Containerization of Intermodal Transport Service

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Introduction

In recent decades, container transportation earned a reputation as the safest and most convenient method for the delivery of different kinds of freight. Nowadays, over 90% of global transportation of general cargo is carried out in containers (Rodrigue, Comtois, & Slack, 2016). The intense containerization is defined by multiple benefits associated with it, e.g. cost efficiency, time efficiency, and many others.

Because of the current macroeconomic situation in the world, the volumes of container transportation rapidly increase in many countries (Notteboom & Rodrigue, 2009). At the same time, maritime shipping remains the prevalent method of cargo distribution across the globe. For the last ten years, the volumes of general cargoes (oil, carbon, iron ore, bauxite, phosphate, and grain) shipped by sea had a moderate growth rate of 4,5% (United Nations Conference on Trade and Development, 2014).

However, the experience of many logistics and transportation organizations demonstrates that containerization functions at the very peak of its efficiency when containers are used for the delivery of cargoes through intermodal communication. Therefore, it is argued that the main direction in the improvement of container transportation in the 21st century is the integration of inland traffic works into the international maritime transport corridors and the creation of effective intermodal shipping technology for foreign trade goods.

To prove the formulated hypothesis, this paper aims to identify the major determining factors of a further increase in global freight and transport containerization and the benefits associated with intermodal cargo distribution services which may stimulate retailers, transport organizations, and ports to use the combination of inland and marine transport more often.

Increasing Cargo Flows Containerization as a Prerequisite for Intermodal Transport System Emergence

According to the recent research findings, logistics operations are interrelated with containerization increase. According to Notteboom and Rodrigue (2009), logistics has a “soft” influence on organizations stimulating them towards the selection of containerized transport (p. 11). Implementation of containers had become an excellent solution for such activities as warehousing, operations management, facility layout, and planning as it enhances their efficiency and effectiveness and allows ports and logistics firms to gain significant financial and competitive benefits.

It is possible to say that integrated implementation of containers is associated with advantages in both maritime and inland kinds of shipping, and the mentioned soft logistics pressures which have driven the process of containerization may stimulate the development of intermodalism as well. For the first time, containers were implemented in the global maritime shipping industry to reduce transportation costs through the cut of expenses for loading and unloading operations (Donovan, 2004). But containerization is also potentially effective in the increase of productivity during the provision of inland transportation service as it has provoked the development of capital-intensive transportation system in which the number of labor costs is minimized.

Nowadays, seagoing vessels play a leading role in the system of cargo delivery, and it is possible to say that the advancement of maritime shipping has influenced the tendencies in the evolution of other transport types and the transport infrastructure as a whole. The prevalence of marine transport is largely conditioned low shipping costs, large vessel capacity, lack of significant limitations on the overall dimension of freight, unified standards of vessels’ construction, etc. (Ducruet & Notteboom, 2012).

The increase in the size of a vessel provokes a positive economic effect associated with a one-off transfer of large loads from one port to another with the unchanging speed of movement. However, big cargo volumes moved at once require more time and monetary investments in loading-unloading works – it can reduce the cost efficiency of shipping mediated through large vessels to a minimum. But containerization of cargo flows provided significant support for organizations in their efforts aimed at the elimination of these financial risks and the achievement of greater cost efficiency.

Containerization and enlargement of cargo space significantly increased the convenience of shipping because containers have standard sizes (Ducruet & Notteboom, 2012). Size standardization implies that the process of shipment, movement, and delivery can be substantially facilitated, and containers thus can be easily transferred using other transport types as well. As a result, the transportation of containerized cargoes by more than one kind of carriage becomes an important phase in the development of the transport industry.

When containerization became the main method of general cargo transportation, it influenced modernization and enhancement of logistics operations at ports and transition points. The advancement of shipping technology impacted not merely transport systems but also allowed cargo owners to shift their focus from actual shipping operations to other managerial activities such as preparation of freight for departure, appropriate implementation of containers; and accomplishment of initial, final, and auxiliary commercial operations, etc. (Ducruet & Notteboom, 2012; Donovan, 2004).

By the transformation of the very idea of containerized cargo movement when its owner does not participate in the organization of the transportation process and only defines the place of shipment and delivery point, the change in the regulation of container delivery has occurred.

The modern level of globalization and market competition motivates logistics managers to achieve minimal expenditures for service and products at the point of consumption. But significant cost efficiency can be attained only through the consideration of multiple factors in which transport expenses play an essential role. The implementation of intermodal transport provides an opportunity to have a holistic view and evaluation of supply chain processes. It is suggested that the integration of different transport modes may lead to the optimization of trade-offs among distinct elements of the supply chain, services, and costs (DeWitt & Clinger, 2000).

Moreover, as it is observed by DeWitt and Clinger (2000) that the further increase in intermodal transportation will be triggered by firms’ growing understanding of rapidly changing customer requirements and intense competition in supply chain systems and global markets. It is suggested that intermodalism may allow transportation service suppliers to become more flexible and efficient in response to changing customer needs.

Potential Benefits of Intermodal Transportation

Intermodalism has several advantages which may predefine its prevalence and increasing importance as a shipping method in the 21st century. The term of intermodal transportation implies an “effective and efficient connectivity for both freight and information among and between the various modes on shipments under a single freight bill” (DeWitt & Clinger, 2000, p. 2).

In this way, intermodal shipping differs from the term of multimodal transportation which does not integrate physical infrastructure, cargo transfer, and information under one freight bill. Single documentation may be regarded as the first advantage of intermodalism as it helps to reduce customers’ concerns regarding process organization and outcome, and eliminate the necessity of searching for several transport service suppliers. Additionally, the variability of shipping modes increases regional freight accessibility (Thill & Lim, 2010).

Thus, it is possible to say that in combination with the high level of cargo safety associated with containerization, intermodal transport service can significantly increase organizational value creation capacity which may strengthen the company’s competitive position.

Intermodalism and containerization are two inseparable phenomena. Shipping companies always use containers for intermodal transportation. Since containers may vary in capacity and functionality, freight forwarders’ customers may use their services to deliver diverse types of goods (Obhodas et al., 2010). For example, reefers can be used for highly perishable products, containers with an open top – for bulk commodities and large goods, tank containers – for liquids, etc.

Moreover, intermodal shipping provided by one service supplier facilitates the integration of a container tracking system that allows retailers to monitor the movement of their goods at every stage of the delivery process. Containers monitoring helps to avoid losing track of cargoes and “provide actionable information to retrieve goods or minimize the damage” (Miler, 2015, p. 40). Such a service makes the work of intermodal freight forwarders more demanded among entrepreneurs because, in this case, they may not be worried about the safety of their products.

Potential Barriers to Growth and Universal Implementation in International Market

If intermodal shipping is carried out in the international context (export-import operations), customs clearance procedures, as well as transport law and legal aspects of commerce across the countries where the route of cargo transportation runs, become of essential importance. Numerous national customs formalities which may lead to unplanned downtime, delivery delays, and additional costs may significantly impede the success of intermodal shipping.

The misunderstanding of the meaning of the customs clearance procedures and instructions is one of the biggest problems which organizations may encounter in the unfamiliar and distant markets (Bask, Juga, & Laine, 2001). The issue of customs clearance may largely increase customs costs and reduce the overall income. While the states which claim for the strategic direction towards the integration into global economy usually understand the relationships between local business conditions (including terms of customs registration) and the attraction of foreign investments in the country, some nations have obsolete and unwelcoming customs regulations which prevent the development of international trade.

Nevertheless, cross-border legal issues and the problems which may arise in the issuance of transportation documents or customs formalities may be resolved through the integration of modern information technologies aimed at the examination and adoption of international standards systems which facilitate transition corridors characterized by a uniform information space (Bask et al., 2001).

Considering the mentioned properties of intermodalism, and the risks associated with it, it is impossible to ignore the fact that the performance of the use of this transportation method requires a high level of managers and operators’ expertise and knowledge of technical, legal, and managerial aspects of intermodal logistics activities. Each type of transport has is associated with a distinct technical base required for its exploitation, maintenance, and repair.

The operational parameters of rolling stock, routes, and terminals are especially important in logistics management, and when selecting a type of vehicle, managers should consider its power and transportation capacity, operational characteristics, and spatial accessibility (Kalašová, Kapusta, & Toman, 2016). Provision of cargo security, compliance with standards of quality, and environmental principles are important transport selection conditions.

As mentioned by DeWitt and Clinger (2000), “to be able to optimize transport options, managers will have to be highly knowledgeable in all of the current and future intermodal options and alternatives” (p. 4). Therefore, a significant amount of efforts should be aimed at the enhancement of staff education and advancement of current information-communications technologies which may enable knowledge development and ensure well-coordinated and integral workflows.

Summary

As the review of the literature revealed, the development of intermodalism and increasing implementation of intermodal shipping methods is stimulated by changing customer demands and the attempts to achieve greater operational and financial efficiency. While customers and cargo owners seek convenience and security, freight forwarders and logistics managers pursue attraction of potential service consumers and better productivity which may lead to the strengthening of the competitive position and more positive financial outcomes.

Although it is impossible to forecast the tendencies of future transportation market development with absolute accuracy, the evaluation of current trends makes it clear that different macroeconomic, operational, and governance factors will likely support the evolution of international intermodal freight transportation.

As it is observed, increasing intermodalism is closely interrelated with the prevalence of containerized cargos in the modern supply chain processes. Containerization has stimulated the changes in the global supply chain requirements, and the shift towards the intermodal transport system may be regarded as the best response towards these changes. Although the increasing complexity of global logistics networks is associated with multiple barriers to the common integration of intermodal transport service which requires additional investments in preparation of skillful personnel, technological advancement, and knowledge management, the modern governmental initiatives aimed at the unification of international trade regulations, as well as the current technological and commercial dynamism interrelated with the intensive containers use, assist transport organizations in decision making, innovation, and achievement of smarter business solutions.

As the recognition of the strategic importance of the intermodal transport system will become stronger at both organizational and governmental levels, the development of intermodal terminal complexes that may ensure high-quality transport maintenance and provision of a wide range of commercial and customer services will be facilitated. Moreover, the collaboration at the national and international levels will allow the creation of appropriate infrastructural conditions for the realization of geographic advantages in different regions and enhancement of their competitive positions in the global trade and transportation markets.

References

Bask, A., Juga, J., & Laine, J. (2001). Problems and prospects for intermodal transport: theoretical tools for practical breakthroughs? Oslo, Norway: The 17th IMP-Conference.

DeWitt, W., & Clinger, J. (2000). Intermodal freight transportation. Transportation In The New Millennium, 1-6.

Donovan, A. (2004). The impact of containerization: From Adam Smith to the 21st century. Review of Business, 25(3), 10-15. Web.

Ducruet, C., & Notteboom, T. (2012). The worldwide maritime network of container shipping: Spatial structure and regional dynamics. Global Networks,12(3), 395-423. Web.

Kalašová, A., Kapusta, J., & Toman, P. (2016). A model of transatlantic intermodal freight transportation between the European continent and the United States. Nase More, 63(1), 5-15. Web.

Miler, R. (2015). Electronic container tracking system as a cost-effective tool in intermodal and maritime transport management. Economic Alternatives, 1, 40-52.

Notteboom, T., & Rodrigue, J. (2009). The future of containerization: Perspectives from maritime and inland freight distribution. GeoJournal, 74(1), 7-22. Web.

Obhodas, J., Sudac, D., Valkovic, V., Baricevic, M., Franulović, A., Perot, B., &… El Kanawati, W. (2010). Analysis of containerized cargo in the ship container terminal. Nuclear Instruments & Methods in Physics Research Section A, 619(1-3), 460-466. Web.

Rodrigue, J., Comtois, C., & Slack, B. (2006). The geography of transport systems. London, UK: Routledge.

Thill, J., & Lim, H. (2010). Intermodal containerized shipping in foreign trade and regional accessibility advantages. Journal of Transport Geography, 18(4), 530-547. Web.

United Nations Conference on Trade and Development. (2014). Review of maritime transport. Web.

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