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Road freight looks smart in green


Trying to influence the European Commission to develop strategic policies to the benefit of industry and yet not detracting from those policies for the greater good can sometimes be a thankless task. As one who has been involved in


lobbying - or persuasion based on sound and balanced reasoning, as I prefer to call it - it can seem a never ending task. However, in the freight transport policy being developed by the European Commission there was a small Hallelujah moment recently. Henrik Hololei, who heads vice president Siim Kallas’ cabinet, said categorically at the International Road Transport Union (IRU) conference: “Growth of the economy is important. Growth and environmental sustainable are not mutually exclusive” . A small victory in a long


campaign, maybe, but significant. In these times of austerity. The European Commission appears to have realised the economy is just as important as the environment, but it is something industry representatives like the European Shippers’ Council have been trying to get across for years;economy and environment must go hand in hand. Road transport has usually borne


the brunt of the EC policy stick, but maybe it is being recognised finally, officially, that for all the benefits of rail, inland waterways and shipping, we are and will remain dependent on road transport. There is no escaping the


importance of road freight to the European economy. Transport in the EU directly employs more than 10 million people and accounts for about 5% of GDP; between 2000 and 2007, road freight transport in Europe increased by 27%. Trucks carry almost 75% of the total volume and 90% of the total value of goods in Europe. Every day, trucks transport around 100 kilos of goods for every EU citizen. By 2030 trucks will still account for about 67% of all freight movements and are likely to remain significant to 2050 due to the limited degree of


substitution by other


modes. Geographical growth correlates


with GDP forecasts, so trucking growth is likely to be higher in Eastern European countries


such as Romania, Latvia, Poland, Bulgaria and the Slovak republic. Projections in central and northern Europe suggest domestic freight traffic will remain stable, decoupled from economic growth, while traffic originating from or outside the EU or having a destination outside the EU is projected to grow faster than the economy. But a balance does have to be


struck with the environmental consequences of this ‘dependency’ on road freight. Trucks account for 3% of the vehicles on the roads but up to 25% of the emissions and around 6% of global CO2. It is arguable that truck fuel efficiency has not


significantly improved


since the early 1990s and that Euro engines have not really focussed on reducing CO2 emissions. It’s suggested that for each litre of diesel fuel that is consumed, 2.62 kg of CO2 is emitted into the air. But is it fact? The honest answer is nobody


truly knows, but it is time to find out. An industry-led initiative formerly known as SmartWay Europe, is due to be launched on 27th March, under the new name, Green Freight Europe. Founder members comprise, at the time of writing, over 30 companies, including multinational shippers, carriers, retailers and associations and they aim to establish Green Freight Europe as the leading independent voluntary programme for improving environmental performance of road freight transport in Europe. By providing a platform,


the programme aims to help companies reduce the carbon emissions of their road freight, monitored through a central database. Furthermore, shippers are encouraged to compare the environmental performances of different carriers, which will enable logistics managers to measure the carbon footprint of their products. The carriers themselves also reap benefits since green hauliers will attract more climate- conscious customers. A certification system will also be established. Collaboration between carrier


and customer, and the sharing of best practices are two central pillars of the strategy to reduce CO2


By Andrew Traill


emissions. Road freight is too important to be


leſt to the politicians. Industry must act and show that it is responsible enough to balance commercial viability with environmental sustainability. Initiatives such as the


new Green Freight Europe need to be given our full support, and to show the policy makers that its not just about regulating the industry. For


further information see


either www.smartway-europe.com or www.greenfreighteurope.com.


It’s all about quality


Maersk Line’s new chief executive officer Søren Skou was quite right to highlight the issue of service quality and price the other day. He raised an important issue: if you could get to a point where the lines differentiated between each other on service quality, you could and should base your pricing on that. At the moment, negotiations


on service quality and price seem to take place in two completely different planes. Shippers spend a long time talking with lines about about all sorts of KPIs and what service levels they require but then there is an almost separate conversation about the rate. (In some cases they may in fact be negotiated by different sets of people.) But why not build service levels,


and the price, into the same contract? That would give the line a vested


interest in keeping its performance up to scratch. The money back guarantee in


the Daily Maersk service does go some way towards this but I would envisage a contract whereby if, for instance, KPIs achieved dropped below a certain percentage, then the overall price paid by the shipper to the line would fall also. Concentrating on service


quality would help move the liner shipping industry away from being a commodity industry and one based on service. Of course, we wouldn’t be having


all these discussions now if the shipping industry hadn’t been so foolish in its investment decisions. The fact that we are in crisis mode now is due to the rush into big ships, without any regard as to whether there was the business to fill them.


Axing block exemption has not affected rates, claims FMC


Ending of the liner shipping industry’s block exemption from EU competition rules in 2006 has had little impact on shipping rates, according to a new study by the US Federal Maritime Commission. The FMC said it could detect similar differences in revenues between comparable trade routes. although it appeared to have caused an increase in the volatility of rates, a small increase in market concentration and a decline in market share stability, the FMC found. Nor was there any “persuasive evidence” that the repeal had had much effect on service quality, The study concluded that the harm liner conferences were causing harm to shippers was “less substantial than previously believed” although it admitted that the world recession had clouded the issue. The European Shippers’ Council


said, in response, that “the FMC must be commended for a well-researched report which, however, is top-heavy in terms of data and graphs but rather prudent in terms of interpretation and recommendations. The overall impression gained is that maintaining the status quo in the US regulatory field would be the best option for all parties.” However, the FMC had failed to recognize the greater transparency


and potential negotiability which now exists for fuel surcharges (BAFs) and Terminal Handling Charges (THCs) following


the regulatory


repeal. More seriously, said the chairman


of the ESC’s Maritime Transport Council, Jean-Louis Cambon,


“The


FMC seems to have underestimated some of the market differences between the Asia-Europe trades and those of the Asia-Pacific. For example, the higher rate volatility on the former trades is heavily influenced by the increasingly larger ships plying the trades, which cannot be shifted to other routes, and which have added to the scramble for market share to fill the excess capacity which exists under the current economic climate. The higher prevalence and influence of the spot market in Europe-Asia trades is also in part responsible for some of the rate volatility.” With the recent spate of proposed


rate increases by shipping lines, Mr Cambon added: “Notwithstanding the self-inflicted dire situation in which the carriers find themselves, it is very remarkable that the date of 1 March be so often adopted by most of them with a largely similar increase. It is all the more peculiar that, very rarely in the past has a GRI been successful at such a date, so shortly


after Chinese New Year, and taking now into account the background of a depressed European economy.” He further questioned the lines’


logic in chasing market share, oſten pricing below shippers’ target levels, and then having to ask for unreasonable increases in one go. “Going for market share always brings depressed revenue levels for largely unchanged market positions. It is called value destruction and is detrimental to both carriers and shippers.” However, recent alliance


developments do reflect a more mature response from the industry, showing a mindset more concerned with cost reduction, efficiencies and service quality. However, “a close watch should be maintained on the larger alliances to ensure there is no infringement of normal business conduct. There are mechanisms for removing volatility, and one of the best is to enter into longer term contracts which removes the short term unpredictability from the rates.”


First thoughts on UPS-TNT merger


UPS’s takeover of TNT, announced earlier this month, is one of the most epoch-making events in our industry – certainly in the express parcels segment. Mergers are nothing new, of course, but this is the first time two global operators have tied the knot. The nearest in our own times I can think of is Dhl/ Deutsche Post’s purchase of Exel a few years ago, the latter by then having become a global player with its merger with MSAS. When the dust has settled and


when – and if – competitive issues are resolved, it will clearly put some


pressure on DHL as there will be another global player of similar size. But anyone who is concerned about the market being dominated by giants should remember that there are plenty of alternatives. I recently attended an event held by a group of freight forwarders who have networked together, bringing together the individuality of the small or medium sized company but with some of the scale economies of the big boys. So there are plenty of


alternatives to the big fish, for those that care to seek them out.


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