Transition in platforms step #1:
After a year of writing, on November 15, 2014, I shared this point of view "Multimodal transport exchanges? Why should freight railways be interested?". It discussed how European rail freight could be integrated in multimodal transport by using platforms to reduce CO2 emissions. Since then and now while concluding my research on this topic, a number of topics are alrealdy implemented. Notably, a mind shift regarding rail and multimodality can be observed! Efforts to reach the green climate goals however require further efforts on part of serveral actors, and ofcourse, what I learnt out of this experience: a great deal of patience.
I cannot but mention, that it was my good luck to have a great teacher in this journey: my father, an unassuming person, who contributed to the rail, energy and telecom in India and other countries over six decades. This transition series is dedicated to him! Rest in peace Daddy!
Read more about this in my paper presented in 2015 at Rail New Castle here DOI 10.5281/zenodo.8050256. Its free access.
Current market scenario and challenges for freight railways.
The introduction of containers and the internet has changed the consumer pattern of customers. The consequent change in production trends (from buffer stocks to “just in time”) and transportation needs (from bulk to retail) has made a large impact on the transport business. Products and raw materials are bought at unimaginably low prices from different parts of the world and shipped over long distances in containers. This trend is a challenge and an opportunity for all transports, especially the freight railways.
The road transport offers here a cut throat competition through cheaper rates and faster door to door transport. Readily available as and when required. Freight railways, especially in piecemeal freight cannot match this. Further, the pressure of providing subsidized services erodes their financial viability. So how can freight railways afford to remain in business and be financially sustainable in such situations? This is an abstract of my paper on multimodal transport exchange which deals and provides a solution to this important issue. Although I have focussed on European freight railways, the benefits are extended to road transporters, ocean and air freight, freight forwarders, government etc. In addition, it benefits many countries, both, developed and developing.
Learning from other businesses
To improve long term prospects, millions of Euros are being invested in terminals, warehousing facilities etc. indicating the emphasis of rail industry in meeting operational requirements. But what about the optimal usage of existing infrastructure and resources?
Freight exchanges are a solution which aim at optimum utilisation and revenue maximization of each mode of transport including railways. Road transport and other freight exchanges in operation are good examples to learn from. They ensure better service (visibility, flexibility, efficiency in handling etc.) to customers at lower price and enable greater volume of business for the involved members. This applies to long term and spot market. In Switzerland, this comes at an appropriate time, since the regulations for freight transport are under revision. The time is right to make this solution a reality. A freight exchangein general, a market maker which uses an online service for freight haulers, logistics solution providers, freight forwarders. It allows transport companies/haulers to advertise their offers for freight transport, and freight forwarders/logistics providers to offer freight to be transported[1]. As of today, the maximum freight exchanges exist for road transporters, simply because there are so many road operators in the world.
The code 24 for Rotterdam-Genoa[2] route and X-Rail[3] (joint effort of certain European railways to boost wagonload traffic) are efforts in freight railways in this direction. However much is still to be done. These efforts should be complemented by railways by riding on the experience of the transportation industry. Freight railways can start by joining hands in existing freight exchanges favourable to them. All this is of course is a challenge but also a chance for the freight railways. Co-existing by using its unique position, instead of only competing or being protected from the state!
Are freight railways capable of implementing such solutions?
The biggest challenge for railways is to realise and see their gain in new solutions, as also in the case of this multimodal transport exchange. It requires a change in attitude, from being state supported to becoming self-sufficient. Employees have to be trained and skilled personnel to be recruited to run market operations. This transformation is a huge effort. However this is an offer for future perspectives for the employees. In commercial and IT area major change changes will be required to be a participant in the exchange. Although, initial investments for IT will be high, these will be justified by the benefits of standardization and efficiency they are expected to offer. This means increased visibility in real time for the customer.
The proposed MTEx Multimodal Transport Exchange (TM)
This is a short description of the proposed multimodal transport exchange and its relevant characteristics. It is more than just a freight exchange in that it calculates possible combined transport services as a complete solution in the bidding process for the customer, keeping interoperability in mind. It does not perform the transport functions itself. Different parties as mentioned in the freight exchange definition above and visible in the figure below will be interested in participating in this exchange. If freight railways initiate this process, they have a good chance of influencing the composition of MTEx. Even the state can participate in MTE to get the best economical offers for traffic services in order to meet their social obligations. This will reduce the pressure of subsidised services on the freight railways. To ensure neutrality of the exchange operator and transparency in exchange operations, MTEx will be a registered private company being controlled by regulatory laws. Its management board will consist of major participants as stakeholders.
What are the main functions of the MTEx?
Organisation objectives | Service objectives |
|---|---|
Ensure delivery of transport service as per contract | Define minimum service requirementsto ensure quality, punctuality and safety |
Maximise available capacity utilisation, Maximise revenues for MTEx | Provide IT services registering and access for fast on line bidding |
Provideinformationexchangeforall members | Select most optimum combined or single party offer |
Provide means for settlement of financial transactions between members (Clearing House) | Provide IT services for on line tracking of consignments for customers, settlement and documentation |
How can an MTEx help freight railways?
MTEx can ensure effective resource utilisation of all members and customers including railways. Once formed, itwillprovide future projections of traffic volume, types of rolling stock, technological changes required in handling and movement etc. Hence freightrailways will have qualified inputs to better plan their assets andoperational requirements. MTEx will also ensure the non-discriminatory access to all its members. This is today a barrier for most freight railways due to the lower priority they receive over passenger traffic. Most importantly, railways will have a chance to get heavier and long lead traffic in which they are decidedly economical and operationally better than other transport modes. They will find matching last mile transport services from other modes at economical rates for providing door to door services
Who should take lead in the formation of MTEx?
The obvious choice would be freight railways. They profit from the MTEx,the market maker, where there is a high probability of complementary offers to be found. Freight railwayscanbuild alliances withothertransportsfor this. Henceprices can and will be adjusted downwards to win orders. Freight Railways, will be major stakeholder in this model since they transport long haul and bulk freight in an environment friendly manner at competitive prices. They own dedicated rolling stocks, infrastructure which gives them a lead in avoiding congestions and delays. Their biggest asset is that they have the largest experienced man power in operations. They can expand their operations at a faster pace. Last but not the least, the regulatory laws of certain (type and volume) demand traffic to be compulsorily carried by railways. This will benefit the freight railways in MTEx to always carry a certain amount of traffic.
How do other parties benefit from MTEx?
The MTEx model ensures greater and useful exploitation of all transport modes and infrastructure. This includes reduced carbon footprint, reduction in empty runs etc.
It will be easier to meet the fluctuating customer demands. Due to coordinated effort, many costs in companies can be reduced. Also, the open market will create competition (create best practices) and hence reduce prices for the customers. All members will also profit from increase in efficiency with the use of electronic information exchange throughout the freight transport logistics and supply chain.
MTEx will enhance interoperability between freight transport and their information systems. The transport carriers in general will be able to reduce the risk of resource shortage.
Why should government and regulators be interested in MTEx? What should be their role?
MTEx has common objectives with the government to achieve. They both encourage better use of infrastructure (therefore reduce unnecessary investments) and environment friendly transport. There is every reason should the government and regulators will encourage the usage of MTEx. This would ensure the transparency in implementation of rules set for exchange operations and keep the price mechanism in the market under check.
As a benefit for economy, they should facilitate introduction of IT Systems and electronic exchange of data between MTEx and members. Government can also be a customer to MTEx and pay for the essential services to most suitable and economical transport carrier. Governments have to offer support in harmonisation of vocational studies4and support in training personnel for the new model. They should provide incentives to freight forwarders to join MTEx to achieve best utilisation of resources and ecological balance.
Recommendations for the next steps
Freight railways need to initiate a study together with state/regulators, key customers in order to detail the benefits and organisation of MTEx. The study will be aimed to recommendations on regulatory aspects which need to be anchored in the transport regulations and develop the MTEx model.
* These are author's personal views
1.http://en.wikipedia.org/wiki/Freight_exchange
2.http://www.code-24.eu/activities/rail-freight-exchange/
3.http://www.xrail.eu/
4.Study on Freight Integrators to the Commission of the European Communities, Final report
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