Factor Cause Consequence
Technology Containerization & IT Modal and intermodal innovations; Tracking shipments and managing assets
Capital investments Returns on investments Highs costs and long amortization; Improve utilization to lessen capital costs
Alliances and M&A Deregulation Easier contractual agreements; joint ownership
Supply chains Globalization Coordination of transportation and production (integrated demand)
Networks Consolidation and interconnection Multiplying effect
Integrated Transport Systems: From Fragmentation to Coordination
The notion of integrated transport systems received a lot of attention, particularly with improvements in the capacity, efficiency and reliability of freight transportation. The conventional fragmented and sub-optimal freight transport systems have substantially been improved. A process of coordination of freight transport is emerging and favored by several factors:
  • Technology has been a prime driving force. Containerization is without any doubt the most significant technological factor behind a more efficient coordination of transport modes. Innovations include modes, such as post-panamax containerships or double-stacking freight trains, but also intermodal equipment to handle significant transshipment demands. Hard (technical) assets require soft (management) assets for their efficient operations. Information technologies have gone a long way to help improving the level of control over supply chains, which includes aspects such as tracking shipments and managing fleets. The issue of e-commerce has particularly received attention since it incites the consideration of several modes to insure fast and reliable deliveries.
  • Freight transportation is a capital intensive sector with high entry costs for the maritime and rail segments. The amortization of modes and infrastructures, particularly terminals, has to be spread over a significant time period, sometimes over more than a decade. This environment is prone to risks and many potential investors are reluctant to commit capital for infrastructure projects unless there is a clear business case. This a reason why governments are often been called to step in and provided related infrastructure investments. Still, freight transport companies are dominantly private entities and must rely on capital markets to finance their ventures. If through a higher level of coordination with other elements of the supply chain a greater quantity and stability in utilization can be secured, capital costs can be reduced and financial returns improved. Thus, intermodal projects have potentially a lower capital risk.
  • Coordination also implies new forms of relationships between freight forwarders. This was favored by the deregulation of many transport modes in the early 1980s. The Aviation Deregulation Act (1979), the Staggers Act (1980), the Motor Carrier Act (1980) and the Ocean Shipping Act (1984) are significant landmarks in this direction. It became easier for different transport operators to establish contractual agreements. Mergers / acquisitions within the same mode started to take place, mainly in maritime and rail transportation, but also modal and intermodal alliances.
  • Globalization has permitted the emergence of a structure of production, often known as global commodity chains or global production networks. This structure production requires a high level of coordination between modes and different transport systems. Under such circumstances, transport demand should increasingly be considered as integrated.
  • Finally, integrated transport systems rely on the respective strengths of each transport networks. Since networks are expensive to build and operate, linking them promotes efficiency and a higher level of control. This can be considered as a multiplying effect where the efficiency of the whole intermodal network is greater than the sum of its parts.