ChemLogSWOTAnalysis

Strengths,Weaknesses,OpportunitiesandThreats ofChemicalLogisticsinCentralandEasternEurope

www.chemlog.info

Imprint ChemLogSWOTAnalysis Strengths,Weaknesses,OpportunitiesandThreatsofChemicalLogisticsinCentralandEasternEurope Authors: AssociationoftheChemicalIndustryCzechRepublic AssociationofChemicalandPharmaceuticalIndustryofSlovakRepublic FHOResearchandDevelopmentGmbH/LogistikumCompetenceCentre iswInstituteforStructuralPolicyandEconomicDevelopment MinistryforEconomyandLabourofSaxonyAnhalt MinistryforRegionalDevelopmentandTransportSaxonyAnhalt PolishChamberofChemicalIndustry ProvinceNovara RegionalDevelopmentHolding,Budapest UstiRegion Ithastobeadvertedthatthoughelaboratenessneithertheauthorsnortheeditortakeresponsibilityforthe correctnessoftheunderlyingdataandstatementsinthestudy. ThisprojectisimplementedthroughtheCENTRALEUROPEProgrammecofinancedbytheERDF www.central2013.eu Any liability for the content of this publication lies with the authors. The European Commission is not responsibleforanyusethatmaybemadeoftheinformationcontainedherein. Editor: FHOForschungs&EntwicklungsGmbH Logistikum/CompetenceCenterforLogisticsandEnterpriseNetworks,2008 Wehrgrabengasse13,A4400Steyr www.logistikum.at Steyr2009

Tableofcontent

1 ProjectChemLogChemicalLogisticCooperationinCentralandEasternEurope.....................4 1.1 1.2 1.3 1.4 1.5 2 Prefaceandacknowledgments..............................................................................................4 ProjectIdea............................................................................................................................5 ProjectPartners.....................................................................................................................5 ProjectObjectives..................................................................................................................6 ProjectActivities....................................................................................................................7

SWOTAnalysisStrengths,weaknesses,opportunitiesandthreats...........................................8 2.1 2.2 2.3 2.4 StructureofSWOTAnalysis...................................................................................................8 TargetgroupofSWOTAnalysis...........................................................................................10 MethodologicalapproachofSWOTAnalysis.......................................................................10 StructureofSWOTAnalysis.................................................................................................12

StrengthsandWeaknessesoftheChemicalIndustry andChemicalLogisticsinCEE......................................................................................................13 3.1 3.2 3.3 3.4 3.5 3.6 3.7 Strengthsandweaknessesinprocurement.........................................................................13 Strengthsandweaknessesinwarehousingofrawmaterials, semifinishedandfinishedproducts....................................................................................14 Strengthsandweaknessesinproductionlogistics..............................................................15 Strengthsandweaknessesindistributionandtransport....................................................15 Strengthsandweaknessesinplanningandcontrolling.......................................................16 Strengthsandweaknessesinorderprocessing...................................................................17 Strengthsandweaknessesininformationlogistics............................................................17

OpportunitiesandThreatsoftheChemicalIndustryand ChemicalLogisticsinCEE.............................................................................................................18 4.1 4.2 4.3 4.4 4.5 4.6 4.7 Economictrends..................................................................................................................18 Socioculturaltrends.............................................................................................................20 Technologicaltrends............................................................................................................21 EnvironmentandEnergy......................................................................................................22 Politicsandinnovation.........................................................................................................23 Transportinfrastructure......................................................................................................24 SafetyandSecurity..............................................................................................................29

NeedforfutureactionsandimprovementsConclusion...........................................................30 5.1 5.3 5.4 Needforfutureactionsandimprovementsintermsofpoliticsfor transportationandinfrastructure .......................................................................................30 . NeedforfutureactionsandimprovementsforchemicallogisticsinCEE........................35 Needforfutureactionsandimprovementsfromtheecologicalpointofview..............37

OutlooktoMainstreamingandImplementationofProjectResults...........................................38 Literature.....................................................................................................................................40

rojectChemLogChemicalLogisticCooperationinCentral P andEasternEurope
Prefaceandacknowledgments
further development of technologies for the transfer of goods between different transport media. Insufficient priority is given to freight traffic compared to passenger traffic. Finally, thereisnocollectiveapproachtoshareandfind logistic solutions in the relevant regions and countries. The target group of the project consists of chemicalenterprises,logisticproviders,national and regional politicians, national and regional ministries for transport and economic affairs, Regional Development Agencies, Chambers of CommerceandResearchInstitutions.Thereare about 2500 Chemical enterprises and 200 enterprises in the area of logistic providers specialised in chemicals in the partner regions. Furthermore, there are about 50 Chambers of Commerce and 50 Research Institutes. The chemical enterprises and logistic providers are interested in improving framework conditions to transport their products and feedstock in Central Europe in relation to reduced costs, increasedspeed,betterreliabilityandflexibility as well as higher safety. The logistic providers are interested in improved logistics and transport of chemical goods. The national and regional administration and chamber of commercewanttoimprovechemicallogisticsto strengthencompetitivenessoftheeconomy. Transnational cooperation is vital for the achievementoftheexpectedresultsduetothe complexity and transnational dimension of chemical logistics in Central Europe. The Chemical Industry itself is one of the most globalized industrial branches in Europe, 50 to 60%ofitsproductsareexported.Furthermore, the largest parts of the feedstocks are transportedtotheproductionlocations,mostly fromRussia.ThereforetheChemicalIndustryis

1.1

TheChemicalIndustryinCEEismostlybasedon Russian raw materials. The use of roads and railways together with the development of pipeline systems for the connection of raw material locations and production locations all play an important role in this context. As a result of historic decisions the important chemicallocationsinPoland,theCzechRepublic, Slovakia, Austria, Hungary, Novara and East Germany are due to historic decisions taken inland about locations with no direct access to sea harbours. Therefore, these locations have competitivedisadvantages,especiallyinrelation to the higher costs compared to chemical locationsinWesternEuropethathaveexcellent access to sea harbours and connected waterways. The existing cost disadvantages resulting from the traditional location and missingWestEastconnectionsareanimportant development barrier for the Chemical Industry in CEE. These competitive disadvantages are furtherenhancedbythedisproportionateuseof road transport and the resulting lower use of lowcostrailways. In many regions, especially in Eastern Europe, road traffic has reached its capacity limits. Further deficits are a barrier to the development of the chemical clusters: Capacities and the expansion of transport infrastructure are not sufficiently oriented towardstheneeds. There is a lack of harmonisation of technical, administrativeandsocialregulationsandlawsin Europe. Furthermore insufficient European coordination of transport related decisions on the part of the countries concerned remains a problem. There are shortcomings in the organisation of transport, especially in the conception of intermodal terminals and the

responsible for a large share of transnational freighttransportinCentralEurope. The project aims to work on the different dimensions of logistics e.g. rail, waterway, intermodal transport, pipelines and harmonisation of regulations. The biggest barriers in these areas result from different framework conditions, policies and regulations inthepartnercountries.Thelackofcooperation at transnational level in the area of transnational logistics is the main reason for many deficits in the area. The project specifically wants to improve this situation. MoreoverthedivisionofEuropeduringtheCold War has not enabled the development of functioning transport networks similar to those that have emerged in Western Europe in the pastdecades.Thereforetheenlargementofthe

European Union is still a specific challenge for chemicallogistics. In order to develop solutions to the above mentioned problems it is necessary to bring together the relevant stakeholders from the partner countries in order to initiate a transnationalcooperationprocess.Thisprocess will allow the transnational transfer of experience and mutual learning. Furthermore Feasibility Studies for specific transnational logistic projects will be developed under participation from partners of different countries. Finally the development of the joint strategy and action plan is an undertaking that can only be agreed by partners from the relevant countries in order to agree on future prioritiesforinfrastructureplanning.

1.2 ProjectIdea
workshop was organised on 20.02.08 in Magdeburg with participants from Germany, Poland, the Czech Republic and the European Commission, which have agreed on the main objectives and activities of the projects and a successful project application as been developed. The project is financed by the INTERREG IVB Central Europe Programme and was approved on 25.09.2008. The project duration is 3 years from November 2008 to October2011withanoverallbudgetof2.2Mio. Euro,whereas1.7Mio.Euroarefinancedbythe EuropeanRegionalDevelopmentFund(ERDF).

The project idea has been developed by the partnersduringthediscussionoftheHighLevel Group for the Competitiveness of the Chemical Industry in Europe, which united highlevel representativesfromtheEuropeanCommission, Member States and Industry. The European Chemical Regions Network, which represents thejointinterestof19chemicalregionsfrom9 countries participate in the High Level Group andhasproposedamoreintensivecooperation in the area of logistics in CEE, which has found widesupportbytheHighLevelGroupMembers. In order to further develop the project idea a

1.3

ProjectPartners
This composition of partnership allows an efficient division of work and ensures a good implementation of project activities. The public regional and local authorities have the responsibility for infrastructure planning, they provide sound framework conditions and offer substantial funding resources in the area. They are especially working in view of joint strategy developmentandactionplanning.

The partnership consists of different entities, whichfulfilspecificfunctions: Regional and Local authorities, such as ministries for economic affairs or transport, municipalities or regional developmentagencies, ResearchandClusterorganisations, InterestedGroupsandAssociations

LeadPartner:MinistryforEconomyand LabourofSaxonyAnhalt(DE) Ministry for Regional Development and TransportSaxonyAnhalt(DE) isw Institute for Structural Policy and EconomicDevelopment(DE), PolishChamberofChemicalIndustry(PL) Association of the Chemical Industry CzechRepublic,(CZ) Association of Chemical and Pharmaceutical Industry of Slovak Republic(SK) UstiRegion(CZ), ProvinceNovara(IT), FH O Research and Development GmbH/LogistikumCompetenceCentre, Steyr(AT), Regional Development Holding, Budapest(HU) The research and cluster organisations fulfil a mediator function between the political and industrial environment. They are specifically focussing their efforts in the analysis and exchange of experience. The identification and transfer of bestpractice will be mainly supported by these entities. Furthermore they actively contribute to the mainstreaming and evaluationoftheproject. The interest organisations have the direct contact to the enterprises, one of the most importanttargetgroupsoftheproject.Theywill ensure the integration of the needs and interests of the enterprises in the project activitiesanddisseminatetheresultstoabroad rangeofrelevantstakeholders.Furthermorethe development of the feasibility studies is an importantactivityforthem.

Altogether the partners are committed to establishinganintensivecooperationtoimprove the situation for chemical logistics and provide concrete examples and recommendations for actions in the future. The combination of the specific strengths and joint interests of the partnerswillensureasuccessfuloutcomeofthe project. The relevant stakeholders and key actors are chemical enterprises and logistic providers and chambers of commerce from industry side, the national and regional ministries and development agencies from political side and research institutions from academia. The industry stakeholders will be involved in the project in the framework of the regional stakeholder meetings. Furthermore project partners such as the Chemical Industry Association will ensure involvement from industry. The political level will also be actively involvedintheprojectactivities,byparticipation in meetings or development of the action plan. Especially the advisory group meeting will be used to involve the political level (national and EU)inthemainstreamingofresults.Theanalysis and exchange of experience activities will be implementedundertheinvolvementofrelevant research institutions. The different types of project partners will use their existing links to therelevantstakeholdersfortheproject. Transnational cooperation is vital for the achievementoftheexpectedresultsduetothe complexity and transnational dimension of the chemical logistics in Central Europe, as the biggest barriers in these areas result from different framework conditions, policies and regulationsinthepartnercountries.

1.4

ProjectObjectives
Network as a platform for the joint discussion and cooperation for chemistry relatedtransportissues,

The project ChemLog has the following general objectives: 1. to strengthen territorial cohesion in Central Europe by developing a Central and Eastern European Chemical Logistics

2. to promote the internal integration by improving chemical logistics in Central Europeand 3. to strengthen the competitiveness of the chemical clusterinbetter connectingraw material and production locations and betteraccessingthegrowthmarketsinCE Europe. Thespecificobjectivesare: 1. Strengthening rail and waterway transport for chemical goods in comparison to road in order to improve safety and environmental protection, to reduce costs and increase speed and flexibilityofchemicallogistics. 2. Support the development of logistic centresforintermodaltransportandtheir integrationininfrastructureplanning. 3. Facilitate the connection of pipelines for aneffectiveCentralandEasternEuropean ChemicalLogisticsNetwork. 4. Initiate transnational knowhow and technology transfer for the development of transport and guidance systems focusedintheWestEastdirection. 5. Supporting the realisation of Trans EuropeanTrafficroutsandharmonisation of regulations and coordinated planning ofinfrastructureandtheuseofStructural Funds. The project will strengthen the territorial cohesion in Central Europe by developing a CentralandEasternEuropeanChemicalLogistics

Network, which will improve the framework conditions for economic growth and regional development.Amodernandsafeinfrastructure is also the precondition for new investments, creation of employment and increased productivity.Especiallyinregionslaggingbehind and in the new member states improved infrastructurewillgiveimpulsesforgrowthand convergence and improve life quality. The project will promote the internal integration in Central Europe by improving chemical logistics. The countries of Central Europe are especially disadvantaged due to existing barriers and missing connections alongside the former border between Eastern and Western Europe. The project will especially work on the further development of the Transeuropean Transport Networks with specific focus on the transnational projects in the partner countries. Theprojectwillstrengthenthecompetitiveness of the Chemical Industry in Central Europe, whichisamajoreconomicindustrywithstrong impact on innovation and employment in the partner countries. Furthermore the Chemical Industry has a strong influence on many other industries alongside the valuechain. A better connectionbetweenthechemicallocationsisa preconditionforthesustainabledevelopmentof the industry in the longrun, especially taking into account the increased competition from Asia and the Far East. The knowhow and technology transfer will help to increase the innovationcapacityofthepartnerregionsinthe areaofchemicallogistics.Thereforetheproject willactivelycontributetotheLisbonAgenda.

1.5

ProjectActivities
transnational relevance. The final package will focus on the strategy development and the mainstreaming of the project result. The major activities such as the establishment of the CentralandEasternEuropeanChemicalLogistics NetworkandtheJointStrategyandActionPlan will be implemented in the last year of the operation.

Besides Management in work package 1, Dissemination activities will be implemented in work package 2. Work package 3 will focus in the first year on the analysis of the current situation and identification of needs and best practice. Work package 4 will work on the preparation of investment, by implementing 4 feasibility studies of infrastructure project with

SWOTAnalysisStrengths,weaknesses,opportunitiesand threats
strengths, weaknesses, opportunities and threatsandtoidentifyneedsforfurtheractions as a basis for the implementation of four feasibility studies in work package 4. These will bedonebyauniformmethodusedbyallproject partners according to the SWOT concept. The nextstepistoidentifyandanalysedeeplybest practice solutions for exchange of experience andtoprovidetheresultsfortheworkpackage Investment Preparation. All partners will contributetotheseactivities.

The SWOT Analysis is together with the Best PracticeStudy,whichwillbefinalizedwithinthe next project steps the major output of work package 3 Analysis and Exchange of Experienceandthemaininputfortheupcoming work packages such as Investment Preparation andStrategyDevelopment. The main objectives of work package 3 are to analyse the current situation of the Chemical Industryandrespectivelyofchemicallogisticsin the partner regions as well as to identify

SWOTAnalysis AnalysethecurrentsituationofChemical Industryineachpartnerregion Identifystrengths,weaknesses, opportunitiesandthreatsofchemical logisticsinthepartnerregionsasbasisfor exchangeofexperience Developadescriptionofchemicallogistics tohaveacommonunderstandingofcurrent situation Identifyregionalneedsandfuturepotential areasforcooperationandimplementation offeasibilitystudies BestPracticeStudy Deeperanalysisofbestpracticesolutionsin theareaofchemicallogistics Discussionofpotentialforthetransferof experienceasbasisformutuallearning Showopportunitiesforfurthercooperation

Table1:SWOTAnalysisandBestPracticeStudy

2.1

StructureofSWOTAnalysis
company itself. Opportunities and threats are external, supporting or hindering factors or trends, whereas the company is not able to influencethemdirectly.

The SWOT Analysis is a holistic concept to analyse a topic regarding its strengths, weaknesses, opportunities and threats. Strengthsandweaknessesareunderstoodasso called internal, supporting or hindering factor, which can be directly influenced by the

Internal,supportingorhinderingfactors forvaluecreation=influenceable

Positive Factors

Strengths

Opportunities

Weaknesses

Threats

Negative Factors

External,supportingorhinderingfactors forvaluecreation =NOTinfluenceable

Figure1:ApproachofSWOTAnalysis

For the purpose of the project the SWOT conceptwasimplementedinpracticeasfollows: In order to generate the information about strengths and weaknesses of chemical companies in general and in terms of chemical logistics in CEE, individual expert interviews were organized. To gain facts about global trends, external opportunities and risks the projects partners used Regional Stakeholder Meetings as Expert Workshops. Furthermore experts were asked about improvements and measures and about the identification of best practice cases. The idea behind the separation ofindividualinterviewsandworkshopswasthat generally internal and companyspecific strengths and weaknesses could be better discussed within single interviews, whereas globaltrends,opportunitiesandthreatsarenot companyspecific and can be discussed in a biggergroup. In fact each partner region carried out a SWOT analysis.Auniformtemplateandstructurewas provided by the Logistikum in order to guaranteecomparability: 1. Introductiontoregion/country 2. Description of domestic Chemical Industry 3. Descriptionoftransportinfrastructure a. Intermodal b. Pipeline c. Road d. Railway e. Inlandwaterway 4. Internal strengths and weakness of the Chemical Industry from the logistic pointofviewinCEE 5. External opportunities and threats of the Chemical Industry from the logistic pointofviewinCEE

2.2

TargetgroupofSWOTAnalysis
and micro economic experts and stakeholders withrelevancefortheChemicalIndustry: ServiceSector(withrelevanceforCI) Logisticserviceproviders Industryassociations Politicaldecisionmakersinthefieldof Economy Politicsandinnovation Transportation Technology Environmentandenergy

The target group of SWOT Analysis consists of the Chemical Industry itself but also of macro ChemicalIndustry Manufactureofbasicchemicals Manufactureofpesticidesandotheragro chemicalproducts Manufactureofpharmaceuticals,medicinal chemicalsandbotanicalproducts Manufactureofsoapanddetergents, cleaningandpolishingpreparations, perfumesandcosmeticandhygiene products Manufactureofotherchemicalproducts Manufactureofmanmadefibres Manufactureofrubberproducts Manufactureofplasticproducts

Table2:TargetgroupofSWOTanalysis

2.3

MethodologicalapproachofSWOTAnalysis
atemplateordesignforexpertworkshops and atemplatefortheSWOTanalysisitself wereprovidedtotheprojectpartners. StrengthsandWeaknesses Procurement Warehousingofrawmaterials,semifinished andfinishedproducts Productionlogistics Distributionandtransport Planningandcontrolling OrderProcessing Informationlogistics

In order to guarantee an efficient and standardized return of facts, figures and information aguidelineforsingleinterviews OpportunitiesandThreats Economictrends Socioculturaltrends Technologicaltrends Environmentandenergy Politicsandinnovation Transportinfrastructure Railway,Waterway,Road,Intermodal, Pipeline SafetyandSecurity Industrysectorandcompetition Suppliers Customers Accesstothemarket/marketentry Substitutes

Table3:Methodologicalapproach

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ExpertWorkshops ItwasrecommendedeithertousetheRegional Stakeholder Meetings or individual organised expert workshops in order to gain information about global trends, opportunities and risks of the Chemical Industry and chemical logistics. It was proposed that several group discussions with a maximum of 10 experts per workshop should be arranged. Theses workshops were held between April and March 2009 in all partnerregions.Theprojectpartnersreceiveda workshopdesigninadvancewithapreselection ofspheresofinfluenceandtheirfactorsonthe discussed topic to ensure a productive and effective discussion. For opportunities and threats 8 spheres of influence (view table 3) with 74 factors were predefined to provide a

guideline for group discussion. For each factor theexpertshadtoevaluatewhetheritposesan opportunity or threat, further, to scale the degreeofinfluencefrom 3to+3.Additionally, the content of the discussions were documented.

SingleExpertInterviews Strengths and weaknesses due to concealment reasons were mainly held as single expert interviews. For that purpose an interview guideline (see attachment) which at the same time can be used as a questionnaire was provided for the project partners to organise either interviews or a postal questioning.

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2.4

StructureofSWOTAnalysis
SWOTAnalysis, there are only the pillars and the roof of the below house described. Regarding the information including region and countryrespectively,thechemicalindustryitself, transport infrastructure and the chemical logistics, these topics are mentioned in the individual SWOTAnalysis of each project partner, which can be downloaded at the ChemLoghomepage.1 Literature NeedsforfutureactionsandimprovementsConclusions External External Threats, opportunities Internal Internal Problemsand forchemical Weaknesses Strengths Barriersfor logisticsin ofChemical ofChemical chemical Centraland Companies Companies logisticsin andLogistic andLogistic Eastern Centraland Providers Providers Europe Eastern Europe Descriptionofchemicallogisticsintheregion/country Descriptionoftransportinfrastructure DescriptionofChemicalIndustry IntroductiontoRegion/Country
Figure2:StructureofSWOTAnalysis

The structure of the SWOT Analysis, issued by eachpartnerregionsisbasedonastandardized model. After giving a brief overview of the partnerregion,thedomesticChemicalIndustry, logisticsandthetransportationinfrastructureis described in detail. In particular the regional SWOTAnalysisincludestheresultsoftheexpert interviewsandworkshopsaswellasneedsand measuresforfutureactionsandimprovements. However, in this consolidated version of the

Downloadat: http://www.chemlog.info/impressum.html

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StrengthsandWeaknesses oftheChemicalIndustry andChemicalLogisticsinCEE

Which strengths and weaknesses can be influenced internally by the company regardingchemicallogisticsinCEE?

3.1

Strengthsandweaknessesinprocurement
handling of goods especially in terms of unloading of goods posing major safety and security risks. The supplies of natural gas and crude petroleum are dependent on Russian federation and transit via Ukraine. Big companies transport supplies by pipeline and railway. Small commodities are usually transported by road. The import of supplies by rail from the Ukraine and the Russian Federation is influenced by broadgauge track withanecessityofreloadingorboogieshifting. Thegeneralprocurementpolicyistoguarantee at least two suppliers for products with critical availability. For nontimecritical products (in particular basic chemicals) under the condition that warehousing capacities are sufficient the procurement is dependent on price and lead time. Sources of supply in those cases can be countries in Eastern Europe or South/EastAsia. Collaborativedemandplanning For this factor it is essential to distinguish whether companies are part of a corporate groupornot.Eithertheprocurementstrategyis agreed nationally or internationally with headquarters or in best cases companies use collaborative demand planning with their supplier. Opinionformers consider

Procurementleadtimeforrawmaterialand intermediates Regardingtheprocurementofrawmaterialsthe suppliers are generally located globally. Chemical sites in CEE have to face a disadvantageous situation as important materials and products are supplied from overseas markets. Numerous chemical companies rely on justintime delivery of raw materials as especially within the commodity sector high volumes of raw materials are supplied, and companies try to avoid huge inventory. Therearevariousbutunreliableraw material producers in Eastern Europe. Due to obsolete sites and technologies justintime delivery of raw materials is not possible under those circumstances. In order to prevent deviations of stored raw materials, prices are often agreed monthly instead of quarterly. Transportishandledonthebasisofcontractsor onspotmarketsforthemodeswaterway,road andrailway. Thesuppliersavailability,reliabilityand flexibility Expertsclaimthatthedeliverytimeofsuppliers from emerging markets is rather unpredictable becausethequalityofproductsandpackagingis often not sufficient. This leads to problematic

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collaboration as a necessary factor during the planningperiod. Supplierassessmentandmanagement The evaluation of suppliers in order to benchmarkthembythemeansofstandardized keyperformanceindicatorswasqualifiedasone of the strengths. Suppliers assessment with regular revisions especially for critical products is extremely important from the companies point of view and a set part of supplier management. Communicationtosuppliers Communication channels operate well. The ways and directions of the communication

channels are clearly defined. The companies of the chemical sector consider it as one of the ir strengths. Qualityofproductandpackaging The products are wellpacked and precisely labelled, they can be clearly identified. Thereforethiscategorywasevaluatedasoneof theirstrengths. Termsofpaymentanddelivery Payments prove to be settled according to the required proceedings. The delivery takes place subsequentlytotheeventofordering.Payment deadlines are kept. This category was qualified asstrength.

3.2

Strengthsandweaknessesinwarehousingofrawmaterials,semi finishedandfinishedproducts
suppliers. Consignment stores for raw and packaging material increase the flexibility and reduce costs for the producing company. The supplier can develop a more intensive connectionwiththeproducingcompany.Inthis respect the selection of qualified and reliable enterprises (e.g. SQAS certification) is very important Nevertheless companies claim a lack of specialized logistic service providers having the required experience for warehousing and handling of chemical goods. Warehouse infrastructures are adequate, as far as capacity andsafetyareconcerned.Nowadays,thereare strong tendencies to minimize warehouse stocks and utilize the raw materials and intermediatesforproductionbyajustintime approach. Many chemical enterprises developed innovativesolutionsforstockmanagementand control in order to contribute to optimizing logisticprocesses.

Itistheexpertsopinion,that theshareofraw materials in production costs is rather high. Furthermore raw materials are often stored over long periods, due to long delivery times and unreliable suppliers. Within the Chemical Industry products and materials are produced onstock(madetostock)oronthebasisofsales forecasts.Onlyfewcompanieschoosemaketo order strategies. Experts from chemical companiesclaimlimitedinventorycapacitiesfor raw materials, semifinished and finished products. Furthermore productspecific characteristics and requirements limit the inventorytime.InEasternEurope,warehousing facilities are available although in most cases adjustments are necessary, own investments have to be placed and the qualification of staff hastobeimproved. Nevertheless companies try to hold an optimal inventory and safetystock level, this means they try to maintain the balance between the risk of running out of stock and high inventory costs. Sufficientexperiencewithfunctionalwarehouse outsourcing is missing as the majority of companies have their own warehousing facilities or have consignment stocks with their

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3.3

Strengthsandweaknessesinproductionlogistics
inthreeshiftmodelsandinsomecasesalsoon weekends. The utilization of machines and production lines is good owing to highly automated processes. Basic chemicals have to face longer durations for production changes (setupsandcleaningofreactors).Nevertheless someexpertsseehighpotentialinthereduction ofdamagewithintheproductionprocessesand in decreasing the time for production change over. Production planning is supported by IT Tools and major objectives are to maximize delivery reliability and productivity. Furthermore companies try to minimize setup andcleaningtimes.Flexibilityintheproduction processoftencausedbyshorttermchangesin customer demand is limited within the ChemicalIndustry.

The Chemical Industry in CEE has a good competitive position due to its strong integration, optimised and stable structures of theproductionprocesses.Highinvestmentsand a largescale restructuring process in the framework of the privatisation after the reunificationhavecreatedthebasisforahighly modernandcompetitiveChemicalIndustry.This is especially true within Central Europe, which hasgrownaboveaverageinthepastyears.The establishment and the further development of clusters and networks alongside the value added chain are additional location advantages fortheChemicalIndustry Chemical companies report stable production processes with extremely low scrap rates. In general duration, production processes for finished products last about 2 days. In most of thechemicalcompaniesproductionisorganised

3.4

Strengthsandweaknessesindistributionandtransport
betweenrailsystemsinWestandEastEurope, bureaucratic barriers, lack of quality of equipment and inflexibility as well as an inadequate terminal structure for intermodal transport hinder companies from shifting volume to railway. Experts think railway transportation is challenged by limited availabilityofwagons,whicharesometimesina poorconditionandbadlycleaned.Furthermore some equipment or wagons (e.g. NH3wagons) isunsafeinhandling. Some chemical locations established public terminals for intermodal transport either directly on site or within their vicinity. These terminals are specialised in the handling of chemical goods and play a central role in the improvementofchemicallogistics. In some Eastern European countries road transportation is influenced by low quality and inefficiencyoftheroadinfrastructureaswellas by nonharmonized countryspecific administrativeandsocialregulations(e.g.digital

Highly different productspecifics generate special requirements for distribution. Even within sectors of the Chemical Industry (e.g. commodities), customer demands vary regarding costs and quality of distribution logistics (e.g. fertilizer: high cost pressure, acceptable quality, small time slots for delivery or melamine: high quality demands, exact meeting of delivery dates or urea: high quality demand, not as timecritical as melamine). Chemical companies try to shift volume from road to railway; in particular commodities are suitedforrailwaytransportation(bulkloads). Multimodal transport is difficult due to insufficient transloading facilities and railway connections. Transhipment of cargo demands special equipment, but efficiency depends on volumes and on regularity. This can only be achieved by generating synergies and cooperation with partners. Therefore the last mileandthelowutilizationstillremainasmajor problems. Additionally, interoperability

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tachometer). Many companies remark that the customer defines the mode of transport according to their requirements in terms of flexibility. Safety and Security when loading goods at chemical sites in Eastern Europe is challengingforcompaniesassometimestaffdo not wear personal safety equipment and cargo safetymeasuresaremissing. Transportationandfreightmanagementisoften outsourced. Transport to CEE countries is usually are organised via international freight carriers,whereastransportwithinCEEcountries is often carried out by local carriers. The main problem is the lack of utilities for cargo safety and insufficient use of personal protective equipment when transloading cargo in CEE countries. In general, the equipment and the conditionofthefreightvehiclesareinadequate. Coordination and communication with logistic serviceprovidersinCEEcountriesissometimes difficult due to language barriers and the missing harmonization of social standards (e.g. driving hours). In addition, experts partly claim the nonavailability of people with excellent logistic background in terms of collaboration withlogisticserviceprovidersinCEE.Ingeneral

experts see high potential in the development and improvement of the road infrastructure especiallyinthoseCEEcountrieswhichrecently joinedtheEuropeanUnion. Inlandwaterwayisthemostimportantmodeof transportation in terms of high quantities and bulk cargo especially for commodities. The availability and effectiveness of the Danube waterway is hardly predictable due to external influences like flood, low water and icing. Therefore this mode of transportation is not suitable for time critical cargo. Furthermore, modern unloading facilities within ports in CEE countriesaremissing(e.g.roofedterminals).In terms of hazardous goods, special transports are necessary although appropriate vessels are not always available. Low outbound volumes signify low utilization, which makes the inland waterwaylesscompetitive. Selected chemical companies have developed extensive pipeline networks in order to ensure cost effective and safe transport of raw and intermediate materials. Pipelines are also an activecontributiontoenvironmentalprotection through avoidance of transport on road and railway.

3.5

Strengthsandweaknessesinplanningandcontrolling
demand planning: the more detailed and reliable, the better the planning of inventory levels.Theaccuracyandflexibilityinproduction and delivery planning is welldeveloped, these are documented strengths. Close cooperation between chemical enterprises and logistic service providers has lead to a clear improvement of performance of the chemical logistics by active support of the processes. Therearealotofbestpracticesolutionsinthis area. The chemical logistics is in a constant processofoptimisation.

It is the experts view that accuracy and reliability in demand and supply planning or forecasting with customers is rarely realizable. Eventhereliabilityofdatadependsbothonthe suppliers and the customers. The enterprises have problems with an insufficient reliability of sales forecasts, which form the basis for production planning. The sector is affected by the necessity to act and react flexibly to plan production, distribution, procurement of raw materials and inventory levels. The planning of inventory levels depends on the supply and

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3.6

Strengthsandweaknessesinorderprocessing
majority of interviewed companies see their strengthsinshortordercycletimeaswellasin standardizedandconstantorderprocessing.

Generally, order processing is supported by software applications that make processes standardized, stable and transparent. The

3.7Strengthsandweaknessesininformationlogistics
ProductionPlanningSystems(PPS)areusedfor production planning in order to maximize productivity and adherence to delivery schedules as well as to minimize cleaning and setuptimes.Inmanycompanies,softwareisin use to manage the supply chain. Enterprise Resource Planning (ERP) and Material Requirement Planning (MRP) Systems are in action for order processing, procurement, production,inventoryandtransport.

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OpportunitiesandThreats oftheChemicalIndustryand ChemicalLogisticsinCEE

In order to gain representative results for opportunities and threats expert workshops wereorganizedduringtheRegionalStakeholder Meetings. The main objective was to collect as much information as possible about external opportunities which it is not possible to influenceinrelationtochemicallogisticsinCEE. Representatives of the Chemical Industry, logisticserviceprovidersaswellasexpertsfrom other stakeholder groups attended the workshops. The results are summarized in the followingchapters.

4.1

Economictrends
The current economic situation is extremely difficult for the Chemical Industry, but should ratherberegardedasanopportunityandnotas athreat.Expertsbelieveandexperienceinthe sectors dealing with bulk, fine and speciality chemicals shows that German companies view theeconomiccrisismorecriticallythanAustrian chemicalcompanies. Internationalization of selling and sourcing markets Access to international selling and sourcing marketsisakeysuccessfactorandvitalforthe Chemical Industry. Especially for new member states import and exports are now mainly concentrated on EU markets and access to markets is therefore easier. The majority of experts feel that the internationalization of sourcingmarketsposesanopportunityduetoa wider access to sources, whereas the opinions in terms of selling markets differentiate as companiesfearincreasingcompetitionspossibly from cheap Asian products. Consequently this leads to an enlargement of the supply chain as well as to longer transportation distances. The

Currenteconomicdevelopment Despitethecurrentfinancialandeconomiccrisis, the expected positive long term economic development and the increasing freight transportvolumesallconstituteanopportunity forthegrowthand thefurtherdevelopmentof mostofthechemicalenterprises.Thiscanbean important contribution to the stabilisation of markets and the improvement of customer satisfaction. Nevertheless,thepresenteconomiccrisisserves as a threat to many chemical and logistic companiesbothworldwideandontheregional level. Especially small and medium sized companies find the current economic situation hardlychallengingandarestrugglingtosurvive. Especially logistic service providers and freight carriersaresufferingfromthedeclineinfreight volume. Some experts expect a further intensification of competition after an ongoing reduction in customer demand. Other companies are more optimistic in terms of the economic crisis and expect an increase in consumption and investment both on a global andregionallevel.

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sourcingofenergyisdonemainlywithregional suppliers, but only with limitations. Many experts think that the internationalization of sourcing markets is a huge chance for the logisticsector.Fromthesalespointofview,the internationalization of selling markets leads to higherproductvariety. An increasing replacement of production sites hasbeennoticedwithinthelastyears.However, experts are not sure how long this trend will continueinthesameintensityaslabourcostsin EasternEuropeareexpectedtoincreasefurther on. In the Far East labour costs are low as is often the quality of chemical products. Nevertheless, experts predict that quality will adapttotheEuropeanlevelwithinthenextfew years.Qualityawarenessremainsaquestionof mentality. Intensified competition and global cost pressure Representatives of the Chemical Industry think that intensified competition, and as a consequencehighercostpressure,isseenboth as an opportunity and as a threat. The competition is vital for innovations and new distributioncanals.Althoughthesituationposes a risk as European chemical companies have a comparative price and feedstock disadvantage in certain products and their derivatives (e.g. Olefins). Enterprises are also facing an upcoming wave of additional petrochemical capacities, especially in the Middle East. In terms of logistics, intensified competition resultsinsimilarbasicconditions.Someexperts notice an augmenting shakeout or market adjustment which can be partly traced back to theeconomiccrisis.Neverthelessaclearmarket positionplaysanimportantrolenowadays. Individualizationofproductsandservices Individualization of products and services is a must especially within the fine chemical sector andleadspossiblytomarketsegmentation.For the basic chemicals sector, individualization is considered as a neutral factor although special markets demand individualized products and services. For the discussed sector, this factor can be seen as an opportunity as long as the

customers are prepared to pay for the additional services. From the logistic point of view small and medium companies see a high potential in valueadded services which is not fully tapped yet, especially in the field of infrastructure.Thecustomeristhedrivingforce and often valueadded services in the field of logisticsareseenasamust. AdjustmentofEasternEuropeanwagelevelto CentralEuropeslevel Labour costs in the EU Chemical Industry are high in a worldwide context with rather high differences within the EU 27, although ULC levels in the EU are competitive with most countries. 2 The challenge is to hand those higher costs on to the customer. In terms of logistics, companies benefit from the lower wagelevel in Eastern Europe as in future, the trend referred to, will probably result in higher logistic costs. For example: current rail prices are advantageous which can be lead back to a lowwagelevelinEasternEurope.Ontheother hand, logistic experts possibly expect an opportunity,especiallyforfreightmanagement, due to the pullback of business to Central and Western EuropeanCountries.FromtheEastern European countries or, respectively, from the newmemberstatespointofview,expertstreat thatdevelopmentasathreatduetoworsening competitionconditions. ChangeofimageoftheChemicalIndustry Associations of the different countries have started campaigns in order to make chemical companies more open, especially in terms of the environment, climate protection as well as regarding sustainability, safety and security. In general, the focus is put on restructuring and redesign of the communication policy and public relations. The main objective is to re experiencetheChemicalIndustryinthepublic opinion,aslivingChemicalIndustry. Trendtowardssmallerproductionlots In the course of this trend, the dose rates are increasing significantly in order to reduce the
ULCUnitLaborCosts,Productivityand InternationalCompetitiveness,RuG2005.
2

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production lots, especially within the pharmaceutical industry. Thereby a more valuableeffectaswellashigherrequirementsin termsofqualityareachieved. PartnerswithcompetencesinR&D Customers tend towards partners with well developedstrengthsinthefieldofResearchand Development in order to acquire and keep strategic partnerships. During time periods of economic boom this step is easier as strategic cooperations in R&D come along with high investments.

Thinkglobal,actglobal Centralization of decision makers within corporate groups implies a threat; therefore companies tend to form smaller decision making units. Companies benefit from a large integrated European market and from continued strategic restructuring efforts to adopt for flexibility, which enables high international orientation and a global network toconsumers.

4.2

Socioculturaltrends
Skills of employees in the field of logistics (professional,socialandintercultural) MostoftheEasternEuropeanexpertsaddthat the educational standard, and in particular the skills of employees in the field of logistics, is a major opportunity in CEE. Furthermore, companiesrefertowelldeveloped connections and relationships to educational institutions, universities as well as to research and development institutes. Although intercultural competenceisanimportantfactor,itshouldnot be overestimated. The accessibility to professional trainings and their standardization was classified as an opportunity in the market segments. Again experts stressed the lack of qualified staff specialized in the logistics of hazardous chemicals, therefore they defined this factor as a potential threat. Furthermore, someexpertsclaimtheincreasingfluctuationof employees is possibly leading to a low level of skillsandexperienceinchemicallogistics. PublicimageoftheChemicalIndustry The public image of the Chemical Industry is evaluatedbychemicalproducersasabigbarrier, because people are still afraid of hazardous chemicals in their neighbourhood. Therefore there have been a lot of measures and actions in order to change the image of the Chemical Industry i (more green, responsible care, sustainability etc.); experts see an opportunity to position the Chemical Industry as a sustainable and secure workplace. For other

DemographicchangeinCEE The opinions regarding the influence of the demographic change in CEE are divided as 50% see that development neutrally and the other part of the group expects a disadvantageous impactontheChemicalIndustry. Availability of human resources in the field of logistics InCentralandWesternEuropeancountriesthe availability of human resources in the field of logistics is still a risky factor as a lack of employees both in the operative and strategic field is expected. It is also increasingly difficult to find qualified staff in the field of chemistry. Some companies have the possibility to stay optimistic, as they have a wellperforming internaleducationsystem. Representatives of logistics and forwarding companies also note that approximately 10 years ago there was a significant drain of Eastern European logistics specialists to Western and Central European countries, as these countries had been suffering from a lack of highly qualified logistics staff. Nowadays the situation is almost stable, although some experts claim that graduates from technical universities still leave Eastern European countriesfortheWestorOverseas.Thereislow student interest in studying technical subjects (chemistry, logistics, electrical and mechanical engineering).

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expertsthistrendisnotvisibleandhasminimal degreeofinfluence. Changesinvalues,interculturalcompetences In a heterogeneous cultural context like CEE, a smooth cooperation, based on the consolidation of common values, may meet withdifficulties.Ingeneralitcanbestatedthat the cooperation with the partners to the west

of Eastern European countries suffers from certain deficiencies. A slight discordance of interestshasbeenemergingwithGermanyand AustriaandTurkey. Transitiontoflexibleworkinghours The transition to flexible working hours is seen anopportunity.

4.3

Technologicaltrends
Innovations in transport, cargo handling and warehousing Innovations in transportation, cargo handling andwarehousingshouldleadtostandardization of infrastructure, vehicles and handling technologies resulting in cost reductions and increaseofqualityandsafety.Securinguniform types of vehicles with fixed platform gates is seenasahugeopportunityespeciallyinrelation to cargo. Innovations are further awaited for terminalinfrastructure,warehousingandgoods handlinginordertoachieveprocessstabilityas well as reduce leakage (video control at cross dockingareas and especially mentioned by the pharmaceuticalindustry).Thistrendisseenasa competitivefactor.Howeverinordertobenefit fromthatcompetitiveadvantageitisnecessary that technological developments in the field of logistics are implemented by each party in the supply chain (e.g. monitoring during transport of dangerous materials, tracking and tracing of shipments, mechanical breakdown of transport modesduringthetransportofexplosives,etc.) Screeningoftechnologies Itishighlyimportantforchemicalcompaniesto develop a technologyportfolio for production and process technologies. In that context the employees play a major role in creating customerorientedsolutions.

Technologyascorecompetence Competence in R&D as well as in production andprocesstechnologyareobservedasahuge opportunity for the Chemical Industry. Customerspecificapplicationscometothefore. Strong innovation efforts will generate new growth clusters: biotechnology, renewable feedstock,efficientenergyuse,healthandnew materials (e.g. nanomaterials) which have the potential to solve upcoming societal mega challenges. InformationandCommunicationTechnologies It is the experts opinion that, Information and Communication Technologies definitively come along with the opportunity to realize standardization along the whole supply chain, whereas the potential cannot yet be fully tapped as long as interfaces do not work properly.Financialinvestmentsarenotefficient in an economic context. Standardization is also atopicforaccompanyingshippingdocumentsin terms of language and symbols. Furthermore, fromthelogisticpointofview,Informationand Communication Technologies can be a competitive valueadded service. To take infrastructureintoconsiderationisanimportant aspect in terms of Information and Communication Technologies (e.g. integration ofterminals).

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4.4 EnvironmentandEnergy
Climate change especially Carbon Dioxide Emissions ThisfactorposesarealthreatfortheChemical Industry and results in a distortion of competition. Furthermore the real impact and the prospective possibilities of chemical companiestoreactonthatdevelopmentcannot be determined. At the same time the climate change provides numerous opportunities for companies and new potential as well as opportunitiestoshapecollaborations. Availabilityofnonrenewableenergysources Due to the fact that nonrenewable energy sources are the main resources and raw materials for the Chemical Industry this development is a threatening challenge. Gas and oil have to be imported because Europe is neitherastronggasnoroilproducer.Numerous European countries are energetically (crude petroleumandnaturalgas)dependentonsingle suppliers. The diversification and securing of supply is crucial for a competitive domestic ChemicalIndustry.Othercountries(MiddleEast, Russia, India, Brazil, etc.) have preferential accesstotheseenergysources.Thereisahuge threat of closing down or capacity changes of production units in Europe due to a lack of accesstoenergyfeedstocks. Availabilitytorenewableenergysources Having no significant influence in chemical logistics, the availability of renewable energy sourcesposesanopportunityforsectorswithin the Chemical Industry focussing on the exploitation and manufacture of for example biomass, biogas, biolubricants, agromaterials, biopolymersorbiofuelsetc.Althoughinorder to force availability and use of renewable energy sources it is essential to enhance researchanddevelopmentactivities.Thisispart oftheresponsibilityofpoliticaldecisionmakers within the European Union and the Member State. Internalisingexternalcosts The increase in road transport of cargo has decoupled from economic growth for the last years.Onlyasmallpartoftheexternalcostsfor infrastructureispaidforbytheroadtraffic.The costs will augment disproportionately with the increaseofroadtraffic.Only56%ofallexternal costsareactuallycoveredbycongestioncharges. This combined with the fact that there are congestion charges for railway too leads to a distortion of competition of means of transportation. Doubtless for the logistics internalising external costs will result in a disadvantageousdevelopment. Energycosts Currently expertsdo notseeanythreatcaused by energy costs. Due to the expected sharp increasesinenergyexpenses,thisdevelopment is a major risk for the Chemical Industry, as an energyintensive industry sector. Primarily, this factorisadangerfortheChemicalIndustry,but at the same time as far as possible the sector can detect and benefit from new alternatives. Experts state that energy markets have a quasioligopolisticorganizationleadingtohigh andnontransparentenergycostforconsumers andindustry. A further possibility for chemical companies to reduce energy costs is to enter into collaborations. The development of the diesel priceandtollfeesisanimportantcostfactorfor chemical logistics. Increasing prices causes an additional cost burden. National and European regulations,whichleadtohigherpricesandfees compared to the global market, are a specific competitive disadvantage for European chemical enterprises. The discrimination and lack of equality in the treatment of foreigners forthecollectionoftollfeesisaspecialproblem inRussia.

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4.5

Politicsandinnovation
anopportunity.Evidenceforthisisprovidedby thefactthat aremarkableamountofEUfunds are devoted to this priority. Hence this factor wasevaluatedbytherespondentsasoneofthe most outstanding opportunities. However, it was interpreted as a serious drawback that policymakers may reorientate the developmental targets and withdraw money fromtrafficinfrastructurewithreferencetothe declineoftheavailableresourcesresultingfrom theeconomiccrisis. Financingoftrafficinfrastructureprojects Given the fact that the projects are sufficiently financed, the prevailing policy on financial subsidies in the field of traffic and transportation including infrastructure is identifiedasanopportunity.Themajorityofthe respondents stressed again the fact that the amount of the available EU resources for infrastructuredevelopmentmaybeshrunkenin the context of the restrictive economic measures. This could result in a major setback for the sector. For the moment there are sufficient resources for fulfilling the developmentaltargets. Howeverunifiedefforts should be made in order to sustain these financial conditions in the future. On the one hand experts describe the lack of logistic competence within the ministry of transport, party political influence as well as the insufficient transparency and inefficient use of the existing infrastructure. On the other hand there could be opportunities for improvement withinthepoliticalsystem(e.g.PPPFinancing). Infrastructure employment costs (costs of usage) Congestion charges are vital for financing infrastructure projects, although for the competitiveness of the Austrian business location in an international context, this developmentisdisadvantageous.

International harmonization of transport and trafficrelatedlawsandregulations Especiallywithininternationalcorporategroups the crossborder harmonization of transport and trafficrelated laws and regulations within CEE is a huge topic also in terms of equal competitive opportunities. In particular this concernaffectsregulationsforhazardousgoods, safety and security issues. From the Eastern European Experts point of view this developmentisseenasathreat. Differentlawsandregulationsmayhamperthe smooth implementation of the necessary procedures applied in logistics and have an impact on the competitiveness of a business location. Furthermore, special attention should be paid to the regulatory environment of the Eastern European countries near the Schengen borders. In the harmonisation and standardisation process the chemical enterprises have the opportunity to participate actively in the definitionofjointstandardsandthetransferof knowledge. In a dialogue process joint efforts forthecoordinationoftransportroutescanbe implemented. An insufficient harmonisation of technical and administrative standards for the transport of chemicals generates increased costs and time for the handling of crossborder transports. Differentsocialstandardsleadtoadistortionof competition. Prioritization of traffic infrastructure issues withinthepoliticalprograms Experts remark partially neutral and positive comments on the prioritization of traffic infrastructure projects within the political programs as traffic increases with economic development. Focus should put be on internationally coordinated projects, for instance the motorway connection Austria Slovakia. Considering all countryspecific interests and requirements is a challenge. According to the opinions of Eastern European expertstheprioritizationoftrafficinfrastructure in the political programs can be interpreted as

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Crossborder capacity planning of traffic infrastructureacrossthecarriers For the majority of the experts involved this parameterisseenasahugeopportunity,butit demands an international bundling of freight volume. Nevertheless some workshop participants clearly define the crossborder capacity planning of traffic infrastructure as a source of threats as the result of the emerging contradictions in this matter in the field of transportation in particular (e. g. definition of parity, difficulties caused by the provisions of theSchengensystem(e.g.multihourqueuesat theSchengenborder).Transregionalintegration of territorial development plans is difficult and slow. Policy on financial subsidies in the field of trafficandtransportation When discussing the policy on financial subsidies in the field of traffic and transportation, the experts did not strike an agreementastowhetherthisposesathreator a chance. Experts expect a reasonable use of financial subsidies especially for traffic infrastructure and the carriers rail and inland waterways. The support of commercial zones withoutrailwaysidingishardlycriticized,asthe

opportunity to move to alternative means of transport is prevented. For the dedication of financial subsidies a superior authority is requested. Some experts think that the competitionshouldberegulatedbyitself. Publicacceptanceofinfrastructureprojects Thefactorofpublicacceptanceofinfrastructure projectswasevaluatedasthreateningsinceany kindofinfrastructureprojectcanbesuspended even by a spontaneous initiative and be prolonged as the result of incidental social resistance(e.g.representativesofGreenPolitics, associations for the protection of the environment). Prioritizationofpassengertraffic Theprotectionofpassengertrafficisevaluated as a source of an indirect threat in the context of logistics due to the tendency to protect passengertrafficasopposedtothetransport. Integrationoflanduseplanningintothepolicy oftrafficinfrastructure According to the results of the polls, the majorityofthequestionedstakeholdersdonot considerthefactorasrelevant.

4.6 Transportinfrastructure
Railway
In general, experts expect railway to become a more competitive mode of transport in the futureasfuelpricesandroadtollswillprobably riseandgeneratehighercostsofroadtransport. TheChemicalIndustryitselfishighlyinterested in shifting volumes, especially hazardous cargo, from road to railway, while increasing the qualitylevelofrailwaytransport. Locationandstructureoftherailwaysystem Themajorityofexpertsagreeonaninsufficient and suboptimal situation of the railway infrastructure in CEE. There is no budget for investmentsintotherailwaynetwork,whichhas beenevenreducedforthelastyears.Especially in the southern part of Eastern Europe the conditions are dramatic as the state railroad nearly went bankrupt. The equipment is, in terms of quality and availability, beyond contempt and the price policy is disastrous so thatfurthershiftingoffreightvolumetoroadis done. Furthermore, for the whole region the experts claim inadequate interfaces, lack of integrationofroadintotheplanning ofrailway terminals, no mutual intermodal project activities between road and rail, obsolete equipment, suboptimal schedules and in total an inefficient process of transportation by rail. Experts suppose a potential in making the existingrailwaynetworkmoreefficientthrough the optimal design of handling nodes. In addition, the liberalization of the railway transportisseenasaverypositivedevelopment in terms of service quality and prices due to

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intensifiedcompetition.Inthesouthernpartof Europe there is a growing shortage of side tracksconnectingtheindustrialsites:inspiteof this, track dismantling goes on, compelling industriestochoosetheroad. Theplanistobuildabroadgaugetrackandto expand the crossborder points between neighbouring countries, though high fees may lead to a low level of utilization. Furthermore, the conditions to enable the north/south capacity from Poland to Hungary to be increasedarenecessary. The Hungarian and Polish experts remark that therailwaynetworkintheircountriesarewell developed and of high density. Poland benefits from the transit position near panEuropean corridors. The domestic network is well developed, although the crossborder railway network has to be improved for example betweenRussia,Poland,andSlovakiaaswellas towards the southern part of Hungary. The existingbroadgaugerailconnectionwithRussia and the Commonwealth of Independent States are the advantage for the Polish rail network, ensuring fast and safe transport of goods to easternmarkets. Although many experts feel that the railway structureitselfiswelllocated,theconditionand quality of the railway track infrastructure is suboptimalandthereisadifferencesinclasses between Eastern and Western European countries (most railway tracks are class C 20 tonnes weight per axle instead of class D 22.5 tonnes weight per axle obligatory standard in Western European countries). Furthermoreduetotheseclassdifferences,rail equipment has to be adapted (class C railway tracks are not permitted as modern rail tank carsaccordingtotheRID,TSI,etc.) TheinadequaterailwayinfrastructureinCEEisa bigbarrierforchemicaltransportinthisregion. A large share of the chemical goods are transported on the roads, because the railway can only be used to a limited extend. But the capacity limits of the roads are already exceeded. A special weakness of the railway transportisthereloadingattheborderstations. The closing of identified railway infrastructure

gapsinCentralGermanyisdelayedduetotime consuming procedures for planning and realisation. An inadequate coordination between the neighbouring states leads to furtherdelaysanddiscontinuityinthetransport routes. Capacity,efficiencyandlocationofterminals The location of railway terminals is currently evaluated as being insufficient and inadequate for the Chemical Industry or respectively for chemical logistics. Within the Central and Eastern European countries there is a deficit in terms of quantity, quality and accessibility. Capacity and efficiency of terminals is under developedandtheequipmentisobsoleteornot adequate for the purposes of the Chemical Industry. Theviewsregardingthecapacityandefficiency of terminals differ: most experts do not think that the terminals themselves are bottlenecks within the logistic processes. A minority feels thatthecapacityandefficiencyofterminalsare athreatforchemicallogisticsinCEE. Availabilityandcapacityofrailwaywagons Troublesinavailabilityariseespeciallyatadhoc orindividualtransports,whereasthelongerthe planning horizon, the better the availability (in particular for block trains). Tank wagons are mainly booked at private railway transport operators.Thequalitydiffers,dependingonthe origin country. The sourcing of special equipment or wagons is problematic. So the experts opinions about the mentioned factor rangedfrom anevaluationofneutral tooneof seeingitasarisk. Accesstoterminals General this factor poses a risk but with low influence. The Austrian ports of Vienna and Krems are especially mentioned as infrastructural bottlenecks. Krems for instance doesnothaveanaccessforhazardousgoods. Stateownedrailwaysystems Private railway transport operators are well situated in CEE and are quite competitive due sometimes to noncomprehensible public price policy. Although the price policy of the state

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ownedrailwaysystemisseenasathreatdueto the quasimonopoly and nontransparent situation, numerous experts think that the marketisselfregulatingandthattherewillbea further shakeout in the future. Especially logistic service providers benefit from a liberalized market of railway operators. Although the stateowned railway systems provideacertainstability,theexperts expecta further liberalization and privatization process of railway market and PPP investments in the railwaysector. InteroperabilityInternationalstandards AmainproblemofrailwaytransportationinCEE isthatrailsystemsarenotcompatible,meaning thattherearedifferenttypesoftracks,country specific security regulations and isolated systems. In general there is a lack of harmonization of administrative, technical and socialstandards.Expertsfeelthatinsomecases interoperable systems are created to protect own structures and to keep a proportion of power. Harmonization is expected and a huge opportunity for all parties within the supply chain. The incompatibility of railway networks and the different tracks within Western and Eastern Europe are a special problem for chemical enterprises. An additional reloading causeshighercosts,abiglossoftimeandhigher safetyrisks. Multimodality Expertsevaluateawelldevelopedandaccepted basic railway infrastructure with the potential for improvement within the processes themselves. Duetorestructuringoftherailway networkthelastmileislengthened. Bureaucracyincustomsclearance(RIDSGMS) Complex customs clearance and partially different interpretation of regulations by the custom authorities are a handicap for cross border chemical transport. Under these conditions, contract logistics is almost not possible and interferences have a negative impactoncustomersatisfaction.

Waterway
Location and structure of the waterway network Generally, the network of inland waterway is locatedadvantageouslyandfitsPanEuropean corridor, although in some partner regions it is limited to one or two main waterways. Nevertheless, in the long run, the waterway appears as a highly competitive mode of transportation for the Chemical Industry, especially for bulk cargo, under the condition thatthecapacityandefficiencyisguaranteed.In some harbours, rail tracks do not reach the docks,makingintermodalitydifficult. The Central European Chemical Industry has a location disadvantage due to the inadequate access to waterways and the overseas ports. Therefore the connection to the international commodityflowsismorecomplicatedandhigh priced. Hence, the inland transport via railway and road plays a more important role. Due to the congestion of ports in the Baltic and Black Sea, these ports can only be used for chemical transport in a limited way. Additionally an adequate port in the Mediterranean Sea is missing. Therefore chemical goods have to be transportedviathecostintensiveinlandroutes. Locationofinlandports Ports in CEE are welllocated and strategically wellpositioned with a high density of ports althoughoftenprivateportscannotbeusedby thirdparties. Capacityandefficiencyofwaterway In order to use waterway transportation efficiently, it is essential to improve the navigability by addressing ice, flood and low water problems and to eliminate shoals. The conditions for inland navigations are weather dependentandthereforeunstable.TheDanube is navigable only from March to May with the exceptionofthetimeoffloodsandatlowtide. Due to natural regions, for instance alongside the Danube, these projects are only partly realizableandthereforekeepingthestatusquo poses a threat due to the ongoing dependency onexogenousfactors.FortheportofConstanta it is planned to establish a container line with

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preandoncarriageviatheDanubeadditionally to fullcontainer loads. Furthermore there is a lack of pairing between imports and exports. Additionally legal differences and barriers hinder the shifting of more volume to that alternativemodeoftransportation. Accesstoports The opinions concerning whether the access to portsisachanceorathreatdiffergreatly.Linz (Austria)wasmentionedasanegativeexample duetothelackofconnectionstothetrafficand transport infrastructure. In some cases ports and terminals are closed on a weekend, which posesasignificantproblem. Availabilityandcapacityofwatervessels The current equipment of the water vessels is obsoleteandthereisalackofreinvestmentand expansion.

Road
Locationandstructureoftheroadnetwork Generally the infrastructure of road transportationisimprovableintermsofquality and quantity. Although experts of Eastern European partner regions admit that the location and structure of the road networks is highly centralized, as opposed to a more synergetic and more favourable decentralized networkstructure.Thefactorwasidentifiedasa source of threats. Poland with its strategically advantageous transit position near pan European corridors (I, II, III, VI) benefits from a highdensityofroads.Expertsstresstheneedto enhance safety in terms of transportation of hazardous goods and to expand suburban road rings. In Central Europe a modern and capable infrastructure has been developed. Especially the connection of chemical enterprises to the motorwaynetworkissuperior. Capacity and efficiency of trunk roads and motorways This factor is seen neither as chance nor as a threat.Expertsseeopportunitiesforexpansion, the intelligent control of traffic (e.g. to abolish the ban on driving at night and on public

holidays) in order to regulate the density of traffic, lower congestion charges within determinedtimeframestodislocatethetraffic. Experts from Eastern European countries claim that the capacity and efficiency of motorways are not satisfactory due to the poor quality of theroadinfrastructure. Developmentofincreaseinroadtoll Different systems and evaluation methods in CEEintermsofroadtollleadtoanimbalancein international competition. Furthermore transport is shifted to minor roads in order to avoid road tolls. Several experts think that an increase in road tolls is positive on condition that the money is used for infrastructure investments.Ontheotherhandroadtollscould leadtohigherefficiencyinlogistics,e.g.shorter distances,shorterdeliverytime,etc. InteroperabilityInternationalstandards Thedegreeoftheapplicationofandcompliance with the international standards is satisfying. The appropriate initiatives have already been launched for interoperability. Therefore the factor was evaluated by the polled companies asanopportunity.Harmonizedsociallegislation, maximum allowed dimensions and weights of vehicles for international transport make physical logistic processes more efficient. Howeverthereisstillalackofharmonizationin termsoftunnelsbetweenCentral,Westernand EasternEuropeancountries:inconnectionwith the transport of hazardous goods, the present tunnels do not fulfil the requirements of the ADR agreement. In addition the transport of dangerousgoodsisbannedonseveralsegments of international roads (E) with a negative impact on logistics. A lack of truck parking facilitiesmakesitdifficulttofulfilrequirements ofsociallegislation.

Intermodal
Location, structure and capacity of intermodal nodes The majority of chemical producers expect intermodal transport to constitute an opportunity to improve logistics and lower

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transportcosts,highersafetyandlessdamages ofcargo.Howevertheyindicatethenecessityof enlarging intermodal nodes and terminals as presently they are rarely dedicated to the complexrequirementsoftheChemicalIndustry, especiallyintermsofhandlingdangerousgoods. Additionallyneitherthepresentnetworkoftank cleaning stations is sufficient, nor are they integratedintheplanningproceduresfornewly built terminals. The majority of intermodal terminals are oriented on sea transports in ordertoarrangethehinterlandtransports,pre carriages and oncarriages coming from the maritime harbours of Hamburg, Bremerhaven, RotterdamandKoper. Generally big terminals at strategic important nodes exist, although there is a lack of decentralized terminals throughout the area. The handling technologies are indeed well developedinthebiggerterminals,butcoverage ofdecentralizedregionsisquitedifficultdueto insufficient compatibility and inflexibility of systemcomponents.Furthermorethereisalack of comprehensive national and international concepts.Handlingtechnologyacrossallcarriers requires high investments in order to develop sophisticatedandadequatelogisticterminals.In general experts claim that the political procedureofplanning,coordinationandcontrol of the development of intermodal nodes is not transparent and is inefficient as far as the requirements of the companies are concerned: for the Chemical Industry intermodal centres outside of urban areas are required to handle andstorechemicalgoodssafely. At the moment there is no well developed structure for intermodal terminals in Eastern Europe.Thisleadstolossofefficiencyoflogistic processesforthecombinedtransportofrailway androad.

Pipeline
Locationandstructureofthepipelinenetwork Generally the asitis situation of the pipeline network is seen as a threat, mainly due to the previously mentioned lack of welldeveloped

structure. A pipeline network has been built in eastwestdirections.Forthesecurityofsupplies it is necessary to also build north/south connections. There are numerous pipeline projects planned and ongoing in Eastern Europe in order to expand the existing pipeline network and to increasethecapacity: Ethylene pipeline Plock Bohlen to enhanceethyleneexporttoGermanyand to focus on the possibility of the implementationoftheprojectwithother possible pipelines for propylene and LPG transmission. OdessaBrodyPlockPipelinetorealize the transport of petroleum from oil pool in the Caspian Sea, mainly from Azerbaijan. Baltic Pipe (Skanled) to diversify gas supply to Poland from Scandinavian direction. Nord Stream pipeline: a gas pipeline to link Russia and the European Union via the Baltic Sea. Carrying natural gas to supplybothbusinessesandhouseholds. Nabucco pipeline: represents a new gas pipeline connecting the Caspian region, MiddleEastandEgyptviaTurkey,Bulgaria, Romania, and Hungary with Austria as well as further on to the Central and Western European gas markets. The pipelinelengthisapproximately3,300km, starting at the Georgian/Turkish and/or Iranian/Turkish border respectively, leadingtoBaumgarteninAustria. TheinadequatepipelinenetworkforOlefinsisa big competitive disadvantage for the Central GermanChemicalIndustryincomparisontothe WesternEuropeancompetitors.Theenterprises are forced to transport a large share of their products byroad and railway, leading to higher costsandlongertransporttimes. Capacityandefficiencyofpipelinenetwork Capacities of the pipelines are evaluated as marginal but in general the situation poses neitherathreatnorachance.

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4.7 SafetyandSecurity
InternationalSafetyStandards There is no common Emergency Response and Crisis Management System in the Eastern European States outside the European Union (especially Russia and Ukraine). This is a big threattothesafetyofchemicaltransports. International unified Safety and Security Standards within Eastern and Western Europe pose a huge chance for the competitiveness of the Chemical Industry. The European harmonization of the legal framework of dangerous goods transport (ADR, RID, ADN, IMDGcode,IATADGR)makestheconditionsfor transport easier and more transparent. In addition REACH secures a standardized registration, evaluation and authorisation of chemicalsubstanceswithintheEuropeanUnion. A further intensification of safety and security standards on an international level is expected bytheexperts. The Chemical Industry in Central Europe has achieved a high safety standard in the fields of production, logistics and transport in recent years. This ensures a responsible treatment of chemical products and processes in relation to the employees, clients and environment. Initiatives such as Responsible Care and SQAS playanimportantroleinthisrespect. Tracking&Tracingofcargo The international standards for tracking and tracing cargo were already initiated, however, the required infrastructure for GPS tracking solutions is not satisfactory, and therefore this factorwasidentifiedasasourceofthreats. The tracking and tracing of cargo is not only highly interesting for the customer but also in terms of hindering misuse of dangerous goods by terrorists. This is easier when the vehicle is directly marked according to ADR, RID by UN code or even by name. Even the rail tanks present a higher danger of misuse than accompaniedroadtransport. Althoughtheexpertsattachedgreatimportance tothefactorforthemajorityofcompaniesnot dealingwithlogistics,thetrackingandtracingof cargo is a neutral parameter. For the logistics and forwarding companies this factor represents strengths, because it represents a valueaddedserviceforcustomers.

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Needforfutureactions andimprovementsConclusion

5.1 Needforfutureactionsandimprovements intermsofpoliticsfortransportationandinfrastructure

Better coordination of PanEuropean infrastructure projects Europeanwide harmonized standards for planning and controlling of traffic, transportation and infrastructure. A better coordination of the panEuropean infrastructureplansinWestEastandEastWest direction is necessary to agree on common priorities for the development of transport routesandtospeeduptherespectiveextension of infrastructure. The relevant stakeholders frompolicy,industryandadministrationhaveto be actively integrated in this coordination process in order to ensure high opportunities for implementation and the focus of planning according to the expected needs. The different political levels on a regional, national and Europeanlevelhavetobeinvolvedaccordingto their specific regulatory and decision making competencies. TheChemLogprojectwantstodeliveraspecial contributionfortheareaofchemicallogisticsin thisrespect.Atthesametimetheprojectaims to develop close cooperation with similar initiatives such as the programme of the ChamberUnionElbeOderforthedevelopment of infrastructure, ensuring mobility and access as well as the strengthening of economic development. In general, planning horizons for crossborder traffic projects, especially for European corridors shall be speeded up significantly. MoreeffectivedistributionofEUfunds Thedevelopmentofcrossborderinfrastructure projects inCEEshouldbesupportedbya more efficient use of EU Structural Funds in interaction with other regional and national funding sources. This should contribute to the integration of the new Member States in the European Union and to strengthen competitiveness of the Central and Eastern European industry. The EU funding has special importance due to its leverage effects for the mobilisation of further public and private investments.IntheframeworkoftheuseofEU funds a prioritisation of especially important infrastructure projects is necessary. Further requests are to increase political acceptance of and priority assignment to the investments required for transport infrastructure. However some experts fear major setbacks of EU funds due to the impacts of the financial and economiccrisis. Longterm, rational and sustainableoriented transportpolicy According to the experts opinions, traffic and transport infrastructure are of prime importance for the successful future of the Chemical Industry and especially for chemical logistics.Thetransportpolicyshouldfocusonan integrated and longterm approach which overlaps several legislation periods. The main objective is to develop an optimized global trafficsystem.Challengesofthecomplextraffic

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system can only be met through the all embracing consideration of the relevant political sub areas and by taking the mutual consequences into account. Coherent and sustainable goals are pursued by means of an integratedtransportpolicyrational,.Inorderto reach the political objectives in terms of multimodality, the conditions have to be adjusted to the requirements of the economy. The target is the optimization of the quality along the whole multimodal supply chain. Depending on economic demand and geographical location, the expansion and customization of neutral bimodal and trimodal terminalsshallbeforced. Institutionalizationofanintegratedplanningof traffic infrastructure and landuse planning. infrastructure analysis creates a transparent basis for decisions to increase efficiency and utility and/or to expand transport infrastructure. Improved assurance of areas to expand infrastructure and the transparent landuse planning procedure along highranking infrastructures can be ensured by mutual commitment, reconcilement of interests and longterm planning and financing reliability. Every measure to increase capacity and

efficiencyofinfrastructureshallbecoordinated both with traffic and landuse planning issues. Thisrecommendationaccompaniestherequest for analysis of existing, planned and needed infrastructure a comparison of estimated demand and existing capacity as a basis for infrastructure building projects or to improve efficiency in operating. Furthermore it is essentialtostandardizethelegislationwiththe EuropeanUnionwithinthesectorsoftrafficand landuse planning. For logistic purposes it is recommended to define a master plan for the territorial use for logistic purposes on national orregionallevel. Efficient use of infrastructure by mileage relatedchargesandintelligentcontrol Through traffic control measures the degree of utilization of transport infrastructure can be enhanced.Furtherpossibilitiestoguaranteethe efficiency of traffic systems include innovative instruments for use optimization: for example pricingoftheinfrastructuredependingon time anddemandaswellasintelligenttrafficcontrol depending on capacity utilization are able to optimizethedegreeofefficiencyandtoprevent or reduce congestions and time loss. This stimulatesselforganizingeffects.

5.2

Needforfutureactionsandimprovements fromthegenerallogisticpointofview
market enable novel, innovative and global logistic concepts, which are essential to deal withrisingcomplexityinsupplychainnetworks. Thus, the importance of the discipline of logistics and the demand for experts will increase continuously. Logistics provides potential for rationalization and consequently for reduction of inventory respectively for effective management and bundling of transports and thereby nonproductive return shipmentscanbediminished.

Globalizationoflogistics:actandreact The internationalization of business, for example Global Sourcing, the deployment of production and the international division of labour, causes greater distances, an increase in transport volume and in the number of transports. Under consideration of changing flows of traffic, multimodal transport solutions willgaininimportance.Deceleratingthevertical range of manufacturing in western industrial countries as well as displacing core competences effect an escalation of intercontinental overseas container transports. The intensified interdependencies between western industry countries and the Asian

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Innovative network structures and logistic cooperations to achieve excellence on both sides The concentration tendency in markets serves as an important driver for strategic competitiveness, especially in logistics. A growing number of partners and locations lead to increasing complexity within supply chain networks. Thereby the challenge is to connect actors and process in both physical and informational matching. Logistic collaborations predominantly centre on classical and basic functions: procurement and distribution. To ensure successful and sustainable vertical partnerships between logistic service providers and their customers the coverage of the whole range of services is preconditioned. Horizontal cooperation opens up new opportunities when structuring international logistics and supply chain networks and generating synergies especially in freight management, inventory management as well as in information and communicationtechnologies. Cooperative contacts and networks are important although not every cooperation project is profitable. Intentions to cooperate with high investment effort are only recommendableifthereisastrategicbenefitfor thecompany.Investingtimeandresourcesinto collaborations with customers or suppliers in order to drive innovation and differentiate services should payoff and create value for all involved companies. In terms of logistics reduction of costs and tiedup capital on both sides by decreasing inventories, reduction of transportation costs and storage costs can be achieved. In addition more effective and efficient processes through reduction of order cycle time, lead time and increase of delivery performance create shared success. Taking out nonvalueaddedactivitiesonbothsideslikethe declineinerrorsorthereductionofproduction change over and additional setups pose objectives of a logistic cooperation. Shortterm improvement projects regarding transport and distribution could be the consolidation of shipments on selected products and destinationsortheincreaseofdirectshipments inorder toreduceshipping,transportationand inventory costs. To create processes of order

processinganddemand/supplyplanningmore efficient better coordination between supplier and customer could lead to a diminishment of leadtimesandthereductionofsafetystocksby collaborative forecasting. More intensive cooperation can be found in strategic product development, joint optimization of product portfolio or collaborative projects on process innovations. Trust and openness between partners is the key success factor to build reliable supply chain and logistic opportunities. In general, alliances among small and medium sized companies in order to increase international market access and penetration as well as to facilitate scale economy shall be forced. Companies have to face rising demand for superiorlogisticservices Increasing customer requirements for bestin class logistic services and the need for continuous improvement challenge providers within globalized markets. Low fixed capital guarantees flexibility in designing transnational logistics processes. Flexible network structures are increasingly the key factor in dynamic markets.Inordertoensureproductavailability worldwide at customerdefined conditions, enterprises are challenged to optimize their logistic concepts. This is essential to meet high requirements on flexibility due to necessary shortterm reaction on customer orders, smallish order sizes and decreasing acceptance for delivery failures or delays. The challenges generateadjustmentsoflogisticsstrategiesand have to be orientated towards the following competitivefactors: Customerservice:Themodernlogisticapproach seesthecustomerasbeingthecentralpointof all entrepreneurial activities. For this reason logistics is the ideal initial point for customer binding measures and the generation of competitive advantages. Customeroriented logistic measures do not have to be attended necessarily by customerspecific design of logistic concepts; productsupporting services cangeneratecustomervaluetoo.

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Delivery performance: Increasing quality requirementsregardingdeliveryperformanceas well as the continuous optimization of logistic costs result in a conflict of objective. The demand for superior logistic services, shorter periods to response on customers requirements and other changes within the supply chain pose difficult challenges for companies. If product attributes and price do notdiffersignificantly,logisticservicewillbethe decisivepurchasecriterionasthecustomerwill probably choose the product offering the best options.Inthiscase,deliverytimeandreliability are the major competitive factors, crucial for thestrategicsuccessofthecompany. Ineachfield(B2B,B2C,etc.)customersrequire the personal and institutional perception of responsibility. This involves a new significance oftheroleoflogisticserviceproviders,evolving from typical task fulfilment to innovative and creativedesigningwithinareliablepartnership. Companiesarechallengedbygrowingdemand forcustomizedlogisticsolutions Standardization and Optimization within the managementofcustomersandnetworkswillbe determining challengesforlogisticprocessesas atthesametimeenterprisesandlogisticservice providers have to meet requirements which apply specifically to a concrete problem, sector or customer (standardized individuality). Logistic solutions which are readymade will not be viable in the future: all the more customized and efficient concepts focused on the customers topics represent important success factors for companies to distinguish themselves from competing companies. Furthermore the well directed application of logistics technology systems focused on customeroriented product and service specifications will be indispensable. Complexity and cost pressure come second to robustness and security in supply chain management as conceptsforstocklessorlowinventory(intimes of uncertainty and risks in a turbulent worldwide environment) have to be reconsidered and new optima have to be defined. A return to increased Europeanwide networkingcannotbeexcluded.

Optimization of logistic processes as the key forcostreductionandtransparency Asignificantlyimportantobjectiveoflogisticsis the reduction of costs through optimization of the total system, especially of operational activities which come along with increasing market performance. The growing range of taskswouldinfactleadtoanincreasingshareof logisticcostsonoverallcosts,althoughcostscan be further reduced continuously by process optimization. The development of intelligent logistic solutions together with the efficient design of operational sequences enables companies to continue cost reduction. Freight costs optimization have high influence, which can be realized by optimizing the payload, re considerthetransportdistancetocustomersin respect of transportation mode as well as optimize the freight tariff. Process monitoring and controlling with Supply Chain Event Management Systems (SCEM) create highly competitiveadvantages.Outsourcingcanposea chance to optimize logistic processes too and therefore remains attractive for companies, eventhoughmotivesforindustryandretailare changing. Besides concentration on core competences, cost and quality aspects are focussed. Singlesourcing strategies will gain importanceinthiscontext. Companies shall be prepared for accumulated andintensifiedsafetyregulations Accumulated safety regulations in global trade increase the complexity for logistic processes. Examples would be: (1) long waiting periods in already overloaded entrance ports, hence resulting in (2) demurrage costs for containers, incalculable turnaround times as well as (3) incomplete information availability and (4) an additional expenditure in administration and handling. These parameters often entail unpredictable indirect costs and aspects of quality. The examination of Worst Case scenarios allows the stability and operability of the supply chain to be maintained and applies, beside flexible processes and structures, as a success criterion. A substantial contribution to increasing security in supply chains is made by information and communication technologies. In container traffic technologies like RFID, GPS

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and Smart Container enable consistent transmission pursuit and the identification of deviations and potential dangers. In the scope of sensor engineering the electronic seal is a possibility for the recording of incidents; the market penetration is inhibited because of the lack of standardization. The topic security in global supply chains does not only require the operational, but also the strategic viewpoint of allelementsandparties,inparticularthefocus has to be put on the weakest link in the chain. Due to the strategic importance and in the sense of prevention it is essential to place this topicontopmanagementlevel. Rising importance of intelligent Information and Communication Technologies in the field oflogistics Technological progress opens up new ways for process innovations within the logistic field. A possible and potential solution instrument for many logisticsrelevant, in particular traffic related problems, is the Information and Communications Technology (ICT). Experts assumethatinthefuturemanyvehicleswillbe equipped with Information and Communications Technology interfaces resultingineasierimplementationofadditional options (e.g. improvement of the extent of utilization of the vehicles). Beyond that the futurevehiclesareinterlacedandequippedwith justintime (JIT) information services. Customers will call for transparency and informationavailabilityatanytimeinthesupply chain;fulfillingthosecustomerdemandsisalso a competitive advantage for the companies. By the use of information and communication technologies as well as the integration of internetbased solutions, the speed and transparency can be ensured to enable cross company planning and the control of complex logisticschains.Tocope withthecomplexityof the supply chain and to integrate the partners and the processes of global cooperative networks and logistic operational sequences of international enterprise activities, intelligent information systems are required. In logistics research in the field of selfmonitoring is needed, namely the tracking of goods during

transport by systems which react in case of deviations. Increasingrequirementsforthelogisticstaff Theglobaldimensionoftheflowsofgoodsand information leads to higher and differentiated requirements of logistic personnel. Apart from thecrossculturalcompetence,specialattention has to be placed on the cooperative strategy, plan and target setting. Further the technologicalrequirementswillincreasenotably. Handling the complexity of logistic solutions in accordance with the requirements of the economy and the customers demands both technical and general knowhow as well as crosscompany thinking soft skills. In future better skilled and qualified employees will operate in the logistic industry. Expert related further education in companies will become moreimportantundamplifiestheinnovationin therangeoflogistics. Sustainablemanagementoflogisticsystems The consequences of a growing environmental sensitivityofthepopulationforlogisticsshould not be underestimated: increasing aversion towardroadtransportcouldforcecompaniesto rearrange their transportintensive delivery chainsandchangeovertothecarriersrailand inland waterways or sea. However, this could not be the only reason for a restructuring of logistics. Today the cost analysis concentrates onlyontheindirecttraceablecosts,forexample warehousing, transport and inventory costs. Environmentalcostscausedbylogisticactivities areconsideredtoalesserextent.Thefactthata methodical agreement for calculating the externalcostsismissingcombinedwiththelack of political willingness to internalize these means that these costs cannot be assigned to logistics. In the future, the stronger environmental adjustment of the society, for example the regionalization of the transportation flows, may cause a decrease of transportationvolumes.Undisputableisthefact that because of new legal requirements to reduce emissions and to save resources additional tasks will be assigned to the supply chain management. This requires detailed knowledgeoftheentirevaluechain,sinceeach

34

partcandirectlyorindirectlygenerateoravoid emissions. The management itself has to act in line with longterm goals and to ensure the sustainableuseofthepotentialforsuccess,not forshorttermprofitmaximization. IntegrationofLogisticsinthebusinessstrategy Referringtothecompaniestheabovelistedand discussed opportunities and threats require a strategicviewofthelogisticrelevantchallenges.

The logistic strategies and targets have to be integrated in the strategic plan and system of objectives of the companies. Continuous changes and reorientations within the logistic processes as well as global economic dynamics require both a companywide and cross company oriented approach and as well as flexibleprocessesandstructures.

5.3

Needforfutureactionsandimprovements forchemicallogisticsinCEE
improvement of chemical logistics. Especially the barriers at the border crossing and at identified bottlenecks should be overcome. Important transport corridors for the Chemical Industry start in Central Germany extended to theeconomiccentresandgrowthmarketsinSt. Petersburg, Moscow, Vladimir, Kiev or Odessa andfurthermoretoChina.Furthermoreincities and agglomerations ring road section constructionshallbetakenintoconsiderationas well as the improvement of transit conditions through big cities. Improvements also address theincreaseofsafetyontheroad,especiallyin termsofhazardousgoods.Presentandplanned roadtunnelsarenotallclassifiedfordangerous goods according to ADR. These issues shall be taken into consideration within planning proceduresofroadinfrastructure.Furthermore, experts recommend installing bigger parking facilities with higher security standards, as the lack of truck parking facilities makes it difficult to fulfil requirements of social legislation. Transporting dangerous goods by road shall be more transparent, meaning on the one hand reassessing the restrictions for transport of dangerous goods on several segments of road network,ontheotherhandtomakingadraftof transitroadnetworksfortransportofhazardous goods. The railway system is especially challenged to increase efficiency, respectively to modernize rail corridors (according to AGTC agreement) and to speed up the transition from

Development of vision of a PanEuropean Olefinpipelinenetwork ThedevelopmentofavisionforapanEuropean Olefin pipeline network in CEE is an important contribution for strengthening the competitiveness of this region especially in comparison with the highly integrated Western European chemical locations. The pipeline network can only be implemented under consideration of the interest of private enterprises in close cooperation with the political level. The pipelines can contribute to avoidance of transport especially on the congestedroadsandrailway,toimprovesafety of chemical transports and to reduce costs for chemicallogistics.Theexternaleffectsandcosts ofpipelinesarealmostnegligibleandlimitedto the construction of the infrastructures and the energyproductionforthepumpinginstallation. Itisthereforeobviousthatamodalshiftinfavor of pipelines is in line with the EU Transport Policy and constitutes an excellent opportunity to integrate transport in sustainable development and promote European regional cohesion. The improvement infrastructure and diversification of gas supply projects from the Scandinaviandirection(BalticPipe,Skanled)are of key importance for Eastern European countries. Improvement of transportation network and systemsinCEE Extensive investments in the railway and road infrastructure in CEE are necessary for an

35

bureaucratic or partly monopolistic culture and mentality to a marketdriven habit with the main objective to satisfy customer demands, respectively to continue the privatization and liberalizationprocess.Itisexpectedthatthiswill leadtolowercosts,inparticulartoareduction in infrastructure management costs. The attention and investments shall not only be dedicatedtopassengertraffic,butalsotocargo transport. In particular investments shall be madeinmodernizationandpurchasingofrolling stockwithEuropeanFunds.Itisimportantthat these implement modern technologies. Additionally, it is proposed to consider big transalpine projects on European level as a unique opportunity to encourage transition from road to rail. Harmonization of technical, social and administrative regulations within rail transportation is primordial for the competitiveness of a business location. These requests are not only addressed to political decisionmakers but also to private logistic operators. The first priority to enhance inland waterway transport in CEE is to reduce bottlenecks, to createconditionsforyearroundnavigationand to develop and integrate European inland waterway transport according to the European Agreement on main Inland Waterway of international Importance (AGN). The investments in improvement of the water infrastructure shall be done according to EU standards. Investment in terminals for intermodal transport Investment in Terminals for intermodal transport have a special importance for the Chemical Industry. The combined use of differenttransportmodesespeciallyrailwayand road are especially important for an efficient inland chemical logistics in CEE. Intermodal Terminals have to be developed, extended and connected especially close to the economic centres alongside the important transport corridorsandshallbeaccessibletoalloperators. Furthermore, an increase in efficiency of cargo handlingbetweenthetransportmodesandthe

capacitiesofcargoterminalshastobeachieved. Intensified utilization of Information and Communication Technologies (ICT) in the area of multimodality shall be forced and financially supported technical innovations shall be launched. New intermodal or distribution centres shall be better adjusted to the requirements of the Chemical Industry, respectivelyintermsofstorageandhandlingof dangerous goods. Chemical companies are recommended to consider private or PPP investments. Although a better cooperation between private and stateowned logistic operators is necessary in addition to longterm and strategic governmental support for intermodalsector. Chemical companies also recommend as well the expansion of intermodal terminals by installing valueaddedservices specifically for theChemicalIndustry(e.g.tankcleaning). Building alternative ports for short sea transport Theextensionofalternativeportsfortheshort sea transport is important for the Chemical Industry, to improve the access to the international transport flows and to bypass congested existing ports. The harbour interconnection both via road and railway shall be highly supported by hinterland logistic infrastructure in order to increase inland waterwaytransport. Harmonizationofstandards Theharmonisationofstandardsinthetechnical administrative area as well as in the safety, security and social dimension are necessary to improve efficiency of chemical logistics for crossborder transports, to reduce costs, to reduce delivery times, to minimise safety risks andtoensureanequallevelplayingfield. ImplementERandCrisisManagementSystems fortheChemicalIndustry In the area of safety standards, best practice solutions from Western Europe can be transferredtoCEE.

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Knowhowtransfer KnowhowtransfertoCEEcancontributetoan improvement of chemical logistics. The experiences of the constant optimisation process of logistics can be used in closed cooperationbetweentherelevantstakeholders tomutualadvantage. Coordinationandbundlingoftransport The coordination and bundling of chemical transportsfromoneregiontoaselectedtarget

destination can produce synergies and cost advantages.Thisapproachrequiresahighlevel of cooperation between the relevant chemical enterprises and logistic providers across the borders. Solutions can only be developed and implemented in close cooperation between Enterprises / Logistic Providers and Politics and Administration at regional, national and EuropeanLevel

5.4

Needforfutureactionsandimprovements fromtheecologicalpointofview
by Europeanwide harmonization of the taxation of energy considering prior performanceisvitalfor the EuropeanChemical Industry. For the chemical companies the growth of a sustainableChemicalIndustryshallbetargeted, actively contributing to Responsible Care Programmes. Support of research and utilization of alternativeenergysources Political decision makers shall force research, development and utilization of alternative energy sources by the allocation of financial benefits. This would lead to a diversification of the sources and possibly, as a consequence, to highersecurityofsupplies.

Strategic orientation of the environment and energy policy regarding a sustainable development Currently shortterm orientation and a heterogeneous picture of the environment and energy policy are obvious in their controversial discussion regarding future availability of resources,implementationofclimateprotection programmesandthetaxpolicyoffossilenergies. Therefore it is highly recommended EUwide harmonized environment regulations to be achieved as these constitute determining factors for a sustainable development. Environmental policies have to be internationally agreed in order to guarantee international competitiveness and have to be oriented towards the polluterpaysprinciple. The provision of neutral terms of competition

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OutlooktoMainstreamingandImplementationofProject Results
road map for implementation. This mainstreamingprocesswillreflectthedifferent dimensions at policy level: European, national and regional; at stakeholder level: politics, industry, Logistic Service Provider and the time span: long term, midterm and shortterm. The projectwillestablishaPolicyAdvisoryGroupto involvetherelevantstakeholdersfromdifferent policy levels and industry in the mainstreaming process. In the process of further specification of potential measures and projects, the partner will implement several feasibility studies from November 2009 until October 2010. These feasibility studies will focus on transnational infrastructure projects in the area of railway transport, intermodal transport, waterway and pipeline transport. These indepth studies should be used to assess the feasibility of selected infrastructure projects with high potentialfortheChemicalIndustryandcontain detailed conclusions for the realisation of this infrastructureinviewofinvestmentpreparation. In the last year of the project from November 2010 to October 2011 the partners will focus their efforts on the strategy development and mainstreaming. On the basis of the mainstreaming process and the results of the feasibility studies the partners will develop a joint strategy and action plan with concrete implementation steps for the improvement of chemical logistics in CEE. This strategy and action plan will contain a list of priority infrastructure projects and measures for cooperation and a description of relevant stakeholders and partnership for implementationoftheseplans.Furthermorethe financial framework for this will be specified in viewofcombiningpublicfundingfromdifferent sources (EU, national and regional) and private investments. The Strategy and Action Plan will also include a time plan with concrete implementation steps and milestones in the years after the end of the ChemLog project.

TheSWOTAnalysishasbeenthefirststepofthe ChemLog project to identify the internal strengths and weaknesses of chemical companies and the external opportunities and threatsfor chemicallogisticsinCentralEurope. On this basis the project partners have drawn general recommendations on needs for future actions and improvements, which have been describedinthischapter. These general recommendations will be used for the further development of the project activities with the objective to achieve the mainstreaming of projects results with a high practical implementation orientation for the improvement of framework conditions and the support of infrastructure development for chemicallogisticsinCEE. In the next step of the work package Analysis and Exchange of Experience the identified strengths and weaknesses will be used to further explore bestpractice solutions in chemicallogisticsinthepartnercountries(from June to November 2009). This analysis will initiate an intensive process of exchange of experience among the partners and involved stakeholders and should allow mutual learning. Withthisactivitytheprojectwantstofacilitate deeper cooperation in the area of chemical logistics in CEE and support the transnational knowhowtransfer. The general recommendations of the SWOT Analysiswillbefurtherdevelopedandspecified inthecourseoftheprojectwiththeobjectiveto agree on concrete recommendations for measuresandprojectsforchemicallogisticsand infrastructure. The project partners should set priorities for specific measures and projects in order to focus joint efforts on promising activities with a high impact for the chemical cluster in CEE. The tangible output of this exercisewillbeashortlistofpotentialconcrete measuresandprojectswithadescriptionofthe currentsituation,needsforimprovementsanda

38

Finally the project will establish a European Network for Chemical Logistics Cooperation in CEEinordertocreateasupportingstructureto implement the recommendations of the

strategy and action plan and to continue cooperation in the area of chemical logistics aftertheprojectend.

ChemLog Implementation and Mainstreaming Strategy

SWOT Analysis
Jun 09
Identified Strengths and Weaknesses Identified Threats and Opportunities General Recommendations for improvements and future actions

Exchange of Experience
Nov 09

Investment Preparation
Oct 10

Strategy Development
Oct 11

Analyse Best Practice Solutions

Facilitate cooperation & know-how transfer Development of Strategy and Action Plan with concrete implementation steps for improvement of chemical logistics (priority infrastructure projects & measures, partnership, finance, time plan) Establishment of Europ. Network for Chemical Logistics Cooperation in CEE as supporting structure

Concrete Recommendations for measures and projects for chemical logistics and infrastructure Priority setting

Implementation of Feasibility Studies on Railway, Intermodal, Waterway and Pipeline Transport

Mainstreaming of Project Results

Policy level: European, National, Regional Stakeholders: Politics, Industry, Logistic Service Provider Time horizon: Long-term, mid-term, short term

Figure3:ChemLogImplementationandMainstreamingStrategy

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