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Case Study. Cargo Domizil - Intermodal less than truckload transport. European Commission

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European Commission

www.bestlog.org

Cargo Domizil - Intermodal

less than truckload transport

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If transport continues to grow at the same rate as the economy, this will become both an economic and an environmental problem. lncreasingly congested roads are as much a disadvantage to European business as they are to society at large. The bestlog project, initiated by the European Commission, will establish an exchange platform for the improvement of supply chain

management practice across Europe.

To improve logistics practice and logistics education

To raise the overall standards of practice across Europe

To set high standards for logistics education and practice

To create economic growth and job opportunities as a result

Achieve a better match between EC policy and business decisions

OBJECTIVES

European platform for sharing logistics best practice

Online directory of logistics best practice case studies

Online directory of European logistics education opportunities

Benchmarking on line for European companies

European conferences to share logistics best practice

Web forum, award directory, media directory, and more

lndustry workshops

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COMPANY FACTS

PROBLEM DESCRIPTION

Cargo Domizil - Intermodal

less than truckload transport

Cargo Domizil was launched in 1981 as a division of SBB (the Swiss railways) to execute unit load rail shipments. As the aim of the Swiss government and of the state-owned

SBB was to shift freight traffic from road to rail, SBB

developed long-haul rail freight services with collection/ distribution by truck. The business model initially failed due

to organizational and operational inefficiencies, and the operation was unprofitable.

Meanwhile, private sector transportation companies in Switzerland were affected by a change in the government’s

transport policy - specifically by a national ban on night-time

trucking (10 pm-5 am) and by relatively high per-kilometer tolls for trucks on all Swiss roads.

After its partial privatization in 1992, SBB sold Cargo Domizil to a consortium of three large and medium-sized road haulage contractors. This consortium is called Transvision and comprises Camion Transport AG, Galliker Transport AG and, Planzer Transport AG. These co-owners needed to restructure Cargo Domizil’s operations to make its „combined mode“ service competitive with road haulage services, capitalizing on the advantages of overnight rail movements and the negative image of road transport, especially in Switzerland. Cargo Domizil uses trains for long haul transport within Switzerland partly to avoid the night-time trucking ban.

The Swiss logistics service provider Cargo Domizil offers unit load shipments by combined road and rail transport. Long haul transports, usually executed via road transport, are performed by rail, offering a better level of service and cleaner transport than road-only services. The major challenge for Cargo Domizil’s management was to turn this formerly state-owned

loss-making business into a profitable

private company, and this required major restructuring. Since the shareholders of Cargo Domizil are competitors in other business sectors, coordination between the enterprises associated with the company was a major issue for the management - especially since they were working together without any complex contractual arrangements.

Company name: Cargo Domizil

Location: Berne, Switzerland

Industry/sector: Logistics Services

Company size: Medium

Employees: 1,000

Turnover: over CHF 200 millions

Services/products offered:

Unit load/part truckload shipments via combined transport modes (rail/road)

Further case related logistics figures:

Daily despatches: 10,000

Rail-side logistics depots: 11

Substituted kilometres (rail ofroad):

13 million

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Cargo Domizil offers less-than-full-truckload (LTL) shipments via combined rail/road facilities. This system is seen as unique in Europe, where LTL shipments are generally moved solely by road. Daily 24-hour deliveries of unit loads to locations across Switzerland are guaranteed by the road/rail network. The three partner companies manage 11 Cargo Domizil logistics depots between them, and all depots are at rail trackside locations. Cargo Domizil trucks collect consignments during the afternoon and take them to these rail-side depots, where they are loaded on trains, forwarded to Olten near Zurich, sorted by the SBB and sent to their destination depot overnight. (Cargo Domizil normally uses around 250 rail cars per night). In the morning, trains arrive at the destination logistics depots, where the freight is transferred back to a truck and delivered to the customer in the morning.

Besides avoiding the night-time trucking ban and expensive

road tolls, the use of rail offers significant advantages in

Switzerland’s mountainous regions, which are sometimes

difficult to reach by truck. (Switzerland built tunnels exclusively

for trains).

Thanks to the hub-and-spoke structure of Cargo Domizil’s logistics depots, the company’s drivers always operate in the same region and are familiar both with routes and individual customers – an advantage in providing courteous and friendly

service, especially in Switzerland, which has three official

languages and where customers expect to be addressed in their own mother tongue.

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In order to cut fixed costs and make Cargo Domizil profitable, the number of logistics depots had to be significantly reduced

without affecting 24-hour delivery services throughout the network. This was achieved after the Transvision consortium reorganised some of its collection/delivery routes and negotiated an agreement with the SBB Cargo division of the Swiss railways that ensures adherence to delivery times and competitive rail transport rates.

Structural changes were accompanied by a training program, as Cargo Domizil considered that its employees were the key

factor in efficient processes and on-time-deliveries.

Since the three consortium partners were also competitors and had to manage their own logistics depots, effective communication was of major importance and common IT systems needed to be implemented.

The consortium partners also needed to find practical ways to avoid inequalities in the allocation of Cargo Domizil’s profits.

Transport volumes vary within Switzerland; some regions send more goods outwards than others, while others receive more

shipments than they send, resulting in different financial flows in different areas. Adequate definitions of value had

to be agreed upon in order to ensure equal allocation of revenues.

CHALLENGES

Challenge 1: Turning around an

unprofitable state-owned entity to become a profitable

less-than-truckload service provider

Challenge 2: Implementation of a business model exploiting the advantages of rail

Challenge 3: Reducing the handling time for unit load transfers between trucks and rail wagons

Challenge 4: Designing an optimum, future-proof structure for a

rationalized logistics center network proved complex

Challenge 5: Implementing collaborative behavior within a consortium of competitors

Challenge 6: Cooperating without a complex contractual arrangement, keeping formal rules to a minimum

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The success of the restructuring of a formerly state-owned company was underpinned by the collaboration-based relstionship between the consortium partners. Only their strong commitment could have ensured Cargo Domizil’s continuing success. The partners are still working together without any detailed contractual arrangement, other than the articles of association of Cargo Domizil AG itself.

The consortium realized early on that logistics customers

preferred „green“ transport to conventional road haulage, but only when offered at the same price, so it wanted to offer rail transport services for unit loads.

The consortium wanted to gain a competitive advantage

over other logistics providers by moving goods at night when competitors could not use their trucks.

Switzerland’s extensive rail network and the partners’

local distribution operations enabled them to cover the whole of the country while reducing the number of own distribution depots.

New operating structures were particularly important in

enabling the success of the now privately-owned Cargo Domizil.

Personnel training was particularly important, given the

management and coordination challenges created by reducing the number of logistics depots.

Last but not least, the political environment in Switzerland

had a major influence on the success of the concept

of LTL rail shipments. The night-time trucking ban and high road tolls in combination with Switzerland’s highly

developed rail network contributed significantly to the

project’s success.

„After more than 20 years of Cargo

Domizil an impressive idea has

prevailed against many adversities

and is now more successful than

ever. “

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CHALLENGES

Transferables

Limitations

Country Sector Company Size

++: very high, +: high, o: neutral, -: low, --: very low

TRANSFERABILITY

The Cargo Domizil solution is transferable to a company of any size. In particular, larger companies with their own logistics infrastructure networks could easily adopt the concept of transporting unit loads by train overnight. The concept could easily be adopted, and possibly enhanced, in other countries offering similar logistics environments beyond Switzerland.

The particular political environment in Switzerland played a major role in the success of the Cargo Domizil concept. It would therefore not be easily

transferable to other countries with significantly

different transport policies or infrastructures. A further limitation is that the concept is feasible only for logistics service providers supplying less than full truck unit load services.

0 + ++

T H E B E N E F I T S

As each shipment is delivered by the same person, customers across Switzerland

enjoy friendly service from an individual sharing their own cultural background. Increased capacity utilization through consolidation of loads at depots: competitive

advantage as the concept bypasses the Swiss ban on night-time trucking Competitive advantage of green labeling

Economic

Rail is considered less CO2 emission-intensive than road freight transport

Fewer fine particulates are emitted by electrified rail transport, as energy can be •

produced with less pollution in power generation plants than in truck engines Electricity used by trains can be generated from alternative energy sources

Less energy per ton-kilometer is used by trains than by trucks

Environmental

Lower transport emissions due to use of rail

Rail freight is generally safer than road haulage; a single train handles more cargo

than a single truck, thereby reducing the risk of accidents in proportion to the tonnage carried

Specialist training programs are available for intermodal unit cargo handling

A sustainable business model secures jobs in the Swiss rail freight industry

A source of noise was removed from the roads (but shifted to the railway)

Social

SUST

AINABILITY

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PROJECT SECRETARIAT

Berlin Institute of Technology H90 - bestLog Strasse des 17. Juni 135 10623 Berlin - Germany Phone: +49-30 - 314 299 80 Fax: +49-30 - 314 787 94 E-Mail: info@bestlog.org Web: www.bestlog.org European Commission

www.bestlog.org

Markets & Strategies

Structures & Planning

Processes & Operations

Enablers & Support

Best Practice T

opics in bestLog

Customer Product Tactical Planning Network Design Reverse Procurement Transport Distribution Production Warehousing Infrastructure Information & Communication System People Resources

Thorsten, Klaas-Wissing. University of St. Gallen; Christoph, Tyssen. University of St. Gallen (2009): BestLog Good Practice Cases. Cargo Domizil - Intermodal Less than truckload transport. Published by BestLog Project. www.bestlog.org.

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