Strategic Mapping of a National Logistics & Supply Chain System: The Case of Greece, Katerini, 2012

 

 

 

 

 

Strategic Mapping of a National Logistics & Supply Chain System: The Case of Greece

Ioannis Siamas1, Eleftherios Iakovou2, Dimitrios Vlachos3

Laboratory of Quantitative Analysis, Logistics and Supply Chain Management, Department of Mechanical Engineering, Aristotle University of Thessaloniki, Greece

1 BoD Member of TRAINOSE, Greece, Ph.D. Candidate,

2Professor,

3Associate Professor

Laboratory of Quantitative Analysis, Logistics and Supply Chain Management, Department of Mechanical Engineering, Aristotle University of Thessaloniki, Greece

1siamas@auth.gr, 2eiakovou@auth.gr, 3vlachos1@auth.gr

Keywords: national logistics system, strategic transport policy, global supply chain networks

 

1. Introduction

Today, the most severe challenge for the system of freight transport in Greece is stagnation stemming from the severe recession of the economy. According to the Commission of European Communities for freight Logistics in Europe, the Supply Chain (SC) is divided in four sectors: the preparation of goods for shipment and shipment from the production sites, the transport of goods, the forwarding of goods and warehousing and finally the storage and inland terminal operations (COM (2006) 79). In Greece, only transportation is regulated within a dedicated institutional framework, while the rest three sectors are functioning without a legal framework and the strategic guidance of the SC, its internal organization and its international perspective. Thus, the organization of the Greek SC system has been developed throughout the years privately without a comprehensive strategic development plan. That is the reason why today, all modes of transport still maintain their functional autonomy. Inter-modal transport has no visible role in the Greek political and policy-related agenda. Thus, the goal of Greece to establish itself as an international Logistics Centre (LC) and a hub of cargo freight in the wider SE European region under these circumstances is unrealistic. The slow pace of the territorial development has forced Logistics services to work under outdated frameworks resulting into spatially dispersed companies, without proper planning and organization. This has further led to low competitiveness for the relevant Greek companies in the international markets. The internal distribution of goods had to follow the growth of the Greek economy and be modernized by the pace of the market. The Greek SC should have been shielded through the right strategy in order to prepare itself for an extrovert course, something that was almost a certainty during the past 30 years. Thus, the consequences from the inclusion of land adjacent countries to the European Union (EU), the Monetary Union, the democratization of Eastern Europe, the growth of Asian countries and especially of China and the international trade flows passing south and east of Greece were not panned for as they should. That left a huge organizational gap, which led to the poor performance of extrovert Greek companies within global SC networks. At the same time, other European countries (such as Italy, Spain, Germany, The Netherlands, Belgium, etc.) took advantage of their own internal development strategy in the past 20 years and opened into new markets and services, while strong foundations built through internal activation have provided a buffer for them in times of financial dire straits.

Logistics is a supportive procedure of the production and the processing of raw material into final product, from the production site to the final consumer. In a complex of institutional, systemic, infrastructure and economic restrictions environment, we aim to map these procedures for Greece from the point of view of the Supply Chain and Logistics. This mapping should not stay limited to the Logistics sector; it may easily extend over the finance and tax environment.

A Logistics System is not a set of individual modes and procedures but rather a system with capacity much greater than the sum of these components based upon the ensuing interactions. All modes, namely road, rail, air and sea, are mapped from the point of view of the institutional framework and the infrastructure. Additional key components are the procedures and policies that are followed by the public sector and the behavior of the stakeholders in the economic environment. In the entrepreneurial process, the first step is to setup the business with the necessary infrastructure and capital from equity or financing. The second step is to run the business attracting capital for raw materials, human resources, education etc. In a classical privately held company, the same stakeholder performs both procedures. When the public sector is involved, these steps are usually shared between the private and the public sector. To set up a Logistics system, assets such as infrastructure and transport modes are necessary, coupled with the management capitals, information and procurement-product flows under specific procedures. The systemic relation of these components in the nowadays non-systemic or near-systemic approach of the Greek National Logistics System is also mapped.

 

The contribution of this paper lies in its mapping comprehensively albeit synoptically, the current situation of Logistics in Greece, internally and as a part of the wider Global Physical Network. It collects the scientific trends for the institutional intervention in developing the SC, their valuation and their shift in the political community so to be implemented immediately. In Section 2 we provide a through description of the current institutional/regulatory framework. In Section 3, we provide a strategic synopsis of the supply chain related infrastructure in Greece. In Section 4, we discuss procedures and the slide of Greece in the World Bank’s Logistics Performance Index (LPI) ranking from 2007 to 2012. Finally, in Section 5 we present the key stakeholders of the national supply chain network and we wrap-up with conclusions in Section 6.

2. Institutional Framework

The institutional framework of implementation of the terms of freight transport is characterized by shared jurisdiction of many governmental bodies, which fall into different ministries with shared responsibilities. When it was first created, it served an inferior transport infrastructure network, functioning as a tool for the development in a postwar and dramatically different economic environment. Anachronistic rules were accepted, as long as freight transport still took place in the level of carrier and carriage, economies were practically closed and import trade was limited due to currency conversions. At the same time, achieving high speeds in long distance transport for perishable products was almost impossible. However, due to worldwide changes, national economies became part of the globalized economy, new markets emerged, the speed of transport modes increased, border barriers disappeared and developing economies showed great potential for productive investments. Thus, the SC developed at an international level, so as to cover a wide range of economic activities, from the preparation of production, movement, alternation and storage of products to ordering, redistribution and of course transportation (Siamas, Balkamos, 2010).

Greek freight transport is characterized by an anachronistic legislation, since there is no institutional organization at any level. This emerges as a serious disincentive against business investments. Greek legislation remains quite remote from the global trends of organization and modernization of the SC. Actually, the State of Greece never took freight transport under serious consideration, leading to the stagnation of the sector, since it was never assisted effectively in order to adopt European standards. Greece, despite its inability to complete the necessary specialized infrastructures for the SC, must still establish a suitable institutional framework in order to increase the investments by the private sector.

To this direction, a new institutional framework of transport liberalized public transport activities has been created (Law 3887/2010). Even though the organizational structure of the SC of markets and producers has changed, goods still reach the retailer from the producer with approximately the same institutional processes, as if nothing has really been altered.

Transport Modes

The institutional framework currently addresses transport modes myopically, without any systemic approach. A discussion on the transport mapping is provided below.

 

Road

Road transport, being the oldest form of transport, is regulated by a series of laws and decisions with earlier references in the Commercial Law of 1835 (Articles 95-107). Historically, Legislative Decree 531/1970 has enabled the replacement of animal-drawn vehicles for transporting goods by trucks, achieving the renewal of transport. The 383/1976 law codified the rules on carrying out road freight transport with the employment of public use vehicles. By law 1073/1980, the replacement of three-wheeled public use vehicles with public use trucks (PUTs) was allowed. The 1959/1991 law consolidates all legislation relating to road transport by private use trucks.

Recently, the intent of liberalization for the sector emerged with laws 3887/2010 and 4038/2012. These last decrees point to the right direction of liberalizing the market, but they still don’t adopt a systemic approach in transport. The number of licenses for PUTs is freed, fare limits are abolished and transporters could be organized in SAs and Ltd companies. This effort will assist the sector of freight transport in Greece in adjusting to international trends. Specifically, it includes new intentions, such as liberalization of freight transport, which practically implies that any person could obtain a PUT license under certain conditions, increased competitiveness for advanced services at lower prices, abolishment of freight limits, which will be fixed between the lessee and the carrier, organization of transporters in companies, evaluation of the existing licenses, integration of transport, thus abolishing the separation of international and national transport, establishment of a national electronic registry for transporters with new vehicle inventory, compulsory insurance of goods by transporters, environmental issues with the use of modern engines (at least Euro 4 or above) and  the recommendation of the National Committee on Road Transport (Law 3887/2010). Also, cabotage is enforced by the Greek State, which issues only a specific number of licenses to the interested foreign countries. That has led to the transshipment control and creation of problems in controlling the flow of goods. The liberalization of road cargo transport was supposed to increase the number of PUT licenses, but the demand of transport loads has actually fallen, so the results of this initiative are still to be seen. Similarly, price results should appear when economy passes to inflation.

Rail

The railway transport service in Greece is provided by “TRAINOSE”, a public body. Access to railway infrastructure, from other transport companies, became possible after the adoption of Council Directive 91/440 with the 324/96 Presidential Decree. But the liberalization of rail freight transport applied in 2012. The “Railway Regulatory Authority (RAS)” based on the 101A Article of the Hellenic Republic Constitution created the necessary regulatory framework that regulates the entry of private companies in the Greek railway network. RAS is the Regulatory Body for railway transport in Greece (Law 2668/1998). Its main mission is to ensure the fair and non-discriminatory access to the national railway infrastructure and services. To obtain a license from RAS, one must prove credibility, financial independence, professional competence and their corporation (MD 1594/107 & PD 41/2005). License is valid for all EU territory, so any EU railway undertaker may start activities in Greece by obtaining a safety certificate and contracting an access agreement with the railway infrastructure manager “OSE”. RAS gives the final approval according to safety certification process (PD 160/2007) and infrastructure safety (MD 26697/2422). The cost of the levying of charges for the use of the infrastructure is common to any undertaker.

 

Air-Sea

Things are different for air and maritime transport. All vessels can enter the Greek ports and access to ports is free of institutional constraints. Although air cargo transport is fully liberalized, high transport and handling cost prevent the development of this mode. Therefore the only suitable products are high value short life products. In Greece, scheduled routing is covered in Athens and Thessaloniki by three airlines: DHL, Air-Post and TNT. On demand routing is more often and may also serve other airports.

Merchant maritime transport is a completely liberalized mode with global regulations. Practically there is no need of infrastructure on its travel, except on the port-edges. Big agents and transporters prefer to direct their loads in sea highways or European Corridors, where they can augment their benefits. Finally, Greece’s ports are connected worldwide.

 

3. Infrastructure

Infrastructure provides the structural elements of the physical network.

 

Roads

The main highways of Greece are crossing in Thessaloniki. PATHE is the vertical axis (N/S) and Egnatia Odos is the horizontal one (E/W). These axes are part of the SE EU corridors. Each of them has several bottlenecks, where a possible interruption may cut off the communication, as there are no alternatives with enough capacity to accommodate the traffic. PATHE bottleneck is the Tempi Valley and Egnatia Odos bottlenecks are Polimilos, Grevena, Metsovo and Paramythia, all in the mountainous NW Greece. The traffic flow in these detours is insufficient. The first highway links the ports of Patra, Piraeus and Attica, Volos by a detour and Thessaloniki. It also covers flows to northern borders, especially to F.Y.R.O.Macedonia and less to Bulgaria. The second highway links the ports of Igoumenitsa, Thessaloniki, Kavala and Alexandroupoli. On the east side Greece has borders to Bulgaria and EU Borders to Turkey. Egnatia Odos is the main arteria for trucks connecting Turkey and Europe. Secondary for the moment, is Ionian Road, the road connection of Patra and Igoumenitsa. The Port of NAVIPE-Astakos is also connected with the Ionian Road albeit with a road of unsatisfactory quality. Through this unsatisfactory road linking, the port of NAVIPE-Astakos has an artificial handicap of linking in highways. As a result, ports of Patra and Igoumenitsa, also placed in the Ionian Sea, maintain this competitive advantage. In a total of 116,711km, Greece has 948km of expressways and is ranked 38th among 221 nations.

As for hydrocarbons network 1240km of gas pipes for natural gas and 75km of oil pipes that mostly connects airports and refineries are placed parallel to the existing roads (CIA, 2012). The capacity of road modes in Greece consists of 33,000 PUTs and 1,200,000 private trucks in 2010 figures (Siamas, Balkamos, 2010). Land Cargo Transport is shared between 98.4% on the road and 1.6% on the rail.

 

Rail

The total railway length is 2548km. Greece has 1565km of 1.435m gauge (the standard in Central Europe) from which 764km are electrified, 961km of 1.000m gauge and 22km of 0.750m gauge in 2009 figures and is ranked 65th among 134 nations (CIA, 2012). The goal for 2012 is to transport 350,000,000tn/km. In September 2012, the connection of the New Ikonio Port (belonging to the Piraeus Port Authority) with rail network will be completed. The new freight-related goals are 500,000,000tn/km for 2013 and are quite similar for 2014. The efficiency of cargo-rail is expected to increase. In 2012, two scheduled trains per week will connect the Thriassio Field (Athens & Piraeus rail center) and Thessaloniki. After 2013 the schedule is planned to become daily. Bailout agreement and austerity measures (Law 3845/2010) specify that maintenance charges of OSE to any rail operator such as TRAINOSE will raise 25% in 2013 and 3% in 2015 to reduce waste (TRAINOSE Masterplan 2012-2015). The electricity of the total network in the axis Athens-Thessaloniki in April 2014 will increase network potential by increasing train speed. New product offerings and new markets such as a strategic partnership of mail or door-to-door services via rail and a strategic partnership with foreign rail operators to connect and improve Europe’s rail corridors are envisioned. The parallel strategic goal for TRAINOSE is to maintain viable while raising the market share of cargo transport. The capacity of the networks cannot be raised.

Applying faster trains in railway network will improve the travelling conditions and meet EU standards. For example, a speed increase from 120 km/h to 180 km/h can serve 50% more additional traffic, as long as the security of the network is not compromised.

 

Airports

Cargo stations are functionally operated in the Athens International Airport “El. Venizelos” and in Thessaloniki Airport “Macedonia”. Many other airports may turn-into cargo stations if security problems are solved; such as the absence of large-scale metal detectors and other advanced air cargo security equipment. Greece is ranked 68th among 236 countries. The following table (table 1) presents the airports of Greece based on the country’s efficiency (CIA, 2012).

 

Ports

Ports usually offer passenger and freight services under the same authority. Besides the Private Port of Navipe-Astakos in the Ionian Sea, which services exclusively freights, all others offer mixed services. They are separately managed as public organizations, without coordination management processes in place. Each port authority is evaluated only by its financial results. No cooperation and harmonization between rail and other ports is required to unleash new growth opportunities. They are legally, financially audited through their separate balance sheets. While various Greek ports are extrovert (e.g. see memorandum of cooperation between the Port Authority of Igoumenitsa and the one of Venice), such cooperation has not manifested among Greek ports. Different authorities mean different cost policy and different pricing. They behave competitively just because they are not systemic. A systemic behavior prefers the additional role of every stakeholder instead of a competitive one. This myopic view is a result of the absence of a central freight policy in Greece.

The Ports of Piraeus and Thessaloniki have offered shares into stock-market, making privatization a reality, without losing their public characteristics. In order to accelerate this transformation, the State of Greece endorsed a concession agreement between the Port of Piraeus and Cosco Pacific, for attracting containerized cargo in 2008. The same year, the same concession did not complete between the Port of Thessaloniki and Hutchison. Vessels are also an important infrastructure component. Table 2 shows the types of vessels that operate under the Greek flag.

 

Table 1. Airports in Greece. Airport country rank: 68 among 236 countries (CIA, 2012)

Airport Runways

Long (m)

Airports

Paved

3047 -

6

Paved

2438-3047

14

Paved

1524-2437

20

Paved

914-1523

18

Paved

- 914

9

Unpaved

914-1523

2

Unpaved

- 914

12

Heliports

 

9

 

 

Table 2. Greek State’s vessels ownership. Vessels under Greek flag. 62 vessels are foreign owned (CIA, 2012)

 

Type

Vessels

Bulk carrier

263

Cargo

53

Carrier

1

Chemical tanker

72

Container

34

Liquefied gas

13

Passenger

8

Passenger/cargo

116

Petroleum tanker

312

Ro/Ro

13

Specialized tanker

1

Total

886

 

Special Infrastructure for Logistics

Freight Village or Logistics Centre (LC)

The construction of LCs will consolidate all SC services conducted by different stakeholders in one place, paving the way for the creation of dynamic synergies for the organization of the Logistics system. This organization leads to the reduction of transportation cost and the increase of service level concerning a cargo in a specific area. Their development outside the city, gives great potential for fast flow, while it does not create city supply malfunction problems. Moreover, the concentration of activities in a specific area gives the opportunity of using special infrastructure support such as telecommunications, roads, irrigation systems, drainage systems, recycling and environmental protection, high-capacity machinery, etc. otherwise no such potential could have emerged. It also provides specialized services for indoor and outdoor storage, parking, and cargo service through machinery, road network, railway network and connection through internal hubs or even a free industrial zone.

Companies that are nested inside LCs, achieve higher levels of space exploitation since they are led by demand, which means that they can lease, as much space as they need. On the contrary, when companies are scattered, they are mostly driven by the supply of land, as they need to lease all the land that owners offer, even though it might be more than needed. This causes the creation of a bullwhip effect in the urban plan of the district, resulting to lack of free land due to its illogical utilization.

In the LC designated areas, productivity of the fleet used will increase as the movement of cargo will decrease and every mode is expected to maintain its best possible position in the Logistics chain (Siamas, 2010). Rail will be used for mass long distance transport and road modes in more agile transport. The availability of existing road modes will not be used for long distance transport, which for so many years was substituted, and will be directed to operations around the LC, in distances lower than 150km (Council Directive 92/106/EEC/1992).

Especially for Attica, a scattered development of Logistics service companies will hinder the organization of trade flows, delaying them and reducing their speed and the competitiveness of Greek corridors. European instructions for the reorganization of the transport system will also be followed through the creation of LCs and by adopting concepts of combined transport friendly to the environment such as intermodality and comodality. The principles for sustainable mobility and sustainability were depicted in 2001 by the European Union (COM (2001) 370).

As for strategic purposes, LCs should meet organizational, environmental, political and economic goals. This systemic approach for supplying markets, which in Europe has already been in use for 40 years, makes the best use of resources, business organization and consolidation of cargos, to the benefit of the supply speed and urban decongestion evolving sometimes into free trade zone. The continuous urbanization with high population density creates corridors of high growth rates. The increasing population density in Eastern Europe, Turkey, Balkans and countries of the former Soviet Republics creates respective conditions for the creation of economic development zones similar to the ones of the Central Europe. Their expansion to the east may create a new economic center (Brunet, Roger, 2002). Their location must be appropriate in order to have the opportunity of future use and connection to Trans-European Networks (TENs), as well as traverse trans-European corridors.

From the financial point of view, the organization of supply businesses could be controlled regarding its sustainability in 4 separated phases (Tsamboulas, Kapros, 2003):

 

  • Site selection and traffic forecast
  • Definition of services offered and corresponding dimensions
  • Estimation of investment and operation costs
  • Political and economic evaluation and the potential of PPP.

 

The choice of the location proves that a fully private investment for a LC will be unsustainable, with the main difference lying in the choice of the location which translates to the ensurance of land. It is even more difficult to maintain viability of a fully private investment, regarding a subset of activities such as forwarding, for the same reasons. This implies that public contribution is necessary, here as well, in order to achieve the sustainability of the LCs and the translocation of forwarding companies into them (Iakovou et al., 2009). At the same time, other similar infrastructures that coincide in the same range and control, along with LCs, self-negate the strategies of the system of LCs when they are not included in the same control system (Iakovou et al., 2009). These special conditions of service spread, jeopardize the viability of PPP, due to sharing of the incoming freight flow, while they discourage a fully private investment. If the LC is not open-use to any firm, the benefits from the LC to specific firms will increase the unfair competition and small-scaled companies may not survive. Additionally, the static scheduling of daily operations as carried out today will be replaced by dynamic programming based on system connectivity and process visibility (Fitzsimmons, 2008).

For Greece, which does not possess significant production and manufacturing activity, the activities of SC and Logistics should be focused on third party freight (3PL) services. This trend is reinforced by the geopolitical position of the country as the peninsula closer to the eastern part of Europe and as a gate for the European continent and by business investments of shipping companies CKYH (Cosco, Kawasaki, Yang Ming, Haνzing) focusing on third party transportation of goods. Vopak, which is the world’s largest independent tank storage provider, plans to develop a tank storage terminal as a part of a worldwide network in the Mediterranean Crete (Ministry of Development, Press Release, July 2012). Under these circumstances, forwarders, who organize the transportation process (by providing added value to transfer), are obliged to work as suppliers, as customers and as custodians of the goods and at the same time, emphasizing in administrative organization (Fitzsimmons, 2008). The ultimate goal is to meet both needs of production and consumption, supply and demand and the achievement of balance, by ensuring the movement of goods, from point of origin to their final destination, at the right place at the right time and in good condition avoiding as much as possible traffic and port congestion.

 

4. Procedures

Customs clearance is a procedure that public administration has the primary participation and influences the rules of import and export activities by controlling the legislation. Table 3 lists the relevant customs procedures.

 

Table 3. Customs Procedures (Doing Business, 2012)

 

Customs Procedures

Release for Free Circulation

Transit

Customs Warehousing

Inward Processing

Processing under customs control

Temporary admission

Outward Processing

Exportation

 

Import is the physically passing of foreign goods with all its clearance procedures until it is classified as a national good. The physically entrance is affected by the transport system. In a globalized market, transport should behave more or less similarly between countries, but clearance procedures are undetermined severely by bureaucracy and bribery at the customs. The necessary documents to import products in Greece are referred in table 4.

 

Table 4. Necessary documents to import in Greece (Doing Business, 2012)

 

Documents to import

Bill of lading

Cargo release order

Certificate of origin

Commercial invoice

Customs import declaration

Packing list

 

In table 5, the time and the cost of each import procedure are listed. The total time of import procedure is the key to a competitive transport system.

 

Table 5. Import procedures, time to spend and cost in Greece (Doing Business, 2012)

 

Import Procedures

Time in days

Cost per US$

Documents preparation

12

140

Customs clearance and technical control

6

265

Ports and terminal handling

5

380

Inland transportation and handling

2

480

Total

25

1265

 

Export is the opposite; that is the physically passing of domestic goods with all its clearance procedures until it behaves as a foreign (or one of the arrival’s nationalities) good. The necessary documents to export products from Greece are referred in table 6.

 

Table 6. Necessary documents to export from Greece (Doing Business, 2012)

 

Documents to export

Bill of lading

Customs export declaration

Commercial invoice

Certificate of origin

Technical standard & health certificate

 

In table 7, the time and the cost of each export procedure are listed. The total time of export procedure is the key to a competitive transport system.

 

Table 7. Export procedures, time to spend and cost in Greece (Doing Business, 2012)

 

Export Procedures

Time in days

Cost per US$

Documents preparation

14

235

Customs clearance and technical control

2

230

Ports and terminal handling

2

228

Inland transportation and handling

2

460

Total

20

1153

 

These days of delay can be shortened by setting time limits in each procedure. Analytically:

  • Documents preparation is a bureaucratic procedure that has all the problematic elements of the public sector.
  • Customs clearance in imports is long because of white strikes of the employees in tax offices and the absence of risk management as a control policy.
  • Ports handling needs internal traffic control and priority management. If there was a problem of efficiency, the time should increase continuously.
  • As a result a decrease of document preparation to a half, would lower export-procedure time to 13 and import to 19. Export time is closer to the mean of 10 of OECD countries. But import procedures can lower up to 2 by managing port handling in a scheduled 24/7 operation.
  • A risk strategy about import controls may decrease the customs procedure to 2. As for the technical control only an internet mail is necessary to receive all technical specifications and standardizations, like an e-note system. A real sample may be arrived earlier by air to control, if the origin state or firm is not reliable. In that case, only the physical inspection remains whenever it is necessary by the risk-based profile system, which should be established.
    • There are 3 tools that facilitate trade that is: single window, risk-based inspections and electronic data interchange systems. Greece has no reform because it has no progress since 2009. Single window and electronic data interchange systems are IT-based applications. Risk-based inspection can improve the efficiency of the controls. The creation of risk indicators by using routes of containers and vessels or to take into account historical data on container routes, obtained by Internet may structure a new risk analysis (Joint Research Center, Contraffic, 2012). The risk analysis data is influenced by the customs procedure (transit, import, export), by characteristics of the goods (tariff classification, value), by the routing (port of load, transshipments, intermediate) and by the stakeholders that are involved (importer, customs broker, carrier, forwarder).
    • In imports, clearance procedure tax calculation in customs should follow an objective way of taxing. The time that tax is charged is also an accelerator or a retarder in the total procedure. So, if tax is calculated with an optical view of goods it is more delaying than if it was calculated by price or load or fixed from similar goods before the arrival. In that case the empty-time-gap of transport is utilized to run the procedure and goods are moving faster. Note that physical inspection in EU should be less than 2%.
    • Besides risk, tax calculation is not functional. The officer is in charge to compare and refer the highest charge. For the same load custom tax varies between officers. Adopting risk analysis strategy, function a tax calculation system.

 

The influence of these procedures is captured systemically in the Logistics Performance Indicator (LPI) of The World Bank (Arvis et al., 2007, 2009, 2012). Table 8 is a comparative import-export procedure among competitive routes of other Mediterranean Countries.

 

Table 8. Comparative table of the Mediterranean Continent Countries (Doing Business, 2012)

 

Indicator

Greece

Turkey

Italy

Croatia

Slovenia

France

Spain

Albania

2011

2012

2011

2012

2011

2012

2011

2012

2011

2012

2011

2012

2011

2012

2011

2012

Import

Documents

6

6

8

8

4

4

8

8

8

8

2

2

7

7

8

8

Days

25

25

15

15

18

18

16

16

17

15

11

11

10

10

18

18

USD cost

1265

1265

1063

1063

1245

1245

1141

1180

765

765

1248

1248

1221

1221

710

730

Export

Documents

5

5

7

7

4

4

7

7

6

6

2

2

6

6

7

7

Days

20

20

14

14

20

20

20

20

19

16

9

9

9

9

19

19

USD cost

1153

1153

990

990

1245

1245

1281

1300

710

710

1078

1078

1221

1221

725

725

Rank

84

86

79

80

63

63

99

100

60

50

26

24

57

55

76

76

 

 

In addition, as a result of recession, new purchasing orders to Greek export companies in April 2012 decreased 15.6% since last year’s same period, resulting in reduced industrial production for the following months. The problem is even more heightened if it is considered that the raise of Greek exports was compensating for the internal fall of demand due to the recession, so the negative influence of exports fall is greater than figures indicate (ELSTAT, 2012).

The LPI consists of two parts and is based on numerical ratings of 1 (weakest) to 5 (strongest) to assess logistics performance (Arvis et al., 2012). International LPI is based on the assessment of foreign operators located in the country’s major trading partners, and is a weighted average of the six components:

  1. Efficiency of the customs clearance process
  2. Quality of trade and transport-related infrastructure (Ports, airports, road, rail, warehousing, telecommunication & IT)
  3. Ease of arranging competitively priced shipments
  4. Competence and quality of logistics services
  5. Ability to track and trace consignments
  6. Frequency with which shipments reach the consignee within the scheduled or expected time. Timeliness of deliveries.

 

Domestic LPI is based on logistics professionals’ assessments of the country where they work, and contains detailed information on individual aspects of logistics performance:

  1. Quality of trade-related infrastructure
  2. Competence of service providers
  3. Efficiency of border procedures
  4. Data on the time and cost of moving goods across borders.

 

Ranking in the International LPI 2012 Index is influenced by 6 components:

  1. Efficiency of customs clearance
  2. Timeliness of deliveries
  3. Ability to track and trace consignments
  4. Quality and competence of services
  5. Ease of arranging shipments
  6. Infrastructure quality.

 

Comparing the Mediterranean Countries with the Northern Sea’s Countries we observe that shipping time from Mediterranean to North Sea is shorter than the delay of Clearance procedure in South Europe. So for Greece is about a fourth and for Turkey is about a half of their execution time. This gap has to be covered by administration’s reforms to shorten the procedure. As for the documents, stability and effectiveness is more important than any change. The cost that is referenced is for a 20ft container (20ft x 8ft x 8ft is the TEU standard unit measure, about 6m long) and includes: all documentations, inland transport and handling, customs clearance and inspections, ports and terminal handling and official costs. Ocean transport cost for the North Sea is higher than for Greece concerning Asian origins, so a little cost reduction in Greece’s cost may redirect a vast number of containers. E.g. Piraeus-Rotterdam freightage cost $437 (€350) that raises the total cost, upgrading Greece (Invest In Greece, 2011). Bribes are not included and in Greece may at least extend the cost and at the most to lose this importer from Greece’s path.

The distance between Piraeus and Rotterdam is 3299NM. Travelling with a mean speed of 15 knots, the distance is covered in 9 days plus the detour time for the intermediate stations. Therefore, the actual problem for the Greek Logistics System is to have a competitive transport system. For example we can diminish the total of delivering days to Hungary by applying proper use of alternative inland corridors via Greece. These simple calculations reveal that Greece has structural problems that influence negatively the competitiveness. Table 9 is a comparative import-export index-procedure among competitive alternatives of other Northern Seas Countries.

 

Table 9. Comparative table of Greece and the North-Western Continent Countries (Doing Business, 2012)

 

Indicator

Greece

Netherlands

Germany

Belgium

Denmark

2011

2012

2011

2012

2011

2012

2011

2012

2011

2012

Import

Documents

6

6

5

5

5

5

5

5

3

3

Days

25

25

6

6

7

7

9

8

5

5

USD cost

1265

1265

942

975

937

937

1600

1600

744

744

Export

Documents

5

5

4

4

4

4

4

4

4

4

Days

20

20

6

6

7

7

8

8

5

5

USD cost

1153

1153

895

895

872

872

1429

1429

744

744

Rank

84

86

12

13

13

12

40

36

6

7

 

5. Key Supply Chain Stakeholders

Supply Chain stakeholders include Road Transport Carriers, Road Transport Drivers, Train Drivers, Pilots, Marines, Forwarders, Agents, Customs Clearers, Port Workers, Lift and Crane Operators etc. Their specialization is not always approved by licensing. More specifically, while for example the operation of vehicles and customs clearance is regulated others are participating in the SC in a quite unregulated manner.

Third Party Logistics (3PL) services provide a holistic basket of supply chain added value services exceeding the traditional transport related services. Forwarding and Logistics, according to CLECAT, are the services that are related with the transport, consolidation, warehousing, handling, packaging, or distribution of goods, as well as complementary and advisory services without being limited by customs and fiscal matters, declaration of goods for official purposes, insurance, collection or payment and collecting or providing documents related to the goods. Forwarding also includes Logistics services where information technology and communication is combined with the transport for handling or storing of goods and the integration of SC management (CLECAT).

Similar freight transport activities are also provided by coaches (intercity passenger buses KTEL) mixed loaded and post-courier services. The market is clearly demanding door-to-door services despite regulatory impediments.

Global terminal operators are transport shipping companies such as multinational carriers and container companies with great number of multinational contracts and high transporting capabilities. Cosco Pacific has taken-over of the wholly owned terminal operation of Pier 2 and 3 at the Port of Piraeus. Greece was selected as model case of China’s overseas investment. The concession agreement commenced on 1 October 2009 for a period of 35 years. The Piraeus Container Terminal S.A. has 6 berths, 14.0-16.0m depth and 3,700,000TEU’s as annual handling capacity. Piraeus Terminal, a wholly owned subsidiary of Cosco, returned to profitability through strong marketing and internal management in 2011. In addition, throughput the Piraeus Terminal rose to 1,188,148 TEUs (2010: 684,881 TEUs) in 2011 (73.5%), contributing revenue of US$101,420,000 (2010: US$83,303,000) in 2011 (21.75%) to the Group during the year. The Terminal recorded a profit of US$6,502,000 in 2011 (2010: loss of US$10,156,000) and returned to profitability from September 2010 (Cosco, 2012).

In all the Cosco group, the throughput of overseas terminals accounted for 13.2% of total throughput, reaching 6,709,807 TEUs (2010: 5,428,908 TEUs), an increase of 23.6%. Cosco estimates that additional annual handling capacity provided by its new operations in 2012 will reach 5,150,000 TEUs.

The new capacity will be also the result of the upgrading of Pier 2 at Piraeus Terminal to 1,000,000 TEUs. Upgrading work at Pier 2 of Piraeus Terminal started in the second quarter of 2010. Six new super post-panamax quay cranes and eight newly-acquired rail-mounted gantry cranes have been put into operation. The works will be completed in the first half of 2012 and will increase the annual handling capacity from 1,600,000 TEUs to 2,600,000 TEUs. Construction of Pier 3 started in the fourth quarter of 2011 and is expected to bring an additional 1,100,000 TEUs annual handling capacity to the terminal. Sales and marketing work have also progressed satisfactorily, with two international shipping companies increasing berthing and commencing calls during the year. Operating leverage continued to improve on the back of fast growth in business. Cosco is developing Piraeus Terminal into the key transshipment terminal in the Mediterranean region, providing efficient, reliable and stable transshipment container handling services to attract more international shipping companies. This has assisted Cosco in maintaining stable cash flows while achieving a satisfactory investment return. Cosco also invested by 50% in Terminal Related Business founding Piraeus Consolidation and Distribution Centre S.A. (Cosco, 2012).

OLP & Cosco Piers have a total capacity of 4,700,000 TEUs. For 2011 OLP has transferred 500,133 TEUs (513,319 in 2010 and 664,895 in 2009). The Car terminal serviced 328,996 cars for transshipment and 88,663 cars for inland arrivals in 2011 (246,801 and 133,545 in 2010). The economic share of each activity in the commercial port is 67.85% for containers, 28.60% for car terminal and 3.55% of other loads (OLP, 2012).

Finally, the Port of Thessaloniki (OLTH) has transferred 295,870 TEUs in 2011 (220,425 full load and 75,445 empty) instead of 209,560 TEUs in 2010 (272,282 full load and 63,722 empty). In the first quarter of 2012, 95,541 TEUs have transferred (93,046 in 2011) (OLTH, 2012).

 

6. Conclusions

The lack of an appropriate comprehensive strategy from the Greek State combined with the discrepancies between the Greek and international legislations, the delay of implementation of European Directives, bureaucracy, non-risk approach of customs control, price volatility for road tolls, and the weakness of developing transportation systems characterize the current state of freight transport in Greece. Devising a strategy for supporting 3pl services could offer significant opportunities for growth to Greece within the confines of European corridors of freight flow. To that effect, one must define a strategic direction that will monitor and record progress and will be controlled by a public entity, ministry or an independent administrative authority.

 

The proposed suggestions to enhance logistics performance are:

  • The creation of an institutional framework for the SC that defines and differentiates all supply chain actors and provides for them under one institutional umbrella.
  • The necessity of focusing on the transport system rather than the mode, were the interest is based on the load, on the speed in order to achieve the correctness of the procedures.
  • In order for the SC to be functional and reliable, is necessary to reinforce the trend of hub development of all those involved in the SC.
  • The territorial arrangement with hubs, connected with the LC, must be accompanied by accelerating the creation of the centers. The new LCs will increase the service rate of cargos and the speed of transportation by including freight forwarders into the LC.
  • Single transport document for all modes and types of transport. Effective implementation of ADR, RID Conventions and similar acceptance by the maritime community within the limits set by the IMO, but at the same time accepting the corresponding forms of other conventions.
  • The creation of training organizations for safe loading, for transport, for workers, operators, shippers and forwarders to the proper implementation of civil and criminal law. Upgrading workers from the rate of unskilled worker in register and loader, depending on the materials they handle. License for safe loading, especially for drivers and loaders. Continuous training for the workforce. Creation of special education departments for new innovative specialties required for the LC.
  • The establishment of a Greek Transport Observatory.
  • Monitoring in a National Single Window System ports and customs to regulate traffic between ports and inland, prevent delays by monitoring and detouring bottlenecks. Such a single window must observe and record free port space, price and estimated time of arrival in the final destination. The next step is to interface with a similar one concerning export products and productivity, so to create a critical mass to export and have a virtual report of cost and time of arrival. This IT innovation has the potential of contributing significantly in Greece’s GDP.
  • Development of strategic agreements for priority or slot reservations in all intermediate destinations, especially abroad, to prevent bottlenecks.

 

It is envisioned that the adoption of such interventions could contribute to the emergence of Greece as a hub of transit in the SE European region. More specifically, the service level of internal, European and international transport could attract significant Foreign Direct Investments. The portfolio of choice for transport modes will be more flexible, outsourcing will be easier for corporations, while companies would dedicate less time to bureaucratic activities and tax document preparation. This overall simplification of operations would facilitate the public sector’s policy-making strategy while enhancing simultaneously the transport system’s development.

The systemic use of intermodal logistics will result in the increase of speed of the total cargo travel procedure, the redirection of cargos, the improvement of handling and the availability of new offering for product distribution. Additionally, a single streamlined institutional framework for the national SC system would resolve the existing bureaucratic issues as it would harmonize the regulatory environment for all modes.

The identification of each SC stakeholder according to his activities will maintain the social balance in the SC and assist in avoiding the potential conflict of interest within the sector. Thus, SC will be normalized and possible distortions of the market will be tackled. Additionally, the decongestion of urban areas by the shift of plants in organized hubs or LCs will lead to significant and highly visible environmental benefits. LCs will also create demand for new employment opportunities throughout the whole logistics sector. Finally, catalytic to such improvement are port related interventions, such as organizing the supply of the shipping line agents, reevaluating pricing strategies around SE & Central Europe ports and reducing congestion-related delays.

 

 

References

Arvis, J., Mustra, M., Ojala, L., Shephred, B., Saslavsky, D., (2012), Connecting to compete: Trade Logistics in the global economy, The International Bank for Reconstruction and Development / The World Bank.

Arvis, J., Mustra, M., Ojala, L., Shephred, B., Saslavsky, D., (2010), Connecting to compete: Trade Logistics in the global economy, The International Bank for Reconstruction and Development / The World Bank.

Arvis, J., Mustra, M., Panzer, J., Ojala, L., Naula, T., (2007), Connecting to compete: Trade Logistics in the global economy, The International Bank for Reconstruction and Development / The World Bank.

Brunet, R., (2002), Lignes de force de l'éspace Européen  (in French), Mappemonde (66): 14–19, April.

CIA, (2012), The World Factbook 2011, Central Intelligence Agency, Office of Public Affairs, April 2012

CLECAT, European Association for forwarding, transport, Logistics and customs services.

Cosco, (2012), Core Competence, COSCO Pacific Limited Annual Report 2011, 11 April 2012, Hong Kong

Doing Business (2012), Doing Business in a more transparent World 2012, International Finance Corporation, The World Bank

Elstat, (2012), Hellenic Statistical Authority, Orders in Greek Export Companies, 17 June 2012

Fitzsimmons, J.A., Fitzsimmons, M.J., (2008), Service Management, Operations, Strategy, Information Technology. 6th ed. McGraw Hill Higher Education

Iakovou E., Kapros S., Siamas I., Tsamboulas D., Vamvakopoulos D., (2009), Development of Specialized Logistics Infrastructure (in Greek), Hellenic Ministry of Infrastructure, Transport and Networks, Athens, Greece

Invest in Greece, (2011), Indicative Cost of Doing Business 2011, Ministry of Development and Competitiveness, Athens, Greece

Joint Research Centre, (2012), ConTraffic by Kotsakis E., European Commission, Jan 2012

OLP, (2012), Annual Report 2011, May 2012, Piraeus, Greece

OLP, (2012), OLP MasterPlan 2012-2016, May 2012, Piraeus, Greece

OLTH (2012), Statistics 1st Quarter 2012, Thessaloniki, Greece

Siamas I., (2010), Territorial Organization of Forwarding Activities in Attica. Needs and Prospects, 1st International Conference on Supply Chains, Katerini, Greece, 2010

Siamas I., Balkamos I., (2010), Institutional Framework of Freight Transport in Greece, 1st International Conference on Supply Chains, Katerini, Greece, 2010

TRAINOSE (2012), TRAINOSE MasterPlan 2012-2015, Ziliaskopoulos A., Athanasopoulos N., Papanastasiou A., Tsagkalidis D., Siamas I., Athens

Tsamboulas, D. Kapros, S., (2003), Freight village evaluation under uncertainty with public and private financing, Transport Policy 10 (2003)141-156)

 

Legislation

European Union Legislation

COM (2001) 370 White Paper. European transport policy for 2010: time to decide.

COM (2006) 79 Communication from the Commission. Proposal for a Regulation of the European Parliament and of the Council on enhancing supply chain security (SEC (2006)251).

Council Directive 91/440/EEC of 29 July 1991 on the development of the Community's railways

Council Directive 92/106/EEC of 7 December 1992 on the establishment of common rules for certain types of combined transport of goods between Member States

 

Greek legislation (Hellenic)

Commercial Law, Royal Decree 19-4/1-5-1835

Hellenic Republic Constitution

Law 1073/1980, Replacement of three-wheeled trucks with PUTs

Law 1959/1991, Road Transport, Government Gazette 123/5.8.1991, Issue A

Law 2668/1998, Organization of Postal Services and Communication Ombudsman, Government Gadget 282/18-12-1998, Issue A

Law 383/1976, PUT freight transportation

Law 3845/2010, Measures to Implement Bailout for the Greek Economy by Eurozone State Members and the International Monetary Fund, Government Gazette 65/6-5-2010, Issue A

Law 3887/2010, Road Freight Transport, Government Gadget 174/30-9-2010, Issue A

Law 4038/2012, Austerity Measures for the Implementation of Mid-Term Fiscal Strategy Framework 2012-2015, Government Gazette 14/2.2.2012, Issue A

LD 531/1970, Replacement of carts with PUTs

MD 1594/107, Rail Operators Licensing, Government Gazette 56/25.1.2012, Issue B

MD 26697/2422, Safety Certification Procedure of Rail Operators, Government Gadget 986/22.05.2009, Issue B

PD 160/2007, Safety of EU Railways, Government Gadget 201/23.08.2007, Issue A

PD 324/1996, Harmonization with Council Directive 91/440/EOK of 29 July 1991 for the Community Railway Development, Government Gazette 220/9.9.1996, Issue A.

PD 41/2005, Development of EU Railways, Government Gazette 60/7.3.2005, Issue A.

 

 

 

 

 
 
 
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