Rail Freight in Europe: different perspectives on achieving higher service levels.

RFTCs perceive freight rates and to a lesser extent available capacity, reliability, and total journey time as typical strengths of road transport, in addition to the ability to deliver goods door-to-door (or the flexibility) of road transport. To compete with road transport, respondents emphasized that further development of frequent point-to-point services, guaranteed delivery times, one-stop-shopping facilities, and uninterrupted (international) services are necessary for reaching acceptable service levels. Offering additional logistics services are required, especially network facilities and feeder services. Handling services and loading/ unloading services are considered less important (Stank and Stephenson 1995). LSPs consider development of integrated logistics concepts more useful to affect the service levels than traction providers, who consider shuttle and haul operations as their core businesses.

Traction providers seem hesitant to become involved in services other than transportation. However, RFTCs are generally interested in cooperating with road carriers or truck-asset-based LSPs as they recognize the strengths of road transport and admit that combining both modes may affect the service levels in the short term. Cooperation such that rail freight is responsible for the line/circle haul function and road for the feeder function is an example.

The Role of Government

How can government policies and practices contribute to improved rail freight services?

Respondents expect that further EU regulations to reduce road transport will only lead to a marginal increase in rail freight. New entrants primarily indicate that they will probably not be able to handle a considerable increase in volume due to a variety of reasons. These reasons include the scarcity of suitable assets, the state of the infrastructure, and the severe competition between RFTCs and between other modes, resulting in difficulties to achieve adequate performance (Miller 2007). Incumbents and larger new entrants appear more comfortable with handling a considerable growth in volume.

Two situations were mentioned by respondents, in which local and regional governments could have facilitated rail but failed to do so. The first situation relates to three multinationals that would like to have access to an inland water terminal to be constructed. Public discussion evolved around a new road to be constructed to provide access to an inland terminal (Bergen op Zoom--Netherlands). A rail track that is dormant, but readily available, was hardly considered in the discussion. Government officials involved in this project appeared unaware that rail could be an alternative. The multinationals, some of which had earlier experiences with rail freight, appeared not to consider rail for this project as well. A second situation involved a major connection between a significant port in one country, Belgium, and an economic center in another country, Germany, that can be reached only through a third country, the Netherlands, the so-called Iron Rhine near Roermond in the Netherlands (Etienne et al. 2003). The Netherlands appears unwilling to modernize the infrastructure, since it would affect the competitive position of the main Dutch Sea Port Rotterdam and benefit its primary competitor the Port of Antwerp, Belgium.

The general public appears to be ignorant about projects until political decisions are made and various media sources pick up the news.

Customer Orientation

How can more customers benefit from improved rail freight services ?

RFTCs use a combination of communication tools such as personal selling, Web portals, conferences, advertising, direct marketing, and exhibitions to inform the market about rail freight services. In spite of these tools, most RFTCs think that within a distance of 25 km from the most frequented route only few potential customers have knowledge about RFTC transportation services. On average between 1 percent and 5 percent of the company's turnover is allocated for sales and marketing activities. Most RFTCs indicate that they have one employee dedicated to commercial tasks like gaining new freight contracts or keeping current ones, while the larger RFTCs have four persons dedicated to these commercial activities. RFFCs generally are of the opinion that their customer base is large enough to achieve the company objectives and to operate freight trains as efficiently as possible. RFTCs on the most frequented routes serve fewer than five customers and traction providers fewer than three. The customers that are served on the most frequented routes represent a mix of shippers, asset-based LSPs, non-asset-based LSPs, road carriers, and other RFTCs.

The management of information flows, customer relations, and supplier relations are considered important initiatives in the improvement of current processes and flows in the supply chain (Evers and Johnson 2000). Respondents perceive focus on reliability, development of strategic alliances, initiating commercial activities, effective communication, marketing planning, increases in capacity, attractive freight rates, industrial containerization, and the ability to combine freight flows as pragmatic initiatives for developing new business (Stank and Roath 1998).

Table 1 summarizes the results for each of the major categories of investigation.

Observed Inertia

RFTCs appear generally satisfied with their own performance and believe that their own initiatives affect service levels. They tend to offer undifferentiated services based on a traditional market approach. Substantial growth in the volumes of rail freight is seen as problematic. Truck-asset-based or non-asset-based LSPs have no or limited understanding of rail freight opportunities. Small and medium-sized road carriers believe that rail cargo may endanger their very existence. As long as road is the most popular mode of transport, initiatives to include rail in freight movements are not likely. Some shippers still seem to think that rail freight is controlled by state-owned rail companies.

However, the different stakeholders appear to agree on a need for door-to-door focus, cooperation between modes, and increased efficiencies. Government policies can promote rail freight through improved infrastructure projects and awareness building. Better understanding of customers and their supply chains and utilizing road and rail capabilities will likely benefit more customers.

CONCLUSIONS

How can European RFTCs improve rail freight service levels and ensure their long-term viability?

RFTCs have started various initiatives to improve service levels in the short term. These initiatives mainly cover rail freight elements. Optimizing the utilization of assets and the preparedness to start or to intensify cooperation with road carriers are most frequently mentioned. Other initiatives include increasing flexibility and management capabilities, focusing on personal selling or other communication methods to increase sales, and developing intermodal concepts as well as other routes.

The most preferred strategy by RFTCs involves a mix of cooperation and competition. An RFTC cooperates with another RFTC on certain destinations, but competes with the same RFTC on other destinations. Most incumbents and larger new entrants still prefer a stand-alone strategy, although some indicate that cooperation is needed eventually. Smaller new entrants must become financially stronger to survive and become viable partners (Stehmann and Zellhofer 2004). New entrants are considered key in improving rail freight competitiveness.

The study revealed that synergies were created by close cooperation among shippers, LSPs, and RFTCs, enabling the transfer of a larger quantity of freight to rail, including the involvement of road. Traction providers seem reluctant to focus on understanding the customer supply chains.

Further restrictions on road transport will lead to increasing pressure on rail freight and will likely affect service levels negatively. Most RFTCs are not yet ready to handle a considerable increase in freight volumes. The largest freight volumes involve road transport. Increasing rail freight volume will most likely not be achieved by competing, but by cooperating with road carriers.

RECOMMENDATIONS

All projects related to the development of assets, infrastructure, and other rail freight elements should be continued. The availability of cross-border assets, extension and improvement of the infrastructure, and pan-European arrangements in rail freight will help RFTCs improve their service levels. RFTCs must take more responsibility for improving service levels.

RFTCs should begin stronger lobbying efforts for rail freight on local, regional, national, and international levels. They should also start using market segmentation and strategy techniques to differentiate their services from other providers and should deliver these services to selected target groups. Communications with these target groups should be intensified, as substantial numbers of potential customers are still unaware of the strengths of rail freight. Road firms appear to be unaware of the strengths of rail freight and in many aspects perceive rail as a threat. Initiatives in this field will certainly create awareness and may lead to initiatives that result in serving the final customer instead of focusing on competition. European initiatives should be communicated to national, regional, and local governments, and different levels of government should link up to make the various isolated rail projects a success. Better communication would likely foster awareness.

LIMITATIONS AND FURTHER RESEARCH