A feasibility study on rail transportation of paperboard at Tetra Pak

Abstract

The current global trade scenario has a large infrastructural gap, which limits the possibilities for physical distribution of goods among different countries or continents. The ‘Belt and Road Initiative’ will be used to close this gap. Tetra Pak being global organisation would like to explore the possibilities of using rail transport in BRI. For this reason, they would like to evaluate the benefits and challenges associated with changing of transport mode from sea to rail.The purpose of this thesis is to conduct a feasibility analysis of change in mode of transportation from sea to rail from an economic, environmental and service performance aspects while proposing a better understanding of the advantages and challenges of rail freight. In order to fulfill the purpose of the thesis, the authors have used inductive case study approach. This was done by analyzing and comparing the as is state to the to be state, using the qualitative and quantitative data coming from interviews and company documents.The analysis resulted in showcasing the total logistics costs for both modes of transport along with the impact it would have on service and environmental performance. It was found that the rail freight would not be suitable and economical to ship paperboard due the its low unit value.

Popular Abstract

Freight transportation systems play a huge part in the economy of a nation by providing goods and services to the required destination on time. Suppliers and customers, factories and markets are often parted by a physical distance. Freight transportation systems integrate numerous complex activities. The current global trade scenario has a large infrastructural gap, which limits the possibilities for physical distribution of goods among different countries or continents. Given this infrastructural gap, China has commenced a major global effort, by initiating a global development strategy, called the Belt and Road Initiative (BRI). BRI aims to develop infrastructural network of railways, highways and ports across six main economic corridors encompassing China, Mongolia and Russia; Eurasian countries; Central and West Asia; Pakistan; other countries of the Indian subcontinent; and Indochina. Apart from connectivity in terms of industrial cooperation and development, BRI will also pursue innovation-based development and ensure sustainable development in terms of peace, environment and ecology, water conservation and civil society. Also, due to the BRI, an improved railroad infrastructure is available for shipments between Europe and Asia.
This study aims to analyse rail freight transportation enabled by the BRI in comparison to the existing mode of transportation used which is sea freight. The assessment was based on the different performance measures like total logistics cost, carbon emissions and service performance. These performance measures have previously been used to analyse and compare two transportation modes. Apart from these performance measurements, the risks and challenges associated with the use of BRI was also taken into consideration, to present a holistic understanding. The material under focus is paperboard, which is one of the raw materials used to produce the final product known as the packaging material. The analysis also focused on paperboard coming in from the supplier in Sweden and going to the three Chinese factories.
Observations after the analysis showed that the TLC of sea freight which included the inventory costs along with the transport costs was lower for sea freight when compared to rail freight. This was due to higher transport costs for rail and low unit price of paperboard. Apart from the better economic performance, sea freight was also found to be environmentally friendly, due to the unmatched capacity compared to rail freight. The only advantage rail freight had over sea was its lower transit time but since the unit cost of paperboard was low, it did not have a significant impact on the inventory holding costs. Moreover, rail came with its own sets of challenges like capacity constraints, technical limitations and subsidiary issues. Overall, the analysis presented the variables which affected the TLC like unit cost and transportation cost and how the capacity of a mode will affect the environment.
This study also recommends that future research should be conducted on similar basis to compare rail freight and air freight. Furthermore, TLC of rail freight could also be analysed for high value items like processing equipment or spare parts where, lower transportation times are of high importance. This alternative study will help to further develop understanding the benefits and challenges of different modes of transport, trade-offs involved in selecting transport mode and BRI itself.

• author: Mudaliar, Sanjay and Teldeschi, Murilo
• supervisor: Ebba Eriksson
• organization: Engineering Logistics; Department of Industrial Management and Logistics
• course: MTTM02 20201
• year: 2020
• type: H2 - Master's Degree (Two Years)
• subject: Technology and Engineering
• keywords: BRI, Mode choice, total logistics cost, service, environment.
• report number: 5912
• language: English
• id: 9010812
• date added to LUP: 2020-05-27 11:48:37
• date last changed: 2020-06-22 12:15:04