Let's Go Europe: Touring Transportation Best Practices
U.S. companies exploring uncharted markets to expand their global presence might consider taking a second pass through Europe for a fresh perspective on transportation best practices.
If you've ever found yourself lost in an unfamiliar European roundabout, there probably wasn't anywhere to turn except clockwise. Veering left didn't feel right. But circling the rotary again did. And so you learned your way around and gained a new perspective, perhaps appreciation, for European transportation flow.
Traffic patterns are just one of many peculiarities that distinguish European and U.S. views on transportation. In logistics terms, idiosyncrasies are no less apparent: there are lorries in lieu of trucks, phonetically confused distribution centres, performance metrics measured in metrics, and charming "freight villages" that make U.S. intermodal sites seem alien. These anomalies are semantic, but they also reflect the unique ways Europeans approach transportation planning and execution.
In today's global village, logistics best practices are sweeping across continents, creating a more integrated and educated supply chain. North America and Europe are the two most developed continents in the world—and prosperity lends itself to transportation and logistics wealth. But cultural and economic diversity, and unique geographies, have their own ways of shaping how businesses and governments devise tactical and strategic solutions to common problems.
A MATTER OF DIVERSITY
If the United States is a cultural goulash, then Europe is a pot not yet stirred. Since its inception in 1993, the European Union (EU) has made great progress building on the original foundation of the European Economic Community, assimilating new members into a cohesive trading bloc.
Despite this singular entity, and largely uniform, if increasingly unstable, currency, EU countries are nationalistic by nature, with unique cultural wrinkles. Many of these subtleties are easily obscured by business commonalities. As a developed, consumer-oriented region, a historical hub for manufacturing and trade, and a single market, the EU is more like the United States than different. This harmony plays out on the logistics side as well, especially in terms of technology and process, which increasingly have no bounds.
"Logistics best practices tend not to differ significantly," suggests Simon Dixon, owner of Hatmill, a management consulting firm located in Harrogate, United Kingdom. "Principles such as minimizing touches, balancing stock with availability, and proximity to the customer are ever present in both the United States and Europe."
Differences emerge where borders end, and specifically where geography and transportation divide. Europe, less than one half the size of the United States, presents a far different trade dynamic. There are as many sovereign states on the continent as there are in the United States—and only 27 of those countries are part of the EU.
"European nations, being relatively small and close to one another, have had to learn how to deal with many different cultures," notes Dr. J. Rod Franklin, vice president, product development, Kuehne+Nagel. "Operating in this manner means they are much more at home trading internationally than U.S. operators who have become accustomed to a large, relatively homogeneous home market."
Smaller countries are largely dependent on raw material imports and finished goods exports to drive their economies, which places greater emphasis on global trade flows and efficient throughput. As a consequence, transportation demands in Europe are markedly different.
"In the United Kingdom, for example, trailer turnaround speed is of great importance to maximize asset utilization," explains Dixon. "It makes economic sense to devote more time, resources, and cost to maximizing vehicle fill in the United States" because distances are far greater.
Given its scale, Europe also has a greater density of port facilities, and richer multimodal (rail, road, river, and ocean) connectivity between transport hubs than the United States. This diversity, further squeezed by geographic constraints and cultural nuances, exposes different approaches to intermodal transport and sustainable infrastructure development.
CLOSING GAPS BETWEEN THE TRACKS
European transportation is dynamic simply because geographies are constrained and modal options are without bounds. The continent has more miles of railroad and considerably more navigable inland waterways than the United States, even if road networks are comparatively lacking.
Still, as the EU has evolved and borders have collapsed, road infrastructure within the region has expanded and improved measurably. The Trans-European Transport Networks, a set of road, rail, air, and water corridors throughout Europe, have helped pave the way for greater intra-EU connectivity. But this concentrated effort has also flowed investment toward roadways while siphoning resources away from a pan-European railroad.
"Rail freight share in Europe has been decreasing since the 1970s because the increased importance of just-in-time and door-to-door deliveries makes road transport a better alternative than rail," says Martijn Tasma, global business solutions manager, Geodis Wilson.
This scenario is all too familiar in the United States, where demand tendencies and modal competition over the past 30 years have placed a premium on efficient and expeditious motor freight services. But even where the U.S. railroad industry has lagged in terms of attracting and embracing mainstream industries, it still has a leg up on Europe.
"Early privatization of the U.S. railroad helped to develop a market-based focus on the mode as an attractive freight alternative, whereas most countries in Europe had a nationalized railroad," observes Patrik Thollesson, director operations and business excellence, Americas Region, Geodis Wilson. "The rail system in Europe was built up from the individual countries' perspective, focusing on domestic rather than international traffic."
Over the past decade, European countries have made strides to deregulate and privatize the rail industry, which increased competition and lowered costs. But obstacles still remain.
Europe's railroad system has evolved to transport people, not cargo. "This creates problems for freight because it is always moved on a 'rail space available' basis, which usually means during off hours or in a start/stop manner through the day," explains Franklin.
Unlike in the United States, rail freight doesn't take priority over passengers, and development has been engineered toward the latter. "The European rail system is largely electrical, and, until recently, the dead weight pulling capacity of these types of engines has been considerably less than the diesel locomotives used in the United States," Franklin adds.
Moreover, because European rail operators have traditionally been government owned or regulated, operational inconsistencies between countries—such as signaling, communication, and rail gauge conformity—impede connectivity and flow.
ALL MODES LEAD TO INNOVATION
For logistics companies operating in Europe, these railroad gaps present challenges. "Utilizing rail networks is often difficult because suppliers and customers have limited access to track," says Michael Samuels, executive vice president, business development, for DHL's UK operation. "Combined with on-time service requirements and the relatively short distances needed for European distribution, rail/intermodal can be problematic."
Consequently, European businesses have been forced to adapt and devise more innovative intermodal solutions. In Switzerland, for example, sustainable transportation is a priority given the country's sensitive alpine climate. Night driving, weight restrictions, and a yearly quota on trans-Alps truck moves, make rail/intermodal a necessity. To bypass these regulations, SBB Cargo, the freight division of Switzerland's national railroad, offers an innovative door-to-door intermodal service.
Geared toward short- and medium-distance, time-sensitive hauls, the Cargo Domino solution eliminates transshipment and maximizes asset utilization between rail and road. The railroad's specialized carriage equipment mechanically slides intermodal containers on and off rail and truck flatbeds, allowing for multiple handoffs at once. McDonald's uses the Cargo Domino service for half its transport moves in Switzerland.
Elsewhere, the RETRACK Consortium, a group of European rail freight operators, IT companies, and research and development organizations, has taken the initiative to design, develop, and implement a new trans-European rail freight service concept, linking Rotterdam to Constanta, Romania, the Black Sea, and Turkey. The objective is to shift long-haul cargo from road to rail, creating an effective and scalable freight corridor between high-growth areas in Western and Eastern Europe.
The Netherlands is also taking a progressive approach to intermodal transportation with a "green" twist, says Stephan Satijn, senior manager logistics North America, for the Holland International Distribution Council. The Port of Rotterdam is in the process of reclaiming land from the sea to double capacity at the port. But before it could sign off on the expansion, it had to cap the number of outbound truck movements.
Such an ambitious undertaking is only possible because Rotterdam is Europe's leading short-sea shipping hub. Between freight barge and ferry services, it has maritime connections to more than 100 European ports. Eighty-two percent of all shipments flowing through the country are intermodal and nearly 20 percent move via water; 40 percent of Europe's barge fleet sails under the Dutch flag.
"Intermodal infrastructure is well developed in the Netherlands. We have choices, we have the flexibility to explore more economical modes, and we have scale in terms of connecting to Europe's many entry points," says Satijn.
Historically, Europe has always been anchored in maritime trade. That pedigree provides an ideal complement to, and cover for, fragmented or underdeveloped road and rail networks.
"Because of Europe's independent country history, most nations have some maritime experience and developed ports," notes Franklin. "This infrastructure enables countries to utilize short-sea shipping instead of trucking to move freight from major east/west terminal ports, such as Hamburg or Rotterdam, to smaller ports closer to the cargo's final destination."
Thollesson agrees, suggesting that the prevalence of coastal and river transport options in Europe reveals a stark contrast to U.S. intermodal flows. "The United States has more than double the size of landmass compared to the EU, but has only one-ninth the total coastline of Europe. This is one reason why Europe has a much more developed short-sea shipping structure, and has a lower freight share on rail than the United States," Thollesson explains.
In spite of railroad inconsistencies and increasing road congestion concerns, Europe has enhanced short-haul intermodal efficiency by mixing rail, road, and water transportation to varying degrees. Individually there are limitations. But collectively, and with greater integration, this multimodal footprint keeps freight flows fluid while building a more economical and environmental network for distributing shipments.
ANCHORING INFRASTRUCTURE DEVELOPMENT
Europe's approach to transportation development is largely tied to its extensive intermodal use, so there is much greater parity between water, road, and rail investment. By contrast, in the United States, highway infrastructure has always been the top priority.
In terms of short-term tactics and long-term vision, Europe holds the edge, thanks to the unlikeliest of sources—World War II and the U.S. Marshall Plan. The comprehensive devastation of infrastructure throughout Europe during the war required a large-scale reconstruction effort to stimulate economic development and trade within the region. As a consequence, European transportation networks are generally in better shape than those in the United States.
Like everywhere else, EU countries face financial burdens that place infrastructure issues in a precarious position. But different pressures at play give Europe a discernible advantage.
"European countries have in their favor the fact that they are all traders," says Franklin. "There is an understanding, to a much greater extent than the United States (or at least the U.S. electorate), that they must maintain their port, road, rail, and river systems for trade so that their economies can keep growing. This fact provides them with more ability to divert scarce funds to infrastructure projects."
This is readily apparent in countries such as the Netherlands, where government and private sector interests have found common ground on the importance of sustainable development.
Given road congestion problems around Dutch cities, and the volumes of freight moving in and out of the country's ports, the government recently passed legislation to introduce a per-mile driving tax beginning in 2012.
The recent collapse of the Dutch government may postpone the mandate, but its trajectory thus far reveals a national understanding of the interests at stake, Satijn notes. Similar proposals in the United States have been largely panned.
"There isn't a strong headwind in front or tailwind behind, but there is a common understanding that the Netherlands needs to be sustainable," adds Satijn. "We pay higher taxes but we also see the benefit of a government that drives infrastructure projects." For example, there is a noticeable difference between driving on Belgian and Dutch motorways.
Europe's penchant for intermodal transport and green leanings have explicitly steered transportation planning and policy-making toward meeting these shared goals. Franklin perceives this as yet another difference between U.S. and European transportation strategies.
"The United States devotes most of its infrastructure investments to road-related projects, but Europe does not," he says. "Much of the EU's outlay is used to improve rail, barge (inland ports), air, and seaport infrastructure, although in Eastern Europe the road system is a key area for investment. The United States has fallen a bit behind."
APPROACHING NEW ROUNDABOUTS
Myriad pressures dictate how countries and industries execute on and invest in transportation. In the United States, motor freight has been a mainstay, and the railroad has re-emerged as a competitive force. This is a consequence of sheer scale, demand sensitivities, and capacity constraints, among other factors. Europe's strength remains in the maritime trade, largely because of its extensive and developed coastline. There are best practices to be gained in either direction.
Ironically, one area where there has been convergence is U.S. adoption of European road interchanges. Plagued by congestion around populated enclaves, countries such as the United Kingdom, Ireland, and France have long engineered practical traffic patterns for managing vehicle movement. Roundabouts and countless other creative, Euro-bred junctions are becoming more commonplace across the United States.
In Europe there are upwards of 60,000 different types of interchanges in use, but in the United States they are still a novel alternative to traffic lights. Once merely the domain of U.S. ski towns, the rotary has become a popular solution for communities looking to increase safety, alleviate bottlenecks, reduce carbon emissions, and improve traffic flow.
For these reasons, transportation officials in Missouri recently introduced the European "diverging diamond"—or double crossover intersection. It's a sophisticated step up from traditional rotaries, but it demonstrates the imaginative progression from simple circles to convoluted loops.
Transportation innovation proceeds in a similar way. Different perspectives trigger new approaches and better solutions. That may mean yielding to routine and giving the familiar another spin to find missed opportunities; or it might demand an escape from circular thinking and a break from convention.
Either way you turn, it's like navigating a roundabout.