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Road Freight Transportation - Essay Example

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The essay "Road Freight Transportation" focuses on the major issues in road freight transportation. The road freight industry is set to undergo a drastic transition driven by growing globalization, better regulations, the wave of mergers and alliances, and the booming e-commerce industry…
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Road Freight Transportation
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Research Academia d 10th Dec.08 Road Freight Contents Introduction 2. Road freight transport Statistics a, UK freight movement b, EU movement 2. Industry structure 4. Public ownership and private ownership 5. Supply Chain Comparisons The Road freight industry in the supply chain 6. Manufacturers and customers 7. Multimodal transport 8. Warehouses and Distribution centres. 9. Consumer led Competition 10.System of work 11.Vehicles 12.Trunking Operations 13.Value chain 14. Porter's five forces 15. Regulations 16.Future Trends 17 Conclusions Road Freight Transport 1. Introduction The road freight industry is set to undergo drastic transition driven by growing globalization, better regulations, the wave of mergers and alliances and the booming e-commerce industry. This brief contains a strategic overview of the upcoming trends in the European market. There are encouraging trends in this sector and the future looks brighter. 2. Basic Statistics There were 446 thousand goods vehicles over 3.5 tonnes capacity registered in Great Britain in 2007. There is fall in the number of goods vehicle operators from 115 thousand in 1996-97 to 100 thousand in 2006-07 All Road goods vehicles of all nationalities travelling to Europe in 2007 were 2,940 thousand. This was 56% more than in the year 1997. Over 2006 this number was only 5% more. Out of these, the number of powered vehicles were 2,129 thousand. This was an increase of 86% over that of 1997 level and 5% increase over 2006 level. Out of all these powered vehicles in 2007, 400 thousand vehicles were registered in UK. In 2006, 2% more and in 1997 26% more vehicles were registered than those in 2007. 5.1 million tonnes of goods were moved out of the UK in 2007 by UK-registered vehicles. This is 33% less than in 1997 and equals that in 2006 figure. Total goods moved out of UK by vehicles registered in UK were 4.2 billion kms. This was 49% lower than that moved in 1997 and equal to that moved in 2006. Total freight moved by heavy goods vehicles registered in Great Britain increased from 156 billion tonne kilometres in 2006 to 161 billion tonne kilometres in 2007. This was an increase of 4% in one year. GDP of Great Britain in between 1997 and 2007 moved up by32% but total freight moved up by 8% only in this period. Freight movement through 33-tonnes gross weight articulated vehicles had an increasing share in all goods moved that was 73% of total tonne kilometres in 2007 compared to that in 1997 having 63% share. Total freight in 2007 lifted in 2007 was 1869 million tonnes. This was 3% less at 1813million tonnes lifted in2006 but 17% higher that in 1997. A definite increase in overall average length of haul was registered from 68 kilometres in 1980 to 86 kilometres in 2007 and higher at 95 kilometres in 1999. Over half of goods lifted which was 52% were limited for a distance of 50 kilometres or less in 2007. Rigid Goods Vehicles had given an average mileage of 9.4 miles per gallon compared to 8miles per gallon given by articulated heavy weight vehicles. Greenhouse gas emission from goods vehicles rose by an average 2.5% in between 1996-2006. This is quite higher if seen from the perspective of 5.8% in crease in amount of goods moved and 11.4% increase in goods lifted for transportation by goods vehicles in the same period. (National Statistics Online) published on 28August 2008 by Transport Statistics. 2.b The European road freight hire accounted for 80% of Europe's road freight traffic in 2006. Number of road freight enterprises was little changed over the period. Vehicles 5 years old or less accounted for more than 60% of vehicle-kilometres recorded by haulers in the EU of 15 nations with the exceptions of Belgium, Greece and Portugal. For members that joined the EU in 2004 and 2007 new vehicles were not so common. There was emergence 0f new highly effective competitors in European road freight transport. In 2006, Poland was the major actor taking 17% of the total tonnes lifted, ahead of the Netherlands and Germany. The Czech Republic was in fourth place. The market in Europe in 2006 was dominated by younger road freight vehicles 5 years old or less. They accounted for over 60% of the total vehicle kilometres with those over 10 years old forming 12% of vehicle-kilometres. There has been a strong growth in the share of vehicles two years old or less since 2004 but it has still not returned to the level recorded in 2000. 80% of the activities in road freight in the EU account for Hire or reward elements. This applies to cross-trade where 97% of transport is taken on hire or reward and where the organisational demands are the greatest. Data: Eurostat Website: http://ec.europa.eu/eurostat visited on 6th Dec 08 3. Industry Structure The UK road freight industry is the largest and most developed in Europe, with an extensive and well connected road transport network. This industry is known for small and large network of transport operators spread all over the country. They on account of being in proximity with the clients can provide most flexible services. Yet they face competition from rail, barges, express services and others. For the last decade with the increasing share in outsourced business in the road freight activities the UK transport industry has witnessed a major breakthrough. With the support of extensive and well connected road transport network the industry has spread its leg far and wide. The takeover of the biggest road freighting firm Christian Salvasen by the French giant, Norbert Dentressangle brought maturity in the industry. However, in the recent times the rise in cost of fuels, increasing pressure from the government for regulatory compliance, and high tax levels has affected the competitiveness of this European road freight industry. (United Kingdom: Structure of Outward International Road Transport ...) www.reuters.com/article/pressRelease/idUS95646+23-Jun-2008+BW20080623 visited on 6th Dec 08 4. Private and public ownership The UK freight industry is heavily dependent on road transport and they fall mostly in private ownership. The characteristics about the governance of a sector such as transportation determine the ownership whether public or private. Modes of financing, operations, external relationships are some of the main criteria to differentiate them. In public transportation the ownership lies with the government bodies. Investment in the infrastructure and its expansion is done by public authorities. They use public money. They may offer the job of completing the job to private sector after negotiation through tender and quotation. In private ownership private capital is used to provide infrastructure. For transport terminals private capitals are not used generally but there are exceptions. (Salvesen, Christian Industry Trends Research and Markets)2008 The UK Road Freight Outlook(http://www.researchandmarkets.com/research/8ba094/uk_road_freight_ou) 5. Supply chain A supply chain is the system of organization, people technology, activities, information and resources that are involved in moving a product or service from the premises of supplier to that of the customers. Supply chain activities are geared to transform natural resources, raw materials and components into finished products. Growth in freight transportation as a result of increased volume of goods produced and consumed increased the supply chain links and its depth and duration. This resulted in growth of new pattern of freight transport in whole of Europe including Britain as long hauls. This requires precise planning of deliveries to match production and sales. Overloading and lack of standardisation are two problems the road freighting faces. Freight distribution by air can solve some of the problems of road freight distribution. Freight distribution by sea water has 23% of total tonne km and 95% of all export trade by weight through sea route. Inland freighting carries less than 1% of UK's domestic freight at present with potential of diverting 3.5% of total freight through rivers and canals. Shipping is not constrained by capacity. UK as in island country can fully exploit freight distribution through shipping on coastal short-sea routes that can minimise cots and pollution. Rail freighting is costly and moves on rigid route. Rail can not be flexible unless backed by road transport. Airfreight is costly but fast. A co-ordinated network of all these channels of freight can improve the supply chain link to yield better service and cost saving. 6. Multimodal transportation Multimodal transport solutions are the door-to-door service that integrates collection, shipment and delivery into a seamless transport solution. Extensive experience and dedicated staff assure that the cargo is delivered as agreed, while the customer has a single point of contact for the entire transport chain. Interchanges in efficient freights are an essential means of inter-modal transportation. The problem of management of pre haulage and end haulage has to be sorted out. There are more problems in the management of smaller companies particularly in sphere of standardization and container transport.(Vision 2030 - A Portfolio of Transport Visions www.transportvisions.org.uk/trendsfreight.htm) 7. Sellers and manufacturers Sellers in freight distribution business are those who are engaged in selling specific carrier activities, logistics, freight services, freight forwarding, bonded ware houses, supply chain clearing and distribution. They are generally expert in logistics through experience and provide the highest standardization possible. Manufactures of vehicles are important for road transportation. They need to manufacture reasonably prices vehicles with all encompassing feature to lure fleet owners to buy and include additional vehicles in their fleet. 8. Warehousing and distribution Warehousing and distribution centres are very important conduits for efficient transportation in the primary as well secondary distribution. In course of long hauling of goods these have to be stored in warehouses for certain days till orders or requisitions for secondary distribution are received and executed. In distribution of fragile items or food products special trucks and warehouses with freezers, racks, disposal tools and good management team are required. (www.prlog.org/10054395-pss-warehousing-transportation-announces-launch-of-additional-distribution-center-in-dayton-nj.html 9. Consumer Led Competition Consumers are gradually becoming demanding because of rapid globalization and spread of information through internet. There are mass production system and oversupply through multi-distribution channels. Customers are in bargaining position. There is relentless downward pressure on costs and quality improvement Thus consumer led competition in every segment. Supply chain management has the clear task of reducing transportation and distribution cost back by this consumer led competition. (Dynamic Pricing Schemes - Modern Consumer Led Pricing - Part 1 www.managingchange.com/dynamic/demand.htm) 10. System of work in road transportation System followed in transportation is similar to that in other spheres. It is based on demand and supply. Demand can be measured in numbers of journey made or total distance traveled in passenger kilometers for public vehicles and vehicle-kilometer of travel for private transport. Supply is a measure of capacity and price of goods is measured as per the generalized cost of travel. www.en.wikipedia.org/wiki/Road 11. Vehicles Types of vehicles used in road transport for freight distribution should not create environment pollution and improve urban environment. The vehicle should be of high cubic capacity vans and more specialist equipment for fragile goods or temperature sensitive goods. Vehicle using CNG gases and electrically propelled should be used. Environmentally friendly vehicle technologies guaranteeing low emission of gases should be adopted. 12. Trunking operation Trunking or line-haul operation is the division of the transportation on primary and secondary basis. In primary large vehicles are used to carry freight fully loaded to one single destination without offloading to any other destination than destined for. This is not a hopping vehicle. The delivery is solely from NDC to plant or Plant to NDC. The secondary transportation is a multi-drop vehicle that carries goods in small lots to be delivered to various retail centres. UK road freight uses both types of transportation.. 13. Value Chain Value chain model is putting the business needs at the centre. The value chain establishes alliances with suppliers and customers alike. Instead of cornering them into unreliable supply chains, partners are placed in a value network. The formation of multi-company alliances and enabling all partners work towards the same final goal is the major objective. The value chain brings the strength of its suppliers, its manufacturing services and its transportation providers - to meet the needs of each individual customer.(XTL Transport Inc. - Value Chain Model) www.xtl.com/xtlweb.nsf/logistics_en/Value+Chain+ModelOpenDocument 14. Porter's Five Forces Model Road freight industry can be analysed with the use of Michael Porter's Five Force Model: All industries and sectors have a fundamental structure giving rise to five competitive forces. The collective strength of these five forces ultimately determines the profit potential of an industry. Which forces will dominate and shape the competition is determined by the industry type. The five forces model is relevant for both service and production companies. The five forces enable how to position itself favourably in its industry or sector depending upon the company's strengths and weaknesses and points out areas where strategic changes may yield the greatest payoff. It also tells the ways to differentiate the product or services and position in the market. Basic model: Threat of new entrants The industry jockeying for position among current competitors Barging power of buyers Bargaining power of suppliers Threat of Substitutes products or services European Union introduced the concept of free road cabotage for all transporters and freight forwarders applicable to EU. Member states and the haulers in that member country were allowed to perform domestic transportation in another member country with the objective to not to return empty but with loaded truck that would enable to make more revenues in the same trip of up and down. This was an ideal scheme but hidden with competitive problems for different member states. Some states like Sweden were quite uncompetitive on the basis of high cost of drivers' salary, whereas Great Britain was comfortable for their low cost. Thus they were affected differently by the road Cabotage system. Sweden can outwit competition by adopting strategies of marketing such as lowering the cost of transportation by providing discounts or service differentiation by adding more features in the service or by lowering the drivers' salaries and so on. Figure 3.2-1: Porters five forces Source: Porter, 1998, p. 22 15. Regulations Transporters have to follow a number of rules and regulation to enable the industry to run smoothly. The main areas of importance are as follows: 1. Rules regarding maximum hours of working and rest breaks. The latest EU legislation covering truck driver's hours is Regulation 561/2006. Truck operators were originally responsible for enforcement of the rules in this section but recently it has been made subject to assessment by Vehicle and Operator Services Agency. This clause will remove the threat of prosecution of operators directly. The burden of proof about the complaint has shifted from the operators to the enforcers. UK exporters prefer using foreign hauliers offering cheap rates on account of cheaper diesel availability in that country to transport their goods beyond UK or freight within UK. But FTA warned them that 'the influx of foreign haulage capacity has introduced a transitory element into the market, which UK transport buyers must avoid being beguiled by' The new regulation introduced has put responsibility on the consignor to ensure that all rules of freighting are followed and no coercion to be applied on truck operators to agree to impossible schedules that cause them to infringe the rules. (Road to more haulage regulation: international trade UK import )... www.internationaltrade.co.uk/roadtomorehaulageregulation visited on 8th Nov 08 16. Future Trends in Transport Industry of UK: Road Transport has a leadership role in the UK freight industry because of heavy dependence on this segment. Road transport offers the most flexible, cheapest and efficient door to door to service. That makes the road freighting very popular to claim 80% of domestic freight tonnage and 65% of total tonnage. For last decade number of trips has gone up by 38% and this is likely to increase with the rising GDP of European countries. The number of goods vehicles is estimated to double up by 2031 according to forecast made by National Road forecasters. Heavy Goods Vehicles are growing by 169% as per central forecast. This rapid expansion will further increase the market share of freight transported by road. 17. Conclusion There is no doubt that road freight industry will always thrive in spite of developments in other freight services such as express ways and waterways. The best feature this made of transportation is the flexibility of services and retail offloads to multi-destinations. Road transport is getting congested gradually and the environment pollution caused by this sector is another big concern. There is need for more sustainable distribution of logistic responsibility among other forms of freight handling such as rail and waterway networks. The cost factor and inflexibility in these transport sectors is a matter of concern that prohibits it for easy switch over. Development of more advanced and multi modal freight chains through out Europe are required to solve the problem. Bibliography 1. (National Statistics Online) published on 28August 2008 by Transport Statistics 2. Data: Eurostat Website: http://ec.europa.eu/eurostat visited on 6th Dec 08 (United Kingdom: Structure of Outward International Road Transport ...) 3. www.reuters.com/article/pressRelease/idUS95646+23-Jun-2008+BW20080623 visited on 6th Dec 08 4.Vision 2030 - A Portfolio of Transport Visions www.transportvisions.org.uk/trendsfreight.htm 5. www.prlog.org/10054395-pss-warehousing-transportation-announces-launch-of-additional-distribution-center-in-dayton-nj.html 6. Dynamic Pricing Schemes - Modern Consumer Led Pricing - Part 1 www.managingchange.com/dynamic/demand.htm) 7.(XTL Transport Inc. - Value Chain Model) www.xtl.com/xtlweb.nsf/logistics_en/Value+Chain+ModelOpenDocument 9.Figure 3.2-1: Porters five forces Source: Porter, 1998, p. 22 10. Road to more haulage regulation: international trade UK import )... www.internationaltrade.co.uk/roadtomorehaulageregulation visited on 8th Nov 08 Read More
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