Dry ports and the extended gateway concept: port-hinterland container

network design considerations and models under the shipper perspective

Dr. Fedele Iannone

Abstract

The hinterland distribution of maritime containers from and to seaports has received a great deal of
attention lately. Increasing traffic volumes and the introduction of bigger vessels put pressure on marine
container terminals and inland transport infrastructure, leading to congestion. Solutions are therefore
needed, and the development of dry ports according to the extended gateway concept is a relevant option
to reduce congestion and improve the accessibility and connectivity in port-hinterland container networks,
thus enhancing the competitiveness of seaports and more generally the cost and service efficiency of
production-distribution and logistic supply chains.

This paper contains an introduction to key issues in the field of port-hinterland container logistics, with a
focus on dry ports, the extended gateway concept, and the demand side of inland container services. The
selection of services or service providers, or the routing of containers on multimodal networks is considered
as an integral part of managing global production-distribution supply chains. The main considerations
underlying the design of port-hinterland container networks under the perspectives of shippers are
therefore discussed and a critical review of major optimization models developed by academics is presented.
Through the assessment of the current state of research, important issues, challenges and requirements for
more comprehensive network design modeling are identified.

Shippers evaluate the advantages and drawbacks of alternative hinterland container logistics solutions
against their supply chain objectives involving various trade-offs. There is a need for new tools of analysis
that incorporate more realistic features, such as regulatory environment, uncertain information, risk
modeling, logistic integration, and environmental and social impacts of container distribution operations. In
any case, the optimal port-hinterland network configuration from the shippers’ viewpoint is case-specific,
depending on factors such as the type of goods, the level of the inventory holding costs, the service levels
and pricing structures at marine and inland terminals, the customs procedures and inspection rules, the
capacity constraints and the lead times for different operations, and so on.

Key words: port-hinterland container logistics, intermodal transport, dry ports, extended gateway
concept, network design, shipper perspective, supply chain management, optimization models

1. Introduction

This paper contains an introduction to key aspects and concepts in the field of port-hinterland container
logistics. The main considerations underlying the design of port-hinterland container networks under the
perspectives of shippers are discussed, and important issues, challenges and requirements for more
comprehensive modeling are identified.

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Among the most notable recent trends associated to the development of container logistics, it seems worth
pointing out the following (Ocean Shipping Consultants, 2004, 2007, 2011): (i) rising importance of the
global dimension of supply chains1; (ii) increasing involvement of shippers and consignees in terminal
selection and port-hinterland transport control; (iii) changing competition between seaports from seaport
related competition to competition between logistic chains; (iv) collaborative models, consolidation, and
vertical integration for the development and operation of infrastructure and services; (v) new legislation
regarding customs, safety and security, environment etc.

The port-hinterland distribution of maritime containers, in particular, has received a great deal of attention
lately due to issues concerning the continuous growth of international trade, the introduction of bigger
ships into the main trade lanes, and the possibility to raise the competitiveness of seaports and supply
chains by means of the practical implementation of innovative concepts in inland intermodal logistics
systems.

Port-hinterland container networks are composed of multiple inland transport modes and nodes, and
involve a wide range of problems affecting public and private stakeholders. A typical port-hinterland
network is shown in Fig. 1. A network design problem is the reengineering of such network to enhance
value creation for the involved stakeholders. In order to reengineer an existing network, one or more
alternative potential configurations of the network, including infrastructure, services, regulations and
transport volumes, must be elaborated and evaluated based on some predetermined value criteria (e.g.
internal costs, time duration of operations, environmental impacts).

Intermodal developments in port-hinterlands demonstrate that market players are constantly searching for
ways to bundle cargo and integrate operations along the supply chain. Marine terminals are entering a
tendency to work together and in a seamless way with systems of networked inland intermodal facilities in
order to increase their productivity and extend their hinterland. On the other hand, marine and inland
terminals have begun to play a decisive role in global production-distribution supply chain management
strategies. The ongoing process of close interaction between port-maritime systems and inland freight
transport networks is called “port regionalization” (Notteboom and Rodrigue, 2005), whereas the process
of increased role of terminals in the supply chain strategies of shippers has been labeled as “supply chain
terminalization” (Rodrigue and Notteboom, 2009).

Concepts as “dry port” and “extended gateway” are gaining momentum (Franc and Van der Horst, 2010;
Iannone and Thore, 2010; Rodrigue and Notteboom, 2009, 2011; Roso and Lumsden, 2010; Veenstra,
2006). Dry ports are inland intermodal hubs where a range of services may be offered to shippers and
carriers beyond the simple handling and storage of standardized loading units. The extended gateway
concept incorporates the idea that some seaport facilities and functions can be duplicated or
complemented at hinterland locations. Many dry ports effectively operate as an extension of gateway
seaports, facilitating the operations of increasingly integrated sea-land intermodal network systems2.

The implementation of such concepts suggests a shift to sustainable transport solutions by the extensive
use of trains and/or barges, and is essentially supposed to result in relevant benefits to all stakeholders in
port-hinterland container logistics, representing a significant innovation dramatically changing the lay-out,
flows and scope of logistic networks (Thore, 2007). Indeed, dry ports and extended gateways should
contribute to: (i) enhance the hinterland accessibility and connectivity of seaports, (ii) relieve congestion
phenomena in seaports and over inland transport networks, (iii) promote logistic integration between

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different types of firms. By this way, dry ports and extended gateways: (i) affect the cost and service
efficiency of supply chains, (ii) improve the competitive position of the seaports, and (iii) promote
sustainable development and regional economic growth.

A multitude of quantitative models have been developed to analyze optimal choices in multimodal logistics
networks. Bontekoning et al. (2004), Caris et al. (2008), Crainic and Kim (2007), Macharis and Bontekoning
(2004), and Schwarz (2008) have reviewed the application of operations research models and methods in
the field of intermodal logistics. Danielis (2006) has put into evidence the role of the economic analysis for
investigating intermodal railway transport. Yet, research on the modeling of extended gateway and dry
port concepts is only at the beginning and many issues still need to be more comprehensively considered.
As it will be demonstrated in this paper, new types of network design models need to be developed to
address the extended gateway role of dry ports in the supply chain management strategies of shippers.
These models should be also formulated based on the so called “triple bottom line” or “sustainable”
perspective, by simultaneously evaluating economic, environmental and social performances of port-
hinterland container logistics. In general, network design modeling is suitable both for strategic and tactical
planning in intermodal freight logistics (Caris et al., 2008; Crainic and Laporte, 1997).

1.1. Plan for this research

The remainder of the paper is structured as follows. Section 2 presents basic definitions, concepts and
issues in port-hinterland container logistics with a focus on all involved stakeholders and the physical and
information flows, including customs procedures and coordination problems. In addition, the role of
hinterland networks for the competitive position of seaports and supply chains is explained. Finally, the dry
port and extended gateway concepts are presented, and their benefits outlined, while also discussing some
strategic aspects associated to the development of dedicated transport and logistics systems. In Section 3,
the main considerations in port-hinterland container network design under the shipper perspective are
presented. The performance measures relevant for shippers are described as well. Here, the selection of
transport and logistic services or service providers, or the routing of containers on multimodal networks is
considered as an integral part of managing global production-distribution supply chains. Section 4 reviews
the main contributions of the academic literature on optimization models for port-hinterland container
network planning under the shipper perspective. Also, the existing gaps that in the author’s opinion should
be addressed in future modeling research are discussed. In particular, a number of shortcomings and
missing aspects in the reviewed literature are pointed out, thus motivating the development of more
accurate and comprehensive models. Finally, Section 7 addresses conclusions.

2. Fundamental topics in port-hinterland container logistics

2.1. Actors and their physical and information flows

Port-hinterland refers to the landside geographic area served by a specific seaport for importing and
exporting goods. Port-hinterland container networks are composed of multiple inland transport modes and
nodes, and involve a wide range of problems affecting public and private stakeholders from long term to
short term. The actual modes of transport are road, rail and barge.

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Port-hinterland container logistics fundamentally features physical and information flows among actors and
nodes operating in port-hinterland networks. Port authorities, shipping lines, marine and inland terminals,
freight forwarders, consignors and consignees, customs and other administrative and inspection bodies,
barge and train operators, trucking companies, and information service providers are all involved in this
process.

Primary actors in the decisions are shippers, carriers and terminal operators. Shippers are economic agents
that need to move containerized cargoes between origin and destination locations. Carriers are companies
that provide transportation services for these demands. Terminal operators transship loading units
between transport means and can also directly provide, according to circumstances, other value added
activities, intermodal marketing services, and even inland transport services. Demands and supplies are
matched on the networks, and the interactions of all involved players and elements affect the
performances of the resulting logistics systems. The trade-off between customer demand characteristics
and carrier strategies is supposed to lead to the development of a variety of possible inland container
routing patterns as pointed out by Notteboom (2008a; 2008b).

The contrast between the supply side and demand side of transport is relevant for freight networks in
general but it is especially interesting in port-hinterland container logistics mainly with regard to the
different possibilities and responsibilities to arrange transport operations, but also with regard to the
dynamic nature of horizontal and vertical integrations occurring throughout the logistic chain. The
selection, organization and control of inland transport can be done either by shippers or forwarders in case
of “merchant haulage”, or by shipping lines and marine terminal companies respectively in cases of “carrier
haulage” and “terminal operator haulage”. Also, it is a common practice among the players involved in
container logistics to expand the scope of their activities through investments in new assets and/or
agreements with other companies. On the whole, the development of the container logistics industry has
evolved from the need for economies of scale, strategic positioning, and market control. Such an expansion
has been motivated by a host of technological, regulatory and financial reasons, in addition to changes in
shippers’ preferences.

Approximately a quarter of the annual total inland freight within European Union is port related (NEA,
2010). Unimodal transport via road is still the dominating mode in port-hinterland container distribution
due to its advantages in terms of speed and flexibility, having a share ranging, for instance, from 96 to 89
and 58 per cent in the ports of Naples, Le Havre, and Rotterdam, respectively. However, the huge demand
of road freight transport is also leading to unsustainable and undesirable levels of negative impacts both on
environment and on society (such as air pollution, climate change, congestion, and safety risks). The most
prominent of these effects is the global warming caused by the emissions of carbon dioxide (CO2) and other
greenhouse gases.

Much attention is currently being given to intermodal solutions in relation to the optimization of the
landside distribution of maritime containers from and to seaports. Intermodal transport enables the door-
to-door delivery of standardized loading units using different modes, such as for instance truck and rail, and
different means of transport, thus having the potential to mitigate the negative environmental and social
impacts of freight transport operations. Indeed, one of the advantages of intermodal transport is the
possibility of modal shift, that is the partial or full transfer of shipments from one mode to another, such as
for instance from truck-only to barge/truck or rail/truck combined transport, during the forwarding to
destination.

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In addition to pure transport activities, port-hinterland container logistics also involves other physical and
administrative activities such as container handling and storage at terminal facilities, customs clearance and
other types of controls and inspection procedures both at seaports and at inland facilities, and other value
added activities.

Within the dwell time3 that a container stays at the seaport terminal some administrative processes have to
take place. The release of containerized cargoes from customs deserves particular attention. This
procedure has several alterations according to the specific treatment and transport scheme applied in each
situation. As soon as a laden container is stored in the marine terminal’s yard, the containerized cargo
acquires the customs status of “goods in temporary storage” until the moment when a further customs-
approved treatment or use is assigned to it. Examples of possible forms of treatment of import cargoes are
the followings: (i) released into free circulation, (ii) transit procedure and subsequent completion of
clearance at an inland customs office, and (ii) transit under the customs license of either shipping line or
terminal company towards an inland terminal or dry port, and subsequent completion of clearance at the
inland customs office (i.e. the extended gateway concept). Reversed processes and similar labels apply to
export cargoes as well.

As reported in Drewry Shipping Consultants (2010), import boxes have a port dwell time of 5 to 7 days on
average in most terminals, although in countries with inefficient or highly bureaucratic customs regimes,
dwell times of up to 20-25 days are common. As it has also been pointed out by Glukhenkiy (2009), inland
clearance may allow for smooth door-to-door delivery of cargoes, reducing border delays and, as a result,
generalized logistic costs for shippers. This requires the establishment of special procedures between the
entry customs and the inland customs offices4.

The trend towards greater emphasis on the quality of port-hinterland container connections has resulted in
an even greater importance of timely, full and reliable information. A significant aspect in the relations
between seaports and their hinterland is the introduction of efficient technologies, such as for instance the
port community systems, that allow for a fluent exchange of data and documents. The availability of the
right information at the right time and at the right place about the shipments (e.g. on cargo, orders,
handling instructions, tariffs, checks, intended mode of hinterland transport, and required arrival date and
time) is a crucial condition for the development of efficient and effective hinterland networks. In many
cases, information flows precede physical flows and are indispensable for the regular carrying out of
physical processes (Van Oosterhout, 2008; Zuidwijk et al., 2008; Zuidwijk and Veenstra, 2010).

The highly demanding and competitive nature of supply chains necessitates proactive collaboration
amongst trading partners in the freight community. More than ever, organizations not only need to
exchange data between disparate systems in an efficient manner, but also require full visibility into each
and every shipment and corresponding documents. For instance, prompt communication about arrival
times of containers to the next link in the transportation chain is essential to streamline logistic operations.
Improved information provision on containers may help terminal operators in reducing internal reshuffling
of containers and thus enhance yard productivity. These operators could make use of predicted dwell times
in their own storage planning. Most valuable are also message systems informing shippers regarding
deviations from the original plan. In general, integrated information systems should facilitate cooperation
and coordination between the various links in the port-hinterland supply chain, enabling parties to avoid
any additional costs and to align planning and execution of all processes.

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Coordination problems in hinterland chains have been addressed by Van Der Horst and De Langen (2008)
with a strong focus on organizational forms and an institutionalist approach. Moreover, coordination issues
between various public bodies is becoming an area of great concern. Customs inspections and other types
of administrative and technical controls need to be coordinated by the parties in order to minimize time
and costs involved. Physical concentration of controls may be a solution, as well as coordinated planning
and execution (i.e. the so called “single window”).

Bottlenecks in port-hinterland container logistics can range from physical operations to administrative
processes and information flows. Identifying and addressing bottlenecks helps to build up efficient, secure
and resilient production-distribution and logistic supply chains.

2.2. Port-hinterland connections and competitiveness

The importance of well-functioning port-hinterland connections is widely recognized in academic literature

and industrial practices. Gateway seaports and the multimodal corridors connecting them to widely
dispersed hinterlands are of crucial importance to international trade and the world economy.

The supply chain has become a relevant scope for analyzing the competitiveness of both seaports (Carbone
and Gouvernal, 2007; Robinson, 2002) and the integrated territorial logistics systems the seaports belong
to. The attractiveness of a port is more and more dependent on its ability to synchronize and integrate port
operations with inland transport nodes and with other players within extended logistic networks.

Nowadays, containerports are interested in more than their captive service regions, which are in a close
distance, and compete with neighbor ports in contestable hinterlands in order to attain a bigger share of
container flows from and to more distant regions through their terminals and network systems. This is the
case, for instance, for almost all seaports within the Le Havre - Hamburg range, in Northern Europe, the
hinterland of which is contestable and serves a total of several hundred millions of consumers.

Hinterland accessibility and connectivity are further recognized as crucial factors determining the
competitive position of seaports when considering the introduction of ever larger containerships
(“Malaccamax” vessels with capacity up to 18,000 TEU)5, which suggest calls on fewer key deepsea
terminals with larger container exchanges. This development will put pressure on the capacity of both the
marine terminals and the links connecting them with hinterland regions.

Often, the development of additional capacity in a seaport will only get an approval if some strong
engagements concerning sustainable hinterland flows are made. A recent example in this respect is the
development of the Maasvlakte II in Rotterdam port, where the authorization for the project has been
obtained on the basis of an agreement providing to apply strict modal split targets in favour of rail and
barge transport for the forwarding of loading units from and to the hinterland of the port.

Terminal congestion and inefficient and unreliable hinterland connections undermine the competitiveness
of seaports, while leading to increased internal and external costs of supply chains. As reported in
Notteboom (2004), the portion of inland costs in the total internal cost of door-to-door container transport
chain is estimated to range from 40 to 80 per cent.

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2.3. Dry ports and the extended gateway concept

Increasing attention has been given to intermodal logistics systems in relation to the hinterland reach of
major gateways (Van Klink and Van de Berg, 1998). In recent decades, trade liberalization and specialization
in global supply chains have resulted in a steady increase in maritime and port traffics of containers
worldwide, placing great stress both on the seaport facilities and on the road systems surrounding the
major port cities. This has generated a need for innovative landside distribution solutions essentially based
on the combination of different transport modes and interchange nodes. The overall aim is to relieve
congested areas at and near seaports and achieve economies of scale by bundling container flows on high
capacity and environment-friendly links to optimal locations for further distribution over short and long
distances.

The multimodal interchange nodes in the hinterland network of seaports are described differently in
different countries, such as for example “inland ports” or “inland terminals” in the United States and
Canada, “strategic rail freight interchanges” in the United Kingdom, “dry ports” in Sweden, the Netherlands
and other countries, and “interports” in Italy (see, among others: Harrison, 2007; Iannone et al., 2007;
Jaržemskis and Vasiliauskas, 2007; Kirkland, 2007; Leitner and Harrison, 2001; Leveque and Roso, 2002;
Rodrigue and Notteboom, 2009; Rodrigue et al., 2010; Roso, 2008; Roso and Lumsden, 2010; Thore, 2007;
UNCTAD, 1982, 1991). In most cases, these facilities all have the same function, that is to consolidate at a
single location a number of operations such as: modal interchange, temporary storage and distribution of
intermodal loading units, customs clearance and other administrative and inspection services, and value
added logistics services.

Within the container logistics industry, dry ports have became increasingly popular as a mean for boosting
seaport capacity, facilitating intermodal transport and expanding port-hinterlands. In this respect, dry ports
are intended as nodal infrastructures handling the same functions as the port terminals except ship to
shore transfer. These inland facilities may be tied to the production process of importers by supplying the
processes with goods in a just-in-time concept (Ocean Shipping Consultants, 2004, 2007; Rodrigue and
Notteboom, 2009). For many factories it is important that containers arrive punctually at their doorstep.
Under specific conditions, this can be achieved much easier and economically from a nearby dry port than
directly from a seaport. In addition, dry ports may also be functioning as inland depots for the shipping lines
where non-shipbound empty containers can be collected.

The customs dimension is particularly relevant to discriminate among dry port facilities by qualifying the so
called “extended gateways”. The extended gateway concept is a straightforward concept which exists, in
practice, already for years (Franc and Van der Horst, 2010; Hayuth, 1980; Iannone and Thore, 2010;
UNCTAD, 1982, 1991). The term simply refers to a particular type of “trade facilitation” based on the
possibility to rely on a regime of customs continuity between seaports and dry ports. Under extended
gateway systems, customs authorities qualify dry ports as an integral part, that is an extension of specific
seaports. Customs licensed dry ports or the extended gateways can be recognized as the points of origin or
destination in steamship bills of lading accompanying the containerized import-export cargoes. Shipping
lines or marine terminal operators may assume the full responsibility for inland transport under customs
bond between seaports and dry ports. Operators do not have to wait for customs officials either to release
the containers at the seaports or to issue inland transit documents. Shippers and/or their logistics agents
can arrange directly in the dry ports all the formalities in relation to the clearance of international cargoes.

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The extended gateway concept incorporates some of the natural consequences of the dry port concept, but
it puts more emphasis on the coordination and control of the flows in the multimodal hinterland network
(Veenstra and Zuidwijk, 2010). Therefore, there are a number of challenges behind dry port development
according to the extended gateway perspective: new partnerships have to be established, new business
models have to been developed, and transparency of goods and information flows has to be achieved.

In general, the setting of dry ports involves private and public interests. In Table 1 the potential benefits
arising from dry ports are summarized. The first column of the table lists the concerned parties, whereas
the second column presents the associated advantages deriving from the implementation and operation of
dry ports. Such facilities can promote regional economic and social development, including employment
and income generation. In order to deliver these benefits, proper planning, management and targeted
marketing is essential.

The rapid development of dedicated transport and logistics systems based on dry ports and the extended
gateway concept is changing some basic conditions in the competitive landscape of port-hinterland
container distribution, and several actors are modifying their market strategies accordingly. By employing
the concepts of vertical control proposed by Wilmsmeier et al. (2011), it can be observed that the
development of some dry ports and inland terminals worldwide is driven “inside-out” by intermodal and
rail companies (such as for instance in the case of the Eskilstuna rail terminal located in Sweden, Europe),
whereas other developments are driven “outside-in” by port authorities, marine terminal companies and
shipping lines seeking greater integration with inland networks (such as for instance the network of inland
terminals of ECT in Northern Europe or the Virginia Inland Port located in Front Royal, Virginia, USA). In our
opinion, such categorization needs to be further expanded by also considering the possibility of “inside-
out/outside-in hybrid” developments. As a matter of fact, the development of the interport of Nola in the
Campania region of Southern Italy, for instance, had been purely inside-out driven at an early stage,
whereas an outside-in process of evolution of the same interport is nowadays in place as well6.

In Europe, a large number of rail terminals that also serve seaport traffics are built and operated by large
railway incumbent undertakings and by smaller players from private sector, but the major actors in the
development of projects providing new container distribution solutions based on multimodal dry ports
seem to be port authorities and marine terminal operators.

The changing scope of port and terminal competition (from port/terminal competition to competition
between logistic chains) and the increasing role of merchants and their representatives in selection
processes requires an entirely different approach in the competitive assessment and planning of port-wide
service and cost levels. Competitive strategies are focused on the performance of the ports as well as on
the number, quality and frequency of connections of the hinterland networks. Although some seaports are
still reluctant to engage clear strategic partnerships with dry ports in the fear of core activities shift to other
operators, some promising projects have emerged in continental Europe.

Port authorities are more and more conscious that the success of their facilities is highly dependent on
their capability to fit into the networks that shape supply chains. Deep-sea terminal companies can play a
pivotal role in bundling container volumes of different shipping lines and therefore in facilitating intermodal
transport services. In some cases, specific value added services are provided to accommodate the logistical
requirements of single customers or even attached to individual containers. The introduction of new
activities has shifted the role of terminal companies from being that of “node operator” to that of “flow

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operator” (Veenstra and Zuidwijk, 2010). Some marine terminal operating firms are pursuing these
strategies simply through better coordination with inland operators, while others are acquiring or setting-
up separate companies or business units.

Port authorities and marine terminal companies in Rotterdam (Netherlands), Barcelona (Spain), Marseille
(France) and Savona (Italy) have taken concrete initiatives to improve port-hinterland accessibility by
means of dry ports, while trying to figure out what are the future global supply chains and how to
effectively position themselves in supply chain management networks. On the contrary, as reported in
Franc and Van der Horst (2010), there are not many examples of shipping lines investing in dry ports.

3. Supply chain requirements of shippers: the demand side of port-hinterland container logistics

The demand side of container distribution originates from shippers. The shipper is a transportation
customer who needs to move containerized cargo from one location to another. He is normally the cargo
owner, and could be the consignor or the consignee depending on its position and function in the supply
chain. The term shipper is also employed to designate an intermediary broker or third-party logistics
company governing and coordinating the whole delivery process for cargo owners. In port-hinterland
container logistics, shippers typically aim to the minimization of generalized costs, which include direct and
indirect costs of distribution operations.

There is a growing belief that further optimization and expansion of the intermodal industry will also
greatly depend on successful actions towards coordination and cooperation at the demand side of the
market, i.e. the shippers and cargo controllers (Theys et al., 2008). On the other hand, the shipper is
basically the key actor in the intermodal chain, or even the reason for the chain’s existence. Although
intermodal transport networks are formed as a combination of individual transport modes and transfer
facilities, shippers perceive them as single integrated services functioning similarly to unimodal services,
especially in terms of speed, reliability, and availability.

In recent years, companies have realized to some extent the importance and relevance of distribution and
logistics to their business. The reduced costs of intercontinental transport have enabled supply chains to
globalize their operations and to locate production facilities at those places in the world where conditions
are favorable, not necessarily close to the markets (Van Baalen and Zuidwijk, 2008). The major logistic
implications of globalization are: (i) extended supply lead times, (ii) multiple transport options, (iii)
extended transit times, (iv) multiple consolidation options, and (v) production postponement with local
value added.

Manufacturers, distributors and retailers are increasingly interested in the control of their cargo flows, and
this controls is performed directly or via their logistics service providers. The container industry is therefore
switching from a focus on shipping lines to a focus on merchants (Ocean Shipping Consultants, 2004, 2007,
2011). Modal and nodal choices in container logistics are dependent on the network system-wide
generalized costs borne by shippers (Notteboom, 2008a; 2008b). The growing influence of merchants has
substantial impact on strategies, design, operations and marketing of both ports and port-hinterland
networks.

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The planning of port-hinterland logistics under the shipper perspective means finding the answers mainly
for the decisions in long term, such as for instance: (i) should the container distribution be arranged by
merchants, carriers or terminal operators? (ii) Which transport modes and inland facilities (dry ports,
warehouses, etc.) should be used? (iii) How much inventory should be kept in stock and at which stocking
locations?

The port-hinterland network design in shipper perspective can therefore be considered as a sub-problem of
a wider supply chain network planning problem involving decisions on transportation solutions as well as
on the number, location, capacity and scope of the production-distribution facilities of a company, or of a
set of collaborating companies, in order to provide goods to a customer base. Obviously, network design in
supply chain management also involves decisions related to the selection of suppliers, subcontractors and
logistics providers.

Supply chain requirements are ever-changing and becoming more complex. The goal when designing a
supply chain is to maximize the firm’s profits while satisfying customer needs in terms of demand and
responsiveness (Chopra and Meindl, 2007). To manage the supply chain logistics system efficiently, the
dynamic and static states of material flows (i.e. transportation and storage) are key points to be taken into
consideration (Mitsuo et al., 2008)7.

The more integrated supply chain decision-making becomes, the more the focus in port-hinterland
container distribution is shifted to the total generalized logistic costs borne by shippers and therefore to
the so called “inventory-theoretic” approach to modal and nodal choices. Supply chain literature provides
the conceptual framework to separate logistic costs deriving from sequential operations and to
subsequently assess the impacts of new business models, regulatory or investment measures, etc.

In this setting, the design involves trade-offs among different incompatible goals. The out-of-the pocket
costs of transporting and handling containerized cargoes between seaports and hinterland locations
constitute just one component of a larger set of elements influencing logistic decisions. Trade-offs may
entail additional costs in some functions but will provide greater cost savings in other. The overall aim
should be a net gain to the system. There are indeed a number of factors which can add to the inland
container logistic costs of supply chains, including amongst others, the opportunity and depreciation costs
of in-transit inventories, the reliability of operations, the additional inventories that must be held at
destination to avoid stock outs, and the level of cargo losses and damages.

Which port-hinterland network configuration will eventually be cheapest from the viewpoint of total
logistic cost is case-specific, depending on factors such as the type of goods, the level of the inventory
holding costs, the service levels and pricing structures at marine and inland terminals, the customs
procedures and inspection rules, the capacity constraints and the lead time for different logistic operations,
etc. The weighing of factors will differ with the logistical needs of the shipper. Shippers might opt for more
expensive inland distribution solutions in case the additional direct costs are overcompensated by savings
in other logistic costs. Shippers evaluate the advantages and drawbacks of alternative distribution solutions
against their supply chain objectives.

In general, the higher the cargo value the higher the attractiveness of minimum time distribution solutions
because of the high time-related inventory costs. Speed will be the most important variable also in the case
of unforeseen additional demand. Vice-versa, in cases of low value goods and/or highly predictable

10
demand, distribution solutions aim at minimizing the direct logistics costs by applying consolidation policies
in high capacity but slow transport solutions.

Supply chain responsiveness can be usually obtained by fast transport solutions and by keeping inventories
close to customers in distribution centers (DCs) which have fixed cost elements and increase safety stocks.
However, it has also to be noted that time is not always a speed issue. Often just-in-time objectives apply,
at which speed is not the dominant factor, but the necessity that the cargo is delivered as promised and
agreed upon, within specific time windows and with minimal uncertainty. The supply chain may incur extra
costs if the goods arrive early or late. Unpredictability is therefore a critical factor affecting shippers’
decisions in port-hinterland logistics.

Merchants are often forced to hedge against unreliable delivery services either through increasing buffer
inventories or through switching to alternative, but expensive logistic solutions. Especially the planning of
intermodal transport solutions is severely challenged due to the uncertainties in the times the containers
are available for transport and the transit times (Zuidwijk et al., 2008). As a result, the container
distribution planning is often also characterized by a conservative approach where slack times are built in
to avoid late arrivals at destination (Zuidwijk and Veenstra, 2010). In general, the more frequent a transport
service is offered between origin and destination, the less additional delay is caused by a late arrival of a
container. Therefore, a higher frequency mitigates the variability of total lead time for shippers (Blauwens
et al., 2002).

In addition, the minimization of total lead time may not be the main objective for merchants whenever
marine and inland terminals are used as storage areas for the cargoes. Indeed, the port-hinterland
container logistics economics in shipper perspective is mainly based on the possibility of optimizing dwell
time at terminals and therefore, in some cases, also on the possibility of combining in the best way the
sequential employment of marine and inland nodes, while minimizing in any case the warehousing capacity
at DCs. This implies the optimization of the terminal buffer function by making the best use of the free of
charge storage time imposed by marine and inland terminal operators.

Substantial warehousing costs can be saved when holding inventory in the pipeline. In such a situation, high
dwell times at marine and/or inland terminals can be increasingly associated with deliberate inventory
management strategies of the shippers. For instance, in the case of goods featuring predictable demands
and thus economies of scale in their production, slow and cheap intermodal transport can be selected and
terminals can be used to position inventories in advance of the realization of demand. This advance
deployment of stocks in global supply chains can offset the disadvantage of longer transit times in
intermodal transport, while reducing non-moving inventories and improving the order fill rate. In particular,
through the postponement of destination selection, relevant pooling effects8 can be obtained in
comparison to direct road-only transport. The cost advantages arising from intermodal-based floating stock
policies in fast mover consumer goods supply chains have been assessed by Dekker et al. (2009) and
Pourakbar et al. (2009).

Moreover, shippers may leave their cargoes in container yards because this would delay the payment of
customs duties and taxes, reducing temporarily the pressure on their cash flow. In general, the so called
“supply chain terminalization” is just the process of coupling “inventory in transit” with “inventory at
terminals” (Rodrigue and Notteboom, 2009). Especially in the seaports, due to relevant capacity
constraints, terminal operators react to the supply chain terminalization phenomenon by imposing

11
restrictions in terms of free time and by increasing storage charges. In this respect, dry ports in the
hinterland are expected to offer more favorable conditions to shippers in terms of free time, storage fees,
customs services and other administrative and technical operations.

The compliance of customs and other administrative formalities is an essential element of the international
logistics that more and more needs to be integrated by shippers within supply chain processes. The port
congestion created by excessive container checks adds costs, delays and uncertainties to the supply chain,
adversely affecting the service levels for cargo owners and their customers (see for instance: Arvis et al., 2010;
Hausman et al., 2005; Holloway, 2010; Lee and Whang, 2005; OECD, 2009; World Bank, 2010).

Finally, another important dimension in the myriad of trade-offs shippers need to balance in their supply
chain decisions is the sustainability. Different areas of the supply chain, including the port-hinterland
distribution of maritime containers, present options for becoming more environmental and social friendly.
Important examples of negative externalities deriving from transport and logistics operations are carbon
dioxide emissions (CO2), air pollution, noise, accidents and traffic congestion9. A major challenge of modern
logistics lies in minimizing the negative external effects of transport operations while attaining strong
internal benefits in terms of reduction of generalized costs and improvement of service levels. This will
require significant changes to the structure of logistics networks, bringing to new configurations of supply
chains. On the other hand, the different transport modes feature different trade-offs between internal
costs, service level and external impacts. For instance, truck carriage generates about six times the carbon
emissions of rail to move the same level of freight; barge and train have less negative environmental and
social impacts than road transport but usually feature longer and more uncertain transit times.

Many companies have even started to adopt “green” approaches to supply chain management as part of
their Corporate Social Responsibility (CSR) agenda (Sarkis, 2006). These policies are prompted partly by the
own well-meaning intentions of the firms (also to strengthen their brand image), but largely by pressure
from governments that have put in place ambitious targets for sustainable development.

4. Optimization models for port-hinterland container logistics network planning under the
shipper perspective

4.1. Review of academic literature contributions

The optimization models available in the academic literature on port-hinterland container logistics network
planning under the shipper perspective mostly focus on determining, at a strategic level, the optimal
routing of shipments in predefined networks in terms of nodes and links, services, capacities, and pricing
structures. Based on a multi-year experience in the research on this topic, we have identified and reviewed
a number of representative literature contributions, which are also summarized in Table 2. Algorithmic
issues and solution methods are outside the scope of this review.

Van Duin and Van Ham (1998) presented a three-level modeling approach for the location and design of
intermodal terminals, taking into account the different perspectives of shippers, terminal operators,
agents, consignees and carriers. In the first stage, a linear programming model minimizing the internal costs
of container distribution determines the optimal locations for intermodal terminals under the shipper

12
perspective. The model contains 129 demanding regions in Europe, 21 choices for rail terminal locations,
and 13 choices for barge terminal locations.

Cullinane et al. (2002) employed a multimodal, capacitated and multiobjective programming model to
simulate, based on transport time and direct cost criteria, the optimization of the port-hinterland flows of
full containers imported in China. The hypothetical network encompasses seven nodes, including two
seaports and three inland transshipment centers, and 14 links. The transportation modes considered in the
model are road, railways, and inland waterways.

Luo and Grigalunas (2003) proposed a multimodal model optimizing the containerized transport of 30 cargo
categories imported and exported through US seaports. The transport network includes maritime routes,
ports, railways and highways. Shippers select the routes that minimize port fees, transportation costs and
in-transit inventory holding costs.

Kim et al. (2008) developed a multimodal and capacitated mixed integer linear programming model to
optimize the flows of full containers imported and exported in Korea. The network is composed by 27
seaports (also including foreign seaports), two inland container depots and 43 cities. The transportation
modes taken into consideration are road, railways, and their combinations. The objective of the problem is
to minimize the total logistic cost given by the sum of the direct costs for transportation and handling, plus
the indirect costs arising from the holding of in-transit inventories.

Iannone and Thore (2010) developed a capacitated multimodal and multicommodity linear programming
model, called the “interport model”, optimizing the inland distribution of imported laden and empty
containers flowing through the seaport-dry port logistics system of the Campania region in Southern Italy.
The program minimizes the total generalized cost of container logistics operations throughout a port-
hinterland network featuring two seaports, two dry ports, other 22 inland locations, and 163 road and
railway links. Total logistic cost includes transportation costs, seaport and dry port terminal operation costs,
customs control costs, in-transit inventory holding costs, and container leasing costs. By means of
parameters representing dwell times, free of charge storage times, handling charges, demurrage charges,
probabilities and costs of customs controls, the interport model simulates in detail the container release
operations and their associated pricing mechanisms at both seaport and dry port terminals, including the
possibility for shippers to postpone storage and customs operations from seaports to dry ports. The model
also incorporates a supply sub-model for the quantification of transport time on road links according to
Road code regulations. The equilibrium solution of the model can be broken down into merchant flows and
carrier flows.

Mallidis et al. (2010) implemented a decision support tool addressing a white goods supply chain network
design problem of a multinational company in South-Eastern Europe, including decisions on port of entry,
inland transportation modes and leasing vs. outsourcing of transportation and DCs. The proposed
methodology and its application is based on a multiobjective mixed integer linear model minimizing total
costs and physical emissions from transport. Total costs include container transportation, handling and
holding costs, plus the rental and operational costs of DCs. The logistic network includes one loading point
in China, a transshipment hub port in Italy, three ports of entry and 15 regional markets in Bulgaria,
Romania and Macedonia, while also allowing for 16 potential DCs. The inland transport modes are truck
and train.

13
Zuidwijk and Veenstra (2010) analyzed the value of information in container transport in terms of multiple
performance dimensions, i.e. logistic costs, reliability, security, and emissions. The analysis is based on a
probabilistic model addressing the tactical decisions of allocating import containers to different inland
transport modes (slow, low price, no flexible departure times, versus fast, high price, flexible departure
times). A frontier of Pareto optimal decisions under different information scenarios is constructed. The
mathematical results are also illustrated by using two numerical examples involving barge and rail
transport. The model incorporates the departure time of intermodal transport as a decision variable, and
this variable is equivalent to the slack time reserved by the shipper to mitigate the risk of containers
planned for intermodal distribution are released by the seaport terminal after its departure time. The
introduction of multiple routes and multiple deadlines would extend the decision problem to a network
design problem.

Iannone and Mavrotas (2011) expanded the originary single-objective interport model of Iannone and
Thore (2010) by introducing multiple objective functions. The “multiobjective interport model” also
includes explicit environmental and social attributes of transport modes in order to address goals for
reducing greenhouse gases (CO2, CH4, N2O), air pollutants (SO2, NOx, PM10, CO, VOC), accidents, noise, and
congestion. The model may be used with up to 16 different objective functions expressed either in
monetary or physical terms. It solves for the port-hinterland container routings featuring both the least
internal generalized costs and the least external impacts. A specific bi-objective formulation examining the
relationship between logistic costs (Euros) and greenhouse gas emissions (tonnes of CO2 equivalent) was
applied to optimize the inland multimodal distribution of imported laden and empty containers through the
seaports and interports of the Campania region in Italy. Nine modeling scenarios representing different
market situations were considered in the analysis. The empirical evaluations show how the trade-off
between logistics costs and carbon emissions is influenced by the level of transport prices as well as by the
demands and capacities of the whole logistic system. The attained results reveal a strong potential to
implement new policy options aimed at promoting the decarbonisation of transport operations for the
inland distribution of containers transiting through the regional port-interport network system. A great
reductions in CO2 emissions can be achieved by “sacrificing” only little more cost, something that cannot be
discovered using a conventional, single-objective (cost minimization) model.

Jula and Leachman (2011) developed a mixed integer non-linear programming model optimizing the supply
chains of importers of containerized cargoes from Asia to 21 regions in the USA via 11 North American
ports of entry. The model determines the least-cost distribution strategy in terms of seaports and inland
transport modes to be used. Costs considered in the model include transportation and handling, in-transit
inventories, and safety stocks. The containers may be directly shipped inland to the DCs (direct shipping)
and/or they may be unloaded at transload or import warehouse facilities and the cargoes are sorted and
re-shipped in domestic containers or trailers to multiple DCs (consolidation/deconsolidation shipment).
Both direct and consolidation/deconsolidation shipments may use different inland transport modes, i.e.
train, truck, and local drayage. The model integrates a location/allocation problem with risk pooling, choice
of transportation mode and routing, while considering stochastic demand and random lead time to achieve
a desired customer satisfaction level.

Iannone (2012) expanded the model of Iannone and Thore (2010) to simultaneously optimize the inland
logistics of imported and exporting containers through the Campanian regional load center network system
(“import/export simultaneous interport model”). This more comprehensive analysis also takes into account
the external costs (greenhouse gas emissions, air pollution, noise, accidents, and congestion) and physical

14
air emissions arising from inland container transport operations, but these impacts are not internalized in
the model’s objective function.

4.2 Identification of literature gaps and call for new research

In the field of port-hinterland container logistics, network design under the shipper perspective is a
planning activity that essentially supports strategic decision-making by identifying potential alternatives in
terms of network configuration and operations, possibly supported by a quantitative model which selects
the decisions that are optimal along a set of objectives, and that respect a set of constraints.

Two main conclusions can be drawn from the review of modeling contributions presented above. One is
that the developments related to network design for port-hinterland container movements under the
shipper perspective is still very limited. On the other hand, the state of the art in models for planning the
landside distribution of maritime containers from and to seaports is lagging behind the research in other
segments of logistics.

A second major finding is that network planning models in port-hinterland container distribution very often
fail to incorporate realistic features present in the different phases of the supply chain. The main challenge
is to incorporate in the models complex processes and behaviors, also involving multiple agents.

Except the contributions by Iannone and Thore (2010), Iannone and Mavrotas (2011) and Iannone (2012) to
a certain extent, all the reviewed models do not take into consideration terminal and customs operations,
and their associated working and pricing structures. A crucial process occurring after and before the sea leg
of container distribution just consists of the release operations for cargoes and loading units at marine and
inland terminals, including dry ports and extended gateways. This process can be characterized by relatively
high costs and uncertainties due to complicated technical and administrative procedures. Laden containers
can be selected by customs for checks, based on risk analysis. In addition, the clearance of containerized
goods can also involve other types of controls, such as sanitary controls, veterinary controls, and so on.

Customs clearance and examination procedures include checking the accuracy of shipping documents,
calculating duties and taxes, locating containers, moving them to the customs area for X-ray scanning
and/or manual inspection, submitting to inspection, taking samples of goods for analyses, ensuring that
illegal goods are not being moved, returning the container to the stacking yard or quay and recording.

Terminal operators offer storage services to decouple the successive steps in the container transport chain
and they normally provide a limited amount of free of charge storage time which should allow for the
customers to arrange customs formalities and other authorities to do their required clearances. Storage
rates after free time (demurrage fees) are usually charged by container terminal companies on a sliding
scale and have the objective to optimize the yard productivity, minimizing the container dwell time. As
already pointed out, dry ports usually offers to their customers more convenient conditions in terms
technical and administrative procedures and related pricing structures compared to those provided in
marine terminals. Extended gateway procedures are a relevant option in this respect.

Customs and administrative procedures may add substantially to the dwell time, and therefore to the direct
and indirect costs for shippers. In some cases, shippers endeavour to have all necessary containers checked
within free storage time provided by terminal companies, with this typically being not achieved for 100 per
cent of container volumes and determining significant generalized costs to be borne.

15
The future modeling research in port-hinterland container logistics should also consider to what extent the
possibility of reducing and/or knowing in advance the rates of customs controls enables the reduction of dwell
times, delays, total lead time variability and inventory costs. In this respect, the procedures that encourage and
support the pre-arrival check and clearance of cargoes deserve attention. In many cases, such “green lanes”
already exist, or are being developed, by removing bottlenecks in information exchange with customs, and
improving information exchange along the chain, both between business involved, and between customs
agencies in different countries. These procedures have a positive impact both on terminal operations and on
the competitiveness of international supply chains10.

Container dwell times are therefore amongst the most important parameters to be incorporated in port-
hinterland container network models. Indeed, dwell time is a measurement of terminal performance, when
it is considered as a variable that can be influenced by terminal management. However, it is also one of the
determinants for terminal capacity, when it is considered as an exogenous factor influenced by elements
that are not controlled by the terminal operator. To sum up, dwell time is a critical factor correlated to
terminal capacity, and it is affected by: (i) customs and other administrative control procedures; (ii) the
terminal operator’s service level; (iii) the shipper’s supply chain management strategies based on the
employment of the terminals as places for the low-cost warehousing of goods.

A major abstraction in most of the models reviewed in this paper is that the objective function and the
constraints are formulated by summing individual terms that are proportional to the values of variables.
There are many real-word problems, however, in which non linearities are present. For instance, there
might be economies of scale that allow one to reduce costs as volume of activities increases. Piecewise
linear functions can be used to represent economies of scale in logistic costs associated with concentrated
flows. Furthermore, non linear performance functions depending on driving time, value of time and link
capacity utilization can be used to model congestion phenomena on roads (BPR, 1964; Sheffi, 1985).
Anyway, the implementation of such a dynamic modeling methodology could prove to be quite complex
unless more comprehensive network models able to simulate all road traffic flows (including passenger
flows) are available. Thus, a reasonable final alternative in a static modeling framework could consist in
adopting a more detailed segmentation of average flow speeds varying according to specific traversed
areas. For instance, the transits through high density urban and suburban areas can be modelled by
assuming a very low speed of freight vehicles on the corresponding links.

Except the contributions by Jula and Leachman (2011) and Zuidwijk and Veenstra (2010), all the reviewed
shipper models ignore uncertainty, changing dynamics and temporal fluctuations that are present in port-
hinterland logistics system. Indeed, most real life problems contains deterministic elements as well as
random parameters with accompanying probability distributions. Uncertainty has different meaning and
implications in a number of different aspects. For instance, regular logistic operations tend to be disrupted
by a number of phenomena. The anticipation of risks (intended as possible negative deviations from
desired business targets) should therefore become more integrated in decision-making (risk management).
The uncertainty and disruption sources, description methods, network measurements, and solving
methods are particularly important in this respect. Perhaps the reason for this lack is the added complexity
of finding solutions for the resulting models. Also, one of the major difficulties of the stochastic
programming approach is to deal with the possibly infinite number of potential scenarios.

A specific aspect that deserves more attention is the modeling of reliability, including elements related to
just in time deliveries, safety stocks and their associated costs. Shippers or consignees may not be

16
interested in fast deliveries, and yet a delay with respect to an expected delivery time may produce a great
damage, sometimes even a far greater damage than what should have been borne to obtain a timely
delivery by using a more expensive mode of transport. When investigating such cases, the valuation
fundamentally depends on the value of goods and the needs of the consignees, with effects on the so
called ‘‘safety’’ or ‘‘buffer’’ inventories.

As from business logistics literature, buffer inventories can be calculated based essentially on: (i) the
customer service level, (ii) the uncertainty in shipment lead time, and (iii) the demand forecast error. The
transit time of transport services is thus only a part of the total lead time of shipments. Usually, it is not an
easy task obtaining detailed data on stated or revealed preferences of the consignees. Hence, when specific
data are not already available or it is not possible to carry out an ad hoc study, a more conventional
approach based on the opportunity cost of frozen capital may be used, such as the approach used in the
models developed by Iannone (2012), Iannone and Mavrotas (2011), Iannone and Thore (2010), Kim et al.
(2008), Luo and Grigalunas (2003). In practice, this method only requires an evaluation of the so called ‘‘in
transit inventory costs’’ by calculating the interest matured on the value of the goods in transit in relation
to the average time duration of distribution operations.

Moreover, in our opinion, the main challenge in port-hinterland container logistics modeling under the
shipper perspective seems to be that of calculating the unit safety stock costs at destination in relation to
the movements of full containers transported simultaneously by different and alternative transport
solutions featuring different lead times. In the available literature, safety stock costs are calculated only
relating to the deliveries of total batches of containers by single transport solutions (Jula and Leachman,
2011). A better starting point for more realistic approximations of safety inventories could be the analytical
approaches introduced by Boute and Van Mieghem (2011) and Combes (2011). These contributions show
how to estimate the safety stock for a single good that is sourced from two locations (“dual sourcing”) or by
using simultaneously different transport solutions.

The performance of a port-hinterland multimodal logistics system directly depends on the performance of
its key individual elements, as well as on the quality of interactions between them regarding operations,
information, and decisions. Ultimately, port-hinterland logistics systems, including dry ports and extended
gateways, require an innovative range of relationships and network formations with and between carriers
and cargo generators.

Although integrated models taking account of the different goals of the different stakeholders are
inherently more complex than those dealing with planning aspects of a single decision makers, the
potential benefits of these models could outweigh the added complexity. A good attempt at outlining these
tools can be found in the three-level modeling approach followed by Van Duin and Van Ham (1998). The
need for integrated models is also reinforced by the reviews presented in Macharis and Bontekoning (2004)
and Caris et al. (2008), recognizing that modal changes through the development of intermodal transport
will require collaboration along the hinterland supply chain. The development of new tools of analysis
considering simultaneously both demand and supply side factors would provide the opportunity to better
understand the relative importance of port-hinterland connections, while facilitating a holistic assessment
of the challenges for the involved logistic systems. Such tools could also therefore allow governments to
more accurately assess the contribution of hinterland networks to the competitiveness of territories,
measure the level of integration across different transport modes, and benchmark the performances of a
particular area against other areas.

17
Finally, sustainability is a key factor that absolutely needs to be considered when designing port-hinterland
container networks. The negative environmental and social impacts of distribution operations can be
formulated and taken into account in monetary and/or physical terms, and can be incorporated in
optimization models as: (i) constraints, (ii) objective functions, (iii) part of the objective function.
Accordingly, the existing network models have to be revised to address negative external impacts while
simultaneously working to meet the conventional business objectives regarding total costs and service level
achievements. Perhaps, it is more significant to model sustainability issues as objectives - such as in
Iannone and Mavrotas (2011) and Mallidis et al. (2010) - and not as constraints because it can generate
more information regarding overall costs and implications of impacts. Multicriteria decision-making models
and techniques are becoming an influential trend worthy of study in the field of green logistics and supply
chain management, given their suitability to deal with problems involving trade-offs among conflicting
goals. Shippers and/or logistics service providers may be interested in implementing this type of models in
order to create a higher level of transparency concerning the environmental footprints of their operations.

5. Conclusions

The expansion of containerized trades feeds the congestion in harbors and over the roads around major
port cities in the world, so the optimization of port-hinterland logistics is of paramount importance under
the perspective of shippers and controllers of cargoes. In response to these challenges, significant
innovations can be identified that also require advances in the field of scientific research.

Dry port terminals supporting the container traffics of seaports are becoming increasingly important in
production-distribution and logistic supply chains. Marine and inland terminals are part of complex
networks, and competition takes place amongst integrated networks rather than between single nodes and
single players. This development has led to a number of responses from the logistics industry itself, as well
as from governments. An emerging trend has been how to manage public and private priorities so that
modal shift can be achieved while at the same time stimulating private investment and development
strategies on the basis of profit-seeking competition.

The extended gateway concept, in particular, is gaining more and more momentum as a business network
innovation based on the possibility of duplicating and/or complementing some container seaport activities
at dry ports. If properly implemented in port-hinterland network systems, extended gateways can relieve
seaport congestion phenomena, promote the shift of standardized loading units from road-only transport
to sustainable inland transport solutions, and stimulate integrated freight logistics operations inland, thus
reducing the internal and external costs of supply chains and promoting regional economic growth.

Dry ports and their use as extended gateways of container seaports are positioned as having relevant
impacts on the design and scope of shippers’ supply chains and logistic networks. Different strategies can
therefore be developed to get benefits from such an innovation. Nevertheless, the use of mathematical
programming models to support the port-hinterland logistics planning of shippers in a comprehensive
manner is still at its infancy. Several shortcomings and opportunities for research have been identified in
this paper, and it is argued that new models dealing with all problem facets are in need.

Most current models make significant assumptions and simplifications falling short of current industrial
needs. Shippers evaluate the advantages and drawbacks of alternative hinterland logistics solutions based

18
on various trade-offs, and there is a need for new tools of analysis that incorporate more realistic features,
such as regulatory environment, uncertain information, risk modeling, logistic integration, and
environmental and social impacts of container distribution operations. All these elements make the
formulation of network programming models more complex. However, these models should strike a
balance between realism and solvability, using data available in practical contexts.

The requirements associated to modern industry trends are predicted to stimulate an improvement of the
scientific research in port-hinterland container logistics. Accordingly, the quality of optimization models in
this field is expected to increase in the near future. This development will bring benefits not only to public
and private firms but also to the society as a whole.

Acknowledgements

Part of this paper includes some of the results achieved by the author during a period of study spent from February to
April 2011 in Rotterdam, the Netherlands, as a visiting research fellow at the Department of Decision and Information
Science of the Rotterdam School of Management (RSM) - Erasmus University, within the framework of a short term
cooperation between RSM and the National Research Council of Italy (CNR-IRAT) on the “Ultimate” research project
funded by Dinalog and aimed at investigating new concepts for the design and operations of efficient multimodal
port-hinterland networks. Prof. Rob Zuidwijk and Ir. Panagiotis Ypsilantis at RSM are acknowledged for the discussions
had with the author on earlier versions of the manuscript. The Department of Economics and Quantitative Methods
(DIEM) at the Faculty of Economics of the University of Genoa in Italy is acknowledged for having supported the
research activities of the author, and particularly the completion of the paper, between 2011 and 2012. The editing
for publication onto the Internet has been done on August 2013. On the whole, the content of the manuscript reflects
the views of the author who is solely responsible for the facts and the accuracy of information presented herein.

Notes
1
Differently from the most conventional practice, the term supply chain is used in this paper also to indicate a
network of organizations working together in different activities and processes in order to bring services to the
market, with the purpose of satisfying customers’ demands (see for instance Christopher, 2005). Often, the term is
conventionally employed in industrial and scientific practice only to indicate a network of organizations involved in
fulfilling products to customers. This type of use came into prominence since Cooper et al. (1997) addressed the term
supply chain as an extension of the term logistics.
2
Rotterdam is a good example of the changes that are gaining momentum in the hinterland container logistics
industry. The marine and inland terminals of Europe Container Terminals (ECT) and their connecting barge and rail
services have been around for a long time, but are now being made more attractive through the development of its
extended gateway and terminal operator haulage concepts.
3
Dwell time is the length of time a container remains at a terminal before being loaded onto a transportation vehicle
for further distribution.
4
National customs transit applies to one country or customs territory when the office of departure and the office of
destination are in the same territory. International customs transit consists of a chain of national transit operations
and applies when an operator carries goods across one or several borders, in accordance with a bilateral or
multilateral agreement. Generally, to start a customs transit procedure, an operator has to comply with a number of

19
requirements. Main requirements are the lodging of a transit declaration at the customs office of departure (e.g. the
T1 declaration for transporting non Community goods from one location in the EU to another location in the EU) and
the provision of a guarantee (banking guarantee, money deposit, surety, etc.) based on the value of applicable duties
on transit goods to cover the risk of cargo disappearance within the customs transit territory. The goods and
documents are thoroughly examined at the office of departure. Following that, the goods must be identified, e.g. by
affixing customs seals, thus avoiding the necessity to re-check the goods in other countries (in case of international
transit).
5
TEU stands for twenty-foot equivalent unit and is the standard measure for containers. One TEU is equivalent to a
20- foot-long (6.1 m) container.
6
Interporto Campano is the concessionary private company for the design, construction and management of the dry
port at Nola. It controls two other firms: Terminal Intermodale Nola - TIN (the intermodal terminal company operating
at the interport), and Interporto Servizi Cargo - IC (a rail traction and intermodal marketing operator). Since some
year, TIN is also being participated by the private Gallozzi Group which controls the marine container terminal at the
seaport of Salerno through the subsidiary Salerno Container Terminal – SCT company. Furthermore, since 2008 TIN
also manages the railway terminal at the seaport of Naples.
7
Supply chain optimization models cover a number of formulations ranging from simple single product type to
complex multi-product ones, and from linear deterministic programs to non-linear stochastic ones. These are
therefore usually built on the root features of classic operations research models such as, for instance, the
transportation model and the shortest path model.
8
Risk pooling is an important concept in logistics and supply chain management. It can be defined as the consolidation
and aggregation of individual demand and/or lead time variabilities in order to reduce the total variability and thus
uncertainty and risk. As far as inventory pooling is concerned, if the demand in different destination locations is
satisfied by centralizing all inventory holding at one location, it can be formally shown that the standard deviation of
total demand is less than or at least equal to the sum of standard deviations of demand at the different destination
locations. In general, variability reductions allow a decrease in safety stocks and therefore reduce average inventories
(Oeser, 2010; Simchi-Levi et al., 2003).
9
Logistics is a large and growing emitter of CO2 and contributes about 5.5 per cent of the total greenhouse gas
emissions generated by human activities. Transportation is responsible for 89 per cent and the rest attributed to
warehousing and distribution facilities (Supply Chain Digest, 2009). For transportation, the amount of carbon emitted
is directly attributed to weight, mode and distance travelled. For warehouse and store locations, the amount of
carbon emissions is directly attributed to the type of energy consumed to operate facilities (Global Commerce
Initiative, 2008).
10
Insight into the impact the inspection processes may have on congestion and disruptions of terminal operations has
been recently derived from the analysis performed by Bakshi et al. (2011).

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Figure 1 - Stylized representation of a port-hinterland logistics network

Seaport Hinterland

Table 1 - Benefits of dry ports

Seaport terminals Less congestion, increased capacity

Expanded hinterland
Terminal operator haulage opportunities
Seaport cities Lower road congestion
Land use opportunities
Shipping lines Liner shipping service schedule reliability improvement
Cheaper empty depot services
Better empty repositioning
Carrier haulage opportunities
Shippers Improved seaport access
Supply chain benefits
Green marketing
Third party logistics providers New business opportunities
Economies of scale
Customs Less congestion in port-related activities
Higher volume of activities resulting from the increasing of seaport
competitiveness for international cargo transits
Rail and barge operators Economies of scale
Gain market share
Road operators Less time in congested roads and terminals
Society Lower environmental impact of inland distribution
Regional economic development and growth

25
Table 2 - Port-hinterland container logistics network planning models under the shipper perspective

Inland
Objective Mathematical
Authors Main objective of the work Planning scope transport
function(s) approach
modes

Present a three-level modeling approach for the location Three-level

and design of intermodal terminals, taking into account modeling (linear
the different perspectives of shippers, terminal operators, Road, rail, Internal programming,
Van Duin and Van Ham (1998) Strategic
agents, consignees and carriers. In the first stage, a barge container costs financial analysis,
programming model determines the optimal terminal discerete event
locations under the shipper perspective simulation)
Total direct
Develop a single commodity, multimodal capacitated
Road, rail, transport cost; Multiobjective
Cullinane et al. (2002) model to simulate the optimization of the flows of full Strategic
barge total transport linear programming
containers imported in China
time
Develop a spatial economic, multimodal simulation model
Total internal
dealing with the containerized transport of 30 cargo Shortest path
Luo and Grigalunas (2003) Strategic Road, rail generalized
categories imported and exported through US container (Dijkstra algorithm)
logistic cost
seaports
Total internal
Develop a multimodal model to optimize the flows of full Mixed integer
Kim et al. (2008) Strategic Road, rail generalized
containers imported and exported in Korea linear programming
logistic cost
Develop a capacitated multimodal and multicommodity
Total internal
model optimizing the inland distribution of import Linear
Iannone and Thore (2010) Strategic Road, rail generalized
containers flowing through the seaport-dry port system of programming
logistic cost
the Campania region in Southern Italy
Internal
Develop an optimization model addressing a white goods container Multiobjective
Mallidis et al. (2010) supply chain network design problem of a multinational Strategic/tactical Road, rail costs; mixed integer
company in South-Eastern Europe transport linear programming
emissions
Internal logistic
Develop a probabilistic model addressing the decisions of costs;
Road, rail, Multiobjective
Zuidwijk and Veenstra (2010) allocating import containers to different inland transport Tactical reliability;
barge probabilistic model
modes security;
emissions
Total internal
Develop a capacitated multimodal and multicommodity generalized
model optimizing the inland distribution of import logistic cost;
Multiobjective
Iannone and Mavrotas (2011) containers flowing through the seaport-dry port system of Strategic Road, rail emissions;
linear programming
the Campania region in Southern Italy, based on multiple accidents;
objectives noise;
congestion
Develop a programming model optimizing the supply Total internal
Mixed integer non-
Jula and Leachman (2011) chains of importers of containerized cargoes from Asia to Strategic Road, rail generalized
linear programming
the USA logistic cost
Develop a capacitated multimodal and multicommodity
Total internal
model optimizing the inland distribution of import and Linear
Iannone (2012) Strategic Road, rail generalized
export containers flowing through the seaport-dry port programming
logistic cost
system of the Campania region in Southern Italy

26