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Sending Parts From China to Europe? Try the Trans-Siberian Railway

Even though I have been covering the electronics supply chain for years, there are some dots I'm slow at connecting.

For instance, I just assumed that most parts coming and going from China to Europe moved by plane and boat. However, looking at the €500 million (about $645 million in US dollars) investment a Chinese company poured into a port expansion project is Barcelona, Spain, where I'm based, helped steer me to that conclusion. And mostly for safety reasons and the amount of time I thought was needed to cross the vast the Eurasia land mass, rail — and certainly truck — deliveries didn't even show up on my radar screen.

But seeing DHL's recent announcement about launching the first fast-rail connection between China’s megacities and Europe got my own wheels chugging (bad pun intended).

People have used this overland trade route since the days of Marco Polo, so why was I surprised to hear that this could now be applied to the 21st Century global supply chain? Was this an option before, and if so, how did I miss that? Have we indeed reached a point in time when it's now safe and cost-effective enough to move goods by train between these continents?

DHL sees a future in railroad transportation from China to Europe.

DHL sees a future in railroad transportation from China to Europe.

Here's what DHL is bringing to market, as spelled out in its press release:

The new service now offers two routes that combine rail and road transportation: daily shipments from Shanghai via the trans-Siberian route in the North and a weekly departure from Chengdu through China’s West Corridor rail line.

Amadou Diallo, CEO of DHL Freight, adds:

As a flexible solution, this service offers the option of booking variable capacity — ranging from a single container to a whole train. At the same time, it connects seamlessly with both our groupage [STET] network in Europe and DHL Global Forwarding, Freight’s Asian network, including markets such as Japan and Korea.

The benefits, listed by the company, chalk up to a seemingly impressive list:

  • A greener option: The multimodal solution reduces CO2 emissions by up to 90 percent.
  • Lower transportation costs
  • Shorter lead times: Door-to-door lead times decreased by up to 21 days compared to ocean freight

On the Trans-Siberian route to and from Shanghai, DHL claims to be first in the industry to offer customers the option of booking the transport capacity they require at a particular point in time. The main overland transportation mode between Shanghai and the European Union border at Małaszewicze (Poland) is rail, with last-mile transportation by road.

The other route is “optimized for Chengdu-based customers,” and provides “lower transit times of up to eight days compared to the trans-Siberian route and greater cost reduction.” The once-a-week service departs every Friday to Małaszewicze along China’s West Corridor rail line through Kazakhstan, the company said.

So tell us, do you think this a viable alternative? Is this really the most cost-effective way to ship parts? Let us know in the comments section.

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30 comments on “Sending Parts From China to Europe? Try the Trans-Siberian Railway

  1. SP
    May 17, 2013

    Its definitely very cost effective to use Train as mode of transport. Its great it has started from China, almost all companies wants their raw materials from China. But what kind of insurance does Train transport provide.

  2. SemiMike
    May 18, 2013

    When the artic opens up for shipping in most summers, will that be used by China, Japan, Korea et al for shipping to North America and Western Europe?   Seasonal products for Xmas season might be sent in summer at very low rates that way.

  3. _hm
    May 18, 2013

    @jennifer: By sending parts by rail road in place of sea route, does CO2 emission reduce by 90%?

  4. Mr. Roques
    May 19, 2013

    What are the normal maritime routes from Asia to Europe? Through the Mediterranean Sea? Or does it need to border Africa? In that casa, it makes sense that trains take less time than boats.

  5. Taimoor Zubar
    May 20, 2013

    Seems like an ingenious service to me and a great business idea. The initial investment will be high but the cost-savings in the long run should make up for it. I think it's a great service when there's a direct route between two countries. When more than two are involved and there's no direct link between the countries, the situation gets complex.

  6. Taimoor Zubar
    May 20, 2013

    “But what kind of insurance does Train transport provide.”

    @SP: I think since this service is being offered by DHL, the company carries a certain brand value and hence the reliability will be as good as it being sent through air or sea. I don't think people would want any additional insurance cover just because the mode of transport has changed.

  7. prabhakar_deosthali
    May 21, 2013

    The Rail road option is good if there are not many country borders to be crossed. The delays and hassles cause by the customs at each border may add to delays and uncertainties .

     

  8. Houngbo_Hospice
    May 21, 2013

    If it is greener and cost effective, then I think it is a good alternative. But its viability depends on its fiability and the overall transit time. 

  9. Houngbo_Hospice
    May 21, 2013

    @prabhakar_deosthali

    The delays and hassles cause by the customs at each border may add to delays and uncertainties .

    For sure it is not a good option for express delivery. It can still be used in cases where a reasonable delay can be tolerated.

  10. Houngbo_Hospice
    May 21, 2013

    @_hm,

    By sending parts by rail road in place of sea route, does CO2 emission reduce by 90%?

    I wonder how they come up with this figure. If the rail road routes are shorter than sea routes and the train are powered by electricity, there may be a significant reduction of CO2 emission, but 90% reduction seems exagerated.

  11. Ashu001
    May 21, 2013

    McClayton,

    That was precisely what I had in Mind too!

    The rationale behind logistics is that it should be robust and repeatable again and again.

    Can the same be said for The Trans-Siberian Line?

    I am not so sure.

  12. TomMurphy
    May 21, 2013

    The TSRailway has been running a very long time!  You know, Lockheed used to use carrier pigeons at remote site before wireless email came along.  When you need to move parts of info, it's whatever works best.

  13. FLYINGSCOT
    May 22, 2013

    For smaller shipments that are too heavy for air freight this is a great alternative to shipping.  I believe it will do very well but I wonder how capacity constrained it is and what bandits might do to it once everyone knows about it.

  14. Ashu001
    May 22, 2013

    Tom,

    No Disputing the Resilience of the TSR.

    A few days back I had seen a Big Documentary on Bloomberg TV on the TSR(At that time itself I knew it was little more than a Marketing pitch for More External Business by the TSR.

    But we can't ignore History or Geopolitics here.

    We're talking about Transferring Cargo from China to Europe via Russia.

    This seems to be ignoring the Huge Levels of Suspicion that the Chinese and The Russians view each other with(especially in Russia's Far East).

    Then there is the lack of reliability of the Russians as a Supplier-Remember what they did to the Europeans(on Natural gas Supply front) in peak winter few years back?

    The Europeans would be beyond Foolish to trust the Same Russia(which never hesistates to use whatever Resources it has for its Geopolitical needs).

    If more than 33% of the Annual China-Europe Traffic flows along this Route then I am 100% confident the Fools sitting in Brussels deserve to FIRED.

     

    Regards

    Ashish.

  15. Ashu001
    May 22, 2013

    Flying Scot,

    Don't forget the Biggest Bandit of them all-The RUSSIAN STATE!

     

  16. Jennifer Baljko
    May 24, 2013

    MClayton200 – I was thinking the same thing. Seems like a good alternative for the shipments that have to start moving for back-to–school and Christams sales in Western Europe. Also, seems to be a good way for Asian built components to reach EMS companies in Eastern Europe, cutting out some of the distance for getting parts from Europe's coastal areas to inland sites.

  17. Jennifer Baljko
    May 24, 2013

    HH, _hm – I wondered, too, abt this 90% number. Wasn't exactly too clear to me either how they came up with the number in this press release: http://www.dhl.com/en/press/releases/releases_2013/logistics/dhl_with_fast_rail_connection_between_chinas_megacities_and_europe.html#.UZ9hsyuhIVR

  18. Jennifer Baljko
    May 24, 2013

    Ashish – this a very good point…As a BRIC country, Russia is still very much a developing market and has many of the issues you would find in developing countries (infrastructure, government instability, etc) But, many of these issues are not exclusive to Russia – corruption, fraud, empty political promises, bribes, supply chain and customs risks, rocky relations with neighboring countries exist in every part of the globe, and still parts and devices make it through.

  19. Ashu001
    May 24, 2013

    Jennifer,

    That's right.Just feel the Russians are more interested in One-upmanship than Business.

    Thats what happens when a country which was once a Super-power can't come to terms with its loss of power and influence over its wider area.

  20. itguyphil
    May 24, 2013

    What makes you say that?

  21. Ashu001
    June 19, 2013

    pocharle,

    I highly recommend you read up on the past track record of the Russians(since Putin ascended to Office) as Economic Partners.

    It does'nt exactly inspire great confidence in their ability as Stable& reliable Partners in Economic Success.

  22. Ashu001
    June 24, 2013

    pocharle,

    You following Bill no. S .544?

    Its called-Rebuild American Manufacturing Act of 2013.

    The idea is this-

    To require the President to develop a comprehensive national
    manufacturing strategy, and for other purposes.

    Basically the idea is this-Any Company which is Headquartered in America will be required to build a fixed percentage(arbitrarily decided by Congress) of their Products here in America.

    How do you think that will affect the Chinese and the Russians????

    My answer is their reaction won't be pretty.

    Silly things like a SuperBowl ring will be the last thing to matter here.

     

    Regards

    Ashish.

  23. itguyphil
    June 25, 2013

    What is that percentage? Is it fixed or based on the company?

  24. Ashu001
    June 26, 2013

    pocharle,

    The Bill is currently being debated in Congress and has many Fans.

    You should expect a percentage which is suitably high enough to Damage & hurt the way Global Business is run today .

    After all when was the last time you heard Politicians doing sensible things for the Economy?

  25. itguyphil
    June 27, 2013

    Well the only time that happens is if it benefits them in some way.

  26. Ashu001
    June 28, 2013

    pocharle,

    I assume you don't know how Politics work in the US.

    Its about Lobbyists and who can Lobby (with more Dollars or “Consultancy” Jobs after the retire from Congress) the Sitting Representatives in Congress.

    Right now a lot of money is pouring in from the Many Manufacturers who are based 100% in the US as well as the Labor Unions.

    Also,A lot of Constituents (who are largely unemployed and on Food Stamps-Over 46 million ) are very angry and want their Politicians to just do something to generate more Jobs in the US;This is why this policy will play very,very well with the Rank and File (and the ordinary Joes)in the US.

    I have a feeling it will pass through(Only Question is with what kind of Amendments).

    Regards

    Ashish.

  27. Susan Fourtané
    June 28, 2013

    Jennifer, 

    In these days when many companies are looking for becoming greener I believe this is a great option; with the addition that the trans-Siberian route has a great view. All in all, the companies that decide to choose the DHL routes will be adding points to their supply chain green initiative. I think this is great, indeed. 🙂

    -Susan

  28. itguyphil
    June 29, 2013

    I am aware of how politics work.

    I'm also aware that the statement I made essentially mirrors your comment.

  29. Ashu001
    July 3, 2013

    Susan,

    Don't tell me you have actually have travelled by the Trans-Siberian Railway too???

    Lucky You!

    Really Lucky!

    There is no doubt that this Railway gives all the Supply Chain Honchos another option to Ship Goods from China to Europe but I still feel this won't ever be the No.1 Route(because of Geopolitics involved and the Kremlin's Penchant to not Do Business simply).

     

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