1. Transportation Summit 2011: Best Practices Shaping Global Logistics, Vancouver, BC, March 2-3 2011 Inland Infrastructure: Bulk to Container 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, Canada

2. Inland Infrastructure: Bulk to Container 1 How inland ports fit within North American freight distribution? 2 To what extent commodities can be containerized? 3 How bulk and containerized logistics can be reconciled?

3. Developing Inland Infrastructure: A Taxonomy of Logistics Zones

4. The Insertion of Inland Ports in North America: Basic Requirements Intermodal Rail Terminal Rail Corridor to the Gateway Logistics Activities

5. Northwest Ohio Intermodal Terminal, CSX 2011; An Inland “Port”

7. Main Advantages of Co-location FactorAdvantages Real estate Lower land acquisition costs. Higher acquisition capital. Joint land use planning. Specialization Rail company; terminal development and operations. Real estate promoter; logistic zone development and management. Cargo interdependency Respective customers. Joint marketing. Drayage Priority gate access. Shorter distances. More delivery trips. Higher reliability. Asset utilization Better usage level of containers and chassis. Chassis pools. Empty container depots. Information technologies Integration of terminal management systems with inventory management systems.

8. Intermodal Terminals and Recent Co-Located Logistic Zones Projects Every rail operator involved. Partnership with a major real estate developer.

9. Containerization Growth Factors Derived Economic and income growth Globalization (outsourcing) Fragmentation of production and consumption Substitution Functional and geographical diffusion New niches (commodities and cold chain) Capture of bulk and break-bulk markets Incidental Trade imbalances Repositioning of empty containers Induced Transshipment (hub, relay and interlining)

10. Growth Factors behind the Containerization of Commodities FactorOutcome Rising demand and commodity prices More commodities in circulation (usage of containerization to accommodate growth). New producers and consumers (marginal markets penetration). Fluctuations and rises in bulk shipping rates Decrease in the ratio cargo value per ton shipping rate for commodities. Volatility (rates) and risk (hedging). Search for options to bulk shipping. Low container shipping rates Increase in the ratio cargo value per TEU shipping rate for commodities. Relative rate stability. Containerization more attractive as an option. Imbalances in container shipping rates Export subsidy for return cargo. Empty containers repositioning Pools of containers available for backhauls.

11. IMF All Commodity Index and Baltic Dry Index, 2000- 2010 (2000=100)

12. IMF All Commodity Index and Average Container Shipping Rates, 2000-2010 (2000=100)

13. Bulk and Containerized Commodity Transportation: Dichotomy or Complementarity? Bulk (Grain, Minerals, Oil)Containerized Sectors Primary / TransformationManufacturing / Retailing Driving force Cost / VolumeTime / Flexibility Mode of shipment Large batchesSmall shipments Frequency LowHigh Flows One wayMore balanced Terminals Dedicated by commodityGeneral container Seasonality From low (energy) to high (agriculture) Low (retail cycles) Exchange Markets Mass (futures / forward)Niche (spot)

14. Bulk and Containerized Commodity Chains Bulk Commodity Chain Containerized Commodity Chain Consolidation center Port Supplier Customer Intermodal terminal Container port Pendulum Services Point-to-Point Complementarity

15. From Bulk to Containers: Breaking Economies of Scale Container as an independent load unit. Minimal load unit; one TEU container. Entry Barriers Limited differences in scale economies for a producer. Incremental / linear cost-volume function. Required Volumes New producers (smaller). Product differentiation. Market Potential

16. Commodity Group and Containerization Potential Category (SITC)Examples Containerization (Existing or Potential) Food & Live Animals Meat, Fish, Wheat, Rice, Corn, Sugar, Coffee, Cocoa, Tea Low (grains) to high (cold chain products) Beverages & Tobacco Wine, Beer, TobaccoHigh Raw MaterialsRubber, Cotton, Iron oreCommodity specific Fuels & LubricantsCoal, Crude oil, Kerosene, Natural gasVery limited Animal & Vegetable Oils Olive oil, Corn oilHigh ChemicalsSalt, Fertilizers, PlasticsLow to average Manufactured Goods Paper, Textiles, Cement, Iron & Steel, CopperCommodity specific Machinery & Transport Equipment Computer equipment, Televisions, CarsVery high (already containerized) Miscellaneous Manufactures Furniture, Clothes, Footwear, Cameras, Books, Toys Very high (already containerized)

17. Challenges for the Containerization of Commodities ChallengeIssues Container availability Locational and load unit availability. Weight Limitations to about 30 tons (40 footer). 20 footer the preferable load unit (26-28 tons). Container preparation Pre-use and post-use cleaning (avoid contamination). Dedicated containers? Container loading, unloading and transloading Bulks difficult to load horizontally. Vertical loading / unloading (equipment). Transloading issues. Source loading. Weight distribution Containership load (10-14 tons per TEU). Trade imbalances create mitigation strategies. Land consumption at port terminals Space consumption (4 times more than bulk) mitigated by velocity. Existing distribution channels Considerable accumulated investments. Established distribution practices. Modal shift inertia.

18. Containerized Cargo Flows along Major Trade Routes, 1995-2009 (in millions of TEUs)

19. Maritime Freight Rates (Nominal USD per TEU), 1993- 2009

20. American Foreign Trade by Maritime Containers, 2009 (in TEUs)

21. The Complexities of Inland Logistics: The “Last Mile” in Freight Distribution Gateway Inland Terminal DistributionCenter Capacity Frequency Corridor Customer “Last Mile” Segment GLOBAL HINTERLAND REGIONALLOCAL Shipping Network MassificationAtomization 2 2 1 1 2 2 Inventory in transit 1 1 Inventory at terminal

22. Distribution based on RDCs Distribution based on two gateways Distribution based on tiered system Distribution based on local DCs

23. Asymmetries between Import and Export-Based Containerized Logistics Many Customers Function of population density. Geographical spread. Incites transloading. High priority (value, timeliness). Few Suppliers Function of resource density. Geographical concentration. Lower priority. Depends on repositioning opportunities. Gateway Inland Terminal DistributionCenter Customer Supplier Repositioning Import-Based Export-Based

24. Conclusion: The Flipside of Reverse Logistics A Inland ports as key strategic infrastructures. Principle of co-location appears the most effective. B Containerization of commodities a powerful niche trend. Emerging complementarity between container and bulk. C Container and bulk are asymmetric distribution systems. Inland ports as platforms reconciling inbound / outbound logistics.