward operators Fig. 3. Share of empty vehicle-kilometres in the total vehicle- kilometres by type of transport, 2008 – % in Vkm (Source: (Pasi 2007). Eurostat) 4. Conclusions 3.1. Comparison of Efficiency of the Use of Own Account Transport with Hire or Reward 1. Transport companies are under constant pressure Haulage to use their transport resources more efficiently, however, in many cases the efficiency depends on strategic solu- The EU rules were adopted in 1980 and should be tions of the manufacturer or retailers. Manufacturers andseen in relation to the regulations governing road haulage retailers should place a bigger focus on the managementfor hire or reward at that time. These latter have under- of transport resources by optimizing routes.gone important changes at national level in the Member 2. Empty running and loading factors are efficiencyStates. In parallel to the introduction of increasingly indicators of transport operations. Return cargo is im-stringent quality criteria, quantitative licencing and oblig- portant for all modes of transport, therefore, the strategyatory tariff systems were abandoned, leading to better and of the distribution network should ensure a higher level ofcheaper transport services which, in turn, made many interaction of transport modes and bringing empty run-companies opt for transport for hire or reward instead of ning to the minimum.using their own vehicles. 3. Economy of logistics operations can be achieved Own-account transport of goods is an important part by reducing the number of transition points, while in-of goods transport by road and a vital component of the crease of transportation distances would increase themarketing and logistics concepts of hundreds of thou- efficiency of use of intermodal transport. Changes in thesands of companies in the European Union and in Europe distribution network should reduce the inefficient use ofat large. More competition in road transport, better possi- transport resources and mitigate the geographical imbal-bilities of adapting transport services to the needs of the ance of transport flows.shippers, integration of other logistic services and an 4. Haulage of cargo at own account allows betterincrease in average transport distances make transport for understanding of distances of transport operations, im-hire or reward an increasingly attractive alternative to proving loading ratio and reducing empty running. How-own-account carriage. ever, own-account haulage is less efficient in many coun- Many companies continue to consider own vehicles tries due to the difficulty in finding return cargo in case ofand full control of the business, including the logistic and international routes. Nevertheless, due to extremely fiercetransport element, as the preferred solution for whole or competition among logistic companies in some Europeanpart of their activities. The reason can be cost efficiency, countries, the efficiency of own-account haulage is mere-when the characteristics of the transport operations make ly slightly different from hire or reward transportation.it difficult for transport service providers to profit from 278
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