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Is this the next logistics revolution?

Is this the next logistics revolution?

Switzerland’s private sector is upending the logistics scene, as it plans a nation-wide underground autonomous cargo delivery network.

The consequences of increased transport traffic are well known; however, in Switzerland the environmental and economic impacts are especially hard hitting. Switzerland is at the cross-roads of inter-European trade and transit, and has long sought to tackle the substantial through-traffic tranversing the country.

Switzerland’s mega-project pedigree

Switzerland’s central location and the necessities of travel in a mountainous country have long spurred massive infrastructure projects in the country. The Swiss built the first tunnel through the Alps, the 14 km Gotthard rail tunnel, in 1882. In 1913 the 14.6km Lötschberg rail tunnel opened further to the west.

This tunnel now forms part of the Swiss ‘rolling highway’ in which freight trucks are ferried from the Italian to German borders on electric trains, reducing pollution and congestion. Said traffic has only increased, especially in the wake of the creation of the EU and the Schengen area. The Swiss are cognizant of this and have in recent decades launched a series of highly audacious mega-projects.

In 1980 the 16.9 km Gotthard road tunnel was opened, and currently there is a referendum underway in Switzerland to bore a second tunnel in order to increase safety and repair the original. Next to these tunnels, the Gotthard Base Tunnel (GBT) is slated to finish construction this summer.

Comprising two 57 km routes and a total of 151.8 km of tunnels, shafts, and passages this $12.3 billion mega-project is the world’s longest and deepest traffic tunnel. The GBT is expected to see 40 million tonnes of annual rail cargo traffic.

Add to this the 39.8 km Ceneri tunnel slated for completion in 2020, and it is easy to see how Switzerland has established itself a global drilling, boring, and construction leader.

Cargo sous terrain – the next logistics revolution?

Switzerland finds itself at the centre of Europe’s largest logistics and transit corridor, the so-called ‘Blue Banana’ which stretches from London to Genoa. The Alps create a bottle neck that severely limits continental trade and traffic.

The latest Swiss mega-project seeks to upend the traditional logistics and distribution system. Cargo sous terrain (CST) is envisioned as a nation-wide, underground, autonomous transport network. Specifically the system comprises a three lane network hosting electric, drone delivery capsules. Said vehicles are to be designed around the standard cargo Euro-pallet (being able to hold two), and will travel via an induction rail at 30 km per hour, 24/7.

All moving parts are on the pods, reducing maintenance costs. Moreover, the pod’s autonomous nature means further savings from not having to build ventilation and signalling systems, escape routes and other human-centric design features.

Cargo pods will travel underground, with elevators carrying the pods 50 meters directly into major pre-existing distribution centres, or at strategically located purpose built logistic hubs. The final plan envisions a system spanning from Lake Geneva to Lake Constance, with branches to Thun, Luzern, and Basel. Such a mega-project would be unprecedented, and the 70 km pilot project between logistic hub Härkingen-Niederbipp and Zurich is projected to cost $3.6 billion and come online in 2028.

Both the ecological and economic merits of the projects are being touted by supporters, as the completed system is projected to reduce CO2 emissions by 80% and highway transport traffic by 40% by 2030 compared to existing transport methods. This corresponds neatly with government projections of a 45% increase in transport traffic for the same period.

CST also allows for round the clock delivery, circumventing the current night-time transport vehicle ban, as well as reducing intercity congestion, noise, and accidents. Instead of waiting for deliveries to become cost effective by filling large trucks, the cargo pods allow for targeted and timely deliveries.

This enables round the clock restocking and distribution options, pushing just-in-time logistics norms to new heights. Coupled with small eco-friendly (and potentially autonomous) inner-city distribution vehicles, CST basically eliminates the need for large transport vehicles to enter high density areas.

Another interesting feature is a suspended upper rail for rapid package delivery. This travels at 60km per hour and is targeted at priority packages, as well as rapid deliveries of single items from warehouses purchased online.

Swiss private sector taking up nation building mantel

Previous Swiss mega-projects, and projects of such scale in general, are typically the purview of national governments. What makes CST interesting is that it is overwhelmingly a private sector endeavour. From “2030 the privately financed underground system operating between urban centres will simplify Swiss cargo transport.” CST President Peter Sutterlüti goes one step further, excitedly claiming that “this will stand the world of logistics on its head.”

Currently CST is supported by the lobby group Retail Switzerland, SBB Cargo (the national railway cargo division), the Swiss postal system, Swisscom, as well as Migros and Coop (the two largest Swiss supermarkets) among others. This alliance of firms and organizations released the project’s feasibility report on January 26th 2016, and are planning to create a joint-stock company sometime in 2016/2017.

Projections place the average price of CST at $0.51 per tonne-kilometer, compared to the $0.36 per tonne-kilometer of existing transportation systems. This difference still makes CST competitive, especially when one includes the additional cost of inflation by 2030, as well as CST’s value added savings from increased efficiency, space saving in warehouses and reduced personnel costs. CST is projected to become profitable by 2036.

The fact that the Swiss private sector is leading the way with CST is very telling. It demonstrates long-term vision, but also a willingness to rethink established norms in the face of growing economic and environmental costs. CST is also a great example of how the green-tech revolution is creating sustainable growth opportunities. Perhaps most importantly, CST showcases what engaged pro-active companies should be doing: namely investing in next-gen innovation.

While CST has the potential to boost Swiss growth and create jobs, it is also a potentially lucrative export product. The problems which CST seeks to tackle are universal, and are felt even more acutely by larger nations. Consequently, Daniel Wiener with CST Investor Relations, notes that “the project is attracting a lot of attention, even from insurance and pensions funds. Another possibility is for the export of this innovation overseas. Google and Uber have already signalled their interest.”

One large incentive for the Swiss firms behind CST is likely the current -0.75% interest rates in Switzerland – a result of an overheating currency. Low domestic growth due to weakening demand and a overly strong franc, could very well discourage firms from investing. Instead, spurred by negative interest rates, Swiss companies are willing to think big and innovate.

This runs counter to the voices of austerity in Europe and abroad. If a country as pro-business and laissez-faire as Switzerland is investing in such mega-projects, it undermines the stances of fiscally conservative pro-business governments, notably David Cameron’s in the UK.

The ambition shown by Swiss companies with CST demonstrates that even in (nay, especially in) trying economic times, fortune favours the bold.

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