How can we make the rail industry better?

Welcome to HHLA, Berit! It’s great that you were just able to make it! There were a few challenges with that …

“Just made it” is a nice way of putting it. I was an hour late. I came by train today and nearly had to step in as an evacuation assistant. There was an ICE express train on the route in front of us that needed to be evacuated. But everything went well in the end, as it so often does in life. And we have a bit of a buffer today, so everything should still be OK.

The experience you have had today with trains as a passenger, do freight clients have the same experiences?

Yes, of course there are delays in rail freight, too. There are operational disruptions every day. They are part of our day-to-day business and I have to be able to manage them. What makes the difference is whether I am well informed, and what I do with the information. Do I have a plan B? I felt very well informed today, it has to be said. After briefly checking whether there was an alternative, I was able to let you know. And that’s how it is with rail freight, too. A lot of it is about communication.

We’ve really dived right in there, but let’s briefly circle back to the beginning. As our audience probably heard, you're specialised in rail. And, if I could say so, a rail expert who is in high demand. It wasn’t easy to get this appointment with you so I’m all the more delighted it worked out. For the listeners who aren’t familiar with you, could you please tell us why you are relatively well known in the industry?

Firstly, it’s because I’ve been in the business for a relatively long time – it’s been a long time that logistics has had me under its spell. My first experience with intermodal transport, which is now the main focus, was in 2004. After several years in a consulting role and in academia, I went to Transfracht. There, I was the regional manager for the German seaports, later the managing director. My job was to ensure that as many containers as possible arriving at the quayside here in Hamburg or in Bremerhaven were not transported into the hinterland by truck but by train. That was how I started out, and I did this for a relatively long time. Then I went to TX Logistik AG in 2017 – an Italian subsidiary of the Italian national railways. This meant my remit now covered a major continental network. We operated rail connections in eleven countries. And when you’re in this business, you work with a lot of different people. I was always in sales, and sales also covered dispatch and customer service. That meant that I always had client contact. So, contact with shipping companies, forwarders and also carriers. After all, it’s always important to know what the end customer wants. On the other side are the service partners, terminal operators and partners that we worked with to offer the rail services. They are often international companies and it is rare for one company to cover the entire route. So, a large number of people are involved and, over the years, you get to know one another.

You have a very broad perspective and that’s why we invited you to come and tell us a bit about intermodal transport from all perspectives. You also attend meetings of the logistics think tank. Most recently in Stuttgart. Perhaps you can tell us a bit about the trends that were discussed there? Is there perhaps a finding that you can tell us about? I think the outlook for the industry is often discussed there?

That’s right: the logistics think tank has been around for about ten years. I've been part of it since 2016. It’s a panel of experts in Germany that represents various areas: the automotive industry, the chemicals industry, engineering, logistics. And the scientific community is also involved. It’s our job to issue a forecast for the following year for growth or decline for the logistics industry. And if you ask me now how it went in Stuttgart, we continued discussing trends that are already well documented. So, the developments playing a significant role in terms of demand and costs are relatively clear. The buzzwords are energy, the lack of skilled workers, or workers in general, structural change, consolidation processes in the industry, climate protection and – of course – geopolitics. We’re all on the same page about that. What is new in the past one or two years is that these events are now all occurring at the same time. This results in uncertainty, which makes it harder to issue forecasts. This means we’re currently with a range of different development scenarios. For 2023, we revised our forecast downwards to minus 2.5 percent (in real terms) within a corridor of plus or minus one, and for 2024 we revised it downwards again to minus 3.5 percent (in real terms) with the same range of possibility. Now we need to see how accurate we are. This shows the challenges the economy is faced with, and the logistics industry is of course a significant bellwether.

During the course of the conversation we will see if there are also things we can be optimistic about when it comes to intermodal transport, I think we all need that at the moment. But perhaps we can define the topic of intermodal transport a bit more clearly. Not all of our listeners are engaged with the topic to the same degree when we talk about continental transport, seaport-hinterland traffic, intermodal and other terms. How would you define intermodal, or intermodal transport? We might refer to it from time to time.

Intermodal transport is the term we use to describe the perfect match between two types of carrier. That means I arrange a transport so that the short distance for pre-carriage and on-carriage is by road, i.e. heavy goods vehicle, and the long distance is covered by train. What does that mean? I need a terminal. I don’t handle the goods there myself but the transport containers. In seaport-hinterland traffic, this generally takes the form of a shipping container. In continental traffic, we generally use semi-trailers or trailers and swap bodies. It’s also possible to distinguish between accompanied and unaccompanied transport but then things get a bit complicated. So, intermodal generally describes how I got here today. I took the car from the countryside to the station and then took the train for the greatest distance, and you could say that’s actually …

Intermodal passenger transport!

Yes, exactly. Mobility is similar. By covering the greatest distance by rail, I have a good mixture of productivity and eco-friendliness. Although we don’t have double-decker trains, as they do in the US, and the container trains aren’t two kilometres long like they are there. We are still working with a train length of 740 metres. We’ll come back to that perhaps later, when we discuss infrastructure. Trains of 740 metres also aren't possible everywhere in Germany. On average we have around 550 metres at the moment. So, a goods train can carry up to 100 twenty-foot containers (20’) or replace about 50 heavy goods vehicles. That really illustrates the significance of rail.

We will probably mainly be talking about rail transport today but the main route, so the largest portion of the route, could also potentially be by inland waterway ship, couldn’t it?

That’s correct. Intermodal could also include inland waterway ships for the main part of the route. Generally, when we talk about intermodal, we mean rail because this accounts for a much bigger proportion. Here, inland waterway shipping generally relates to transporting goods via the river Rhine. I think that accounts for around 80 percent.

There’s also the river Elbe, even if there’s less container traffic there.

I don’t want to put any river at a disadvantage! After all, we’re on the river Elbe here in Hamburg. For inland waterway shipping, many forwarders now use a double-tracked solution in the truest sense of the word: They use rail transport options in addition. This is because low water levels in rivers, so low tide or shallow water, may mean that vessels can only carry 40 percent of their capacity. And of course that’s not ideal.

You’ve mentioned this seaport-hinterland traffic a few times already. It’s a long term. And then there’s also continental transport. As we always say, Hamburg is the biggest rail port in the world. That primarily relates to containers. How does it look in terms of continental traffic?

If we look at Europe, hinterland traffic makes up two thirds and one third is continental traffic. However, the big growth driver is continental traffic because a large proportion of goods transport is still sent by road. This can be explained by the fact that around 90 percent of all semi-trailers approved in Europe are not craneable, which means they cannot be handled in a rail terminal. This just shows what kind of potential there is here.

Working to improve this is a political issue. For example, we have the “Green Deal” – perhaps you can explain to us why politics is so slow to catch up in this area? Why should the proportion of intermodal transport, rail transport, be increased?

Well, of course there’s the argument that rail transport is much more environmentally friendly. Rail transport lowers carbon emissions by around 80 percent. Goods transport also account for a large proportion of greenhouse gas emissions. Transport accounts for between 20 percent and 27 percent of emissions in Germany and Europe. Currently, this is mainly made up of road freight, followed by logistics properties. Rail freight is therefore a major leverage factor and that’s why there’s great interest in increasing the share of rail traffic. But it’s also important to me to mention that rail transport is environmentally friendly but the consignments are also very safe in comparison to other carriers. And, of course, it offers other, much larger capacities. In order to make full use of these advantages, it is necessary to upgrade the infrastructure.

I would say that this potential is recognised by everyone. People say: Get goods moving by rail and transport needs to become greener by increasing the rail share. So, the question now is where is the potential for this? If we look at Germany, a route such as Berlin to Hamburg is occupied if a broken-down ICE express is stuck on it. Then it takes a while to get things going again. The alternative routes are sometimes quite far away. Metrans, our rail subsidiary, uses this corridor along the river Elbe to Bad Schandau. If big construction works are planned, huge detours are involved. So, the question arises: Where do we have the capacity to get even more goods onto the rail network?

There’s no question about the fact we need to invest more. The question is, what investments are currently being made? What you’re addressing is the topic of high-use corridors. They need to be “completely” overhauled, which would result in this kind of high-use corridor being out of action for probably months at a time. And there’s no experience in Europe with overhauls of this scope. Everyone’s agreed that something needs to be done. But there are also less drastic measures, such as “making sidings longer”. This would also help to activate alternative routes. But it’s not just tracks we need to be available. Infrastructure is much more than that. Terminals also need to be available to the extent necessary. On the one hand all of our rail infrastructure requires an urgent upgrade, and we need to be able to use it at the same time, how do I make best use of the infrastructure? It needs to be expanded. But what I already have can also be managed more intelligently.

I think we will cover the topic of digitalisation later. Now you’ve just mentioned terminals, I have another question. You know our rail subsidiary Metrans. Their concept is to increase reliability with their own terminals, their own locomotives and freight wagons, so their own rolling stock. How do you view this, as a consultant? Is that the right way to go?

Yes, absolutely. Metrans is already in pole position there, and it has been for quite some time. I work as a consultant now, that’s correct. And I manage lots of projects in this area. But I also know this from the time I was actively working in this area and Metrans was always the yardstick against which we were all measured. Metrans is vertically integrated into the value chain, i.e. into production. That’s truly very smart. Lots of people are now trying to catch up with this development; for example, trying to acquire stakes in terminals. Even if they are minority stakes, I am able to influence things in a different way. That was something that was often underestimated in the past. People always look to see if there are enough of the right kind of tracks, but I also need the right terminal slot so that I can maintain a good operating environment. Because this determines whether I need one wagon fleet more or less in my rail traffic. Or, can I manage a fast change of direction for the locomotive? I don’t want to speak in production-related terms, but at the end of the day, that’s what it comes down to. If I have any influence over the terminal, if there’s a delay, it’s easier for me to say: Put in some overtime so the train can be processed.

Yes, or the terminal can function as a temporary storage yard for containers that aren’t needed at this time in order to expand capacity. Before, you also spoke about smaller-scale measures that could perhaps have a big impact. What else comes to mind? You mentioned longer sidings – also an interesting idea. But are there any more topics that come to mind now we’re discussing it? Yes, why isn’t anyone doing that?

There’s a lot of potential in partnership. If we were to cooperate more intensively to really make the most of the capacities available. And there, I’m not wondering why no one’s doing that – I wonder why it’s so difficult. It’s more a question of making better use of the resources available. For example: Train drivers are always a bit of a bottleneck. You can plan a train to perfection but sometimes reality takes over. And then there’s the question of whether I could perhaps also use a competitor’s resources? Maybe there’s a train driver who happens to be sitting in the ICE express on their way to work elsewhere, who could get out at the next station and take over for the goods train. It sounds a bit pie in the sky, perhaps, but there are tools for this nowadays. Lots is changing and you can tell that people are more open to these kinds of partnerships. I also see that carriers are getting more active and are more willing to take a little entrepreneurial risk. Forwarders are also getting more involved in rail traffic. You don’t need to jump right in with a huge network – you can also launch pilot projects on individual routes. There’s quite a bit of scope.

Now maybe we can turn to digitalisation after all. These days, communication means digital communication. You can send data sets that can be made accessible to more people perhaps, thus improving data management and cooperation, which is something you just mentioned. I have the feeling that our logistics industry, but particularly the rail sector, is a bit behind the curve here. Do you also feel like that?

Well, I don’t just feel that way. I think that’s a given. I had a particular experience a few years ago. The company Freighthub, known now as Forto, had just joined the market as a digital forwarder. Sitting in Berlin, we all thought: Have you thought about rail transport? And they hadn’t at that point. And then they explained how they came up with their business idea. The founders sat down and asked themselves which sectors were the least digitalised. Freight forwarding and rail weren’t at the forefront of the movement. Digitalisation is absolutely vital for concentrating the rail network and expanding capacity. It’s all about automation, aiding decision-making and optimisation. Train scheduling is still often done manually. Something has to be done, and there is progress being made.

I’ve heard colleagues mention that the topic of data sharing can also be a problem. People in the industry aren’t too keen on sharing. Is data protection a hurdle, do you think, because it is associated with so much red tape? Or do you think it could also be an advantage in the long term if people know their data is safe? I can determine exactly what is being done with my data, and by whom. What do you think about this?

It’s good you ask what I think about it. I don’t think there is one correct answer here. In our industry, some business models are built precisely on being the opposite of transparent. So, it’s not just about not sharing data willingly but that business success depends on it. In my view, that’s also one reason why platforms are still viewed rather sceptically.

Platforms is a great segue. We launched a platform that you are pretty familiar with: Modility. Maybe you could explain for us what you find online if you search for Modility? What can you do with it?

Modility is a digital platform for intermodal transport. This distinguishes it from a portal where only one company offers its services to a number of users. Modility offers rail operators transport capacity via rail and road, i.e. in intermodal transport, and to advertise their own capacity. As a user, a forwarder or shipping company, I can go on the platform and see that there are various offers available for tomorrow, or the day after, or next week, on the route I need for the container I want to transport. That means that with just a few clicks and within a few seconds, I have an overview of the options available for transporting it intermodally. This solves a huge problem in intermodal transport – the fact that companies don’t know what service providers there are.

We also want to be transparent. You’re a member of the Modility advisory board, if I remember correctly. That’s why you know so much about it.

That’s right. I’m very familiar with Modility and I am also familiar with other platforms. Rail-Flow, for example, has created an ecosystem and offers navigation services for use with the rail network.

Are you aware of any other examples of successful platforms that make business easier for the logistics industry?

Yes, there’s Timocom, for example, which has been a success on the market for quite some time. In order to reach the next level, you could also combine several tools. It would be amazing, for example, if Modility could also become a kind of one-stop shop for bookings that include inland waterway shipping. There are also portals with great offers. But the appeal of the platform is that I can get a quick overview of what’s available and what’s best for me. Then I press the button and that’s it, I’m done!

That’s what you learn to appreciate about online platforms. On booking.com, there’s not just one chain of hotels available, or two, or three, but a huge range of accommodation options. That’s how it might look in the future. I need to move something from A to B and can then decide, depending on what’s most important to me: What’s cheapest, has the lowest emissions, is the most sustainable or the fastest?

That’s right. And the Modility team has managed to get even more companies on board because platforms offer lots of opportunities. As an intermodal operator, I can try out flexible pricing, for example or appeal to specific target groups. It has been my experience that more and more people are recognising the advantages of using digital platforms for intermodal transport, and that fears relating to transparency are misplaced.

We’re talking about the future a bit now. Assuming we meet again in ten years’ time, Do you think the rail share will have increased significantly?

What do you mean by significantly?

Well, let’s say by more than three or four percent.

The aim is for the rail share to account for 25 percent by 2030. I don’t think that will be manageable within so short a time. Freight traffic continues to boom. And even if the rail share stagnates at around 19 percent, as it is at the moment, this is still associated with growth. Every project transferred to the rails is a positive development. But I think the rail share will get bigger. That’s because I’m certain that more and more players are going to get serious about rail and will also be more willing to invest. As part of my consultancy work, I see forwarders coming and wanting to cooperate in order to manage volume flows. There are more and more hauliers wanting to transfer their goods to rail and asking themselves which parts of the value chain they have to manage themselves, where they need to invest, and whether they need their own assets. The impetus will have to come from the client. That’s why I’m sure that if we were to meet again in ten years, significant progress will have been made.

You see, we did manage to leave things on an optimistic note after all! That’s important. Even if there is the odd obstacle in the industry here and there to be overcome, together where possible,we have a clear aim. It’s about making traffic more sustainable and easing the burden on the road networks. Far too many heavy goods vehicles are still travelling on our motorways. That needs to change, and hopefully we will be able to see a positive change reflected in motorway usage patterns in ten years’ time.

I also think we can be optimistic. There’s lots to be done. I also see new players thinking more in terms of transport systems. And that's an important point, I think. From my perspective, polarising the debate with “this carrier is good and that one is bad” doesn’t make any sense. We need to think in terms of transport systems and remain open to trying out new financing models. Then we have every reason to be optimistic.

That’s a great word to leave things on. Thank you for coming here today and for such an interesting, thought-provoking conversation.

Thank you. I also enjoyed it. And I’m happy that we are both heading to the 7th Rail Conference now. I’m excited to see what kind of impression we’ll get there.

Published 22.2.2024