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Research in Transportation Economics 41 (2013) 3e16 Contents lists available at SciVerse ScienceDirect Research in Transportation Economics journal homepage: www.elsevier.com/locate/retrec Logistics and supply chain management Dewan Md Zahurul Islam a, J. Fabian Meier b, Paulus T. Aditjandra a, *, Thomas H. Zunder a, Giuseppe Pace c a NewRail, Newcastle Centre for Railway Research, Freight & Logistics Research Group, School of Mechanical and Systems Engineering, Newcastle University, UK Institut für Transportlogistik, Technical University of Dortmund, Germany c Ghent University, Belgium b a r t i c l e i n f o a b s t r a c t Article history: Available online 27 November 2012 In this paper an introduction to the principles and methods used in logistics and supply chain management is presented. It begins by a discussion on fundamentals and explains the relevant terms. Next policy and practice associated with logistics and freight services are regarded with a focus on the EU policy for the sector which greatly influences the development of logistics chains and services. Mathematical formulation of typical transport and logistics-related problems is also presented followed by a discussion on the concept of sustainability. Ó 2012 Elsevier Ltd. All rights reserved. Keywords: Logistics Freight transport Policy Practice Sustainability 1. Principles of logistics Dr. Dewan Md Zahurul Islam, NewRail, Newcastle University. 1.1. Background The term “logistics” originates from the ancient Greek word “lógo2” (logosdratio, word, calculation, reason, speech, oration), and as such the word logistics has been in use for a much longer time than the current business logistics concept. The word logistics itself originates from the military discipline. There were divisions in the military who were responsible for the supply of necessary arms, ammunition and rations as and when they were needed, for example when they had to move from their own base to a forward position. In that situation the logistics division would provide all the necessary support to move the arms, ammunitions, tents, foods etc. In the ancient Greek, Roman and Byzantine empires, there were military officers with the title ‘Logistikas’ who were responsible for financial, supply and distribution matters. Not surprisingly the Oxford English dictionary defines logistics as; “The branch of military science having to do with procuring, maintaining and transporting material, personnel and facilities.” Another dictionary defines logistics as “The time related positioning of resources.” * Corresponding author. NewRail Research Hub, Stephenson Building, Newcastle University, Newcastle upon Tyne NE1 7RU, UK. Tel.: þ44 (0) 191 222 5997; fax: þ44 (0) 191 222 8600. E-mail address: paulus.aditjandra@ncl.ac.uk (P.T. Aditjandra). URL: http://www.ncl.ac.uk/mech/staff/profile/paulus.aditjandra 0739-8859/$ e see front matter Ó 2012 Elsevier Ltd. All rights reserved. http://dx.doi.org/10.1016/j.retrec.2012.10.006 Logistics is also commonly seen as a branch of engineering which creates “people systems” rather than “machine systems”, but the modern logistics concept and practice is about providing cost and time effective services for non-military, mainly commercial activities. This service includes the transport of goods from one point to another, warehousing them in a suitable place, inventory, packaging, and other administrative activities such as order processing. 1.2. Understanding logistics Generally logistics is about adding “place utility” to a product meaning that, for example, a product needs to be moved from one point say Newcastle upon Tyne, UK to another point say Budapest, Hungary (Fig. 1). The product could be raw material to be processed (thus will also need material management) in a factory, or the product could be finished from the factory and to be distributed to the market for consumption. In terms of “place utility” in logistics, this is due to the fact that a buyer and a seller of the product have agreed to sell and buy the product at certain conditions that include delivery price and time. As per the agreed conditions, a transport and/or logistics service provider will be hired (by the buyer or seller depending on the sales terms) to move cargo from the seller’s premises to the buyer’s premises. When it is in transit or under logistics service, the “product” will be termed as “cargo” or “goods”. As per the agreement, the cargo may need to be stored in somewhere along the transit; this service is termed as ‘warehousing’ and depending on the necessity and type of cargo, the warehouse location, size, type etc. will be determined. The buyer may buy the product in a big lot 4 D.M.Z. Islam et al. / Research in Transportation Economics 41 (2013) 3e16 Fig. 1. Logistics: a graphical example. for once in a month or every week in a smaller lot and this decision influences the level of inventory the buying company has to maintain. It can be noted that inventory costs capital and interest. To determine the optimal size of the inventory level, there are concepts such as Just-in-time (JIT) which is a ‘pull’ technique meaning that the buyer will receive the product only when it is needed. This concept aims to have an effective inventory level of “zero”. In contrast the traditional approach is the ‘push’ technique where, the buyer will buy the product a lot and will maintain a certain level of inventory. Such an inventory approach is discussed further in a later chapter. For the transport and warehousing services, the product will be suitably packed depending on the type of product it is. From the beginning to end there will be some administrative activities such bill of lading (B/L) issued by the transport service provider. The B/L contains details of the shipment of the product and gives title of the shipment to a specified party (here the buyer). B/L is a very important document used in international trade to provide guarantees that the seller (exporter) receives payment and the buyer (importer) receives the product. From the above discussion we understand that: Logistics ¼ supply of raw materials þ materials management in a factory þ distribution to customers; 1.3. Varying terminologies and definitions Langley, Coyle, Gibson, and Novack (2008, p. 34) notes that “logistics management is the most widely used term and encompasses logistics not only in the private business sector but also in the public/government and non-profit sectors.” There is confusion about the definition of logistics due to the fact that a number of terminologies are used to describe logistics management including the following:          Logistic Management; Business Logistics Management; Integrated Logistics management; Materials Management; Physical Distribution Management; Industrial Logistics Management; Procurement and Supply; Product Flow Management; and Marketing Logistics Management. Logistics involves an integrated approach with the integration of information, transportation, inventory, warehousing, material handling, and packaging, and recently added security. There are varying definitions due to the varying scope and understanding of logistics. Mangan, Lalwani, and Butcher (2008, p. 9) states that “Logistics involves getting, in the right way, the right product, in the right quantity and right quality, in the right place at the right time, for the right customer at the right cost”. Rushton, Oxley, and Croucher (2009, p. 6) explains that “Logistics concerns the efficient transfer of goods from the source of supply through the place of manufacture to the point of consumption in a cost-effective way whilst providing an acceptable service to the customers The Charter of the Institute of Logistics and Transport (CILT) (2012) maintains that logistics should aim “to deliver exactly what the customer wants - at the right time, in the right place and at the right price”. CILT (2012) defines logistics as “the process of designing, managing and improving such supply chains, which might include purchasing, manufacturing, storage and, of course, transport.” D.M.Z. Islam et al. / Research in Transportation Economics 41 (2013) 3e16 1.4. Elements of logistics There are five key elements of logistics: transport, warehousing, inventory, packaging, and information processing (Fig. 2). Generally transport is the major component of most logistics services. The key aspects of transport management include modes of transport (such as road, rail, waterways, air, pipeline, multimodal or intermodal), transport infrastructure, geographical condition, type of delivery (such as overnight express, normal, long distance), load planning (in the cargo unit), routeing and scheduling. The important considerations of warehouse management include the location, number (linked to the warehousing policy as to central versus decentralised concept), size (again linked to the warehousing policy), type of storage (such as for refrigerated cargo, electronics, garments) and material handling equipment. The crucial characteristics of inventory management include the strategic decisions as to what to stock, how much to stock, and where to stock. Inventory management is sometimes confused with warehouse management; inventory management is about the amount of stock of the product or raw material whereas warehouse management deals with the housing aspect of this stock. All products (raw material, semi-finished, finished) need packaging. Packaging and unitisation are also important aspects of logistics. The key elements of packaging and unitisation include the type, cost, etc. that is linked to the value and the type of product. For example, for high value goods, the packaging and unitisation cost can be high whereas for the raw material the cost has to relatively lower and more affordable. 1.5. Logistics e an integrated approach An efficient and effective logistics system needs an integrated approach where all the elements of logistics have to be considered to get a balanced service level that includes transit time, reliability and above all, cost. If a company chooses a slower mode (e.g. waterways) of transport to get a lower transport cost, the company may have to bear higher inventory and warehousing costs and the transit time will be higher. Another issue to be considered is that due to the requirement of multiple handling at modal transport, reliability remains an important issue. Also another such balancing act is to choose between frequent delivery with small lots and less 5 frequent delivery with bigger lot size (e.g. of raw material). In the case of frequent with smaller lot supply will incur higher transport costs but lower inventory and warehousing costs. Thus the managers responsible for hiring transport and warehousing services have to liaison with the inventory manger to make a trade off and adopt the best policy for getting logistics services. Another issue that may need to be considered is that part of the transport chain may be unreliable, which could be due to a number of factors, such as bureaucratic border crossing formalities or loss or theft issues. 1.6. Global nature of logistics Today we are living in a truly global village. We buy many products from stores such as Tesco that receives thousands of items from all over the world, every day or week. Each item has an individual transport chain using multi-modes. When sourcing a particular product from a foreign country, the logistics manager must have knowledge of the logistics service level in that country as well as countries in transit. The Logistics Performance Index (LPI) is produced by the World Bank. The LPI for 2012 offers ranking of countries worldwide based on a survey of logistics service operators working in these countries. They survey collected feedback on the logistics “friendliness” of the countries in which they operate and those with which they trade. The LPI consists of both “qualitative and quantitative measures and helps to build profiles of logistics friendliness for these countries. It measures performance along the logistics supply chain within a country and offers two different perspectives: International and Domestic. International LPI provides qualitative evaluations of a country in six areas by its trading partners e logistics professionals working outside of the country. Domestic LPI provides both qualitative and quantitative assessments of a country by logistics professionals working inside it. It includes detailed information on the logistics environment, core logistics processes, institutions, and performance time and cost data.” 2. Logistics and transport Dr J. Fabian Meier, Institut für Transportlogistik, Technical University of Dortmund. Fig. 2. Key elements of logistics management. 6 D.M.Z. Islam et al. / Research in Transportation Economics 41 (2013) 3e16 2.1. Organisation of shipping Consider that there are a number of recipients, who need some kind of good. Furthermore, there are a number of dispatchers (e.g. warehouses or producers) who provide these goods (Fig. 3). The task is now to organise this shipping. First of all, information about possible means of transport, the costs for using different vehicles or for renting and maintaining additional warehouses/ hubs must be gathered. Once this information is available, there are a number of possible ways to organise the traffic. Important choices are:  Which dispatcher will deliver goods to which recipient (and in what quantity)?  Do we transport our goods directly from A to B or do we consolidate them somewhere else (and deconsolidate them afterwards)? Your choice must not rely solely on chance or some very general considerations, but it should be optimised in some way. Optimisation targets may be different; you could opt for minimizing cost, minimizing time (or some kind of delay), minimizing environmental impact etc. Even if you decide to optimize the overall cost, this does not mean that you ignore the other possible optimisation targets. A delivery which takes a long time may cost a lot of money, and furthermore, usually time restrictions apply. Restrictions or constraints are generally an important concept to keep in mind as normally, your aim to reduce costs is limited by things like working hours or maximum truck loads which have to be checked for every “solution” you come up with; otherwise, it is infeasible. Up to this point, the following should have been done: 1. Gather all relevant information; 2. Decide what is to be optimised; 3. Look for possible restrictions or constraints to the problem. Now a mathematical model has to be formed to accurately represent the problem. This has two major advantages: 1. The model and so the optimisation question becomes very precise. This allows the formal checking of a solution, to determine whether it is feasible or not and furthermore, brings understanding and determines whether all relevant “real” information has been included. 2. It allows the use of a computer for help. This can be generally done in two ways: a. Through giving the formula to some kind of specialized software like GAMS/Cplex or Gurobi; which “attacks” the problem with all the general mathematical methods to find good (or even optimal) solutions depending on the optimisation target. In many situations, especially where formulae are not very big, this works very well. b. By using the formula to develop a unique algorithm to “attack” the problem, usually heuristically: This means a solution is attempted to be found and improved in each step by searching for strategies from which the understanding of the problem can be derived. Giving real world knowledge and experience to the computer may be more powerful because it will consider not only 48 million variables but also a graphical structure of what is to be achieved. Many examples can be used to illustrate the general idea of heuristics, e.g. the Klinkewicz hub location method, the Savings and Sweep Algorithms or the classical transportation problem with its various algorithms. The following are important considerations for a choice of a good example:  The algorithm should be short and computable by hand for small instances in reasonable time;  The solution should be presentable in a table or graph in a human-accessible way.  It is helpful, if the strength of the algorithm can be compared to a naïve solution, other algorithm or a (known) optimal solution;  At least one of the algorithms presented should be strong enough to give near optimal solutions to the example problems. Below, a detailed description of a presentation of the transportation problem is given, comparing a naïve approach to two other algorithms. Furthermore it shows the connection between incorporating more information and getting better results. 2.2. The classical transportation problem Assume there are 3 dispatchers A1, A2, A3 (warehouses, producers) of some homogeneous good (like coal, milk, oil.) and there are 3 recipients B1, B2, B3. Furthermore it is known for each of them, their capacity/demand. Now the aim is to make a strategic plan for how much is to be delivered from which dispatcher to which recipient. This can be seen as a first step before the introduction of more details. For this aim, use a simple cost structure, calculating for every warehouse A and customer B the average cost for transporting a unit (meaning a kilogram, a litre.) from A to B. Having all the information mentioned above, Table 1 is drawn. The last row describes the demands of the three customers B1, B2 and B3, while the last column shows the capacities of the warehouses A1, A2 and A3. The problem is only solvable if the total Table 1 Classic transportation problem I. Fig. 3. Relation between hub-depots-dispatcher. A1 A2 A3 Demand B1 B2 B3 Capacity 5 9 11 19 7 9 4 13 9 3 7 15 12 21 14 D.M.Z. Islam et al. / Research in Transportation Economics 41 (2013) 3e16 capacity of all warehouses is at least the total demand of all customers. The small numbers on top right corner of the grey shaded area give the costs of shipping one unit between the respective warehouse and customer. The aim is to fill the table with numbers (i.e. specify how many units are send from each warehouse to each customer) so that the total cost is as low as possible. An example is shown in Table 2. It can be seen that 6 units are transported from warehouse A2 to customer B2 at a total price of 6$9 ¼ 54. So the total cost of this solution would be: 12$5 þ 7$11 þ 6$9 þ 7$4 þ 15$3 ¼ 263: Additionally this solution should be checked to determine whether or not this solution is feasible. What are the constraints? Each customer has to be satisfied; this means that the sum of the elements in a grey column has to be (at least) the demand written beneath it. Equally, the capacity of each warehouse must be taken into account, i.e. the sum of every grey row can be at most the capacity given at the end of that row. From the table above, it is seen that these conditions are satisfied (e.g. in the second row there is 6 þ 15  21). By drawing the table, the first step in the formulisation process is complete. This must now be transformed into a mathematical problem, which can take the following shape: 7 1. Approaches which first construct a feasible solution; 2. Improvement methods, i.e. heuristics which reduce the costs of a given solution by making small changes. For the transportation problem, only the first approach is discussed. The simplest heuristic is given by transporting as much as possible from the first warehouse A1 to the first customer B1 (in the example, this is 12 units). Then either the first warehouse is empty or the first customer is satisfied. In this way, either the first row or the first column of our table can be deleted. Now this can be repeated for the rest of the table until a feasible solution is constructed. Generally speaking this solution is relatively poor, as a large portion of the information held is ignored and cost is ignored, rather than being optimised. The second approach, the Matrix minimum method, improves on the choice of table cell. A good solution is to look for the cheapest connection (the cell with the least cost), and again transport as much as possible to fully exploit the cell with the smallest cost. As in the approach mentioned before, the row or column can then be deleted. After each deletion the table becomes smaller and this is repeated until the problem is solved. Table 3 shows the situation after 3 steps (where the strikes mean deletion): The solution is normally much better than the naïve result obtained beforehand. The general scheme followed can be described as follows; in every step try to optimize the result of this step. Methods of this kind are called greedy. Greedy methods are suitable objective function m P n P cij xij minFðxÞ ¼ i¼1 j¼1 subject to Pn j¼1 xij  ai Pn i¼1 xij  bj xij  0 (1) for i ¼ 1; .; m for j ¼ 1; .; n for all i and j ðcapacity restriction of warehouse iÞ ðrequirements=demand of customer jÞ The function F sums over all the products that were also considered in the example above (giving 263 e the terms involving zero shipped units were omitted). cij is the cost of shipping a unit from i to j while xij is the number of goods to be shipped. This cost function should be minimized. The constraints are same as those for the table; the first constraint states that no row exceeds the capacity limit whilst the second constraint means that each customer is satisfied (i.e. demand is fully met). The last constraint denotes that negative amounts cannot be delivered, i.e. units cannot be shipped from the customer back to the warehouse. For small or medium sized problems, most optimisation software provides a very good or optimal solution for a problem formulated in this way, as a mathematical optimisation model. For large problems a heuristic approach can be utilised. Generally, heuristics can be divided into two categories: for many situations. Nevertheless this greedy approach does not incorporate the whole picture, but always just one single step. Optimising every step does not necessary produce a good solution for the whole problem. Eating a chocolate fudge cake may be a good decision today, but it could be a regrettable decision later. The Vogel method for the transportation problem uses more information which makes it a stronger method, but also a more time intensive one. Assuming there is one column with costs 5, 7 and 8 and another column with costs 7, 20, and 100, the greedy method would take the 5 (because it is the lowest value). Utilising the 5 and exploiting the connection might mean that the row is deleted, i.e. the 7 is deleted from the second column. Now in order to satisfy the customer with the 7, 20, 100 column, the 20 or the 100 cost cell has to be used, which is unsatisfactory. What can be done? Table 3 Classical transportation problem III. B1 Table 2 Classic transportation problem II. B1 A1 A2 A3 Demand b 12 5 B2 B3 Capacity a 7 9 12 21 14 9 7 19 12 A1 6 7 11 13 9 4 15 7 15 3 A2 B3 Capacity a 7 9 12 9 9 11 A3 Demand b 5 B2 19 13 13 4 15 7 15 3 21 14 8 D.M.Z. Islam et al. / Research in Transportation Economics 41 (2013) 3e16 Through making a list of all the differences between the two smallest values in each row and column, the lowest cost cannot only be identified but also the lowest cost differential. If the difference is low, the column or row can be kept for later use. The method is to start at the cell with the lowest cost in the column/row with the greatest difference! In this way, very costly connections are avoided. Table 4 gives the cost differences in a separate column/row and indicates where the application of the method should start from. The emphasised cells indicate the greatest difference between the two cheapest connections and the lowest element in the row. Once this element has been identified, the method proceeds in a similar manner to those before. By incorporating more information into a heuristic solution, it usually becomes stronger, but also more complicated. Depending on the computation time restrictions and result quality required, a heuristic approach may be the best choice. 3. European Union (EU) rail freight policy with reference to logistics action plan and green corridors Dr. Paulus T Aditjandra and Thomas H Zunder, NewRail, Newcastle University. 3.1. Transport policy and EU The official EU website on transport policy summarises its legislation into a paragraph that states “transport is one of the European Union’s (EU) foremost common policies”. It is governed by Title VI (Articles 90e100) of the Treaty on the Functioning of the European Union. Since the Rome Treaty’s entry into force in 1958, this policy has been focused on removing borders between Member States and thus contributing to the free movement of individuals and of goods. The first steps after the formation of European Union were to foster economic co-operation, which has developed into a single market. An initially purely economic union has evolved into an organisation spanning many areas. Currently, the EU has the most ambitious emission reduction targets for fighting climate change in the world. Since the abolition of border controls, it is now possible for people to travel and trade freely within most of the EU. In 2009, the GDP of the EU was approximately V11.7 billion, larger than the USA. With 7% of the world’s population, the EU’s trade with the rest of the world accounts for around 20% of global exports and imports. The EU is the world’s biggest exporter and the second-biggest importer. Around two thirds of EU countries’ total trade is done with other EU countries. The United States is the EU’s most important trading partner, followed by China. 3.2. Freight transport in EU Recent estimates put the share of the logistics industry in Europe at close to 14% of GDP. Over recent years, the logistics industry has grown at a rate beyond the average growth rate of the European economies. For example, intra-EU and extra-EU trade has Table 4 Classical transportation problem IV. B1 A1 A2 A3 Demand b Diff 5 B2 B3 Capacity a Diff 7 9 12 21 14 2 6 3 9 9 4 11 19 4 13 3 3 7 15 4 risen by 55% in value since 1999. This growth has come about through European integration, liberalisation and the relatively low cost of freight transport, which has led to changes in production and trade patterns, both inside the EU and globally. In 2009, total goods transport activities in the EU-27 are estimated to have amounted to 3632 billion tkm including intra-EU air and sea transport. Individual modal shares were: road 46.6%, rail 10.0%, inland waterways 3.3% and oil pipelines 3.3%. The remaining was intra-EU maritime (including coastal) transport (the second most important) 36.8% and the intra-EU air transport only accounted for 0.1%. Fig. 4 suggests that the share of rail freight transport remained stagnant, with only a slight improvement until 2008 when it fell sharply. In contrast the share of road freight has continuously increased until 2007. Maritime transport also experienced a similar (with road) pattern of share. Henceforth, the role of EU freight transport policy is a crucial component of the planning, practice and sustainability of freight logistics. Whilst much of policy is enshrined at the national level, the Union has various methods in which a pan-European policy can be promulgated. The following are relevant here; the regulation and the decision, which have direct effect; the directive, a legislative act of the EU, which requires member states to achieve a particular result without dictating the means; and the communication, which is an opinion or recommendation which has no legal effect (Borchardt, 2010). 3.3. Timeline and key policies Before the 1990s the EU formulated little transport policy, but in the last decade of the 20th century the area starts to receive focus, in parallel with and caused by the completion of the single European market (1st January 1993), with the free movement of goods, services, people and money. The 1996 Single Market Review concluded that the reorganisation of the distribution process generated lead to logistic cost reductions between 1987 and 1992 of as much as 29%. The largest cost reductions were in transport, where firms reported up to a 50% cost reduction and the average number of days from order placement to receipt declined from 21 days to 15. Key EU freight transport policy milestones:  1992 Common Transport Policy (defining services);  1993 Single European Market e free movement of goods, services, people and money;  1993 TEN-T promoted via the TEN (defining infrastructure);  1996 “A strategy for revitalising the Community’s railways”, Introducing market forces into rail, Integration of national systems;  2001 White Paper e modal shift policy (addressing services);  2006 Review of 2001 White Paper e co-modality policy;  2007 Freight Transport Logistics Action Plan;  2011 White Paper e multimodal policy. The common transport policy from the beginning of 1990s up to 2000 was marked by two significant changes, which were the new environmental debate and the challenge of sustainable development. Whilst environmental issues such as noise, severance, visual intrusion, and pollution had been a concern of the transportation development, the new debate was broader and included the global issue of climate change, use of non-renewable resources and general quality of life. The definition of sustainable development is best summarised as “meeting the needs of present generations without jeopardizing the ability of futures generations to meet their own needs e in other words, a better quality of life for everyone, D.M.Z. Islam et al. / Research in Transportation Economics 41 (2013) 3e16 9 EU27 Performance by Mode for Freight Transport 1995 - 2010 billion tonne-kilometres 2200 2000 1800 1600 1400 1200 1000 800 600 400 200 0 1995 1996 1997 Road 1998 1999 Sea 2000 2001 2002 Rail 2003 2004 2005 Inland Waterway 2006 2007 2008 2009 Pipeline 2010 Air Fig. 4. Comparison between transport modes. Source: EC Statistical Pocketbook (2012). now and for generations to come.” (European Commission, http:// ec.europa.eu/environment/eussd/, retrieved August 2012). Post 2000, the key milestone of common transport policy was the White Paper, “European Transport Policy for 2010: Time to Decide”. One of the main messages is the recognition of the increasing demand for transport that cannot be answered by building new infrastructure, instead the transport system needs optimisation to meet the demands of both enlargement of the EU and sustainable development. The document reviews the problems derived from the growth of road transport demand including distorted competition (between different transport modes), traffic congestion, environmental pollution, public health and road accidents. The White Paper also identifies the need for integration of all modes of transport as envisioned in the Treaty of Rome. Also identified is the need for better usage and integration between sea, inland waterways, and rail. Intermodality is seen as under-utilised, particularly as this provides an opportunity to reduce both road congestion and air pollution. There were 60 measures to be taken at the EC level up to 2010; the key freight issues included:  Funding the need for renewed infrastructure against falling state investment;  Revitalising the railways;  Decoupling economic growth and transport growth;  Improving the quality of the road transport sector;  Turning intermodality into reality, with the new Marco Polo funding instrument;  Building the Trans-European Transport Network (TEN-T);  Developing short sea shipping “Motorways of the Seas”;  Standardising containers and swap bodies (to an EU norm);  Encouraging a new industry role, the “freight integrator”;  Improving road safety;  Eliminating bottlenecks;  Multimodal corridors giving priority to freight;  A policy on the effective charging for transport, fuel tax harmonisation and pooling of funds at EU level. In 2006 the EU published a mid-term review of the 2001 White Paper. Entitled ‘Keep Europe Moving: Sustainability for our continent’ (European Commission, 2006a; the freight aspect was specifically discussed in European Commission, 2006b). It was in many ways a repudiation of the ‘dirigisme’ of the earlier policies, and introduced the concept of co-modality. This is recognition that all transport needs to be sustainable and transport policy should optimize each mode separately, integrate the modes for seamless transport, and then look for modal shift in specific areas (longdistance, urban areas and congested corridors). This coincided with the enlargement of the EU into the former Warsaw Pact countries of Eastern Europe, their needs for growth over environmentalism, and also the changing political and national make up of the European Parliament and the Commission civil service. The 2011 White Paper is a very different document to the 2001. It has been written alongside the “Roadmap for moving to a competitive low carbon economy in 2050”. There are clear division lines between it and its predecessor, clause 18 states bluntly and simply “Curbing mobility is not an option.” Clause 48 begins “New mobility concepts cannot be imposed”. With regard to rail freight the message reiterates that of 1992 and onwards, that rail shall liberalise, separate operations and infrastructure and allow an open free rail freight market, allowing rail to compete with road and actively achieve modal shift. The targets for modal shift are even more ambitious than in 2001, and in line with co-modality, rail is to adopt a dominant role in long haul freight. As part of better modal choices, greater integration of the modal networks and hubs including; airports, maritime ports, dry ports, and rail terminals physically as well as virtually with support from information and communication systems, which will facilitate tracking, tracing, ebooking and e-payment. The optimisation of the performance of multimodal transport chains is aimed to achieve the following targets; 30% of road freight over 300 km should shift to other modes such as rail transport by 2030, and more than 50% by 2050, facilitated by efficient and green freight corridors. Given the failure to achieve the 2001 modal shift targets, these are ambitious targets for the sector. 10 D.M.Z. Islam et al. / Research in Transportation Economics 41 (2013) 3e16 3.4. Freight transport logistics action plan In 2007 the Commission published a Freight Transport Agenda, a top-level statement on freight. The EU had expanded further that year and the rotating Presidency of the Council of the EU passed to Germany who focussed on freight transport, and co-hosted a conference in Brussels on Freight in May. There was concerted attention on freight from the Commission and one of the leading member states and logistics nations in Europe. Co-modality is once again considered critical, and a wide range of policy initiatives are proposed; Freight Transport Logistics Action Plan (FTLAP), Communication on a freight-oriented rail network, Communication on a European Ports Policy, and the commencement of consultation on maritime space and Motorways of the Sea. The document also draws out synergies from all the individual initiatives; a focus on corridors, the promotion of innovative technologies, the simplification of transport chains and the reinforcement of quality. Freight Transport Logistics Action Plan is a focused set of actions to support the logistics industry to achieve primarily sustainable and competitive mobility, and secondarily, a cleaner environment, security of energy supply, transport safety and security. Written after extensive consultation for the mid-term review, it is a document based not in DG TREN (Directorates General Transport and Energy) but in the actors and stakeholders. The key actions are, as follows: 3.4.1. e-Freight and intelligent transport systems (ITS) The concept of e-Freight is of a paper-free, electronic flow of information associating the physical flow of goods with a paperless trail built by ICT (Information, Communication and Technology), RFID (Radio Frequency Identification Technology) and the use of the Galileo satellite positioning system. All of this could lead to the capability to view and compare multiple freight transport services online. A deployment strategy for ITS was proposed, incorporating logistics requirements: navigation systems, digital tachographs, and tolling systems. A number of obstacles were noted including insufficient standardisation of the respective information exchanges, legal requirements, data security, privacy issues and market actors’ disparate capabilities to use ICT (Zunder, Westerheim, Jorna, & Pedersen, 2012). 3.4.2. Sustainable quality and efficiency The theme continues the 2006 identification and solution of approximately 500 operational, infrastructure-related, and administrative bottlenecks. The aim is to enhance the attractiveness of logistics professions, support professional training and encourage staff mobility across borders. Additionally, it targets to establish a core set of generic indicators that would best serve the purpose of measuring and recording performance (e.g. sustainability, efficiency) in logistics chains to encourage a switch to more efficient and cleaner forms of transport and improve logistics performance. It also aims to develop a set of generic European benchmarks for intermodal terminals and to promote best practice through Short Sea Promotion Centres and a network between logistics institutes and industry initiatives. A meta-analysis of port study suggests that international collaboration is relatively limited (Pallis, Vitsounis, & De Langen, 2010). Finally, the research agenda will also include a review of the availability of and determine the requirements for data on freight transport logistics, across modes and assess improvements to the collection of statistical information. 3.4.3. Simplification of transport chains This theme aims to establish a single access point and one stop e for administrative procedures in all modes. It can thus be achieved by firstly, by making a legislative proposal on simplifying and facilitating short sea shipping towards a maritime transport space without barriers. Secondly, examine the details and added value of establishing a single transport document for all carriage of goods, irrespective of mode. One of the key aspects of pursuing such approach would be a ‘liability’ issue that works towards creating a multimodal regulatory structure at global level. This approach has been seen as starting to develop European standards to facilitate the secure integration of transport modes in the logistic chain and simplify port access requirements. Recent review on the impact of supply chain practices on green logistics performance shows that little attention was being paid by researchers (Harris, Rodrigues, Naim, & Mumford, 2010). 3.4.4. Vehicle dimensions and loading The modification of the standards for vehicle weight has conveyed an update to the 2003 proposal on Intermodal Loading Units. It aims to establish a mandate for standardising an optimal European Intermodal Loading Unit (EILU) that can be used in all surface modes. An effort to address this theme has been studying the options for a modification of the standards for vehicle weights (Robinson, Carruthers, O’Neill, Ingleton, & Grasso, 2012). Regarding load factors, a British based study demonstrates that the use of spare existing capacity would increase 38% container traffic by rail that consequently lead to a 65% rail freight traffic growth (Woodburn, 2011). 3.4.5. “Green” transport corridors for freight A corridor approach originated from the development of TransEuropean Network (TENs) leads to a need to understand how best to use these priority networks’ sustainably. Along these corridors, industry will be encouraged to rely on co-modality and on advanced technology in order to accommodate rising traffic volumes, whilst at the same time promoting environmental sustainability and energy efficiency. One of the efforts has been made to address this these was to define green transport corridors and organise cooperation between authorities and freight transport logistics within the TEN-T (Trans-European Transport Network) outline and in the Marco Polo priorities (EC incentives to project on transfer freight from road to rail or short-sea shipping routes or inland waterways) (Aditjandra, Zunder, Islam, & Vanaale, 2012). Additionally a number of EU funded projects have developed a better understanding of freight-oriented rail network and the establishment and recognition of Motorways of the Sea; and the NAIADES programme for inland waterway transport. There is a section on ‘Green Corridors’ that is discussed later. 3.4.6. Urban freight transport logistics The Agenda recognises that the lead in this area has been taken by the cities, and therefore restricted proposed actions to exchange of best practice and the development of benchmarks (Allen, Thorne, & Browne, 2007). Despite the increasing problem caused by freight traffic urban setting may have, rail freight and a sustainable urban distribution potential has been identified as having limited applicability in practice (Dinwoodie, 2006) though in theory, the operation is feasible and potentially beneficial (Motraghi & Marinov, 2012). 3.5. Towards a rail network giving priority to freight When the communication on rail freight was published in October 2007, it was a more clearly defined document than the agenda initially suggested. It also shows how the overall freight policy is intertwined with wider transport policy. EU railway policy is a strategy for the revitalisation of the railways in Europe, against a backdrop of decline, through the separation of infrastructure and D.M.Z. Islam et al. / Research in Transportation Economics 41 (2013) 3e16 operations and the opening of the market to competition. The EU used directives in this area, possibly due to the almost exclusive state ownership of rail at the beginning of the period; these were delivered in railway packages, 2001, 2004, and 2007, with varying success. The first package permitted open access for national rail services across EU. The founding is based on 1991 Railway Directive and focus on the separation of operations and infrastructure. The second package aimed to build an integrated European railway area, in particular by opening up more quickly the international rail-freight market, with a new directive on railway safety and the establishment of a European Railway Agency. The third opened up international passenger rail services from 2010 and the introduction of a certification system for locomotive drivers. The communication of 2007, “Towards a rail network giving priority to freight” notes, “As road transport steadily becomes more efficient, rail transport has to become more competitive, especially as regards quality. For logistics customers, quality means in particular competitive journey times, reliability of goods transport and capacity adapted to needs.” In response to the rejection of a proposal for the regulation of quality levels in rail freight in the third railway package, the European Commission was suggesting the status quo, a partially dedicated freight network, or a wholly dedicated parallel rail freight network, perhaps akin to that proposed by the NEWOPERA project (Castagnetti, 2008). A compromise position, viewing a dedicated network as “too large, too costly and too much of a long-term prospect” has been chosen. In order to support quality reliable international rail freight services, the Commission proposed giving priority to international freight in operation and train path allocation along defined transnational corridors. These would have regulated service quality levels and would operate rather like the dedicated high-speed networks built in Europe for passengers. The problem was they weren’t dedicated; nearly all of the routes were existing mixed-use paths where passenger trains had priority. This problem, which is one the USA is about to face in reverse (Economist, 2010), was too much for the industry and Deutsche Bahn, in its role as infrastructure manager in Germany and growing international and freight operator, came down in marked opposition, so much so that every Annual Report from 2007 to 2010 states blunt opposition to any such proposal (Deutsche Bahn, 2007). Despite the conflict between the Commission and member states, it was argued that EU rail policies in general have positive effects, which created the growth of freight market between 1995 and 2007 in Britain (98% e in tonne km), Sweden (20%) and Germany (63%) (Nash, 2011). The European Commission sent formal notices to 24 EU member states on 26 June 2008 regarding their failure to properly implement the First Railway Package legislation. In 2010 the Commission reported; “it has not been possible to improve the overall modal share of rail freight and passenger transport in line with the objectives set in the 2001 Transport White Paper. monopolistic positions still exist in many Member States both for freight and for passenger transport services.” To that end they have proposed a ‘recasting’ of the first railway package. This proposal emerged following recent studies that identified that ‘weak finance’ of many Railway Undertakings (RUs) in new Member States and low infrastructure quality are the main barrier to the development of the open access (IBM, 2011; PwC, 2009). The first railway recast should emphasise nondiscriminatory use of service facilities, transparency, finance, and political incentives to support new comers (Zunder, Islam, Mortimer, & Aditjandra 2012; Zunder, Westerheim, et al., 2012). Higher number of RUs in a country is highly associated with high rail liberalisation index (IBM, 2011). The Policy realises that the freight shipments over short and medium distances (below 300 km) will largely but not exclusively remain on trucks. There is a concern that this sort of prescriptive cut 11 off distance becomes a self-fulfilling mantra and is based on existing technical, commercial and operational models that may be subject to major change (Zunder, Islam, et al., 2012; Zunder, Westerheim, et al., 2012). Therefore suggesting that the services of other transport models (rail, waterborne transport) have to achieve efficiency, cost-effectiveness, availability, and reliability at the level (if not better) of truck service. The trucking industry also needs to achieve further improved efficiency through the development and the uptake of new engines and cleaner fuels, the use of intelligent transport systems and further measures to enhance market mechanisms (Zunder, Islam, et al., 2012; Zunder, Westerheim, et al., 2012). Over longer distances, options for road decarbonisation are limited, and freight multi-modality has to become economically and operationally attractive for shippers. Thus efficient and effective co-modality is needed. 3.6. Green corridors Following the launch in 2007 of the Freight Transport Logistics Action Plan (FTLAP) document discussed in an earlier section, the concept of ‘Green freight transport corridors’ has been introduced by the European Commission to act as a catalyst to concentrating freight traffic between major hubs over relatively long distances. The overarching objective is to develop a sustainable and competitive co-modal freight services. Whilst the suitability definition of green corridors has been explored and investigated further via European Commission funded research projects (Aditjandra et al., 2012; Psaraftis & Panagakos, 2012), the root of the examination is the development of the trans-European transport networks (TEN-T). The trans-European transport network (TEN-T) is an EU infrastructure development programme that was created following the Maastricht Treaty of 1992 (EU formulation of the Euro single currency) in response to increasing EU economic integration and to the increasing competitive pressures, which consequently demand a solid reliable supra-regional transport system (Vickerman, 1995). Before the TEN-T guideline was introduced in 1996 via Decision 1692/96/EC, the Trans-European Network (TEN) term was used to promote the interconnection and the interoperability of national networks, as well as access to such networks (Böttcher, 2006). International and intermodal links fall under the umbrella of ‘Interconnection’, all of which are aimed at facilitating the use of different nations and different modes’ network. It aims at improving the transport system’s efficiency and effective synergy. ‘Interoperability’ on the other hand is the suitability of a network for safe through traffic with respect to administrative, technical and operational preconditions so that barriers to free access are kept to a minimum. Please note that these preconditions have been taken into consideration particularly with respect to high-speed rail networks (Sichelschmidt, 1999). TENs was designed to develop an appropriate financial instrument for dealing with European Community (EC) infrastructure needs. It is therefore important to note that TENs’ coverage is including energy and telecommunication while TEN-T was designed to address the transport aspects of it including air, road, rail, inland waterways, ports, and maritime transport. The TEN-T programme now has undergone 3 phases in terms of the number EU member states involved in: TEN-T 15 (1996e1999), TEN-25 (2000e2006) and TEN-T 27 (2007e2013). TEN-T 15 included 14 priority projects, mainly rail (with more than 50% of the total investment over the 5 years period that demonstrated a preferential treatment of the railway sector). This is comprised of a network of 70,000 km of rail track (including 22,000 km of new and upgraded track for high-speed trains), 58,000 km of roads (including 15,000 km of new roads). Corridors and terminals for combined transport (i.e. combination of 2 or more transport modes 12 D.M.Z. Islam et al. / Research in Transportation Economics 41 (2013) 3e16 for freight), 267 airports of common interest and networks of inland waterways and seaports are also included. TENT-T 25 extended the project to 20 priority projects and TEN-T 27 to a new tally of 30 projects. The TEN-T 27 comprises 65,100 km motorways and 212,800 km of rail lines (including 110,458 km electrified), 42,709 km navigable inland waterways, and 70,000 km of maritime coasts and 1239 ports. The deployment of Intelligent Transport System (ITS), European Rail Traffic Managements System (ERTMS), Vessel Traffic Management Information System (VTMIS), Air Traffic Management (ATM) and Global Navigation Satellite System (GNSS) are some of the main features included in the TEN-T programme that demonstrates the Commission plans to stimulate the use of telematics e new technologies combining telecommunications and informatics e in order to facilitate an ‘intelligent’ guidance of traffic flows with the aim to improve capacity utilisation of infrastructure networks (Böttcher, 2006; Sichelschmidt, 1999). Table 5 demonstrates details of each of the TEN-T priority projects and the progress. The use of the term ‘green corridors’ has only emerged after the introduction 2007 FTLAP and simply can be recognised as TEN-T. Whilst the idea of green corridors can be associated mainly with rail transport because rail is seen as the greenest mode at least in the UK (AEA, 2010), the development of corridors approach at the later stage has taken a ‘multimodal’ approach as the way ahead from the European Transport Policy perspective. It is in fact a back to back since the term multimodal has been introduced in the 1992 Transport White Paper that described a combination of two or more transport modes for freight as also known as ‘combined transport’. In the 2011 Transport White Paper, however, multimodal approach is simply a transport operation for both freight and passengers using different modes of transport. One of the EU-funded projects looking at the ‘green corridors’ concept is currently on going (2010e2013). The SuperGreen project used the TEN-T structure to investigate priority freight corridors. Fig. 5 shows the scope of the SuperGreen project. At the time of writing, there are no final conclusions officially published from the SuperGreen project, however the initial investigation demonstrates that the priority corridor approach has also been adopted at the national level and can potentially support the connectivity of European supra-regional transport network within a sustainable manner (Aditjandra et al., 2012). 4. Principles of sustainable transportation Giuseppe Pace, Ghent University, Ghent and ISSM-CNR, Naples. 4.1. Introducing the concept Sustainable transportation is associated with the many different disciplines and fields which draw the framework of sustainable development, with the aim of redressing “the balance between economic, social and environmental priorities” (Banister, 2005, p. 3). The emerging discipline, called sustainability science, nonetheless, Table 5 TEN-T priority projects and their progress. Source: Adapted from European Commission (2005). TEN-T EU-15 TEN-T EU-25 TEN-T EU-27 Mode 1996e1999 2000e2006 (include progress) 2007e2013 (include progress) PP1 Rail e high speed (HS) NurembergeBerlin Extended 2004: rail upgrade PP2 PP3 PP4 PP5 PP6 Rail Rail Rail Rail Rail PariseBrusselseCologneeAmsteLondon MadrideBarcelonaeMontpellier PariseStrasbourgeKarlsruhe RotterdameRhineeRuhr (Betuwe line) LyoneTurineTrieste PP7 Road AthenseBulgariaeTurkey PP8 LisboneValladolid PP9 PP10 PP11 PP12 Road (extended to multimodal) Rail Air Road/rail Road/rail Ongoing: Rotterdam station Ongoing: new cross border tunnel Ongoing: new line and upgrade Completed 2007 Extended 2004: new lines, upgrade Extended 2004: new road, upgrade Ongoing: rail upgrade, new motorways Completed 2001 Completed 2001 Completed 2000 Ongoing: road and rail upgrade Ongoing: Brenner tunnel, bridge, new lines Amsterdam station Upgrade and New lines PP13 PP14 PP15 Road/sea Rail ICT PP16 ZaragozaeToulouse PP17 Rail e high capacity freight Rail e HS PP18 Inland waterways StraubingeVilshofen PP19 Rail e HS PP20 Road/rail Spain and Portugal interoperability GermanyeDenmark Fehmarn belt PP21 PP22 PP23 PP24 PP25 PP26 PP27 PP28 PP29 PP30 Multimodal Rail Rail Rail Road Rail/road Rail Rail Rail Inland waterways e HS e HS e HS e dedicated freight and tunnel CorkeDublineStranraer Milano Melpansa Airport DenmarkeSweden (Øresund) CopenhageneStockholmeHelsinki IrelandeUKeBenelux GlasgoweLiverpooleLondon Ongoing: road upgrade Completed 2009 Galileo GPS StuttgarteSalzburgeVienna Ongoing: new tunnel, new track Ongoing: upgrading motorway New Lisbon airport Road and rail upgrade (Sweden and Finland) Ongoing: development and deployment Ongoing: new long distance tunnel, new line Ongoing: new lines, upgrade and electrification Ongoing: improve navigability, new lock Ongoing: new lines Ongoing: rail-road link, upgrade, electrification Motorways of the sea (MoS) AthenseViennaeNuremberg GdanskeBratislavaeVienna Lyon/GenoaeRotterdam/Antwerp GdanskeBratislavaeVienna IrelandeUKecontinental Europe Baltic: WarsaweTallinneHelsinki BrusselseLuxembourgeStrasbourg IonianeAdriatic intermodal corridor SeineeScheldt