Smart Supply Chain Oriented Rail Freight Services. GA No Report on the impact of the concept. Smart-Rail-D6.2-v1.0

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1 Smart Supply Chain Oriented Rail Freight Services GA No Deliverable No. D6.2 Deliverable Title Report on the impact of the concept Document ID Dissemination level Smart-Rail-D6.2-v1.0 Public Main Author Paul Melia - Railistics GmbH Issue date 31 May 2016 EUROPEAN COMMISSION MOVE HORIZON2020 Research and Innovation Action

2 Disclaimer and acknowledgement This project has received funding from the European Union's Horizon 2020 Programme Research and Innovation action under grant agreement No Disclaimer This document reflects the views of the author(s) and does not necessarily reflect the views or policy of the European Commission. Whilst efforts have been made to ensure the accuracy and completeness of this document, the Smart-Rail consortium shall not be liable for any errors or omissions, however caused. Smart-Rail consortium BD rail services Page 2

3 Document information Additional author(s) and contributing partners Name Organisation Udo Sauerbrey Wolf-Dietrich Geitz Eric Demonsant Michael Roggenkamp Philipp Stoebke Railistics Railistics BD Rail Services Ederlog TankMatch Rail Document Change Log Version Date Comments v Feb First draft of document v Apr Revised version based on the comments and input of WP6 Partners v May 2016 First final version, approved by Executive Board, (will be) submitted to EC. v1.1 First draft based upon first final version v2.0 Second final version, approved by Executive Board, (will be) submitted to EC. Document Distribution Log Version Date Distributed to v Feb WP6 Partners v0.1 4 Apr Reviewers for TOC Review (Michael Roggenkamp - ederlog, Philipp Stoebke - TankMatch Rail) V0.2 6 May 2016 Reviewers for document review (Michael Roggenkamp - ederlog, Philipp Stoebke - TankMatch Rail) V May 2016 Executive Board Page 3

4 Verification and approval Name Date Verification Final Draft by WP leader Mr. Udo Sauerbrey 20 May 2016 Approval Final Deliverable by coordinator Mr Paul Tilanus 23 May 2016 Page 4

5 Executive summary This task deals with the cooperation model to successfully extend an existing Single- Wagon-Load (SWL) transport system. The international provision of railway services needs cooperation especially if smaller railway undertakings are offering these. To overcome barriers of national administrative issues and of course to find partners closer to the local markets of other regions in Europe the cooperation approach is crucial for a success. The success of cooperation on the other hand is dependent on the cooperation structure. The structure needs to avoid high effort in the coordination, to create awareness for the options and the limitations of partners, to create a fair split of revenues and of costs etc. The win-win situation needs to be found as a basis for such initiatives. In this work package the existing cooperations in railway business and the principles they follow are described to provide benchmarks for future developments. For the Smart-Rail SWL solution in France, the cooperation existing between BD Rail Service as operator and three railway undertakings is taken as a basis. From this starting point options for cooperation with international partners, be it forwarding industry or railway companies, need to be introduced. This task reflects the process of developing such cooperations, the required arrangements, and the structure of cost and revenue sharing etc. The structure of this is mainly based on the risks taken by each participant. Furthermore it shows the process of the search for partners, the identification and the meetings required to communicate and to disseminate such information to potentially interested parties. To find respective clients for such a network approach a tool has been developed to provide sufficient, even if rough, data about the expected transport costs on certain routes. Smart-Rail aims to substantially improve the basic IT solutions for SWL services. For that reason the Smart-Rail initiative closed cooperation agreements with certain IT providers in the railway sector such as RAILDATA. The overall development of a cooperation model is described in its principles and critical success factors. The results of this task provide a general view on such models and the specific way to develop it within the Smart-Rail initiative. Page 5

6 Table of contents Executive summary... 5 Table of contents... 6 List of Figures... 8 List of Tables... 8 Definitions & Abbreviations... 8 Introduction Background Smart-Rail Purpose of the document Document Structure Deviations from original DoW Description of work related to deliverable as given in DoW Time deviations from original DoW Content deviations from original DoW Cooperation model Added Value of cooperation Business Models and their benefits Governance Models and their benefits Development of a new cooperation model Development of the governance model Development of the business model Transport costs Model Promotion and implementation of the new model Cooperation and possibilities of expansion International Development and agreements in place SBB Agreement RAILDATA Agreement Development of a customer base Developing International Relations Identification of potential customers/participants Promotion of the service Interactive workshops & Meetings Conclusions and recommendations...33 References...34 Annex A...35 Annex B...37 Page 6

7 Annex C...39 Page 7

8 List of Figures Figure 2-1: Competitive strategy Value Chain...14 Figure 2-2: Smart-Rail Cooperation Model...17 Figure 2-3: Breakdown of Costs...19 Figure 2-4: Shipping cost based on commodity type...22 Figure 2-5: Verification of the designed model...23 Figure 2-6: RAILDATA Members...25 Figure 3-1: Service as of the commencement of Smart-Rail...28 Figure 3-2: Extensions in List of Tables Table 2-1: Cost per Equivalent Truck...20 Table 3-1: List of attended conferences...30 Definitions & Abbreviations BDI BDRS CER CIT CLECAT ERFA EIM ERA ISR LSP PACA RU SWL TAC T&E UIP WP Bundesverband der Deutschen Industrie BD Rail Services Community of European Railway and Infrastructure Companies Continuous Improvement Track European Association for Forwarding, Transport, Logistics and Customs Services European Rail Freight Association European Rail Infrastructure Managers European Railway Agency International Service Reliability Logistics Service Provider Provence-Alpes-Cote d Azur Region Railway Undertaking Single Wagon Load Track Access Charge Transport and Environment International Union of Wagon Keepers Work Package Page 8

9 Introduction 1.1 Background Smart-Rail The aim of the European Railway Agency (ERA) is to construct a safe, modern integrated railway network with the overall target that railways must become more competitive to other transport modes and seek and offer high-quality, end-to-end services without being restricted by national borders. To achieve the necessary modal shift from road to rail the rail sector faces an unprecedented challenge of providing the capacity for affordable and attractive services required to enable this modal shift. The current European rail freight market is a complex system involving a great number of different public and private stakeholders, such as infrastructure managers, rail operators, terminal operators and freight forwarders who jointly manage the operation of running trains from A to B. The Smart- Rail project is aligned with the objectives of SHIFT2RAIL and will ensure that the results can be used in further research in this programme. The objectives of Smart-Rail are: - to contribute to a mental shift of the rail sector toward a client oriented and supply chain focus; - to develop working business models for cooperation of different stake-holders; - to develop a methodology and architecture for exchange of data/information required for the optimisation process, between stake-holders, making use of existing initiatives where available (for instance the European Corridor Management and national logistical information centres; - To establish three Continuous Improvement Tracks (CIT) that each focus on different aspects and markets and implement the developed tools, methodologies and concepts. The purpose of the Living Labs is to test and improve the innovative measures in a real life situation. Specific and more dedicated business models, information systems and new rail services will be tested. This CIT will address the issue of efficient and lucrative single wagonload (SWL) services in Europe and in doing so bring the missing piece to the Common European Rail System by taking its place among the other projects contributing to the vision of an open market in which trains can cross borders without stopping. The existing single wagon load services of the traditional incumbent Railway Undertakings (RU) have been reporting a proportional decrease in volumes and losses (varying across Europe). This has led to the resulting modal shift from rail to road as has been witnessed across Europe. This is accompanied and further worsened by a reduction of specific wagon load infrastructure such as sidings and marshalling yards. This trend runs counter to European policy as stated in the 2011 White Paper where modal shift to rail for freight over 300km is planned to be 30% by 2030 and 50% by To achieve these modal split targets, efficient single load forwarding services by rail will be needed to feed the green corridors. To reverse the current negative trend a radically different and competitive approach is needed. Incumbent and new entrant RUs will greatly benefit from the increasing attractiveness of services if a genuine and transparent competitive approach is employed. Shippers and Industries are still interested in reliable, flexible and cost effective services by rail supported by modern technological and operational solutions as evidenced in research projects such as ECOPMS, CREAM, and REORIENT, and demonstrated in projects such as RETRACK, ViWas, and VEL-WAGON. The success of Page 9

10 the liberalised European railway freight transport market (trainload) has shown that railway companies, including the incumbents are able to provide high quality logistics. Unfortunately, SWL has not been part of this success story. Nevertheless the transport of units smaller than block trains is one of the largest potential markets for rail in Europe in the future. The demand for this type of transport is increasing steadily with a relatively small percentage a year. With the growth of lean manufacturing and the reduction of stock in the supply chain, shipments have become smaller and, the working unit for goods today is the trailer or swap body, or even smaller such as pallets or boxes, all of which are suitable for use with the rail wagon. This CIT will demonstrate measures to stop the current negative trend and to significantly enhance the attractiveness of this sustainable transport mode. This requires a major change of SWL s organisation, management and marketing. The approach of this CIT will be based on the existing, promising example of a successful SWL operation (of which partners are included in the consortium) to create a European network solution to follow up and expand on these practices. Successful and new technological and operational solutions will be analysed and their market feasibility evaluated in detail. The costs and the benefits of all the innovations analysed and the potential improvement for operations and marketability will be examined. Through this CIT, Smart-Rail will integrate existing monitoring and information systems to address ICT rail freight standardisation issues where each wagon is seen as a component of a European network and needs to be tracked and monitored in terms of location, technical condition, load condition and security through the whole transit including any road involvement in pre and end haulage. Various single load operation schemes on rail will be assessed and innovative approaches identified alongside various different measures that result in enhanced efficiency in resource utilisation. Accurate cost structures for SWL services will be developed and form part of a financial support system that will enable pricing to be transparent and the contribution of individual traffic flows to be clearly identified. 1.2 Purpose of the document The purpose of this document is to provide an insight into the development of an innovative business model that can be used to encourage cooperation between companies, fairly share the risk and rewards, and provide a starting point that can be used as a springboard for the creation of a profitable, efficient, and reliable international service. International relationships that have so far been developed, including agreements with various associations are also described. This document will also detail the promotion and advertisement steps undergone in developing an initial customer base and how these efforts can be added in order to gain further clients. 1.3 Document Structure Cooperation model: This chapter is dedicated to the cooperation model that has been developed for Smart-Rail and this CIT. It offers background to business models in conjunction with WP3 while detailing what innovations will be utilised as part of this CIT. Development of a customer base: This chapter details the processes developed when deciding which potential clients to contact and which geographical areas to focus on. It Page 10

11 further details what promotions tools will be utilised for advertising the service to potential customers and will detail the various conferences and workshops that have so far been attended. Conclusions & Recommendations: This chapter will summarise what has been learnt during the design of the service concepts and will make recommendations as to how to implement the service. 1.4 Deviations from original DoW Description of work related to deliverable as given in DoW Based on the selected corridor and the design of the wagonload concept the potential participants for implementation of the service will be identified. The identification of potential participants will be based upon their presence in the corridor, the services they may offer and their willingness to participate and share the risks. If participants of the wagonload concept are already a member of the project consortium it is relatively easy to get them involved. If it concerns organisations outside the project consortium, the project partners will use their strong network of companies in the market to contact them and to discuss the wagonload concept. The project is also supported by organisations like UIRR, ESC and ECG who will help to involve their members in the project. In order to get participants involved it is necessary to create awareness with regards to the service, to be able to show the potential impact of the wagonload concept for their own organisation (benefits, costs, risks, etc.) and to create support for the service from these participants. A tool will be developed to show all potential participants the quantitative impact of the service and interactive sessions will be organised in cooperation with WP 10 to discuss the impact and the effort needed for implementation (including necessary cooperation with other stakeholders). These discussions might lead to changes in the design of the wagonload concept. Finally, the aim of this task is to get the right participants involved in the wagonload concept to be able to make it operational Time deviations from original DoW None Content deviations from original DoW The original DoW was written on the basis that a new SWL service would be put in place. This, however, is not the case as from the outset a consortium member has a SWL service already in place. The current service as it stands is coordinated by Smart-Rail consortium member BD Rail Services who, in conjunction with three RUs (Ferrivia, Securail, and RDT13), have commenced operations in the south of France. This offers the CIT the advantageous situation that it can make use of an already existing SWL operation. At a very early stage, the project has a corridor and service that can be used as a building block for further development and expansion. This also gives a focus as to which geographical areas market-research should be carried out, and provides the logical direction for routes into which to expand. The existing route offers a connection from Belleville north of Lyon, to Sélestat near the German border. There are two weekly departures from each city; Monday and Wednesday departing Sélestat, with Tuesday and Thursday departures from Belleville. Page 11

12 The current capacities limitations of the corridor are a 750m train length and 1600 tonnes. At the commencement of the project the service consisted of one customer and 600 pallets per train. The current route offers potential for further connections into the north of France, Belgium, Germany, and Switzerland. The title of this deliverable has been amended from Report on impact of concepts of concept as in the DoW to Report on the Impact of the Concept. Page 12

13 2 Cooperation model 2.1 Added Value of cooperation Cooperation in the rail sector can be obtained through the use of business models and governance models. Within the scope of Smart-Rail, the use of these is covered in more detail in WP3 Cooperation within the Rail Sector Business Models and their benefits A business model demonstrates the connections of operation of an enterprise in this case, of cooperation. Following the reasoning of Bieger [1], there are three concrete benefit components: The first benefit offers the chance to have more analysis of the business model that is currently in place. It presents the functionalities of cooperation and its relations in a simplified manner. The essential elements of the business model and its systemic relations are demonstrated. This process of analysis leads to a concretising of parts of the business model and a consistent and integrated configuration of the current logical connections in cooperation. The second benefit is the planning and development of the future business model, which helps in developing existing activities and the existing business model further. The third benefit is in simple communication with stakeholders. With the help of a business model, the communication with respect to operations and their basic mechanisms is outlined in a simplified and structured picture as compared to internal and external stakeholders. Particularly, the mechanisms of value creation for implementing the organisational or entrepreneurial strategy can be explained in a plausible manner. The question of depth of production of the cooperation to be analysed is comparatively easier to answer. In the rail sector, the following production-related diversification levels are considered: Low diversification: focussing on core business More diversification: rail service includes intermodal operator services or other activities bringing added value (some of the advanced railway undertakings today, such as TX Logistik or Captrain) Holistic approach: carrier joins in railway undertaking / intermodal operator (shipping companies like Maersk, ERS or more local forwarding companies like Emons, Zippel, etc.) In this connection, there is also the question of value addition of the cooperation examined. If one follows the definition according to Porter, there are five primary activities, which are value addition process: internal logistics, production, external logistics, marketing & sales and Service [2]. Page 13

14 Figure 2-1: Competitive strategy Value Chain Moreover, there are support activities that supplement the value addition process: Company infrastructure, human resource management, technology development and procurement. Each company activity presents a starting point for differentiation and contributes towards relative accounting of the company in the competition. What is the added value that the cooperation of actors in the rail sector offers to the customers? The following benefits would be offered to the customers during the active periods of the cooperation described: Cross-border cooperation through private rail: Even in the initial years after rail reforms, it were primarily the state-owned railways that could offer cross-border traffic. Due to the numerous barriers (like permission of locomotives, operation of border lines, provision of push locomotives for inclines for mainly transalpine traffic, customs issues), it remained a domain of state-owned railways in the beginning. Only after private rail had been established in the different countries, this problem could be resolved by partially very creative methods. Strengthening of corridors: Another area of cooperation was the strengthening of corridors. By pooling activities and joint appearance on the market, strengthening of own transport could be achieved, which led to very affordable or even first-time deals for the customers. Strengthening of single-wagon traffic: Through cooperation like X-Rail, and also through more vertical cooperation, successful initial approaches could be executed for strengthening the single-wagon traffic. Despite progressive containerisation and the reduction of railway sidings, which have actually led to partial removal of single wagon traffic in some countries in the European Union, this business field is also of paramount importance in the next year for parts of the manufacturing industry. Further to this, the political ideals responsible for more goods on the Page 14

15 railways can only be implemented if rail traffic is also made more attractive for smaller shipments. One face to the customer: The joint appearance of different RU under one label has not least contributed to the fact that ordering rail services has become simpler for the customers. In contrast to trucks, and also many transport means of stateowned rails, the private rails could initially only serve for individual sub-regions, which made them of little value for the European heavy industry, which relies on deliveries across the whole continent. With the exception of United Railways (this cooperation ran as a separate company), the contracting partner was also the first point of contact in all the cooperation mentioned. The other cooperation partners involved acted in their sub-contract. How do the various actors benefit from this cooperation? The following elements of cooperation can be mentioned on the basis of the existing examples: Page 15

16 Information exchange: It is known that in the case of European Bulls that during the Steering Committees that took place every quarter, the characteristics of the respective partner countries were also taken into consideration. The information exchange thus helped in mutual transfer of knowledge about regional peculiarities, the respective customer structures and margin calculations, the marked-out routes and energy costs, the operation of feeder tracks, etc. This transferred knowledge was therefore a cornerstone for marketing success in the marketing of the rails involved, as international competence could be established. Geographical coverage: Whereas European Bulls (Netherlands, Germany, Poland, Czech Republic, Austria, Switzerland, Italy, France, Spain) as well as United Railways (Slovakia, Hungary, Romania) discovered regions or countries, Cargo SI (Switzerland Italy) as well as Swiss Rail Cargo (Switzerland Germany) was cooperation in North-South-corridors. Cooperation for special products, extension of core business: Only X-Rail is offering a special product, the wagonload traffic. Six state owned companies are offering a network in eleven countries, from North to South: Norway, Sweden, Denmark, Germany, Netherlands, Belgium, Luxembourg, Switzerland, Austria, Hungary as well as Northern Italy. Common use of assets: Mostly locomotives of the alliance partners were used for cross border movements. In the case of European Bulls an IT-solution was developed to allow disposition over the borders. Today, this IT-solution is still used from the former European Bulls member LTE (Austria). Common sales activities: There were more joint marketing efforts than joint concrete sales strategies, which the partners of the respective cooperation have carried out. Basically, separate sales channels were used and supplemented with the marketing for the respective label. Obligation of cooperation: Swiss Rail Cargo, United Railways and X-Rail are organised as independent company. Whereas both the first-mentioned were conducted as a separate company, X-Rail has the company form of a société anonyme, which takes the form of a joint-stock company in French-speaking countries Governance Models and their benefits Governance is essential for a smooth collaboration between partners, e.g. in a supply chain. Beside the legal framework, which facilitate and guarantee a smooth working among the stakeholders the governance model should reflect proper use and privacy of public and private data, as well as fair costs and pricing. The analysis of various business models carried out in WP3 Task 1, has shown that there are different categories of networks of stakeholders. According to Bieger et al. (2002), business models describe mechanisms as well as the ways and means as to how an enterprise, a system of enterprises, or a branch generates added-value [3]. The conclusion, that one network has been more successful than the other is often directly connected with the question: how does the interaction work and what does the governance structure of the respective participating enterprises looks like. In studying the relevant literature on this subject, very quickly the theory of the new institutional economics becomes apparent. This is comprised of the theory of organisation as well as management and corporate governance. In the German language the term Page 16

17 Corporate Governance suggests moral and ethical principles, or in other words, the Corporate Culture, which is not the subject of this deliverable. 2.2 Development of a new cooperation model CIT1 provides the opportunity for the following to be developed, defined and demonstrated: The general organisation of a SWL network, The general rules for developing a productive relationship with the market, The general rules for operations between the partners Processes and IT advancements Development of the governance model A new cooperation model that has been developed for Smart-Rail is detailed in Figure 2-2. Figure 2-2: Smart-Rail Cooperation Model Under this new cooperation model when a shipper is willing to utilise an offer it enters into the overall system via a forwarder. This function of the forwarder can be carried out by either: A rail forwarder, A rail/road operator, A railway undertaking, A coordinator. The responsibility of managing the end to end transportation of the shipment falls to the forwarder. This is in the case of domestic traffic as well as international traffic. Under this model the shipper enters in the network only via one forwarder in charge of overseeing the whole transportation chain and ensuring the efficient completion of the process. The coordination of this is managed by one or more coordinators depending on the geographical scope within which they operate. In the case of Smart-Rail this will include one coordinator with responsibility for France and one with responsibility for Page 17

18 Germany. Further coordinators then get added as the geographical range spreads. The development of individual coordinators for different geographical regions forms the major innovation of this CIT however this also requires specific IT tools to cope with growing customer numbers, standardised definitions, and standardised formats for information sharing. A coordinator is responsible for maintaining the relationships between the various RU and Terminals within their network. Under this model, all parties have to become an active partner of the network; the result of this is that each party is taking a proportion of the financial risk associated with the activities. This further means that a partner can assume different roles in the network but each function is contracted separately. In order to maintain cooperation and keep fair competition in line with legal requirements, there are no exclusivity rules in place under this model. There are however priorities in place. The First priority concerns the geographical area. Under the terms set out in this model, each coordinator has an initial priority in its geographical area of operation. However, should another coordinator win a customer in a particular geographical area, they then get priority. The second priority concerns the technical aspects of the operations. For multimodal operations the responsibility for these fall to the combined operators, for SWL the responsibility falls to the RU, and for Door to Door transport to LSP. The third priority concerns economics. The Party that takes the risk has priority, with the priority level decreasing depending on the commitment. This is divided into three priority levels: A firm commitment on capacity results (full risk) Volume commitment (medium risk) No commitment (no risk) With this concept, a new way of cooperation is developed in order to effectively build up an SWL network. It has similarities to the models that developed between the 1970s and 1990s relating to the transport of pallets by road Development of the business model In terms of finance, the model of cooperation is based on the following principles: Page 18

19 The base costs of operating the service is divided between the parties. This is based on the direct costs including locomotives, drivers, operational staff, energy costs, track access charges etc. A base value of 100 is applied to this. Overheads for RU over and above the direct costs vary little throughout the market and can be estimated at 22%. This is also to provide for a SWL allowance which allows for problems that can occur when running SWL services; such as empty runnings, short notice wagon leasing etc. A factor of 25% is applied to account for the risk of not filling the train on a certain corridor of the network. The final value of this is managed by the partner who is taking the risk. The coordinator who is managing and organising the network is allocated a further 6%. This takes into account tasks such as: o Designing the network, o Managing the exchange of information, o Managing the contracts between the parties. The LSP, who is managing the door to door transportation, provides the interface with the customer and ensures the final service takes a gross margin of 8%. The final margin for each business is estimated at between 10 and 17%. In total this sums up to between 71% and 78% depending on which final margin is applied. These costs along with a worked example are detailed in Error! Reference source not found.. These are based on a diesel locomotive with has direct costs of 12 per kilometre. Figure 2-3: Breakdown of Costs With this concept of cooperation a system is in place where: Transparency between partners takes a key position, Each Party is compensated for its role, Roles can be cumulated by the organisation, Each party plays a role in attracting new customers, The financial risk, which is the key point, is split between the different parties. Based on current experiences in France, if a comparison is made of rail and road; Page 19

20 The direct costs in road haulage are approximately: per km per truck for bulk cargo, per km per truck for maritime containers, per km per truck for dangerous goods - with an average load of approximately 26 tonnes per truck, The direct costs in rail haulage are approximately: - 11 per km per train for electric locomotives on main lines with regular trains, - 12 per km per train for diesel locomotives on short lines with four to ten wagons, - With an average load of approximately 900 tonnes per train (75% capacity). As such, the cost of shipping the equivalent of a truck by train is approximately 0.32 per km for electric locomotives and 0.35 per km diesel locomotives. These are somewhat variable with the costs for the diesel locomotives susceptible to overall fuel prices. These figures show that rail is competitive even when indirect costs are included (as per Figure 2-3 costs over and above the direct costs vary between 71% and 78%). This however assumes that the filling factor of the train is 60% to 65% of the weight capacity (in both outbound and return journeys) and also assumes that an optimised transit time for wagons is utilised in order to minimise the fleet and related expenses. Table 2-1: Cost per Equivalent Truck Direct cost per truck load (26t) per km Short Long distance Distance Filling factor Weight (t) Electric Loco Diesel Loco 35% 420 0,68 0,74 1,32 40% 480 0,60 0,65 1,16 45% 540 0,53 0,58 1,03 50% 600 0,48 0,52 0,93 55% 660 0,43 0,47 0,84 60% 720 0,40 0,43 0,77 65% 780 0,37 0,40 0,71 70% 840 0,34 0,37 0,66 75% 900 0,32 0,35 0,62 Worst Case Cost incl. Mark-up These costs are based on the following: Allowable train weight: 1200 tonne, Average filling rate for trucks: 26 tonne, Cost of electric locomotives: 11 per km, Cost of diesel locomotives: 12 per km. While these numbers show that at a particular loading rate rail services can be competitive with road haulage there is also a large dependency on the distance that is Page 20

21 covered. The service has to be competitive for both the long haul section and the last mile section. An example value of 330 per wagon per origin or destination can be assumed as a value for last mile haulage in France. This value is more expensive than in countries such as Germany, the Netherlands, and Austria where values for last mile shipping range from 50 to 250, averaging at around Higher values in France are expected due to the fact that shippers are more sparsely distributed and longer travel distances are involved when compared to Germany, the Netherlands, and Austria in addition to various political and social reasons resulting in higher costs in France. With that said however rail freight can still be cost effective especially when considering loads other than bulk transport. Using again an average truck load of 26 tonnes this equates to approximately 660 per equivalent truck for the short haul segment. With long distance direct costs of 11 per km (electric locomotive) and additional costs of 78% (assuming a high margin) the following figures can be determined. Scenario 1: Bulk Cargo ( 0.85 per km trucking costs) Rail Truck Distance Haulage Haulage Scenario 2: Maritime Containers ( 1.30 per km trucking costs) Rail Truck Distance Haulage Haulage Source: Benchmarking report carried out by Railistics (2014). Page 21

22 Scenario 3: Dangerous Goods ( 1.80 per km trucking costs) Rail Truck Distance Haulage Haulage Figure 2-4: Shipping cost based on commodity type Transport costs Model In order to carry out initial investigations on potential corridors, carry out price comparisons, and to show the savings that are possible with this new service, a tool was developed within this CIT. With this, various routes between various origin and destination pairs can be calculated. The tool takes into account: the length of the corridor, the travel time, time required at border crossings, the type of locomotive, the types of wagons, Personal costs, Track access charges (TAC), Energy consumption and, Shunting costs. Using this model the cost to transfer one wagon across a defined route can be calculated. To prove the validity of this tool numerous examples were calculated as shown in Figure 2-5. These examples are based on the previous experience of Railistics in conjunction with operators on these routes. Over the development of this CIT, as potential shippers and routes are found, this model will be used to determine the approximate cost of sending shipments on a particular route which can be used as a further aid to entice shippers to utilise a rail based service. Page 22

23 Figure 2-5: Verification of the designed model Promotion and implementation of the new model This initial service that is in place operates within a country where functional, reliable, and efficient SWL services are scarce. With that said, in order to bring potential partner companies (forwarders, coordinators, RUs, operators) on board they have to be made aware of the functionalities of this new model, what is different to previous efforts, and how they stand to benefit when cooperating with this model. Most importantly it has to be seen to be an effective model. This might not happen in the first iteration but as part of this CIT it can be developed over the lifetime of the project. In order for this new model to be a success, all the participants have to be fully engaged. They have to have a full understanding of the various roles, responsibilities, and requirements as well as what their contribution to each of these will be. The cost sharing of this, as well as the relationship of this to the risk they are willing to take also needs to be understood by all parties. The Interrelationships between the various levels within the model and the different priorities applied to those all need to be clearly defined. This work has been ongoing from the early stages of Smart-Rail firstly with contacts of BDRS and following this, with lists compiled by the members of the consortium (Annex A). First developments and refinements will be made with partners in France before being rolled out to a wider geographical area (see D6.1 for further information of future developments). 2 Source: Railistics Page 23

24 2.4 Cooperation and possibilities of expansion Based on the core network that has been built up in France and the proposed short-term developments to this (Figure 3-2), over the lifetime of Smart-Rail and this CIT, the following should be possible: Building a core network for SWL within the PACA region 3, Bourgogne, Alsace and Lorraine (South East and East of France), Building a cooperation with a multimodal operator, for a direct connection to the Belgian Ports namely Zeebrugge, Gent, Antwerp, Building a cooperation with different shippers, RUs and terminals in Germany in order to set-up a direct offer from France to Leipzig area, Building a functioning connection between the French network and Switzerland. This will allow for the practical demonstration of the feasibility of the cooperation model over time and will allow for adjustments to be made over the lifetime of the CIT. This will be based on: A relatively large number of Partners (around 10 to 15 partners), With a variety of commodity and wagon types (standard wagon, swap bodies and maritime container), With a positive return for all the parties. 2.5 International Development and agreements in place SBB Agreement An agreement has been put in place between BDRS and SBB operating out of Switzerland. This agreement covers SBB operated freight between Switzerland and France. This agreement is currently limited to certain type of goods due to previous agreements between SBB Cargo and Fret SNCF. A further opportunity for the development of this link is possible through negotiation, discussion, and the development of new opportunities for cooperation with BLS Cargo and Crossrail RAILDATA Agreement 4 RAILDATA is a subsidiary of UIC and provides freight wagon and consignment information for its member railways. They are tasked with designing, developing and running IT services that support the European freight railway sector. The RAILDATA services are open to the following types of organisation: RAILDATA members under the conditions of the service agreement, Other RUs which have signed a user-contract, Wagon keepers which have signed a user-contract, Other companies which have signed a user-contract. The current members are shown in Provence-Alpes-Côte d'azur Region 4 General information relating to RAILDATA and associated programmes was retrieved from RAILDATA s website: Page 24

25 Figure 2-6: RAILDATA Members As a result of this they have developed four main tools for this purpose: ORFEUS Open Rail Freight EDI User System ISR International Service Reliability Use IT Uniform System for European Intermodal Tracking and Tracing WDI Web Data Interface. An agreement has been signed between RAILDATA and Smart-Rail which will give Smart- Rail access to the ORFEUS and ISR tools. ORFEUS Since 1995, ORFEUS has provided the electronic data exchange of the consignment note data between the co-operating railway undertakings using its central database. In the first step the data are sent in parallel to the paper CIM consignment note (or CUV wagon notes data for empty wagons). Since 2006 ORFEUS migrated to the XML-CTD message using system, in particular to fulfil the requirements related to the coming into force of the new international rail transport law CIM. In 2009, the system was extended with the ECN message format and new message flows. The current users of this system are: CD Cargo (Czech Republic) DB Cargo DK (Denmark) CFL (Luxembourg) DB Cargo NL (Netherlands) Green Cargo (Sweden) RENFE (Spain) HZ Cargo (Croatia) SBB Cargo (Switzerland) Rail Cargo AT (Austria) SNCF Fret (France) DB Cargo DE (Germany) Trenitalia Cargo (Italy) Plans are in place to extend this to Croatia (HZ Cargo), Slovakia (ZSSK Cargo), and Serbia (ZS). Page 25

26 ISR ISR is an information system developed and operated by RAILDATA. It is common tool of RAILDATA RUs for the concentration and exchange of information about movements of freight wagons in international traffic through a central platform. It makes it possible to track both loaded and empty freight wagons and consignments across significant part of Europe. Besides basic information about actual status and position of the wagons, ISR also offers additional information services: Records and shows the wagon movement history (for about two months), Estimates time of arrival based on experience of same past transports, Calculates estimated wagon mileage (km done) based on different sources, Integrates transport descriptions from commercial systems (from ORFEUS), Monitors wagons during train run (using train movement information from TIS), Offers manual input of information (community cloud for data capturing). The ISR members use the ISR data for several purposes, mainly for: Customer information Wagon Tracking Trip Analysis Transport tracking (as forwarding, transit or destination railway undertaking) Wagon Usage Planning Wagon performance measurement (estimated km done) Single wagon performance analysis (via X-Rail) The above data is further able to produce transport dossiers, consignment notes, when the wagon is ready to pull or has been pulled. When the wagon has departed or arrived at the origin or destination station, when the wagon has arrived at, or departed from, an intermediate station, passed through a station, been handed over to a further carrier, been damaged on route and taken out of service, been rejected by a carrier, when a wagon is free and available for disposition, total distance travelled etc. The ISR tool is currently utilised by: B-Logistics (Belgium) IFB (Belgium) BCB (Germany) Nordcargo (Italy) CD Cargo (Czechia) RENFE (Spain) CFL Cargo (Luxembourg) RCA (Austria) DB Schenker DE (Germany) RCH (Hungary) DB Schenker DK (Denmark) SBB Cargo (Switzerland) DB Schenker NL (Netherlands) SNCF Fret (France) DB Schenker RO (Romania) SZ (Slovenia) DB Schenker BG (Bulgaria) Trenitalia (Italy) Euro Cargo Rail (France) ZS (Serbia) Green Cargo (Sweden) ZSSK Cargo (Slovakia) This information provides Smart-Rail and the SWL service to carry out analyses that can be made on a weekly basis, by RU, by route or by combinations of these. Results would not be shown in absolute figures, as there are no reasonable standard definitions of delay, reliability or missed connection etc. between RUs. However, results would be shown on a comparable basis to the week before, which would allow a short term analysis of consequences of changes in operation modes, timetables or routes. This could be a strong indicator whether specific decisions help to improve the operational situation. Page 26

27 3 Development of a customer base 3.1 Developing International Relations Within this CIT and in conjunction with consortium members, contact will be made with different stakeholders in order to develop cooperative services on a corridor operating between Germany and France, a region in which the currently offered services are weak. The development will be based on two different concepts: Integration of the BDRS SWL with private SWL operators in Europe, Partnership with small or medium RU, shippers, terminals, and Forwarders in order to set up a direct link from the Lyon area and Eastern Germany which at the moment does not exists. The first iteration of these potential offers will extend the scope of the BDRS offer integrating Germany, Benelux and Eastern Europe with standard transit time of four to six days. The second opportunity will allow an offer of a transit time of two to three days, which will be a significant increase of quality and reliability of the offer. 3.2 Identification of potential customers/participants Through BDRail Services, a Smart-Rail consortium member, an SWL service is already in operation and as such, there is an initial geographical region as to where to search out potential clients, customers, and supporters of a SWL service. At an early meeting involving WP consortium members regarding the future operation of the system, initial ideas for potential contacts were put forward. As the service is already in operation from Belleville to Sélestat (Figure 3-1) a decision was also made to focus on the expansion of the existing service by acquiring new clients and searching for other networks with which to cooperate. This list (see Annex A) was compiled based on previous contacts that were developed by the consortium members, through previous experience on other projects, as well as an estimation of the potential commodities and size of freight flows in the area. The Port of Fos-sur-Mer has been chosen as a partner RU of BDRS is already established in this area. The foreseen time frame for this extended service to commence is the first half As seen in Figure 3-2 the service will be extended to serve Neuf-Brisach, Chalon-Sur-Saône, Le Teil and Fos-sur-Mer. This extended service will open doors to new clients, new commodities while at the same time offering direct access to port facilities. It is expected that this direct connection to a deep-sea port will make the service more attractive to shippers who require port access as part of their business model. Page 27

28 Figure 3-1: Service as of the commencement of Smart-Rail 5 Figure 3-2: Extensions in Source: BD Rail Services/Railistics Page 28

29 3.3 Promotion of the service In order to promote the SWL service many tools are at the disposal of the consortium. Marketing for this service is based on: 1. Contacting previous clients and sources of rail freight; As BD Rail Services have a longstanding history in France and in particular the region of operation a large potential network of clients is readily available. 2. Using clients of consortium members; Within the Smart-Rail consortium there are 19 companies with vast experience and a large network of contacts. These contacts are being called upon in order to get an idea of the general attitude towards SWL transport, while also advertising this new service to new potential contacts with an aim of widening the scope of service. 3. Conferences & meetings; Conferences and meetings (large scale and one-on-one) are being used as a means for pushing the Smart-Rail agenda while drumming up support and searching out potential clients. 4. Advertising flyers and Newsletters; In conjunction with WP 10 Dissemination, an advertising flyer has been created for the project as a whole. This identifies the members of the consortium while introducing the project and defines what it wishes to achieve over the lifetime of the project (Annex B). In addition to this, a further WP specific flyer has been designed to provide interested parties with extra information related to the SWL services (Annex C). This flyer introduces the idea behind the CIT while detailing the range of expertise within the consortium that can be relied upon over the course of this CIT. This flyer acts as an information document and can be used as a basis when approaching potential clients. It is designed to give the pertinent information in a short timeframe and will evolve and change over the course of the project. As part of WP10, regular newsletters are prepared and issued to all contacts of the project to inform and update them. 5. Website; A project website has been created that will give interested parties updates on the ongoings of the project while keeping them informed with relevant information. Through this it is also possible to subscribe to the newsletter. The final deliverables will also be published on this website and made available to the public. 3.4 Interactive workshops & meetings Interaction with potential customers, stakeholders and interested parties has, for the most part, taken part during one-on-one meetings with these parties. These have been directed towards discovering what possible freight flows a company has, their relevance to this CIT, and their willingness to get involved in Smart-Rail. Further opportunities for introducing Smart-Rail, and in particular this CIT, have included attendance of consortium members at various conferences and events throughout Europe. Table 3-1 shows an example of what has been attended to date with more conferences and attendances at trade-fairs planned over the life-time of the project. 6 Source: BD Rail Services/Railistics Page 29

30 Table 3-1: List of attended conferences Event Location Date Länderkonferenz Rhein: Conference on current and future transport infrastructure and traffic flows (all modes) along the Rhine axis Department for Transport, Rail Industry Day Parliamentary discussion on the Planning, Building and operation of Rail Infrastructure. Mannheim 15 June 2015 London 7 July 2015 Berlin 7 September 2015 Urban Node Berlin-Brandenburg Berlin 21 September th TEN-T Orient/East-Med Corridor Forum: Discussion on development of the TEN-T OEM Core Network Corridor 5 th National Conference on Freight traffic and Logistics Parliamentary discussion on the Potential for European Rail Freight 9th International BME/VDV Railway Congress International Corridor Rhine-Alpine Conference Brussels 2 October 2015 Magdeburg 6 October 2015 Berlin 13 October 2015 Vienna 20 October 2015 Antwerp 21 October 2015 ViWas Final Conference Luzern 23 October 2015 Discussion on the future of Logistics and Mobility 6 th TEN-T Orient/East-Med Corridor Forum: Discussion on development of the TEN-T OEM Core Network Corridor Frankfurt 11 November 2015 Brussels 7 December 2015 RFC opening Event Wien 23 February 2016 TransportNET Seminar Karlsruhe 11 March 2016 Page 30

31 Event Location Date TRA2016 Warsaw 19 April 2016 European Rail Summit Brussels 27 & 28 April 2016 Multimodal2016 Birmingham 10 & 11 May 2016 Multimodal Istanbul Istanbul 11 & 12 May 2016 In addition to these, January 25 th 2016 saw the hosting of a Rail Freight Platform Workshop organised by Transport & Environment (T&E) 7. The topic of this workshop was The Role of Single Wagon Loads in the Future of Transportation of Freight by Rail. T&E organised the event to discuss single wagon loads (SWL) and their potential growth in the future. The following questions were posed as discussion points: 1. What are the major roadblocks to providing SWL? 2. How do we establish the routes where it can be economically viable to operate SWL services? 3. What role can new technologies play in making this service more profitable? The roundtable was attended by 20 participants with representatives from: Shift2Rail CLECAT European Association for Forwarding, Transport, Logistics and Customs Services BDI Bundesverband der Deutschen Industrie CER Community of European Railway and Infrastructure Companies UIP International Union of Wagon Keepers EIM European Rain Infrastructure Managers ERFA European Rail Freight Association The European Parliament The European Commission, and Representatives from various shippers, Railway Undertakings and research institutes. As the leader of this CIT, Railistics were invited on behalf of Smart-Rail to moderate the discussion. In relation to the three discussion points, three challenges were put forward by the moderator for discussion, namely: Co-ordination and co-operation (Flexible Systems) A typical international journey of a single wagon requires the co-operation of two or more railway undertakings; the same is often true for domestic transport. There is only a theoretical opportunity for shippers to create their specific best case for a specific transport among different railway 7 Transport & Environment s mission is to promote, at an EU and global level, a transport policy based on the principles of sustainable development. ( Page 31

32 undertakings. This is due to a lack of interfaces, joint offers, flexible products, or sometimes the willingness to co-operate. A more open approach to balance co-operation and competition among railway undertakings would increase the total market for single wagon freight to the benefit of the sector. Current methods lead to an even more resource-oriented planning of single wagon operations which increases the challenge to fund competitive solutions for specific single wagon transports. Discussion point: Independent sales platforms may be able to combine competitive or neighbouring networks to find the most suitable solution for a specific transport. Neutral IT provider An operational or commercial co-operation between railway undertakings requires the exchange of information which may be sensitive to competition issues. In Europe, unlike in the US, there are only very limited opportunities for a neutral handling of sensitive data while ensuring efficient operation and competitive rates for rail freight. Discussion point: A neutral service provider who handles cross-company operational and commercial data and organizes revenue distribution may be able to overcome confidentiality issues. The challenge of providing subsidies There are many potential measures to provide financial support to the wagon load business to the same extent as road freight is directly or indirectly subsidised. These measures may include financial support for private and public sidings such as roads in commercial areas, a reduction in access fees for feeder services or service facilities, up to direct support of operation costs to make up for competitive disadvantages due to issues like road fees which do not cover their costs or fulfil environmental needs. At the moment, these potential measures are far from being implemented to create a fair competitive situation to road, or, they too often tend to benefit directly or indirectly specific stakeholders in the supply chain and thus limit benefits to a level below potential effects of this measure. Discussion point: A comprehensive approach to organize support on EU-level, bring it to road level and ensure maximised system-wide benefits would increase volumes for single wagon freight independent from specific stakeholders benefits. Page 32

33 4 Conclusions and recommendations In order for an SWL service to be successful across numerous participants and stakeholders, it is critical that an appropriate cooperation model (including governance and business models) is in place. From a general survey of market actors, SWL services have a poor reputation and are generally held in quite low regard. While the existing service that is in place in France shows that demand is certainly available, in order for this service to expand to a wider customer base and cross international borders, new services need to show that there are new innovative practices in place. These can be related to operating practices, business plans, IT tools etc. Within Smart-Rail a new cooperation model has been developed that will provide a guidance to participants regarding the various levels within the model, the interaction of these, and the priorities in place when dealing with customers. It also introduces how customers and corridors covering more than one country or geographic region are dealt with. The governance model developed for Smart-Rail and this CIT describes how the costs will be shared among the participants. This is based on the share of the risk that they are willing to take. In order for a model to be successful, it is important that all parties have a full understanding of their requirements, and their responsibilities in the end. From the point of view of the shipper, there are numerous criteria which they may use when deciding whether to transfer to another service or mode of transport. These include costs, travel time, punctuality, reliability etc. In order to calculate the costs of shipping over a certain route a tool has been developed which will give an impression as to what the shipper will pay and what savings can be made over a certain route. As a starting point, Smart-Rail now has a set of models that can be initially tested for useability, and when necessary, over the next iterations of the CIT changed to test new ideas. These will form a large part of advertising the service to potential shippers with a view to extending the service internationally. Page 33

34 References [1] T. e. a. Bieger, Innovative Geschäftsmodelle, 2011, pp [2] Gabler Wirtschaftslexikon, key word: Value addition chain, Springer Gabler Verlag (publisher), [Online]. Available: [Accessed 2016]. [3] T. e. a. Bieger, Strukturen und Ansätze einer Gestaltung von Beziehungskonfigurationen, 2002, p. 50. Page 34

35 Annex A Proposed companies for contact Arcelormittal ARS Altmann Auchan AUTF Basell Group Bekaert BFL BLG Boissons Cargill CER Slovakia CFL Cargo Chemion ChemOil Confederation of European Paper Industries (CEPI) Constellium Contargo DSV Duisport Düsseldorf Häfen Dyckerhoff EccoRail Poland Emons EP Cargo IDS Cargo Imperial Interport Spedition Lanxess Lehnkering Lotos Kolej Matrans Mosolf Neska Netzwerk Europäische Bahnen Nosta Pansped PCC (Pl) PCC Rail (Cz) Perrier Port of Marseille RailData Raillogix Rhenus Rhodia Roquette Frères Samskip Sasol Solvay Page 35

36 ERS ESC EUROMETAL Evian Evonik EXPRESS-Sped Rail & Logistics Fertilizers Europe Freightliner French Association Agriculture GEFCO Grampetcargo Henkel Hödelmayr SOVAB St. Gobain STVA Tata Steel The European Steel Association (Eurofer) Transa TTS Transterminal Rail TX-Logistik UIRR (Union for Road-Rail Combined Transport (UIRR)) Unipetrol Doprava Vestolit Volvic Zippel Hoyer Page 36

37 Annex B Project Flyer (Page 1) EUROPEAN COMMISSION MOVE HORIZON2020 Research and Innovation Action

38 Project Flyer (Page 2) Page 38

39 Annex C Work Package 6 Flyer Page 39