Intermodal Transportation

Authors: Dr. Jean-Paul Rodrigue, Dr. Brian Slack and Dr. Claude Comtois

1. The Nature of Intermodalism

Competition between the modes has tended to produce a transport system that is segmented and un-integrated. Each mode has sought to exploit its own advantages in terms of cost, service, reliability and safety. Carriers try to retain business by maximizing the line-haul under their control. All the modes saw the other modes as competitors, and were viewed with suspicion and mistrust. The lack of integration between the modes was also accentuated by public policy that has frequently barred companies from owning firms in other modes (as in the United States before deregulation), or has placed a mode under direct state monopoly control (as in Europe). Modalism was also favored because of the difficulties of transferring goods from one mode to another, thereby incurring additional terminal costs and delays.

Since the 1960s major efforts have been made to integrate separate transport systems through intermodalism, which took place is several several stages. This involves the use of at least two different modes in a trip from origin to destination through an intermodal transport chain. Intermodality enhances the economic performance of a transport chain by using modes in the most productive manner. Thus, the line-haul economies of rail may be exploited for long distances, with the efficiencies of trucks providing flexible local pick up and delivery. The key is that the entire trip is seen as a whole, rather than as a series of legs, each marked by an individual operation with separate sets of documentation and rates. From a functional and operational perspective, two components are involved in intermodalism:

Intermodal transportation. The movements of passengers or freight from one mode of transport to another, commonly taking place at a terminal specifically designed for such a purpose.

Transmodal transportation. The movements of passengers or freight within the same mode of transport. Although "pure" transmodal transportation rarely exists and an intermodal operation is often required (e.g. ship to dockside to ship), the purpose is to insure continuity within the network.

Thus, transportation systems having several modes can be considered from two different conceptual perspectives:

Intermodal Transportation Network. A logistically linked system using two or more transport modes with a single rate. Modes are having common handling characteristics, permitting freight (or people) to be transferred between modes during a movement between an origin and a destination.

Multimodal Transportation Network. A set of transport modes offering connections between a set of origins and destinations. Although intermodal transportation is possible, it does not necessarily occur.

The emergence of intermodalism has been brought about in part by technology and requires management units for freight such as containers, swap bodies, pallets or semi-trailers. In the past, pallets were a common management unit, but their relatively small size and lack of protective frame made their intermodal handling labor intensive and prone to damage or theft. By the early 1930s about three days were required to unload a rail boxcar containing 13,000 cases of unpalletized canned goods. With pallets and forklifts, a similar task could be done in about four hours. Better techniques and management units for transferring freight from one mode to another have facilitated intermodal transfers. Early examples include piggyback (TOFC: Trailers On Flat Cars), where truck trailers are placed on rail cars, and LASH (lighter aboard ship), where river barges are placed directly on board sea-going ships.

The major development undoubtedly has been the container, which permits easy handling between modal systems. Containerized traffic has surged in recent years, underlining its adoption as a privileged mean to ship products on international and national markets. Containerization leans on growth factors with the diffusion and adaptation of transport modes to containerization is an ongoing process which will eventually reach a level of saturation. Doublestacking of containers on railways (COFC: Containers On Flat Cars) has doubled the capacity of trains to haul freight with minimal cost increases, thereby improving the competitive position of the railways with regards to trucking for long-haul shipments. Containers have become the most important component for rail and maritime intermodal transportation.

While handling technology has influenced the development of intermodalism, another important factor has been changes in public policy. Deregulation in the United States in the early 1980s liberated firms from government control. Companies were no longer prohibited from owning across modes, and there developed a strong impetus towards intermodal cooperation. Shipping lines in particular, began to offer integrated rail and road service to customers. The advantages of each mode could be exploited in a seamless system, which created multiplying effects. Customers could purchase the service to ship their products from door to door, without having to concern themselves of modal barriers. With one bill of lading clients can obtain one through rate, despite the transfer of goods from one mode to another.

The most important feature of intermodalism is the provision of a service with one ticket (for passengers) or one bill of lading (for freight). This has necessitated a revolution in organization and information control. At the heart of modern intermodalism are data handling, processing and distribution systems that are essential to ensure the safe, reliable and cost effective control of freight and passenger movements being transported by several modes. Electronic Data Interchange (EDI) is an evolving technology that is helping companies and government agencies (customs documentation) cope with an increasingly complex global transport system.

Today, intermodal transport is transforming a growing share of the medium and long-haul freight flows across the globe. Large integrated transport carriers provide door to door services. The limits of intermodality are imposed by factors of space, time, form, pattern of the network, the number of nodes and linkages, and the type and characteristic of the vehicles and terminals.

2. Containerization and Intermodalism

Intermodalism originated in maritime space, with the development of the container in the late 1960's and has since spread to integrate other modes. It is not surprising that the maritime sector should have been the first mode to pursue containerization. It was the mode most constrained by the time taken to load and unload the vessels. A conventional breakbulk cargo ship could spend as much time in a port as it did at sea. Containerization permits the mechanized handling of cargoes of diverse types and dimensions that are placed into boxes of standard sizes. In this way goods that might have taken days to be loaded or unloaded from a ship can now be handled in a matter of minutes (Slack 1998).

Container. A large standard size metal box into which cargo is packed for shipment aboard specially configured transport modes. It designed to be moved with common handling equipment enabling high-speed intermodal transfers in economically large units between ships, railcars, truck chassis, and barges using a minimum of labor. The container, therefore, serves as the load unit rather than the cargo contained therein, making it the foremost expression of intermodal transportation. The usage of containers shows the complementarity between freight transportation modes by offering a higher fluidity to movements and a standardization of loads. Thus, the relevance of containers is not what they are - simple boxes - but what they enables; intermodalism. The reference size is the 20 foot box, 20 feet long, 8'6" feet high and 8 feet wide, or 1 Twenty-foot Equivalent Unit (TEU). Since the great majority of containers are now forty foot long, the term Forty-foot Equivalent Unit (FEU) is also used, but less commonly.

One of the keys to the success of the container is that an agreement about its base dimensions and latching system was reached through the International Standards Organization (ISO) within 10 years of its introduction. From these specifications, a wide variety of container sizes have been put in use. The most prevalent container size is however the 40 foot box, which in its 2,400 cubic feet which carry on average 22 tons of cargo. In the United States, a large amount of domestic containers of 53 foot are also used. Containers are either made of steel (the most common for maritime containers) or aluminum (particularly for domestic) and their structure confers flexibility and hardiness.

Among the numerous advantages related to the success of containers in international and hinterland transport, it is possible to note the following:

• Standard transport product. A container can be manipulated anywhere in the world as its dimensions are an ISO standard. Indeed, transfer infrastructures allow all elements (vehicles) of a transport chain to handle it with relative ease. Standardization is a prevalent benefit of containerization as it conveys a ubiquity to access the distribution system and reduces the risks of capital investment in modes and terminals. The rapid diffusion of containerization was facilitated by the fact that its initiator, Malcolm McLean, purposely did not patent his invention. Consequently all segments of the industry, competitors alike, had access to the standard. It necessitated the construction of specialized ships and of lifting equipment, but in several instances existing transport modes can be converted to container transportation.
• Flexibility of usage. It can transport a wide variety of goods ranging from raw materials (coal, wheat), manufactured goods, and cars to frozen products. There are specialized containers for transporting liquids (oil and chemical products) and perishable food items in refrigerated containers (called "reefers" which now account for 50% of all refrigerated cargo being transported). About 1.1 million TEUs of reefers were being used by 2004. In many developing countries, discarded containers are often used as storage, housing, office and retail structures.
• Management. The container, as an indivisible unit, carries a unique identification number and a size type code enabling transport management not in terms of loads, but in terms of unit. Computerized management enables to reduce waiting times considerably and to know the location of containers (or batches of containers) at any time. It enables to assign containers according to the priority, the destination and the available transport capacities. Transport companies book slots in maritime or railway convoys that they use to distribute containers under their responsibility.
• Costs. Relatively to bulk, container transportation reduces transport costs considerably, about 20 times less. While before containerization maritime transport costs could account between 5 and 10% of the retail price, this share has been reduced to about 1.5%, depending on the goods being transported. The main factors behind costs reductions reside in the speed and flexibility incurred by containerization. Similar to other transportation modes, container shipping is benefiting from economies of scale with the usage of larger containerships (The 6,000 TEUs landmark was surpassed in 1996 with the Regina Maersk and in 2006 the Emma Maersk surpassed the 14,000 TEU landmark). A 5,000 TEU containership has operating costs per container 50% lower than a 2,500 TEU vessel. Moving from 4,000 TEU to 12,000 TEU reduces operating costs per container by a factor of 20%, which is very significant considering the additional volume involved. System-wide the outcome has been costs reductions of about 30% by the use of containerization.
• Speed. Transshipment operations are minimal and rapid. A modern container ship has a monthly capacity of 3 to 6 times more than a conventional cargo ship. This is notably attributable to gains in transshipment time as a crane can handle roughly 30 movements (loading or unloading) per hour. Port turnaround times have thus been reduced from 3 weeks to less than 24 hours. It takes on average between 10 and 20 hours to unload 1,000 TEUs compared to between 70 and 100 hours for a similar quantity of bulk freight. With larger containerships, more cranes can be allocated to transshipment. 5 to 6 cranes can service a 5,000 TEU containership implying that larger ship size do not have much differences in loading or unloading time. A regular freighter can spend between half and two-third of its useful life in ports. With less time in ports, containerships can spend more time at sea, thus be more profitable to operators. Further, containerships are on average 35% (19 knots versus 14 knots) faster than regular freighter ships.
• Warehousing. The container limits the risks for goods it transports because it is resistant to shocks and weather conditions. The packaging of goods it contains is therefore simpler and less expensive. Besides, containers fit together permitting stacking on ships, trains (doublestacking) and on the ground. It is possible to superimpose three loaded and six empty containers on the ground. The container is consequently its own warehouse.
• Security. The contents of the container are anonymous to outsiders as it can only be opened at the origin, at customs and at the destination. Thefts, especially those of valuabe commodities, are therefore considerably reduced.

In spite of numerous advantages in the usage of containers, some drawbacks are evident:

• Site constraints. Containerization implies a large consumption of terminal space. A containership of 5,000 TEU requires a minimum of 12 hectares of unloading space, while unloading entirely its containers would require the equivalent of about 7 double-stack trains of 400 containers each. Conventional port areas are often not adequate for the location of container transshipment infrastructures, particularly because of draft issues as well as required space for terminal operations. Many container vessels require a draft of at least 14 meters (45 feet). A similar challenge applies to container rail terminals, many being relocated at the periphery of metropolitan areas. Consequently, major container handling facilities have modified the local geography of container by forcing a relocation to new sites at the periphery.
• Infrastructure costs. Container handling infrastructures, such as gantry cranes, yard equipment, road and rail access, represent important investments for port authorities and load centers. For instance, the costs of a modern container crane (portainer) are in the range of 4 million $US. Several developing countries cannot afford these infrastructures with local capital and so cannot participate effectively in international trade as efficient load centers unless concession agreements are reached with terminal operators.
• Stacking. The arrangement of containers, both on the ground and on modes (containerships and double-stack trains) is a complex problem. At the time of loading, it becomes imperative to make sure that containers that must be taken out first are not below the pile. Further, containerships must be loaded in a way to avoid any restacking along its numerous port calls where containers are loaded and unloaded.
• Management logistics. The management of containerized operations is very information intensive. This requires high levels of information technology for the recording, repositioning and ordering of the containers being handled.
• Empty travel. Maritime shippers need containers to maintain their operations along the port networks they service. The same number of containers brought into a market must thus eventually be relocated, regardless if they are full or empty. On average containers will spend about 56% of their 10 to 15 years lifespan idle or being repositioned empty, which is not generating any income but convey a cost that must be assumed in one way or the other. Either full or empty, a container takes the same amount of space on the ship or in a storage yard and takes the same amount of time to be transshipped. Due to a divergence between production and consumption, it is uncommon to see an equilibrium in the distribution of containers. About 2.5 million TEUs of empty containers are stored in yards and depots around the world, underlining the issue of the movement and accumulation of empty containers. They represent about 20% of the global container port throughput and of the volume carried by maritime shipping lines. Most container trade is imbalanced, and thus containers "accumulate" in some places and must be shipped back to locations where there have deficits (mostly locations having a strong export function). This is particularly the case for American container shipping. As a result, shipping lines waste substantial amounts of time and money in repositioning empty containers.
• Illicit trade. By its confidential character, the container is a common instrument used in the illicit trade of drug and weapons, as well as for illegal immigrants. Concerns have also been raised about containers being used for terrorism. These fears have given rise to an increasing number of regulations aimed at counteracting illegal use of containers. In 2003, following US inspection requirements the International Maritime Organisation (IMO) introduced regulations regarding the security of port sites and the vetting of workers in the shipping industry. The US, itself established a 24 hour rule, requiring all shipments destined for the US to receive clearance from US authorities 24 hours prior to the departure of the vessel. In 2008, the US Congress has passed a regulation requiring all US-bound containers to be electronically scanned at the foreign port of loading, prior to departure. Needless to say, these measures incur additional costs and delays that many in the industry oppose

The development of intermodal transportation and containerization are mutually inclusive, self strengthening and rely of a set of driving forces.

3. Intermodalism and other modes

With the deregulation and privatization trends begun in the 1980's, containerization, which was already well established in the maritime sector, could spread inland. The shipping lines were among the first to exploit the intermodal opportunities that US deregulation permitted. They could offer door-to-door rates to customers by integrating rail services and local truck pick up and delivery in a seamless network. To achieve this they leased trains, managed rail terminals, and in some cases purchased trucking firms. In this way they could serve customers across the country by offering door-to-door service from suppliers located around the world. The move inland also led to some significant developments, most notably the double-stacking of containers on rail cars. This produced important competitive advantages for intermodal rail transport.

Other parts of the world have not developed the same degree of synergies between rail and shipping as in North America. However, a trend towards closer integration in many regions is emerging. In Europe rail intermodal services are becoming well-established between the major ports, such as Rotterdam, and southern Germany, and between Hamburg and Eastern Europe (van Klink and van den Berg, 1998). Rail shuttles are also making their appearance in China, although their market share remains modest.

While rail intermodal transport has been relatively slow to develop in Europe, there are extensive interconnections between barge services and ocean shipping, particularly on the Rhine. Barge shipping offers a low cost solution to inland distribution where navigable waterways penetrate to interior markets. This solution is being tested in North America, although with limited success so far. While it is true that the maritime container has become the work horse of international trade, other types of containers are found in certain modes, most notably in the airline industry. High labor costs and the slowness of loading planes, that require a very rapid turnaround, made the industry very receptive to the concept of a loading unit of standard dimensions. The maritime container was too heavy and did not fit the rounded configuration of a plane’s fuselage, and thus a box specific to the needs of the airlines was required. The major breakthrough came with the introduction of wide-bodied aircraft in the late 1970s. Light weight aluminum boxes could be filled with passenger’s baggage or parcels and freight, and loaded into the holds of the planes using tracking that requires little human assistance.

A unique form of intermodal unit has been developed in the rail industry, particularly in the US. Roadrailer is essentially a road trailer that can also roll on rail tracks. It is unlike the TOFC (piggyback) system that requires the trailer be lifted on to rail flat car. Here the rail bogies may be part of the trailer unit, or be attached in the railway yard. The road unit becomes a rail car, and vice-versa. It is used extensively by a major US rail company, Norfolk Southern whose “Triple Crown” service provides just-in-time deliveries between the automobile parts manufacturers located in Michigan, and the assembly plants located in Georgia, Texas and Mexico and Canada.

4. Intermodalism and Production Systems

Transport chains are being integrated into production systems. As manufacturers are spreading their production facilities and assembly plants around the globe to take advantage of local factors of production, transportation becomes an ever more important issue. The integrated transport chain is itself being integrated into the production and distribution processes. Transport can no longer be considered as a separate service that is required only as a response to supply and demand conditions. It has to be built into the entire supply chain system, from multi-source procurement, to processing, assembly and final distribution. Supply Chain Management (SCM) has become an important facet of international transportation. As such, the container has become a transport, production and distribution unit.

While many manufacturing corporations may have in-house transportation departments, increasingly the complex needs of the supply chain are being contracted out to third parties. Third party logistics providers (3PL) have emerged from traditional intermediaries such as the forwarders, or from the transport providers such as FEDEX or Maersk-SeaLand. Because the latter are transporters themselves, they are referred to as Fourth Party logistics providers (4PL). Both groups have been at the forefront of the intermodal revolution that is now assuming more complex organizational forms and importance. In offering door to door services, the customer is no longer aware or necessarily concerned with how the shipment gets to its destination. The modes used, and the routing selected are no longer of immediate concern. The pre-occupation is with cost, reliability and level of service. This produces a paradox, that for the customer of intermodal services geographic space becomes meaningless; but for the intermodal providers routing, costs and service frequencies have significant geographical constraints. The effectiveness of intermodal transport systems is thus masking the importance of transportation to its users.

5. Intermodal Transport Costs

There is a relationship between transport costs, distance and modal choice that has for long been observed. It enables to understand why road transport is usually used for short distances (from 500 to 750 km), railway transport for average distances and maritime transport for long distances (about 750 km). Variations of modal choice according to the geographical setting are observed but these figures tend to show a growth of the range of trucking. However, intermodalism offers the opportunity to combine modes and find a less costly alternative than an unimodal solution. As a result, the efficiency of contemporary transport systems rests as much on their capacity to route freight than on their capacity to transship it, but each of these functions have a cost that must be reduced.

Intermodal transportation cost implies the consideration of several types of transportation costs for the routing of freight from its origin to its destination, which involves a variety of shipment, transshipment and warehousing activities. It considers a logistic according to which are organized transport chains where production and consumption systems are linked to transport systems. Numerous technical improvements, such as river / sea shipping and better rail/road integration, have been established to reduce interchange costs, but containerization remains the most significant achievement so far. The concept of economies of scale applies particularly well to container shipping. However, container shipping is also affected by diseconomies involving maritime and inland transport systems as well as transshipment. While maritime container shipping companies have been pressing for larger ships, transshipment and inland distribution systems have tried to cope with increased quantities of containers. Thus, in spite of a significant reduction in maritime transport costs, land transport costs remain significant. Between half and two-third of total transport costs for a TEU is accounted by land transport.

Public policy is also playing a role through concerns over the dominant position of road transport in modal competition and the resultant concerns over congestion, safety and environmental degradation. In Europe, policies have been introduced to induce a shift of freight and passengers from the roads to modes that are environmentally more efficient. Intermodal transport is seen as a solution that could work in certain situations. In Switzerland, for example, laws stipulate that all freight crossing through the country must be placed on the railways in order to try to reduce air pollution in alpine valleys. The European Union is trying to promote intermodal alternatives by subsidizing rail, and shipping infrastructure and increasing road user costs. Since intermodal transportation is mostly the outcome of private initiatives seeking to capture market opportunities it remains to be seen to what extent public strategies can be reconciled with a global intermodal transport system which is flexible and footloose.