1. Terminals and Logistics: The Terminalization Thesis
Jean-Paul Rodrigue
Associate Professor
Dept. of Global Studies & Geography
Hofstra University
New York, USA
TIMEFRAME: 1 hour

2. Contemporary Transport Terminals
Role and Function of Transport Terminals
Technical Changes
Modal and Temporal Separation at Terminals
Container yard, Port of Yantian, China

3. Changing Role and Function of Transport Terminals
Conventional
Container
Small terminal surface
Large terminal surface
Direct transshipment possible
Indirect transshipment (modal separation in time and space)
Limited mechanization and automation
Advanced mechanization and automation
Improvisation in terminal operations
Organization and planning

4. Types of Intermodal Terminals
Port Terminals
Container sea terminal
Offshore hub
Barge terminal
Rail Terminals
On-dock and near dock
Transmodal terminal
Load center
Satellite terminal
Distribution Centers
Transloading
Cross-docking
Warehousing

5. Technical Changes in Container Port Terminals
Standard Container Port
Emerging Paradigm
Stacking density
1,000 to 1,200 TEUs per hectare
2,000 to 4,000 TEUs per hectare
Ship-to-shore gantry crane productivity
About 30 movements per hour
About 50 movements per hour
Dwell time at container yard
About 6 days
About 3 days
Truck turnaround time
About 60 minutes
About 30 minutes
Rail access
In port area
On dock
Berthing depth
12 to 15 meters (40 to 50 feet)
More than 15 meters (50 feet)
Source: adapted from Ircha, M.C. (2006) Characteristics of Tomorrow’s Successful Port, The AIMS Atlantica Papers #4, Atlantic Institute of Market Studies,

6. Modal and Temporal Separation at Freight Transport Terminals
Maritime Transport System
Modal and Temporal Separation 1
Maritime / Barge 2 3
Buffer
Road
Rail 1 1 4
1- Intermodal
2- Transfer quay to truck gates
3- On dock rail
4- Transloading
Inland Transport System

7. Modal Separation in Space: Europa Terminal in Antwerp
Barges
Trucks
Rail
Deepsea services

8. World Container Traffic, 1980-2008. Reaching Peak Growth?
Adoption
Acceleration
Peak Growth
Maturity
2010(?) -
(?)
Divergence
Source: Drewry Shipping Consultants.

9. Terminals and Added Value
Terminal Operations and Added Value
Supply Chains and Added Value
Trimodal Container Terminal, Willebroek, Belgium

10. Freight Transport Terminals: Operations and Added Value
Core
(Operations)
Infrastructure
Modal access (dock, siding, road), unloading areas
Equipment
Intermodal lifting equipment, storing equipment
Storage
Yard for empty and loaded containers
Management
Administration, maintenance, access (gates), information systems
Ancillary
(Added Value)
Trade facilitation
Free trade zone, logistical services
Distribution centers
Transloading, cross-docking, warehousing, light manufacturing, temperature controlled facilities (cold chain)
Storage depot
Container depot, bulk storage
Container services
Washing, preparation, repair, worthiness certification
The core is standard and replicable almost everywhere. It is the ancillary that makes the difference because this is where most of the added value can take place.

11. Freight Terminal Hierarchy and Added Value
Gateway
Tier 1
Freight Distribution Cluster
Tier 2
(lower …) Added Value (… higher)
Tier 3
Inland Port
(load center)
Tier 4
Satellite Terminal

12. Container Transloading
Cause
Outcome
Consolidation
Transferring the contents of smaller containers into larger containers (e.g. three maritime 40 foot containers into two 53 foot domestic containers). Cost savings (number of lifts). Time delays.
Weight compliance
Transferring the contents of heavy containers into loads meeting national or regional road weight limits.
Palletizing
Placing loose (floor loaded) containerized cargo unto pallets. Adapting to local load units (e.g. europallet).
Demurrage
Handing back containers to owner (maritime shipping or leasing company) by transferring its contents into another load unit (e.g. domestic container).
Equipment availability
Making maritime containers available for exports and domestic containers available for imports. Trade facilitation.
Supply chain management
Terminal and transloading facility as a buffer. Delay decision to route freight to better fulfill regional demands. Perform some added value activities (packaging, labeling, final assembly, etc.)

13. Commodity Chains; Where Value Comes From?
High
R&D
Globalization
Sales / Service
Branding
Marketing
Added value
Design
Distribution
The manufacturing function of many corporations has been hollowed out by the process of globalization, in which manufacturing accounts for one of the least value added activity, particularly if it takes place within a subcontracting framework. In a global economy and globalized consumption market an important share of the added value of a product concerns the R&D, branding and design on the concept segment. On the logistics segment, distribution, marketing and sales / after sales services (such as customer support) are the activities generating the most added value.
The term “platform corporation” has been used to describe a variety of multinational corporations which have removed the manufacturing component from their core activities (or never had manufacturing in the first place). They have done so by focusing on the activities that provide the most added value and subcontracted the manufacturing of the products they design. Their core activities include research and development, finance, marketing, retail and distribution. Many of them own globally recognized brand names and are actively involved in the development of new products. Their net worth is thus more a function of their brand names and capacity at innovation than from some tangible assets (like factories), outside those heavily involved in mass retailing where commercial real estate assets can be very significant. They outsource as much of the low margin work as possible and are very flexible in their choice of suppliers, thus the term platform to characterize a mobile core establishing temporary relationships with manufacturers; "Produce nowhere but to sell everywhere". Conceptually, they are reminiscent of the "cottage production system" in the early phases of the industrial revolution where many labor intensive activities (especially in garments) where sub-contracted to households looking for additional income.
Source: Adapted from the Stan Shih “Smile Curve” concept.
Concept
Manufacturing
Logistics
Low
Commodity chain

14. Supply Chains, Transport Chains and Added Value
Customers
Customer
High
Upward
Value Capture / Creation
Market Potential
Value Expansion
Where
How
Distribution Efficiency
Value Retention
Production Costs
Low
Downward
Suppliers
Supplier

15. A concentration of ownership among five major port holdings is observed; APM Terminals (controlled by the Danish maritime shipper Maersk), Dubai Ports World, Hutchison Port Holdings (Hong Kong), Peninsular & Oriental Ports (P&O; United Kingdom) and the Port of Singapore Authority (PSA). Several other port holdings exist, owned by specialized private companies or ocean carriers, but their focus is mostly regional. In 2006 Dubai Ports World acquired P&O further consolidating its global holdings. The outcome will be a landscape of four major container terminal operators, each managing about 40 port terminals.

16. The Value Capture Process along Commodity Chains
Port Authority
Maritime Services
Inland Services
Port Services
Horizontal Integration
Port Holding
Offshore
hub
Inland
Port
Port
Vertical Integration
Maritime shipping has a profit margin of only about 2%. Single operator controls the berth-to-gate operations.
Maritime shipping lines moving inland to capture value. Port terminal operations. Rail and trucking operations. Distribution centers. Logistics.
Commodity Chain
Maritime Shipping
Port Terminal Operations
Inland Modes and Terminals
Distribution Centers

17. Inland Terminal Life Cycle
Traffic
Subsidies / Investments
Planning
Setting
Growth
Maturity
Decline
Profit
Concept
Operations begin
Stage 1
Stage 2
Stage 3
Stage 4
Stage 5

18. Inland Ports: Different Stages, Different Concerns
Phase
Characteristics
Planning
Relevance and viability studies. Local support. Attraction of users and investment commitments. High risk and subsidy level.
Setting
Construction of terminal and distribution facilities. First users (some can be transitional).
Growth
Realization of market potential. Growth of traffic. Capture of additional users. Clustering effect and generation of added value.
Maturity
Traffic stabilization. Available space filled and/or few new users. Non-commercial activities (housing). Revenue generation optimal.
Decline
Change in market conditions. Departure of users. Reemergence of subsidies.
If about 95% of all ideas / productions do not reach the market, we can assume that such a figure applies to inland ports.
Source: adapted from Inland Port Transportation Evaluation Guide,

19. Supply Chains and their Terminalization
The Concept of Terminalization
Export Flows to the Gateways
The Maritime Segment
Import Flows to the Hinterland
Translisft crane, NS Rutherford yard, PA

20. Unraveling the Terminalization Concept
Growing influence of transport terminals in the setting and operation of supply chains in terms of location, capacity and reliability.
Type
Bottleneck-derived
Warehousing-derived
Nature
Terminal as a constraint
Terminal as a buffer
Concept
Rational use of facilities to maintain operational conditions
Incorporating the terminal as a storage unit
Challenge
Storage space, port call frequency, gate access
“Inventory in transit” with “inventory at terminal”
Outcome
Volume, frequency and scheduling changes
Reduce warehousing requirements at distribution centers

21. Terminalization in a Supply Chain Context
Foreland (First Mile)
Suppliers
Bottleneck
Gateway
Buffer
Distribution center (outbound / inbound)
Inland containerized goods flow
Inland non-containerized goods flow
Offshore Hub
Maritime container flow
Gateway
Port regionalization and the creation
of a Regional Load Center Network
Inland
Terminal
Extended Gate
Extended Distribution Center
Customers
Hinterland (Last Mile)

22. Supply Chain Terminalization: Export Flows to the Gateway
Bottleneck-derived terminalization
Containerized cargo:
Logistics zones near the gateway or in a hinterland location connected to the gateway via a multimodal transport corridor.
Distribution:
Tends to be synchronized with terminal handling capacity.
Suppliers
Gateway
Offshore Hub
Gateway
Inland
Terminal
Customers

23. Supply Chain Terminalization: The Maritime Segment
Buffer-derived terminalization
Intermediate facility (offshore hubs):
Transshipment, interlining or relay.
Low cost locations before entering high distribution costs areas.
Suppliers
Gateway
Offshore Hub
Gateway
Inland
Terminal
Customers

24. Supply Chain Terminalization: Import Flows to the Hinterland
Bottleneck and buffer-derived terminalization
Port regionalization:
Regional load center network.
Extended gate:
Development of inland terminals.
Extended distribution center:
The terminal as a warehousing unit.
Suppliers
Gateway
Offshore Hub 1
Gateway 2
Inland
Terminal 3
Customers

25. Terminalization and Supply Chain Costs
Intermodal transportation costs
No noticeable effects.
Related to higher terminal costs.
Cost mitigation through terminal use (e.g. drayage).
In-transit inventory costs
Confers additional flexibility.
Used as a buffer.
Warehousing inventory costs
Partially transferred to the terminal.
Blended with in-transit inventory costs.
Dwell time costs
Terminal not always used as a facilitator for synchronization between transport modes.
Places for cheap storage of consignments.
Could be the result of deliberate actions of actors in supply chains.

26. Terminalization in Practice
North America: Long Distance Rail
Western Europe: Close Integration
Pacific Asia: Outbound Logistics
Chassis waiting to be picked, Corwith Rail Yard, Chicago

27. The Extended Gateway of the Ports of Los Angeles / Long Beach
Intra-terminal
On-dock rail yards
Non-local destination
Alameda Corridor
16%
Near-dock rail yards
Non-local destination
13%
Marine Terminal
Rail
Off-dock rail yards
Non-local destination
13%
Transload facility
Off-dock rail yards
Non-local destination
22%
Source: Port of Long Beach.
Warehouse
Transload facility
Local destination
34%
Warehouse
Non-local destination 2%
Truck

28. Alameda Corridor CBD UP & BNSF Railyards UP & BNSF Railyards Thruport
Mid-Corridor Trench (10 miles)
The Alameda Corridor is a 20-mile-long rail high capacity freight expressway linking the port cluster of Long Beach and Los Angeles to the transcontinental rail terminals near downtown Los Angeles. It was built to provide a better rail access to the San Pedro port cluster which is the most important in North America both in terms of the volume and value of its containerized traffic; they handle about 70% of the American West Coast containerized traffic. The Alameda Corridor consists in a series of bridges, underpasses, overpasses and street improvements that separate rail freight circulation from local road circulation. The outcome is a higher level of efficiency of both systems. The main engineering achievement of the corridor in a 10 miles long 33 feet deep trench that virtually removes the rail infrastructure from the local communities. Construction started in April 1997 and the corridor began operations in April 2002.
From an operational standpoint, the Alameda Corridor is jointly used by BNSF (Burlington Northern Santa Fe; 40%) and Union Pacific (60%) railway companies, the two major railroad operators in the American West. Their rail yards, Hobart (BNSF) and East Los Angeles (UP), handled respectively 1.3 million and 345,000 lifts in About 30% of the port transshipment traffic is handled through Alameda, implying that still 70% of the freight traffic involves trucks using local roads. Typical transit times between the port and downtown Los Angeles rail yards have been reduced from 2-6 hours (depending on congestion) to a reliable 45 minutes with average train speeds of 40 miles per hour. Traffic is not uniform and corresponds to the arrival of containerships in the port cluster. In spite of its numerous advantages, the corridor did not perform as expected as competition from trucking is stronger than expected. The slow start the corridor is facing can be attributed to the following:
Locally bound freight flows. About 80% of all freight tonnage originating in Southern California stays in the region. For international trade, Southern California is the destination of nearly 25% of all inbound cargo coming through the ports. Another 25 to 35% of the cargo temporarily transits through Southern California as part of a value-added process within commodity chains. Thus 50 to 60% of all inbound cargo is not very suitable to be carried through the Alameda Corridor. Because of the implied lower costs and shorter transit times, local and regional shippers find it more convenient to haul freight directly from the port cluster.
Relative transport costs. The trucking industry has experienced a lot of rationalization since the Alameda project was planned in the 1980s with the emergence of large carriers efficiently managing their distribution and lowering their costs. The anticipated comparative advantage of using the corridor has not fully materialized, making it cheaper and easier to move containers by truck than by train. Corridor fees are about $16 per TEU for a full container and $4 per TEU for an empty container.
Relocation of the bottleneck. Travel time reduction provided by the corridor could be offset by congestion at other rail terminals up the chain, starting at downtown Los Angeles. For some cargo, particularly time sensitive freight, a direct haul by truck from the port cluster to an inland intermodal facility is more efficient than using the Alameda Corridor. For instance, the Intermodal Container Terminal Facility (ICTF) is located just 5 miles from the port and performed 626,000 rail lifts in It is mainly used for containers trucked to and from the port in a more time effective way than the corridor.
High intermodal costs. It is a well known fact in transport economics that due to rather high intermodal costs, rail starts to have cost advantages for distances of more than 1,000 miles. This enables rail operators to amortize these intermodal costs. In addition, drayage and terminal handling for the Alameda Corridor add 8 to 24 hours compared to trucking. Intermodal rail operations have limited activities for distances under 750 miles. The corridor thus represents an unusual distance for regular intermodal freight distribution.
Freight distribution centers. There is a large concentration of FDCs in the Los Angeles metropolitan area performing their value added functions (sorting, assembling, packing, etc.). The great majority of those FDCs were designed to accommodate trucks. For these activities using the Alameda Corridor would imply additional costs and delays. In addition, several distribution centers are receiving international containers trucked from the port. They are then unloaded and their contents placed in 53 or 48 foot domestic containers, which are trucked back to a rail yard and shipped to their final destination. Domestic containers are easier to handle on the national intermodal transport system in addition to have a greater capacity.
The Alameda corridor thus represents an unusual intermodal system for freight distribution. Its long term success leans mainly on an efficient Thruport both at the port cluster and at the rail yards. If transshipment costs and delays can be reduced, the corridor could gather additional traffic and fulfill the role it was designed for. The Alameda Corridor has a maximum capacity of more than 150 train trips per day while in 2006 there were about 55 trains per day using the corridor. A plateau appears to be emerging in the growth of traffic, underlining the operational limits of the Alameda corridor. This is a classic inertia phase in modal shift as users are reluctant to abandon an existing mode and existing freight distribution practices. The corridor is also facing the transshipment reality of the San Pedro ports where for each loaded container exported, three are imported.
Source:
Port of Los Angeles
Port of Long Beach
Port of Long Beach
Port of Los Angeles
Port Cluster

29. Monthly Container Traffic Handled by the Port of Los Angeles, 1995-2008 (TEU)

30. North American Rail System
The North American rail transport system shows a high level of integration, particularly for the Canadian and American systems. It goes beyond what NAFTA reflects, since it is simply a trade agreement. The main growth factor for rail in recent years have been linked with a growth in international containerized trade, particularly across the Pacific, large quantities of utility coal moving out of the powder river basin and a growth of the Mexican trade.

31. Major Rail Corridors Improved since 2000
Transcon (BNSF): $US 2 billion
Crescent (NS): $US 2 billion
Southeast (CSX): $US 250 million
Heartland (NS): $US 260 million
Meridian (NS/KCS): $US 300 million
Mexico (KCS): $US NA
Sunset (UP): $US 2 billion.
Source: DANIEL MACHALABA, “New Era Dawns for Rail Building”, Wall Street Journal, February 13, 2008; Page A1

32. Average Speed of Class I Railroads, 1945-2004
Source: Association of American Railroads (2005) “Analysis of Class I Railroads.”

33. Average Freight Train Length, United States
Source: AAR (2007) National Rail Freight Infrastructure Capacity and Investment Study, September.

34. Container Dwell Times at BNSF Rail Terminals
Departure
Return
Free Dwell Time (Days)
Additional Charge (per day)
Loaded
Loaded (same shipper) 6
$25
Loaded (different shipper) 3
Empty 1
$25/$50 (after 10 days)
Source: BNSF Intermodal Rules and Policies Guide (2005).

35. BNSF’s Three Tier Terminal System, 2007
Facility Group
Facility
Free Dwell Time (days)
Charge (per day) 1
Kansas City, KS
Los Angeles, CA
Memphis, TN
$150 2
Alliance, TX
Atlanta, GA (Fairburn)
Chicago (Cicero), IL
Houston, TX
Oakland Intl. Gateway, CA
San Bernardino, CA
Seattle, WA (SIG)
St. Louis, MO
St. Paul, MN
Stockton, CA 3
Albuquerque, NM
Amarillo, TX
Billings, MT
Birmingham, AL
Chicago (Corwith), IL
Chicago (Willow Springs), IL
Denver, CO
Dilworth, MN
El Paso, TX
Fresno, CA
Harvard, AR
Logistics Park Chicago, IL
New Orleans, LA
Omaha, NE
Phoenix, AZ
Portland, OR
South Seattle, WA
Spokane, WA
$100
Kansas City: A major inland hub halfway between the gateway of LA and the continental hub of Chicago.

36. Automated Transfer Management System for Truck-Rail Transfers
Source: Mi-Jack Products

37. Average Dwell Times at Major European Container Terminals (in days)
Characteristics
Bremen
Hamburg
Rotterdam
Antwerp
La Spezia
Gioia Tauro
Import dwell vessel – truck
6.4
7.4
Export dwell truck – vessel
4.6
5.6
Import dwell vessel – train
6.5
7.5
Export dwell train – vessel
4.7
5.7
Import dwell vessel – barge
4.1
5.1
Export dwell barge – vessel
4.3
5.3
Transshipment dwell -

38. Case Studies Europe – Rhine-Scheldt Delta
Container transferium
Extended gate (satellite)
Initiated by POR
TCT Venlo
Extended gate (rail-based)
for ECT/HPH 38

39. Outbound Logistics: Port Regionalization Clusters in Pacific Asia
Hinterland-based regionalization
Foreland-based regionalization
Hinterland-based is the regionalization were are familiar with. Foreland-based regionalization particularly (but not necessarily) takes place where inland distribution systems are weak and activities are located in proximity of the port, which essentially becomes a feeder to the hub (the links are serviced by short sea shipping). This does not mean that a lot of traffic is involved, but that the port can be used as a sub-harbor for another. It can also happen when a maritime range involves a higher detour index, inciting the hub at the margin to act as an offshore hub (Pusan for Yellow Sea, Singapore for Gulf of Thailand). Commodity chain integration (e.g. Korea – Northern China) can also favor a transitional use of the gateway port. All this has several similarities with the use of offshore hubs, but provides additional nuances.

40. Two Major Transpacific Pendulum Routes Serviced by OOCL, 2006 (The Wal-Mart Express)

41. Conclusion: Terminalization and the Integration of Supply Chains
Terminals are getting more embedded in supply chains.
Constraint or buffer.
Extended gateways and extended distribution centers.
Is there a distinct North American, European or Pacific Asian terminalization?
Due to externalities (congestion, environment) Europe shows a more advanced terminalization.
Dwell time pressures indicate a more constraining terminalization in North America.
Pacific Asia dominantly as export gateways based terminalization.
Terminals are getting more embedded in supply chains.