Authors: Dr. Jean-Paul Rodrigue and Dr. Theo Notteboom
A dry port is a rail or a barge terminal linked to a maritime terminal with regular inland transport services. They are also called inland ports.
1. A New Role for Inland Terminals
Transport development is gradually shifting inland after a phase focused on developing port terminals and maritime shipping networks. The complexity of modern freight distribution, the increased focus on intermodal and co-modal transport solutions, and capacity issues appear to be the main drivers behind a renewed focus on hinterland logistics. While trucking tends to be sufficient in the initial phase of the development of inland freight distribution systems, at some level of activity, diminishing returns caused by congestion, energy consumption, and empty movements become strong incentives to consider the setting up of inland terminals as the next step in regional freight planning. The massification of flows in networks, through a concentration of cargo in a limited set of ports of call and associated corridors to the hinterland, has created the right conditions for nodes to appear along and at the end of these trunk lines. Therefore, bimodal and trimodal inland terminals have become an intrinsic part of the transport system, particularly in gateway regions having a high reliance on trade.
The evolution of inland freight distribution can be seen as a cycle in the ongoing developments of containerization and intermodal transportation. The geographical characteristics linked with modal availability, capacity, and reliability of regional inland access have an important role to play in shaping this development. As maritime shipping networks and port terminals become better integrated, the focus shifted on inland transportation and the inland terminal as a fundamental component of this strategy. Thus, after a phase that relied on the development of port terminals and maritime shipping networks, the integration of maritime and inland freight distribution systems has favored the setting up of inland ports.
An inland port has a level of integration with the maritime terminal and supports more efficient access to the inland market for inbound and outbound traffic. This implies an array of related logistical activities linked with the terminal, such as distribution centers, depots for containers and chassis, warehouses, and logistical service providers.
Since the inland terminal is an extension of some port activities inland, the term “dry port” has gained acceptance and tends to be the most commonly used term. The term is subject to debate since many inland terminals are, in fact, “wet” given their direct access to inland waterway systems. Moreover, the inland location can effectively be a port if a barge service is concerned. Still, it fundamentally cannot be considered a port if it involves a rail terminal or, more simply, truck depots. Thus, there seems to be no consensus on the terminology resulting in a wide range of terms, including dry ports, inland terminals, inland ports, inland hubs, inland logistics centers, and inland freight villages. The reason for this lies in the multiple shapes, functions, and network positions these nodes can have. A similar issue applies to the inclusion of airport terminals, mainly their freight activities, as an element of an inland node. A whole array of transport terminal infrastructures is often presented as a dry port. Therefore, the concept of an inland port is polymorphic, implying that it can have different meanings depending on its location, connectivity, role, function, or even the marketing objectives of its promoters. Regardless of the terminology used, three fundamental characteristics are related to an inland node:
- An intermodal terminal, either rail or barge, that has been built or expanded.
- A connection with a port terminal through rail, barge, or truck services, often through a high capacity corridor.
- An array of logistical activities supporting and organizing the freight transited, often co-located with the intermodal terminal.
The functional specialization of inland terminals has been linked with the cluster formation of logistical activities. Inland terminals, in many cases, have witnessed a clustering of logistics sites in the vicinity, leading to a process of logistics polarization and the creation of logistic zones. They have become excellent locations for consolidating a range of ancillary activities and logistics companies. In recent years, the dynamics in logistics networks have created the right conditions for the large-scale development of such logistics zones.
2. Driving Forces
Each inland port remains the outcome of transport geography pertaining to modal availability and efficiency, market function, intensity, and the regulatory framework and governance. Their emergence underlines some deficiencies in conventional inland freight distribution that needed to be mitigated. This mitigation includes:
- Input costs. Land and labor costs are among the highest logistics costs. Many deep-sea terminal facilities have limited land available for expansion, implying higher land costs, while inland locations tend to have land available. Many port areas are also facing higher labor costs since they are located within large metropolitan areas. High input costs favor intensifying activities at the main terminal and the search for lower value locations supporting less intensive freight activities.
- Capacity and congestion. Capacity issues appear to be the main driver of inland port development since a system of inland terminals increases the intermodal capacity of inland freight distribution. While trucking tends to be sufficient in the initial phase of the development of inland freight distribution systems, at some level of activity, diminishing returns such as congestion, energy, and empty movements become strong incentives to consider the setting up of inland terminals as the next step in regional freight planning.
- Hinterland market. Inland ports confer a higher level of accessibility through long-distance transport corridors because of lower distribution costs and improved capacity. These high-capacity inland transport corridors allow ports to penetrate the local hinterland of competing ports and extend their cargo base. In such a setting, the inland port becomes a commercial and trade development tool that jointly increases imports, exports, and intermodal terminal use. It is thus better placed to support regional and international trade patterns.
- Supply chain management. An inland port is a location actively integrated within supply chain management practices, particularly because of containerization. It reflects the level of vertical integration between the port and hinterland actors such as transport companies and supply chain managers. This takes many forms, such as the agglomeration of freight distribution centers, custom clearance, container depots, and logistical capabilities. The inland terminal can also become a buffer in supply chains, acting as a temporary warehousing facility.
- Policy and regulations. Economic development strategies, land use policy, and financial incentives by port authorities and economic development agencies can lead to the development of inland ports. This can be supported by policies related to foreign trade zones and customs procedures, enabling a transfer of functions that were previously taking place at the port (customs port of entry) to an inland location. This is commonly a significant hurdle since many national trade regulations only enable containers to be cleared for imports or exports at a port. A similar trend applies to cargo safety and security procedures, where the inland port becomes a component of a chain of cargo integrity.
The geographical characteristics linked with modal availability and the capacity of regional inland access have an important role in shaping the emergence and development of inland ports. Each inland market has its own potential requiring different transport services. Thus, there is no single strategy for an inland port in terms of modal preferences as the regional effect remains fundamental. In developed countries, namely in North America and Europe, which tend to be at the receiving end of many containerized supply chains, several inland ports have been developed to focus on inbound logistics.
The setting up of global supply chains and the strategy of Pacific Asian countries around the export-oriented paradigm have been powerful forces shaping contemporary freight distribution. Indirectly, this has forced players in the freight transport industry to examine supply chains as a whole and to identify legs where capacity and reliability were an issue. Once maritime shipping networks and port terminal activities became better integrated, mainly through the symbiotic relationship between maritime shipping and port operations, inland transportation became a visible issue to be addressed with the inland terminal, a fundamental component of this strategy. This initially took place in advanced economies, such as in North America and Europe. The focus has also shifted to considering inland terminals for the early stages of global supply chains (outbound logistics), namely in countries having a marked export-oriented function.
Inland terminals have evolved from simple intermodal locations to their incorporation within logistic zones. Rail terminals, in particular, have historically been locations from which specific market coverage was achieved. Containerization has impacted this coverage through the selection of terminals that serviced a wider market area. This spatial change also came with a functional change as intermodal terminals began to experience a specialization of roles based on their geographical location and their function within supply chains.
3. Functions within Transport Chains
A functional and added value hierarchy has emerged for inland terminals. They try to replicate several services performed at a port terminal, namely customs clearance, container storage, cargo consolidation, and de-consolidation. In many instances, freight transport terminals fit within a hierarchy with a functionally integrated inland transport system of gateways and their corridors, where they serve three major functions:
- Satellite terminals. They tend to be close to a port facility, but mainly at the periphery of its metropolitan area (often less than 100 km away), since they mainly assume a service function to the seaport facilities. They accommodate additional traffic and service functions that have become too expensive at the port, such as warehousing and empty container depots, or are less bound to a location near a deep-sea quay. Several satellite terminals only have a transport function transshipping cargo between rail/barge and trucks. Satellite terminals can also serve as load centers for local or regional markets, particularly if the economic density is high. They form a multi-terminal cluster with the main port connected through regular rail or barge shuttle services. For gateways having a dominance in imports, a satellite terminal can serve a significant transloading function where the contents of maritime containers are transloaded into domestic containers or truckloads. As the footprint of container terminals is facing pressure due to increases in traffic and ship sizes, satellite terminals can provide additional terminal footprint at a connected off-port site.
- Freight distribution clusters (load centers). This is a major intermodal facility – load center – granting access to well-defined regional markets that include production and consumption functions. It commonly corresponds to a metropolitan area where a variety of terminals serve simultaneoulsy intermodal, warehousing, distribution, and logistics functions. These tend to take place in logistics parks and free trade zones (or foreign trade zones). The inland terminal is thus the point of collection or distribution of a regional market. The more extensive and diversified the market, the more important the load center is. If the load center has a good intermediary location, such as being along a major rail corridor, freight distribution activities serving an extended market will be present.
- Transshipment facilities. These link large freight circulation systems either through the same mode (e.g. rail-to-rail) or through intermodalism (rail-to-truck, or even rail-to-barge). In the latter case, the inland terminal assumes the role of a load center. The origin or the destination of the freight handled is outside the terminal’s market area, with a function similar to that of transshipment hubs in maritime shipping networks. Such transshipment terminals are often found near country borders, combining administrative processes linked to cross-border traffic to value-added logistics activities. Although this function remains marginal in most parts of the world, ongoing developments in inland freight distribution, where the scale and scope of intermodal services increase, indicate that transshipment services are bound to become more prominent.
These functions are not exclusive, implying that inland terminals can serve several functions at once. Therefore, there is no single model for an inland port. For inbound or outbound freight flows, the inland terminal is the first tier of a functional hierarchy that defines its fundamental (activities it directly services) and extended (activities it indirectly services) hinterlands. Similar to logistics clusters, dry ports offer unique added value opportunities as inland locations handling cargo. Considering the potential mix of the functions of inland ports, five major criteria ensure that they fulfill their role as an interface between global and regional freight distribution systems efficiently:
- Site and situation. Like any transport facility of significance, an inland port requires an appropriate site with good access to rail or barge terminals as well as available land for development. Access to an area of significant economic density, such as one with a large population base, is important since it will be linked to the traffic level handled by the inland port. Transportation remains the highest logistics cost, underlining the importance of an accessible location. Several inland ports also have an airport in proximity, which can help support a variety of freight activities.
- Massification. The hinterland massification opportunities offered by inland ports are associated with lower transport costs and better accessibility. Massification takes place over two interdependent dimensions. The first concern the massification of flows between the port terminal and the inland port through a high capacity corridor. Intermodal rail and barge services represent the dominant means over which this process is achieved. The second relates to the consolidation and deconsolidation of cargo flows, depending on whether inbound or outbound logistics are involved.
- Reconciling cargo flows. Since most long-distance (and some domestic) trade is supported by containerization, there are numerous instances where a regional market imports more than it exports (or vice-versa). Under such circumstances, an inland port must provide the physical and logistical capabilities to ensure that empty containers are repositioned efficiently to other markets if local cargo cannot be found. This can take the form of empty container depots and arrangements with freight forwarders to have slots available for repositioning. Whether there are imbalances in container flows or not, an inland port must ensure that the inbound and outbound flows are reconciled as quickly as possible. A common method involves a cargo rotation from import activities where containers are emptied to exports activities where containers are filled with goods. For container owners, whether they are maritime shipping or leasing companies, a rapid turnover of their assets is fundamental and will secure a continuous usage of the inland port. Effective repositioning and cargo rotation strategies ensure higher revenue for both the container owners and the inland port operators.
- Trade and transactional facilitation. An inland port can also be a fundamental structure promoting both the import and export sectors of a region, particularly for smaller businesses unable to achieve economies of scale independently. Through these, new market opportunities become possible as both imports and exports are cheaper. The setting up of a Foreign Trade Zone (FTZ) is also an option to be considered as a trade facilitation strategy. The functional pairing of inland ports is a transactional strategy where an inland port is an activity seeking agreements with other inland ports so that reciprocal supply chains are established or reinforced.
- Governance. The way an inland port is owned and operated indicates its potential to identify new market opportunities and invest accordingly. In many cases, the commitment of a large private investor such as a terminal operator or a real estate developer can be perceived as a risk mitigation strategy and provide expertise in developing facilities and related activities. Sections of an inland port can be shared facilities (e.g. distribution centers) so that smaller players can get involved by renting space and equipment. This also applies to the appropriate strategies related to each stage in the life cycle of an inland terminal from its construction to its maturity, where its potential has essentially been realized.
The enduring challenges in inland port development remain the provision of infrastructures and the ability to attract in a timely fashion sufficient cargo volumes to justify returns on investments.
4. The Regional Impacts of Inland Ports
Regional issues, namely how inland ports interact with their regional markets, remain fundamental as they define their modal characteristics, regulatory framework, and commercial opportunities. Depending on the geographical setting and the structure, governance, and ownership of inland transport systems, inland terminals have different development and integration levels with port terminals. They are part of a port regionalization strategy supporting a more extensive hinterland.
In Western Europe, the setting up of inland terminals is the most advanced with close integration of port terminals with rail shuttles and barge services. Rail-based dry ports are found throughout Europe, often linked to the development of logistics zones. Depending on the European country considered, these logistics zones are known under different names, such as “platformes logistiques” in France, the “Güterverkehrszentren (GVZ)” in Germany, “Interporti” in Italy, “Freight Villages” in the UK, “Transport Centres” in Denmark, and “Zonas de Actividades Logisticas (ZAL)” in Spain. The rail liberalization process in Europe supports the development of real pan-European rail services on a one-stop-shop basis. Through Europe, new entrants are emerging while some large former national railway companies have joined forces. Rail terminals in Europe are mostly built and operated by large railway ventures. The largest rail facilities have bundles of up to 10 rail tracks with lengths of a maximum of 800 meters per track. Rail hubs are typically equipped to allow simultaneous batch exchanges (direct transshipment) through the use of rail-mounted gantry cranes that stretch over the rail bundles.
In northwest Europe, barge transport is taking a more prominent role in dealing with gateway traffic. Barge container transport has its origins in transport between Antwerp, Rotterdam, and the Rhine basin. Recent years have seen development along the north-south axis between the Benelux countries and northern France. Antwerp and Rotterdam handled nearly 5 million TEU of inland barge traffic in 2010, about 95% of total European container traffic on that mode. Promising barging developments are also found on the Seine between Le Havre and the Paris region, in the Rhône/Seine basin between Marseille, Lyon, and Dijon, on the Elbe and the Weser in Northern Germany and the Danube River out of the port of Constantza. Barge services have also been initiated on the Po River connecting the Port of Venice with Mantua and Cremona near Milan.
European integration processes have permitted the setting up of more natural (commercially based) hinterlands that did not exist before. Since a good share of the European market is inland, growth in international trade required intermediary locations inland to help accommodate larger flows between ports and their hinterlands. A large concentration of inland terminals can be found around the Rhine/Scheldt delta, which is Europe’s most important gateway region with a total container throughput of 28.2 million TEU in 2019, and where the function of satellite terminals is prominent. Almost every European port has an inland terminal strategy as a way to secure hinterland traffic.
B. North America
There have been large inland terminals in North America since the development of the transcontinental railway system in the late 19th century. Their setting up was a natural process in which inland terminals corresponded to large inland market areas, commonly around metropolitan areas commanding a regional manufacturing base and distribution system. Although exports were significant, particularly for agricultural goods, this system of inland terminals mostly supported domestic freight distribution. With globalization and intermodalism, two main categories of inland terminals have emerged in North America.
The first is related to ocean trade. Inland terminals are an extension of a maritime terminal located in one of the three major ranges (Atlantic, Gulf, and Pacific) either as satellite terminals or, more commonly, as inland load centers (e.g. Chicago or Mexico). The second category concerns inland terminals mainly connected to transborder trade that can act as custom pre-clearance centers. Kansas City can be considered the most advanced inland port initiative in North America. It combines intermodal rail facilities from four different rail operators, foreign trade zones, and logistics parks at various locations throughout the metropolitan area. There is even the world’s largest underground warehousing facility, Subtropolis, where temperature stable space can be leased. Like Chicago, the city can essentially be perceived as a terminal.
Several recent logistic zones projects in North America capitalize on the planning and setting up of a new intermodal rail terminal done at the same time as a logistics zone project. This co-location partnership fundamentally acts as a filter for the commercial potential of the project as both actors must make the decision to go ahead with their respective capital investment in terminal facilities and commercial real estate. Compared to Europe, North American dry ports tend to be larger and cover a much more substantial market area.
C. East and Southeast Asia
For Asia, inland terminals are in their infancy. Geographical characteristics, namely coastal population concentrations and export-oriented development strategies, have not been helpful to the setting up of inland terminals. Several container depots have appeared inland to improve the availability of export containers within manufacturing clusters (e.g. South Korea, Thailand, India), but containers are mainly carried by truck. It is China that has the largest potential for the emergence of a network of inland terminals, with three main types emerging:
- The first are satellite facilities in the vicinity of port terminals. They assume the conventional role of accommodating activities decongesting port operations, such as container depots, as well as performing customs clearance.
- The second type concerns inland facilities located in major metropolitan areas to provide better connectivity to port terminals along the coast as well as to support the logistics of a growing internal consumption market. Significant dry port development is taking place on the Yangtze River up to the upper stretches near Chongqing, some 2,400 km upstream from Shanghai. Intermodal rail development faces the prominence of the existing rail network on passengers and dry bulk commodities. As the Chinese economy moves towards a more extensive internal market, intermodal rail and barge traffic is increasing, so is the usage of inland ports.
- The third type is border facilities that fulfil the function of custom clearance, consolidation, and deconsolidation of cargo, as well as emerging trans-modal functions of linking different systems or circulation. The setting up of Asia-Europe rail connections along the Eurasian landbridge may promote this function.
Another system of inland terminals is likely to emerge in Southeast Asia, particularly along the Mekong. In light of the North American and European experiences, the question remains of how Pacific Asia can develop its inland port strategy and regionalism. The unique geographical characteristics of the region are likely to rely much on the satellite terminal concept and inland load centers in relative proximity. For this context, the European example is more appropriate. However, the setting up of long-distance intermodal rail corridors within China and through Central Asia favors to developing the inland load center system common in North America.
5. Future Prospects
The setting up of dry ports has been a dominant paradigm in hinterland transportation development. The growth of maritime shipping and its economies of scale have placed pressures on the inland segment of freight distribution. The prospects for inland ports remain positive, with large continental markets like North America and Europe relying on a network of satellite terminals and load centers as a fundamental structure to support the massification of hinterland freight movements. This has entailed the emergence of extended gates and extended forms of supply chain management in which inland terminals play an active role.
As congestion increases, inland terminals will be even more important in maintaining efficient supply chains. It can also be expected that resources will play a greater role within containerized trade, with inland terminals acting as platforms to export containerized resources. Dry ports play an increasing role as a repositioning strategy for empty containers to improve this repositioning efficiency by providing better cargo rotation opportunities or acting as platforms that can help promote containerized exports. Inland ports are taking part in the ongoing intermodal integration between ports and their hinterland through long-distance rail and barge corridors. They are becoming more important elements within supply chains, particularly through their role as a buffer where containerized consignments can be cheaply stored, waiting to be forwarded to their final destinations.
Like other transport infrastructures, there is a potential for overinvestment, duplication, and redundancy since many inland locations would like to claim a stake in global value chains. This appears to be the case in Western Europe. An abundance of inland terminals, particularly within the Rhine-Scheldt delta, underlines the overly competitive environment and the waste of resources. In North America, because of a different ownership and governance structure, the setting up of an inland port, at least the intermodal terminal component, is mostly in the hands of rail operators. Each decision thus takes place with much more consideration being given to market potential as well as the overall impact on their network structure. The decision of a rail company to build a new terminal or expand existing facilities commonly marks the moment where regional stakeholders, from real estate developers to logistics service providers, readjust their strategies. Further, local governments may devise inland port develp,emt with the expectation to create multiplying effects in the regional economy. Therefore, inland ports should develop in alignment with the market and stakeholders they are servicing. Misalignment may result in missed opportunities and wasteful investments.
The development of dry ports worldwide has underlined an emerging functional relation of port terminals and their hinterland. In the case of China, such initiatives can be far-reaching since the goal is to promote trade and economic integration across central Asia, all the way to Europe. Dry ports assume various functions with co-location with logistical zones, a dominant development paradigm based on their regional setting. While the interest in dry ports has increased, each dry port is confronted with a unique regional, economic, and regulatory setting that defines its functions and its relations with seaports. Best practices can only be applied successfully if the relative uniqueness of each dry port setting is considered.
- Chapter 1.4 Ports and Distribution Networks
- Chapter 2.1 The Changing Geography of Seaports
- Chapter 2.5 Port Hinterlands and Land Corridors
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