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Collaboration & innovative systems keys to success

Collaboration, innovative systems and shared resources can lead to better utilisation of short sea shipping and lead to increased intermodality. In a study by Johan Woxenius, Zeeshan Raza and Lighthouse postdoctor Anastasia Christodoulou, all at the School of Business, Economics and Law at the University of Gothenburg, the operation of RoRo shipping services in Northern Europe is examined. The findings were presented in a recent conference in Mombasa, Kenya.
From the conference paper:
(Text by Lighthouse)
“Due to negative externalities related to unimodal road haulage, the promotion of short sea shipping, SSS, has been an important part of the political agenda of the European Union since decades. Regardless of the multiple initiatives taken by the authorities to increase the use of SSS, unimodal road haulage still accounts for nearly 50% of total freight transport by volume in the European Union. The success of SSS option up to a large extent is dependent on the seamless integration of individual activities and services offered by different agents or stakeholders involved in a multimodal transport chain.

In this paper, through an in-depth case study, the role of a shipper (cargo owner) to integrate multiple traffic modes into a seamless intermodal transport chain and the drivers (enablers) for such integration are explored. Interviews, secondary data and existing literature are the main data sources for this case study.

Innovative system            
We found that Stora Enso, a leading forest-products producer employs an innovative intermodal logistics system for the transport of a huge volume of its products. Instead of relying on third party logistics providers, Stora Enso has designed the logistics system and purchased rail transport of its cargo from Swedish mills to Port of Gothenburg and chartered RoRo vessels to cover the long leg of the journeys. By chartering the RoRo vessels, Stora Enso saves the capital costs, and can release the vessels if any unexpected event such as a decline in its product demand occurs. In addition, the usage of the SECU (Stora Enso Container Unit), with the capacity to load 80 tons of cargo, reduces the total transport and warehousing costs. We believe that these innovative strategies have provided the company with a significant competitive advantage in the market by reducing per-unit cost of its products and enhancing the overall system efficiency.

Stora Enso does not utilise 100% capacity for its own cargo transport on board the chartered vessels. Thus, to sale the extra freight capacity to third parties and to manage the operations of its chartered vessels, Stora Enso formed a strategic cooperation with SOL. As a result of this cooperation, in 2017 the utilisation rate on Stora Enso´s Gothenburg-Zeebrügge RoRo service route reached 95% in both directions, although many northbound SECUs are empty. This high load factor is rare for a RoRo service, as SOL sold nearly 100.000 units to third parties and by the use of stand-by SECUs. Although Stora Enso is the charterer of the vessels but for priority is usually given to third party forwarders, which helps to sustain these third party customers. This finding reflects that by adopting a unique management approach and by developing cooperation with SOL, the shipper Stora Enso efficiently transport its own cargo as well as lowers its costs by selling the capacity to third parties on board its RoRo vessels, eventually leading to an increased integration of RoRo into a multimodal transport chain.

Expensive cargo handling
Our findings are consistent with Ng et al., who emphasised that high cargo-handling cost in ports is amongst the top barriers to enhancing the integration of RoRo services into intermodal transport chains. In our study we found that port costs account for nearly 60% of Stora Enso´s total shipment costs. We believe that a reduction in port costs could make intermodal RoRo services cheaper compared to unimodal road haulage, and thus may increase the competitiveness of this mode.

We believe that the results of this paper bring new insights for various actors involved in a transport chain. Ship operators and large shippers might realise the importance of co-operation and shared planning with other agents of a transport chain. Intermodal integration between different traffic modes or strategic collaboration between cargo owners, ship operators, and forwarding agents might enhance the system efficiency, reduce lead times, emissions and costs and generate additional revenues for all the collaborating parties. Large shippers especially in the forest industry may reconsider their logistics and management strategies, and may benefit by commencing their own unique transport network following the case of Stora Enso as presented in this paper. 

Based on the findings of this paper, we suggest that to enhance the integration of SSS into intermodal transport chains, policy makers should draft policies considering shippers´ needs and encourage innovations in the sector as innovations may in return reduce the unnecessary costs involved (e.g. port costs). In addition, to encourage the use of intermodal transport over unimodal road haulage, behavioural change campaigns targeting all the stakeholders of a transport chain should also be a part of future policies, as environmental sustainability is dependent not only on technological change but also on behavioural change.”

The full bibliographic data on the conference paper can be found here: https://gup.ub.gu.se/publication/270865

Text by: Lighthouse
Please contact Johan Woxenius (johan.woxenius@gu.se) for a full text copy.​

Published: Fri 19 Oct 2018.