When doing business in Europe, one of the most crucial aspects is getting your products to their destination as efficiently and inexpensively as possible.
We look at the pros and cons of various transit methods and some of the issues that British companies should bear in mind when looking to establish or strengthen a successful export business.
One of the principles enshrined in the single market of the European Union is the free movement of goods from one country to another. It’s one of the factors that works to make the continent competitive in a global context. The single market has no internal frontiers, and the whole region is treated as a single territory from a tax point of view. This means that most goods can be moved between countries without paying import duty. This makes trade within the EU easier in many respects, but the logistical issues caused by moving goods across a large land mass with different transport networks and legal protocols can be challenging.
When one thinks of transporting goods across large distances, one of the first images that comes to mind is a truck. There are many advantages to road transit, the main one being that it involves less steps than many other transit methods. Trucks can pick up goods at a facility in the UK and – after a ferry trip or a trip through the Channel Tunnel – be unloaded directly at the destination. In many cases there is no need for your products to leave the truck bed, a fact that greatly reduces the chances of product breakage or spoiling during travel.
All other forms of transit goods involve some degree of road travel anyway. Goods need to be transported by road to the plane if using aviation, or the train if using rail. Once they have reached their destination country, goods have to be collected from the airport or railway station and conveyed onwards via road.
Not only is road travel one of the most straightforward methods of getting your goods from A to B, it’s also one of the easiest on the bottom line. “Generally road freight is the most cost effective,” says Peter Roan, Director of Total Logistics, a leading European Supply Chain Consultancy.
Roan has been working with the company for 13 years, and spent the previous 15 years working for third-party logistics providers in various European countries. He also believes that there are concrete steps that a business can take to make the process even more cost efficient. “Where businesses have part truck loads, it is often more cost efficient to use a logistics service provider (third party logistics) who can combine their traffic with those of others going to the same region,” he says. This method allows for the costs of transport to be shared with other companies who have the same end destination, and where your company would be moving enough product to fill an entire truck.
There are, however, a couple of disadvantages to road transit. The main one is that road transit is not widely held to be the most low carbon way of transporting goods. In 2011 the European Union commissioned a white paper on sustainable transport. The aim of the paper was to come up with a list of proposals that would help build an efficient and competitive transport system within the EU area, while also making it more environmentally sustainable.
One of the key fundamental targets was to move transport from off the road and onto freight rail and waterborne transport. The aim is to reduce carbon emissions by an ambitious 60% by 2050 and, in doing so, reduce European dependency on imported oil. Meeting these ambitious targets will take time, but Roan doesn’t believe that using road transit is necessarily an environmental evil in the meantime, and suggests ways that businesses can be more carbon efficient.
“Generally, there’s a direct relationship between cost and CO2 emissions – so, if you put your warehouses in the right places, fill your vehicles and use the most efficient routing you’ll save money and reduce your carbon footprint.”
Another drawback is speed. If you need to get your goods to a customer or market as quickly as possible, then other transport methods might be better suited to your needs.
Rail transit via the steam locomotive revolutionised distribution and trade, and still plays a key role in Europe’s commercial transit sector. One of the goals set out in the EU white paper on transport is to triple the length of the existing high speed rail network across Europe. This is good news for the sustainability of this mode of distribution in the long term as it continues to get more efficient.
Generally speaking, rail is used as part of intermodal transport, one of several methods involved in a transport solution. One way of doing this is through swap bodies – also known as caisse mobile – where the part of the truck that carries cargo can be detached from the chassis and lifted onto a rail wagon. The main advantage to rail is that it is one of the most environmentally sound ways to send goods long distances. Peter Roan believes that there are advantages, but the inconsistency of rail freight is a large drawback.“Rail can be a cost-effective solution for larger volumes travelling over longer distances, but there are relatively few routes where this is really practical. Too often there are delays when moving freight by rail over longer distances. In the longer term, if rail infrastructure can be developed effectively, it will become a more common solution. However, the signs are that this will take time,” he says.
More than one tenth of total inland freight was transported on the inland waterways of Germany, Bulgaria and Belgium in 2011, with this share increasing to just over one fifth in Romania and over one third of the total in the Netherlands. It’s a growing area, and one that’s getting a considerable amount of investment according to Roan. “There are some interesting developments with investment in inland barge terminals in the Netherlands and Germany and can offer a good solution for goods coming in from outside the EU.” One disadvantage to this method of transport is that it is slightly slower than road transit.
According to the most recent freight transport statistics released by the EU, in 2012, the United Kingdom had the second highest amount of air freight at 2.4 million tonnes.
Air freight may be popular, but it can be expensive. “Air is the most expensive solution, but does have the shortest lead time, so has a role to play for short-lead time products and urgent deliveries,” notes Roan.
One way air transit can be made less expensive is by using a freight forwarder. A freight forwarder takes consignments from a number of different companies. The airline charges the freight company for all goods as a competitively priced unit, and the freight forwarder invoices each company for their proportion plus a fee or extra percentage.
Air freight has declined in popularity in recent years as a result of improved road networks, particularly in Belgium, Luxembourg, the Netherlands, Northern France and the Ruhr area of Germany. The road network in these areas is so good that operators can often guarantee that goods will be delivered between 48 to 72 hours, which for most goods is sufficient.
Air transit is still very useful when it comes to reaching parts of the EU that are difficult to access by other means, such as Finland. It’s also useful as it is the only method that can guarantee same day delivery from the UK to another EU destination.
One issue that needs consideration is the distance of the nearest airport to the final destination. If it’s relatively close, then air freight may be the logical choice for your business. If, on the other hand, there is quite a difference between the airport and your destination, then it may be a better bet to go with road freight.
Some airlines offer a door to door service where they link in with local partners in both the country of origin and the destination, but this should not be assumed.
COUNTRY PROFILE – FRANCE
ROAD: France has a very highly developed modern road network. Unfortunately the costs reflect this, with most highways or autoroutes heavily tolled. It’s important to be aware that there can be restrictions on roads at certain times, says Roan. “In France you can’t drive a vehicle over 7.5 tonnes on the road on a Saturday night, the night before a public holiday or during the day on a public holiday, or on certain Saturdays and Sundays during July and August.”
RAIL: France has one of the most sophisticated rail networks in Europe. Its high speed rail service (TGV) links Paris with most of the other main French cities and beyond. The fact that it connects to London via the Channel Tunnel makes it especially worth consideration.
AIR: France is one of Europe’s hubs for transport with Charles De Gaulle airport, with the Airports Council International (ACI) rating it as the eleventh busiest airport in the world in terms of cargo volume in June 2014.
There is a commonly held belief in business that making environmentally sound choices can end up costing a lot of money. Roan doesn’t believe that this is necessarily true, and furthermore that there is a lot of scope to make improvements to the existing framework that would make European transit more environmentally friendly. “Air is a high CO2 solution, but is expensive. Rail is an environmentally sound solution, in theory, but isn’t a practical option in most cases. Which leaves road. In our view the biggest opportunity for carbon reduction in the short-term is to improve the utilisation of vehicles – larger trucks, more full with products and travelling less distance empty. This requires collaboration between freight users and legislation changes to allow the larger vehicles,” he argues.
As well as incentivising a more modern rail transit network, the EU Commission is also looking to clean up the aviation industry. The white paper spells out the need for the completion of the Common European Aviation Area (CEAA) by 2020.
The CEAA will span 58 countries and more than one billion inhabitants. Air traffic control across Europe will be modernised by this same 2020 guideline, meaning transport of goods by air will be safer and more efficient than ever before. The fact that the paper also sets out a guideline for 40% of all fuel utilised by the aviation industry to be sourced from low-carbon and sustainable methods is importantfor your business’ increasingly important green credentials, and also for your bottom line.
Some European countries offer ‘Green Zone’ systems, where your vehicle is required to have a sticker on it designating how environmentally friendly your vehicle is. In cities, some areas are restricted to all but the most environmentally friendly vehicles. Germany and Denmark are two countries that operate such a scheme. It’s best to research this in advance to avoid being caught out.
“Moving freight across Europe can be complicated, especially when there are a number of countries involved,” says Roan. “Generally there is a will to harmonise transport laws, but at the moment there are still many differences from country to country in terms of regulations and requirements. There’s huge potential for making mistakes – not having the right paperwork, unknowingly breaking regulations, using the wrong mode of transport etc.
Generally you need to have the correct paperwork for both the vehicle and the load, including customs documentation. Planning is the key. If you’re using a specialist logistics service provider they will have a lot of experience and should be able to help you with this.”
Using the wrong mode of transport is another common mistake, he adds. “Air generally offers the fastest service but is expensive – how urgently are your products really required? Often it’s enough to have certainty of day of delivery and to take slightly longer, making road an option.”
COUNTRY PROFILE – ITALY
Most goods in Italy are transported by road so the network is fairly good and constantly being upgraded. It has a reasonably good rail transport and a number of airports. One of the things to bear in mind if looking to transport goods to Italy is that infrastructure is not universal. The standard of transport links is much higher in the north of the country than it is in the south, which you will need to factor into your planning.
Roan offers an important best-practice rule for successful European transit. “If you’re moving traffic by yourself, make sure you understand the rules and regulations for the countries you’re working in. There’s a lot of information on the International Road Transport Union website www.iru.org. If you’re working with a third-party, make sure they understand the service requirements for your traffic,” he urges. Whether logistics and delivery are organised directly by your company or through a third party, understanding your transit options – and selecting the right one for your goods, destination country and customer requirements – will be important to success.