Transport policy holds promise of savings and efficiency

By staff reporter

- Last updated on GMT

Related tags Logistics

The EU Commission yesterday published its outline of a common
transport policy for the bloc, promising companies supply chain
savings and increased efficiency in cross-border trade.

The policy marks a bid by the EU to cut down on pollution, oil consumption and road congestion, mainly by allowing bigger loads and providing designated rail lines between countries for freight.

On average, logistics costs account for 10 per cent to 15 per cent of the final cost of a finished product. The European Commission estimate includes costs such as transportation and warehousing.

Spending on logistics amounts to about €5.4 trillion or 13.8 per cent of the global gross domestic product, GDP a year. Annual logistics expenditure in Europe amounts to about €1 trillion, about the same as in North America, the Commission stated in its policy outline.

In announcing the plan, Jacques Barrot, Commission vice-president responsible for transport, said that the EU had a role to play in the bloc's transport and logistics system by creating a more harmonised infrastructure through which the private sector could operate.

"Efficient logistical services should ensure a seamless flow of cargo,"​ he said. "A European logistics policy should keep know-how and talent in Europe and help to avoid the relocation of jobs outside our borders."

The plan includes creating liaisons with member states and industry to deal with bottlenecks in freight transport logistics. There would be a focus on improving the interoperability in countries computer information technologies and communications for better tracking and tracing of goods.

Dedicated rail freight networks would be set up between countries, under the plan. Money would be channelled into building logistics terminals and improving the training and certification of logistics suppliers and managers.

A move would be made toward harmonising transport documents, and the different liability rules in place throughout the bloc, under the plan.

Money would be spent researching and implementing common standards for loading units. The rules on vehicle dimensions and loading units would be updated. The Commission is putting forward the idea of exploring a "modular concept" of transportation that it says would allow 50 per cent more freight to be carried in one vehicle.

The use of this concept would allow, in specified transport operations, vehicles and loads that are longer than generally allowed under current EU law, the bloc's administrative arm stated.

The Commission's plan now goes to the bloc's Parliament and Council for vetting and approval before it can be implemented. The Commission hopes to have an agreement in place for implementation by spring 2007.

Logistics covers the planning, organisation, management, control and execution of freight transport operations in the supply chain.

The Commission estimates transport is responsible for 71 per cent of oil consumption and for 26 per cent of CO2 emissions in the EU.

Globalisation of production and the corresponding need for established supply chains increase the need for transportation, the Commission stated in noting the growth of the sector.

"There are a number of trends, some of which are contradictory,"​ the Commission stated. "On the one hand, centralisation of logistics organisation in European and regional distribution centres is taking place, and, on the other, decentralisation is emerging in the light of saturation on the European roads, enabling quick response from local warehouses or buffer storages to customer requirements."

A noticeable trend is the outsourcing of logistical operations to third party suppliers. In recent years, co-operation between shippers and service providers has become more long-term in nature and has been combined with a high level of integration in the organisational structures and informatics, the Commission stated.

Competition in the European logistics sector is intense, due to the low concentration rate of third-party logistics in Europe, the Commission stated. The top 20 companies have a market share of 33 per cent, a relatively low share.

Third-party logistics (3PL), as a sector within the transportation industry, is growing exponentially as manufacturers try to cut supply chain costs.

Food processors and other industries contract 3PL providers to broker transportation and other supply chain management services. As such it is a form of outsourcing supply chain management so that the processor can concentrate on in-plant operations.

The overall logistics spend in the European retail market is set to increase by 10 billion by 2010, Datamonitor forecasts in a report published in January this year.

"The driver for all industries looking to outsource the movement of their goods is the need to reduce costs in order to increase profitability," said Chris Morgan, Datamonitor logistics analyst and author of the research. "Employing an expert to maintain various stages of its logistical supply chain allows a company to focus on its core competencies and 'stick to the knitting'."

Morgan told that all industries are increasingly feeling pressure to at least maintain costs or, better still, reduce them.

Related topics Processing & packaging

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