Authors: Dr. Theo Notteboom and Dr. Jean-Paul Rodrigue
Port hinterlands are strategic market areas to interact and compete. An important strategy has been the setting up of corridors and inland load centers.
1. The Hinterland Concept
The hinterland plays an important role in shaping the supply chain of shippers and logistics service providers. Land scarcity concerns, combined with transport reliability issues, have led seaports and hinterland corridors to take up a more active role in supply chains. Port hinterlands are challenging to delimit as they vary according to the type of commodities, such as bulk cargo versus containerized cargo, seasonality, business cycles, technological changes, changes in transport policy, and the cost structure of inland transportation modes. For example, a large part of the volumes in dry and liquid bulk products are relatively captive to the discharging port region since customers are typically located in the port region or the vicinity of the port, if not directly co-located with a port terminal facility. These include steel plants, power generation plants, oil refineries, and chemical companies. The main rationale for this proximity was high inland transportation costs and the difficulties of handling large quantities of cargo. Before containerization, several ports developed expertise in handling specific cargo types, resulting in a specialization of gateways according to the cargo base.
The port hinterland is a land area over which a port sells its services and interacts with its users. It is an area over which a port draws most of its business and regroups all the customers directly bounded to the port and the land areas from which it draws and distributes traffic.
The gateway function for major dry and liquid bulks of ports mainly involves one direction for hinterland flows, either incoming or outgoing, a limited number of market players, and a limited number of destinations. However, for containerized cargo, the hinterland profile involves numerous origins and destinations dispersed over a vast hinterland with more competitors, a large number of economic players, and bi-directional hinterland flows that are rarely balanced. Therefore, the captive nature of container cargo for ports is typically much smaller than for bulk cargo. Moreover, market dynamics make it counterintuitive to have a static concept of port hinterlands being taken for granted and stable in time.
Before containerization, cargo was shipped from the inland production center to the nearest port, and shipping lines designed routes to cover all ports within a coastal range, resulting in captive hinterlands and limited inter-port competition. Containerization expanded the hinterland reach of ports and intensified inter-port competition. Expanding hinterland coverage and shifting from captive hinterlands to shared or contestable hinterlands have changed the perception of port markets from monopolistic or oligopolistic to competitive. Thus, port competitiveness is increasingly derived from its hinterland access and the opportunities it confers.
Most ports act as gateways to often extensive inland networks. These gateways are nodal points where intercontinental transport flows are being transhipped onto continental areas and vice versa. Several factors have facilitated the rise of gateways that vie for contestable hinterlands. First, containerization and the deployment of ever-larger container vessels have gone hand in hand with a concentration of vessel calls in a limited number of load centers, especially on the main long-distance routes where economies of scale at sea are most apparent. Price fixing systems that ensured the reduction of port calls had no negative price impacts on the customer base. For example, shipping lines put in place port equalization systems to compensate inland customers for the longer inland transport distances they might incur when sending or receiving cargo via container load centers.
The development of intermodal corridors and inland terminals allowed deep hinterland penetration via shuttle trains and barges. The rise of intermodalism and associated transport corridors had a significant structuring effect on the hinterland reach of seaports. Not only has intermodalism given incentives for ports to expand their hinterland reach, but hinterlands have also become more discontinuous, especially beyond the immediate hinterland of the port. Such a process can even lead to the formation of “islands” in the distant hinterland for which the load center achieves a comparative cost and service advantage vis-à-vis rival seaports. Conventional market perspectives based on distance decay are ill-fitted to address this new reality. High-volume intermodal corridors typically offer a more favorable relation between transport price, lead time, and distance than conventional and continuous inland transport coverage.
A port hinterland consists of overlapping service areas of individual inland terminals and the modal options available. The size of each inland service area depends on the service frequency and the tariffs of intermodal shuttle services by rail or barge, the extent to which the inland terminal acts as a gateway, and the efficiency and price of trucking. The more intermodality serves as a competitive tool for ports, the more they become dependent on the capacity and efficiency of intermodal carriers to offer services along intermodal corridors. Regarding organizational and operational factors, a volatile intermodal market is not conducive to creating a stable and sustainable hinterland competitive position for a port. The outcome has been a series of port hinterlands serviced by maritime ranges that are a function of economic density, structure, and orientation of transportation networks, which can be contestable.
Hinterlands also have a directional component. Inbound hinterland traffic in North America and Europe tends to be consumption-based, except when commodities and parts are involved in manufacturing. In contrast, outbound hinterland traffic is an outcome of extraction or export-oriented manufacturing activities. The relative importance of forelands and hinterlands varies from a distance and cost perspective. If distance is considered for an international transport chain, the foreland is usually the most important, while the hinterland is usually where most transport costs are realized. It is not uncommon for international shipping that the foreland accounts for 90% of the distance, and the hinterland, including port charges, accounts for 80% of the transport costs.
The rise of corridors is a highly relevant development to any policies to generate a modal shift from road haulage to inland navigation, rail, and shortsea shipping. Intermodal solutions based on barges or rail prove competitive on several high-density traffic corridors or in specific niche markets. Still, they can not serve as complete alternatives for road haulage.
2. The Hinterland and the Maritime-Land Interface
The maritime-land interface concerns the relationships between maritime and inland freight distribution, the two domains of global freight circulation. Maritime shipping is entirely dependent on the performance of inland freight distribution as it ensures the continuity of supply chains. While economic activities, such as production and retailing, are built on the concept of interdependency, distribution is a derived outcome of this interdependency. The maritime-land interface is particularly important for the long-distance trade brought by economic globalization. Thus, the growing distances over which freight is being carried, in addition to a surge in freight volumes, has created multiplying effects on the ability of the maritime-land interface to deal with this new environment. Four major functional elements define the maritime-land interface:
- Foreland. Conventionally, the foreland is a maritime space over which a port has commercial relationships, implying that maritime shipping networks are a common representation of the concept of the foreland. The network represents the level of service offered by maritime shipping companies in terms of port calls, capacity, and frequency, granting each port a different connectivity (foreland).
- Port system. The set up of intermodal infrastructures servicing port operations. The focus is on gateways granting access to large domains of inland freight circulation.
- Modes. Each mode has technical constraints and is positioned to service specific inland markets. They are structured as corridors accessing the hinterland and inland hubs acting as intermodal and transmodal centers. Inland modes represent one of the most difficult challenges in terms of reconciling the surge in containerized maritime volume and the capacity of inland transportation to accommodate these flows. There is a growing asymmetry between maritime transport and inland modes.
- Hinterland. The hinterland is the inland area where a port maintains commercial relations. However, the emergence of supply chain management has placed the inland port at the core of hinterland transportation. Macroeconomic factors linked with economic globalization have become particularly important for explaining hinterland dynamics as greater trade volumes must be reconciled with hinterland capabilities.
The maritime-land interface can also take many transactional forms related to freight and information exchange. There is a trend involving the growing level of integration between maritime transport and inland freight transport systems known as port regionalization. Until recently, these systems evolved separately, but the development of intermodal transportation and deregulation provided new opportunities, which significantly impacted maritime and inland logistics. One particular aspect concerns high inland transport costs since they account for between 40% and 80% of container shipping costs, depending on the transport chain. Under such circumstances, maritime actors (e.g. terminal operators) are more involved in inland transport systems.
The maritime-land interface thus appears to be increasingly blurred depending on the level of port competition, ranging from a single port to multiple ranges. Corridors are becoming the main structure behind inland accessibility and through which port terminals gain access to inland distribution systems serviced by inland ports. Since transshipment is a fundamental component of intermodal transportation, the maritime-land interface relies on improving terminal activities along those corridors. Strategies increasingly rely on controlling distribution channels to ensure an unimpeded circulation of containerized freight through a sequence of intermodal and modal activities.
3. The Hinterland Focus of Market Players
The focus on the port hinterland is usually associated with changing market dynamics. When the demand for cargo handling services grows rapidly, the focus is on expanding terminal capacity. However, when the demand stabilizes or declines, ports tend to focus on their hinterland to attract additional cargo. Hinterland connections are a key area for competition and coordination among market players involved in the maritime-land interface. Many market players understand that landside operations are key to a successful integration along the supply chain. As a result, competition between ports and across the logistics sector is intensifying. As ports and logistics firms compete to protect and gain market share, finding cost savings and efficiency gains becomes even more pronounced.
Shipping lines are keen on developing carrier haulage volumes, where the sea carrier arranges the hinterland transport of containerized cargo. In the case of merchant haulage, the shipper or forwarder manages the inland segment. The deployment of larger vessels, the formation of strategic alliances, and the waves of mergers and acquisitions have resulted in lower costs at sea, shifting the cost burden of shipping lines to the landside. Therefore, several shipping lines extend their scope beyond terminal operations to include inland transport and logistics. To streamline the inland distribution system, shipping lines and their alliances seek to increase the share of carrier haulage. However, large shippers or their representatives, such as logistics service providers, dominate the inland market in most parts of the world.
Still, several larger shipping lines are developing hub concepts in the hinterland of the key ports in their networks. Inland terminals and rail and barge services are combined to push import containers from the ocean terminal to an inland location, from which the final delivery will be initiated at a later stage. This push strategy is initiated by the shipping line and prioritized for the required delivery date. Export containers are pushed from an inland location to the ocean terminal, initiated by the shipping line, yet prioritized based on available inland transport capacity and the estimated time of arrival (ETA) of the deepsea vessel.
Carriers are confronted with some important barriers to improve inland logistics. Landside operations are management intensive and generally involve a high proportion of bought-in services. Moreover, inland movements generate under-remunerated activities such as repositioning empty units, fixed delivery hours, waiting for an available docking bay at a distribution center, network control, and tracking. Other barriers relate to volume and equipment types of imbalances, unforeseen delays in ports and the inland transport leg, as well as the uncertainty of demand forecasts. Carriers have learned to lessen equipment surpluses and deficits through container cabotage, inter-line equipment interchanges, chassis pools, and master leases.
Carriers have limited options to increase their income from inland logistics. If carrier haulage tariffs edge above the open market rates, merchant haulage options might become more attractive for cargo owners. If they generate sufficient volumes, cargo owners may prefer merchant haulage because of better service expectations and flexibility. The risk of cost under-recovery on multiple moves is another challenge in inland logistics, particularly when several options are available if carrier haulage is selected.
Terminal operators are also increasing their influence throughout supply chains by engaging in inland transport. They do so mainly by incorporating inland terminals as extended gates to seaport terminals and introducing an integrated terminal operator haulage concept. The advantages of the extended gate system are substantial, as customers can have their containers available in proximity to their customer base. Simultaneously, the deep-sea terminal operator faces less pressure on its terminals due to shorter dwell times and can guarantee better planning and utilization of the rail and barge shuttles. However, the success of both extended gates and terminal operator haulage largely depends on the transparency of cargo information. Unfortunately, terminal operators often lack information on the onward inland transport segment for containers discharged at the terminal. Close coordination with shipping lines, forwarders, and shippers is needed to maximize the possibilities for developing integrated bundling concepts for the hinterland.
Further, market players are contending with the terminalization of maritime supply chains where terminals can act as a constraint or a buffer.
Terminalization. Terminals taking up a more active role in supply chains with operational considerations such as berthing windows, dwell time charges, truck slots, to increase throughput, optimize terminal capacity and make the best use of available land. Also involves logistics players making best use of the free time available in seaports terminals and inland terminals, thereby optimizing the terminal buffer function.
Terminalization incites the setting of a hierarchy of flows along a transport chain where terminals act as important regulators, either as bottlenecks or buffers.
4. Port Regionalization
The focus on hinterland development has transformed the relationships between the port and its surrounding regions and its port system (or maritime range). A port system is defined as a group of ports sharing similar geographic characteristics, such as a coastline or a bay, and serving overlapping hinterland regions to some extent. Since the mid-19th century and up to the diffusion of containerization as a dominant form of freight distribution in the 1980s, the development of a port system evolved from an initial pattern of scattered, poorly connected ports along a coastline to a network consisting of corridors between gateway ports and major hinterland centers.
Containerization revolutionized maritime shipping and port terminal operations and has supported the substantial growth in international transoceanic trade over recent decades. While traditionally, most ports had a fairly clear and distinctive hinterland, containerization initiated a trend towards large overlapping or contestable hinterland regions. The competitive landscape became even more complex with large container transshipment facilities set up, in many cases, in locations with a limited or non-existing hinterland. From the late 1980s, the integration of transshipment hubs led to a new paradigm in port evolution. Transshipment hubs tend to have greater depth in view of accommodating Post-Panamax containership drafts, placing them at a technical advantage and inciting hub-feeder services and interlining/relay configurations between mainline vessels. As intermediary locations, they offered a compromise between economies of scale in vessels and terminals and the need to maximize connectivity in maritime networks.
The hierarchization and complexification of maritime shipping networks have a correspondence with port hinterlands. The current development phase underlines that ports are going beyond their own facilities to accommodate additional traffic and the complexity of freight distribution, namely by improving hinterland transportation. This has come to be known as port regionalization.
Port regionalization is the logistical integration between maritime and inland transport systems, particularly through the development of rail and barge corridors between a port and a network of inland load centers.
Port regionalization addresses two fundamental issues in port development:
- Local constraints. Ports, especially large gateways, face a wide array of local constraints that impair their growth and efficiency. The lack of available land for expansion is among the most acute problems, an issue exacerbated by the deepwater requirements for handling larger ships. Increased port traffic may also lead to diseconomies as local road and rail systems are heavily burdened. Environmental constraints and local opposition to port development are also of significance. Port regionalization thus enables to avoid local constraints by partially externalizing them.
- Supply chain integration. Global production and consumption have substantially changed distribution, with the emergence of logistics and manufacturing clusters as well as large consumer markets. No single port can efficiently service the distribution requirements of such a complex web of activities. For instance, globally integrated logistics zones have emerged near many load centers, but seeing logistics zones as functionally integrated entities may be misleading as each activity has its own supply chain. Port regionalization allows for developing a distribution network that corresponds more closely to fragmented production and consumption systems.
Regionalization is a process that can take place both on the foreland and the hinterland with the goal of providing continuity between the maritime and inland freight transport systems.
5. Hinterland Accessibility
A. Definition in a port context
Accessibility can be defined as the ease with which activities may be reached from a given location using a particular transportation system. It is a measure of the quality of access from a specific location to several other locations.
A fundamental distinction can be made between relative accessibility and integral accessibility. Relative accessibility describes the relation or degree of connection between any two nodes in a transport system, such as a seaport and a central place). In contrast, integral accessibility describes the relation or degree of interconnection between a given node (a seaport) and all other nodes within a spatial network. The former measure is relevant in assessing land access on a specific origin-destination relation via a transport link or corridor. The latter is more appropriate in determining the overall accessibility and connectivity of a seaport.
Another approach to the issue of land accessibility consists of discriminating between the supply characteristics of the transport system and the actual use and levels of satisfaction. On the one hand, hinterland accessibility may be interpreted as the potential to connect to selected markets in the hinterland. This intrinsic accessibility is a function of the supply/capacity of the infrastructure and transport services. The intrinsic land accessibility to seaports is no longer only considered in terms of proximity but more and more in terms of lead time and reliability. Alternatively, it may be held that the proof of access lies in the use of services, not simply in the presence of opportunities. This behavioral dimension could be described as revealed accessibility and reflects the demand side, such as the actual traffic flows on specific hinterland corridors. The concept of revealed accessibility is a particularly appropriate criterion for assessing the market’s valuation and satisfaction regarding the quality of the land access to a seaport.
B. A multilevel approach to hinterland accessibility
In general, four interrelated layers shape land access to seaports:
- The locational layer (first level) relates to the geographical location of a gateway in relation to central places in the economic space. It forms a basic element for the intrinsic accessibility of a seaport. Therefore, the locational layer is mainly a relative concept to market demand.
- The infrastructural layer (second level) involves providing basic infrastructure for both links and nodes in the transport system. It is a key factor in valorizing a location since it changes its locational characteristics, particularly its accessibility.
- The transport layer (third level) involves the physical aspects linked to transport chains, such as transport services operating on links and corridors between the port and other nodes within the transport system and the transshipment function in the nodes of the system.
- The logistical layer (fourth level) involves organizing transport chains and their integration into the logistic chain.
Each layer valorizes the lower layers, and there is a demand pull exerted from the higher levels toward more basic layers. In a demand-driven market environment, the infrastructural layer serves the transport and logistical layers. The first and second levels demand a more spatial approach, whereas the functional approach prevails for the upper levels. The more basic the layer, the lower the responsiveness or adaptability (expressed in time) to market demand changes. For instance, the planning and construction of major rail infrastructures (infrastructural level) normally take many years, not including possible delays resulting from objections from pressure groups or due to legal complications with financial institutions or building contractors.
The political aspect related to the provision of basic land infrastructures further complicates and lengthens the decision-making process. The duration of the planning and implementation of shuttle trains on specific railway corridors (transport layer) usually varies between a few months to one year. At the logistical level, freight forwarders and multimodal transport operators (MTOs) can respond almost instantly to variations in the market by modifying the transport chain design, such as routing goods through the transport system.
The differences in responsiveness between the layers lead to considerable time lags between proposed structural changes on the logistical and transport layers and the necessary infrastructural adaptations needed to meet these changes adequately. This observation partly explains the under-capacity (congestion) or overcapacity situations in the European hinterland network and port system.
C. Stakeholders in hinterland accessibility
Several stakeholders are involved in land access to seaports:
- Through the infrastructure and transport policy, supranational, national, and regional authorities significantly impact intrinsic accessibility to seaports. The infrastructural investments in links and partly also in the nodes of a transport system shape the basic access profile of a seaport. Moreover, transport service operators must comply with the regulatory specifications issued by governments, such as technical specifications for transport modes and their operational conditions.
- Shipping companies, road haulers, inland waterway companies, and rail companies have a large impact on the second layer (transport) as they determine the frequency, reliability, and quality of services on specific origin-destination relations. These services try to match the logistical requirements of their customers.
- By providing physical transshipment and related activities, stevedoring companies and terminal operators in seaports and inland terminals contribute to the transition and integration of transport modes and networks.
- The higher the efficiency of freight forwarders, multimodal transport operators (MTOs), and other logistic organizers in designing transport chains between origins and destinations, the higher the revealed accessibility for a given intrinsic accessibility. An optimal transport chain design combines quality, reliability, and lead time at the lowest possible costs.
- The role of port authorities in enhancing access in the foreland-hinterland continuum can vary from that of a reactive facilitator to a proactive accessibility manager.
- The trade relations of shippers and their network formations with other firms (particularly outsourcing) shape their demand for accessibility on the logistical and transport layers.
Major freight forwarders, shipping lines, transport operators, terminal operators, integrators, and other logistic service providers are competing for a level of control over door-to-door transport chains. By a vertical and horizontal integration of activities, a large number of these players increasingly affect the transport and logistical layers of the accessibility profile of an individual seaport or port system direcly.
On the infrastructural layer, national and supranational public authorities may be facing severe budget constraints. Any lack of public funds for transport infrastructures puts more pressure on alternative financing via public-private partnerships (PPPs), especially in relation to safeguarding or improving the hinterland access to seaports.
D. Centrality and hinterland accessibility
The geographical location of a seaport constitutes the foundation for its competitiveness in terms of hinterland accessibility. The centrality index, as developed by the Bremer Ausschuss für Wirtschaftsforschung in 1980, is an early example of how to assess the hinterland centrality of a port as a function of port-hinterland distance and population of the main economic regions in the hinterland. The assumption is that the further the nodes are apart, the less interaction there will be because time and cost are presumed to increase with distance (distance-decay hypothesis). Moreover, it is assumed that the more important a place is, measured in terms of population or economic output for central places and cargo volumes for gateways, the larger the attraction exerted towards other places (scale hypothesis).
Any definition of the concept of centrality is relative in that a central location cannot exist other than by reference to other central areas, or a core area, which is a cluster of central areas. For Western Europe, this core corresponds to the “blue banana” (southern England, the Netherlands, Belgium, Luxembourg, the northeast of France, the Rhine axis, southern Germany, and northern Italy). For North America, the most prevalent core is the Eastern Seaboard, a conurbation extending from Boston to Washington. In East Asia, the Pearl River Delta, the Yangtze River Delta, and Tokaido (Tokyo-Osaka) are prevalent core areas. The clusters of container port activity reflect this centrality well.
The distance and scale hypotheses are applied in an imperfect geographical space:
- Customer valuation and satisfaction of port hinterland may differ from the basic intrinsic accessibility obtained by scale and location. This is a consequence of the value the customer attaches to the attractiveness of the port in terms of other more qualitative factors.
- The relation between distance and transport price is sometimes far from being straightforward and linear. In an optimal system, port hinterlands for a specific commodity are separated by lines of equal costs of carrying cargo to and from the port. However, transport pricing and tariffs can lead to large discrepancies among transport modes for hinterland access to major ports. For example, the container tariff policy of railway companies might include high cross-border interconnection fees, giving rival ports situated in these countries an artificial competitive edge over foreign ports.
- The transshipment cost (including the intermediate terminal costs) and its share in the total direct costs related to the inland segment of an intermodal transport chain partly determine the competitiveness of an inland transport mode or intermodal transport solution.
- The relation between distance and lead time is sometimes far from straightforward. The lead time on a given origin-destination relation is a function of two factors. First, the travel time on the transport links is affected by vehicle speed and delays/congestion on infrastructural networks and border crossings. Second, the transit time at the terminals is affected by the terminal productivity and the dwell time of the cargo at the terminal. The dwell time is typically lower for carrier haulage than for merchant haulage.
6. Transport Corridors
A. Definition and performance
Port regionalization and hinterland transportation tend to be coordinated along corridors, which have become the object of intense modal competition with the growth of freight movements. Freight corridors are a particularly dominant convergence paradigm of urbanization, integrating global, regional, and local transportation and economic processes in the geography of distribution.
A corridor is a linear orientation of transport routes and flows, connecting important locations that act as origins, destinations, or points of transshipment.
A freight corridor is a linear orientation of freight flows supported by an accumulation of transport infrastructures and activities servicing these flows.
A freight corridor is the main paradigm of hinterland accessibility as it is through a major transportation axis that port terminals gain access to the inland distribution systems. Inland corridor formation has allowed seaports to access formerly captive hinterlands of other ports. Hinterland corridors complement maritime corridors to form the main arteries of world trade. Corridors are created by economies of scale when compound demand in clusters reaches a critical mass, cargo can be consolidated, allowing other modes of transport and creating (multimodal) corridors. Corridors allow gateways to face less resistance in reaching the natural hinterland of other ports. The outcome has been a wide variety of modal split characteristics of each port hinterland with regional differences, such as between Europe and North America, attributable to hinterland size, market proximity, available modal options, and massification potential.
The multiplication of hinterland corridors brings about a change in the relationship between gateways and their hinterland. On the one hand, the inland penetration strategy is part of increasing the cargo base of maritime gateways. On the other hand, interior regions recognize that it is in their interest to establish efficient links to as many gateways as possible. This strategy not only prevents these regions from becoming captive to one specific gateway but also improves the locational attributes of inland economic centers. Hence, linking to more gateways implies more routing options and flexibility for shippers and logistics service providers. The performance profile of each of the corridors in terms of infrastructure provision (capacity), transport operations (price and quality of the shuttle services), and the associated logistical control is a key competitiveness attribute among various multi-port gateway regions.
Corridor attractiveness depends on the corridor’s inherent value proposition to stakeholders. Several factors impact corridor competitiveness, including distance from the gateway to markets, transit time, logistics performance, political stability, security issues, environmental conditions, and gateway-to-market costs. A corridor’s performance can be analyzed from three perspectives:
- The physical infrastructure, such as the physical capacity of the links and nodes, including the level of utilization of the corridor.
- The quality of services provided for the goods moving along the corridor, including time and cost dimensions linked to specific links and nodes.
- The movements of goods in the corridor are disaggregated for transport services on the links and the processing services at the nodes.
B. Rail corridors
Corridors can offer cost and time-competitive options for the continuity of maritime distribution. In particular, long-distance rail corridors or landbridges can compete with maritime trade routes. This competition and complementarity take shape differently depending on the regional setting. Eurasian landbridges, a set of railway lines connecting East Asia, Central Asia, Russia, and Europe, are becoming more commercially viable. While several segments of the Eurasian landbridge were set up in the late nineteenth century, it was only in the early 2000s that significant landbridge traffic emerged. It was further reinforced by China’s Belt and Road Initiative (BRI), seeking to develop long-distance commercial corridors between China, Central Asia, and Europe. The Eurasian landbridge is developing a niche for time-sensitive cargo, offering a complimentary option for maritime shipping.
In North America, longitudinal long-distance rail corridors, often taking the form of landbridges between coastal gateway ports, are servicing a continental hinterland articulated by major transportation and industrial hubs such as Chicago and Kansas City. Double-stack trains have unit capacities of up to 400 TEU and a total length of well above 2 km, enabling a large-scale inland rail freight distribution that is unique in the world, not only because of its size but also because of the direct link between two different coastlines. The major hinterlands in North America have changed, with the decline of the industrial belt and the industrialization of the “sunbelt”, both of which have long-term impacts on inland freight flows. The setting up of NAFTA in the 1990s incited new gateways and corridors servicing the American market, namely through Canada (particularly Vancouver and Montreal) and Mexico, and a reorientation of traffic flows. One of the key advantages of North American rail is the almost exclusive freight orientation of the network, allowing the planning and operation of rail freight services without impediments from passenger services.
In Western Europe, the hinterland is not only intense along the coastline but also in the interior, notably along the Rhine river system and its tributary rivers (Main and Neckar), in Bavaria in the South of Germany, in the economics centers around Milan in Northern Italy and Madrid in central Spain and in major markets in Paris, the Liverpool-Manchester-Leeds belt in the UK and the belt reaching from Austria to the growing production clusters in Hungary, the Czech Republic, and southern Poland. Moreover, many European economic centers are somewhat remote from the main shipping lanes, as is the case for the Baltic countries. Therefore, European gateways are not the only major markets but are often intermediary locations, even if many are important industrial centers. The hinterland is accessed from coastal gateways such as Rotterdam, Antwerp, Hamburg, Bremerhaven, Le Havre, Barcelona, Marseille, and Felixstowe by medium-distance corridors involving a variety of combinations of road, barge (where available), and rail services.
The development of rail corridors in Europe is enhanced by the EU policy on creating a Trans-European Transport Network (TEN-T) and initiatives of rail operators, megacarriers, and other market players to extend their European transport networks. Major contestable hinterlands are increasingly being serviced not only by the ports of one region but by several gateway regions. The performance profile of each of the corridors in terms of infrastructure provision (capacity), transport operations (price and quality of the shuttle services), and the associated logistical control (management in a supply chain context) is a key attribute for port competition in Europe. With a few exceptions (such as the Betuweroute in the Netherlands), most long-distance and short-distance rail corridors in Europe have mixed-use by freight and passenger trains.
RailNetEurope (RNE), which groups the rail infrastructure managers in Europe, has developed corridor management along a set of European rail freight corridors (RFCS) to plan international train paths and shape corridor infrastructure capacity to market requirements. Therefore, the focus has been on stretching existing corridor capacity through advanced traffic management systems and implementing effective cargo bundling and coordination systems. While measures to optimize the use of existing capacity are effective, there are limits to capacity management, implying that new rail infrastructure might need to be developed to service the hinterland.
C. Inland waterways as hinterland corridors
Corridors are also found in the inland waterway infrastructure network. This network is still deeply influenced by geographical considerations concerning the orientation of the waterways in relation to the orientation of commercial flows. Modifying and improving waterways is capital-intensive and is undertaken when scale advantages are realized. In Europe, the main axes include:
- The Rhine and its tributary rivers (Main, Neckar, Mosel).
- The river system in the Benelux countries and northern France, including main canals such as the Albert Canal between Antwerp and Liège.
- The Rhône-Saône basin.
- The Northern network around the Elbe and Weser and associated canals, (e) the Rhine-Main-Danube linking the Alpine Region to the Black Sea.
The Seine-Nord project is among the most significant infrastructure projects with potential structural effects on port competition and cargo routing in the Benelux and Northern France. In Eastern Europe, ships can reach the Danube from the Rhine, opening up the larger industrial areas in Austria, the Czech Republic, Hungary, Croatia, Serbia, Romania, and Bulgaria. Via the Elbe and the Oder, the industrial areas in Austria, Germany, Poland, and the Czech Republic are within reach. Other European countries that boast inland shipping are Italy, Finland, Sweden, Russia, and Ukraine. However, these pertain to isolated national waterways networks, which (if they are not maritime) have no connection with the European network.
In North America, several large river systems are present, but their latitudinal orientation does not match the general longitudinal orientation of commercial flows. Yet, waterway corridors have played an important role in North America’s commercial development, particularly:
- The St. Lawrence-Great Lakes system connecting the Atlantic deep inside the North American hinterland. However, limited container flows are taking place, and access to the Great Lakes is constrained by locks, particularly the Welland Canal. Most of the system is impacted by winter seasonality and forced to close between December and March. This impediment undermines the competitiveness of this hinterland option, as alternatives must be found during winter.
- The Mississippi-Missouri system connecting the Great Lakes and the American Midwest to the Gulf of Mexico. It is mainly used for ferrying agricultural resources, with most of the traffic downstream bound.
Attempts have been made to improve the competitiveness of inland waterways, namely with the designation of “marine highways” in a manner mimicking the Interstate Highway system.
In East and Southeast Asia, four major river systems are actively used for inland navigation. In Southeast Asia, the Mekong River connects six countries (Vietnam, Cambodia, Laos, Thailand, Burma and China). The Lower Mekong is navigable by ships of 3,000 DWT up to the border of Laos, where rapids and falls prevent going further inland. The upper Mekong offers more sporadic conditions with several segments used by ships under 100 DWT, particularly for ferries, as bridges are scarce due to lower levels of economic development.
China has three major inland navigation systems; the Yellow River in the north, the Yangtze River in the center, and the Pearl River in the south. The Yangtze River is the longest and busiest river in China, dominating its inland waterway sector and being the only river that connects the eastern, central, and western parts of the country. It thus plays an important role in supporting commercial activities in the central and western provinces. The total length of the Yangtze River is about 6,300 km, of which about 2,800 km is navigable for cargo vessels. It handles over two billion tons of freight annually, making it the world’s most important river in cargo volume. Since the turn of the century, when port decentralization started and China joined the WTO, freight volumes on the river have increased significantly. For container transport, the Yangtze River witnessed a development pattern initiated downstream and which is moving upstream. Containerization first occurred at the lower reach in the early 1990s. Manufacturing started along the Yangtze River Delta, which was the first region to be opened to foreign trade due to its high connectivity. The lower reach of the Yangtze River consistently accounted for the majority of the river’s total container traffic. However, its share decreased from 91% in 1996 to 67% in 2016 as economic development shifted upstream.
7. Cargo Bundling in Hinterland Transport
A. Cargo bundling options
Bundling is one of the key driving forces of inland container service network dynamics. The bundling of cargo typically involves several layers, starting with the consolidation of parcels onto a pallet and continuing with the bundling of a large number of containers onto a corridor connecting the port to the hinterland. Three types of bundling networks can be used as an alternative to direct point-to-point inland services. These bundling networks rely on en-route bundling in transfer/intermediate terminals. These types are often combined in rail transport and inland shipping to form multi-layered networks.
The advantages of cargo bundling are higher load factors, larger transport units in terms of TEU capacity, higher frequencies, and more destinations served. The main disadvantages of complex bundling networks are the need for extra container handling at intermediate terminals, resulting in higher transit times, increased risk of damage, longer transport distances, and a higher dependency on service quality. These elements incur additional costs that could counterbalance the cost advantages of higher load factors or larger unit capacities. Longer transport distances combined with time lost at intermediate terminals usually result in a longer transport time than direct services. The attractiveness of direct services with a low frequency largely depends on the ability of the operator to coordinate departure and arrival times with deepsea operations and the normal working hours of firms. There are also some time constraints related to the infrastructure, such as slot availability for freight trains or lock operating schedules on canals.
Complex bundling networks rely on the speed and cost-effectiveness of the transfers at intermediate terminals. Appropriate handling equipment needs to be in place, which is financially justified where there is sufficient traffic. For rail, container transfers between trains offer possibilities as an alternative to shunting container wagons. Lo-Lo (load on, load off) rail hub terminals (also known as thruports) can even outperform marshaling yards in terms of efficiency and speed.
One way to guarantee higher cargo volumes is by providing a broader range of services and modes and mixing local traffic with transit traffic. Another way is by directing cargo of different ports to the same inland hub for consolidation. The duplication of hub terminals, each operated by other market players, is only feasible in places with sufficient cargo volumes.
If an operator opts for a line bundling network, a decision must be taken concerning the number of intermediate stops. Limiting the number of stops at intermediate terminals shortens round-trip times. It increases the number of round trips per year, maximizing revenue and minimizing the equipment required for that specific service. This is a combined result of several effects:
- Lower total (inland) port time and inland port charges on the round voyage.
- A smaller number of units needed to run a service.
- A smaller total round trip length as possible diversion distances to intermediate terminals are avoided.
More intermediate stops can lead to lower pre- and endhaul costs by truck. These costs typically are very high in intermodal transport. Moreover, having more calls per roundtrip might be possible to realize a higher utilization rate for the transport equipment. Hence, the vicinity of an inland terminal could incite shippers to opt for intermodal transport. For container transport by barge, adding an extra intermediate terminal in a roundtrip might generate additional costs for more complex vessel stowage and restows. In rail transport, including an additional intermediate terminal leads to more complex shunting of wagon groups or container lo-lo operations.
B. Cargo bundling in seaport areas
Large seaports with several container terminals often face the challenge of bundling cargo from different terminals on the same train or barge. Two alternative systems exist:
- The conveyance (i.e. barge or combination train) sequentially calls at various deepsea container terminals in order to fill the available capacity.
- All containers bound for a specific inland service are brought to one (or more) dedicated rail or barge terminal in the port area through a network of intra-port services by truck (mostly), barge, or rail.
In the first option, barges and trains consume additional time while collecting hinterland cargo. For example, in the ports of Rotterdam and Antwerp, some inland barges might spend more than 48 hours in the port area collecting containers from different deepsea terminals. Using a central loading/discharging point in the port area dramatically reduces the port time for barges and train combinations. Still, it incurs extra costs related to the operation of inter-terminal container transfers and extra container handlings. The desired configuration depends on the spatial layout of the port area, particularly inter-terminal distances, operational characteristics of terminals, berths, transport equipment, modal options, and the decision on who will have to bear the costs of the inter-terminal transfers, mostly the shipping line or the terminal operator.
C. Specific considerations related to cargo bundling
Cargo bundling typically requires coordination among different supply chain actors supported by digital solutions to increase the visibility and transparency of cargo bundling opportunities and overall performance metrics. There might also be tensions between the expectations and objectives of different market actors:
- Operators typically aim for cost minimization of their intermodal network operations. As such, transport operators are tempted to design only the bundling networks they find convenient. Still, at the same time, they have to provide the services their customers want in terms of frequency, direct accessibility, and connectivity. Moreover, operators have to offer regular schedules with service characteristics, as any change may conflict with existing terminal operations.
- Customer preferences are driven by the minimization of generalized costs. These costs include all the costs of freight movements, loading and unloading, transfer, handling operations at groupage points, capital costs of the goods and depreciation during transport, costs related to damages, and inventory costs to the consignee. Shippers also show a keen interest in the qualitative performance of the whole transport chain in terms of reliability, availability, and compatibility. Hence, inefficiencies at this level will generate indirect logistics costs, such as production delays caused by late deliveries. Transport operators have to take account of the wider logistics perspective of the shippers.
The tension between routing and demand is another important aspect of cargo bundling. Network planners may direct flows along optimal paths for the system, with the lowest cost for the entire network being achieved by indirect routing via intermediate terminals and the consolidation of flows. However, the more efficient the network from the operator’s point of view, the less convenient it could be for shippers’ needs. Time, cost, or reliability concerns of the shipper could make an operator with indirect routes less competitive, thereby opening the possibilities for other operators to fill market gaps. The optimal service schedule is not only a function of operator-specific operational factors but also of shippers’ needs for transit time and other service elements and shippers’ willingness to pay for better service. Thus, the spatial development of bundling networks largely depends on the balance of power between shippers and operators.
Cargo availability has a significant impact on choices made in inland transport services. A port that only serves a dense local economic cluster will have fewer difficulties developing a regular inland service than a port handling containers for a large number of final destinations dispersed over a vast hinterland. A port with a large local cargo base will sooner or later be tempted to increase the inland penetration of its intermodal hinterland network to increase its capture area. From that moment on, the existing dense network of direct shuttles to nearby destinations might complement indirect inland services to more distant destinations built around one or more inland hubs. Extensive cargo concentration on a few trunk lines opens possibilities for economies of scale in inland shuttles by deploying longer trains or larger inland barges with higher frequencies.
Finally, the choice of an optimal service configuration also depends on network characteristics. River systems typically have a treelike structure with limited or no lateral connections between the different branches. Vessel capacity that can be deployed is restricted and not homogeneous due to varying draft limitations and other physical conditions in various parts of the river system. Rail networks usually have some lateral connections and offer a more homogenous profile in terms of train configurations. These differences between river systems and rail networks imply that the collection-distribution and hub-and-spoke network solutions are mainly found in rail container transport. In contrast, inland container barge services, such as on the Yangtze and the Rhine rivers, heavily rely on line-bundling solutions, calling at several inland terminals per navigation area, such as the upper, middle, or lower sections of the river system.
- Chapter 1.4 Ports and Distribution Networks
- Chapter 2.3 Dry Ports
- Chapter 4.3 Port Coordination and Cooperation
- Chapter 4.4 Port Clusters
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