Memorandum by Parcelforce Worldwide (RH
07)
PARCELFORCE
WORLDWIDE—AN
OVERVIEW
Before moving into the issues pertaining to the road
haulage industry, this section of the report attempts to give
the reader a brief over-view of Parcelforce Worldwide (PFW). This
will hopefully convey the scale of the Parcelforce operation,
and demonstrate that as the operator of a large fleet of road
vehicles we are well placed to comment on the industry.
As one of the three main operating companies
under the Post Office corporate banner, Parcelforce Worldwide
(PFW) was formed in the late 1980s from the old parcels division
of Royal Mail. Now operating autonomously from its sister business,
PFW handles around 550,000 parcels each working day, making it
the UK's leading carrier of time sensitive packages and consignments.
A wide range of services are offered to the public, ranging from
express next day delivery with a choice of delivery time criteria,
up to the standard three day non-guaranteed product. These domestic
parcel services are also supported by a nation-wide pallet capability,
and an extensive range of international services.
Key features of Parcelforce Worldwide include:
— approximately 135 million items handled
annually;
— 96 local depots concentrating on
collection and delivery operations;
— 8,000 road vehicles (one of the largest
UK fleets);
— £100m+ currently being invested
in developing Europe's largest parcel sorting facility at Coventry
Airport;
— a network capable of delivering to
all 26 million UK addresses; and
— an international network spanning
239 countries, or 99.6 percent of the world's population.
As a growing force in the next day market, more
than 90 percent of the UK's largest 100 companies entrust Parcelforce
Worldwide with their distribution requirements, and all of the
135 million parcels passing through Parcelforce Worldwide's network
each year will be individually bar-coded by the end of the year,
creating the most powerful parcels tracking system in Europe.
When one considers that over half a million
items pass through the Parcelforce Worldwide network every day,
the sheer scale of this logistical operation can be appreciated,
and the efficient operation of the extensive road fleet is fundamental
to this process. Against this backdrop, Parcelforce Worldwide
has developed a high degree of transport related knowledge and
experience, hence its ability to provide the comments in this
report.
THE ROLE
OF THE
ROAD HAULAGE
INDUSTRY
The road haulage industry represents one of
the commercial foundations of the country, and plays a fundamental
role in enabling our inter-dependant society to function. The
door to door flexibility offered by road haulage has enabled companies
to bridge the geograhpical differences between the points of production
and demand, and the table below demonstrates how road based transport
has become the dominant mode of transport for the movement of
freight:
Domestic Freight Transport by Mode: 1953-95:
| | Goods moved (billion tonne kilometres)
|
| Year | Road
| Rail | Water
| Pipeline |
| 1953 | 32 |
37 | 20
| 0.2 |
| 1960 | 49 |
30 | 20
| 0.3 |
| 1965 | 69 |
25 | 25
| 1.3 |
| 1970 | 85 |
25 | 23
| 3.0 |
| 1975 | 92 |
21 | 28
| 5.9 |
| 1980 | 93 |
18 | 54
| 10 |
| 1985 | 103
| 15 | 58
| 11 |
| 1990 | 136
| 16 | 56
| 11 |
| 1995 | 150
| 13 | 53
| 12 |
Source: Transport Statistics Great Britain 1997
Edition.
However, most people are now aware of, and frequently affected
by the increasing problem of congestion, and there is an increasing
level of knowledge pertaining to the environmental implications
of road based transport. Whilst many people support the view that
"something should be done", early indication suggestthat
the average motorist is unwilling to give up his/her car despite
the spiralling cost of motoring. For example, as a direct result
of taxation policy the price of forecourt fuel has risen considerably
over recent years, yet despite the increase in the cost of motoring,
there is little or no sign of car ownership diminishing. Indeed,
based on current projections and without policy changes, traffic
could grow by more than one third over the next 20 years and by
more than half on trunk roads. As a result of this increase, there
will be an increase in the dis-equilibrium between available road
space and demand for that road space, particularly during peak
travel hours and in the areas of major conurbation's. The implications
of this are that journey times will increase considerably with
a forecast suggesting an increase of 70 per cent on urban motorways
in peak hours by 2016, resulting in what we all recognise as "congestion".
The role of LGV's in causing congestion must be kept in perspective,
and recognise that the actual numbers of LGV fell by 20 per cent
between 1986 and 1996. PFW reflects this trend, having witnessed
a reduction from 800 MU's to 480 over a similar period. Furthermore
our average MU mpg has increased from 6.5 to over 10, and the
average mileage per MU has risen from 50k to 90k per annum, thus
reflecting the trend of fewer, more efficient and better utilised
LGV's.
These statistics highlight the needs for a realisation that
car traffic is a major contributor to congestion, despite the
general perception that LGV traffic is the main perpetrator. Clearly
there is an issue concerning visual intrusion and the perception
this generates in the public eye, but the fact is that traffic
on motorways in England grew by 80 per cent between 1986-96, a
trend which clearly cannot be allowed to continue. However, LGV
traffic must not be seen as the sole source of evil in the congestion
problem, and equality should prevail in any potential policies
aimed at reducing congestion.
Reliable journey times are fundamental to the success of
the Parcelforce operation. Bearing in mind that over 80 per cent
of the mileage of the heaviest articulated vehicles is on trunk
roads and motorways, the efficiency of the whole economy is dependent
on access to congestion free infrastructure. The conceptthat congestion
creates cost is very real, for example considerable direct costs
being born by road usersthrough:
(1) longer journey times;
(2) journey time unreliability; and
(3) increased fuel consumption.
It is estimated that 1.6 billion hours were lost by drivers
and passengers on Great Britain's roads due to congestion in 1996,
with 80 per cent of this occurring in urban areas. This is supported
by the situation at Parcelforce Worldwide where over 50 per cent
of the companies scheduled trunk runs have extra time allowances
because of congestion on the trunk road network.
Allied to the cost of congestion, PFW is also aware of the
environmental implications of road based transport. A quarter
of the UK's total carbon dioxide emissions in 1995 come from transport,
with over four fifths of the transport share emerging from road
vehicles. Furthermore, transport is also the fastest growing source
of CO2 emissions in the UK, which is the main cause
of climate change.
However, there remains the fact that road based transport
is very efficient and very effective. The well documented problems
of congestion are seldom experienced during the night when large
numbers of operators undertake their trunking activity, and the
door to door flexibility offered by a truck remains almost unmatched.
Furthermore, the relatively low barriers to entry into the industry
ensures that there is a high level of competition, ranging from
the one vehicle owner-driver up to the large fleet operators which
dominate the contract distribution sector. Allied to the fact
that few distribution centres are rail connected and the fact
that rail would be unable to penetrate into the high street or
even out of town retail developments andit becomes almost obvious
that road based freight movement will remain dominant for the
foreseeablefuture.
It is therefore necessary that the Government is aware of
the importance of the industry, and ensure that commercial success
is not undermined by legislation which could erode the efficiency
of road transport. Furthermore, there is a requirement on the
Government to ensure that the Road Haulage Industry is able to
compete with competition from European operators, thereby helping
to contribute to the economic well-being of the United Kingdom.
POLICY AND
THE ROAD
HAULAGE INDUSTRY
In the years following the end of the Second World War, most
Governments had a policy to build and upgrade more roads, especially
motorways and trunk roads, in response to growing traffic volumes.
This policy of sustained building has resulted in the UK having
over 3,000 kilometres of motorway, as can be seen on the table
below:
Table 1: Road lengths: Great Britain 1951-95 (kilometres)
| Year | Trunk
| Principal | Motorway
|
| 1951 | 13,275
| 31,435 | —
|
| 1961 | 13,580
| 31,780 | 1,270
|
| 1971 | 14,668
| 32,737 | 2,191
|
| 1981 | 14,949
| 34,656 | 2,647
|
| 1995 | 15,226
| 36,027 | 3,189
|
Source: Department of Transport.
The successive road building policies owed much to the view
that as a trading nation we needed efficient transport both domestically
to function effectively, and to gain access to international markets
via ports of export. The "car is king" philosophy became
a feature of the Thatcher Government's as politicians cashed-in
on the popularity of allowing the masses to have the freedom that
comes with care ownership. Motorways became symbols of economic
prosperity and personal freedom of choice for motorists, underlined
by the statistics that despite representing only 1 per cent of
the total road system, motorways carry 15 per cent of all traffic,
over 30 per cent of HGV traffic and over half of all long distance
traffic.
However, despite the flexibility offered by car ownership
and the prospect of widened horizons offered by fast motorway
journeys, it has become to be realised that there is a price to
pay. In the 1996 Green Paper from the Conservative Government
there is an acknowledgement that Britain's road network was largely
complete and there would be a shift in policy towards marking
efficient use of the existing road network and encourage the use
of alternative modes. Since May 1997, the Labour Government has
taken a more radical stance, especially against the car culture
society. It is still true that trunk roads are a vital part of
the nations strategic transport infrastructure, but there is also
growing emphasis on the role of railways and inland waterways.
It is now considered that all parts of the infrastructures must
play a full part in an integrated transport policy which enables
people to depend on cars less and ensures that more freight is
carried by water and rail.
Whilst Parcelforce recognises that continued road building
is not a sustainable solution to congestion due to evidence of
suppressed demand for travel ie demand is likely to exceed supply
in the medium term, we would like to see alternative infrastructure
developed to avoid serious bottlenecks on the country's strategic
network. A prime example of this is the urgent need for the Birmingham
Northern Relief Road as an alternative to the M6 between junctions
4 and 12 which suffers from almost constant congestion and is
frequently "gridlocked". The chronic situation on this
part of the motorway network not only impairs the movement of
people and freight on a north south axis, but also severely restricts
the performance of our operation within the West Midlands through
reduced utilisation of our driver and vehicular assets, which
ultimately increases our unit costs in that area and impacts on
business profitability.
With reference to managing the utilisation of existing motorway
infrastructure, if any kind of motorway tolling was introduced,
either via permits or a pay as you go method, Parcelforce would
like to see a structured tariff, with the highest charges for
those using the infrastructure during the busiest periods, and
significantly reduced charges for those operators who have minimal
impact by running at night. Whilst access charges are not the
total solution to the problem in hand, they would force drivers
and operators to evaluate the timing of each journey. However,
this approach would need managing in-order to minimise diversion
onto untolled routes, and charges would have to be pitched at
a level significant enough to have an impact, but realistic enough
so as not to be detrimental to commercial performance. It is perceived
however that some kind of "real time user charging"
is preferable to merely increasing taxation on fuel or VED, both
of which will not significantly change the current situation.
As mentioned above, it is likely that any increased costs would
be passed onto the end user, and therefore detailed impact analysis
would be essential.
Furthermore, the use of alternative modes of transport needs
to be fully evaluated in an attempt to exploit all existing opportunities.
Parcelforce, as an environmentally aware company is committed
to reducing our impact on society and at the same time striving
to improve our commercial performance, is very proactive in pursuing
the potential of the intermodal opportunity. We have already introduced
a daily piggyback service between London and Glasgow carrying
eight trailers per day, which has saved some 703,584 motorway
miles per annum. Furthermore, we are also reviewing the rest of
our network operation in attempt to identify other suitable flows
which could utilise the piggyback concept. However, many operators
do not have our proactive stance on such issues, and it is imperative
that as many people as possible are involved in developing intermodal
transport. Ultimately this may need the help of Government, perhaps
by enhancing the incentives for the use of rail or ensuring a
co-ordinated development of out of town freight villages to maximise
market penetration and the provision of adequate services operating
at the right times to serve the geographic flows of traffic.
Apart from the impact on our trunking operations, congestion
problems are also seriously affecting our collection and delivery
operation. Problems of accessing urban areas are mainly caused
by large volumes of car traffic moving at peak times. To this
end it is envisaged that Local authorities need greater powers
to restrict traffic movements, including deliveries during specified
hours, and a commitment to supply suitable alternative modes such
as enhanced public transport which may reduce the use of the car,
although this may need to be coupled with initiatives to restrict
the provision of parking spaces in urban areas, urban access charges,
time access restrictions etc. From the perspective of attempting
deliveries in urban areas, Parcelforce are committed to minimising
our impact on the environment. We are currently evaluating vehicles
powered by Compressed Natural Gas (CNG), although ultimately we
recognise the need to actually reduce the amount of vehicles in
urban areas. Initiatives such as Metrofreight should be fully
encouraged and maybe the concept of Urban Delivery Centres. These
would effectively be concentration points for goods from numerous
suppliers, all for delivery within the same area. The intention
would be to deliver these goods on one environmentally friendly
vehicle in accordance with the customers requirements. However,
there are obvious problems, not all customers can receive their
deliveries at the same time, systems incompatibility and an increase
in the number of smaller vehicles required.
The emphasis of road transport is now firmly on making the
most of what we have as part of an integrated policy. The sphere
of this integrated approach is wide, and the Government suggests
that their policy of integration means:
(a) within and between different types of transport, so
that each contributes its full potential and people can move easily
between them;
(b) with the environment, so that our transport choices
support a better environment;
(c) with land use planning, at all levels to ensure sustainable
travel choices and reduce the need to travel; and
(d) with our policies for education, health and wealth
creation, so that transport helps to create a fairer and more
inclusive society.
The whole integrated transport policy was laid out in a Government
White Paper, which served to underline the fact that Transport
was back on the political agenda, and "doing nothing"
was no longer an option. For example, congestion will be treated
as a transport problem open to a number of solutions and there
will be no presumptions in favour of new road building as an answer.
In essence, the cumulative results of all these factors mean
that the existing road infrastructure will by and large, be the
same one that industry will have to cope with in the next millennium.
For those companies dependent upon road freight services there
will be obvious knock-on costs and operational implications to
handle, allied to the Government generated pressures to switch
to other modes of transport. These pressures may manifest themselves
via the introduction of road tolling on the motorway and trunk
road networks, in addition to the rising cost of fuel mentioned
earlier.
Such factors represent an alarming trend which could threaten
the efficiency of road haulage. The rising cost of fuel at 5 per
cent above inflation has already been highlighted, but allied
to this is the fact that the cost of diesel in the UK is one of
the highest in Europe. Following the reductions in cabotage laws,
which allows foreign hauliers to undertake domestic journeys in
the UK and closer business integration with Europe, British hauliers
are now facing direct competition from companies based in mainland
Europe. Bearing in mind the fact that continent based hauliers
can fill up their fuel tanks with cheaper diesel before entering
the UK, many can under-cut UK haulage rates leading to inevitable
pressures on UK hauliers. The argument for "a level playing
field" ie: consistent fuel prices across Europe, is currently
gathering momentum, supported by industry bodies such as the Road
Haulage Association (RHA) and the Freight Transport Association
(FTA). However, given that the fuel tax multiplier is a Government
policy tool aimed at making people evaluate the necessity of every
journey within the sphere of the Integrated Transport Policy,
it is questionable whether the trade associations will make any
headway with their campaigns. Indeed, so great is the danger to
UK hauliers that many of them are now embarking on a policy of
"flagging out". This involves registering the business
on the continent and thereby operating the trucks out of that
country. Apart from the fuel differentiation, hauliers who have
"flagged out" also enjoy significantly cheaper levels
of Vehicle Excise Duty (VED), and since the trucks only have to
return to their country of registration a limited number of times
per year, they are free to head to the UK and compete for business
with their lower overheads and thereby the ability to undercut
domestic hauliers.
A further major problem facing the haulage industry is the
potential implications of the Working Time Directive (WTD), which
will restrict the number of hours a driver can work once the transport
sector is included within the legislation. Although the industry
is already strictly regulated in terms of drivers hours, operators
suggest that the introduction of the WTD will result in them having
to employ more drivers, thereby increasing their costs and expediting
the problems highlighted above, and when one considers that the
industry has an alleged shortage of HGV drivers following the
changes to the procedure for gaining a full HGV licence, the industry
does seem to be facing some fundamental problems.
The message to be drawn from these various issues is that
road transport is back on the political agenda, and any Government
interference or regulation via policy decisions aimed to reduce
congestion and promote integrated transport are likely to significantly
add to the costs faced by hauliers, in addition to the increasing
competitive pressures from their European counterparts. This will
require all road based operators to review their operation and
adjust accordingly as their industry makes the transition from
one with little Government intervention and sporting an almost
laissez faire attitude to one which is dominated and directed
by legislative and commercial pressures.
There is therefore a clear need for the Government to protect
the Road Haulage industry from spiralling costs, and ensure that
future policies facilitate well-balanced competition between transport
modes.
SUMMARY
— Growth in the number of private cars is the biggest
single cause of traffic congestion.
— There is a significant increase in the number of light
commercial vehicles being used, particularly in urban areas for
small deliveries.
— Whilst it is accepted there will be a very limited
road building programme, this must be aimed at improving the existing
motorway network by removing bottlenecks or bypassing areas like
junctions 4-12 on the M6.
— Some form of road charging appears to be inevitable,
however this should be aimed at whoever is causing the congestion,
ie users of motorways during peak periods.
— Increases in VED and fuel tax are not going to
solve the problem. There is no evidence to suggest motorists will
be taxed off the road.
— Any additional costs incurred by freight operators
or delivery companies will be passed on to end users.
— There is a need to invest in the rail track infrastructure
to allow normal road going trailers to be carried by high speed
trains between freight terminals.
— Tax incentives, by lowering VED or fuel tax, through
a rebate, should be given to transport operators using high volume
double deck trailers with in excess of 60 per cent extra volume,
whilst still operating within the 38 tonne threshold.
— There needs to be an organised integration of
private car usage with public transport.
— Real tax incentives should be offered to operators
of low emission vehicles.
RECOMMENDATIONS
— Whilst accepting the private car is the real cause
of congestion do not use only fiscal measures to discourage car
usage.
— Ensure Local Authorities understand the need for city
centre deliveries. Without goods on the shelf, city centre stores
cannot function and will move to "out of town" locations,
expediting the congestion problem.
— Use the very limited financial resource for road
building to improve existing infrastructure where it is most needed.
— Offer incentives to use motorways during "off
peak" periods.
— Do not consider abolishing VED and increasing
fuel tax. Motorists using cars for short journeys at peak times
will benefit and industry will pick up the bill.
— Consider an "essential user" fuel rebate
for the freight industry.
— Provide freight only lanes on specific routes,
similar to bus only lanes.
— Encourage the use of environmentally friendly
vehicles, ie double deck trailers, gas engined vehicles through
real financial incentives.
— Provide out of town parking areas adjacent to
motorway junctions with rapid rail links direct into city centres.
— Any new money raised by additional fiscal measures
or taxes must be ring-fenced for reinvestment to benefit the transportation
of goods and people.
— More research needs to be undertaken on how Urban
Distribution Centres will reduce the number of delivery vehicles
operating in city centres
Andrew Blundell
Distribution Policy Manager
February 2000
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