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OULU BUSINESS SCHOOL
Aki Aamuvuori
PROJECT DELIVERIES: BARRIERS & OPPORTUNITIES OF TRANSPORT
LOGISTICS IN THE BARENTS REGION
Master’s Thesis
Department of Marketing
May 2014
UNIVERSITY OF OULU
Oulu Business School
ABSTRACT OF THE MASTER’S THESIS
Unit
Department of Marketing
Author
Supervisor
Aamuvuori Aki
Juga, J. (Professor, D.Sc.) & Nuojua, O. (M.Sc.)
Title
Project Deliveries: Barriers & Opportunities of Transport Logistics in the Barents Region
Subject
Type of the degree
Time of publication
Number of pages
Marketing
Master’s Thesis
May 2014
102
Abstract
This research provides insights into project deliveries in the Barents Region. The aim of this research
is to describe the project delivery process and to examine the barriers and the opportunities of
transport logistics that are involved in project logistics in the Barents Region.
The research is conducted with qualitative research methods and it features two case examples of
project deliveries. The literature review provides academic findings from transport logistics and
project logistics sources. Theoretical framework is constructed of the project delivery process that
encompasses a focus on barriers and opportunities of transport logistics. The data collection includes
8 interviews and observation.
The project delivery process consists of several phases: manufacturing, project cargo, transport mode
choice, loading/stowing, transportation and final destination. This research provides also essential
information of barriers and opportunities that are involved in project deliveries in the Barents Region.
The project delivery process includes barriers that are: infrastructure, border crossing issues, distance,
regulation and challenges with all-year traffic. According to the research findings, the best
opportunities for project deliveries are road- and maritime transport. This research reveals that there
are also difficulties in cross-border logistics between the Nordic countries, unlike the earlier academic
findings suggest.
Clearly, this research provides both theoretical contribution and managerial implications. Earlier
research of project deliveries is almost completely lacking, which means that new academic research
is needed. Thus this research presents valuable and new theoretical contribution by describing and
picturing the project delivery process in detailed fashion. The managerial implications are related to
the findings of potential barriers and the best transport mode opportunities in project deliveries in the
Barents Region. By clarifying the potential challenges of project deliveries, this research gives
valuable information of what kinds of problems there might be, and most importantly this research
gives instructions that are valuable for tackling those challenges. All in all, this research provides
valuable findings of project logistics and cross-border logistics in the Barents Region.
Keywords
Project Logistics, Transport Modes, Cross-border Logistics
Additional information
CONTENTS
Abstract
Contents
Figures and Tables
1
INTRODUCTION………………………………………………………………………………….. 7
1.1 Introduction to the research topic …………………………………………………… 7
1.2 Research gap ………………………………………………………………………………….. 9
1.3 Aim of the research and the research questions ……………………………… 10
1.4 Research methodology ………………………………………………………………….. 11
1.5 Structure of the research ………………………………………………………………. 12
2
TRANSPORT LOGISTICS ………………………………………………………………….. 13
2.1 International transport logistics ……………………………………………………. 13
2.2 Transport modes & carrier selection …………………………………………….. 17
2.2.1 Air transport ………………………………………………………………………… 21
2.2.2 Maritime transport ……………………………………………………………….. 21
2.2.3 Railroad transport…………………………………………………………………. 23
2.2.4 Road transport ……………………………………………………………………… 23
2.3 External forces in transport logistics……………………………………………… 24
2.4 Environmental impacts of transport logistics…………………………………. 25
2.5 Barents Transports ………………………………………………………………………. 27
2.6 Transport logistics in Finland ……………………………………………………….. 31
2.6.1 Air transport sector ………………………………………………………………. 35
2.6.2 Maritime transport sector ………………………………………………………. 36
2.6.3 Railroad transport sector ……………………………………………………….. 40
2.6.4 Road transport sector ……………………………………………………………. 41
3
PROJECT LOGISTICS IN THE BARENTS REGION …………………………. 42
3.1 Project deliveries ………………………………………………………………………….. 42
3.2 Offshore projects in the Barents Region ………………………………………… 46
3.3 Barriers of transport logistics in the Barents Region ……………………… 47
3.4 Opportunities for Barents Region transports…………………………………. 50
3.5 Project delivery process model ……………………………………………………… 53
4
METHODOLOGY ………………………………………………………………………………. 56
4.1 Qualitative research ……………………………………………………………………… 56
4.2 Case study method ……………………………………………………………………….. 57
4.3 Data collection ……………………………………………………………………………… 57
4.4 Analyzing the data………………………………………………………………………… 60
5
PROJECT DELIVERIES IN THE BARENTS REGION ………………………. 61
5.1 Case examples ………………………………………………………………………………. 61
5.1.1 Port of Raahe……………………………………………………………………….. 62
5.1.2 Case 1. Offshore Crane (Oy SteelDone Group Ltd.) …………………. 63
5.1.3 Case 2. Transportation of 7 windmills (Wasa Logistics Ltd.)……… 66
5.2 Project delivery process ………………………………………………………………… 68
5.2.1 Transportation focus in design and planning ……………………………. 68
5.2.2 Project cargo ……………………………………………………………………….. 71
5.2.3 Transport mode choice ………………………………………………………….. 71
5.2.4 Handling the project cargo …………………………………………………….. 75
5.2.5 Transportation ……………………………………………………………………… 76
5.2.6 Unloading & Installation……………………………………………………….. 77
5.3 Country related differences …………………………………………………………… 78
5.3.1 Finland ……………………………………………………………………………….. 78
5.3.2 Norway……………………………………………………………………………….. 80
5.3.3 Sweden ……………………………………………………………………………….. 81
5.3.4 Russia …………………………………………………………………………………. 82
5.4 Revised project delivery process model …………………………………………. 84
6
CONCLUSIONS ………………………………………………………………………………….. 88
6.1 Findings ……………………………………………………………………………………….. 88
6.2 Theoretical contribution ……………………………………………………………….. 90
6.3 Managerial implications ……………………………………………………………….. 91
6.4 Validity, reliability and generalization …………………………………………… 92
6.5 Limitations …………………………………………………………………………………… 93
6.6 Future research ……………………………………………………………………………. 95
REFERENCES …………………………………………………………………………………………… 96
Figures
Figure 1. Logistics Performance Index 2012, data source: World Bank (2013)……28
Figure 2. LPI Country Score Cards 2012, data source: World Bank (2013)………..29
Figure 3. Transport modes of foreign exports and imports in Finland 2012, data
source: Tulli (2013)………………………………………………………………….32
Figure 4. Exports & Imports of the ports in the Bothnian Bay in 2012, data source:
Satamaliitto (2013)…………………………………………………………………..39
Figure 5. Project delivery process model…………………………………………….54
Figure 6. Revised project delivery process model………………………………..…87
Tables
Table 1. Barriers of transport logistics in the Barents Region……….………………48
Table 2. Comparison of transport logistics opportunities in the Barents Region……51
Table 3. Interview details……………………………………………………………58
7
1
INTRODUCTION
This chapter introduces research topic, research gap, research aim, research
questions, research methodology and research structure. All in all, the introduction
chapter gives insights into research focus and background information.
1.1
Introduction to the research topic
The role of logistics increased approximately 30 years ago, when the regulation of
international trading began to diminish and thereby trading between nations became
easier through free market focus. All in all, the free trade helped the competitiveness
of transport logistics services, as the costs of logistics diminished. (Wood, Barone,
Murphy & Wardlow 1995: 59; Gourdin 2001: 91; Hickey & Cassidy 2004.)
Furthermore, the founding of EU in the 1990’s made transportation logistics a lot
easier between the member states. Even though the world has faced significant
changes in the past decades, logistics has been and still continues to be an important
part of business. If compared to earlier days, logistics is nowadays seen as an integral
part of the whole business model, rather than a separate function, which managers
just have to deal with. (Gourdin 2001: 1-5; Hickey & Cassidy 2004.) One could
easily state that the globalization of business has increased the importance of
logistics operations (Karhunen, Pouri & Santala 2004: 28). Logistics efficiency is
estimated to build 20 percent of the competitiveness numbers for the Finnish
industrial companies (Paavola, Vehviläinen, Ojala, Antikainen & Iikanen 2012).
Logistics serves as a value creating driver for the customers (Gourdin 2001: 1-5) and
the choice of right transport mode is seen as one of the key things in the logistics
management perspective (Meixell & Norbis 2008). Fortunately, many companies
have understood that the quality of logistics services creates the real value (Solakivi,
Ojala, Lorentz, Laari & Töyli 2012).
Globalization has driven the logistics branch into a situation, where global customers
demand quicker delivery times (Rondinelli & Berry 2000). D’Este (1996) sees that
logistics includes three important aspects: time, cost and risk. These three factors are
always present, and the delivery process has to be planned to meet these
requirements. The shipments should be planned so that the time of warehousing is
8
diminished to minimum. (D’Este 1996.) To overcome these challenges, the logistics
companies have to be able to offer efficient logistics services in global scale
(Rondinelli & Berry 2000). However, Manuj and Mentzer (2008) remind that when
conducting global logistics, one faces several risks. As a matter of fact, the increased
role of globalization adds the risk factors for logistics remarkably (Solakivi et al.
2012). Manuj and Mentzer (2008) suggest that logistics companies should be ready
to encounter these risks by proper risk management strategies. According to
Bowersox and Calantone (1998), the fast development of both globalization and IT
systems has driven logistics into a core competence in business management.
However, the key question behind the emerging importance of logistics is: has the
logistics itself changed, or has its role just become more and more important in our
society? As a matter of fact, the research of Tavasszy, Ruijgork and Davydenko
(2012) shows that the change process of logistics continues, as the role of
information and technology increases in all industries, not only in logistics.
Transport logistics builds upon four different transport modes: Air Transport,
Maritime Transport, Railroad Transport and Road Transport. These modes have pros
and cons, which dictate their usefulness for transporting different kinds of cargo
loads. In order to cope with the challenges driven from global transport logistics,
there has to be profound understanding of how these different transport modes differ
from each other. (Gourdin 2001: 85; Davidsson, Henesey, Ramstedt, Törnquist &
Wernstedt 2005.) Transport logistics faces several barriers that harness the fluency of
transportation processes (Aas, Halskau & Wallace 2009; Siuruainen 2010). When
planning a transportation, there are different kinds of alternatives that are driven by
surrounding opportunities of transport logistics (Valtioneuvoston kanslia 2013). If
one thinks of the Barents Region for instance, the trading happens between four
different countries: Finland, Norway, Russia and Sweden. Traditionally, it has been
discussed that the logistics issues in this region are mainly related to transportations
in Russia, but also the trade between these other nations could be harnessed by
logistics related barriers (Ludvigsen 1999; Lorentz 2008). Barents Region offers
multiple natural resources, and the demand for high technology solutions, especially
in offshore business is rising (Liikennevirasto 2013; Valtioneuvoston kanslia 2013).
Usually the products that are transported for these energy industries consist of
massive and complex project deliveries (Norbury 2012). In order to do successful
9
project deliveries, both efficient logistics and expertise of dealing with the transport
logistics barriers is needed. Furthermore, one has to be aware of suitable transport
mode opportunities, when conducting project deliveries in the Barents Region.
This research focuses on project deliveries in the Barents Region. The research seeks
to underline the prevailing barriers and opportunities of transport logistics for these
types of project deliveries. The research topic is viewed through case examples of
actual transportation processes in port of Raahe. The first case example focuses on
project delivery of offshore crane from Raahe, Finland to Denmark. Whereas, the
second case views the transportation project of windmill parts from Denmark to
Raahe, Finland. These project deliveries are approached through focused interviews
and observation. Although viewing the Barents Region as a whole, the research
emphasizes the barriers and opportunities of transport logistics from the perspective
of Northern Finland. The case studies of this research encompass the logistics chains
of project deliveries, but also other forms of transportation logistics related issues are
discovered. The research contributes especially in viewing possible challenges that
are related to these kinds of international logistics projects. This research builds upon
theoretical background of transport and project logistics. The empirical research is
conducted with special focus on project deliveries and maritime logistics by
examining real life case examples related to port of Raahe. This master’s thesis is
part of the ENPI Kolarctic Barents Logistics II project in Oulu Business School.
1.2
Research gap
Although Finland has good knowhow of arctic conditions and technology
(Valtioneuvoston kanslia 2013), it has been criticized in the media that the Finnish
companies have not yet given interest on the great business opportunities of the
Barents Region (see. Lehtiniemi 2013). One of the main reasons for this might be the
difficulty of doing international business in these different cultural areas. Logistics
issues and internationalization in general, can cause obstacles for the trading
processes. Therefore, a research of the possible barriers and opportunities of
transport logistics in the Barents Region is needed. The transportations are often
linked to large projects, meaning that these transportations are often project
deliveries and there is a clear need for understanding these types of processes.
10
Transporting goods to international markets is not easy, as there are lots different
factors that might hinder the whole business process. Finnish companies for instance,
have had a long history of doing business with Russian companies, but that does not
necessarily guarantee any success for the transactions in general, although companies
with lots of trading experience seem to do little better with the Russian trade
(Lorentz 2008). Lorentz (2008) has found out that expertise and knowledge of the
local business environment helps the companies to be more successful, when trading
goods to Russia. Although the Swedish and Norwegian cultural backgrounds are
very close to Finland, the foreign trade between these countries could also face some
difficulties, which are caused from different kind of logistics barriers (Ludvigsen
1999). It is important to note that even similarities in culture might not guarantee
successful implementation of business transactions. Transporting goods successfully
to foreign countries demands knowhow of both possible barriers and opportunities
related to transport logistics. There is a clear gap in academic research that would
focus solely on project deliveries. Project deliveries are usually very complex in
nature (e.g. size and weight), which separates them from general cargo
transportations (Andersson, Duesund & Fagerholt 2011). Therefore, it would be
important to add understanding of project deliveries, and at the same time; to give
valuable contribution to both academic and managerial fields.
1.3
Aim of the research and the research questions
The aim of this master’s thesis is to describe the project delivery process. This
research seeks to add the understanding of the barriers and opportunities of transport
logistics that are related to the project deliveries in the Barents Region. The concept
of barrier relates to challenge that might harness the transportation process. The
barriers might vary from one country to another. In this research the transport
logistics barriers are focused on challenges that hinder the project deliveries in the
cross-border logistics between the Barents Region countries. The concept of
opportunity means transport modes that are suitable for project deliveries. Transport
modes have several pros and cons that have impact on their usefulness in
transporting project deliveries in the Barents Region. The research questions are
formed in a way that they encompass the focus on the project delivery process in the
11
Barents Region and highlight the role of transport logistics barriers and opportunities
in this process.
The main research question is:
o How is the project delivery process in the Barents Region?
The sub research questions are:
o What kinds of transport logistics barriers there are for project deliveries in
the Barents Region?
o What kinds of transport logistics opportunities there are for project deliveries
in the Barents Region?
1.4
Research methodology
This research is conducted with qualitative research methods. The qualitative
research methods are chosen, in order to gain rich data of the research phenomenon
(Koskinen, Alasuutari & Peltonen 2005: 263-267). Case examples, focused
interviews and observation will be used as a source for the empirical research
material. The theoretical part of the research is created with literature review of
transport and project logistics. Then a theoretical framework of research is
constructed from literature review to further analyze the project delivery process and
the potential barriers and opportunities of transport logistics in the Barents’s Region.
This research features two case examples that encompass real project deliveries in
port of Raahe. The first case example builds upon Oy SteelDone Group Ltd, a
company that is formed by a group off four steel workshops and one engineering
company located mainly in Raahe area. The given case example consists of
transporting a massive offshore special handling system (“offshore crane”) to Åsgard
gasfield in the Norwegian Sea. The project delivery of the offshore crane will take
place in summer 2014. The companies included in this offshore project are SME’s
and together they form a project business network, which operates around this
12
offshore project. The second case examines the project delivery of 7 windmills,
which took place in port of Raahe during summer 2013. The windmill case is
approached through the Wasa Logistics Ltd., a company that is specialized in project
logistics. All in all, these two cases provide valuable real life knowledge of logistics
expertise and systems especially from the Northern Ostrobothnia region perspective.
In general, this particular research gives important examples of logistics barriers and
opportunities that are present, when conducting logistics projects in the Barents
Region. The case examples are discussed in chapter 5.1. The reason for having these
two case examples is to give the reader a detailed view of real project deliveries.
More information of research methodology is provided in chapter 4.
1.5
Structure of the research
First an overview of this research is constructed with an introduction chapter. The
first chapter includes also the research gap, the aim of the research, the research
questions, and a short preview of research methodology. Second, based on academic
literature review an overall picture of transport logistics is formed. The second
chapter includes also information of Barents Region transportations and focuses
especially on the Finnish logistics sector. Third, an exclusive insight into project
logistics in the Barents Region is constructed and theoretical framework is presented.
The third chapter provides information of transport logistics barriers and
opportunities based on the literature review. Fourth, the research methodology is
presented. The fourth chapter introduces what kinds of research methods are used
and how the data is collected and analyzed. Fifth, an analysis of the empirical data is
presented. The fifth chapter concentrates on empirical findings and it provides
valuable quotes from the interviews and underlines the country related differences in
project delivery context. The fifth chapter is constructed in the form of theoretical
framework, in order highlight the relation between the theory and the empirical data.
Finally the conclusions chapter sums up the whole research and provides theoretical
contribution, managerial implications, limitations and suggestions for future
research.
13
2
TRANSPORT LOGISTICS
In this chapter the theme of transport logistics is discussed through a literature review
that encompasses theories from academic research in transport logistics. The chapter
includes also information of Barents transports and Finnish transport logistics sector.
2.1
International transport logistics
Traditionally, transport logistics is seen as a process of delivering product from point
X to point Y (Gourdin 2001: 1-5). However, logistics is not just moving goods; it is
something far more complex. Naim, Potter, Mason and Bateman (2006) point out,
that logistics adds value to the customer relationships. Logistics is needed in varying
industries. This means that every case is somewhat unique. Actually, there are lots of
variations, if comparing the logistics chains of different industries and companies.
One company could focus entirely on manufacturing, whereas the other on the whole
supply chain from the factory site all the way to the end customer. (Gourdin 2001: 15.)
International business occurs between cross national borders, which means that
logistics competence is one of the key issues, when exporting goods to different
locations. One has to remember that geographical distance has always been one of
the most significant elements of transport logistics processes. From managerial point
of view, it would be important to get the costs of logistic chain as low as possible,
which means that the evaluation of different transport modes (e.g. air, maritime,
railroad or road) is always a crucial decision from the financial perspective, when
planning the supply chain management strategy. (Bowersox & Calantone 1998.)
According to Hickey and Cassidy (2004), the real challenge for managers is
simultaneously to both increase the level of logistic quality and to reduce the costs.
Due to the emerging globalization, the business environment itself becomes more
complex. If compared to earlier decades, there are more international factors that
cause problems to the business operations, including the transport logistics.
Moreover, different cultures set their own challenges and the management has to be
14
aware of these challenges the foreign market entries bring with. (Dornier, Ernst,
Fender & Kouvelis 1998: 1.)
Bowersox, Closs and Stank (2000) argue that global logistics has to deal with various
political, labor, cultural and economic environments. Moreover Large, Kramer and
Hartmann (2013) note that there should be a special focus of sustainability in
transport logistics. Throughout the centuries the transportation has been essential part
of global economy. In fact, many empires have been built upon superiority of
transport logistics. This explains why logistics has become an integral part of
national economies. The institutional role of logistics has meant that the
transportation of goods has always been actively regulated with laws, which has also
caused lots of bureaucracy. Unfortunately these regulations tend to barrier the trade
process quite effectively. One of the main problems of this governmental bind in
logistics is that, due to wide ranging regulations, the competitiveness of the branch
suffers. To encounter this problem, there has been a trend of privatizing the logistics
services out of governments’ influence. (Gourdin 2001:11; 91.) However, this
deregulation process still continues in many countries. According to Tibben-Lembke
and Rogers (2006), the deregulation of transportation has led to emergence of using
third-party logistics services. By using third-parties in logistics, the companies will
be able to better concentrate on their core business (Tibben-Lembke & Rogers 2006).
Transport logistics deals with the actual process of moving the products. Therefore,
the transportation of goods is considered to be an integral part of the whole business
transaction. Due to the earlier mentioned free trade, the logistics process has become
easier to accomplish, and at the same time the development of more efficient
logistics strategies and IT systems, has helped the logistics managers to plan the
logistics chains more efficiently. Due to these developments, the cost of transport has
diminished and the quality of service has improved. (Gourdin 2001:5.) One of the
key things in transport logistics is the element of time (Morash & Clinton 1997).
According to Murphy and Farris (1993), time is the most important dimension of
logistics service, even more important than the quality or the costs. The schedules
can be met with efficient supply chain management. Therefore logistics strategies,
like JIT, have become key points for the logistics companies. Being a reliable and
punctual partner creates value for the customer. It is essential that transportation
15
logistics focus is considered, when making supply chain decisions. (Murphy & Farris
1993; Morash & Clinton 1997.) According to Dobie (2005), some logistics
companies have tried to build their competitive advantage through price reductions,
but with light results. This type of strategy focus has led to diminished service
quality, which causes lots of problems. In order to be competitive logistics operator,
one has to create competitive advantage through different values (e.g. service
quality) than price levels. (Dobie 2005.)
Gourdin (2001:24) has noted that, as the companies globalize, the costs of logistics
operations increase. This means that companies need personnel, who can deal with
this challenging international business environment. (Gourdin 2001:24.) One of the
most significant changes in transport logistics in the past decade has been the trend
of outsourcing logistics services. This evolution might be caused by the fact that the
decisions concerning supply chain management demand lots of knowledge that has
been lacking in many companies. Due to growing importance of logistics, the
companies cannot afford making bad transport related decisions. Therefore some
companies have made a strategic decision of outsourcing their logistics services for
the professionals. (Hickey & Cassidy 2004.) Lehmusvaara, Tuominen and Korpela
(1999) argue that the outsourcing of logistics has made the choice of right transport
mode more important. This trend of outsourcing has actually helped some businesses
to flourish. The research of van Laarhoven, Berglund and Peters (2000) shows that,
the outsourcing of logistics services has worked well in many cases. Peters, Lieb and
Randall (1998) discuss that outsourcing of logistics has become natural in many
companies, as the companies have understood the benefits outsourcing creates. One
of the key benefits of outsourcing has obviously been the cost cutting ability and
increased satisfaction amongst customers (Peters et al. 1998). However, Sanders,
Locke, Moore and Autry (2007) found out in their research that the problem of
outsourcing logistics services is in managing the outsourcing relationship.
Dornier et al. (1998: 13) point out that technology has improved the quality of
logistics by adding useful IT-tools for logistics, making the transports faster and the
information more reliable. Wong, Lai and Ngai (2009) discuss that, when
information technology is applied in transportation systems, the logistics companies
gain significant efficiency and most importantly cost reductions. However, it is
16
crucial that there is a real cooperation mentality, when using information technology
in transportation logistics, because the technology itself works only as enabler and
the actors are the ones responsible for its effective use (Wong et al. 2009). According
to Gourdin (2001:13), IT systems have indeed helped the monitoring of the logistics
chains. Many technological solutions (e.g., GPS) have made possible to follow the
logistics process in real time. One could easily use this kind of information to
overcome some possible problems faced during the transport, and this information
can be shared between the logistics chain partners. (Dornier et al. 1998: 360-361.)
When thinking about the role of supply chain management (SCM) for the
transportation logistics, the global focus of managers has changed from logistics cost
cutting to more flexible and specialized offerings. This kind of new approach opens
better competitiveness for new market entries. In addition, the relationship between
the companies and governmental bodies has a significant impact on the international
and domestic trade, which means that decisions regarding social factors,
environmental issues or simply SCM costs can affect the importing and exporting.
(Ross, Parker, Benavides-Espinosa & Droge 2012.) Actually, the real challenge for
freight carriers is to make the transportation with higher quality and at the same time
to stay in schedule without any cargo damages. On one hand, the emergence of
efficient IT-systems has helped to meet these high requirements. On the other hand,
the biggest challenge still remains in environmental issues. Regulations, such as
emissions and engine standards, set new challenges for the whole industry. (Dobie
2005.) At the same time, the transport industry deals with lots of competition, mainly
driven by price-level fluctuations (Lammgård 2012). Logistics provider has to be
ready to adapt to the changing customer needs. In general, this means that the
supplier-customer -relationships has to be flexible to secure maximum value for the
customer. When offering these types of flexible services, the logistics companies are
able to gain competitive advantages. (Naim et al. 2006.) This means that the role of
marketing activities increases in the customer relationships of logistics industry. One
of the key things in logistic chain is that the supplier and customer cooperate already
in the design phase of the products. All in all, cooperation in the early phases is
needed to build and sustain successful logistics customer relationships. (Flint &
Mentzer 2000.)
17
2.2
Transport modes & carrier selection
The choice of transport mode and freight carrier consists of air transport, maritime
transport, railroad transport and road transport. When planning the mode of
transport, many things must be taken into consideration. First, one has to remember
that there is always a schedule which has to be met and at the same time the cost of
transport should not be too high. Second, the goods must not suffer any damage
during the transportation. Third, the service should be flexible and customer has to be
able to trust the supplier. (Gourdin 2001: 85.) The choice of transport mode and
carrier has great impact on both customer satisfaction level and costs (Lehmusvaara
et al. 1999). Liberatore and Miller (1995) discuss that these different transport mode
choices have to be planned carefully, because the quality of logistics services can
vary a lot. Murphy and Farris (1993) point out several factors that have impact on the
transport mode choice (e.g. time, costs & reliability). They suggest that one should
give greater importance on service quality, rather than costs approach in logistics
management. However, there could be a problem of increased customer price levels
due to the improvement of service quality. (Murphy & Farris 1993.) On the contrary,
Gibson, Rutner and Keller (2002) argue that costs are still the most important
determinant in carrier selection. Gibson et al. (2002) add that costs can be diminished
by adding cooperation between the shipper and carrier. It would be important to
remember that customers’ value preferences might vary and change a lot, which
means that the logistics companies need to be ready to both identify those changes
and to react as fast as possible (Flint & Mentzer 2000). In addition, different cargo
types need different kind of service (Ludvigsen 1999). One of the most commonly
used transport cargo type is container. The containers are very handful, because they
can be used in several transport modes. (Gourdin 2001: 96-97.)
As discussed by Davidsson et al. (2005), different transport modes hold varying pros
and cons. Davidsson et al. (2005) point out that maritime- and railroad transports are
more commonly used, when transporting bulk materials. Both of these modes are
quite cheap, if compared to air transport. In most cases one has to use road transport
in some part of the logistics process. The pros of road transport mode are its quick
and flexible service ability. The road transport is very competitive option, especially
when the distance is not very long. If one wants the quickest delivery, the selection is
18
clearly air transport, but one has to remember that the costs of this mode are also the
highest. (Davidsson et al. 2005.) When comparing these four transport modes, roadand railroad transports demand more infrastructure during the actual transportation,
than air- and maritime transport, which operate in air and water surroundings Of
course air transport and maritime transport need infrastructure as well (e.g. ports and
airports), but the actual transport is more flexible in these settings (e.g. routing).
(Badger, Bugg & Whitehead 1993: 63-65.)
According to Liberatore and Miller (1995), logistics managers have to evaluate the
transport modes through different types of measures. This means for example
decisions of costs vs. service quality or delivery time vs. reliability –dimensions
(Liberatore & Miller 1995). Kent, Parker and Luke (2001) list that the most
important criteria for transport mode choices are: “quality, know-how & problem
solving, prices, reaction to complaints, accurate billing, equipment availability and
dependable transit times”. Kent et al. (2001) add that by giving great interest in these
factors, the logistics firms should be able to overcome the difficulties of not knowing
what creates value for their customers. According to Evers, Harper and Needham
(1996), the selection of transport modes depends on the perceptions the logistic
managers have on the modes. Thus, the decision of transport mode is made by
evaluating the possible transport modes with certain criteria formed through the
experiences and knowledge that managers have. For instance, they have to evaluate
“timeliness, availability, firm contact, suitability, restitution and cost of the transport
mode”. In particular, the timeliness and availability are seen as the most significant
determinants in the decision-making process. (Evers et al. 1996.) Premeaux (2002)
notes that the role of information in transport logistics has increased significantly.
One of the reasons for this kind of shift might be the increasing role of information in
the society itself. The carriers have also become more aware of the things the
shippers seek in the business relationship. There is also a growing need for better
service quality, customer relationships and availability. It is essential that both
shipper and carrier understand, what kinds of transport factors the other party
appreciates, and how those factors could be met. (Premeaux 2002.)
No matter what the transport mode is, it is crucial that the buyer and supplier use
collaboration in their relationship, when planning and managing the transportation
19
(Esper & Williams 2003). According to Esper and Williams (2003), the collaboration
in transportation management reduces both logistics cost and risk and adds service
quality and capability. Esper and Williams (2003) add that this collaboration should
be coordinated somehow to avoid ineffective outcomes. Cooperation is equally
important in carrier-shipper relationships, to gain lower costs and better service
levels (Caplice & Sheffi 2003). For instance, IT systems can help the parties to share
information and make the relationships more effective (Esper & Williams 2003).
One of the key issues in collaboration approach is that the parties do not act for
individual purposes. The parties have to be able to trust each other to gain the
maximum value of the relationship. (Skjoett-Larsen, Thernoe & Andresen 2003.)
Gibson et al. (2002) highlight that the carrier places high value for trust,
effectiveness and flexibility in the relationship. Carter and Ferrin (1995) discuss that
in certain situations the buyers show no interest towards the transportation process,
because they feel that their involvement is either not needed or not appreciated.
Carter and Ferrin (1995) point out that it would be important that the buyer is also
involved, because effective supply chain management calls for cooperation from all
parties. There has to be fluent communication between the logistics chain partners.
By sharing information, each party knows what is expected from them, and the
increased communication helps to build customized services. (Flint & Mentzer
2000.)
Each transport mode can be seen as competitive method, but actually they support
each other (Wood et al. 1995; Gourdin 2001: 96-97). The whole logistics chain is
rarely constructed of one transport mode (Gourdin 2001: 96-97). Especially
containers are good example of these kinds of intermodal transports, because they
can be transported easily with several carriers (Wood et al. 1995: 160-161).
However, using several transport modes together could also face some difficulties
(D’Este 1996). These problems might be encountered with coordination between
different activities and cooperation of actors. In addition, technology plays a key role
in building effective intermodal transport. (Rondinelli & Berry 2000.) According to
Kelleher, El-Rhalibi and Arshad (2003), the intermodal transport calls for fluent
information sharing between the operating parties. The supply chain members have
to be able to follow the transport data and the ongoing delivery process with help of
20
IT-systems. By adding cooperation between the parties, unnecessary delays and costs
can be avoided. (Kelleher et al. 2003.)
The research of Lammgård (2012) in Swedish logistics industry shows that
intermodal transport cannot compete with single modal road transport in price levels,
although this is mainly caused by current fuel costs and taxation. Lammgård (2012)
reveals that the inadequate railroad infrastructure causes a great barrier for transport
logistics branch in Sweden. Quite interestingly Ludvigsen (1999) discusses that it is
more common to use single-modal routes than intermodal routes in Nordic countries.
This might be caused by the fact that the shippers usually demand high quality
transports and single-modal transport might deliver better overall quality in many
cases. However, the most important intermodal transport criterion for the Nordic
companies is operational excellence. Although having similar cultural background,
the Nordic countries differ from each other in many ways, which casts a limitation
for making generalization of logistics processes. All in all, one could say that the
quality measures of transport logistics are far more important for the Nordic
companies than the costs. (Ludvigsen 1999.)
One has to take into consideration that the infrastructure has impact on the use of
several transport modes, because some modes might be impossible to combine due to
undeveloped national infrastructure. All in all, the use of several transport modes
together, as a one shipment, is more reliable, cost efficient and it ensures better safety
for the cargo. (Gourdin 2001: 100-101.) The research of Regmi and Hanaoka (2012)
shows that intermodal transportation in global scale could face several barriers
deriving from: “infrastructure, border crossing process, interaction of transport
modes at the borders, unavailability of wagons and frequency of freight trains”.
Regmi and Hanaoka (2012) discuss that the use of information systems in transport
logistics could help to deal with these kinds of barriers. The cargo for instance, has to
be attached very carefully, because the circumstances are often quite of harsh. One of
the problems concerning the attaching is the different level of quality. This means
that the foreign customer and the supplier could have differing perceptions of how
the cargo must be attached. (Gourdin 2001: 153-154.) Especially the maritime cargo
faces lots of hard weather conditions and the cargo has to be stowed carefully to
prevent cargo damage. Safety is actually very important part of every logistics
21
process. Fierce competition can drive the companies to limits, which can eventually
mean reduced safety levels. The problems usually occur, when there is too small
amount of workers handling the cargo. (Gourdin 2001: 120.)
2.2.1
Air transport
Air transport is not used very often, because it so expensive. However, air transport
is quite reliable and the fastest of all transport modes. The choice of air transport
might be best, when the cargo is small and valuable. Air transport uses different
kinds of containers than maritime transport, because airplanes have a limited cargo
space and the maritime containers are bit too heavy. Many times the distance itself
makes the air transport the best choice available. (Badger et al. 1993: 62; Gourdin
2001: 90; 98-100.) Developments in air plane technology have made it possible to fly
longer distances, which makes air transport even more competitive transport mode
(Rondinelli & Berry 2000). Air transport can reach various locations all around the
globe (Badger et al. 1993: 62). The earlier discussed trend of free markets and
deregulation has been a good thing for air transport industry in general. The shift
from regulation to open markets has made air transport a competitive alternative for
transport mode choice. This has also led to changes in price levels. (Button, Costa &
Cruz 2007.) Yuan, Low and Tang (2010) suggest that in order to create fluent
intermodal transportation logistics, air transport industry should try to integrate with
all the other transport modes in a way that provides best value for the customers.
Yuan et al. (2010) remind that, when planning the cost reduction, one should also
consider that these kinds of cost cuttings should not harness the customer’s delivery
schedule and thereby diminish the overall value of service for the customer. Yuan et
al. (2010) discuss that the airports could benefit from having a distribution center in
the close distance of the airport, to gain better service level and competitive
advantage.
2.2.2
Maritime transport
The maritime transport is often used, when the cargo is big. The use of maritime
transport is in many occasions more cost efficient than the other modes. On one
hand, one can move different cargo types easily through sea trade routes. On the
22
other hand, the maritime transport can take lots of time. Maybe one of the most
essential core competences for maritime transport is the diversity, as one can
transport all kinds of cargo from containers to big special freights. (Gourdin 2001:
90-91; 98.) Especially bulk materials are typically transported with maritime
transports (Wood et al. 1995: 105). One has to acknowledge that the maritime
transports are often conducted in line traffic maritime transports. Line traffic means
the regular transportations that usually include containers and standard product
deliveries. (Karhunen & Hokkanen 2007: 60-61.) Maritime transport competes
mainly with railroad- and air transport. The edge of maritime transport is the largest
cargo space. (Gourdin 2001: 90-91; 98.) Moreover, maritime transport can transport
different types of cargo better than the other transport modes (Badger et al. 1993:
89).
The port choices often depend on reliability and speed. In other words, in order to
attract cargo vessels, the port has to have efficient operations. The costs increase, if
the vessel stays for long time periods in the port. (Tongzon 2009.) The more there is
competition among ocean vessels in trade routes, the lower the price level gets. Thus,
competition works as an important cost reducing force in maritime transport. Also
the air transport has become a significant competitor for the maritime transport in
global scale. (Hummels, Lugovskyy & Skiba 2009.) Tongzon (2009) identifies:
“efficiency, frequency of ship visits and adequacy of port infrastructure” as core
factors for port choices. Ports should focus on these elements, because they hold
higher meaning for the customer, rather than costs, although costs are always
important in big picture. Clearly, good geographical location and good connection
with other ports pose important value as well. (Tongzon 2009.) Higher efficiency in
port operations makes it possible for the port operator to raise the price levels. Better
efficiency often cuts the stowing time, which inevitably means both cost and time
savings for the shipment. Furthermore, better infrastructure and active private sector
involvement help to cut the cost of transport. (Wilmsmeier, Hoffman & Sanchez
2006.)
23
2.2.3
Railroad transport
According to Badger et al. (1993: 63-65), the railroads need continuous
infrastructure upgrades and upkeep, if compared to other transport modes. Different
rail gauge standards harness also the efficiency of border-crossing railroad transports
(Badger et al. 1993: 63-65). When compared to other transport modes, railroad
transport is not very flexible (Karhunen et al. 2004: 147-148). Nielsen, Jespersen,
Petersen and Hansen (2003) discuss that one of the recent changes in European
transport has been the replacing of railroad transport carriers with road transport
carriers. However, railroad traffic benefits from having the opportunity of
transporting the cargo with faster speed than the road transport. On one hand, the
railroad transport is more cost-efficient than the road transport, if the travelling
distance is longer. On the other hand, railroad transport faces several costs that
increase the total sum of railroad transports. One of the greatest cons is that railroad
transport is often dependent on other transport modes (e.g. road transport). (Badger et
al. 1993: 63-65.)
2.2.4
Road transport
Road transport has many pros, when compared to other transports modes. The
logistics chain of road transport is more flexible, and in most cases trucks can deliver
the goods directly for end customers. The road transport is very useful, when the
cargo is valuable and the amount of it is quite low. (Badger et al. 1993: 65-66;
Gourdin 2001: 87.) Road transports can be utilized for various types of cargo loads
(Karhunen et al. 2004: 63). The easiness of road transport varies depending on the
current country. One of the biggest challenges for international road transport is the
varying transport weight regulations in different countries. (Badger et al. 1993: 6566; Gourdin 2001: 87.) Many times road transports are seen as a supplementary
carrier for air- and maritime transports, but actually road transports might work better
in many cases. One of the greatest barriers for fluent road transporting is in many
occasions the inadequate road condition. (Badger et al. 1993: 65-66.) Also the
international and domestic regulation of road transports causes standard fluctuations
that have impacts on cross-border road transporting (Karhunen et al. 2004: 45-47).
24
2.3
External forces in transport logistics
Logistics has changed many ways in last decades, as longer transporting distances
have become possible and at the same time the infrastructure and technology have
developed (Nielsen et al. 2003). Dobie (2005) discusses that transportation
companies are nowadays surrounded by uncertainties, because the environment,
where they are operating has become so unstable. Especially the market,
competition, technology and government regulations are causing changes that have
great impacts on logistics decisions (Dornier et al. 1998: 12-13). All of these forces
act as a significant barrier sources in transport logistics.
Business markets change all the time, as varying factors (e.g. customer preferences)
have instant impacts on the logistics process. The fierce competition of the logistics
industry drives the firms to gain competitive advantage through SCM, which causes
shifts in logistics strategies, as traditional means (e.g., price competition) are not
effective anymore. This means that logistics decisions are in key role, when firms are
trying to create competitive advantage. (Dornier et al. 1998: 12-13.) The problems in
the environment are deriving from the urgency of the shippers, regulative restrictions
and globalization. The fundamental problem is that the shippers demand higher
quality of services with lower costs and faster delivery. Furthermore, the
governmental bodies are making different demands for the logistics companies. This
requires higher operational efficiency from logistics management. All in all, it would
be crucial that freight carriers are aware of these issues and try to overcome them in
their strategic transport logistics related decisions. (Dobie 2005.)
Lindholm and Behrends (2012) argue that urban environment itself acts as significant
barrier for the transport logistics. Due to urban environment the quality of effective
transport logistics is harnessed in many ways (e.g. inadequate infrastructure levels).
There is a need for cooperation between authorities and other actors to coordinate all
solutions concerning different transport modes. Efficient logistics creates crucial
competitiveness, which means that all actors need to take this fact into consideration,
when planning and making decision of urban transport logistics. (Lindholm &
Behrends 2012.)
25
The governments have had long lasting bind to transport logistics. On one hand, the
governmental involvement can be seen as a positive factor, because it creates jobs
and wealth, but on the other hand it has also many down sides, which can affect the
competitiveness of logistics branch very much. Many times the logistic companies
are entirely or partly owned by the government, which means that the effects (e.g.
laws and regulations) on the branch come directly from the owners of these logistics
companies. By regulating these industries, the governments can affect various stages
of logistics chain of transports. The costs of logistic services tend to be higher, when
governments have connections to the logistics. The competiveness of each transport
mode
is
strongly
connected
to
current
political
motivations,
such
as
environmentalism or taxation. In most occasions the governmental influence creates
monopolies, which can have negative impacts on entire industries. It can be very
hard for new companies to access these markets, because the governments can use
regulations, which make the market entries a real challenge or nearly impossible. All
in all, there are many negative factors that emerge from governmental regulation.
From the logistics point of view the free market approach would be better in many
ways. (Gourdin 2001: 94-95.)
The governments can affect the logistics process through laws and regulations. The
traffic can be regulated to given hours of day, which means delays to schedules. The
current trend of environmentalism means that the carbon dioxide regulations and
other pollution related directives affect the whole business of these logistics
companies. One of the key issues in logistics is of course the safety. The cargos are
often very big or they contain hazardous materials. This means that governments
must be able to regulate the transports to ensure the safety of environment and
citizens. The customs and other governmental bodies can also increase the cargo
costs with tolls. International trading often includes costs, which might not be present
in domestic markets. However, free trade and nationwide cooperation can ease these
kinds of cross-border logistics related barriers. (Gourdin 2001: 95-96; 121.)
2.4
Environmental impacts of transport logistics
One of the top trends in international transport is the effect of globalization to
climate. In other words, the more there is transportation, the more there are
26
consequences on the surrounding environment as well. (Rondinelli & Berry 2000.)
Eventually, this means that the growing levels of international transport have direct
impact on the climate. In fact, the rising environmental regulations (e.g., carbon
dioxide regulations) have driven some companies to move their operations to
countries which have more flexible environmental regulations. This trend does not
solve the problem, because the trend of relocation only adds traffic levels, which
means more pollution and congestion. (Vöhringer, Grether & Mathys 2013.)
Mollenkopf, Stolze, Tate and Ueltschy (2010) argue that firms are often forced to
focus on environmental issues in their supply chain management, because of the
government regulation. The “green” approach in SCM might be an important value
adding driver too (Mollenkopf et al. 2010). Environmental issues have become
essential part of logistics, as the customers have started to place more value on
environment in their business decisions. Environmental approach creates competitive
advantage and corporate responsibility of logistics operators. (Goldsby & Stank
2000.) Although, there might be a dilemma of reducing transport levels and gaining
growth in economical levels (Nielsen et al. 2003). On the contrary, the research of
Large et al. (2013) shows that the buyers of logistics services might not place very
high value on sustainability, when compared other values. Therefore one might think
how much effort is devoted towards building sustainability for creating
competitiveness. It is evident that the bigger customers appreciate environmental
services more than the smaller ones. The transport logistics companies could
diminish their carbon dioxide -levels by adding the use of intermodal transport
services. Logistics companies should try to embed the environmental thinking to
logistics planning in a way that reduces carbon dioxide by using information systems
as a help to gain valuable data of the potential problem sources. (Lammgård 2012.)
One has to remember that regulations are not really a solution for the problem,
although they do control companies, because the companies have to be ready to take
responsibility already in the pre stages of logistics processes, in order to build
sustainable logistics in long-term (Rondinelli & Berry 2000).
One of the main problems in transport logistics is the growing amount of traffic. This
trend causes lots of pressure to the infrastructure, which again causes problems like
traffic jams and pollution. (Dornier et al. 1998:18-19.) The growing number of civil
27
traffic has effect on the road transport business as well. The transport costs (e.g. fuel
costs) have risen in all transport modes, which means also high price levels for the
customers. (La Londe 2006.) Traffic jams cause big financial losses for the transport
companies every year. Moreover, traffic jams increase other negative impacts such as
pollution. Transportation causes also noise distraction to surrounding environment.
Transport logistics causes also lots of waste in many ways. First, the cargo has to be
packaged, which involves using lots of packaging materials like plastics. Second, the
motor carriers use fuels, oils and different kind of fluids that harness the
environment. (Karhunen et al. 2004: 114-115; 189.) Luckily, the recycling of the
package materials has increased in recent decades. Due to the environmental trend,
the companies have devoted lots of action to reverse logistics. This means for
example, the recycling of the used packaging materials. However, there are issues,
which are making the reverse logistics problematic (e.g. lacking know-how). Clearly,
the governmental influence could help to make the reverse logistics process more
effective. (González-Torre, Álvarez, Sarkis & Adenso-Díaz 2010.)
2.5
Barents Transports
The Barents Region consists of four countries: Finland, Norway, Sweden and Russia.
The first three of these are Nordic countries, which relates to similarities in cultural
background. However, Russia differs from the Nordic Countries a lot. On the
contrary, Finland has had long business history with the Russians and also the
Norwegians have conducted business with the Russians as well. Increased
globalization and increasing cultural awareness might help to overcome some of the
traditional barriers in cross-border logistics. So far Norway has shown the greatest
interest towards the Barents Region’s business opportunities. (Siuruainen 2010.)
According to World Bank’s Logistics Performance Index (LPI), (see figure 1),
Finland is top 3 logistics performer in the world. Finland (LPI: 4,05) offers great
levels of logistics competitiveness, if compared to Norway (LPI: 3,68), Russia (LPI:
2,58) and Sweden (LPI 3,85). Thus, Finland provides excellent logistics
opportunities for the Barents Region’s transports. Only Russia has somewhat low
scores of logistics performance, if comparing the results in global scale. (World Bank
2013.)
28
Logistics performance index
scores 2012
4,05
3,85
3,68
2,58
Finland
Norway
Russia
Sweden
Figure 1 Logistics Performance Index 2012, data source: World Bank (2013)
Figure 2 displays the Country Score Cards for different elements in LPI: Customs,
Infrastructure, International shipments, Logistics competence, Tracking & Tracing
and Timeliness. When these four countries are compared, it is clear that the issues of
logistics are related to those in Russian markets. In all of the Score Card categories,
the three Nordic countries represent good levels. Based on these facts, there might be
only minor issues related to transport logistics in Finland, Norway and Sweden.
However, this does not mean that there could not be some level of logistics barriers
between these three Nordic countries. (World Bank 2013.)
29
LPI Country Score Cards 2012
5
4
3
2
1
0
Customs
Infrastructure
International
shipments
Logistics
competence
Tracking &
Tracing
Finland
3,98
4,12
3,85
4,14
4,14
4,1
Norway
3,46
3,86
3,49
3,57
3,67
4,09
Russia
2,04
2,45
2,59
2,65
2,76
3,02
Sweden
3,68
4,13
3,39
3,9
3,82
4,26
Timeliness
Figure 2. LPI Country Score Cards 2012, data source: World Bank (2013)
Clearly the increasing role of Barents Region’s natural resources might act as an
important driving force for developing the transport infrastructure. Investments are
needed, in order to meet the future needs. Those investments have to be planned with
international perspective in mind. For instance the Finnish road and railroad
infrastructure is decaying. Therefore there is actual need for improvements. Not only
the Finnish infrastructure, but also the role of Russian transport infrastructure has
huge impact for the Barents logistics as well. (Paavola et al. 2012.) Effective
exporting of services, calls for better air- and road transport connections
(Liikennevirasto 2013). The sea routes work well at the moment, but the mine
projects in Northern Finland might cause a need for deepening the shipping lanes in
the near future. The ice conditions cause a need for ice breaking service in the winter
times, which obviously causes some harm for the fluency of transportation. The icebreaking branch needs lots investments in the near future, in order the guarantee the
efficient maritime logistics in the winter times. (Paavola et al. 2012.) At the moment
there are some problems with the current levels of railroad infrastructure in Northern
Finland. The improvement of railroad track Oulu-Seinäjoki (ready in 2017) for
example is one of the most important development projects, because the track suffers
30
from capacity problems. (Liikennevirasto 2013.) To mention some ongoing projects
in Finland, there will be transport infrastructure developments in: E18 road
improvement Seinäjoki-Oulu, railroad improvement Tuomioja-Raahe and the road
improvements to E8 due to possible construction work of the nuclear plant (Paavola
et al. 2012).
Also Russia and Norway have started to develop their coastal infrastructure with
future investments in mind. The road transport infrastructure is one of the key
barriers, when transporting between Finland and Russia. There have been some
improvements to Murmansk road connections in Raja-Jooseppi and Kantalahti, but
the long distances still cause lots of problems. (Siuruainen 2010.) If one evaluates the
railroad transportations, there are two options for railroad connection from Finland to
the Arctic Sea, either through Haaparanta to Narvik or from Vartius to Murmansk.
The route from Vartius to Murmansk suffers from heavy traffic pressure, which
might cause problems for efficient logistics. All transportation infrastructure
developments call for cooperation between Finland, Norway, Russia and Sweden.
Finland could have leading role in the Barents Region’s investments, due to excellent
levels of expertise in offshore and maritime technologies. In addition, the service
industries will have major role in the future as well. (Liikennevirasto 2013;
Valtioneuvoston kanslia 2013.)
The arctic area is changing quite radically in the future, as the global warming has its
effects on the environment. New logistic sea routes will be opened and the natural
resources could be reached more effectively. (Valtioneuvoston kanslia 2013.) The
business opportunities of the whole area are quite good, because massive investments
are being planned for the future (see. Lehtiniemi 2013). These new investments will
have huge impact on Finnish metal-, construction-, logistics and service industries.
The Barents Region holds large amounts of natural resources, especially oil- and gas
fields. One of the main problems in the area is the arctic conditions, which cause lots
of logistics difficulties. (Siuruainen 2010.)
While transportation volumes in the Baltic Sea Region grow steadily, the negative
impacts of traffic (e.g. congestion & pollution etc.) cast a challenge for the logistics
industry (Lindholm & Behrends 2012). All in all, the future investments in the
31
Barents Region call for high technology solutions and knowhow of arctic conditions,
which Finnish companies are ready to offer, as most of the oil and gas fields are
located relatively close to Finland (Siuruainen 2010; Valtioneuvoston kanslia 2013).
Unfortunately, one of the most important investment sites in Russia, the Shtokman
gas field project, was ceased in 2012, which cooled down the investments for a while
at least (Kaleva 2012).
There are lots of ports (e.g. Murmansk and Narvik) that are open all-year in the
coastal areas of Barents Region, which naturally makes the maritime transports
easier regardless of winter conditions (Liikennevirasto 2013). On one hand, the
Finnish companies are eager towards Barents Region’s massive construction
projects. On the other hand, there are lots of barriers that harness the trading to
Russia. Finnish SME’s feel for instance that bureaucracy and border crossing
procedures cause lots of problems. The low level of infrastructure barriers the
transport logistics quite effectively, and different culture barriers (e.g. language)
harness the effective business with the Russians in general. Finnish companies might
face problems that are hard to encounter, if they have not had earlier experiences of
Barents transports, or if they do not use intermediaries as consultants. (Siuruainen
2010.) All in all, the logistics competitiveness of Finland is good, if one thinks of the
transport logistics opportunities for the Barents’s Region’s transport needs.
2.6
Transport logistics in Finland
Finland is one of the four Barents Region countries. This chapter gives insights into
Finnish transport logistics sector and highlights the role of cross border-logistics
between Finland and the other Barents countries.
According to Paavola et al. (2012), the Finnish transport industry works quite
efficiently at the moment. The biggest problem at the moment is the railroad
transportation (Paavola et al. 2012). Tighter environment regulations will have huge
impact on the whole logistics sector in the coming years (Liikennevirasto 2013). The
Finnish logistics industry is also highly dependent on the markets of the near areas,
which causes market fluctuations. Because the logistics market is in constant change,
there has to be efficient supply chain management systems that will help to forecast
32
and overcome possible problems. Furthermore, there are great differences, when
comparing the availability and level of logistics services in different geographical
areas of Finland. On one hand, the competitiveness of Finnish transportation industry
is quite good. (Paavola et al. 2012.) On the other hand, one has to acknowledge that
Finland is heavily dependent on exports, which means that fluctuations in global
economy will have instant impacts on Finnish transportation industry (Liikenne- ja
viestintäministeriö 2009).
In Finland the foreign export and import transports (based on cargo tons) are mainly
done by maritime transports, whereas other forms together constitute less than 20%
of the total transport volumes (see. figure 3). In the year 2012, the foreign export
transports from Finland were focused on maritime transports (88%) followed by road
transports (9%), railroad transports (2%) and other transports (1%) The same trend is
also evident in foreign import transports. However, there were some changes, if
compared to the portions of foreign exports (maritime transports 79%, railroad
transports 11%, road transports 5%, and other transports 5%). (Tulli 2013.)
Transport Modes of Foreign Export
Road
9%
Railroad Other
2%
1%
Maritime
88 %
Transport Modes of Foreign Import
Road
Railroad 5 %
11 %
Other
5%
Maritime
79 %
Figure 3. Transport modes of foreign exports and imports in Finland 2012, data source: Tulli
(2013)
33
Finland’s Ministry of Transport and Communications has listed the external factors,
which are affecting the competitiveness of Finnish Logistics Industry at the moment,
as
follows:
Legislation
and
its
supervision,
International
Regulation
of
Environmental Issues, Scope & Level of Transportation Infrastructure, Availability
of Resources and Labour, Contracts of Labour Markets, Fuel and Energy Taxation,
Taxes and Payments from Traffic Routes, Actions of Competitor Countries,
Efficiency and Predictability in Customs Clearance, Amount of Tariffs and Other
Tax Related Payments. These factors play key role for the whole Finnish economy,
because effective transportation is a basis for successful trading processes. (Paavola
et al. 2012.)
According to Paavola et al. (2012), the competitiveness of Finnish logistics sector is
influenced by several barriers. These barriers are: High taxation of traffic and
continuous traffic tax raise, Decaying Transport Infrastructure, Tight evaluation of
licenses and statutes, Problems with all-year traffic (e.g. weather conditions), EU
decisions concentrating on Middle Europe, Lacking level of international lobbying in
public and private sectors, Cost level of Finnish logistics labour, Big amount of
illegal strikes (when compared to competitor countries), Dependence on maritime
transports, Long distance to main markets, Low streams of goods in domain &
international markets. All in all, there are lots of factors that are harnessing the
competitiveness of Finnish logistics sector. (Paavola et al. 2012.) It seems that these
barriers are mainly caused by EU or the Finnish society itself, which means that the
competitiveness could be increased through diminishing bureaucracy and making
political decisions that support the transport industry. Moreover, it seems that more
attention towards the development of transportation infrastructure is needed.
The Finnish transportation sector faces regulation from both domestic and
international levels. In Finland the main regulations concern taxes and land use,
which have direct influence on the transportation. If one thinks of the most
significant tax sources, those would be: the taxation of fuels and traffic related taxes.
The regulation focuses often on environment and safety issues. Regulation of
competition plays a key role, because the competitiveness of transport modes
depends heavily on regulations. Most of the regulations are done by international
regulators, which might cause problems also for the domestic transport logistics.
34
Especially air transport is regulated in international level, whereas railroad transport
faces usually domestic regulation. One of the key problems for Finnish transport
industry is the absence or inadequate level of lobbying forces in international
cabinets. Finland’s role in international politics is somewhat small, which inevitably
makes it hard to achieve decisions that would benefit the Finnish transport sector.
(Paavola et al. 2012.) One of the future challenges for the Finnish transportation
industry is the emission regulation, as almost every transport mode still uses oil
based fuels. The new regulation directive concerning the sulphur emissions casts a
dark shadow upon the Finnish maritime transport, which could lead to reduction of
competitiveness. The solution for this problem could be achieved by using LNG as a
power source in cargo vessels. On one hand, these regulations harness other nations
as well, not only Finland. On the other hand, there will be huge developments in
fuels in the future. The train transport differs already by using electricity as the main
power source and there is also some level of biofuel -use in other transport modes as
well. (Rautavirta & Jääskeläinen 2013.)
As mentioned earlier, infrastructure plays an important role in the transport logistics,
both as a barrier and as an enabler. In addition, the Finnish transport logistics
companies have to be able to deal with the changing weather conditions. Fortunately,
The Finns have good know-how of dealing with ice and snow. Especially the
maritime sector is heavily dependent on the efficient ice breaking service in the
winter time. The biggest problems of Finnish transportation infrastructure are in rural
areas. Quite interestingly the political decisions do not often times correlate very well
with the business life needs. Overall, the level of infrastructure is sufficient at the
moment. In the future there should be an emphasis on improving the border crossing
infrastructure and port infrastructure, because the foreign trade is heavily dependent
on them. (Paavola et al. 2012.)
Although having lots of challenges, the Finnish transportation industry is also very
competitive in certain sectors. Especially knowledge of arctic conditions is top class
in Finland and these skills could play a vital role as source for creating competitive
advantage in the future. The strengths of Finnish transportation sector are mainly
driven by efficient society, which creates suitable business environment. Finland is
one of the least corrupted countries in the world and high education and
35
technological know-how help to build efficient logistics services. Although, there are
some problems with current level of transport infrastructure, Finland offers good
conditions for transportations in general. One of the key pros is that Finland is
located near to Russia, which opens opportunities for transporting goods to/via
Russia. The WTO-membership of Russia is estimated to increase the transports to
Finland. (Paavola et al. 2012; Liikennevirasto 2013.)
2.6.1
Air transport sector
The Finnish air cargo levels have increased remarkably in the last decade, mainly
due to emergence of JIT–logistics trend, which has reduced warehousing and
increased the role of fast deliveries (Liikenne- ja viestintäministeriö 2009). The
aviation business is free for competition in the EU, which gives fluent access for
markets. The most important Finnish airport is the Helsinki-Vantaa airport, which
works as a hub for Asian traffic. The hub position has made it possible to offer good
flight connections from Finland to other countries in Europe. Although being led by
civil traffic, this development has had a significant impact for the freight transport as
well. One has to acknowledge that in Finnish air transport most of the air freight is
transported in the cargo space of civil traffic air planes, which means that civil traffic
is directly connected to freight flows in air transport industry. Most of the imported
air freight crosses the Finnish border by road transports later on. The overall situation
of Finnish air transport infrastructure is sufficient to meet the demands of air freight
at the moment, thus there is no need for urgent developments. (Paavola et al. 2012.)
The logistics distance of Finland is somewhat large, which means that air transport
offers the fastest way to access the global markets, when transporting goods from
Finland to the main market areas. Even though the total amount of air transport is
relatively small, air transport offers the best option for meeting tight schedule
constraints with high quality services. Finnish air transport sector operates with
relatively small traffic amounts, which means that the traffic is concentrated on main
airports. For example, air transport routes from Northern Finland to Barents Region
are lacking. The air transport industry is built upon tourism, which means that it is
impossible to open only cargo flight connections in cost-efficient level. (Liikenne- ja
viestintäministeriö 2009.) To access the Russian areas of Barents Region from
36
Finland, one has to use flight connections through St. Petersburg or Moscow
(Siuruainen 2010).
The most significant volumes of flight traffic in Northern Finland concentrate on
Oulu airport. There are also other airports (e.g Rovaniemi, Ivalo), but these airports
are heavily focused on tourism due to Lapland’s tourist flows. In Northern Finland,
the number of flight passengers is quite small, which means that it is not rational or
cost-efficient that several air plane companies would offer multiple flight routes.
Because the traffic levels are so low, the flight connections from Northern Finland to
Norway, Sweden and Russia are almost completely lacking. Thus, transporting air
cargo directly from Northern Finland to Barents Region is very difficult. However,
there is a possibility of transporting the goods through Helsinki-Vantaa airport,
which offers better flight connections. (Liikenne- ja viestintäministeriö 2009,
Siuruainen 2010.)
2.6.2
Maritime transport sector
The Finnish ports have been traditionally connected to factory sites. Usually the
owner of the port is either the company that owns the factory or in many cases the
municipality. (Karhunen et al. 2004: 261.) However, there is new legislation, which
changes the ports into private companies in the near future. The maritime transport
industry will face lots of challenges in the coming years. These difficulties are
mainly caused by international environment regulations. (Paavola et al. 2012.) One
of the biggest challenges for the maritime transport industry in Finland is the
emergence of new sulphur emission levels (in 2015) and other environment
regulations, which might harness the whole branch very dramatically by diminishing
the competiveness of maritime transports and at the same time turning the scale
towards other transport modes (Henttu & Hilmola 2011; Paavola et al 2012;
Utriainen 2013; Liikennevirasto 2013). Paavola et al. (2012) discuss that Finland
could suffer the most from these environment regulations, if compared to other
European countries. Eventually these regulations might lead into a situation, where
large vessels would be used as main carriers instead of small cargo vessels. The
number of ports can diminish, because smaller ports cannot compete with the larger
ports anymore. Especially the ports of Northern Finland will face lots of challenges.
37
(Henttu & Hilmola 2011.) As the costs will increase, the number of foreign cargo
vessel visits will reduce, causing cancellations of certain trade routes (Paavola et al.
2012). However, there are lots of planned mine projects in the Northern Finland that
could mean increased transport flows for the ports of the Bothnian Bay. These new
mine projects (e.g. Sokli) could have positive impact on traffic volumes. The mines
might increase the transport flows especially in the ports of Kemi, Kokkola, Oulu
and Raahe. The ports of the Bothnian Bay are already used for transporting mining
goods from Russia. For instance, a significant number of products from Kostamus’
mine travel with train transports through Vartius to port of Kokkola. (Utriainen 2013;
Liikennevirasto 2013.)
The role of government regulation is quite low in Finnish port industry, because the
governmental bodies can affect mainly on building and sustaining the logistic trade
routes. The role of industrial factories is quite remarkable for most of the Finnish
ports. This is why the global market forces have huge impact on the Finnish ports.
The logistics efficiency of Finnish ports does not correlate with the size or the traffic
flows of the port, as smaller ports might be able offer more efficient logistics services
than the bigger ones. Over half of the goods transported to/from Finnish ports are
bulk materials. Maritime transport mode is the most cost-efficient way of
transporting heavy and big cargo loads. Especially the use of the nearest port by
minimizing the distance would be the most rational choice in these kinds of
transports. The container flows are not so dependent on minimizing the road
transport as bulk materials. When transporting containers, the service efficiency
plays more vital role. (Paavola et al. 2012.)
The future of maritime transports looks quite challenging in Finland. Also the actions
of neighbor countries will affect Finnish maritime sector a lot. Especially Russian
port infrastructure is developing in fast pace, which might increase competition with
Finnish ports. The development of Russian transport infrastructure could also be a
good thing for Finnish transport sector, if the export and import processes between
Finland and Russia become more fluent. The increasing role of Europe-Asia route
could also increase the traffic levels significantly in the future. (Utriainen 2013.) If
the challenges of arctic conditions could be solved effectively, new sea routes, like
the Northern Sea Route, will have positive impact on the whole logistics industry
38
(Liikennevirasto 2013; Utriainen 2013). This particular route will diminish the
distance between Europe and Asia significantly. It is estimated that the Northern Sea
Route reduces the distance of Europe and Asia with 40 percent. (Liikennevirasto
2013.) However, there are lots of uncertainties concerning the Northern Sea Route,
as it is difficult to forecast how it would change the transportation routes, thus many
companies have been skeptic towards the competitiveness of this route. Moreover,
the natural resources in the arctic areas might lead to an increase in transportation
levels in the future. (Utriainen 2013.) The Northern Sea Route is not going to replace
the current routes completely, but it could work as a complementary route option for
the transports of mine-, oil- and gas industries (Liikennevirasto 2013).
The maritime transports play a key role for Barents Region’s transport cluster. If one
thinks of the maritime transportation opportunities in the Bothnian Bay, there is a
good variety of ports, which guarantees good opportunities for different types of
transportations (Liikennevirasto 2013). Figure 4 summarizes the import and export
flows of largest ports in the Bothnian Bay. If one compares the four largest ports in
Northern Finland (Kemi, Oulu, Raahe and Kokkola), one could see that port of
Raahe had the first position in import cargo in 2012 and at the same time the port of
Kokkola was clearly the largest export port of these four (Satamaliitto 2013). All of
these ports are very important for the logistics competitiveness of Northern Finland.
These ports have good railroad connection and land reserves for possible
infrastructure developments. (Liikennevirasto 2013.)
39
Exports of ports in 2012 (million tons)
5,118
0,946
1,432
0,887
Kemi
Oulu
Raahe
Kokkola
Imports of ports in 2012 (million tons)
4,547
1,033
Kemi
2,288
2,144
Oulu
Raahe
Kokkola
Figure 4. Exports & Imports of the ports in the Bothnian Bay in 2012, data source: Satamaliitto
(2013)
The cargo of port of Kemi consists mainly of forest industry products and fuel
transportations. Port of Kemi offers good opportunities for the mining industry as
well. Port of Oulu specializes in container transports and offers also transportation
services for forest- and mining industry. The transportations in Port of Raahe are
connected to nearby steel factory. This means that transportations in port of Raahe
are mainly chalk stone and iron ores for steel production and the transportation of the
final steel products from the factory. The most southern of these four, the port of
Kokkola has expertise in transportation of bulk materials (especially mining
industry). The port of Kokkola offers the deepest shipping lane (13 meters), followed
by Kemi, Oulu and Raahe (10 meters each). All in all, these four ports have
important role for the Barents Region’s maritime logistics. (Liikennevirasto 2013.)
40
2.6.3
Railroad transport sector
The Finnish railroad transport sector is dominated by one operator. The lack of
competition, both in domestic railroads and in railroad connections to east (Russia),
harnesses the competitiveness of railroad logistics in Finland. Inevitably, this kind of
market structure causes a situation, where availability of railroad transport service is
weaker and the freight costs are higher. The developments of railroad infrastructure
have focused on the needs of civil traffic sector instead of cargo traffic. New
competitors will face lots of barriers, when accessing Finnish railroad transport
industry. This is mainly caused by the fact that the Finnish railroad standards differ
remarkably of those in Middle Europe (e.g. the width of railroad differs). Luckily,
Finnish railroads have gauge similarity with the Russian railroads, which offer good
transport connectivity to Russian markets. (Paavola et al. 2012.) There has been a
discussion that the increasing role of Barents Region, calls for better railroad
connections from Finland. Especially a railroad from Rovaniemi, Finland to
Kirkenes, Norway has been proposed as a possible future transport connection option
(see. Kaleva 2013). There might be also railroad infrastructure improvements for the
Murmansk railroad track in Russia in the future (Liikennevirasto 2013).
The railroad traffic from Finland to Russia is easier than from Finland to Sweden,
due to similarities in gauge standard (Liikennevirasto 2013). There are four main
railroad border crossing stations in the border of Finland and Russia. These are
Vainikkala, Imatrankoski, Niirala and Vartius. If one thinks of the railroad transports
from Northern Finland’s perspective, Niirala and Vartius are the most significant
border stations. The train transports from Russia through Niirala go in most cases to
areas in Eastern and Northern Finland. The most important border crossing station
for Barents Region is the Vartius station. New railroad improvements in Russia will
connect the Murmansk region through Vartius to Europe. The railroad traffic
between Finland and Russia is dominated by imports from Russia. However, the
Russian railroad network enables to export goods from Finland to other countries in
the East. Clearly, the current railroad infrastructure in Finland enables a good access
to hub positions in Finland, but the connections to Russia are not adequate, especially
if one thinks of the access to Northern parts of Russia (e.g. Murmansk Region); only
Vartius is the possible border crossing station at the moment. (Karhunen et al. 2004:
41
184-185; Liikennevirasto 2013.) When transporting goods from Finland to Russia,
one has to always use the Russian transport equipment (Karhunen & Hokkanen
2007: 116). The railroad connection from Vartius to Murmansk suffers from heavy
traffic volumes and would benefit from having dual railroad track (Liikennevirasto
2013).
Lapland could have more railroads; mainly due to increasing transport needs of the
mining industry. Railroad transports from Finland to Sweden are very low if
compared to Russian trade volumes. The biggest problem for Finland-Sweden
railroad trade is the differences of railroad gauge standards. However, the use of
intermodal transport has increased the railroad transport between Finland and
Sweden. All in all, the biggest challenge of future investments for the railroad
transportations is the capacity constraints. (Karhunen et al. 2004: 184-185;
Liikennevirasto 2013.)
2.6.4
Road transport sector
The road transport sector of Finland faced a big change after the collapse of the
Soviet Union. Especially the transit transports from Eastern Europe have increased
significantly in the past two decades. (Karhunen et al. 2004: 61-62.) The Finnish
road transport sector faces both domestic and international competition and the
business income levels are quite low at the moment. This has led to a situation,
where many Finnish transport companies are forced to end their business and at the
same time the level of foreign transport firms increases. The costs have risen
significantly in the road transport industry in recent years, when compared to other
transport modes. New standards for using bigger trucks/truckloads could help to
reduce both costs and time. (Paavola et al. 2012.) Clearly there is a need for better
roads, because of the new mine projects in the Northern Finland (Liikennevirasto
2013).
42
3
PROJECT LOGISTICS IN THE BARENTS REGION
As discussed earlier, Barents Region possesses a huge amount of natural resources
and there is a need for investments in the oil and gas fields. This means that the
Finnish companies will have business opportunities in both manufacturing and
transporting the orders for the oil- and gas industry customers in the Barents Region.
These types of investments often include the transportations of large project cargoes.
Finland can offer excellent logistics services in these types of project deliveries.
However, there are lots of challenges concerning these types of project deliveries and
it would be essential to have profound understanding of those prevailing challenges
in these type processes. This chapter focuses on project logistics. First, project
deliveries are discussed. Second, follows a discussion of offshore projects in the
Barents Region. Third, the barriers and opportunities are presented. Finally, a
theoretical model of project delivery process is formed.
3.1
Project deliveries
According to Andersson et al. (2011), the transportation of project cargo is more
complex, if compared to standard cargo. Project cargoes pose different kinds of
transportation challenges than normal cargo types (e.g bulk and container) and each
delivery is different from one another (Fagerholt, Hvattum, Johnsen & Korsvik
2013). Typical project cargoes include windmill parts or massive components for the
oil- and gas industries (Norbury 2012). The size and weight of project cargo varies a
lot, which means that it is hard to make any generalization for the transportation
procedures. Project deliveries tend to have certain time frames for shipping schedules
that set their own challenge for the logistics service. Project cargos usually consist of
several parts that have different shapes, weights and heights, which cause variation
for the stowing for instance. One could easily state that each project delivery is
somewhat different, when compared to earlier experiences. (Andersson et al. 2011.)
Clearly, there are lots of challenges that occur, when dealing with specialized freight.
For example lifting the cargo could be very complex and therefore a good planning is
needed to prevent possible cargo damage. Not only the stowing poses a challenge,
but also the selection of best logistics route for the shipment. On one hand, regular
43
shipments are not comparable to project shipments. On the other hand, there are also
similarities in the actual cargo handling that help to plan the transportation. The
shipment consists of certain quantity of cargo to be transported within certain
timeframe (e.g schedule). Inside each project delivery, there are various sub
processes that have to work efficiently and in time, to guarantee that each component
is delivered at the right moment. Actually, if one thinks of the stowing in the port, it
would be important that everything works accordingly with the shipping plans,
because the time the cargo vessel spends in the port should be minimized to avoid
extra costs. Before the shipment happens, one has to know, what type of lifting
equipment is needed to stow the cargo and most importantly to decide, what kind of
cargo vessel would suit best for the given project cargo. The weight and shape of
cargo set certain parameters for both stowing and selection of cargo vessel. In some
cases the project cargo is coupled (e.g. combined) with other cargos, which
obviously changes the schedules and other transportation related procedures. These
kinds of cargo couplings are used, because a cargo ship that does not carry a full
cargo load would not be wise from financial perspective. However, transporting
other cargo has to fit the project delivery schedules in a way that they can be
included rationally in the same route. (Andersson et al. 2011; Fagerholt et al. 2013.)
There are some critical stages in project deliveries. The actual handling stage is very
complex and one has to ensure that the cargo suffers no damage during the stowing.
(Nodar 2006.) To avoid possible stowing problems, there should be special emphasis
on planning the stowing process in advance (Fagerholt et al. 2013). The massive
weight of project cargo can make problems for the transportation, and project
deliveries tend to feature heavy lifts, which set challenges for the transportation
(Badger et al. 1993: 194-195; Norbury 2012). When the cargo is stowed to the cargo
vessel, one should make sure that the cargo does not move during the transportation.
There are many ways for securing the cargo load carefully and often there are
multiple methods that are used together. Obviously the given cargo load defines what
kind of methods will be used. For example, welding could be used for maximizing
the cargo security. There has to be careful stowing plan to keep the vessel in balance
during the maritime transportation. (Badger et al. 1993: 194-195; 208-209.) It is also
important that there is a special emphasis on the transportation already in the
designing phase of the complex products (Inbound Logistics 2011; Fagerholt et al.
44
2013). Stowing is one of the most difficult phases in the entire transportation process.
If one thinks of the stowing of huge project cargoes, clearly the placement options
are either on deck or in hold. One has to plan these placements carefully, because
deck cargo loads have to be unloaded first, thereby affecting on the logistics route
decisions. (Fagerholt et al. 2013.)
When the cargo is delivered to the final port location, there could be challenge of
finding enough space for the unloaded cargo. This is why logistics planning should
focus on punctual delivery schedules. (Badger et al. 1993: 194-195.) The
transportation of large size cargoes is often conducted with the help of freight
forwarding professionals. Obviously one of the greatest problems is caused by
changing weather conditions and geographical distances. Transports concerning
cross-border logistics could face several difficulties that have to be considered
already in the planning stage. Safety issues are often present, especially, when
transporting in risk areas. Maybe the most significant point is that project cargo
delivery stays in schedule. There is also a possibility to divide massive cargo
components into smaller shipments and transport the parts in containers.
Transporting bigger amounts as a one shipment has significant benefits in reducing
the costs and delivery times. From the customer’s point of view it would be
important that the logistics processes are included in the order. (Guzman & Norgaard
2000.)
Badger et al. (1993: 195) discuss that maritime transportation suits best for the
complex project cargoes. Nevertheless, the longer distances and harsh conditions
could pose a challenge for secure cargo transportation. On one hand, rail road
transports can be used for these types of large scale cargo transportations. On the
other hand, rail transportation suffers from limitations in capacity constraints and
cargo dimensions. All of these complexity factors are also evident in road
transportations, which are often used for shorter transportations. (Badger et al. 1993:
195.) Sometimes the project cargo could be so large that transporting it with road
transports is not even possible (Norbury 2012). Transporting huge project cargoes on
the road demands careful advance planning and collaboration with the authorities to
ensure fluent transport (Guzman & Norgaard 2000). If road transports are used for
large cargo movements, there could be a need for special arrangements and bigger
45
trucks. Complex road transports are often done in a convoy that consists of freight
forwarding professionals. There are varying regulations in different countries that are
restricting these types of special cargo road transports. (Karhunen & Hokkanen 2007:
152-153.) The fourth opportunity would be using air transportation for project
deliveries. Although using air transportation for project delivery is one possibility, it
is not used very often, because there are lots of difficulty factors (e.g. limited cargo
space). (Badger et al. 1993: 195.)
The planning of project delivery itself takes lots of time, if compared to normal
freight planning (Norbury 2012). There is a trend of transporting bigger and heavier
cargoes, which increases the complexity level (Canadian Sailings 2011). This is why;
there is a need for cooperation, amongst the project actors, that ensures fluent
transportation (Inbound Logistics 2011). When transporting large scale project
cargoes, using outsourced logistics operators (e.g. freight forwarders) is almost a
necessity for the transportation success (Branch 2009:88-89; Dubin 2010; Saeed
2013).
According to Branch (2009:88-89), it is important that one stays in schedule, and
implements the project very carefully, when conducting massive installation projects.
Especially every single phase of the project delivery process has to be made in way
that it supports the overall requirements of the whole project. There could be a
problem, if multiple actors are conducting the transportation process together. This
means that potential failures could be caused by lacking collaboration both in the
installation and transportation phases of the project. To avoid failures, it would be
crucial to have an efficient combination of plans, schedules, cooperation,
communication, risk management and professional work force. International project
deliveries tend to construct of logistics chains that involve cross-border
transportations, which mean that possible problems might evolve also from external
forces as well. These types of deliveries are usually transported with several different
transport modes, and therefore the entire transportation should be planned carefully,
by considering the possibility of failures deriving from several mode…
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