Germany's two main ports, Bremerhaven and Hamburg, have long been the intermodal gateway to Central Europe, and their importance has increased as Eastern Europe has opened up to the West. Two rail services dominate these intermodal movements. Transfracht (TFG) provides port-to-point intermodal service throughout Germany, Austria, Switzerland, and eastern France. Service to Hungary is coming soon. POLZUG Intermodal connects the German ports with all of Eastern Europe, the CIS countries and beyond. To learn how intermodal service in Germany and Eastern Europe is developing, we spoke with the top executives of both of these services: Gerhard Oswald, the managing director of TFG, based in Frankfurt, and Walter Schulze-Freyberg, CEO of POLZUG, based in Hamburg.
Q: Is Transfracht the intermodal subsidiary of Deutsche Bahn (DB), the German national railroad?
Oswald: No. Transfracht (TFG) is owned by the DB's logistics division, DB Mobility Logistics, and HHLA Intermodal, which is a major investor in the Port of Hamburg, so we are an independent company. But we have been around a long time. TFG will mark its 40th anniversary in 2009. TFG carried the initial containers on Germany's first intermodal rail service, and it has been one of the innovators in European international trade.
Q: How exactly how does TFG fit into Europe's intermodal network?
Oswald: First you have to understand that European rail operations and structure are quite different from what you have in the U.S., where there are basically four or five major companies that own all the road beds and the equipment and operate their own systems and provide most of the services, including intermodal. Railroads in Europe are, for now, owned by the various national governments, but other parties can obtain trackage rights to run their own trains. We contract with the DB to run our trains. In fact, TFG is one of the largest operators of block trains in Europe, but there are many others. We compete with them all, as well as with barge and highway competitors.
Q: So TFG is essentially a private intermodal rail operation?
Oswald: No. TFG owns no rail equipment or transportation assets, nor does it run the drayage operations. What TFG provides is the logistics know-how to assure quality combined transport, or what you call intermodal service in the U.S. For the last 40 years, we have focused entirely on service between Germany's two major ports and the hinterland. We take the financial risk of running the trains, which is considerable. We contract for space on DB trains. Our annual fixed costs for these contracts last year was 150m euros [Ed. Note: about $239m]. We are the customer's one point of contact for the service, and this requires a large investment in IT capabilities and customer service.
Q: How about POLZUG? Is it built on the same model as TFG?
Schulze-Freyberg: Like TFG, POLZUG Intermodal is a joint venture. It was founded in December of 1991 as a joint venture of the Polish national freight railroad ( PKP Cargo), DB Mobility Logistics and HHLA Intermodal, so there are many similarities. There is one very big difference. POLZUG is an operating company as well as an intermodal service provider. When the Soviet Union collapsed and Eastern Europe was opened to the West, there was an immediate need for high quality intermodal service, but the national railroads did not have the capital or the expertise to provide this service. POLZUG was created to run the service as well as to market the service. POLZUG has its own equipment, terminals and other operations.
Q: What is the scope of intermodal service that TFG offers?
Oswald: In 2007, TFG moved nearly 600,000 containers or 932,000 TEUs on our AlbatrosExpress trains out of Bremerhaven and Hamburg. That is 2,000 units per week or 15,000 high-speed connections per year to various hinterland terminals in the economic centers of Germany, Austria, Switzerland, eastern France and, soon, Hungary. Delivery to points throughout this network is within 12 to 36 hours.
Each day 20 feeder trains move containers from the two ports to a mid-point hub location. Beyond this hub, we run 320 trains per week, which is double what it was just a few years ago. There are three daily trains to major German cities such as Munich, Stuttgart and Leipzig. There are services six times a week to Austrian terminals in Vienna, Salzburg and Linz. Overnight service to Switzerland is to terminals in Basel, Zurich and Rekingen.
Q: How about POLZUG? What is the scope of its services?
Schulze-Freyberg: POLZUG runs several container trains per day from Hamburg to Poland, Lithuania and Ukraine and four trains per week from Bremerhaven and Rotterdam. It provides on-carriage rail to Russia, Moldova, the Caucasus, Central Asia, Mongolia and Afghanistan. Within Poland, it runs between the major Polish seaports and inland terminals. POLZUG's inland depots provide storage of containers, swap-bodies and trailers. It also provides plug-in capability for reefers and delivery of dangerous goods by licensed truckers. From these depots, POLZUG connects with terminals in the Czech Republic and Slovakia.
Q: It sounds like Poland has become a key transport hub for the East. Why is that?
Schulze-Freyberg: Poland is the rail turntable of Europe today connecting Western Europe with Baltic states, Russia and all the CIS countries. Rail service is the most important freight mode because highways are not nearly as well developed as they are in the West. In fact, Russia has no modern highway system to speak of, so rail is the future for economic development in this entire region.
Also, Poland's economy is advancing around industries that are rail-oriented. Automotive, furniture, machinery, ship-building and chemicals are all growing rapidly. For example, IKEA now makes all of its furniture in Poland. Automotive has become important, not just in Poland, but throughout Eastern Europe with all of the major automotive companies operating or planning plants somewhere in the region. While it is questionable about how much real auto demand there is going to be in this region, the industry is developing significant imports and exports. We now have an agency office in Detroit because of the automotive business.
Q: Does TFG handle nearly all the rail intermodal traffic in and out of Bremerhaven and Hamburg?
Oswald: No, we certainly do not handle all the intermodal traffic. More than 10 million containers moved through Hamburg alone last year, and this number will double in the next 10 years. TFG has about 50 percent of the rail movement of containers in and out of these ports, but the other half is shared by a long list of competitors.
Our competition is really all of the inland services from all the European ports, including truck and barge as well as rail. Services in and out of Rotterdam are our largest competitors, but most of the services go by barge up the Rhine. Rotterdam has a new rail service into Germany connecting at Duisburg, but it has not yet made a huge impact. Less than five percent of the port traffic goes by rail. LeHavre is becoming more competitive to us and will be expanding with another 4 million-TEU terminal in the near future.
The competition in Western Europe is no longer between the major ports because they all are operating at near capacity. The competition is between the services that move the traffic into the hinterland of Europe. Because trackage rights can be obtained on many national rail systems, there are many intermodal competitors. A few large shippers are even looking at running their own trains. Mittal Steel is doing this now. IKEA did this at one time as well. As you can see, the market is very competitive.
Q: How about trucking? Is TFG's intermodal service competitive with trucking?
Oswald: Competition is largely a matter of length of haul and service quality to specific points. Truck handles everything within a hundred or so kilometers of the ports, and it is very competitive to other nearby cities such as Berlin where only about 20 percent of the containers go by rail. To inland cities such as Munich, however, 95 percent of the containers move by rail. Truck should be for the [destinations] very close by, not for most container traffic.
Q: Green logistics is a buzzword, today, especially in Europe. How does this trend impact TFG's AlbatrosExpress service and its competitiveness?
Oswald: Very well. Environmental concerns have become one of our most important selling points. Fuel consumption and CO2 emissions from our AlbatrosExpress trains are 4.5 times less than truck transport. It is even more environmentally friendly than barge in terms of CO2. We have shifted 600,000 road trips per year to rail, which has saved 360,000 tons of CO2 from going into the environment.
Q: Who are TFG's major customers?
Oswald: We work with virtually all the major forwarders and many small ones as well. We also deal directly with a number of major shippers, including Mercedes, IKEA, Karstadt, Red Bull and many others.
Q: You mentioned that IT was a key element in TFG's business. How so?
Oswald: In many ways, TFG is an IT company. We have only 170 employees and the majority of them are some way involved with customer service, most of which is electronic. We have long had an online reservation center that also provides comprehensive tracking from any location. Probably 90 percent of our bookings have been electronic for some time via EDI.
Earlier this year, TFG launched its new Dispo Center, so customers can book shipments with an easily accessible tool via the internet. It is a web-based system that requires no extra in-house software by the users. The average booking takes about two and half minutes. Users can even book freight at the last minute, and many do to obtain discount pricing if any space is available. Most reservations are made online well in advance, as long as three months in advance.
The online tool offers an overview of the status of both container reservations and regular transports around the clock. Customers can access immediate information concerning reservations requiring order data or location of containers.
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