Speech
Lloyds 6th Short Sea Shipping Europe 2000 Conference in Duisburg
Measuring Performance in Short Sea Shipping - A Progress Report
Chris Welsh, Secretary General, ESC
8 November 2000
Ladies and Gentlemen it is once again my pleasure to be invited to speak at the Lloyd's Short Sea Shipping conference. Last year I sketched an outline of what progress had been made to promote and market short sea shipping and what shippers expected from the suppliers of short sea shipping services.
Essentially, the point I was making last year was that we now needed to move from talking about the problem, or the obstacles perceived to be associated with making short sea shipping (SSS) a preferred option for shippers, to action i.e., taking some positive steps to make it an irresistible choice for customers. To underscore the points made at last year's conference in Hamburg, I emphasized that:
- Short Sea operators needed to adopt a more positive image through better marketing of the SSS product
- Greater customer focus was necessary by Short Sea operators
- An appreciation was needed of the importance of meeting the overall needs of the shipper's supply chain requirements on a door-to-door basis
- Charging other transport modes, like road transport, through higher taxes or charges, was not a panacea or sure fire success factor for short sea shipping
- Key performance indictors were considered essential by shippers in order to give confidence that short sea shipping could provide a reliable alternative to existing tried and tested transport methods
The first thing to say is that since the Hamburg conference there has been considerable progress in promoting short sea shipping. On the political or policy front, short sea shipping has been identified as a key EU transport policy priority. This was reflected in the considerable efforts made by the Finnish government during their Presidency to push short sea shipping up the policy ladder. Their joint Community and industry workshops did much to keep the momentum going and helped to focus on tangible actions to stimulate opportunities for growth in the short sea sector.
Similarly, the "Northern Quality Shipping"(NQS) promoted by the Scandinavian countries, Baltic States and northern European nations has continued to champion the case for the development of a viable short sea shipping industry. The development of the short sea shipping bureaux, focal points and information centres have all equally contributed to greater awareness of the services that are available.
In addition to this the Maritime Industries Forum Short Sea Shipping Panel has taken on board many of the points made by ESC, particularly recognition of the vital importance of fully integrating short sea shipping within the shipper's overall door-to-door supply chain.
There are no doubt other very notable achievements by other worthy groups, but perhaps the most impressive response has been industry itself. From a very static position (official Community figures for international intra EU sea- borne trade and national domestic water -borne movements show a very flat/shallow growth in short sea transport during the 1990's) there are positive signs of greater interest and indeed growth for the first time in a decade.
While short sea is already significant in many sectors, most notably in movement of automobiles, there are encouraging signs of further growth not only in this market but also in new market segments. This is very much attributable to the " can do" attitude of particular shippers who are increasingly looking to alternative long-term sustainable alternatives and carriers who have taken a more customer- focused approach to building new business. The biggest success stories are those where customers and suppliers have worked side-by-side to develop and to integrate short sea shipping within the shipper's supply chain. Some of the most notable examples being the STORA ENSO supply chain system and the FIAT and Grimaldi short sea shipping case study. 
So, we can see from these real live examples how it is possible to promote and stimulate short sea shipping. In short, there would appear to be clear potential for short sea to win new business and even to take away existing business from other modes of transport.
This is underlined by the following potential short sea shipping success factors:
- The time is right
- Increasing road congestion is undermining the reliability of industry's supply chains
- Road freight costs are likely to rise over time, while there is real scope to reduce the costs of short sea shipping through economies of scale and greater efficiency
- The political will is there to promote short sea shipping
- JIT/ECR methods demand increased reliability and performance from service providers
These positive indicators should not however delude those involved in the short sea sector that all they have to do is sit back and wait for the business to fall into their laps. The reality is that by and large the short sea a sector is well behind other more reliable and tried and tested modes. The road transport sector is, for example, more:
- Flexible
- Reliable
- Cost effective
- Integrated and provides door-to-door solutions
- Trusted and understood by its customers, and with a proven track record of success and capability of meeting customers needs
So what else does the short sea sector need to do to build on the encouraging signs that there is an optimistic future for short sea? Clearly, short sea must:
- Compete effectively with other modes
- Facilitate distribution right across the supply chain, working more closely with shippers, ports, combined transport operators, hauliers, and forwarders
- Win customers by exciting them with an irresistible offer
While all three of these elements is crucial to the future success of short sea, perhaps the most important success factor is working with others to enhance the supply chain. This is the essence of the STORA ENSO quality system in which short sea is the core mode used. Speaking at the ESC's Shipper 2000 conference in Rotterdam Olle Widigsson stressed five essential elements to guarantee a long-term, competitive transport alternative from mill to customer and from supplier to mill. These include:
- Long-term cost-efficiency
- Quality
- Service
- Flexibility
- Environment
In order to ensure that these conditions are met STORA expects it carriers to adhere to high minimum standards and a commitment to continuous improvement.
However, STORA is not alone in demanding high minimum standards and a commitment to concepts such continuous improvement. Nor is this unique to the short sea -shipping sector. It is a general requirement by shippers in all modes of transport to ensure enhanced performance and improved reliability in their supply chains.
Last year in Hamburg I outlined in general terms how the ESC had worked together with the air cargo industry in developing common industry service standards or to use the full terminology " Service Performance Indicators" (Sip's). These standards are now accepted as the minimum industry standards. At our recent ESC Shipper 2000 Conference in Rotterdam major carriers and logistics providers, such as MSAS/EXEL Logistics and Air France, explained how they are using the ESC air cargo performance indicators to improve the quality of their services. The MSAS/EXEL case study showed how they had convinced their number one account -Sun Computers- who were threatening to move their custom elsewhere how they would improve their performance. They have succeeded, Sun Computers is still their number one client account.
In Hamburg I said that the process devised to improve service standards in the air cargo industry was also applicable to short sea and other modes of transport. In discussing the concept further with shippers and carriers it was clear that there were a number of generic indicators which were common to all modes and that underpinned to the air cargo KPI's.
The UK Freight Transport Association's Head of Logistics, Mick Jackson, in conjunction with UK and European Shippers identified the following generic Service Performance Indicators (SPI's) which are common to all modes:
- Timeliness
- Consignment care
- Compliance
- Corporate efficiency
From this generic basis the ESC in conjunction with the UK FTA has adapted an SPI approach based on:
- Individual modes
- Individual corridors
In order to develop the SPI's the following players are necessary:
- Operators/carriers
- Shippers/supply chain managers
- Government
The service performance indicators have major benefits for various players in the supply chain. These include:
- Assets/resources- carriers/operators
- Supply chain service levels - shippers
- Infrastructure performance - Carriers/governments
Our experience in the air cargo sector has identified five key stages in the development of SPI's these include:
- Formulation
- Dissemination
- Verification
- Implementation
- Benchmarking
This approach enables carriers and shippers to identify supply chain modal SPI's, make corridor specific modal performance comparisons. This in turn enables shippers to make informed modal split decisions, opens the way for exploitation of unfamiliar modes and opens the path towards aggregation on specific corridors, and ultimately -benchmarking.
The ESC believes all stakeholders obtain benefits in this process. Carriers benefit from establishing service performance indicators that meet the needs of the customers' needs. Governments gain from indicators aimed at measuring the performance of infrastructure and in identifying bottlenecks. Shippers can use service performance indicators to improve the performance and reliability of their supply chains. The latter can also use SPI's to compare different modes of transport on particular corridors, making less well-known modes potentially attractive.
At last year's Hamburg meeting I reported that there can been an encouraging response to our approach to service based service performance indicators at our Marseilles conference from all sides of the transport industry and from government. We have continued to pursue these ideas with the EC Commission and with a number of governments. Kerstin Sterner Principle Adviser at DG TREN gave broad support for the concept at ESC's Rotterdam conference two weeks ago, describing the potential for SPI's to compare the performance of modes of transport on specific corridors as the sort of scheme the Commission would be interested in providing funding support.
In addition to this, earlier this year the ESC was approached by the Dutch Maritime Department of the Ministry of Transport and the Swedish Maritime Administration to present proposals for the development of SPI's in the short sea sector, specifically between Goteborg and Rotterdam. In June the ESC and the UK FTA gave a presentation to the Swedish and Dutch governments, the Swedish and Dutch ship owners' associations and representatives of the ports of Goteborg and Rotterdam to show how we had developed the air cargo key performance indicators. We were asked if the process used in the air cargo KPI study could be used to introduce relevant service performance indicators in the short sea trades.
Having explained the background to the air cargo KPI's and how this work was developed in conjunction with all the parties involved in the air cargo supply chain, the ESC and FTA was asked to put together a costed project to introduce similar SPI's on a short sea service between Goteborg and Rotterdam. All parties expressed an interest in such a project and agreed to pursue the project further.
Last month ESC presented the project to the stakeholders and the governments concerned. There was unanimous support from all the stakeholders and governments to undertake the project.
So what is different about the SPI project and ESC/FTA's approach, and why does it stand a greater chance of success over other approaches? We believe, based on our experience in developing the air cargo key performance indicators, that given the commitment and will of the stakeholders it has a greater chance of success because it will be developed by the industry itself. Consequently, in our view it stands a greater chance of success because is more likely to be practical and relevant to the needs of those who will use it.
The biggest challenge will be in implementation. This has proved to be the most difficult part of the process, largely because the industry players set such high standards and measurements. But as case studies showed at our recent conference leading air industry companies are overcoming the obstacles. Whatever, is produced the test is that it must be:
- Cost Effective
- Capable of being operated
- Realistic
- Meaningful to decision makers
We intend to start the Goteborg/Rotterdam project in January 2001. We have already identified shippers and ship owners' interested in participating in the project and the first plenary meeting in January will set out the framework and modus operandi for all future work. We are confident that given the will and commitment of the stakeholders that the development of appropriate service performance indicators for the short sea sector will contribute to building confidence in the ability of short sea shipping to provide a reliable, trusted alternative option for shippers.
We are moving from talking about the problem to action.
Thank you for your attention.
Chris Welsh
Secretary General, European Shippers' Council
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