Whether it’s road, rail, sea, or even canal, there are many challenges facing the logistics and transport sector. Integrated networks could be the answer – it’s time to think about links
The Victorians got it right. They created integrated and localised supply chains (the holy grail of modern logistics) to serve and nurture a manufacturing base.
Think traffic through the two major ports of Liverpool and London, supported by a rail and canal infrastructure, serving the north and south of the country.
Now history could repeat itself. Peel Ports – as part of its Mersey Ports Master Plan – will spend £300m to create a deep-water container terminal at Liverpool 2. Not only will this mean businesses can avoid the restrictions on vessel size at the current terminal, but they will also be able to connect by barge with the Manchester Ship Canal.
This canal is also owned by Peel Ports and £200m is being spent on warehousing, distribution and rail links. Both projects are expected to be finished within the next three years.
“At the moment 90 per cent of trade with the rest of the world that is containerised goes through the southern ports, but 50 per cent of manufacturing and demand sits in the northern half of the country,” says Stephen Carr, head of business development at Peel Ports (Mersey).
“We are not looking to be a competitor to England’s southern ports, but to create an efficient logistics hub.”
An economical route
The scheme aims to allow global shippers to access the UK’s major import centres via the most economical – and lowest carbon – route and provide exporters based in the North with a more competitive route to overseas markets.
That approach reflects predictions and advice for the next 25 years set out recently by the Chartered Institute and Logistics and Transport (CILT) in its Vision 2035.
In the vision, CILT argues that long supply chains, which are liable to disruption and high-cost increases, should be reconsidered so production and distribution can be moved nearer to the point of consumption. It wants logistics and transport planners to promote a reduction in both freight and passenger traffic by supporting alternatives to travel, reduced commuting distances and shorter, more localised supply chains.
“Businesses and logistics need to think outside the conventional,” says CILT chief executive Steve Agg. There is evidence that some businesses are grasping the nettle and thinking of ways to operate locally or to move their goods without dispatching lorries on long motorway journeys.
Rapidly expanding retailer B&M, will this year import 12,000 teu (twenty-foot equivalent units) of cargo, mainly fast-moving consumer goods, from the Far East through Liverpool. The figure, representing a four-fold increase on last year’s traffic on the same route, brings the goods closer to B&M’s main distribution centre and head office in Speke, only 14 miles from the port.
“Our partnership with the Port of Liverpool has been pivotal to the supply chain,” says B&M owner and managing director Bobby Arora. Meanwhile, rail freight is taking more lorries out of the equation. The amount of freight carried by rail has increased by 13.3 per cent since 2010, and is now as likely to be foodstuffs, clothing and white goods as the traditional coal and aggregates.
Cutting the road miles
Retailers are also exploiting the potential of linking existing deep-water container ports with the national rail network. Asda, for example, uses the Freightliner Group, the intermodal rail freight provider, to run services from Southampton port to Freightliner’s Cleveland terminal and so service the retailer’s north-east distribution centres.
“This enables us to ship a greater amount of product through Southampton port with the added benefit of fast transit and reduced emissions by placing our product within a few short miles of the target destination,” says Alex Linton, Asda’s import supply chain manager. Freightliner estimates that the new services will remove 10,000 road miles from the network each week.
It’s not just about long-distance travel though, according to Professor Michael Browne, a specialist in freight transport and logistics at the University of Westminster. “Within city centres there are many things that businesses can do,” says Browne, who thinks that neighbouring businesses could work together. “For example, they could think about what they can do at the receiving end, such as grouping together orders they can share – many offices find that they have too many deliveries – or having joint initiatives for their waste contracts.”
Browne also points to the success of businesses such as Gnewt Cargo, which uses cargo cycles and electric vans to collect goods (which in turn have been sent overnight from other depots) from what it calls “a micro-consolidation centre” then delivers them along the final mile of their journey.
On and around the roads, strategic development is being undermined by economic uncertainty, says Brian Templar, chairman of supply chain consultancy Davies & Robson. He is seeing less investment in IT systems that can help plan effective journeys and, with the exception of internet businesses which need picking and packing operations, less investment in new, well-placed warehouses.
Templar has noticed some recession-inspired innovation, however. “It is very difficult for businesses to pass on price increases to the consumer, so they are trying to improve efficiencies,” he says.
“There is more co-operation between companies now, and more emphasis on keeping costs down by using contractors rather than liveried trucks. Businesses are using backloads to cover the costs of getting trucks back, to save them running back empty and to make use of their fuel.”
Fuel prices have of course soared in recent years but have shown signs of falling back. The bulk price of diesel per litre peaked at 117.22p in March this year (excluding VAT) and at the time of printing was back down to 110.23p, almost the same as 12 months ago. However, as a 3.5p litre tax increase is expected in August, few will feel the benefit of lower prices.
Meanwhile, rail freight could benefit from further investment in infrastructure; a government announcement expected in July will build on the existing £400m investment in the Strategic Freight Network.
Lindsay Durham, head of rail strategy at Freightliner Group, welcomes the investment, but adds that the growth of rail can still be restricted by the physical network. “Some rail bridges need to be raised to accommodate the height of containers,” she says. “A hilly route restricts weight, too, when freight is mixed [with passenger carriages].”
With a maximum speed of 75mph, trains are faster than lorries (whose maximum speed is 56 mph), but thanks to quirks in the network they are not yet up to full capacity in terms of accommodating containers. “The typical length of a train is 500 metres; we are aiming to run 750 metres on some routes by 2014,” Durham says.
Back at CILT, chief executive Steve Agg says there is still potential for rail freight, as the high-speed HS2 will throw up more capacity for the entire rail industry, but that barriers to growth will come from passengers getting higher priority than freight and competition, among providers, for track access.
He points out that the UK has yet to exploit the full potential of the sea. He would like to see the smaller ports taking smaller ships which are engaged in short hops along the coastline. “We could send sea freight around the coast with no congestion problems,” he says.
“And as China becomes a consumer society, to which we can export, our import profiles will change. Perhaps manufacturing will bring jobs closer to home and we will import less.
“We have this other motorway around us – it’s called the sea,” says Agg.