Intermodal combines road and rail for big benefits

With road congestion, environmental issues and South Africa’s high logistics costs increasingly under the spotlight – and hampering our ability to compete in the global marketplace – the time is ideal for an “intermodal renaissance” that will enable South African companies to leverage the strengths of both road and rail transport.

This is the contention of Gebisa Ledwaba, rail projects executive at IMPERIAL Logistics, who believes that companies who join what he has dubbed the “intermodal renaissance” at grass roots level will have the benefit of shaping a logistics strategy that holds vast untapped potential. Key to the success of firms entering these uncharted waters however, is selecting the right logistics partner, he cautions.

Intermodal transport is defined as the transportation of unitised (generally containerised) cargo using multiple modes of transport (ship, rail and road). Ledwaba’s – and IMPERIAL Logistics’ – focus is on making a move from road to rail in Southern Africa. “IMPERIAL Logistics’ intermodal transport strategy encompasses increasing appropriate product movement on rail infrastructure, and we will contribute towards converting existing road freight transport to rail freight transport in Southern Africa,” he explains.

Combining the strengths of road and rail
This intermodal renaissance combines the strengths of both road and rail, to offer Southern African companies the best of both transport modes. “It is not a threat,” he stresses. “It is an absolute opportunity, even an imperative.” By utilising a hybrid form of transportation, intermodal unifies trucks, rail and sometimes cargo ships into one transportation system, utilising intermodal containers, so that shippers do not have to pack and unpack their cargo each time the mode of transit changed which improves efficiency and safety.

Outlining the benefits of rail, he notes that it is more economical and fuel efficient than road transport. The hybrid transport solution presents unique benefits by combining the cost advantage presented by economies of scale, cheaper fuel and labour of trains over long haul with superior service qualities of road trucks and flexibility over short distances. As a result, intermodal can offer competitive rates to customers over several years because of the stability of the rail’s cost structure and long-term payback period. "In terms of fuel efficiency, rail consumes around one third of the fuel required by road transport.”

Further factors in rail’s favour are its environmental benefits: less noise and air pollution and lower carbon emissions. “With a carbon tax on the cards, the “greening of the supply chain” issue is not just about being environmentally aware. This is also an important, financial consideration going forward,” Ledwaba states.

Leveraging the benefits of rail transport 
Additional benefits of rail transport are lower road maintenance, policing and accidents costs. “Our growing population is contributing to an ever increasing number of road users, more congestion on our roads, and more strain on our road infrastructure. Moreover, the total externality costs (accidents, CO2 emmisions, congestion, noise and policing) for South Africa in 2010 are estimated at R27.8 billion yet are unaccounted for in financial statements of the users of the logistics system. Some of these costs will be internalised through taxation and similar mechanism in the near future and should therefore not be ignored according to the 8th annual State of Logistics Survey 2011. And the costs aren’t just financial,” he stresses. “We must also consider the high death toll on our roads.”

And while our roads are becoming increasingly congested, rail has excess capacity. “The current utilisation of rail transport between Gauteng and Durban is around 30%,” says Ledwaba.

The investment cost of road versus rail infrastructure is comparable, but he adds that rail has the advantage over road infrastructure in that, once established, it has over twice the lifespan.

Ledwaba acknowledges that there has long been consensus on the benefits of rail, but states that it is time to move from consensus to action. “South Africa is perfectly placed to reap the rewards of an intermodal transport strategy that combines the benefits of road and rail. The country’s main economic hub is Gauteng, which is some 600km away from our nearest point of entry. This distance provides an ideal opportunity to leverage the advantages of rail, which yields the greatest economic benefits over long distances, and for volume transport. Obviously rail in Africa is slower than road transport, so there must be some trade-off between cost and speed, but for the right company, and the right cargo, and in partnership with the right logistics service provider, intermodal is an opportunity to be seized now.”

Intermodal transport into Southern Africa
Also significant is the potential of intermodal transport into Southern Africa. “Here, too, the distances covered make rail the ideal transport mode,” he contends. “The fact that throughout Africa we have the same gauge rail infrastructure also makes it a perfect solution.” Border posts along Southern Africa’s North-South Corridor are notorious efficiency inhibiters and cost drivers for companies doing business in Africa, but Ledwaba notes that border crossings by rail are usually fast and efficient, with most rail cargo having pre-clearance.

With 90% of goods today transported in containers, Ledwaba believes a change of mindset will also see the application of intermodal transport for cargo not normally associated with rail. “Rail is known for moving bulk commodities, but we need to start considering it for consumer products, too. With the lion’s share of consumer goods now outsourced to China for manufacturing, and then shipped into South Africa, the need exists to move these goods inland as cost effectively as possible. If the cargo is containerised (or moved in a homogenous unit) it’s suitable for intermodal transport, whether it’s clothing or electronics.” He notes that blue chip companies like, Samsung, Woolworths, Nike and Tigerbrands are now utilising rail for their products.

With South Africa’s high logistics costs a widely acknowledged impediment to our global competitiveness, Lebwaba asserts that a move to intermodal transport, and the associated cost benefits, would contribute to turning this around. “Total logistics costs in South Africa in 2010 amounted to R339 billion, or 12.5% of GDP. In Europe and the USA, this is around 7 or 8% of GDP. Our high logistics costs - 53% of which are spent on transport – need to be addressed in order for South Africa to compete in an increasingly global marketplace.”

Collaboration is key to success 
The challenges associated with rail, have, in the past, deterred companies considering this mode of transport, but Ledwaba emphasises that the success of intermodal lies in collaboration – in particular, with a trusted, experienced logistics service provider (LSP). “Intermodal transport is complex, so the key is to have the multiple parties coordinated by one LSP. This LSP also needs to provide the visibility that has, in the past, been a challenge associated with rail transport. As a well established logistics provider, IMPERIAL Logistics has the ability to bring all role players together, to offer a seamless intermodal solution,” Ledwaba states.

IMPERIAL Logistics’ global intermodal experience and expertise is founded on its international business units, Freightmax, neska and IMPERIAL Shipping, which have been operating in this arena for decades. The group has the technical knowledge and skills to successfully coordinate intermodal transport in Southern Africa, and also boasts a significant geographic footprint into Africa, Ledwaba adds. “This,” he says, “is critical for the success of intermodal transport,” stressing that for intermodal transport to work, the LSP must have a physical presence.

Road, rail and port interact effectively
IMPERIAL Logistics offers specialised intermodal logistics services, where road, rail and port infrastructure interact effectively. “Transnet provides core parts of these services, as our partner and supplier, and we are actively engaging with Transnet and other providers to build relationships and drive consensus and action,” Ledwaba explains. “Another element of our intermodal approach is that we regard Transnet as a strategic client that can benefit from our professional and logistics execution service offerings,” he adds.

While the intermodal renaissance is still in its infancy in South Africa, and it will be some years before we see the results of Transnet Freight Rail’s R206-billion investment in rail projects, Ledwaba urges forward thinking companies to make the move to intermodal transport now. “In order for it to be the complete solution that it has the potential to be, we do need to see significant investment in our rail and port capacity, and an increase in mechanisation, along with investment in technology, is a priority. But the tide is turning, and we should start reaping the rewards that intermodal transport has to offer. In partnership with the right LSP, companies can make the move to intermodal transport now; spearhead the intermodal renaissance, and start leveraging the advantages that rail plus road has to offer. In this case, in terms of the benefits of intermodal transport, one plus one equals three,” he quips