Exploring the potential for making sea containers go all the way (A-Z) through the supply chain

A lot of the manufactures sold by European retailers have their origin in China, and are transported in containers to Europe. The typical way this is done is that each manufacturer in China sends full containers to the European distribution point, where cargo is cross-docked into trailers or units destined for the final retailing point in European countries. After cross-docking much of this cargo is lost for the maritime transport business. If we could combine cargo from several Chinese manufacturers at a cross-docking facility in China - to prepare full container-loads for each retailing point in Europe, then the likelihood of those shipments being made by ships also on the last leg will increase. This will in turn relieve congested European road networks and reduce emissions from freight transport. The SeaConAZ project has explored the potential for such solutions by pooling highly skilled academic institutions both at the European side and in China to investigate how such a solution could materialize to a larger extent in the future. A number of interviews with actors both on the Chinese and European side of the supply chain has been conducted. The project has gained access to data from actual supply chains which are founded on such market models. Based on these data we have developed models for costs and emissions from such logistics solutions. The output is then compared to the characteristics of the traditional solutions. The model runs indicate that this way of organizing the supply chains may have cost-reducing advantages, especially when the fact that the concept better facilitates maritime or rail-based feeder solutions on the European side. CO2-emissions may also fall with this kind of solution, again provided that there is a modal shift towards sea transport or railways on the European leg. The fact that the concept also entails a transferring of logistics activities from Europe to China may limit the environmental benefits, as related electric energy needed is produced by coal-fired power plants to a greater extent in China, compared to a typical European energy-mix. The market model seems to fit best where one has: * Limited order volumes from each vendor, too small to exploit regular FCL services, * Many different suppliers, but where these are located in a limited region in China, * Big enough total order volumes from one region in China to achieve a sufficient capacity utilization of consolidated containers. * Cargo in smaller units which are not palletized (which would make cross-docking in Europe costly), * Retailing points on the European side are far from central European logistics hubs (e.g. Scandinavia, Ireland), * All or a significant part of the product specter coms from China and has limited needs for integration with European products. The main focus is therefore put on shipments which are smaller than full container-loads, destined for countries like Norway, Sweden and Ireland. The financial potential for this kind of solution is highly affected by factors like: * The level of the Asia to Europe container rates. Low rates makes consolidation activities less profitable. Some would rather send half-full containers as FCL, rather than applying LCL solutions. Higher rates would normally make upstream buyer consolidation more profitable. * Exchange rates and relative wages. Part of the motivation for such solutions has been lower costs per main-hour in China, and a higher wage growth and unfavourable exchange rate developments may jeopardize these advantages. * The seasonality of the demand. The focal solution would fit best where one has a stable demand over the year. Being locked in into uplstream buyer solutions when the seasonal fluctuations are high, might result in poor utilization of containers when demand is low. Buyer-consolidated containers also facilitate intermodal solutions on the European side, possibly paving the way for lower costs and environmental impacts in Europe. Our model-based analyses suggests, however, that the reductions in emissions on the European side may be offset by the increased activities on the Chinese side, especially when considering the bigger climatic impact of Chinese electricity production.

Through the encompassed PhD project, detailed models for cost comparison of alterative supply chain designs and for mapping the CO2 footprint has been developed. These are well documented in the PhD thesis. Both the qualitative and the quantitative information reported on in the thesis and the final report is highly relevant for policy makers, researchers, and industry participants when new sustainable supply chain solutions are sought for. In a wider context, the project has strengthened international research collaboration between European research environments in the UK, The Netherlands, Sweden and Norway. The project has also added to the competences of the research community through the successful completion of the entailed PhD project. The candidate has already successfully defended his thesis, and been offered a job at a Norwegian research institute.

If the typical organization of container supply chains from China to Norway could be changed in the way described in this project proposal, this could reduce emissions from freight transport and reduce logistics costs for Norwegian retailers. It would also strengthen the competitive position of maritime service providers. The key issue is to explore what it would take to make more sea-containers go all the way from China to Norwegian retailers. Behind the SeaConAZ project are three strong Norwegian academic institutions with a high competence in freight transport and logistics. To further strengthen the analysis of these international container supply chains, five excellent European and Chinese institutions form part of the consortium. Apart from representing the best expertise on maritime logistics, these institutions also carry with them important networks of relevant actors for this particular supply chain. The Norwegian institutions involved will develop their competencies through the interaction with these highly skilled academic international environments, and the project will also build academic capacity through the financing of a PhD scholarship included in the proposal. The project is also closely linked to an EU FP7 Marie Curie network project (ENRICH). Ultimately, this building of academic quality and capacity will benefit the end users of these competencies, i.e. Norwegian retailers and maritime service providers.