Union des Ports de France / Association pour le Développement des Ports FrançaisDecember 2 2011

Advanced Port Economics Seminar, University of Antwerp, Institute of Transport and Maritime Management, December 17 2012

The Terminalization of Containerized Supply Chains

Jean-Paul Rodrigue

ProfessorDept. of Global Studies & GeographyHofstra UniversityNew York, USA

1- Contemporary Transport Terminals2- Supply Chains and their Terminalization3- The Insertion of Inland Ports

Contemporary Transport Terminals

Role and Function of Transport TerminalsModal and Temporal Separation at Terminals

Terminals and Added Value

What Drives Supply Chain Management? Control Freaks…

Added Value

Efficiency Control

Offshoring

Costs / time /

reliability

Internalize

efficiency

Changing Role and Function of Transport Terminals

ConventionalSmall terminal

surfaceDirect transshipment

possibleLimited

mechanization and automation

Improvisation in terminal operations

ContainerLarge terminal

surfaceIndirect

transshipment (modal separation in time

and space)Advanced

mechanization and automation

Organization and planning

Types of Intermodal Terminals

Port TerminalsR

ail Terminals

DistributionCenters

Container sea terminalIntermediate hub Barge terminal

On-dock and near dock SatelliteterminalLoad centerTransmodal

terminal

Transloading Cross-docking Warehousing

The Global Gateway System, 200639 Gateway Regions90% of the World’s Freight TransportPearl River Delta: 16.7%

Technical Changes in Container Port Terminals

Standard Container Port Emerging Paradigm

Stacking density 1,000 to 1,200 TEUs per hectare

2,000 to 4,000 TEUs per hectare

Ship-to-shore gantry crane productivity

About 30 movements per hour

About 50 movements per hour

Dwell time at container yard

About 6 days About 3 days

Truck turnaround time About 60 minutes About 30 minutes

Rail access In port area On dock

Berthing depth 12 to 15 meters (40 to 50 feet)

More than 15 meters (50 feet)

Modal and Temporal Separation at Freight Transport Terminals

Road Rail

Modal and Temporal Separation

Buffer

Maritime / Barge

Inland Transport System

Maritime Transport System

1

1 1

2 3

4

1- Intermodal2- Transfer quay to truck gates3- On dock rail4- Transloading

Modal Separation in Space: Europa Terminal in Antwerp

Trucks

Deepsea services

Rail

Barges

Strategies Used by Port Authorities to Coordinate their Hinterland

Usage of incentives Coordinate operations of freight actors.Optimal usage of transport chains.

Inter-firm alliances Vertical integration (along transport chains).Horizontal integration (between competitors).Alliance between a maritime shipping company and a terminal operator (vertical).Equipment / container pools (horizontal).

Organisational scope

Vertical integration where an actor decides to penetrate a new market.A maritime shipping company involved in port terminal operations.A port authority developing an inland port.

Collective actions Public / private partnerships to create logistics parks.Each actor contributes within its realm of expertise.Development of multiplying effects.

Freight Transport Terminals: Operations and Added Value

Core(Operations)

Infrastructure Modal access (dock, siding, road), unloading areas

Equipment Intermodal lifting equipment, storing equipment

Storage Yard for empty and loaded containers

Management Administration, maintenance, access (gates), information systems

Ancillary(Added Value)

Trade facilitation Free trade zone, logistical services

Distribution centers Transloading, cross-docking, warehousing, light manufacturing, temperature controlled facilities (cold chain)

Storage depot Container depot, bulk storage

Container services Washing, preparation, repair, worthiness certification

Rationale of Container Transloading

Consolidation

Weight compliance

Palletizing

Demurrage charges

Equipment availabilitySupply chain management

Supply Chains and their Terminalization

The Concept of TerminalizationExport Flows to the Gateways

The Maritime SegmentImport Flows to the Hinterland

Unraveling the Terminalization Concept

■ Terminalization• Growing influence of transport terminals in

the setting and operation of supply chains in terms of location, capacity and reliability.

Type Bottleneck-derived Warehousing-derivedNature Terminal as a constraint Terminal as a bufferConcept Rational use of facilities to

maintain operational conditions

Incorporating the terminal as a storage unit

Challenge Storage space, port call frequency, gate access

“Inventory in transit” with “inventory at terminal”

Outcome Volume, frequency and scheduling changes

Reduce warehousing requirements at distribution centers

Terminalization in a Supply Chain Context

Gateway

Offshore Hub

BottleneckBuffer

Distribution center (outbound / inbound)Inland containerized goods flow

Inland non-containerized goods flowMaritime container flow

Foreland (First Mile)

Hinterland (Last Mile)

Gateway

Suppliers

CustomersExtended Distribution Center

Extended Gate

Port regionalization and the creation of a Regional Load Center Network

Inland Terminal

Supply Chain Terminalization: Export Flows to the Gateway

■ Bottleneck-derived terminalization• Containerized cargo:

• Logistics zones near the gateway or in a hinterland location connected to the gateway via a multimodal transport corridor.

• Distribution:• Tends to be

synchronized with terminal handling capacity.

Gateway

Offshore Hub

Gateway

Suppliers

Customers

Inland Terminal

Supply Chain Terminalization: The Maritime Segment

■ Buffer-derived terminalization• Intermediate facility

(offshore hubs):• Transshipment,

interlining or relay.• Low cost locations

before entering high distribution costs areas.

Gateway

Offshore Hub

Gateway

Suppliers

Customers

Inland Terminal

Liner Shipping Port Calls, 2009

17.2%62.0%

18.6%

2.2%

Direct One TransshipmentTwo Transshipments Three Transshipments

Factors behind Transshipment

FactorSubstitution Small ships instead of large ships (better asset utilization).

Water instead of land (modal shift).Network expansion More links and wider coverage (more traffic and throughput).

Intersection and relay (transit between long distance services).Imposed Lack of port infrastructure (capacity unavailable for large ships).

Congestion (potential delays for large ships).High port costs (port call charges versus volume).

Cost trade off Savings in ship cost vs. additional port handling (advantages of ‘offshore’ locations).

Level of service Transit Time (varied; depend on the port pairs).Frequency (higher; more port calls).Reliability (less; more potential for delays).

Appeal Lead to surges in traffic (additional revenue).Limited externalities (hinterland connections).

The Advantages of Intermediate Hub Terminals

• Proximity to major shipping routes (low deviation)

• Intermediary locationsLocation

• Greater depth (>13.5 meters)• Accommodate post-panamax

shipsDepth

• Large yard area• Available land for expansionLand

• Lower costs and less regulations

• Fast throughputCosts

• Limited investment requiredHinterland

• Commonly managed by a (single) global private operator

Ownership

The Insertion of Intermediate Hub Terminals

85% of Transshipment Traffic 15% of Transshipment Traffic

Gateways and Transshipment Hubs: Different DynamicsMonthly Container Traffic (Jan 2005 =100)

Transshipment Volume and Incidence by Major Ports, 2007-09

Asia – Mediterranean Corridor Caribbean Transshipment Triangle

East Asia Cluster

Northern Range

Supply Chain Terminalization: Import Flows to the Hinterland

■ Bottleneck and buffer-derived terminalization1. Port

regionalization:• Regional load center

network.2. Extended gate:

• Development of inland terminals.

3. Extended distribution center:• The terminal as a

warehousing unit.

Gateway

Offshore Hub

Gateway

Suppliers

Customers

Inland Terminal

1

2

3

Asymmetries between Import and Export-Based Containerized Logistics

Many Customers• Function of population density.• Geographical spread.• Incites transloading.• High priority (value, timeliness).

Few Suppliers• Function of resource

density.• Geographical

concentration.• Lower priority.• Depends on

repositioning opportunities.

GatewayInland

Terminal

DistributionCenter

Customer

SupplierRepositioning

Import-Based

Export-Based

Impacts of Terminalization on Supply Chain Costs

Intermodal transportation costs

No noticeable effects.Derived from higher terminal costs.Cost mitigation through terminal use (e.g. drayage).

In-transit inventory costs Confers additional flexibility.Used as a buffer.

Warehousing inventory costs

Partially transferred to the terminal.Blended with in-transit inventory costs.

Dwell time costs Terminal not always used as a facilitator for synchronization between transport modes.Places for cheap storage of consignments.Could be the result of deliberate actions of actors in supply chains.

The Insertion of Inland Ports

Inland Ports: Governance and Added ValueInland Ports in North America

The Containerization of Commodities

The Inland Logistics Funnel: The “Last Mile” in Freight Distribution

CapacityFunnel

FrequencyFunnel

CapacityGap

Economies of scale

FrequencyGap

FORELAND

HINTERLAND

Main Shipping Lane

Inland Terminal

INTERMEDIATE HUB

GATEWAY

Atomization

Massification

Basic Requirements for Inland Ports

Intermodal Rail Terminal

(Massification)

Logistics Activities

(Agglomeration)

Rail Corridor to the Gateway

(Massification)

Co-location

Functions of Inland Terminals

A –

Sate

llite

Term

inalClose to a port

facility; Handle traffic and functions that have become too expensive at the port, Container transloading.

B –

Load

Cen

terAccess regional

markets; Intermodal, warehousing, and logistics functions; Linked with logistics parks and foreign trade zones.

C –

Tran

sshi

pmen

tLink systems of freight circulation either through the same mode (e.g. rail-to-rail) or through intermodalism (e.g. rail-to-truck).

A B C

PortCorridor

Drayage

Modal Shift and Inland Freight Diversion

Satellite Terminal

Inland Port

Flows Relations

Gateway

A

B

Road

Rail Gateway

The Massification of Transportation and Land Use in Inland Systems

Port Port Port

IT

IT

IT

IT

InlandPort

Corri

dor

Port-Centric

Inland Load Center Network Formation Supporting Land Use

Direct truck End haul Rail / barge service

IT

Intermodal Industrial

Park

InlandTerminal

Main Governance Models for Inland Ports

Model Characteristics Implications

Single Ownership A public or a private actor entirely responsible for development and operations.Single vision and conformity to a specific role.

Potential lack of flexibility in view to changes (single mandate).Potential conflicts with surrounding communities.

Public – Private Partnership

Help combine public planning of infrastructures with private operational expertise.Public (local) interests represented.

Tendency to prioritize public interests over private interests.

Landlord Model Public ownership and private operations (a form of PPP).Long term concession agreements.

Managerial flexibility between the owner, the site manager and the operators.Most of the risk assumed by private operators.

Added Value Activities Performed at an Inland Port

Activity FunctionsConsolidation / Deconsolidation

Inventory management practices.Cargo consolidated (or deconsolidated) into container loads (paletization).Attaining a batch size (group of containers) fitting a barge or a train shipment.Breaking down batches so that they can be picked up by trucks.

Transloading Change in to load unit (Maritime / Domestic).Consolidation, deconsolidation and transloading commonly mixed.

Postponement Opportunity to route freight according to last minute and last mile considerations (dwell time).Buffer within a supply chain.

Light transformations Forms of product and package transformations (packaging, labeling).Customization to national, cultural or linguistic market characteristics.

Market Accessibility of Major North American Inland Load Centers

American Foreign Trade by Maritime Containers, 2010 (in TEUs)

Wal-MartTarget

Home DepotLowe's

Sears HoldingDole FoodHeineken

PhilipsChiquita

SamsungLG GroupIkea Intl.

JC PenneyCostco WholsaleAshley Furniture

JardenGeneral Electric

Red BullNike

Whirlpool

0 200,000 400,000 600,000 800,000

696,000

455,500

296,700

221,600

212,800

211,200

129,000

127,200

117,100

109,100

101,900

95,700

89,900

83,000

77,300

77,100

76,700

74,000

72,300

64,100

Importers

America Chung NamKoch IndustriesWeyerhaeuserDow Chemical

DupontNewport CH Intl

JC HorizonShintech

Allenberg CottonPotential Industries

ExxonMobilDelong

BASFMeadwestvaco

Cedarwood-YoungSDDC

Sims Metal ManagementCargill

ScoularEastman Chemical

0

200,000

400,000

600,000

800,000

300,800122,400113,900109,300

93,60093,10082,70079,80078,70078,60075,50075,30070,20063,70060,40060,20052,20051,20050,20048,100

Exporters

Main Container Ports, Trade Corridors and Distribution Hubs in North America

Two growth dynamics:1) Coastal shift / rebalancing2) Commodities

Main Advantages of Co-location: Multiplying Factors for the Last Mile

Factor AdvantagesReal estate Lower land acquisition costs. Higher acquisition capital.

Joint land use planning.Specialization Transport company; terminal development and

operations.Real estate promoter; logistic zone development and management.

Cargo interdependency Respective customers. Joint marketing.Drayage Priority gate access. Shorter distances. More delivery

trips. Higher reliability.Asset utilization Better usage level of containers and chassis. Chassis

pools. Empty container depots.Information technologies

Integration of terminal management systems with inventory management systems.

BNSF Logistics Park, Chicago

BNSF

Inte

rmod

al Y

ard

Distribution Centers

Wal-Mart

Mae

rsk

CaliforniaCartage

Chica

go (

60km

) ►

An Expected Shift in Containerization Growth Factors

DerivedEconomic

and income growth

Globalization

(outsourcing)

Fragmentation of

production and

consumption

Substitution

Functional and

geographical diffusion

New niches (commodities and cold

chain)Capture of bulk and

break-bulk markets

Incidental

Trade imbalancesRepositioning of empty containers

Induced

Transshipment (hub,

relay and interlining)

Growth Factors behind the Containerization of Commodities

Growing availability of containers

Rising demand and commodity prices

Fluctuations in bulk shipping rates

Imbalances in container shipping rates (export subsidy)

Empty containers repositioning

Containerized Weight for Selected Commodities

Commodity Pounds per cubic foot Weight in a fully loaded 20 foot container

Wheat 48 26 tons* (28 tons)Corn 45 26 tonsDry peas, beans and lentils

37 22 tons

Vegetable oil (e.g. canola) 60 26 tons* (35 tons)Coffee (fresh beans) 35 21 tonsLumber (2x4s) 45 26 tonsHay (e.g. alfalfa) 14 8 tonsPotash 80 26 tons* (46 tons)Coal (Anthracite) 70 26 tons* (41 tons)Paper or wood pulp 75 26 tons* (44 tons)

* Exceeds maximum permissible weight.

From Bulk to Containers: Breaking Economies of Scale

• Container as an independent load unit.• Minimal load unit; one TEU container.Entry Barriers

• Limited differences in scale economies for a producer.

• Incremental / linear cost-volume function.

Required Volumes

• New producers (smaller).• Product differentiation (more variety).

Market Potential

Loading Coffee into Containers

Loading Coking Coal into Containers