Focus Stephen Rinsler Article

The people who work in the UK supply chain, logisticsand freight transport sector add real value to the nation’seconomy, but their significance is not well known. It is avery fragmented profession, divided by economic sectorsand different transport channels, and driven by thefulfilment of customer requirements.This article sets outthe need for three strategies – freight, infrastructureinvestment and skills – to be put in place across thewhole sector.

Significance of the sectorFreight is not a sector that is properly defined inGovernment statistics, nor is it a high-profile industry atthe forefront of media reporting. It is partly in the visiblelogistics sector – warehouses and lorries – and partly inthe invisible supply chain sector – sales forecast, stockcontrol, purchasing, production and movement of goods.Heavy goods vehicles (HGVs), medium-sized lorries andwhite vans are highly visible and are seen as tax earnersby Government and by other road-users as difficultpartners in crowded motorways and urban roads.

The supply chain sector is hidden – for example, inmanufacturing, fmcg, retail, healthcare, the airline industry,construction, chemical and petroleum sectors, rail, theMOD, third-party logistics (3PL) sectors and freightforwarding. These sectors purchase goods and servicesand then, with their suppliers, freight forwarders, and 3PL

companies, plan and manage the movement of those goodsand services to, for example, their manufacturing plants,retail warehouses, retail stores and export customers.

The significance for the UK economy is that the supplychain, with its logistics partners, plans and executes themovement of everything we eat and drink, wear, read,sit on, sleep on, build with, process data with andcommunicate with. Digital movement of data is eatinginto the movements of films, music and books, but thoseare small numbers of movements a year in comparisonto those in the food, clothing, drink, construction, fuel andmilk markets.Yes, there are pipelines for some materials,but often for those materials the final delivery ofconsumable products happens by road.

The people who work in this sector need to be skilledat different levels, but need deep skills in forecasting,computer systems, buying the right goods, data analysis,project and programme management, planning, driving,running warehouses, picking the right goods andmanaging stakeholders.

Some numbersThe logistics sector employs 1.7 million people across194,100 companies. Including those who work in logisticsand supply chain occupations in other sectors, suchas manufacturing or retail, the actual size of the sector isan estimated 2.6 million people, which equates toapproximately 8/9% of the UK’s workforce.1

OPINION

Bisham Director Stephen Rinsler FCILT, a past chairman ofthe Institute, gives some perspective of a long-term userand provider

SUPPLY CHAIN

Promoting the UK’s logistics,supply chain and freight sector

48

FOC

US

JULY

2012

AUTHORStephen Rinsler FCILT

48-51 perspective.qxp:Layout 1 2/7/12 14:03 Page 1

The number of HGVs registered in the UK is around415,000 and the number of vans is 3.3 million. Some 20%of goods are moved by vehicles registered outside theUK.2 The overwhelming volume of domestic freight ismoved by road3 – see Table 1.

Some 2.6 million people in the UK are employed inthese supply chain, logistics and freight transport roles,which is a significant part of the working population.Theyhave a profound effect on the efficiency of the variouscompanies in which they work. Getting the right goodsof the right quality and price to the right place at theright time requires a huge effort to be executed with theright level of collaboration, but the UK has some of thebest supply chains in the world.

There are three fundamental requirements for thisgroup of people that would make their contribution tothe UK economy significantly greater than it already is:

1. A UK freight strategy that would encompass:

� Modal shift: encouraging the move from road torail for the region to region movement of goods inthe UK

� Collaboration: persuading the use of commonvehicles to deliver to the high street throughconsolidation, reducing the number of vehiclesdelivering if coupled with out of town or edge oftown consolidation centres

Such a strategy would help the transport industry playits part in the reduction of UK CO2 emissions. Largelorries are unlikely to be electric powered, but trains are,and switching to rail helps real reductions in CO2emissions.A freight strategy would also provide guidancefor other planning strategies – for example, spatialdevelopment or energy requirements.

2. An infrastructure investment strategy that wouldremove current bottlenecks in roads, rail and ports andprovide capacity for the future. Given the need toreplace diesel as the main motive power, this investmentstrategy must also include the provision of nuclearelectricity so that rail and short to medium lorryjourneys would have the use of electric motive power.

3. A skills strategy for logistics and the supply chain thatwould drive skills encouragement. A recognition inGovernment sectors that the logistics and supply chainskills standards already set by CILT could help definethe requirements that people working at all levels inthe supply chain should attain as a mark of theirpotential ability. In terms of scarce skills of programmemanagement needed often by supply chain managers,the Masters delivered by Saïd Business School, OxfordUniversity or Cranfield University are world class.

Logistics/supply chain sectorWhy does the sector have such a low profile when it isvital to the efficient running of the UK economy? It isdown to a variety of reasons and some change inapproach is vital if we are to make progress.

Firstly it is not recognised as a true operational sector.It is very fragmented with at least five parties:

SupplyChain

TransportPlanning

Rail

ActiveTravel & Travel

Planning

Bus &Coach

PortsMaritimeWaterways

FreightForward

Aviation

49

www.ciltuk.org.uk

Volumes of freight moved in the UK

Sector Tonnes, millions Tonne-km, billions

Road 1488 136.8

Rail 49 19.1

Water 110 48.6

Pipeline 147 10.2

Table 1

Freight is not at the forefrontof media reporting, but has ahuge part to play in the waywe all live

NEXT PAGE

48-51 perspective.qxp:Layout 1 3/7/12 08:57 Page 2

manufacturers; importers/exporters; retailers; logisticscompanies; and the customer/consumer. Each has adifferent facet of the operation to deal with and fewpeople have a holistic view of the complete supply chain.

Supply chain costs are often 5–12% of the productcosts and everyone has been used to the final purchaserpaying for any increase in these costs. In truth, until somefive years ago costs had fallen consistently year on yearas efficiencies were taken in the supply chain. However,with the increase in diesel prices and congestion andthe application of the Working Time Directive, supplychain costs are now increasing again and look set toincrease further.

Secondly, jobs within the supply chain are verydetailed, with many daily transactions and short-termdecisions often taken at relatively junior levels. Withsmall numbers of supply chain directors across manyeconomic sectors, there is little chance of pulling themtogether to provide coherent arguments for the needsof the sector. CILT helps in this area with its veryactive Public Policies Committee and the IndependentTransport Commission also publishes independentresearch into many cogent transport policy areas.

Thirdly, professional institutes are often mainlyconcerned with individual professionalism/learning anddo not always articulate the overall needs of the rail androad infrastructure for freight as opposed to passengers.Trade bodies such as the FTA, IGD, FDF and RHA tendto be concerned with their relatively narrow sectionaland corporate interests – for example, the road fundlicence, road charging, health and safety or access toLondon.

Freight strategyThere are many compelling reasons why we need acoherent freight strategy, but the main two thrusts are:

� There are many stakeholders to any freight strategy,including local communities, and if there is nocoherent direction by Government then nothing willchange; the Localism Bill4 suppresses the needs ofthe wider community to that of the possibly verylocal community

� The infrastructure requirements require the buildingof new assets with lives of 30+ years and withoutpolicy direction no one will invest in the low30-year returns

We therefore do not seem able to allow the freemarket to drive the UK freight strategy; corporationsneed to make returns over two or three years, but30-year returns are for Government or pensionsindustry investment. Furthermore, there are so manydifferent stakeholders that coherency will not be possibleunless the Government takes the lead. Currently, roadsare free, apart from road fund licences, which skews theevaluation between road and rail because there aresubstantial access costs required to run your own trainservice on Network Rail. Road costs are well known andare reasonably transparent, but rail costs are not, and therail freight market is not liquid and open.

As with roads, there is congestion on the rail network,but there is little incentive to deal with it and railfreight loses out to passenger train path requirements;passengers have votes. The freight industry needs topersuade Government to amplify the freight requirementson the rail network, and many more day and, particularly,night movements are required.

CollaborationGiven the level of empty running of heavy goodsvehicles – 3.3 billion km a year in the UK, which is 28%of all km driven, and as many or more by whitevans – there seems to be an obvious case forcollaboration5 – see Figure 1.

However, if executed on a one-for-one basis,collaboration takes time to agree and implement, and ishard to achieve and keep going. What is needed is anindependent load and capacity matching facility that canalso show the relative CO2 emissions for the routes andmode chosen. One such system is TAILgate, a projectto provide online collaboration space for shippers andlogistics companies and funded in part by theTechnologySteering Board.6

Investment and planning strategyThere appears to be a lack of Government policy onfreight; the older papers on strategy that were on theDepartment for Transport (DfT) website do not seemto be generally available any more.

There are no working parties for freight strategy toinform and orchestrate Government policy.This leads toa gap in the direction and application of strategy andthe lack of consistent decisions on modal shift – forexample, fuel tax, road fund licence, certificate ofcompetence for drivers and MOTs.There is no directionfor planning guidance for freight access in local planningreviews, leading to an asymmetry in the importance ofthe local view over the greater good of the region orthe UK as a whole. Given also that regional planning hasbeen watered down, there is little of the co-ordinationrequired to deliver geographically dispersed infrastructuredecisions.

But there are some other important issues:

� There is a major gap in the availability of dataleading to a breakdown of the evidence-basedanalysis that Government is insisting is needed fordecision-making7

� We have two major complementary infrastructureinvestment requirements: road and rail; how do youbalance the interests of passengers and freight?

� How can greater collaboration in freight beencouraged to remove some of the empty runningand service the high street together?Figure 1

UK empty running levels

OPINION

SUPPLY CHAIN

50

FOCUS

JULY

2012

Perc

enta

geof

vehi

cle

–km

run

empt

y

48-51 perspective.qxp:Layout 1 3/7/12 08:58 Page 3

� European competition rules seem to inhibit sensiblehorizontal co-operation between companies;why cannot companies join forces to deliver goodsto their joint customers?

� Whilst many talk about supply chains being incompetition and that supply chains differentiatecompanies, the reduction of risk and costs in thesupply chain is so important to the viability andprofitability of companies; collaboration is one routethat could drive these goals8

� The transport industry will be slower than most toreduce its carbon footprint as it requires motivepower to move goods, but rail freight and sharingdeliveries are two ways that could make a majordifference; it is all very well to state that reducing themileage goods are moved would save emissions butoranges come from Spain, French cheese comesfrom France, clothes come from Sri Lanka, China,Indonesia,Turkey...

� Freight movements use diesel as the main motivepower, which is flexible and very efficient; the use ofelectricity is more difficult for freight vehicles, but if inthe main freight was being moved by rail above orbelow ground to city or town interchange pointsand the loads broken down across smaller trucks forimmediate consolidated delivery to the high street,many shorter urban journeys could be made usingelectric trucks, which would be a huge gain fortowns and cities in terms of, say, emissions and noise

� Rail freight terminals need to be rethought and thequick throughput of arriving freight directly on tovehicles for immediate delivery needs to be thenorm, rather than only building large storagewarehouses at the freight/road exchange points

Skills strategyWhilst good progress has been made in identifying andbuilding the skills and competences of drivers HGVs, carsand buses, we need to encourage the skills required torun efficient supply chains. Just as being a Member of theChartered Institute of Purchasing and Supply (MCIPS)has come to be recognised in some public sectors as alevel of competence in procurement, so the post-nominalCMILT should be recognised in as competence intransport, logistics and supply chain management.

Given the overarching nature of CIPS and CILT, thosetwo bodies should show the way to bring coherence tothe UK skills requirements in these areas.

Way forwardRail needs to be seen as a strategic asset that requiresthe balancing of its output – passenger miles andfreight-tonne miles – thus serving voters in two ways:getting passengers to their destinations; and getting thegoods and services they require to their shops or theirdoorstep.

Better information exchange on rail freight traintimetables, access to part trains and part containers andempty vehicle movements would drive economic pricing,as well as volume. There is a need for an independentsystem to provide the collaborative space to optimise agood proportion of the freight movements, and TAILgatewill provide that functionality.

Industries and interest groups need to collaboratebetter on this overarching problem, thus inviting aGovernment response. We need the wider expressionof views on what is important and what might bethe solutions to drive the debate and CILT needs to leadthe way.

We need to recognise that secondary education doesnot see logistics and transport in its curriculum. Thereneeds to be the incorporation of supply chain principlesinto maths, economics and geography. Learning thosedisciplines through practical examples that use algebra,probability and statistics, as well as costing andoptimisation techniques, will introduce students to thefascinating world of supply chains, logistics and transport.This is key to getting first-rate graduates into the industry.

About the author

Stephen Rinsler FCILT is a Director, Bisham Consulting; Chairman, and CILT(UK) Trustee.

References

1. Skills for Logistics: Sector Skills Assessment 2010 and Skills for Logistics AACS LMI report 2010

2.The Logistics Dashboard, FTA 2011

3. ‘Road and Water: Department for Transport, Rail: Office of the Rail Regulator’, Pipeline: DECC, all 2009

4. Received Royal Assent: November 2011

5. Department for Transport 1995, 1999, 2008. Also ALLEN J and BROWNE, MIKE, Road Freight Transportand Sustainability in Britain, University of Westminster, 2010

6. It has been successfully steered to the demonstration stage by a collaborative consortium includingOmPrompt Ltd, ELUPEG Ltd, Bisham Consulting Ltd,TEG Ltd, DSV Ltd and SFS plc. www.TAIL-gate.org

7. UK Government White Paper: ‘Modernising Britain’, 1999

8. Professor Alan Waller, ELUPEG meeting, 2011

ESSENTIALS

END

51

ww

w.c

iltuk

.org

.uk

The author (centre) received the2012 President’s Medal at thisyear’s International Conventionfor Services to CILTInternational. It was presentedby International HonoraryPresident HRH The PrincessRoyal and InternationalPresident Alan Waller OBE FCILT

SupplyChain

TransportPlanning

Rail

ActiveTravel & Travel

Planning

Bus &Coach

PortsMaritimeWaterways

FreightForward

Aviation

48-51 perspective.qxp:Layout 1 2/7/12 14:03 Page 4