Source: adapted from Rodrigue, J-P and T. Notteboom (2009) “The Terminalization of Supply Chains: Reassessing the Role of Terminals in Port / Hinterland Logistical Relationships”, Maritime Policy and Management, Vol. 36, No. 2, pp. 165-183.
Two types of terminalization can be identified:
- Bottleneck-derived terminalization. It encompasses a conventional perspective on the role of terminals where the terminal is the primary source of delay and capacity constraint for the supply chain. It does not necessarily mean that the terminal is running close to capacity but that operational issues (storage space, port call frequency, gate access) are imposing a more rational use of the facilities so that the performance and reliability of the terminal are maintained. This is particularly important since terminal operators must maintain a level of service to their users, particularly maritime shipping lines. In this case, the supply chain adapts to volume, frequency, and scheduling changes and may seek alternatives if performance and reliability are not satisfactory.
- Warehousing-derived (buffer) terminalization. It refers to the function of warehousing, in whole or in part, shifting to the terminal. The terminal becomes a buffer like a distribution center, which functionally makes the terminal an active component of the supply chain, not as a factor of delay, but as a storage unit. It can provide the supply chain with a higher level of flexibility by lowering warehousing costs as well as adapting to unforeseen events such as demand surges or delays. An inventory-in-transit strategy coupled with an inventory-at-terminal strategy can significantly reduce warehousing requirements at distribution centers and offer more flexibility in selecting the final destination of an unbound shipment. Considering the wide variety of supply chains, each with its own requirements in terms of origins, destinations, frequency, reliability, and overall elasticity, buffer-derived terminalization can take many forms.