Bottleneck and Warehousing-Derived Terminalization

Bottleneck and Warehousing-Derived Terminalization

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 encompasses a conventional perspective on the role of terminals where the terminal is the main 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 is 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 with volume, frequency and scheduling changes and may seek alternatives if possible.
  • Warehousing-derived (buffer) terminalization 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 a component of the supply chain, no longer as a factor of delay, but as a storage unit. It gives the supply chain a higher level of flexibility to lower warehousing costs as well as to adapt to unforeseen events such as demand surges or delays. An inventory in transit strategy coupled with an inventory at terminal one can reduce significantly warehousing requirements at distribution centers. 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.