Intermodal Cost Function
Intermodal transportation has a specific cost structure where the friction of distance has a stepwise structure depending on if what is being transported is in movement or being handled at a transport terminal or distribution center. On the above graph, intermodal transport costs (C(T)) between an origin and a destination and using an intermediary transshipment point, is the summation of composition (C(cp)), connection (C(cn)), interchange (C(I)), and decomposition (C(dc)) costs.
Connection and interchange costs are related to national or international distribution costs. This can involve trucks moving consignments from a warehouse to a port, a terminal handling them and loading them on a ship, or maritime shipping costs from the port of origin to the port of destination. Composition and decomposition costs are related to local or regional distribution costs, such as packaging and handling consignments in a distribution center or final deliveries to customers. Significant costs reduction can be achieved with technical improvements in transshipment provided by intermodal transport. However, with growing congestion, particularly in urban areas, composition and decomposition costs may increase.