1. Inland Terminals, Logistic Clusters and Global Commodity Chains: Looking Into the Eye of the Storm
Jean-Paul Rodrigue
Associate Professor, Dept. of Global Studies & Geography, Hofstra University, New York, USA
Van Horne Researcher in Transportation and Logistics, University of Calgary, Alberta, Canada
TIMEFRAME: 30 minutes
I would like to thank the Transport Institute of the Asper School of Business for inviting me to give this presentation.
I prefer to use the term “Inland terminal” instead of “inland port” or “dry port”.

2. Inland Terminals: The Eye of the Storm
Containerized Trade
Questioning growth prospects.
Paradigm shift (forecasting…).
Trade Imbalances
Imbalanced flows and shipping rates.
Load centers for empties on backhauls to ports.
Terminalization
Integrating inland terminals, corridors and commodity chains.
Governance
Including inland terminals within public policy and regional planning.
Value capture.   

3. Global Containerized Trade: Prepare to be Disappointed
Potential Divergence: The First Crisis of
Globalization
Container yard, Port of Yantian, China

4. Impact of Recessions on Consumption and Freight Rates
Significant
Consumption B D
A – Basic Goods
B – Discretionary Goods
C – Durable Goods
D – Capital Equipment
E – Luxury Goods
Decline
Severity A E
None
Low
High
Value of Goods
Source: adapted from D. Jacoby (2008) “How should the global financial crisis affect your freight strategy?”, Logistics Digest, December. 1
Trade and Freight Rates
Significant 2 3
1 – Futures Indexes
2 – Income and Spending
3 – Container Volumes
4 – Value of Trade
Decline 4
None
Sequence

5. Futures Indexes: The Current Trend is Strongly Deflationary…
Source: Bloomberg.

6. Annual Light Vehicle Sales, United States, January 2008 – January 2009 (millions)
-36.8%
Source:
-42.3%
-22.9%

7. Port of Los Angeles (Monthly TEUs), 1995-2008: Peaking … and About to Fall Off a Cliff?
Traffic peaked in 2006 to 8.5 M TEU, to drop to 8.4 M TEU in 2007 and 7.8 M TEU in 2008.

8. World Container Traffic, 1980-2008. Reaching Peak Growth?
Adoption
Acceleration
Peak Growth
Maturity
2010(?) -
(?)
Divergence
Source: Drewry Shipping Consultants.

9. Global Bulk and Container Fleet Partially Immobilized (Singapore, January 2009)
According to our sources there are currently 130 ships idle outside Singapore, and satellite pics indicate over 100 ships idle in Piraeus (Greece). This is obviously a temporary strategy while waiting for trade to pick up. The question is what happens next if the trade does not pick up, which is very likely?
“The number of containerships laid up is growing very fast. According to French maritime consultant AXS-Alphaliner, 255 ships, equivalent to 675,000 teu in capacity (5.5% of the global containership fleet), were laid up as of January 19 this year. It projects that the volume of containerships on standby will jump to the equivalent of 750,000 teu in early February this year, accounting for 6% of the entire global boxship fleet.”
Source: Unknown.

10. Cars Accumulating at the Long Beach Port Terminal, December 2008
Source: Getty Images

11. Trade Imbalances: Coping with Distortions
Transport Flows
Transport Rates
Inland Terminals and Repositioning
NS Rutherford Inland Terminal, Pennsylvania

12. Containerized Cargo Flows along Major Trade Routes, 1995-2007 (in millions of TEUs)
Source: UNCTAD, Review of Maritime Transport, various years.

13. Containerized Cargo Flows along Major Trade Routes, 2007
Million TEUs
Growth ( )
15.4 (+175%)
14.9
4.9 (+48%)
Asia
19.9
33.1
USA
10.0 (+178%)
7.6
17.7 (+293%)
Imports (M TEUs)
4.5 (+55%)
20.4
Europe
14.5
2.7 (+23%)
Exports (M TEUs)

14. Maritime Freight Rates (Nominal USD per TEU), 1993-2008
Source: UNCTAD, Review of Maritime Transport, Various years.

15. Geographical Levels of Empty Container Repositioning
Hinterland
Global Repositioning
Inter-Regional Repositioning
(inland)
Inter-Regional
Repositioning
(coastal / fluvial)
Regional
Repositioning
Source: adapted from Boile, M., S. Theofanis, A. Baveja and N. Mittal (2008) “Regional repositioning of empty containers: A case for inland depots.” Transportation Research Record: Journal of the Transportation Research Board (in press).
Foreland
Port
Depot / Inland terminal
Freight Distribution Cluster
Cargo Rotation

16. Main North American Trade Corridors and Metropolitan Freight Centers
Efficient repositioning
Cargo rotation
Export market

17. Bulk and Containerized Commodity Chains
Bulk Commodity Chain
Supplier
Customer
Port
Point-to-Point
Consolidation center
Complementarity
Container
port
Pendulum
Services
Inland Terminal
Containerized Commodity Chain

18. Several Established Containerized Commodity Chains in Western Canada
Source: Quorum Corporation (2007) Container Use in Western Canada: Inland Terminals, Container Utilization, Service and Regulatory Issues and the Optimization of Use in Western Canada, Government of Canada, Report of the Grain Monitor: Supplemental Program.

19. Terminalization and Inland Terminals
Economies of Scale: A Hard Pill to Swallow
Terminalization and Supply Chains
Extended Distribution Centers
Trimodal Container Terminal, Willebroek, Belgium

20. Type and Function of Inland Terminals
Load center
Corridor
Transmodal terminal
Satellite terminal
Type
Function
Satellite terminal
Close to a port facility. Accommodate additional traffic and serve functions that have become too expensive at the port. Container transloading.
Freight distribution cluster / load center
Access regional markets (production and consumption). Intermodal, warehousing, and logistics functions. Linked with logistics parks and free trade zones.
Intermodal / Transmodal facility
Link large systems of freight circulation either through the same mode (e.g. rail-to-rail) or through intermodalism (e.g. rail-to-truck).

21. The Largest Available Containership, 1970-2007 (in TEUs)
E “Emma” Class (2006)
S “Sovereign” Class (1997)
R “Regina” Class (1996)
L “Lica” Class (1981)

22. Hinterland Logistics: The Realm of the “Last Mile” (or the “First Mile”)
Massification
Atomization
Frequency
Capacity
GLOBAL
HINTERLAND
REGIONAL
LOCAL
Shipping Network
Corridor
Segment
Customer
“Last Mile”
Inland Terminal
Distribution
Center
Gateway

23. Massification of Inland Terminals: Automated Transfer Management Systems
Source: Mi-Jack Products

24. Supply Chain Terminalization: Import Flows to the Hinterland
Foreland (First Mile)
Suppliers
Bottleneck
Gateway
Buffer
Distribution center (outbound / inbound)
Inland containerized goods flow
Inland non-containerized goods flow
Offshore Hub
Maritime container flow
Gateway
Port regionalization and the creation
of a Regional Load Center Network
Inland
Terminal
Extended Gate (Inland terminals)
Extended Distribution Center (Terminal as
A warehousing unit)
Customers
Hinterland (Last Mile)

25. Container Transloading: Could it Move Inland?
Cause
Outcome
Consolidation
Transferring the contents of smaller containers into larger containers (e.g. three maritime 40 foot containers into two 53 foot domestic containers). Cost savings (number of lifts). Time delays.
Weight compliance
Transferring the contents of heavy containers into loads meeting national or regional road weight limits.
Palletizing
Placing loose (floor loaded) containerized cargo unto pallets. Adapting to local load units (e.g. europallet).
Demurrage
Handing back containers to owner (maritime shipping or leasing company) by transferring its contents into another load unit (e.g. domestic container) to avoid charges.
Equipment availability
Making maritime containers available for exports and domestic containers available for imports. Trade facilitation.
Supply chain management
Terminal and transloading facility as a buffer. Delay decision to route freight to better fulfill regional demands. Perform some added value activities (packaging, labeling, final assembly, etc.)

26. Governance and Inland Terminals
Terminal Operators and Value Capture
Regional Integration as Logistics Clusters
Uiwang Inland Container Depot, South Korea

27. The Value Capture Process along Commodity Chains
Port Authority
Maritime Services
Inland Services
Port Services
Horizontal Integration
Port Holding
Offshore
hub
Inland
Port
Port
Vertical Integration
Maritime shipping has a profit margin of only about 2%. Single operator controls the berth-to-gate operations.
Maritime shipping lines moving inland to capture value. Port terminal operations. Rail and trucking operations. Distribution centers. Logistics.
Commodity Chain
Maritime Shipping
Port Terminal Operations
Inland Modes and Terminals
Distribution Centers

28. Inland Terminals: Operations and Added Value
Core
(Operations)
Infrastructure
Modal access (dock, siding, road), unloading areas
Equipment
Intermodal lifting equipment, storing equipment
Storage
Yard for empty and loaded containers
Management
Administration, maintenance, access (gates), information systems
Ancillary
(Added Value)
Trade facilitation
Free trade zone, logistical services
Distribution centers
Transloading, cross-docking, warehousing, light manufacturing, temperature controlled facilities (cold chain)
Storage depot
Container depot, bulk storage
Container services
Washing, preparation, repair, worthiness certification
The core is standard and replicable almost everywhere. It is the ancillary that makes the difference because this is where most of the added value can take place.

29. Functional Integration of Freight Clusters
Scope
Logistic Pole
FTZ
Logistic Cluster
The level of functional integration between the distribution activities located within a cluster varies from small where they simply share a location and its accessibility to significant where activities have a high level of integration. Thus, three major levels of functional integration can be found for freight distribution clusters:
Logistic zones. The suburbanization of distribution centers (DC) resulted in the formation of various logistics zones where land is available and with proximity to major road infrastructure. However, those activities are commonly unrelated, implying that they have their own supply chains and distribution networks. Accessibility tends to be the main factor favoring agglomeration within the freight cluster. They are likely to appear rather spontaneously as several firms realize the advantage of a location for freight distribution centers.
Logistic clusters. A concentration of freight related activities within a specific area, commonly built for such a purpose, master planned and managed. These activities include distribution centers, warehouses and storage areas, transport terminals, offices and other facilities supporting those activities, such as public utilities, parking space and even hotels and restaurants. Although a logistic cluster can be serviced by a single mode, intermodal facilities can offer direct access to global and regional markets. The development of logistic clusters has many benefits to manage the freight flows generated by several unrelated users through economies of scale since they are sharing the same facilities and equipment, mostly around a transport terminal or a depot. This in turn reduces transport costs and promotes its reliability. Various names have been used to label them, such as "freight villages".
Logistic poles. Has all the characteristic of a logistic cluster, but commonly implies a higher level of integration between the firms and distribution centers present within the pole as well as with transport terminals servicing the pole. This can also involve the setting of a free trade zone (FTZ) within the pole, conferring an additional level of flexibility (and complexity) in freight distribution. In some cases of advanced supply chain management strategies, the terminal upstream of the supply chain can act as a storage buffer and functionally be part of the logistic pole. Logistic poles tend to be the outcome of a concerted action between government agencies and the private sector.
Freight distribution clusters can grow both in scale and scope. Although they can independently grow either in scale or scope, this process tends to be concomitant.
Logistic Zone
Distribution center
Terminal / Depot
Port
Scale

30. Free Trade Zones: Setting The Rules
Infrastructures
High level of infrastructure, such as land, transport, office space, utilities, logistics services, business services and other facilities.
Regulations
Streamlined to improve efficiency, including custom services, labor regulation and permits.
Location
High accessibility location, often close to major terminal facilities such as a port, inland terminal or an airport. Location often away from conventional industry.
Export-oriented
Activities operating within the zone produce mainly or exclusively for foreign markets.
Incentives
Variety of incentives, including low cost land, infrastructures, tax and duty exemptions or various subsidies.
Source: adapted from Kusago, T and Tzannatos, Z. (1998) “Export processing zones: A review in need of an update”, SP Discussion Paper No The
World Bank.

31. Free Trade Zones: “Bending the Rules”
Custom Clearance
Done inland instead of at the gateway port.
Likely faster.
Receiver gets further advance notice.
Duties
Not paid until the consignment is released and moved out of the FTZ.
If transformation is performed in the FTZ, the duty class may change.
Select the taxation regime.
Settlement
If combined with Warehousing.
Vendors often not paid until the freight leaves the terminal for delivery.

32. Inland Terminals: The Calm after the Storm (lessons to be learned)
Rebalancing of the global economy
Repositioning strategies
Terminalization (intermodal integration)
Logistics cluster (regional integration)  
While the current context is prone to uncertainties, it can be anticipated that once the malinvestments caused by the housing bubble and its contamination of the global economy have been cleared by a deep recession, a new period of growth will result. The storm will abate, leading to a calmer period where future trends are easier to assess. The following interelated points can provide a guideline:
1) The global economy will be rebalanced under different fundamentals that are likely to be linked with lower growth rates. Still, large continental markets like North America will rely on a network of inland terminals as a fundamental structure to support and organized hinterland freight movements, as import and export-based activities. It is to be kept in mind that while energy prices have collapsed because of demand destruction, they are likely to surge again once the recession runs its course. Once this takes place, inland terminals will be even more important in maintaining efficient commodity chains.
2) It can be expected that resources will play a greater role within containerized trade with inland terminals. This implies a set of repositioning strategies where inland terminals play a fundamental role either to improve the efficiency of this repositioning, provide better cargo rotation opportunities, or act as an agent that can help promote containerized exports.
3) Inland terminals will take part of the ongoing intermodal integration between ports and their hinterland and through long distance rail corridors. They are likely to be more important elements within supply chains, particularly through their role of buffer.
4) Inland terminals will achieve a higher level of integration within regional freight distribution activities, both from an import and export based perspectives. They will be part of a freight cluster. Governance and PPP are means to insure that the terminal fits within regional policies. 