The future of freight transport in the UK

The question might well be posed: What is the road ahead for the UK’s road freight industry? Battered by cost increases due to the oil price, falling trade volumes and now the announcement in Alastair Darling’s 2009 budget that there is to be a regular series of further fuel tax increases, the industry is struggling.

Industry estimates are that the tax increases alone place an additional burden of over £800m on the logistics sector.

Adding to the picture of woe, the transportation sector is in the front line regarding carbon emissions and negative environmental impact, and thus attracts attention from regulators and activists alike.

How should the industry in the UK respond to the pressure? A recent BDP study of manufacturing companies in North America and Europe, involved in international trade, noted that respondents' biggest near-term priority with regard to sourcing, logistics and supply chain practices was cost-based selection of transportation modes among rail, barge and truck for domestic transport.

But reactive cost-cutting alone, and local protectionism in the areas of sourcing and transportation, will only damage the UK transport industry further in the longer term. The current crisis seems to demand a ‘slash-and-burn’ approach, focused on reducing the capital risk of running hard and expensive assets like fleets.

A more productive way forward lies in a braver and more innovative approach, one which supply chain management service providers have long been advocating for its benefits, even when times were good.

John van Wyk, CEO of Barloworld Logistics Europe explains: “Transportation, especially road transport, makes up a significant cost portion of any supply chain. So, when cost reduction is necessary, companies tend to see it as the first area for cuts. But unless this is done in the holistic context of a supply chain network plan, cutting fleet and distribution capacity can lead to service levels declining, which could lead the business into a negative spiral.”

Supply chain management companies, like Barloworld Logistics, can help companies manage their transportation costs by utilising advanced optimisation software such as CAST to redesign the holistic network infrastructure, select the best suited carriers and modes, and reallocate distribution boundaries between warehouse locations...all variables that change as fuel costs fluctuate. In the execution, they focus more on the visibility and optimal management of goods as they move across an entire road transport network. This allows the client to focus on their core business, particularly since the supply chain service provider can also manage the transportation companies – the rubber on the road – to ensure service levels continue to be met and exceeded.

“We are able to handle the end-to-end management and optimisation of the entire road transport-based distribution system,” continues van Wyk. “This means we can suggest redesigns of the system and the network itself, as well as optimising the performance of the transport fleet through integrated planning and management, for example. This kind of holistic view, and the increased visibility and management efficiencies introduced, can save companies far more in the long run than simply cutting capacity.”

Companies like Barloworld Logistics can even respond to the growing need for measurement and management of carbon emissions in an industry supply chain, offering a sophisticated software application, CAST CO2, as part of their management offering. Deployed at companies like Colgate Palmolive and Nokia, the software optimises and measures the environmental impact of a supply chain, thus enabling intelligent decisions to be taken on carbon reduction steps.

“The burning issue in the current economic environment,” concludes van Wyk, “is about survival, certainly, but it is also about sustainable businesses. Unless planning and management of the transport function takes a longer-term view of how to address the current crisis, the knock-on effects could be severe.”