The document discusses the importance of the logistics and supply chain sector in the UK economy. It notes that the sector employs over 2.6 million people and moves the vast majority of domestic freight by road. However, the sector has a low profile. The author argues that three strategies are needed to help the sector contribute more to the economy: 1) a UK freight strategy to encourage modal shift from road to rail and increase collaboration, 2) infrastructure investment to remove bottlenecks and enable electric vehicles, and 3) a skills strategy to drive skills development in the sector and recognize existing standards. Such strategies would help reduce UK emissions and provide guidance for future growth of the freight industry.
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Focus Stephen Rinsler Article
1. OPINION
AUTHOR
SUPPLY CHAIN Stephen Rinsler FCILT
Promoting the UKs logistics,
FOCUS JULY 2012
supply chain and freight sector
48
Bisham Director Stephen Rinsler FCILT, a past chairman of
the Institute, gives some perspective of a long-term user
and provider
The people who work in the UK supply chain, logistics companies, plan and manage the movement of those goods
and freight transport sector add real value to the nations and services to, for example, their manufacturing plants,
economy, but their significance is not well known. It is a retail warehouses, retail stores and export customers.
very fragmented profession, divided by economic sectors The significance for the UK economy is that the supply
and different transport channels, and driven by the chain, with its logistics partners, plans and executes the
fulfilment of customer requirements.This article sets out movement of everything we eat and drink, wear, read,
the need for three strategies freight, infrastructure sit on, sleep on, build with, process data with and
investment and skills to be put in place across the communicate with. Digital movement of data is eating
whole sector. into the movements of films, music and books, but those
are small numbers of movements a year in comparison
Significance of the sector to those in the food, clothing, drink, construction, fuel and
Freight is not a sector that is properly defined in milk markets.Yes, there are pipelines for some materials,
Government statistics, nor is it a high-profile industry at but often for those materials the final delivery of
the forefront of media reporting. It is partly in the visible consumable products happens by road.
logistics sector warehouses and lorries and partly in The people who work in this sector need to be skilled
the invisible supply chain sector sales forecast, stock at different levels, but need deep skills in forecasting,
control, purchasing, production and movement of goods. computer systems, buying the right goods, data analysis,
Heavy goods vehicles (HGVs), medium-sized lorries and project and programme management, planning, driving,
white vans are highly visible and are seen as tax earners running warehouses, picking the right goods and
by Government and by other road-users as difficult managing stakeholders.
partners in crowded motorways and urban roads.
Some numbers
The supply chain sector is hidden for example, in The logistics sector employs 1.7 million people across
manufacturing, fmcg, retail, healthcare, the airline industry, 194,100 companies. Including those who work in logistics
construction, chemical and petroleum sectors, rail, the and supply chain occupations in other sectors, such
MOD, third-party logistics (3PL) sectors and freight as manufacturing or retail, the actual size of the sector is
forwarding. These sectors purchase goods and services an estimated 2.6 million people, which equates to
and then, with their suppliers, freight forwarders, and 3PL approximately 8/9% of the UKs workforce.1
2. The number of HGVs registered in the UK is around Volumes of freight moved in the UK
Supply
415,000 and the number of vans is 3.3 million. Some 20% Chain
of goods are moved by vehicles registered outside the Sector Tonnes, millions Tonne-km, billions
UK. The overwhelming volume of domestic freight is
2 Road 1488 136.8 Transport
Planning
moved by road3 see Table 1. Rail 49 19.1
Some 2.6 million people in the UK are employed in Water 110 48.6
these supply chain, logistics and freight transport roles, Pipeline 147 10.2
Rail
which is a significant part of the working population.They
have a profound effect on the efficiency of the various Table 1 Active
Travel & Travel
companies in which they work. Getting the right goods Planning
of the right quality and price to the right place at the 2. An infrastructure investment strategy that would
right time requires a huge effort to be executed with theremove current bottlenecks in roads, rail and ports and Bus &
right level of collaboration, but the UK has some of the provide capacity for the future. Given the need to Coach
best supply chains in the world. replace diesel as the main motive power, this investment
strategy must also include the provision of nuclear Ports
Maritime
There are three fundamental requirements for this electricity so that rail and short to medium lorry Waterways
group of people that would make their contribution to journeys would have the use of electric motive power.
the UK economy significantly greater than it already is: Freight
3. A skills strategy for logistics and the supply chain that Forward
1. A UK freight strategy that would encompass: would drive skills encouragement. A recognition in
Modal shift: encouraging the move from road to Government sectors that the logistics and supply chain Aviation
rail for the region to region movement of goods in skills standards already set by CILT could help define
the UK the requirements that people working at all levels in
the supply chain should attain as a mark of their
Collaboration: persuading the use of common
potential ability. In terms of scarce skills of programme
vehicles to deliver to the high street through
management needed often by supply chain managers,
consolidation, reducing the number of vehicles the Masters delivered by Sa誰d Business School, Oxford
delivering if coupled with out of town or edge of University or Cranfield University are world class.
town consolidation centres
www.ciltuk.org.uk
Such a strategy would help the transport industry play Logistics/supply chain sector
its part in the reduction of UK CO2 emissions. Large Why does the sector have such a low profile when it is
lorries are unlikely to be electric powered, but trains are, vital to the efficient running of the UK economy? It is
and switching to rail helps real reductions in CO2 down to a variety of reasons and some change in
emissions. A freight strategy would also provide guidance approach is vital if we are to make progress.
for other planning strategies for example, spatial Firstly it is not recognised as a true operational sector. 49
development or energy requirements. It is very fragmented with at least five parties:
Freight is not at the forefront
of media reporting, but has a
huge part to play in the way
we all live
NEXT PAGE
3. OPINION
manufacturers; importers/exporters; retailers; logistics We therefore do not seem able to allow the free
companies; and the customer/consumer. Each has a market to drive the UK freight strategy; corporations
different facet of the operation to deal with and few need to make returns over two or three years, but
people have a holistic view of the complete supply chain. 30-year returns are for Government or pensions
Supply chain costs are often 512% of the product industry investment. Furthermore, there are so many
costs and everyone has been used to the final purchaser different stakeholders that coherency will not be possible
paying for any increase in these costs. In truth, until some unless the Government takes the lead. Currently, roads
SUPPLY CHAIN five years ago costs had fallen consistently year on year are free, apart from road fund licences, which skews the
as efficiencies were taken in the supply chain. However, evaluation between road and rail because there are
with the increase in diesel prices and congestion and substantial access costs required to run your own train
the application of the Working Time Directive, supply service on Network Rail. Road costs are well known and
chain costs are now increasing again and look set to are reasonably transparent, but rail costs are not, and the
increase further. rail freight market is not liquid and open.
Secondly, jobs within the supply chain are very As with roads, there is congestion on the rail network,
detailed, with many daily transactions and short-term but there is little incentive to deal with it and rail
decisions often taken at relatively junior levels. With freight loses out to passenger train path requirements;
small numbers of supply chain directors across many passengers have votes. The freight industry needs to
economic sectors, there is little chance of pulling them persuade Government to amplify the freight requirements
together to provide coherent arguments for the needs on the rail network, and many more day and, particularly,
of the sector. CILT helps in this area with its very night movements are required.
active Public Policies Committee and the Independent
Transport Commission also publishes independent Collaboration
research into many cogent transport policy areas. Given the level of empty running of heavy goods
vehicles 3.3 billion km a year in the UK, which is 28%
Thirdly, professional institutes are often mainly
of all km driven, and as many or more by white
concerned with individual professionalism/learning and
vans there seems to be an obvious case for
do not always articulate the overall needs of the rail and
FOCUS JULY 2012
collaboration5 see Figure 1.
road infrastructure for freight as opposed to passengers.
Trade bodies such as the FTA, IGD, FDF and RHA tend However, if executed on a one-for-one basis,
to be concerned with their relatively narrow sectional collaboration takes time to agree and implement, and is
and corporate interests for example, the road fund hard to achieve and keep going. What is needed is an
licence, road charging, health and safety or access to independent load and capacity matching facility that can
London. also show the relative CO2 emissions for the routes and
50 mode chosen. One such system is TAILgate, a project
Freight strategy to provide online collaboration space for shippers and
There are many compelling reasons why we need a logistics companies and funded in part by the Technology
coherent freight strategy, but the main two thrusts are: Steering Board.
6
There are many stakeholders to any freight strategy,
Investment and planning strategy
including local communities, and if there is no
There appears to be a lack of Government policy on
coherent direction by Government then nothing will
freight; the older papers on strategy that were on the
change; the Localism Bill4 suppresses the needs of
Department for Transport (DfT) website do not seem
the wider community to that of the possibly very to be generally available any more.
local community
There are no working parties for freight strategy to
The infrastructure requirements require the building inform and orchestrate Government policy.This leads to
of new assets with lives of 30+ years and without a gap in the direction and application of strategy and
policy direction no one will invest in the low the lack of consistent decisions on modal shift for
30-year returns example, fuel tax, road fund licence, certificate of
competence for drivers and MOTs.There is no direction
for planning guidance for freight access in local planning
UK empty running levels reviews, leading to an asymmetry in the importance of
the local view over the greater good of the region or
the UK as a whole. Given also that regional planning has
been watered down, there is little of the co-ordination
required to deliver geographically dispersed infrastructure
decisions.
Percentage of vehicle km run empty
But there are some other important issues:
There is a major gap in the availability of data
leading to a breakdown of the evidence-based
analysis that Government is insisting is needed for
decision-making7
We have two major complementary infrastructure
investment requirements: road and rail; how do you
balance the interests of passengers and freight?
How can greater collaboration in freight be
encouraged to remove some of the empty running
Figure 1 and service the high street together?
4. European competition rules seem to inhibit sensible Given the overarching nature of CIPS and CILT, those
Supply
horizontal co-operation between companies; two bodies should show the way to bring coherence to Chain
why cannot companies join forces to deliver goods the UK skills requirements in these areas.
to their joint customers? Transport
Whilst many talk about supply chains being in Way forward Planning
competition and that supply chains differentiate Rail needs to be seen as a strategic asset that requires
the balancing of its output passenger miles and
companies, the reduction of risk and costs in the Rail
freight-tonne miles thus serving voters in two ways:
supply chain is so important to the viability and
getting passengers to their destinations; and getting the
profitability of companies; collaboration is one route Active
goods and services they require to their shops or their Travel & Travel
that could drive these goals8 Planning
doorstep.
The transport industry will be slower than most to Better information exchange on rail freight train Bus &
reduce its carbon footprint as it requires motive timetables, access to part trains and part containers and Coach
power to move goods, but rail freight and sharing empty vehicle movements would drive economic pricing,
deliveries are two ways that could make a major as well as volume. There is a need for an independent Ports
Maritime
difference; it is all very well to state that reducing the system to provide the collaborative space to optimise a Waterways
mileage goods are moved would save emissions but good proportion of the freight movements, and TAILgate
oranges come from Spain, French cheese comes will provide that functionality. Freight
Forward
from France, clothes come from Sri Lanka, China, Industries and interest groups need to collaborate
Indonesia,Turkey... better on this overarching problem, thus inviting a Aviation
Freight movements use diesel as the main motive Government response. We need the wider expression
power, which is flexible and very efficient; the use of of views on what is important and what might be
electricity is more difficult for freight vehicles, but if in the solutions to drive the debate and CILT needs to lead
the main freight was being moved by rail above or the way.
below ground to city or town interchange points We need to recognise that secondary education does
and the loads broken down across smaller trucks for not see logistics and transport in its curriculum. There
immediate consolidated delivery to the high street, needs to be the incorporation of supply chain principles
www.ciltuk.org.uk
many shorter urban journeys could be made using into maths, economics and geography. Learning those
electric trucks, which would be a huge gain for disciplines through practical examples that use algebra,
towns and cities in terms of, say, emissions and noise probability and statistics, as well as costing and
Rail freight terminals need to be rethought and the optimisation techniques, will introduce students to the
quick throughput of arriving freight directly on to fascinating world of supply chains, logistics and transport.
vehicles for immediate delivery needs to be the This is key to getting first-rate graduates into the industry. 51
norm, rather than only building large storage
The author (centre) received the
warehouses at the freight/road exchange points 2012 Presidents Medal at this
years International Convention
Skills strategy for Services to CILT
Whilst good progress has been made in identifying and International. It was presented
building the skills and competences of drivers HGVs, cars by International Honorary
President HRH The Princess
and buses, we need to encourage the skills required to
Royal and International
run efficient supply chains. Just as being a Member of the President Alan Waller OBE FCILT
Chartered Institute of Purchasing and Supply (MCIPS)
has come to be recognised in some public sectors as a
level of competence in procurement, so the post-nominal
CMILT should be recognised in as competence in
transport, logistics and supply chain management.
ESSENTIALS
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 Transport
and Sustainability in Britain, University of Westminster, 2010
6. It has been successfully steered to the demonstration stage by a collaborative consortium including
OmPrompt 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
END