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Rail cost savings to "bite your hand off"

PRESS RELEASE

April, 28, 2015: Freight trains are now carrying more intermodal traffic, mainly fast-moving consumer goods, around the UK than coal. But more work is needed if rail operators are to wean more customers off road transport and "green" the supply chain.

Speaking at a seminar at the Multimodal Exhibition at the Brimingham NEC, Julian Worth, Director of Transworth Rail and Chairman of the Rail Freight Forum at the Chartered Institute of Transport & Logistics, said that when UK rail services were privatised 15 years ago, the main freight flows comprised heavy, low-value goods and FMCG was barely on the radar. He highlighted the "three Cs", cost, carbon and convenience, as the reasons for rail's change of direction.

He claimed goods could be transported from deep-sea ports to the so-called Golden Triangle in the West Midlands up to 40% more cheaply by rail than by road – "an order of cost saving for which most people would bite your hand off".

Every tonne moved by rail would generate 76% lower carbon emissions. "If you're looking to de-carbonise your supply chain, there's nothing more effective you can do," Worth said.

The convenience aspect was that a truck driver would have to offload and turn around inside two hours to pay his way, Worth added. "With a rail box, within reason, you can call it in when you want it."

Andrew Hemmings, Secretary of the Rail Freight Forum and a contributor to Network Rail's freight utilisation strategy, said, "We weren't far-sighted enough to see the decline in coal, or may have thought that biomass would be going [by rail] into the power stations instead. But the economics of the supermarkets have dictated the rise of boxes into national and regional distribution centres."

From the customer perspective, Tim Wray, General Manager of Multimodal Logistics, said he "struggled" to accept that rail transport to the Midlands could save him 40%. With the merchant haulage market offering him such low rates, rail was "not a cost-effective option," he said.

"Capacity when you need it is the issue. Huge vessels all arrive at same time, and coping with the volumes is difficult."

Rail infrastructure must improve and more lines should be electrified, Wray said. Shippers would make "huge savings" if electric trains didn't have to switch to diesel on route to Felixstowe, for example. The East Coast Main Line was not cleared for high-cube containers and transport was therefore cheaper by road.

Better wagon configurations were vital to a more efficient rail service, and Wray was unhappy about operators' continued use of 60ft wagons. "We need 45ft units, but you take it because you need the capacity."

Worth pointed out that the biggest cost of intermodal transport "isn't the rail bit, it's the on-cost of going the final 30 or 40 miles by road." By using a DC at Daventry - Tesco has already put in place, with Sainsbury set to follow – a container load of goods could be put on a dock loader for £30 or £40 against a cost of up to £100 "just to get out of the gate" by truck.

Tesco had taken out a further tranche of cost by using rail outbound from a national distribution centre to regional facilities in Barking and Tilbury, from where stores across the UK south-east are supplied.

Worth noted a generational shift in attitudes to rail. A former generation of transport managers were actively migrating to road, then came distribution directors who were "agnostic". Incoming supply chain managers now more aware of the need for sustainability and saw rail as a genuine option, though he could recall only one customer who had ever offered to pay more to be green.

Hemmings said freight facility grants had helped pump prime rail projects over a 20-year period but were currently only available in Scotland and Wales, not in England. However, EU funding was available to incentivise small and medium enterprises in eastern England to try rail, and 70 had converted some of their traffic.

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