OPINION AUTHOR SUPPLY CHAIN Stephen Rinsler FCILT Promoting the UK’s logistics,FOCUS JULY 2012 supply chain and freight sector48 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 nation’s 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 UK’s workforce.1
The number of HGVs registered in the UK is around Volumes of freight moved in the UK Supply415,000 and the number of vans is 3.3 million. Some 20% Chainof goods are moved by vehicles registered outside the Sector Tonnes, millions Tonne-km, billionsUK. The overwhelming volume of domestic freight is 2 Road 1488 136.8 Transport Planningmoved by road3 – see Table 1. Rail 49 19.1 Some 2.6 million people in the UK are employed in Water 110 48.6these supply chain, logistics and freight transport roles, Pipeline 147 10.2 Railwhich is a significant part of the working population.Theyhave a profound effect on the efficiency of the various Table 1 Active Travel & Travelcompanies in which they work. Getting the right goods Planningof the right quality and price to the right place at the 2. An infrastructure investment strategy that wouldright 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 Coachbest 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 Waterwaysgroup 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 Forward1. 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 Saïd 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 sectorits part in the reduction of UK CO2 emissions. Large Why does the sector have such a low profile when it islorries are unlikely to be electric powered, but trains are, vital to the efficient running of the UK economy? It isand switching to rail helps real reductions in CO2 down to a variety of reasons and some change inemissions. 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. 49development 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
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 5–12% 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 andFOCUS 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 and50 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?
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 President’s Medal at this year’s International ConventionSkills strategy for Services to CILTWhilst good progress has been made in identifying and International. It was presentedbuilding the skills and competences of drivers HGVs, cars by International Honorary President HRH The Princessand buses, we need to encourage the skills required to Royal and Internationalrun efficient supply chains. Just as being a Member of the President Alan Waller OBE FCILTChartered 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. 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