Improving the efficiency of UK freight movements: the ITC interim report

The challenges facing freight and logistics in the UK

The Occasion

The ITC commissioned in 2013 a research work stream to investigate the efficiency of freight movements in the UK: an issue of crucial importance to the UK economy. This emerged from our recognition that the freight and logistics industry faces significant pressure from cost increases, environmental legislation and rapid changes in global connectivity patterns. In order to understand the existing situation an interim report was compiled to review current evidence and identify where the main challenges lie. To launch this report the ITC held an evening of discussion and debate to explore the issues raised and identify where further research is needed. See full report here: Improving the Efficiency of Freight Movements.

The event took place on 16^th July 2014 and was chaired by Nicholas Finney OBE, an ITC Commissioner and a former Director of the British Ports Federation. The findings of the report were introduced by lead author Nick Gazzard, Chief Executive of Incept, and responses were offered from a range of experts including Philip Roe, Managing Director of Innovation, Strategy and Business at DHL Supply Chain; Perry Glading, Chief Operating Officer at Forth Ports; and Alan Braithwaite, Visiting Professor at Cranfield University School of Management.

ITC Commissioner Nicholas Finney chairing the launch of the freight efficiency report and discussion

The guest speakers focused on a number of key issues:

Nick Gazzard introduced the ITC interim report and its key findings. He noted that the report focused on three key issues: the need to reduce empty container movements, the impact of large container shipping on port-centric distribution, and the potential for more efficient urban freight distribution practices. The research team reviewed more than 200 papers and articles, as well as interviewing many leading academics and stakeholders. It was clear, he reported, that freight and logistics costs have a significant impact on national output. However, unreliable data means that currently the precise impacts are difficult to measure. The research found that the UK logistics industry is undergoing rapid and significant change due to an increase in online purchases, re-shoring, the impact of higher fuel prices, and the trend towards ever-larger container shipping. The imbalance of UK imports and exports also resulted in a high level of empty container movements. In response, the report called for further case studies to explore solutions, and for a workshop to agree better data collection.

Nick Gazzard of Incept discussing his thoughts on freight efficiency

Phil Roe responded by looking at trends in urban logistics. He noted that DHL’s key focus today is on safety, efficiency and customer service. Given the small margins in the industry maintaining a good reputation is of critical importance, and DHL was proud to be making progress in all these areas. He added that online purchases were presenting new challenges, and that urban consumers behave differently to others, noting particularly their preference for ‘click and collect’ services. One development was the use of new urban consolidation centres, such as at Camden, which had helped to generate a 60% reduction in delivery movements and a 65% reduction in carbon emissions. In conclusion, he suggested that the future focus would be on safer, cleaner and quieter deliveries, that we would see more people working in urban logistics, and also that there was a need for greater collaboration across the industry.

Perry Glading focused on developments in the Ports sector. He explained that port-centric distribution had been in the making for many years, and currently the focus was on holding cargo imports for wider distribution: a challenge due to the high numbers of container ships arriving together. One trend in UK Ports was towards the export of waste for electricity generation elsewhere, to avoid UK landfill taxes. This was now the UK’s largest export movement and is helping to fill containers otherwise empty due to the imbalance of UK imports and exports. He noted that planning authorities and LEPs need to work more closely with the Ports to ensure more efficient practices. Endorsing the findings from the report, Mr Glading suggested that it would be important to look at the nature of current trade imbalances.

Professor Alan Braithwaite provided a response, welcoming the report and agreeing that due to the fragmentation of the freight industry good data was in short supply. He added that freight was a very adaptive industry and would continue to meet challenges that it faced. However, he added that freight doesn’t currently pay for its real externalities, noting that 36% of road occupancy was now attributable to vans and lorries. Developing a better framework for understanding these issues would be important, he added.

The issues raised by the speakers provoked a lively discussion lead by our evening’s chair and panel of speakers

A number of themes were raised in the subsequent discussion. These included the crucial role that technology can play in improving efficiency and optimizing the capacity of our transport networks. Some of the key problems raised were the need for increased data sharing and agreement on measurements in order to improve the potential of new software to assist efficient freight movements. We also need to better understand the real costs and externalities of freight movements, taking into account a wider range of factors when planning logistics, which can contribute to better investment decisions in the industry. The question arose about how we can address the congestion that freight causes on our road networks, and whether this can be solved through road pricing schemes that encourage lower usage at peak time and make better use of existing capacity. It was also made clear that we should consider the role that air freight plays in UK logistics, and its links with road and rail that could absorb the predicted increase in air freight volume. With the freight industry being very adaptive, delegates were positive about how new initiatives such as electric vehicles and consumer software have the potential to transform the sector and meet the challenges ahead.