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Sustainable Transport and Reliable Supply Chains Jari Kauppila Economist F&L Working Group meeting, Paris, 2 July 2013.

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Presentation on theme: "Sustainable Transport and Reliable Supply Chains Jari Kauppila Economist F&L Working Group meeting, Paris, 2 July 2013."— Presentation transcript:

1 Sustainable Transport and Reliable Supply Chains Jari Kauppila Economist F&L Working Group meeting, Paris, 2 July 2013

2 Related work at the ITF/OECD Improving Reliability on Surface Transport Networks (ITF/OECD 2010) Managing Urban Congestion, ITF/OECD (2007) Internalisation of External Effect in European Freight Corridors Road Haulage Taxes and Charges, Summary analysis and data tables (related database available at Measurement of National Level Logistics Costs and Performance All ITF/OECD work on shipping 2

3 Related work at the ITF/OECD Statistics Brief on Global Trade and Transport e-Transport.pdf e-Transport.pdf Spending on Transport infrastructure Moving Freight with Better Trucks (Summary document) Charges for the Use of Railway Infrastructure Workshop and presentations on Information and Communications Technologies for Innovative Global Freight Transport Systems Workshop and presentations on Innovation in Road Transport: Opportunities for improving efficiency Workshop and presentations on Overcoming Border Crossing Obstacles 3

4 Key messages  Take into account all elements of sustainability  Focusing on reliability can improve sustainability of supply chains  Reliability should be incorporated into transport policy 4

5 Sustainability  Economic viability  Efficiency is key in contributing to growth  Social welfare  Safe and equitable access to jobs, education, healthcare  Impact on cost of goods  Environmental carrying capacity  Transport consumes massive amounts of finite resources  Should not surpass key environmental thresholds > limit opportunities for future generations 5 Sustainability and transport

6 Sustainability and supply chains: challenges  Economic viability  Uncertainties (Volatility in oil prices, slack demand) 6

7 Global freight volumes suggest continuous uncertainty 7 Source: International Transport Forum statistics

8 Global air freight as a lead indicator 8 Source: International Transport Forum statistics

9 Supply chains and sustainability challenges  Economic viability  Uncertainties (Volatility in oil prices, slack demand)  Congestion 9

10 10 Road Congestion  Continued dependency on road freight  Options for shifting to other modes limited  Infrastructure investments necessary but not sufficient  Significant impact on efficiency  Unmanaged road capacity no longer an option  Identify & target strategic bottlenecks  Regional planning key in port-hinterland networks  Focus on managing networks for reliability, users’ needs

11 Supply Chains and Sustainability Challenges  Economic viability  Uncertainties (Volatility in oil prices, slack demand)  Congestion  Social welfare  Supply chain contribution to cost of goods  Impacts on safety 11

12 Safety Road safety  Around 1.3 million people die on roads every year  million injured  Truck involvement  10-25% in OECD countries  Up to 70% in developing economies  Multiple causes, including speed, non-respect of traffic laws, over-loading and equipment failure  Huge cost for society and impact for well-being

13 Supply chains and sustainability challenges  Economic viability  Uncertainties (Volatility in oil prices, slack demand)  Congestion  Social welfare  Supply chain contribution to cost of goods  Impacts on safety  Environmental carrying capacity  Energy use/GHG and air pollution (land and sea) 13

14 14 Air pollution  Transport key contributor to the overall air pollution  Control strategies are known but implementation lagging in non-OECD countries  Need to address concentration of air pollutants in port cities and port areas

15 Responses  Regulatory  E.g. mode-specific emission and energy efficiency agreements and standards  Reorganization of supply chains  Shifts in production composition  Relocating production (especially for low value goods where transport component is large)  Operational  Slow steaming 15

16 16 Supply chains are slowing down “There is this big, ugly thing in the middle of the supply chain slowing down” –Ron Widdows, CEO Rickmers Holdings

17 Supply chains are slowing down - impacts  Logistics business with inability to deliver goods on time  Inventory levels affected – more stocks are held in compensation for uncertainties  Companies need to adapt their operations either through the way they operate or building in buffer stocks 17

18 18 Reliability carries a premium “We like speed but spend most of our time making the supply chain predictable” –Jeff Langenfeld, VP, International Logistics, Walmart

19 Reliability carries an premium  Reliability may matter more than speed  Cost of unreliability rival those of congestion  Users often face delays at interfaces  Reliable but slow can be also greener 19

20 Shift in policy focus 20 Travel time Current focus in reducing average travel time Future focus in reducing also variability

21 Choosing the low-hanging fruit  A key policy challenge to create incentive structures that encourage cost-effective solutions  Improvements can be delivered by both users and network providers 21

22 Transport is a component of process speed 22 McKinnon et al (2009).  Easier to pay someone to move goods faster than to change the procedures within the company “Own company actions” the most important source of delays

23 PIMP your transport policy  P rovision: Increase physical capacity either through supplying extra capacity or improving the quality of existing infrastructure 23

24 Provision  Physical growth through new, expanded or upgraded facilities (mostly bottleneck removal)  Higher network standards can deliver higher reliability  E.g. long-life pavements reducing need for maintenance  Providing additional capacity in infrastructure has limited remaining scope in traditional corridors  Time consuming, costly and politically difficult 24

25 PIMP your transport policy  P rovision: Increase physical capacity either through supplying extra capacity or improving the quality of existing infrastructure  I nformation: Informing users enabling them to mitigate the adverse effects of poor predictability 25

26 Information  Monitoring reliability is a policy signal and needed to inform policy  Diverge information is needed for different users 1.Government to design cost effective policies 2.Network managers to enhance service provision 3.Users (carriers) to adapt behaviour accordingly or to mitigate adverse effects of poor reliability 4.Logistics managers handling the total trip not just part of the trip (supply chain) 26

27 “Fluidity index” by Transport Canada 27 Source: Transport Canada – Economic Analysis & Research Evidence-based information leads to greater accountability and transparency in the supply chain and will benefit all gateway users

28 PIMP your transport policy  P rovision: Increase physical capacity either through supplying extra capacity or improving the quality of existing infrastructure  I nformation: Informing users enabling them to mitigate the adverse effects of poor reliability  M anage: Better management of existing infrastructure 28

29 29 Managing existing infrastructure “Before building new infrastructure, we need to make sure the existing works as it was meant” – Catharina Elmsäter-Svärd, Minister of Infrastructure, Sweden

30 Managing existing infrastructure  Pro-active management  Active management  Government can have a facilitating role  Managing interfaces  Ports and hinterland connections  Borders  Network providers  Organizational interfaces 30

31 PIMP your transport policy  P rovision: Increase physical capacity either through supplying extra capacity or improving the quality of existing infrastructure  I nformation: Informing users enabling them to mitigate the adverse effects of poor reliability  M anage: Better management of existing infrastructure  P rice: Charging directly for reliability to achieve more efficient levels of reliability 31

32 Price-reliability spectrum, with circle size illustrating traffic volume (USA) 32 Source: Derived from The Tioga Group (2003).

33 Conclusions  Take into account all elements of sustainability  Focusing on reliability can improve sustainability of supply chains  Improves efficiency  Reduces congestion, cost of goods and environmental footprint  Focus on interfaces and better management  Governments may have a facilitation role  Enhanced interface coordination and corridor management  Provide information for all users 33

34 Future and on-going work at the ITF/OECD  Workshop on Supply Chain Resilience  APEC Supply Chain Resilience Workshop, Bali, July 2013  Follow-up early 2014, jointly with APEC  Measurement of national-level logistics costs and performance (two post-docs)  Supply chain performance  ways to better measure and benchmark their supply chain performance (APEC priority)  Working Group on Infrastructure Adaptation to Extreme Weather and Climate Change (on-going) 34

35 Thank you Jari Kauppila T +33 (0) E Postal address 2 rue Andre Pascal Paris Cedex 16


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