Rail Freight

Rail is another form of land-based transportation. The United Kingdom and most European Union countries have extensive rail networks. In the United Kingdom, private rail freight providers offer highly competitive rates for companies moving large and heavy bulk materials, such as shipping containers, aggregates, liquids, and other high-volume, high weight loads. Material by the train-load is highly economical, provided the volume is sufficient to merit the single train-load configuration. In most cases, volume requirement is sufficient (low volumes tend to go more economically by road), hence train-load configurations are these days more common than wagon-load.

(In the wagon-load configuration, wagons carrying different loads are marshalled together by shunting to form the train. in the train-load configuration, all the wagons that comprise the train are loaded with the same material or cargo - ideally for the same customer.)

The train-load formation is typical of UK freight by rail, with only a few companies these days committed to and capable of profitably configuring wagon-load trains. The case of intermodal containers is representative. Few of the UK's rail freight operators perform intensive wagon-load operations, since wagon-load configurations require marshalling processes that incur non-value adding activities. Freightliner, for example, prefers to run trains that include empty intermodal wagons rather than shorten trains according to exact requirement. Shortening the train is regarded as an unnecessary and uneconomical operation, so is avoided. Costly marshalling is minimized. In Continental Europe, marshalling yards are more common, but still impose a profitability constraint.

With the Channel Tunnel, inward rail freight has increased. Inside the United Kingdom, shipping container movement is currently the most common type of freight moved by rail. Although the advantages of rail are considerable, the disadvantages are also acute. The following describe the advantages and disadvantages of freight by rail. ...continue reading

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  • Track – labour (skilled, technical, engineering, and unskilled), signalling equipment, electrification management and support (possible but unlikely, since most of these functions will be provided in-house).
  • Facilities – construction and maintenance of yards and permanent way.
  • Fleet – locomotive and wagon manufacturers (including supplier liaison), maintenance of wagons and locomotives, and stabling of locomotives and track maintenance vehicles.
  • Transport operations – automated (and possibly manual) train formation switches, shunting engines, GPS and RFID technology and management, goods and materials distribution facilities (additional logistics processes involving, for example, forklift trucks, container cranes, warehousing), road vehicles.
  • Fuel – procurement and handling/distribution.
  • Transport support functions (waste management).
  • Products and supplies (IT products and consumables).

Detailed knowledge of the general DB procurement strategy will be valuable, if a supply chain-level understanding of the organisation is sought. Central procurement is likely to generate volume purchase economies, but given the variety of rail systems across Europe, locally-specific locomotives might have several cost/efficiency advantages, such as proximity to the maker’s facilities, local availability of drivers qualified to drive that class of locomotive, low cost of spares, network suitability, and so on. However, from the group perspective, such advantages are likely undermined by the practical difficulties of deploying a highly regional locomotive to elsewhere in the group (in response to sudden requirements for capacity increase, for example).

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DB Schenker Rail provides locomotives and single wagon or block train carriage of freight. The division performs marshalling/train composition operations. Yard activities represent numerous cost factors, few of which will be, from the customer’s perspective, value adding. In terms of customer value, flexibility – the capability to acquire wagons and cars in response to demand fluctuation – will represent value-addition. To provide such flexibility, the DB fleet must include functioning, load-appropriate vehicles in adequate quantity, and locate them sufficiently close to the customer to prevent internal logistical costs offsetting profitability and eroding value to the customer.

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Variance

In terms of pure logistical activities: restricting variance creates efficiencies that add value. Use of standard wagons, for example, allows automated unloading. In non-automated scenarios, operations involving standard wagons are safer and quicker due to compatibility and familiarity. Restricted variance in handling practice and rolling stock contributes to value/service quality. Flexibility in scheduling and wagon availability maybe attractive offerings, but reduced variance in practice and equipment decreases risk.

In the non-rail activities of railfreight, usable, intuitive customer interface points and proactive communications by customer services are value-adding activities. ...continue reading

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Companies are keen to show their CSR credentials to customers and the public at large. To do so authentically, they must demonstrate visibility, economies, and dynamic control and responsiveness throughout their supply chains. Rail freight companies provide their customers with “external logistics”. Choice of logistics provider impacts directly on a company’s supply chain performance and green credentials. Rail freight companies are also composites and syntheses of their own supply chains, so must be as sensitive and responsive to CSR issues as their higher profile B2C customers. The greenness of rail freight can only bear scrutiny if the rail freight company’s own supply chain is green. This means supply chains must be subject to rigorous monitoring and control. Companies who fail in this regard run the risk of exposure. Companies whose suppliers use materials sourced in unregulated environments or produced by ethically dubious means will reap negative publicity. The construction and enforcement of supplier audits and procurement codes of policies are typical measures companies take to lower such risks. ...continue reading

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Value-Driving in Logistics

For customers purchasing logistics services, value is created by the following capabilities:

  • Accommodation of changes to freight form. If variance in lot sizes and unitized loads can be supported by the transporter’s equipment with acceptable time/cost incurred, value is created. There exist positive opportunities for suppliers who are able to change the configuration of their supplies in accordance with the preference of their customers. Hence, transporters that can support such variance are attractive. ...continue reading
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Value Chains as Value Systems

According to Porter (1984), value depends on how the customer uses the product; value and cost incurred are dissimilar; costs include raw materials for example. Only when the product meets the customer/end consumer can the value of the logistical provision be understood. Key to understanding value drivers in the case of DB SR is a detailed appreciation of the requirements of the customers of DB SR’s customers. These will vary, but the SLAs and quality requirements will likely be covered in the golden trio: “on-time, in full”; “right first time”; and “error free”. ...continue reading

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Supplier and supply chain management are means by which cost-reducing efficiencies can be obtained and profits thereby increased. DB customers want to minimize logistical costs in order to maximize returns from the sale of freight. For the manufacturing customer, movement of goods to consumer or retailer/distribution centre constitutes “outbound logistics”, usually the final physical distribution stage for which the manufacturer is responsible. The provider decision is usually the responsibility of a supply chain or logistics managers (in some companies, transport is often purchased by generalist procurement personnel). Supply chain-aware managers will prioritize capability rich, known-good providers, ideally with robust supply chains of their own. ...continue reading

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The following figure illustrates the four constitutive elements of value obtained by customers engaging with DB.

Quality

“Quality” is a variously interpretable, somewhat overused and overextended term. In manufacturing and operations management generally, and service industries specifically, quality is defined by the customer. Performance quality expectations are usually formally encoded in key performance indicators (KPIs) or Service Level Agreements (SLAs) that DB will accept or reject prior to commitment. Normally, KPIs enforce performance conditions on service providers, so are of extreme importance to all parties. Failure to meet a KPI, such as 90% OTIF (“on time, in full”) would result in compensatory remuneration or, if persistent, discontinuation of contract. As already mentioned, if competitors can meet quality requirements while offering attractive prices to their customers, and if contractual conditions are comparable between competitors, quality of service beyond basic requirement will acquire significance. The railfreight provider that is capable of providing service quality that meets or exceeds customer requirement has greater order-winning potential when no other differentiating provisions exist. ...continue reading

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When business is acquired, the customer interface priority moves from attraction to provision of service quality. The longevity of the business relationship is contingent on the continuous and consistent delivery of the service in the form promoted in the enticement/attraction stage (1. and 2.).

Whether the freight is traditional (i.e. rail-suited) or novel (multimodal-suited), quality/value in rail freight customer service can be divided into three phases of activity, which are depicted as the following trinity.

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