An initial framework for implementing a modal shift in a fast moving consumer goods supply chain in Western Europe

ABSTRACT The TransportNET is a network composed by eight leading University Groups involved in Transport Research and high-level Education, funded by the European Union under the Sixth Framework Marie Curie Actions Programme. Set up in 2003, TransportNET has as its main purpose the co-operation in the field of transportation research and research training. In this context, the following abstract is the result of a case study developed during this two-year Early-Stage Training (EST). The obtained results, as the present paper, represent the final output of some fundamental elements during TransportNET project. The acquisition of high level academic knowledge, the possibility of interaction with members of the industry and the opportunity to work in a group are components that enabled for a complete and interdisciplinary a learning process. Road Freight transport in Europe is growing at an unsustainable rate and consequently, is posing serious problems regarding environment, congestion and road safety. Despite the efforts done by the European Commission to support intermodal transport, the carriage of goods by truck is still a prevailing trend due to its inherent flexibility, high reliability and relatively low prices, up to now. Nevertheless, current oil price volatility and the increase of transportation-related externalities are boosting public awareness on the fact that all-road solutions will not be sustainable for the decades to come. In this paper, the shifting from a dominantly road-based FMCG supply chain distribution to an intermodal solution is studied. An initial framework is presented in which the concept of “smart logistic hubs” is introduced. The challenge of this modal shift is not only about meeting current service level requirements (such as just-in-time deliveries), but also finding solutions to overcome important weaknesses of intermodal transport, such as reliability issues, longer lead-times and the need for higher inventory levels. Several studies showed that when economies of scale and distances are large enough, costs of intermodal transport, in some of the biggest freight corridors in Europe, are lower than all-road solutions. The network of “smart logistic hubs” focuses on optimizing and shifting freight from road, involving the co-location and integration of warehousing services of several companies. Furthermore, it would employ the concept of floating stock, implying a reduction of warehouse-related costs by replacing a part of the warehouse-held inventory by inventory in a “transport pipeline”. To materialize this shift a network of “smart logistic hubs” is introduced. This initial framework was applied to a large FMCG company active in Western-Europe (PG therefore in some corridors the freight volume is high enough to apply the concept of “smart logistic hubs” to this company alone. However, better results can be obtained (as it was already mentioned in previous studies) with the selection of the right partners or under the umbrella of a logistics provider, allowing the consolidation and balance of flows and additionally, increasing their frequency. Keywords: TransportNET, Transport Research, Supply Chain Management, Smart Logistic Hubs, Intermodal Transport, Fast Moving Consumer Goods