The shift of long-haul freight transport from road to rail is an opportunity whose time has finally come. As we push to make logistics operations more climate-friendly, rail promises to reduce CO2 emissions, and that could provide a boost to industry players committed to reaching specific CO2 reduction targets. So, it’s not surprising that there’s growing momentum for action coming from both business and EU government leaders.
However, in order to grow rail logistics to its full potential and accelerate the shift from road to rail, all stakeholders, including rail network companies, operators, logistics providers, and customers will have to come together and push for a viable solution – by making investments and committing to conscious trade-off on costs or lead times to achieve a greener emission footprint.
The Strength of Road to Rail
First, let’s define what we mean by ‘road to rail’. It refers to replacing the largest part of long-haul transport with rail (instead of truck), leaving only the first and last mile transport to road.
With freight demand in Europe expected to rise over 3% per year until 2050, there are good reasons to shift a larger share of the transport demand to rail.
Cutting carbon emissions is certainly the biggest one. Rail produces 75% less CO2 emissions per tonne-kilometer than that of road freight transport. Yet currently in the EU, rail makes up only around 19% of total freight transport (road accounts for 75% and inland waterways 6%.)
There is a growing desire among industry stakeholders to push for greener solutions. Whether it’s end consumers who are demanding a lower carbon footprint from their products, manufacturers who are responding to this, or logistics providers who enable the flow of goods, all are starting to see themselves as an important contributor to CO2 reduction. That only makes rail’s appeal stronger.
For its part, Europe’s road freight industry is working to slash its CO2 footprint with the use of biofuels and cleaner energy sources. But these emission cuts will reach a certain plateau. It will be rail that takes emission reduction to the next level – if we enable it.
Carbon reduction aside, there are other reasons to get behind rail, such as lower road congestion, reduced noise pollution in urban areas, and safer transport. Plus, consider the recent challenges in the trucking sector:
- Freight prices increased by as much as 60% due to the acute shortage of truck drivers
- New EU legislation on driver mobility and wage equality that will make cross-border trucking complex
- The rising cost of fuel
- Supply chain constraints resulting in long waiting times for new equipment, like trailers
All told, we’re at an inflection point, and the energy for road-to-rail has never been higher.
Making Road to Rail Successful: Post and Parcel Paves the Way
A commercially viable rail transport solution is possible, but it’s going to take logistics providers working together with customers and rail providers to make it happen. Together, we’ll need to ensure that road to rail is reliable, efficient, cost-effective, and flexible. Realistically, though, achieving this while also cutting CO2 levels by 75% might require compromises for example, on delivery times.
We see this playing out already in the Post and Parcel example. In early October 2021, Deutsche Post DHL Group and Deutsche Bahn (DB) announced an extension of their collaboration to move post and parcels by rail, increasing the share of items transported by DB Cargo from 2% to 6% starting immediately. The long-term goal is to grow this share to 20%.
How will they achieve this? In the short term by adding more connections. Until recently, DB Cargo offered 13 connections, mostly running on weekends, for post and parcel transport. To reach the 6% share, it added 7 more connections during weekdays.
It’s a good start. Yet to reach that 20% goal – and reap the huge carbon savings it will provide – it will take much more. One challenge to overcome is the lack of parcel centers equipped with rail sidings. Parcel centers still rely on trucks to transport items to freight terminals. As part of the new program (and a first), DB Cargo will construct access from the Cologne parcel center directly to the closest container terminal. When finished, this will enable greater volumes of post and parcels to be transported by rail.
The long-term success of the Post and Parcel collaboration will rely on the development of other upgrades, too, like faster freight cars and better rail lines, including high-speed routes. It may also require compromise. In some cases, customers will have to accept longer transit times in exchange for climate-friendly transport.
Volumes Suitable for Rail Transport
While the conditions for success are important, we also have to accept that not all freight volumes are suitable for road transport. A few characteristics determine whether freight is suitable for rail-based intermodal transport.
The first is distance. Total end-to-end route distances of at least 500 km work best for an intermodal solution. The longer the better.
Another is low time sensitivity. Rail has extended lead times and higher risk of disruptions, so it is less suitable for transporting time-critical products.
Lastly is the suitability of products. Products like steel, paper, wood, manufactured goods, and high density/high weight cargo are suitable for rail, given that rail can carry more weight per trailer or container than truck.
How Can We Support the Road to Rail Shift?
Now that there’s a growing commitment to make road to rail a reality, stakeholders need to tackle some significant barriers. I believe they can accelerate the shift by focusing on seven areas:
- Improve rail density. Create dedicated freight corridors for more efficient movement of goods by rail, making rail more comparable to road.
- Invest in cross-border corridors. This is where the real push will come for the shift to rail. Allow commercial operators to determine their preferred routes and work with railway operators to plan them.
- Develop terminal services. Enable logistics providers and terminal service providers to expand and improve services, like easier access and transit storage space.
- Provide customer-oriented services. Give shippers a say in how train schedules are developed and provide them strategic priority in the network.
- Harness the power of data analytics. Data will be critical to aid the shift from road to rail. All stakeholders should integrate data analytics into their planning, in order to better match available capacities to market demand, discover optimal pricing for the spot market, and plan rail and feeder networks more efficiently.
- Develop a spot market. Create a rail freight capacity exchange platform to sell available capacity on the spot market. This is crucial to maximize the utilization of current trains.
- Invest in track and trace. Many digital platforms have started to provide door-to-door tracking. We should further invest in and support this space to help bring track and trace capabilities that help customers improve their last-mile operations from real-time visibility on goods arrival.
Road to rail is only one part of a bigger picture
A shift from road to rail is undoubtedly a great next step for sustainable logistics to cut emissions. However, even if the optimistic EU target of 30% intermodal shift by 2030 is achieved, in itself this is not sufficient to achieve net-zero emissions. This is because rail cannot fully overtake road freight volumes due to capacity and operational constraints. Not to mention that we would have shifted to a mode of reduced emission rather than zero-emission. Therefore, we need to look at the bigger picture of how supply chains work and focus on other sources of large emissions and their reduction.
This will require smart use of data and technology to improve efficiencies. However, more importantly, it will require all stakeholders to come together and take bolder, more wide-ranging actions to cut source emissions. Investing in circular economies to help reduce emissions from “end of life” and raw material extraction is one of them. Regionalizing production to reduce ocean and airfreight emissions is another. Finally, an important but tough action would be changing emission-intensive consumer behavior. Depending on the industry and nature of the product, one or all of these changes would be significantly impactful in addition to the rail shift for emissions reduction.
For example, approximately 70% of emissions in electronics goods like mobile phones come from manufacturing activity including raw material extraction and component fabrication. These products use many non-renewable precious metals like gold, palladium, and cobalt that are emission-intensive to mine.
Yet only 50% of them are recovered at the end of the lifecycle of the phones. By investing in a circular economy to better capture and re-use these metals, we would be able to massively reduce mining and extraction-related emissions, thereby contributing to a sustainable supply chain.
I am watching the road to rail movement closely and am excited about its future. Shifting to long-distance freight by rail throughout Europe has the power to make logistics much more sustainable and contribute to reaching EU emissions targets.
As one of many industry leaders who feel a responsibility to act now, I’ll be advocating for more initiatives to scale its adoption. If we keep our eyes on the goal, we can tackle the challenges and develop a greener, more efficient logistics industry.
This Article was first published here. Sabine Müller is a member of Prequel Ventures‘ advisory board. You want to keep up to date with the latest industry trends? Browse our blog here or keep up with supply chain management innovation and technology at scm-startups.com.
About the author
Member of the Advisory Board at Prequel Ventures
I am Sabine Mueller, the CEO of DHL Consulting. DHL Consulting is an independent strategic supply chain and management consultancy of Deutsche Post DHL Group. I have been dedicated to the logistics sector for close to two decades. My personal blog serves as an exchange platform on the topics of Supply Chain trends, Women in Leadership, and Talent Management.