From the October 2021 print edition
There has been a paradigm shift in logistics, and it isn’t a subtle one. The logistics of things has been propelled into the spotlight. The how, who, what and where, didn’t impact the day-to-day decision of purchasing in years past. The thinking was, “it’ll get there when it gets there” or “we’re out of stock, here’s a rain check.”
Multiple converging events have changed our worldview regarding how our products are moved. Boats, trains, planes and trucks have come together to provide a solution. Enter the star of the show: the multimodal movement of freight.
The forces driving this shift are e-commerce and just-in-time delivery. More important,
the desire for right-to-door delivery or final mile is warping supply chains to develop solutions once thought impossible. Competition in global markets has meant the adoption of strategies such as total quality management, flexible manufacturing systems, agile manufacturing, lean production and quick response manufacturing, among others. These forces call for on-time, door-to-door delivery and minimizing waste of time and money.
Customers do not focus on the different modes of transport. Rather, they focus on performance, such as door-to-door service, from multimodal transportation operators. Door-to-door service is achieved through using multimodal transportation. That’s what makes it strategically important.
Globalization’s rapid growth has pushed the demand for freight transportation, which increases year by year. To meet that demand in more viable ways, different service providers must combine different modes of transportation. The multimodal freight transportation developed as the most sustainable form of transportation between origin and destination. The best way to achieve better logistical integration is through increasing cooperation and integration within a supply chain distribution network. Those involved in the supply chain, including shippers, logistics service providers, or governments that make policies, have different objectives. They pressure transportation providers to achieve more sustainable freight transportation and to reduce other transportation waste like congestion, CO2 emissions and accidents. They also promote better vehicle utilization.
The quality of multimodal logistics, together with what products are offered, helps define the competitiveness of products. The transportation network includes a centralized source warehouse (hub and spoke methods), a set of destination warehouses (RDC), and intermediate transshipment terminals.
The design of the intermodal transport network is about having options. Customers focus on optimal control of performance and cost in selecting their modes of transportation. That’s why multimodal solutions make the most sense to global customers.
The catalyst for multimodal systems is the integration of information and communication. Information and communication technology acts like a nexus and offers multiple benefits to organizations. For example, it provides real-time visibility, efficient data exchange and better flexibility to react to unexpected changes during shipments.
Cloud software has driven traditional static software out and provided a dynamic means
to provide solutions. It also gives real-time updates and allows for different work locations. Cloud computing, social networking and wireless communication have changed how information is shared and supply chains are structured. The antique cue card system of dispatching could not achieve this depth.
The concept of cross solutions is what drove intermodal networks to emerge from truck and rail providers as they both saw an opportunity to provide a competitive edge. Trucking companies had the flexibility of being able to dray to customer to bring the rail closer to hubs that lack infrastructure while being connected to the rail network for visibility and cost savings. Companies that can now flex between rail and road can mostly bypass any “acts of God” that occur that impact one mode or another.
The rail companies capitalized on the opportunity to drive demand for their mode by expanding their network beyond their rail lines or by eliminating unprofitable lines and supplementing them with a trucking solution.
Ocean freight intermediaries, the middlemen of ocean freight, are critical to the profitability of container carriers. Non-vessel-operating common carriers (NVOCC) are the most common intermediary in the maritime industry. NVOCC buy space from ocean carriers to provide a solution that is more inclusive of modes across the supply chain, usually pairing with warehousing to gain competitive edge. Think, Kuehne + Nagel or DB Schenker. The demand for NVOCC filled a niche in global commerce for the smaller shippers and SMEs that can’t operate their own logistics departments.
Multimodal’s aim is to transfer goods in a continuous flow through the supply chain to make that flow more efficient from a financial, environmental and time perspective.
With the growth in container demand and the shift in thinking from a single modal to a system concept multimodal approach, it is the main method in the international transportation process. It organizes all transport modes into an integrated, single system for the efficient and cost-effective delivery of goods. A combination of characteristics of each transport mode could place more constraints on goods during transportation in areas like packaging, transportation conditions and storage. As well, multimodal combines the advantages of each mode in a single solution – the flexibility of road transportation, the large capacity of rail and the lower costs of ocean transport in a combined, best-way-possible scenario.
Having each mode working in unison complicates the management of the whole multimodal transportation process. It is complex and involves different actors. These include freight forwarders, 3PLs, logistics service providers, couriers, different road carriers, rail, sea carriers, along with port and intermodal terminal operators. There isn’t a “true” multimodal provider. Rather, there’s a network of actors working together through a partner network, utilizing other niche abilities.
Managing the chain
Communication between multimodal parties must be accurate, timely and efficient for a flawless and visible delivery process. This could be challenging due to varying technologies deployed by those involved. Managing the multimodal transport chain is supported by several activities where each phase must be optimized and integrated with other activities:
- transportation order handling node: delivery schedule, and forecasting;
- the logistics node: selecting contract services and customs;
- warehousing node: preparing transportation, the loading and unloading and terminal;
- operations, including managing stock operations; and
- KPI node: reports on unloading, loading, damage, monitoring transportation; tracking vehicles and driver behaviour.
Comprehensive and dynamic information sharing is key to the success of the multimodal operation. As everyone does their part of the activity, it triggers an action for others to do their part.
The multimodal network amalgamates different actors for a comprehensive solution. It is especially important in the age of increasing e-commerce flows and last-mile transport problems that generate too high external transport costs. Just-in-time logistics provided the groundwork for supply chains to share information to know what product will be needed.
E-commerce needed just-in-time solutions to provide the foundation to service customers. E-commerce’s gravity is accelerating the pull of multi-modal solutions on logistical networks. When a consumer purchases goods online, the forces that move that item for next-day delivery utilize all aspects of the supply chain. That product went through most of the nodes of the supply chain to land at the consumer’s door.
Logistics is transforming. For a long time, transportation was seen as a waste, a means
to an end that should be minimized. That view is changing and at the forefront of the change is the multimodal system.