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Freight Transport Association represents the transport interests of companies moving goods by road, rail, sea and air. FTA members operate more than half the UKs heavy goods vehicles. In addition they consign over 90 per cent of the freight moved by rail and over 70 per cent of sea and air freight. You can nd more information at www.fta.co.uk, follow us on twitter.com/newsfromfta and join us on facebook.com/ftafb
In association with We are again delighted to be supporting FTA in the production of the annual Logistics Report. The transport industry is very much in the public mind both in relation to developing the right infrastructure for the UK economy and facilitating economic growth per se. The report provides stakeholders with an informative and important contribution to facilitate future planning and decision making.
Introduction
Welcome to the Logistics Report 2012, the annual review of logistics challenges, successes and progress over the last 12 months. The report is produced by FTA in association with PwC and brings together research and analysis from both organisations. Using independent and in-house data, it presents a unique picture of a dynamic and responsible industry which has:
delivered customer demands for ever higher service levels at ever lower cost contributed signicantly towards industry and Government reducing their impact on the environment
and meeting emission targets
achieved the safest ever working environment for our employees and the general public
Following a prolonged period of downturn in the economy, and with forecasters telling us there is little prospect of signicant growth in the coming year, we continue to face tough times. Volatility and uncertainty in world markets, especially for our trading partners in Europe, makes for a cautious approach. As the UK looks to do business with emerging, faster growing economies, logistics needs to make its voice heard on the world stage and to spread best practice at a global level. I am condent that the resilience and talent for innovation of UK logistics will enable us to spearhead any recovery and respond to future growth. But success is not just about the bottom line. In difcult times, logistics has maintained its commitment to key principles, ensuring improvements in the safety of its operations and making them less environmentally damaging. Maintaining this progress and achieving recognition for what we do are important goals for the next year. I am immensely proud of the achievements of our industry; we are responsive to changing customer demands, innovative when opportunities arise and accurate when the task is complex. Logistics is the fundamental conduit for future growth. Without world class logistics, the UK would stand still. The Logistics Report 2012 sets out how logistics got the job done in 2011. We hope that you nd this appraisal insightful and useful.
Contents
Introduction The logistics dashboard
Chapter 1 3
Economy
Chapter 2
10
24
34
46
54
64
Chapter 1
KPI ROAd trANSpOrt iNdUStry 1 2 3 4 5 6 7 8 9 10 Reported prot margin of top 100 road hauliers Number of goods vehicle operator licences Population of hgvs licensed Population of vans licensed Population of hgv trailers (based on number tested) Hgv registrations Van registrations Number of hgv drivers in employment in transport industries (thousands) Claimant count (hgv drivers for December) Hgvs laid up (SORN)
2008
2009
2010
2011
Page ref
4%
21 15 15
SAFEty 11 12 13 14 15 16 17 Hgv motor vehicle test pass rate initial (>3.5tonnes gvw) Van test pass rate initial (Class 7) Hgv roadside encounter prohibition rate percentage roadworthiness Hgv roadside encounter failure rate percentage drivers hours and tacho Hgv roadside encounter failure rate percentage overloading RIDDOR reportable workplace accidents for transport Road casualties linked to hgvs (number killed or seriously injured) 68% 51% 33% 17% 31% 21,905 1,712 73% 50% 32% 15% 38% 19,222 1,439 75% 51% 30% 17% 58% 16,810 1,379 38 36 36
1 Euro Area is the ofcial term for the group of countries that have adopted the Euro as their single currency.
KPI EFFiciENcy 18 19 20 21 22 23 Percentage of hgvs empty running Percentage of inland freight moved by rail (billion net tonne kilometres) Lading factor percentage (by weight) for hgvs (>3.5 tonnes gvw) Hgv fuel consumption (mpg) (articulated vehicles) Use of alternative fuels in hgvs Average hgv payload capacity (tonnes)
2008
2009
2010
2011
Page ref
29% 9%
2
39 17 39 39
TrAFFic FlOWS 24 25 26 27 28 29 30 31 32 33 34 35 Containers handled by major UK ports (thousand TEUs) Freight handled by air (tonnes) Goods moved by hgvs (>3.5 tonnes gvw) (billion tonne kilometres) Van kilometres (billion vehicle kilometres) Cabotage within the UK (million tonne kilometres) Goods moved by rail (billion tonne kilometres) Goods moved by domestic intermodal rail (billion tonne kilometres) Channel Tunnel rail freight volumes (tonnes) Number of rail freight train movements Percentage penetration of cross Channel market by UK hgvs Hgv movements to mainland Europe (unaccompanied trailers only) Hgv movements to mainland Europe (all powered vehicles) 8,714 2,282,153 146 68.1 1,712 21.1 5.3 1,239,445 316,684 19% 709,000 2,060,000 7,373 2,047,861 125 66.6 1,231 19.2 5.3 1,181,089 278,431 20% 611,000 1,764,000 8,222 2,324,822 139 67.2 1,224 18.6 5.6 1,128,079 265,127 21% 673,000 1,794,000 20% 660,000 1,812,000 16 16 21.0 6.2 1,324,673 17 17 16 16
EcONOMic iNdicAtOrS UK economic activity 36 37 38 GDP (Q4 annual percentage change) Volume of goods exported to the EU (annual percentage change) Volume of goods exported to the rest of the world (annual percentage change) Volume of goods imported from the EU (annual percentage change) Volume of goods imported from the rest of the world (annual percentage change) Retail Prices Index (annual ination in December) Consumer Prices Index (annual ination in December) /$ exchange rate (average for December) /e exchange rate (average for December) Wage settlements (annual change in basic pay) Total hgv operating costs (annual change for 44t gvw artic) Bulk diesel (average pence per litre in December ex VAT) Gas oil (average pence per litre in December ex VAT) Rotterdam diesel (average per tonne in December) Brent blend (dated) (average per barrel in December) Jet fuel (Rotterdam kerosene) (average per tonne in December) Rotterdam gas oil (average per tonne in December) -5.4% -2.5% +7.1% -0.8% -15.9% -10.9% 1.7% +10.9% +15.8% 0.7% +4.1% +10.5% 14 16 16 UK exports
UK ination and currency 41 42 43 44 Costs 45 46 Fuel 47 48 49 50 51 52 82.35 39.01 $479.78 $40.26 $482.64 $457.73 89.99 44.05 $624.50 $74.52 $663.11 $610.95 103.30 55.11 $797.65 $91.78 $831.09 $761.87 112.05 64.92 $948.10 $108.19 $987.35 $926.87 19 19 19 19 19 19 +2.7% -1.4% +0.1% +5.4% +2.1% +7.0% +2.6% +4.0% 20 19 0.9% 3.1% $1.4854 e1.1070 2.4% 2.9% $1.6242 e1.1115 4.8% 3.7% $1.5588 e1.1791 4.8% 4.2% $1.5614 e1.1849 16 20
Figures are included up to 2011 only. There is a delay of up to one year in the release of many ofcial statistics.
2 FTA estimate
Chapter 1
Economy
Economy
2011 was widely expected to be the year when the economic tide nally turned. But while there were many indications of improvement, continuing uncertainty both at home and abroad meant that 2011 did not deliver the kind of recovery logistics had been hoping for. The global economy
The past three years have seen the global economy recovering from a nancial crisis. The co-ordinated worldwide response in 2009 is credited with helping to stabilise the economy at that time. However, the escalating Euro Area crisis, and continued weak growth in other advanced economies, has meant that forecast levels of growth for the world economy in 2012 have been pared back. A year ago, growth of 4.2 per cent was anticipated. Most recent forecasts put 2012 growth at 3.5 per cent.1 PwC expects the US economy to grow at 2 per cent next year2, below its 200207 trend rate of 2.6 per cent. Growth is also expected to be signicantly below trend rate in China, India and many emerging economies, while it is anticipated that there will be a mild recession in the Euro Area in the rst half of the year. The weakness of the Euro Area economies is the most signicant reason for the current world economic slowdown being greater and more prolonged. Recent agreement among Euro Area leaders to move to a stronger economic union, provide additional support to weaker economies and introduce new measures to support bank lending, have yet to restore the condence of nancial markets in the ability of some Euro Area governments to repay their debts. PwCs 15th Global CEO Survey results reect the drop in wider business condence. In 2010, chief executives in logistics were far more upbeat than the overall sample, with 60 per cent very condent of revenue growth over the next 12 months. The percentage dropped sharply in 2011, with only 36 per cent of logistics CEOs feeling very condent (graph 1.1). Graph 1.1 Logistics CEOs condence levels
How condent are you about your companys prospects for revenue growth over the next 12 months? 100 90 Percentage of respondents 80 70 60 50 40 30 20 10 0 2008 2009 2010 2011 2012 Total sample
50 48 25 31 21 40 36 60
1 National Institute Economic Review, National Institute of Economic and Social Research 2 Economic Views: Global, PwC, December 2011
44
Economy
13
Over-regulation
Inflation
This lack of condence, and a sense that European policy makers are muddling their way through, breeds volatility in the markets and causes households and businesses to delay investment and expenditure decisions until they are more certain about the future. These factors hold back economic growth and are a particular cause for concern for CEOs in logistics, who ranked the uncertainty and volatility of economic growth as the biggest threat to business prospects in PwCs most recent Global CEO Survey (graph 1.2).
the US Dollar since the second quarter of 2011. This is detrimental for the global economy, as the Euro Area will not contribute to global growth during 2012, and is particularly adverse for countries that export to it. However, it is not all bad news. PwCs Global Outlook for 2012 (gure 1.1) predicts that signicant business and trade opportunities will arise in emerging markets for European businesses (even at below trend levels of economic growth). Slower growth will also remove upward pressure on world oil prices. Having risen from $79 per barrel in 2010 to $109 per barrel in 2011, as a result of supply demand balances and the Libyan crisis, prices are expected to remain broadly stable at $111 per
In the past, recovering from a downturn was a more predictable process; businesses could look forward to studying the trends and the competition, and planning how to respond.Those days are long gone.Three years into the nancial crisis, uncertainty and volatility have become the baseline expectation
Coolin Desai Logistics Industry Leader, PwC UK
14
Economy
KEY OPPORTUNITIES
Emerging market economic growth Affluent consumers in developing economies Stable oil prices Trade opportunities in China, India, South Korea and other stable emerging economies A Eurozone break-up Heightened market volatility Policy uncertainty Capital outflow from risky emerging economies and vulnerable European countries
4 2 0 Year-on-year growth 2 4 6 8 2007 Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1
KEY THREATS
Strong recovery
Main scenario
Double dip
barrel in 2012. However, signicant risks are attached to this forecast. In particular, if tensions with Iran intensify, there could be a large temporary spike in the oil price.
domestic economy shrank by 0.5 per cent over the year3. A double dip recession is not ruled out but PwC and most forecasters anticipate that the economy will be broadly at in 2012. Although business investment increased in 2011, growth was subdued at 1.3 per cent per annum; this was from a very low base following falls of 13 per cent in 2009 and 2 per cent in 20104. Business investment is expected to fall in 2012, as a result of weak prospects for domestic and foreign demand. Most UK exports remain heavily focused on slow growing economies in Europe (57 per cent of total UK exports in 2009) and North America (16 per cent), with only about 7 per cent of exports going to faster growing economies. Despite this, PwCs main forecast is for very modest growth in the UK economy over the next year, although there will be many obstacles to negotiate along what is likely to be a long and bumpy road to recovery.
UK economy
In 2011, the UK economic recovery became more sluggish, growing by 0.7 per cent, less than half the rate of 2010. Growth was strongest in the rst half of 2011 but later fell away, with the result that the economy shrank by 0.3 per cent in the nal quarter (graph 1.3). This weak growth over the year as a whole was upheld by a strong export performance; the latest trade data suggests that export volumes expanded by 4.3 per cent in the last three months of the year compared to a year earlier. However, domestic demand was disappointing, as consumer spending reduced, especially over the Christmas period; the UK
To achieve sustainable growth in the medium to long-term, the economy has to become more driven by investment and exports, while allowing the burdens of both Government and consumer debt to subside. Failing to rebalance alongside debt reduction would leave the economy struggling to grow
John Cridland Director General, CBI
3&4 National Institute Economic Review: National Institute of Economic and Social Research
Economy
15
Graph 1.4 Number of goods vehicle operator licences in Great Britain 20002010
Economic downturn leads to an acceleration of long-term trend of reducing numbers of transport businesses 120,000 Number of goods vehicle operator licences
100,000
80,000
60,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: Trafc Commissioners Annual Reports Note: gures are for tax years, eg 2010 gures relate to April 2010 to March 2011
UK logistics market
Logistics faced a particularly challenging business environment in 2011, with businesses having to contend with weak levels of commercial activity as the economy saw only meagre growth after the recession, and rapidly rising fuel prices. The recession resulted in a sharp reduction in the number of businesses operating hgvs as measured by goods vehicle operator licences (Logistics Dashboard Indicator LDI 2). Numbers of operator licences were already falling as a result of business consolidation, and the sluggish state of the economy has accelerated this process (graph 1.4). The number of commercial vehicles in use has shown a similar pattern, with falls in the number of hgvs (graph 1.5) and trailers (LDI 3 and 5).
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Business volumes
In FTAs 2011 Logistics Industry Survey, members reported that business condence within the domestic road freight sector remained comparatively weak, with outturn levels of activity for 2011 well below those anticipated at the end of 2010, and no improvement in market conditions expected in 2012 (graph 1.6). The subdued market for domestic road freight is reected in the principal activity measure for hgvs (goods moved), and vans (vehicle kilometres). On these measures, work done in 2010 (graph 1.7), whilst up on 2009, was below pre-recession levels in 2007 (LDI 26 and 27).
Sources: Table VEH103 Road Freight Statistics 2010 and Transport Statistics Great Britain 2011 Licensed vehicles by tax class Great Britain (goods vehicles only)
Within logistics, there are wide variations in business optimism. Operators involved in international freight movement express widespread condence that freight volumes will rise during 2012. For retail and manufacturing, expectations of growth are more muted, whilst for wholesale, construction and public authorities, a contraction in business
2010
16
Economy
Expectation
2005
2006
2007
2008
2009
2010
2011
Sources: FTA Quarterly Transport Activity Survey FTA Logistics Industry Survey 2010/11 FTA Logistics Industry Survey 2011/12
2012
120
Source: Table RFS0109 Vehicle kilometres by vehicle type, annual 2000-2010 Road Freight Statistics 2010
volumes is expected. When taken together, overall levels of business sentiment reect wider economic expectations that domestic demand may contract further in 2012, with any overall economic growth coming from net trade growth, as was the case in 2011 (graph 1.8). The scale of the sovereign debt crisis in the Euro Area has created a similarly muted picture for international road freight movements. At the end of 2010, businesses were expecting to see strong trade growth with the Euro Area, with the extent of growth much more widespread than domestic markets continuing a trend evident in 2010. In the event, growth in 2011 was weaker in Euro Area countries than it was for domestic markets. Accompanied hgv activity to mainland Europe rose by just 1 per cent in 2011 (LDI 35) and remains 15 per cent down on its pre-recession peak of 2007. Unaccompanied trailer movements fell in 2011 by 2 per cent (LDI 34) and are 16 per cent down on their pre-recession peak. The extent of freight growth in 2012 for Euro Area markets is expected to be broadly in line with freight activity within the UK (graph 1.9). Optimism among businesses involved in international export movements beyond the Euro Area is generally much stronger. Although there is signicant variation in the extent of growth between trade lanes, the overall picture is one of exporters benetting from Sterlings relative weakness against the US Dollar, which makes UK manufactured goods more price competitive. Export
60 50 Percentage balance of respondents 40 30 20 10 0 10 20 30 40 Agriculture Wholesale Retail Manufacturing Construction Utilities Distribution, haulage Public authority
Economy
17
volumes to countries outside the EU rose by 9 per cent in 2011 (LDI 38), compared to 4.3 per cent growth to countries within the Euro Area (LDI 37).
In the case of deepsea freight movements and aircargo, the trade lanes that have seen strongest growth have been the Far East, Indian Sub-continent and Middle East regions which have been less affected by the global recession and whose lower labour costs make their exports attractive. Activity growth with North America, on the other hand, has been much more subdued (graphs 1.10 and 1.11). The central role of trade to the UKs economic recovery reinforces the need for shippers to have a coherent voice, to ensure that deepsea and airfreight services offer competitive freight rates and service levels which support wider market reach. The establishment of the Global Shippers Forum in 2011 is an important step in that process. The strength of freight ows linked to international markets outside the EU is highlighted by rail freight activity. Bulk rail freight volumes have continued to face tough market conditions, primarily as a result of the displacement of coal by gas for electricity generation, and weak overall levels of construction activity, which is a key customer for rail freight. By contrast, intermodal container services fared far better, seeing strong growth in 2011 and overtaking coal as the largest rail freight market segment for the rst time. Domestic intermodal rail freight activity in 2011 was 11 per cent higher than in 2010 (LDI 30, graph 1.12).
Sources: FTA Quarterly Transport Activity Survey FTA Logistics Industry Survey 2010/11 FTA Logistics Industry Survey 2011/12
18
Economy
Graph 1.10 Deep sea shipping market performance in 2011 and expectations for 2012
Export growth concentrated in rapidly industrialising countries5 80 70 60 50 40 30 20 10 0 10 20 30 40 50 60 Western Europe North America South America Africa Middle East Indian Subcontinent Far East Australia Western Europe
UK exports 2011
UK exports 2012
UK imports 2011
Graph 1.11 Air freight market performance in 2011 and expectations for 2012
UK export volumes by air generally more buoyant than import volumes 50 Percentage balance of respondents 40 30 20 10 0 10 20 30 40 50 North Atlantic South America Southern Africa Far East including Japan Middle East Australia UK exports 2012 60
UK exports 2011
UK imports 2011
6 The balance of respondents anticipated that UK imports would be broadly unchanged in 2012, compared to 2011.
Economy
19
Graph 1.13 Bulk diesel prices and price expectations for 2012
No let-up anticipated in high diesel prices which remain close to all-time highs
120 115 Pence per litre (ppl) excluding VAT 200203 200304 200405 200506 200607 200708 200809 200910 201011 110 105 100 95 90 85 80 75 January 2009 April 2009 July 2009 October 2009 January 2010 April 2010 July 2010 October 2010 January 2011 April 2011 July 2011 October 2011 January 2012 April 2012 July 2012 October 2012 January 2013 Source: EnergyQuote JHA
Fuel prices
A rise in world oil prices from $95 per barrel (bbl) at the beginning of 2011 to $110 bbl in December, combined with a steady decline in Sterlings value against the US Dollar over the last six months, has had a signicant impact on the price of diesel and other fuel products. At 112.1 pence per litre (ppl), bulk diesel prices in December 2011 were 8.5 per cent higher than a year previously (LDI 47), and bulk gas oil prices were 17.8 per cent higher (LDI 48) the higher percentage increase reecting the much lower proportion of fuel duty in gas oil prices, the absolute level of which fell in Table 1.1 Changes in principal transport fuel costs in 2011
All transport modes face rapidly rising fuel costs Product Diesel Gas oil Marine bunker fuel7 Jet kerosene Application hgvs, vans rail freight deep sea shipping air freight
2011. In the case of road freight, fuel now represents around 40 per cent of hgv operating costs, up from 33 per cent only two years ago. The increase in fuel costs in 2011 alone has added 31,580 to the cost of operating a eet of 10 x 44 tonne articulated trucks in the UK (graph 1.13). However, all modes of transport rely on conventional hydrocarbon oils, either directly through marine bunkers in the case of shipping, kerosene for aircraft or gas oil for freight locomotives, or indirectly where locomotives use electricity as their power source (table 1.1). Alternatives such as biogas and biodiesel come at a signicant price
20
Economy
premium around 20 pence per litre in the case of biodiesel, and are not available in sufcient quantities to offer an alternative to mainstream fuels.
Labour costs
With the price of fuel outside the control of carriers, businesses have remained proactive in managing other signicant cost areas such as labour. The focus of these cost-cutting measures includes: pegging wage settlements to below ination. Basic pay for transport staff rose by 2.6 per cent in 2011 (LDI 45) compared to an ination rate of 4.8 per cent (LDI 41) reductions in overtime use of temporary staff to cover peaks, rather than relying on agency drivers which come at a cost premium Even after the deep cuts in driving staff at the beginning of the recession (LDI 9), 1 in 3 companies surveyed in the FTA Logistics Survey 2011/2012 still continue to consider reducing their driver workforce to reect lower business volumes.
2011
Economy
21
Despite the focus on reducing costs, the extent of driver training continues to increase. In part this may reect the requirement for all existing hgv drivers to have received 35 hours of training by 2015 to full their Driver CPC (Certicate of Professional Competence) requirements. However, it also highlights the important role training itself plays in cost management including fuel efcient driving, reduced engine wear and lower levels of accidents (graph 1.14).
With pressure on margins as a result of weak business volumes and higher input costs, many operators have scaled back investment plans. The extent of this pressure is evident from FTAs Managers Guide to Distribution Costs which shows that in the year to October 2011, whilst operating costs rose by 7.0 per cent (LDI 46), typical haulage rates rose by just 4.6 per cent. This erosion of operating margins leaves businesses with little choice but to scale back capital investment plans to rebuild prot margins (LDI 1) (graph 1.15). Amongst businesses responding to the Logistics Industry Survey 2011/12, only 24 per cent of operators expanded their hgv eet in 2011 and 23 per cent of van operators. Whilst registrations of hgvs and vans rose in 2011 (graph 1.16), both vehicle categories remain well below prerecession levels of 2007 (LDIs 6 and 7).
Investment intentions
2008
2009
2005
2006
Hgv operating costs Haulage trends RPI Source: FTA Managers Guide to Distribution Costs
Hgv registrations
2007
Hgv registrations Van registrations Source: Table RFS0109 Vehicle kilometres by vehicle type, annual 20002011 Road Freight Statistics
Van registrations
2011
22
Economy
Graph 1.17 Fleet investment intentions in 2011 and expectations for 2012
Little sign of upturn in commercial vehicle and trailer market
Prospects for 2012 suggest little improvement.Twenty nine per cent of operators expect to expand their hgv eets and 22 per cent of van operators. The short-term trailer market is poorer still, with just 20 per cent planning to expand eets (graph 1.17). The squeeze on credit evident during the recession continues to exert an important inuence over business investment plans. However, operators are also wary of committing to investment in new vehicles whilst business prospects remain fragile. Eighty six per cent of operators cited reduced levels of business activity as governing investment decisions. Equally important though was the lack of availability of funding for nancing investment plans. These factors outweigh positive reasons to invest, such as improved fuel efciency of newer vehicles and opportunities to increase vehicle ll through high capacity trailer designs (graph 1.18). Carriers caution over the pace of the economic recovery in the UK, and the levels of growth in their own businesses, is also reected in their unwillingness to commit to largescale capital investment. The likelihood of acquiring new businesses in the next 12 months is much lower than a year ago. Fewer businesses are expecting to rent additional business premises or commit to relocation (graph 1.19).
16 14
Percentage balance of respondents
12 10 8 6 4 2 0 2 4 6 Hgv fleet
2011
Lcv fleet
2012
Trailer fleet
Economy
23
There is no doubt that the high oil price driven both by real demand and the Iranian situation is of great concern across the world
George Osborne Chancellor for the Exchequer, Budget Statement, 21 March 2012
2011
2012
Chapter 2
actions taken previously, the Governments assessment was that it needed to step up a gear, and logistics was identied for study during phase 2. As a designated sector champion, FTA played a crucial role in the review process, both by challenging some misconceptions for example, the suggestion that UK logistics was less efcient than its competitors elsewhere and, with the help of members, providing hard evidence of the barriers to growth which the industry faces. The culmination of this effort was a response to Government which set out a clear programme of actions for the short (12 years) and medium (3+ years) terms against each of the four economic ambitions. At the end of November 2011, Government published the Logistics Growth Review: Connecting People with Goods and the National Infrastructure Plan 2011. These demonstrated that many of FTAs recommendations had been accepted, including the need to tackle congestion across the UKs infrastructure networks.
To create the most competitive tax system in the G20 To make the UK the best place in Europe to start,
nance and grow a business
The logistics sector has a key role in supporting economic recovery and growth so Government should always look at where regulation is imposing extra costs on business and seek alternative ways to achieve its goals
Ray Ashworth Managing Director, DAF Trucks Ltd
27
in trialling and implementing low emission technologies and behaviours, as well as making a commitment to consider the need for further planning guidance on night time deliveries. FTAs lobbying efforts were rewarded in terms of deregulation as well. For example, Government said it would review the Habitats and Wild Birds Directives, which impact ports and shipping; there was also a commitment to review the speed limit for lorries on single carriageway roads and the intention to move towards a new risk-based regime for aviation security. A signicant number of further changes, for example a proposal to scrap the regulation requiring drivers to hold a paper counterpart to their driver licence by 2015, have also been promised as a result of the Red Tape Challenge conducted at around the same time. Logistics is one of the most heavily regulated sectors of industry and this can impose signicant costs on businesses. Table 2.1 Logistics Growth Review and Red Tape Challenge outputs
Subject Major rail freight terminals SRFIs: Network Rail support Strategic Rail Freight Network (SRFN) Aviation strategy Long-duration incidents and delays Semi-trailers Operator licensing regime Fuel efciency technologies for the logistics industry Hgvs: low emission technology Quiet night time deliveries Inclement weather conditions preparation Skills for Logistics Driving licences Vehicle registration Drivers hours/working time Roads Motorways and trunk roads Parking charges and enforcement Speed limits Vehicle standards Roadworthiness testing Enforcement Driver CPC
The Logistics Growth Review and Red Tape Challenge outputs offer considerable potential benets for logistics, if Government stays true to its word. In 2012, FTA will concentrate efforts on ensuring that the demonstrable improvement in Governments understanding of the role of logistics is followed through by tangible actions.
Infrastructure investment
Congestion particularly on the road network costs industry billions of pounds each year. It makes logistics operations less efcient through longer journey times and unforeseen delays and, as a result, increases carbon and other harmful emissions. At a time when the economy
Network Rail charged with supporting the development of a network of SRFIs 55 million of investment in the SRFN to remove bottlenecks and improve connectivity to the UKs major ports Government to publish aviation policy framework in spring 2012 Implement the recommendations from the Motorway Incidents Review to reduce long-duration incidents 3 million fund to assist police forces to purchase laser scanning equipment 10 year trial of longer semi-trailers commencing January 2012 Explore potential for changes to the operator licensing regime to support the use of green tech nologies task force established to promote use of fuel efcient, low emission road freight tech Industry-led nologies million to pump prime the procurement of low emission hgv technologies and supporting 8 infrastructure Consider the need for further planning guidance on quiet night time deliveries Noise Abatement Society and FTA to develop toolkit that includes standards for quiet night time
Government statement of support for development of, and investment in, Strategic Rail Freight Interchanges (SRFI)
Commitment
Trial the temporary use of snowploughs attached to certain types of heavy duty vehicles 4 million to Skills for Logistics to improve training approaches in logistics Scrap paper counterpart by 2015 Remove the need to apply for SORN every year Remove need to hold V5C (registration certicate) for every vehicle Examine scope for simplication of drivers hours and working time rules Consult on changing the digital tachograph download requirements from every 56 days to 90 days Introduce lane rental pioneers Re-examine off-side lane lorry restrictions on M42, A1M and (proposed) M11. If justied, will wrap into one regulation Scrap minimum rate for penalty charges Consult on raising national speed on motorways and some dual carriageways from 70mph to 80mph on raising the speed limit on single carriageways for goods vehicles over 7.5 tonnes Consult Streamline vehicle standard regulations (type approval, construction and use regulations etc) Review MOT regime Simplify regulations on dynamic axle weighing for overloading enforcement Review of exemptions
The Logistics Report 2012 Freight Transport Association
deliveries
28
This whole process [the Red Tape Challenge] just proves that theres so much sitting on our statute books that, at the very least, needs a good spring clean or can be scrapped entirely
Justine Greening Secretary of State for Transport
remains subdued, targeted additional capital spending on the road and rail network provides an important growth stimulus. The Government has announced that it will be targeting over 1bn investment in the most growth-critical roads. It will also use a pinch point fund to deliver technology improvements on a number of key routes, such as the M5, M40, M3 and M54. However, increasing the long-term capacity of routes such as the A14, and the M4 in South Wales, remains in the balance. Congestion on these routes will not go away by Government announcing studies, and industry will be looking for early, tangible progress in providing it with the journey time reliability it needs. For rail, Government will make available funding for an investment of 55m in the Strategic Rail Freight Network to remove bottlenecks and improve connectivity to the UKs major ports. Network Rail has been asked to work with the private sector to support a network of Strategic Rail Freight Interchanges. The changes the Government is introducing to the planning system will be essential if this is to progress smoothly. The Government has also announced the go-ahead for High Speed 2; this will involve the construction of a new railway line which should release capacity for freight on the existing network between London and the Midlands and, eventually, the North of England. However, representations from the aviation sector and wider industry show that Government also urgently needs to make a decision on increasing airport capacity in the South East of England. Failure to do so would put UK logistics global competitiveness at risk.
The Government has three levers at its disposal to get the best out of logistics; regulating less, investing in alleviating congestion on key parts of the transport network and reducing tax. Reducing tax through a cut in fuel duty has the most immediate effect on stimulating the economy and increasing industry competitiveness
Simon Chapman Chief Economist, Freight Transport Association
29
A key feature of the campaign was the successful recruitment of a large number of supporters through the use of social media. The ability to obtain and respond to individual stories of hardship and frustration through the campaigns Facebook pages and Twitter brought a powerful human dimension to the otherwise impersonal economic arguments.The campaign also received a further boost when the Conservative MP for Harlow, Robert Halfon, stepped up as the leading backbench MP, ready to co-ordinate debates and questions on fuel prices in the House of Commons. During the summer, when the Government promised to allow a debate in the House of Commons on any issue that successfully recruited 100,000 signatures though its ofcial e-Petition website, FairFuelUK launched its own petition. The required number of signatures was reached by 30 September. FTA also included the subject at each of its fringe meetings during the party conferences in September and early October.These attracted high prole political speakers and signicant numbers of delegates, meaning that the range of generally supportive views could be shared and noted by policy advisers and party
strategists. The House of Commons debate was held on 15 November and the strength of feeling expressed almost certainly contributed to the Chancellors decision to again abandon the planned 3ppl increase in fuel duty from 1 January 2012 in his Autumn Statement on 29 November. Twice, in the space of eight months, George Osborne abandoned his ambitions to increase fuel duty in the face of a high prole, professionally organised, media intensive
12ppl
11ppl
10ppl
01/09/2001
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FEBRUARY 2011
Banner displaying how big a slice of the fuel price is tax displayed outside the Treasury
MARCH 2011
26.2 billion cheque handed to the Treasury
MArch 2011
Tractor unit hauled up Whitehall to highlight the effects of the high price of fuel
APRIL 2011
4ppl fuel duty increase postponed
JUNE 2011
Individually addressed letters to every MP in the House of Commons handed over to a group of supportive MPs
JULY 2011
70,000 signature petition delivered to Number 10
NOvEMbEr 2011
135,000 signature e-petition triggered a parliamentary debate on the impact of high fuel prices
31
public campaign. In fact, fuel duty stands at 1 pence per litre (ppl) lower today than it did 12 months ago, thanks to FairFuelUK successfully linking the high price of fuel, of which 60 per cent is tax, with suppressed consumer demand in the economy and sluggish recovery from the recession. Without this campaign fuel duty would now be 70ppl and the retail price of diesel closer to 160ppl. The Chancellors decision in November provided a much needed lifeline to many businesses as the price of diesel had risen by over 13ppl (13.9 per cent) in the last year, representing an extra 1.4 billion cost to road freight operators. However, FTA contended that the Chancellor had not been bold enough, failing to rule out the planned 3ppl duty rise in August 2012 as, if world oil prices remain high and above $100 per barrel into next year, this will still hit industry hard. Therefore, the FairFuelUK campaign continues in 2012, starting with the rst National FairFuel Day on 7 March.
This morning I met with representatives of the Freight Transport Association.They told me that high fuel prices have had a crippling effect on the logistics industry, whose business viability is determined by the price of fuel
Caroline Nokes Conservative, MP for Romsey and Southampton North Fuel duty debate, 15 November 2011
Survey1 clearly demonstrate how poorly thought out policies can impact on freight operators. Under the old planning regime, where there was greater centralised power in the decision making process, all these areas suffered setbacks in the planning process. In some cases investors walked away from projects due the time taken by the planning process, often as the result of very small interest groups using stalling tactics to delay schemes. In 2011, FTA played an important role in shaping planning policy by inuencing the Localism Act in its passage through Parliament and continues to do so, informing prospective changes to the planning system in order to ensure that national interests are protected and the case for a streamlined planning approval process is heard. The Governments desire to empower local communities within the planning system, through local referendums and other local authority processes, raised a number of
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Local authorities play a key role in determining policies in their areas but they are not always best placed to see the bigger picture. Logistics does not work to local boundaries. Infrastructure, policies and strategies are needed in the right places to meet national needs
Christopher Snelling Head of Supply Chain Policy, Freight Transport Association
Graph 2.2 Impact on UK Governments net scal position after one year
Cutting fuel duty by 2.5 pence per litre would be revenue neutral for the Treasury in 2012/13 1,000 500 0 500 1.0p 2.0p 2.5p 3.0p 4.0p 5.0p
concerns for logistics, as infrastructure issues have always suffered when dealt with by the local planning system. Given the opportunity, many communities will take the not in my back yard approach in their views on whether or not sites for logistics schemes get the go-ahead. FTA identied three key areas which would be under threat from local planning regimes if the localism agenda were to be pursued without the right checks and balances: port developments and infrastructure that creates the access to ports, intermodal rail freight interchanges and lorry parks. This infrastructure is essential if UK logistics is to continue to be a world player.
million
1,000 1,500 2,000 2,500 3,000 3,500 Gross tax loss Net impact on public finances
Source: CEBR report: The impact on the UK economy of a reduction in fuel duty, March 2012
As the new system was being developed, FTA communicated industrys concerns over the effect of interference at a very local level in infrastructure projects of strategic national interest. FTAs role was to lessen the potential effect of local referendums in the wide-ranging areas that were originally proposed; this would have had a negative effect on logistics infrastructure projects. FTA also ensured that access to ports and intermodal terminals was considered in a strategic, rather than local, context. Logistics concerns were recognised by Government, which accepted that without adequate infrastructure provision,
completed in a timely and cost effective way, our national interest in the efcient distribution of goods would be affected and that would not help economic recovery. The strategic areas of concern were incorporated in the National Planning Policy Framework and key powers were retained as a matter for central Government policy. While the Localism Act abolishes the Infrastructure Planning Commission, its functions are transferred to the Secretary of State which is a welcome protection for important, strategic developments.
Centre for Economics and Business Research report: The impact on the UK economy of a reduction in fuel duty
FairFuelUK asked CEBR to model the effects on the wider economy of a cut in fuel duty. The rationale for this work is that such a move would act in the same way as a reduction in the basic rate of income tax, or a cut in VAT, by increasing consumer disposable income and boosting domestic demand. The initial ndings of this work were presented to Chloe Smith, MP, Economic Secretary at a meeting on 28 February 2012. CEBR found that an immediate cut of 2.5 pence per litre in fuel duty would be cash neutral to HM Treasury over the 2012/13 nancial year. Economic growth would be boosted by 0.3 per cent and 180,000 additional jobs would be created. FTAs pre-Budget 2012 submission reinforced the messages of the FairFuelUK campaign, pressing for a 5 pence per litre cut on road fuel duty. Other key features of the submission included making the case for the Chancellor to: reassure industry that plans for a UK vignette will be tax neutral by conrming the offset mechanism used will be vehicle excise duty support freight industry actions to reduce its environmental footprint by retaining the current used cooking oil fuel duty differential stimulate investment in low-carbon fuels by freezing fuel duty rates for road fuel gas and biomethane for at least ve years
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The Chancellor failed to grasp the benets that a fuel duty cut could have delivered.Talking about growth is not enough, lowering fuel duty would boost the economy and generate jobs
Theo de Pencier Chief Executive, Freight Transport Association
Chapter 3
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compared to 5,282 in 2000. When the distance travelled is taken into account, the involvement rate is showing a clear, downward trend (graph 3.2). In recent years, vehicle design and standards of operation have been the focus of safety improvements and real advances have been achieved. Improvements in vehicle safety standards are one of the reasons for the continued decline in the accident rate.These advances can be expected
I welcome the commitments made by the freight industry, including the Freight Transport Association, regarding cycle safety to encourage all drivers of large vehicles to become more cycle aware
Norman Baker, MP Transport Minister Early-day motion 2689 debate, Westminster Hall The Times Cities t for cycling campaign, is relevant, 23 February 2012
to continue; the European General Safety Regulation, which will be fully implemented by November 2015, is introducing a range of advanced safety features in new vehicles, such as Advanced Emergency Braking Systems, Electronic Stability Control and mandatory requirements for lane departure warning systems. The EU Whole Vehicle Type Approval Directive will also introduce up to 58 pieces of legislation (where previously there were six), many of which cover safety and environmental requirements. Whilst the statistics on the number of road deaths involving hgvs are showing a welcome decline, an increase in cycling, possibly in response to the economic downturn and campaigns encouraging it, has also, sadly, been accompanied by a rise in the number of cyclists being killed in collisions
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Fatal accidents
Cycling Code
With an increasing number of road users and a growing proportion of these being cyclists, the risk of collisions is greater than ever. Indeed, 2011 was a bad year, with 13 fatal collisions between hgvs and cyclists in London alone. To take the initiative in promoting safety, FTA signed an agreement with Transport for London that set out how the two organisations would co-operate to reduce the number of cyclists killed or seriously injured. In 2011, FTA built on this agreement by working with the cycling community, the police and a range of FTA members to produce the Cycling Code. The code is designed to promote better understanding of the needs of all road users; it sets out measures for cyclists and drivers as well as for operators.These include actions around training for drivers and cyclists; potential improvements to bikes and hgvs to reduce the likelihood of a collision; and steps that highway authorities can take to make roads safer for all users. The code is managed by the companies that have signed up to it, making a commitment to their drivers and to other road users. It is a living document and is reviewed regularly to make sure that the advice given remains timely and appropriate. Working with the police and cycling community also makes sure that the advice that is given is consistent with what cyclists are being told by their own associations.
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Safety is an integral part of our culture. Our approach focuses on improving driver behaviour and knowledge, as well as introducing additional safety features to our eet and working with members of the public, particularly vulnerable road users and cycling organisations, to raise the awareness of safe cycling
Julie Welch Logistics Health and Safety Manager, CEMEX
with goods vehicles. In London alone, 13 out of the 16 cyclist fatalities in 2011 involved a lorry. In the course of last year, FTA built on its previous work with concerned members, the police and cycling groups, culminating in the launch of the Cycling Code. Following this launch a number of initiatives are now being developed. Human factors remain the most important inuence on safety standards in the sector and, despite a fall in the number of incidents of all severities, it remains a hazardous place in which to work (table 3.1). There were 16,810 reported workplace incidents for the transport and communications sector in 2010/11, 13 per cent fewer than in 2009/10 (LDI 16). Table 3.1 Trends in logistics workplace accidents
Reportable incidents to HSE maintain their downward trend Fatal injuries Non-fatal major injuries Over 3-day injuries 2004 22 3,618 21,576 2010 12 2,725 14,073
Of the main industrial sectors, construction and agriculture have the highest rates of fatal injuries. These sectors accounted for 50 and 34 fatal injuries respectively in 2010. Within the gures for all the main industry sectors, logistics related fatalities accounted for 12 deaths (reported by employers). Of the non-fatal logistics injuries, 40 per cent involved slipping or tripping and 16 per cent were as a result of falls from height. Of those injuries that resulted in an absence from work of over three days, 36 per cent were caused by handling, lifting or carrying injuries and 23
Safety in operation is at the core of everything we do in Suttons. Protecting the public, our employees, our customers and the environment, through continuing investment in training, equipment and risk management is fundamental to ensure the continuing success of our business across the world
Andrew J Palmer Group Managing Director, Suttons Group
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per cent by slipping or tripping. Compared to other sectors, in terms of self reported injuries (as opposed to illness), transport and storage, construction, manufacturing and human health and social work had statistically higher rates than for all industry1. In order to examine and implement ways to address the safety of those who work in logistics, FTA established the Logistics Safety Working Group.
The O licensing system in Great Britain has proven that, as well as increasing safety standards, hgvs are more reliable and cost-effective to operate over the vehicle lifetime if preventative maintenance procedures are employed.These practices will ultimately increase professionalism across the Northern Ireland transport industry
John Jenkins Managing Director, Dennison Commercials Ltd
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Even in these tough times, moving to a low carbon economy is the right thing to do, for our economy, our society and the planet
David Cameron, Prime Minister and Nick Clegg, Deputy Prime Minister Foreword from Carbon Plan
the UK to a low carbon economy. In so doing, it sets out the next steps to meeting the fourth carbon budget, equivalent to a 50 per cent cut in greenhouse gas emissions by the mid 2020s. The Carbon Plan asserts that businesses will need to act to meet these aspirations.
The intense focus of politicians and Government on the economy has led some commentators to question whether the Coalition remains as committed to carbon reduction as it had previously suggested. However, through its public statements Government has sought to reafrm the need for action.
Carbon policy
Whilst international progress in securing a global deal on climate change remains slow, the UK has set a challenging trajectory to reduce greenhouse gas emissions which is inuencing the way businesses operate. Under the Climate Change Act, the UK must reduce greenhouse gas emissions by 80 per cent by 2050 against 1990 levels. There is also a short-term target to reduce greenhouse gas emissions by 34 per cent by 2020 against a 1990 baseline, backed up by a series of ve-year carbon budgets which map out how interim progress will be achieved. To date, no targets have been set for individual sectors.The Governments Carbon Plan, published in December 2011, commits the Coalition to move
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Graph 3.3 Emissions per vehicle km for freight industry vs LCRS participants
When compared to the industry as a whole, scheme participants are making better progress in reducing emissions
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The 2012 Review will look at measures currently in place to reduce fuel consumption and emissions, as well as potential future progress that the freight industry is likely to make towards the UKs climate targets.The success of the Logistics Carbon Reduction Scheme gives me condence that the industry is taking its responsibilities seriously
Mike Penning, MP Logistics Minister, Department for Transport
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Government has welcomed industrys proactive approach to reducing emissions, as evidenced by the endorsement of the Logistics Carbon Reduction Scheme (LCRS) by Mike Penning, Logistics Minister, in April 2011, following the publication of the schemes rst annual report.The scheme has played a signicant role in persuading Government to refrain from setting additional regulatory requirements, so far. When compared to the freight industry as a whole, scheme participants are making better progress in reducing emissions (graph 3.3). In 2011, LCRS participants were surveyed for the rst time to establish quantitative data on the extent to which carbon saving interventions are in place, undergoing trials, or
kg of CO2e per vehicle km by freight industry kg of CO2e per vehicle km by LCRS participants
Source: LCRS Second Annual Report
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One of the biggest costs in our business is road transport fuel. Our GoGreen programme, an internal carbon management plan, sets out a clear carbon reduction strategy, incorporating initiatives and technical solutions that achieve both environmental and commercial objectives
Jim York VP GoGreen, DHL Supply Chain, EMEA Region
planned for 2012.The survey revealed that interventions that improve fuel efciency are already widely adopted by scheme participants. However, other forms of intervention, such as use of alternative fuels, are less mature in terms of take-up, and offer further carbon saving potential (graph 3.4). The scheme shows that there is strong will within the freight industry to voluntarily reduce emissions but the Governments commitment to a voluntary approach will be tested with
Graph 3.4 What carbon saving interventions have had the most widespread take-up since 2010?
Measures to improve fuel efciency are widely adopted by scheme participants 80 Percentage of respondents who have introduced interventions 70 60 50 40 30 20 10 0 Driver fuel performance Eco-driver training Adopt vehicles Reduce engine Improve vehicle Increase the with automated idling fill on laden proportion of manual transmission trips (by weight off-peak, and/or volume) evening and night-time deliveries Mode transfer Make greater use of double deck vehicles (or high cube vehicles) Accelerate turnaround times at collection and delivery points Introduce computerised vehicle routing and scheduling
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this summers DfT Freight Review which will assess whether the sector is making a sufcient contribution to national greenhouse gas reduction targets. It is therefore essential that the scheme continues to grow in membership in order to signicantly contribute to DfTs Freight Review and to communicate to Government that industry is best placed to voluntarily report emissions and incorporate decarbonisation measures that make commercial sense. The mode shift initiative is a further example of logistics taking positive action in support of Government objectives; it is part of logistics commitment to promoting modal shift, where this is possible.
Graph 3.5 Reduction in permitted emissions of particulates and oxides of nitrogen from heavy duty diesel engines 19892013
Engine design improvements deliver a 98 per cent reduction in key air quality pollutants
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EURO 0
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Particulate (g/kWh)
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However, while industry has made signicant advances in the proactive, voluntary approach it has taken to reduce carbon emissions, it is also important that Government is willing and able to support these efforts and ensure that their effectiveness is maximised. Following signicant involvement in development of the proposals themselves, FTA welcomed Governments decision to undertake a 10-year trial of high volume semitrailers, which are up to two metres longer than standard trailers. Research suggests that there can be signicant environmental and efciency benets as a result of using these vehicles, as they offer a 15 per cent payload increase over standard vehicles. Although they are not suited to every sector or type of goods, high volume semi-trailers, as part of the overall UK eet, will enable reductions in the number of vehicles on the road. However, other legislative proposals are less welcome. As recognised in the Logistics Growth Review, FTA persuaded Government of the need to strongly resist draft European Union plans to impose a 4 metre height limit on trailers. If enacted, these plans would have increased the number of hgvs on the roads, causing extra congestion and emissions. The impact would be signicant, around 80 per cent of UK trailers are single deck and over 4 metres (the standard UK specication typically being around 4.24.3 metres). In terms of maritime emissions, at a worldwide level, the Global Shippers Forum (GSF) has published an authoritative
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maritime emissions brieng paper, analysing the impacts of the various market-based measures to inuence the International Maritime Organizations debate on the subject. The paper reinforces the need for co-ordinated action focusing on carbon reduction resources, rather than additional taxes and charges aimed at internalising the cost of emissions without a pathway to reduction.
Rail clearly delivers signicant environmental benets and it has the potential to offer cost savings.We aim to exploit it as much as possible
Simon Polmear Strategic Transport Development Manager, Sainsburys
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We believe that having an ambitious and positive future looking approach is the only way to ensure we have a long-term, sustainable way of mitigating the ever-growing challenges presented by increasing operating costs, and to address the important environmental obligation we all share
Geoff Wright Head of Corporate Services, AAH Pharmaceuticals Ltd
and fuel quality improvements that has brought about a dramatic reduction in the amount of these pollutants emitted by new engines. Parallel developments have taken place in reducing pollutant emission from rail freight rolling stock, with reductions in the sulphur content of gas oil and leaner burning locomotive engines. In the case of diesel, the fuels sulphur content, which has a direct impact on emissions of SOx, has been reduced by a factor of 200, from 2,000 parts per million (ppm) in 1992 to just 10ppm from 2009. A series of phased reductions in the remaining four pollutants has been achieved by progressive reductions in the maximum amount of each of the pollutants that new vehicles can emit. Following the establishment of a baseline level of emissions in 1990, successive, ever more demanding Euro standards have been introduced; the latest being Euro V which was introduced for new hgvs in 2009. A further tightening of standards for emissions from hgvs will take place from 2013, when Euro VI becomes mandatory. As each new Euro standard has been introduced, there has been a step change in the emissions of pollutants that affect air quality, to the extent that the newest Euro V truck emits just a fth of the particulate matter of the ve year old truck it replaces (graph 3.5). However, measures to improve air quality have come at a price. As each new Euro standard has been introduced, engine fuel efciency has been reduced. Vehicle manufacturers will only achieve comparable levels of fuel efciency on Euro VI vehicles with Euro V by exploiting every opportunity for vehicle body and transmissionrelated measures to save fuel. Without these, operators would face a fuel consumption penalty. The case for future Euro standards linked to air quality is therefore nely balanced with the need to reduce carbon dioxide emissions, which the European Commission also has set a target for member states to achieve. As a result of improvements in engine design, the UK is now meeting the binding targets set by the European Commission on atmospheric levels of PM. However, it still has some way to go if it is to achieve targets linked to NOx by 2015. The UK Government is currently looking at measures at a local level to accelerate compliance with NOx levels. Some measures under consideration, such as anti-idling zones and tment of anti-idling technology to vehicles, are business sympathetic as they have the dual benets of reducing fuel use and improving air quality. Other measures, such as the introduction of LEZs, have the potential, if poorly conceived, to add cost to business and achieve little in the way of improvement. An LEZ is already
the directive are being exceeded in a number of AQMAs and will not be acheived by the 2015 deadline. While the precise implications for the freight industry remain unclear, the potential for the introduction of new low emission zones (LEZs), or other forms of restrictive measures, is a signicant cause for concern. Improving local air quality through targeting pollution from vehicles has been a key priority for regulators at European and national level for over 20 years as a means of improving health, particularly in heavily trafcked towns and cities. This focus has centred on fuel quality in particular, reducing the levels of sulphur, lead and aromatics in hydrocarbon fuels, and improving vehicle engine technology. The goal of regulatory action has been to achieve reductions in the key air quality pollutants, namely carbon monoxide (CO), hydrocarbons (HC), oxides of nitrogen (NOx), sulphur oxides (SOx) and particulate matter (PM). Working in partnership with vehicle and engine manufacturers and fuel producers, the European Commission established the Auto-Oil Programme in 1987, this agreed a long-term programme of engine development
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in place in London, and standards were tightened for hgvs and introduced for vans in January 2012. But FTA is concerned that other local authorities may consider such schemes, as pressure to improve air quality increases. FTA believes that LEZs should be considered as the policy of last resort and will encourage local authorities to ensure that their policies focus on those road users that are the principal cause of poor air quality excedences and to develop solutions which minimise the costs imposed on businesses.
The Department for Transports Freight Industry Review, in summer 2012, will scrutinise the measures taken so far by logistics in achieving carbon reduction and identify whether further, mandatory steps need to be taken. The LCRS will be an important part of the industry evidence base for this review. FTAs Mode Shift Centre will be expanded in 2012, to offer advice on water freight, as well as building on its advice service for businesses potentially making the switch to alternative modes. On air quality, it is still not yet clear which policies Government will pursue. However, logistics will need to work with national organisations, as well as Government, to promote the attractiveness and availability of technologies that will help achieve reductions in NOx and PM. As discussions about the establishment of low emission zones become more widespread there will also be a need to urge policy makers to fully exploit logistics-friendly air quality improvement measures rst and ensure any LEZs which are introduced are structured around a consistent, national framework of standards.
Chapter 4
Graph 4.1 Industry perception of public understanding of the role of logistics in the economy 201112, 201011, 200910
Public understanding of logistics is perceived to be poor A very good understanding A good understanding Some understanding A slight understanding No understanding 0 20 40 60
Percentage of respondents Public understanding of the role of logistics in the economy 2010 Report Public understanding of the role of logistics in the economy 2011 Report Public understanding of the role of logistics in the economy 2012 Report Source: FTA Logistics Industry Survey 2011/12, 2010/11 and 2009/10
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policies, night time delivery bans and low emission zones. The task facing logistics is substantial but efforts to change perceptions must be driven by business itself. That is why, alongside its emphasis on working with Government to achieve growth and build on safety and environmental improvements, FTA has maintained its focus on initiatives that project a positive image of logistics during 2011.
Suckling Transport was pleased to launch its new Love Logistics truck livery in April 2012. Acquainting the public and the policy makers with the essential role that logistics providers perform is essential if supply chains are to operate efciently
Peter Larner Managing Director, Suckling Transport Ltd
Love Logistics
The Love Logistics campaign, launched in spring 2010, has at its heart the objective to inform, assist and educate three distinct audiences; members of the general public, politicians and industry. In 2011, FTA continued to raise
the prole of the essential role logistics plays in society and within the economy: the campaign moved into a new phase in the course of the year with the publication of the toolkit to reinforce high level campaigning activities. This aims to raise awareness and understanding of logistics through activities targeted at companies, universities, schools and parents and by promoting the sector as a career. The toolkit was launched at FTAs Love Logistics Showcase event in Birmingham in June and it is hoped industry will use it to help enhance the image of logistics with the public.
Van Excellence
Vans have been the fastest growing sector of the vehicle market in recent years, offering versatility and ease of operation for the service industries. However, the poor image of the van sector, where white van man is demonised as the bane of other road users, runs counter to
Van Excellence
In recognition of the need to improve the image of vans and their drivers, and to support the needs of van eet operators, FTA established and launched Van Excellence, an accreditation scheme that demonstrates compliance with high standards of eet management and operation. The initiative aims to: enhance standards of van operator compliance celebrate operators who demonstrate excellence represent the interests of the van industry Van operators register and seek accreditation to the standards of the Van Excellence Code through an independent chargeable audit. Upon passing the audit, the organisation is enrolled in theVan Excellence scheme. Supported by the Guide to Van Excellence, a comprehensive manual of best practices for van eet operation, the scheme has been enthusiastically adopted by FTA members with 18 eets accredited during 2011.The rst ve successfully accredited eet managers received their certicates from Mike Penning, Logistics Minister, at the Commercial Vehicle Show in April. By the end of the year the number of vans operated by businesses involved with Van Excellence exceeded 80,000.
www.lovelogistics.co.uk
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Businesses big and small have told me that restrictions, such as restrictions on night time deliveries and noise, are an issue for them trading in town.Too often the voice of the few inhibits the ambitions of our businesses and some small issue can stop a project in its tracks
Mary Portas The Portas Review: an independent review into the future of our high streets
its importance to the national economy and the excellent working practices developed by many van operators. The Van Excellence scheme seeks to gain wider recognition of logistics voluntary steps to improve standards in the operation of smaller goods vehicles.
The QDDS trials are a signicant landmark on the journey to achieving the ultimate goal of out-ofhours delivery without disturbance
Gloria Elliott Chief Executive, Noise Abatement Society
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However, compliance with legislative training requirements is also important and the sector needs to ensure that there is increased uptake of the Driver CPC. Working on the assumption that there are around 700,000 active large goods vehicle (lgv) and passenger carrying vehicle (pcv) drivers, the road transport industry should be achieving over 4.9m hours of periodic training for the Driver CPC per year. The way the data is collated and reported makes analysis of the shortfall problematic because gures for bus and truck drivers cannot be separated. However, the amount of training so far undertaken appears to be signicantly less than that required (table 4.1). Responsible businesses are already planning and ensuring compliance with the legislation but concerns remain that other vehicle operators may struggle to secure training for their drivers. As the deadline approaches (2013 for bus drivers and 2014 for lorry drivers), it may prove difcult for the training industry to meet demand, or indeed for companies to release drivers for the required amount of time. The Logistics Growth Review recognised that the skills base was an issue for the industry. The Government announced that it would provide 4m of funding to Skills for Logistics to work with major trade bodies, such as FTA, to establish new and innovative approaches to training to increase the economic competitiveness and subsequent productivity of the sector. This would include the establishment of a UK modern logistics guild-like organisation which will work to promote the image of the sector, attract new entrants and support the development of the current workforce. There will also be the creation of Local Logistics Community Networks, to ensure that training and qualications are relevant, valuable and accessible to all interested individuals and meet the needs of local logistics businesses. Employers will also be encouraged to have greater involvement and ownership of the skills system, through the facilitation of engagement with universities and other training providers to make sure qualications and courses are appropriate and relevant. Skills for Logistics caried out its UK Modern Logistics Guild feasibility study in February, and will launch four projects to support this in April 2012.
There is concern across a number of businesses that a lack of skilled young entrants, a poor sector image and a low uptake of vocational training among SMEs is severely constraining growth of the sector
Logistics Growth Review Connecting People with Goods Department for Transport
TNT has always set great store by attracting talented people into the company and then giving them the opportunity to develop and grow with the business. A high proportion of our senior managers started out in the grass roots of the organisation which I believe is one of our great strengths
Alistair Cochrane Managing Director, UK & Ireland, TNT UK Ltd
1 The Driver CPC applies from September 2008 for passenger carrying vehicle drivers and September 2009 for heavy goods vehicle drivers.
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economy by some 750m. Businesses involved in logistics, if they get their planning right, can expect to share in this. Throughout the course of 2011, FTA worked to raise awareness of the importance of freight movements in London and the potential consequences both for businesses and for residents of not having in place a credible action plan for facilitating deliveries. Despite FTAs best efforts, it was not until responsibility for the issue transferred to Transport for London that any real progress was made. Since then co-operation and the level of understanding has increased dramatically. A key element of FTAs work has been to identify the information needs, practical help and advice needed by
Planning to hire additional staff Preparedness of your customers for managing deliveries July 2011 October 201 January 2012 0 1 2 3 4
FTA has worked closely with TfL to enable us to deliver a successful Olympic Games and ensure that London keeps working and takes advantage of the business opportunity that the Games presents
Peter Hendy CBE Commissioner, Transport for London
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Night time deliveries will be a key solution to cope with the additional daytime access restrictions London will face during the Games, so FTA is working with TfL to seek support of the code of practice both from industry and the boroughs
Natalie Chapman Head of Policy for London, FTA
Consecutive survey results show that levels of preparedness are slowly improving, but many respondents still have a long way to go. A fth of respondents suggested that they were not at all prepared in January 2012, compared to over a quarter in October 2011 (graph 4.2). However, there remain some signicant issues to be addressed particularly the difculty in achieving any meaningful relaxation of the restrictions placed on night time deliveries for the period of the Games; and fullling the industrys need for detailed information about the restrictions that will be in place. The 2012 Olympics provide a unique opportunity to showcase what UK logistics can do. FTA will be working to ensure members are in a position to meet this challenge head on and get the recognition they deserve. And while there is still some ground to cover, one important legacy of the 2012 Olympics will be a much improved understanding within TfL of how the freight industry works and how policy makers can help to ensure that it meets customer requirements in the most efcient manner possible.
companies, as well as supporting those responsible for the running of the Games in putting in place policies and programmes that will allow operators to carry on delivering the goods. In addition, FTA is monitoring operators preparedness to deal with the disruption which will be caused. In FTAs Quarterly Transport Activity Survey, operators have been asked to rate their preparedness in terms of their contingency plans, the provision of additional vehicles and staff, and the preparedness of their customers for managing deliveries.
Chapter 5
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Table 5.1 Risks and opportunities matrix Next 12 months Next 5 years More than 5 years away
Public spending cuts Consumer condence World oil prices Euro Area stability Coalition stability Policy stagnation Scottish independence London Mayoral
election
Low economic growth Interest rates Industrial unrest Consumer spending Business taxation Euro Area recovery Planning reforms and
localism
Uncertain economic
growth rates
Currency exchange Talent recruitment Carbon trading Road pricing UK airport capacity
Red Tape Challenge Fuel duty EU 4m trailer height limit Logistics Growth
Review goals
New rail franchises EU cabotage reform Infrastructure spending Air quality/low emission
zones
UK fuel prices Vehicle and driver performance data London 2012 Games integration High volume semi trailer trials Alternative fuels Carbon footprint Euro VI trucks measurement Cyber security Multi-channel retailing
Third generation
tachographs
1 Cyber security
The threat to businesses and organisations highly dependent on the internet and other cyber media from disruptive attacks by hackers, terrorist and criminals. How do you protect yourself whilst maintaining the necessary connectivity with customers, suppliers and staff?
2Multi-channel retailing
The growing use of the internet by consumers to purchase goods has disrupted traditional logistics models based on deliveries to high street stores. Logistics needs to encompass the demands of these new channels to market in order that businesses can efciently capture the new opportunities they bring.
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Cyber security
In June 2011, Nintendo joined fellow online games company Sony and US-based defence contractor Lockheed Martin in conrming that it was among the latest targets of cyber attacks.The announcement came just days after the UKs Chancellor of the Exchequer, George Osborne, told an international conference that British Government computers are now on the receiving end of over 20,000 malicious email attacks every month.1
Unprecedented opportunities
The growing threat reects the explosion of online services in all sectors.Across the world, more and more private and public sector organisations are capitalising on web, mobile and social media platforms to improve their performance and serve customers more effectively. Online interactions bring a blend of four key benets: lower costs to serve, higher speed to market, greater customer loyalty and, in the case of the private sector, the potential for higher revenue growth. With such a focus on efciency and margin, logistics has been adopting various online tools for years in areas such as freight management and stock control and increasingly into other areas including navigation and the use of social media.
Graph 5.1 Has your organisation suffered from any of the following cyber attacks in the last six months?5 Terrorism Warfare Activisim Espionage Financial crime
External fraudsters 46 per cent Both internal and external perpetrators 29 per cent Inside the organisation 13 per cent Dont know 12 per cent The message is clear: no organisation in any sector is safe and the threat is growing. At the heart of a more interconnected world, logistics faces many, often unique, challenges concerning cyber security including: global trades dependency on vital transport hubs ghting remote and fast paced threats, such as piracy threats in the shipping industry freight and passenger transport being a common target for terrorism the need for sharing data with third parties widespread use of hand-held devices and GPS technology in the eld
3 Warfare this may involve states attacking private sector organisations and especially the critical national infrastructure 4 Terrorism this overlaps with warfare but attacks are undertaken by (possibly state-backed) terrorist groups, again attacking either state or private assets
1 http://nakedsecurity.sophos.com/2011/05/16/ uk-government-under-cyber-attack-sayschancellor-george-osborne/ 2 PwC/Information Security Forum Quickpoll 3 Global Economic Crime Survey, PwC, 2011 4 Analysis of cyber security aspects in the maritime sector, European Network and Information Security Agency
Activism this overlaps with other categories, but the attacks are undertaken by proponents of an idealistic cause
5 Delusions of safety. The Cyber Savvy CEO: Getting to grips with todays growing cyber threat, PwC, 2011
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2 Reassess the security functions tness and readiness for the cyber world
Organisations already have IT security functions that may be doing a good job in protecting against traditional threats. As new risks emerge, the focus needs to be on upgrading or transforming the existing capabilities to deal with them. Rather than creating something new from scratch, this means building on the existing base to ensure that the organisations responses to its security needs fully encompass cyber security.
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Multi-channel retailing
The internet has transformed the way we shop, long gone are the days of simply going to a store and buying an item. As the gure shows, the customer purchase journey is now more complex and we have multiple channels through which we can shop.We can now research products and compare prices online, order or buy from websites, mobile apps, catalogues and telesales as well as having items sent to local stores, our homes or secure third parties. However, many retailers are lagging, not leading, the multi-channel trend. Some are more advanced than others and meeting the growing complexity, but there are still some businesses that dene customers as people who are in their physical stores. A consumer brand like Apple, by contrast, is focused ruthlessly on the consumer. They dont mind which route consumers take, as long as they arrive.
Fractured models
Some retailers, particularly those that started life with bricks and mortar, have inherited business models and cultures focusing entirely on running an efcient shop operation. They may not be as exible when the need arises to accommodate new consumer demands. For example, many retailers lack a central database for managing customer information across channels.
Figure 5.1 The new multi-channel customer journey Research Store Catalogue Mobile Website Source: Customers take control, PwC, 2011 Compare Transact Receive Aftersales
As the complexity of managing both digital and traditional operations grows, retailers are relying on logistics as a critical part of delivering the best customer experience. PwC consumer research shows that factors such as fast and reliable delivery, returns, stock availability and visibility and in-store collection were all important drivers of consumer preferences and satisfaction when rating their favourite multi-channel retailers.
Graph 5.2 What attracts you to your favourite multi-channel retailer? Logistics excellence is at the heart of multi-channel retailing I like the products they offer I trust them Easy to use website I know theyre always cheap/reasonably priced Fast/reliable delivery I like the store They always have the items I want in stock Good returns policy I can return items to store Website stores my address and personal information They do free returns I can reserve or purchase items for in-store collection I get points/rewards I like the staff They have innovative products 0 10 20 25 25 24 23 23 30 40 50 60 70 80 30 Multi-channel factors Retail factors Supply chain factors 36 39 37 44 48 53 51 59 63
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The multi-channel trend has fractured the traditional logistics model of delivering to high street stores into a complex range of interrelated activities including lower quantity deliveries, single pick capability, managing returns, direct to home deliveries and running multiple warehouse operations. In many instances the speed of change has overtaken the operational systems and capabilities which are causing problems, and high costs for retailers and logistics providers alike. For example the high level of customer no-shows for deliveries; up to 35 per cent of all home deliveries fail on the rst attempt, which creates signicant inefciency. But it is more than the volume of deliveries that create economic strain in the supply chain. Many shoppers in most categories, but particularly for fashion and footwear, routinely return unsuitable items and expect to be able to do so with relative ease. The logistics challenge this creates is formidable. The ability to manage returns effectively is becoming a critical differentiator for online and multi-channel retailers. Some electrical retailers now deploy technical staff within warehouse operations. Many apparently faulty consumer electronic items are returned owing to installation errors by the consumer rather than defects. An in-warehouse technical team is able to test and return goods without the need to transfer back to the manufacturer, saving considerable time. With online volumes expanding fast, and consumer behaviour continuing to evolve, the logistics profession faces a major challenge and opportunity to provide the level of service demanded, at the same time as making an economic return. Rather than making piecemeal changes to operations, both internal logistics operations and third party providers have an opportunity to lead the change and help retailers take a more strategic and integrated approach to meeting the multi-channel challenge.
For any organisation, attracting, developing and retaining the best people is tough at the best of times. Faced with a stagnating economy, pay freezes and pressure on budgets, many businesses in the UK and elsewhere are struggling to ensure they can grow their most important asset. This is reected in PwCs 15th Global CEO Survey this year. Despite the challenging economic conditions, 47 per cent of CEOs are condent of growing their businesses over the next three years, but only 30 per cent believe theyll have the right talent in their organisations to achieve this.
Graph 5.3 To what extent do you anticipate changes at your company in any of the following areas over the next 12 months? Talent remains a top priority for CEOs 2012 Strategies for managing talent Organisational structure (including M&A) Approach to managing risk Captial investment decisions Focus on corporate reputation and rebuilding trust Capital structure Engagement with your board of directors 21 55 26 50 32 50 38 42 49 35 55 29 83 27 % No change Some change 19 15 14 8 23 22 27 2011 17 52 25 47 23 54 23 48 36 41 50 34 52 34 % A major change 31 27 23 28 22 15 12
Source: 15th Annual CEO Survey, PwC, 2012 This talent crunch is already affecting growth and prots in logistics; 21 per cent of logistics CEOs believe their company wasnt able to achieve its growth forecasts, both at home and overseas, due to a shortage of skilled people. Looking ahead, only 27 per cent say they are very condent of having the talent they need to execute their companys strategy over the next three years. And its not likely to get any easier, with 40 per cent believing its becoming more difcult to hire qualied workers in their industry.
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A new challenge
Within this war for talent a new battle is brewing. Over the next ve to seven years a major demographic shift will begin as the baby-boomers retire and the millennial generation joins the workforce. The incoming generation (those born after 1986) will require very different approaches from their baby-boomer or Generation X and Y predecessors. Baby-boomers are typically hard-working, materialistic and reward-focused. In contrast, the millennials exhibit quite different characteristics. They nd variety attractive, are less concerned with job security and nancial reward. They believe the world is a much smaller place than their predecessors and want to see as much of it as they can. Millennials have very clear ideas about the type of organisation that they want to work for. In response companies will need to be more aware of what good people look like for them, and what they are going to have to do to attract them. With a different set of motivations and requirements from work, millennials no longer believe that it is their job to sell themselves to an employer; instead, it is the employer who should do the selling. The competition for the best people will become intense, and only increase as the economy improves. While all employers face this challenge, those that start thinking about their strategies today will have a head start, as few have really begun to differentiate themselves to this new generation. As graph 5.4 below shows, its encouraging that logistics businesses are on the front-foot in looking at how they can better incentivise younger staff.
Graph 5.4 To what extent do you plan to change your people strategy over the next 12 months? Logistics CEOs are seeking ways to motivate staff Use more non-financial rewards to motivate staff Deploy more staff on international assignments Work with Government/education systems to improve skills in the talent pool Incentivise younger staff differently than others 0 10 20 30 40 50 60 70
A compromised position
One reason logistics businesses are more focused on this issue than their peers may be an awareness that the younger generation simply do not nd the industry an exciting or attractive prospect compared with others, such as charities, technology or media. As the graph 5.5 shows, the younger generation feel they have had to make compromises during the economic downturn after graduating, and more so for those who joined logistics. One of the principal requirements that millennials have is the need to feel an emotional engagement with their work and employer that goes beyond the nancial incentives on offer. At the same time, the younger generation expects to change employers much more during their career than previous generations. As one panellist felt, a more realistic approach for the sector going forward is to adopt a more philosophical approach to people coming and going, and stress the sector as a great stepping stone to another career if need be. We need to get the best of people while we have them, but accept that they wont be around forever. The industry will have to ght harder and become more attractive to the younger workforce if it is to remain competitive. The international nature of the industry may help, millennials are more interested in overseas postings than their predecessors, 71 per cent want to work abroad at some point in their careers. Also, promoting other areas which appeal to this generation, such as helping to tackle climate change through improved supply chains and making sure products of major brands reach the shops, may help with engagement.
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Graph 5.5 Did you have to make any of the following when accepting your current job/job you are due to start? Millennials making compromises in logistics Taking a lower salary than expected Fewer additional benefits than hoped for More limited opportunities for advancement than hoped for Working for an organisation that was not my first choice Taking a job for which Im over-qualfied Working outside my preferred sector Working outside my preferred role 0 10 20 30 40 Source: Millennial at work, PwC 2011 Transport and logistics Total
Evidence base
Evidence base
The Logistics Report 2012 draws its evidence from the following sources:
the latest annual FTA Logistics Industry Survey 2011/12 a selection of data and survey results from PwC including the 15th Global CEO Survey 2012 the summaries of a series of round table discussions led by PwC the FTA Quarterly Transport Activity Surveys (QTAS) FTA Managers Guide to Distribution Costs FTA/TNS-BMRB Survey: Public attitudes to the logistics sector, 2009 ofcial statistical publications
County Council, Palmer and Harvey, PwC,Tate & Lyle,Team Excellence, UPS and Yusen Logistics.The event was focused around a set of topics which are known to be under active consideration by the Department for Transport as well as the European institutions, or have been long-standing challenges for the industry. In this report we summarise the discussion in three PwC Forward Think articles.
1 Business sentiment measures the mood of respondents as positive or negative and is measured using a percentage balance of responses calculated by subtracting all negative responses to a question from all positive responses
Evidence base
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of current and future business conditions in the logistics sector and external factors inuencing efciency.
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