The Asia Pacific Gateway and Corridor Initiative: Toronto Workshop, June Extending the Gateways: Logistic Zones in North American Freight Distribution Jean-Paul Rodrigue Associate Professor, Dept. of Global Studies & Geography, Hofstra University, New York, USA

What Drives Supply Chain Management?

Worlds Major Gateway Systems and Hinterland Structure, Gateway Regions 90% of the Worlds Freight Transport Pearl River Delta: 16.7% Coastal concentration Landbridge connections Inland concentration Coastal gateways Coastal concentration Low hinterland access

Logistics Zone Extending the Gateways: Two Dimensions Gateway Logistics Zone On-dock and near dock Satellite terminal A A B C Logistics Zone Corridor B-C Logistics Zone Gateway / Port Regionalization (A) Satellite terminals and logistics zones. Maritime / land interface. Inland Port (B-C) Corridor development. Regional load centers.

The Complexities of Inland Logistics: The Last Mile in Freight Distribution Gateway Inland Terminal DistributionCenter Capacity Frequency Corridor Customer Last Mile Segment GLOBAL HINTERLAND REGIONALLOCAL Shipping Network MassificationAtomization Logistics Zone On-dock and near dock Satellite terminal A Logistics Zone Corridor B-C Logistics Zone

Extending the Gateway Through Governance Changes Planning and management of port area. Provision of infrastructures. Planning framework. Enforcement of rules and regulations. Cargo handling. Nautical services (pilotage, towage, dredging). Conventional Port Authority Expanded Port Authority

The North-American Container Port System and its Multi-Port Gateway Regions Multi-port gateway regions 1. San Pedro Bay 2. Northeastern Seaboard 3. Southwestern Seaboard 4. Puget Sound 5. Southern Florida 6. Gulf Coast 7. Pacific Mexican Coast

Something Strange Happened on the Way to the Terminal… Networks Terminals Warehousing Outdoor Storage Port terminals Rail terminals Airports Energy Roads / lines Rights of way Distribution centers Cross-docking Freight Village Transportation Storage Inventory in transit 1 1 Inventory at terminal

Containerization Growth Factors: Which Opportunities are Left? Derived / Organic (A) Economic and income growth. Globalization (outsourcing and global sourcing). Fragmentation of production and consumption. Substitution (B) Functional and geographical diffusion. New niches (commodities and cold chain) Capture of bulk and break-bulk markets. Incidental (C) Trade imbalances. Repositioning of empty containers. Induced (D) Transshipment (hub, relay and interlining). ABCD

American Foreign Trade by Maritime Containers, 2008 (in TEUs): The Trade Fundamentals

Asymmetries between Import and Export Containerized Logistics Many Customers (Importers) Function of population density. Geographical spread. Incites transloading. High priority. Few Suppliers (Exporters) Function of resource density. Geographical concentration. Lower priority. Depends on repositioning opportunities. Gateway Inland Terminal DistributionCenter Customer Supplier Repositioning

Distribution Network Configurations for Containerized Import Cargo TypeSupply Chain Gateway-based Few mass market goods (economies of scale in distribution). Few very specialized goods (economies of scale in warehousing). Little if any transformations. Transloading. Tiered-based Mix of retail goods coming through a few gateways. Some customization. Large suppliers and large retailers (Big Box). Transloading, Postponement and Cross-docking. Regional distribution centers Complex set of goods coming from numerous suppliers (e.g. automotive parts). Regional variation of the nature and extent of demand. Local distribution centers Time sensitive bulky cargo (e.g. perishables). Low lead times. City logistics.

Distribution based on RDCs Distribution based on two gateways Distribution based on tiered system Distribution based on local DCs

Optimal Location and Throughput by Number of Freight Distribution Centers

Functional Relations between Inland Terminals and their Hinterland Inland Terminal Logistics activities Retailing and manufacturing activities IIIIII FLOWS & INTEGRATION Logistics Pole Freight Region

Added Value Activities Performed at an Extended Gateway ActivityFunctions Consolidation / 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.

Inland Terminals as Foreign Trade Zones (FTZ) Custom Clearance Done inland instead of at the gateway port. Likely faster (less congestion). Consignment can stay for an unlimited amount of time in the FTZ. Consignee gets further advance notice that shipment is ready. Duties Not paid until the consignment is released and moved out of the FTZ (storage). Deferred if goods moved to another FTZ. If transformation is performed in the FTZ, the duty class may change (Select the taxation regime). Not paid for damaged, defective or obsolete goods. Settlement Vendors often not paid until consignments leave the facility for delivery (Delay settlement). Remove damaged or defective products from the settlement.

Savannah Logistics Cluster NS Near Dock Intermodal Terminal ContainerTerminals Port Industrial Park Crossroads Industrial Park HomeDepot Wal-Mart TEC North Point Real Estate Savannah River International Trade Park Ikea Target

Raritan Center, New Jersey Port of New York (20km) Port of New York (20km) Raritan Center Heller Industrial Park Port Raritan

BNSF Logistics Park, Chicago (Extended Gateway of LA / LB) BNSF Intermodal Yard Distribution Centers Wal-Mart Maersk California Cartage Chicago (60km) Chicago (60km)

CenterPoint-KCS Intermodal Center, Kansas City KCS Intermodal Yard Retail Phase 1 Phase 2 Phase 3 Phase 4 Phase 5 Kansas City (25 km) Kansas City (25 km)

Rickenbacker Global Logistics Park, Columbus Ohio NS Intermodal Terminal Columbus ( 15km ) Rickenbacker International Airport Intermodal Campus Rail Campus Air Cargo Campus North Campus Gateway Campus

Container Traffic at North American Ports, : This was supposed to be impossible…

Then, this must be lunacy…

Share of the Northeast Asia – U.S. East Coast Route by Option

Transit Times from Shanghai and North American Routing Options (in Days) Vancouver Seattle / Tacoma Prince Rupert Oakland Los Angeles Lazaro Cardenas Panama Houston Savannah/Charleston Norfolk New York Chicago Dallas Atlanta Toronto Lower aggregate demand. The curse of economies of scale. Response from West Coast ports. Response from railways (East vs. West). New gateways (Canada: CN, Mexico: KCS). Response from terminal operators. Response from Caribbean transshipment hubs. Costs (fuel prices and Panama Canal toll rates). Competition from Suez and the Mediterranean. Regionalization of production.

Extending the Gateways 1- Regional Division of Distribution 2- Functional, Managerial and Governance Changes 3- Potential paradigm shifts