Logistics Requirement for Commercial Rail Freight Services in Europe
Authors
Zomer*, G. and Islam**1, D.M.Z.
*TNO, Business Unit Mobility and Logistics. PO Box 49, 2600 AA Delft, Visiting address: Van Mourik
Broekmanweg 6, 2628 XE Delft, The Netherlands, Telephone +31 (0)15 269 68 75,
Email gerwin.zomer@tno.nl
**NewRail, Mechanical and System Engineering, Newcastle University, NE1 7RU, UK, Telephone +44
(0)191 2223972, Email: dewan.islam@ncl.ac.uk
Abstract
Freight transport is crucial for economic competitiveness for any country or region. In Europe freight
transport volume has increased substantially, but rail freight has increased insignificantly (9.2%) in
contrast to huge increase of road freight (37.9%) over the period 1995-2005. European transport
policy focuses on sustainable but competitive market. Even being generally environmentally
favourable, rail could not increase its market share due to failure to deliver key customer
requirements: reliability, quality of service, a door-to-door service and cost. With the adoption of new
EC ‘Co-modal’ policy, modal shift is no longer a goal in itself, we should utilise the different modes or
combination of modes in the best possible way. Thus there is an urgent need to investigate the rail
potential and thus suggest logistics necessity for rail freight services in a commercial, competitive,
secure and sustainable fashion. In line with this policy objective, this paper reports the findings of a
literature review and 21 in-depth interviews among the stakeholders along the rail corridor between
Rotterdam in the Netherlands and Constanza in Romania. The study applied a top down and bottom
up analysis approach. The study finds that the corridor has a potential of to start a rail freight service in
the corridor with a frequency of 2 to 8 times per week.
Key words: logistics requirement, competition, rail freight and Europe
Introduction
Freight transport is crucial for economic competitiveness for any country or region (Rushton et al,
2000). In Europe the freight transport has from a total of 2972 million tonne-kilometres in 1995 to 3903
million tonne-kilometres in 2005 (on average annual 3.13% growth). But in modal aspect, rail freight
has increased a total of only 9.2% in contrast to road freight of 37.9% over the same period (EC,
2007). European transport policy focuses on a single market based sustainable but competitive model.
Rail over road is generally is accepted as a more environmental sustainable mode. Even being
environmental friendly, rail could not increase its market share due to failure in delivering key
customer requirements: reliability, quality of service, a door-to-door service and cost (EC, 2001, EC,
2006a and b). With the adoption of new EC ‘Co-modal’ transport policy, the EC policy focus towards
promoting non-road modes has shifted, we should utilise the different modes or combination of modes
in the best possible way. Thus there is an urgent need to reinvent and explore the rail potential in a
new market environment and to suggest key logistics necessities for rail freight services in a
commercial, competitive, secure and
sustainable fashion (EC, 2006c). in this regard this paper
attempts to report rail freight market potential and rail logistics necessities through top down and
bottom up analysis approach. In the following sections research methodology is discussed followed by
findings of top down and bottom up approach. Then summary and conclusions are drawn and some
recommendations are made for introduction of commercial rail freight service in Europe.
Research methodology
The research is conducted through combined methodology of top down and bottom up analysis
approach. The top down analysis approach included assessment of potential freight volume in the
corridor using TRANS-TOOLS2 model which provides Origin-Destination freight volume statistics for a
corridor. Among others Eurostat (2005) and TNO’s own d data bank were very useful for this analysis.
The top down methodology also conducted literature review in the field including recent EC funded
projects including COMPETE, INTERIM, REORIENT and TREND, providing useful information on
shipper’s requirements and needs. The bottom up analysis approach included a survey among over
330 shippers and 21 in-depth interviews among stakeholders consisting of eleven service providers
1
Corresponding author
TRANS-TOOLS is a European transport network model covering both passenger and freight as well
as intermodal transport, developed by TNO among others.
2
and ten service users in different European countries around the corridor between Rotterdam in the
Netherlands and Constanza in Romania. The country-wise breakdown of 21 respondents is:
Netherlands-7, Slovakia-6, Germany-3, UK-2, Austria-2 and Poland.
Findings through top down approach
As the Europe Union is expanding the more logistics networks are emerging as well as becoming
more complex. The main challenges for the different actors of transport chain partners in emerging
logistics networks are to manage these logistics networks in an efficient way and to satisfy the
customer’s requirements. Each transport mode has its own strength and weakness and new EC comodal transport policy aims to exploit each mode’s strength to achieve optimum solution (EC, 2006a
and b). For example, rail transport generally offers cheaper service in the long distance but
dependable on road for pick-up and delivery services, thus requires modal transfer at terminals. The
modal transfer may means extra cost and time and uncertainly. Thus the rail service may appear to
customers as unreliable and may also cause loss, damage or delay. On the other hand, road transport
is flexible and can offer tailor made service to customers. The service is generally cheaper in short
hauls and offers higher customers satisfaction. However, the European road transport network is
highly congested and not able to accommodate further freight transport growth. The weakness of road
may offer an opportunity to rail freight service as a competitor to road, provided they can meet
customer requirements. This scenario can also offer an opportunities for rail intermodal (pick-up and
delivery services within 200km from the terminal by road and the long haul by rail) freight transport in
Europe. Thus road and rail freight service providers will compete and cooperate (i.e. co-petition) with
each other (Nalebuff and Brandenburger, 2002) to prove commercial but environment friendly service.
Figure 1 shows a typical rail-road intermodal freight service.
Shipper
at origin
Terminal: offloads
truck & put onto
platform
Road
transport to
terminal
Consignee
at destination
Road transport
to destination
Rail transport
Terminal: offload
train platform &
put onto truck
Figure 1: Typical rail-road intermodal freight service
The stakeholders of rail intermodal freight service include shippers/ consignees, service providers that
include road/rail operators/ undertakings, terminal operators, freight forwarders, rail regulators. Each
stakeholder has their own interests and needs, which makes cooperation as an essential requirement
to develop a new rail intermodal freight service a real challenge. The reviews of recently implemented
European Research& Development projects including COMPETE (2006), INTERIM (2007)
PROTRANS (2002) RE-ORIENT (2007), TREND (2006) provide useful information on demand issues,
like shipper’s requirements and logistic needs in different sectors. The literature reviews finds that the
most important shippers’ requirements are: cost, reliability, service quality and security. For many
shippers reliable transport is even more important than the transit time or cost. The findings of these
projects suggests that intermodal rail transport is very competitive with road transport on long
distances (>600 km) in terms of cost and transit time. More specifically, on distances up to 1500 km or
more, the cost difference is up to 10-15%, sometimes even higher.
The top down modeling approach (see figure 2 at the end of the paper) suggests that the RETRACK
rail freight service can attract cargo from the following four target markets:
Existing long distance rail transport: The East-West and West-East target volume is almost 2
million tons. Realistic volume to be attracted by RETRACK is about 3-10%, corresponding to
56.000-187.000 ton per year.
Long distance road transport: The East-West and West-East target volume is 4.7 million tons.
Realistic volume to be attracted by RETRACK is about 1.5-5%, corresponding to 70.000234.000 ton per year.
Maritime transport North Sea – Black Sea: The maritime transport volume between North Sea
and Black Sea ports equals 2.6 million tons. Realistic volume to be attracted by RETRACK is
about 1-5%, corresponding to 26.000-100.000 ton per year.
Import/export from TRACECA countries: Transport between European RETRACK countries
(NL, DE, AT, HU, RO) and TRACECA/Turkey equals almost 15 million tons, mainly road or rail
transport between Turkey and EU (7.5 million) and import from Kazachstan (6.8 million).
Realistic volume to be attracted by RETRACK is about 0.5-2%, corresponding to 38.000150.000 ton per year.
Total RETRACK potential from these four target markets adds up to 212.000 to 824.000 tons per year,
which is even a conservative estimate. This should be sufficient to start a rail freight service in the
corridor with a frequency of 2 up to 8 times a week.
Findings through Bottom up approach
The bottom up analysis approach was performed through 21 interviews using interview protocol
among the stakeholders of different European countries around the RETRACK corridor. (A copy of the
interview protocol can be collected from the corresponding author).
The bottom up approach provides insight in the characteristics, needs, requirements and potential
within four market segments: dry and liquid bulk, specialized products, maritime containers and swap
bodies.
In the dry and liquid bulk segment, the transported volume by rail is usually large and
predictable. For the larger volumes block trains are often used, but for new locations wagon
loads can be an interesting market for RETRACK. Adequate safety and security is an
important requirement in this market. More and more, larger chemical companies like BASF,
Dow, Degussa, etc, are setting up manufacturing activities and finding new customers in
Romania, Turkey, Ukraine, Russia and the Caucasus. This requires the transport of supplies
to these sites, but also transport to Western Europe.
In the market segment oversized and special goods, the transported volume by rail is usually
large and predictable (due to the manufacturing process). For the larger volumes block trains
are used, but for new locations wagon loads can be an interesting market for RETRACK.
Adequate safety and security is a little less important, than in the first market segment, but
reliability is of major importance, especially for the automotive industry. The RETRACK rail
freight service will provide an opportunity for Eastern European steel and automotive
manufacturing to transport their finished goods to Europe. Especially in Slovakia, there is
interest in using the RETRACK rail service. This load needs to be put on the train in Budapest,
probably with a feeder link from Kosice or Bratislava to Budapest.
The market of maritime containers shows major growth in demand, especially to destinations
in Eastern Europe. Rotterdam, Antwerp and Constantza will continue to grow in the next 5 to
10 years, and in all ports there is a policy objective to use rail and inland waterway transport
more. Logistics service providers and several shipping lines are interested in using the
RETRACK rail service.
Also the market for continental swap bodies shows a potential for major growth in demand,
especially to destinations in Eastern Europe. Especially in this market, Austrian logistics
service providers provide network services by e.g. collecting containers from Benelux,
Germany and France and put them on a rail shuttle to e.g. Romania and vice versa. The
RETRACK shuttle offers possibilities for large retail groups with interests in Eastern Europe,
like Carrefour and Tesco. This market will probably grow a little less than the other three
markets.
This bottom-up analysis supports the findings of aforesaid the top-down modeling approach that there
is enough potential for a rail freight service in the corridor. However, the following crucial customer
requirements must be met:
The intermodal rail transport costs have to be lower then road transport to compensate for
weaker performance on some other performance indicators; in some market Logistics market
requirements for new rail freight services 10 segments the cost difference should be up to 1015% to attract new customers. The top down approach reveals that these cost advantages are
realistic on several long distance D2D connections in the corridor if the number of stops is
limited. By introducing additional stops, the cost difference becomes smaller which might be in
conflict with requirements of a specific group of potential users. On the other hand, including
additional stops can also generate more traffic volume. It requires additional model analysis to
analyse this trade-off in the particular corridor.
The intermodal rail transit time has to be competitive with road transport but above all reliable.
The top-down modeling approach reveals that transit time is similar on distances of 600 to 800
km and shorter on longer distances, though this also depends on the number of stops. In
intermodal rail transport there is often a lack of technical and administrative interoperability
and coordination, thus increasing the chance of delay. Road transport is in general more
reliable. Though road congestion has an impact on reliability, delay due to congestion is often
quite predictable. A new rail service should therefore focus on interoperability issues and
coordination between countries.
The new rail freight service should offer a safe and secure way of transportation, reducing the
isk of accidents, theft and damage. Security and incidents is of particular interest for transport
of chemicals and dangerous goods whereas damage and theft is more relevant for transport
of containers and swap bodies. In general, safety and security is a strong point of rail freight
transport compared to road transport.
Potential customers want to create flexibility in logistics processes, able to meet changes in
demand. In general, road transport is very flexible, whereas rail freight transport offers limited
flexibility in reserving capacity on a train. However, this does not have to pose limitations to
shippers in using rail transport. If it is not possible to reserve additional capacity, road
transport can be used in addition to rail transport to provide this flexibility.
Both top-down (macro) and bottom-up (micro) approaches support the conclusion that there are good
opportunities for a RETRACK shuttle service. The macro approach indicates enough potential for a
frequent rail freight service in the RETRACK corridor, based on statistics on existing long distance
transport use and assumptions on the share of relevant target markets that can be shifted towards
intermodal rail freight transport. These assumptions are supported by the interviews with potential
users of the RETRACK service. In doing so, the approach brings together macro and micro analysis.
The start of a rail freight service in the corridor Rotterdam-Constantza requires a pragmatic approach,
and a dynamic view on the concept development. Some anchor customers (chemical cargo between
Germany and Constantza) are the base to launch a rail service and this might start as a block train.
Other customers (e.g. containers) can complement the block train and interest from new customers
should push the concept in the direction of a public shuttle service. The other market segments, i.e.
TRACECA countries, are to be developed after first the pilot has been established on “firm grounds”
with customers on the corridor. The requirements of the launching customers are crucial in the
decision of the origin and destination of a block train concept. Demand and requirements from other
customers should be leading in the decision to move towards a shuttle service concept. The top-down
modeling approach indicates significant cargo potential in Germany, Austria, The Netherlands as well
as Hungary and Romania, but the decision on the number of stops and the location of stops should be
driven by customer demand and requirements.
Summary and conclusions
The study finds that the RETRACK rail freight corridor has a potential cargo of up to 212.000 to
824.000 tons per year, which would be sufficient to start a rail freight service in the corridor with a
frequency of 2 to 8 times per week. The study applied bottom up and top down analysis approach.
The top down modeling approach shows that the rail freight service on the corridor can attract cargo
from four target markets: the existing long distance transport hauls, long distance road transport,
maritime transport of North Sea-Black Sea and import/ export from TRACECA countries. The bottom
up approach supports the findings of the top-down modeling approach subject to the fulfillment of
following customer’s requirements: a) costs must be lower than road transport to compensate for
weaker performance on some other performance indicators; b) transit time has to be competitive with
road transport but above all reliable; c) the service should offer a safe and secure way of
transportation, reducing the risk of accidents, theft and damage; and d) flexibility in logistics
processes, able to meet changes in demand. In general, road transport is very flexible, whereas rail
freight transport offers limited flexibility in reserving capacity on a train. However, this does not have to
pose limitations to shippers in using rail transport. If it is not possible to reserve additional capacity,
road transport can be used in addition to rail transport to provide this flexibility.
Some anchor customers (e.g. chemical cargo between Germany and Constantza) are the base to
launch a block train. Other customers (e.g. containers) will complement it and interests from new
customers will push the concept of bloc train to shuttle service. Other market segments are to be
developed after first the pilot. The fulfilment of the requirements of launching customers is crucial to
launch the block train and then subsequently a move towards shuttle service concept. The decision on
the number of stops and the location of stops should be driven by customer demand and
requirements.
References
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Figure 2: Current rail freight volume in the Rotterdam-Constancza corridor (source: Eurostat, 2005)
25.000
Romania
Hungary
Slovakia
Austria
Germany
Netherlands
15.000
10.000
5.000
-
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et
he
r la
G nds
er
m
an
Au y
st
r
Sl ia
ov
ak
ia
H
un
ga
r
R
om y
an
ia
1000 tonnes
20.000
Destination
Top Origin-Destinations:
NL DE: 15.5 million tons
DE  AT: 9.1 million tons
AT  DE: 7.1 million tons
DE  NL: 4.0 million tons
...
HU  RO + v.v.: 2.7 million tons
NL+DE+AT  HU+RO: 1.5 million
ton