Fast and green:
Trans-Eurasian railway transportation
Sustainable, green and ecofriendly: railway transportation is not only a climate friendly alternative, but also more efficient compared to other ways of transportation. Starting as a pilot in 2017, it is now implemented at Daimler in China. Du Qingyang from International Procurement Services shares the details.
Editors: Ms. Du Qingyang, what was the initial idea of the railway project?
Du Qingyang: At IPS, our goal is to be experts in our respective commodities and always look out for the best deal for Daimler. CRexpress, a part of China’s “Belt and Road Initiative”, is a train that connects Asia and Europe. This initiative started in 2013. As the infrastructure matured, IPS and RD team started to explore this potential market together in 2016, followed by a deep-dive market research in 2017. Our conclusion was clear: Railway transportation is more efficient. It offers faster lead-time than ocean freight, and lower cost than air freight. In this context, the fact that railway transportation is more sustainable, greener and eco-friendlier than other ways of transportation clearly benefits the cause. China marks the largest oversea market of Mercedes-Benz. Simultaneously, the capacity building of railway transport is developing fast, so it is more efficient to connect the Central European market through Trans-Eurasian railways.
That sounds like a great opportunity for Daimler. What were your first steps during the project?
After the positive result from the market research, IPS proposed to conduct pilot run of railway transportation for RD China. They sometimes have rush requests for the transportation of RD testing cars, due to tight testing timeline. Those vehicles were used to be transported to China by air, however, we were convinced that railway transportation offers optimized balance between the cost and lead-time. RD accepted our proposal and we started a pilot. During our pilot nine vehicles were transported by railway instead of air freight. The numbers speak for themselves: in total, we achieved 67% saving in actual spending.
What happed after the pilot? Are you still using railways transportation?
Yes, the pilot run in 2017 was a huge success and confirmed our predictions. China marks the largest oversea market of Mercedes-Benz. Simultaneously, the capacity building of railway transport is developing fast. Consequently, railway transportation has been integrated into the regular supply chain map. Therefore, the railway transportation becomes a recurring service with continuous framework contracts, awarded via competitive bid.
Such a complex project needs strong partners. What were your premises when choosing the supplier?
Railway transportation is a relatively new concept in China. The fast developing market brings challenges when enhancing the supplier pool. Additionally, the major part of the service package “international railway transportation” is managed by railway companies in various countries. This package includes services at both ends outside of the train, where customized Daimler requirement is applied. Therefore, we needed to select some professional logistics service provider for the whole service package. In the end, a local supplier was chosen as the service provider for RD through competitive bid. At a later stage, an international supplier was awarded through a separate bidding for BMBS business according to their service requirement.
Looking back on the project, which characteristics and features – both from you and from the supplier – played a major role in enabling a successful cooperation?
I can only stress the importance of innovation. Without innovation, we would not be able to jump out of daily routine operation, and try out new transportation modes. Furthermore, without innovation, IPS and BP would not open for such new ideas, conduct market research together, and develop this new concept together.
Of course, such innovative ideas can only become true, with the close collaboration with our business partner and our supplier. That was crucial during the pilot, as there were definitely unclear points in the beginning of the project. No one knew for sure, if the new transportation mode could actually run smoothly. However, we worked really close together in terms of business concept defining and in order to deep dive into technical details like departure and arriving stations or service before the vehicle boards the train.
Thank you Ms. Du Qingyang and congratulations again to this successful project!