WP2: IR2.4 Best Practice Implementation Action 3 CIRCLE … · IR2.4 Best Practice Implementation Action 3 CIRCLE LINES Sustainable Port-Hinterland Logistics ... 4 ELEMENTS OF A CIRCLE

WP2: IR2.4 Best Practice Implementation Action 3

CIRCLE LINES Sustainable Port-Hinterland Logistics

OPERATING SYSTEM FOR

COLLABORATION AND SHARING OF UNUSED CAPACITY

Date: Delivered 20 December 2014

Project co-funded by the European Commission within the Seventh Framework Programme Start date of project: 1st January 2012 Durati on: 48 months

Dissemination Level PU Public

PP Restricted to other programme participants (including the Commission Services)

RE Restricted to a group specified by the consortium (including the Commission Services) CO

Confidential, only for members of the consortium (including the Commission Services)

BESTFACT IR 3.3

Page 1 Date of release: 20.03.13

Contact: www.ecoslc.eu [email protected] +31612596407 File name: BESTFACT IR31 Final update 3 20.03.2013.doc Version: Final

Editors

Main editor(s) Herman Journée, ECO Sustainable Logistic Chain Foundation,ECOSLC

Contributor(s)

Contact

www.ecoslc.eu [email protected] +31612596407

Disclaimer This document reflects only the author’s views and the European Community is not liable for any use that may be made of the information contained therein.

BESTFACT IR2.4

Page 2 (55) Date of release: 20.12.14

Contact: www.ecoslc.eu [email protected] +31612596407 Version: Final

Table of contents

1 INTRODUCTION ................................................................................................. 4

2 THE EXTENSION OF THE CIRCLE LINES BASIC NETWORK .......................... 5

2.1 OVERVIEW OF THE STEPS IN SCALING UP. .................................................. 5

2.2 RESULTS FROM JOINING CIRCLE LINES .......................................................11

2.3 SUPPORTING PROJECTS................................................................................12

3 LESSONS LEARNED ........................................................................................14

3.1 CHALLENGES, PREJUDICES PREVENTING TO JOIN CIRCLE LINES ...........14

3.2 DECISION TO JOIN CIRCLE LINES: CONVINCING ELEMENTS .....................16

3.2.1 Description of the process to attract new partners ..............................................16

3.3 THE APPLICATION OF KNOWLEDGE .............................................................24

3.3.1 Alignment to the chain result orientation .............................................................24

3.3.2 The process of implementation of the best practice ............................................24

3.3.3 joining and step by step improving for chain result orientation ............................28

3.3.4 Validation of findings and transferability of the approach to new comers. ...........30

4 ELEMENTS OF A CIRCLE LINES BUSINESS PLAN ........................................31

4.1 General ..............................................................................................................31

4.1.1 Vision .................................................................................................................31

4.1.2 Aim.....................................................................................................................31

4.1.3 Problem .............................................................................................................31

4.1.4 Solution ..............................................................................................................31

4.1.5 Why now? ..........................................................................................................32

4.2 POLICY ..............................................................................................................33

4.2.1 The Market .........................................................................................................33

4.2.2 Competitors ........................................................................................................33

4.3 ORGANIZATION ................................................................................................33

4.3.1 Introduction ........................................................................................................33

4.3.2 Trusted Third Party Role ....................................................................................34

4.3.3 Finance ..............................................................................................................37

4.3.4 General Calculation Model .................................................................................37

4.3.5 Legal issues .......................................................................................................40

4.4 CHALLENGES ...................................................................................................42

4.4.1 Limited chain management innovation capacity .................................................42

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4.4.2 Some regulatory challenges of introduction of short sea shipping in the basic line..............................................................................44

4.4.3 Other Challenges for scaling up .........................................................................44

4.4.4 Companies and port connected with the actual Circle Line System ....................45

4.4.5 Strategy .............................................................................................................46

5 STRATEGY AND POLICY IMPLICATIONS .......................................................47

5.1 CIRCLE LINES STRATEGY FOR PORT HINTERLAND CHAIN MANAGEMENT .....................................................................................47

5.2 FROM POLICY TO PRACTICE ..........................................................................48

6 RECOMMENDATION FOR IMPLEMENTATION STEPS ...................................50

7 FUTURE DEVELOPMENT .................................................................................53

8 REFERENCES ..................................................................................................54

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1 INTRODUCTION The scope of this implementation project is a description of the daily practice of operations, lessons learned, future scale of operations and elements of the innovative sustainable logis-tics chain operating system, Circle Lines. The description can be considered as a “handbook” that could support interested parties to join and implement the system. The report is not intended as a scientific analysis for validation of results. This will be consid-ered as follow up. Circle Lines is fully in operation as a sustainable chain management approach and involves a number of commercial companies. The approach that is followed in this project has therefore some limitations. The descriptions are based on insight in daily practices of commercial com-panies that collaborate in a sustainable chain management system. The information is as-sembled in personal meetings with representatives of the companies and authorities in-volved, with representatives of companies with an interest to introduce the chain approach of Circle Lines and from reports and press publications. Confidential company data are shared with the author to get insight in the functioning of the system but publication of these confidential details from each of the companies is not al-lowed. However if aggregated to a more general level publication of the findings is sup-ported, as is done. All partners have a common view that sharing chain information and good practice experi-ence will lead to improvements for all but at the same time there is a need to protect confi-dential company data. This approach limits the possibilities to inform about, sometimes, small details that have led to cost reductions and environmental improvements of the total chain result. The total of the improvements is in effect the result of many small improvements in all partner organisations and the total chain organisation and a few larger scale improvements. The improvements that are realized by the system in the end to end chain is the sum of many small improve-ments in daily operations and management. The common denominator of the improvement is: a change of the mind-set that leads to a change of the traditional management method within and between companies that cooperate in chain management.

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2 THE EXTENSION OF THE CIRCLE LINES BASIC NET-

WORK Introduction Circle Lines is an innovative sustainable logistic chain operating system. It is constructed in the period 2008 to 2010 from elements of innovative proven practices that improved parts of chains. These practices have been developed and implemented in the last 5 years by large shippers and seaport container terminals in the UK, Netherlands and Belgium. Each of the practices proofed to deliver substantial cost reductions and environmental improvements in the part of the chain in which they have been applied. One of these proven practices is an innovative port hinterland sustainable chain collaboration that was operational in 2009. The Dutch transport newspaper, Nieuwsblad Transport of 15 April 2009 (and the Port of Rotterdam Website) reported on this example of chain sustaina-bility improvement system. The system realizes on time delivery guarantees, capacity guar-antees and paperless transport management in large parts of the chain. It also delivers part transparency of chain activities for all partners. One of the core chain elements of this exam-ple is the cooperation between shipping line Maersk/container terminal operators APMT and ECT in Rotterdam and CT/Vrede Steinweg in Amsterdam. Basic cargo streams at that time have been delivered by Veolia Environnement: namely waste. Other connected companies: Rheincontainer (barge operations on the river Rhine, DéCéTé inland container terminal in Duisburg (Germany) and inland terminal Willebroek (Belgium), with connections to the Port of Antwerp. However the core activity between Rotterdam and Amsterdam was interrupted during the economic downturn. Further Veolia had to change and partly interrupt its operations substan-tially at that time. The Circle Lines model can be seen as the integration of this example and other examples of proven practices extended with other innovative chain operating approaches into an inte-grated sustainable chain management model. The model has been successfully tested in 2010.

2.1 OVERVIEW OF THE STEPS IN SCALING UP. The start of Circle Lines in the market In October 2011 SCS Multiport, one of the partners in the development of the Circle Lines system and tests in practice started a new sustainable chain operation based on the Circle Lines sustainable chain operating system. A basic Circle Line was created, connecting the Ports of Amsterdam and London Tilbury with connecting Circle Lines on both sides. The basic cargo that started the system was containerized bulk: industrial waste (Refuse-de-rived Fuel: RFD) from the London Region, delivered by SitaUK, the waste and recycling com-pany - a subsidiary of SUEZ Environnement from the France based Group de Suez. There-fore Sita has been awarded a trans-frontier shipment (TFS) consent from the UK Environ-ment Agency to transport the material.

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The waste is used for the production of renewable energy in ‘waste to energy plants’ in The Netherlands. A new type of container had to be developed to create the possibility to transport this bulk cargo in the container system. The first ship contracted was the short sea vessel, Vantage, (3650 ton, 99,97x15.85 m). Its capacity is 354 TEU but in the first period only waste was transported: 75 containers of 40 Feet, that means 150 TEU on each trip. After a short period of learning and of fine tuning of the collaboration between all relevant partners into a smooth functioning full logistic chain process, the Circle Line became a relia-ble system (98% on time delivery end of the chain). From this moment the core Circle Line was in place and activities started to add other Circle Lines whereby the first Circle Line was considered as the basic system. A first contract of 200.000 tons industrial waste (RFD) per year started the operations, to be delivered to the Amsterdam based waste to energy plant.

Halfway 2012 Sita UK signed a second agreement to deliver an additional volume of 200.000 tons RFD for another Waste to Energy Plant in The Netherlands: HVC in Alkmaar, around 45 kilometres North of the Amsterdam Port. Many additional innovative new waste containers had to be built to transport this cargo. In 2014 it became clear from statistics of the UK Environmental Agency that the Netherlands remained the largest market for waste derived fuels from the UK, with around 764,853 tonnes of material sent to the country up to the end of July 2014.

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The first extension: filling empty containers The system proofed to be a stable logistics operation soon after its start. From that moment a new step was developed: filling the empty waste containers that returned to the UK. Another bulk cargo was found that had to be containerized. A manufacturer/shipper of traditional bricks for house building showed an interest in the new frequent service and started first tri-als of the new system. A large number of stone racks have been built to transport them on trucks and in containers. Connecting the production of bricks and stones with the new Circle Lines reliable logistics system created innovative possibilities for improvements in the pro-duction process, in the working processes of the end-users: the real estate building compa-nies involved, as well as in companies of other partners in this chain. It also led to a substan-tial expansion of this niche market. Amongst others the set-up of a depot system apart from the production site created new options for expansion. This in turn led to the need to expand the terminal capacity and capacity in other parts of the Circle Lines system. It also led to a substantial improvement of the on time delivery and offered new options for last minute delivery by the creation, first of 2 shared depots, in Amsterdam and close to the London/Tilbury port followed by own SCS Multiports depots in Amsterdam, Zeebrugge, Til-bury, near the port of Hull and Grimsby in Caistor, and in the port of Blyth, close to Newcas-tle. This new network of hubs improved the logistics for the delivery and stock holding of house building projects in the UK, Scotland and Ireland reduce transport and logistics costs and environmental impact of the transport and improved the logistics quality of on time deliv-ery. A regular port hopping service is provided from 2013 starting with 12 million bricks and in-creasing rapidly to 72 million. Further growth is expected. In addition also other types of cargo are booked on the Circle Lines, amongst other food products.

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Nieuwsblad Transport reported on 13 November 2013 : SCSMultiport hires parts of the ACT container terminal (main-contracted by Hutchison) in Amsterdam together with partners. This was agreed to have more space for its fast expanding building bricks and stones export to the UK partly as return cargo in empty waste containers. Between February and July 2014 a test was held with an extension of ports involved from 2 (Amsterdam and London Tilbury) to 5: Amsterdam, Rotterdam, Zeebrugge (Belgium), Radi-catel (France), London Tilbury, with an additional short sea ship of around 358 TEU. Www.lcdf.co.uk reports on 8 May 2014: SCS Multiport expands its CWT service at Tilbury London Container Terminal will service five calls per week London Container Terminal, owned by Forth Ports Limited, and Amsterdam based SCS Multiport who operate in the UK with CWT have now expanded their current service from three calls to five calls per week at Tilbury The market-driven decision to increase the service to five calls per week will see volumes of building bricks and stone being imported from their own Amsterdam depot to Tilbury for the UK housing market. CWT will create a new depot for their bulk services in Tilbury giving them depots on site at both Ports. Anton van Hattem, Director of SCS Multiport said: “We have seen an increase in demand for our service and this has led to this expansion from three to five calls each week to Tilbury. Tilbury is our ‘home port’ in the UK and we receive an excellent service from the team at London Container Terminal. The port offers us an addi-tional advantage of warehousing space which allows us to centralise all of our activities in one convenient place.” Commenting on the announcement, Perry Glading, Chief Operating Officer of Forth Ports (owners of London Container Terminal) said: “It is great to be working with SCS Multiport on this increased service. This is good news for Tilbury and SCS and shows a healthy sign of improving market conditions in the UK. By us-ing our strategically placed ports and our warehousing facilities we are able to bring many benefits to SCS’s operation and it complements our Portcentric objectives.” On 13 May 2014 Nieuwsblad Transport also reported on this extension and mentioned that the waste service extended from 3 to 5 times per week and that one short sea ship of the same class is added to the existing system: short sea ship Fiorano (3871 ton, 99,97x15,85; 354 TEU. The new ship and the higher frequency led to a substantial increase of transport capacity. This new Circle Lines based logistics for bricks extended with the new capacity has led to a very sharp growing export volume of bricks to the UK market. This led to exceeding the ca-pacity of the empty waste containers.

On 31 July 2014 www.forthports.co.uk reported: Tilbury and Zeebrugge’s Strategic Agree-ment signs up SCS Multiport to deliver Far East Deep Sea transhipment and continental loads between the container ports of Tilbury, Amsterdam and Zeebrugge. This new regular service, which begins on the 3rd of August, will run twice weekly directly between Zeebrugge and Tilbury, connecting East / West shipping lanes with the main trade route for London and the South East. The service brings a new option for both imports and exports to reach the Far East or London and its surrounding areas, without any loss in transit time, and without the need to road goods long distances to reach their destination.

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Commenting on the announcement, Perry Glading, Chief Operating Officer at Forth Ports (owners of Port of Tilbury and LCT) said: “This is great news and a real opportunity to capitalise on Far East transhipment opportunities at both Ports, as well as capturing new vol-umes through the CWT European Network. We welcome SCS Multiport and CWT to the partnership and with their expertise, we can offer an alternative for large deep sea vessels. Tilbury has a unique position in the UK at the heart of the London and South East markets and using a regular feeder service from Zeebrugge, customers can take advantage of the ex-cellent connectivity and accessibility that we have to the UK markets.” Joachim Coens, CEO of the Port of Zeebrugge said: “This connection gives a unique and faster connectivity for our deep sea cargo into the heart of London. Furthermore, it strength-ens both ports’ network into the European market. We look forward to working closely to pro-mote the service into the market.” Carla Debart, Managing Director at APM Terminals Zeebrugge NV said: “We are very pleased that CWT chose Zeebrugge to expand their network. We welcome all new custom-ers and are looking forward to a fruitful cooperation which will also be beneficial for our exist-ing customers. Securing these connections will create more flexibility for our customers that is often needed.” Anton van Hattem MD of SCS Multiport said “We worked hard to develop this service with our partners Forth Ports, London Container Terminal and CWT-UK, Port of Zeebrugge, APMT and PSA. It is amazing what we have achieved in a few months and it shows what the strength of combined forces are. It is a pleasure to work with our partners and grow the business a few steps further than we can do as SCS Multiport”. Worldmaritime news.com on 1 August 2014 and www.apzi.be/news on 7 August 2014 add to this information that SCS Multiport starts services for its shareholder CWT to its locations in Western Europe, Rumania, Bulgaria and Turkey. The services delivers an East west link for Tilbury’s London Container Terminal and a North/South link for Zeebrugge. This offers direct links between the Circle Lines system and deepsea services to the Far East and South America via the container shipping lines: Maersk, (hj:nr 1 on the world list of larg-est container shipping lines), MSC (nr5) and CMA-CGM (nr 10). It offers the option to con-nect Far East cargo arriving in Zeebrugge with destination UK with Tilbury. Joachim Coens, CEO of the Port of Zeebrugge said: “This connection gives a unique and faster connectivity for our deep sea cargo into the heart of London. Furthermore, it strength-ens both ports’ network into the European market.”

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In July 2014 another addition to the logistics system of waste export was agreed: Forth Ports, the owner of London/Tilbury Port announced a long-term partnership with SITA UK. The Port of Tilbury will become major recycling hub in South East of UK. About 3 million tonnes of waste is likely to be shipped abroad for use as fuel this year, according to waste company SITA UK – almost double the 1.6 million tonnes exported in 2013 and up from less than 1 million tonnes in 2012 (www.telegraph.co.uk aug 2014). E-commerce examples Online buying and selling first of air tickets and now of a wide range of products has led to fully new systems of transport and logistics. Companies like Amazon (USA) and similar but substantially smaller companies like Bol.com in the Netherlands and Belgium, introduced systems to buy and pay on line, to look 24/7 in the chain and to organise their transport and logistics on the basis of end result of the chain (at the customer) in costs and quality. The CEO of Bol. com explained in 2014 on business radio Netherlands the innovative ap-proaches of transport and logistics by his company that deliver the possibility to make 12 transport and logistics companies collaborate and operate as one chain result oriented com-pany, needed to make sure that the product is delivered on time with a 98% guarantee. The role of a trusted third party amongst others in alignment of their operations into a chain ori-ented operation is a very critical success factor. Only few information is available about the way of logistics operations of Amazon in this respect but this confirms a similar approach. In Circle Lines these activities are also key critical success factors.

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2.2 RESULTS FROM JOINING CIRCLE LINES Statements mentioned in contacts The results of the Circle Lines are realized in the very competitive world of transport and lo-gistics and therefore very close related to confidential company data. Especially where inter-nal logistics and management approaches could be introduced confidentiality had to be agreed. Therefore the results had to be described in general terms. However they are related to dif-ferent types of companies involved.

1. Shipper : the proof of practice of the Circle Lines system is sufficiently convincing to join. Its approach fits in our Strategy and CSR policy that aims at a substantial im-provement of the sustainability of our transport and logistics. We expect from its fre-quent, reliable services improvement in our company logistics and production pro-cess.

2. Shipper : we analyse every possible option to bundle cargo with other shippers in and outside Europe in relevant transport and logistics corridors. The Circle Lines ap-proach connects to the requirements of our approach: a trusted third party who over-views the full chain operations, a trusted data management system, a chain control tower and no investment needed on beforehand to join.

3. Shipper : the frequent, reliable and scheduled service delivers new options to intro-duce new efficiencies in our internal logistics and also in our production process. The option to connect to additional hubs adds our presence near to the market and offers options to realize urgent last minute shipments without raising its cost level. Espe-cially the avoidance of road congestion is an advantage in our planning. In addition environmental improvements of the environmental impact of our transport can be re-alized.

4. Manufacturer : the deliveries of raw material via Circle Lines had a positive effect on our production planning and adds new efficiencies in urgent shipments where the ur-gency was caused for example by incorrect estimates of raw material needed that would delay the production and contracted delivery time. Reliability and new shared depots in low cost areas improved the efficiency of our production and lowered its costs and took away the need for creation of costly timely storage in inner city areas. In total the production could substantially be increased. This has led to a new scale of production that offered new efficiency possibilities, new products and a wider network clients.

5. Shipping Line : the frequency, reliability and scheduled services of Circle Lines gives us the trust to share empty containers for refilling during return to the contracted loca-tion and to create a win-win effect.

6. Seaport Terminal : the frequency, reliability and scheduled services of Circle Lines feeder system offer new options to connect to niche markets, leading to increase of activity in our port and preservation of jobs or expanding jobs. The innovative logistics improvements could be included in our Terminal Operating System and added to the efficiency of the terminal and attractiveness for new clients.

7. Seaport : our connection to Circle lines offers options for frequent feeder services that connects us with important deep sea services to countries and cargo streams that are central in our strategy. This offers also options to extend our network with other ports in Europe that could lead to new activities and jobs in our port.

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8. Small Ports nearby industrial regions : we are now connected via Circle Lines with a new highway to potential new markets. This started already new investments in de-pots and in activities in our port that is expected to lead to expanding jobs.

9. Trucking Company : joining Circle Lines has led to substantially improved loading levels of our trucks and a higher usage per 24 hours and contributes to the sustaina-bility of our company.

Examples of environmental and cost improvement

1. Shipper: cargo is transported in The Netherlands, by truck only, on a distance of 300 km of which only 50% is fully loaded. This cargo transport has been connected with the Circle Line that delivers stones export to the UK in a high frequency and in a scheduled service of trucks and barges. The truck had to add 25 km to its journey but can return fully loaded. The total road distance is now 335 km but 90% is loaded.

2. Three shippers delivered their cargo to Amsterdam by trucks that returned empty. A connection is made with a Circle Line inland waterway transhipment location in a dis-tance of 60 km, the cargo is transhipped on a barge and is transported by waterway for the second 60 km. The trucks are now empty over 60 km and the result for each delivery is 120 km less road kilometres.

3. Shipper: cargo used to be transported between Zeebrugge and Amsterdam by truck in 80 trips per week. The cargo is now connected with the new Circle Line based on short sea shipping. This reduced the number of truck movements to less than half.

2.3 SUPPORTING PROJECTS During the period October 2010-November 2014, several supporting projects have been setup to deliver solutions for challenges for further extension of Circle Lines networks to the European Scale and to deliver tools that creates a higher management capacity of the Trusted Third Party Role.

• Extending the basic Circle Line network from 2 to 6 seaports including pilot with switching Port Hinterland cargo from continental transport (truck, train, barge) to short sea shipping as the basic system in Circle Lines port-hinterland transport and logis-tics

• Test of extending the basic network from 2 to 6 seaports using the working name: Coast-Port-hopping

• Development of a Chain Dashboard (IT Platform/ Chain Control Tower) with all rele-vant chain data and chain management information

• Development of a basic Quality management System, Standards and Certification for cooperation between chain partners in sustainable chain management

• Chain cash flow as alternative for bank loans in pre-financing SME’s in chain opera-tions

• Development in and partial test of software modules to “look and book in a certain port hinterland chain“

o Have a 24/7 overview of unused capacity in containers, trucks, barges, stacks and cranes in terminals and

o Of available cargo o Offer an on line booking option for shippers to book this capacity for a part or

the whole of a certain port hinterland chain o Offer an online tariff negotiation Tool to set the tariff

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o Offer an on line contract Tool to fix the contract o Offer an in line message system to start the operation

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3 LESSONS LEARNED 3.1 CHALLENGES, PREJUDICES PREVENTING TO JOIN CIRCLE

LINES Introduction The overview below shows a number of challenges: convictions and prejudices, that are pre-sented in first meetings with potential new partners in a Circle Line collaboration. These les-sons are learned from the first period of operations of the Circle lines network system in the market: the period October 2010 to November 2014. Solutions found and approaches that have been followed are added. The examples are based on different sources: innovative good practices introduced for parts of a chain developed and introduced by large shippers, interviews with partners in the Circle line, interviews with representatives of large companies in ports and logistics and representa-tives of authorities with an operational function in the Circle Lines network. The overview could be seen as part of a checklist for preparing for sustainable chain collabo-ration in the Circle Lines, sustainable logistic chain operating system.

CIRCLE LINES INNOVATION: NO AUTOMATIC ACCEPTANCE LIST OF VIEWS FROM THE PUBLIC AND PRIVATE SECTOR

CHALLENGE SOLUTION APPROACH COMPANIES LOGISTICS CONCEPT

Disbelief that truck only is not cheaper than the Circle Line network approach with more tranship-ments

Existing broad sup-ported view that includ-ing inland shipping makes a systemized concept not feasible

Approach new partners based on proven prac-tice

Building upon proven practices. Large esti-mated companies with experience to involve in market the concept

Perceived costs Only total chain costs to be made leading princi-ple

Calculation model for new partners based on figures from practice

Perceived too low qual-ity level because of in-land barges involvement

Collaboration in the full chain. Higher on time delivery quality for the full chain than truck only.

Show experience from practice: end to end on time delivery 98% against truck only (in the same port city con-gested areas: 70%

Transport time with barges too long

Introduction of plan abil-ity as criterion for quality

Make facts transparent for average transport time practices from truck, train, barge short sea ship and show cost advantages from plan ability of the whole chain.

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Reliability not available in inland waterways transport

Guarantee fall back so-lution when transport in-terruptions occur or fast moving is needed

Show successful prac-tices

Trust Distrust for other part-ners especially when they are also competitor

IT systems for transpar-ency of all chain opera-tions, time needed for operations and of all costs involved

Dashboard with chain data, partly automatic made available 24/7 and partly still manual

Knowledge level No insight in cost reduc-tions due to the chain approach

Standardized calculation model with figures from practice from all part-ners

Chain information made visible via inter-views by an independ-ent logistic specialist

Insufficient knowledge about logistics chain col-laboration with the rele-vant employees of the partner companies

Development of training modules for basic knowledge level. Perma-nent training in sustaina-ble chain management for collaborating part-ners

Basic sustainable Lo-gistic Chain quality management system to be introduced as a first step in alignment to chain orientation

Not include all cost and income effects to com-pare actual transport model with Circle Lines network/chain model, such as cost reductions and additional income from added value prod-ucts and services in the total chain costs that have been delivered by following the chain ap-proach

Deliver insight in the cost reductions

Develop a knowledge base in personnel in-terviews with con-nected managers

CHALLENGE SOLUTION APPROAC Willingness to change

Insufficient drive or no mandate for pre-invest-ments in training and IT

Inform top management as well as departments about the system

Inform market parties with interest in innova-tive sustainable ap-proaches. Develop a model for financial support for the starting period, from subsidies or from the chain cash flow

No support from top management

Develop a business case for top manage-ment

Information to top management about proven practices from esteemed companies

GOVERNMENTS Conflicts of interest between political goals

Conflict of interest be-tween economic and other interests, espe-cially from the residen-tial sector extension in-terests

Political lobby based on policy and regulation. Assist governments in creating a view on goods transport

Use good practice ex-amples of government oriented transport pol-icy and regulation

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The assistance of a mu-nicipality is needed for the extension of the port/transport sector but the advantages of this extension stay with an-other authority (region or country) and the daily disadvantages stay in the municipality

Improved explanation of the advantages for the municipality. Involve the municipality in the re-gional or national ad-vantage respectively swap advantages

Involve a municipality in a collaboration that delivers also other ad-vantages.

No policy available Regional or municipal government has no spe-cific transport policy.

Create a policy that de-livers the insight be-tween different govern-mental policies and cre-ate a support on the ad-ministrative and political level that can be used as an assessment framework for port, transport and logistics related plans

Use the new policy as an assessment frame-work for decision mak-ing on plans for exten-sion of port, transport and logistics.

Different time hori-zon

Large difference be-tween the planning hori-zon of the government (10 years or longer) and companies (1 to 3 years).

Introduce a pilot project for the total or subpro-jects that deliver the op-tion of delivery of final results within the politi-cal period of 4 years.

3.2 DECISION TO JOIN CIRCLE LINES: CONVINCING ELEMENTS Application of the lessons learned from the Circle Lines conclusions

3.2.1 Description of the process to attract new par tners

General approach

The operators of companies that are invited to join forces and join Circle Lines often report prejudices and challenges that prevent them from joining Circle Lines and from acting together as one chain operating company.

The most convincing argument that can convince companies is the evidence that the operation is functioning in practice in the market: a successful test in practice is not seen as sufficient.

Companies will not easily change to a new system if their existing system is ade-quate. For the introduction of this system they have gone through a lengthy, costly and risky decision making process. That means that the system has been checked against a number of internal and external requirements, such as for example: several

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types of risk, liabilities, permits that have been based on existing systems, costs, prof-itability, environmental impact, needs for adapting IT-systems, needs for introducing new IT systems, equipment or new personnel, effects on reputation, flexibility to adapt to sudden changes in the market.

An important blockade can come from the existing systems, such as management systems and operating systems if these do not have sufficient flexibility to enter new approaches.

Therefore the requirements to join Circle Lines are held at the minimum. In effect companies are allowed to join with their existing systems and personnel if they com-mit themselves to applying the Circle Lines approach in a step by step way in their own tempo.

This approach leads to Circle Lines partners that collaborate but have different levels of integration of the Circle Lines approach in their own operating system.

The process to attract new partners takes a number of steps, such as the following: • Preferably companies are selected to be approached that are known from be-

ing active in introducing sustainable chain thinking and acting in their company or that from the characteristics of their products and the related logistic system could contribute to the existing Circle Lines

• Personal presentation of the system to the managing director • Discussion of the details of the existing operating system and the logistics of

the new partner to reveal operation or management details that could be im-proved and improve the total chain result. Improvements also lead to cost re-ductions that make internal budgets free to further invest in improvements.

• Presentation of options for improvements for the new partner if joining Circle Lines from lessons learned in Circle Lines so far and from good practice expe-rience.

• The confirmation that no pre-investment is needed, be it in systems, equipment or personnel, that means that no financial hurdle is created to start

• A model calculation that could show the potential cost and environmental effect of these options for the company if adapting in steps its operating system to bring it in line with a chain approach

• Proposal to include the partners operating system, as it is, in the Circle Lines approach, that means without the need for immediate investment in systems, equipment or personnel

• Commitment to (try to) include the Circle Lines approach in the operating sys-tem of the company

• Quotation for the delivery of the services of that company as part of the chain operation

1.1.1. Elements that influence the decision to join or to support

The table below is an extension of the table in the former chapter and mentions more ele-ments that need to be covered after an interest for joining Circle Lines is shown. They are mentioned in the interviews that have been held during the preparation of this report with the manager of the system, new users, experienced users and companies that consider using

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the system. The elements can be seen as a guide for companies to join the Circle Lines op-erating system. These elements can also be used as the main guiding principles from which key performance indicators can be derived to manage the system and for the permanent im-provement of the system. In the table concrete figures are presented. These are derived from a variety of sources, such as the good practice descriptions for parts of the chain that are incorporated in the Cir-cle Lines model, conversations with company representatives that joined the Circle Lines and companies that showed an interest to join. Cost reduction information is only presented as estimates only and an indication of scale. Information could not be presented, if directly re-lated to the different partners but had to be generalized because this information is consid-ered as confidential by these companies that are operating in the very competitive world of transport and logistics. Some concrete figures are just global estimates by representatives of partners.

AD-VANTAGES

DIS-AD-VANTAGES

NEW IN-COME

NEW COSTS RISKS CHAL-LENGES

GENERAL No pre-in-vestments needed to join, “only” strict com-mitment to align opera-tions to chain result orientation.

Partner has to take more com-panies and interests into consid-eration

Alignment leads to im-proved inter-nal logistics processes and there-fore cost re-duction that creates budget for investments. New insights stimulate creativity for additional other inno-vations.

New investments in new hardware and software are only done after first cost reduc-tions from joining have been real-ized

Confidential data are used by other part-ners to ap-proach and take away clients

Keep trust between partners 24/7 on the level, re-quired for structural coopera-tion

SHIPPER

Quality guar-antee

More par-ties in-volved therefore more ad-justing needed and therefore leading to internal costs

Lower costs in several depart-ments. Good practices: can be be-tween 5 and 10%.

Training person-nel into chain ori-ented working methods

More tran-shipment could mean more risk of delay or of damage

To ensure that ad-vantages from the system that come in other de-partments will be shared with logis-tics depart-ment

AD-VANTAGES

DIS-AD-VANTAGES

NEW IN-COME


Better envi-ronmental reputation with permit giving au-thorities

Costs and process time for permits decreases

Investment needed in soft-ware for digital documents

Insufficient reliability connection points be-tween Cir-cle Lines

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Better op-tions for bundling of cargo and therefore cost reduc-tions

Lower stock financing. Good prac-tices: can be between 10 and 30%.

24/7 accessibility needed leads to higher personnel or automation costs

Competi-tors use chain infor-mation to approach clients

Anticipates to upcoming legislation

Digital transport and sustain-ability infor-mation also usable for monitoring and improv-ing of legal reports to environmen-tal authori-ties. Cost re-ductions from intro-ducing good practices: 1/10 Fte

Costs of improved internal communi-cation by new tasks for person-nel and new IT systems (hard-ware/software)

CONTAINER TERMINAL IN SEAPORT AND INLAND PORT

Steadier oc-cupancy of personnel and equip-ment

Sharing cli-ents with competitors

Less over-time person-nel plus effi-ciency im-provements by introduc-tion of good practices: cost reduc-tions over-time up till 50%.

Investment in soft-ware for large per-centage digital documents

Competi-tors misuse chain infor-mation to approach clients

To ensure that ad-vantages from the system that come in other de-partments will be shared with logis-tics depart-ment

AD-VANTAGES

DIS-AD-VANTAGES

NEW IN-COME


Less termi-nal conges-tion of peaks in work

Costs of transport planning will decrease. Good prac-tices: can be up till 1/10 Fte.

Almost 24/7 open requires new per-sonnel costs or automisation costs.

Insight in-formation of competitors could lead to reputa-tion dam-age


Less costs for repairing failures by more trans-parent plan-ning. Exam-ple from good prac-tices: cost of

Contributing to central trusted third party chain organization.

Undercut-ting of tar-iffs by out-siders in or-der to pre-vent Circle lines from starting

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repair of fail-ures is around 20% of operating costs. Can be reduced with 20-30%.

Increased options for logistics and sustainable innovations


Personnel capac-ity needed for chain IT systems including training.


TRUCK OWNER

Steadier oc-cupancy of the equip-ment

Better occu-pancy of truck and therefore lower costs and higher income. Good prac-tices: im-provements could be around: 43% - 80%.

Training person-nel to be intro-duced in the sys-tem. Additional training budget needed.

Risk of los-ing cargo to inland ship-ping.

AD-VANTAGES

DIS-AD-VANTAGES

NEW COSTS NEW COSTS RISKS CHAL-LENGES

Piggyback on innova-tions in lo-gistics and therefore new work

Costs of transport planning will decrease. Good prac-tices: can be up till 1/10 Fte.

Investment in technical systems


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SHIP OWNER Steadier oc-cupancy of the ship

Better occu-pancy of ship and therefore lower costs and higher income. Good prac-tices: im-provements could be around: 43% - 80%.

Training person-nel to be included in system. Addi-tional training costs.

Undercut-ting of tar-iffs by out-siders in or-der to pre-vent Circle lines from starting

Better chances to learn about and intro-duce logis-tics innova-tions


Investment in soft-ware for digital documents.

Brings policy into practice

Increased results of environmen-tal improve-ment

Investment in technical parts of the system

Sustainabil-ity in-creased: training, cost reduction, environmen-tal improve-ments

Contribution to central third party chain manage-ment

AD-VANTAGES

DIS-AD-VANTAGES

NEW IN-COME


New costs for in-ternal communi-cation


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OWNER PORT OR INDUSTRY AREA OR REAL LOGIS-TICS ESTATE

Better mar-keting repu-tation by better ac-cessibility

Quicker in-crease of value be-cause of ac-cessibility guarantees. Percentages from good practices; 2-8% higher value com-pared to area’s only accessible by trucks.


Cost and process time of permits reduced.

New costs for in-ternal communi-cation: personnel capacity and IT systems.

Better chances to learn about and intro-duce logis-tics innova-tions


PORT MAN-AGER

Increased results in en-vironmental improve-ment

Improved sustainabil-ity: training, cost reduc-tion, in-creased in-come, im-proved envi-ronment


AD-VANTAGES

DIS-AD-VANTAGES

NEW IN-COME


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ENVIRONMEN-TAL AUTHOR-ITY

Better re-sults from environmen-tal improve-ment activi-ties



GOVERNMENT Brings strat-egy and pol-icy into prac-tice

Increased results in en-vironmental improve-ment



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3.3 THE APPLICATION OF KNOWLEDGE

3.3.1 Alignment to the chain result orientation

The most critical success factor to put Circle Lines into existence is aligning new partners to “chain result orientation” of their management and operations and to keep it permanent. Only this approach delivers the aimed quality (reliability) of 98% end of chain on time delivery, cost reduction, flexibility towards disruptions or urgent deliveries, environmental improvement, so-cial improvements. This requires full chain control, of each of the Circle Lines involved and of the connection points between them. Collaborating partners that allow full chain approach al-low in effect an active role of an outsider in their own companies’ operations. They only will agree with this approach if this is executed by a trusted third party and when there is suffi-cient trust that their chain related data are managed in a trusted way.

Alignment means that existing methods and habits of a company that influence logistics, on the general management level as well as on the daily operational level have to be adapted and have to be kept in the new mode. This is an intensive process that is executed by a per-son that is trusted by all collaborating partners. This requires full insight of the trusted third party in the transport and logistics operations of the new partner company and insight a in many confidential company data to find where logistics improvements could be realized. The logistics processes and their costs have to be understood perfectly well to find elements for improvement and ways for alignment to the chain result orientation that delivers cost reduc-tions for the partner involved as well as for the chain as a total.

The alignment method is based on many person to person contacts between operational em-ployees and supported by IT systems, organized in regular personal visits by the trusted third party.

3.3.2 The process of implementation of the best pra ctice

General Approach

Lessons learned by one partner in a Circle Line are directly shared with all other partners and where possible directly implemented by them as a new approach. Where transport and logistics involve daily many very practical handlings an “innovation” or a different way of working may require only a very small change. However when this change leads to percent-ages of cost reduction in one partner company the total chain result gains too in a structural manner.

The process of implementation of the Circle Lines approach in a company delivers two types of results: 1. improvement of cost and quality results of the total chain operations and 2. im-provements of the internal logistics of the participating company. The chain results strength-ens the position of the common service organization, Circle Lines that now offer better cost and quality options that could attract more clients. The company results improve the broader

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position of the company and can be considered as the direct effects of joining Circle Lines that could reduce the need for part of existing budgets and thus creates new budget.

The trusted third partner/Circle Lines expert visits frequently the partner organization to ana-lyze options to adapt details of its operating system in small steps that could improve its con-tribution in improving the end result of the chain in terms of costs, cash flow, on time delivery, and learning by improving effects for personnel.

Each visit may lead to such small step of improvement. Logistics is a very practical system. Even a small detail in improvement can have an important effect on the overall costs of the chain.

The improvement of the own operations is seen as a direct result of joining Circle Lines.

In the first Circle Lines system a model was developed to share revenues between collabo-rating partners in a chain in an objective way.

After starting operations in practice this model was not followed because it was in the phase of starting operations considered as too complicated and too time consuming, for example in dealing with differences in interpretation of each partner’s contribution and costs.

In the actual system another approach is followed as is described above to prevent these dif-ficulties.

Now the added value from joining comes from improvements done by the participating com-pany itself while trying to act as a chain oriented company and while keeping the Circle Lines system functioning as collaborating partner. The partner is assisted in doing so by the trusted third party.

The picture below shows the basic Circle Line and two connected Circle Lines. In many parts of the chain system improvements have been developed. A number of them are shown in the yellow circles. The information connected with these circles is described in the picture and more extensive in the text below the picture.

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EXPLANATION A= logistic chain alignment of operators of all par tners to chain result orientation ma-nagement Frequent analysis of partner’s logistics and advice for operators of partners by trusted third party to adapt daily operations in small steps to chain result orientation B= internal logistics improvement: cost and revenue oriented A broad Scala of improvements in daily operations of all cooperating chain partners: examples: Shipper 1: limitations in production could be removed leading to increased production that entered therefore the option of a larger scale set up that brought efficiency and quality impro-vements and increased market opportunities: cost reductions and revenue improvements for manufacturer and the total Circle Lines system. Fixed, reliable and frequent transport and lo-gistics schedules and 24/7 transparency of movements of cargo could change and improve production process and raise quality and planning of deliveries at end user. End user 1: fixed, reliable and frequent transport and logistics offered options to improve the planning, costs and time of the production process, costs of last minute urgent changes, due to for example wrong estimates of products needed, and its negative effect on the production process could be reduced substantially. C=filling empty containers, barges, short sea ships on the return trip This “regular” activity of all transport planners for parts of a chain is different in Circle Lines while all operational partners of a full chain make sure that the whole chain is made transpa-rent by sharing all relevant confidential information of unused capacity 24/7 for the trusted third party who can than optimize loading levels, costs and environmental impact of the whole chain. D= daily transport planning: look and book in the c hain’s unused capacity in terminal equipment, containers, trucks, barges, short sea sh ips Intensive use of unused capacity improved the use of the equipment and means of transport, reduced their costs and environmental impact and convinced companies to switch from a

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truck only approach to a sustainable logistics chain management system. The fixed, reliable and frequent transport and logistics options paves the way to e-commerce-like online contai-ner booking for shippers. E= paperless digital chain administration and copie s where still needed In principle the whole chain can be and is in parts of the Circle Line operated paperless but legal requirements or internal company liability rules still requires paper and manual signa-tures. The cost improvements of the paperless approach are received even for the manual parts that now partly are derived from the digital documents. F= basic chain logistics configuration: frequency a nd scheduled services for stan-dards and better planning of inbound and outbound l ogistics The basic set up of all Circle Lines is: frequency, scheduled services and on time end of chain delivery. This offers a metro like planned system on which the planning of production processes and terminal processes can be built. This results in improvements of these pro-cesses that can only be gained by offering a systematic planned basic system. G= cost management pilot costs: same ship same crew The use of short sea shipping as basic Circle Line offers important cost and environmental improvements compared to landside transport by truck and even barge. However a number of laws and regulations are in place for short sea shipping that can lead to additional high costs that would prevent the use of short sea shipping, such as pilot costs. Circle Lines ap-plied for a low cost exemption rule but had to manage a strict system: same ship same crew if entering a seaport. H= waiting time reduction management bridges, locks , seaside and inland waterways Waiting time is loss of capacity use and costly. Smooth planning of passing locks and bridges that does not interrupt the time schedules offers important improvements but laws and regulations are not adapted to this approach. I = new stuffing, stripping and handling methods The use of containerized bulk for creating a basic Circle line means that low tempo goods are brought in a high tempo container system. The management methods and terminal sys-tems of the high tempo container system are not adapted to give containerized bulk the same tempo. Adaptations had to be developed, trained and introduced.

A Circle Line starts with companies that function in their own way but commit themselves to alignment to “sustainable chain result orientation”. Therefore a Circle Line can have say, 3 different types of collaborating partners: 1. Not yet green: no chain result improvements have been introduced yet, 2. Light green: some operational and management improvements are introduced way and 3. Green: full sustainable chain result orientation, operation and man-agement.

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3.3.3 joining and step by step improving for chain result orientation

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3.3.4 Validation of findings and transferability of the approach to new comers.

The validation of findings is based on interviews, press releases and reports. An in-depth analysis is not foreseen in this implementation action but is considered as a separate project. However some general observations are presented here. The aim of this report is to deliver elements for a handbook for newcomers to join Circle Lines. As is described here above the key data for decision making for joining are confiden-tial commercial company data of companies that are functioning in a very competitive world. They are only shared with the trusted third party. It is therefore not allowed to use them as examples in the handbook if they would refer to individual partner com-panies.

For that reason lessons learned are described in a more general way that are usable nonetheless. A detailed validation is only possible if the companies involved would agree with sharing confidential data also in this publication. This is now not the case. Possibly a separate project could be set-up that can include this strict confidentiality element.

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4 ELEMENTS OF A CIRCLE LINES BUSINESS PLAN 4.1 General 4.1.1 Vision

The transport of goods is expected to double in the coming years. This would require addi-tional transport and handling capacity in ports, transport and distribution and to additional negative effects on sustainability; sustainability seen as costs, environmental impact and so-cial impact. At the same time a substantial reduction of personnel is expected due to retiring. This leads to the expectation of a substantial personnel shortage in these areas and lack of personnel capacity to manage the transport and handling of the increased cargo flows. This is expected to lead to negative effects on economic development. At the same time the ac-tual system of ports, transport and distribution shows a substantial unused capacity: more than 50% of all ships, trains and trucks in inland transport are sailing and driving empty. In all of the three parts of an end to end logistic chain, sea, port hinterland and city, recently inno-vative logistic solutions have been implemented to deal with these challenges: sea transport (Daily Maersk, port-hinterland transport (Circle Lines) and city transport (e-commerce com-panies: Amazon (USA) Bol.com (Netherlands). Connecting them could deliver a worldwide innovative sustainable logistics chain operating system. In all cases full control of the chain is the leading management principle and steering on end result of the chain.

4.1.2 Aim

To operate a sustainable ports, transport and logistics operation for a port hinterland end to end logistic chain, based on daily scheduled services with fixed and guaranteed arrival and departure times whereby all operational chain partners, such as shipper, terminals in sea-ports and inland ports, truck, train and barge companies, collaborate and together operate the end to end logistic chain as a separate shared chain service cooperative that manages all daily operations of the chain whereby all relevant chain information of all partners is shared and that is increased to a larger scale by adding individual Circle Lines to deliver larger scale ports, transport and logistic options.

4.1.3 Problem

A shipper cannot get sufficient insight in the real cost of the whole chain due to the way in which the transport market is organized and managed. At the same time it is visible for the shipper that a large part of containers, trucks, trains, ships are sailing and driving empty. This proofs that inefficiencies are existing, prices paid may be too high and development and im-plementation of innovations may be impeded.

4.1.4 Solution

The starting point for creating a Circle Line is the availability of a sufficiently large and at the same time continuous bulk cargo stream that can be switched to the container transport sys-tem. The continuity of this basic stream is needed to keep the line structurally in the market also in a weakening economy. A bulk cargo stream of a type that is continuously available, namely municipal waste, was found and contracted to deliver this basic cargo stream for con-tinuous operations.

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However the introduction of bulk cargo in container transport systems requires adaptations in terminal management with respect to stuffing, stripping, transhipment and stacking in a learn-ing by doing way. The same goes for the internal logistics of shippers. In addition, before op-erations could be started, an innovation has to be introduced in container design. For exam-ple: waste is bulk cargo that is traditionally deposited in open containers or in open ships. Bulk cargo like waste could not be put easily in a container and in the container transport system. In order to be able to do so a new, innovative, container has to be designed, built and accepted by authorities. This has been done and from that moment bulk waste could be transported in a container. The waste had to be treated before to transform it into industrial waste. This is done by taking out certain materials and by shredding the rest. Shredding leads to particles that easily can be put into the container. The particles are used as fuel to be burned to create energy. This is done in waste to energy plants. The basics of this Circle Line contribute substantially to sustainability by leading to renewable energy. Now a Circle Line could be started on the basis of waste transport. The waste containers delivered a daily transport and logistics system that operates within fixed time frames and schedules with as the basic element: a short sea connection between London Container Terminal in London Tilbury and SCS Multiport Terminal in Amsterdam. After it was proved in practice that the basic waste transport and logistics system could be operated in a stable way, the Circle Line is created by introducing the use of empties to transport third party cargo by booking bulk cargo in the empty containers on their return trips and also by booking of third party contain-ers on this daily service. This daily operating and planning system offers options for shippers and deep sea liner services to include this time based system in their own planning. Circle lines extensions have also been created by contracting other Circle Lines type systems like the Extended Gateway System of Hutchison-ECT Terminals in Rotterdam to enlarge the scale of operations further into the UK, Ireland, Benelux, France, Germany and Italy.

4.1.5 Why now?

Reasons are amongst others: new insights in the increasing environmental (health) effects of transport, the increasing road congestion in port city areas that has a negative influence on the accessibility of ports and cities and also on the plan ability of production processes and on time delivery of products of manufacturing companies. This has led to new legislation on European, national and local level intended to improve its efficiency as well as environmental impact, especially in Port Hinterland Logistics. This again has led to very different ap-proaches, solutions and standards adding to costs and inefficiencies. From there many initia-tives are seen that create a switch from transport orientation to logistics and to a process and systematic approach and that try to introduce global standards. Maersk introduced a break-through approach in deep sea transport and logistics with its Daily Maersk, now followed by a far larger global approach with its P3 initiative in which 255 mega containerships deliver daily services that connect the main ports in the world, recently changed into the M2 initiative, ex-pected to start early 2015. The arrival of the mega containerships in sea ports requires sub-stantial structural changes in the port model and in Port Hinterland Logistics. Circle Lines de-livers daily services and standards that can be connected with the daily deep sea services in the required sustainable way and solutions to connect “distant” industries in regions in a sus-tainable way. New insights in logistics and system approach and especially recent availability of new IT and Internet based logistics support systems have been essential in creating the possibility to start Circle Lines. The new systems deliver a 24/7 transparency of chain related information for all cooperating partners in a Port Hinterland logistics chain. This however is not a sufficient basis because the willingness to share company related chain information is needed to be able to require the intended results. Here again special methods are developed

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and introduced to create a change the mindset that can lead to the logistics system approach and that can deliver the basis for the creation of trust that is needed to make cooperation be-tween competing companies possible to run a common Port Hinterland sustainable chain op-erating system.

4.2 POLICY

4.2.1 The Market

Circle Lines is a shipper-oriented system. Circle Lines is directed at shippers and other chain partners with forward thinking and acting approach in sustainable logistics for delivering the basic cargo and other shippers for booking on this system. The system can be of importance for companies that want to proof their sustainable behavior and their Corporate Social Re-sponsibility. This can by definition not be the full European market for Port Hinterland transport and logistics. A first estimate of the market is that 10% of the market may be inter-ested to use the daily scheduled and sustainable services of Circle Lines.

4.2.2 Competitors

Circle Lines is a new approach that up till now is a unique approach. Some companies de-liver Port Hinterland end to end chain services for parts of a chain that are similar but not identical. Examples:

• The large logistic service providers: Schenker, Kühne Nagel, DHL. • Large Terminal operators: ECT Extended Gateway System, APMT, DP World, PSA. • Large shippers: Friesland Campina, Procter & Gamble, Nike, Flora Holland, Tata

Steel. Circle Lines delivers additional benefits such as daily and scheduled (plan able) services, full chain information transparency that leads to additional added value logistics products and services, this also leads to improvements of the internal logistics of all participating compa-nies.

4.3 ORGANIZATION

4.3.1 Introduction

Circle Lines is a sustainable Port Hinterland logistic chain operating system. It is operated by a cooperative of all companies that are needed to deliver all operations of this end to end chain: the shipper, container terminals in the seaports and inland ports, trucking, train and barge-companies. In the cooperative the operational employees from the companies in-volved in the Circle Line operations are trained to think and act as a chain operator and are cooperating closely with the operational employee in the shackles in the chain before and af-ter his own shackle. This can be seen as a social innovation. A trusted third party delivers the daily chain management and the “referee- role” to make sure that the daily communications and the trust of partners in collaboration will be maintained and continued. He also plays a role in management of shared chain information, public and confidential and is in this knowledge position able to advice on improvements in the chain logistics as a total and in in-ternal logistics of the participating companies.

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Participation in a Circle Line cooperative requires a mindset, attitude and trust to cooperate and to share all relevant chain information with all collaborating partners. It also requires a proven record of quality management of sufficient level to be able to fulfill the SLA require-ments of the shippers that book their cargo on the Circle Line. The basis for a start is the par-ticipation of a large shipper with sufficient daily cargo to run a daily Circle Line service. This cargo can be bulk cargo that can be containerized. The Circle Line operation is financially set up as a common service cooperative for the chain in which the chain partners collaborate. The cooperative in which partners deliver their ser-vices to each other while operating as one chain operating system on the basis of a negoti-ated tariff. An SLA is contractually agreed. The tariff is cost covering from the start. The profit is limited at the start. The cooperation makes cost reductions and environmental improve-ments possible in a “learning by doing and improving” way. The cost reductions are consid-ered as the revenue of the operation for each of the partners. The logistic chain information management can lead to improvements in the internal logistics of participants and in this way create additional cost reductions or added value (income) from new logistic products and ser-vices for the individual companies. The large shipper needed to start operations may deliver a contract for 2 or more years. The volume of cargo needed for daily operations can differ from Circle Line to Circle Line, starting with say 200.000 tons per year. After the start based on this cargo additional third party, cargo comes in to be booked in the empty containers of the Circle Line. This part can start with half this figure. After this step third party containers are booked as well. Third party clients can be as limited as a few containers to large quanti-ties. In this way the volume of a Circle Line may grow to several times the initiating and basic volume that must guarantee continuity of operations. The marketing of Circle Lines is mainly via hearsay and personal contacts to be complemented with website information.

At this moment the initiator of the first Circle Line acts as contact person for Circle Lines, as its chain manager and is accepted to fulfil the role of trusted third party.

4.3.2 Trusted Third Party Role

Introduction

A special element of the daily management of a Circle Line requires separate attention. It is one of the most critical success factors: trust management.

Trust that shared confidential company information is kept confidential

Trust between the partners that cooperate to manage together a Circle Line is an essential prerequisite for success. Some of the partners in a Circle Line are competitors, for example terminals in the same port or in competing ports, barge companies or trucking companies.

A Circle Line can be considered as a special purpose chain management service organiza-tion. The special purpose is to run a certain chain together based on the Circle Line logistics system. The chain can only be managed in this way if all partners share all information that is relevant to manage the daily operations of the chain in the required quality on a 24/7 basis. That means that every participating company has to agree to share certain company infor-mation with all others. This information is partly public information, for example chain related

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information, that has to be delivered to authorities and partly confidential company infor-mation. Most companies treat however the abovementioned type of public company infor-mation also as confidential. They would not publish this easily.

Before starting it is therefore important to make sure that all partners are aware of this need and understand perfectly why sharing information is needed in the Circle Lines approach to realize the aimed results of the total chain operation.

It is essential that this commitment of each of the potential participants is received before starting.

Proven experience is leading

The way in which this is done is an entrepreneurial way. Trust is a person to person attitude and related to a person and not to a company in which the person is working. Trust in a com-pany considers the quality norms and standards and the ethics of a company as a whole. So in effect the selection of partners follows a two-step approach. First: selecting companies that are trusted and second: a person within that company that is trusted to be part of the Circle Lines approach. Trust is based on experience in practice. So normally a Circle Line coopera-tive is easiest set up between partners that have practical experience in working with them.

Causes of decreasing confidence

The transport sector is a very competitive and fragmented sector where many means are used to compete. Information and disinformation is one of these means. Wrong information easily can undermine trust while a Circle Lines system is in operation. This was proofed al-ready in the first pilots, used to test the system. When trust starts disappearing, the percep-tion of risk of continuing operations immediately increases. The risk that is seen as danger-ous is for example loss of cargo to a competitor or loss of the whole operation because the agreed quality level can no longer be delivered because one of the partners delivers work below standard (but does not agree with this view) leading to a chain result below SLA re-quirements and a fine. This can lead, as was shown in practice, to stopping the operation al-together. Disinformation can come up every moment because of the large number of players involved in transport and logistics. For this reason a daily and intensive trust management is needed to clarify disinformation immediately at the right place and prevent that this infor-mation leads to distrust.

Referee and Rules book

Trust Management is one of the contractual pillars of a Circle Line. The trusted third party can be considered as a referee. The referee controls the players in the Circle Lines “game” by checking the rules of the game in which cooperation is a key for success. The rules of the game have been drafted by all participants together. The referee uses therefore a sort of Cir-cle Lines Rulebook. The “players” in effect agreed with being controlled, warned, and fined on the basis of the rules that they have written themselves.

Different tasks

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The role of the trusted third party has not a uniform standardized set up. It can differ between the different Circle Lines and is adapted to the type of partners and the specific circum-stances of each Circle Line. Main aim is that all partners are confident with the way in which trust is created and managed.

The trusted third party has the following tasks: 1) Acting as a neutral sparring partner for all participants that interferes immediately when

disinformation may lead to distrust in another partner. He will make sure that the right in-formation is available and all partners have the right information again.

2) Meeting on a regular basis each partner individually with the task to make sure that full trust is still available and full commitment as well. If the commitment level has reduced or is reducing he takes action to bring it back at the level, needed for continuity or in case repair is no longer possible he prepares the exchange of this partner by a new partner.

3) The trusted third party delivers advice to the cooperative to improve quality and results. He is able to design options for solutions because he has a full overview is all, public and confidential, information of all partners because he is allowed to look in all information that all participants delivered.

A part of the confidential information is needed to plan and manage daily operations. This in-formation has to be available to all operational persons. Therefore the trusted partner role has also an extension in the following way: each partner appoints one of its employees a trusted person who is allowed to receive and manage the trusted partner information needed for daily operations.

This approach can also have the following implication: if a logistics service provider is, via outsourcing involved in the daily operations a part of the confidential information will be needed for his work. In this case a specific agreement is made with this company to appoint a trusted person within the company who is allowed to see and use this information. This means that not a company is trusted partner but a person within that company.

Different Forms

The role of the trusted third party can therefore take different forms.

Examples: 1) A neutral third party person. For example a person who is an employee of a large logis-

tics services provider, a financial accounting and controlling company or a lawyer. 2) A representative of one of the participating companies 3) A group of representatives of each of the participating companies 4) A representative of an external company that via outsourcing is involved in the operations

First practices In the ongoing Circle Line a very intensive regular person to person contact is used by the chain manager as a means to be kept informed about all possible issues that influence the daily operations, including trust and commitment. This role is now fulfilled by the director of SCS Multiport. CS Multiport was one of the partners in the development and testing of Circle Lines. Challenges are discussed and options for solutions are agreed. Innovations are dis-cussed and ways in which they can be implemented in all parts of the chain are agreed. The result is: full Circle Line control and full end to end chain control.

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4.3.3 Finance

A Circle Line is a cooperation between large, medium sized and small companies (SME’s). SME’s need pre-finance facilities for their contribution. The usable bank loans are no longer available due to changes after the bank crisis. Therefore a new and large challenge is seen: financial means have to be found within the cash flow of each Circle Line before starting. Fi-nance is needed for elementary elements such as bunkering of ships. Different options are found. The aim of Circle Lines is to limit the need to choose for bank loans for pre-financing operations and their related uncertainty for operations.

The Circle Line cooperative is run in the first three years by the initiator for implementation of this innovative logistics business model: SCS Multiport. The whole operation is for each of the participants financially feasible. Further revenues are expected from further cost reduc-tions in each of the participating companies that can be obtained from the cooperation in Cir-cle Lines related operations. Obtaining increased efficiencies and cost reductions in internal logistics of each participant are seen as an additional option for improvements.

4.3.4 General Calculation Model

In this chapter an example is given of a combination of Circle Lines originating from The Netherlands. The different types are shown including the cost of each physical step (sailing, driving, and handling) and the number of documents and their management involved as well as their costs. In an ongoing supporting project the calculation model is further developed into a profes-sional management support Tool. The figures used here are not necessary real market figures but they demonstrate a general cost model that can be used to put in own figures to calculate improvements that could be delivered by the introduction of Circle Lines. The figures are appraised by partners in the Cir-cle Lines and considered as “not too far outside reality” and usable for explanation. Concrete company related figures are not made available for publication because they are considered as confidential company information. The numbers of document handling in each step is also not necessary the exact number in the market but is also not “too much outside real market figures” and usable to demonstrate the model for first decision making. A general approach for these figures is given below. The Circle Line started based on a contract to export 200.000 ton industrial waste (RFD) per year from the UK to The Netherlands. A number of innovative waste containers have been built to offer the option to transport this bulk cargo in the container system. In the first period the containers have been returned empty. After other bulk-cargo was found, building bricks and stones, for filling the empty containers on their return trip, cost re-ductions (1) could be realized as well as environmental improvements (2) of the transport of waste and of the new cargo.

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Connecting this new cargo to the frequent, reliable Circle Lines system revealed new possi-bilities of improvements that could not be realized before: improvements in the internal logis-tics (3) of the companies involved: the production company of building bricks as well as the end-user, the building companies. Further, and even more important efficiency and cost im-provements could be realized in the production process (4) that are directly derived from be-ing connected to the frequent and reliable planned services of Circle Lines. Both improve-ments created another added value, this time on the revenue side: substantial expansion of production and market (5) of this niche market, the investment in new, shared depots in sev-eral places near seaports. All new activities together are expected to lead to the creation of new jobs (6). The trusted third party, for the starting off phase personalized by Anton van Hattem, de director of SCSMultiports, plays a crucial role in analyzing and advising on possi-ble improvements in the specific partner companies’ inbound and outbound logistics and their relation to production. The advice is chain result oriented. Essential information on which these advices can be built is the shared chain information delivered by all chain part-ners. A comparison between this synchro-modal or metro-logistics Circle Lines chain operating system and unimodal ‘truck only’ transport system or multimodal transport system is clarified in the picture below. It is important that the net chain result definition used here is: the net effect of cost reduction, revenue increase or additional income from new added value products and services directly resulting from an integrated chain result approach of all logistics activities in a typical end to end chain that is delivered by a number of Circle Lines: transport by truck train, short sea, barge, internal transport in the connected companies: shippers and terminals and its effects on the production process. The integrated approach is only possible if all chain partners agree to share all relevant chain related data, confidential and not confidential. Insight in the total by a trusted third party offers options for improvement that are not possible in other, mainly transport oriented approaches or outbound logistics approaches. In the unimodal and multimodal transport approach effects of improvements in internal logis-tics or related production process improvements are here not considered. In the comparison of the three models the full chain is considered. However in the unimodal and multimodal system only transport costs are a variable element and not the internal logis-tics costs, their effects on production and the introduction of added value logistics products and services that is made possible from the shared chain data. These last elements are part of the chain approach of Circle Lines and therefore taken into consideration. The information given is based on confidential company data mentioned in interviews. It could not be agreed to publish them. Therefore presentation had to be limited to estimates and a general explanation as shown here-above and supporting press messages and state-ments of companies involved. The name Circle Lines is introduced after the development of this sustainable logistic chain operating system and is still used to describe the operating system that is the basis of the chain logistics operations described in this report. Market considerations require the use of different names for extensions on the system, such as Port Hopping or Coast Hopping for the basic Circle Line. Below 2 pictures are shown to clarify cost effects of a Circle Line approach. The first shows transport costs in all parts of the connected first set up of the Circle Lines system and offers a possibility to calculate the transport costs of a certain transport distance in this system. The picture also shows the number of documents needed: 46 to transport one container through the system. This number may now be more and can go up to 200 docu-ments, stamps and signatures. The costs of transport and documents can be equal. Fully

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digitalizing documents to a paperless chain can reduce these costs with up to 90% depend-ing on the chain configuration. That would mean that the total transport plus document costs of such chain is reduce to almost 50%. Of course the process of digitizing transport and lo-gistics documents has started and most chains see no longer 100% manually operated docu-ments. Different chains show different levels of document digitization. Circle Lines comes to 100% but laws and regulations of the public and private sector still require paper documents and stamps and signatures.

CALCULATION SCHEME FOR CHAIN TRANSPORT COSTS AND CH AIN DOCUMENTS PER CONTAINER

In the picture below one consideration of all parties interested in Circle Lines is shown: “if moving from truck only operations to multimodal or synchromodal a number of additional container handling is necessary, adding substantially to the costs’. That is correct. It is also mentioned that: “eventual reductions such as less environmental impact of the total chain cannot compensate this increase. Therefore these systems stay more expensive and have also other drawbacks such as less reliability”. This is not right but convincing prejudices can only be done by practice that is proven during a number of years.

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COMPARISON BETWEEN A TRUCK ONLY, MULTIMODAL AND CIR CLE LINES COST MODEL

4.3.5 Legal issues

Contracts

In practice the full model of a cooperative cannot be realized from the start for the whole Port Hinterland Logistic Chain. At the starting phase the cooperation is organized partly by cooperation, partly by contractual outsourcing and partly by contractual cooperation with Circle-Lines- like other systems such as the Extended Gateway System of ECT Rot-terdam. This last option delivers the option to scale up quickly to the European Dimen-sion.

In all cases however full control of the end results of the total chain operation are guiding the contractual obligations. These end results are derived from the Service Level Agree-ment between Circle Lines and the cargo- owner, mostly the manufacturer/shipper who uses Circle Lines for its Port-Hinterland Transport and Logistics.

The contracts in the actual Circle Line

Short Sea Vessel.

The vessel is chartered in a time charter contract. That means that the ship and the ship’s crew are fully available for the Circle Line and part of the cooperative. The ship is not shared with other users. In addition the captain of the ship who is also its owner, agrees to participate in as team partner of the logistic chain: chain result oriented. This

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gives a specific role in the terminal operations. The price is fixed during the lease period or adapted following usable systems in the market. This approach has several ad-vantages: such as:

• No others can interfere in the scheduled fixed services. • The fixed price delivers transparency and delivers stability of financial planning

and costs of this part of the Circle Line. • Being fully available for this operation only the ship’s crew develops experience

with the Circle Lines system and the cargo transported through the system and contributes as one of the “operational chain managers” to the permanent im-provement of the system. This enhances quality management and trust amongst the Circle Lines partners and especially the main client: the shipper.

Terminals and Hubs/Cross docking Centers

With each terminal separate contracts are made that contain the conditions for delivery ser-vices that guarantee that Circle Lines can function within its conditions and in so-doing can guarantee its SLA conditions such as for example a guaranteed delivery at the end of the chain of 95-98%.

Truck, Barge, Train

Contracts contain conditions that rule that the driver or captain of the ship acts as a “chain manager” who understands, thinks and acts in chain management. The contract does not de-scribe in detail each action but delivers a certain amount of freedom in using own solutions to fulfill the requirements. This is done to prevent the development of a passive attitude of only looking to and fulfilling the written requirements. This attitude easily can be counterproductive in case of exceptional operational circumstances and would block a driver to do the right thing that is needed to do when using common sense.

Flexibility management

In the whole Circle Line on different places time buffers are built in that delivery time to adapt to uncertainties as bad weather at the sea, certain types of road congestion or equipment break down. This approach gives the flexibility conditions that are contractually laid down in the Chain SLA with the shipper. The main organizer of the Circle Lines has decided to build an own network of hubs, close to end users, that could be shared with others, in order to stay in full control of the chain results. In addition a truck company has been taken over for that same full control reason. Full control was also the reason to take over a logistic service pro-vider with specialism on certain cargo types because. After integration in the central Circle Lines organization alignment to the Circle Lines approach could be better guaranteed.

Rules for bundling of different types of cargo

Strict rules are in place that govern combining different types of cargo, especially if waste and food related products are transported and if bulk and other containerized cargo is brought together in one transport system.

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Competition Law

Competition law has set rules that prevent creating circumstances that could reduce free competition. The creation of a group of competitors to serve a part of the market could easily be considered as a distortion of the rules of the competition law. Therefore it is important to stay within the criteria before staring cooperation.

There are several examples of competitors that share knowledge and resources in the devel-opment and production of certain parts of their products. For example the automotive indus-try has set up several companies to produce engines that are used in cars that compete on the market.

The Circle Lines cooperative that was designed as a basic model for cooperation follows the competition law criteria such as: open entrance.

For participation in this cooperative a number of requirements have to be fulfilled in order to be able to deliver the high quality of services that is aimed by Circle Lines. For example: a guarantee of 95 to 98% on time delivery at the end user. The whole operation that has to de-liver this high mark is executed by mostly more than 12 different companies and includes dif-ferent modes of transport. That means that each of them has to deliver even a higher service level in order to be able to deliver this end result as a cooperative. If weak parts can only de-liver half this level or irregularly, the cooperative will not have continuity.

The cooperative as legal organization model is advised from the start of the development of Circle Lines because it is an open system, easy to enter, if the criteria are fulfilled and it is also easy to leave again without specific legal action. It is a rather free system for coopera-tion in special purpose activities such as Circle Lines. This legal model is in recent years con-sidered as interesting legal basis for cooperation, also in public private cooperation.

4.4 CHALLENGES

4.4.1 Limited chain management innovation capacity

Circle Lines follows a person to person approach in which the trusted third party plays the pivotal role. The capacity of this person, or persons is the limiting factor for extension of this trust based system. Management support systems are needed to take away management activities that are just done because of in transparency of data and information in the chain. On many points in the chain automation can be introduced that also creates management capacity . A more structural measure is a creation of a special trusted partner service organi-zation in the chain consisting of (trusted) representatives of the collaborating partners. Transparency in the chain can be developed by sharing information and by making this avail-able to all collaborating partners. Special rules have to be made for dealing with confidential company information. In addition to this also trusted data sharing systems are needed.

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4.4.2 Some regulatory challenges of introduction of short sea shipping in the basic line

When short sea ships are used to take over a part of the port-hinterland transport from trucks, trains and barges additional costs are involved that raise the total chain costs such as:

o International (IMO, Solas), national and local rules require that ships that want to en-ter a seaport take a pilot on board, with adequate knowledge of the local circum-stances, and has to pay for the costs involved. However a regulatory possibility, the rule of pilot exemption, is offered to limit the additional costs substantially. Therefore Circle Lines has to take organizational measures. For example: in case of pilots the ship that enters the port in the chain approach has to be the same for each visit and has in addition to have the same crew. This has been done.

o If the short sea ship would come outside of the European territorial waters (European economic Area) when operating a short sea basic Circle Line on the sea, the cargo on board will be considered as import cargo from other continents and additional cus-toms clearance and therefore additional costs and time are involved. This prevents Cirlce lines from offering the flexibility that is offered now: offer cargo for transport very short (12 hours) before the ship leaves the port. Legal options for improvements are available but require agreements with customs. With one national customs organ-isation a first, temporarily agreement could be made.

o Combining different cargo in one ship can lead to conflicts of interests with existing cargo streams and cargo contracts. Solutions could involve high additional costs. These can be prevented by transporting only own cargo streams and own Circle Lines managed streams.

4.4.3 Other Challenges for scaling up

Additional terminal capacity

The permanent increase of the volume of transport within the Circle Lines system has led to the need to add a new container terminal in the Port of Amsterdam with facilities for larger sea ships that need a quay wall with more depth than now is available at the SCS Multiport terminal. Negotiations have finalised but the environmental permit to start operations take more time than expected. To prevent interruptions in the increase of activities agreements have been made with terminals in Rotterdam and Zeebrugge (Belgium) and with an new in-land hub terminal in between, in Tiel in the Netherlands, at the river Waal, an extension of the Rhine.

Improved permit policy in safety security

A process has started to improve the exchange of data between authorities to improve data exchange in the public private collaboration of chain data and improvements that this new approach could provide in the permit procedures. This can keep safety/security at the re-quired level but increase quality and efficiency and lower costs for the chain as a total.

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Awareness and understanding of the innovative appro ach of Circle Lines of stake-holders

Commitment of the collaborating partners in the Circle Lines system is not enough to secure the continuity of the system. Frequently it is needed to explain its functioning to outsiders: partners of the partners or clients of the partners, to adapt also their attitude towards chain result orientation. This requires substantial management time. Supporting IT transparency and calculation Tools are developed now to support the management and to reduce his time.

Alignment the logistics of collaborating partners t o the chain logistics

In several cases the in depth analysis of the logistics of a new partner in Circle Lines to in-clude him in the Circle Lines network led to the proposal to integrate the transport part with hubs and warehouses and also with the production process of the partner. This provides full control by the trusted third party of transport and logistics and of guaranteed on time delivery and a IT platform and dashboard for presentation of all relevant chain data and their “trans-lation” in information for the chain management. The platform can take away “unnecessary” management costs caused by in transparent data and information streams in the chain.

Introduction of adapted management methods for deal ing with switching bulk cargo to the container transport system

This switch to this new way of transporting bulk was not easily taken up by container terminal operating methods. A number of changes had to be introduced in working methods. This is done in a learning by doing and improving way.

4.4.4 Companies and ports connected with the actual Circle Line System

A number of companies are permanently connected with the Circle Lines daily scheduled services network as to November 2014 or have been connected in a testing phase this year or with extension plans or contributed to the system development: SeaPorts Amsterdam (NL), Antwerp (B), Zeebrugge (B), Rotterdam (NL), London Tilbury (UK), Hull/Grimsby (UK), Blyth (UK)

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SeaPort Terminals APMT, PSA, London Container Terminal (Forth Ports) Tilbury, ECT Terminals (Rotterdam), Radicatel (Le Havre, France) Inland Port Terminals Connections Amsterdam/Rotterdam Rhine: Utrecht Container Terminal (NL), Tiel (NL), Duisburg (G) Inland Rail Terminals Northern Italy, Duisburg (Germany) Shippers in Netherlands, Belgium, France, Germany, Italy, UK, Ireland, Amongst others: Tata Steel, Flora Holland, Procter & Gamble Deepsea Shipping Lines

4.4.5 Strategy

During the operations from 2011 the insight grew that short sea shipping as basic Circle Line for further extensions may be the way forward that delivers the best end to end chain results even if this replaces inland shipping partly. Therefore now a simple but adequate general strategy is followed to scale up the Circle Lines network: Organize transport in port hinterland connections as long as possible via the open sea by building a frequent metro like network on the seas of coast hopping by short sea ships as the permanent Circle Line to which metro like port hinterland logistics with truck, barge, train are smoothly connected in a fully controlled chain management approach.

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5 STRATEGY AND POLICY IMPLICATIONS

5.1 CIRCLE LINES STRATEGY FOR PORT HINTERLAND CHAIN MANAGEMENT

The port, transport and distribution activities in the hinterland of large port/city regions is tra-ditionally an area of strong competition between shipping lines, ports, seaport terminals, in-land port terminals, truck-, barge- and train operators. However this view is changing fast into the common understanding that functioning of these companies in the hinterland faces so many problems and bottlenecks that a common approach delivers better business effects for each of them than continuing in the traditional competition model. Port-Hinterland logistics chain management can be organised as a systems approach and a new and neutral type of organisation and collaboration model. This delivers the systematic approach to manage in an easier way the many bottle necks that pose a problem for an individual company. The new type of collaboration between can develop and implement solutions that only can be created by this collaboration and not by individual companies, such as daily scheduled services, not only in the main transport corridors but also in the smaller “capillaries”. This collaboration in-cludes all relevant parties, defined as all parties that are needed to manage all operational tasks of an end to end hinterland supply chain as a separate chain business activity. That means that collaboration will go further than traditionally and includes co-designing logistics operations in all participating companies into one integrated company-like chain system. By choosing for this approach of a separate business activity new solutions become availa-ble for issues like: transporting containers while empty, driving or sailing with empty slots, in-sufficient hinterland transport capacity because less than half of the transport equipment is filled with cargo, need for experienced port and transport personnel that will no longer be available because of retirement, strict and different environmental, safety and security re-quirements by local, regional and national governments in parts of transport corridors. Infor-mation transparency, sharing of company information throughout the full chain, which thus far is considered as confidential, delivers insights that are the starting points for new and sus-tainable logistic chain solutions, products and services of Port-Hinterland logistics. innova-tions introduced in recent years by large shippers and terminals in parts of the chain show impressive results compared to truck only solutions of cost reductions up till 50%, CO2 re-ductions of up till 80% per container. A mental shift is needed to change company strategies in this direction of collaboration in Port Hinterland instead of competition and to define a dif-ferent definition of their competition area. Maersk Lines showed already that a breakthrough like this is possible by its introduction of a systems approach on the deep seas (Daily Maersk) to be enlarged by its P3 plans. This pushes forward the need for systems based solutions for hinterland logistics. The creation of a new and neutral type of collaboration for logistics innovation in Port-Hinter-land Logistics by large shippers is one of the intentions of the EC by its creation of the Tech-nology Platform for Logistics Innovation, ALICE (Alliance for Logistics Innovation through Collaboration in Europe) in July 2013, with its ambitious aim to reduce logistics costs for the European manufacturers with 300 billion euros before 2030. The undersigned was invited to become a member of ITS Steering Group.

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5.2 FROM POLICY TO PRACTICE Governments are on different levels involved in the development and implementation of inno-vations in sustainable ports and logistics: European, National, Regional and local. They fulfill 3 roles here: 1. Regulatory Authority, such as for customs control, inspections and permits.. 2. Facilitator, such as in port hinterland transport bring together of all relevant parties to de-

velop or extend an inland terminal. 3. Stimulator, such as offer an efficient contact organization for all relevant regulatory issues

for the creation of a sustainable port hinterland operating system. In each of these 3 roles a professional approach could be followed by taking 6 phases of an innovation project into consideration:

a Preparation: what is the main idea? b Exploration: who wants what? c Definition and planning: how and when? d Development and contracting: what to be agreed with who e Realization: f Management and maintenance: how to keep control and quality?

In Annex 1 the required commitment of authorities in these phases is mentioned as a checklist and their various roles are described. This can be used in negotiating with authorities with an operational task in accept the functioning of Circle Lines within the rules and to get Circle Lines implemented.

Several instruments have been designed as an option or tested as a pilot in the development and testing phase of Circle Lines. After the start of operations in the market, in October 2011, some of them are further elaborated for management support and new instruments have been developed and tested.

Actually for the introduction of Circle Lines the following instruments are available or under development:

1 Serious games, and role playing options. 2 Permit checking system (what permits needed, what procedure and procedure time and

what costs)

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3 Port Hinterland chain cost calculation model: actually under development. 4 Customized logistics improvement options for shippers and other chain partners to align to

sustainable chain result orientation 5 Individual partner assistance in the alignment process 6 Sustainable Chain Management support system:

a. Look and book in the chain b. 24/7 chain data dashboard for public and confidential data

7 Chain cash flow financing model 8 Liability contracts 9 Basic Quality management Systems and certification for port environmental management

and sustainable logistics chain management

10. IT support services like port IT data sharing services

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6 RECOMMENDATION FOR IMPLEMENTATION STEPS Within the previous sections a detailed insight into the essential elements of the Circle Lines has been given and discussed. With regard to the BESTFACT best practice work the follow-ing recommendations can be given in order to set up and implement collaborative ap-proaches such as circle Lines.

1. CARGO BASE

Create a cargo volume basis of bulk cargo that can be containerized and that delivers a strong basis of continuity of fully cost covering operations with limited fluctuations in cargo supply to start a basic Circle Lines network that can be continued for many years. Use this basic sustainable end to end logistics chain network to book non bulk containerized cargo, that shows more volatility in its supply.

Explanation: many initiatives for innovative multimodal operations intended to reduce truck transport failed and had to be stopped after a short period because costs could not be cov-ered in a period of weak supply of cargo. The basis of containerized bulk delivers a stronger basis for cost covering continuity.

2. PARTNERS

Select a group of trusted partners with a proven forward thinking and acting attitude in the orientation of their operations on the result of the full chain operation instead of on parts of the chain only. The partners have to offer together all operational activities of a full end to end sustainable chain network.

Explanation: this selection criterion delivers a quicker and better understanding of the ap-proach and of willingness to cooperate to get it functioning and offers a lower risk of disconti-nuity that would be by decreasing of the mutual trust between partners.

3. CHAIN DATA SHARING

Get the commitment of all selected partners** to share all relevant transport, logistics, timely unused assets capacity, chain related working capital and chain related cash flow data under the supervision of a trusted third party and get their permission to allow the trusted third party (with transport and logistics expertise) to analyse each partner’s logistics approach and to advice on innovations that allow this partner to function as an integrated part of the end to end chain cooperative.

Explanation: a large part of the cost and quality improvements of the chain and of the individ-ual partner companies by participating come from alignment of their internal and external lo-gistics to the chain result orientation.

Explanation: the insight in all relevant data of the chain processes of all partners delivers a wealth of options for permanent improvement of the functioning of the whole chain.

4. TRUSTED THIRD PARTY MANAGEMENT

Elect a trusted third party from the partner’s group and define his tasks and responsibilities to make sure that the cooperative functions as one sustainable end to end logistics chain “com-pany” and that manages the continuity of trust between the collaborating partners.

Explanation: partners accept trusting each other but at the same time don’t want other part-ners to look into their confidential chain related company data but accept that a trusted third party is allowed to do so and to use the unique insight of all data for improvements.

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5. LEGAL ENTITY FOR CHAIN COLLABORATION

Create a legal entity for collaboration of the partners based on the Circle Lines model in an open entry way but connected with strict entry quality requirements that secure the Circle lines network approach.

Explanation: the legal entity has to be as open as possible to reflect market options and to fulfil requirements of competition legislation: a cooperative is seen as the best option, for now.

6. IT BASED CHAIN MANAGEMENT SUPPORT SYSTEM

Design, develop and implement the IT based sustainable chain network management sup-port systems: control tower and trusted confidential chain data sharing devices.

Explanation: the large number of data to be managed to run a full end to end chain network requires sophisticated IT capacity to deliver the 24/7 overview for the trusted third party chain management, to deliver 24/7 visibility to all partners of the main chain processes and to man-age continuity of mutual trust among the collaborating partners.

7. STANDARDS FOR LAW IMPLEMENTATION

Design and implement easy accessible IT management support devices to support the intro-duction of standards to implement relevant laws, regulations and management systems. Explanation: the chain network approach has to fulfil international, national and local rules that can provide contrary requirements. Standards and IT support systems are needed to manage this properly.

8. SHARING INNOVATIONS

Develop and implement methods to make innovations of chain partners visible and imple-mentable within the chain cooperative for all partners immediately after the innovation has showed improvements and has been implemented by the partner that designed this. Explanation: Circle Lines is a dynamic system that offers the option to adapt the processes based on progressive insight from the learning by doing approach. All possible results of an innovation or practical improvements with interesting cost results this improvement are shared immediately and implemented immediately in all partners operations to receive imme-diately the full chain network result of this innovation.

9. ALIGNEMENT TO CHAIN INTEGRATED PARTNER

Start the chain transport and logistics alignment process, intended to adapt each partner’s internal and external logistics towards its functioning as an integrated part of this the end to end chain “management company” results to be managed by the trusted third party (with lo-gistics expertise). Explanation: the alignment of the internal and external transport and logistics processes of all partners towards chain result orientation creates a full chain management network company whereby the costs and working capital needed can be reduced and managed easier.

10. TRAINING, CERTIFICATION AND IMPROVING

Deliver frequent training of the relevant partner’s management and operators to implement standards of the Circle Lines based chain management method and certification of the sus-tainable end to end chain network.

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Explanation: managers and operators of the individual partner companies have to “play 2 roles” at the same time: 1. Oriented to company results and for its participation in the Circle Lines approach 2. Oriented to an end to end chain network result.

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7 FUTURE DEVELOPMENT The further construction of the Port Hinterland network for sustainable logistics chain man-agement on the basis of the Circle Lines model will continue the dynamic entrepreneurial ap-proach of learning by doing. In the period between its start and today a number of steps have proven to be functioning well. They will be included in the further extension to the European Scale:

• Basic Circle Lines need structural cargo streams to keep going even in weakening economy and to manage the continuity of its reputation of a new structural logistics system.

• Containerized bulk cargo can be a strong basis. This basis can be extended with initi-ative to bundle cargo streams of large shippers. Some large shippers consider bun-dling their cargo streams in large transport corridors in and outside Europe and con-sider Circle Lines as an operating system that includes most of their primary require-ments, especially with respect to trusted data systems to share confidential chain re-lated data, needed to create chain transparency. Further a chain control tower and the trusted third party to secure continuity of cooperation in sustainable chain man-agement.

• The partners involved in the actual Circle Lines network contribute to further expan-

sion now their own networks in Europe.

• In August 2014 the Circle Lines network made a first connection with Circle Lines-like approaches in deep sea shipping. This connects standards like on time delivery guar-antee at the end of the chain and chain transparency by sharing chain data that may lead to new added value logistics products and services that improve the total chain results.

The first versions of the supporting projects need now an upgrading to the professional mar-ket level. Presentations of the actual functioning of Circle Lines in Strategy seminars in 2013 and 2014 with ports, port community companies and shipping lines in Asia, North and South America and discussions confirmed that strategic approach of the Circle Lines Port Hinterland system connects well with actual strategies for future port and port hinterland logistics and invest-ment plans in different countries.

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8 REFERENCES

1. Interviews with representatives of companies that contributed to the development of Circle Lines.

2. Interviews with representatives of companies that manage and use the actual Circle Lines.

3. Interviews with companies that consider the setup of a new Circle Line. 4. Websites seaports and inland ports 5. Reports on Circle Lines related activities by the press

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