CFR Marfă’s privatisation brought back into discussion the situation of state-owned terminals and the free access to their services and facilities. 27 in number, CFR Marfă’s terminals exist mainly on paper, most of them being deserted and requiring urgent modernisation. The representatives of private employers’ associations who attended the first session of the public debate regarding CFR Marfă’s privatisation demanded to know more about the fate of the 27 terminals and also about the impact that the privatisation will have on the logistics market. There are, however, other companies that chose not to wait around for miracles and began to develop their own projects which involve the use of some of the intermodal terminals. A similar project, which turned out to be a success and a positive example for other logistics operators who activate on the Romania market, came from British group Delamode, who launched a railway service that uses a private terminal, built in the ’70s. How did Delamode Logistics Romania manage to become the first and currently the only private rail container terminal operator and attract the most exigent customers on the logistics market, retailers? Railway Pro managed to get an exclusive interview in the attempt to find out what is the company’s recipe for success.
Railway Pro: What changes do you expect CFR Marfă’s privatisation to bring on the market?
David Goldsborough: The new owner should cultivate the competitive spirit which inspires other markets in Western Europe and in other parts of the world as well and also make sure that all the players benefit from equal treatment. Many foreign companies that took over Romanian state-owned companies chose the people in the management board from within the company and with the same old-fashioned mentality. If that should be the case with CFR Marfă, then I don’t see an immediate change. In the private sector, if you are not competitive, you disappear; in the public sector you can always find solutions to survive, even if the initial problem persists; for instance, you replace the management board and this way you have a different perception; so, if we could inject a competitive spirit and the commercial exigency from the private market, then we could see some results.
The recession has a plus side: Retailers opt for railway transport
A huge threat is the economic recession which, despite the optimistic statements of the Romanian government continues to affect the strategies developed by most companies, both private and state-owned. How does the future of Delamode’s intermodal service look like? The answer to this question was given to us by George Petre, Head of Multimodal Operations at Delamode.
George Petre: “As the recession deepened, our customers began to pay more attention to the money they invested and they tried to reduce their operational costs, retailers especially, seeing as in their case any extra cost increases directly the cost of their shelf products; that is why they demanded lower prices. By opting for railway transport, which is cheaper than road transport, we not only succeeded in meeting their requirements, but we also attracted new customers, especially retailers. We can safely say that sometimes, the recession has a plus side, in the sense that it forces companies to find the best solutions, at competitive prices.”
When it comes to retailers, Sir Tony Berkley, President of the European Rail Freight Association (ERFA), said that they are mostly to blame for the current gap between the various modes of transport and that bringing large retailers towards the railway will balance the situation between road and rail in Europe. The reason why retailers chose road transport in the first place was because of this dire need to maintain or reduce the prices of shelf products, without considering the consequences. Sir Tony Berkley accuses retailers of being too much anchored in the present and that their strategies are influenced by the current price of fuel and by the tax level, without talking into consideration the fact that favouring railway transport will have a positive effect on the long-term by eliminating pollution from road transport and by gradually balancing the level of costs of various modes of transport.
Including railway transport in Delamode’s logistics offer has changed the strategy of the group, whose future plans focus on intermodal services that incorporate rail transport.
Railway Pro: Can we safely say that the economic recession has ended for the European freight logistics market and how will this affect your activities in Eastern Europe?
David Goldsborough: There are signals in the West that the market is recovering. However, there is a 9 to 12 months gap between what happens in the West and the time it reaches the East, but the orientation towards the East will continue, despite the on-going crisis. There are no major opportunities in the West. In Romania, we launched the container transport service in 2007-2008, where the crisis continued to make its presence felt. Therefore, we can say that we operated these services throughout the economic recession and we had good results. In recent years, the number of employees has doubled, reaching 700, and this was mainly due to the success we recorded. You could say that the recession forced us to be more competitive and to adapt to the existing market conditions. Our future plans focus on intermodal offers as well. We are currently negotiating with a retailer who activates on the Romanian and Bulgarian markets for the development of a container transport service. We are considering the possibility of integrating the current offer with other railway services that include cross-border transport. Again, the biggest problem in this case is represented by the terminals, seeing as Bulgaria is no different from Romania when it comes to this particular issue.
Local decision will weigh more in the future than the headquarter strategy
Railway Pro: “Gradually, large European logistics operators are becoming aware of the potential brought by rail transport in Romania and they are making the first steps towards developing services that include rail transport and the Romanian market. As a predecessor, how do you see the evolution of the Romanian market from this point of view and how do you plan to face rivals like DB Schenker, Gebruder Weiss etc.?
David Goldsborough: Small and medium-sized logistics group such as Delamode Logistics were able to face the recession due to a flexibility which allowed them to adapt their prices to the offer and to maintain or even attract new customers. Adopting an offer based on the customers’ demand allowed us to create a powerful clientele. I believe that these large companies, in the attempt to recover their losses, will enter the Eastern markets with rather high prices and they will have trouble in facing the competition. Maybe that is why the companies that you mentioned before chose to take over Romanian companies that had already consolidated their position and which had already created their own clientele instead of developing their own network, based on their own patterns. Also, in the case of large logistics operators, the operational management is, in most cases, done at the headquarters, in Germany, Austria, Switzerland etc., following a well-established pattern. But the reality is totally different. In all our projects we chose to find out the situation on site and not listen to what people had to say; otherwise, we wouldn’t be where we are now. This will act as an advantage or a disadvantage for the new players on the market. The local decision will weigh more than the strategies developed at headquarters… we are going towards a regionalization in terms of strategic decisions and this is a good thing, because the reality is very different from what is seen at headquarters. That is why I insist on the relevance of human resources and the mentality of decision-makers.
The intermodal container transport service was launched following the contract signed with retail group Metro (formerly managed by DB Schenker). So we are not afraid of the competition. A market that has powerful players benefits all those who activate on the Romanian market.
Railway Pro: Does the Eastern market provide long-term development opportunities? In your opinion, how will the logistics flow map look like in 10 years’ time?
David Goldsborough: If we continue to invest in the infrastructure, I would have to say yes. At the same time, adopting a proper mentality for a long-term development planning is essential. The trend is to move towards the east. There is no doubt that Russia will be targeted by investors – unless this is already happening – because the market has a great potential. Romania, based on its geographical position, may very well become the gateway to markets from the former CIS. It all depends on how we use this potential and on adopting fast solutions, based on what is at your disposal, and not wait around for miracles. The answer can come just like that, like it happened in our case and it made us look for answers in places where everyone said it was impossible.
Interview by Alin Lupulescu
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