April 30, 2024

Reviving rail freight transportation: a sustainable solution for industrial sites

In this article we dive into the world of on-site rail logistics and rail freight transportation. We look at its history, the pivotal role rail plays on industrial sites, and what challenges need to be overcome to promote rail as the number one sustainable solution for modern logistics.

If we look at the history of transportation, rail freight reigned supreme since the dawn of the steam engine in the early 1800s. Steel arteries crisscrossed nations, fueling economic growth and connecting industries. However, after the second world war, a steady decline set in. Mainly attributed to the development of air and road transport, as it gained increased flexibility and competitiveness due to a multitude of reasons we will discuss later in this article. Since 2000, there has been a relatively steady distribution of the modal split, yet road transport continues to grow in importance

In light of the escalating impact and hazards of climate change, EU policymakers have committed to ambitious targets for reducing CO2 emissions. Given the amount of emissions coming from transportation, it has become a key focus. As such the European Green Deal states that rail freight transport's modal share needs to be elevated to 30% by 2030, a notable increase from the current 17.1% share. The average provided may not accurately reflect the diverse landscape of rail usage across countries, as illustrated below. Some nations, like Switzerland and Austria, already have a significant rail freight modal share of 25-35%. This achievement is bolstered by pro-rail policies and substantial investments in infrastructure. In contrast, other European countries lag behind with hardly any rail freight activity, highlighting the pressing need for substantial improvements in these places.

Modal split of freight transport in Europe in 2022 - Source: Eurostat

On-site logistics and rail freight transportation

Before we dive into the world of on-site logistics and rail freight transportation it is important to note their differences. On-site logistics is almost exclusively used on private industrial sites and in ports. It is often a part of the production process similar to a conveyer belt.

Rail freight transportation is when Railway Undertakings use public rail infrastructure to transport goods from point A to point B. In 2022 we used rail for 17.1% of all inland freight tonnes transported per km in Europe. Examples of Railway Undertakings are DB cargo, SNCF, Lineas, etc.

On-site logistics and rail freight transportation are primarily used for the following goods:

  1. Mining ores such as coal, iron, copper, etc.
  2. Agricultural products
  3. Steel and its derivatives
  4. Chemicals
  5. Automotive

Why did rail  transport lose modal share?

Rail freight transportation in Europe suffered from a steady decline over several decades. The modal share of rail freight has decreased from a dominant 60 percent in the 1950s, and 30 percent in the 1970s, to as little as 17 percent in 2022. How did this decline come about?

  • When labour costs rose and stricter environmental laws were put in place, mines closed and  raw materials from outside of Europe became cheaper when imported. As a result a lot of key customer industries for rail moved away from Europe.
  • After the second world war, industries divided from large production sites into smaller factories. These either couldn’t fill convoys as quickly or had no connection to rail infrastructure.
  • New developments such as e-commerce has drastically changed how goods are shipped and delivered. With a rise in parcel shipments and an increased demand for single wagon load transport, coupled with the necessity for greater last-mile flexibility, trucks became more valuable in modern logistics.
  • Rail had a hard time keeping up to the speed of innovation. Hindered by regulations, vendor lock-in, lack of liberalisation and more, its cost position worsened in favour of other modes of transport
  • Until recently, the environmental impact of road transport was not factored into their pricing, leading to artificially lower costs for this mode of transportation.

Rail versus road transport: The benefits

Rail freight transportation boasts an array of benefits that make it indispensable in modern logistics:

  1. Cost-Effectiveness over long distance: Rail offers unparalleled cost efficiency for transport over 300 kilometers. Its ability to transport large volumes over long distances makes it ideal for industries who have a sustained output of bulk, heavy, large or dangerous goods.
  2. Environmental friendly: Approximately 10% of Europe's CO2 emissions come from freight transport, with trucks being responsible for 75% of all freight. Rail uses 6 times less CO2, 8 times less air pollution and 6 times less energy, which makes it the transport mode of choice for environmentally friendly transport.
  3. Increased Safety: The risk of a rail accident is around 40 times lower than for road transport, which stems from strict safety protocols and comprehensive measures. There is however still room for improvement, which is why we developed our OTIV.ONE solution to increase safety in shunting and our OTIV.TWO solution to increase detection of on-rail dangers.
  4. Lower traffic congestion: Motorists in Europe's top 25 congested cities lose 75 to 150 hours yearly in traffic. With freight set to surge 30% by 2030, roads struggle to cope with growing truck loads. Rail, with its dedicated infrastructure and underutilized capacity, offers the sole remedy for congestion.
gCO2 per tonne-km emitted for each transport mode - Source: ECA, based on European Environment Agency data as at 2018.

Reviving rail-based on-site logistics and rail freight transportation

Despite its advantages previously discussed, on-site rail logistics and rail freight transportation face multiple challenges on its path to resurgence.

1. Improving rail capacity

Increasing capacity of current railways is difficult. Running a freight train through Europe means adapting to different Traffic Management Systems, priority rules and speed limits for every country. Because of this requesting rail paths needs to be done a year in advance. This rigidity makes it very hard to optimize capacity.

There are many different solutions being worked on to solve this problem. European Traffic Management System (ERTMS) is a single signalling and speed control system. Digital Capacity Management will allow RU’s to request rail paths in real-time. Digital Automatic Coupling will make it possible to reduce time spent manually coupling wagons. Automatic Train Operation (ATO)  makes trains run automatically, reducing downtime and offering a solutions for increased labour shortages. Read all about these emerging technologies here.

2. Expand infrastructure and intermodal integration

We need to improve and expand rail infrastructure. The length of motorways in Europe grew by 30.000 km between 1995 and 2020, whereas railways shrank by 15.650km. On top of improvements to mainline rail, we need to improve connections to customers and suppliers through rail sidings. If there is no connection to the public network, its impossible to incentivize these companies to use rail.

Europe announced it was going to invest 6.2 billion in transport projects across Europe. Rail is one of the major focus areas for this package, as major cross-border rail connections along the TEN-T core network have been prioritised for funding.

Being able to connect with other modes of transport such as maritime and in-land shipping or trucking for last-mile is critical to increase the use of rail. Companies such as VIIA or CargoBeamer are putting trucks directly on trains. A lot of different ports such as the Port of Hamburg or the Port of Duisburg are also heavily investing in multimodal integration.

3. Align regulatory framework

In many ways there are regulations favouring road transport. As mentioned before, rail has to deal with many more country-specific regulations, but it goes further than that. Road transport has much better cost-effectiveness, because external costs such as the environmental impacts were never taken into account. Trucks pay for 10% of their total costs, whereas rail pays for 90% of it. Legal acts, in particular for road transport, can have an impact on the competitiveness of intermodal transport. For example, the Eurovignette Directive regulates the charges that can be imposed on road vehicles in order to account for the external costs of road transport. Another example of where we are going in the wrong direction is the latest vote on the directive of weights and dimensions, allowing for mega trucks to be used in long-distance road transport.

4. Improve innovation by combating vendor lock-in

In rail there is often a limited pool of suppliers for the different components of rail vehicles and infrastructure. This exclusive supplier landscape results in a vendor lock-in scenario, leaving Railway Undertakings with few alternatives to select from. In turn this reduces incentive for suppliers to innovate, and poses significant barriers for new entrants attempting to penetrate the market.

This underscores the vital role of startups like OTIV, Konux, Railnova and more in propelling innovation within the rail industry. As young companies, we approach challenges in rail with fresh perspective, unencumbered by the organizational scale or extensive product offerings characteristic of larger OEMs. However, collaboration remains key; we must work alongside OEMs and operators to collectively validate and test these solutions. By forming strategic partnerships, we can effectively integrate these technologies into operations.

OTIV works together with large industrial players such as ArcelorMittal to increase safety and efficiency in on-site logistics


Reviving rail freight transportation and on-site logistics by rail, presents a multifaceted challenge but offers amazing opportunities at a lower environmental and societal cost. By addressing capacity constraints, expanding infrastructure, aligning regulations, and fostering innovation, we can unlock the full potential of rail as the cornerstone of sustainable logistics. OTIV leads the charge by offering cutting-edge technologies to industrial companies and railway undertakings, enhancing safety, efficiency, and aiding in addressing labor shortages.

Interested in learning how our products can help your on-site logistics? Let’s connect and talk about possible solutions together!