Case. Optimising Logistic Schemes for the Delivery of Cargoes from the EU to the Russian Federation by Railway
The volume of rail freight transported from the European Union to the Russian Federation in physical terms is much less than road freight. However, the Eurostat figures show that growth rates for rail freight hold at the level of the previous year (around 6%) against the significant reduction of road freight transported from the EU to the Russian Federation in the current year. It means that the number of goods transported from Europe to Russia is increasing this year.
The major argument for railway transportation while developing logistic schemes for the delivery of goods from the EU to Russia is the fact that a consignment exceeding one standard truck is more profitable to transport by rail.
Freight costs for 2-3 trucks going in international directions even for relatively short distances, like Central or Northwestern regions of the Russian Federation, are no longer competitive with railway transportation costs. Naturally, the price is not the only factor considered when choosing a transportation scheme, but rail delivery of large consignments, especially for long distances, can be suitable for any kind of goods.
As an example, the case that required the development and optimisation of a logistic scheme for the delivery of ceramics from the European Union to the Russian Federation by railway is described below.
The development of a scheme for the delivery of ceramic tiles from the Czech Republic to the Russian Federation (Novosibirsk)
The task included a number of conditions, both “ordinary” and individual:
- the delivery cost should be minimal preserving the quality of processes;
- the delivery time should be predictable without any crucial changes from the planned date;
- minimal involvement of customer’s employees – TELS employees should resolve transportation issues independently where possible;
- a customs broker providing cargo clearance on entrance to the territory of the EEU should be found as the cargo should arrive cleared to the destination station;
- the logistics scheme should be reliable.
Cargo characteristics and route length
- ceramic tiles are heavy – one cubic meter is about 2.4 tons;
- planned shipment volumes – from 40 tons per one contract;
- international route over 5 thousand km.
Selecting the mode of transport
Taking into consideration the characteristics of the cargo and the length of the route, the specialists of TELS Group of Companies decided to transport by railway as a priority mode for the development of the best delivery scheme. The major argument for railway is the fact that one car can carry up to 68 tons of tiles, which is comparable to the capacity of three standard semi-trailers (in other words, three freight rates for international road transportation over 5 thousand km). Even if the consignment is minimal (40 tons), the cost of rail transportation will be more profitable than by two trucks.
Optimising the transportation scheme
Further, optimisation of the logistic scheme focused on the loading place.
The “standard” scheme for multimodal transportation of consumer goods from Europe implies, as a rule, road transportation of goods to the railway station situated close to the border of the EEU country with further reloading into the rail car. In most cases, such a scheme is optimal due to a number of factors.
A direct railway route from the Czech Republic to Novosibirsk runs via the Republic of Belarus (Brest station). However, the specialists of TELS Group of Companies decided to load the consignment into the rail transport in Riga. This solution allowed to reduce the costs of road transportation and handling at the first stage.
Andrey Lisovsky, Head of the Department of Railway Transportation, TELS Group of Companies:
“The transportation route went through Riga mainly because:
- reloading is more expensive in Brest than Riga;
- road transportation is within the territory of the European Union, which is cheaper and easier than international transportation to Brest;
- the Balts boast of better terminal service.
The standard of the railway gauge is the same as in Russia, so reloading at the border is not required.”
Customs clearance along the route
To meet customer’s requirements for customs clearance along the route, a customs broker was employed at Posin station, Pskov region. All the necessary documents were collected and sent to the broker in advance to speed up customs formalities. As a result, the train passed the station without any noticeable delays.
The benefit of customs clearance at a railway station near the border is that:
- the cargo is no longer in internal customs transit (no additional costs are required),
- customs procedures for the release of goods at the destination station are not required – the cargo is simply reloaded into the truck and transported to consignee’s warehouse.
The developed logistic scheme met all customer’s requirements and allowed them to:
- plan and carry out regular deliveries of ceramic tiles from Europe;
- increase the load in one shipment to 68 tons without a significant increase in the delivery cost;
- optimise the logistics budget of the business.
Andrei Lisovsky: “As a result of the developed rail transportation scheme, TELS customers have received new opportunities to optimise their logistics schemes for the delivery of goods from Europe. If the delivery goes to central and northern regions of Russia, it is more profitable to build a railway route via Riga; and if the cargo goes to the south, it is better to go via Brest, for example. However, all the options are calculated and offered for the customer, including the schemes with sea transport if necessary.”