Opinion of the European Economic and Social Committee on the European logistics policy
Date: 2007-02-15
Institutions: European Economic and Social Committee
Subjects: EU policy, carriage of goods, freight rate, mode of transport, organisation of transport, transport policy

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Official Journal of the European Union

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Opinion of the European Economic and Social Committee on the European logistics policy

(2007/C 97/08)

On 17 November 2005, in connection with the activities of the Finnish Presidency of the European Union,
H.E. Mari Kiviniemi, Minister for Foreign Trade and Development of Finland, requested by letter an opinion
of the European Economic and Social Committee, under Article 262 of the Treaty establishing the European
Community, on the: European Logistics Policy.

The Section for Transport, Energy, Infrastructure and the Information Society, which was responsible for
preparing the Committee's work on the subject, adopted its opinion on 11 January 2007. The rapporteur
was Mr Ranocchiari.

At its 433rd plenary session, held on 15-16 February 2007 (meeting of 15 February), the European
Economic and Social Committee adopted the following opinion by 82 votes to five with 10 abstentions.

1. Recommendations and conclusions

European competitiveness. Managing

Efficient transport is an essential element in maintaining
1.1
the
and enhancing
transport flows in a modern society requires
complexity of
highly efficient modes of transport and seamless cooperation
between them. Advanced and integrated logistics solutions can
help optimise freight transport operations and thereby favour
growth and make Europe globally more competitive.

1.2
The Finnish Presidency initiative and the communication
published by the Commission in June of this year (1) show how
logistics efficiency can be a tool to reinforce and exploit the
positive
synergies between environmental protection and
competitiveness. This can be accomplished by optimising the
rational use of vehicles and infrastructure in order to reduce
unnecessary transport. This is why the EESC believes it is impor-
tant to secure a development effort that can capitalise on input
from all players: logistics firms and their employees; user under-
takings and their employees; public authorities and organisa-
tions.

ners can promote the procedures and functioning of the logistic
through ongoing dialogue. Ensuring
employment market
permanent
jobs and occupational well-being, as well as
improving productivity can be seen as joint goals.

1.6
The Commission's previous approach to solving the
congestion problem on certain roads within the EU by regu-
lating for a return of
transport mode share to 1998 levels
seems not to be in tune with current developments in the trans-
port market.

The main task is to achieve coordination between modes
1.7
of transport where possible and where the individual mode's
efficiency and suitability can be exploited to the full. This will be
achieved when the technical, practical and economic conditions
are present. The challenge for the EU is to agree on a common
policy to create or develop these conditions. The future policy
will also have to focus on ensuring safe, environmentally clean
and efficient transport systems.

1.3
This effort should be underpinned by a strategic plan for
growth and competitiveness through logistics, established by the
Commission. The plan must clearly define the duties of the
authorities and of the business world. It must take a multimodal
approach to transport and be based on economic, transport
policy, social and environmental interests and regional factors.

2. Background

Logistics

is a labour-intensive activity that

1.4
requires
skilled, well-educated staff and management. The plan must
therefore illustrate in detail the situation for logistics studies in
compulsory education and post-school education. It must also
look into the options for providing support for research and
infrastructure development.

1.5
In this framework jobs markets could play an important
role in maintaining and developing the logistic services that
serve the needs of competitiveness and industry. The social part-

(1) Freight Transport Logistics in Europe — the key to sustainable mobility

COM(2006) 336 final of 28.6.2006.

2.1
Finland has asked the EESC to draw up an exploratory
opinion on A European logistics policy, citing a number of
reasons why development in this area is so important to Euro-
pean competitiveness. These include the following:

2.2
The global economy is in a period of transition. The
most recent phase in globalisation started in the 1990s, when
the growing economies in Asia opened up the international
market economy. This resulted in a relocation of both industrial
production and provision of services. In Europe, EU enlarge-
ment, economic growth in the Union's neighbouring countries
and Russia's economic recovery are changing the structures of
the European industrial production and services markets. The
EU has to swiftly and determinedly respond to these challenges
as outlined in the Lisbon Strategy.

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These developments are also reflected in the European
2.3
transport sector. Firstly, transport markets in all Member States
must be successfully integrated into Community transport
markets. Special attention must be given to the countries that
are still technically integrated in the transport system of the
former USSR. Secondly, remaining mobility constraints in the
EU must be removed and transport operations effectively orga-
in order to capitalise fully on the economic
nised. Thirdly,
opportunities of
transport
connections to these countries must be developed. The existing
bottlenecks on the borders with non-EU countries prove the
need for work to be done to solve these problems. Freight trans-
port in many cases crosses the frontiers of the EU, therefore
attention to the development of appropriate infrastructure and
technologies on both the EU and non-EU country sides is
becoming extremely important.

the EU's neighbouring countries,

One of the objectives of the Lisbon Strategy is to make
2.4
Europe the most competitive economy in the world. A modern,
operational and efficient transport system is vital for sustainable
economic development. However, improvement, in the competi-
tiveness of EU enterprises requires ever higher quality, punctu-
ality and efficiency in transport. At the same time, a rapid
increase in goods transport — especially on roads — causes
saturation of transport in many parts of Europe. This means
additional costs for European industry. Such undesired develop-
ment also has negative repercussions on the natural living envir-
onment.

Considerable efforts have been made in the EU to open
2.5
the markets of logistics services and to integrate the transport
networks in Europe. However the results are not yet satisfactory
and many barriers to progress still remain. In the EU transport
policy,
received the attention it deserves
although logistic costs in industry and trade are considerable. In
fact, they form a significant part of enterprises' total turnover.
The European logistic sector is also an important employer.

logistics has not

Logistic efficiency is a tool to reinforce and exploit the
2.6
positive
synergies between environmental protection and
competitiveness. This can be accomplished by optimising the
rational use of vehicles and infrastructure in order to reduce
unnecessary transport.

Improved logistics may also have positive effects on the
2.7
EU's regional development, because it decreases the importance
of geographical locations and thus promotes regional economic
growth and competitiveness.

3. Introduction

Contacts between Finland and the Commission have
3.1
resulted in the Commission's publication in June 2006 of a

communication on Freight Transport Logistics in Europe — the
key to sustainable mobility (2). The communication looks at the
scope for bringing logistics and transport policy closer together.

In its March 2006 consultation document (3) on this
3.2
communication, the Commission addresses a number of issues
regarding the future development of logistics and its importance
for an efficient transport sector in the EU, with a clear emphasis
on intermodality and cooperation between modes of transport.

3.3
The document indicates that when comparing GDP and
logistics expenditure, including transportation between Europe
(EU-15) and North America, the logistics percentage of GDP has
grown in Europe from 12.2 % in 1998 to 13.3 % in 2002.
During the same period, logistics expenditure in North America
has decreased from 11 % to 9.9 %.

3.4
The Commission's consultation document also refers to
previous measures adopted by the Commission. Research and
Technological Development (RTD) efforts over the last few years
have seen a number of projects deal with intermodality on the
one hand, and logistics on the other. The aim of these projects
is to develop a better understanding of the interrelation between
logistics decisions and transport services (4).

transport. By 2010 the market

The 2001 Commission White Paper (5) contains basic
3.5
information about the EU transport system and puts forward a
number of ideas, approaches and proposals for improving the
transport situation by 2010. It sets quantitative objectives for
different modes of
share
between the various transport systems will be restored to 1998
levels. There is strong emphasis on the importance of intermod-
ality, i.e. how the various modes of transport can be integrated,
especially as regards long distance haulage within Europe. The
aim is to switch more freight to rail and maritime transport.
The Marco Polo programme is part of this effort. However, this
will require favourable technical and logistical solutions that
enable a door-to-door concept to be pursued. The White Paper
states that
the delays and additional costs associated with
reloading are obstructing competitiveness, to the benefit of road
haulage, whose highly developed network makes it possible to
transport goods to more or less any destination. The above
comments on developed road infrastructure apply primarily to
the EU 15 countries. The road network in the new Member
States is poorly developed and often of low quality. There is
huge potential for developing rail transport in these countries;
this should be exploited, e.g. by supporting investment in rail
infrastructure.

(2) Freight Transport Logistics in Europe — the key to sustainable mobility

COM(2006) 336 final of 28.6.2006.

(3) Communication document on logistics for promoting freight inter-

modality.

(4) I.e. projects as: SULOGTA, PROTRANS, EUTRALOG, FREIGHTWISE,

POLLOCO, etc.

(5) White Paper on European Transport Policy for 2010: time to decide,

COM(2001) 370 of 12.9.2001.

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The Commission's Communication (6) on the mid-term
3.6
review of the White Paper confirming the importance of inter-
modality, seems to be more pragmatic as regards the balance
between different modes of transport.

4. Finland's focus on a future European logistics policy and

logistic trends

The preparatory work that Finland has submitted to the
4.1
Commission includes a study of new trends in the field of logis-
tics and an account of the so-called EULOG project. The main
objective of the project was to create a discussion paper that
comprehensively represents the best global knowledge about the
desired future of European logistics and transport logistics and
the necessary policies for its achievement.

The production will grow especially in the developing
4.2
economies of China, India, Brazil and Russia. The amount of
transported goods and the transport distances will grow. The
control of global supply chains is demanding and it is possible
that
the decision making moves to Asia. The competition
intensify which makes the
between the economic areas will
capacity of the infrastructure an increasingly critical competitive-
ness factor. The growth of production and consumption in
Eastern parts of Europe forces to shift part of the goods trans-
port away from roads. The development of intermodal freight
distribution centres in the frontier EU countries of that region is
thus becoming extremely important. This will mean optimising
the EU transport system's operating costs. The EU institutions
should support this positive trend and promote environmentally
friendly modes of transport as part of sustainable development.

4.3
In production and services customer orientation defines
the structures of supply chains. The chains are differentiated not
only by the characteristics of the product but also by the needs
and expectations of the customers. The system integration is
both technological and organisational and it
is knowledge
oriented. Supply network engineering requires innovation both
in products and processes. In western countries the services will
increase while the production is moving to other parts of the
network. There is a demand for accurate information about the
environmental
impacts of products and services. This will
increase the importance of tracing and tracking in efficiency
development and waste avoidance. The importance of reverse
logistic will grow when the used products must be utilised or
abolished in a controlled fashion.

4.4
Information and communication systems enable to
control the vital information flows between planning, managing
and executing supply chains. ICT enables to improve the security
and service level of
logistics at the same time as costs are
reduced. New intelligent technologies and standardised interfaces
are
identification becomes
common it gives significant possibilities to improve the tracking,
tracing and security of deliveries.

radio frequency

required. As

(6) See footnote No 2.

Cost efficiency is always important. The transport cost
4.5
will grow because of increased labour cost and oil price, conges-
tion and infrastructure charges and tightening security demands.
Also reverse logistics will influence cost efficiency. The logistic
costs are not sufficiently known and thus decisions are based on
partial information. The modelling of true costs must be devel-
oped. Logistic costs should be included in key performance indi-
cators of companies. Against this background, the cost calcula-
tion model prepared by the European Commission as part of
the implementation of the Euro-vignette Directive, which, inter
alia, takes into account external costs and the costs of infrastruc-
ture utilisation, will be useful for calculating the actual costs of
logistics operations.

4.6
Public policies aim to create an operating environment
that fosters the competitiveness of trade and industry. Regu-
lation is a necessary part of European mixed economies but it
must be intelligent and further development and competitive-
ness. The harmonisation of policies and regulations and the
investments in infrastructure are precondition for abolishing the
barriers of common market. Although the importance of
regional authorities will grow in the regulation and investments
of transport they must consider also the development of the
global operating environment.

4.7
The authorities will promote innovations and their
exploitation. From logistics point of view the main development
areas are the supply chain management and new business
models. In the supply chain further development is required e.g.
tracing and tracking and intermodal
in safety and security,
operations. On the logistics business new abilities are needed
e.g. in collaboration and risk sharing.

5. General comments

5.1 When the term ‘logistics’ is used, its detailed content and
meaning is generally not specified. There is no uniform defini-
tion of the expression. Logistics is a term originally used in a
military context. Freight logistics (or transport logistics) can be
defined as the process of planning, implementing, controlling
and synchronising the efficient, cost-effective forward and
reverse flow and storage of raw materials, in-process inventory,
finished goods and related information from point of origin to
point of consumption for the purpose of meeting customers'
requirements. This definition covers the ones the Commission
uses in its consultation document.

By way of introduction, the EESC notes that the Finnish
5.2
presidency gives a long list of reasons for the importance of a
fully operational European logistics market and argues convin-
cingly for logistics to be given a significantly higher profile in
European transport policy. The Committee realises the impor-
tance of this and is therefore ready to give this initiative its full
support.

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The renewed Lisbon Strategy is a major challenge and its
5.3
delivery depends upon economic growth in Europe. Economic
growth requires increased trade and continued streamlining and
innovation in industry. It is increasingly affected by international
influences and competitiveness factors.

This approach also permeates the communication on
5.9
mid- term review of the White Paper, and which the EESC
endorses. The EESC intends to discuss the communication in a
separate opinion, but wishes nevertheless
to make some
comments here. The consultation document that preceded the
communication focused exclusively on intermodality as set out
in the 2001 White Paper,
i.e. transferring transport volumes
from the road haulage sector to the shipping and rail sectors.

In almost all areas of society, passenger and goods trans-
5.4
port are essential to economic activity, manufacturing and trade.
Time and cost factors are crucial to business localisation deci-
sions, but also to individual choices. Just as structural changes in
society impact on transport needs, changes are driven by the
introduction — or otherwise — of new transport facilities.

5.10
The EESC is pleased to note that the Commission no
longer sees intermodality as an end in itself, but rather as a
means to coordinate different modes of transport.

5.5
The EESC believes that in an increasingly internationa-
lised economy, logistics and logistics costs will be increasingly
important
factors in competitiveness and streamlining, and
increasingly important for environmental protection. Delivering
access to markets, employment, education, services, etc. via
increased mobility is dependent on one essential criterion: the
existence of efficient transport systems.

5.6
The EESC therefore endorses the Commission's view that
transport is an essential element in maintaining and enhancing
European competitiveness. Managing the complexity of trans-
port flows in a modern society requires highly efficient modes
of transport and seamless cooperation between them. Advanced
and integrated logistics solutions can help optimise freight trans-
port operations and thereby favour growth and make Europe
globally more competitive.

5.7
It is important to remind in this context that logistics is
an enterprise-based, customer-driven activity which the market
has a duty to deliver. This means that consumer transport
requirements are the main driver in this area. For example, the
transport needs of manufacturing industry are continually
increasing in order to reduce storage of manufacturing compo-
nents and finished products. The increase in internet commerce
and a liberalised postal market are other areas where the
demand for fast, punctual transport — and consequently logis-
tics — will increase. It is also important to stress that such a
development must be carried out in a sustainable way, providing
for specific rules in order to safe-guard social and environmental
requirements.

Customer transport choices are influenced by a large
5.8
number of factors and depend, of course, on the type of goods
to be transported. Valuable, fragile or easily damaged goods are
usually transported by road or by air. Low value, heavy or bulky
goods are often transported by sea or by rail. Time factors (just
in time) and the number of reloads are other factors affecting
the choice of mode of transport.

In the Commission consultation document on the
5.11
2001 mid-term review of the White Paper, the Commission
stood by its view that the balance between modes of transport
must be restored to 1998 levels. The 2001 White Paper stressed
that the European Union must act to address the increasing
imbalance between modes of transport. The growing popularity
of car and air transport brings with it increased network conges-
tion. At the same time, alternatives to road haulage are hindered
owing to a failure to capitalise adequately on the potential
traffic
offered by rail and short
congestion within certain parts of the EU should not be allowed
to hide the fact that peripheral areas have inadequate access to
centrally located markets.

range shipping. However,

5.12
According to the Commission, over time this has lead
to a transport imbalance resulting in increased congestion, parti-
cularly on the trans-European transport routes and in cities. The
Commission believes that in order to solve this problem, two
overarching objectives will have to be achieved by 2010:

— regulated competition between the different modes of trans-

port;

— coordinated development of the different modes of transport

in order to achieve successful intermodality.

5.13
The EESC criticised this position in its 2002 opinion on
the White Paper (7). With regard to the first bullet point above,
the Committee emphasised the following:
‘The problem of
congestion is one of the central themes of the document. But
there is no recognition that this problem really affects only a
small part of the territory of the Community, specifically areas
with very high population density (which is one of the causes of
the problem) … It is thus inappropriate to draw up a general,
uniform transport policy for the Community as a whole …
What is really needed is a specific policy for each of these areas.’
The EESC maintains this view.

(7) Opinion of the Economic and Social Committee on the ‘White Paper
(COM

on European transport policy for 2010:
(2001) 370 final) — OJ C 241, 7 October 2002.

time to decide’

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It is misleading to have distribution of market share as
5.14
a quantitative objective for the different modes of transport.
Total goods transport volumes within the EU via separate trans-
port modes do not account for a significant market in which
road, railways, short sea shipping, inland waterways and pipe-
lines compete with each other. The statistics currently used,
where the market shares of the various modes of transport are
compared on the basis of goods transport volumes, does not
accurately reflect the actual situation on the transport market.
The development of more advanced statistical methods should
be encouraged, which distinguish between long-distance and
short-haul transport.

5.15
The main task is to achieve coordination between
modes of transport where possible and where the individual
mode's efficiency and suitability can be exploited to the full.
Generally speaking, this requires advanced logistics solutions. In
the long run, the result of these efforts could provide for a
significantly more rational and environmentally-friendly exploi-
tation of global transport capacity, which could reduce conges-
tion to some extent on certain roads. The Committee takes the
view that this must not be allowed to obscure the fact that a
modern, efficient infrastructure is needed to achieve the objec-
tives.

The EESC notes that in its Communication on the mid-
5.16
term review of
the 2001 white paper, published while this
opinion was under preparation, the focus now is shifted toward
a holistic approach in which each mode of transport has its
proper place in order to create a transport policy that can boost
the international competitiveness of combined transport and
offer solutions integrating several modes, the main aim being to
remove bottlenecks and weak links in the logistics chain.

6. The importance of an efficient logistics market

6.1
Transport — regardless of mode — is physically the
most visible part of the logistics chain. Transport will therefore
inevitably be in focus when logistics is addressed.

6.2
Logistics govern the industrial product and information
supply chain, and the distribution of end products. This activity
chain must meet customer demands and expectations, while
being environmentally and socially sustainable.

6.3
Coordination and integration are two key concepts for
the transport sector. Physical coordination involves reloading
that makes transport more expensive while putting the goods at
risk. If this coordination is to work, freight carrier reloading

Brussels, 15 February 2007.

needs to be easy. This is a technical issue, but also an organisa-
tional one.

6.4
In order to achieve coordination, work is required in
several areas. Organisational coordination is needed between
different modes of transport, as is a holistic approach to the
development of transport nodes, intermodal freight carriers and
multimodal systems. This approach must be developed in order
to achieve effective, competitive logistics systems and sustainable
transport.

6.5
Logistics is thus a component in industrial and trade
activity. The trend is to move away from capacity-governed
delivery towards order-governed delivery. Products are adapted
to customers. Great demands are placed on short lead times and
short advance planning, and on precision and flexibility. Trade
is being globalised. Many subcontractors are involved in the
supply chain. Goods values increase as businesses limit their
stocks in order to reduce capital tie-up.

This requires fast, punctual deliveries during both the
6.6
production process and during distribution to end customers,
and in return flows. There is greater demand for efficient logis-
tics. The ability to exploit and intermesh transport chains to the
full is key to success in controlling and managing material and
product flows.

All modes of

6.7
transport are needed and the interplay
between them should be promoted. This intermodal transport
calls for some new thinking in order to link the different modes
together.

6.8
The creation of terminals, networks, electronic informa-
tion management and good mutual confidence create new
opportunities for cooperation between transport market opera-
tors.

6.9
Every mode of transport has its own history but the
change in a more liberal direction has been driven by external
technical, economic and trade conditions. The EU has had and
continues to have a major role to play in this ongoing change.

6.10
All firms realise the prime importance of efficient logis-
tics in the production and transport chains. Many sectors are
working hard to make progress in this area; this work should be
in a
supported and encouraged, as it could also be helpful
broader context of sustainable mobility.

6.11
This is the background to the European Economic and
Social Committee's support for the Finnish presidency's initiative
to put European logistics on the agenda.

The President

of the European Economic and Social Committee

Dimitris DIMITRIADIS