The Function of Transport Terminals

Authors: Dr. Jean-Paul Rodrigue and Dr. Brian Slack

1. The Nature of Transport Terminals

A terminal may be defined as any facility where passengers and freight are assembled or dispersed. Both cannot travel individually, but in batches. Passengers have to go to bus terminals and airports first, where they are "assembled" in busloads or planeloads to reach their final destinations where they are dispersed. Freight has to be consolidated at a port or a rail yard before onward shipment. Terminals may also be points of interchange involving the same mode of transport. Thus, a passenger wishing to travel by train from Paris to Rotterdam may have to change trains in Brussels, or an air passenger wishing to fly between Montreal and Los Angeles may have to change planes in Toronto. Terminals may also be points of interchange between different modes of transportation, so that goods being shipped from the American Mid-West to the Ruhr in Germany may travel by rail from Cincinnati to the port of New York, put on a ship to Rotterdam, and then placed on a barge for delivery to Duisburg. Transport terminals, therefore, are central and intermediate locations in the movements of passengers and freight.

Terminal. Any location where freight and passengers either originates, terminates, or is handled in the transportation process. Terminals are central and intermediate locations in the movements of passengers and freight. They often require specific facilities and equipment to accommodate the traffic they handle.

Terminals may be points of interchange within the same modal system and which insure a continuity of the flows. This is particularly the case for modern air and port operations with hubs connecting parts of the network. Terminals, however, are also very important points of transfer between modes. Buses and cars deliver people to airports, trucks haul freight to rail terminals, and rail brings freight to docks for loading on ships. One of the main attributes of transport terminals, international and regional alike, is their convergence function. They are indeed obligatory points of passage having invested on their geographical location which is generally intermediate to commercial flows. Thus, transport terminals are either created by the centrality or the intermediacy of their respective locations. In some cases, large transport terminals, particularly ports, confer the status of gateway or hub to their location since they become obligatory points of transit between different segments of the transport system.

Three major attributes are linked with the importance and the performance of transport terminals:

Location. The major locational factor of a transport terminal is obviously to serve a large concentration of population and/or industrial activities, representing a terminal's market area. Specific terminals have specific locational constraints, such as port and airport sites. New transport terminals tend to be located outside central areas to avoid high land costs and congestion.
Accessibility. Accessibility to other terminals (at the local, regional and global scale) as well as how well the terminal is linked to the regional transport system is of importance. For instance, a maritime terminal has little relevance if it is efficiently handling maritime traffic but is poorly connected to its market areas through an inland transport system (rail, road or barge).
Infrastructure. The main function of a terminal is to handle and transship freight or passengers since modes and passengers or cargo are physically separated. They have a nominal capacity which is related to the amount of land they occupy and their level of technological, labor and managerial intensity. Infrastructure considerations are consequently important as they must accommodate current traffic and anticipate future trends and also technological and logistical changes. Modern terminal infrastructures consequently require massive investments and are among the largest structures ever built. A utilization rate of 75 to 80% is considered to be the optimal since above this level, congestion starts to arise, undermining the reliability of the terminal facility.

The time a vehicle (bus, truck, train, or ship) is allowed to load or unload passengers or freight at a terminal is usually referred as dwell time. For freight terminals dwell time refers to the amount of time cargo stays in a terminal yard or storage area while waiting to be loaded. Dwell time can be operational, which reflects the performance of terminal infrastructures and management, including the scheduling and availability of transport services. It can also be transactional, which is usually linked with the performance of clearance procedures (such as customs). Finally, dwell time can be storage related, implying that the owner or the carrier of the cargo deliberately leaves the cargo at the terminal as part of a transport or supply chain management strategy. Intermodalism has incited new relations between transport terminals, which are becoming nodes in integrated transport chains. This is particularly the case between port, rail and barge terminals. New forms of integration are also emerging, such as between ports and airports.

2. Passenger Terminals

With one exception, passenger terminals require relatively little specific equipment. This is because individual mobility is the means by which passengers access busses, ferries or trains. Certainly, services such as information, shelter, food and security are required, but the layouts and activities taking place in passenger terminals tend to be simple and require relatively little equipment. They may appear congested at certain times of the day, but the flows of people can be managed successfully with good design of platforms and access points, and with appropriate scheduling of arrivals and departures. The amount of time passengers spend in such terminals tends to be brief. As a result bus termini and railway stations tend to be made up of simple components, from ticket offices and waiting areas to limited amounts of retailing.

Airports are of a complete different order. They are among the most complex of terminals functionally. Moving people through an airport has become a very significant problem, not least because of security concerns. Passengers may spend several hours transiting, with check-in and security checks on departure, and baggage pick up and in many cases customs and immigration on arrival. Planes may be delayed for a multitude of reasons, implying a complex management of gates and scheduling of flights. The result is that a wide range of services have to be provided for passengers not directly related to the transfer function, including restaurants, bars, stores, hotels, in addition to the activities directly related to operations such as check-in halls, passenger loading ramps and baggage handling facilities. At the same time airports have to provide the very specific needs of the aircraft, from runways to maintenance facilities, from fire protection to air traffic control.

Measurement of activities in passenger terminals is generally straightforward. The most common indicator is the number of passengers handled, sometimes differentiated according to arrivals and departures. Transfer passengers are counted in the airport totals even though they do not originate there, and so airports that serve as major transfer facilities inevitably record high passenger totals. This is evident in airports such as Atlanta and Chicago where in-transit passengers account for over 50% of the total passenger movements. High transfer passenger activity has been enhanced by the actions of many of the leading airlines adopting hub and spoke networks. This results in many passengers being forced to change planes at the hub airports. By selecting certain airports as hubs, the carriers are able to dominate activity at those airports, thereby controlling most landing and departure slots and the best gates, thus fending off rival airlines. In this way they are able to extract monopoly profits.

A further measure of airport activity is number of aircraft movements, a figure that must be used with some caution because it pays no regard to the capacity of planes. A 50 seat regional jet and a 300 seats wide-body aircraft both count as one movement. High numbers of aircraft movements thus may not be highly correlated with passenger traffic totals. Still, the number of aircraft movements is an important variable as it indicates the level of usage of the runways as aircraft take the same landing of takeoff capacity, irrespective of their size.

3. Freight terminals

Freight handling requires specific loading and unloading equipment. In addition to the facilities required to accommodate ships, trucks and trains (berths, loading bays and freight yards respectively) a very wide range of handling gear is required that is determined by the kinds of cargoes handled. Freight transport terminals have a set of characteristics linked with core (terminal operations) and ancillary activities (added value such as distribution). The result is that terminals are differentiated functionally both by the mode involved and the commodities transferred. A basic distinction is that between bulk, general cargo and containers:

Bulk refers to goods that are handled in large quantities that are unpackaged and are available in uniform dimensions. Liquid bulk goods include crude oil and refined products that can be handled using pumps to move the product along hoses and pipes. Relatively limited handling equipment is needed, but significant storage facilities may be required. Dry bulk includes a wide range of products, such as ores, coal and cereals. More equipment for dry bulk handling is required, because the material may have to utilize specialized grabs and cranes and conveyer-belt systems.
General cargo refers to goods that are of many shapes, dimensions and weights such as machinery, processed materials and parts. Because the goods are so uneven and irregular, handling is difficult to mechanize. General cargo handling usually requires a lot of labor.
Containers are standard units that have had a substantial impact on terminal operations. Container terminals have minimal labor requirements and perform a wide variety of intermodal functions. They however require a significant amount of storage spaces which are simple paved areas where containers can be stacked and retrieved with intermodal equipment (cranes, straddlers and holsters). Depending on the intermodal function of the container terminal, specialized cranes are required, such as portainers (container cranes). Intermodal terminals and their related activities are increasingly seen as agents of added value within supply chains.

A feature of most freight activity is the need for storage. Assembling the individual bundles of goods may be time-consuming and thus some storage may be required. This produces the need for terminals to be equipped with specialized infrastructures such as grain silos, storage tanks, and refrigerated warehouses, or simply space to stockpile, such as for containers. Containerization, because of its large volumes, has forced a significant modal and temporal separation at terminals and thus the need of a buffer in the form of storage areas. In addition, a variety of transloading activities can take place in the vicinity of terminals, particularly if long distance inland transportation is involved. Transloading, when suitable, enables to reduce transportation and inventory costs.

Measurement of freight traffic through terminals is more complicated than for passengers. Because freight is so diverse, standard measures of weight and value are difficult to compare and combine. Because bulk cargoes are inevitably weighty, terminals specialized in such cargoes will record higher throughputs measured in tons than others more specialized in general cargoes. This is evident for the world's two leading ports, Singapore and Rotterdam, which are dominated by petroleum. The reverse may be true if value of commodities handled is the measure employed. The problem of measurement involving weight or volumes becomes very difficult when many types of freight are handled, because one is adding together goods that are inherently unequal. Care must be taken in interpreting the significance of freight traffic totals, therefore. For container terminals a common measure of productivity concerns the number of lifts per container gantry crane-hour, which are usually 25-40 moves per hour for quay cranes and 40-60 for rail cranes.

The difficulty of comparing traffic totals of different commodities has led to attempts to ‘weight’ cargoes based upon some indication of the value added they contribute to the terminal. The most famous is the so-called "Bremen rule". It was developed in 1982 by the port of Bremen and based on a survey of the labor cost incurred in the handling of one ton of different cargoes. The results found that handling one ton of general cargo equals three tons of dry bulk and 12 tons of liquid bulk. Although this is the most widely used method, other ‘rules’ have been developed by individual ports, such as the Antwerp and Rotterdam rules. The "Antwerp rule" indicates that the highest value added is the handling of fruit. Using this as a benchmark, forest products handling requires 3.0 tons to provide the same value added as fruit, cars 1.5 tons, containers 7 tons, cereals 12 tons, and crude oil 47 tons. The "Rotterdam Rules" are more recent (2009) and relates to common practices to insure the transport of freight "door-to-door" which a sea transport leg is concerned.

4. Terminal Costs

Because they jointly perform transfer and consolidation functions, terminals are important economically because of the costs incurred in carrying out these activities. The traffic they handle is a source of employment and benefit regional economic activities, notably by providing accessibility to suppliers and customers. Terminal costs represent an important component of total transport costs. They are fixed costs that are incurred regardless of the length of the eventual trip, and vary significantly between modes. They can be considered as:

Infrastructure costs. Include construction and maintenance costs of structures such as piers, runways, cranes and facilities (warehouses, offices, etc.).
Transshipment costs. The costs of loading and unloading passengers or freight.
Administration costs. Many terminals are managed by institutions such as port or airport authorities or by private companies (e.g. terminal operators). In both cases administration costs are incurred.

Because ships have the largest carrying capacities, they incur the largest terminal costs, since it may take many days to load or unload a vessel. Conversely, a truck or a passenger bus can be loaded much more quickly, and hence the terminal costs for road transport are the lowest. Terminal costs play an important role in determining the competitive position between the modes. Because of their high freight terminal costs, ships and rail are generally unsuitable for short-haul trips.

Competition between the modes is frequently measured by cost comparisons. Efforts to reduce transport costs can be achieved by using more fuel-efficient vehicles, increasing the size of ships, and reducing the labor employed on trains. However, unless terminal costs are reduced as well, the benefits would not be realized. For example, in water transportation, potential economies of scale realized by ever larger and more fuel-efficient vessels would be negated if it took longer to load and off-load the jumbo ships.

Over the last decades, very significant steps to reduce terminal costs have been made. These have included introducing information management systems such as EDI (electronic data interchange) that have greatly speeded up the processing of information and removing delays typical of paper transactions. The most significant development has been the mechanization of loading and unloading activities. Mechanization has been facilitated by the use of units of standard dimensions such as the pallet and most importantly, the container. The container, in particular, has revolutionized terminal operations. For the mode most affected by high terminal costs, ocean transport, ships used to spend as much as three weeks in a port undergoing loading and loading. The much larger ships of today spend less than a couple of days in port. A modern container ship requires approximately 750 man/hours to be loaded and unloaded. Prior to containerization it would have required 24,000 man/hours to handle the same volume of cargo. The rail industry too has benefited from the container, which permits trains to be assembled in freight yards in a matter of hours instead of days.

Reduced terminal costs have had a major impact on transportation and international trade. Not only have they reduced over-all freight rates, and thereby re-shaping competition between the modes, but they have had a profound effect on transport systems. Ships spend far less time in port, enabling ships to make many more revenue-generating trips per year. Efficiency in the airports, rail facilities and ports greatly improves the effectiveness of transportation as a whole.

Activities in transport terminals represent not just exchanges of goods and people, but constitute an important economic activity. Employment of people in various terminal operations represents an advantage to the local economy. Dockers, baggage handlers, crane operators and air traffic controllers are example of jobs generated directly by terminals. In addition there are a wide range of activities that are linked to transportation activity at the terminals. These include the actual carriers (airlines, shipping lines etc.) and intermediate agents (customs brokers, freight forwarders) required to carry out transport operations at the terminal. It is no accident that centers that perform major airport, port and rail functions also important economic poles.