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January 31, 2011

Collaborative approach is key to reviving European wagonload

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It has been said that between ‘wagonload’ and ‘problem’ there are never more than two words. Now after many years of regression, an innovative alliance is actively seeking to revive the fortunes of a sector hit hard by road competition and the economic crisis, as UIC director of freight Oliver Sellnick (pictured) tells Keith Barrow.
 
FOUNDED in 1997, the Star Alliance is one of the most successful examples of transport operators working together to streamline processes and offer a better product to customers. Today the alliance has 27 member airlines with 21,000 daily departures covering 181 countries and carrying 623 million passengers per year.
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One of the figures behind the alliance was Mr Oliver Sellnick, who worked on the project on behalf of Lufthansa in the early 1990s. After a spell with German Rail's long distance division, where he was vice-president for international business and alliances, Sellnick joined the International Union of Railways (UIC), where he was instrumental in the creation of the Railteam alliance of European high-speed operators.

In his present role as UIC director of freight, Sellnick is advancing an innovative project that brings together operators in a long-troubled sector of the European railfreight industry - wagonload. Xrail was launched a year ago in Zurich with the aim of increasing competitiveness and streamlining services, setting common standards, and improving reliability. It has seven members including DB Schenker Rail, Rail Cargo Austria, SBB Cargo and Green Cargo, SNCB Logistics, CFL Cargo, and CD Cargo.

Wagonload has struggled for decades in the face of high fixed costs and intense road competition, which has been made even fiercer by overcapacity in the road freight industry that caused hauliers to cut prices, with inevitable consequences for wagonload volumes.

Nonetheless, Sellnick is convinced there are significant opportunities for wagonload to recover market share if the competitiveness of the sector can be enhanced. "Block trains are no longer the paradise they used to be because liberalisation has brought down prices and heavy industry is declining in much of Europe," he explains. "Wagonload operations tend to be dominated by the incumbents, as the complexity of the production process means private operators generally do not have the resources to operate a cost-effective wagonload network. Xrail is a joint product which makes wagonload more responsive to customer needs and more transparent. The customer-facing end remains with the railways, but through Xrail the operators harmonise their production processes. Railways must remain independent and we wanted them to retain their own marketing activities."

Under Xrail, members can approach customers directly in all markets and remain in direct competition. However, they must maintain mutual commitments to Xrail wagonload service standards, and progress is constantly monitored through a system of key performance indicators.

All of the partners have agreed to offer a minimum of 90% on-time performance, provide customers with information on international schedules and delay alerts, and offer transport quotes within a maximum of three days. At the launch of Xrail, there were no international schedules for wagonload services and no scalable systems for tracking wagons.

Furthermore, Xrail aims to bring down average siding-to-siding transit times to less than three days within its initial core network, covering 13 economic centres in an area stretching from Sweden and Norway in the north to Switzerland and Austria in the south.

In the initial phases of Xrail, the partners designed and developed the IT tools that would support the international network with the support of project partner McKinsey & Company. This led to a pilot project which allowed members to validate and evaluate the new system.

"The pilot project was a real eye-opener for some members because it showed how weak their international wagonload processes really were," says Sellnick. "We have had to find a formula for reliability and look hard at the issue of scheduling. We have only selected economic centres where we know we can deliver."

Today Xrail is an independent commercial undertaking, spun off from the UIC and headquartered in Belgium. The body is responsible for ensuring service standards are maintained, development of IT tools, and coordinating the entry of new members.

A key omission from the network at present is France, one of Europe's most important freight markets. For many years French National Railways' (SNCF) railfreight subsidiary Fret SNCF has struggled with a failing wagonload network and this is being reorganised yet again in the wake of the economic crisis. "Fret SNCF says it wants to get its house in order before it talks to Xrail," says Sellnick.

Despite this, Sellnick believes Xrail has sufficient scale to be a success. "The network has the critical size, but we want it to become truly pan-European," he says. "It's clear we need to have integrated international wagon capacity planning and this will be a big cultural shift. But Xrail will succeed and it will change planning logic in the future."

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