INSTITUTE OF MANAGEMENT, NIRMA UNIVERSITY

PROJECT IN LOGISTICS
MANAGEMENT
MULTIMODAL TRANSPORT

Faculty
Prof. P.K. Chugan

SUBMITTED BY:

RANDEEP SINGH ARORA

111340
04-Mar-13
ACKNOWLEDGEMENT

On the onset I would to thank Prof. P.K. Chugan, Faculty, IMNU,

Ahmedabad, for giving me this opportunity to undertake this project in
Logistics Management, which has broadened my Intellectual Horizon.

I am Highly indebted to him for the same.

Randeep Singh Arora

111340

IMNU- 2011-13

CONTENTS
Page 2 of 23
1) Introduction
3

2) Advantages of Multimodal
Transport.4

3) Forms of Multimodal
Transport..6

4) Case
Study
..12

5) Questions &
Analysis
19

6) References
..22

Page 3 of 23
PART A:

INTRODUCTION

Multimodal transport (also known as combined transport) is the

transportation of goods under a single contract, but performed with at least
two different means of transport; the carrier is liable (in a legal sense) for the
entire carriage, even though it is performed by several different modes of
transport (by rail, sea and road, for example). The carrier does not have to
possess all the means of transport and in practice usually does not; the
carriage is often performed by sub-carriers (referred to in legal language as
"actual carriers"). The carrier responsible for the entire carriage is referred to
as a multimodal transport operator, or MTO.

In other words, Multimodal transport, as understood by many, refers to a

transport system usually operated by one carrier with more than one mode
of transport under the control or ownership of one operator. It involves the
use of more than one means of transport such as a combination of truck,
railcar, airplane or ship in succession to each other e.g. a container line
which operates both a ship and a rail system of double stack trains.

Article 1.1. of the United Nations Multimodal Convention defines multimodal

transport as follows: "'International multimodal transport' means the carriage
of goods by at least two different modes of transport on the basis of a
multimodal transport contract from a place in one country at which the
goods are taken in charge by the multimodal transport operator to a place
designated for delivery situated in a different country".

The most far reaching impact of containerisation on the role of freight

forwarders is their involvement in multimodal transport, i.e. carriage of
goods by more than one mode of transport under a single contract.

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When a freight forwarder acts as a multimodal transport operator, he
assumes responsibility for the execution of the multimodal transport
contract, and of the carriers participating in the multimodal transport
operations. He may enter into separate contracts with individual transport
operators and provides of services, but these subcontracts would not affect
his obligations to the consignor for the performance of the multimodal
transport contract and his liability to him arising under the contract.

When a forwarder acts as multimodal transport operator, it thus involves a

major transformation of his role. The carriers for whom he was previously
acting as an intermediary become his subcontractors and he becomes the
principal.

Multimodal transportation is not a recent invention since any consignment

coming from overseas and destined inland will be travelling on multi modes
of transport utilizing sea, rail, air or road.

What is new is that such a transport can be made without breaking bulk, i.e.
without taking it out of the container, vehicle or trailer in which in was loaded
at the place of origin, and often under the cover of one transport document.

This is the result of the container revolution which has occurred over the
last 20-30 years and with the development of Ro-Ro vessels, trailers or sea-
ferries creating land-bridge routes.

Heavy loads can also be sent in barges which in turn can be loaded onto
vessels in the same manner as containers, in systems known as lash or
Aseabee.

Advantages of multimodal transport

Minimises time loss at trans-shipment points.

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Multimodal transport, which is planned and coordinated as a single
operation, minimises the loss of time and the risk of loss, pilferage and
damage to cargo at trans-shipment points. The multimodal transport
operator maintains his own communication links and coordinates
interchange and onward carriage smoothly at trans-shipment points.

Provides faster transit of goods

The faster transit of goods made possible under multimodal transport

reduces the disadvantages of distance from markets and the tying-up of
capital. In an era of Globalization the distance between origin or source
materials and consumer is increasing thanks to the development of
multimodal transport.

Reduces burden of documentation and formalities

The burden of issuing multiple documentation and other formalities

connected with each segmented of the transport chain is reduced to a
minimum.

Saves cost

The savings in costs resulting from these advantages are usually reflected in
the through freight rates charged by the multimodal transport operator and
also in the cost of cargo insurance. As savings are passed onto the consumer
demand increases.

Establishes only one agency to deal with

The consignor has to deal with only the multimodal transport operator in all
matters relating to the transportation of his goods, including the settlement
of claims for loss of goods, or damage to them, or delay in delivery at
destination.

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 Reduces cost of exports

The inherent advantages of multimodal transport system will help to reduce

the cost of exports and improve their competitive position in the
international market.

Forms of multimodal transport operations

Currently, different types of multimodal transport operations involving

different combinations are taking place, such as:

Land-Sea-Land

An example of this form of the transport is as follows:

An empty container is picked up from the lines container yard in Singapore

and trucked to shippers factory in Johore (Malaysia) for stuffing, thereafter
the FCL is trucked to Singapore and transported by ocean vessel to New York.

Truck from vessel to rail-head New York.

Rail from New York to rail-head Chicago.

Truck from Chicago rail-head to consignees warehouse.

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There can be several additional links, for instance, if the container was
carried by rail from, say, Kuala Lumpur to Singapore.

Where LCL cargo is concerned, the individual shipments would be delivered

to the freight forwarders CFS or the shipping lines CFS and consolidated into
a FCL which, in Chicago, is trucked to the CFS, where from it is picked-up by
the consignees truck.

Road/Air/Road

A combination of air carriage with truck transport is a frequent method of

multimodal service. Undoubtedly, pick up and deliveryservices by road
transport are usually incidental to air transport. Butapart from this, road
transport is now being increasingly used, particularly in Europe and U.S.A.,
for trucking air freight over long distances, sometimes across national
boundaries, to connect with the main bases of airlines operating long haul
services such as trans-Pacific, trans-Atlantic and inter-continental. Several
airlines are building up a number of trucking hubs in Europe to act asfocal
points for road-based feeder operations.

Many airlines provide road service to cities which they either find
uneconomical to service by air, or to which they do not enjoy landing rights.
This road transportation is often effected with their own vehicles, and to and

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from their own facilities, but on occasion they do also use highway common
carriers.

Sea/Air/Sea

This combines the economy of sea transport and the speed of air transport
and is becoming increasingly popular in several international trade routes
like the Far East Europe route. The economics of this combination mode
favour high value items like electronics, electrical goods, computers and
photographic equipment as well as goods with high seasonal demand such
as fashion wear and toys.

This multimodal operation is particularly applicable where the route to be

covered combines large distances via land and water, and where transit time
is important.

Rail/road/inland waterways/sea

This combination mode is in common use when goods have to be moved by

sea from one country to another and one or more inland modes of transport
such as rail, road or inland waterways, have to be used for moving the goods
from an inland centre to the seaport in the country of origin or from the
seaport to an inland centre in the country of destination.

Mini-bridge

This involves the movement of containers, under a through bill of lading

issued by an ocean carrier, by a vessel from a port in one country to a port in
another country and then by rail to a second port city in the second country,
terminating at the rail carrier's terminal in the second port city. The mini-
bridge offers the consignor a through container rate inclusive of rail freight
up to the final port city in the country of destination. The railways are paid a
flat rate per container by the ocean carrier for the rail transit. This system is

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in operation on certain routes covering the trade between the United States
and the Far East, United States / Europe, United States / Australia, etc.

Land bridge

This system concerns itself with shipment of containers overland as a part of

a sea-land or a sealand-sea route. In this case also, the railways are paid a
flat rate by the ocean carrier who issues the through bill of lading. This
system is in operation for the movement of containers on certain important
international routes such as: between Europe or the Middle East and the Far
East via the Trans-Siberian land bridge; and between Europe and the Far East
via the Atlantic and Pacific coasts of the U.S.A., continental U.S.A. being used
as a land bridge.

Ro-Ro (Roll-on/Roll-off)

This mode combines different means of transportation (sea and road), and is
used most often with new automobiles, which are shipped by sea and them
simply driven off the vessel to the importers warehouse. Heavy and
overdimensional cargo is also suitable for Ro-Ro transport.

L.A.S.H. (Lighter Abroad Ship)

LASH transport is the combination of deep sea and inland waterway

transportation. An example is the route from Germany to the Mississippi
Ports where the barges sail down the Rhine, Elbe or Weser in Germany, are
loaded onto LASH container vessels in Rotterdam, Hamburg or Bremen; are
then carried across the Atlantic, only to be unloaded at a Mississippi delta
port to sail upstream in the U.S.

It must be noted that LASH vessels are expensive, and furthermore it is

necessary to check on the availability of the special handling facilities
necessary in the ports of destination.

Piggyback
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This is a system of unitised multimodal land transportation, acombination of
transport by road and rail. It has become popular in Latin American and
European countries because it combines the speed and reliability of rail on
long hauls with the door-to-door flexibility of road transport for collection
anddelivery. The goods are packed in trailers and hauled by tractors to the
railway station. At the station, the trailers are moved onto railway flat cars
and the transport tractors, which stay behind, are then disconnected. At
destination, tractors again haul the trailers to the warehouses of the
consignee.

The system has undergone refinements and sophistication by the

introduction of the so-called "trailer train" which uses the same trailer as a
vehicle on the road and a rail vehicle on the rail.

In other words, the trailer moves on its wheels as a truck on the road but the
wheels can be retracted by an air suspension system and connected to a rail
bogie for movement by rail. At the end of the rail journey, the conversion
back to being road vehicle is effected for delivery of the goods to the
customers.

Sea train

This is another innovation in the multimodal transport system involving the

use of rail and ocean transport. It was originally adopted in the U.S.A. It is
similar to the roll-on, roll-off (Ro-Ro) system except that in the place of the
Ro-Ro vehicle a rail car is used so that geographically separated rail systems
can be connected by the use of an ocean carrier. Typically these vessels are
long and thin and consist of one main deck running the length of the ship.
They are quicker at loading trains than general cargo vessels since the
trains carriages do not need to be detached from one another.

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These examples are only illustrative, not exhaustive. In actual practice,
several other combination modes may be used depending upon the trade
routes, trans-shipment points and the availability, of different modes of
transport. New infrastructural developments are being proposed the world
over to create a seamless flow of traffic e.g. the channel tunnel linking
England and France, the Oresund bridge linking Sweden and Denmark.. As
these projects have become reality so the flow of traffic changes. Other
changes such as global warming pose the potential for new routes to open
up via the northern sea between Russias northern border and the north pole.

An MTO should have the knowledge and skill to organise the transportation
of goods through different modes of transport. He should be aware of what is
happening in the areas of technological development, political stability of
countries, congestion of routes or mergers of operators. The MTO needs this
information because he arranges with the trucking company, railways,
shipping lines and other transport operators to transport the goods from one
place to another within the shortest time which may not necessary be the
most direct. Since the function of the MTO arises out of the needs of the
shipper, he must be able to offer a service which covers a wide geographical
area, either through an in-house branch network or by means of reputable
agency arrangements.

The value added in terms of the services provided by a MTO is significantly

greater than that provided by the conventional carrier. The role of the MTO in
the transportation of goods doorto-door will continue to increase because of
the single carrier liability they undertake and the flexibility with which they
function. They can, for example, vary the all-in freight rates according to the
complexity of the service provided, taking into account the volume of
business provided by their customers.

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PART B:

CASE STUDY- Extending the supply chain into Europe via

multi-modal Transportation.

There are many opportunities which exist for companies to gain significant
improvements within their operations through the increased use of
technology. This will not only be of benefit to the individual companies but
also to their customers a genuine win/win opportunity for those who are
prepared to take on the challenge.

In reviewing the European scene it is already possible to identify major

successes which have been achieved by companies who have taken control
of their supply chain at the highest level. This article looks at the importance
of the supply chain within Europe and the recent technological developments
which are leading to the emergence of more sophisticated multi-modal
distribution techniques.

Against the background of the single market, and the accompanying

implications for cross-border movements, the key issues can be approached
under the broad headings of:

The macro-economic environment;

Developments in the supply chain;

Increasing importance of multi-modal distribution solutions; and

The developments in technology facilitating the changes.

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The macro-economic environment

The much heralded single market has facilitated trade within Europe by
reducing trade and customs barriers and thereby making trade easier, more
cost effective and faster. Trade between the UK and its European partners
now accounts for over 60 billion per annum in exports and approximately
70 billion in imports this compares with exports of 18 billion and imports
of 20 billion with North America.

Industrial activity in Europe is concentrated in a wide band which includes

England, the Benelux, eastern France, western Germany, Switzerland and
northern Italy.

The demand for products manufactured in these areas lies across the whole
of Europe, thus presenting the need for logistics solutions which move the
products from the point of manufacturer to the end user in the most cost-
effective manner. It should also be noted that a number of companies are
now moving their production units into eastern Europe, and if this develops
then it will have a profound effect on the need for logistics solutions into the
future.

The 1980s witnessed a marked concentration in industrial production into a

smaller number of larger plants. This trend has continued and has been led
by a number of issues:

specialization of manufacturing units in a narrower range of products;

product internationalization and standardization; and

improved information technology.

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This has enabled production to be separated from the national market
through increased sophistication in the management of the supply chain.

Development in the supply chain

Concentration of production has been accompanied by a similar

concentration in warehousing, with larger, strategically-located warehouses
serving much wider geographic areas, often encompassing more than one
country. This has again been led by economies of scale, information
technology and also improved transport capabilities, which have benefited
directly from the reduction of cross-border barriers.

Warehousing concentration has been affected directly by advances in IT,

permitting the management of a wider range of goods in a larger location
and with ever more sophisticated interfaces with other parts of the supply
chain. This has enabled products to be ordered more efficiently and with a
greater degree of reliability.

Inventory levels have fallen across all the manufacturing

industries

At the same time, inventory levels have fallen across all the manufacturing
industries. Improved production lead times have combined to make just-in-
time ( JIT), and more frequent, smaller deliveries, an accepted manufacturing
technique. JIT is well documented in the motor vehicle industry with parts

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arriving at the production unit only when needed. Vehicle manufacturers are
reducing the amount of stock held in dealerships and replacing it with central
storage location serving the motor dealers. By doing so, Rover estimates that
over 80 million has been saved. In addition, dealers are now being allocated
specific production slots which will reduce the central pool of cars still
further.

At the same time, the UK retail sector has itself taken a JIT demand-driven
approach with stores receiving high turnover products in smaller loads but
with a greater frequency. This has moved even further with the development
of consolidated loads to improve vehicle utilization, so bringing
environmental benefits.

My own companys experience in the UK retail sector has seen regional

distribution centre stockholdings fall from over four weeks to less than one
week, with stores receiving specific products twice, or even three times a day
instead of the traditional once. Also, our work with the automotive sector has
seen increased importance being placed on ex- works consolidation prior to
assembly based on strict time windows for delivery line-side and these are
getting tighter all the time. Reduced inventory and more frequent deliveries
means that the supply chain has become more complex to manage. There is
a need for greater integration between each element of the supply chain and
logistics is key to its success.

Each area of the supply chain purchasing, manufacturing, inventory,

distribution, sales and customers services impacts simultaneously on the
other elements and it is essential that the extent of this impact is
understood.

The supply chain is not about the purchasing department obtaining the best
price per purchased unit on a bulk purchase, which then has to be stored for
months in overspill warehousing tying up extra capital and resources but

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does not sell as predicted and eventually incurs write-off costs and
significant warehouse costs.

Nor is it about the production manager who wants to keep his machines
running at 100 per cent to minimize unit costs, even though the sales teams
cannot possibly sell all the product, again incurring excessive inventory
costs, extra storage and handling costs. Nor is it the salesman who promises
product which is not in stock within a very short time period, or in order
quantities which makes the distribution costs excessively high and the deal
unprofitable, yet demands that unless the order is met the customer will be
lost and go elsewhere.

However, through an integrated approach, many successful companies are

now obtaining competitive advantages through greater levels of customer
service, lower inventory levels and lower logistics costs. Supply chains have
to become more responsive to customer requirements through improved
service levels without increasing total costs.

Companies are now having to deal with longer supply chains as they become
increasingly European in their trading outlook. Issues of minimum order
sizes, frequency of purchase and delivery times are becoming increasingly
important. No longer can companies become complacent and insular within
their old national boundaries. As the European market becomes increasingly
competitive, companies must look for more creative ways of meeting their
customer requirements compete or die! The supply chain has, therefore,
become an integral part of running a successful business.

The growing awareness of the supply chain as a key driver in business

operations, customer service and profit benefits has elevated the status of
logistics. This has led to further investigations into operating procedures,
methods and modes of transport within the context of the supply chain.

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Multi-modal transportation is the movement of product via at least two
modes of transport using containers, swapbodies, semi-trailers, etc., and
involving a combination of road, sea and rail and, in some cases, the inland
waterways.

The key issues which are encouraging the move to multimodal transportation
are:

creation of the single market;

move towards pan-European trading;

new EC transport legislation;

increasing road congestion;

recognition of the key role of distribution;

move towards harmonizing technical standards for rail and road;

agreement on a network of 30 main rail routes in Europe;

opening of the Channel Tunnel.

However, from a UK perspective, the one element which will play the biggest
role is the opening of the Channel Tunnel. The impact could be dramatic,
with, for the first time, a direct rail link from the UK to the existing intermodal
network of mainland Europe.

However, in the UK, the practicality of a multi-modal solution is dependent

on the infrastructure built to support the Channel Tunnel. This is represented
principally by the construction of freight villages which will be linked by rail
to the tunnel. When the Tunnel becomes fully operational there are
scheduled to be 22 daily rail services. This is likely to be very attractive to
companies with intra-European transport needs and will mean that multi-
modal transport becomes an increasingly attractive option.

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Technological developments

There are two areas in which technological advances are having a significant
impact on the opportunities for improvement in the supply chain, giving
benefits both in terms of costs but significantly in terms of improved service
levels to the customer. These two areas are:

(1) information technology; and

(2) warehouse and transport technology.

THE FUTURE OF MULTIMODAL TRANSPORTATION IN

EUROPE

All the signs are that the movement of goods across Europe will continue to
increase, and a new dimension will gradually be introduced with the growing
use of Eastern Europe as a manufacturing base. Companies will be seeking
solutions to their pan European distribution needs which will allow them to
gain the maximum benefits from manufacturing but ensuring that ever more
exacting service levels are achieved. In this respect, multi-modal distribution
will become an integral part of total European logistics solutions.

For example, multinationals which have production in the majority of

European countries backed up by national storage and distribution
structures, are changing to zonal/European-wide production and distribution
structures, e.g. Colgate Palmolive, Mars, P & G, Compaq, Panasonic. This
developing structure recognizes the need for mass production at the lowest
unit costs, the reduction of inventory with minimal numbers of stockholding
points and the drive towards stockless depots, consolidated deliveries and
cross-docking distribution services.
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In this rapidly developing scenario there will be the need for the major trunk
movements over the long distances into a market/country where product is
dispersed quickly.

In this case, rail will provide a cost-effective mode for moving large volumes
of product long distances. These products then have to be broken down and
delivered in their designated quantities to the customer requirements.

It is vital that the right balance of speed, service and costs is achieved in
order that the supply chain provides a competitive advantage in terms of
both service and cost.

These factors, together with legislation and technological developments, will

ensure that multi-modal logistics solutions will increase in popularity.

Companies, with operations in the main economies of Europe, are in the

unique position of being able to provide European consolidation services with
direct rail connections and high-quality automated shared user warehousing;
thus, combining the benefits of rail transport for the long journeys and the
distribution skill for the onward delivery. Technology is the single most
important issue which businesses need to address if they are to compete as
world-class companies. Multi-modal transportation will become an
increasingly key part within the management of the European supply chain,
and it is for the logistics professionals to work closely with their clients to
ensure that the most effective method is selected.

QUESTIONS & ANALYSIS

Q1) List out the objectives of Multimodal Transportation, as applicable in the

case above.

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Ans 1: The objectives for use of multi-modal transportation are:

lower overall costs;

improved transit times for long-haul journeys;

reduced environmental issues;

reduced road congestion;

higher quality of service.

Q2) What will be the features or characteristics that will drive the decision on
Multimodal transporatation?

Ans 2:

the characteristics of the product;

volumes to be moved;

frequency of shipments;

distance to be covered, as this is a key element in deciding road versus

rail;

customer service requirements;

overall cost.

Q3) Elaborate on the two areas of Technological Developments in the Supply

Chain, as mentioned in the case above.

Ans 3: Information technology

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The significant developments in IT have enabled ever more complex
operations to be handled, and become increasingly involved with the drive
towards minimal stockholdings, JIT operations and the move towards cross-
docking distribution. All these elements require increased information
availability in order to manage the supply chain cost effectively.

There are two key roles for IT in the multi-modal supply chain:

(1) identifying where a consignment/unit/stock is at any point in time, i.e.

product tracking enabling a transport operator to provide highest levels of
service while minimizing disruption/repositioning and maximizing asset
utilization; and

(2) IT links between the operator(s) and the customer(s) to receive and
confirm transport requirements and advise of delivery status and to clarify
stockholding levels and stock availability. The main areas of interest lie in
satellite tracking, satellite communications and electronic data interchange
(EDI) links which integrate the supply chain between production unit and
point of sale. These are set to grow in use, along with computer-assisted
ordering and automated replenishment facilities.

IT facilitates real-time information, which in itself speeds up the general

movements along the supply chain, increases efficiency and (hopefully)
profitability.

Warehousing and transport technology

Warehouse technology, for example barcoding, has gone hand in hand with
developments in IT. At the same time, larger centralized warehouses across
Europe are becoming increasingly automated in some form or other, be it
with unmanned vehicles, high-speed retrieval systems, computer-controlled
movements and other forms of automation.

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A number of companies have already developed fully automated
warehousing facilities for their own dedicated use.

We are currently in the process of building a high-bay automated shared user

warehouse at our Dagenham site, which is rail linked, and this will be a key
development for us in developing our groups distribution strategy across
Europe.

REFERENCES

1. http://www.unescap.org/ttdw/CapBuild/Module%20Multimodal
%20Transport%20Operations.pdf

2. http://www.emeraldinsight.com/journals.htm?
issn=09576053&volume=8&issue=6&articleid=851958

3. http://en.wikipedia.org/wiki/Multimodal_transport

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