Major mover on the road less travelled – interview with head of TNTs Express Road Network

When a fourth Boeing 737 joined his fleet last year, Niky Terzakis, MD of TNT Airways, told IFW it would enable the whole of Europe to be connected at speed. He chose Portugal to Finland as the longest possible journey across the continent, and one that most road operators would think twice about undertaking.
By genuine coincidence, however, one of the first packages I studied during a recent evening tour of TNT's Express Road Network (ERN) hub in Duiven, near Arnhem, was a batch of Tyco wiring harnesses which had begun their journey in Lisbon on 15 February. Two nights later, they had reached Arnhem via Benavente in Spain, one of the network's 14 sub-hubs. In another two days they would arrive at their final destination of Turku, either on a direct trailer or via an "overspill" trunker through the Helsingborg sub-hub.

"We could even have flown the package from Lisbon to Turku via our Liège air hub for next-morning delivery, but for this particular shipment, four days was OK, " says Ben Klaassen, MD of TNT's Express Road Network (ERN).

There are usually second or third options in TNT's multiple hub and spoke system. If the consignee knows his goods are on the way, the only thing that matters is delivery as promised. Last year, ERN achieved 95% on-time arrival, despite ferry strikes, weather and other out-of-its-hands events. In terms of "controllables", the figure was 99.7%.

The Arnhem facility, shared with one of TNT's four Dutch depots, was built in 1998. It sits on the main A12 trunk route, close to the German border and just an hour from the Ruhr.

Transit time to Liège, where Klaassen worked as director of network operations and planning before taking up his new role in January, is two-and-ahalf hours.

TNT shifts 130,000 international consignments a week, made up of more than 200,000 pieces. Of these, 65% are conveyables – packages of up to 30kg which can be handled by one person and go through the automatic sort. (Klaassen points out, however, that any large international operation has to manage local quirks – for example, under Swedish health and safety legislation, workers are limited to lifting 20kg. ) Volume growth across the network in 2004 was close to 10%. With a similar pace of growth expected this year, work has begun to extend the hub, increasing sort capacity from 6,500 to 11,000 parcels per hour (IFW, 7 March) and creating around 100 new jobs over the next five years.

Arnhem currently serves 60 linehaul destinations in 16 countries, part of a total network that grew to 33 countries in October 2004 with the addition of Bosnia. "And unlike some of our competitors, we don't include minnows such as Andorra and Monaco in that figure, " says Klaassen.

Of the 170 daily inbound trailers into Arnhem, 60 are from within the Netherlands, 90 are international and 20 dedicated to major customers, who get the benefit of late cut-offs in return for their consistent volumes.

The total figure of outbound trailers is higher at 190, an apparent paradox explained by the fact that TNT sorts to more locations than it receives from.

Klaassen envisages adding perhaps another 20 linehaul destinations this year, splitting cities such as Bremen and Hannover, for example, as volumes grow. "Because the whole network is under our own management, we can add a linehaul connection every time we can make a business case, " he says.

With its mix of international air and road services, TNT claimed to be uniquely positioned between national express delivery companies and the global integrators. "The big difference is that we have not built international business on the back of a domestic network – it's the reverse." How does TNT's service stack up against DHL, UPS and FedEx? "They have one hobby – and that's flying, " Klaassen says.

"But if you can truck, you do it." It is the depth of the road network that makes this cost-effective, he implies. Everything arriving at, or departing from, the Liège air hub will make the local journey by road up to a radius of 500km, and sometimes a lot further. "We truck air freight on public holidays and on some routes at weekends, either because the distance becomes feasible or owing to driving restrictions. You're selling a service, not a mode, " says Klaassen.

"The key is to balance-off trucks and aircraft against each other, and work as smart as possible to meet the customer's demands cost-effectively."

The UK represents one of the biggest and better balanced linehauls, with an average of 15 trailers a night between Northampton and Arnhem. The last truck out of the UK leaves at 7am with collections from the previous day, arriving late in the evening at Arnhem. UK shippers receive a 48-hour service to many destinations, and three days into eastern Europe.

Not all traffic passes through Arnhem, however. There is a direct linehaul from Northampton to Madrid when the volume is there. Otherwise the truck calls at Paris en route, but with the same arrival time in Madrid of 10am next day.

Arnhem works to the pattern of a national parcel or pallet operation, but on a much greater scale. Trucks from Sweden and Norway arrive at the hub first in the evening, followed by vehicles that have made gradually shorter journeys from countries such as Italy, Spain and the UK, and last of all those from its own doorstep in the Netherlands.

Departures are geared to the delivery times that are possible in destination markets. "Why hurry and leave for Spain at 1am if you're going to be too late to make local deliveries that day?" asks Klaassen. Instead, the Madrid trunker goes later in the night, arriving 24 hours later ready for an early sort and second-day delivery.

It all sounds pretty slick, but Klaassen genuinely cannot quote a utilisation figure.

Capacity can be matched to demand more easily than when you're trying to run a fleet of aircraft, he points out. "You can charter a truck in one or two minutes if you know the market. The choice is so much wider than when you're trying to locate an aircraft." If a truck looks part-empty when it is carrying fragile shipments, that does not mean it is running inefficiently, he adds.

"Sometimes you will have a situation where a truck is carrying only three tonnes, but if it's non-stackable goods, you couldn't do it any smarter. Every week, we calculate the unit cost per kilo, look at our service performance and ask ourselves:

could we do it any better?" In imbalanced markets such as Greece and Italy, TNT runs more goods in than out and tries to leverage the 80% of driving that is sub-contracted to improve efficiency. "You try to find sub-contractors who have freight coming back, or you can change the route going back, for example running from Milan via Paris to Arnhem, to achieve a better balance. And sometimes there is a need to reposition cages, " Klaassen says.

Last year, ERN's throughput was 8m kg. The 35% non-conveyable traffic is made up of palletised and "awkward" shipments ranging from agricultural engines to tyres.

Average shipment weight is higher than might be expected at 35kg, and that is not as a result of TNT's acquisition of Wilson. Klaassen says the Scandinavian freight forwarder has impacted more on TNT's commercial air network so far than on its own-operated flights or road system, where full integration is still to come.

The group supports its claim to operate the most extensive express road network in Europe by going through a scrupulous benchmarking process each year.

Sixteen new linehauls were added in eastern Europe as the EU expanded last year – "something no competitor did, " Klaassen says, proudly. "You start with a 7.5 tonner to see how it goes, but on some new routes we have multiple trailers already." It is not all east-west traffic, he adds. "Alot of the material stays within the east. Vienna-WarsawRiga is an imporant new backbone to our network and enables next-day delivery to places like Zagreb, Ljubljana, Bratislava and the Baltic states." Klaassen gives the impression that little keeps him awake at night. German motorway tolls have increased TNT's costs, but those of the competitors likewise. Incoming controls on drivers'working week will have limited impact as the second driver that TNT usually has in the cab on its linehauls is not defined as working when he isn't driving.

"Some of our sub-contractors may face cost increases from that, however, and certainly our biggest challenge is to cope with new regulations, " he says.

"We have to worry not only about working time, but emission levels, more tolls, more restrictions from Eurotunnel and so on.

"All we can do is lobby in Brussels along with other companies to make sure that we are not surprised by stronger regulations."

Posted: 14/03/2005